Doximity's (NYSE:DOCS) Q4 Earnings Results: Revenue In Line With Expectations But Stock Drops

Radek Strnad /
2023/05/16 4:07 pm EDT

Healthcare professional network Doximity (NYSE:DOCS) reported results in line with analyst expectations in Q4 FY2023 quarter, with revenue up 18.5% year on year to $111 million. Guidance for the full year also exceeded estimates, however the guidance for the next quarter was less impressive, coming in at $107 million, 4.28% below analyst estimates. Doximity made a GAAP profit of $30.7 million, down on its profit of $36.7 million, in the same quarter last year.

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Doximity (DOCS) Q4 FY2023 Highlights:

  • Revenue: $111 million vs analyst estimates of $110.1 million (small beat)
  • EPS (non-GAAP): $0.20 vs analyst estimates of $0.17 (16% beat)
  • Revenue guidance for Q1 2024 is $107 million at the midpoint, below analyst estimates of $111.8 million
  • Management's revenue guidance for upcoming financial year 2024 is $503 million at the midpoint, in line with analyst expectations and predicting 20% growth (vs 22.4% in FY2023)
  • Free cash flow of $45.6 million, roughly flat from previous quarter
  • Gross Margin (GAAP): 87.7%, in line with same quarter last year

“With the public health emergency officially over, we’re proud to emerge with a record number of providers using our physician cloud in Q4 to power their scheduling, fax, e-signature, and telehealth needs,” said Jeff Tangney, co-founder and CEO at Doximity.

Founded in 2010 and named for a combination of “docs” and “proximity”, Doximity (NYSE: DOCS) is the leading social network for U.S. medical professionals.

The coronavirus pandemic has underscored the importance of high-quality health infrastructure in times of crisis. Coupled with intense competition between drugmakers and the growing volume of data in the health care sector, demand for data management solutions in the healthcare space is expected to remain strong in the years ahead.

Sales Growth

As you can see below, Doximity's revenue growth has been impressive over the last two years, growing from quarterly revenue of $66.7 million in Q4 FY2021, to $111 million.

Doximity Total Revenue

This quarter, Doximity's quarterly revenue was once again up 18.5% year on year. But the revenue actually decreased by $4.3 million in Q4, compared to $13.1 million increase in Q3 2023. If we take a closer look, we'll observe a similar revenue decline in the same quarter last year, which could suggest the decline is seasonal. However, the management is guiding for a further drop in revenue in the next quarter, so it is definitely worth keeping an eye on the situation.

Guidance for the next quarter indicates Doximity is expecting revenue to grow 18.1% year on year to $107 million, slowing down from the 24.7% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $503 million at the midpoint, growing 20% compared to 22% increase in FY2023.

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Cash Is King

If you have followed StockStory for a while, you know that we put an emphasis on cash flow. Why, you ask? We believe that in the end cash is king, as you can't use accounting profits to pay the bills. Doximity's free cash flow came in at $45.6 million in Q4, roughly the same as last year.

Doximity Free Cash Flow

Doximity has generated $173.4 million in free cash flow over the last twelve months, an impressive 41.4% of revenues. This robust FCF margin is a result of Doximity asset lite business model, scale advantages, and strong competitive positioning, and provides it the option to return capital to shareholders while still having plenty of cash to invest in the business.

Key Takeaways from Doximity's Q4 Results

With a market capitalization of $6.61 billion Doximity is among smaller companies, but its more than $841 million in cash and positive free cash flow over the last twelve months give us confidence that Doximity has the resources it needs to pursue a high growth business strategy.

Revenue and adjusted EBITDA guidance for the next year were both ahead of expectations, which was a positive. On the other hand, revenue was just inline. Additionally, it was unfortunate to see that the revenue as well as adj. EBITDA guidance for the next quarter missed analysts' expectations. Overall, it seems to us that this was a complicated quarter for Doximity. The company is down 5.82% on the results and currently trades at $31.89 per share.

Doximity may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.