What Happened:
Shares of healthcare professional network Doximity (NYSE:DOCS) fell 23.5% in the morning session after the company reported first quarter results with revenue guidance for the next quarter coming in below analysts' expectations and indicating a pretty significant slowdown in growth. The full year guidance also missed and was lowered, which isn't a good sign for a company that bulls argue is still very early in penetrating a large and growing addressable market.
On the other hand, revenue and earnings per share both came in ahead of Consensus during the quarter. Gross margin and free cash flow also improved compared to the previous quarter. In addition, the company announced a plan to reduce headcount by approximately 100 employees, representing 10% of its workforce. This is aimed at simplifying its operations and better aligning its resources with business goals. The estimated cost of the restructuring effort is projected to fall within the range of $8 to $10 million, with the main portion anticipated to be concluded during the second quarter of fiscal year 2024.
Overall, it was a weaker quarter for the company, with the results largely falling below Consensus. At the same time, the announced restructuring effort could provide some assurance that profitability might improve in the coming quarters.
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What is the market telling us:
Doximity's shares are very volatile and over the last year have had 23 moves greater than 5%. But moves this big are very rare even for Doximity and that is indicating to us that this news had a significant impact on the market's perception of the business.
The previous big move was three months ago, when the company dropped 10.8% on the news that the company reported fourth-quarter results that narrowly surpassed analysts' revenue estimates. Gross margin, free cash flow, and EPS also beat. However, revenue and adjusted EBITDA guidance for the next quarter were below the Consensus, though the full-year guidance came in above estimates for both metrics. The results revealed a notable slowdown in revenue growth as the demand for healthcare services continued to normalize, moving away from the pandemic-induced surge.
Doximity is down 24.2% since the beginning of the year, and at $24.90 per share it is trading 37.7% below its 52-week high of $39.94 from August 2022. Investors who bought $1,000 worth of Doximity's shares at the IPO in June 2021 would now be looking at an investment worth $469.97.
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