Doximity (DOCS) Dialing Up Some Very Healthy Gains As Top-Line Growth Rate Reaccelerates In 2Q23
2:36 pm Friday, November 11th, 2022
Telehealth company Doximity (DOCS), a former high-flyer during the pandemic, is soaring following an upside 2Q23 earnings report that featured a reacceleration of top-line growth and a sharp improvement in adjusted EBITDA margin. The company also reaffirmed its FY23 revenue and adjusted EBITDA guidance of $424-$432 mln and $47.7-$48.7 mln, respectively. That comes as a relief after DOCS issued downside FY23 guidance in its 1Q23 earnings report on August 4.
When the company went public in June 2021, telehealth usage was taking off as health-conscious people stayed away from hospitals and physician offices. Accordingly, demand for DOCS’ fax, e-signature, and online scheduling tools flourished, as evidenced by its high-double digit revenue growth in calendar year 2021 and early 2022. The impressive growth pushed the stock to post-IPO highs of about $108 in September 2021, good for a 310% gain versus its $26/share IPO price.
What immediately jumps out is that DOCS’ revenue growth accelerated to 29% from 25% last quarter, putting an end to the down trend in its growth rate that began a year ago. The company also slightly beat its guidance, generating revenue of $102.2 mln vs. its forecast of $99.5-$100.6 mln.
In Q2, usage hit new highs across the board. More specifically, its fax and e-signature products registered record usage with millions of HIPPA-related secure messages. Additionally, DOCS’ physician scheduling tool experienced a 57% increase in unique logged in users.
Adjusted EBITDA of $46 mln came in 12% above the high end of DOCS’ guidance, was higher by 40% on a yr/yr basis and equated to a margin of 45% compared to 41% in the year-earlier period. Although the company is still investing in R&D and Sales & Marketing, with those expenses up by 19% and 26%, respectively, DOCS was able to achieve G&A efficiencies as costs declined by 1% in that category.
The main takeaway is that while DOCS may never return to its near triple-digit growth rates seen during the pandemic, its digital tools became entrenched across the healthcare sector. In fact, the company stated that its telehealth tools were used by a record 370,000 unique physicians, nurse practitioners, and physician assistants in Q3. This growing usage should bode well for DOCS’ top-line growth moving forward.
