Doximity Posts 25% Revenue Growth, But Stock Sinks As Company Cuts Revenue Guidance

By Heather Landi

As doctors shift to a hybrid work model that combines digital communication and in-person interactions, Doximity is in a strong position to capitalize on this evolution, executives said.

Doximity, a digital platform for medical professionals, brought in US$91 million in revenue in the most recent quarter, a 25 per cent jump from a year ago as the company saw strong growth in its telehealth services.

But the company’s stock took a hit in after-hours trading Thursday after it slashed its revenue guidance for the year.

Doximity now expects that full-year revenue will be between US$424 million and US$432 million, the company announced during its fiscal 2023 first-quarter results following market close on Thursday. The previous outlook was for revenue between US$454 million and US$458 million.

The revised guidance represents 25 per cent year-over-year revenue growth, which is a slower pace compared to last year. Doximity’s fiscal-year 2022 revenue jumped 66 per cent from US$207 million to US$344 million.

Guidance for the next quarter indicates Doximity is expecting revenue to grow 26 per cent year on year to US$100 million, slowing down from the 76 per cent year-over-year increase in revenue the company had recorded in the same quarter last year.

“Our historically stable upsell rate among our pharmaceutical clients, which accounts for 10 per cent to 15 per cent of our annual revenue, has slowed year to date,” co-founder and CEO at Doximity, Jeff Tangney said during the company’s earnings call.

Tangney said pharmaceutical companies are feeling the pressure from the current macroeconomic headwinds.

“Looking back at our clients and revenue forecast, we thought we’d be largely unaffected by the macro pressures. We’ve learned that we’re not immune from those macro pressures but we’re fully vaxxed in the sense that it is a 6 per cent hit for us,” he said.

“When macro belt-tightening does hit, such as Novartis cutting 8,000 people and US$1 billion in expenses, it’s quickest and easiest to hit pause on new digital projects. This digital air pocket is short-term,” he said.

“Looking ahead, we believe these are near-term challenges. And the high ROI we deliver becomes even more attractive in an efficiency-focused environment,” said Doximity chief financial officer Anna Bryson during the earnings call.

Founded in 2010 and named for a combination of “docs” and “proximity”, Doximity operates like a LinkedIn for doctors and provides a digital platform for US medical professionals, including telehealth and scheduling tools. The company has more than 2 million medical professional members as of March 31, 2022, the end of its 2022 fiscal year. Doximity claims to have more than 80 per cent of doctors on its network.

The company’s paying customers include pharmaceutical manufacturers, health systems and medical recruiting firms. These organizations purchase subscriptions for Doximity’s marketing solutions, hiring solutions and telehealth services.

The health tech company brought in US$22 million in profit in its fiscal year 2023 first quarter, versus US$26 million in profit a year ago.

The company’s non-GAAP net income for the quarter came to US$30.8 million, versus US$30.6 million a year ago, representing a 34 per cent margin.

The San Francisco-based company said it had a net income of 14 cents per share during the quarter. Earnings, adjusted for one-time gains and costs, came to 16 cents per share versus 15 cents a year ago.

The company’s revenue and bottom line results surpassed Wall Street expectations with analysts expecting earnings of 11 cents per share.

The company reported adjusted EBITDA of US$34 million, versus US$31 million, an increase of 8 per cent year-over-year, representing adjusted EBITDA margins of 37 per cent, versus 43 per cent.

Doximity ended the quarter with operating cash flow of US$45 million, versus US$33 million, and free cash flow of US$43 million, versus US$32 million.

Doximity also reported that its mobile telehealth platform, added in 2020 during the pandemic, grew to 360,000 active providers. These providers used the company’s telehealth platform, called Doximity Dialer, over 200,000 times per workday last quarter.

The company also added new features to the platform. A scan number feature enables physicians to use the camera on their mobile device to rapidly read and dial phone numbers directly from a paper chart or desktop EHR screen. The platform’s Siri integration enables doctors to initiate secure patient calls hands-free—whether scrubbed into surgery or driving between clinical sites.

As doctors shift to a hybrid work model that combines digital communication and in-person interactions, Doximity is in a strong position to capitalize on this evolution, executives said.

“The new medical normal is hybrid. Our data shows doctors are not reverting back to pre-pandemic work schedules but have evolved to a new, more mobile hybrid schedule. They are following up with their patients from their offices and their living rooms, and they are billing for it,” Tangney said.

One-third of US physicians are subscribers to the company’s paid Dialer enterprise service, he said.

The company saw strong growth in the use of its fax and e-signature tools, with 30,000 faxes and e-signatures per workday, more than double pre-pandemic levels, Tangney said.

“Our vision is to be the physician cloud and offer the go-to app for hybrid mobile medical work. The pandemic forced many docs to shift to the cloud. This last quarter ‘new normal’ shows that they are here to stay,” he said.

In the long-term, Doximity is benefiting from the healthcare industry’s shift to digital and the pharma industry’s shift to digital marketing, executives said. Pharma companies use Doximity’s marketing solutions to get their brands in front of medical professionals.

“We believe this industry is in the early innings of a decade-long shift to digital,” Tangney said.

Last week, the company launched its Environmental, Social and Governance (ESG) website to highlight its efforts to reduce administrative burden, which contributes to burnout, and reduce its environmental footprint. The company estimates that approximately 3,000 to 3,500 metric tons of carbon dioxide equivalent emissions are avoided for every million virtual visits that would have otherwise required car travel.

The company also announced  Phoebe Yang, general manager at Amazon Web Services, has joined Doximity’s board of directors. Yang will provide strategic guidance to Doximity as it continues to innovate its clinical productivity tools and build the “physician cloud” for US health systems.