DocGo (DCGO) - 2023 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive income, statements of changes in stockholders' equity, and statements of cash flows, along with their accompanying notes for DocGo Inc. and its subsidiaries for the periods ended September 30, 2023 and 2022 Condensed Consolidated Balance Sheets ASSETS (in USD) | ASSETS (in USD) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Accounts receivable, net | 207,324,368 | 102,995,397 | | Total current assets | 267,146,297 | 271,080,905 | | Total assets | 419,784,142 | 393,277,628 | | LIABILITIES (in USD) | | | | Accounts payable | 8,951,261 | 21,582,866 | | Accrued liabilities | 58,883,665 | 31,573,031 | | Total current liabilities | 113,059,417 | 100,158,490 | | Total liabilities | 128,231,727 | 114,350,237 | | STOCKHOLDERS' EQUITY (in USD) | | | | Total stockholders' equity | 291,552,415 | 278,927,391 | Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income Metric (in USD) | Metric (in USD) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenues, net | 186,552,910 | 104,319,894 | 425,042,373 | 331,730,750 | | Cost of revenues | 131,502,046 | 71,254,838 | 296,346,420 | 219,418,873 | | Income from operations | 8,707,955 | 4,199,190 | 3,381,322 | 21,751,512 | | Net income | 4,630,239 | 2,466,486 | 2,055,068 | 23,594,786 | | Net income attributable to DocGo Inc. | 4,764,921 | 3,154,430 | (712,016) | 26,519,778 | | Basic EPS | 0.05 | 0.03 | (0.01) | 0.26 | | Diluted EPS | 0.05 | 0.03 | (0.01) | 0.24 | Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity Total stockholders' equity increased from $278,927,391 as of December 31, 2022, to $291,552,415 as of September 30, 2023, primarily driven by additional paid-in capital from stock-based compensation and exercise of stock options, partially offset by a net loss attributable to stockholders for the nine months ended September 30, 2023[14] Unaudited Condensed Consolidated Statements of Cash Flows Cash Flow Activity (in USD) | Cash Flow Activity (in USD) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | (58,303,111) | 37,607,545 | | Net cash (used in) investing activities | (26,919,379) | (37,793,968) | | Net cash (used in) provided by financing activities | (11,858,533) | 685,871 | | Net (decrease) increase in cash and restricted cash | (96,853,136) | 246,594 | | Cash and restricted cash at end of period | 67,255,938 | 179,352,324 | Notes to Unaudited Condensed Consolidated Financial Statements 1. Description of Organization and Business Operations DocGo Inc. is a healthcare transportation and mobile health services company operating in the U.S. and U.K., utilizing proprietary dispatch and communication technology - DocGo Inc. provides healthcare transportation and mobile health services in the U.S. and U.K. using proprietary technology[26] - The company operates in two segments: Mobile Health Services (home/office services, COVID-19 testing/vaccinations, event support, total care management) and Transportation Services (emergency and non-emergency transport, including ambulance and wheelchair transports)[28] 2. Summary of Significant Accounting Policies This section outlines the significant accounting policies, including the basis of presentation, principles of consolidation (including VIEs like MD1), foreign currency translation, use of estimates, self-insurance reserves, concentration of credit risk, major customers and vendors, emerging growth company status, reclassifications, cash and cash equivalents, restricted cash, fair value measurements, accounts receivable, property and equipment, software development costs, business combinations, impairment of long-lived assets, goodwill, line of credit, related party transactions, revenue recognition, stock-based compensation, earnings per share, equity method investments, leases, and income taxes - The financial statements are prepared in accordance with U.S. GAAP and SEC interim financial reporting rules, consolidating DocGo Inc. and its subsidiaries, including the variable interest entity MD1[30][32][34] - The company has significant customer concentration, with two customers accounting for approximately 33% and 32% of sales and 36% and 28% of net accounts receivable, respectively, for the three months ended September 30, 2023[43] - Revenue is recognized from Transportation Services and Mobile Health Services, with performance obligations satisfied immediately as customers simultaneously receive and consume benefits, and is recorded net of estimated contractual allowances[83][85] Revenue Breakdown by Geographical Markets and Service Lines | Revenue Breakdown (in USD) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Primary Geographical Markets | | | | | | United States | 174,076,595 | 101,337,899 | 385,589,261 | 322,706,143 | | United Kingdom | 12,476,315 | 2,981,995 | 39,453,112 | 9,024,607 | | Total revenue | 186,552,910 | 104,319,894 | 425,042,373 | 331,730,750 | | Major Segments/Service Lines | | | | | | Transportation Services | 47,212,443 | 27,670,109 | 132,690,538 | 77,657,852 | | Mobile Health Services | 139,340,467 | 76,649,785 | 292,351,835 | 254,072,898 | | Total revenue | 186,552,910 | 104,319,894 | 425,042,373 | 331,730,750 | 3. Property and Equipment, Net This section details the composition of property and equipment, net, and the associated depreciation expenses for the periods presented, showing an increase in net property and equipment from December 31, 2022, to September 30, 2023 Category (in USD) | Category (in USD) | Sep 30, 2023 | Dec 31, 2022 | | :------------------------ | :----------- | :----------- | | Transportation equipment | 23,327,391 | 20,773,862 | | Medical equipment | 6,864,138 | 5,177,520 | | Office equipment and furniture | 3,507,597 | 2,686,065 | | Leasehold improvements | 656,662 | 579,658 | | Buildings | 527,283 | 527,283 | | Land | 37,800 | 37,800 | | Less: Accumulated depreciation | (13,068,208) | (8,524,013) | | Property and equipment, net | 21,852,663 | 21,258,175 | - Depreciation expense for the three months ended September 30, 2023, was $1,625,070, up from $1,150,806 in the prior year, and for the nine months ended September 30, 2023, it was $4,697,717, compared to $2,592,244 in the prior year[106] 4. Acquisition of Businesses DocGo Inc. completed several acquisitions in 2022 and 2023 to expand its medical services and transportation capabilities, involving a mix of cash, stock, deferred consideration, and contingent liabilities - In 2022, DocGo acquired Government Medical Services, LLC (GMS), Exceptional Medical Transportation, LLC (Exceptional), Ryan Bros. Fort Atkinson, LLC (Ryan Brothers), Community Ambulance Services Ltd. (CAS), and Location Medical Services, LLC (LMS) to expand its services and geographic presence[107][108][109][110][111] - In 2023, DocGo acquired 51% of Cardiac RMS, LLC (CRMS) for $10 million (cash and stock), the remaining shares of Ambulnz-FMC North America LLC (FMC NA) for $7 million (cash and stock), and the remaining shares of Healthworx LLC for $1.385 million in cash[114][115][116] Total Consideration for Acquisitions | Consideration Type (in USD) | Total Consideration | | :-------------------------- | :------------------ | | Cash consideration | 52,979,760 | | Stock consideration | 4,000,000 | | Due to seller | 17,279,201 | | Amounts held under an escrow account | 1,333,333 | | Contingent liability | 26,377,730 | | Total consideration | 101,970,024 | 5. ABC and Held for Sale Ambulnz Health, LLC initiated an ABC liquidation process in February 2023, leading to its assets and liabilities being classified as held for sale and subsequently derecognized from the consolidated balance sheet - Health ceased business operations and initiated an ABC liquidation process, with assets transferred to an Assignee for creditor distribution[121] - As of December 31, 2022, Health's assets and liabilities were classified as held for sale, and by September 30, 2023, all related assets and liabilities were adjusted to zero, indicating the completion of the held-for-sale classification[122][125] 6. Goodwill Goodwill balances were impacted by an impairment charge related to the Health reporting unit's liquidation in 2022 and increased due to acquisitions in 2023, with a carrying value of $47.6 million as of September 30, 2023 - A non-cash goodwill impairment charge of $2,921,958 was recognized in 2022 due to the ABC filing of the Health reporting unit[127] Goodwill (in USD) | Goodwill (in USD) | Amount | | :------------------------ | :----------- | | Balance as of Dec 31, 2022 | 38,900,413 | | Goodwill acquired during the period | 8,642,190 | | Currency translation adjustment | 51,701 | | Balance as of Sep 30, 2023 | 47,594,304 | 7. Intangibles Intangible assets increased significantly from December 31, 2022, to September 30, 2023, primarily due to additions in customer relationships and the reclassification of trade credits, with a corresponding increase in amortization expense Intangible Asset (in USD) | Intangible Asset (in USD) | Sep 30, 2023 Net Carrying Amount | Dec 31, 2022 Net Carrying Amount | | :------------------------ | :------------------------------- | :------------------------------- | | Patents | 69,089 | 52,707 | | Computer software | 13,900 | 22,942 | | Operating licenses | 9,399,004 | 8,799,004 | | Internally developed software | 1,441,939 | 1,905,147 | | Material contracts | 62,550 | 62,550 | | Customer relationships | 25,714,946 | 11,803,653 | | Trademark | 295,070 | 323,243 | | Non-compete agreements | 90,000 | — | | Trade credits | 1,500,000 | — | | Total Intangibles, net | 38,586,498 | 22,969,246 | - Amortization expense for intangibles increased to $1,515,378 for the three months ended September 30, 2023 (from $990,345 in 2022) and to $4,295,958 for the nine months ended September 30, 2023 (from $2,269,423 in 2022)[135] - Trade credits of $1,500,000 were reclassified from accounts receivable to intangible assets in June 2023, representing the remaining amount owed by a customer for mobile health services, to be amortized as advertising services are used[138][139] 8. Accrued Liabilities Accrued liabilities significantly increased from December 31, 2022, to September 30, 2023, primarily driven by higher accrued subcontractors and accrued workers' compensation and other insurance liabilities Accrued Liability (in USD) | Accrued Liability (in USD) | Sep 30, 2023 | Dec 31, 2022 | | :------------------------------------ | :----------- | :----------- | | Accrued subcontractors | 24,121,473 | 8,101,150 | | Accrued general expenses | 13,595,062 | 11,436,462 | | Accrued workers' compensation and other insurance liabilities | 10,786,533 | 3,766,469 | | Accrued payroll | 5,707,651 | 4,245,838 | | Accrued bonus | 1,893,172 | 1,500,717 | | Accrued fuel and maintenance | 902,789 | 253,243 | | Other current liabilities | 798,826 | 706,528 | | Accrued legal fees | 550,921 | 344,417 | | Accrued lab fees | 463,008 | 584,203 | | Credit card payable | 34,941 | 78,838 | | FICA/Medicare liability | 29,289 | 555,166 | | Total accrued liabilities | 58,883,665 | 31,573,031 | 9. Line of Credit DocGo Inc. entered into a $90 million revolving credit facility in November 2022, with an option to increase by $50 million, and drew $25 million on October 19, 2023, with no amounts outstanding as of September 30, 2023 - On November 1, 2022, the Company entered into a revolving credit facility for an initial aggregate principal amount of $90,000,000, with an option to increase by an additional $50,000,000[142] - The Revolving Facility matures on November 1, 2027, and is secured by a first-priority lien on substantially all of the Company's present and future personal and intangible assets[142] - As of September 30, 2023, no draws had been made, but on October 19, 2023, the Company drew down $25,000,000[142] 10. Notes Payable The company's notes payable, primarily for equipment and financing loans, increased from December 31, 2022, to September 30, 2023, with varying interest rates and maturity dates through 2028 Notes Payable (in USD) | Notes Payable (in USD) | Sep 30, 2023 | Dec 31, 2022 | | :------------------------------------ | :----------- | :----------- | | Equipment and financing loans payable | 2,740,991 | 1,901,514 | | Less: current portion of notes payable | (696,053) | (664,913) | | Total non-current portion of notes payable | 2,044,938 | 1,236,601 | - Interest expense on notes payable was $48,794 for the three months ended September 30, 2023 (up from $26,296 in 2022) and $110,203 for the nine months ended September 30, 2023 (up from $69,804 in 2022)[144][145] 11. Business Segment Information DocGo Inc. reports in three operating segments: Transportation Services, Mobile Health Services, and Corporate, with the Corporate segment centralizing shared services and leadership costs since Q1 2023 - Beginning Q1 2023, the Company reports in three segments: Transportation Services, Mobile Health Services, and Corporate, with the Corporate segment handling shared services and senior leadership costs[146] Segment Operating Results (Three Months Ended September 30) | Metric (in USD) | Transportation Services (2023) | Mobile Health Services (2023) | Corporate (2023) | Total (2023) | Transportation Services (2022) | Mobile Health Services (2022) | Corporate (2022) | Total (2022) | | :-------------------------- | :----------------------------- | :---------------------------- | :--------------- | :----------- | :----------------------------- | :---------------------------- | :--------------- | :----------- | | Revenues | 47,212,443 | 139,340,467 | — | 186,552,910 | 27,670,109 | 76,649,785 | — | 104,319,894 | | Income (loss) from operations | 503,687 | 21,109,619 | (12,905,351) | 8,707,955 | (3,858,715) | 17,962,484 | (9,904,579) | 4,199,190 | | Total assets | 129,796,548 | 225,084,373 | 64,903,221 | 419,784,142 | 102,061,123 | 84,096,109 | 169,762,978 | 355,920,210 | | Depreciation and amortization expense | 2,333,426 | 1,193,187 | 809,654 | 4,336,267 | 1,688,219 | 550,034 | 776,611 | 3,014,864 | | Stock compensation | 136,472 | 274,108 | 2,950,130 | 3,360,710 | 152,163 | 80,351 | 878,689 | 1,111,203 | | Capital expenditures | 3,016,381 | 1,692,902 | 783,422 | 5,492,705 | 4,839,972 | 11,504,148 | 1,009,414 | 17,353,534 | Segment Operating Results (Nine Months Ended September 30) | Metric (in USD) | Transportation Services (2023) | Mobile Health Services (2023) | Corporate (2023) | Total (2023) | Transportation Services (2022) | Mobile Health Services (2022) | Corporate (2022) | Total (2022) | | :-------------------------- | :----------------------------- | :---------------------------- | :--------------- | :----------- | :----------------------------- | :---------------------------- | :--------------- | :----------- | | Revenues | 132,690,538 | 292,351,835 | — | 425,042,373 | 77,657,852 | 254,072,898 | — | 331,730,750 | | Income (loss) from operations | 853,164 | 52,081,169 | (49,553,011) | 3,381,322 | (11,737,903) | 71,540,872 | (38,051,457) | 21,751,512 | | Total assets | 129,796,548 | 225,084,373 | 64,903,221 | 419,784,142 | 102,061,123 | 84,096,109 | 169,762,978 | 355,920,210 | | Depreciation and amortization expense | 6,137,364 | 3,111,497 | 2,567,796 | 11,816,657 | 4,127,322 | 980,677 | 2,145,657 | 7,253,656 | | Stock compensation | 612,077 | 573,930 | 13,975,840 | 15,161,847 | 827,946 | 486,231 | 3,219,582 | 4,533,759 | | Capital expenditures | 16,460,730 | 28,109,057 | 3,159,172 | 47,728,959 | 3,317,127 | 10,884,649 | 5,908,513 | 20,110,289 | 12. Equity The company's Board of Directors authorized a share repurchase program of up to $40 million in May 2022, under which 536,839 shares were repurchased and cancelled in 2022, with no repurchases during the nine months ended September 30, 2023 - A share repurchase program of up to $40,000,000 was authorized on May 24, 2022, expiring November 24, 2023[155] - In 2022, 536,839 shares were repurchased for $3,731,712 and subsequently cancelled, with no shares repurchased during the nine months ended September 30, 2023[155] 13. Stock-Based Compensation This section details the company's stock option and restricted stock unit (RSU) activity, including grants, exercises, cancellations, and associated compensation expenses, with significant unrecognized compensation costs remaining - As of September 30, 2023, approximately 2.9 million employee stock options had vested, with a total unrecognized compensation of $30,994,529 expected to be recognized over 1.85 years[156][160] Stock Option Activity (Nine Months Ended September 30, 2023) | Stock Option Activity | Options Shares | Weighted Average Exercise Price | | :-------------------- | :------------- | :------------------------------ | | Balance as of Dec 31, 2022 | 11,571,308 | $7.11 | | Granted/vested | 1,115,874 | $8.92 | | Exercised | (493,984) | $3.63 | | Cancelled | (551,665) | $7.66 | | Balance as of Sep 30, 2023 | 11,641,533 | $7.42 | - For RSUs, the total grant-date fair value granted during the nine months ended September 30, 2023, was $2,130,040, with unrecognized compensation cost for non-vested RSUs of $3,290,875 expected to be recognized over 1.3 years[161][162] 14. Leases The company has both operating and finance leases for office space, dispatch stations, and transportation equipment, with increased cash payments for both lease types in 2023 compared to 2022 Operating Lease Costs (in USD) | Component of Total Lease Cost | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :---------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating lease expense | 697,050 | 626,188 | 2,319,282 | 1,517,541 | | Short-term lease expense | 452,538 | 334,619 | 1,156,886 | 863,316 | | Total lease cost - operating leases | 1,149,588 | 960,807 | 3,476,168 | 2,380,857 | Finance Lease Payments (in USD) | Component of Total Lease Cost | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :---------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Finance lease payment | 782,808 | 672,975 | 2,293,330 | 2,146,857 | | Short-term lease payment | — | — | — | — | | Total lease payments | 782,808 | 672,975 | 2,293,330 | 2,146,857 | - As of September 30, 2023, the weighted average remaining lease term for operating leases was 4.36 years with a discount rate of 5.76%, and for finance leases, it was 3.58 years with a discount rate of 5.96%[170][180] 15. Other Income (Expense) Other income (expense) for the three and nine months ended September 30, 2023, showed a significant shift compared to the prior year, primarily due to the absence of warrant liability remeasurement losses/gains and the recognition of a contingent liability change in fair value Other Income (Expense) (in USD) | Other Income (Expense) (in USD) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Interest income (expense), net | 346,376 | 334,221 | 1,677,420 | 296,891 | | (Loss) gain on remeasurement of warrant liabilities | — | (1,831,947) | — | 1,137,070 | | Change in fair value of contingent liability | 159,974 | — | 159,974 | — | | (Loss) gain on equity method investments | (95,503) | 93,371 | (301,362) | 99,840 | | Gain on remeasurement of finance leases | 4,834 | — | 4,834 | 1,388,273 | | (Loss) gain on disposal of fixed assets | (9,983) | 42,667 | (163,452) | 42,667 | | ABC litigation | — | — | (1,000,000) | — | | Other income | 43,353 | 30,900 | 338,175 | 42,288 | | Total other income (expense) | 449,051 | (1,330,788) | 715,589 | 3,007,029 | 16. Related Party Transactions The company engages in transactions with related parties, specifically legal services provided by a firm owned by its General Counsel and Secretary, with payments made in both 2023 and 2022 - The Company made legal payments to Ely D. Tendler Strategic & Legal Services PLLC, a related party, totaling $204,700 for the three months ended September 30, 2023 (vs. $261,185 in 2022) and $674,970 for the nine months ended September 30, 2023 (vs. $704,593 in 2022)[189] 17. Income Taxes The company recorded an increased income tax provision for both the three and nine months ended September 30, 2023, compared to the prior year, primarily due to higher pretax income - Income tax provision for the three months ended September 30, 2023, was $(4,526,767) compared to $(401,916) in 2022[191] - Income tax provision for the nine months ended September 30, 2023, was $(2,041,843) compared to $(1,163,755) in 2022[191] 18. 401(k) Plan The company established a 401(k) plan in January 2022 for eligible U.S. employees but has not made any employer contributions as of September 30, 2023 - A 401(k) plan was established in January 2022 for U.S. employees, but no employer contributions were made as of September 30, 2023[192] 19. Legal Proceedings The company is involved in legal actions in the normal course of business and accrues for probable and estimable losses, including a class-action lawsuit settled for $1 million in July 2023 - A class-action lawsuit (Stephanie Zamora, Jascha Dlugatch, et al. v. Ambulnz Health, LLC, et al.) alleging wage and hour violations was settled for $1,000,000, which was paid in July 2023[194][195] 20. Risk and Uncertainties The COVID-19 pandemic had a mixed impact on the company, initially causing declines in non-emergency transportation but boosting Mobile Health Services, with anticipated continued demand driven by secular factors - COVID-19 initially caused a decline in non-emergency medical transportation but led to incremental transportation revenue from FEMA projects and the formation of RRT for COVID-19 testing and vaccinations[197][198] - RRT expanded its services beyond COVID-19 testing to a wide variety of tests, vaccinations, and other procedures as COVID-19 testing activity slowed[198] - The company's business plan assumes increased demand for Mobile Health Services, driven by both pandemic acceleration and long-term secular factors like patient preference for out-of-hospital treatments[199] 21. Subsequent Events Subsequent events include the resignation of former CEO Anthony Capone, the appointment of Lee Bienstock as new CEO, a $25 million draw on the revolving credit facility, and a new class-action lawsuit alleging federal securities law violations - Anthony Capone resigned as CEO on September 15, 2023, and entered a transition services agreement to serve as a consultant until March 15, 2024[200][201] - On October 19, 2023, the Company drew $25,000,000 under its Revolving Facility[202] - On October 27, 2023, a putative class action complaint was filed against the Company and its officers for alleged violations of federal securities laws, which the Company intends to vigorously defend[204][206] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, operations, revenue, expenses, liquidity, capital resources, and critical accounting estimates, highlighting revenue growth and cash flow shifts Cautionary Note Regarding Forward-Looking Statements - The report contains forward-looking statements subject to substantial risks and uncertainties, which may cause actual results to differ materially from expectations[209] - Investors are cautioned not to place undue reliance on these statements, as the company operates in a competitive and rapidly changing environment, and new risks may emerge[210][211] Overview - DocGo Inc. is a healthcare transportation and mobile services company operating in the U.S. and U.K., with revenue from Mobile Health Services and Transportation Services[213][214] - The company began reporting in three operating segments in Q1 2023, adding a Corporate segment for shared services and leadership costs[214] Net Income (in USD) | Period | Net Income (2023) | Net Income (2022) | | :------------------------------------ | :---------------- | :---------------- | | Three months ended September 30 | 4,600,000 | 2,500,000 | | Nine months ended September 30 | 2,100,000 | 23,600,000 | Factors Affecting Our Results of Operations - Key factors influencing results include operating licenses, acquisition strategy, market conditions for healthcare transportation and mobile health, competitive environment, macroeconomic and geopolitical conditions, labor costs, and supplier production schedules[220] - The company completed two acquisitions for $32.8 million in the nine months ended September 30, 2023, and three acquisitions for $34.1 million in the same period of 2022[222][223] - Inflation has increased expenses (wages, fuel, medical supplies), compressing gross profit margins as the company is generally unable to pass these higher costs to customers in the short term[231] Components of Results of Operations - Revenue is generated from Mobile Health Services and Transportation Services segments[236] - Cost of revenues includes wages, vehicle insurance, maintenance, fuel, laboratory fees, facility rent, medical supplies, and subcontractors[237] - Operating expenses comprise General and Administrative, Depreciation and Amortization, Legal and Regulatory, Technology and Development, and Sales, Advertising and Marketing expenses[238][239][240][241][242] Results of Operations Comparison of the Three Months Ended September 30, 2023 and 2022 DocGo Inc. saw substantial revenue growth in Mobile Health and Transportation Services for Q3 2023, increasing net income despite faster cost of revenue growth and higher operating expenses Consolidated Financial Performance (Three Months Ended September 30) | Metric (in Millions USD) | 2023 Actual Results | 2023 % of Total Revenue | 2022 Actual Results | 2022 % of Total Revenue | Change $ | Change % | | :------------------------------------ | :------------------ | :---------------------- | :------------------ | :---------------------- | :------- | :------- | | Revenues, net | 186.6 | 100.0 % | 104.3 | 100.0 % | 82.3 | 78.9 % | | Cost of revenues | 131.5 | 70.5 % | 71.3 | 68.3 % | 60.2 | 84.4 % | | Income from operations | 8.8 | 4.7 % | 4.2 | 4.0 % | 4.6 | | | Net income | 4.7 | 2.5 % | 2.5 | 2.4 % | 2.1 | | | Net income attributable to stockholders | 4.8 | 2.6 % | 3.2 | 3.0 % | 1.6 | | - Mobile Health Services revenue increased by $62.7 million (81.8%) to $139.3 million, driven by expansion in government customer sector, increased customer base, geographic reach, contract extensions, and broader services[246][248] - Transportation Services revenue increased by $19.5 million (70.6%) to $47.2 million, due to 9.4% higher trip volumes (64,321 trips) and an increase in average trip price from $374 to $409, benefiting from higher-priced transports and an 8.7% increase in Medicare reimbursement[249] - Total cost of revenue increased by 84.4% (to 70.5% of revenue), primarily due to a $6.3 million increase in compensation, $35.7 million in subcontracted labor, and $12.3 million in medical supplies[250][251] Comparison of the Nine Months Ended September 30, 2023 and 2022 DocGo Inc. achieved significant revenue growth in the nine months ended September 30, 2023, driven by Transportation Services despite declining COVID-19 testing revenue, but increased operating expenses led to decreased operating income Consolidated Financial Performance (Nine Months Ended September 30) | Metric (in Millions USD) | 2023 Actual Results | 2023 % of Total Revenue | 2022 Actual Results | 2022 % of Total Revenue | Change $ | Change % | | :------------------------------------ | :------------------ | :---------------------- | :------------------ | :---------------------- | :------- | :------- | | Revenues, net | 425.0 | 100.0 % | 331.7 | 100.0 % | 93.3 | 28.1 % | | Cost of revenues | 296.3 | 69.7 % | 219.4 | 66.1 % | 76.9 | 35.1 % | | Income from operations | 3.4 | 0.8 % | 21.8 | 6.6 % | (18.4) | | | Net income | 2.1 | 0.5 % | 23.6 | 7.1 % | (21.5) | | | Net income attributable to stockholders | (0.7) | (0.2)% | 26.5 | 8.0 % | (27.2) | | - Mobile Health Services revenue increased by $38.3 million (15.1%) to $292.4 million, despite a significant decline in COVID-19 related mass testing revenue (from $74.0 million in 2022 to $3.0 million in 2023)[269] - Transportation Services revenue increased by $55.0 million (70.9%) to $132.7 million, driven by a 20% increase in trip volumes (185,404 trips) and an average trip price increase from $362 to $405[270] - Total operating expenses increased by $34.4 million (38.4%) to $125.3 million, primarily due to a $21.3 million increase in total compensation (including stock-based compensation), $4.7 million in depreciation and amortization, and $3.5 million in IT infrastructure[275][276] Liquidity and Capital Resources - The company's liquidity sources include existing cash, operating cash flows, and a $90 million revolving credit facility (with an option to increase by $50 million), which was drawn for $25 million in October 2023[289][290] - Working capital decreased by $17.0 million (10.0%) to $154.0 million as of September 30, 2023, primarily due to a $104.4 million decrease in available cash, offset by increased accounts receivable and higher current liabilities[292] Cash Flow Summary (Nine Months Ended September 30) | Cash Flow Activity (in Millions USD) | 2023 | 2022 | Change $ | Change % | | :------------------------------------ | :--- | :--- | :------- | :------- | | Net cash (used in) provided by operating activities | (58.3) | 37.6 | (95.9) | (255.1 %) | | Net cash (used in) investing activities | (26.9) | (37.8) | 10.9 | 28.8 % | | Net cash (used in) provided by financing activities | (11.9) | 0.7 | (12.6) | (1794.1 %) | | Net (decrease) increase in cash | (96.9) | 0.2 | (97.1) | (48526.6 %) | - Operating activities used $58.3 million cash in 2023 (vs. provided $37.6 million in 2022), mainly due to a $103.5 million increase in accounts receivable from business growth with municipalities and a $12.6 million decrease in accounts payable[294] Critical Accounting Estimates - The financial statements are prepared in conformity with U.S. GAAP, consolidating DocGo Inc. and its subsidiaries, including the variable interest entity MD1[304][307][308] - Business combinations are accounted for using the acquisition method, with assets and liabilities recorded at fair value, and goodwill is tested for impairment annually or more frequently if indicators suggest impairment[310][311][313] - Revenue recognition follows ASC 606, identifying performance obligations and recognizing revenue as benefits are transferred to customers, net of estimated contractual allowances[316][317][318] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, primarily interest rate risk, foreign exchange risk, and concentrations of credit risk, with fixed-rate notes limiting interest rate volatility and foreign exchange risk limited to U.K. operations - The company's principal market risks are interest rate volatility (limited due to fixed-rate notes payable), foreign exchange risk (limited to U.K. operations), and concentrations of credit risk[321][322][323] - Foreign exchange loss amounted to $(582,471) in Q3 2023, compared to a gain of $248,283 in Q3 2022[322] - Significant customer concentration exists, with two customers accounting for approximately 33% and 32% of sales and 36% and 28% of net accounts receivable, respectively, for the three months ended September 30, 2023[325] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2023, with no material changes in internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective as of September 30, 2023[327] - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2023[328] PART II - OTHER INFORMATION Item 1. Legal Proceedings This section reiterates information about legal proceedings, including a new putative class action complaint filed on October 27, 2023, alleging federal securities law violations against the company and its officers - A putative class action complaint was filed on October 27, 2023, in the U.S. District Court for the Southern District of New York, alleging federal securities law violations against the Company, its Chairman, current and former CEOs, and CFOs[333] - The company disputes the allegations and intends to defend itself vigorously, noting that it cannot reasonably estimate the potential range of loss at this early stage[333] Item 1A. Risk Factors As of the filing date, there have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes to the risk factors disclosed in the 2022 Form 10-K have occurred as of the date of this Quarterly Report on Form 10-Q[335] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities This item reports no unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities for the period - No unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities occurred during the period[336] Item 3. Defaults Upon Senior Securities This item indicates that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities during the reporting period[337] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[338] Item 5. Other Information This section details recent corporate governance updates, including amendments to the company's bylaws and the executive employment agreement for the new CEO, Lee Bienstock, and confirms no trading plans were adopted, modified, or terminated by directors or officers in Q3 2023 - The Board of Directors approved and adopted an amendment and restatement of the company's bylaws on November 2, 2023, to align with new SEC rules and Delaware General Corporation Law changes[339] - Lee Bienstock was appointed CEO on September 15, 2023, with an Executive Employment Agreement providing an annual base salary of $785,000, a target annual bonus of 100% of base salary, and significant equity grants[343][344] - No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements in Q3 2023, and the company did not adopt any Rule 10b5-1 trading arrangement[349] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance documents, executive agreements, certifications, and XBRL data files - Key exhibits include the Amended and Restated Bylaws, the Separation and Transition Services Agreement with Anthony Capone, and the Executive Employment Agreement with Lee Bienstock[351] - Certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Exchange Act rules and Sarbanes-Oxley Act are also included[351] Signatures The report is duly signed on behalf of DocGo Inc. by its Chief Executive Officer, Lee Bienstock, and Chief Financial Officer and Treasurer, Norman Rosenberg, on November 6, 2023 - The report was signed by Lee Bienstock, Chief Executive Officer, and Norman Rosenberg, Chief Financial Officer and Treasurer, on November 6, 2023[357]