Doximity(DOCS) - 2023 Q4 - Annual Report

Part I Business Doximity operates a leading digital platform for U.S. medical professionals, generating revenue from subscription-based Marketing, Hiring, and Telehealth solutions - Doximity is the leading digital platform for U.S. medical professionals, with over two million members as of March 31, 2023, including more than 80% of U.S. physicians, over 50% of nurse practitioners and physician assistants, and over 90% of graduating medical students[18] - The business model provides free tools for medical professionals while generating revenue from customers like pharmaceutical manufacturers and health systems through three main solution categories: Marketing, Hiring, and Telehealth[21][22][23] - The company's growth strategy includes expanding its member network, innovating its platform, increasing sales to existing customers, attracting new customers, monetizing telehealth solutions, and pursuing strategic acquisitions[50] - On April 1, 2022, Doximity acquired AMiON, a shift scheduling service, to further expand its physician cloud platform[47][50] Overview and Tools for Medical Professionals Doximity's platform offers U.S. clinicians a professional network, AI-powered newsfeed, and HIPAA-compliant productivity tools like Dialer for enhanced patient care and collaboration - The platform provides members with a professional network for connectivity, a personalized newsfeed for medical information, and a suite of productivity tools[19] - The Newsfeed uses AI to deliver personalized content, including medical articles and videos, and automatically tracks eligible Continuing Medical Education (CME) credits for members[29][30] - Productivity tools are HIPAA-compliant and include Dialer for voice and video calls, secure messaging, and digital fax/eSignature capabilities to streamline clinical workflows[32][35] Solutions for Healthcare Customers Doximity provides subscription-based Marketing, Hiring, and Telehealth solutions to pharmaceutical manufacturers, health systems, and medical recruiting firms, including the AMiON shift scheduling service - Marketing Solutions enable pharmaceutical and health system customers to serve members with tailored sponsored content, categorized into Awareness, Interactivity, and Peer modules[34][35][45] - Hiring Solutions offer digital recruiting capabilities through job posts and direct messaging subscriptions, supplemented by a tech-enabled, higher-touch service called Curative Talent[40][41][42] - Telehealth Solutions include Dialer Enterprise, a subscription-based telehealth tool for health systems, which builds on the organic adoption of the free Dialer tool used by individual members[43][44][45] - The acquisition of AMiON on April 1, 2022, added a shift scheduling service for health systems to the company's offerings[47] Competition Doximity faces competition across member engagement, marketing, hiring, and telehealth segments from large tech companies, specialized healthcare platforms, and staffing firms - Competes for members with large tech companies like LinkedIn, Facebook, and Google[60] - Competes for marketing budgets with outlets like WebMD's Medscape[60] - Competes for hiring budgets with healthcare staffing companies and job boards[60] - Competes for telehealth budgets with dedicated services like Teladoc and Amwell, and communication platforms like Zoom and Microsoft Teams[60] Data Protection, Security, and Regulatory Compliance Doximity is subject to complex data privacy and healthcare regulations, including HIPAA, CCPA/CPRA, and TCPA, requiring strict compliance and robust data protection measures - The company is a "business associate" under HIPAA and is subject to its privacy and security rules, with potential for civil and criminal penalties for violations[70][71] - Doximity is also subject to various state privacy laws, such as the California Consumer Privacy Act (CCPA) and California Privacy Rights Act (CPRA), which may be more restrictive than HIPAA[72] - The company's communication tools may be subject to federal and state laws like the Telephone Consumer Protection Act (TCPA)[73] - Data is protected with measures including Web Application Firewalls, Bot Protection, DDoS mitigation, and encryption (TLS 1.2 in transit, AES-256 for PHI at rest)[69] Risk Factors The company faces significant risks including operational challenges, intense competition, stringent data privacy regulations, technology dependence, and concentrated voting control due to its dual-class stock structure - Failure to effectively manage growth, retain members, or attract and retain customers could significantly harm the business[88][94][98] - Revenue is relatively concentrated, and the loss of key customers could slow growth or cause revenue to decline[101] - The business is subject to stringent and changing data privacy laws (e.g., HIPAA, CCPA), and a failure to comply or a security breach could result in significant fines, liability, and reputational harm[123][125][136] - The dual-class stock structure concentrates approximately 86% of voting power with executive officers and directors, limiting the influence of Class A stockholders on corporate matters[87][230] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[245] Properties Doximity's corporate headquarters is a leased 9,197 square foot space in San Francisco, with additional leased office space in Irving, Texas - The corporate headquarters is approximately 9,197 square feet of leased space in San Francisco, CA, with the lease expiring at the end of 2023[246] - The company also leases office space in Irving, Texas and does not own any real property[246] Legal Proceedings Information on legal proceedings is detailed in Note 14—Commitments and Contingencies of the financial statements - Information on legal proceedings is detailed in Note 14—Commitments and Contingencies[248] Mine Safety Disclosures This item is not applicable to the company - None[249] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Doximity's Class A common stock trades on the NYSE, with no cash dividends paid, and the company repurchased $16.0 million in shares during fiscal 2023 - Class A common stock is listed on the NYSE under the symbol "DOCS", trading since June 24, 2021. There is no public market for Class B common stock[251] - The company has never paid cash dividends and does not expect to in the foreseeable future, intending to retain earnings for business expansion[253] Share Repurchases (Q4 FY2023) | Period | Total Number of Shares Repurchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions) | | :--- | :--- | :--- | :--- | | January 1 - 31, 2023 | — | $ — | $ 70.0 | | February 1 - 28, 2023 | — | $ — | $ 70.0 | | March 1 - 31, 2023 | 523,647 | $ 30.59 | $ 54.0 | Management's Discussion and Analysis of Financial Condition and Results of Operations In FY2023, Doximity's revenue grew 22% to $419.1 million, with net income decreasing due to a prior-year tax benefit, while maintaining strong liquidity and customer retention FY2023 vs. FY2022 Financial Performance | Metric | FY 2023 | FY 2022 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $419.1M | $343.5M | +$75.5M | +22% | | Gross Profit | $365.6M | $303.8M | +$61.8M | +20% | | Income from Operations | $125.1M | $113.5M | +$11.6M | +10% | | Net Income | $112.8M | $154.8M | -$42.0M | -27% | | Adjusted EBITDA | $184.0M | $150.3M | +$33.7M | +22% | Key Business Metrics | Metric | March 31, 2023 | March 31, 2022 | March 31, 2021 | | :--- | :--- | :--- | :--- | | Customers with at least $100,000 of revenue | 294 | 254 | 188 | | Net revenue retention rate | 117% | 157% | 153% | - The 22% revenue growth in FY2023 was primarily driven by a $70.4 million increase in subscription revenue, with $55.1 million from existing customer expansion and $15.3 million from new customers[288] - The company maintains strong liquidity with $841.0 million in cash, cash equivalents, and marketable securities as of March 31, 2023[299] Results of Operations (FY2023 vs FY2022) In FY2023, revenue grew 22% to $419.1 million, while increased operating expenses and a shift from a tax benefit to a tax provision led to a decrease in net income Revenue Breakdown FY2023 vs FY2022 | Category | FY 2023 (in millions) | FY 2022 (in millions) | Change (in millions) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $419.1 | $343.5 | $75.5 | 22% | Operating Expenses FY2023 vs FY2022 | Category | FY 2023 (in millions) | FY 2022 (in millions) | Change (in millions) | % Change | | :--- | :--- | :--- | :--- | :--- | | Research & Development | $80.2 | $62.4 | $17.8 | 29% | | Sales & Marketing | $123.5 | $92.1 | $31.4 | 34% | | General & Administrative | $36.7 | $35.7 | $1.0 | 3% | - The provision for income taxes was an expense of $20.3 million in FY2023, compared to a benefit of $40.8 million in FY2022. This change was primarily due to a decrease in tax deductions from stock option activities[296] Liquidity and Capital Resources As of March 31, 2023, Doximity held $841.0 million in cash and marketable securities, with strong operating cash flow and ongoing share repurchase programs - Principal sources of liquidity as of March 31, 2023, were cash and cash equivalents and marketable securities totaling $841.0 million[299] - The company authorized two separate $70.0 million share repurchase programs. The first was completed in September 2022. Under the second program, authorized in October 2022, the company repurchased $16.0 million of stock, with $54.0 million remaining as of March 31, 2023[301][302] Cash Flow Summary (in millions) | Cash Flow Activity | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $179.6 | $126.6 | | Net cash used in investing activities | $(59.9) | $(640.6) | | Net cash (used in) provided by financing activities | $(74.5) | $560.4 | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate fluctuations, potentially impacting its $841.0 million investment portfolio, and the potential future effects of inflation - The company is exposed to interest rate risk on its portfolio of cash, cash equivalents, and marketable securities, which totaled $841.0 million as of March 31, 2023[337][299] - A hypothetical 100 basis point increase in interest rates would have resulted in a $5.0 million decrease in the market value of cash equivalents and marketable securities as of March 31, 2023[338] - The company does not believe inflation has had a material effect on its business to date[339] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements, including the auditor's report highlighting critical audit matters like revenue recognition and AMiON intangible asset valuation - The independent auditor's report identified two critical audit matters: (1) Revenue Recognition for subscription contracts, focusing on the evaluation of contract terms to determine the pattern of recognition, and (2) the valuation of the customer relationships intangible asset acquired in the AMiON business combination[347][348][350] Consolidated Balance Sheet Highlights (as of March 31, 2023) | Account | Amount (in millions) | | :--- | :--- | | Assets | | | Cash and cash equivalents | $158.0 | | Marketable securities | $683.0 | | Total Assets | $1,136.9 | | Liabilities & Equity | | | Total Liabilities | $170.8 | | Total Stockholders' Equity | $966.1 | | Total Liabilities and Stockholders' Equity | $1,136.9 | Consolidated Statement of Operations Highlights (for Fiscal Year Ended March 31, 2023) | Account | Amount (in millions) | | :--- | :--- | | Revenue | $419.1 | | Gross Profit | $365.6 | | Income from Operations | $125.1 | | Net Income | $112.8 | | Diluted EPS | $0.53 | Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of March 31, 2023, with no material changes during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2023[550] - Management's report concluded that internal control over financial reporting was effective as of March 31, 2023, and this assessment was audited by the independent registered public accounting firm[553] - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2023[551] Part III Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2023 Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[556] Executive Compensation Information regarding executive compensation is incorporated by reference from the 2023 Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[558] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership by beneficial owners and management is incorporated by reference from the 2023 Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[559] Certain Relationships and Related Transactions, and Director Independence Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the 2023 Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[560] Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the 2023 Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[561] Part IV Exhibits and Financial Statement Schedules This section lists all exhibits filed with the Annual Report, including corporate governance documents, material contracts, and certifications - Lists all exhibits filed with the Annual Report, including the Amended and Restated Certificate of Incorporation, bylaws, equity incentive plans, and CEO/CFO certifications[563] Form 10-K Summary The company indicates that no Form 10-K summary is provided - None[566]