Doximity(DOCS) - 2024 Q3 - Quarterly Report

Part I—Financial Information Condensed Consolidated Financial Statements (Unaudited) Presents Doximity's unaudited condensed consolidated financial statements for Q3 and nine months ended Dec 31, 2023, including balance sheets, operations, and cash flows Condensed Consolidated Balance Sheets Doximity's total assets decreased to $1.0 billion from $1.14 billion as of December 31, 2023, driven by reduced cash and marketable securities Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2023 | Mar 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $840,899 | $975,453 | | Total Assets | $1,000,649 | $1,136,888 | | Total Current Liabilities | $104,762 | $139,507 | | Total Liabilities | $136,035 | $170,772 | | Total Stockholders' Equity | $864,614 | $966,116 | Condensed Consolidated Statements of Operations For Q3 2023, revenue grew 17% to $135.3 million and net income increased 43% to $48.0 million, with diluted EPS at $0.24 Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | 9 Months 2023 | 9 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $135,284 | $115,262 | $357,365 | $308,086 | | Gross Profit | $123,094 | $101,736 | $319,263 | $268,273 | | Income from Operations | $58,551 | $38,484 | $122,026 | $92,267 | | Net Income | $47,956 | $33,468 | $106,964 | $82,150 | | Diluted EPS | $0.24 | $0.16 | $0.52 | $0.38 | Condensed Consolidated Statements of Cash Flows Net cash from operations decreased to $120.2 million, while investing activities provided $107.4 million, and financing used $262.4 million due to repurchases Cash Flow Summary for Nine Months Ended Dec 31 (in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $120,152 | $132,963 | | Net cash provided by (used in) investing activities | $107,356 | $(46,719) | | Net cash used in financing activities | $(262,446) | $(62,599) | - The increase in cash paid for income taxes to $38.4 million from $2.5 million YoY was partially related to the Tax Cuts and Jobs Act of 2017, requiring capitalization and amortization of R&D expenditures[197] Notes to Condensed Consolidated Financial Statements Detailed notes explain accounting policies, revenue recognition, investments, equity structure, and the August 2023 restructuring plan - The company's revenue primarily derives from Marketing Solutions and Hiring Solutions for pharmaceutical and health system customers[28][39][40] Revenue Disaggregation (in thousands) | Revenue Source | Q3 2023 | Q3 2022 | 9 Months 2023 | 9 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Subscription | $129,489 | $107,508 | $337,398 | $286,556 | | Other | $5,795 | $7,754 | $19,967 | $21,530 | | Total revenue | $135,284 | $115,262 | $357,365 | $308,086 | - In August 2023, the company initiated a restructuring plan, reducing its workforce by approximately 10% and incurring $7.9 million in related expenses[120] - As of December 31, 2023, $62.0 million remained available under the latest $70 million stock repurchase program authorized in October 2023[97][98][99] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, highlighting 17% revenue growth, key metrics, non-GAAP measures, operational results, liquidity, and capital resources Overview and Key Metrics Doximity, a leading digital platform for U.S. medical professionals, achieved 17% YoY revenue growth in Q3 2023, with key customer and retention metrics monitored - Doximity's platform includes over 80% of U.S. physicians across all 50 states and every medical specialty[137] Key Business Metrics as of December 31 | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Customers with at least $100,000 of TTM revenue | 289 | 282 | | Net revenue retention rate | 115% | 119% | Non-GAAP Financial Measures The company utilizes Adjusted EBITDA and Free Cash Flow as key non-GAAP measures, with Adjusted EBITDA reaching $73.3 million (54% margin) in Q3 2023 Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Metric | Q3 2023 | Q3 2022 | 9 Months 2023 | 9 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net income | $47,956 | $33,468 | $106,964 | $82,150 | | Adjusted EBITDA | $73,283 | $55,501 | $174,020 | $135,038 | | Net income margin | 35% | 29% | 30% | 27% | | Adjusted EBITDA margin | 54% | 48% | 49% | 44% | Reconciliation of Net Cash from Operations to Free Cash Flow (in thousands) | Metric | 9 Months 2023 | 9 Months 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $120,152 | $132,963 | | Purchases of property and equipment | $(147) | $(1,680) | | Internal-use software development costs | $(4,020) | $(3,478) | | Free cash flow | $115,985 | $127,805 | Results of Operations Q3 2023 revenue increased 17% to $135.3 million, driven by subscription growth and improved gross margin to 91%, while operating expenses remained relatively flat - The $20.0 million YoY revenue increase in Q3 was primarily driven by $16.0 million from existing customers and $6.0 million from new customers[173] - Gross margin for Q3 and the nine-month period increased to 91% and 89% respectively, benefiting from revenue growth and restructuring efficiencies[174][176] - The company incurred $7.9 million in restructuring charges during the nine months ended Dec 31, 2023, related to a 10% workforce reduction[184] Liquidity and Capital Resources As of December 31, 2023, liquidity totaled $710.2 million in cash and marketable securities, with active share repurchase programs including a new $70 million authorization - Principal sources of liquidity as of December 31, 2023, were cash, cash equivalents, and marketable securities totaling $710.2 million[188] - The company completed $340 million in share repurchase programs and authorized a new $70 million program in October 2023, with $62.0 million remaining available as of Dec 31, 2023[189][190][191] Quantitative and Qualitative Disclosures about Market Risk The company faces market risks, primarily interest rate risk on its $710.2 million investment portfolio, with a 100 basis point rate increase potentially decreasing its market value by $2.9 million - The company's primary market risk is interest rate risk affecting its $710.2 million portfolio of cash, cash equivalents, and marketable securities[188][208] - A hypothetical 100 basis point increase in interest rates would decrease the market value of cash equivalents and marketable securities by $2.9 million as of December 31, 2023[210] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of December 31, 2023, with no material changes in internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the report period end[212] - No material changes in internal control over financial reporting occurred during the quarter[213] Part II—Other Information Legal Proceedings The company is not aware of any legal matters that would materially affect its financial position or results of operations - The company is not aware of any legal matters that would materially affect its financial results[126][216] Risk Factors There have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the fiscal year ended March 31, 2023 - No material changes to the risk factors from the Annual Report on Form 10-K for the fiscal year ended March 31, 2023, have been reported[217] Unregistered Sales of Equity Securities and Use of Proceeds Details unregistered equity sales, including stock option exercises and warrant, and updates on share repurchase activities, with no material change in IPO proceeds use Share Repurchases for Q3 2023 | Period | Total Shares Repurchased | Average Price Paid per Share | | :--- | :--- | :--- | | Oct 1 - 31, 2023 | 2,916,353 | $21.84 | | Nov 1 - 30, 2023 | 162,720 | $24.17 | | Dec 1 - 31, 2023 | 169,240 | $24.13 | | Total | 3,248,313 | - | - The October 2022 ($70 million) and June 2023 ($200 million) repurchase programs were completed as of October 2023, with a new $70 million program authorized[222][224] Other Information CFO Anna Bryson adopted a Rule 10b5-1 trading plan on November 30, 2023, to sell 120,000 shares of common stock over a one-year period - CFO Anna Bryson adopted a Rule 10b5-1 trading plan on November 30, 2023, to sell 120,000 shares of common stock over a one-year period[228]