DocGo (US:DCGO)2024-02-27 16:00Part I Business Overview DocGo operates as a mobile healthcare services company, providing medical transportation and mobile health services in 30 U.S. states and the United Kingdom, with Mobile Health Services accounting for 71% of 2023 revenue FY 2023 Revenue by Segment | Segment | Revenue Contribution | | :--- | :--- | | Mobile Health Services | 71% | | Transportation Services | 29% | - Government contracts are a substantial part of DocGo's business, representing approximately 73% of total revenues for the fiscal year ended December 31, 202340 Employee Breakdown as of December 31, 2023 | Employee Category | Full-time | Part-time | Total | | :--- | :--- | :--- | :--- | | Healthcare Professionals | 2,176 | 1,234 | 3,410 | | Field Management Personnel | 469 | 6 | 475 | | Corporate Support Staff | 270 | 9 | 279 | | Total | 2,915 | 1,249 | 4,164 | - The company faces competition from a range of providers, including larger national telehealth companies like DispatchHealth and Modivcare, as well as potential disruption from large technology companies such as Amazon and major retailers like CVS6465 - DocGo's operations are subject to comprehensive U.S. federal, state, and local regulations, including the False Claims Act, HIPAA, the Anti-Kickback Statute, and the Stark Law, which govern healthcare services, billing, and patient data privacy70717886 Risk Factors DocGo faces multiple risks, primarily related to its heavy reliance on government contracts and a small number of large customers, intense competition, and the complex regulatory environment - The company's reliance on government contracts is a significant risk, as these contracts accounted for approximately 73% of revenues in 2023 and are subject to funding changes, audits, and potential termination114 - DocGo has significant customer concentration risk, with two customers accounting for approximately 40% and 21% of total revenues for the year ended December 31, 2023119 - Labor expenses are the company's largest cost, representing approximately 73% of 2023 revenues, and inability to control these costs could adversely affect business158 - The company is highly dependent on information technology systems and faces risks from security breaches and cybersecurity incidents that could compromise sensitive patient health information (PHI), leading to liability and reputational harm151 - Operating in the heavily regulated healthcare industry exposes DocGo to risks of non-compliance with laws like the False Claims Act, Anti-Kickback Statute, and HIPAA, which could result in significant penalties and changes to operations201202 Unresolved Staff Comments The company reports that there are no unresolved staff comments - None273 Cybersecurity DocGo has implemented a cybersecurity risk management program overseen by its Chief Technology Officer and the Board's Audit and Compliance Committee, with no material impact to date - The company's cybersecurity risk management is led by the Chief Technology Officer (CTO) and overseen by the Board's Audit and Compliance Committee280281 - DocGo has adopted a Cybersecurity Incident Response Plan that follows the National Institute of Standards and Technology (NIST) framework, focusing on preparation, detection, containment, and remediation276277 - As of the report date, risks from cybersecurity threats have not materially affected the company's business strategy, results of operations, or financial condition279 Properties DocGo's principal executive offices are in New York City, with 45 U.S. and 14 U.K. office locations, and a fleet of 580 vehicles in the U.S. and 294 in the U.K Vehicle Fleet as of December 31, 2023 | Region | Total Vehicles | Key Vehicle Types | Ownership Status | | :--- | :--- | :--- | :--- | | United States | 580 | 350 ambulances, 54 wheelchair vans | 56% owned, 44% leased | | United Kingdom | 294 | 22 first response ambulances, 200 patient transport vehicles | 75% owned, 25% leased | - The company's U.S. ambulance fleet has an average age of approximately four years, and vehicles are generally replaced every five to eight years283 Legal Proceedings DocGo is subject to legal proceedings, including a settled $1 million class-action lawsuit for wage and hour violations and an ongoing putative class-action complaint for alleged federal securities law violations - A class-action lawsuit in California alleging wage and hour violations was settled for $1 million, with final court approval granted on May 2, 2023647 - In October 2023, a putative class-action complaint was filed against the company and certain officers alleging violations of federal securities laws, which the company disputes and intends to defend vigorously648 Mine Safety Disclosures This item is not applicable to the company - Not applicable289 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities DocGo's common stock trades on Nasdaq under "DCGO", the company has not paid cash dividends, and the Board approved a new $36 million share repurchase program in January 2024 - The company's common stock is traded on the Nasdaq Stock Market under the symbol "DCGO"292 - DocGo has not declared or paid any cash dividends and does not currently intend to pay them in the foreseeable future, planning to retain earnings for operations and expansion293 - On January 30, 2024, the Board approved a share repurchase program authorizing the purchase of up to $36 million of Common Stock, expiring on July 30, 2024298 Management's Discussion and Analysis of Financial Condition and Results of Operations In fiscal year 2023, DocGo's total revenues increased by 41.7% to $624.3 million, but net income declined to $10.0 million due to a 50.1% increase in cost of revenues and negative operating cash flow of $64.2 million Comparison of Fiscal 2023 with Fiscal 2022 | Metric ($ in Millions) | 2023 | 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues, net | $624.3 | $440.5 | 41.7% | | Cost of revenues | $428.9 | $285.8 | 50.1% | | Income from operations | $15.1 | $21.8 | (30.7%) | | Net income | $10.0 | $30.7 | (67.4%) | Revenue by Segment (FY 2023 vs FY 2022) | Segment ($ in Millions) | 2023 | 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Mobile Health Services | $442.8 | $325.9 | 35.9% | | Transportation Services | $181.5 | $114.6 | 58.3% | - Cost of revenues as a percentage of revenue increased to 68.7% in 2023 from 64.9% in 2022, primarily due to higher compensation, a significant increase in subcontracted labor costs, and higher medical supply costs333334 Cash Flow Summary (FY 2023 vs FY 2022) | Cash Flow ($ in Millions) | 2023 | 2022 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(64.2) | $28.9 | | Net cash used in investing activities | $(29.9) | $(38.4) | | Net cash provided by (used in) financing activities | $1.1 | $(6.2) | - The company drew down $25 million under its Revolving Facility on October 19, 2023, which was repaid in February 2024, with the facility providing up to $90 million in credit378 Quantitative and Qualitative Disclosures About Market Risk DocGo is exposed to market risks, primarily interest rate risk from variable-rate borrowings and significant customer concentration risk, with limited foreign currency exchange risk - The company is subject to interest rate risk from its variable-rate Revolving Facility, with $25 million outstanding as of December 31, 2023, subsequently repaid in February 2024411 - Foreign exchange risk is limited, arising from U.K. operations, where a hypothetical 10% change in the exchange rate would have impacted 2023 total revenues by approximately 0.7%412 - Significant customer concentration risk exists, with one customer accounting for 40% of revenues and 42% of net accounts receivable, and another for 21% of revenues and 40% of net accounts receivable in 2023415 Financial Statements and Supplementary Data This section presents DocGo's consolidated financial statements for 2021-2023, including an unqualified audit opinion from Urish Popeck & Co., LLC, and notes on critical audit matters - The independent registered public accounting firm, Urish Popeck & Co., LLC, issued an unqualified opinion on the consolidated financial statements and the company's internal control over financial reporting as of December 31, 2023419420433 - The auditor identified two critical audit matters: the loss allowance for accounts receivable due to significant management judgment, and revenue recognition for transport services due to judgment in determining historical collection lookback periods425427 Consolidated Balance Sheet Summary (as of Dec 31) | Metric ($ in Millions) | 2023 | 2022 | | :--- | :--- | :--- | | Total Assets | $490.5 | $393.3 | | Total Liabilities | $185.3 | $114.4 | | Total Stockholders' Equity | $305.2 | $278.9 | Consolidated Statement of Operations Summary (Year Ended Dec 31) | Metric ($ in Millions, except EPS) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Revenues, net | $624.3 | $440.5 | $318.7 | | Net income | $10.0 | $30.7 | $19.2 | | Diluted EPS | $0.06 | $0.34 | $0.25 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None657 Controls and Procedures Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2023, with no material changes in the fourth quarter - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2023659 - Based on an assessment using the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2023661 - No material changes to the company's internal control over financial reporting occurred during the fourth quarter of 2023664 Other Information In the fourth quarter of 2023, CEO Lee Bienstock terminated a Rule 10b5-1 trading arrangement that was originally adopted on May 17, 2023 - CEO Lee Bienstock terminated a Rule 10b5-1 trading plan on November 10, 2023, which was intended to sell 20,000 shares and had been adopted on May 17, 2023666 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable667 Part III Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2024 proxy statement, and the company has adopted a Code of Business Conduct and Ethics - The required information for this item is incorporated by reference from the company's 2024 Proxy Statement670 - The company has adopted a Code of Business Conduct and Ethics, which is available on its website671 Executive Compensation Information regarding executive compensation is incorporated by reference from the company's definitive proxy statement for its 2024 Annual Meeting of Stockholders - The required information for this item will be included in the company's 2024 Proxy Statement and is incorporated by reference672 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership of certain beneficial owners, management, and related stockholder matters is incorporated by reference from the company's definitive proxy statement for its 2024 Annual Meeting of Stockholders - The required information for this item will be included in the company's 2024 Proxy Statement and is incorporated by reference673 Certain Relationships and Related Transactions and Director Independence Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's definitive proxy statement for its 2024 Annual Meeting of Stockholders - The required information for this item will be included in the company's 2024 Proxy Statement and is incorporated by reference674 Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the company's definitive proxy statement for its 2024 Annual Meeting of Stockholders - The required information for this item will be included in the company's 2024 Proxy Statement and is incorporated by reference675 Part IV Exhibits and Financial Statement Schedules This section lists the documents filed as part of the Annual Report, including the Consolidated Financial Statements and an index of all exhibits, with all financial statement schedules omitted as not applicable - This item lists the Consolidated Financial Statements and all exhibits filed as part of the Annual Report678681 - All financial statement schedules have been omitted because they are not applicable or the necessary information is already provided in the Consolidated Financial Statements or their notes679 Form 10-K Summary The company indicates that there is no Form 10-K summary - None684