Doximity doubles down on AI-fueled growth, boosts 2024 revenue guidance

Doximity, a digital platform for medical professionals, is doubling down on its investment in artificial-intelligence-powered technology to fuel its growth as it boosts its 2024 revenue guidance.

The company reported 17% revenue growth in its fiscal 2024 third quarter, which ended Dec. 31, bringing in $135 million, reflecting a 6% surpass of guidance.

The company's bottom line was also strong in the third quarter, bringing in a profit of $48 million, up 43% compared to a year ago. Doximity reported an adjusted EBITDA margin of 54% or $73 million, which was 18% above the high end of its guidance. Quarterly earnings came in at 29 cents per share, beating Wall Street estimates.

Doximity, which provides scheduling, telehealth and clinical workflow tools for physicians, raised its fiscal 2024 annual revenue guidance midpoint by $8 million or 2%. Doximity now expects annual revenue between $473 million and $474 million. In fiscal year 2023, the company brought in $419 million in revenue.

The increased annual outlook reflects stronger-than-expected upsells by year-end, Doximity Chief Financial Officer Anna Bryson said.

"We're also raising our EBITDA guidance midpoint by 6% to $225 million or a 47% margin. So that's our Q3 financial highlights, a 6% beat, a 2% raise and a 54% EBITDA margin," said Jeffrey Tangney, Doximity co-founder and CEO, during the earnings call Thursday.

Doximity has an operating cash flow of $50 million, versus $48 million, an increase of 3% year over year, and free cash flow of $49 million, versus $47 million, an increase of 3% year over year.

Six months ago, in August, the company cut its workforce by 10%, or 100 employee positions, and downgraded its revenue guidance as it faces economic pressures and slowing sales among its pharmaceutical customers.

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 U.S. medical professionals, including telehealth and scheduling tools. Doximity claims to have more than 80% 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. 

"Our Q3 engagement reached a new high-water mark. Our unique active users on a quarterly, monthly, weekly and daily basis were all up double-digit percentages year on year. As with last quarter, our daily users grew the most, underscoring how much our EHR-integrated workflow tools continue to gain share and daily use among doctors," Tangney said.

During the quarter, Doximity added several major new hospital clients. "Go-lives at these hospital systems contributed to a record 560,000 unique prescribers using our workflow software in Q3. We now count 17 of the top 22 U.S. hospitals as enterprise software clients and all of them as marketing clients," the company's CEO said.

A year ago, the health technology company rolled out a beta version of a ChatGPT tool for doctors that helps streamline some of their time-consuming administrative tasks, such as drafting and faxing preauthorization and appeal letters to insurers.

The AI writing assistant, called Doximity GPT, helps doctors draft prior authorization letters, insurance appeals and letters of patient support, among other tasks.

"Our next phase of growth, we believe, will be AI fueled," Tangney told investors during the earnings call. "Our HIPAA-compliant GPT product has organically grown to thousands of uses each day, and we love all the ways it's already helping doctors cut the scut and reduce their administrative load."

The company also is investing in internal uses for AI for general and administrative functions as well as R&D.

Doximity also leverages AI to personalize its news feed for physician users. "Our AI products really span all of what we do. So within our news feed, I think our news feed gets more and more relevant using machine learning, using AI, and that certainly has led to better program results for our clients, which is terrific," Tangney told investors. "AI has also led to more usage. So doctors come in to write an insurance appeal letter or a service animal letter in our DocsGPT product, which continues to grow nicely and organically. We see a lot of future engagement news there. But what's nice is those sessions can also be monetized over time. We're seeing a lot of mid-days for doctors between telehealth calls, checking their news feed, staying up to date on what's the latest in medicine, again, which accrues directly to our clients."

Doximity plans to continue rolling out new innovations to help streamline tasks for physicians, he noted.

"There's a lot of mediocre writing that has to be done in healthcare, and what AI is really good at is mediocre writing," Tangney noted. "It's really good at helping you get the administrative work done to fight with the insurance companies or others more quickly. So we're super excited that will drive a whole another wave of engagement for us, just like COVID did with our telehealth that will, again, accrue to our clients in terms of increased news feed and workflow platform usage."

A study published in 2016 found that for every hour physicians spend in exam room visits with patients, they spend nearly two hours on electronic health record and desk work during office hours.

That represents an "incredible problem," Tangney said. "We're helping them take that two hours and really shrink it down. While we're not going to speak specifically to our road map here, we've had some alpha tests that have gone very, very well," he added.

Last fall, Tangney said offering a HIPAA-compliant ChatGPT tool for health systems and doctors gives Doximity a competitive advantage.

"In terms of pricing, we're in a land grab mode right now. I don't think we expect more than a few million dollars in revenue from it this year. But once we get out there and have more doctors using us, we think that there's a long-term opportunity here to add more value and ultimately to have it grow to be a much bigger business," he said back in August.

In response to a question from an investor about Doximity's revenue strategy for the ChatGPT tool, Tangney said the company was focused on building engagement with physicians.

"Our goal here is this summer that we're going to have built the engagement to be able to add the monetization," he said.

As the company builds out its tech and AI innovations, it tapped an Alphabet executive, Lisa Greenbaum, as its new chief commercial officer. Greenbaum previously served in the same role at Google sister company Verily. She will be heading up Doximity’s efforts to build a hybrid go-to-market strategy, executives said.

"Lisa's husband is a pediatrician and long-time Doximity user. So while she's only been here a month, it feels like she's known us for years," Tangney said during the earnings call. "We know our clients will appreciate Lisa's deep relationships and unique insights from being both a successful tech and healthcare executive at market-leading firms."

The company also is making big investments in its back-end marketing platform, including rolling out self-service dashboards. It developed a pharma self-service client portal, which is available in a phase one beta version now with 10% of its pharma clients and will be fully launched this summer, executives said.

For its fiscal fourth quarter, Doximity is projecting revenue between $115.9 million and $116.9 million and adjusted EBITDA between $50.5 million and $51.5 million.

In a note, Ryan Daniels, an analyst with William Blair, said the third-quarter results point to strong momentum going into 2024.

"We believe the solid results and improved guidance range mark another positive step for the company, as management seeks to reestablish credibility with investors following multiple guidance resets in prior quarters," Daniels wrote. "Despite several recent fits and starts, we maintain our positive bias toward Doximity for long-term investors, supported by the company’s compelling value proposition for physicians via a broad suite of workflow tools, the organization’s large and diverse end-user base, and our favorable view of the growth outlook for digital pharma marketing platforms over the coming years."