Doximity brings in $155M profit in 2021, but stock slides after disappointing revenue forecast

Doximity, a health tech company that claims to have more than 80% of doctors on its network, brought in $344 million in annual revenue and boasted profits of $155 million for the year.

Doximity operates like a LinkedIn for doctors and provides a digital platform for U.S. medical professionals, including telehealth and scheduling tools. The company has more than 2 million medical professional members as of March 31, 2022, the end of its 2022 fiscal year. The company's membership also includes more than 50% of physician assistants and nurse practitioners, according to Jeff Tangney, co-founder and CEO of Doximity, during the company's fiscal-year and fourth-quarter earnings call Tuesday.

The company's customers are primarily healthcare organizations, in particular pharmaceutical manufacturers, health systems and medical recruiting firms, that purchase subscriptions for marketing, hiring and telehealth solutions.

The company's existing clients generated a record 157% net revenue retention rate for the trailing 12 months, Tangney said.

Doximity's fiscal-year 2022 revenue jumped 66% from $207 million in revenue the year prior. A year ago, the company reported net income of $50 million.

For the fourth quarter, the company pulled in revenue of $94 million, up 40% compared to $67 million in the same period a year ago. Doximity also brought in $22 million in net income in its fiscal 2022 fourth quarter versus $10 million during the same quarter a year ago, representing a 39% margin.

The company, which went public a year ago, is focused on its largest opportunities with its health system and pharmaceutical company clients, executives said. It works with the top 20 hospitals and all of the top 20 pharma companies.

In February, Doximity picked up Amion, an on-call physician scheduling site, for $53.5 million in cash plus up to $29 million in earnouts and equity compensation over four years. Amion manages nearly 200,000 physician schedules at thousands of hospitals including 18 of the top 20.  

Strong growth in the pharma market represents a big tailwind for Doximity, Tangney told investors. "The pipeline for new drugs is equally promising, with more than 250 in the FDA queue. We look to partner with these newly launched drugs each year, plus what we call the mega brands: those that sell over $100 million per year in the U.S. The number of such mega brands grew from roughly 350 to 415 last year, so up 18% or 65 new mega brands. Today, we work with just over half of those mega brands. And when we do, we get about 5% of their healthcare professional marketing budgets," he said.

On the provider side, the company saw record use of its fax, e-signature and telehealth tools and added scheduling to its product suite with the acquisition of Amion, Tangney said.

The company boosted its full-year outlook by $6 million and now expects revenue for fiscal year 2023 in the range of $454 million to $458 million, representing 33% growth at the midpoint.

Doximity's chief financial officer Anna Bryson said the boost in the annual forecast was driven by strength in the company's core business as well as the inclusion of a few million from its acquisition of Amion.

"As we look to fiscal 2023 and beyond, we are incredibly excited about the amount of white space we have ahead of us as our customers continue on their decadelong shift to digital. We are very encouraged by the growth in the universe of $100 million-plus mega brands, demonstrating the increasing size of our opportunity," Bryson said during the earnings call. "While we continue to capitalize upon this opportunity, signing 55 new mega brands in the past year alone, we still only work with just over half of them. This leaves ample white space ahead of us, especially as this cohort continues to grow."

But Doximity shares fell as much as 25% in after-hours trading following the earnings report that projected an unexpected revenue decline in the first quarter of fiscal year 2023. Doximity shares fell 12% to $29.77 in Wednesday trading, MarketWatch reported.

The price decline was a knee-jerk reaction to Doximity's forecast for first-quarter revenue in the range of $88.6 million to $89.6 million, representing 23% growth at the midpoint. Analysts on average expected first-quarter revenue of $96.8 million prior to the earnings report.

"As we think through the cadence of growth for the year, note that Q1 revenue from last year was atypically high, as we benefited from a significant pull-forward of demand, growing 100% year-over-year in that quarter," Bryson told investors during the call. "This has made for a tougher comparable for Q1 of this year as the shift to digital normalizes. Today, we are starting to see historical trends reemerge, in which Q1 is typically our lightest quarter due to the timing of program launches and expansion."

Executives said they are confident that Doximity will see year-over-year revenue growth accelerate in the fiscal second quarter.

"As with past years, 60% of our subscription-based annual guidance was already under contract as of March 31, and we expect another 35% to come from renewals and up-sells with existing clients," Tangney said. "So only 5% of our annual guidance is what we call 'go get,' that is revenue from new clients."

The San Francisco-based company said it had a net income of 17 cents per share during the fourth quarter. Earnings, adjusted for one-time gains and costs, came to 21 cents per share versus 9 cents a year ago.

The company's bottom line results surpassed Wall Street expectations with analysts expecting earnings of 15 cents per share.

The medical social networking site's quarterly revenue of $94 million also topped Street forecasts, with analysts expecting revenue of $90 million.

The company's adjusted EBITDA during the fourth quarter came to $39 million versus $27 million, an increase of 47% year over year, representing adjusted EBITDA margins of 42% versus 40%.

For the full year, the company's adjusted EBITDA was $150 million, representing adjusted EBITDA margins of 44%, and grew 132% year over year. The company grew its cash, cash equivalents and marketable securities balance to $798 million at year-end, executives said.