• Revenue: $169 million for Q3 Fiscal 2025, 25% year-on-year growth.
• Adjusted EBITDA Margin: 61%, $102 million, up 39% year-on-year.
• Net Revenue Retention Rate: 117% on a trailing 12-month basis.
• Top 20 Customers Growth: Net revenue retention rate of 122%.
• Non-GAAP Gross Margin: 93%, flat versus the prior year period.
• Free Cash Flow: $63.4 million, 30% increase year-over-year.
• Cash and Equivalents: $845 million at the end of the quarter.
• Share Repurchase: 19.2 million shares repurchased at an average price of $48.62.
• Q4 Revenue Guidance: $132.5 million to $133.5 million, 13% growth at the midpoint.
• Full Fiscal Year Revenue Guidance: $564.6 million to $565.6 million, 19% growth at the midpoint.
• Full Fiscal Year Adjusted EBITDA Guidance: $306.6 million to $307.6 million, 54% margin.

• Warning! GuruFocus has detected 7 Warning Signs with YAHOF.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Doximity Inc (NYSE:DOCS) reported a 25% year-on-year revenue growth for the third quarter of fiscal 2025, reaching $169 million, which exceeded the high end of their guidance by 10%.
• The company achieved a record adjusted EBITDA margin of 61%, translating to $102 million, marking a 39% increase year-on-year.
• Doximity Inc (NYSE:DOCS) saw significant growth in its network engagement, with unique active users hitting new highs across quarterly, monthly, and weekly metrics.
• The company's new products, particularly point of care and formulary products, grew over 100% in Q3, contributing to over 20% of pharmaceutical sales.
• Doximity Inc (NYSE:DOCS) successfully expanded its client portal, with over half of its brand clients now having access, and plans to include all clients by 2025.

Negative Points

• Despite strong performance, the company acknowledged that the 61% EBITDA margin in Q3 might not be sustainable, advising to consider the annual margin of 54% as a more accurate representation.
• The health system business, while performing better than expected, still faces macroeconomic uncertainties and is not expected to see material growth in the near future.
• Doximity Inc (NYSE:DOCS) noted that the digital market growth is expected to remain at 5% to 7%, with the majority of their growth attributed to share gains rather than market expansion.
• The company faces potential challenges with tougher revenue comparisons in fiscal 2026 due to the accelerated revenue recognition from January launches.
• There is uncertainty regarding the impact of macroeconomic factors and regulatory changes, such as the Inflation Reduction Act, on the pharmaceutical industry, which could affect future growth.

Q & A Highlights

Q: Can you provide insights on the growth differences between clients using the portal and those who are not? A: Jeffrey Tangney, CEO: We've observed higher growth from our portal clients. About half of our clients are currently trained on it, and we plan to roll it out to all clients this year. The portal allows clients to see their return on investment monthly, enabling strategic adjustments.

Q: How should we interpret the 61% EBITDA margin this quarter? A: Anna Bryson, CFO: The strong margin was due to material upsell outperformance, which flowed through to the bottom line. However, this should not be seen as a new baseline. We recommend looking at our annual EBITDA margin, which is projected at 54% for this fiscal year, as a more accurate representation.

Q: What is driving the momentum in your sales, particularly with new products and integrated programs? A: Jeffrey Tangney, CEO: It's a combination of factors. Our portal shines during midyear when budgets are smaller, while integrated programs perform well during year-end budget cycles. These programs allow clients to optimize their campaigns using our data science, leading to larger deal sizes.

Q: How might the launch of larger multimodal integrated programs at the start of the calendar year affect revenue seasonality? A: Anna Bryson, CFO: These programs, typically 12 months in length, start with whichever module has pre-approved content, allowing for faster launches. This could lead to a more consistent revenue curve year-to-year as more customers adopt these programs.

Q: How are you targeting the growing market of nurse practitioners (NPs) and physician assistants (PAs)? A: Jeffrey Tangney, CEO: We have over 60% of NPs as members and are focusing on their needs through tools like our workflow tools, which are popular among them. We are also hosting advisory boards to better understand their requirements and enhance our offerings.

Q: Can you discuss the runway for point of care and formulary products, given their strong growth? A: Anna Bryson, CFO: Despite consecutive quarters of over 100% year-on-year growth, we believe we are still in the early stages. Our workflow modules have the potential to become as significant as our news feed over the next 3 to 5 years, driving incremental growth.

Q: How do you view the potential impact of macroeconomic factors and regulatory changes on your market growth and positioning? A: Nate Gross, Co-Founder: While it's early to predict the impact of regulatory changes, such as those affecting DTC advertising, we focus on delivering value to our clients. We believe our positioning in the market remains strong, regardless of these external factors.

Q: What are your thoughts on the long-term growth rate for the pharma digital market, and what could drive it higher? A: Anna Bryson, CFO: The current 5% to 7% growth rate reflects macroeconomic conditions and pharma's digital shift. Pharma is still under-indexed in digital spending compared to other industries, suggesting potential for higher growth rates in the future, though timing is uncertain.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.