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spk01: Ladies and gentlemen, thank you for standing by. And welcome to Doximity's fourth quarter fiscal 2022 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. Harry Gold, head of investor relations, you may begin your conference.
spk05: Thank you, operator. Hello and welcome to Doximity's fiscal 2022 fourth quarter earnings call. With me on the call today are Jeff Tangney, co-founder and CEO of Doximity, Dr. Nate Gross, co-founder and CSO, and Anna Bryson, CFO. A complete disclosure of our results can be found in our press release issued earlier today, as well as in our related form 8K, all of which are available on our website at investors.doximity.com. As a reminder, today's call is being recorded and a replay will be available on our website. As part of our comments today, we will be making forward-looking statements.
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spk05: These statements are based on management's current views, expectations, and assumptions and are subject to various risk factors and uncertainties. Actual results may differ materially, and we disclaim any obligation to update any forward-looking statements or outlook. These refer to the risk factors in our S-1, our last quarterly report on Form 10-Q, and our other reports and filings with the SEC that may be filed from time to time, including our upcoming filing on Form 10-K. We would like to specifically caution investors that our future performance will be harder to predict for this foreseeable future given the COVID-19 pandemic. Our forward-looking statements are based on assumptions that we believe to be reasonable as of today's date, May 17, 2022. Of note, it is Doximity's policy to neither reiterate nor adjust the financial guidance provided on today's call unless it is also done through a public disclosure, such as press release or through the filing of a Form 8-K. Today, we will discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. A historical reconciliation to comparable GAAP metrics can be found in today's earnings release. Finally, during the call, we may offer incremental metrics to provide greater insights into the dynamics of our business. These details may be one time in nature, and we may or may not provide updates on those metrics in the future. I would now like to turn the call over to our CEO and co-founder, Jeff Tangney. Jeff?
spk06: Thanks, Perry, and thank you, everyone, for joining our fourth quarter earnings call. We'll begin with a few highlights. First, our top line. I'm pleased to report that we delivered $93.7 million in revenue for the fourth quarter of our fiscal 2022, an increase of 40% over the same quarter last year and 5% above the midpoint of our guidance. For our full fiscal year ended March 31st, we delivered $344 million in revenue or 66% growth year on year. As a reminder, our clients are the best brands in medicine, including all of the top 20 hospitals and all of the top 20 pharmaceutical companies. Our interactive platform allows them to connect efficiently with the right physician about new treatments and patient referrals. We then measure our clients' return on investment, or ROI, using third-party claims and prescription data. Our ROI measurements continue to come in at or above the levels reported in our S-1s, which was 10 to 1 for pharma and 13 to 1 for hospitals. And that 10x plus proof of value has allowed us to expand nicely within these blue chip clients, earning us 157% net revenue retention rate last year. Today, we're raising our fiscal 2023 annual guidance by $6 million to a midpoint of $456 million or 33% growth year on year. As with past years, 60% of our subscription-based annual guidance was already under contract as of March 31st, and we expect another 35% to come from renewals and upsells with existing clients. So only 5% of our annual guidance is what we call go-get, that is, revenue from new clients. Okay, turning now to our bottom line. We posted an adjusted EBITDA margin of 42% last quarter, or $39 million, which was 14% above the midpoint of our guidance. Our Q4 free cash flow was a bit higher at $45 million. For the full year, our EBITDA margin was 44%, or $150 million, and grew 132% year on year. This, in turn, grew our cash, cash equivalents, and marketable securities balance to $798 million at year end. For next year, we're guiding to $194 million in EBITDA and expect our free cash flow to be close to that. Given this strong and growing cash flow, our board has authorized a $70 million one-year share repurchase program. This will offset dilution from employee shares since IPO, plus expected dilution for the next year or so. It won't touch our IPO war chest as we generated $70 million in free cash flow just over the last two quarters. We'll structure this to minimize any management distraction as we want to maintain our full focus on building software to help physicians save time and provide the best care for their patients. Speaking of which... Our last and most important highlight is that our network continues to grow. With over 80% of U.S. physicians and half of physician assistants and nurse practitioners, we surpassed 2 million registered members last quarter, and we did so in half the time it took us to get the first million. Our usage also hit fresh highs. As hybrid home office work schedules become the new norm for many doctors, we're proud that our fax, e-signature, and telehealth products each hit new record highs last quarter. We joke that we're the fax toner and pager salesman's worst enemy. Adding to our workflow suite, we successfully closed our acquisition of Amion.com, which powers 200,000 U.S. physician schedules. When combined with our telehealth tools, which were used by over 350,000 unique physicians, NPs, and PAs last quarter, we believe we'll become the physician cloud in the United States, a sort of Bloomberg for doctors. Alongside our EHR partners, we're excited to continue digitizing the many paper-based and legacy workflows that physicians face today. As a product-led software company, we will continue to invest and grow our business while always keeping physicians first. So those are the highlights. A 5% beat, a $6 million raise, and record network usage. All in all, a strong quarter.
spk08: Okay.
spk06: I'd like to take a few minutes now to do a deeper dive on the new normal we're seeing in pharmaceutical marketing, and then I'll close with a partner spotlight from the quarter.
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spk06: We need only to look to China and their current lack of an mRNA vaccine to appreciate the innovation and competitiveness of our U.S. pharmaceutical industry. This innovation extended well beyond COVID this past year, with more than 70 novel active substances launched in 2021, up 50% from the prior five-year average. And 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 megabrands, those that sell over $100 million per year in the U.S. The number of such megabrands grew from roughly 350 to 415 last year, so up 18% or 65 new megabrands. Today, we work with just over half those megabrands, and when we do, we get about 5% of their healthcare professional marketing budgets. So we believe we're just 3% into our TAM for these pharma mega brands. We further segment our pharma clients in the top 20 and mid-tier. As reported by Fierce Pharma, the industry had a good year in 2021, with the top 20 firms growing revenue 23% on average to $41 billion each. Historically, we focused most of our sales efforts on these top 20 pharma as they have the deepest pockets and own two-thirds of the mega brands or about 13 each. But the mid-tier is growing fast for us as they pioneer what McKinsey is calling, quote, a new operating model for pharma, end quote, a more agile, more digital, more team-based approach to sales and marketing, which pairs digital marketers with frontline sales teams. Over half the new mega brands this year are from mid-tier pharma, and as these smaller teams scrum and lean into our ROI, they've become large, multimillion-dollar clients for us. We'd like to spotlight one of these emerging pharma clients today, Biohaven Pharmaceuticals. They've been a partner of ours for two years now. During the pandemic, we worked with them to launch their novel migraine drug, Nurtec ODT. The brand has increasingly leveraged the suite of Doximity's offerings and became a top 30 brand partner for us in fiscal 2022. It's a credit to Biohaven CEO, Dr. Vlad Korek, and his entire team that their nimble, self-described digital-first launch won out over industry heavyweights with much larger sales forces and established brands. We're proud to innovate with Biohaven and are expanding what we do together. This coming year, Biohaven will leverage physician opinion leaders and their peer connections on Doximity to reimagine speaker programs. The pilot, powered by shareable video highlight reels, allows busy docs to swap business cards and collaborate face-to-face without giving up a whole night away from their home or personal lives. We hope our work with Biohaven has helped blaze a path for others to follow. The pandemic has definitively shown the market that a digital-first commercial model works. It's not only more economically efficient for reaching doctors and thought leaders, but also can deliver faster adoption and blockbuster sales results. Okay, I'd like to end by thanking the entire Doximity team who worked incredibly hard to deliver a spectacular quarter and year. And with that, I'll hand it over to our CFO, Anna Bryson, to discuss our financials and revise guidance. Anna?
spk18: Thanks, Jeff, and thanks to everyone on the call today. We achieved another strong quarter in Q4, outperforming all areas of our guidance and are pleased with the way we have ended our first fiscal year as a public company. Our unique combination of high growth, robust profitability, and strong free cash flow continues to be well reflected in our results. Fourth quarter revenue grew 40% year over year to 93.7 million, exceeding the high end of our guidance range. Full year revenue grew to $343.5 million, a substantial 66% increase year over year. Similar to prior quarters, our existing customers continued to lead our growth. We finished the year with a net revenue retention rate of 157%. We are very encouraged by the increasing scale at which our customers are spending on our platform, demonstrating the tremendous value they are receiving from our solutions. We ended the year with 265 customers contributing at least $100,000 each in subscription based revenue. This is a 33% increase from the 200 customers we had in this cohort a year ago. Out of these 265 customers, 45 contributed at least $1 million in revenue for the year. This represents a 55% increase from the 29 seven figure plus customers we had a year ago. More impressively, the revenue contribution from these seven-figure customers grew even faster, expanding 77% year over year. This illustrates how our largest and, in many cases, most tenured pharmaceutical and health system customers continue to lead the industry's shift to digital. Turning to our profitability, we remain focused on building a meaningful business of scale with not only sustainable long-term growth, but also attractive margins. Non-GAAP gross margin in the fourth quarter was 90%, compared to 88% in the prior year period. For the full fiscal year, non-GAAP gross margin was also 90%, compared to 85% last year. From an operating expense perspective, our highly efficient vertical sales model has allowed us to generate the vast majority of our revenue from low friction renewals and upsells, leading to significant leverage over the past few years across both sales and marketing and R&D. Adjusted EBITDA for the fourth quarter was $39.4 million, and adjusted EBITDA margin was 42%, compared to $26.7 million and a 40% margin in the prior year period. Our adjusted EBITDA exceeded the high end of our guidance range due to our top line outperformance. For the full fiscal year, adjusted EBITDA was $150.3 million, growing 132% year over year. Full year adjusted EBITDA margin was 44%, representing significant leverage versus fiscal 2021's 31% margin.
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spk18: Turning to our balance sheet and cash flow, we ended the fiscal year with $798.1 million of cash, cash equivalents, and marketable securities. We generated free cash flow in the fourth quarter of $44.9 million, compared to $36.6 million in the prior year period. For the full fiscal year, we generated free cash flow of $120.9 million, compared to $78.4 million in fiscal 2021, up 54% year over year. Our growing free cash flow makes us well-positioned to continue investing in our core business and long-term growth. Now moving on to our outlook. For the first fiscal quarter of 2023, we expect revenue in the range of $88.6 to $89.6 million, representing 23% growth at the midpoint. And we expect adjusted EBITDA in the range of $28.6 to $29.6 million, representing a 33% adjusted EBITDA margin. For the full fiscal year, we expect revenue in the range of $454 to $458 million, representing 33% growth at the midpoint. We expect adjusted EBITDA in the range of 192 to 196 million, representing a 43% adjusted EBITDA margin. We are pleased to increase our full-year guidance by 6 million at the midpoint from our prior estimate of 450 million. This is driven by the continued strength in our core business, as well as the inclusion of a few million from our Amion acquisition. 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, which we discussed on our Q1 2022 earnings 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. Consistent with prior years, we're confident we'll see year over year revenue growth accelerate in Q2. As Jeff mentioned, our subscription-based business model and foundation of recurring customers provides us with high visibility into this year's revenue. With only 5% reliance on go-get customers, we have line of sight into 95% of our subscription-based annual guidance. 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 decade-long 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. 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. Lastly, our business exhibits a number of key strengths. which we believe position us to drive sustainable growth and profitability, even in an uncertain market environment. The need for critical medication and healthcare services is recession resilient. We have become a trusted key partner to our customers over the past decade. And in tough times, we find that established, cost-effective, high ROI solutions such as Doximity generally take share. Finally, We have always run our business on the core value of profitability. We are debt-free, high cash generating, and empowered to strategically execute on the large opportunity ahead of us. With that, I will turn it over to the operator for questions.
spk01: We will now open the line for questions. If you would like to ask a question during this time, please press star, then the number one on your telephone keypad. We have 30 minutes for our Q&A. Your first question comes from the line of Stephanie Davis with SVB Securities. Your line is open.
spk13: Hey, guys. Thank you for taking my questions. I'm going to ask the same question that I think a lot of folks are going to ask in this Q&A, but your one cue came in a bit lighter than our estimates, but you also raised the full year guidance. Can you give us some building blocks to bridge this ramp?
spk18: Sure. Thanks, Steph. So this cadence actually is pretty typical for us as Q1 has historically been a lighter quarter in most prior years. And now if we look ahead, based on currently signed deals, we're confident that we'll see an acceleration in revenue growth starting in Q2. And just to reiterate, as you just heard me mention in the prepared remarks, we have line of sight into 95% of our subscription-based annual guidance with approximately 60% under contract at the beginning of this year, and now naturally that's increased since March 31st. So we feel highly confident in our 33% growth guidance for the year.
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spk13: All right, understood. Is there a way we should think about the step up throughout the year or what a normalized cadence could look like? Is this more of a back half ramp or is this relatively stable beyond one Q?
spk18: It should be relatively stable beyond one Q. We think the ramp will start in Q2. And once again, we have a really strong line of sight into that based on currently booked deals.
spk13: Understood. And one quick follow-up, just because we've had a few surprises this earnings season on customer concentration risk. Could you give us some color around your relationship with your largest customer, confidence and sustainability of the relationship, and maybe some color on the buying dynamics for ads? So is this really one large customer or many individual decision makers around spend?
spk18: Yeah, sure. It's a great question. You'll see in our 10K when it comes out next week that we have no customer that represents more than 10% of our revenue. And to your question, kind of going a layer deeper, our largest customers are top pharma manufacturers. And in many cases, they're purchasing on an individual brand-by-brand basis across dozens of brands. And we have no one brand that makes up more than 2% of our revenue. So we're really not concerned about customer concentration with our company at all.
spk13: Good to hear. Thank you for your question.
spk01: Your next question comes from the line of Ryan Daniels with William Blair. Your line is open.
spk03: Yeah, thanks for taking the questions. And, Anna, maybe I'll continue through that line of thought. Just by looking back to your financials prior to COVID, kind of pulling forward digital marketing spend and hiding some of the seasonality, If I go back to pre-COVID, it looks like between the fourth quarter of 19 and first quarter of 21, you actually had an 18% drop in sales sequentially, and your guidance only calls for a 5% drop this quarter. So it's actually a little bit better seasonality than maybe we've seen pre-COVID. So my question is, is the visibility here actually increasing for the organization prior to two or three years ago based on what you're seeing in the bookings in the pipeline?
spk18: Yeah, that's a great question, Ryan, and I'm actually really glad you pointed that out. As you've mentioned, we've definitely seen improvement between Q4 and Q1, and a lot of that actually is due to the fact that we've invested heavily in our customer success team, and we've become really ingrained with our clients and in their marketing strategies. So we're seeing continued efficiency in our go-live time, continued visibility into our pipeline, strengthening our And that's really enabled us to kind of see less of a sequential decline between Q4 and Q1 than we've seen historically. So I'm really glad you pointed that out and, you know, really encouraged by what that really means for us going forward.
spk03: Yeah. Well, I think it's just, you know, the blurring of the numbers because of the COVID pull forward is probably confusing some people, but that makes sense. I guess a similar question just on deferred revenue. Any changes there that we should think about with payment terms? Obviously, that's cash you receive to deliver services in the future, and that looks flat year over year. Does that have anything to do with longer-term contracts but not billing as much up front such that you still have visibility even though the cash might not be sitting there? Anything of that nature? Thanks.
spk18: Sure. Yeah, deferred revenue is impacted by a couple factors. It mainly is due to the fact that we do milestone-based billing and then the timing of revenue recognition. And so since this past year, as we've mentioned, launches have gotten more efficient. The timing of billings and revenue recognition were more closely correlated. So we didn't see an increase in deferred revenue year over year. But that said, because we do milestone-based billing, and I think this is an important point to get across, It's often the case that a significant amount of backlog might not show up on our deferred revenue balance. And so as a company, we've never really thought of deferred revenue as a meaningful metric for us.
spk03: Yeah, yeah, I appreciate that. I just thought it might be important to point out because that tends to be another concern. Thank you for the caller.
spk01: Your next question comes from the line of Glenn Santangelo with Jefferies. Your line is open.
spk19: Oh, yeah. Thanks, and good evening. Just a couple of quick questions. Unfortunately, I also want to follow up on this 1Q guide. You know, Anna and Jeff, it sort of seems like, you know, the revenue deceleration from 3Q to 4Q kind of made sense, given the budget impact on your fiscal 3Q results. But now... The revenues are declining again into fiscal 1Q. And so I'm kind of curious, are there any brands that maybe are not renewing or anything that maybe surprised you this year with respect to your customer activity? And then I had a follow-up.
spk18: I'll start and, you know, Jeff also feel free to chime in on this one. But, you know, as we were just talking about with Ryan, we're certainly seeing some temporary lumpiness this past year as our clients had to quickly evolve their go-to-market strategies. And we're expecting that to strain out in future quarters. As far as from a brand perspective, not necessarily. What we are seeing, though, I'll say is a flurry of live events reemerging. You know, just as we're all experiencing, there's kind of a return to live activity here. And I'm sure that has had some minor impacts maybe from a launch perspective. But from a signing deals perspective, our brands are continuing to come back, renew, and continue to upsell.
spk19: And now the NLR, I think, kicked down to 157. Any sort of insight or guidance you can give us in terms of how you expect that NLR to trend as we move through fiscal 23? And then my last question, you know, was for Jeff. Jeff, you talked about I think you work now currently with half of the mega brands, and I think you said you have 5% of their professional marketing budgets today. Could you maybe flesh those comments out a little bit more? Because I just want to understand what the opportunity is relative to the TAM based on kind of where you are right now. Thanks.
spk18: Sure, Glenn. I'll just quickly hit on NRR and then pass it over to Jeff on the TAM. Yeah, NRR, we believe our existing clients will continue to lead our growth, just as you've seen in prior years. We think NRR will normalize pretty much back to what we saw in the pre-pandemic years, you know, that roughly 130%, which is pretty consistent with what we've said. And we think we're really excited about the prospect of delivering yet another very strong NRR year.
spk06: Great. Yeah, and Glenn, this is Jeff. I'll just comment that we just finished our 50-client advisory board out in Philadelphia a couple weeks ago with our top pharma clients. So I can tell you, they're as pleased as they've ever been with our product and service and growth and ROI as we measure it and as they measure it. I will say, harking back to Ryan's question, you know, we do see a spring break effect in pharma. We've seen that in past years. I know we only put three years of data into our S1, but we've seen it in prior years. And the 18% dip that Ryan mentioned is more typical. And again, it's just because new program implementations go a little slower when you need approvals and more folks are, you know, in a busier time of year. And I think this year we are seeing this flurry of live events like we're doing ourselves. And so folks have been in full digital mode for two years, and it's the first time they can get together with their full sales forces and, you know, dust off those print aids from from two years ago, so there is some of that activity. As far as how we're doing with the mega brands, I'll just go back to that and say we see a lot, I mean, we're the early innings here of growth. And we highlighted Biohaven on the call because we are seeing, I think, real growth from these mid-tier pharma companies. I'll tell you that, you know, Claritin sort of revolutionized direct-to-consumer advertising for pharma back in 1995, right? Those blue-sky TV ads they ran, it was the first time it had ever been done, and that industry went from zero to 10 billion in less than a decade. And we think Biohaven, with a digital-first launch against industry heavyweights, really did, I think, create this new poster child for digital-first. And we're really proud to have worked as deeply with Vlad and his team as we did, and And we think that the industry pays attention to these things, and so we're going to see more folks start to follow that NERTEC model.
spk19: Okay, thank you.
spk01: Your next question comes from the line of Brian Peterson with Raymond James. Your line is open.
spk07: Thanks for taking the question, Jeff. Maybe following up on that, just, you know, as we're thinking about some of the mid-tier customers that you reference, are they able to go all in digital much quicker than some of the larger customers? And I'd be curious maybe what your displacement budget is coming from, kind of in mid-tier versus some of the larger customers out there.
spk06: Yeah, that's a great question. Thank you. The short answer is we're able to get – I mean, they build their programs around digital because they're starting from scratch in many cases. So our market share among the mid-tier has actually been lower because we've really focused all of our outbound sales effort on those top 20 pharma. So as I said in our prepared remarks, the top 20 pharma have 13 megabrands each in their portfolios on average, and most mid-tiers are just one or two. So there's less land and expand growth for us, but actually what we've seen this past year – is that these mid-tier, since they're all in on digital, it's their chance to be the digital David up against the top-tier Goliaths, right? And so their spend with us per brand has grown a lot faster in a lot of cases. And you're right, they're building these scrum teams, these more agile teams around the digital outreach. So anyway, we're excited about where that can go. And from our point of view, I think they're pioneering a model that clearly the whole industry is paying attention to.
spk07: It's good to hear. And, Anna, maybe just a follow-up. I know there's been a couple questions on the guidance, but could we maybe take a more holistic look at seasonality? You know, is it right to think about the December quarter probably as the peak quarter, you know, down in March, down in June, and then kind of up from there? You know, it's tough with all the moving parts, but is that the right way for us to kind of think about revenue growth if we're looking at it on a quarter-to-quarter basis?
spk18: You know, I think we're really just emerging after two years of an unprecedented pull forward of demand, and that's really created some atypical dynamics in our quarterly revenue spread. So I would not assume that what we're seeing today is necessarily what we're going to see going forward. And as we are moving forward and we kind of see more of the typical buying patterns reemerge, sure, we may see a bit of seasonality around annual launches, but we believe it'll be much less pronounced in future years than what we're seeing here today as we're exiting these two years of unprecedented pull forward of demand.
spk07: Understood. Thanks, Anna.
spk01: Your next question comes from the line of Scott Burke with Needham. Your line is open.
spk02: Hey, this is Matt Shea on for Scott Berg. Thanks for taking the questions. I wanted to touch on the guidance again. So Q1 EBITDA margins are now guiding to 33%, but for the full year, you're actually higher than your prior guidance, 43% margins versus 40%. Curious if you could just provide some color on what's going on with the margin structure in Q1 and then what levers you have over the course of the year to unlock that margin potential for the full year.
spk18: Sure. Just as what we're seeing with revenue, adjusted EBITDA is typically the lightest for us in Q1 historically, as we're kicking off our fiscal year with hiring, raises, team meetings, et cetera. If you actually look back two years, I'll pull a Ryan Daniels here and go back on the history. If you look back two years, Q1 adjusted EBITDA was 11%, and we finished the year with 31% margins. So what we're seeing today is it's fairly consistent with what we've seen in prior years. And similar to revenue, we're confident we'll see EBITDA growth accelerate in Q2, and we have really high line of sight into our 43% margin guidance for the year.
spk02: Got it. Appreciate that. And then touching on pharma, you know, Pfizer's made some comments about moving away from direct sales reps in favor of digital, which obviously benefits you guys. But curious, you know, as this shift happens, you know, do these dollars shift immediately? Does it take time for them to shift into a digital budget that benefits you? Or how should we kind of think about the timing dynamic as headcounts wind down and digital marketing budgets wind up?
spk06: Yeah, no, great question, Scott. This is Jeff. I mean, our best estimate is that pharma still is only spending 20% to 30% of its marketing dollars digitally. The mid-tier is probably higher for the reasons I just said. They're starting more from scratch, and they're going where the ROI is, and so they may be over 50% digital, which is closer to the Fortune 500, which is at 70% digital, right? So that's the opportunity, I think, for us in mid-tier to, I think, lead the rest of the market digitally. But you're right, Pfizer and a number of notable others really, I mean, they're seeing where the ROI is and they're really, thinking about what McKinsey is calling this new operating model, and it is more agile. Agile is the word I keep hearing from them. And what it really means is bringing together digital marketing as part of that sales force and sales team. And in many ways, the sales team, again, in the mid-tier companies, is following the lead of the email marketers as opposed to the other way around, which is how this industry has worked traditionally. So we are still seeing this steady shift, but it will take time. it will take a decade. We're in the early innings of this shift.
spk01: Our next question comes from the line of Cindy Motz with Goldman Sachs. Your line is open.
spk15: Oh, hi. Thanks for taking my question. Congrats on the quarter and the buyback. Yeah, I just wanted to follow up a little bit more. I understand the seasonality with the revenues and I guess with the cost, but Just following up more on the cost question because, you know, I mean, maybe I'm missing something, but, like, when I assume the gross profit is going to be the same, but, like, where exactly, Anna, like, where will I see this? Because I don't expect a huge ramp in R&D. I guess you said, you know, you've only got 5% to get, so I wouldn't expect to see a big ramp in sales and marketing. So, I mean, are we talking a big ramp in G&A? Just trying to look for more clarity there because I just don't – I guess I'm just not – getting to that number. And then the second question is just around the cash balance. So you've got about $800 million on the balance sheet now. By the end of next year, you'll be close to a billion. Just curious if you have any ideas like where you may put that cash to work. So thanks.
spk18: Sure, Cindy. I'll take that first part of the question as far as expenses. So it's not G&A, no. We're continuing to invest in R&D and sales and marketing. As I just mentioned, when we kick off the year, it's typically our highest hiring quarter. It's the quarter we do raises. It's also the quarter we're able to do team meetings, and we're really happy that we're able to do that again this year for the first time really in two years. So that's kind of what you're seeing. The uptick in travel and team meeting-related expenses are certainly impacting Q1. But as far as investment for the year, very consistent with what we've seen for prior years, continuing to invest in R&D, continuing to invest in sales and marketing, and continuing to invest in customer success, which we think will allow us to achieve really good sustainable long-term growth.
spk20: Hi, Cindy. This is Nate. I'll take your second question. You're right. We've really honed our cash-generating business, and so we're able to both maintain our war chest, refill it after strategic acquisitions, and fund our self-growth initiatives. We do believe that that healthy level of cash on the balance sheet is going to put us in a position of strength. That's both as healthcare continues to digitize. and also as the market presents some unique opportunities over the years ahead at our core in our dna we're a software company and we've been a company that excels at building we're going to predominantly build not buy and act accordingly because we build our our platform in a way that maximizes our market opportunity and our flywheel so a good example of that would be telehealth our healthy cash reserve allowed us to move into the telehealth market with really rapid confidence It gave us plenty of headroom to grow organically. That said, it will allow us to be opportunistic around synergistic acquisitions or partnerships. I think Amion is a great example. That's a day-to-day workflow technology used by a substantial physician population, nearly 200 physician schedules used quite frequently, also a high-margin subscription business with a broad footprint across hospitals, and most importantly, a mission-oriented company on making physicians' lives easier and That's the kind of thing that this cash on the balance sheet will allow us to continue to stay focused on our core mission while moving quickly into the right opportunity when it makes sense over the next few years.
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spk01: Your next question comes from the line of Richard Close with Canaccord Genuity. Your line is open.
spk08: Yeah, thanks for the questions. Jeff, I was wondering if you could just talk a little bit about, you know, if we go into a very challenging economic environment here. Do you see this accelerating the shift to digital at all? Just perspectives on that would be good.
spk06: Thanks, Richard. Yeah. So, you know, I've lived through this back in 2001 and 2008 at my last public company. And actually, I'm rubbing my hands a little bit because great teams are built during these downturns. And this is when Google got going in the early aughts and built everything. And it's when we got going in my last company and were able to hire great talent and Right now, year-to-date, the U.S. Pharma iShares index is only down 3%. This is a recession-resilient industry, and that's what my experience has been at Hippocrates in 2001 and 2008. So it's really kind of our time to thrive. And in terms of the buyback, it's really just a sign of our confidence in our moats and our growth. I mean, we grew EBITDA 132% last year, and we're going to keep growing that. And we're spending less than 10% of our cash, so it won't limit our strategic options. And it's anti-dilutive, right? It's all the RSUs we've issued to employees and acquisitions since IPO plus the next year. In terms of pharma, to your specific question, I actually think if pharma does get squeezed, that's when they do get more creative. And that's when they do start shifting more and more to the high ROI budget items for them. I don't want to name names, but there are a couple clients that are top 20 clients who aren't doing as well, who are actually shifting to digital faster. And I think that's because... they are doing it out of necessity. They can't afford to spend what they're spending on lower ROI initiatives. And it's the reason why the mid-tiers are starting to lap them in some cases, which, again, is going to drive the competitiveness of the industry. So for a bunch of reasons, I actually am not afraid of a quarter or six months or even a year of tougher times in the broader markets, because I do think that that accrues to our benefit.
spk08: And then maybe just to follow up on an earlier question, with respect to Salesforce cuts, you know, with any companies that did that over the last year, if they were your customers, did you actually see an acceleration and adoption of the digital with those customers?
spk06: You know, we tried to run a little correlation on this, and it's hard because they're all so quiet about, you know, they don't want the word layoffs appearing anywhere in any of the documentation that they put out. We have to go to Cafe Pharma and read the boards to see who's doing what. I can tell you that some of the names that have been mentioned on this call, I mean, grew much more than our net revenue retention rate. So, yeah, I'd say anecdotally we do see in the handful who have announced Salesforce cuts, I mean, they're more than doubling in many cases their spend with us. Great. Thank you.
spk01: Your next question comes from the line of Sandy Draper with Guggenheim. Your line is open.
spk04: Thanks very much. A lot of the questions have been asked. One, and I may have missed it at the beginning of the call, Anna, did you give the breakout between revenue and subscription versus the recruiting placement fees, or do we need to wait for the 10K on that?
spk18: I did not give the breakout in my prepared remarks, but I'm happy to give it now. Our subscriptions, about 93% of our total revenue comes from subscriptions, and the remaining other from that PERM placement and tent placement fees, it's only about 7%. And we expect that to be pretty consistent going forward.
spk06: Yeah, Sandy, I'll just jump in here. We are seeing doctors reconsidering their job options right now. The great resignation is happening here. I'll share a fun story. Doctors do want to talk to recruiters, but they are fearful of getting hammer-texted later because once a recruiter gets your phone number, they will keep calling and texting you for years. And so just like we work on our telehealth product to shield our doctors' cell phone numbers, we actually created a product last year that allows a doctor on our job board to go choose a job and then open up a 30-day temporary line that the recruiter gets that is only good for 30 days. We're doing thousands of those proxy lines, temporary proxy lines, per month right now. And that 7% of revenue, it isn't much, but it was up 111% last quarter, year on year. So we do see this great resignation as being positive for our business.
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spk04: Got it. That's really helpful. And then my second question, I've gotten hit with this on a couple emails, just to remind me, so And how much is Amion going to contribute in revenue this year? And then I can't remember the comments. I think your original guidance was 450, and I didn't know if that included the Amion. I'm just trying to think about, you know, the apples to apples, what the original guide was versus the new guidance today and making sure I'm comparing those numbers correctly. Thanks. Thanks.
spk06: Yeah, this is Jeff Sandy. I've been working the most on the Amion acquisition, so I'll speak to it. It's been going really well. It's only six weeks in, and we've already integrated and ported a lot of the site over into our site. I'm really excited about the product vision here of letting a hospitalist look up who the cardiologist on call is, send them a secure message on Doximity, let that cardiologist call back to the hospitalist. And, again, doing that for 200,000 physician schedules is a meaningful addition to our overall product suite and to our coverage. So we're excited about all that. It's just a few million in revenue, as we announced last time, and we are not planning to grow that revenue. We're trying to grow the user base. So right now we are going, as we do in telehealth, to their clients, and we've assigned a couple already with them in the first six weeks here under our new paperwork. We're pleased to already have some sales success here. And we're just trying to open up and make it so that more of their departments use Amion and Doximity so we get more doctors who are using these schedules every day. Because, of course, for our core business, when I'm done looking at that schedule, when I'm done with that dialer call, I hang up and then I'm on our news feed. And that actually can be a perfect time to catch up on a few things while I'm waiting for the cardiologist to call me back, which, of course, feeds into our core engagement. Great. That's really helpful. Thanks for taking the questions.
spk01: Your next question comes from the line of Jessica Tussan with Piper Sandler. Your line is open.
spk16: Hi. Thank you so much for taking the questions. I was hoping you could just clarify what you mean by 5% go-get, kind of how much visibility do you have into that 30% of upsells and renewals? And just interested to know, like, are those essentially off calendar contracts? And then the 5% refers to revenue from outside of your existing customer base.
spk06: Yeah, that's right, Jessica. So as of March 31st, looking at that $456 million, we have 60% of it already signed and under contract, inked, done, subscriptions, launched, ready, going. We have line of sight to another 35%, which is the renewals and upsells that we expect throughout the year as our clients add modules or continue the programs that don't run the full year. So, that's what we've seen historically. It's actually very similar. In fact, I think these are the exact same percentages almost to the percent that we had last year on this. And then the 5% go-get is us going after those 60% of mid-tier pharma mega-brands that we don't work with today, which we highlighted, I think, with Biohaven are going to spend more of a time going after. And medical devices, we spoke about on the last call, that's been going well. That business has been growing faster for us as well. But we expect roughly 35% renewals, then only 5% from the go-get this year.
spk16: That's helpful. Thank you. And then just – so I think you referred to 20% to 30% of ad dollars currently spent in digital channels. Do you have a sense of the split between direct-to-provider and direct-to-consumer? And then just if DOCSIS is only 5%, where do you get the sense that these dollars are being deployed otherwise? Or what does the competitive landscape look like from your perspective? Thank you.
spk06: Yeah, no, great question, Jessica. So the 20% to 30% refers to what we call the HCP, or healthcare professional marketing budget. So we don't consider the direct-to-consumer at all on that. And actually, I don't even know offhand what percent of direct-to-consumer is digital. It's probably higher. That's probably shifted faster. But in the healthcare professional budgets, which usually live inside different teams inside pharma companies, it's only 20% to 30% that's spent on digital. The other 70% is literally print aids and dinners, and a whole bunch of things that are fairly traditional. Interestingly, I just learned at this summit we had that a lot of that 20%, 30% is actually spent on iPad apps, what they call interactive visual aids, IVAs, that the reps drive around and show to doctors and theoretically tap through, although if you ask reps about it, they may admit now and then that they sit in the parking lot and do it to hit their call numbers. So as we look at that digital spend, again, we think there's a lot of room to grow, and you need only look to the mid-tier companies to see that happening. Again, there we're seeing them spend more like the Fortune 500, more like 70% digital.
spk16: Thank you. I have just one quick follow-up. Do you guys offer life sciences companies the capability that would allow the provider to communicate either synchronously or asynchronously with a pharma rep through the Doximity app, and is that an attractive or an important capability?
spk06: Yes and yes. We have a product called RepConnect, and we're doing a lot more here. So again, I don't want to get too much into I think, proprietary secrets and things that we're doing with our clients. But as we did mention at a high level with Biohaven, we are helping their, what they call KOLs, their key opinion leaders, reach out peer-to-peer to doctors that they already know, that they already know someone in common with. That we're finding is working very well as a way to orchestrate little snippets of dinner meetings. Instead of having to drive to a restaurant and give up my whole evening, I can get the three minutes of content that are most relevant to my practice and still exchange a business card and ask a quick question. Same with reps and sample requests. So, again, I think this is some of the new digital frontier that we're going to see more and more of from pharma. To be honest, today it really only lives mostly within these more innovative mid-tier companies. But you're going to see more and more of it throughout the industry.
spk16: Got it. Thanks again.
spk01: Yep. That is all the time we have for questions. I'll turn the call back to Jeff for closing remarks.
spk06: Okay. Well, I'd like to end by thanking the entire Doximity team for their hard work and results this year. We appreciate everyone joining today. Thanks.
spk01: This concludes today's conference call. You may now disconnect.
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