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spk06: Hello and welcome to Doximity's fiscal Q3 2023 earnings call. I will now pass the call over to Doximity's head of investor relations, Perry Gold, to kick off the call.
spk05: Thank you, operator.
spk16: Hello and welcome to Doximity's fiscal 2023 third 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 make forward-looking statements. These statements are based on management's currently used expectations and assumptions and are subject to various risks and uncertainties. Actual results may differ materially, and we disclaim any obligation to update any forward-looking statements or outlook. Please refer to the risk factors in our annual report on Form 10-K, any subsequent Form 10-Qs, and our other reports and filings with the SEC that may be filed from time to time, including our upcoming filing on Form 10-Q for the quarter. Our forward-looking statements are based on assumptions that we believe to be reasonable as of today's date, February 9th, 2023. 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 a press release or through the filing of a Form 8-K. Today, we will discuss certain non-GAAP metrics that we believe 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 Tanguy. Jeff?
spk02: Thanks, Barry, and thanks, everyone, for joining our third quarter fiscal 2023 earnings call. We have three updates today, our financials, our network growth, and new products. I'll start with the good news. Our Q3 financials were strong. We delivered a 3% beat on the high end of our revenue guidance at $115 million, and a 14% beat on the high end of our adjusted EBITDA guidance. Our adjusted EBITDA margins hit a record high 48%, and our free cash flow grew 85% year on year. We completed 31 client ROI studies in the quarter, and our median return remains well above the 11 to one median we reported last quarter. Our physician engagement also hit new record highs, but more on that in a minute. Overall, it was a strong Q3. Okay. Now for the not-so-good news. Our new peer-to-peer and point-of-care modules, which are our first paid products to offer vertical video, hit unexpected content approval delays. One of the main moats in the pharma industry is the complexity of medical legal review, or MLR. It's a moat we're adept at navigating. Last quarter, our writers and account teams managed thousands of MLR approvals and new content launches, including over 100 video assets of all types. To us, vertical video was just another aspect ratio. But to many of our clients, it felt like a completely new medium, one which raised unique new questions. This required us to go back to MLR square one, often for the first time in a decade, and re-present to their independent promotional review boards. While a surprise to us, these content re-reviews went well. After a few live meetings and a couple months of testing, They found our vertical videos to be, quote, endemic, end quote, or medical in their tone. But the net result of these delays is that we expect about a 2% miss from the midpoint of our annual guidance, finishing the year at 22% annual growth versus the 23% to 26% we had projected. A few comments as we reset expectations here. First, this revenue is delayed, but it isn't lost. It's still under contract. Second, the silver lining here is that clients bought more new product than we expected. In the short run, this amplifies our revenue delays, but in the long run, it bodes well for our ability to innovate and grow. Last but not least, this miss is not something we take lightly. We'll be sure to keep innovating, but also to bake in ample time for new product approvals. Okay, while our implementation slowed a bit, we closed a record high selling season last quarter, led by our new products and existing clients. As a reminder, our clients include all of the top 20 pharma companies and all of the top 20 hospital systems, who tend to renew our annual contracts in December. We signed the first of these clients 11 years ago. Interestingly, our largest and longest-standing clients tend to be our fastest-growing clients. In Q3, our net revenue retention rate was 127% among our top 20 clients, each of whom has worked with us eight years on average. You can see our land and expand growth at a brand level as well. Last quarter, we doubled our number of $5 million brand clients to eight. We even signed our first ever $10 million brand with a top 10 pharma company that we've worked with now for over a decade. As a highly analytical and respected industry leader, we believe this client is a bellwether of things to come. At the market level, we focus on the 415 pharma mega brands, those with over $100 million in U.S. sales, and we now work with slightly more than half of them. We estimate we're gaining share, but we're still less than 5% of U.S. medical professional marketing budgets. The upshot of this strong renewal season is that we project a minimum of $500 million in revenue, or roughly 20% growth year-on-year, as the backstop for our fiscal 2024 guidance. Of note, given macro uncertainties, we're being more conservative with our assumptions here than in years past. Turning to our bottom line, we expect our fiscal 2024 adjusted EBITDA margins to be the same or better than this year's 43%. All in all, we're projecting a rule of 60 plus year in fiscal 2024. Okay, turning now to our network growth. Our quarterly active users among physicians, NPs, PAs, and medical students hit an all time high last quarter across our entire platform. This growth was led by our telehealth tools, which were used by a record 375,000 unique providers last quarter. and we're thrilled to announce that for the second year in a row, Doximity was ranked the number one best in class telehealth video platform, beating out Microsoft Teams, Zoom, and many others. Based on class interviews with hundreds of hospital IT clients, we earned the top marks for product, culture, loyalty, operations, relationships, and value. Last quarter, we signed several new health systems, totaling over 43,000 new physician users. In sum, over 35% of all US physicians now have a Doximity Dialer Enterprise integration via their health system. We also hit record highs across our entire workflow suite, led by new physician usage records for our scheduling, HIPAA-secure digital facts, and e-signature tools. With all-time high network usage in Q3, we're proud to help more physicians be more productive than ever before. Okay, to close, we'll highlight a couple projects coming out of our R&D labs. First, we're excited to collaborate with scheduling automation leader Calendly. Each year, doctors attend millions of events to stay up to date on the latest treatments, and we know from the 200,000 physician on-call schedules that we power today that doctors need help keeping track of it all. By integrating Calendly scheduling software into our platform, doctors will be able to easily schedule appointments with colleagues and industry without having to navigate multiple platforms or waste all that time on back and forth scheduling emails. In our pilot test, doctors like using an online tool to arrange meetups with the scientific medical industry as impromptu meetings can disrupt their clinical workflows and aren't efficient for either party. While this is clearly early stage and zero revenue this year, We're excited about the very large market opportunity this could unlock. Okay, our second labs project is using ChatGPT, the buzzy AI writing assistant we all can't stop talking about. It began over the holidays when our engineers created a beta site called docs, D-O-C-S, GPT.com. The site lets doctors and their staff play around with their ChatGPT API and share some of their favorite prompts. After the usual mirth and humor, like Dr. Seuss rhyming treatment instructions for kids, a key use case bubbled up. Doctors still handle a lot of actual paperwork, and much of it is still sent by fax machines. So we integrated our free online fax directly with GPT for doctors to share news. Its early use has been promising. An oncologist from Ohio called DocsGPT, quote, a game changer, end quote. after it drafted an appeal letter for a cancer patient with a heart condition. The insurer got the facts and approved within the hour, allowing the patient to receive a non-generic medication with fewer cardiac side effects. Meanwhile, a department chief from a top five hospital emailed us to say that Doc's GPT was, quote, pretty badass, end quote, for helping him fax through his backlog of peer credentialing letters. Obviously, Doc's GPT is just a small test project. But more broadly, we're enthused about AI's potential to streamline workflows across all of our physician cloud. Imagine an autofilled reply to a pharmacy fax form or a three-line summary of any journal article. With AI, we don't think this future is far off, and we plan to be at the forefront. As always, we'll roll up our sleeves with our physician advisors to build the best products. Speaking of which... We are excited to convene our 11th annual DocsTech Summit in San Francisco next month. We can't wait to brainstorm and beta test with 200 of our nation's top digital doctors to build the next phase of the clinical cloud. Okay, I'd like to end by thanking my nearly 1,000 and growing Doximity teammates who continue to work incredibly hard to realize our mission. And with that, I'll hand the call over to our CFO to discuss our financial performance and our guidance. Anna?
spk09: Thanks, Jeff, and thanks to everyone on the call today. I'll begin with our Q3 financial results and then move on to our outlook for Q4, as well as an early preview for fiscal 2024. Third quarter revenue grew 18% year over year to $115.3 million, exceeding the high end of our guidance range. Similar to prior quarters, our existing customers continued to lead our growth. Our net revenue retention rate was 119% in Q3 on a trailing 12-month basis. Additionally, our largest customers are still growing the fastest with a 127% net revenue retention rate for our top 20. We ended the quarter with 290 customers contributing at least $100,000 each in subscription-based revenue on a trailing 12-month basis. This is a 12% increase from the 258 customers we had in this cohort a year ago. This cohort of customers accounted for 87% of our total revenue. As a reminder, our fiscal third quarter represents our largest sales quarter by a significant amount. During Q3, customers sign on for next year's program and commit the majority of their entire annual marketing budget. This year, we had a record selling season and achieved some major milestones. Notably, we signed eight farm brands to programs of $5 million or greater, which is double the number we signed last year. This includes our first ever $10 million brand, which purchased five different modules. This demonstrates that as we continue to innovate and create new additive modules, we can continue to unlock incremental spend per brand. Turning to our profitability, non-GAAP gross margin in the third quarter was 91%. flat versus the prior year period. Adjusted EBITDA for the third quarter was $55.5 million, and adjusted EBITDA margin was 48.2%, a new record, compared to $47 million and a 48% margin in the prior year period. Now turning to our balance sheet and cash flow. We ended the quarter with $801 million of cash, cash equivalents, and marketable securities. We generated free cash flow in the third quarter of 47.5 million, compared to 25.6 million in the prior year period, an increase of 85% year over year, as we continue to run a very profitable high cash generating business. Now moving on to our outlook. For the fourth fiscal quarter of 2023, we expect revenue in the range of 109.6 to 110.6 million. representing 18% growth at the midpoint. And we expect adjusted EBITDA in the range of 45.2 to 46.2 million, representing a 42% adjusted EBITDA margin. For the full fiscal year, we are revising our revenue guidance to 417.7 to 418.7 million, representing 22% growth at the midpoint. We are revising our adjusted EBITDA guidance to 180.2 to 181.2 million, representing a 43% adjusted EBITDA margin. As Jeff mentioned, our revised fiscal 2023 outlook is primarily the result of new product launch delays. Simply put, content approval has taken more time due to the novel formats of our new point of care and peer-to-peer offerings. These delays are having a larger impact on our near-term revenue, due to a higher mix of new products sold in Q3 than initially thought. We do expect to have this content approved and ready to go live in the coming months. And the early demand we've seen from customers makes us even more confident in the potential of these products to drive future growth. While the delays are disappointing, we'd like to be clear that the absolute dollar value of our Q3 sales came in slightly above our internal forecast as of our November earnings call. The issue is the pace of revenue recognition. As we look ahead to next year, we are providing a preliminary outlook for fiscal 2024 of greater than $500 billion in revenue and at least 43% adjusted EBITDA margins. For this outlook, we are assuming a similar percentage of mid-year upsells to what we saw in fiscal 2023, which was about half of our historical upsell rate. While we hope to outperform here, we are not assuming this in our outlook due to continued macro uncertainty. As of today, we have a higher percentage of this $500 million backstop under contract than we did of the $418.2 million midpoint at this same time last year. I'd like to close by reiterating that while our forecasted growth won't be quite as high as we'd expected for the full fiscal year 2023, the momentum in our business remains strong. After achieving our first $5 million-plus brand only last year, we have reached a new milestone with our first $10 million brand just a year later. This speaks to the market fit of our innovative new products and the robust ROI our customers are receiving from our platform. Additionally, we continue to run a highly profitable business, and we're encouraged by the fact that we are still projecting fiscal 2023 adjusted EBITDA to come in near the midpoint of our prior range. Looking ahead, we'd like to reiterate our commitment to be a long-term Rule of 60-plus company through a combination of growth and profitability. With that, I will turn it over to the operator for questions.
spk06: Thank you. We'll now open the line for questions, and please press star 1 if you would like to join the queue. We have 30 minutes for a Q&A. Our first question comes from Brian Peterson with Raymond James. Your line is open.
spk04: Hi, thanks for taking the question. So I wanted to clarify on the March core guidance and maybe what changed. It sounds like some of the newer products were a little bit more delayed versus what you guys expected. But was that just related to some new products like point of care that were coming out? Or I know there were some plans for some of the renewed programs to get those out earlier this And given what's happened, is there any kind of updated view on how we should be thinking about the seasonality of the business going forward?
spk09: Yeah, sure, Ryan. Anna here. I'll start with your first question and then go on to your second one there. So as far as where we're seeing the delays, it is contained to just our new products. So only peer-to-peer and point-of-care. I know you heard us last quarter talk a lot about the operational efficiencies we're working on to increase the pace of launches for our core news and video products. And we actually were really successful there. We had a greater than 50% increase in the number of programs launching in January for our core news and video products. So because of that, we had initially thought when we gave guidance back in November that these operational efficiencies would increase revenue conversion from Q3 deals by several percentage points. However, as you heard here in our prepared remarks, given we sold a greater mix of new products than expected and we faced delays getting these new products live, this counterbalanced the increase in revenue conversion from our operational efficiencies, and we ended up not seeing a material change in our overall revenue conversion rates from Q3 deals, which is the primary reason for the revised guidance you're seeing here. As far as the seasonality question, which I'll hit on as well, You gave me a big one there. I'll hit on the seasonality piece too. I think the way our customers have purchased and launched their programs has fundamentally changed over the last several years. And we've certainly seen quarterly cadences that have been difficult to draw patterns from. As we move forward and we're getting a better handle on what post-pandemic buying looks like for our customers at this increased scale that we're at now, we are actually starting to see a pattern emerge where we do see a step down around annual launches. But it's now occurring in our fiscal Q4 instead of our Q1 as we get more efficient with launches and our customers are getting stricter on running programs from calendar year start to calendar year end. So because of this, you know, our best estimate at this point is that going forward, we will see a step down between Q3 and Q4 around our annual launches. But then we'll see, you know, flat to a slight step up between Q4 and Q1, a step up between Q1 and Q2, and then a larger step up between Q2 and Q3 as our customers add on to our programs.
spk04: Awesome. Thanks, Anna. A lot of detail there. And maybe one, Jeff or Anna, I don't know if you want to take this, but it sounds like the newer products had a pretty strong start. Can you talk about, you know, where that fits into budgets? Is that kind of net new? Does that maybe displace other categories in any updated perspective?
spk02: how some of your customers are thinking about overall budgets for next year thanks guys yeah brian this is jeff i'll speak to that um it does come from a slightly new cam new budgets point of care budgets um and as anna said the mix there came in much stronger than than we had thought which is great actually we're getting very large organizations to buy into our you know innovative products in the first quarter as it's available uh and as anna said More than 100% of our miss really was those new products. So if those new products had all launched, we would have hit our forecast. But for the reasons we described in the prepared remarks, they got a little bit spooked, I think, by vertical video. They are used to viewing us sort of like a medical journal. And vertical video is a little different. So it did take us back to having to do more of a base review, which was fine. And it has gone fine. I would add that most of the clients that we have had to go back and do that new product review with have now approved it, and it's going ahead to launch.
spk05: So revenue is delayed but not lost. Great. Thanks, Jeff.
spk06: The next question is from Scott Berg with Needham & Company. Your line is open.
spk13: Hi, everyone. Thanks for taking my questions, and congrats on the core bookings momentum here. I guess I got a couple of them here. One to start off with commentary on the mid-year upsells, at least you're forecasting next year to be in line with what you were selling this year. I guess, how should we think about the variance opportunities with that? And don't know how that maybe sits relative to what you saw booking so far in Q3. We tend to get a lot of questions on the opportunity for that to rebound, but also on the opportunity that those mid-year you know, mid-year bookings just might be weaker on a perpetual basis going forward.
spk09: Yeah, sure, Scott. Anna here. I'll take that question. I mean, we certainly hope that that can rebound. I think in this current macro environment, we're not going to assume that. I think what we saw last year was pretty atypical, right? We're coming out of a pandemic and right into a macro downturn, and we saw our customers do some precautionary belt tightening. I would think as we move forward, our customers have done a better job of planning for next year. So we certainly are hopeful that we'll see more mid-year upsells, but we don't think it's the prudent thing to do to include that in our guidance right now.
spk13: Sure. Got it. Helpful. And then from a follow-up perspective, I thought at least the initial commentary on any sort of chat GPT functionality to be interesting. I guess as you look at that product, and I'm sure it's very, very early, Is this something that you can ultimately monetize directly through some sort of subscription payments, et cetera? Or is this really a piece of functionality that should be viewed as to drive higher levels of engagement by the positions on the platform?
spk02: Yes, Scott, this is Jeff. Honestly, I'll make a joke here. We probably spent more time worrying about the liability of that product than the monetization of it so far. But that said, we think there's a lot of ways that down the road we could monetize here, ultimately helping doctors save time. And of course, they're in our products. They're coming back in our news feed and other ways. So we've shown that we can, I think, monetize physician time pretty well. But we just need to provide things that are useful to them. And for physicians, 76% of health care documents in our U.S. system today are still sent via fax and snail mail. And so you just think of all of those letters that need to be sent back and forth between insurers and providers, and we'd really love to help them out with that. It's really had a lot of warm accolades in a pretty short period of time.
spk06: Great. That's all I have. Thanks for taking my questions. The next question is from Sandy Draper with Guggenheim. Your line is open.
spk15: Great. Thanks so much. So I guess maybe a follow-up, Anna, about the cadence. So if I just look at the difference between where guidance was last quarter and this, it's about a $10 million push. When we think about, I think as Jeff mentioned, that revenues book, not loss, just timing, I want to make sure that you're not implying that there's a $10 million sequential increase in the June quarter, and then you build from there. But you'll probably see that build more smoothly. So I just want to make sure I'm clear on that first.
spk09: That's correct, Sandy. We are not saying that we'll start seeing a $10 million step-up right away in our Q1. While we are through most of the approvals, so we do actually have the approvals that we need from most of our customers to get these programs live, we're still working on them. We think they'll go live in the coming months, and so you'll see it more of a smoother cadence there. But that does contribute to the slight step-up that we're going to see between Q1 and Q1, but it will be more of a smooth cadence throughout the year, so it won't all be hitting in our Q1.
spk15: Okay, great. That's helpful. And then on the expense side, just thinking about the different lines, are there any, when I think about just the three buckets of sales and marketing, R&D, and G&A, would you call out any notable changes from growth rates on a relative basis, how those are going to be trending out when we're looking out next year to maintain the 43% margins, or when I think about relatively how those grew relative to the top line, say in 23 and in 22, the trajectory is the same, or as you're the CFO thinking about where we're maybe spending more, but we're going to pull back here. Are there any things we should be thinking about? Thanks. Sure.
spk09: No significant changes to what we saw this last year. We're going to continue to invest in R&D and sales and marketing. I think our investment in R&D has shown to be successful. Jeff mentioned that we saw record QAUs this last quarter as we're continuing to invest in our R&D team, continuing to invest in our product, and continuing to invest in growth there. Additionally, we're continuing to invest in sales and marketing. We saw that come to fruition with our most successful new product launch to date. We are tightening our belt here and sharpening our pencils on G&A, as I mentioned last quarter. So that will be an area we'll continue to be pretty prudent about how we think about investments. but certainly continue to invest in sales and marketing and R&D.
spk05: Great. Thanks so much.
spk06: The next question is from Stan Berenstein with Wells Fargo Securities. Your line is open. Hi. Thanks for taking my questions.
spk14: Last quarter you called out earlier start dates for contracts that are benefiting the fiscal fourth quarter. So if we think about kind of like an Apple-Savos comparison with the prior year fourth quarter, How should we think about the contract targets contributing to your revised guidance for this fiscal 4Q?
spk09: Sure, Sam, I'll take that one. So as I mentioned earlier with Brian's question, we did see some success in getting our core products launched in January. Now, it unfortunately was counterbalanced by the new product delays. So when you actually look at our holistic revenue conversion rates from Q3 programs in fiscal 2023, it ended up being essentially flat versus last year because these new product delays counterbalanced the increase in operational efficiency on our core products. On a go-forward basis, we're continuing to focus there. We are really, really pleased with the progress we've made and we'll continue to focus in there and continue to get more and more of our customers live in January. But this year, unfortunately, the new product delays made it less impactful.
spk14: Got it. And then it was interesting to see that the beat in the third quarter, particularly since it didn't seem if you got any new client growth sequentially in 3Q. Was that part of expectations or did something materialize where client growth kind of stalled out this quarter?
spk09: No, not necessarily. We do see some quarterly fluctuations in the number of 100K customers A lot of that just has to do to the timing of launches and when programs run. That's why we try to focus more on the annual growth, which continues to be strong. One thing that we've talked about before historically is as we think more on a three to five year horizon, we do believe that over time we'll start to see more growth come from the average revenue per 100K customer than the total number of 100K customers. So we're continuing to lean in there and upsell our customers.
spk05: Got it. Thanks so much.
spk06: The next question is from Richard Close with Ken Accord Ingenuity. Your line is open.
spk03: Yeah, thanks for the questions. Had a couple here. I was wondering maybe if you could provide any metrics on the higher visibility this year versus last year for us. And we'll start there and I'll ask a follow up.
spk09: Sure, Richard, happy to take that one. So I think My best proof point for you is going back to the prepared remarks where I said, as we sit here today, we have a higher percentage of the $500 billion preliminary guidance under contract than we did at this point last year for the final $418.2 million midpoint for fiscal 2023. So we're going into the year with more backlog, which leads to higher visibility. And we're also going into the year with pretty low assumptions from our perspective for a mid-year upsell. We are assuming no improvement there versus what we saw last year. Now, as I mentioned earlier, we hope to be able to see some improvement, but all those things combined means that we do expect to start the year with more revenue under contract than prior years.
spk03: Okay. And Jeff, you noted the record engagement. You had scheduling in there. I was wondering if you could provide any metrics in terms of the uptake in scheduling, considering I guess it's been about a year now that you've had that?
spk02: Yeah, no, thanks, Richard. I'd love to talk about our scheduling product, Amion. It's been doing really well. So I'll speak to the client side of it. This past quarter, we went out and started offering an enterprise, unlimited enterprise offering so that you wouldn't buy it just department by department in a hospital, but the whole health system could use it for a flat rate. And it was really popular. We got three quarters of our top 20 clients with Amion to go purchase that. And that's going to increase, we believe, our overall rollout, get more doctors, more departments using us as a more centralized scheduling system. The other thing I'd share there is just like we all check our calendars every day, doctors do too. So most of our doctors who are using the service, and again, there are 200,000 physicians who have schedules on Amion, are using it every day. The final point I'll make there is it's not just some sort of bolt-on for us. We've fully rebuilt the product. It's integrated inside the Doximity platform, and we have now migrated about half of those doctors into the fully logged-in Doximity platform where they can also directly make phone calls and message each other, so really making it part of our full, larger suite.
spk05: Okay. Thank you.
spk06: The next question is from Ryan Daniels with Blair. Your line is open.
spk11: Yeah, thank you for taking the questions. Anna, let me start with one for you, and this one relates to the EBITDA guidance. Obviously, a really strong outperformance this quarter and just a modest downtick to the full year, I think about 70 bps, which means Q4 is going to come in lower than you anticipated. So is there any color you can offer on why this quarter was so much stronger than you anticipated and then why the Q4 performance will be below prior anticipated levels. Was there any pull forward or nuances there?
spk09: Sure, Ryan. I think the majority of that difference from an EBITDA perspective has to do with the difference from a revenue perspective. That said, we do continue to be diligent with how we think about our investments. And we are also seeing continued improvement in our vertical sales model from an efficiency perspective. So when we think about Q3, for example, as we mentioned earlier, we did have a higher mix of new products, and our new products and new modules have very high incremental margins. So that can help contribute to the EBITDA beat that we saw in Q3, and as far as it pertains to Q4, it really is just a function of revenue.
spk11: Okay, that's helpful. And then, Jeff, one for you, just to go back to the comment on the peer-to-peer and point-of-care video content approval delays. You know, are those now at a point where they've been approved and you actually have a firm launch date? Or is that still in the works where there could be some delta and push forward again? So you've got the approval. Do you actually have the launch date is my question. Thanks.
spk02: Yeah, that's a good question, Ryan. As we said in the prepared remarks, most have been approved. I would say that not all of those are live yet. So some have hard scheduled dates and will get live soon. So it's really a continuum. The short answer is I think in the coming months, we say, in the next few months, we expect to get these all out there.
spk06: The next question is from Elizabeth Anderson with Evercore. Your line is open.
spk07: Hi, guys. Thanks so much for the question. In the quarter, I just noticed you guys didn't really do any share repo, which is a little bit of a departure from other quarters this year. I was just wondering if you had any updated thoughts on the pacing given the authorization that you guys put forward a couple months ago. Thanks.
spk09: Sure, Elizabeth. Not much I can really say there, to be honest. I mean, from our perspective, we have done a set it and forget it plan from a share buyback perspective. So for us, just as simple as it didn't hit our price targets this quarter, but we're continuing our commitment to doing that on a go-forward basis. And it's still live. It just hasn't triggered yet.
spk07: Got it. Perfect. Thank you so much.
spk06: The next question is from Jessica Tessan with Piper Sandler. Your line is open.
spk01: Thanks so much for taking the question. I was hoping you could discuss some of the behavior you're seeing for branded drugs facing biosimilar competition. What are kind of the trends in physician education for the brand versus the biosimilar competition? And are you seeing educational budgets for disease categories increase, decrease, or stay about flat overall where there are biosimilar launches challenging some major brands?
spk10: Hey, Jessica. This is Nate. I'm happy to chime in here. So the industry has always had arcs of prominence for major therapies. And, you know, industry competition in general is a good thing for society. It drives competition. It drives innovation. As new products, competing products are launched. That creates a need for education at the caregiver level. And what's interesting about biologics and biosimilars and the nuances between them at a molecular level, at a current state of research level, a patient cohort level, payer adoption, coverage and policy level, that's a lot to parse and keep up with. And that complexity is only going to continue to accelerate as medicine becomes increasingly personalized. So It really takes a precision education and really an individualized digital platform like ours to be able to address the needs in that sort of evolving complex market. And we think we're well positioned to help the field there, even as the amount of spend on different budgets shifts.
spk01: Got it. That makes sense. And then I just have a quick follow-up to Ryan's question. How would you describe the visibility into the revised FY20 free guidance at this point? Thanks.
spk09: Sure. At this point, when it comes to the revised fiscal 23 guidance, I mean, we've got, what, two months left in the year. We have a ton of visibility there. We're very, very comfortable with those numbers.
spk01: Got it. Thank you so much.
spk06: The next question is from Stephanie Davis with SVB Securities. Your line is open.
spk08: Hey, folks. Thank you for taking my question. Anna, building on your visibility comments, can you walk us through how you've looked at contracting and get visibility and maybe give us a bit more of a bridge around the go-gets, renewals, and already contracted pieces of the revenue for next year? And then Jeff, I'd actually like a history lesson from your time at Hippocrates. Were there any insights on contracting for visibility there given similar tough macro backdrops that you've seen in the past?
spk09: Sure, Steph. I'll start out and then pass it over to Jeff for your second part of the question. So continuing to elaborate on the visibility, we're not going to give the exact figures around 60, 65, 70, whatever percentages we've given in the past. But I think a good way to think about it is we are starting the year with more revenue under contract than prior years. We are less dependent on mid-year upsells than prior years. And that means we're more dependent on our core annual renewal cycle, which continues to perform really well for us. Our core annual renewal cycle this year was incredibly strong. Demand is incredibly strong. We saw larger brand sizes, longer term programs than we've ever seen before. So we're really encouraged by that. And that's something that's really never been up in the air for us. So I think through a visibility perspective, we feel very, very comfortable with how we look for next year with this $500 million backstop.
spk02: Yes, Stephanie, and this is Jeff. I'll chime in and say, yes, having managed through the 2008-2009 crises and other crises in the past, in general, pharmaceuticals and healthcare is recession-resistant. I joke we're not immune to broader macroeconomic ills, but we are fully vaxxed in that regard. And I think that comes up and shows that we're still an organic rule of 60-plus company this year, giving guidance here for 20% top-line growth, again, in a very tough macro, and 43% EBITDA margins based on a record 48% EBITDA margin last quarter. So I think we're seeing folks pull back a little bit. I think in some ways a more efficiency-driven environment is good for us. It clears out some of those digital pet projects that sort of accumulated during the height of lockdown. The new websites that got a few million here or there and never got any use. So the fact that clients see that they spend $1 with us and get $11 back, I mean, over time, they just keep moving more and more of that budget over to us, which is why I'm so proud that this new $10 million client we have, brand we have, is with one of our oldest clients, someone we've worked with for a decade. So the more you know us, the more you want to work with us. We think that's great. All right, last point I'd just add on is we've talked a lot about pharma on this call, but our hospital business this time around, it's surprisingly, I shouldn't say surprisingly, it's been very strong. And I know last quarter we had shared that we were so excited we had our first $4 million brand there, first $4 million account. And now we've upped that. Now it's our first $5 million account. So we continue to see strong growth in our hospital business as well as they move more digital.
spk08: I'll do a follow-up there because it sounds like you want to talk hospital a little bit. Is that a function of more the tight labor market and trying to get more seats filled within the hospital? Is it telemedicine? Is it something else that's really hitting on all cylinders?
spk02: Yeah, it's really the marketing side of it. And I think hospitals are realizing that it's not about the billboards and sports stadiums. It's about finding people. patients digitally and having good relations with physicians in the community who refer in. So I think we're very strong at doing that. And to our team's credit, I think we've done a really nice job of penciling the math for them, actually looking at claims data to see how many new referrals they get from the programs we run so that they can go back to their management and say, look, we ran this program and here's the ROI. We should do more.
spk05: Awesome.
spk08: Thank you, guys.
spk06: The next question is from Glenn Santangelo with Jefferies. Your line is open.
spk12: Yeah, thanks for taking my question. Hey, Jeff, I just wanted to come back to this visibility thing, right? Because, you know, we get so many questions on it. If you look over the last four quarters, three of them you've been, you know, surprised on a number of different things. And each one of them kind of sounds like it makes sense. But, you know, we're getting a lot of questions about are they guiding conservatively or do they really have the level of visibility they think they have? And just kind of coming back, Anna, to your comments on the visibility for next year, I went back to this same transcript last year, and you said, both you guys said that you had 60% visibility sort of heading into the next year, and that was fiscal 23. Is that like a reasonable benchmark to start when we think about, you know, this 500 million? We're just trying to get a sense for how much of this may already be booked, and maybe you don't want to share that number, but Maybe you can comment if that 60% last year was even accurate.
spk02: Sure. Thanks, Glenn. Yeah, as Anna shared, it's above that 60%, you know, as we plan into this next year. So we're ahead as a percentage of where we were last year. But, you know, I do take your comment to heart here. I think this new product shift was something that we should have seen coming. And from our end, we, I think, gotten into an easy rhythm with our clients where everything was sort of on a fast track approval. And we assumed that our new products would be as well. And then our new products sold much, much better than we thought. I mean, again, this is the best product launch we've had by many fold this last year. Again, it's great that our clients are innovating with us. But those delays were not something that I think we had put in enough buffer for. So I We take your feedback very seriously. We do not take this lightly. But I can tell you, you know, it's not like folks are canceling contracts or other things. It's really just that the revenue has been a bit delayed.
spk12: All right. And maybe if I could just sort of follow up. I also want to talk about margins, right? And if I look at this this year, basically you're going to have three quarters with kind of flat to down margins. And obviously... The September quarter had a nice margin expansion, and now you're sort of forecasting 20% revenue growth with your gross margin level, and the margins are basically flat year over year in terms of what you're forecasting. I mean, I heard you about the incremental investments in a couple of areas, but, you know, Jeff, is there anything going on with the competitive landscape? Anything sort of happening here with pricing that maybe we're sort of talking about? Or, you know, I don't know if there's any sort of comments you can make because I'm trying to assess your rule of 60 comments. And, you know, I think we were all sort of conditioned to believe, and I don't know what you're implying, if that's 40 and 20, or if it can be 45 and 15. But, you know, we're just trying to think because your margins have fluctuated. You know, you had 48%, one quarter, 37% in the fiscal first quarter. And so I'm just trying to, you know, think about the volatility and margin when we're sort of building our models for next fiscal year. Thanks.
spk09: Sure, Glenn. I'll take that one. And just before I hit on that, actually, I'll also hit back to your visibility piece. I do think it's just important to remember, and we'll be the first to say it, this was a tough year from a visibility perspective. We were coming out of a pandemic into a macro downturn, coming off of two years where we were growing at a 70% plus kegger. So it definitely was a harder year from a visibility perspective, and we'll be the first to admit that. And I think going forward, as we're looking ahead and as we're hoping to give some more color on the guidance for next year, I think we're going in eyes wide open and we're thinking more about what could potentially happen if backward deteriorates further, et cetera. So I just wanted to kind of clarify that and hit that on the head. From a EBITDA perspective, we do see quarterly fluctuations. It typically is around the selling season, right? We do see higher sales and marketing in Q3 and Q4 and So there is some increase there. As far as how we're thinking about next year, we're continuing to invest in growth. We still see ourselves as a growth company, and we want to keep investing there. So we think 43% plus margins in this environment and 20% growth is really strong. So we're really pleased to be able to be a company that's organic, really 60 plus.
spk12: And you're seeing no erosion on the pricing side?
spk09: No, we're not seeing erosion on the pricing side. I mean, the way we think about pricing is we think about it through a value lens. That's how our customers are thinking about pricing. So given our ROI, it actually continues to get more affordable to our customers because our ROI continues to increase. As far as how we think about long-term pricing, I mean, we aim typically for somewhere near a mid-single-digit price increase each year, and we're having no problems achieving that.
spk12: Perfect. Thanks for the comments. Much appreciated.
spk06: That concludes our question and answer session. I will now pass the call back over to Doximity's CEO, Jeff Taney, for any closing remarks.
spk02: Thank you, everyone, for joining the call.
spk06: We look forward to talking to you again next quarter. Thanks, everyone. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
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