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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________________________________________________________________________________________
FORM 10-Q
_________________________________________________________________________________________________________________
(Mark One)
| | | | | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2024
OR
| | | | | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 001-40508
_________________________________________________________________________________________________________________
Doximity, Inc.
(Exact Name of Registrant as Specified in its Charter)
_________________________________________________________________________________________________________________
| | | | | | | | |
Delaware | | 27-2485512 |
(State or Other Jurisdiction of Incorporation or Organization) | | (I.R.S. Employer Identification Number) |
500 3rd St. Suite 510 San Francisco, CA 94107 (Address of principal executive offices, including zip code) |
(650) 549-4330 (Registrant's telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | | Name of exchange on which registered |
Class A common stock, $0.001 par value per share | | DOCS | | The New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | |
Large accelerated filer | ☒ | | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
| | | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
The registrant had outstanding 128,135,991 shares of Class A common stock and 58,555,770 shares of Class B common stock as of October 31, 2024.
TABLE OF CONTENTS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which are statements that involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “shall,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
•our expectations regarding our revenue, expenses, and other operating results;
•our future financial performance;
•our expectations and management of future growth;
•our ability to acquire new members and successfully retain existing members;
•our ability to acquire new customers and successfully retain existing customers;
•our ability to achieve or maintain our profitability;
•future investments in our business, our anticipated capital expenditures, and our estimates regarding our capital requirements;
•the costs and success of our sales and marketing efforts, and our ability to promote our brand;
•our ability to effectively manage our growth, including our ability to identify, retain, and recruit personnel, and maintain our culture;
•our ability to comply with laws and regulations;
•our ability to successfully defend litigation brought against us;
•our ability to maintain, protect, and enhance our intellectual property rights and any costs associated therewith;
•our ability to maintain data privacy and data security;
•our ability to respond to rapid technological changes;
•our expectations regarding the impact of uncertainty in the current economic environment and macroeconomic uncertainty;
•our ability to compete effectively with existing competitors and new market entrants;
•the growth rates of the markets in which we compete;
•the increased expenses associated with being a public company;
•the impact of any cost-savings or restructuring activities we may undertake in the future;
•the sufficiency of our cash and cash equivalents and marketable securities to meet our liquidity needs;
•our ability to comply with modified or new laws and regulations applying to our business;
•our ability to successfully identify, acquire, and integrate companies and assets;
•developments and projections relating to our competitors and our industry, including competing solutions;
•impact from future regulatory, judicial, and legislative changes or developments that may affect our customers’ or our business; and
•the risks related to our Class A common stock and our dual class common stock structure.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, results of operations, financial condition, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2024 filed with the Securities and Exchange Commission, the SEC, on May 23, 2024, and elsewhere in this Quarterly Report on Form 10-Q, as well as in our other filings with the SEC. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.
PART I—FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
DOXIMITY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
| | | | | | | | | | | |
| September 30, 2024 | | March 31, 2024 |
Assets | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 184,248 | | | $ | 96,785 | |
Marketable securities | 621,310 | | | 666,115 | |
Accounts receivable, net of allowance for doubtful accounts of $1,767 and $1,893 at September 30, 2024 and March 31, 2024, respectively | 124,793 | | | 101,332 | |
Prepaid expenses and other current assets | 27,361 | | | 48,709 | |
Total current assets | 957,712 | | | 912,941 | |
Property and equipment, net | 12,818 | | | 12,318 | |
Deferred income tax assets | 43,761 | | | 45,068 | |
Operating lease right-of-use assets | 9,774 | | | 12,332 | |
Intangible assets, net | 25,195 | | | 27,317 | |
Goodwill | 67,940 | | | 67,940 | |
| | | |
Other assets | 1,316 | | | 1,458 | |
Total assets | $ | 1,118,516 | | | $ | 1,079,374 | |
Liabilities and Stockholders’ Equity | | | |
Current liabilities: | | | |
Accounts payable | $ | 2,770 | | | $ | 2,253 | |
Accrued expenses and other current liabilities | 33,540 | | | 43,703 | |
Deferred revenue, current | 93,751 | | | 99,145 | |
Operating lease liabilities, current | 2,222 | | | 2,149 | |
| | | |
Total current liabilities | 132,283 | | | 147,250 | |
Deferred revenue, non-current | 148 | | | 211 | |
Operating lease liabilities, non-current | 11,269 | | | 12,397 | |
Contingent earn-out consideration liability, non-current | 5,469 | | | 10,895 | |
| | | |
Other liabilities, non-current | 8,151 | | | 7,224 | |
Total liabilities | 157,320 | | | 177,977 | |
Commitments and contingencies (Note 12) | | | |
| | | |
| | | |
Stockholders' Equity | | | |
Preferred stock, $0.001 par value; 100,000 shares authorized as of September 30, 2024 and March 31, 2024, respectively; zero shares issued and outstanding as of September 30, 2024 and March 31, 2024, respectively | — | | | — | |
Class A and Class B common stock, $0.001 par value; 1,500,000 shares authorized as of September 30, 2024 and March 31, 2024, respectively; 186,781 and 186,562 shares issued and outstanding as of September 30, 2024 and March 31, 2024, respectively | 187 | | | 187 | |
Additional paid-in capital | 863,113 | | | 823,885 | |
Accumulated other comprehensive income (loss) | 2,676 | | | (2,664) | |
Retained earnings | 95,220 | | | 79,989 | |
Total stockholders’ equity | 961,196 | | | 901,397 | |
Total liabilities and stockholders’ equity | $ | 1,118,516 | | | $ | 1,079,374 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
DOXIMITY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Six Months Ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Revenue | $ | 136,832 | | | $ | 113,612 | | | $ | 263,508 | | | $ | 222,081 | |
Cost of revenue | 13,676 | | | 12,759 | | | 27,226 | | | 25,912 | |
Gross profit | 123,156 | | | 100,853 | | | 236,282 | | | 196,169 | |
Operating expenses: | | | | | | | |
Research and development | 23,240 | | | 19,958 | | | 45,814 | | | 41,889 | |
Sales and marketing | 34,367 | | | 30,201 | | | 69,611 | | | 64,656 | |
General and administrative | 10,103 | | | 8,966 | | | 19,358 | | | 18,213 | |
Restructuring and impairment charge | 2,304 | | | 7,936 | | | 2,304 | | | 7,936 | |
Total operating expenses | 70,014 | | | 67,061 | | | 137,087 | | | 132,694 | |
Income from operations | 53,142 | | | 33,792 | | | 99,195 | | | 63,475 | |
Other income, net | 9,029 | | | 5,903 | | | 16,145 | | | 10,742 | |
Income before income taxes | 62,171 | | | 39,695 | | | 115,340 | | | 74,217 | |
Provision for income taxes | 18,017 | | | 9,093 | | | 29,809 | | | 15,209 | |
Net income | $ | 44,154 | | | $ | 30,602 | | | $ | 85,531 | | | $ | 59,008 | |
Net income per share attributable to Class A and Class B common stockholders: | | | | | | | |
Basic | $ | 0.24 | | | $ | 0.16 | | | $ | 0.46 | | | $ | 0.30 | |
Diluted | $ | 0.22 | | | $ | 0.15 | | | $ | 0.43 | | | $ | 0.28 | |
Weighted-average shares used in computing net income per share attributable to Class A and Class B common stockholders: | | | | | | | |
Basic | 186,252 | | | 193,112 | | | 185,933 | | | 193,813 | |
Diluted | 200,407 | | | 209,014 | | | 199,818 | | | 210,681 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
DOXIMITY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Six Months Ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Net income | $ | 44,154 | | | $ | 30,602 | | | $ | 85,531 | | | $ | 59,008 | |
Other comprehensive income | | | | | | | |
Change in unrealized gain on available-for-sale-securities, net of tax provision of $1,246, $1,146, $1,803 and $1,736, respectively | 3,684 | | | 3,408 | | | 5,340 | | | 5,155 | |
| | | | | | | |
Comprehensive income | $ | 47,838 | | | $ | 34,010 | | | $ | 90,871 | | | $ | 64,163 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
DOXIMITY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2024 |
| Class A and Class B Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income (Loss) | | Retained Earnings | | Stockholders' Equity |
| Shares | | Amount | | | | |
Balance as of June 30, 2024 | 185,704 | | | $ | 186 | | | $ | 841,470 | | | $ | (1,008) | | | $ | 72,932 | | | $ | 913,580 | |
Stock-based compensation | — | | | — | | | 16,992 | | | — | | | — | | | 16,992 | |
Exercise of stock options and common stock warrants | 1,441 | | | 1 | | | 7,707 | | | — | | | — | | | 7,708 | |
Vesting of restricted stock units | 321 | | | — | | | — | | | — | | | — | | | — | |
Tax withholding on shares under stock-based compensation awards | — | | | — | | | (5,828) | | | — | | | — | | | (5,828) | |
Repurchase and retirement of common stock, including excise tax | (740) | | | — | | | — | | | — | | | (21,866) | | | (21,866) | |
Common stock warrant expense | — | | | — | | | 1,350 | | | — | | | — | | | 1,350 | |
Issuance of common stock in connection with the employee stock purchase plan | 55 | | | — | | | 1,422 | | | — | | | — | | | 1,422 | |
Other comprehensive income | — | | | — | | | — | | | 3,684 | | | — | | | 3,684 | |
Net income | — | | | — | | | — | | | — | | | 44,154 | | | 44,154 | |
Balance as of September 30, 2024 | 186,781 | | | $ | 187 | | | $ | 863,113 | | | $ | 2,676 | | | $ | 95,220 | | | $ | 961,196 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2023 |
| Class A and Class B Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Loss | | Retained Earnings | | Stockholders' Equity |
| Shares | | Amount | | | | |
Balance as of June 30, 2023 | 194,649 | | | $ | 195 | | | $ | 777,772 | | | $ | (12,336) | | | $ | 225,156 | | | $ | 990,787 | |
Stock-based compensation | — | | | — | | | 12,348 | | | — | | | — | | | 12,348 | |
Exercise of stock options | 1,129 | | | 1 | | | 3,960 | | | — | | | — | | | 3,961 | |
Vesting of restricted stock units | 199 | | | — | | | — | | | — | | | — | | | — | |
Tax withholding on shares under stock-based compensation awards | — | | | — | | | (2,120) | | | — | | | — | | | (2,120) | |
Repurchase and retirement of common stock, including excise tax | (7,536) | | | (8) | | | — | | | — | | | (170,355) | | | (170,363) | |
Common stock warrant expense | — | | | — | | | 1,350 | | | — | | | — | | | 1,350 | |
Issuance of common stock in connection with the employee stock purchase plan | 77 | | | — | | | 1,494 | | | — | | | — | | | 1,494 | |
Other comprehensive income | — | | | — | | | — | | | 3,408 | | | — | | | 3,408 | |
| | | | | | | | | | | |
Net income | — | | | — | | | — | | | — | | | 30,602 | | | 30,602 | |
Balance as of September 30, 2023 | 188,518 | | | $ | 188 | | | $ | 794,804 | | | $ | (8,928) | | | $ | 85,403 | | | $ | 871,467 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
DOXIMITY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended September 30, 2024 |
| Class A and Class B Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income (Loss) | | Retained Earnings | | Stockholders' Equity |
| Shares | | Amount | | | | |
Balance as of March 31, 2024 | 186,562 | | | $ | 187 | | | $ | 823,885 | | | $ | (2,664) | | | $ | 79,989 | | | $ | 901,397 | |
Stock-based compensation | — | | | — | | | 33,089 | | | — | | | — | | | 33,089 | |
Exercise of stock options and common stock warrants | 2,225 | | | 2 | | | 10,254 | | | — | | | — | | | 10,256 | |
Vesting of restricted stock units | 532 | | | — | | | — | | | — | | | — | | | — | |
Tax withholding on shares under stock-based compensation awards | — | | | — | | | (8,222) | | | — | | | — | | | (8,222) | |
| | | | | | | | | | | |
Repurchase and retirement of common stock, including excise tax | (2,593) | | | (2) | | | — | | | — | | | (70,300) | | | (70,302) | |
Common stock warrant expense | — | | | — | | | 2,685 | | | — | | | — | | | 2,685 | |
Issuance of common stock in connection with the employee stock purchase plan | 55 | | | — | | | 1,422 | | | — | | | — | | | 1,422 | |
Other comprehensive income | — | | | — | | | — | | | 5,340 | | | — | | | 5,340 | |
Net income | — | | | — | | | — | | | — | | | 85,531 | | | 85,531 | |
Balance as of September 30, 2024 | 186,781 | | | $ | 187 | | | $ | 863,113 | | | $ | 2,676 | | | $ | 95,220 | | | $ | 961,196 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended September 30, 2023 |
| Class A and Class B Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Loss | | Retained Earnings | | Stockholders' Equity |
| Shares | | Amount | | | | |
Balance as of March 31, 2023 | 193,941 | | | $ | 194 | | | $ | 762,150 | | | $ | (14,083) | | | $ | 217,855 | | | $ | 966,116 | |
Stock-based compensation | — | | | — | | | 25,307 | | | — | | | — | | | 25,307 | |
Exercise of stock options | 2,380 | | | 2 | | | 7,252 | | | — | | | — | | | 7,254 | |
Vesting of restricted stock units | 320 | | | — | | | — | | | — | | | — | | | — | |
Tax withholding on shares under stock-based compensation awards | — | | | — | | | (4,084) | | | — | | | — | | | (4,084) | |
Repurchase and retirement of common stock, including excise tax | (8,200) | | | (8) | | | — | | | — | | | (191,460) | | | (191,468) | |
Common stock warrant expense | — | | | — | | | 2,685 | | | — | | | — | | | 2,685 | |
Issuance of common stock in connection with the employee stock purchase plan | 77 | | | — | | | 1,494 | | | — | | | — | | | 1,494 | |
Other comprehensive income | — | | | — | | | — | | | 5,155 | | | — | | | 5,155 | |
| | | | | | | | | | | |
Net income | — | | | — | | | — | | | — | | | 59,008 | | | 59,008 | |
Balance as of September 30, 2023 | 188,518 | | | $ | 188 | | | $ | 794,804 | | | $ | (8,928) | | | $ | 85,403 | | | $ | 871,467 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
DOXIMITY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited) | | | | | | | | | | | |
| Six Months Ended September 30, |
| 2024 | | 2023 |
Cash flows from operating activities | | | |
Net income | $ | 85,531 | | | $ | 59,008 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 5,175 | | | 5,208 | |
Deferred income taxes | 204 | | | — | |
Stock-based compensation, net of amounts capitalized | 34,958 | | | 27,448 | |
Non-cash lease expense | 951 | | | 1,077 | |
| | | |
| | | |
Accretion of discount on marketable securities, net | (5,368) | | | (1,794) | |
| | | |
| | | |
| | | |
Amortization of deferred contract costs | 4,759 | | | 4,730 | |
| | | |
| | | |
| | | |
Impairment of long-lived assets | 2,304 | | | — | |
Other | (122) | | | 127 | |
Changes in operating assets and liabilities: | | | |
Accounts receivable | (23,478) | | | 9,644 | |
Prepaid expenses and other assets | 19,948 | | | (10,504) | |
Deferred contract costs | (3,216) | | | (2,448) | |
| | | |
Accounts payable, accrued expenses and other liabilities | (5,546) | | | (8,063) | |
Deferred revenue | (5,457) | | | (13,753) | |
Operating lease liabilities | (1,054) | | | (582) | |
| | | |
Net cash provided by operating activities | 109,589 | | | 70,098 | |
Cash flows from investing activities | | | |
| | | |
Purchases of property and equipment | — | | | (111) | |
Internal-use software development costs | (3,247) | | | (2,732) | |
| | | |
Purchases of marketable securities | (367,808) | | | (180,226) | |
Maturities of marketable securities | 417,913 | | | 212,768 | |
Sales of marketable securities | 7,241 | | | 37,525 | |
| | | |
| | | |
Net cash provided by investing activities | 54,099 | | | 67,224 | |
Cash flows from financing activities | | | |
| | | |
Proceeds from issuance of common stock upon exercise of stock options and common stock warrants | 10,243 | | | 7,218 | |
Proceeds from issuance of common stock in connection with the employee stock purchase plan | 1,422 | | | 1,494 | |
Taxes paid related to net share settlement of equity awards | (8,222) | | | (4,084) | |
Repurchase of common stock | (74,198) | | | (186,184) | |
Payment of contingent consideration related to a business combination | (5,470) | | | (5,390) | |
| | | |
Net cash used in financing activities | (76,225) | | | (186,946) | |
Net increase (decrease) in cash and cash equivalents | 87,463 | | | (49,624) | |
Cash and cash equivalents, beginning of period | 96,785 | | | 158,027 | |
Cash and cash equivalents, end of period | $ | 184,248 | | | $ | 108,403 | |
Supplemental disclosures of cash flow information | | | |
Cash paid for taxes, net of refunds | $ | 21,985 | | | $ | 29,438 | |
Non-cash financing and investing activities | | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Share repurchases included in accrued expenses | $ | 104 | | | $ | 5,003 | |
Excise tax payable on share repurchases | $ | 1,493 | | | $ | 1,030 | |
| | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
DOXIMITY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Description of Business
Doximity, Inc. (the “Company”) was incorporated in the state of Delaware in April 2010 as 3MD Communications, Inc. and is headquartered in San Francisco, California. The Company subsequently changed its name to Doximity, Inc. in June 2010. The Company provides an online platform, which enables physicians and other healthcare professionals to collaborate with their colleagues, stay up to date with the latest medical news and research, manage their careers and on-call schedules, streamline documentation and administrative paperwork, and conduct virtual patient visits. The Company’s customers primarily include pharmaceutical companies and health systems that connect with healthcare professionals through the Company’s digital Marketing and Hiring Solutions. Marketing Solutions provide customers with the ability to share tailored content on the network. Hiring Solutions enable customers to identify, connect with, and hire from the network of both active and passive potential medical professional candidates.
2. Summary of Significant Accounting Policies
There have been no material changes to the significant accounting policies of the Company during the six months ended September 30, 2024 as compared to those described in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2024 and filed with the SEC on May 23, 2024.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with U.S. GAAP. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2024.
The accompanying condensed consolidated financial statements include the accounts of the Company and its consolidated subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. In the opinion of the Company’s management, the information contained herein reflects all adjustments necessary for a fair presentation of the Company’s financial position, results of operations, stockholders’ equity, and cash flows. The results of operations for the three and six months ended September 30, 2024, shown in this report are not necessarily indicative of the results to be expected for the full year ending March 31, 2025.
Fiscal Year
The Company’s fiscal year ends on March 31st. Unless otherwise noted, all references to a particular year shall mean the Company’s fiscal year.
Use of Estimates
The preparation of the Company’s condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts stated in the condensed consolidated financial statements and accompanying notes. These judgments, estimates, and assumptions are used for, but not limited to, revenue recognition, the fair values of acquired intangible assets and goodwill, the useful lives of long-lived assets, fair value of contingent earn-out consideration, and deferred income taxes. The Company bases its estimates on historical experience and on assumptions that management considers reasonable. The Company assesses these estimates on a regular basis; however, actual results could differ from these estimates due to risks and uncertainties, including uncertainty in the current economic environment.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, and accounts receivable. The primary focus of the Company’s investment strategy is to preserve capital and meet liquidity requirements. The Company’s investment policy addresses the level of credit exposure by
DOXIMITY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
limiting the concentration in any one corporate issuer or sector and establishing a minimum allowable credit rating. To manage risk exposure, the Company invests cash equivalents and marketable securities in a variety of fixed income securities, including government and investment-grade debt securities and money market funds. The Company places its cash primarily in checking and money market accounts with reputable financial institutions. Deposits held with these financial institutions may exceed the amount of insurance provided on such deposits, if any.
Concentrations of credit risk with respect to accounts receivable are primarily limited to certain customers to which the Company makes substantial sales. No customer represented 10% or more of revenue for the three and six months ended September 30, 2024 and 2023. The Company’s significant customers that represented 10% or more of accounts receivable, net for the periods presented were as follows:
| | | | | | | | | | | | | | | | | | | |
| | | Accounts Receivable, Net |
| | | | | September 30, 2024 | | March 31, 2024 |
| | | | | | | | | |
Customer A | | | | | | | | | 13 | % | | * |
Customer B | | | | | | | | | 13 | % | | 15 | % |
Customer C | | | | | | | | | 10 | % | | * |
_______________
* Less than 10%
For the purpose of assessing the concentration of credit risk for significant customers, the Company defines a customer as an entity that purchases the Company’s services directly or indirectly through marketing agencies.
Accounting Pronouncements Not Yet Adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. This ASU is effective for the Company for its fiscal year beginning April 1, 2024, and for interim periods within the fiscal year beginning April 1, 2025, with early adoption permitted, and requires retrospective application to all prior periods presented in the financial statements. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance annual income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for the Company’s annual periods beginning April 1, 2025, with early adoption permitted, and may be applied either prospectively or retrospectively. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.
3. Revenue Recognition
The Company’s revenue is primarily derived from the sale of subscriptions for the following solutions:
•Marketing Solutions: Hosting of customer-sponsored content on the Doximity platform and providing access to the Company’s professional database of healthcare professionals for referral or marketing purposes during the subscription period.
•Hiring Solutions: Providing customers access to the Company’s professional tools where recruiters can access the Company’s database of healthcare professionals, allowing customers to send messages for talent sourcing and to share job postings during the subscription period.
The Company recognizes revenue through the following five steps:
1) Identify the contract with a customer
The Company considers the terms and conditions of its contracts and the Company’s customary business practices in identifying its contracts under ASC 606. The Company determines it has a contract with a customer when the contract has been approved by both parties, it can identify each party’s rights regarding the services to be transferred and the payment terms for
DOXIMITY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
the services, it has determined that the customer has the ability and intent to pay, and the contract has commercial substance. At contract inception, the Company evaluates whether two or more contracts should be combined and accounted for as a single contract. The Company applies judgment in determining the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s payment history or, in the case of a new customer, the customer’s credit and financial information.
Contractual terms for Marketing Solutions contracts are generally 12 months or less. Customers are generally billed for a portion of the contract upon contract execution and then billed throughout the remainder of the contract based on various time-based milestones. Certain Marketing Solutions contracts are cancelable with a customary notice period. The Company does not refund customer payments, and customers are responsible for amounts invoiced where payment was not made upon cancellation. The contractual term for Hiring Solutions contracts is generally 12 months. Hiring Solutions contracts are noncancelable and customers are billed in annual, quarterly, or monthly installments in advance of the service period.
2) Identify the performance obligations in the contract
Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract.
Marketing Solutions customers may purchase a subscription for a specific module to be used over a defined period of time. These customers may purchase more than one module with either the same or different subscription periods. Modules are the core building blocks of the customers’ marketing plan and can be broadly categorized as Awareness, Interactivity, and Peer. As an example, the Company’s Awareness modules may include a sponsored article, short animated videos or other short-form content that is presented to the targeted member.
Each module targets a consistent number of Doximity members per month for the duration of the subscription period. The Company treats each subscription to a specific module as a distinct performance obligation because each module is capable of being distinct as the customer can benefit from the subscription to each module on their own and each subscription can be sold standalone. Furthermore, the subscriptions to individual modules are distinct in the context of the contract as (1) the Company is not integrating the services with other services promised in the contract into a bundle of services that represent a combined output, (2) the subscriptions to specific modules do not significantly modify or customize the subscription to another module, and (3) the specific modules are not highly interdependent or highly interrelated. The subscription to each module is treated as a series of distinct performance obligations because it is distinct and substantially the same, satisfied over time, and has the same measure of progress.
Marketing Solutions customers may also purchase integrated subscriptions for a fixed subscription fee that are not tied to a single module but allow customers to utilize any combination of modules during the subscription period, subject to limits on the total number of modules launched in a given period of time, active at any given time, and members targeted. These represent stand-ready obligations in that the delivery of the underlying sponsored content is within the control of the customer and the extent of use in any given period does not diminish the remaining services.
Subscriptions to Hiring Solutions provide customers access to the platform to place targeted job postings and send a fixed number of monthly messages. Each subscription is treated as a series of distinct performance obligations that are satisfied over time.
3) Determine the transaction price
The transaction price is determined based on the consideration the Company expects to be entitled to in exchange for transferring services to the customer. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue recognized under the contract will not occur.
The Company may generate sales through the use of third-party media agencies that are authorized to enter into contracts on behalf of an end customer. The Company acts as the principal in these transactions since it maintains control prior to transferring the service to the customer and is primarily responsible for the fulfillment that occurs through the Company’s platform. The Company records revenue for the amount to which it is entitled from the third-party media agencies as the Company does not know and expects not to know the price charged by the third-party media agencies to its customers.
DOXIMITY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental entities.
4) Allocate the transaction price to performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative stand-alone selling price (“SSP”). The determination of a SSP for each distinct performance obligation requires judgment. The Company determines SSP for performance obligations based on historical arrangements sold on a standalone basis. To the extent historical sales are not available or do not provide sufficient evidence, the Company estimates the SSP by taking into account overall pricing objectives, which take into consideration market conditions and customer-specific factors, including a review of internal discounting tables, the type of services being sold, and other factors. The Company believes the use of its estimation approach and allocation of the transaction price on a relative SSP basis to each performance obligation results in revenue recognition in a manner consistent with the underlying economics of the transaction and the allocation principle included in ASC 606.
5) Recognize revenue when or as the Company satisfies a performance obligation
Revenue is recognized when or as control of the promised goods or service is transferred to the customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. Subscriptions represent a series of distinct goods or services because the performance obligations are satisfied over time as customers simultaneously receive and consume the benefits related to the services as the Company performs. In the case of module specific subscriptions, a consistent level of service is provided during each monthly period the sponsored content is available on the Company’s platform. The Company commences revenue recognition when the first content is launched on the platform for the initial monthly period and revenue is recognized over time as each subsequent content period is delivered. The Company’s obligation for its integrated subscriptions is to stand-ready throughout the subscription period; therefore, the Company considers an output method of time to measure progress towards satisfaction of its obligations, with revenue commencing upon the beginning of the subscription period.
The Company treats Hiring Solutions subscriptions as a single performance obligation that represents a series of distinct performance obligations that is satisfied over time. Revenue recognition commences when the customer receives access to the services and is recognized ratably over the subscription period.
Other revenue consists of fees earned from the temporary staffing and permanent placement of healthcare professionals. Revenue is recognized when control of these services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.
Revenue Disaggregation
Revenue consisted of the following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Six Months Ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Subscription | $ | 129,639 | | | $ | 106,654 | | | $ | 249,607 | | | $ | 207,909 | |
Other | 7,193 | | | 6,958 | | | 13,901 | | | 14,172 | |
Total revenue | $ | 136,832 | | | $ | 113,612 | | | $ | 263,508 | | | $ | 222,081 | |
Contract Balances
Timing of revenue recognition may differ from the timing of invoicing to customers. Marketing Solutions customers are generally billed for a portion of the contract upon contract execution and then billed throughout the remainder of the contract based on various time-based milestones, starting when the tailored content is first shared on the Doximity platform. Hiring Solutions customers are generally billed periodically throughout the service period. The Company’s contracts do not contain significant financing components.
DOXIMITY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
The Company records unbilled revenue when revenue is recognized in amounts for which it is contractually entitled but exceeds the amounts the Company has a right to bill as of the end of the period. The Company records unbilled revenue on the condensed consolidated balance sheets within prepaid expenses and other current assets. The Company’s unbilled revenue balances were $1.3 million and $2.3 million as of September 30, 2024 and March 31, 2024, respectively.
Deferred revenue consists of noncancelable customer billings or payments received in advance of revenue recognition. Deferred revenue balances are generally expected to be recognized within 12 months. Since the majority of the Company’s contracts have a duration of one year or less, the Company has elected not to disclose remaining performance obligations in accordance with the optional exemption in ASC 606. Remaining performance obligations for contracts with an original duration greater than one year are not material.
Revenue recognized for the three months ended September 30, 2024 and 2023 from amounts included in deferred revenue as of the beginning of the period was $76.0 million and $71.4 million, respectively. Revenue recognized for the six months ended September 30, 2024 and 2023 from amounts included in deferred revenue as of the beginning of the period was $89.9 million and $97.1 million, respectively.
Deferred Contract Costs
The Company capitalizes sales compensation that is considered to be an incremental and recoverable cost of obtaining a contract with a customer. The Company pays commissions based on signing new arrangements with customers and upon renewals and expansion of existing contracts with customers.
Deferred compensation is generally amortized over the weighted-average contractual term, ranging from 7 months to 14 months. The portion of deferred compensation expected to be recognized within one year of the balance sheet date is included in prepaid expenses and other current assets, and the remaining portion is recorded as other assets on the condensed consolidated balance sheets. The amortization of deferred contract costs is included in sales and marketing expense in the condensed consolidated statements of operations. Sales compensation that is not considered an incremental cost is expensed in the same period that it was earned.
The Company capitalized $1.8 million and $3.2 million of contract acquisition costs for the three and six months ended September 30, 2024, respectively, and $1.2 million and $2.4 million of contract acquisition costs for the three and six months ended September 30, 2023. Amortization of deferred contract costs was $2.1 million and $4.8 million for the three and six months ended September 30, 2024, respectively, and $2.0 million and $4.7 million for the three and six months ended September 30, 2023. As of September 30, 2024, the Company’s current and non-current deferred contract cost balances were $3.4 million and $0.5 million, respectively. As of March 31, 2024, the Company’s current and non-current deferred contract cost balances were $5.0 million and $0.4 million, respectively.
Deferred contract costs are periodically analyzed for impairment. There were no impairment losses relating to deferred contract costs during the three and six months ended September 30, 2024 and 2023.
DOXIMITY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
4. Investments
The cost, gross unrealized gains and losses, and fair value of investments are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | |
| As of September 30, 2024 |
| Cost or Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | | | Fair Value |
Cash equivalents: | | | | | | | | | |
Commercial paper | $ | 14,949 | | | $ | 2 | | | $ | (1) | | | | | $ | 14,950 | |
| | | | | | | | | |
Money market funds | 123,972 | | | — | | | — | | | | | 123,972 | |
| | | | | | | | | |
Total cash equivalents | 138,921 | | | 2 | | | (1) | | | | | 138,922 | |
Marketable securities: | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Commercial paper | 49,639 | | | 59 | | | — | | | | | 49,698 | |
Corporate notes and bonds | 460,784 | | | 2,990 | | | (41) | | | | | 463,733 | |
| | | | | | | | | |
U.S. government and agency securities | 107,308 | | | 571 | | | — | | | | | 107,879 | |
| | | | | | | | | |
Total marketable securities | 617,731 | | | 3,620 | | | (41) | | | | | 621,310 | |
Total cash equivalents and marketable securities | $ | 756,652 | | | $ | 3,622 | | | $ | (42) | | | | | $ | 760,232 | |
As of September 30, 2024, the contractual maturities of the Company’s available-for-sale debt securities were as follows (in thousands):
| | | | | |
| Fair Value |
Due within one year | $ | 397,730 | |
Due in one to two years | 238,530 | |
| |
Total | $ | 636,260 | |
Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay certain obligations.
The cost, gross unrealized gains and losses, and fair value of investments were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | |
| As of March 31, 2024 |
| Cost or Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | | | Fair Value |
Cash equivalents: | | | | | | | | | |
| | | | | | | | | |
Corporate notes and bonds | $ | 1,180 | | | $ | — | | | $ | — | | | | | $ | 1,180 | |
Money market funds | 83,049 | | | — | | | — | | | | | 83,049 | |
| | | | | | | | | |
Total cash equivalents | 84,229 | | | — | | | — | | | | | 84,229 | |
Marketable securities: | | | | | | | | | |
Asset-backed securities | 121 | | | — | | | — | | | | | 121 | |
| | | | | | | | | |
Commercial paper | 70,804 | | | 1 | | | (50) | | | | | 70,755 | |
Corporate notes and bonds | 225,880 | | | 133 | | | (191) | | | | | 225,822 | |
Sovereign bonds | 7,749 | | | — | | | (73) | | | | | 7,676 | |
U.S. government and agency securities | 365,123 | | | 2 | | | (3,384) | | | | | 361,741 | |
Total marketable securities | 669,677 | | | 136 | | | (3,698) | | | | | 666,115 | |
Total cash equivalents and marketable securities | $ | 753,906 | | | $ | 136 | | | $ | (3,698) | | | | | $ | 750,344 | |
As of September 30, 2024 and March 31, 2024, the Company has recognized accrued interest of $4.9 million and $3.8 million, respectively, which is included in prepaid expenses and other current assets in the condensed consolidated balance sheets.
DOXIMITY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
As the Company does not intend to sell the securities with unrealized losses and it is more likely than not that the Company will hold these securities until maturity or until the cost basis is recovered, the Company did not recognize any impairment on these securities as of September 30, 2024 or March 31, 2024. The Company did not recognize any credit losses related to the Company’s debt securities as of September 30, 2024 or March 31, 2024. The fair value related to the debt securities with unrealized losses for which no credit losses were recognized was $52.4 million and $547.5 million as of September 30, 2024 and March 31, 2024, respectively.
The following tables summarize the gross unrealized losses and fair values of investments in an unrealized loss position, aggregated by security type and length of time that the individual securities have been in a continuous unrealized loss position (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of September 30, 2024 |
| Less than 12 months | | 12 months or greater | | Total |
| Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | | | | | | | | | | |
| | | | | | | | | | | |
Commercial paper | $ | 4,496 | | | $ | (1) | | | $ | — | | | $ | — | | | $ | 4,496 | | | $ | (1) | |
Corporate notes and bonds | 47,935 | | | (41) | | | — | | | — | | | 47,935 | | | (41) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total | $ | 52,431 | | | $ | (42) | | | $ | — | | | $ | — | | | $ | 52,431 | | | $ | (42) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of March 31, 2024 |
| Less than 12 months | | 12 months or greater | | Total |
| Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
Asset-backed securities | $ | — | | | $ | — | | | $ | 121 | | | $ | — | | | $ | 121 | | | $ | — | |
| | | | | | | | | | | |
Commercial paper | 67,336 | | | (50) | | | — | | | — | | | 67,336 | | | (50) | |
Corporate notes and bonds | 131,443 | | | (191) | | | — | | | — | | | 131,443 | | | (191) | |
Sovereign bonds | — | | | — | | | 7,676 | | | (73) | | | 7,676 | | | (73) | |
U.S. government and agency securities | 81,130 | | | (139) | | | 259,784 | | | (3,245) | | | 340,914 | | | (3,384) | |
Total | $ | 279,909 | | | $ | (380) | | | $ | 267,581 | | | $ | (3,318) | | | $ | 547,490 | | | $ | (3,698) | |
5. Fair Value Measurements
Available-for-sale debt securities are recorded at fair value on the condensed consolidated balance sheets. The carrying value of cash equivalents, accounts receivable, accounts payable, and accrued expenses and other current liabilities approximate their respective fair values due to their short maturities.
Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a three-tier hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1—Inputs that are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2—Inputs (other than quoted prices included in Level 1) that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities and which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
DOXIMITY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
The following tables present the fair value hierarchy for the Company’s assets and liabilities measured at fair value on a recurring basis (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| As of September 30, 2024 |
| Level 1 | | Level 2 | | Level 3 | | Total |
Cash equivalents: | | | | | | | |
Commercial paper | $ | — | | | $ | 14,950 | | | $ | — | | | $ | 14,950 | |
| | | | | | | |
Money market funds | 123,972 | | | — | | | — | | | 123,972 | |
| | | | | | | |
Total cash equivalents | 123,972 | | | 14,950 | | | — | | | 138,922 | |
Marketable securities: | | | | | | | |
| | | | | | | |
| | | | | | | |
Commercial paper | — | | | 49,698 | | | — | | | 49,698 | |
Corporate notes and bonds | — | | | 463,733 | | | — | | | 463,733 | |
| | | | | | | |
U.S. government and agency securities | 104,844 | | | 3,035 | | | — | | | 107,879 | |
| | | | | | | |
Total marketable securities | 104,844 | | | 516,466 | | | — | | | 621,310 | |
Total cash equivalents and marketable securities | $ | 228,816 | | | $ | 531,416 | | | $ | — | | | $ | 760,232 | |
| | | | | | | |
Liabilities: | | | | | | | |
Contingent earn-out consideration liability | $ | — | | | $ | — | | | $ | 11,236 | | | $ | 11,236 | |
Total contingent earn-out consideration liability | $ | — | | | $ | — | | | $ | 11,236 | | | $ | 11,236 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| As of March 31, 2024 |
| Level 1 | | Level 2 | | Level 3 | | Total |
Cash equivalents: | | | | | | | |
| | | | | | | |
Corporate notes and bonds | $ | — | | | $ | 1,180 | | | $ | — | | | $ | 1,180 | |
Money market funds | 83,049 | | | — | | | — | | | 83,049 | |
| | | | | | | |
Total cash equivalents | 83,049 | | | 1,180 | | | — | | | 84,229 | |
Marketable securities: | | | | | | | |
Asset-backed securities | — | | | 121 | | | — | | | 121 | |
| | | | | | | |
Commercial paper | — | | | 70,755 | | | — | | | 70,755 | |
Corporate notes and bonds | — | | | 225,822 | | | — | | | 225,822 | |
Sovereign bonds | — | | | 7,676 | | | — | | | 7,676 | |
U.S. government and agency securities | 355,804 | | | 5,937 | | | — | | | 361,741 | |
Total marketable securities | 355,804 | | | 310,311 | | | — | | | 666,115 | |
Total cash equivalents and marketable securities | $ | 438,853 | | | $ | 311,491 | | | $ | — | | | $ | 750,344 | |
| | | | | | | |
Liabilities: | | | | | | | |
Contingent earn-out consideration liability | $ | — | | | $ | — | | | $ | 16,813 | | | $ | 16,813 | |
Total contingent earn-out consideration liability | $ | — | | | $ | — | | | $ | 16,813 | | | $ | 16,813 | |
During the six months ended September 30, 2024 and 2023, the Company had no transfers between levels of the fair value hierarchy.
DOXIMITY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Contingent Earn-out Consideration Liability
The following table summarizes the changes in the contingent earn-out consideration liability (in thousands):
| | | | | | | | | | | |
| Six Months Ended September 30, |
| 2024 | | 2023 |
Beginning fair value | $ | 16,813 | | | $ | 21,862 | |
Additions in the period | — | | | — | |
Change in fair value | 423 | | | 316 | |
Payments | (6,000) | | | (6,000) | |
Ending fair value | $ | 11,236 | | | $ | 16,178 | |
The contingent earn-out consideration liability relates to the AMiON acquisition, which closed on April 1, 2022. The fair value of the liability is remeasured at each reporting date until the related contingency is resolved, with any changes to the fair value recognized as sales and marketing expense in the condensed consolidated statements of operations.
To determine the fair value of the contingent earn-out consideration liability, the Company used the discounted cash flow method. The significant inputs used in the fair value measurement of the contingent earn-out consideration liability are the discount rate and the timing and amounts of the future payments, which are based upon estimates of future achievement of the performance metrics. As these inputs are not based on observable market data, they represent a Level 3 measurement within the fair value hierarchy. Changes in the significant inputs used would significantly impact the fair value of the contingent earn-out consideration liability.
6. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
| | | | | | | | | | | |
| September 30, 2024 | | March 31, 2024 |
Furniture and equipment | $ | 2,140 | | | $ | 2,833 | |
Computers and software | 689 | | | 745 | |
Leasehold improvements | 815 | | | 992 | |
Internal-use software development costs | 30,892 | | | 26,827 | |
Total property and equipment | 34,536 | | | 31,397 | |
Less: accumulated depreciation and amortization | (21,718) | | | (19,079) | |
Total property and equipment, net | $ | 12,818 | | | $ | 12,318 | |
Depreciation and amortization expense on property and equipment was $1.6 million and $3.1 million for the three and six months ended September 30, 2024, respectively, and $1.4 million and $2.8 million for the three and six months ended September 30, 2023, respectively. Included in these amounts was amortization expense for internal-use software development costs of $1.4 million and $2.7 million for the three and six months ended September 30, 2024, respectively, and $1.2 million and $2.4 million for the three and six months ended September 30, 2023, respectively. The amortization of the internal-use software development costs is included in cost of revenue in the condensed consolidated statements of operations.
During the three and six months ended September 30, 2024, the Company capitalized $2.0 million and $4.0 million, respectively, and during the three and six months ended September 30, 2023, capitalized $1.5 million and $3.3 million, respectively, of internal-use software development costs, which are included in property and equipment, net in the condensed consolidated balance sheets.
During the three and six months ended September 30, 2024, an immaterial impairment charge was recognized on property and equipment. See Note 11 for further details. No impairment was recognized on property and equipment during the three and six months ended September 30, 2023.
DOXIMITY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
| | | | | | | | | | | |
| September 30, 2024 | | March 31, 2024 |
Accrued commissions | $ | 4,338 | | | $ | 5,404 | |
Accrued payroll, bonus, and related expenses | 8,493 | | | 8,513 | |
Employee contributions under employee stock purchase plan | 568 | | | 496 | |
Rebate liabilities | 1,504 | | | 995 | |
Sales and other tax liabilities | 2,350 | | | 2,978 | |
Income taxes payable | 5,353 | | | — | |
Current portion of contingent earn-out consideration liability | 5,767 | | | 5,918 | |
| | | |
Share repurchase liability | 104 | | | 4,000 | |
Transferable federal tax credits payable | — | | | 11,040 | |
Other | 5,063 | | | 4,359 | |
Total accrued expenses and other current liabilities | $ | 33,540 | | | $ | 43,703 | |
8. Intangible Assets and Goodwill
Intangible Assets
Intangible assets, net consisted of the following (in thousands):
| | | | | | | | | | | |
| September 30, 2024 | | March 31, 2024 |
Customer relationships | $ | 37,069 | | | $ | 37,069 | |
Other intangibles | 1,531 | | | 1,531 | |
Total intangible assets | 38,600 | | | 38,600 | |
Less: accumulated amortization | (13,405) | | | (11,283) | |
Total intangible assets, net | $ | 25,195 | | | $ | 27,317 | |
Amortization expense for intangible assets was $1.0 million and $1.2 million for three months ended September 30, 2024 and 2023, respectively, and $2.1 million and $2.4 million for the six months ended September 30, 2024 and 2023, respectively.
No impairment charges on intangible assets were recorded during the three and six months ended September 30, 2024 and 2023.
As of September 30, 2024, future amortization expense is as follows (in thousands):
| | | | | |
Year Ending March 31, | Amount |
Remainder of 2025 | $ | 2,123 | |
2026 | 4,012 | |
2027 | 4,010 | |
2028 | 4,010 | |
2029 | 4,010 | |
2030 | 4,010 | |
Thereafter | 3,020 | |
Total future amortization expense | $ | 25,195 | |
DOXIMITY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Goodwill
As of September 30, 2024 and March 31, 2024, the Company’s goodwill balance was $67.9 million. No impairment charges on goodwill were recorded during the three and six months ended September 30, 2024 and 2023.
9. Equity
Preferred Stock
In connection with the IPO, the Company’s amended and restated certificate of incorporation became effective, which authorized the issuance of 100,000,000 shares of undesignated preferred stock with a par value of $0.001 per share with rights and preferences, including voting rights, designated from time to time by the board of directors. As of September 30, 2024 and March 31, 2024, there were no shares of preferred stock issued and outstanding.
Common Stock and Creation of Dual-Class Structure
The Company has two classes of common stock authorized: Class A common stock and Class B common stock, and are collectively referred to as common stock throughout the notes to the condensed consolidated financial statements, unless otherwise noted. On June 8, 2021, the Company’s board of directors and stockholders approved an amendment to the Company’s amended and restated certificate of incorporation which authorized 1,000,000,000 shares of Class A common stock with par value of $0.001 and one vote per share, and 500,000,000 shares of Class B common stock with par value of $0.001 and ten votes per share. The holders of common stock are entitled to receive dividends, as may be declared by the board of directors. Each of the Company’s 85,523,836 shares of then-existing common stock outstanding was reclassified into Class B common stock. Each outstanding share of Class B common stock may be converted at any time at the option of the holder into one share of Class A common stock. As of September 30, 2024, there were 128,216,478 shares of Class A common stock, and 58,564,170 shares of Class B common stock outstanding.
Stock Repurchase Program
Prior to March 31, 2024, the Company’s board of directors authorized various programs to repurchase up to $410 million of the Company’s Class A common stock. Under these programs, the Company repurchased and retired 16,480,514 shares of Class A common stock. All of these programs were completed as of April 2024.
On May 1, 2024 the Company’s board of directors authorized a program to repurchase up to $500 million of the Company’s Class A common stock with no expiration date. As of September 30, 2024, the Company repurchased and retired 1,021,233 shares of Class A common stock under this program for an aggregate purchase price of $30.0 million and $470.0 million remained available and authorized for repurchase.
All repurchases are subject to general business and market conditions and other investment opportunities and may be executed through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. Immediately upon the repurchase of any shares of Class A common stock, such shares shall be retired by the Company and shall automatically return to the status of authorized but unissued shares of Class A common stock.
Effective January 1, 2023, the Company’s share repurchases in excess of allowable share issuances are subject to a 1% excise tax as a result of the Inflation Reduction Act of 2022. As of March 31, 2024 and September 30, 2024, the Company had accrued excise taxes of $1.5 million, all of which remained unpaid as of September 30, 2024.
Common Stock Warrants
In March 2017, the Company issued a warrant to purchase 250,000 shares of common stock at an exercise price of $0.72 per share in connection with a contract signed between the Company and U.S. News & World Report, L.P., or U.S. News. All shares under the warrant were exercised as of March 31, 2024 for an aggregate intrinsic value of $6.7 million.
In October 2021, the Company issued a warrant to U.S. News (the “U.S. News Warrant”) to purchase 516,000 shares of Class A common stock with an exercise price of $12.56 per share in connection with the execution of a commercial agreement with U.S. News. The U.S. News Warrant expires 10 years from the date of grant. The first tranche of the U.S. News Warrant vested on May 1, 2022 and the remainder will vest on a monthly basis over approximately 6 years. The grant-date fair value of the U.S. News Warrant was $34.7 million, which was determined using the Black-Scholes option-pricing model on the date of
DOXIMITY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
grant. The fair value of the warrant is recognized as expense in cost of revenue in the condensed consolidated statements of operations on a straight-line basis over its vesting term of 6.48 years. During the six months ended September 30, 2024 and 2023, $2.7 million was recognized as stock-based compensation expense relating to the U.S. News Warrant. During the six months ended September 30, 2024, 200,667 shares with an intrinsic value of $3.6 million were exercised under the warrant. The remaining 315,333 shares under the warrant were outstanding as of September 30, 2024. As of September 30, 2024, unamortized stock-based compensation expense related to the unvested warrants was $18.8 million, which is expected to be recognized over the remaining vesting period of 3.50 years.
Equity Incentive Plans
The Company maintains three equity incentive plans: the 2010 Equity Incentive Plan (the “2010 Plan”), the 2021 Stock Option and Incentive Plan (the “2021 Plan”), and the 2021 Employee Stock Purchase Plan (the “ESPP”). Upon IPO, the 2021 Plan became effective and the 2010 Plan was terminated. The 2010 Plan continues to govern the terms of outstanding awards that were granted prior to the termination of the 2010 Plan. The 2021 Plan provides for the granting of incentive stock options, nonstatutory stock options, restricted stock units, and restricted stock awards to employees, non-employee directors, and consultants of the Company.
The Company granted stock options under the terms of the Plans and outside of the Plans, as approved by the board of directors. During fiscal 2018, the Company granted 4,682,582 options outside of the Plans, of which 2,044,582 options were exercised and 2,638,000 were outstanding as of September 30, 2024.
The Company has shares of common stock reserved for issuance as follows (in thousands):
| | | | | | | |
| September 30, 2024 | | |
Common stock warrants | 315 | | | |
2010 Plan | | | |
Options outstanding | 12,737 | | | |
2021 Plan | | | |
Awards outstanding | 4,185 | | | |
Shares available for future grant | 40,572 | | | |
2021 ESPP | 9,812 | | | |
Options outstanding outside the plans | 2,638 | | | |
Total | 70,259 | | | |
Stock Options
Stock options granted generally vest over four years with service-based, performance-based, and/or market-based conditions and expire ten years from the date of grant.
Stock option activities within the Plans as well as outside of the Plans were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Number of Shares (in thousands) | | Weighted-Average Exercise Price | | Average Remaining Contractual Term (in years) | | Aggregate Intrinsic Value (in thousands) |
Balance, March 31, 2024 | 17,480 | | | $ | 4.60 | | | 5.72 | | $ | 389,931 | |
Options exercised | (2,024) | | | 3.82 | | | | | |
Options forfeited or expired | (81) | | | 7.41 | | | | | |
Balance, September 30, 2024 | 15,375 | | | 4.69 | | | 5.32 | | 597,777 | |
Vested and exercisable as of September 30, 2024 | 11,265 | | | 3.57 | | | 4.94 | | 450,577 | |
Vested and expected to vest as of September 30, 2024 | 15,375 | | | 4.69 | | | 5.32 | | 597,777 | |
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
The aggregate intrinsic value of options exercised during the six months ended September 30, 2024 and 2023 was $55.1 million and $61.8 million, respectively.
As of September 30, 2024, unamortized stock-based compensation expense related to unvested stock options was $15.9 million, which is expected to be recognized over a weighted-average period of 2.34 years.
The Company has not granted any stock options since the first quarter of fiscal 2022.
Restricted Stock Units (“RSUs”)
RSUs granted by the Company generally vest over three or four years based on continued service.
The following table summarizes RSU activity (in thousands, except per share information):
| | | | | | | | | | | |
| Number of Shares | | Weighted- Average Grant Date Fair Value |
Unvested balance, March 31, 2024 | 2,093 | | | $ | 33.79 | |
Granted | 2,599 | | | 25.87 | |
Vested | (731) | | | 30.52 | |
Forfeited | (87) | | | 28.26 | |
Unvested balance, September 30, 2024 | 3,874 | | | 29.22 | |
The total fair value of RSUs vested during the six months ended September 30, 2024 and 2023 was $21.9 million and $11.3 million, respectively.
As of September 30, 2024, total unrecognized stock-based compensation expense related to unvested RSUs was $104.2 million, which is expected to be recognized over a weighted-average period of 2.42 years.
Performance-Based Restricted Stock Units (“PSUs”)
During the six months ended September 30, 2024, the Company granted 4,897 PSUs that are subject to both service-based and performance-based vesting conditions. During the six months ended September 30, 2024, 66,654 PSUs vested. As of September 30, 2024, the unamortized stock-based compensation expense related to unvested PSUs was $1.4 million. The amount to be recognized will be based on the extent the performance metrics are achieved.
Stock-Based Compensation Expense
Total stock-based compensation expense recognized in the condensed consolidated statements of operations was as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Six Months Ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Cost of revenue | $ | 2,661 | | | $ | 2,278 | | | $ | 5,555 | | | $ | 4,739 | |
Research and development | 5,447 | | | 2,538 | | | 10,131 | | | 5,794 | |
Sales and marketing | 6,808 | | | 2,697 | | | 13,394 | | | 8,692 | |
General and administrative | 2,952 | | | 2,288 | | | 5,878 | | | 4,577 | |
Restructuring | — | | | 3,646 | | | — | | | 3,646 | |
Total stock-based compensation expense | $ | 17,868 | | | $ | 13,447 | | | $ | 34,958 | | | $ | 27,448 | |
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
10. Net Income Per Share Attributable to Common Stockholders
The following table presents the reconciliation of the numerator and denominator for calculating basic and diluted net income per share (in thousands, except per share data):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Six Months Ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Numerator | | | | | | | |
Net income | $ | 44,154 | | | $ | 30,602 | | | $ | 85,531 | | | $ | 59,008 | |
Denominator | | | | | | | |
Weighted-average shares used in computing net income per share attributable to Class A and Class B common stockholders, basic | 186,252 | | | 193,112 | | | 185,933 | | | 193,813 | |
Dilutive effect of stock options | 13,162 | | | 15,673 | | | 13,230 | | | 16,573 | |
Dilutive effect of common stock warrants | — | | | 122 | | | — | | | 122 | |
Dilutive effect of other share-based awards | 993 | | | 107 | | | 655 | | | 173 | |
Weighted-average shares used in computing net income per share attributable to Class A and Class B common stockholders, diluted | 200,407 | | | 209,014 | | | 199,818 | | | 210,681 | |
Net income per share attributable to Class A and Class B common stockholders: | | | | | | | |
Basic | $ | 0.24 | | | $ | 0.16 | | | $ | 0.46 | | | $ | 0.30 | |
Diluted | $ | 0.22 | | | $ | 0.15 | | | $ | 0.43 | | | $ | 0.28 | |
Certain potentially dilutive securities have been excluded from the calculation of diluted net income per share during the applicable periods because their inclusion would have been anti-dilutive (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Six Months Ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| | | | | | | |
Other share-based awards | 271 | | | 1,665 | | | 626 | | | 911 | |
| | | | | | | |
Common stock warrants | 405 | | | 516 | | | 460 | | | 516 | |
Total | 676 | | | 2,181 | | | 1,086 | | | 1,427 | |
11. Restructuring Expense and Impairment Charge
Restructuring Expense
In August 2023, the Company announced a restructuring plan (the “Restructuring Plan”) intended to simplify the Company’s operations and better align the Company’s resources with its priorities. The Restructuring Plan included a reduction of the Company’s workforce by approximately 10%. The Company incurred $7.9 million in restructuring expense in the second quarter of fiscal 2024 in connection with the workforce reduction under the Restructuring Plan, consisting of $4.3 million of severance payments and employee benefits and $3.6 million of stock-based compensation expense for the accelerated vesting of equity awards. The actions associated with the workforce reduction under the Restructuring Plan were completed as of March 31, 2024.
Impairment Charge
During the three months ended September 30, 2024, the Company executed a sublease for a portion of its Curative office space in Irving, Texas. The Company evaluated the associated asset group for impairment, which included the right-of-use assets and underlying property and equipment for the lease. The Company compared the expected future undiscounted cash flows to the carrying value and determined the respective asset group was not fully recoverable. The Company calculated the fair value based on the present value of the estimated cash flows from the sublease for the remaining lease term and compared the estimated fair value to its carrying value, which resulted in a $2.3 million impairment charge. The fair value of the operating lease right-of-use assets and associated property and equipment was estimated as of the sublease execution date using level 3
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
inputs based on an income approach by converting future sublease cash inflows and outflows to a single present value. Estimated cash flows were discounted at a rate commensurate with the inherent risks associated with the asset group to arrive at an estimate of fair value. The impairment charge was included in restructuring and impairment charge in the consolidated statements of operations.
12. Commitments and Contingencies
Contractual Commitments
The Company has contractual commitments that relate mainly to third-party cloud infrastructure agreements and subscription agreements, which are used to facilitate the Company’s operations.
Indemnification
The Company enters into indemnification provisions under agreements with other companies in the ordinary course of business, including, but not limited to, clients, business partners, landlords, and other parties involved in the performance of the Company’s services. Pursuant to these arrangements, the Company has agreed to indemnify, hold harmless, and reimburse the indemnified party for certain losses suffered or incurred by the indemnified party as a result of the Company’s activities. The terms of these indemnification agreements are generally perpetual. The maximum potential amount of future payments the Company could be required to make under these agreements is not determinable. The Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification agreements. The Company maintains commercial general liability insurance and product liability insurance that may offset certain of its potential liabilities under these indemnification provisions.
In addition, the Company has agreed to indemnify its officers and directors and certain key employees while they are serving in good faith in their respective capacities. To date, there have been no material claims under these indemnification provisions.
Legal Matters
Beginning in April 2024, the Company and certain of our directors and officers have been named in lawsuits in the United States District Court for the Northern District of California. The first lawsuit is captioned In re Doximity, Inc. Securities Litigation, No. 5:24-cv-02281-EKL (N.D. Cal.). The operative complaint brings securities law claims on behalf of a putative class of our investors from June 24, 2021 and August 8, 2023 against the Company and our CEO related to our disclosure of user count and engagement rates. Two shareholder derivative lawsuits have also been filed and are consolidated under the caption In re Doximity, Inc. Derivative Litigation, No. 5:24-cv-02801-EKL (N.D. Cal.). The complaints assert claims for, among other things, breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste against certain of our directors and officers on a similar basis to the securities lawsuit. Other similar lawsuits or proceedings may be initiated in the future. The defendants intend to defend vigorously against these actions. In light of, among other things, the early stage of the litigation, the Company is unable to predict the outcome of these matters and is unable to reasonably estimate the amount or range of loss, if any, that could result from an unfavorable outcome.
From time to ti