Form 10-Qに記載された将来を展望する発言は、その発言がなされた日時に関連しています。Form 10-Qでなされた将来を展望する発言について、このForm 10-Qの発行日以降の出来事や事情を反映させる義務はありません。新しい情報や予期せぬ出来事の発生を反映させるために、法令に従う以外で、当社はForm 10-Qでなされた将来を展望する発言を更新する義務を負いません。当社の将来を展望する発言に明記された計画、意図、または期待を実際に達成するとは限らず、当社の将来を展望する発言に過度の信頼を置くべきではありません。当社の将来を展望する発言は、将来の買収、合併、譲渡、合弁事業、または投資の潜在的な影響を反映していません。
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.
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.
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):
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
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
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):
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
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 time, the Company has become involved in claims and other legal matters arising in the ordinary course of business. The Company investigates these claims as they arise. Although claims are inherently unpredictable, the Company is currently not aware of any other matters that, if determined adversely to the Company, would individually or taken together have a material effect on its results of operations, financial position, or cash flows. No material loss contingencies were recorded for the three and six months ended September 30, 2024 and 2023.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
13. Leases
The Company has non-cancelable operating leases for the rental of office space with various expiration dates through 2030.
The components of lease expense were as follows (in thousands):
Three Months Ended September 30,
Six Months Ended September 30,
2024
2023
2024
2023
Operating lease cost
$
615
$
701
$
1,246
$
1,402
Variable lease cost
3
45
9
65
Total lease cost
$
618
$
746
$
1,255
$
1,467
During the three months ended September 30, 2024, the Company executed a sublease for a portion of its Curative office space in Irving, Texas. Any impairment to the associated right-of-use assets and underlying property and equipment as a result of a sublease is recognized in the period the sublease is executed and recorded in the consolidated statements of operations. See Note 11 for further details.
The sublease will commence in November 2024 and has a lease term of approximately 5.5 years. The Company has classified the sublease as an operating lease. Total lease payments under the sublease are $2.4 million over the lease term of the sublease. The Company will recognize sublease income as a reduction of lease expense in the Company’s consolidated statements of operations. No sublease income was recognized for the three and six months ended September 30, 2023 and 2024.
Supplemental cash flow information related to leases was as follows (in thousands):
Six Months Ended September 30,
2024
2023
Cash paid for amounts included in measurement of lease liabilities—Operating cash flows
$
1,350
$
907
Supplemental balance sheet information related to leases was as follows:
September 30, 2024
March 31, 2024
Weighted-average remaining lease term (in years)
5.62
6.09
Weighted-average discount rate
4.18
%
4.18
%
Maturities of operating lease liabilities, excluding sublease income, as of September 30, 2024 were as follows (in thousands):
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
14. Other Income, net
Other income, net consisted of the following (in thousands):
Three Months Ended September 30,
Six Months Ended September 30,
2024
2023
2024
2023
Interest income
$
9,112
$
5,822
$
16,280
$
10,840
Net gain (loss) on sale of marketable securities
31
131
31
(142)
Other income (expense)
(114)
(50)
(166)
44
Other income, net
$
9,029
$
5,903
$
16,145
$
10,742
15. Income Taxes
The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any. The Company’s effective tax rates for the three and six months ended September 30, 2024 were 29.0% and 25.8%, respectively, and for the three and six months ended September 30, 2023 were 22.9% and 20.5%, respectively.
The Company's effective tax rate differs from the U.S. federal statutory rate, primarily due to state income taxes, stock-based compensation related tax benefits, which are subject to limitations for certain executive officers under IRC section 162(m), and federal and state research and development tax credits. The Company’s effective tax rate is based on forecasted annual income before income taxes which may fluctuate through the rest of the year.
The Company is only subject to income taxes in the United States. Significant judgment is required in evaluating the Company’s uncertain tax positions and determining the provision for income taxes. As of September 30, 2024 and March 31, 2024, the Company had unrecognized tax benefits (“UTBs”) of $10.2 million and $9.3 million, respectively, which are primarily included in other liabilities, non-current in our consolidated balance sheets. If realized, $10.0 million would impact the effective tax rate while the remainder would reduce deferred tax assets subject to a full valuation allowance. The Company does not expect any material changes to its UTBs within the next 12 months.
16. Segment and Geographic Information
The Company considers operating segments to be components of the Company in which separate financial information is available and is evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and in assessing performance. The chief operating decision maker for the Company is the Chief Executive Officer. The chief operating decision maker reviews financial information on a consolidated basis to make decisions about how to allocate resources and how to measure the Company’s performance. As such, the Company has determined that it has one operating and reportable segment.
Substantially all of the Company’s long-lived assets were based in the United States as of September 30, 2024 and March 31, 2024. No country outside of the United States accounted for more than 10% of total revenue for the three and six months ended September 30, 2024 and 2023. Substantially all of the Company’s revenue was derived in the United States for the three and six months ended September 30, 2024 and 2023.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and accompanying notes that are included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K, filed with the SEC on May 23, 2024. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, as described under the heading “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” in Part 1, Item 1A of our Annual Report on Form 10-K or in other parts of this Quarterly Report on Form 10-Q. Our historical results are not necessarily indicative of the results that may be expected for any period in the future, and our interim results are not necessarily indicative of the results that may be expected for the full fiscal year or any other period. The last day of our fiscal year is March 31st. Our fiscal quarters end on June 30th, September 30th, December 31st, and March 31st. Fiscal 2025, our current fiscal year, will end on March 31, 2025.
Overview
We are the leading digital platform for U.S. medical professionals, as measured by the number of members. Our members include more than 80% of U.S. physicians, spanning all 50 states and every medical specialty.
Our mission is to help every physician be more productive and provide better care for their patients. We are physicians-first, putting technology to work for doctors instead of the other way around. That guiding principle has enabled Doximity to become an essential and trusted professional platform for physicians. Our physician cloud puts modern software in the hands of physicians and other medical professionals, enabling our members to collaborate with 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. Our revenue-generating customers, primarily pharmaceutical manufacturers and healthcare systems, have access to a suite of commercial solutions that benefit from broad physician usage.
At the core of our platform is the largest medical professional network in the nation, which creates proximity within our community of doctors and hundreds of thousands of other medical professionals. Verified members can search and connect with colleagues and specialists, which allows them to better coordinate patient care and streamline referrals. Our newsfeed addresses the ever increasing sub-specialization of medical expertise and volume of medical research by delivering news and information that is relevant to each physician's clinical practice. We also support physicians in their day-to-day practice of medicine with mobile-friendly and easy-to-use productivity tools such as voice and video dialer, secure messaging, digital faxing, and Doximity GPT. Our business model is designed to both respect and support physicians while driving value for our customers through our Marketing, Hiring, and Productivity Solutions. Our revenue-generating customers, primarily pharmaceutical manufacturers and health systems, have access to a suite of commercial solutions that benefit from broad physician usage.
Our business model has delivered high revenue growth at scale with profitability. For the three months ended September 30, 2024 and 2023, we recognized revenue of $136.8 million and $113.6 million, respectively, representing a year-over-year growth rate of 20%. For the six months ended September 30, 2024 and 2023, we recognized revenue of $263.5 million and $222.1 million, respectively, representing a year-over-year growth rate of 19%. For the three months ended September 30, 2024 and 2023, our net income was $44.2 million and $30.6 million and our adjusted EBITDA was $76.1 million and $54.2 million, respectively. For the six months ended September 30, 2024 and 2023, our net income was $85.5 million and $59.0 million and our adjusted EBITDA was $142.1 million and $100.7 million, respectively. We have accomplished this while focusing on our core mission to help every physician be more productive and provide better care for their patients.
We monitor a number of key business and financial metrics to assess the health and success of our business, including:
Customers with Trailing 12-Month Subscription Revenue Greater than $500,000.The number of customers with trailing 12-month (“TTM”) subscription revenue greater than $500,000 is a key indicator of the scale of our business, and is calculated by counting the number of customers that contributed more than $500,000 in subscription revenue in the TTM period. Our customer count is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity, and we present our total customer count for historical periods reflecting these adjustments.
The number of customers with at least $500,000 of revenue has grown steadily in recent years as we have engaged new customers and expanded within existing ones. This cohort of customers accounted for approximately 83% of our revenue for the TTM ended September 30, 2024.
September 30,
2024
2023
Number of customers with at least $500,000 of revenue
103
92
Net Revenue Retention Rate. Net revenue retention rate is calculated by taking the TTM subscription-based revenue from our customers that had revenue in the prior TTM period and dividing that by the total subscription-based revenue for the prior TTM period. For the purposes of this calculation, subscription revenue excludes subscriptions for individuals and small practices and other non-recurring items. Our net revenue retention rate compares our subscription revenue from the same set of customers across comparable periods, and reflects customer renewals, expansion, contraction, and churn. Our net revenue retention rate is directly tied to our revenue growth rate and thus fluctuates as that growth rate fluctuates.
September 30,
2024
2023
Net revenue retention rate
116
%
114
%
Non-GAAP Financial Measures
We use adjusted EBITDA and free cash flow to measure our performance, identify trends, formulate financial projections, and make strategic decisions.
Adjusted EBITDA
We define adjusted EBITDA as net income before interest, income taxes, depreciation, and amortization, and as further adjusted for stock-based compensation expense, restructuring and impairment charge, change in fair value of contingent earn-out consideration liability, and other income, net. Net income margin represents net income as a percentage of revenue and adjusted EBITDA margin represents adjusted EBITDA as a percentage of revenue.
Adjusted EBITDA is a key measure we use to assess our financial performance and is also used for internal planning and forecasting purposes. We believe adjusted EBITDA is helpful to investors, analysts, and other interested parties because it can assist in providing a more consistent and comparable overview of our operations across our historical financial periods.
Adjusted EBITDA and adjusted EBITDA margin are non-GAAP measures and are presented for supplemental informational purposes only and should not be considered as alternatives or substitutes to the financial information presented in accordance with GAAP. These measures have certain limitations in that they do not include the impact of certain expenses that are reflected in our condensed consolidated statements of operations that are necessary to run our business. Other companies, including other companies in our industry, may not use these measures or may calculate these measures differently than as presented in this Quarterly Report on Form 10-Q, limiting their usefulness as comparative measures.
The following table presents a reconciliation of net income to adjusted EBITDA, adjusted EBITDA margin, and net income margin (in thousands, except percentages):
Three Months Ended September 30,
Six Months Ended September 30,
2024
2023
2024
2023
Net income
$
44,154
$
30,602
$
85,531
$
59,008
Adjusted to exclude the following:
Stock-based compensation
17,868
9,801
34,958
23,802
Depreciation and amortization
2,613
2,604
5,175
5,208
Provision for income taxes
18,017
9,093
29,809
15,209
Restructuring and impairment charge
2,304
7,936
2,304
7,936
Change in fair value of contingent earn-out consideration liability
221
47
423
316
Other income, net
(9,029)
(5,903)
(16,145)
(10,742)
Adjusted EBITDA
$
76,148
$
54,180
$
142,055
$
100,737
Revenue
$
136,832
$
113,612
$
263,508
$
222,081
Net income margin
32
%
27
%
32
%
27
%
Adjusted EBITDA margin
56
%
48
%
54
%
45
%
Free Cash Flow
Free cash flow is a key performance measure that our management uses to assess our overall performance. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by our business that can be used for strategic opportunities, including investing in our business, making strategic acquisitions, and strengthening our financial position.
We calculate free cash flow as cash flow from operating activities less purchases of property and equipment and internal-use software development costs.
Although we believe free cash flow is a useful indicator of business performance, free cash flow is presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP. Free cash flow has limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of other GAAP financial measures, such as net cash provided by operating activities. Some of the limitations of free cash flow are that it may not properly reflect future contractual commitments that have not been realized in the current period. Our free cash flow may not be comparable to similarly titled measures of other companies because they may not calculate free cash flow in the same manner as we calculate the measure, limiting its usefulness as a comparative measure.
The following table presents a reconciliation of our free cash flow to the most comparable GAAP measure, net cash provided by operating activities, for each of the periods indicated (in thousands):
Marketing Solutions. Our customers purchase a subscription to Marketing Solutions, either directly or through marketing agencies, for the ability to share tailored content on the Doximity platform via a variety of modules for defined time periods. We generally bill customers a portion of the contract upon contract execution and then bill throughout the remainder of the contract based on various time-based milestones. Generally, we bill in advance of revenue recognition. When revenue is recognized in advance of billings, we record unbilled revenue. Unbilled revenue is recorded on the condensed consolidated balance sheets within prepaid expenses and other current assets. Subscriptions to Marketing Solutions include the following contractual arrangements:
•Subscriptions for specific modules delivered on a monthly basis to a consistent number of targeted Doximity members during the subscription period. Pricing is based on the number and composition of the targeted Doximity members, and on the specific modules purchased.
•Integrated subscriptions for a fixed subscription fee that are not tied to a single module, allowing customers to utilize any combination of modules during the subscription period.
For these subscription-based contractual arrangements, we recognize revenue over time as control of the service is transferred to the customer.
Hiring Solutions. We provide customers access to our platform which enables them to post job openings or deliver a fixed number of monthly messages to our network of medical professionals. Hiring Solutions contracts are noncancelable and customers are billed in annual, quarterly, or monthly installments in advance of the service period, and revenue is recognized ratably over the contractual term.
We also generate revenue from temporary and permanent medical recruiting services which we charge on an hourly-fee, and retainer and placement-fee basis, respectively. For the three and six months ended September 30, 2024 and 2023, the revenue from temporary and permanent medical recruiting services was not significant to our total revenue.
For a description of our revenue accounting policies, see Note 2—Summary of Significant Accounting Policies included in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended March 31, 2024 and filed with the SEC on May 23, 2024.
Cost of Revenue
Cost of revenue is primarily comprised of expenses related to cloud hosting, personnel-related expenses for our customer success team, costs for third-party platform access, information technology and software-related services and contractors, and other services used in connection with the delivery and support of our platform. Our cost of revenue also includes the amortization of internal-use software development costs, editorial and other content-related expenses, and allocated overhead. Cost of revenue is driven by the growth of our member network and utilization of our productivity tools. We intend to continue to invest additional resources in our cloud infrastructure and our customer support organizations to support the growth of our business.
Gross Profit and Gross Margin
Gross profit is total revenue less total cost of revenue. Gross margin is gross profit expressed as a percentage of total revenue. Gross profit and gross margin has been and will continue to be affected by a number of factors, including the timing of our acquisition of new customers and sales of additional solutions to existing customers, the timing and extent of our investments in our operations, cloud hosting costs, growth in our customer success team, and the timing of amortization of internal-use software development costs. We expect our gross margin to remain relatively steady over the near term, although our quarterly gross margin is expected to fluctuate from period to period depending on the interplay of these and other factors.
Operating Expenses
Our operating expenses consist of research and development, sales and marketing, general and administrative expenses, and restructuring and impairment charge.
Research and development expense is primarily comprised of personnel-related expenses associated with our engineering and product teams who are responsible for building new products and improving existing products. Research and development expense also includes costs for third-party services and contractors, information technology and software-related costs, and allocated overhead. Other than internal-use software development costs that qualify for capitalization, research and development costs are expensed as incurred. We expect research and development expenses will increase on an absolute dollar basis as we continue to grow our platform and product offerings.
Sales and Marketing
Sales and marketing expense is primarily comprised of personnel-related expenses, sales incentive compensation, advertising costs, travel, and other event expenses. Sales and marketing expense also includes costs for third-party services and contractors, information technology and software-related costs, allocated overhead, amortization of intangible assets, and change in fair value of contingent earn-out consideration liability. We capitalize sales incentive compensation that is considered to be an incremental and recoverable cost of obtaining a contract with a customer. These sales incentive compensation costs are amortized over the period of benefit. We expect sales and marketing expense to increase and to be our largest expense on an absolute basis.
General and Administrative
General and administrative expense is primarily comprised of personnel-related expenses associated with our executive, finance, legal, human resources, information technology, and facilities employees. General and administrative expense includes fees for third-party legal and accounting services, insurance expense, information technology and software-related costs, and allocated overhead. We expect that general and administrative expense will increase on an absolute dollar basis as we incur compliance costs associated with being a publicly-traded company, including legal, audit, and consulting fees.
Restructuring and Impairment Charge
Restructuring expenses primarily consist of severance payments, employee benefits, and stock-based compensation in relation to the modification of equity awards associated with the management-approved plan. One-time employee termination benefits are recognized at the time of communication of the terms of the plan to the employees, unless future service is required, in which case the costs are recognized over the future service period. Impairment charges primarily include impairment of right-of-use and other property and equipment recognized upon the execution of a sublease for a portion of our office space.
Other Income, Net
Other income, netconsists primarily of investment income earned on our cash equivalents and marketable securities.
Provision for Income Taxes
Provision for income taxes consists primarily of income taxes in U.S. federal, state, and local jurisdictions in which we conduct business. We calculate income taxes in interim periods by applying an estimated annual effective tax rate to income before income taxes and by calculating the tax effect of discrete items recognized during the period. Our effective income tax rate generally differs from the U.S. statutory tax rate of 21.0% primarily due to U.S. federal and state research and development tax credits and stock-based compensation related tax benefits, and state income taxes.
The following tables set forth our condensed consolidated results of operations data and such data as a percentage of revenue for the periods presented.
Three Months Ended September 30,
Six Months Ended September 30,
2024
2023
2024
2023
(in thousands)
Revenue
$
136,832
$
113,612
$
263,508
$
222,081
Cost of revenue(1)
13,676
12,759
27,226
25,912
Gross profit
123,156
100,853
236,282
196,169
Operating expenses:
Research and development(1)
23,240
19,958
45,814
41,889
Sales and marketing(1)
34,367
30,201
69,611
64,656
General and administrative(1)
10,103
8,966
19,358
18,213
Restructuring and impairment charge(1)
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
_______________
(1)Costs and expenses include stock-based compensation expense as follows:
Comparison of the three and six months ended September 30, 2024 and 2023.
Revenue
Three Months Ended September 30,
Change
Six Months Ended September 30,
Change
2024
2023
$
%
2024
2023
$
%
(in thousands, except percentages)
Revenue
$
136,832
$
113,612
$
23,220
20
%
$
263,508
$
222,081
$
41,427
19
%
Revenue for the three months ended September 30, 2024 increased $23.2 million as compared to the same period in 2023. The increase was primarily driven by a $23.0 million increase in subscription revenue. Of the increase in subscription revenue, $5.7 million was driven by the addition of new subscription customers1 and $17.3 million was due to the expansion of existing customers. The expansion of existing customers was primarily driven by average revenue per existing Marketing Solutions customers increasing by approximately 22% as a result of adding new and growing existing brands and service lines. Approximately 95% of our revenue for the three months ended September 30, 2024 was derived from subscription customers.
Revenue for the six months ended September 30, 2024 increased $41.4 million as compared to the same period in 2023. The increase was primarily driven by a $41.7 million increase in subscription revenue. Of the increase in subscription revenue, $9.0 million was driven by the addition of new subscription customers1 and $32.7 million was due to the expansion of existing customers. The expansion of existing customers was primarily driven by average revenue per existing Marketing Solutions customers increasing by approximately 20% as a result of adding new and growing existing brands and service lines. Approximately 95% of our revenue for the six months ended September 30, 2024 was derived from subscription customers.
Cost of revenue, gross profit and gross margin
Three Months Ended September 30,
Change
Six Months Ended September 30,
Change
2024
2023
$
%
2024
2023
$
%
(in thousands, except percentages)
Cost of revenue
$
13,676
$
12,759
$
917
7
%
$
27,226
$
25,912
$
1,314
5
%
Gross profit
$
123,156
$
100,853
$
22,303
22
%
$
236,282
$
196,169
$
40,113
20
%
Gross margin
90
%
89
%
90
%
88
%
Cost of revenue for the three months ended September 30, 2024 increased $0.9 million as compared to the same period in 2023. The increase was driven by a $0.4 million increase in stock-based compensation as a result of new awards granted to existing employees and a $0.3 million increase in third-party software costs to support revenue growth.
Cost of revenue for the six months ended September 30, 2024 increased $1.3 million as compared to the same period in 2023. The increase was primarily driven by a $0.8 million increase in stock-based compensation as a result of new awards granted to existing employees and a $0.3 million increase in third-party software costs to support revenue growth.
The gross margin for the three and six months ended September 30, 2024 increased due to the growth in our revenue outpacing the growth in our cost of revenue.
1We define new subscription customers as revenue-generating subscription customers in the current fiscal period who did not contribute any revenue for the same period in the prior fiscal year.
Research and development expense for the three months ended September 30, 2024 increased $3.3 million as compared to the same period in 2023, primarily driven by a $2.9 million increase in stock-based compensation as a result of new awards granted to existing employees.
Research and development expense for the six months ended September 30, 2024 increased $3.9 million as compared to the same period in 2023. The increase was driven by a $4.3 million increase in stock-based compensation, primarily due to new awards granted to existing employees, a $0.6 million increase due to employee events and travel-related expenses, partially offset by a $0.9 million decrease in personnel costs due to reduction in average headcount as a result of the Company’s restructuring plan executed in August 2023.
Sales and marketing
Three Months Ended September 30,
Change
Six Months Ended September 30,
Change
2024
2023
$
%
2024
2023
$
%
(in thousands, except percentages)
Sales and marketing
$
34,367
$
30,201
$
4,166
14
%
$
69,611
$
64,656
$
4,955
8
%
Sales and marketing expense for the three months ended September 30, 2024 increased $4.2 million as compared to the same period in 2023. The increase was driven by a $4.1 million increase in stock-based compensation primarily due to new awards granted to existing and new employees and the reversal of expense in the prior period from award forfeitures as a result of the August 2023 restructuring plan and a $0.7 million increase in sales incentive compensation. These increases were partially offset by a $0.7 million decrease in personnel costs due to a reduction in average headcount.
Sales and marketing expense for the six months ended September 30, 2024 increased $5.0 million as compared to the same period in 2023. The increase was driven by a $4.7 million net increase in stock-based compensation as a result of new awards granted to existing and new employees, partially offset by a decrease in stock-based compensation from awards fully vested since the prior year, a $1.7 million increase in sales incentive compensation, and a $0.6 million increase in third-party software and contractor costs. These increases were partially offset by a $2.3 million decrease in personnel costs due to a reduction in average headcount.
General and administrative
Three Months Ended September 30,
Change
Six Months Ended September 30,
Change
2024
2023
$
%
2024
2023
$
%
(in thousands, except percentages)
General and administrative
$
10,103
$
8,966
$
1,137
13
%
$
19,358
$
18,213
$
1,145
6
%
General and administrative expense for the three months ended September 30, 2024 increased $1.1 million as compared to the same period in 2023, primarily driven by a $0.7 million increase in stock-based compensation as a result of new awards granted to existing employees and a $0.4 million increase in legal costs.
General and administrative expense for the six months ended September 30, 2024 increased $1.1 million as compared to the same period in 2023, primarily driven by a $1.3 million increase in stock-based compensation as a result of new awards granted to existing employees, and a $0.4 million increase in legal costs. These increases were partially offset by a $0.3 million decrease in personnel costs due to reduction in average headcount.
During the three and six months ended September 30, 2024, the Company executed a sublease for its Curative office space in Irving, Texas, which resulted in a $2.3 million impairment charge for the subleased asset group.
In August 2023, the Company initiated a restructuring plan to better align the Company’s resources with its priorities, and reduced its workforce by 10%. The $7.9 million in restructuring charges incurred during the three and six months ended September 30, 2023 consisted 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.
Other income, net
Three Months Ended September 30,
Change
Six Months Ended September 30,
Change
2024
2023
$
%
2024
2023
$
%
(in thousands, except percentages)
Other income, net
$
9,029
$
5,903
$
3,126
53
%
$
16,145
$
10,742
$
5,403
50
%
Other income, net for the three and six months ended September 30, 2024 increased $3.1 million and $5.4 million as compared to the same periods in 2023, primarily driven by increases in interest income due to higher yields earned on our cash equivalents and marketable securities portfolio, partially offset by lower average portfolio balances.
Provision for income taxes
Three Months Ended September 30,
Change
Six Months Ended September 30,
Change
2024
2023
$
%
2024
2023
$
%
(in thousands, except percentages)
Provision for income taxes
$
18,017
$
9,093
$
8,924
98
%
$
29,809
$
15,209
$
14,600
96
%
Income tax expense for the three and six months ended September 30, 2024 increased $8.9 million and $14.6 million as compared to the same periods in 2023, primarily driven by higher income before taxes and decreased tax deductions from stock award activities.
Liquidity and Capital Resources
Since inception, we have financed operations primarily through proceeds received from sales of equity securities and payments received from our customers. As of September 30, 2024, our principal sources of liquidity were cash and cash equivalents and marketable securities of $805.6 million. Our marketable securities consist of U.S. government and agency securities, corporate notes and bonds, and commercial paper.
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.
We believe that our existing cash and cash equivalents and marketable securities will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months.
Our future capital requirements will depend on many factors, including our revenue growth rate, the timing and the amount of cash received from customers, the expansion of sales and marketing activities, timing of share repurchases, and the timing and extent of spending to support research and development efforts. Further, we may in the future enter into arrangements to acquire or invest in businesses and technologies. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, financial condition, and results of operations could be adversely affected.
We have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities.
For further details regarding our cash requirements from noncancelable operating lease obligations and other contractual commitments, see Note 12—Commitments and Contingencies and Note 13—Leases included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Cash Flows
Six Months Ended September 30,
2024
2023
(in thousands)
Net cash provided by operating activities
$
109,589
$
70,098
Net cash provided by investing activities
$
54,099
$
67,224
Net cash used in financing activities
$
(76,225)
$
(186,946)
Net cash provided by operating activities
Cash provided by operating activities was $109.6 million for the six months ended September 30, 2024. This consisted of net income of $85.5 million, adjusted for non-cash items of $42.9 million and a net outflow from operating assets and liabilities of $18.8 million. Non-cash items primarily consisted of stock-based compensation expense of $35.0 million, depreciation and amortization expense of $5.2 million, amortization of deferred contract costs of $4.8 million, impairment of long-lived assets of $2.3 million, and non-cash lease expense of $1.0 million, partially offset by the accretion of discount on marketable securities of $5.4 million. The net outflow from operating assets and liabilities was driven by a $23.5 million increase in accounts receivable due to the timing of billings and collections, a $5.5 million decrease in accounts payable, accrued expenses, and other liabilities which was primarily due to the timing of income tax and transferable tax credit payments, a $5.5 million decrease in deferred revenue due to the timing of customer billings and program launches, and a $3.2 million increase in deferred contract costs. The outflows were partially offset by a $19.9 million decrease in prepaid expenses and other assets primarily due to prepaid taxes. During the six months ended September 30, 2024 and 2023, the Company made $22.0 million and $29.4 million, respectively, in payments for taxes. The increase in cash paid for income taxes in these periods, as compared to prior years, was partially related to the Tax Cuts and Jobs Act of 2017, which eliminated the option to deduct research and development expenditures and required taxpayers to capitalize and amortize them over five or fifteen years. Although Congress is considering legislation that would defer the amortization requirement to later years, we have no assurance that the provision will be so deferred, repealed or otherwise modified. The requirement may also reduce our cash flows from operating activities in future periods, the amounts and specific periods of which we are unable to estimate at this time.
Cash provided by operating activities was $70.1 million for the six months ended September 30, 2023. This consisted of net income of $59.0 million, adjusted for non-cash items of $36.8 million and a net outflow from operating assets and liabilities of $25.7 million. Non-cash items primarily consisted of stock-based compensation expense of $27.4 million, depreciation and amortization expense of $5.2 million, amortization of deferred contract costs of $4.7 million, non-cash lease expense of $1.1 million, partially offset by the accretion of discount on marketable securities of $1.8 million. The net outflow from operating assets and liabilities was driven by a $13.8 million decrease in deferred revenue due to the timing of customer billings and program launches, a $10.5 million increase in prepaid expenses and other assets primarily due to prepayment of income
taxes, an $8.1 million decrease in accounts payable, accrued expenses, and other liabilities which was primarily due to the timing of commissions and agency rebate payments, and a $2.4 million increase in deferred contract costs. These outflows were partially offset by a $9.6 million decrease in accounts receivable due to the timing of billings and collections.
Net cash provided by investing activities
Cash provided by investing activities was $54.1 million for the six months ended September 30, 2024, which primarily consisted of proceeds from the maturities of marketable securities of $417.9 million and $7.2 million of proceeds from the sale of marketable securities, partially offset by $367.8 million of marketable securities purchases and $3.2 million for internal-use software development costs.
Cash provided by investing activities was $67.2 million for the six months ended September 30, 2023, which primarily consisted of proceeds from the maturities of marketable securities of $212.8 million and proceeds from the sale of marketable securities of $37.5 million. These inflows were partially offset by $180.2 million of marketable securities purchases and $2.7 million for internal-use software development costs.
Net cash used in financing activities
Cash used in financing activities was $76.2 million for the six months ended September 30, 2024, which primarily consisted of common stock repurchases of $74.2 million, $5.5 million of payments for contingent consideration related to the AMiON acquisition, and $8.2 million of taxes paid related to the net share settlement of equity awards. These payments were partially offset by $10.2 million of proceeds from the exercise of stock options and common stock warrants, and $1.4 million of proceeds from the issuance of common stock in connection with the Company’s employee stock purchase plan.
Cash used in financing activities was $186.9 million for the six months ended September 30, 2023, which primarily consisted of common stock repurchases of $186.2 million, $5.4 million of payments for contingent consideration related to the AMiON acquisition, and $4.1 million of taxes paid related to the net share settlement of equity awards. These payments were partially offset by $7.2 million of proceeds from the exercise of stock options, and $1.5 million of proceeds from the issuance of common stock related to the employee stock purchase plan.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q are prepared in accordance with GAAP. The preparation of our financial statements also requires us to make estimates and assumptions that affect the amounts stated in the condensed consolidated financial statements and accompanying notes. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results could differ significantly from the estimates made by management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.
There have been no material changes to our critical accounting policies and estimates during the three and six months ended September 30, 2024 as compared to those described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024 and filed with the SEC on May 23, 2024.
Recent Accounting Pronouncements
Refer to Note 2—Summary of Significant Accounting Policies included in Part I, Item 1 of this Quarterly Report on Form 10-Q for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Substantially all of our operations are within the United States and we do not have any foreign currency exposure. We are exposed to market risks in the ordinary course of our business, including the effects of interest rate changes and inflation.
Interest Rate Risk
Our cash and cash equivalents and marketable securities primarily consist of cash on hand and highly liquid investments in money market funds, corporate notes and bonds, commercial paper, and U.S. government and agency securities. As of September 30, 2024, we had cash and cash equivalents of $184.2 million and marketable securities of $621.3 million. We do not enter into investments for trading or speculative purposes. Our investments are exposed to market risk due to fluctuations in
interest rates, which may affect our interest income and the fair value of our investments. Fixed rate securities may have their market value adversely affected due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fall short of expectation due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates.
A hypothetical 100 basis point increase in interest rates would have resulted in a decrease of $5.0 million and $3.4 million, respectively, in the market value of our cash equivalents and marketable securities as of September 30, 2024 and March 31, 2024. This estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur. Fluctuations in the value of our investments caused by a change in interest rates are recorded in other comprehensive income and are realized in net income only if we sell the underlying securities.
Impact of Inflation
We do not believe that inflation has had a material effect on our business, results of operations, or financial condition. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs. Our inability or failure to do so could harm our business, financial condition, and results of operations.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating our disclosure controls and procedures, our management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the disclosure controls and procedures are met. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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.
For further discussion of our legal proceedings, please refer to Note 12—Commitments and Contingencies included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Item 1A. Risk Factors
We are subject to various risks that could have a material adverse impact on our financial position, results of operations, or cash flows. Although it is not possible to predict or identify all such risks and uncertainties, they may include, but are not limited to, the factors discussed under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2024. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also materially adversely affect our financial position, results of operations, or cash flows. There have been no material changes to the risk factors included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
Common Stock Warrant Exercises
On August 8, 2024 and August 14, 2024, the Company issued 100,000 and 100,667 shares of Class A common stock, respectively, upon the exercise of the warrant issued to U.S. News & World Report, L.P. in June 2021, at an exercise price of $12.56 per share and aggregate consideration of $1.3 million and $1.3 million, respectively.
The foregoing transaction did not involve any underwriters, underwriting discounts, or commissions, or any public offering. We believe the issuance of the above securities was exempt from registration by virtue of Section 4(a)(2) of the Securities Act because the issuance of the securities to the recipients was a transaction that did not involve a public offering. The recipient of the securities in the transaction represented (i) its intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and (ii) that it is an accredited investor under Regulation D of the Securities Act. Appropriate legends were placed upon the stock certificates issued in the transaction. The recipient had adequate access, through its relationships with us, to information about us. The issuance of these securities was made without any general solicitation or advertising.
The following table presents information with respect to the repurchases of our Class A common stock during the three months ended September 30, 2024:
Period
Total Number of Shares Repurchased(1)
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Program(1)
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in thousands)
July 1 - 31, 2024
394,319
$
27.63
394,319
$
481,181
August 1 - 31, 2024
191,932
$
26.99
191,932
$
476,002
September 1 - 30, 2024
153,412
$
39.14
153,412
$
469,998
Total
739,663
739,663
_______________
(1)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. The repurchases can be executed through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans.
Use of Proceeds
On June 28, 2021, we closed our IPO of 22,505,750 shares of our Class A common stock sold by us, including 3,495,000 shares pursuant to the exercise of the underwriters’ option to purchase additional shares of our Class A common stock, and 4,289,250 shares of Class A common stock sold by an existing stockholder, at an offering price of $26.00 per share, resulting in proceeds to us of $548.5 million after deducting underwriting discounts and commissions as well as deferred offering costs. All of the shares issued and sold in our IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-256584), which was declared effective by the SEC on June 23, 2021. Morgan Stanley & Co. LLC, Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Piper Sandler & Co., William Blair & Company, L.L.C., Canaccord Genuity LLC, Needham & Company, LLC, Raymond James & Associates, Inc., and SVB Leerink LLC acted as underwriters for the offering. We incurred offering expenses of approximately $5.5 million. No payments for such expenses were made to our directors or officers or their associates, holders of 10% or more of any class of our equity securities, or to our affiliates. Upon completion of the sale of the shares of our Class A common stock referenced in the preceding sentences, the IPO terminated. There has been no material change in the planned use of proceeds from our IPO from those disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2024.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
During the quarter ended September 30, 2024, none of our directors or executive officers as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934 adopted, modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
Filed herewith
__________________
* The certifications attached as Exhibit 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are deemed furnished and not filed with the SEC and are not to be incorporated by reference into any filing of the Company under the Securities Act or the Exchange Act, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.
# Indicates management contract or compensatory plan, contract or agreement.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DOXIMITY, INC.
Date: November 7, 2024
By:
/s/ Jeffrey Tangney
Jeffrey Tangney
Chief Executive Officer
(Principal Executive Officer)
Date: November 7, 2024
By:
/s/ Anna Bryson
Anna Bryson
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)