Doximity, Inc. (DOCS) Q1 2026 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

Doximity's earnings call summary and Q&A section indicate strong financial performance, with revenue and EBITDA exceeding guidance, and promising AI investments. Despite cautious guidance due to policy uncertainty, the company's robust client engagement, strategic AI integration, and successful product portfolio suggest a positive outlook. The Pathway acquisition's minimal cost impact and high engagement metrics further support this view. Overall, the company's strategic initiatives and market growth potential outweigh any uncertainties, leading to a positive sentiment.

Key Financial Performance

Revenue $146 million for Q1 fiscal 2026, representing 15% year-over-year growth. Reasons for growth include a strong upsell season and new products and portal.

Adjusted EBITDA $80 million for Q1 fiscal 2026, representing a 55% margin and 21% year-over-year growth. Reasons for growth include better-than-expected performance and margin expansion.

Free Cash Flow $60.1 million for Q1 fiscal 2026, representing a 52% year-over-year growth. Reasons for growth include the reversal of the need to capitalize R&D due to new tax laws.

Net Revenue Retention Rate 118% on a trailing 12-month basis, with top 20 customers at 119%. Reasons for growth include strong performance from existing customers and higher retention among top customers.

Non-GAAP Gross Margin 91% for Q1 fiscal 2026, compared to 92% in the prior year period. Slight decrease attributed to operational factors.

Number of High-Value Customers 120 customers contributing at least $500,000 each in subscription-based revenue, a 17% increase from 103 customers in the prior year. Reasons for growth include strong customer engagement and subscription growth.

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Operating Highlights

Doximity AI Scribe: Launched recently, it is a HIPAA-compliant ambient notetaking tool that is free for users. It has been beta-tested by over 10,000 physicians, PAs, and NPs, and has shown high user retention with over 75% returning weekly. It aims to save physicians time and improve their work-life balance.

Pathway AI acquisition: Acquired Pathway, a Montreal-based AI clinical reference startup, for $26 million in cash and up to $37 million in equity grants. Pathway specializes in AI clinical reference tools and has developed a highly accurate medical AI dataset. The acquisition aims to enhance Doximity's AI capabilities and integrate Pathway's tools into its offerings.

Revenue growth: Achieved $146 million in revenue for Q1 FY2026, a 15% year-on-year growth, exceeding guidance by 4%. Net revenue retention rate was 118%, with top 20 customers achieving 119%.

Customer expansion: Increased the number of customers contributing at least $500,000 annually to 120, a 17% year-on-year growth. These customers accounted for 84% of total revenue.

Profitability: Adjusted EBITDA margin was 55%, with adjusted EBITDA growing 21% year-on-year to $80 million. Free cash flow grew 52% year-on-year to $60.1 million.

Share repurchase program: Repurchased $122.3 million worth of shares at an average price of $53.99, with $302 million remaining in the program.

AI integration and focus: Doximity is focusing on AI as a strategic growth area, integrating Pathway's AI tools into its offerings and launching a physician AI suite that includes Scribe, GPT, and Pathway's Corpus.

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Risk or Challenges

Regulatory and Policy Uncertainty: Despite a strong Q1 performance, the company acknowledges continued policy uncertainty, which could impact future business operations and revenue.

Revenue Dependency on Top Customers: A significant portion of revenue comes from 120 customers contributing at least $500,000 each, accounting for 84% of total revenue. This concentration poses a risk if any major customer reduces or discontinues their spending.

Stock-Based Compensation and Dilution: Stock-based compensation is expected to increase to the high teens as a percentage of revenue in fiscal 2026 and 2027, which could lead to shareholder dilution despite share repurchase efforts.

Integration and Execution Risks: The acquisition of Pathway and its integration into Doximity's operations could face challenges, particularly in aligning teams and ensuring the success of new AI-driven products.

Economic and Market Conditions: The company has not seen a slowdown yet but remains cautious about the potential impact of broader economic conditions on its business.

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Guidance & Outlook

Revenue Guidance for Q2 FY2026: Expected revenue in the range of $157 million to $158 million, representing 15% growth at the midpoint.

Adjusted EBITDA Guidance for Q2 FY2026: Expected adjusted EBITDA in the range of $87 million to $88 million, representing a 56% adjusted EBITDA margin.

Full Fiscal Year 2026 Revenue Guidance: Expected revenue in the range of $628 million to $636 million, representing 11% growth at the midpoint.

Full Fiscal Year 2026 Adjusted EBITDA Guidance: Expected adjusted EBITDA in the range of $341 million to $349 million, representing a 55% adjusted EBITDA margin.

Free Cash Flow Impact: Free cash flow is expected to be positively impacted by the new tax law reversing the need to capitalize R&D, with a cash tax rate expected to drop to roughly 10% to 15% starting this fiscal year.

AI and Pathway Acquisition Impact: Recent investments in AI, including the Pathway acquisition and the launch of Scribe, are expected to drive long-term growth.

Stock-Based Compensation Outlook: Stock-based compensation is expected to increase to the high teens as a percentage of revenue in fiscal 2026 and 2027, then trend back down to the mid-teens starting in 2028.

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Shareholder Return Plan

Share Repurchase Program: During the first quarter, Doximity repurchased $122.3 million worth of shares at an average price of $53.99. The company believes repurchasing shares is a valuable use of the incremental cash generated above what's needed to reinvest in the business. As of June 30, $302 million remained in the existing repurchase program.

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Key Q&A

Q:How does the company view the opportunity for Scribe, Pathway, and DocsGPT in terms of engagement or hours on the platform?

A:The company sees these AI tools as a potential 'third act' that could be as big or bigger than their first two acts (newsfeed and workflow tools). These tools aim to answer doctors' questions in front of patients, leveraging AI to improve clinical workflows and reduce 'pajama time.' The integration of Scribe, DocsGPT, and Pathway is expected to provide seamless support for doctors, enhancing their efficiency and engagement.

Q:Why does the guidance for the second half of the year imply a deceleration?

A:The company is taking a cautious approach due to policy uncertainty and the fact that there is still a significant portion of the year left. While the business remains strong and client budgets are better than expected, the company does not want to extrapolate one quarter's outperformance for the rest of the year.

Q:What are the qualitative differences in upsell cycles this year compared to previous years?

A:This year, the upsell cycle is unique because all aspects of the business are performing well, including SMB customers, news modules, workflow modules, and health system customers. The client portal has been a game changer, helping customers maximize ROI and contributing to over 100% year-over-year growth in SMB customers in Q1. The diversified commercial product portfolio has also allowed customers to maximize reach and frequency across the platform.

Q:What are the drivers of increased utilization of the company's products?

A:Key drivers include the growth of workflow tools like the scheduler and telehealth products, which are used daily by doctors. The newsfeed continues to grow due to its ability to provide relevant clinical news without the noise of other social media. AI has also enhanced the newsfeed by rewriting headlines to make them more digestible and interesting. The company’s products are used throughout the day, from morning news updates to workflow tools during work hours and newsfeed usage in the evenings.

Q:How is the company leveraging AI for internal productivity and operational efficiency?

A:The company is using AI across various internal teams, including sales, marketing, G&A, and R&D, to boost productivity. Despite flat headcount over the last two years, the company has grown significantly, demonstrating the efficiency gains from AI. These tools are expected to contribute to long-term margin improvements, although the impact has not yet been fully assessed.

Q:Will the new AI offerings like Doximity GPT, AI Scribe, and Pathways clinical tools become revenue-generating products?

A:Yes, the company sees these offerings as similar to the Dialer product, which started as a free product and later became a successful revenue stream. Discussions are already underway with clients about enterprise versions of these tools, and the company views them as long-term opportunities for direct subscription revenue.

Q:What percentage of revenue for the year is already under contract?

A:The company started the year with just under 70% of subscription-based revenue under contract. This percentage has increased significantly, although the exact number is not disclosed. The remainder of the year’s revenue is primarily dependent on renewals.

Q:What is the expected impact of the Pathway acquisition on operating expenses?

A:The Pathway acquisition will add just over $2 million to operating expenses for the year. As a small company with only six employees, the additional costs are minimal and primarily related to infrastructure.

Q:What are the characteristics of super users of DocsGPT and other workflow tools?

A:Over 75% of Scribe users use the product weekly, indicating high engagement. The company’s products are used throughout the day, with the newsfeed being popular before and after work, and workflow tools like Scribe and GPT being used during work hours. This comprehensive usage pattern makes the platform integral to doctors’ daily routines.

Q:How is the company integrating the Pathway acquisition into its platform?

A:The Pathway product has been largely integrated into the Doximity GPT product, providing a single interface for doctors to ask clinical or administrative questions. The company has made the product free, eliminating the previous $300 annual fee, and aims to leverage its best-in-class accuracy and data set to become a leader in medical AI search.

Q:What is the company’s strategy for increasing visibility into its business?

A:The company has improved visibility by encouraging longer contracts with January start dates and leveraging the client portal for better insights into upsell cycles. These initiatives, along with stable client budgets, have enhanced the company’s ability to forecast and plan.

Q:What trends are being observed in the small and medium-sized business (SMB) segment?

A:The SMB segment is growing rapidly, with over 100% year-over-year growth in Q1. These businesses are increasingly adopting digital-first strategies, which align well with Doximity’s offerings. The company sees this as a strong long-term opportunity.

Q:How is the company addressing policy uncertainty in its guidance?

A:The company is taking a cautious approach to guidance due to ongoing policy uncertainty. While the business remains strong, the company is not assuming stable budgets for the remainder of the year and is prepared for potential disruptions.

Q:What is the company’s approach to leveraging AI in its products?

A:The company is heavily investing in AI to enhance its products, such as using generative AI to improve newsfeed headlines and developing AI-driven tools like Scribe and GPT. These investments aim to make the platform more efficient and valuable for doctors.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on the exact percentage of revenue currently under contract, stating only that it has increased significantly from the initial 70%. Additionally, while discussing the potential long-term margin impact of AI investments, management acknowledged that it is too early to assess the full impact, leaving some uncertainty about future financial outcomes.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

DOCS Transcript

Doximity, Inc. (DOCS) Q2 2026 Earnings Call Transcript

Positive11-6

The earnings call reveals strong financial performance with a 56% EBITDA margin and 15% revenue growth guidance. Product development is promising with AI investments and Pathway acquisition. Market strategy is robust, focusing on AI and health systems. Expenses are controlled with margins expected to remain stable. Shareholder return is not explicitly mentioned, but positive cash flow is anticipated. Q&A insights show optimism in AI and integrated programs, despite some uncertainties in policy impacts. Overall, the sentiment is positive, likely leading to a stock price increase of 2% to 8%.

Doximity, Inc. (DOCS) Q1 2026 Earnings Call Transcript

Positive8-7

Doximity, Inc. (NYSE:DOCS) Q4 2025 Earnings Call Transcript

Positive5-17

Doximity shows strong financial performance with significant revenue and EBITDA growth, a robust client retention rate, and successful AI tool adoption. Despite some uncertainties in AI investment payback and macroeconomic impacts, the company's strategic initiatives and share repurchase program indicate confidence. The Q&A highlights strong client interest in AI and no signs of market slowdown. The positive guidance and financial results, along with a proactive shareholder return plan, suggest a positive stock price movement in the short term.

Earnings call transcript: Doximity’s Q4 2025 results beat EPS expectations

Positive5-15

The earnings call reflects strong financial performance with record revenue and EBITDA growth, surpassing guidance. Despite cautious client spending due to macroeconomic factors, AI tools are driving double growth rates among adopters. The company's robust share repurchase program and stable margins further strengthen its position. While guidance is conservative, the overall sentiment remains positive due to strong client loyalty and operational efficiency. The Q&A session highlighted enthusiasm for AI and strategic investments, suggesting potential for future growth.

DOCS Report

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