Q2 2022 DocGo Inc Earnings Call

August 9, 2022

Operator 1: Greetings, and welcome to the DocGo Q2 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and then zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Steve Halper. Please go ahead, sir.

Operator: Greetings, and welcome to the DocGo Q2 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and then zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Steve Halper. Please go ahead, sir.

Greetings and welcome to the Duck second quarter 2022 earnings conference call.

At this time all participants are in a listen only mode.

A question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

I'd now like to turn the conference over to your host Steve Holt. Please go ahead Sir.

Steve Halper: Thank you, Irene. Before turning the call over to management, I'd like to make the following remarks concerning forward-looking statements. All statements in this conference call, other than historical facts, are indeed forward-looking statements. The words anticipate, believe, estimate, expect, intend, guidance, confidence, target, project, and other similar expressions are used typically to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and may involve and are subject to certain risks and uncertainties and other factors that may affect DocGo's business, financial condition, and other operating results. These include, but are not limited to, the risk factors and other qualifications contained in DocGo's annual report on Form 10-K, quarterly reports filed on Forms 10-Q, and other reports and statements filed by DocGo with the SEC to which your attention is directed.

Thank you Irene.

Before turning the call over to management I'd like to make the following remarks concerning forward looking statements.

All statements in this conference call other than historical facts are indeed forward looking statements. The words anticipate believe estimate expect intend guidance confidence target.

Right.

<unk> and other similar expressions are used typically to identify such forward looking statements. These forward looking statements are not guarantees of future performance and may involve and are subject to certain risks and uncertainties and other factors that may affect dot goes business financial condition and other operating results.

These include but are not limited to the risk factors and other qualifications contained in <unk> annual report on Form 10-K.

Early reports filed on forms 10-Q, and other reports and statements filed by <unk> with the SEC to which your attention is directed.

Steve Halper: Actual outcomes and results may differ materially from what is expressed or implied by these forward-looking statements. In addition, today's presentation contains references to non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our earnings release, as well as in our filings with the Securities and Exchange Commission. The information contained in this call is accurate only as of the date discussed. Investors should not assume that statements will remain relevant and operative at a later time. We undertake no obligation to update any information discussed in this call in the future. At this time, it is now my pleasure to turn the call over to Mr. Stan Vashovsky, CEO and Co-Founder of DocGo. Stan?

Actual outcomes and results may differ materially from what is expressed or implied by these forward looking statements. In addition, today's presentation contains references to non-GAAP financial measures reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our earnings release as well as in our.

Filings with the Securities and Exchange Commission. The information contained in this call is accurate only as of the date discussed investors should not assume that statements will remain relevant and operative at a later time, we undertake no obligation to update any information discussed in this call in the future at this time. It is now my pleasure to turn the call over.

To Mr. Stanford Schottky, CEO and cofounder of <unk> Stan.

Stan Vashovsky: Thank you, Steve, and thank you all for joining us today. The Q2 represented another period of strong operational execution. Our revenues increased 76% year over year to $109.5 million. Continued sales momentum and acquisition-based contributions have supported an increase in our 2022 revenue guidance to a range of $425 to 435 million, up from a previous range of $400 to 420 million. We're also raising our guidance for adjusted EBITDA to a range of $40 to 45 million, compared to our original guidance of $35 to 41 million. Some of the key factors driving our continued organic growth, including the expansion of our agreements with Carnival Cruise Line, new municipal programs in New York, new mobile health programs in Los Angeles, and expanded medical transportation business with Northwell.

Thank you Stephen and thank you all for joining us today.

The second quarter represented another period of strong operational execution.

Our revenues increased 76% year over year to $109 $5 million continued sales momentum and acquisition based contributions have supported an increase in our 2022 revenue guidance to a range of 425 200 $435 million up from our previous range of 400.

$420 million.

We're also raising our guidance for adjusted EBITDA to a range of $40 million to $45 million compared to our original guidance of $35 million to $41 million.

Some of the key factors driving our continued organic growth, including the expansion of our agreements with Carnival cruise lines, New municipal programs in New York, New Mobile health programs in Los Angeles, and expanded medical transportation business with north well.

Stan Vashovsky: Our mass COVID testing revenues for the quarter were approximately $28 million and are expected to decline significantly in Q3. We have already begun offsetting with non-COVID related business in place, and in many cases the customers will remain the same. An example of this in New York is our transition from mass COVID testing with a municipal client directly into providing primary care at homeless shelters or medical imaging services for that same client. In sum, we expect the transition to these new non-COVID projects to be relatively seamless with minimal impact on revenue generation. On the M&A front, we expect to increase our activity with several prospective transactions in the pipeline, about which we are very excited. We continue to pursue synergistic opportunities where prospective targets may be currently outsourcing services which DocGo could directly provide.

Covid testing revenues for the quarter were approximately $28 million and are expected to decline significantly in the third quarter.

We have already begun offsetting with non COVID-19 related business in place and in many cases the customers will remain the same and example of this in New York is our transition from mass Covid testing with our municipal clients.

Correctly to providing primary care at homeless shock homeless shelters or medical imaging services for that same client.

In sum, we expect the transition to these new non COVID-19 projects to be relatively seamless with minimal impact on revenue generation.

On the M&A front, we expect to increase our activity with several prospective transactions in the pipeline about which we are very excited we continue to pursue synergistic opportunities where prospective targets may be currently outsourcing services, which taco could directly provide this is in addition to those opportunities.

Stan Vashovsky: This is in addition to those opportunities which open up new markets and drive enhanced profitability. Our goal is to continue utilizing our strong balance sheet and cash flow from operations to expand the breadth, depth, and profitability of the company portfolio of services. We continue to do an excellent job both securing new customers and deepening those relationships considerably over time. Last quarter, we shared a statistic that approximately 90% of DocGo's revenues are generated from customers in the third, fourth, or fifth generation contract, and that trend continues today. This success has occurred across all varieties of customers, from corporations, healthcare systems, and municipal accounts. This achievement speaks volumes about our ability to get our foot in the door, provide exceptional value to the customer, and grow that business substantially.

Which opened up new markets and drive enhanced profitability.

Our goal is to continue utilizing our strong balance sheet and cash flow from operations to expand the breadth depth and.

Ability of the company portfolio of services.

We continued to do an excellent job both securing your customers and deepening those relationships considerably over time.

Last quarter, we shared a statistic that approximately 90% of <unk> revenues are generated from customers in the third fourth or fifth generation contract and that trend continues to date.

This success has occurred across all varieties of customers from corporations to health care systems and municipal accounts. This achievement speaks volumes about our ability to get our foot in the door, providing exceptional value to the customer and grow that business substantially.

Stan Vashovsky: We have also significantly enhanced our RSP capabilities in recent months, allowing us to actively bid on larger contracts across the country. While it is too early to quantify expectations, the pace of activity in this channel has more than tripled recently, and we anticipate a meaningful contribution from these efforts as we enter 2023. It is clear that the municipal customer segment will remain a cornerstone of our business for the foreseeable future, providing us with a stable base of revenue upon which we can build. Our direct to consumer and corporate health beta tests continue to provide very encouraging results. The direct to consumer market represents a tremendous opportunity, and we have partnered with some of the largest payers in the industry, including Aetna, Blue Cross, and L.A. Care. We expect coordinated marketing efforts to begin with these partners in late 2022 and early 2023.

We have also significantly enhanced our RFP capabilities in recent months, allowing us to actively bid on larger contracts across the country.

It is too early to quantify expectations the pace of activity in this channel has more than tripled recently and we anticipate a meaningful contribution from these efforts as we enter 2023. It is clear that the municipal customer segment will remain a cornerstone of our business for the foreseeable future, providing us with a stable base of revenue upon which.

We can bill.

Our direct to consumer and corporate health Beta test continues to provide the very encouraging results that direct to consumer market represents a tremendous opportunity and we are partnered with some of the largest payers in the industry, including Aetna Blue Cross as a cure.

We expect coordinated marketing efforts to begin with these partners in late 2022 in early 2023.

Stan Vashovsky: One market I would like to take a moment to review in greater detail is the cruise line business, given that it represents a great business study regarding the value of DocGo's services to the customer. Initially, we entered this market with a relatively small contract to provide COVID related testing services to Carnival staff in early 2021. By the end of 2022, we expect to be facilitating full spectrum of standard healthcare services from doctors down to lower level clinicians on majority of Carnival's fleet. In 2022, we began serving two additional major cruise lines that we expect to follow a similar growth trajectory. The pace at which these initial contracts expanded highlights the attractiveness of DocGo's unique model and commitment to customer service. This success is also reflected in our NPS or Net Promoter Score, which is the gold standard of customer experience metrics.

One market I would like to take a moment to review in greater detail as the cruise line business given that it represents a great business studies regarding the value of telco services to the customer.

Initially we entered this market with a relatively small contract to provide COVID-19 related testing services to Carnival staff in early 2021.

By the end of 2022, we expect to be facilitating full spectrum of standard healthcare services doctors, that's a lower level condition, a majority of carnival fleet in.

In 2022, we began serving two additional major cruise lines that we expect to follow a similar growth trajectory.

Peso, which these initial contracts expanded highlights the attractiveness of <unk> unique model and commitment to customer service to.

This success is also reflected in our NPS or net promoter score, which is the gold standard of customer experience metrics.

Stan Vashovsky: Scores are measured from a range of -100 to +100, with scores over 30 commonly viewed as good, with over 50 being considered excellent. Our Q2 mobile health NPS score was an impressive 77, which is a testament to our customers' strong perception regarding the value of DocGo's service. Another example of continued business execution comes from a major hospital system in Southern California. This customer utilizes DocGo's emergency room avoidance program, which attempts to mitigate unnecessary emergency room visits. With our program, we achieved a 35% reduction in ER visits, resulting in a significant financial savings for that institution and earning bonus payments to DocGo for hitting that goal.

Scores are measured from a range of negative 100 to positive 100 with scores of over 30, commonly viewed as good with over 50 being considered excellent.

Our Q2 mobile health NPS score was an impressive 77, which is a testament to our customers' strong perception regarding the value of backup service.

Another example of continued business execution comes from major hospital system in Southern California. This customer utilizes dark clothes emergency room avoidance program, which attempts to mitigate unnecessary emergency room visits.

With our program, we achieved a 35% reduction in ER visits, resulting in a significant financial savings for that institution, and earning bonus payments to darko hitting that goal.

Stan Vashovsky: At the end of the day, our proprietary technology is the lifeblood that allows us to deliver efficient, cost-effective healthcare in a mobile setting, and we are making further substantial investments to support the next generation of functionality. At this time, I will hand it over to Anthony Capone, our President, to provide us some details on that front. Anthony?

At the end of the day, our proprietary technology.

Is the lifeblood that allows us to deliver efficient cost effective healthcare in the mobile sector and we're making further substantial investments to support the next generation of functionality at.

At this time I will hand, it over to Anthony Capone, our president to provide some details on that front Anthony.

Anthony Capone: Thanks, Dan. At its heart, DocGo is a technology company. As its former chief technology officer, I've observed our software evolve into a highly sophisticated system. In Q2, we greatly enhanced our dispatching application with the ability to assign mobile health and ambulance resources based upon predictive demand analysis. This sophisticated model allows for increased utilization, thus decreasing the idle time of our mobile units, further enabling our ability to deliver cost-effective healthcare. Our team also built a highly intelligent machine learning system to help predict reimbursement and help ensure collectability. At DocGo, we build software that is core to our business model and integrate with systems that support our business. In Q2, we completed our integration with one of the nation's largest EHRs, athenahealth. Additionally, DocGo was accepted into the Epic App Orchard as its first and currently only fully embedded mobile health ordering application.

Thanks, Dan.

At its heart Darko is a technology company.

I think the former Chief Technology Officer, I've observed our software evolved into a highly sophisticated system.

In Q2, we greatly enhanced our dispatching application with the ability to assign mobile health an ambulance resources based upon predictive demand analysis.

This sophisticated model allows for increased utilization doesn't decreasing the idle time of our multi units further enabling our ability to deliver cost effective health care.

Our team also built a highly intelligent machine learning system to help predict reimbursement and help ensure collectability.

At <unk>, we built software that is core to our business model and integrate with systems that support our business in Q2, we completed our integration with one of the nation's largest EHR Athena health. Additionally, Darko was accepted into the Epic's App Orchard as its first and currently only fully embedded mobile health ordering application.

Anthony Capone: Being in the Epic App Orchard grants the thousands of hospitals using Epic the ability to order DocGo services directly from within their native EHR. DocGo believes in virtual and mobile-first medicine. To support this vision, we've improved HealthPoint, our patient EHR system, by embedding telehealth support, which ensures a seamless in-app patient experience. Software and automation is at the heart of our company, and over the coming years, DocGo will continue investing $ tens of millions into our engineering team. Stan, I'll hand it back to you.

And the Epic's App Orchard grants.

Persons of hospitals, using epic the ability to order Darko services directly from within their need of EHR.

Darko believes in virtual and mobile first medicine to support this vision, we've improved health point, our patient EHR system by embedding telehealth support which ensures a seamless in app patient experience.

Software and automation is at the heart of our company and over the coming years Darko will continue investing tens of millions of dollars into our engineering team Stan I'll hand, it back to you.

Stan Vashovsky: Thanks, Anthony. In sum, after an excellent quarter, we continue to see tremendous growth potential coming from a variety of different avenues in the years ahead. At this point, I will hand it over to Andre Oberholzer to address the financial details.

Thanks, Anthony and some after an excellent quarter, we continue to see tremendous growth potential coming from a variety of different avenues in the years ahead.

At this point I will hand, it over to Andre Oberholtzer to address the financial details.

Andre Oberholzer: Thank you, Stan, and good morning. Total revenue for Q2 2022 amounted to $109.5 million, representing growth of 36% as compared to the $62.2 million recorded for Q2 2021. The year-over-year revenue growth was driven mainly by the contribution of revenue from continued expansion of major corporate accounts, new and expanded municipal mobile health contracts, and the expansion of key customer relationships on the medical transportation side, such as Northwell. Mobile health revenue for Q2 2022 amounted to $87.3 million as compared to $33.2 million in Q2 2021, up approximately 163%.

Thank you Stan and good morning.

Total revenue for the second quarter of 2020 amounted $209 5 million representing growth of 6%.

As compared to the $62 2 million reported for the second quarter of 'twenty one.

Revenue growth was.

Driven mainly by the contribution of revenue from continued expansion of major corporate accounts, new and expanded municipal global health contracts and the expansion of key customer relationships.

Medical transportation side, that's a small cell.

Mobile health revenue for the second quarter of 2022.

They wanted to $87 3 million, let's complete the Sydney $3 2 million in Q2 of 'twenty one.

Approximately 163%.

Andre Oberholzer: Excluding mass COVID testing revenues from both quarters, mobile health revenue amounted to $59.3 million, up from $23.2 million last year, an increase of 156%. Total medical transportation revenue amounted to $22.2 million, compared to $28.9 million in Q2 2021. Recurring transportation revenue increased to $20.2 million as compared to $18.7 million in the prior year quarter, an increase of 8%. It is important to note that last year's second quarter included approximately $10.2 million in project-based standby transportation revenue, comprising emergency deployments on behalf of different municipal agencies to provide standby services at testing and vaccination sites. These emergency deployments were gradually wound down by the end of the second quarter of 2021. During Q2 2022, project-based emergency deployment revenues amounted to approximately $2 million.

Excluding Mexico with testing revenues from both quarters mobile health revenues amounted to $59 3 million up from $23 2 million last year, an increase of 156%.

Total medical transportation revenue amounted to $22 2 million compared with $28 9 million in Q2 'twenty one.

Recurring transportation revenue increased $22 million.

Compared to $18 7 billion in the prior year quarter.

Increased 8%.

I think it's important to note.

Last year's second quarter, and can get approximately $10 2 million.

Please stand by transportation revenue comprising emergency deployment on behalf.

Municipal agencies.

To provide standby services at testing and vaccination site.

These emergency deployment gradually well and bill by the end of the second quarter of 'twenty one.

During Q2, 'twenty two project based emergency deployment savings amounted to approximately $2 million.

Andre Oberholzer: Mobile health revenue amounted to 80% of total revenue during Q2 this year. This is 53% in the prior year, with transportation as the remainder. Revenue generated by the UK market grew by 45% to $3.2 million during Q2 of this year, representing approximately 3% of total revenue. Net income amounted to $11.8 million in Q2 of 2022, which represents a substantial improvement over net income of $100,000 recorded in Q2 of the prior year. Please note that net income includes the gain of approximately $3 million from the remeasurement of warrant liabilities and $1.4 million in a gain from remeasurement of finance leases. Even after removing these items, net income amounted to more than $7 million for Q2.

Mobile health and a new amounted to 80% of total revenue during Q2 this year.

Sustaining in the prior year with transportation that remainder.

Revenue generated by the U K market seems like 45% to $3 2 million during Q2 of this year.

<unk> approximately 3% of total revenue.

Net income.

$11 8 million in the second quarter of 2022 weeks.

This represents a substantial improvement over net income of <unk> wallets recorded in the second quarter, probably a year.

Please note that net income includes a gain of approximately $3 million from the replacement of volumes liabilities.

And welcome 2 million gain from Remeasurement of financing leases.

Even after removing these items.

And the other two more than $7 million for Q2.

Andre Oberholzer: The net income improvement resulted from a strong increase in revenues during the quarter, coupled with improved total gross margin, while certain overhead costs related to infrastructure provided leverage as it did not increase in the same proportion as the revenue growth. Adjusted EBITDA grew to $12.3 million during Q2 2022, up from $3.4 million in the prior year period, even with additional investments made in regional expansion, product offerings, and infrastructure. As a reminder, adjusted EBITDA is a non-GAAP measure representing earnings before interest, tax, depreciation, amortization, stock-based compensation, warrant and finance lease liability revaluation, and other non-recurring expenses. Please refer to our earnings release for a reconciliation of adjusted EBITDA to net income. Total gross margin percentage during Q2 2022 amounted to 35.9% as compared to 34% in the same period of 2021.

Net income improvement resulted from a strong increase in revenues during the quarter, coupled with improved total gross margin, while certain overhead costs related to infrastructure.

Added language as it does not repeat in the same proportion as the revenue growth.

Adjusted EBITDA grew to $12 3 million during the second quarter of 'twenty two.

From $3 4 million in the prior year period.

Even with additional basins, we flagged in regional expansion product offering that infrastructure.

As a reminder, adjusted EBITDA at the non-GAAP major that.

If there is any earnings before interest taxes depreciation amortization.

Stock based compensation Waddington finance lease liability revaluation.

<unk> expenses.

Please refer to our earnings release for a reconciliation of adjusted EBITDA net income.

Total gross margin percentage.

Q2 'twenty two.

35, 9% as.

Compared with 34% in the same period of 'twenty one.

Andre Oberholzer: It is important to note that on a consolidated basis, DocGo was able to drive year-over-year gross margin improvements despite the negative impacts of inflation on the cost of labor and other cost of sales items. The 1.9% increase in the total gross margin percentage was driven by the mobile health segment, where gross margins increased from 28% during Q2 last year to 39.9% during our second quarter this year. This mobile health gross margin improvement was driven by a combination of factors, including lower lab fees and a continued shift away from higher price subcontractor labor, which represented a much lower percentage of mobile health revenues this quarter versus last year's second quarter. Positive improvements were reduced somewhat by higher costs of certain medical supplies.

It is important to note that on a consolidated basis <unk> was able to drive year over year gross margin improvement.

Like the negative effects of inflation on the cost of labor and other cost of sales items.

One 9% increase in the total gross margin percentage was.

Driven by the mobile health segment gross margins increased from 2008. The same during Q2 last year to 39, 9% during our second quarter. This year.

This mobile health gross margin improvement.

It's driven by a combination of factors, including lower lab piece and a continued shift away from higher price.

Like the labor.

Presented as a much lower percentage.

Global Health savings this quarter versus last year's second quarter.

Or do you think for instance would it be somewhat by higher cost in certain medical supplies.

Andre Oberholzer: Margins from the transportation segment were 20% during Q2 this year compared to 22.7% during Q1. Our transportation gross margin this year continues to be suppressed by the impact of higher hourly wages over time and a significantly increased cost of fuel. Transportation gross margins last year benefited from the inclusion of over $10 million in high-margin emergency deployment standby revenues. As of 30 June 2022, our total cash and cash equivalents totaled $208 million, as compared to $199 million and $179 million as of the end of Q1 this year and the end of fiscal 2021, respectively. During H1 2022, +$30 million net cash provided by operating activities, versus $1.1 million cash used in operations during the prior year period.

Margins from the transportation segment with 20% during Q2 this year compared to 22, 7% in Q1.

Our transportation gross margin this year continues to be suppressed.

The impact of higher hourly wages overtime and it significantly increased the appeal.

Okay expectation gross margins last year.

From the inclusion of over $10 million in.

Margin emergency deployment standby revenues.

As of June 32002, our total cash and cash equivalents.

$208 million.

$299 million.

Seven 9 million as of the end of Q1, this year and the Haynesville.

Fiscal 'twenty, one to stick with you.

During the first half of 'twenty two.

Positive net cash provided by operation activities down at this $30 million versus $1 1 million cash used in operations during the prior year period.

Andre Oberholzer: Excluding vehicle leases, outstanding debt amounted to $2.6 million at the end of Q2 versus $1.9 million at the end of last year. In May of this year, DocGo announced a share repurchase program of up to $40 million of common stock. Under this program, we repurchased 70,000 shares at an average cost of $7.10 during the quarter. In terms of the impact of inflation, as previously discussed, we have two major expense categories where inflation may significantly impact our results. Our 2022 guidance provided at the beginning of this year assumed that the average cost per hour of labor would increase by approximately 7% versus the already inflated '21 labor rates, and that the average cost of gas would be $4.03 per gallon.

Excluding vehicle leases.

Ending debt amounted to $2 6 million at the end of Q2 versus $1 9 million at the end of last year.

In may of this year.

Share repurchase program of up to $40 million of common stock.

This program will be.

Just give me 1000 shares at an average.

Statements contained during the quarter.

The impact of inflation.

He discussed.

Two major expense categories, where inflation may significantly impact our results.

Our 2022 guidance provided at the beginning of this year assume that the average cost.

Our flavor with E&P supply approximately 7%.

You already inflated 21 labor rate.

The average customer guest.

$4 30 per gallon.

Andre Oberholzer: During Q2 2022, the actual increase in the average hourly labor rate was higher than last year's actual rate, but lower than our assumptions, while the average fuel cost per gallon was significantly higher versus both the prior year and our forecasted rates. During Q2 of this year, the negative impact of the increased gas costs was approximately 73 basis points on gross margin compared to Q2 2021, with a negative impact of 35 basis points against our assumption for 2022. As for the cost of labor, the year-over-year increase in the average hourly rate was a negative impact of 129 basis points on margins during Q2 of this year. However, the actual average hourly rate was lower versus our 2022 assumption, which resulted in a positive impact against forecasted gross margins of approximately 94 basis points.

We must take a quarter or two to the actual increase average salary.

Labour rate was higher than last year's actual rate lowered enel assumptions, while the average fuel cost per gallon.

Significantly higher versus both prior year and our forecast great.

During Q2 of this year.

The negative impact of increased gas cost.

With the 73 basis points on gross margin compared to the second quarter of 'twenty, one with a negative impact of 55 basis points.

Our assumption for 'twenty two.

As for the cost of labor year over year increase in the average hourly rate what they make.

That's an impact of 129 basis points on margins to keep two of this year.

Either the actual average hourly rate was slow with this out 2022 assumptions.

It resulted in a positive impact against forecasted gross margin of approximately 94 basis points.

Andre Oberholzer: COVID-related testing and revenue declined to $28 million during Q2 2022, as compared to $38 million in Q1. Excluding COVID testing revenue from both Q1 and Q2 of this year, mobile health revenue increased by 13% to $59.3 million in Q2 2022, up from approximately $52 million in Q1. As we have indicated before, going forward, we will no longer break out COVID-related testing revenue from total revenue. Adjusted EBITDA amounted to $12.3 million in Q2 2022, approximately 11.2% of revenue, basically in line with Q1's EBITDA margin of 11.5% and above the annual guidance of 9.3% given at the beginning of the year.

Yes.

Illustrated 16 revenue declined $28 million during the second quarter of 'twenty two.

Compared to the $38 million in the first quarter.

Excluding COVID-19 testing revenue from both Q1 and Q2 of this year.

Well health revenue increased by 13% to $59 3 million in the second quarter of 22 up from approximately $52 million in the first quarter.

SP as indicated before.

Going forward, we will no longer breakout Cove estimated testing revenue from total available.

Adjusted EBITDA amounted to $12 3 million in the second quarter of 2022.

11, 2% of revenue.

Basically in line with the first quarter EBITDA margin of 11, 5%.

And above the annual guidance of nine 3%.

Beginning of the year.

Andre Oberholzer: For H1 2022, total revenue amounted to $227 million, representing growth of 104% over total revenue of $112 million last year. Adjusted EBITDA for H1 2022 amounted to $25.9 million, representing a substantial improvement versus the adjusted EBITDA of $3.8 million last year. Now turning to our 2022 outlook. We anticipate strong demand from our customers for both mobile health and transportation services. Given our strong year-to-date performance, as Stan mentioned earlier, we are increasing our revenue guidance to $425 to $435 million, up from our prior guidance of $400 to $420. We are increasing our adjusted EBITDA guidance to $40 to $45 million, up from $35 to $41 million.

For the six months ended June 30, 22 total revenue.

$227 million.

<unk> growth.

12% over total revenue.

But yes last year.

Adjusted EBITDA for six months ended June 2022, and none at the $25 9 million, representing a substantial improvement business to adjusted EBITDA of $3 8 million last year.

Now turning to our 'twenty two outlook, we anticipate strong demand from our customers or both mobile health and transportation services.

Given our strong year to date performance as Dan mentioned earlier.

We are increasing our revenue guidance to $425 million to $435 million up from our prior guidance of 420.

Increasing our adjusted EBIT Guide.

Guidance to $45 million to $40 to $45 million.

From $35 million to $41 million.

Andre Oberholzer: This represents revenue growth of 33% to 36% year over year, while adjusted EBITDA would show improvement as a percentage of revenue to approximately 10% this year versus 7.9% during fiscal 2021. In terms of segment revenues, we expect that the Mobile Health segment will continue to contribute approximately 74% to 76% of revenues, with Medical Transportation as the remainder. That concludes our prepared remarks. At this time, we will ask the operator to open the call to questions. Thank you.

This represents revenue growth of 33% to 36% year over year, while adjusted EBITDA, which showed improvement as a percentage of revenue to approximately.

The same this year.

Kevin lines of same during fiscal 'twenty one.

In terms of statements revenues, we expect that the mobile health segments will continue to contribute approximately 74% to 76% of revenues.

Medical transportation is the remainder.

That concludes our prepared remarks at this time, we will ask the operator to open the call for questions. Thank.

Thank you.

Yeah.

Yes.

Operator 1: Our first question is from Richard Close of Canaccord Genuity. Please go ahead.

Thank you at this time, we will be conducting a question and answer session.

To ask a question. Please press star and then one on your telephone keypad.

Confirmation tone will indicate your line is in the question queue.

You May press Star and then two if you would like to remove your question from the queue.

So participants using speaker equipment it might be.

Seems to pick up your sensitive focus on the star Keys, one moment please poll for questions.

Operator: Our first question is from Richard Close of Canaccord Genuity. Please go ahead.

Our first question is from Richard close of Canaccord Genuity. Please go ahead.

Richard Close: Yes. Thanks for the question. Congratulations on the continued success. Andre, I was wondering maybe just some housekeeping. Is there any way you could provide us the transport volumes, and pricing, for the quarter? As we think about the growth rate, in transportation on the recurring revenue side, I'm just curious, your thoughts on the 8% growth. Should we be looking for something greater than that going forward? How should we think about growth on recurring revenue in transportation?

Yeah.

Yes, thanks for the questions congratulations on the continued success.

Andre I was wondering maybe just some housekeeping is there any way you could provide us the transport volumes.

Pricing.

For the quarter and then as we think about the growth rate.

In transportation.

Recurring revenue side, just curious your thoughts on the 8% growth should we be looking for something.

Greater than that going forward or how should we think about growth on recurring revenue in transportation.

Andre Oberholzer: Hi, Richard. In terms of the actual volume, and the price per trip, at this time we have not disclosed that. That will be in MD&A tonight when we file with the SEC. When you see the results, you will see both an increase in the trip volume as well as the increase in price per call, which drove the 8% increase year over year. That excludes the, you know, project-based revenue, so just recurring. We still feel as in the past that transportation year over year will grow around 30%. We do not see that trend changing at this point in time.

Hi, Richard.

In terms of the actual volume.

The price per trip.

At this time, we have not disclosed that companion MD&A Tonight, maybe fall with the agency.

When you see the results you will see both an increase in electric volume as well as the increase in price per coal, which drove an 8% increase year over year that excludes the.

Project K savings.

But just to be occurring.

We still feel as in the past, but transportation year over year and will grow at 30%.

We do not see that trend changing at this point in time.

Richard Close: Okay.

Stan Vashovsky: Let me add to that, Richard.

Okay, Let me ask.

Richard Close: Okay.

Stan Vashovsky: Richard, it's Stan. Good to hear from you again. Also, you know, as we've discussed earlier, our business model has evolved over the last several years, where the metric of quantity of trips per day is really no longer relevant because of the way we charge our customers, what we refer to as our Lease Out program. We get paid the exact same dollar amount by the customer. They're paying us at a, you know, call it a minimum rate per day, which includes vehicle, crew, supplies, everything. If we do one transport or if we do seven transports with that single vehicle for that one customer, our compensation for that day is the same.

Richard.

Richard It stands Matt good to hear from you again.

Also as we've discussed earlier, our business model has evolved over the last several years, where the metric of quantity of trips per day is really no longer relevant because of the way we charge our customers.

When we refer to as our leased our program. So we get paid the exact same dollar amount by the customers. They are paying us at a call. It a minimum rate per day, which includes vehicle crew supplies everything.

If we do want transport or if we do seven transports with that single vehicle for that one customer our compensation for that day is the same.

Stan Vashovsky: This helps mitigate, you know, you know, days that are quieter versus days that are busier, brings some consistency and allows us to better forecast our business. It also allows the customer to be assured that they have dedicated resources versus on-demand resources that in the past have proven to be somewhat unreliable.

This helps mitigate.

We have days that are quieter versus days at a busier being some consistency and allows us to better forecast.

Power of our business. It also allows the customer to be assure that they have dedicated resources versus on demand resources that in the past have proven to be somewhat not reliable.

Richard Close: 30% is a good growth rate in transportation?

Okay.

And then but 30% is a good growth rate in transportation.

Stan Vashovsky: Yeah.

Richard Close: I just wanna clear. Okay.

Stan Vashovsky: Yeah. We

Richard Close: All right.

Stan Vashovsky: We're still gonna stick with 30% growth for the year in that range.

Okay, Yes, we're still going to stick with 30% growth for the year in that range.

Richard Close: Okay. Is there any non-recurring revenue in Q3 of 2021 that we should be aware of?

Okay and is there any.

Nonrecurring.

Revenue in the third quarter of 2021 that we should be aware of.

Stan Vashovsky: Well, Richard, it's kinda hard to project. Right now we're not projecting much, but the reality, you know, is that, you know, there could be a hurricane tomorrow, there could be forest fire in California, where we get notified by FEMA, we get notified by state agencies to come in and assist. Those are project-based, one-time type services. They happen several times throughout the course of the year, but projecting them is quite difficult. But we're, you know, always gonna be super conservative and say that we can accomplish our growth target, with what we can rely on, which is our contracted business. We don't know if Q3 is gonna have that one time, you know, call it project-based, emergency response, that we've had in the past.

Yeah.

Well, Richard it's kind of hard to project right now, where we're not projecting much but the reality is that there could be a hurricane tomorrow that could be a forest fire in California.

Where we get notified by FEMA, we get notified by state agencies to come in and assess those are project based onetime type services. They happened several times throughout the course of the year a project and then it is quite difficult.

But we are we're always going to be Super Conservative and say that we can accomplish our growth targets.

But what we can rely on which is our contracted business.

We don't know Q3 is going to have that one time.

Project based emergency response.

Stan Vashovsky: Odds are we'll probably have a little bit of it there, but no way to gauge on how much of it will be in Q3.

That we've had in the past.

We'll probably have a little bit of it there, but no way to gauge on how much of that will be in Q3.

Richard Close: But-

Andre Oberholzer: Richard, in terms of last year.

But certainly at the beginning of last year in terms of last year Q3.

Richard Close: Yeah.

Andre Oberholzer: Q3 does not have any significant project-based revenue. Most of that work wound down by the end of Q2 last year.

Richard Close: Q3 does not have any significant project-based revenue. Most of that work wound down by the end of Q2 last year.

Don't have any significant project based revenue most of that work wound down by the end of Q2 last year.

Richard Close: Okay. That's very helpful. Thanks, Andre. Stan, on the M&A opportunity, maybe,

Okay. That's very helpful. Thanks, Andrzej and then Stan on the M&A opportunity maybe.

Stan Vashovsky: Mm-hmm.

Richard Close: If you could just dive into that a little bit more. Based on your comments, it somewhat sounded like you guys are seeing opportunities on the mobile health side, maybe with some additional services. Did I hear that correctly or just any thoughts?

If you could just dive into that a little bit more based on your comments.

Somewhat sounded like.

You guys are seeing the opportunities on the mobile health side, maybe with some additional services did I hear that correctly or.

Stan Vashovsky: Yeah.

Richard Close: on M&A?

Just any kind of M&A.

Stan Vashovsky: No, you're absolutely right, Richard. Our focus on M&A is mobile health services. You know, we think there will be opportunities. We're starting to see more and more opportunities, you know, approaching us. We hope to execute in the near future on some of these opportunities. We'll always acquire licenses and small little companies on the transportation side, because that's just the most effective way to get a license to break into a market.

No Youre absolutely right Richard our focus on M&A is mobile health services.

We think there will be opportunities, we're starting to see more and more opportunities.

Hi.

<unk>.

Hope to execute.

Near future on some of these opportunities.

Always acquire licenses and small little companies on the transportation side, because that's just the most effective way to get a license of breaking into a market.

Stan Vashovsky: You can file for one, but you can wait 6, 12, 24 months if you're working through the municipality for a license, or you can spend $ a few hundred thousand and acquire a small company and then just use that license as a starting point. There'll always be some, you know, call it license acquisitions on the transportation side, but we are reserving most of our, call it, capital for a, you know, significant amount of M&A activity in the future around mobile health. That's the space that we're mostly excited. It's a very fast-growing space. We see, you know, endless amounts of possibilities. We see lots of areas that we're very interested in, that we've proven to be very effective in, and that's how we're gonna put our capital to work.

You can file for one that you can wait six months 12 months 24 months, if youre working through the municipality for a lifetime.

<unk> spent a few hundred thousand dollars of acquired a small company and then just use that license.

As a starting point.

They'll always be some call it license acquisitions on the transportation side, but we are reserving most of our call it capital 40.

A significant amount of M&A activity in the future around in Oklahoma. That's the space that we're mostly excited it's a very fast growing space B C.

Endless amount of possibilities, we see lots of areas that we're very interested in that we've proven to be very effective in.

And that's how we're going to put our capital to work.

Operator 1: The next question is from Mike Latimore of Northland Securities. Please go ahead.

Operator: The next question is from Mike Latimore of Northland Securities. Please go ahead.

The next question is from Mike Latimore of Northland Securities. Please go ahead.

Mike Latimore: Great. Thanks, Stan Vashovsky. Congratulations. Excellent execution again. So I guess just on the guidance, in the press release, it says guidance increases based on organic growth and M&A activities which occurred subsequent to the quarter. It kind of sounds like you've already made an acquisition, or am I interpreting that incorrectly?

Great. Thanks, Yeah congratulations.

Excellent execution again.

So I guess just on the guidance.

In the press release the press release. It says the guidance increase is based on organic growth and M&A activities, which occurred subsequent to the quarter as Ken It sounds like you've already made an acquisition or am I interpreting that correctly.

Stan Vashovsky: No, your assumption is correct. We've made what we call, you know, we use a term tuck-in acquisitions, you know, small acquisitions that give us licensing capabilities. We haven't spent any material amount of money. We haven't acquired any material amounts of revenue. But we're always-

Okay.

No. Your assumption is correct, we've made what we call.

We use the term tuck in acquisitions small acquisitions that give us licensing capabilities. So we haven't spent any material amount of money, we havent acquired any material amount of revenue.

Mike Latimore: Got it.

Stan Vashovsky: I mean, historically, buy five, six, seven little companies. We use their licenses as launching points. You know, we haven't done anything, call it, material, Richard, I mean Mike.

We're always I mean, historically by 567 little companies, we use their license with us launching points.

And we haven't done anything call it activity.

Mike Latimore: Oh, got it.

Stan Vashovsky: If historically you look at our pattern, you know, every quarter, we always, you know, buy a small little mom-and-pop out somewhere for their license.

Mike.

Stan Vashovsky: If historically you look at our pattern, you know, every quarter, we always, you know, buy a small little mom-and-pop out somewhere for their license.

Yes.

But historically you look at our pattern every quarter, we always.

They are small little mom and pop out somewhere score for their license.

Mike Latimore: Yeah. Most of the increase relates to organic activities.

Yes, so most of the increase relates to organic activities.

Stan Vashovsky: Virtually all of it. I mean, a very, very small amount of

Virtually all of it.

Mike Latimore: Virtually all of it.

Very very small amount here.

Stan Vashovsky: Yeah. You also have to understand, a lot of times we'll acquire a company that may have a couple, a few million dollars a year in revenue, but it's not the kind of business we want to keep anyway. We'll-

Yes, you also have to understand a lot of times, we will acquire a company that may have a couple of few million dollars a year in revenue per topic kind of business, we want to keep banging away.

Mike Latimore: Okay.

Stan Vashovsky: We'll release that revenue and, you know, focus more on the way we wanna conduct our business.

So we'll get at least that revenue.

Focus more on the way, we want to conduct our business.

Mike Latimore: Okay, great. Obviously, the growth margins are great. Should we view them as, you know, relatively maintainable at these levels? Or are there room for expansion in H2 of the year?

Okay great.

And the obviously the gross margins are great.

Should we view them as.

Relatively maintainable at these levels or is there room for expansion in the second half of the year.

Stan Vashovsky: Well, you know, the reality is, Mike, we're always gonna try to make them better. You know, we still pay premium for staffing. You know, as the market is talking about contracting on staffing, we're doing the opposite. We're hiring full speed ahead. You know, we're paying recruiter fees. We're paying staffing agencies. You know, we're still giving up a lot of margin that over time I think will stabilize, and that will help drive continued improvement of our growth margin. We've always said mobile health ideally should be somewhere about 42%, 43% gross margin and transportation, you know, slightly below that. There's, you know, still room for growth and improvement.

Well.

The reality is Mike, we're always going to try to make them better.

We still pay a premium for staffing.

Where as the market is talking about contracting on staffing by doing the opposite we're hiring full speed ahead, we're paying recruiter fees for paying staffing agencies.

We're still giving giving up a lot of margin over time, I think will stabilize and that will help drive <unk>.

Can you improve our gross margin.

We've always said mobile health ideally should be somewhere about 40% to 43% gross margin and transportation slightly below that so there is.

We'll go for growth and improvement.

Mike Latimore: Okay. Just last on the I think you said you're hiring, or you wanna hire 600 people by year-end. How many of those are, you know, sort of net new versus replacing a staffing agency person?

Okay.

And then just last on the I think you said, you're hiring or do you want to hire 600 people by year end.

How many of those are.

Net new versus replacing a staffing agency person.

Stan Vashovsky: All 100% are incremental to our current headcount. Whatever we have right now, that's the kind that does not include, you know, replacements from attrition. You know, just based on current workload contracts that we've executed with start dates we've already agreed to, work that we're anticipating in Q2, our need for clinicians and operational staff is quite strong. We have a recruiting group of over 20 people. We have a whole bunch of agencies that help us bring candidates. We're continuing to hire as aggressively as, you know, almost as aggressive as last year.

All 100%.

Incremental to our current head count.

So whatever we have right now we're not that's the country does not include replacement from attrition.

Just based on permit workload contracts that we've executed will start phase two.

The work that we're anticipating in the second quarter of the year.

Our need for clinicians and operational staff is quite strong.

We have a recruiting group over 20 people, we have a whole bunch of agencies that help us and candidates.

So we're continuing to hire as aggressively as almost as aggressive as last year.

Andre Oberholzer: This is Andre. I just wanna clarify something Stan said. For mobile health, we still price contracts with a desired margin around 50% to 53%. Based on the improvement you saw in Q2, you know, two-

Okay.

This is andre.

All right.

Clarify something for mobile health.

Milk price contracts with a desired margin around 50% to 53%.

And based on the improvement you saw in Q.

Stan Vashovsky: That's correct.

Andre Oberholzer: Using less subcontract and labor, we are, you know, on that path towards those desired margins.

To use contract labor.

On that path towards those compliance modules.

Stan Vashovsky: Correct. Thanks for that, Andre.

Mike Latimore: Correct. Thanks for that, Andre.

Correct, Thanks for that.

Operator 1: Our next question is from Sarah James of Barclays. Please go ahead.

Operator: Our next question is from Sarah James of Barclays. Please go ahead.

Our next question is from Sarah James of Barclays. Please go ahead.

Sarah James: Thank you. You guys had a really strong quarter as far as contract signing goes. I think you flagged Carnival, L.A. Care, and Empire BlueCross in the release. Can you give us any idea on size of those or how we should think about modeling new contract adds as far as transportation revenue growth goes?

Thank you.

So you guys had a really strong quarter as follows.

Contract signing with I think if I kind of like here the Empire Blue Cross.

Lee.

Can you give us any idea on size.

As of those or how we should think about modeling new contract adds as far as transportation revenue okay.

Stan Vashovsky: You know, that's a great question, Sarah. We don't really provide details down to the customer level. You know, our agreements with our customers prohibit us from sharing that kind of information. In terms of modeling, you know, all I can say is we have a very good, strong track record of meeting and beating our guidance. You know, we feel very comfortable with the municipal contracts, the hospital contracts that we've signed. You know, the percentage of customers that are migrating from COVID-related work to non-COVID-related work is extremely high, well over 80%. You know, I would just say that municipal work will continue to be our biggest contributor throughout the country.

Okay.

So that's.

Great question Sara.

We don't really provide detail down to the customer level.

Sure.

Our agreements with our with our customers prohibit us from sharing that kind of information.

In terms of modeling.

All I can say is we have a very good strong track record of meeting and beating our guidance.

We feel very comfortable with the municipal contracts hospital contracts that we've signed.

The percentage of customers that are migrating from COVID-19 related work to non COVID-19 related work is extremely high well over 80%.

And.

I would I would just say that municipal work will continue to be our biggest contributor throughout the country.

Stan Vashovsky: We have some very unique programs, you know, that I think differentiate DocGo from other medical providers, and then followed by hospitals and insurance companies from there. Andre, anything else you wanna add to that, or what do you think, Andre?

We have some very unique programs.

Hi.

I think the franchise Darko from other medical providers.

And then followed by hospitals and insurance companies from there.

Andre anything else you want to add to that or what do you think contract.

Andre Oberholzer: No, that sounds good. I mean, year-over-year, you know, we see this year about 30 to 36% growth and, you know, that's kind of the, those kind of contracts and systems that have the growth.

So that sounds good I mean year over year.

Yes.

This year about 30 36 screen growth.

Yes.

So it's going to contract with Cisco.

Stan Vashovsky: You know, let me just add one more thing. We talk about 36% growth, but that's if you take, you know, the number of $319 million from last year compared to the guidance that we provided this year. The realities are that $319 million number from last year has about $40 to 60 million of COVID testing that's not gonna replicate this year. So if you take that $319 million number down to, let's say, $250 million, you know, that's the real incremental business that we're out there securing. So it's been a wonderful year. We're very excited about the year. The demand for our services continue to be very strong. We provide clinical services in a way that our competition does not. Extremely innovative and very tech-enabled. So it's 30 to 35% if you look at it from end of last year.

The growth.

Let me just add one more thing we talk about 30% 36% growth.

You can take.

The number of 319 from last year compared to the guidance that we provided.

This year the realities are.

Thats $3 19 number from last year has about $40 million to $60 million of Covid testing, that's not going to replicate in this year.

So if you take that $3 19 number down to let's say $2 50.

That's the real incremental business that were outpaced secure right.

So it's been a wonderful year, we're very excited about the year the demand for our services continues to be very strong we provide clinical services in a way that our competition does not extremely innovative and very tech enable.

So it's 30%, 35% if you look at it from end of last year, but in reality that number is closer to 50%, 60%. If you remove last years.

Stan Vashovsky: In reality, that number is closer to 50, 60% if you remove last year's, you know, H2 portion of the COVID testing, which we did not see as a major contributor this year.

Stan Vashovsky: In relity, that number is closer to 50, 60% if you remove last year's, you know, H2 portion of the COVID testing, which we did not see as a major contributor this year.

Second half portion of the Covid testing, which we do not see as a major contributor this year.

Sarah James: Got it. That's very helpful. Could you give us a little color on your pipeline for new clients, either municipal RFP pipeline or, conversations with-

Okay, that's very helpful.

Could you give us a little color on your pipeline for new clients.

RFP.

Pipeline or.

Stan Vashovsky: Yeah.

Sarah James: Providers? How does that compare to last year?

Conversations with.

How does that compare to last year.

Stan Vashovsky: Strong. Extremely strong. You know, one thing that we've said before, you know, something that we're very happy about is the remainder of the COVID business. There's really only two major customers left that we do mass COVID testing for. One of those agreements expire early September. The other one, the second one, is extremely small. Something that we're just super proud of, and I think, you know, speaks a lot to our company's efforts, is that same exact customer is migrating from a COVID program to a pure mobile health traditional type program. The same personnel and the revenue that they contributed will remain working. There will be no layoffs.

Yeah.

Strong extremely strong.

One thing that we as we've said before something that we're very happy about is the.

The remaining of the cobot business, there's really only two call it customers.

Two major customers left that we do.

Covid testing for.

And one of those agreements expire early September and the other one the second one is extremely small.

Something that we're just super proud of and I think it speaks a lot to our company's efforts.

Is that same exact customer.

Is migrating from a corporate program to a pure mobile health traditional type program.

And the same and personnel and the revenue that they contributed will be main workings there'll be no layoffs of just simply come in and get some additional training in house and then be redeployed a lot of time working for that exact same customer.

Stan Vashovsky: They'll just simply come in, get some additional training in-house, and then be redeployed, a lot of times working for that exact same customer. We've accounted for all of the revenue that we expect to lose from the mass COVID testing sites for H2. All of that revenue is gonna be traditional mobile health, nothing to do with COVID testing, COVID vaccinations, or anything related to COVID.

We've accounted for all of the revenue that we expect to lose some domestic COVID-19 testing sites for the second half of the year.

And all of that revenue is going to be traditional mobile has nothing to do with COVID-19 testing covered vaccinations or anything related to COVID-19.

Operator 1: Our next question is from Pito Chickering of Deutsche Bank. Please go ahead.

Operator: Our next question is from Pito Chickering of Deutsche Bank. Please go ahead.

Our next question is from Peter Chickering with Deutsche Bank. Please go ahead.

Kieran Ryan: Hi there. This is Kieran Ryan on for Pito Chickering. Thanks for taking the question. Just wanted to ask on margins again. I heard your comments on, you know, the strong Q2 gross margin and, you know, you think that can be maintainable going from here, but it looks like the guidance, you know, suggest at least some step down in H2. Just wanted to get a feel for is that just kind of the roll-off of the COVID testing revenue or, you know, some conservatism around the labor and fuel costs? Or can you just talk a little bit more about kind of that move in margins going into H2?

Okay.

Hi, there this is Kieran Ryan on for Pete Thanks for taking the question.

Just wanted to ask on margins again I heard your comments on the strong <unk> gross margin and you think that can be maintainable going from here, but it looks like the guidance suggests at least some step down in <unk>. So just wanted to get a feel for is that just kind of roll off.

The COVID-19 testing revenue or some.

Some conservatism.

Services around the labor and fuel costs, Eric can you just talk a little bit more about kind of that move in margins in the two H.

Stan Vashovsky: Andre, you wanna take that, and then I'll add to it?

Joe you want to take.

That and then I'll ask.

Andre Oberholzer: Sure. I'll give it a go. In terms of the COVID testing reduction, there's no real impact on gross margin because everything we price on mobile health, that includes COVID testing, and it is mass testing, not consumer. We price it about the same margin between 50 and 52, 53%. As we roll off a COVID program and roll into a mobile health replacement program, there's no real change in the margin shift. For H2, you know, we continue to look at inflation. Gas prices, you know, did surprise us more than we planned on during Q2, so that cost us a couple of basis points. Labor is still holding, but you know, we always wanna give guidance that includes you know, some conservatism.

Sure.

No.

So the Covid testing.

And there is no real impact on gross margin because it would seem with price on mobile health.

15.

Mass based in a consumer need.

Priced at about the same margin.

<unk>.

Dave.

So as you roll off equivalent program.

And to your mobile health replacement program.

No real change in the margin shift.

For the second half we continue to look at the inflation.

Gas prices.

Probably that's more than we planned on during Q2, so that's caused us across the basis points.

Labor is still holding.

We always wanted to keep guidance include.

Some of the cyclical.

Andre Oberholzer: There's no real margin decline that we plan on other than, you know, looking at inflation and thinking about the impact of inflation in H2.

There's no real <unk>.

Margin decline that we plan on other than looking at inflation.

About the impact of inflation in the thick of patents.

Kieran Ryan: Got it. Okay.

Stan Vashovsky: Yeah. I would just add that, you know, traditionally, we've been always very conservative when it comes to revenue and EBITDA guidance. Internally, we always plan for the worst, and those are the numbers that you're seeing. Ideally, we hope for the best. If we see an improvement, we'll go ahead and then raise guidance one more time if that opportunity arises at the end of the next quarter. But in general, you know, our company cultures try to be conservative, you know, expect the worst and hope for the best.

Got it okay.

I would just add that.

Traditionally we've been always very conservative.

When it comes to revenue and EBITDA guidance.

Let's turn Italy, we always plan for the worst and those are the numbers that you're seeing.

Ideally we hope for the best if we see an improvement.

We'll go ahead and everybody's guidance, one more time, if that opportunity arises at the end of the next quarter.

But in general our company cloud sculptures tried to be conservative.

Expect the worst and hope for the best.

Kieran Ryan: Got it. Thank you. Then if you could just give us any quick update on, is there any seasonality to watch for on the transportation side, in Q3 into Q4? Just kinda how did that business track versus

Got it. Thank you and then if you could just give us any quick update on is there any seasonality to watch pouring on the transportation side.

<unk> and the <unk> and just kind of how how did that business track versus your internal expectations. This quarter I think you took down.

Anthony Capone: Your internal expectations this quarter, I think you took down, you know, that transport mix as a percentage of total by one percentage point. I'm guessing that's just kind of some outperformance on the COVID revenues within mobile health. Did that kinda live up to what you guys wanted to see there in Q2? Thanks a lot.

Kieran Ryan: Your internal expectations this quarter, I think you took down, you know, that transport mix as a percentage of total by one percentage point. I'm guessing that's just kind of some outperformance on the COVID revenues within mobile health. Did that kinda live up to what you guys wanted to see there in Q2? Thanks a lot.

That transport mix as a percentage of total by one percentage point I'm guessing that's just kind of some outperformance on the COVID-19 revenues within mobile health, but did that kind of live up to what you guys wanted to see there in <unk>. Thanks a lot.

Stan Vashovsky: Yeah. Look, we see a lot of value in our transportation business. That part of our business is getting smaller a little bit. You know, it may continue, you know, over time, we'll see. We like that business because it's recurring, it's steady, it's almost annuity-like. It also gives us access to a lot of patients that may, down the line, require our mobile health services. You know, naturally, we focus our energy, we focus our strength in our higher revenue, higher gross margin, more profitable business, which is mobile health. We are still strategically committed to our transportation business. We still see good, steady growth in that business. What we're very busy with doing is, you know, we transport tremendous amounts of thousands of people every single day.

Yeah.

But we.

We see a lot of value in our transportation business.

That part of our business is getting smaller a little bit.

It may continue over time, we'll see.

Like that business because it's recurring it's steady it's almost annuity like it also gives us access to a lot of patients that made down the line would require our mobile health services.

So.

Naturally we focus our energy we focus our strength in our higher revenue higher gross margin more profitable business, which is mobile health.

But we are still strategically committed to our transportation business.

We still see good steady growth in that business.

And what we're very busy with doing is with transport.

Tremendous amounts of thousands of people every single day.

Stan Vashovsky: What we're very busy in doing is saying, "Hey, you know, we've got a person in our vehicle, we're taking them home. We know why they're being released. Well, what other services can we now offer to that patient?" Ultimately take a patient that was purely transport revenue and have that patient contribute in the future to our mobile health revenue. That's the kind of stuff that we're always thinking about and innovating.

So we're very busy in doing is saying hey.

<unk> got a person in our vehicle with taking them, how we know why they're being released or what other services can we now offered to that patient and ultimately take a patient that was purely transport revenue and have that patient contribute in the future to our mobile health nothing.

And thats, the kind of stuff that we're always thinking about innovating.

Operator 1: Our next question is from Ryan MacDonald of Needham. Please go ahead.

Operator: Our next question is from Ryan MacDonald of Needham. Please go ahead.

Our next question is from the line Mcdonald of Needham. Please go ahead.

Ryan MacDonald: Thanks for taking my question, and congrats on a great quarter. Stan, first one for you. It's great to see all the success you're starting to have in the payer end market. You know, now accessing member populations really starts to flex a new muscle for DocGo in terms of needing to market to members within that population. Would just be curious, you know, how that's going thus far in the beta test and, you know, maybe what your expectations are as this grows, of what sort of penetration you think you can get within those member populations. Then lastly, are you assuming any revenue or much revenue contribution from these contracts in the H2 of this year? Thanks.

Thanks for taking my questions and congrats on a great quarter, Stan first one for you.

It's great to see the success Youre starting to have in the payer end market, but now accessing member populations really starts to flex a new muscle for dotcom in terms of meaning to market. Two members within that population will just be curious how thats going thus far in the beta test and.

Maybe what your expectations are as this grows what sort of penetration you think you can get within those member populations and then lastly are you assuming any any revenue or much revenue contribution from these contracts in the back half of this year. Thanks.

Stan Vashovsky: Hey, Ryan, good to hear from you again. The reality is we do not assume any revenue or any significant revenue from those payers for all the rest of 2022. We see a little bit of contribution in 2023. We see a lot of potential in that space in our direct to consumer future offering. The results are coming in very strong. Ryan, as you can imagine, we don't do anything traditional. That, you know, we realize that in a traditional direct to consumer offering, the customer acquisition costs can get very high. We know that.

Hey, Ryan.

From you again.

But the reality is we do not assume any revenue or any significant revenue from.

From those payers for all the rest of 2022.

We see a little bit of contribution in 'twenty three.

We see a lot of potential.

In that space in our direct to consumer future offering.

Results are coming in very strong, but Ryan as you can imagine we don't do anything traditional and that we realize that in a traditional direct to consumer offering the customer acquisition cost can get very high we know that so we are.

Stan Vashovsky: We are working and thinking very creatively how do we reach out to millions of patients that can benefit from our service, but doing it in a non-traditional way that allows us to have access to high amounts of people at a very low cost. Until we figure that out, you know, we're gonna keep on trying various different things. Right now, the pilots are going very well in New York and New Jersey. I would say tracking a little bit ahead of plan where we had expected, but we still have a long way to go to really come up with a direct to consumer plan that we feel super confident about.

Working and thinking very creatively, how do we reach out to millions of patients that can benefit from our service, but doing it in a non traditional way that allows us to have access to high amounts of people at a very low cost.

And until we figure that out.

We're going to keep on trying various different thing.

Right now the pilots are going very well in New York, and New Jersey, I would say tracking a little bit ahead of plan, where we had expected.

But we still have a long way to go to really come up with a direct to consumer plan that we feel super Super confident about and then once that happens and we hope that will happen sometime in 2023.

Stan Vashovsky: Once that happens, and we hope that will happen sometime in 2023, you know, that will open up a tremendous TAM that we're not even tapping into right now.

Open up a tremendous Tam that we're not even tapping into right.

Ryan MacDonald: Really helpful color, Stan, thanks very much. Then maybe just as a follow-up, you know, I thought it was interesting to hear about the updated technical integrations with athenahealth and then being accepted into the Epic App Orchard. I'd be curious, in your conversations with health systems, how much in the past has this been maybe a gating factor that might have prevented opportunities from materializing? How do you think the impact is to the pipeline, you know, having these natural integrations with two major EHRs now? Thanks.

Really helpful color. Thanks, very much and then maybe just as a follow up I thought it was interesting to hear about the updated technical integrations with Athena health and then being accepted into the epic App Orchard I'd be curious in your conversations with health systems, how much in the past at this point may be a gating factor that might.

Have prevented opportunities from materializing and how do you think what do you think the impact is to the pipeline, having even natural integrations with two major EHR is now thanks.

Stan Vashovsky: Ryan, I'm gonna let Anthony Capone, our President, answer that. Go ahead, Anthony.

Brian I'm going to let Anthony Chris Holland, our president after that.

Anthony Capone: Thanks. Yeah. Thanks, Stan. One of the biggest, I would say, issues that many companies run into when they work with health systems is they try to convince the health system to use their software. It's a whole new application, and a hospital system may have thousands, tens of thousands of employees, and they're trying to get those tens of thousands of employees to use their new web portal, their new application. When you embed inside of their EHR and you eliminate all of that, so it's single sign-on, it's a click right from the patient's chart, it's seamless integration of data of all the patient's demographics, payer details, and charting information, H&P, all of that comes straight into your application, the barrier is pretty much nonexistent at that point. That's what the Epic App Orchard allows us to do.

Yes, Thanks, Dan.

So one of the biggest.

I would say.

[noise] issues that many companies run into when they work with helps us as they tried to convince the health system to use their software. So it's a whole new application and hospital system may have thousands tens of thousands of employees and they're trying to get those tens of thousands of employees to use their new web portal their new application.

When you embed inside of their EHR and you eliminate all of that so it's single sign on it's a click right through the patient chart. It seamless integration of data of all of the patients demographics payer details and.

Charting information <unk> all of that comes straight into your application. The barrier is pretty much nonexistent that point, that's what the epic's App Orchard allows us to do now many people go into the Epic's App Orchard, It's really just a link that youre inside of epic and then launches your application that's not the route we took we took the route where the entire.

Anthony Capone: Now, many people go into the Epic App Orchard, it's really just a link that you're inside of Epic, and then it launches your application. That's not the route we took. We took the route where the entire experience, end-to-end, start to finish, is inside of Epic, and then all of the data goes back into Epic so that the health system can do all of their reporting and KPIs and metrics inside of their application, without having to come to us for any of that. So that really you know, eliminates the barrier. As far as the second part of your question about what it opens up to. Well, Epic is you know, the most widely used and the fastest growing EHR in the hospital health system space.

Her experience end to end start to finish.

Is inside of epic and then all of the data goes back into epic So that the health system can do all of their reporting and kpis or metrics.

Metrics inside.

Inside of their application.

Having to come to us for any of that so that really really.

Eliminates the barrier as far as the second part of your question about what it opens up to well epic is.

The most widely used and the fastest growing EHR in the hospital health system space.

Anthony Capone: That is, you know, very encouraging for us because the Epic App Orchard is now available to anyone that's in that space.

And that is in that.

That is very encouraging for us because of the epic App Orchard is now available to anyone that scheme in that space.

Stan Vashovsky: Ryan, let me add to that. You know, coming into a hospital system, a major hospital system, and sharing with them an offering that we would like to do with them and telling them they can further leverage their investment that they've already made in Epic, by utilizing our tech, it just makes the sale so much more attractive than anything else a competitor might be able to offer. In terms of barriers of entry, getting that integration completed took years. It took millions of dollars, and most importantly, it took major hospital systems lobbying on our behalf with Epic to get the support we needed to complete this endeavor. This was, you know, very, very complex, expensive, and time-consuming.

And Ryan, let me add to that coming into a hospital system and a major hospital system.

And sharing with them and offering that we would like to do with them and telling them. They can further leverage their investments that they've already made an ethic.

By utilizing our tech.

It makes the sale so much more attractive than anything else a competitor might be able to offer.

In terms of barriers of entry.

Getting that integration completed took years it took millions of dollars and most importantly, it took major hospital systems logging on our behalf with epic to get the support we need it to complete this endeavor. This was very very complex expensive and.

Stan Vashovsky: The only reason why we were able to achieve it is because large hospital systems that we have working relationships with lobbied on our behalf. Our competitors today don't have that advantage. That's something that we're, you know, very excited about and, you know, something that we think will continue to contribute to our growth in the future, because we're telling hospitals, "Hey, just further leverage what you've already spent $hundreds of millions on by using our services.

And time consuming and the only reason why we were able to achieve it is because large hospital systems that we have working relationships with larger than our behalf our competitors to date don't have that advantage.

And that's something that we're very excited about and.

Something that we think will continue to contribute to our growth in the future because we're telling hospital stay just further leverage what you've already spent hundreds of millions of dollars on by using our services.

Operator 1: Our next question is from Craig Jones of Stifel. Please go ahead.

Operator: Our next question is from Craig Jones of Stifel. Please go ahead.

Our next question is from Craig Jones of Stifel. Please go ahead.

Craig Jones: Hey, thank you. Dan, you mentioned how that your main COVID mass COVID testing partner was rolling into just a mobile health contract. Of that $28 million that you did in Q2 of the mass COVID, how much of that are you modeling in for Q3 and Q4, whether it's mobile or COVID or however you wanna classify it?

Hey, Thank you.

So Dan you mentioned, how that your main Covid Nasco Retesting partners rolling into just a mobile health contracts.

All of that $28 million that you did in <unk> of the mass coded.

Is that are you modeling in for <unk>, whether it's mobile or Covid or however, you want to classify it.

Stan Vashovsky: Very little. We basically just have, you know, through August, a couple of days in September, and then that entire program goes away. You're looking at, you know, we don't give segment reporting out on particular projects. What I would say is, you know, very minimal mass COVID testing revenue going forward. That is the reason why, as Andre mentioned, we don't really plan on reporting it as a separate line item going forward. It's way below the level of materiality, and it's just way too much effort and way too much work to continue doing. You know, something that generates a few million here and there is not worth separating out for us.

Very little.

We basically just have.

Through August .

<unk> based in September and then either type program goes away.

So youre looking at.

We don't give segment reporting out on particular projects.

But what I would say is.

Very minimal.

Maps COVID-19 testing revenue going forward.

And that is the reason why as Andre mentioned, we don't really plan on reporting it as a separate line item going forward, it's way below the level of activity already.

Just to wait too much effort to wait too much work to continue doing.

Something that generates a few million here and there is not what separating out for us.

Craig Jones: Yeah, sorry, maybe I didn't ask that well enough. I meant so your client is transitioning to mobile health. How big of a quarterly revenue contributor will they be from a mobile health perspective?

Yes, sorry, maybe I didn't ask that well enough.

So your client is transitioning to mobile health so.

How big of a quarterly revenue contributor will be from a mobile health perspective.

Stan Vashovsky: From that aspect, I would say, you know, you can basically model out very similar to, you know, if not maybe a little higher, to what they were contributing in terms of revenue while they were doing COVID testing. Okay. The majority of the $28 million should keep going just but as under a different contract under mobile?

So from that aspect.

I'd say.

You can pay sickly model out very similar if.

If not maybe a little higher.

What they were contributing in terms of revenue, while they're doing prototypes.

Craig Jones: Okay.

Stan Vashovsky: We expect.

Craig Jones: The majority of the $28 million should keep going just but as under a different contract under mobile?

Okay. So that I expected that the majority of the $28 million should keep going just but under a different contract on their mobile.

Stan Vashovsky: Under a different contract under traditional mobile health services, correct.

Under different contract on the traditional mobile health services correct, Okay got it.

Craig Jones: Okay. Got it. On the Carnival side, you know, I think the mobile health grew something like 13-14% sequentially, excluding COVID. Was the majority of this Carnival ramping? You think about sort of the ARR, you know, how close are we to getting, you know, I guess where is it right now from either monthly or annual perspective, recurring, and then, you know, how high can it get?

And then on the on the Carnival side.

I think the mobile health grew something like 413, and 14% sequentially. Excluding Covid was the majority of this.

Carnival ramping and then.

If you think about sort of the IRR, how far how closer are we to getting I guess, where is it right now from either monthly or annual perspective.

Recurring and then how high can it get.

Stan Vashovsky: You know, Carnival was definitely a contributor. We have other cruise lines that are contributors. We have other hospitals and municipalities that are contributors. Another way that you may wanna consider looking at it is that all of the COVID, or the very vast majority of the COVID testing revenue is going to become mobile health revenue. Whatever growth you're seeing right now in mobile health, that excludes mass COVID testing. In the future, you know, you can basically model out that revenue will become part of mobile health, and that percentage of mobile health growth will increase nicely going forward in Q3 and Q4.

Carnival was definitely a contributor we have other cruise lines that are contributor we have other hospitals and municipalities are contributors.

But another way that you may want to consider looking at it is that all of the Covid.

It's very vast majority of the Covid testing revenue is going to become mobile health revenue. So whatever growth you are seeing right now in mobile health.

That excludes mass COVID-19 testing in the future.

You can basically model out that.

That revenue will become part of mobile health and that percentage of mobile health growth will increase.

Fleet going forward in Q3 and Q4.

Craig Jones: Got it. Okay. If we look at the guidance, it looks like it's implying, you know, sequentially lower Q3 and Q4 versus H1 for mobile health or I guess for, yeah, probably for mobile health. If that customer is largely transitioning from, you know, mass COVID to mobile, what's driving that headwind there? Why that would decline sequentially?

Got it okay.

If you look at the guidance it looks like it's implying a sequentially lower through June <unk> versus the first half.

For mobile.

Sure.

Yes, probably for mobile health, so if that if.

If that customer is largely transitioning from mass COVID-19 to mobile what what's driving that headwind there.

Why that was.

Stan Vashovsky: You know, kind of like we mentioned earlier, we're always taking a very conservative approach. Many things can happen during the transition. We feel very good about the way H2 looks. Naturally, you know, we are, you know, taking a conservative approach. At the end of Q3, if we're a bit too conservative, we'll once again go ahead and raise guidance.

Sure.

So it's kind of like.

We mentioned earlier.

<unk> always taken a very conservative approach many things can happen during the transition.

We feel very good.

About the way the second half of the year looks but.

Naturally.

We are.

<unk> taken a conservative approach.

And at the end of the third quarter, if if we were too conservative well once again go ahead and base guidance.

Craig Jones: Okay, got it. All right. That's good to know. Thank you, Stan. That's all for me. Thanks.

Okay got it.

That's good enough. Thank you that's all for me.

Yeah.

Operator 1: Our next question is a follow-up from Richard Close of Canaccord Genuity. Please go ahead.

Operator: Our next question is a follow-up from Richard Close of Canaccord Genuity. Please go ahead.

Okay.

Our next question is just follow up from Richard close of Canaccord Genuity. Please go ahead.

Richard Close: Yep. Thanks for the follow-up. Stan, I was wondering if you could talk a little bit about the RFP. You made some comments there about activity growing.

Yes, thanks for the follow up.

Dan I was wondering if you could talk a little bit about the RFP you made some comments there about activity growing can you just dive in a little bit more on that.

Stan Vashovsky: Mm-hmm.

Richard Close: Can you just dive in a little bit more on that? Is anything baked into your guidance, or is that all upside? On those type of contracts, how does a typical contract look like on that side?

Is there anything baked into your guidance or is that all upside in and on those type of contracts.

How does the typical contract look like on that side.

Stan Vashovsky: Well, in terms of baking anything into our guidance, the answer is no. You know, we base our guidance on contracts and agreements that we feel very confident about. On the RFP side, we have access to lots of municipal and government systems that allow us to see what needs are throughout various municipalities throughout the country. We probably have the most amount of experience in these large medical programs of anyone out there today. We have wonderful clients that are willing to be our references for those types of services. We've seen a 3x growth in our responses in those RFPs.

Well.

Arms of baking anything into our guidance the answer is no.

We based our guidance on our contracts and agreements that we feel very confident about on the RFP side.

Sure.

We have access to lots of municipal and government.

<unk>.

That allow us to see what needs are throughout various municipalities throughout the country.

We probably have the most amounts of experience.

The large medical programs.

Anyone out there today.

And we have a wonderful clients that are willing to be our references for those types of services. So we have seen a three X.

Growth in our responses in those rfps.

Stan Vashovsky: We win some of them, and they could be small contracts, but we're now really are focusing in for some of the large ones. You know, contracts by the CDC, Department of Homeless Services, and there's municipalities, border patrol. There are medical services by very large agencies, dozens of them, that come out every couple of months. More than ever, we're responding to those and slowly we're starting to win a couple.

We win some of them and there could be small contracts, but we're now really are focusing and for some of the large ones.

Contracts by the CDC Department.

Homeless services and Theres municipalities border patrol.

There are medical services by very large agencies dozens of them.

That come out every couple of months and more than ever where we have.

Responding to those and slowly we are starting to win a couple.

Richard Close: Okay, thank you.

Okay. Thank you.

Operator 2: George.

George.

Operator 1: Ladies and gentlemen, we have reached the end of the question and answer session. I would like to hand the call back to Stan Vashovsky for closing remarks.

Operator: Ladies and gentlemen, we have reached the end of the question and answer session. I would like to hand the call back to Stan Vashovsky for closing remarks.

Ladies and gentlemen, we have reached the end of our question and answer session and I would like to hand, the call back to Stan <unk> for closing remarks.

Yeah.

Stan Vashovsky: Okay. Well, this concludes our call this morning. We began 2022 with a clear and significant momentum across our businesses. I'm optimistic that we have set the stage for a very successful year. I look forward to our next quarterly update in November. Thank you everybody for joining us.

Okay.

Okay well. This concludes our call. This morning, we began 2022 with a clear and significant momentum across our businesses and I'm optimistic that we have set the stage for a very successful year.

Look forward to our next quarterly update in November . Thank you everybody for joining us.

Operator 1: This concludes today's conference. Thank you for joining us. You may now disconnect your lines.

Operator: This concludes today's conference. Thank you for joining us. You may now disconnect your lines.

This concludes today's conference. Thank you for joining US you may now disconnect your lines.

[music].

Yeah.

Hum.

[music].

Q2 2022 DocGo Inc Earnings Call

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