Q2 2023 Doximity Inc Earnings Call
Which means we believe we still have much headroom to grow more on this market sizing in a minute.
Turning to our bottom line, we delivered an adjusted EBITDA margin of 45% last quarter or $46 million, which.
Which was 12% above the high end of our guidance.
We completed our $70 million a share buyback in Q2 over the last six months. This buyback has reduced our shares outstanding by about 1%.
Given the $80 million of free cash flow, we generated in the first half of this year and our $750 million cash balance our board has authorized an additional $70 million one year share buyback program as before it won't touch our IPO war chest or affect our strategic investments.
Looking ahead to the second half of our fiscal year, we are reiterating our annual guidance of 25% topline growth with 43% EBITDA margins at the midpoint of our quarterly guidance. This implies a 911% revenue growth quarter on quarter for the next two quarters.
Okay, turning now to our network growth or usage it fresh highs in Q2, our fax and E signature products saw record use with millions of HIPAA secure messages are physician scheduling tools saw 57% year on year rise in unique doximity logged in users as we rebuild our <unk> acquisition into our core product.
And our telehealth tools were used by a record 370000 unique physicians NPS <unk> last quarter, making over 200000 calls per workday.
All in our mobile office suite is helping more doctors than ever stay connected on the go.
On the EHR partnership front, we are now a validated member of the Oracle sooner code developer program. So along with epic we can now connect with 85% of large hospital EHR as per class research and we remain the best in class across our hundreds of dialer enterprise clients as we've had 100% renewal rate so far this year.
Bears repeating we've had zero churn in our enterprise telehealth clients. So far this year.
For those not using epic or Cerner, we've added a new scan number feature where the doctor can simply point their phone's camera at the EHR screen, our AI than scans for the patient's phone number and calls it it's nearly instantaneous and really a nifty feature.
Any doctor on any EHR can use it we joke that hits, our universal EHR integration and it gets us thousands of times each workday.
It's time saving the lighter features like scan number that have earned us a perfect five star review, an 88% of our 140000 App store reviews and keep in mind. The doctors are tough graders, most physician workflow apps get two to three stars on average we.
We don't see it or pay for any of these reviews, but we do spend a lot of time listening to our docks. Our design mantra here is physicians first.
To that end, we're excited to convene our 11th annual Doc Tech summit in San Francisco in a few months it'll be 200 of our nation's top digital docs rolling up their sleeves with our engineers to design software to make health care better.
We can't wait to build the next phase of the clinical cloud.
Okay I'd like to take a few minutes now to discuss the post pandemic shift to digital marketing and how this affects our long term growth rates.
As a reminder, our clients include all of the top 20 hospitals and all of the top 20 pharmaceutical companies a distinction we believe no other digital health company shares hospitals have surprisingly been our fastest growing clients. This year, they've accelerated their shift to digital out of necessity.
Austin Hall predicts that half of U S hospitals will lose money this year and there is a painful and growing divide between the digital halves and the digital have nots.
We're proud to serve the digitally savvy and they like our ability to track referrals and show hard ROI.
Our median all time hospital Rois now 17 to one up from the 13 to one we cited in our S. One and we just signed a $4 million hospital renewal, our largest ever and we're not done yet.
That said pharma is the larger market and a very different story financially pharma is doing quite well. Despite the macro headwinds there sales are up 12% year to date for <unk> among the S&P 500 pharma.
And pharma stocks are only down 9% year to date per Ishares U S pharma Etfs.
As for pharma digital marketing a few analysts have predicted a flat year as farmer returns to its pre pandemic ways. We believe this is overblown.
While we hit an air pocket early this year, we've since seen a steady rebound in the market as pharma migrates traditional dollars to digital.
A number of credible sources agree with this year for starters. This August E. Marketer estimated the digital <unk> healthcare marketing our core market grew 46% in 2020, 30% in 2021 and will grow 17% in 2022, we think this sounds about right.
Pharma is known to be recession resistant and the latest standard Media Index report supports this their September AD tracker shows that pharma and probably led all other industries and AD dollar growth.
Looking ahead to next year, a digital health Coalition study in September of 70, Pharm execs found that 74% will be more relying on digital in 2023, while only 6% said they would be less reliance.
This said, it's not really about digital dogma, that's about ROI, especially in leaner times pharma is incredibly measured and disciplined about ROI.
Generally they strive for a three to one return on their marketing dollar and they will continue to invest at that level.
Digital solutions will cut the mustard and somewhat.
Which leads me to perhaps the best out of this call for.
For the third party studies completed over the last six months, our median pharma rois improved to over 15 to one.
It's well above the 10 to one we cited last year in our S. One.
This is for a host of good reasons, including our increased reach and personalization.
Our all time pharma median ROIC now stands at 11 to one and our logged in identity verified double different methodology remains the industry gold standard for ROI measurement.
And 11 to one ROI implies that all else equal if we theoretically did nothing but raise prices than we would have seven years of 20 plus percent growth ahead of us before Roy falls to three to one.
That's the baseline aperture through which we view our longer term growth rate as we've obviously, many many other vectors to grow beyond price.
In sum, we are fulfilling our long term mission of being the digital platform for doctors.
During the pandemic, we pulled away from our competition in terms of physician usage and utility our mobile medical office suite was always differentiated but many pre COVID-19 practices simply didn't use it telehealth wasn't reimbursed and there was little reason to try.
Then the Lockdowns hit and Dr. Scrambled to learn to use our fax E signature and telehealth tools and so much like the QR code has become a permanent part of our culture, our tools have become a permanent part of medicine.
The practice of Medicine is mobile now and we're honored to power it and.
And with the launch of our point of care and peer to peer products. We are just now beginning to realize the benefits of that growth our clients are resilient and profitable and we continue to benefit from multiyear tailwind in our industries, Nathan and overdue shifts to digital.
ROI driven pricing model aligns us with our clients, making us their digital HCP partner.
And as our position platform continues to set usage records. We're excited by a generational opportunity to create a win win digital platform to connect physicians across the greater healthcare ecosystem.
Okay I'd like to end by thanking my 953, and growing Doximity teammates, who continue to work incredibly hard to realize our mission.
The best journeys are rarely a straight line and I am proud to be on this one with you.
And with that I'll hand, the call over to our CFO and Brian to discuss our financial performance and guidance Anna.
Thanks, Jeff and thanks to everyone on the call today I'll.
I'll begin with our Q2 financial results and then move onto our outlook.
Second quarter revenue grew 29% year over year to $102 2 million exceeding the high end of our guidance range.
Similar to prior quarters, our existing customers continue to lead our growth.
Our net revenue retention rate was 128% in Q2 on a trailing 12 month basis.
Additionally, our largest customers are still growing of assets with a 136% net revenue retention rate for our top 20.
We ended the quarter with 291 customers contributing at least $100000 each and subscription based revenue on a trailing 12 month basis.
This is a 24% increase from the 235 customers we had in this cohort a year ago.
This cohort of customers accounted for 87% of our total revenue.
Turning to our profitability non-GAAP gross margin in the second quarter was 90%.
Versus the prior year period.
EBITDA for the second quarter was $46 million and adjusted EBITDA margin was 45%.
Compared to $32 8 million and a 41% margin in the prior year period, while we continue to strategically invest in R&D and sales and marketing with these non-GAAP costs growing 19% and 26% year over year, respectively.
Encouraged by our ability to generate efficiencies in G&A shrinking costs here by roughly 1% year over year.
Now turning to our balance sheet and cash flow.
We ended the quarter with $750 million of cash cash equivalents and marketable securities.
We generated free cash flow in the second quarter of $37 7 million compared to $18 1 million in the prior year period.
An increase of 109% year over year as we continue to run a very profitable high cash generating business.
Now moving onto our outlook for.
For the third fiscal quarter of 2023, we expect revenue in the range of $110 seven so $111 $7 million representing.
Representing 14% growth at the midpoint.
And we expect adjusted EBITDA in the range of 47, 7% to $48 7 million, representing a 43% adjusted EBITDA margin.
For the full fiscal year, we are reiterating our revenue guidance of $424 million to $432 million, representing 25% growth at the midpoint.
In addition, we are reiterating our adjusted EBITDA guidance of $178 million to $186 million, representing a 43% adjusted EBITDA margin.
As you consider our Q3 revenue growth guidance. Please recall two factors we've discussed previously.
First with some material revenue outperformance in Q3 of last fiscal year as many of our clients were instituted layoffs.
Adjusting our go to market strategies and quickly reallocating their dollars to digital.
As mentioned on prior calls we did not expect a budget reallocation of this magnitude to repeat.
The second factor impacting our Q3 growth rate is the cumulative effect of the midyear upsell slowdown that we discussed last quarter.
That said demand has returned in recent months and we are encouraged by the traction we're seeing in the midst of our clients' annual buying cycle.
We see digital budgets, among our clients growing and it's clear to us that they view their high ROI generating marketing programs on Doximity as core to their overall marketing strategy.
As Jeff mentioned, our all time pharma median ROI has increased to 11 to one across 25 therapeutic areas and our all time health systems median ROI now stands at 17 to one.
These studies show that our clients continue to drive higher returns and greater value through our platform.
We're also excited by the opportunity to provide even further value and unlock additional budget categories with our new point of care module set to launch on January 1st.
As it pertains to getting these annual programs lives. This year, we have focused heavily for the first time on content planning in tandem with deal negotiations.
Our deep relationships with existing brands combined with our large library of approved content allows for this optimization to occur.
As a result, we expect smoother revenue recognition productivity and more January start dates.
The strength of our pipeline and this operational gain is reflected in our implied Q4 guidance range.
I'd like to close by re emphasizing the long term growth potential that we believe we have that toxicity.
We are in the early innings of a large and growing market opportunity aided by a secular shift to digital.
As of today, we still remain less than 5% penetrated into our clients U S medical professional marketing budgets and we believe we are uniquely advantage to gain market share as these budgets continue to shift to digital over the next decade.
With our leading network and high ROI, we have a significant opportunity to not only grow within our existing budgets, but also unlock new budgets over time.
With that I will turn it over to the operator for questions.
We will now open the line for questions, we have 30 minutes for Q&A.
Our first question comes from the line of Ryan Daniels with William Blair.
Hey, guys. Thanks, so much for the question congrats on the strong results, Jeff, hoping you could go a little bit more detail into the value you're creating in the provider market I think a lot of investors still think of you as a pharma only company, although obviously very strong solutions for the acute care and broader provider market. So can you talk a little bit more.
More about what you're offering there and why you've seen such great traction of late.
Yes.
Thanks, Ron Yeah. This is Jeff good question.
So I'm proud as we mentioned in the prepared remarks that we have renewed 100% every single one of our hundreds of dialer enterprise clients. So far this year, which is obviously, creating a lot of value in the provider market saving doctors a lot of time.
And making the money right as they now can do their visits on the go from everywhere become the removal office.
Also sure that hospitals as we mentioned in the prepared remarks have been our fastest growing clients. So far this year and the growth rate. There has been tremendous and again, we find that a bit surprising given the overall financial hardships that the hospital industry is currently facing but what's interesting is you know adversity breeds innovation.
Right.
Nancy focused environment.
Think the shift to higher ROI becomes more important.
So in a weird way I think some of the adversity has helped clients move more quickly onto our platform.
And again as far as end user value goes again I would encourage folks to go read our apps to reviews, we don't see it or pay for any of them. I mean, you can see that they've never been higher so far this year. Our average five store rate has been 89%, which is as high as it's ever been and again to get doctors, who.
Usually are pretty tough on the software they use have 89% of them, saying that we are a five star app for them is something we're just incredibly proud of.
So I hope that answers your question.
Yeah that was great and maybe one quick follow up obviously, some big Biosimilars coming to market next year I'm, hoping you could speak to your opportunity there, especially as you've launched the <unk>.
Telehealth solution into the pharmacy market Theres, some interchangeable biosimilars, where they may be able to be influenced as well. So I'm curious what your thoughts are there. Thanks so much.
Yes. So are you talking about the GOP, one specifically or just more broadly.
Humira.
In particular, but more broadly just your opportunity with Biosimilars.
Yeah. So.
I'll say a few things.
Yes, I mean, right now innovation in the pharmaceutical industry.
Just never been been so good the pipeline going into the FDA is just very strong.
I have to say as an American I'm very proud of the fact that here we are three years in.
Other parts of the World, China have not been able to produce an mrna vaccine on their own yet again I think it's just a strong sign of what what.
What kind of technological innovation, we have we do have some very big drug launches and some some new products hitting the market. This next year pharmacists will be a growing piece of that I can share that.
Pharmacist as a percent growth within our client base, it's been one of the strongest or both the digital marketing on the on the dollar side and on the user growth side.
So we focus more on that I don't think we have any numbers exactly to share on that front, yet, but we do we do very well there among pharmacists.
Secondly, I'd share that within telehealth are strongest specialty as endocrinology, which of course is right at the center of diabetes care, which is where a lot of this innovation is happening.
So that's just a great thing for US we've had over 30% of all U S. Endocrinologists do a telehealth visit with US just in the last quarter again, which is an excellent footprint through which to provide better care to patients.
And to help these patients with <unk>.
Our coupon copay programs end and.
And other things so we're really excited about some of this innovation.
It relates particularly to the diabetes space I think we are just in a very strong position.
Great. Thank you so much.
Next question.
It comes from the line of Brian Peterson with Raymond James.
Mr. Peterson your line is open.
Sorry, guys I'm, a little bamboozled by the mute button, there, but hey, so.
So I wanted to follow up on some of the comments you made on budgets for next year I. Appreciate the color that flat is probably too draconian, but if we think about maybe a tough macro and look at prior cycles is there any way to think about a range of outcomes. There in terms of just the overall budgets and maybe any other qualitative factors that we should be.
Paying attention to as we think about what budgets could look like in calendar year 'twenty three.
Okay. This is Jeff I'll take that one Brian Thanks, Yes. Good question.
Listen if you boil it down we expect that our market digital health care professional marketing and health care will grow in the teens next year, but keep in mind as you look back over the past few years, we have grown significantly faster than the market has grown.
If you recall that your market forecast we presented.
They said the market grew 46 and 30% in 2021, and we grew 65 and 79% in the same two year, so significantly faster than the market and frankly, we think the market has tried a lot of things during the pandemic that didn't work.
A lot during the early phases, where companies were just doing anything that could throw up a website that in the end didn't work that well or garner that much traffic or attention.
Again, we think they'll shift those dollars over to our proven ROI on our platform.
Thanks, Jeff and maybe as a follow up I know you mentioned the the point of care module as we think about new modules coming onto the platform is there any way to think about the revenue ramp of that and any color you can give there thanks guys.
I don't think it will be a significant percent of our revenue ramp in the next quarter or two I think with any new product. It takes a little while for things to get going that said longer term. We're very excited about our point of care product now keep in mind, our doctors each month wait a year, we say about 500000 minutes that.
<unk> been waiting et cetera, workflow apps and that's just because some things take a little bit of time. So it takes a minute or two to get a fax received confirmation from aetna.
Or it takes a minute and a half or so for a patient to click on that consent form before they start to call and so earlier. This year. We started offering. These while you wait widgets that were really a hit among doctors kind of helping them stay up to date on the latest journal headlines, which is what a lot of them chose to see.
Or calming videos or their stocks. So these widgets allow doctors to personalize and most of them have what they could see on the side of the screen as they're waiting for that one minute for the factory play or the patient consent.
So our point of care offering I think is a great opportunity here for our sponsors we're not going to have more than one in 10 of those 500000 minutes be sponsored but I can tell you that the industry reaction. So far to what has been really positive because it's truly in between seeing patients with doctors, which can take clients or just.
Very enthusiastic to have that moment I'm not certain there is a comparable moment in.
In the real halls of medicine that doctors have.
That moment by themselves.
Weighting between patient visits so we.
We think the ROI potential here is pretty strong and can't wait to see that get launched.
Great to hear thanks, guys Yep.
Question comes from the line of Scott Berg with Needham.
Hey, Thank you. This is Matt Shea on for Scott Barry I. Appreciate you guys, taking the question and congrats on congrats on a solid quarter.
I wanted to touch on renewals I appreciate the commentary on the hospital renewal that sounded like a great win there but our.
My understanding is Q3 is a big renewal quarter for you guys.
Keeping in mind, it's still early I'm wondering what you guys are seeing so far in terms of renewal trends and are you still seeing this as a fruitful time to drive Upsells and cross sells you've been kind of given what's going on with budgets.
Sure I'll take that one thanks for the question.
Short answer is our implied Q4 guidance I think gives you a really good idea of the strength of our current discussions that we're having right now with our customers around renewal as Jeff mentioned, we've had some nice early wins right. That's just our largest ever deal in health system history and were seeing our pharma customers leaning heavily not only for our core modules, but also there.
We're excited about our new offering.
I think one of the good things about this year is that we've begun having discussions with our clients earlier than ever and what that has resulted in for US is a pipeline with bigger dollar deals than we've seen before so as far as it comes to our opportunity to cross sell and upsell and this renewal cycle and we feel incredibly optimistic and positive about what we're going to see there.
And then the final point I'll make on this is I think we're also excited about the operational efficiencies that we're working on with our clients around this content planning in tandem with deal negotiations, which are we are actually finding that that's aiding our annual planning because we're able to have more strategic discussions with our clients and our clients are incredibly receptive to this because they want to be on channel in January .
So all signs point to a very strong real cycle Brown.
Got it that's Super helpful. And then maybe as a follow up I know at the beginning of the year you guys called out mid tier pharma as a focus and you also had some kind of newer initiatives such as leaning into the med Tech end market.
Curious what kind of traction you guys are seeing in both mid tier pharma and the the med Tech end market and just kind of what if youre still seeing like a higher digital mix with some of them say those mid tier pharma companies.
Thanks, Matt This is Jeff I'll answer that in short our medical device and mid tier initiatives go really well.
They're smaller companies, obviously, but growing fast.
Coming back to the case that we shared I think two calls ago with bio Haven.
Looking back Bio Haven was actually our number 11 client over the three years prior to their their big drug launch in her tech 2019, and 2021, which of course means that as this tiny pre revenue company. They were spending more with us than top 20 pharma because they were a number of 11 overall client and so they really bad big on us.
And I think they see the futures here today, it's just not evenly distributed I think some of the things Theyre CEO Vlad who was a doctor and really gets it and his digital first launch that playbook is something that is just the rest of the industry is learning from us.
As we continue to work with <unk> and team, but also.
Continue to see that Med Tech is probably I'm, sorry, not mid to mid tier is really the best place for innovation for us.
So anyway I hope that answers your question I will say in terms of overall dollar spend when you cut the Tam data.
The reality is that these small companies get acquired by the bigger ones the bigger ones tend to be most of the market, but again in terms of innovation and growth rates. We're really excited about how we've done with medical devices and with mid tier.
Awesome. Thanks, Congrats again.
Your next question comes from the line of Richard close with Canaccord Genuity.
Great. Thanks for the questions.
Congratulations good to hear on the renewal process and larger deals.
Curious, Jeff if you can.
Sort of provide details.
You guys have discussions with your clients in terms of <unk>.
As you're going into the next year and talking about.
Their budgets getting a feel from them what kind of like maybe <unk>.
Inter year.
Potential.
<unk> cells are there.
They are thinking about spot buys and stuff like that the stuff that essentially you took out.
Of the guidance. This year is there a way to have those discussions earlier and get higher visibility.
Hey, Richard This is Jeff I'll take the first part I'll, let Ian a reply on the Upsells here in a moment I will say, it's this whole annual dance with us with our largest clients. We grew 31% this past year over year in our in our Ars 128%. So obviously most of our growth comes from existing clients and so these renewal discussions.
<unk> are important for us and you do they typically started in September . So this year. They started in June as clients are coming to us, bringing us into their strategy reviews, and Thats, where we do decide essentially on the modules and the reach and the budgets.
And so then they rollout purchase orders, we started doing content approvals, which is really I'd say the major changes here, we were doing it sporadically before but now we are.
As a as a company we are doing the presumptive close or the Assumptive close we are assuming that we will work with you again next year because we've worked with you. The last three years as opposed to trying to use that as a lever around contracting I think it's just better I think for us to make a small investment in our physician writers.
<unk> to start working on next year's content, even before we have.
Everything in can dry, but we do the purchase orders from these folks were getting the content approvals now and again it goes very well we were having.
Our best largest dollar renewal season ever here as we go through.
But as Anna mentioned this is the kind of thing that.
I think.
We've really become the digital health care partner.
Digital HCP partner of our clients and again, it's just a presumed roll forward process. So with that let me turn to Ana on the upsell specifically.
Yes, sure I'm happy to put some more numbers behind your question here, Richard So as far as how we think about a given fiscal year. The majority of the year, so like roughly 80% or so of our year comes from this core annual renewal cycle that we have just before the fiscal year starts and about three quarters of the way through that next fiscal year.
And we're consistently seeing really strong growth there so that 80% piece is an area, where there's very little and.
Anything there is typically some upside as far as that midyear upsell piece and year ends up some piece that you were referencing in a typical year is that really just represents north of 10% of our revenue. So it's really not a significant portion of our revenue now last year. We came in above historical norms, there as that shift to digital reach a tipping point this year, we're coming in a little below him.
Oracle norm as our client did some precautionary and belt tightening early this summer, but I just want to reemphasize that the majority of our year in a given fiscal year is coming from these core renewals.
That's great and Jeff you talked you through the hypothetical out there on price increases and still provide a great ROI.
I'm curious if you could talk a little bit about price increases.
You've experienced historically.
And maybe now during the renewal season.
Thanks, Richard Yeah last quarter, we put out there that we had grown 11% in one measure of our pricing year on year.
Boy I learned that I shouldn't really do that.
It leads to lots of questions and other things.
We don't disclose.
The way, we calculate and put together our pricing on this I'll just say that again this first half of the year, having a greater than 15 to one return on investment that's really how we align ourselves with with our in clients' interests in and how we lead in to making sure that it's not a noisy platform for a doctor So I would say that.
The lens through which we view pricing is all ROI based and the good news is even with whatever price increases and revenue growth. We've had our rois have never been higher.
That's great. Thanks.
Our next question comes from the line of Sandy Draper with Guggenheim.
Thanks very much.
So congrats on a good quarter.
Two questions for you and I guess the first is.
When I look at the EBITDA outperformance on that can obviously see strong gross margins strong costs was there relative to what you guided to were expecting was there was something changed in the gross profit.
Equation faster than you thought you just didnt have to spend as much time, just trying to get a sense for where the delta was relative to where you thought it was going to come in.
Sure. Thanks, Dan It's a great question. So naturally first and foremost I will just say part of the EBITDA beat is the revenue flow through but as far as how we're thinking about our opex and where we were able to see some efficiencies G&A spend came in a little bit lower than expected as I called out in my prepared remarks, we saw.
There's actually decrease for G&A, 1% year over year. So we've been able to really find efficiencies in an environment like this which I think we're really proud of we're focusing a ton on automation, there and that would really be the lever where we saw quite a big beat from an EBITDA perspective, and then the other thing I'll note. Our vertical sales model also continues to be highly.
Efficient and we expect that to continue to be the case going forward.
Okay great.
Really helpful. Thanks, and then the follow up you alluded to sort of the implied fourth quarter guide and.
And if I, just sort of take a midpoint in third and sort of you've got a swing of $1 20 to $1 28.
Is that really just what you negotiate in terms of new deals what the timing of those deal size.
Just trying to think about what gets you to low end high end and then I didn't quite.
And if it is they're doing offline the comments here theres sort of a new process youre going through in terms of doing this maybe that is the conservative into that it doesn't go as well as you think the upper end at this new process really changes the velocity of sales closings.
Sure I'll say two things on that one so first with reference to the wide range.
You know and as we've mentioned we're in the midst of our annual buying season, and while demand has returned and we're having very positive conversations with our clients. We're still cognizant of the current macro environment. So we're being prudent as we think about the range of outcomes here as far as what can move the needle to your point when it comes to these efficiencies that we're talking about from an.
Operational efficiency perspective.
You said you didn't fully get it let me make sure I take a step back and just kind of explain what we're doing there because I know I only hit on that briefly in the prepared remarks, but the way it works is.
Vast majority of our sales in Q3 will be with brands, we've already worked with before and what we're trying to do here is we're trying to optimize our assembly line by having these content strategy discussions and approval occur in tandem with these deal negotiations in Q3 historically the way it used to work as we would wait until the deal was signed to kick off these discussions.
Which meant that many annual program sprout might not launch until February or March and this is where we're looking to improve our customers want to be on channel for the full year and so they're very receptive to this new strategy and they are working closely with us to ensure that we can actually launch in January and this in turn creates the revenue recognition productivity.
And could result in some upside there.
Okay got it that's really clear now I appreciate that thanks Ana.
Question comes from the line of Cindy mode. The Goldman Sachs.
Oh, great. Thanks for taking my question and also congrats on a very good quarter.
I actually have two questions.
But I just wanted to follow up quickly on what you. What you just said about the smoothing because like.
Your G&A was really good. So so why why is it going to pop up maybe again are some of the expenses.
In the December quarter, I guess, I understand the smoothing and everything like you're talking about but I guess.
If I had to look at it here I just wanted to understand because your cost control was pretty good. So so where do you expect it maybe to go up.
Does your guidance would indicate that the <unk>.
Actually adjusted EBITDA margins that you expect to see now that the December quarter is a little lower and then we're going to see.
And I guess last year that wasn't the case and so I understand part of it is this smoothing, but I'm trying to understand if you think maybe certain costs are going to come up in the December quarter, and then I just have a big picture follow up thanks.
Sure.
Short answer there is the output of our revenue growth combined with kind of two key factors. So December is our largest sales quarter. As we were just talking about and then that's also naturally our largest commissions quarter. So commissions do spiked for us in Q3. So that is one of the big reasons I think other thing is that we didn't see last year, we didn't see the year before while we are.
The pandemic is we are seeing a return to some yearend and personal activity. So as our sales reps are having these conversations with clients in many cases, they're having them live their out there main clients taking them to dinner traveling and we're actually finding that that person is.
We've been quite a bit of benefits for us because of that connection but that naturally also will increase costs a little bit there in our Q3, but I do want to make sure I emphasize Cindy.
42% adjusted EBITDA margin is still amongst one of our highest adjusted EBITDA margin quarters to date. So I think we're really happy with where that is.
Okay, Great and then just as a follow up I guess on the revenue line I mean.
Saying you know demand has returned do you feel like in general you are taking share here or is it kind of like the digital tide is rising.
Rising most boats and then.
Longer term as you look at this you know I mean do you I guess one of the questions. We get a lot is just do you see the revenue growth still staying up at these levels.
In the range of 25%.
I know you said with pricing alone it could be like 20% for multiple years, but do you still see that and then also what the EBITDA would you think that would continue in the forty's. Thanks.
Is there any Jeff here I'll take the first part yes, as we've mentioned we think the market will continue to grow in the teens and will grow significantly faster than the market. As we have these past couple of years right the market grew.
40% and 30% we grew 7% to 60%. So obviously, we're taking share from others candidly as we should because a lot of the digital initiatives that were brand new and tried during COVID-19 didn't work that well is our high ROI platform.
Anna.
Yes.
Perspective.
Revenue growth EBITDA I think what we've said before is that we aim to be a rule of 60 company on a long term basis through a combination of that growth and profitability and we are certainly feel confident that this is achievable as we look ahead in the next three to five years.
Couple of reasons, why the first and foremost as it pertains to our topline our network our engagement RLI and our relationships with our customers continue to grow and we have significant room for growth amongst our existing customers as we continue to sign up new brands upsell of additional module. It's still the case that when we look at that $100 billion brand.
Universe, we only work with just over half of those brands and that universe is growing and then we also have room for growth into the new budget categories and we're innovating on our module just like we're demonstrating without point of care module and I think what's unique about our ability to innovate. There is it also very high incremental margin innovation, so our vertical sales model.
It allows us to create a new module and then utilize our existing sales force and our existing team to go sell that module. So we're able to get really high incremental margins from that so those points combined are why I think we're very confident that we can be a rule of exiting company for the long term.
Great. It looks like your other revenue was up decently too in the quarter, just when I want it back it out like around $13 million is that about right.
No I think our other revenue was about just over six about 6.8, $6 9 million, Okay and you can see that in our 10-Q that we just released and that subscription versus the other component, but it is up nicely at them about 30%.
Thanks, a lot.
Okay.
Question comes from the line of Stephanie Davis with SBB Leerink.
Hey, guys congrats on a solid quarter and thank you for taking my question I've got two questions one for Jeff one for Anna Jeff you're up first.
I am seeing so many ads for <unk> I know, we've gone back and <unk>.
I'm, hoping that's a function of a higher level of consumer AD spend from pharma and not just whatever it is that they are targeting yes.
I was wondering how these competitive consumer facing drug releases like seven blue tide effect AD spend that you see some pharma companies there any opportunity there.
Well, Thanks, Stephanie I Love that you call out who has to answer each question. It makes our lives easier here around the phone.
And yes, maybe it's a sign you're spending a lot of time in Hollywood as Youre getting targeted.
I don't know.
I'll I'll do my sat in my chair right.
What are the other.
I will say I think mojo versus <unk> as probably being one of the biggest drug marketing battles of this decade and.
Believe it or not I've seen this movie before at Epocrates, when <unk> was launching against Viagra and since patients will ask you about the docs need to know in our news feed is placed the doctors learn the latest so I think it's ultimately good for us to see such innovation.
And.
So much.
Interest in a new therapy.
And I'll just add as I mentioned I think earlier that our coverage of the diabetes space Endocrinology is terrific. There are most active till I hope your users.
So I do think again as there is more activity there will benefit in terms of do those DTC dollars of dollars that they're spending towards targeting a banner ads to you do they spill over to US I mean, there is certainly correlated right I think again the larger the budget the more the marketing or the more they will spend on both HCP and <unk>.
On DTC.
Yeah.
Typically they're separate budgets within pharma, but I will say that that whole category is going to be.
It's going to be a real battle. These next couple of years and again I think it will be good for doctors that have a place to discuss it and it will be good for our business.
That there is such a battle.
Helpful. Thank you Jeff.
I was hoping we could dig one step deeper into that core growth versus upsell question earlier can.
Can you talk a little bit about your contracted minimums and how much of your remaining revenue to book already in the bag as a function of your contractual minimums versus pricing and Upsells and everything else.
Sure happy to so I think we've said this publicly before you all know our contractual minimums for our pharma clients are north of six eight years and as we think about our annual renewal cycle and that kind of 80% or so that comes from those core renewables. The majority of that is brands coming back and buying.
Same module or buying an additional module, so starting with one and maybe expanding to two or a customer that we've worked with for a while might have a new brand that we can now add into our portfolio of brands that we work with let's cross sell into those additional brands. So the two core components of where we see growth in that renewal cycle is adding additional <unk>.
Brand and then up selling these additional module and then as far as kind of the third and fourth component the Sterne would actually be adding audience members. So we do see quite a bit of expansion each year, our brands might have run a program with us for a set amount of audience members really high ROI on that program and now they want to add more audience members for next year so that.
Would be the third component of our growth here in that annual renewal cycle, and then I think the fourth and final component.
In this exact order would be pricing, but pricing makes up the least of our growth versus that tier four I just mentioned.
Awesome. Thank you.
Your next question comes from the line of Stan <unk> with Wells Fargo Securities.
Hi, Thanks for taking my questions.
I have a quick one here we've been hearing some pressure on marketing budgets, maybe more on the consumer focus side than on the provider, but if we maybe look at your performance from the perspective of your clients do you have a sense. If you are on the receiving end of clients reallocating their budgets away from lower ROI platforms.
Sure Hey, Stan this is Nate.
So great question and there haven't been too many changes within the competitive front.
In digital as you know there are high barriers to entry are physician network effect has never been stronger.
But with the pandemic, we did see an acceleration of the digital shift to things like websites that doctors aren't going to visit.
Digitization of brochures experimentation that wasn't as high ROI and that creates an opportunity for us really an opportunity to migrate to higher ROI solutions within digital now that pharma has had a chance to see the results of what Rand during the pandemic.
Moreover, some of the changes that we're seeing with digital privacy regulation is a net positive for us as our physicians first approach means that we draw a hard line on protecting our physicians privacy zero percent of our revenue is there ever was based on Nokia technologies, We don't do banners and so I think we're advantaged over many in the digital space to lean heavily among those.
<unk> technologies.
Alright, thank you.
The Q&A portion of the call has now concluded I will now pass the call back to Doximity fee CEO , Jeff <unk> for closing remarks.
Well I want thank everyone for joining us this evening and appreciate the good questions look forward to seeing you all again next quarter. Thanks, so much.
This concludes today's conference you may now disconnect.
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