Q2 2025 Doximity Inc Earnings Call
and are subject to various risks and uncertainties.
Actual results may differ materially and we disclaim any obligation to update any forward-looking statements or outlook.
Please refer to the risk factors in our annual report on Form 10-K, any subsequent Form 10-Qs, and our other reports and filings with the SEC that may be filed from time to time, including our upcoming filing on Form 10-Q.
Our forward-looking statements are based on assumptions that we believe to be reasonable as of today's date, November 7, 2024.
Of note, it is Doximity's policy to neither reiterate nor adjust the financial guidance provided on today's call unless it's also done through a public disclosure such as a press release or through the filing of a Form 8K.
Today, we will discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results.
A historical reconciliation to comparable debt metrics can be found in today's earnings release.
Finally, during a call, we may offer incremental metrics to provide greater insights into the dynamics of our business.
Speaker Change: These details may be one-time in nature, and we may or may not provide updates on those metrics in the future. I would now like to turn the call over to our CEO and co-founder, Jeff Tangney. Jeff?
Jeff Tangney: Thanks, Perry, and thank you, everyone, for joining our second quarter earnings call. We have three updates today, our financials, network growth, and client portal.
Jeff Tangney: First, our top line. We delivered $137 million in revenue for the second quarter of our fiscal 2025, which represents 20% year-on-year growth and a 7% beat from the high end of our guidance range.
Jeff Tangney: Of note, our top 20 clients once again grew the fastest for us, up 24% on a trailing 12-month basis. These clients are the largest, most sophisticated pharma companies, who employ entire teams of analysts to measure their marketing effectiveness.
Jeff Tangney: We believe our continued growth with them is proof of our value to the broader marketplace.
Jeff Tangney: Our bottom line was also strong in Q2 with a record adjusted EBITDA margin of 56% or $76 million.
Jeff Tangney: Our bottom line was also strong in Q2, with a record-adjusted EBITDA margin of 56%, or $76 million, which was 41% year-on-year growth and 20% above the high end of our guidance.
Jeff Tangney: Which was 41% year on year growth and 20% above the high end of our guidance.
Jeff Tangney: In short, we had a better than expected first half of our fiscal year with 19% topline growth and 54% margins, our CFO, who will provide details and guidance in a minute.
Jeff Tangney: In short, we had a better-than-expected first half of our fiscal year, with 19% top-line growth and 54% margins. Our CFO, Anna, will provide details and guidance in a minute.
Jeff Tangney: Okay, turning now to our network growth and engagement Q2 was another record engagement quarter for us our unique active users on a quarterly monthly weekly and daily basis were all up double digit percentages year over year drill.
Jeff Tangney: Okay, turning now to our network growth and engagement. Q2 was another record engagement quarter for us. Our unique active users on a quarterly, monthly, weekly, and daily basis were all up double-digit percentages year over year.
Jeff Tangney: Drilling down to our biggest revenue driver, our newsfeed did particularly well in Q2 setting a new record for articles read we're proud to put our 12 years of proprietary data to use to personalize each news feed for each of our more than 2 million members.
Jeff Tangney: Drilling down to our biggest revenue driver, our newsfeed did particularly well in Q2, setting a new record for articles read. We're proud to put our 12 years of proprietary data to use to personalize each newsfeed for each of our more than 2 million members.
Jeff Tangney: Our workflow tools also set new records in Q2 with over 600000 unique active prescribers as a reminder, our workflow tools include our telehealth facts scheduling and AI assistance, our AI tools grew the fastest with over 1 million Doximity GPT.
Jeff Tangney: Our workload tools also set new records in Q2 with over 600,000 unique active prescribers.
Prompts in Q2, but our <unk> tools grew nicely as well in this age of increasing burnout, we're proud to help doctors save time be more mobile and provide the best care for their patients.
Jeff Tangney: While we're still in the early innings of monetizing these workflow tools, our point of care and formulary products continue to gain traction indeed, 20% of our pharma sales in Q2 came from our workflow related modules.
As health care shifts to be more digital more mobile and more AI powered.
Jeff Tangney: Proud to be leading the way.
Speaker Change: Okay, turning now to our new client portal.
In September we hosted our annual pharma client showcase in New York City, where we were joined by over 150 marketing leaders from our largest brand and agency partners.
Speaker Change: Hit of the day was our panel of top digital doctors, describing how our AI at point of care tools are already transforming their practices and lives for the better or.
Speaker Change: Our clients were excited to hear how we allow doctors to focus more on patients and less on paperwork.
Speaker Change: Excitement was also high for a new client portal, which is now open to more than 40% of our pharma brand clients, among whom our sales growth has been the strongest.
In part that's because upsells are easier at our portal.
Speaker Change: Our best selling add on to date has been nurse practitioner or NP audience extensions.
Speaker Change: Portal identifies NPS, who work for our clients top positions and then can add them at a modest cost to existing programs.
Speaker Change: <unk> conducted over 1 billion patient visits in the U S last year in pharma knows they are an important high growth audience to reach.
Speaker Change: Thankfully they are also heavy doximity users.
Speaker Change: Over the last quarter. We've also seen that AD agencies can be key portal allies for us they help existing clients use the portal and introduce us to new SMB clients as well. So we've created an agency partners program to offer them more training, we've signed a handful of agencies, so far and they've all zero.
Speaker Change: Third as to new six figure clients.
Speaker Change: Based on this positive feedback and sales growth, we plan to rollout our client portal to all of our pharma clients. Starting early next year of note. We are now prioritizing agency partnerships over SMB self service as we see better sales leverage there that's it.
Speaker Change: Our client portal remains a multiyear initiative and we will continue to learn and adapt as we onboard more clients and partners.
Speaker Change: Okay I'd like to end by thanking my Doximity teammates, who continue to work incredibly hard to realize our mission to better health care I personally have never been more excited or more proud about what we're building together.
And with that I'll hand, it over to our CFO <unk> to discuss our financials and guidance Anna.
Anna: Thanks, Jeff and thanks to everyone on the call today second quarter revenue grew to $136 8 million up 20% year over year and exceeding the high end of our guidance range.
Similar to prior quarters, our existing customers continued to lead our growth.
Anna: We finished the quarter with a net revenue retention rate of 116% on a trailing 12 month basis up from 114% in Q2 of last year.
Our top 20 customers remained our fastest growing with a net revenue retention rate of 124% up from 119% in Q2 of last year.
Anna: We ended the quarter with 103 customers contributing at least $500000 each and subscription based revenue on a trailing 12 month basis. This.
Anna: This is a 12% increase from the 92 customers. We have in this cohort a year ago and these customers accounted for 83% of our total revenue.
Anna: Turning to profitability non-GAAP gross margin in the second quarter was 92% versus 91% in the prior year period.
Anna: Adjusted EBITDA for the second quarter was $76 1 million and adjusted EBITDA margin was 56% compared to $54 2 million and a 48% margin in the prior year period.
Anna: This represents adjusted EBITDA growth of 41% year over year as we continue to run a very profitable business with high incremental margins.
Anna: Now turning to our balance sheet cash flow and an update on our share repurchase program.
Anna: We generated free cash flow in the second quarter of $66 8 million compared to $11 6 million in the prior year period, an increase of 475% year over year, primarily driven by higher profits and the timing of quarterly tax payments.
Anna: Last year, we expect to pay roughly 20% to 25% and cash taxes annually and given those payments may vary quarter to quarter. We believe annual free cash flow growth is the best measure of performance.
Anna: We ended the quarter with $806 million of cash cash equivalents and marketable securities.
Anna: During the second quarter, we repurchased $22 $1 million worth of shares at an average price of $29 85.
Anna: We believe repurchasing our shares is a valuable use of the incremental cash we generate above what's needed to reinvest in the business.
Anna: Share repurchase efforts have decreased our fully diluted shares outstanding by roughly 4% since Q2 of last year.
Anna: As of September 30, we had $470 million remaining in our existing repurchase program.
Now moving onto our outlook for the third fiscal quarter of 2025, we expect revenue in the range of $152 million to $153 million, representing 13% growth at the midpoint.
Anna: And we expect adjusted EBITDA in the range of $83 million to $84 million, representing a 55% adjusted EBITDA margin.
For the full fiscal year, we now expect revenue in the range of $535 million to $540 million, representing 13% growth at the midpoint.
Anna: This is an increase of roughly 4% or $19 million at the midpoint after outperforming our Q2 guidance by roughly $10 million.
Anna: We now expect adjusted EBITDA in the range of 274 to 279 million, representing a 51% adjusted EBITDA margin.
Anna: This is an increase of roughly 9% or $24 million at the midpoint after outperforming our Q2 guidance by roughly $13 million.
Anna: Our increased outlook is due to all business is performing better than expected this past quarter as well as the continued momentum we are seeing into Q3.
Specific to our pharma customers are up sell season has shown strong growth driven by a combination of new product traction client portal insights and market stabilization.
In Q2 sales for our new point of care and formulary products were each up more than 100% year over year. These.
Anna: These products are becoming essential modules for our clients and we are excited by the potential to see additional growth year during our upfront season.
Anna: We also continue to see success with the cohort of brands tapping into our client portal to track and enhance their program performance from.
Anna: From real time insights to program expansion recommendations, our clients are leaning into new opportunities to scale their programs on doximity.
Anna: We're pleased that this up some momentum has also continued into Q3.
Anna: As you consider our implied Q4 revenue guidance. Please keep in mind key factors first.
As we've mentioned before our customers are getting more disciplined about completing their annual programs and up sells by calendar year end.
Anna: As we go to launch next year's programs, we anticipate we may see longer launch timelines due to the traction of our new workflow products.
Anna: Any evolution in how our customers deploy their annual budgets. We continue to believe our annual growth rate is the best metric to measure the performance of our business.
Anna: Looking ahead, we believe we are entering the upfront season, and a strong competitive position and we look forward to continuing to deliver value for both our customers and members.
Speaker Change: With that I will turn it over to the operator for questions.
Speaker Change: Thank you and everyone. If you would like to ask a question today. Please press star one on your telephone keypad. Once again that is star one to ask a question. We'll go first to Glen Santangelo with Jefferies.
Speaker Change: Yeah.
Glen Santangelo: Thanks for taking my question.
Glen Santangelo: Obviously, the results were great and I think what everyone's trying to really basically figure out is.
Glen Santangelo: How much of the upside is coming from maybe the market stabilizing where the market getting better maybe Atlanta.
Glen Santangelo: You just suggested versus maybe.
Glen Santangelo: Some of these new product revenues really starting to contribute versus maybe share gains. So that's kind of the first question and the second question. Maybe is on that implied Q4 exit rate into that you were just talking about because if.
Glen Santangelo: If you look at look at <unk>, now, you're sort of forecasting 3% revenue growth and 42% margins as sort of what we calculate and you're kind of making the case that customers are getting more discipline to complete their programs by year end and customers are signing longer programs, but I guess im.
Speaker Change: Clear as to why that would be impacting fiscal <unk> as much as it seemingly is or maybe it's just a lot of conservatism built them theyre not sure and I'll stop there. Thanks.
Jeff Tangney: Hey, Glenn This is Jeff I appreciate your question and I'll hand to Ana for the Q4 question, but to your first question. Yes, we're pleased with our results and we did see as Ana said in her prepared remarks over 100% growth from our new products, which was terrific.
Jeff Tangney: We have seen the market stabilize as well and of course, we think we are gaining share in our core product suites as well.
Jeff Tangney: So the short answer is really all of the above.
Jeff Tangney: Candidly, we don't know yet I think how much of it really is market stabilization, but we can tell you we feel really strong about how were doing again relative to our competition.
Jeff Tangney: In terms of our user growth, which again at record levels on a daily weekly monthly quarterly basis.
Speaker Change: Yeah, Hey, Glenn and thanks for the question. So with regards to Q4, specifically I'll just reiterate the two dynamics I mentioned in my prepared remarks. So first digital HCP has become a bigger line item for our customers. They have set up more guardrails around how annual budget can be deployed and what they're wanting to do is limit budget dollars.
Speaker Change: Crossing between calendar years, so what that means is that we're seeing less revenue dollars from calendar 2024 programs flow into our fiscal Q4.
Speaker Change: Then the second dynamic is that while we are excited by the potential for another strong annual buying cycle. It is just too soon for us to know what the mix is going to look like of new brands and new products and what those launch timelines for next calendar year might look like especially given the way new products are resonating with clients.
Speaker Change: Likely we could see a stronger mix of sales come from those products and those products typically do have longer launch timelines.
Speaker Change: Like Korlym altogether here and reiterate that this is a good example of how evolving industry dynamics or the product mix can lead to quarterly variations in revenue growth and changes in the shape.
Speaker Change: And that's why we think it's critical to focus on our annual growth rate as the best metric to measure the success of our business and we've seen strong momentum there over the past six months and we're really encouraged by.
Speaker Change: Thank you very much.
Speaker Change: The next question is from Brian Peterson Raymond James.
Speaker Change: Hi. Thank you this is jonathan to carry on for Brian Congrats on the quarter.
Speaker Change: So first on the self serve portal, it's nice to hear about the continued progress there I think you've sort of spoken to it in three waves before referencing our recommendations and pricing phase and then a content creation phase. It was in beta in the past can you just explain what you expect to go live with all clients next year is that all of that functionality or can you just remind us on the roadmap and how you're monetizing that.
Jeff Tangney: Yes. Thanks, Jonathan This is Jeff So I'm really pleased with our <unk>.
Jeff Tangney: Content portal, our client portal and how that's been growing as we mentioned in our prepared remarks, we're seeing really stronger growth from clients who are on that we are over 40% of clients on today and early next year, we plan to roll it out to all of our clients. So obviously, we were pleased with how it's doing we want all of our clients to have it.
The key thing I think we've learned is that these recommendations. These easy packages that clients can just go see.
Jeff Tangney: <unk> and MP extension package can be a great growth driver for us and again really drove a good upsell season for us this past summer.
Jeff Tangney: We do have the content creation capabilities coming online and they are going well, but as we alluded in our prepared remarks, we're really seeing more growth opportunity and working with agency partners in the short term as opposed to going direct to small clients.
Jeff Tangney: With a full end to end self serve option.
Jeff Tangney: And so we're going to prioritize working with those agency partners first in part because it matches the land and expand go to market motion. That's worked so well for us for the last decade.
Jeff Tangney: Just to remind you we would work with a top 20 pharma company worked with one of their brands and then expand to 15 or 20 of their brands. So.
Jeff Tangney: So that land and expand.
Jeff Tangney: And then the way we would get small clients in the past it was really the lateral movement of a lot of our brand manager clients from big pharma going to small pharma.
Jeff Tangney: See a similar land and expand motion. However, with these agencies, who do tend to work with dozens of different brands and again, we can use the same sort of proof and trust of ROI when in E&C works with US on brand day to then also go work with them on brand B and C. So we're going to lean a little bit more into that motion but.
Jeff Tangney: Overall.
Jeff Tangney: Our product roadmap for this I've been really excited by the growth and the team has been doing a great job on our clients really do just prefer the ability to have this in place dashboard, we call it but in flight the idea they're flying they're planning on their program and seeing the results every day, which is build trust in our day.
Jeff Tangney: And our ROI and again, our clients are just more engage we're more top of mind with them every day.
Jeff Tangney: So.
Jeff Tangney: Moving ahead, we're not going to give.
Jeff Tangney: All sorts of product roadmap details, but suffice it to say again, starting early next year, we'll have all of our clients on our client pool.
Jeff Tangney: Very helpful. All right. Thanks, Jeff.
Jeff Tangney: Stephanie Davis from Barclays does that neck.
Stephanie Davis: Hey, guys. Thank you for taking my question and congrats on an awesome quarter.
Speaker Change: There were a lot of bright spots, but engagement with an especially bright one so I wanted to hear a little bit more about what.
Jeff Tangney: So Jeff is that to be a platform.
Jeff Tangney: <unk> strategy or do you think really seeing a change in how folks.
Jeff Tangney: <unk> got them deployed itself.
Speaker Change: Well thanks Stephanie.
Speaker Change: Was a lot of bright spots in this quarter.
Speaker Change: I'll speak to the the bright spots from a physician and clinician engagement and then I'll turn to Andy maybe to speak to that.
Speaker Change: The client engagement a bit but on the physician side. There are two things we highlighted first in our news feed and an all time record high of articles tapped articles read which now we're just really proud of we're so proud to help doctors stay up to date on the clinical news that matters most of them, especially in this world that is increasingly noisy from a media landscape and we're so proud.
Speaker Change: To keep the clinical focus on what doctors need to provide better care for their patients and again for that to do well in a very heavy new cycle and other things I think is aside of the doctors are keeping their heads down in treating their patients and doing their best work. So we're we're proud to help with that the other record highs that with a number of workflow users with.
Speaker Change: <unk> helped and aided some 600000 in the quarter the fastest growing piece of which was our AI. So we're really excited to put multiple AI models to work for our doctors, who use perplexity to help them answer questions, where they want to cite the sources and know the provenance nowhere the guideline came from.
Speaker Change: We use open AI to help them write the letters or the prior authorization or the patient education, but the net result of all of that was a lot of growth and we're really excited I think about the <unk>.
Speaker Change: AI can do for doctors specifically.
Speaker Change: For health care more broadly I think the.
Speaker Change: The growth and opportunity there has been terrific.
Speaker Change: Yes, So I think you're also asking a little bit about client engagement with the portal and that's definitely something that we see reflected in the numbers. So our brands have access to our portal once again grew quite a bit faster than our overall pharma business in Q2, so that cohort of brands has certainly been responsible for helping to increase our revenue outlook.
Speaker Change: I mean Q2, I think what we saw with these brands more was there we're leaning heavily into the recommendations aspect of the portal. So Jeff mentioned in his prepared remarks, the NPS throughout the biggest add ons that we saw and these recommendations are helping our clients make easy upsell decisions and focus on maximizing ROI. So we're really pleased with the trajectory and the engagement that.
Speaker Change: We've seen some pharma client portal and how that's already helped our business and the other thing I'll say on that is I. Just think we are in the early innings here too.
Speaker Change: Okay Dovetailing on that question then so when you think about how that portal.
Speaker Change: Optimize this higher level.
Speaker Change: Is it a lack or you're thinking of boring right you can try to drive more sustainable.
Speaker Change: Engagement or is it kind of still to come.
Speaker Change: Okay.
Speaker Change: I assume youre talking Stephanie about our clients' engagement and I'll just say prior to this portal that we've worked so hard in the last year really the only way clients work with us with the E mail or call us at.
Speaker Change: And this is a lot of friction to all of that and we've heard it from our agency partners now as well and so it's just so much easier better if I've got a AAM meeting on Thursday, and it's Wednesday afternoon to go pull up our portal get the latest stats understand your ROI see what's working what's not working.
Speaker Change: So just they don't want to do another video call. Another E mail another phone call and again, we're making that all just a lot lot simpler and easier for them.
Speaker Change: And our engagement that is the amount of time, our clients are spending in the portal has been.
Speaker Change: Impressive higher than we would've expected so I.
Speaker Change: Hope that answers your question.
Speaker Change: Thanks, So much and thank you for joining my airport background noise.
Speaker Change: Okay.
Speaker Change: The next question is from Jared Hi, William Blair.
Speaker Change: Hey, good evening and thanks for taking the questions. This is Jared on for Ryan Daniels, maybe I'll just tack on a quick follow up as it relates to the.
Speaker Change: User engagement in the quarter I'm curious are you seeing any differences and engagement by I guess specialty I know you talked a little bit about the dynamic with MTS, but just sort of beyond that any differences by specialty or therapeutic area that would be incremental or different than what you experienced in the past.
Speaker Change: Yes, thanks Darren.
Speaker Change: As we've shared in the past Telehealth has also been a great growth factor and driver for US and that was also at record highs this quarter.
Speaker Change: In terms of specialties. The one thing we've highlighted endocrinologists, who are the core specialty for <unk> ones. So an important I think commercial audience for us. They are among the heaviest users of telehealth and we have a high percentage of endocrinologists in the country, who use us every every week.
Speaker Change: Every month to communicate and see their patients.
Speaker Change: Really fits very well with that model of <unk>.
Speaker Change: Seeing folks titrating their meds.
Speaker Change: But again doing that in a nice face to face visits that they can do from home. The other thing I would highlight is going back to the <unk> for a moment.
Speaker Change: We said mp's been really popular on our portal and we've been prioritizing the more in our growth strategies. They are one of the fastest growing professions in the country. According to the Bureau of Labor statistics.
Speaker Change: And.
Speaker Change: Over 1 billion businesses this past year.
Speaker Change: So one of the new products that we're coming out with here is what we call NP navigator, which is helping them find the right school to go to become an NP and to further their training as an EMP, which is sort of complexity. There's over 500 different programs out there they have to get preceptorships with doctors in order to get the right training. So.
Speaker Change: So we have thousands of reviews now that we've gathered up from MTS themselves about their programs I am pleased to announce that the number one online school is Duke University that everyone in person school as University of Miami.
Speaker Change: And again, we're providing a simple place like we've done with our residency navigator for.
Speaker Change: Medical school students, new graduates and that product has gotten to 90% of graduating medical school students who use us.
Speaker Change: As with MP navigator, we will have similar.
Speaker Change: Sort of ongoing evergreen use as they are finding the best training and sharing within their profession. The best places to be trained.
Speaker Change: Okay, that's great to hear and I appreciate all that color and then maybe for you I just had one on the guidance and maybe just to put a fine point on sort of the assumptions for the second half year, because it looks like.
Speaker Change: The implied sort of step up in Opex relative to I think it was flat in the first and second quarter here. So just any anything you'd share in terms of I guess investment areas. It sounds like obviously with the rollout of the corridor, maybe there is some incremental investment there or things around AI, just anything you'd call out in terms of the second half investment priorities.
Speaker Change: Yes definitely thank you for the question. So a couple of things first and foremost since.
Speaker Change: Since Q3, and Q4 are typically our highest sales quarters.
Speaker Change: Also our highest commission quarters and given the way we're pacing for the year. We are expecting strong commission payout. So that is a natural step up that we see into Q3 and Q4 every year as far as some of the newer investment areas. As we mentioned last quarter as of September 1st we're now buying the weekly prescription data and set up monthly to provide even stronger real time.
Speaker Change: For our clients, but that's certainly a factor in the back half expense growth and then we're also focusing on hiring commercial R&D sales rep sales leadership to continue to build on our client portal and enhance all of our other offerings. So it's very standard for us to see the back half step up and the other thing.
Speaker Change: I will note is that we are now guiding to a 49% EBITDA margin in the back half of the year and so we think very consistent with our overall margin trajectory.
Speaker Change: Perfect if that makes sense and congrats on all the momentum.
Speaker Change: Your next question comes from Elizabeth Anderson Evercore ISI.
Elizabeth Anderson: Hi, guys. Congrats on the quarter very nice to see and thank you for the question I have no question about agency partnerships I mean that that's such an interesting opportunity.
Elizabeth Anderson: Opportunity and a way to further leverage not only your own sales efforts, but sort of the Tam and the reach in there how do you see at least from the early learnings there.
Elizabeth Anderson: The impact of that and where have you sort of see that both from an AR.
Elizabeth Anderson: The biggest impact from an efficiency internally perspective, and then the types of customers that that really has allowed to leverage into.
Elizabeth Anderson: Okay.
Jeff Tangney: Yes. Thanks, Elizabeth this is Jeff I'll speak to that.
Jeff Tangney: Yes. The agencies, we've always worked with at least in some degree we contract directly with with end clients, who work directly with end brands, but agencies are involved in most of our work in business, but.
Jeff Tangney: But with the portal I think we've really opened up a new place for them to really engage and.
Jeff Tangney: Smart in front of their clients in a better reports on ROI and what sort of content is resonating and not resonating and insights. So we really think it's a big win win here for us with agencies and we have worked on.
Jeff Tangney: Better agency alignment in our business.
Jeff Tangney: So part of that will be as part of this agency partner programming letting them author the content, we will still approve it.
Having them offer it within the portal, which should be.
Jeff Tangney: Small lift to our overall margins since it will be work that we're not doing that they can do but interestingly when we let them do that we see that they actually get content approved faster.
Jeff Tangney: Understand the internal legal processes.
Jeff Tangney: These top 20 pharma better and Thats good news for Us I get the program's launch faster and as either ROI is slightly higher as well, which means that they are finding the right tone and the right residents I think with with their content. So we think it's a real win win for us to work with agencies and as we said in our prepared remarks, we've already had multiple.
Jeff Tangney: <unk>.
Jeff Tangney: Client referrals, new clients they brought us that we've never worked with before that.
Jeff Tangney: Our six figure clients. So we're excited to do that more of that we just got an email from one of them yesterday.
Jeff Tangney: One of our new program partners. They just signed their contract this week in May.
Jeff Tangney: 70 emails that are chomping at the bit to get access to the portal.
Jeff Tangney: Which I think speaks to the excitement they have I think to have some of this analytics can be done for them in a more seamless way because a lot of what agencies do.
Jeff Tangney: Putting together a lot of spreadsheets and it takes a lot of time and you'd be surprised how.
Jeff Tangney: Hum manual a lot of that process is today, so haven't had pulled together all in one place.
Jeff Tangney: Like you would expect to do with a Google or with with other major portals I think it is really exciting for them.
Speaker Change: Thank you.
Jeff Tangney: Yeah.
Speaker Change: The next question comes from Allen Lutz Bank of America.
Speaker Change: Good afternoon, and thanks for taking the questions. Jeff you mentioned that workflow tools drove 20% of the pharma revenue in the quarter I think you caught out telehealth back scheduling AI assistant.
Speaker Change: Can you talk about how the growth of those products has been over the past year kind of what was the contribution maybe a year ago.
Speaker Change: And then you also mentioned you are in early innings monetizing these workflows.
Speaker Change: You're trying to understand how much larger can they get is it about penetrating more of your customers are growing share of wallet really trying to understand how big the specific pieces of the business can be.
Speaker Change: Yes, thanks for the question Alan So when.
Speaker Change: Jeff referenced in his prepared remarks is that we've not 20% of our sales in Q2 come from these new workflow products, such as formulary and point of care now if we look back over the last 12 months, obviously, it's going to be a lower percentage of that but it is growing faster than our overall business. We think that we're still in the early innings here of the opportunity.
Speaker Change: And between the engagement, we see in our workplace channels and the and monetize the white space. We believe our workflow modules could be on par with our new speed over the next three to five years. Once again, we're still in the very early inning, but these modules are certainly helping to lead our growth and we do think that over the next three to five years will continue to become.
Speaker Change: Higher percentage of our overall business.
Speaker Change: Got it that's really helpful. Thank you and then one for you on the EBITA margin to 56% in the quarter really really strong how should we think about the incremental cost in the model I mean over the past year, you've invested in a lot of new products point of care peer to peer the client portal and it obviously.
Speaker Change: Youre managing opex growth incredibly well I think it was about maybe a year and a half ago, you talked about 45% plus EBITDA margins.
Speaker Change: Is there any update to that specific target just trying to understand how you think about the incremental cost in the model.
Speaker Change: Yes, thanks for the question Alan So as far as EBITDA expansion.
Speaker Change: Two things here. So one we're still in the early stage.
Speaker Change: Ages of learning, how AI could make our business more efficient and we're also still in the early stages of learning how our client portal could impair.
Speaker Change: Impacts incremental margins.
Speaker Change: At the same time, we're in the early stages of investments in these two areas. So it's just too soon for us to know exactly what medium to long term margins could look like for US. There's no reason for us to believe that we will see margins decreased materially by any means of these investments because we do think we have a lot of upside.
Speaker Change: Through AI and through the incremental margins that our client portal can drive, but we just wanted to get a better understanding on those two aspects of the business before we do dance a updated long term outlook.
Speaker Change: Thanks Anna.
Speaker Change: Next we'll take a question from Michael Cherny Leerink.
Speaker Change: Great. Thank you this is Dan Clark on for Mike.
Speaker Change: Just curious when you look at that and accordingly.
Speaker Change: <unk> revenue in Q, if there were any like common theme.
What drove the outperformance of barrel like specific drug.
Speaker Change: Drug classes that you saw particular strength in marketing campaigns or anything like that.
Speaker Change: Thank you.
Speaker Change: Hey, Mike Thanks for the question, so I'll get back to some of the things you said earlier. So it wasn't all business has performed better than expected in Q T. R pharma business as well as our health system business I would say most of the growth was led by pharma is we had a really strong upsell season.
Speaker Change: But the strength was broad based there wasn't anything specific class of drugs or therapeutic area that was unique that led the growth I would say kind of the two factors that we pointed to are the client portal, helping to provide real time insights and recommendations and then also new product traction, but that once again has been broad based across.
Speaker Change: Many of our pharma brands at clubs.
Speaker Change: Thank you.
Speaker Change: Your next question is from Scott selling health Keybanc.
Speaker Change: Yeah.
Speaker Change: Hi team. Thanks for taking my question, so I kind of want to follow up on Jeff's question at the beginning of the Q&A session. Here. If you look back at last year, where you had the portal up and running I think you've maybe potentially lost some market share to competitors that had the portal now after successfully launching yet.
Speaker Change: Youre seeing some market share gains back and then ultimately into next year. When we have all of your clients on our portal, we should be really unlocking a lot of up selling opportunities here.
Speaker Change: Through the portal just kind of wanted to understand where you think market conditions will be overall for next year and how much more market share gains you can potentially do next year versus prior years.
Speaker Change: With your with your portal.
Speaker Change: Yes. Thanks, Scott This is Jeff So I'll begin and then maybe Andy can speak a little more to the longer term.
Speaker Change: If we look back on it yes, I think we have the best product that we werent the easiest to buy a year and a half ago and now the portal has helped us really fix that problem and beyond just being easier to buy I think we're also providing them additional insights that really are I think putting us again at that strategy table with our clients where we are.
Speaker Change: He has been but now even with I think a greater level of influence and an insight. So I think that's that's been terrific.
Speaker Change: So I'll, let Dan speak to the market growth yes.
Dan Clark: It's still early we are in our upfront season right now, we're having discussions with our clients.
Dan Clark: As of right now we are.
Dan Clark: No reason to believe that we're going to see much of a change in pharma budget growth at least for this next year and we'll know a lot more in December and we'll obviously give you a more robust update.
Dan Clark: In February I'll just.
Dan Clark: Remind you that if we think about our industry. It's evolved a lot over the past five years right. So pre pandemic pharma was spending just about 17% of their budget digitally during the pandemic, we saw massive acceleration to digital.
Dan Clark: Budget growth of roughly 30% to 40% a year and then sustained efficacy at a little bit of a digital detox, if you well and we're seeing budget growth now in the mid single digit.
Dan Clark: As we look ahead, we believe farmers still very under indexed digitally and we don't believe long term that mid single digit is that long term industry growth rate, but as far as we see in the near term. There is nothing that suggest that that's going to change at least in the next year or so but over the medium to longer term. We do think we'll see a higher <unk>.
Dan Clark: With rate for our overall pharma budgets.
Speaker Change: Great. Thanks, and then I guess I would follow up with you I think.
Speaker Change: Quarters ago, you outlined about.
Speaker Change: Growth from the health care end markets baked into your guidance for this year has that changed.
Speaker Change: Recently thanks.
Speaker Change: Yes, we've definitely seen stability in our health system business over the past six months and so if we look at our expectations today versus our expectations six months ago.
Speaker Change: Anything marginal improvement there, but I'll continue to reiterate that the majority of our outperformance has been led by our pharma business.
Speaker Change: Thanks, so much.
Speaker Change: The next question is Scott Berg from Needham and company.
Speaker Change: Hi, everyone Super Nice quarter here I guess, just one question for me.
Speaker Change: Through the first season, using the portal and I know not.
Speaker Change: All your clients or on it yet but.
Speaker Change: Any commentary in terms of what Youre seeing pricing there would hold up that the same as if the clients working with you directly and not on the portal and then as you look back at the first several months on.
Speaker Change: On your customers using it is there any lessons in terms of things you might tweak going forward that might be interesting to note as you head into next year.
Speaker Change: Yes, Scott Jeff here, it's probably too soon to be doing too many analyses around the pricing and the recommendations, but suffice it to say I think we we think we've given ourselves more granularity here more levers and again, we've made it easier for them to have these add on packages.
Speaker Change: In terms of things, we would do different I mean of course, there is theres always things we learn as we go through this I guess I hesitate to get into too many specifics, but I will say I think the agency angle that we've found in the last quarter.
Speaker Change: Been going really really well and again I think folks.
Speaker Change: On Wall Street, a tool for a while that we need more agency alignment and though I feel happy that I think we're finally, finding it we're making them look smart we're looking smart we're not just taking money out of their pocket right, which is what we've done historically and it feels nice to be working together with them.
Speaker Change: Got it helpful. Thank you.
Your line you think I'm curious has the next question.
Speaker Change: Alright, thank for taking my call.
Speaker Change: Quick question on <unk>.
Speaker Change: <unk> customers as they become more and more.
Speaker Change: Okay.
Speaker Change: Yes things are okay, but one of your company either Panther and welcome M&A.
Speaker Change: And given the potential for rate cuts.
Speaker Change: Okay.
One other customer that acquired desktop.
Speaker Change: Revenue would have been can you walk us through what typically happens.
Speaker Change: Okay.
Speaker Change: And they'll go to channel marketing approach.
Speaker Change: Alright.
Speaker Change: Alright, Thanks for the question I'll take the first part about our largest customers and I'll, let Mitch chime in on the second part so yeah, we've definitely seen our largest customers continue to lead our growth specific to our top 20, and we actually saw our net revenue retention rate of 124.
Speaker Change: Percent over the past 12 months comparing that to 119% in Q2 of last year. So we've seen pretty strong acceleration there in top 20, we're continuing to find ways for these customers to extend their programs such as adding point of care modules or adding <unk> to our client portal recommendation.
Speaker Change: So we believe we're really in transparent top 20, and doing very well and very excited about where we can take the long tail of some of the agency partnerships and the client partner.
Speaker Change: And this is Nate I'll, just chime in and add certainly M&A is something that's quite common in the industry a lot of the top 20 clients have.
Speaker Change: Pretty robust pipeline strategies that involve M&A and while we don't often name our clients or call out case studies on these calls we have been a few in the past a good example, here might be bio Haven App was a company, where we had great relationships both with the brands, but also with the C suite of the company.
Speaker Change: Oftentimes with these smaller clients were able to have a relationship with both because it's a tighter cohort of people.
Speaker Change: And because they were smaller and I think they were able to be a little more nimble when it came to adopting digital first or digital forward strategies that began with tactics like doximity, rather than beginning with the reps or some of the more historical.
Speaker Change: Marketing methodologies that that pharmacies over the decades, and so when when M&A occurs that often becomes a great sort of.
Speaker Change: Cultural Trojan horse in many ways.
Speaker Change: Can can help us have new hotspots with digital first strategies within these larger top 20 customers.
Speaker Change: Okay.
Speaker Change: And then just one quick question.
Speaker Change: Hum.
Speaker Change: Yeah.
Speaker Change: Oh My gosh.
Speaker Change: That's for sure from a similar end markets.
Speaker Change: Uh huh.
Speaker Change: I'm, calling on them.
Speaker Change: On a comparable.
Speaker Change: Yes, thanks for the question so.
Speaker Change: I'll be brief on it but we continue to steadily increase in prices, but it isn't our primary growth leverage that if we think about our key growth levers pricing is on the lower Roe.
Speaker Change: Right.
Speaker Change: Yeah.
Speaker Change: We'll take our next question from Eric Percher Nephron.
Speaker Change: Thank you.
Speaker Change: Going to the upfront selling season I'd love to get your take on the competitive environment and going back to Andrew's commentary earlier does it feel like there was an increase in competition coming out of the pandemic.
Speaker Change: You've clearly equalized kind of the go to market and other elements here with the portal.
Speaker Change: How do you feel about kind of external factors of competition and then balance by the internal actions you are taking.
Nate: Hey, this is Nate.
Nate: Feel good about our ability to gain share and our competitive positioning I think a lot of that comes from the deep and high trust relationships, we have with our clients.
Nate: We've heard from some of our clients that some of these competitive areas like programmatic share may have stabilized. There are some platforms have been losing a bit of share, but really our focus is inward and us towards our clients and.
Nate: Our clients have had to go through a lot in the past few years everyone's still learning.
Speaker Change: As Ana said, but.
Speaker Change: Our ability to have really high quality product reach authentic engagement and doctor Centricity to these commercial programs.
Speaker Change: It means key and we think when our clients sit down and take a breath and look at the ROI, we feel real good about our ability to come out on top.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: And you had a comment about <unk>.
Speaker Change: Next year's launches and perhaps longer timelines I think that was.
Speaker Change: Turning to new workflow products can you just go a level deeper on.
Speaker Change: Cause and effect there.
Speaker Change: Yes, sure so listen anytime we have a client by a product for the first time it takes a little bit longer to go lives we have to create the content.
Speaker Change: And we're still in growth phase right now with our workflow products. So when we look at our Q4 guidance. We're just trying to bake in plenty of time to get those programs lives and especially given the traction we've seen with our workforce products year to date. It is very possible that we will see a higher mix of Q3 sales come from those products. So that's.
Speaker Change: We're seeing we're just baking in plenty of time to get these programs life just because they are newer programs for a lot of our clients.
Speaker Change: Got it thank you.
Speaker Change: A reminder, everyone star one if you have a question next up is John Park Morgan Stanley.
John Park: Hi, This is John stepping in for Craig Thanks for taking my question.
John Park: It's been about a year since the company withdrew the five year revenue growth target as far as the.
John Park: Rule of 65 target I was wondering if management or the board.
John Park: The intention to revisit those goals.
Speaker Change: Yes. Thanks for the question John listen, it's we're still early in the evolution right now of our client portal and really what the long term market growth rate and so I'll kind of go back to my answer from an earlier question that I think that we're in a phase <unk>.
Speaker Change: Here, we don't know what the long term pharma digital market growth rate as we think it's probably a little bit too low right now, but until we get a little bit more stability on that long term growth rate and then we get a better sense of what our client portal could be long term and how much growth, we could see theoretically from SMB long term.
Speaker Change: We're not going to give us an update on those targets until that so.
Speaker Change: I wouldn't expect anything from us in the near term on that.
Speaker Change: Got it.
Speaker Change:
Speaker Change: And what are some art agency partners, saying about client spending landscape.
Speaker Change: Post election World, just trying to get a sense of.
Speaker Change: <unk>.
Speaker Change: Optimism or pessimism moving forward. Thank you.
Speaker Change: Hey, John This is Nate Youre right agencies do help us keep our finger on the pulse and get a little bit better of a view into the macro.
<unk> commented a lot on the other benefits.
Speaker Change: Benefits that we get from our agency partners.
Speaker Change: With regards to the election I will say, it's still early we continue to take a more cautious than longer approach to the overall market and elektron results can certainly introduced new uncertainty too.
Speaker Change: Our partners, but in general we're in a relatively well insulated platform at the moment I'm not sure. Our particular products are uniquely exposed in a positive or negative way too.
Speaker Change: What were some of the leading <unk>.
Speaker Change: Substantial platform.
Speaker Change: Pillars that the candidates have and will highlight.
Speaker Change: The ICL with <unk> pharma ETF.
Speaker Change: It's up around 11% year to date and if you look at it over to the window that the election stabilized and concluded it's remained pretty stable. So the people who spend all day thinking about this arent or haven't yet price skin much risk or upside even in a world with many complex ongoing layers.
Speaker Change: I appreciate it thank you.
Speaker Change: Everyone. At this time there are no further questions I'll hand things back to Jeff for any additional or closing remarks.
Jeff Tangney: Thank you so I'd like to end just by thanking our entire doximity team for their hard work, serving more doctors everyday than ever before thank you and thank you everyone else for joining.
Speaker Change: Once again that does conclude today's conference. Thank you all for your participation you may now disconnect.
Yeah.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Yeah.