Q1 2027 Doximity Inc Earnings Call Transcript
Key Points
- Revenue growth reaccelerated to $157 million in Q1, up 7% year over year, beating guidance by 3%.
- Adjusted EBITDA was $75 million with a 48% margin, exceeding the high end of guidance by 8%.
- Doximity's AI product 'ask' led the independent NOHARM study with the lowest clinical error rate (4.8%) among US models, outperforming competitors like Anthropic.
- Quarterly active workflow prescribers grew over 30% year over year, with nearly half using AI tools and AI prompt volume up 25% quarter over quarter.
- AI search monetization is off to a strong start, with over two dozen programs onboarded and a robust pipeline, driving a full-year revenue guidance raise.
- The company has 165 signed health system AI clients, including top hospitals like Northwestern, Penn Medicine, and the University of Michigan.
- AI scribe users grew 10 times year over year in July, positioning Doximity as a top-three player in both AI search and scribe markets.
- AI search unit economics are favorable, earning more than 10x per search in revenue compared to costs, with potential for margin expansion.
- The company maintains a strong balance sheet with $688 million in cash and no debt, and repurchased $92 million in shares during the quarter.
- SMB pharma business grew over 100% in the quarter, diversifying the customer base and expanding market opportunities.
- Q2 revenue growth is expected to be only 1% year over year due to tough comparisons and modest AI search revenue recognition.
- Gross margin declined to 88% from 91% year over year due to increased AI compute spend, with expectations of mid-to-high 80% margins for the year.
- The overall pharma spending environment remains tight, with budget stability but not significant growth.
- AI search revenue is not recognized in Q1, and the majority of contracted revenue is expected to be recognized in Q3, creating timing uncertainty.
- Free cash flow decreased to $40 million in Q1 due to normal fluctuations in collections, which may impact near-term liquidity.
- Stock-based compensation increased to 23% of revenue, primarily due to an AI-focused R&D grant, which could pressure earnings.
- The company is investing heavily in AI, with over 90% of AI expenses focused on responding to demand, potentially limiting near-term profitability.
- GAAP effective tax rate rose to 40% from 17% due to equity compensation treatment, impacting reported earnings.
- The AI search product is still in early stages with conservative inventory caps and short-term contracts, limiting immediate revenue contribution.
- Competition in clinical AI is intense, with major players like Microsoft and UpToDate, and the market is still evolving toward enterprise adoption.
Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Doximity first-quarter 2027 earnings conference call. (Operator Instructions)
And I would now like to turn the conference over to Perry Gold, Senior Vice President, Investor Relations. You may begin.
Thank you, operator. Hello, and welcome to Doximity's fiscal 2027 first-quarter earnings call. With me on the call today are Jeff Tangney, Co-Founder and CEO of Doximity; and Matt Sonefeldt, CFO.
A complete disclosure of our results can be found in our press release issued earlier today as well as in our related Form 8-K along with a copy of our prepared remarks, all available on our website at investors.doximity.com.
As a reminder, today's call is being recorded, and a replay will be available on our website. As part of our comments today, we will be making forward-looking statements. These statements are
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