Doximity IPO: Everything you need to know about Doximity
Oliver Brett July 8, 2021 9:48 AM
Doximity proceeded to an IPO in June 2021 on the New York stock exchange. It has found a niche as the LinkedIn of the medical profession and has grown rapidly while regularly posting strong profits. Here's a look at how it got to where it is now and what the future may hold.
What does Doximity do?Doximity has been described as a "LinkedIn for doctors". Reuters says its 1.8 million members represent a remarkable 80% of doctors in the United States. It provides a range of services that facilitate:
Doctor-to-patient contact, via one-tap video calling:
- A search facility that allows doctors to find other medical professionals in seconds
- A user-friendly news and research facility
- A "fax without a fax machine" facility
Doximity was launched in San Francisco in March 2011 on the back of $10.8 million in venture capital funding. It took in further investment of $17 million in September 2012 and $54 million in April 2014.
How did Doximity proceed to an IPO?In its fiscal year ending March 2021, with a full year of pandemic-enforced remote contacts between doctors and patients, Doximity revenues proved spectacular. They jumped by 78% to $206 million while net income jumped 70% to $50 million.
It appeared to the company's founders that now was the perfect time to invite investment from the public. However, when unveiling its IPO prospectus in May 2021, Doximity announced it would allocate up to 15% of shares in the offering to doctors through a "reserved share program."
That meant eligible doctors would have stock reserved for them at the price as a select group of institutional investors. Uber and Airbnb had similar schemes to enable the people who had helped build their networks - drivers and property owners - preferential terms.
The IPO could barely have been more of a success. Its blockbuster public debut on June 24 saw shares opening more than 58% above their offer price. The stock, trading under the ticker symbol “DOCS”, closed at $53, up 104%, on its first day, valuing the company at $7 billion.
>>>Take your position on popular IPOs through CFDs<<<
What has happened to Doximity's shares post-IPO?Doximity stock continued to perform strongly to the end of June, hitting $58.35 on June 28 before some profits were locked in during early July. However there was no indication at this point that the stock was overvalued: it nosed up again on July 7, just shy of the $50 mark.
Does Doximity make a profit?Doximity has achieved a rare double in the world of tech start-ups: rapid growth and strong profits. It does through managing operations in a sober fashion, resisting spending excessive capital while it works out how to retain profitability at each stage of its growth.
One could argue that it is a good example of a scalable business model.
Doximity retains growth and profitability by keeping marketing and sales expenses low and did not need to use the money it raised in 2014.
It uses "the rule of 60" to ensure it chalks up profits annually. This states that the sum of the revenue growth rate and profit margin must be greater than 60. In the fiscal year ending March 2021 its rule of 60 calculation amounted to 102 — 78% revenue growth plus a 24% net margin.
>>>What is an IPO and how does it work? Read our guide<<<
How does Doximity make money?Most of Doximity's money comes from ad revenue. Specifically, drug makers, many of whom have marketing budget to spend in the light of the pandemic, are keen to use such a strongly targeted platform to peddle their wares. Doximity estimates this market to be a $7.3 billion opportunity.
And the good news for shareholders is that it is very hard for anyone else to just wade into the market owing to laws concerning the handling of medical information and verification of doctors.
Interestingly, the markets for recruiting doctors and telehealth - video consultations and the ilk - are even larger — but are much more competitive because both are less heavily regulated.
What is the business strategy of Doximity?Clearly, investors should carefully consider whether Doximity can sustain its rapid growth before deciding whether its stock should be bought or sold.
CEO Jeff Tangney has already warned that the 2020-21 numbers cannot be realistically repeated. But he still expects another 10 years of high growth.
Outlining his plans to Forbes.com, he explained: "Our net retention — upsell minus churn — is up 53%. We land and expand. This year we sign up the vascular surgery department. We walk to the next floor and sign up neurosurgery and orthopedic surgery.
"We have a master service agreement which incorporates a reference selling model and makes it less costly to add a new department after the initial sale."
Of course, such a successful IPO equates to some handy cash in the bank.
But it's not going to be spent any time soon. Tangney said: "We will not bet the farm. We will not acquire for revenue. Our largest customer provides us $24 million in revenue, 80% more than in 2020.
"The proceeds are mattress money. We might use it to acquihire [the practice of acquiring companies primarily to recruits its employees, rather than gain control of its products]."
Who are the senior staff at Doximity?
- Jeff Tangney, co-founder and CEO
- Shari Buck, co-founder and SVP People & Ops
- Nate Gross, MD, co-founder and chief strategy officer
- Anna Bryson, chief financial officer
- Joe Kleine, chief commercial officer
- Jey Balachandran, chief technology officer
How to trade stocks at City Index
You can trade stocks with City Index using spread-bets or CFDs, with spreads from 0.1%. Follow these easy steps to start trading now.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.