Yahoo Finance DocGo Inc. (NASDAQ:DCGO) Q4 2023 Earnings Call Transcript
DocGo Inc. (NASDAQ:DCGO) Q4 2023 Earnings Call Transcript February 28, 2024
DocGo Inc. misses on earnings expectations. Reported EPS is $0.06 EPS, expectations were $0.13. DocGo Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day, ladies and gentlemen and welcome to the DocGo Fourth Quarter and Full Year 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. The question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Mike Cole, Vice President of Investor Relations. Please go ahead, sir.
Mike Cole: Thank you, operator. Before turning the call over to management, I would like to make the following remarks concerning forward-looking statements. All statements made in this conference call other than statements of historical fact are forward-looking statements. The words may, will, plan, potential, could, goal, outlook, design, anticipate, aim, believe, estimate, expect, intend, guidance, confidence, target, project and other similar expressions may be used to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and we cannot assure you that we will achieve or realize our plans, intentions, outcomes, results or expectations. Forward-looking statements are inherently subject to substantial risks, uncertainties and assumptions, many of which are beyond our control and which may cause our actual results or outcomes or the timing of results or outcomes to differ materially from those contained in our forward-looking statements.
These risks, uncertainties, assumptions include, but are not limited to, those discussed in our risk factors and elsewhere in DocGo’s annual report on Form 10-K, quarterly reports on Form 10-Q, and other reports and statements filed by DocGo with the SEC to which your attention is directed. Actual outcomes and results or the timing of results of our outcome may differ materially from what is expressed or implied by these forward-looking statements. In addition, today’s call contains references to non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are provided directly as part of this call or included in our earnings release, which is posted on our website, docgo.com, as well as filed with the Securities and Exchange Commission.
The information contained in this call is accurate as of only the date discussed. Investors should not assume that statements will remain relevant and operative at a later time. We undertake no obligation to update any information discussed in this call to reflect events or circumstances after the date of this call or to reflect new information or the occurrence of unanticipated events, except to as the extent required by law. At this time. It is now my pleasure to turn the call over to Mr. Lee Bienstock, CEO of DocGo. Lee, please go ahead.
Lee Bienstock: Thank you, Mike and thank you all for joining today. It is certainly fair to say that 2023 was an eventful year and my first hundred days as CEO were laser-focused on setting an ambitious vision for how we will proactively help make patients healthier and help keep them out of the hospital. Our record Q4 and full year results are proof that this vision is taking shape, and I look forward to continuing to build on this momentum in 2024 and beyond. During the quarter, we experienced significant growth and strong operational execution as we made considerable progress with our core strategic objectives in all three key customer verticals, insurance partners, hospital systems and our government population health programs.
I’m going to share accomplishments and progress across all three of these verticals, but first, I want to lead off with our financial performance and guidance for 2024. In Q4, we grew revenues and adjusted EBITDA to $199.2 million and $22.6 million, respectively, up 83% and 232% when compared to the fourth quarter of 2022. In the fourth quarter alone, DocGo performed over 72,000 mobile health interactions and 190,000 medical transports globally, while leveraging a workforce of now more than 8,000. We continue to grow not only in size, but also in scope as we have more than doubled our service offerings in the last year to include procedures such as bone density scans, depression screenings and other valuable services we can deliver where convenient outside of the traditional brick-and-mortar healthcare system.
While there is more work to do, we made substantial progress late in the fourth quarter with our cash collections and that trend has accelerated in 2024. Subsequent to year end, we have collected approximately $120 million in outstanding receivables and are working with our largest customers to maintain a more consistent cadence going forward. We’re also moving into a more mature state with some of our recent municipal and population health initiatives and are seeing the associated higher costs that came with those program launches abate. This puts us in a strong position to achieve improved adjusted EBITDA margins and cash flow as we progress through 2024. On that note, today, we updated our 2024 revenue guidance to a range of $720 million to $750 million.
This is consistent with our previously disclosed view that suggested 2024 revenue would exceed $700 million. Our 2024 adjusted EBITDA guidance range is $80 million to $85 million. We also recently announced a share repurchase approval for up to $36 million. DocGo is confident in our cash position, we are confident in our cash collections, we are confident in our access to capital, and we are confident in our strong business fundamentals. At current valuation levels, we believe that share repurchases represent an efficient and value-enhancing use of capital. Since becoming CEO, I centered our efforts around our core customers, insurance partners, hospital systems and government population health programs. Now, I would like to share progress and growth on all three.
First, one area that is relatively small, a relatively small contributor to revenues today, but which we believe offers tremendous growth potential, is our care gap closure programs with major insurance companies. The core initial focus of these programs is on non-compliant patients who have not seen their primary care provider in over a year and have at least one chronic condition. By leveraging our mobile capabilities and meeting patients where they are, by bringing care to their homes, we are validating to these customers that we can improve patient compliance rates materially. We are now offering over 30 different care gap closure services, including colon cancer screenings and diabetic retinal exams. Late in 2023, we launched payer programs in Michigan, Connecticut and New Jersey, and during the fourth quarter alone, we more than doubled the number of patients seen under these programs when compared to the third quarter, and we expect that trend to continue.
The reality is, that a certain percentage of the population simply avoids or is unable to go to a traditional brick-and-mortar facility for these services. By making the process extremely convenient and efficient in the comfort of their own home, we can improve health outcomes, lower costs, help stratify risk and help keep people out of the hospital, which is what our insurance partners want. And it’s, of course, what our patients want. Our remote patient monitoring efforts continue to progress as well. We currently monitor approximately 50,000 CIED or Cardiac Implantable Electronic Device patients, which is up from 38,000 at the start of 2023. We continue to see a significant opportunity in our monitoring efforts, both on a standalone basis and as part of our HEDIS quality score improvement and value-based service offerings.
Second, with our Medical Transportation segment, which is largely hospital systems, we closed out the year with another strong performance. To put the progress in perspective, in the fourth quarter of 2023, this business was at a revenue run rate of $160 million with a gross margin of 28.9%. Closing the year, that run rate was $190 million with a gross margin of 37.5%. We announced a number of meaningful RFP wins in the second half of 2023, both domestically and in the UK, which we expect will continue to help drive strong growth in 2024. We have also placed a significant emphasis on cross-selling and growing our Mobile Health presence with our hospital system partners, and expect the results of that effort to begin yielding benefits later in the year.
And third, in the government RFP channel, we currently operate population health programs in Arizona, California, Michigan and Tennessee in addition to New York. These represent excellent opportunities to prove our value proposition and grow these geographies over time, much like we have done so successfully in the northeast. Our work with asylum seeker populations in New York has enabled us to expand and augment DocGo’s offerings, including scaling our behavioral health competency by performing over 50,000 depression screenings, growing our mobile pharmacy to prescribe over 70 different types of medications, and increasing our vaccine administration capacity to over 40 different types of vaccines. We will continue to expand our capabilities and use this institutional knowledge and experience to create valuable new programs for current and prospective customers.
A great statistic that highlights the value we are providing. We estimate that in 2023, we prevented over 54,000 unnecessary emergency room visits and saved our partners and their patients over $167 million in healthcare spending across our various programs, demonstrating just how much of a positive impact DocGo can have for our partners and perhaps more importantly, for the communities we serve. The impact and reach of our business extends far beyond underserved populations like the homeless and asylum seekers. We provide Medical Transportation for hundreds of hospitals, we deploy vaccination programs in multiple states, we monitor tens of thousands of cardiac patients, we close care gaps for bedbound, chronically ill and so much more. In summary, our mission remains the same, to continue bringing healthcare to people where and when they need it, which we did for many hundreds of thousands of patients in 2023 from all walks of life, all with the goal of helping keep them out of the hospital and we’re seeing great success with this effort.
At this time, I’ll turn the call over to Norm, our CFO, to review the financials for both the fourth quarter and the full year 2023. Norm, please go ahead.
Norman Rosenberg: Thank you, Lee and good afternoon, everyone. Total revenue for the fourth quarter of 2024 was $199.2 million, which was a 7% increase from a quarter ago and an 83% increase from the fourth quarter of 2022. For the full year, total revenue was $624.2 million at the high end of our upwardly revised guidance range, and more than 40% higher than full year 2022 revenues of $440.5 million. Mobile Health revenue for the fourth quarter of 2023 was $150.4 million, up 8% from the third quarter and more than double the levels of fourth quarter 2022. We experienced growth across several projects, business lines and geographies. Medical Transportation revenue increased to $48.8 million in Q4 of 2023, 32% higher than the transport revenues we recorded in the fourth quarter of 2022.
Nearly every transportation market witnessed year-over-year revenue growth, continuing the momentum that began in the second half of last year. Transport revenues have now increased sequentially for six consecutive quarters, more than doubling during that time. In the fourth quarter, Mobile Health revenues accounted for about 75% of total revenues and transport for the other 25%. We expect that Mobile Health will continue to account for about 75% of total revenue in 2024. Net income was $8 million in Q4 2023, compared with net income of $4.6 million in the third quarter and net income of $7.1 million in the fourth quarter of 2022. As the fourth quarter of 2022 saw a tax benefit of $9.1 million relating to the release of a valuation allowance for net operating losses.
For the full year, net income was $10 million compared to $30.7 million in 2022. The year-over-year drop in net income is explained by two line items, non-cash stock compensation expense and income tax expense. We have expanded our stock compensation program to include a broader group of managers, so that more of our colleagues who drive strategy and execution are incentivized to maximize shareholder value. On the tax front, in 2022, we realized a tax benefit of approximately $9 million as we released the valuation allowance on our net operating loss carryforwards or NOLs, as we began generating pre-tax income and those NOLs became realizable. In 2023, we recorded income tax expense as we exhausted those federal net operating loss carryforwards due to the generation of pre-tax income.
Our effective tax rate for the fourth quarter was approximately 35%, which we believe is a good assumption for future periods. Adjusted EBITDA for the fourth quarter of 2023 was $22.6 million, up 35% from adjusted EBITDA of $16.7 million in the third quarter and more than tripled to $6.8 million in last year’s fourth quarter. For the full year, adjusted EBITDA was $54 million, a 31% increase from $41.3 million in 2022 and more than doubled the adjusted EBITDA recorded back in 2021. The adjusted EBITDA margin was 11.4% in Q4, up from 8.9% in the third quarter and up from 6.3% in the fourth quarter of 2022. In fact, the fourth quarter’s adjusted EBITDA margin represents the highest level we’ve recorded since the first quarter of 2022, when nearly a third of total company revenues came from relatively high margin mass COVID testing services.
Total gross margin percentage during the fourth quarter of 2023 was 33.5%, up nicely from the 29.5% in the third quarter, but lower than the 39% gross margin recorded in the fourth quarter of 2022. The fourth quarter of 2023 was the highest margin quarter during the year, slightly higher than what we saw in the second quarter. Gross margin in the fourth quarter represented a solid rebound from the subpar levels of the third quarter, which had been negatively impacted by the increased cost that resulted from the recent launch and ramp up of new projects. During the fourth quarter, while we were able to maintain third quarter revenue levels and, in fact, increase them further, we were able to improve margins by bringing overtime costs and subcontracted labor expenses closer in line with their projected levels.
As these projects hit their stride, through the first two months of 2024, we have seen further improvements in these areas and believe that we should see some sequential gross margin improvements in Q1 of 2024. During the fourth quarter of 2023, gross margins from the Mobile Health segment was 32.2% compared to 28.8% in the third quarter and 43.9% in the fourth quarter of ‘22, which had benefited from some one-time high-margin revenue streams. In the Transportation segment, gross margin continued to expand, increasing to 37.4% in Q4 of 2023, up from 31.7% in the third quarter and 29.4% in Q4 of 2022. Transportation gross margin has now expanded for six consecutive quarters, alongside the sequential revenue increases I mentioned earlier, as we’ve benefited from scale, improved utilization and easing of wage and fuel price pressures, and a higher value mix of trips, along with a continued shift toward higher-margin leased hour programs.
Looking at operating costs. SG&A as a percentage of total revenues amounted to 27.6% in the fourth quarter of 2023, up from 24.8% in the third quarter, but much lower than the 38.1% in the fourth quarter of 2022. As revenues increased over the second half of 2023, we saw SG&A decline as a percentage of total revenues, leading to operating margin expansion. We are also regularly reviewing our expense base for efficiency gains, particularly our non-field headcount. During Q1 of 2024, we executed a targeted reduction in force, which resulted in some cost savings that will be realized as we move into Q2 and beyond. Turning to the balance sheet. As of December 31st, 2023, our total cash and cash equivalents, including restricted cash, was $72.2 million as compared to $67.3 million as of the end of Q3.
Our accounts receivable continued to increase, reflecting the spike in revenues that we witnessed over the second half of 2023. This increase in accounts receivable is being driven by our government business, which features a very long initial payment cycle, as we’ve discussed. However, as Lee mentioned earlier, in the fourth quarter, we began to receive payments for this work, with an acceleration of these payments taking place since the beginning of the New Year. A significant proportion of the year end accounts receivable have now been collected in the recent weeks. Looking at our project with New York City’s Department of Housing Preservation and Development or HPD, as of today, we have collected nearly 80% of the year end 2023 accounts receivable for this project, and we are very close to being current on this project.
As we further work down this receivable, we expect that near term collections will be enough to drive our total cash balance higher in subsequent periods, despite our ongoing working capital needs as we grow. The recent collections have allowed us to pay down the outstanding amounts on our credit line and the present outstanding balance is zero. Turning to our guidance and outlook for 2024, we anticipate continued strong demand from our customers for both Mobile Health and Transportation Services. We are forecasting that revenues for 2024 will be in the range of $720 million to $750 million. We anticipate quarterly revenues resembling the levels we saw in Q3 of 2023 throughout the year. As any anticipated declines in migrant related revenues in the second half of the year are expected to be offset by new programs and growth in other areas.
We expect gross margins to come in above the levels of the full year 2023, much more in line with what we experienced in Q4. We expect to see adjusted EBITDA in the range of $80 million to $85 million, with adjusted EBITDA margins expected to be solidly in the double-digit area. We expect that full year 2024 adjusted EBITDA margins will be 250 to 300 basis points higher than the adjusted EBITDA margins we experienced over the course of the full year 2023. Finally, we expect to generate cash flow from operations of $65 million to $75 million in 2024. At this point, I’d like to turn the call back over to the operator for Q&A. Operator, please go ahead.
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