NEW YORK, June 19, 2024 (GLOBE NEWSWIRE) -- Bragar Eagel & Squire, P.C., a nationally recognized shareholder rights law firm, is investigating potential claims against Doximity, Inc. (NYSE: DOCS) on behalf of long-term stockholders following a class action complaint that was filed against Doximity on April 17, 2024 with a Class Period from February 9, 2022 to April 1, 2024. Our investigation concerns whether the board of directors of Doximity have breached their fiduciary duties to the company.
Doximity operates a digital platform that provides connections between, medical information to, and patient scheduling tools for medical professionals. The Class Period begins on February 9, 2022, when Doximity released its quarterly financial results for the third quarter of fiscal year 2022, after the market closed the night prior. During the accompanying quarterly investor earnings call afterhours on February 8, 2022, Defendant Anna Bryson, the Company’s Chief Financial Officer, emphasized that “marketers have been able to witness the value of running these digital programs” and that it was this “value that’s the main reason we’re seeing this sustained demand from our customers and not new [COVID] variants.” To this end, Defendant Bryson further assured investors that the Company was “focused on . . . really building a business that can provide years of sustainable growth with high margins.”
The complaint alleges that, throughout the Class Period, Defendants continued to tout the sustainability of the Company’s business prospects while also downplaying the importance of customer upsell rates on the Company’s financial performance. For example, during the Company’s second quarter fiscal year 2023 investor earnings call on November 10, 2022, Defendant Jeffrey Tangney, the Company’s Chief Executive Officer, reassured investors that “pharma’s doing quite well” amid investor concerns that macroeconomic headwinds would substantially impact Doximity’ financial performance. Defendant Bryson similarly emphasized that the Company’s sales pipeline has “bigger dollar deals than we’ve seen before” and, to alleviate investor concerns, explained that, while Doximity’s upsell rates were “a little below historical norms,” customer upsells are “not a significant portion of our revenue.”
Similarly, in February 2023, Defendant Bryson specifically noted that Doximity is “less dependent on major upsell than prior years,” and in May 2023, Defendant Bryson indicated that the Company was being conservative with its financial guidance to the market by assuming upsell rates of “half of our historical [upsell] rate.”
The complaint further alleges that notwithstanding Defendants’ claims regarding the sustainability of Doximity’s growth and profitability, investors began to learn the truth on August 8, 2023, when, after the market closed, Doximity reported its financial results for the first quarter of fiscal year 2024, which ended June 30, 2023. While the Company exceeded its quarterly revenue and adjusted EBITDA guidance for the first quarter, the Company provided disappointing guidance for the second quarter of fiscal year 2024 and slashed its guidance for the full fiscal year 2024. Specifically, Doximity announced that it expected fiscal year 2024 revenue of between $452 million and $468 million (down from prior guidance of between $500 million and $506 million, and representing year-over-year revenue growth of only between 7.9% and 11.7%), and adjusted EBITDA of between $193 million and $209 million (down from prior guidance of between $216 million and $222 million, and representing year-over-year adjusted EBITDA growth of only between 4.9% and 13.6%). In conjunction with the disappointing guidance, Doximity announced that it would reduce its workforce by approximately 10%. The Company further noted that the workforce reduction is expected to cost approximately $8 million to $10 million.
In explaining this about-face, Defendant Bryson admitted that the Company’s “major upsells have materially underperformed, and we expect this to continue in the near term.” Defendant Tangney further explained that Doximity failed to close sales due, in part, to “fewer face-to-face meetings with our clients.” On this news, the price of Doximity common stock declined $7.49 per share, or nearly 23%, from a close of $32.79 per share on August 8, 2023, to close at $25.30 per share on August 9, 2023.
Investors learned more about the unsustainability of the Company’s revenue growth on April 1, 2024, when Jehoshaphat Research published a report alleging, among other things, that “Doximity’s underlying sales . . . are declining at a negative -3-6% rate, but that this decline has been masked through accelerated revenue recognition.” On this news, the price of Doximity common stock declined $1.11 per share, or more than 4% over two trading-days, from a close of $26.91 per share on March 28, 2024, to close at $25.80 per share on April 2, 2024.
The Complaint further alleges that, throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts, about the Company’s business and operations. Specifically, Defendants repeatedly touted the Company’s business prospects and the sustainability of the Company’s revenue growth and profitability, while downplaying the impact of competition and tightening macroeconomic conditions on the Company and Doximity’s reliance on “upselling” products and services (such as additional advertising) to existing customers to sustain the Company’s performance and future growth.
If you are a long-term stockholder of Doximity, have information, would like to learn more about these claims, or have any questions concerning this announcement or your rights or interests with respect to these matters, please contact Brandon Walker or Marion Passmore by email at investigations@bespc.com, by telephone at (212) 355-4648, or by filling out this contact form. There is no cost or obligation to you.
About Bragar Eagel & Squire, P.C.:
Bragar Eagel & Squire, P.C. is a nationally recognized law firm with offices in New York, California, and South Carolina. The firm represents individual and institutional investors in commercial, securities, derivative, and other complex litigation in state and federal courts across the country. For more information about the firm, please visit www.bespc.com. Attorney advertising. Prior results do not guarantee similar outcomes.
Contact Information:
Bragar Eagel & Squire, P.C.
Brandon Walker, Esq.
Marion Passmore, Esq.
(212) 355-4648
investigations@bespc.com
www.bespc.com
