DCGO - DOCGO: DISRUPTING THE TRADITIONAL HEALTHCARE SERVICES SYSTEM
DOCGO: DISRUPTING THE TRADITIONAL HEALTHCARE SERVICES SYSTEM
DocGo Inc. (NASDAQ: DCGO), a leading provider of last-mile mobile health services, is disrupting the traditional four-wall healthcare system by providing high-quality, highly affordable care to patients where and when needed. With Mobile Health, DocGo empowers the potential of telehealth by facilitating healthcare treatment, in tandem with a remote physician, in the comfort of a patient’s home or workplace.
Market Cap: $844.67M; Current Share Price: $8.02
Data by YCharts
The Company
DocGo aims to deliver high-quality, cost-effective healthcare mobility solutions by leveraging its proprietary technology platform powered by artificial intelligence (AI) and its network of healthcare professionals, which has provided service in 29 states and the United Kingdom.
DocGo offers various services, from traditional EMS to mobile urgent care to higher acuity medical services. Its unit economic model utilizes lower-cost healthcare staff for onsite visits, with higher-cost APPs connected virtually via high-resolution video.
Since its founding in 2015, DocGo has had more than 8 million patient interactions, which has enabled the Company to create a promising delivery care model designed to drive greater efficiency and improved access to patient care.
We’ll discuss a few key factors which indicate that DocGo is worth watching out for.
- Operation in rapidly expanding industry segments
The Company operates in two main segments.
Mobile Health Solutions – this health care delivery model limits the need for individuals to seek routine treatment in more expensive and environmentally exposed, less comfortable settings such as emergency departments and urgent care clinics, and also helps reduce unnecessary burdens on healthcare systems.
For its services, DocGo charges a fixed rate per day, per vehicle, and per clinician, mitigating volume-based revenue and margin risk. The Company charges approximately $3,800 daily for a mobile urgent care unit, including vehicle, driver, LPN, RN, APP, and social worker, with a target gross margin of approximately 50% at scale (after 3-6 months). Contract terms tend to be one year with an auto-renew feature for municipal contracts, 2-3 years for state programs, and 3+ years for federal contracts.
Major customers of the Company for this segment include the City of New York, Jefferson Health, and Carnival Cruise Lines. The success of this care delivery model is reflected in DocGo’s NPS, or Net Promoter Score, which for Q4 FY22 stood at 76. These scores are measured from -100 to +100, with scores over 30 commonly viewed as good and over 50 considered excellent.
For FY22, the Mobile Health segment’s revenue for DocGo was approximately $325.9 million, representing approximately 74% of the company’s revenues. The Total Addressable Market for this segment is about $265 billion, indicating much scope for growth and expansion.
Medical Transportation – this service is provided under the Ambulnz brand. The Company helps provide reliable, efficient access to local clinical services, including primary and specialty care, dialysis treatments for chronic care management, and transfers between clinical settings.
DocGo’s leased-hour pricing model provides greater financial predictability – the Company charges approximately $1,500 per day for a dedicated two-person crew and ambulance. For this segment, major customers include Fresenius, Northwell, and HCA.
For FY22, Medical Transport revenue for the Company was approximately $114.6 million, representing about 26.0% of total revenues. The Company has a gross margin target of more than 35% for this segment. The Total Addressable Market for this segment is about $7 – $13 billion. Hence, even a small increase in market share in this segment could result in huge profits for the Company.
- Illustrious Customers, Partners, and Projects
The Company has created customized and highly valuable programs for key segments such as government, hospitals, payers, and events.
Due to its exceptional service, DocGo has built up an impressive base of illustrious clients and projects, as shown below.
As recently as March 2023, the Company announced that it had been awarded multiple new single and multi-year revenue contract wins as well as contract expansions valued at over $180 million over the next three years, including new customer relationships with a premier not-for-profit health system serving Philadelphia and its western suburbs, a leading hospital network on Long Island, multiple federally funded hospitals, a Primary Care Network in South West London, UK, as well as expanded relationships with Philadelphia’s largest hospital network, and with the largest municipal health care system in the nation. To accommodate this growth, DocGo expects to hire hundreds of clinicians and will increase the size of its fleet by more than 100 vehicles.
The Company is making significant efforts to capitalize on large federal and state-level opportunities through the Request for Proposal (RFP) channel. These represent the potential for multi-million-dollar deals. For example, DocGo has 34 active RFP submissions pending award, totaling over $1 billion in aggregate contract value.
Additionally, the Company has launched multiple pilot programs – it is partnering with household brands who want to leverage DocGo’s technology and reach. This has become the foundation for innovative partnerships that utilize co-branding techniques for patient care across the map.
As the Company adds new clients, partners, and programs, it will continue to grow from strength to strength.
- Strong revenue growth
DocGo has displayed strong revenue growth since its inception. As recently as FY22, the Company reported that total revenue increased to $440.5 million, compared to $318.7 million for FY21, an increase of 38%.
Gross Margin for FY22 was 35% compared to 34% in FY21. Full-year 2022 Adjusted EBITDA was $41.3 million, compared to $25.1 million for FY21, an increase of 65%. Full-year net income amounted to $30.7 million, compared to net income of $19.2 million for FY21, an increase of 60%.
On the other hand, total Q4 FY22 revenue was $108.8 million compared to $121.3 for the comparable period in FY21. Excluding mass COVID testing revenue from both periods, total revenue in Q4 FY22 increased by approximately 49% compared to Q4 FY21.
For FY23, management expects continued strong demand from its customers for mobile health and transportation services solutions. It anticipates FY23 revenue to be approximately $500-$510 million, representing growth of approximately 14% to 16% over FY22 on an as-reported basis, or growth of 36% to 40% if non-recurring mass Covid testing revenue of approximately $75 million in FY22 is excluded. Adjusted EBITDA is anticipated to be approximately $45-$50 million. Full-year gross margin is expected to be approximately 35%.
DocGo’s current Backlog is $180 million over three years, of which all related contracts are expected to be fully rolled out by the end of Q3 FY23.
As of December 31, 2022, the company held total cash and cash equivalents, including restricted cash, of $164.1 million. Moreover, DocGo has secured a $90 million line of credit with Citibank, N.A. The line includes a $50 million accordion option and carries a five-year term that remains unused, implying that the Company has access to enough funds to engage in expansion activities.
It is evident from DocGo’s illustrious client and partner base (and also stellar revenue growth) that the Company offers a unique and valuable proposition to healthcare systems and patients. The Company is also working relentlessly towards improving its services and establishing new revenue channels. As DocGo continues to achieve its objectives, it will likely display exponential growth.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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Reference:
https://ir.docgo.com/static-files/2a1d0b18-96e7-4c4e-b467-72eb2a7d3385
https://www.sec.gov/ix?doc=/Archives/edgar/data/1822359/000121390023019936/f10k2022_docgoinc.htm