Doximity, Inc. (NYSE: DOCS) Securities Fraud Class Action

LEAD PLAINTIFF DEADLINE IS JUNE 17, 2024.

A class action lawsuit has been filed on behalf of those who purchased or acquired Doximity, Inc. (“Doximity”) (NYSE: DOCS) common stock between February 9, 2022 and April 1, 2024, both dates inclusive (the “Class Period”). 

Case Background:

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.”

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.”

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 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. 

A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member’s claim is typical of the claims of other class members, and that the class member will adequately represent the class. Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. Filling out the online form above or communicating with any counsel is not necessary to participate or share in any recovery achieved in this case.  Any member of the purported class may move the court to serve as a lead plaintiff through counsel of his/her choice, or may choose to do nothing and remain an inactive class member.

If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to these matters, please contact Kessler Topaz Meltzer & Check, LLP:  Jonathan Naji, Esq. (484) 270-1453 or via e-mail at info@ktmc.com.