DOCS - NYSE

Good day, everyone, and welcome to the Doximity Fiscal First Quarter 2025 Earnings Call. At this time, I would like to hand things over to Vice President of Investor Relations, Perry Gold. Please go ahead, sir.

Thank you, operator. Hello, and welcome to Doximity's fiscal 2025 first quarter earnings call. With me on the call today are Jeff Tangney, Co-Founder and CEO of Doximity; Dr. Nate Gross, Co-Founder and CSO; and Anna Bryson, CFO. A complete disclosure of our results can be found in our press release issued earlier today as well as in our related Form 8-K, along with a copy of our prepared remarks, all available on our website at investors.doximity.com. As a reminder, today's call is being recorded, and a replay will be available on our website. As part of our comments today, we will be making forward-looking statements. These statements are based on management's current views, expectations and assumptions and are subject to various risks and uncertainties. Actual results may differ materially, and we disclaim any obligation to update any forward-looking statements or outlook. Please refer to the risk factors in our Annual Report on Form 10-K, any subsequent Form 10-Qs and our other reports and filings with the SEC that may be filed from time to time, including our upcoming filing on Form 10-Q. Our forward-looking statements are based on assumptions that we believe to be reasonable as of today's date, August 8, 2024. Of note, it is Doximity's policy to neither reiterate nor adjust the financial guidance provided on today's call unless it is also done through a public disclosure such as a press release or through the filing Form 8-K. Today, we will discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. A historical reconciliation to comparable GAAP metrics can be found in today's earnings release. Finally, during the call, we may offer incremental metrics to provide greater insights into the dynamics of our business. These details may be one-time in nature, and we may or may not provide updates on those metrics in the future. I would now like to turn the call over to our CEO and Co-Founder, Jeff Tangney. Jeff?

Thanks, Perry, and thank you, everyone, for joining our first quarter earnings call. We have three updates today; our financials, network growth and product highlights. First, our top line. We delivered $127 million of revenue for the first quarter of our fiscal 2025, which represents 17% year-on-year growth and a 5% beat from the high end of our guidance range. Of note, our top 20 clients once again grew the fastest for us, up 21% on a trailing 12-month basis. These clients are the largest, most sophisticated pharmaceutical manufacturers who employ entire teams of analysts to measure their marketing effectiveness. We believe our continued growth with them is proof of our value to the broader marketplace. Our bottom line was also strong in Q1 with an adjusted EBITDA margin of 52% or $66 million, which was 18% above the high end of our guidance. Our adjusted EBITDA grew 42% year-on-year as we continue to run a disciplined and efficient business. In short, we had a better than expected Q1, led by our new products and new client portal. Our CFO, Anna, will provide more detail on this in a minute. Okay. Turning now to our network growth and engagement. We had another record quarter in Q1. Our unique active users on a quarterly, monthly, weekly and daily basis were all up double-digit percentages year-over-year. And once again, our daily active users grew the most, a sign that we become the go-to app for hybrid mobile medical work. In Q1, a record 590,000 unique active prescribers used our generative AI, telehealth, messaging, and scheduling workflow tools to provide better care for their patients. Our news feed also set new records. Last quarter, article reads among prescribers reached an all-time high. We're proud to be both the news feed of medicine and the mobile medical office app. The practice of medicine is increasingly mobile, and we're honored to power it. Okay. Now for updates on our new AI and client portal products. As a reminder, we're not AI tourists. For nearly a decade now, we've employed machine learning and AI to power our news feed, personalizing articles for each of our more than 2 million members based on their practice, publications and reading histories. This personalized approach ensures that physicians receive the most relevant information, helping them stay current with the latest medical advancements. We were also one of the earliest adopters of generative AI, launching our own Doximity GPT product just three months after ChatGPT's debut. Doximity GPT provides a HIPAA-compliant writing assistant for doctors. To date, over 1.5 million letter requests or prompts have been completed on Doximity GPT, demonstrating the significant demand doctors have to cut the scut or streamline administrative writing tasks. Last month, we made the front page of the New York Times in an article titled In Constant Battle With Insurers, Doctors Reach for a Cudgel: A.I. Now if you ask me, we're more of a Jedi lightsaber than a cudgel, but I won't quibble. We're just proud to help busy physicians get better care for their patients. In the article, Dr. Azlan Tariq highlighted how Doximity GPT has halved his time spent on insurer appeal letters, while increasing his appeal approval rate from 10% to 90%. The American Medical Association estimates that doctors spend 12 hours each week on prior authorization paperwork. So cutting that time in half is a substantial improvement. Dr. Tariq went on to say that Doximity GPT is "finally a tool I can use to fight back." As always, we're proud to put physicians first and help them level the technology playing field with insurers. Our commitment to leveraging AI for the benefit of healthcare providers and patients remains unwavering, and we look forward to continuing to innovate in this space. Okay. Moving on now to our new client portal. Our portal is now available to 30% of our clients and their feedback so far has been uniformly positive. In particular, they appreciate three key features; one, daily updates; two, seamless sales data; and three, actionable recommendations. First, clients value our daily in-flight updates on their programs, which allow them to see their best performing content and optimize accordingly. The transparency, consistency and fidelity of our daily online reports stands in stark contrast to others who often redact and cherry-pick the data they provide in their quarterly e-mailed reports. Second, our seamless inclusion of prescription sales data allows clients to measure ROI, not just annually or quarterly, but by individual headline or video message. This offers new real-time insight into what content resonates best. For instance, does their new clinical trial or co-pay coupons resonate most with doctors and patients? Third, the portal provides recommendations for easy add-on programs, suggesting new audiences and content orchestration to optimize ROI. This easy access includes pricing and simplifies the entire upsell process. We are encouraged by our clients' reactions and upsells to date, and we remain on track with our longer-term portal plan. Our first phase, reporting and insights, is nearly complete. Our second phase, recommendations and pricing, is now available to clients and soon for our agency partners. Our third and final phase, content creation, is currently in beta with the full rollout expected by the end of this year. Clients love our portals tech and transparency. And consequently, they're giving us a speed at their strategy table like never before. Okay. So I'd like to end by thanking my Doximity teammates who continue to embrace our lean team principles and find more and more efficient ways to serve our physicians and clients. With record engagement and a robust pipeline of new products, I couldn't be more excited about what we're building together. And with that, I'll hand it over to our CFO, Anna Bryson, to discuss our financials and guidance. Anna?

Thanks, Jeff, and thanks to everyone on the call today. First quarter revenue grew to $126.7 million, up 17% year-over-year and exceeding the high end of our guidance range. Similar to prior quarters, our existing customers continued to lead our growth. We finished the quarter with a net revenue retention rate of 114% on a trailing 12-month basis. For our top 20 customers, net revenue retention was higher at 121%. So our biggest, most sophisticated customers remain our fastest growing. We ended the quarter with 102 customers contributing at least $500,000 each in subscription-based revenue on a trailing 12month basis. This is a roughly 16% increase from the 88 customers we had in this cohort a year ago, and these customers accounted for 82% of our total revenue. Turning to our profitability. Non-GAAP gross margin in the first quarter was 92% versus 90% in the prior year period. Adjusted EBITDA for the first quarter was $65.9 million, and adjusted EBITDA margin was 52% compared to $46.6 million and a 43% margin in the prior year period. We are proud to continue to run a very profitable business with strong margin expansion. Now turning to our balance sheet, cash flow and an update on our share repurchase program. We generated free cash flow in the first quarter of $39.5 million compared to $55.6 million in the prior year period, a decrease of 29% year-over-year, driven primarily by the timing of tax payments compared to last year. We ended the quarter with $750 million of cash, cash equivalents and marketable securities. During the first quarter, we repurchased $48.2 million worth of shares at an average price of $26.3. We believe repurchasing our shares is a valuable use of the incremental cash we generate above what's needed to reinvest in the business. These share repurchase efforts have decreased our fully diluted shares outstanding by 6% since Q1 of last year. As of June 30th, we had $492 million remaining in our existing repurchase program. Now moving on to our outlook. For the second fiscal quarter of 2025, we expect revenue in the range of $126.5 million to $127.5 million, representing 12% growth at the midpoint. And we expect adjusted EBITDA in the range of $62.5 million to $63.5 million, representing a 50% adjusted EBITDA margin. For the full fiscal year, we now expect revenue in the range of $514 million to $523 million, representing 9% growth at the midpoint. And we now expect adjusted EBITDA in the range of $248.5 million to $257.5 million, representing a 49% adjusted EBITDA margin. Our increased outlook is due to all businesses performing better than expected this past quarter. Specific to our pharma customers, we saw a strong start to the upsell season, which we believe is due to a couple of factors. First, we've never had a more focused and attractive product portfolio, and our new products continue to resonate with clients. In Q1, sales for our new point of care and formulary products were each up more than 70% year-over-year. Second, the client portal is providing deeper insights into program performance and driving favorable purchasing decisions. With greater visibility, our clients can evaluate their programs in real time and allocate additional spend to maximize their ROI. As we continue to build out our purchasing and content creation capabilities, we believe our portal will unlock further budget over time. We are proud of our Q1 performance and encouraged by the start to our year. We also recognize this remains an uncertain macro environment. Because of that, we will continue to take a measured approach to the revenue we have yet to book, which is reflected in our outlook for the back half of fiscal 2025. Most importantly, we are focused on delivering industry-leading products and investing in our long-term growth. With record engagement across our platform and our new client portal now providing deeper insights to our customers, we're even more confident in our competitive position and our ability to gain market share. With that, I will turn it over to the operator for questions.

[Operator Instructions]. Our first question comes from Brian Peterson, Raymond James.

Thanks for taking my question. Congrats on the quarter. So given what you've seen so far this year with the strong upsell activity, is there any updated stance on how you're thinking about pharma budget growth for the full year?

Hi, Brian. Thanks for the question. So we still believe that overall budget growth for our pharma customers is at roughly 5% to 7% that we've cited before. So we don't necessarily think we've seen a change in budget. But we do think that, as I mentioned in my prepared remarks, because of our strong product portfolio, and the additional insights that are being driven by our client portal, our customers are now more comfortable deploying their dollars with Doximity earlier on in the upsell cycle. So we believe that's a very strong indication of the value they're receiving from our platform. And I think that speaks to our ability to gain share in our strong competitive position.

And maybe one for Jeff. Just we didn't hear about record engagement on the platform and daily average users. Any help or diving a little bit deeper on what's driving that? I know that's come up a lot with investors. So I'd really love to double click on what's driving that expansion. Thanks guys.

Thanks, Brian. Yes, double-digit percent growth, as we said, across monthly, weekly, quarterly, and daily active use. And daily active use grew the most. And that's what I'm most excited about. I think we really are becoming the doctor's mobile medical workflow tool, doing their scheduling, doing their telehealth visits and so forth. We are seeing more doctors doing work from home days, and we'll have more on this when we come out with our telehealth report in a month or two. But we are seeing the practice of medicine here post-COVID get into a rhythm where doctors are doing a decent chunk of their work mobily and that's where we're serving them and I think getting really strong usage growth. So yes, excited about the continued growth. And again, it's been a solid couple of years now post-COVID, where we've continued to hit record highs.

We'll take the next question from Scott Berg, Needham & Company.

Hi, everyone, really nice quarter. Thanks for taking my questions. I guess, I have two. Jeff, I wanted to ask about portal. I know Anna talked about initial trends there that have been really positive and strong and maybe above your expectations. But how do we think about some of those trends? Is it more customers are using it, getting more comfortable on how to use it, maybe making their buying decisions quicker? Or are you seeing, I guess, volumes of upsell be maybe just larger than what you're expected? Any color there would be helpful.

Hi, Scott. Thanks for the question. Yes, I think we're really excited by where we are in the phase of development of the portal. So right now, a lot of our brands are using it to get more real-time insight. So they're able to log in and see how their programs are performing in real time, which allows them to make their upsell decisions in a more informed manner. So one thing I'll call out is that our brands with access to our portal actually grew quite a bit faster than our overall pharma business in Q1. So that cohort of brands were certainly responsible for part of the upside. So right now, we're still in the insights and reporting phase. And I think over time, we're really excited by what the portal could need longer term as we get the content creation and actual purchasing capabilities.

Got it. Helpful. And then one question I've had that's popped up a couple of times lately is really around kind of the variability of the company's growth rates. If you look over the last five or six quarters now, there's been some wide swings around revenue growth. Is this kind of a pattern, kind of a lack of pattern that we should kind of continue to expect? Or will there be some seasonality in this kind of newer growth environment that you've been experiencing over the last year that might show some relative consistency between period to period?

Yes, Scott, it's a great question. And as we've said before, the way our customers purchase and launch their programs has and likely will continue to evolve over time. So that's where we're seeing this quarterly variations in revenue. It depends on the timing of upsells. What products they're buying. Are they newer products or are they existing products, how many new brands we have? So there is going to be some variation in revenue and that's why we try to focus on our annual performance as opposed to our quarter-over-quarter performance which is consistent with how our customers think about deploying their dollars. And so that's where we always focus when we consider the health of our business. We think about it annually.

We'll take the next question from Stephanie Davis, Barclays. Just one moment, Stephanie. Stephanie, please go ahead.

No worries. I want to dig in a little bit deeper on the comment that you're seeing faster growth at your largest clients because this isn't the first quarter of that trend. Is this a function of maybe macro falling earlier for the largest clients or is this going to be a broader trend where you see a bifurcation in your customer base and maybe it encourages a portion of the base to the self-service platform and the higher touch hours more to the high end?

Sure. Stephanie, this is Jeff. I'll take it. Yes, we're really proud that among our top 20 clients we've had consistent 20%-plus year-on-year growth. And we're really proud because those are the clients who actually know and measure us best. The other ones who have the teams of consultants looking at our return on investment and they know how to optimize their programs best. I think the portal is taking some of the things that those clients do with us and really making it available to a broader swath of clients, even the folks who can't afford to have 50 consultants working on the program and the optimization. And I'll tell you I'm particularly excited this last quarter in our ability to start looking at ROI on a headline basis for our clients in these insights. I mean little things like one client learns that if you say the drug is most powerful that sounds great, but actually doesn't perform as well as saying it's the most efficacious because when you say something is powerful to doctors they tend to think of it as maybe adjunct or second-line therapy after you tried the first-line therapy. And the ability to see the difference in sales, in ROI and to see that seamlessly through our portal was the kind of thing that was really only available to again really top-tier brands and pharma companies previously. And now with our portal, I think will be available to a lot more. So on that front we're pleased to also announce here that we are digging deeper on our prescription sales data and we're going to be making an investment this year going from having monthly data available for our clients to optimize to having weekly data which we think will make it easier for clients to log in each week and look at how they're doing again the ROI of their programs and see this on a more ongoing basis. Last quick note here. ROI is something that gets batted around a lot by a lot of players in this industry. The reality is that most folks only look at it once a year and sometimes those reports when they're only delivered once a year can be cherry picked and put into a less incredible light when you look at how they've been cherry picked and put together. I think our portal has really brought a new standard here where we are providing daily data to our clients in a way that we can't just cherry pick the results. They're looking at it on an ongoing basis and at one of our clients' requests we did go through an audit with the Alliance for Audited Media this past quarter which we and passed with flying colors to go through and again just provide greater credibility, greater trust around the data they're getting from us because they're getting it from a website and not from an e-mail and they're getting it on an ongoing basis.

And maybe on that kind of point of adding new things into the portal. Anna you mentioned that you were also getting some learnings from the portal and changing some of your reporting or adding new metrics that clients are asking for via inbound. Is there any update on that and kind of what we've seen Doximity's solutions that grow from portal learnings?

Hi, Steph. Sorry, could you repeat it? It cut out a little bit?

No worries.

Sorry about that.

Remember how you mentioned that you were getting some learnings from the portal like you found that there were a lot of inbounds of clients asking for different data points or different ways they could optimize their ad spend? Could you give us an update on that and just tell us like what's gotten better or what you've done to refine your approach on the portal?

Yes. Steph, this is Jeff. I'll take that. I've been working a lot on the portal and clients and going back and forth. The truth is there's a ton of added insight again that we can have. I mean we look at when doctors are watching a video where are they dropping off in the video. Literally, second by second as they go through the video that was the kind of insights that our clients were never able to have before and now can really understand which points are resonating best with doctors where they're most interested, where they aren't. We've also leveraged AI to go through and look at what we call the words that click, the words that really do resonate with doctors. And some doctors we found to have better personalized headlines because they prefer that you use the explicit medical jargon versus talking about the guidelines versus talking about what patients are reading. So again we've been able to I think really personalize the experience here in working hand-in-hand with our clients. So I would say that the feedback loops here have just become very tight and it's exciting again to bring I think some of this more consumer split testing technology to the healthcare professional space.

We will take the next question from Jared Hass, William Blair.

Hi. Good evening. This is Jared Hass on for Ryan Daniels. Thanks for taking our questions. Maybe just one on the guidance Anna I appreciate your comments around sort of taking a measured approach to revenue that's not yet booked. Can you just unpack that a little bit more in terms of as you sit today what's under contract or what you have line of sight into relative to the full year? And then also maybe if you could quantify at all how the upsell season has gone relative to what your expectations were in the prior outlook?

Thanks for the question, Jared. I'll start on the visibility piece. So as a reminder we have definitely seen a trend towards better visibility in our business as our customers are doing more upfront buying. So we entered this fiscal year with a higher percentage of revenue under contract than we've ever had at over 70% as of our May earnings call. Now we're not going to give an update on the specific number every quarter, but what I will say is our visibility trend is continuing in a positive direction. So that means that as we sit here today, we have a higher percentage of the remainder of the year booked than we did at this point last year. And then as far as kind of the second piece of your question around upsell. Yes, we're definitely really encouraged to have had the strongest start to our pharma upsell season in the past 3 years. So we certainly outperformed our expectations. You can see that in the beat that we had in Q1 and the fact that for Q2 we're guiding to a higher growth rate at 12% growth versus the 11% growth that we saw last Q2. So we definitely are excited about the momentum that we're seeing in our business, but back to those prepared remarks there is still a lot of runway left in the year and we once again don't want to get ahead of our skis here. We recognize there's still continued macro uncertainty. So we are going to be continuing to take that prudent approach to the dollars we don't have yet booked as it pertains to guidance.

Okay. That’s great. I appreciate that. And then also great to hear just kind of the broad-based upside that's driving the outperformance here. I think there were a couple of examples, Anna, that you shared on the pharma side. So I wanted to double-click on the health system expectations. Are you seeing any incremental improvement relative to what you shared last quarter in terms of your full year guidance?

Yes, sure like I said that we did see out performance across all of our businesses. I would say health systems we've seen a marginal improvement over the last 90 days. The majority of our outperformance did come within our pharma business, but we are seeing more stability in the health system space. So we're definitely excited. I'm going to go back to that McKinsey report that we cited last quarter that forecasting improving profits there amongst our health system customers. So we do think that we will kind of continue to see improvement there over time.

From Canaccord Genuity, Richard Close has the next question.

Hi. This is John Pinney on for Richard Close. Thanks for the questions and congrats on the quarter. So obviously, strong margin performance here. I just wanted to ask how sustainable this is, how much of this is driven to the portal? Just any insight there would be helpful?

Sure. Yes, happy to take that one. So in addition to the revenue flow-through we do definitely continue to drive operational efficiencies in our business. We are leaning into AI internally to enhance our productivity. That's definitely helped us to gain some further leverage. If we look at Q1 specifically there is also kind of a timing component here of hiring that we do expect to pick up slightly in Q2. Evident our expense guidance going forward as we focus on continuing to invest in the business and build out the commercial R&D team, continue to make incremental sales hires. As Jeff mentioned earlier, buying more data so going from buying monthly prescription claims data to buying weekly prescription claims data. So we are certainly investing in the business, but we feel really good about the fact that we're guiding to 49% EBITDA margins this year.

Great. Thanks. One follow-up. I guess looking out with the -- like when you're using the portal to go more down market, do you have any like plans or any differences of what the go-to-market would be going for those smaller brands?

Yes, John, this is Jeff. So we haven't done much of that yet. Again to date we've rolled it out to existing clients. And again the feedback has been uniformly positive, but yes you're absolutely right. I think down the road certainly it will make it easier for folks to come on board. Again, we've had high minimums as a company to come and purchase with us. And we think it will make it easier for folks to come and try us out. The real key unlock there for us will come later this year when we let people start creating their own content. Right now, the only way to create content on Doximity is to call one of us and talk to one of our team members. And the portal is in beta on that today as we said in our prepared remarks. And we're really excited about where that can go later this year. There's a lot of exciting stuff going on with AI in this whole space. Specifically, you can just put in the URL of your product's website and we could probably create a pretty decent 20-second video using some of the imagery and copy from that website. So the ability to again create engaging content, summarize things and do that in a self-serve fashion is not something the portal does yet, but something we're excited about is doing later this year.

We'll take the next question from Allen Lutz, Bank of America.

Good afternoon, and thanks for taking the questions. You mentioned that subscriptions -- or I guess, just doing the math, subscriptions are growing, call it, 8 to 10 percentage points above the 5% to 7% market growth. Is there any way that you can rank order the major drivers of your outsized growth versus the market? I guess, the big buckets that I'm thinking of are new products, your normal share gains, maybe contributions from client portal in the most recent quarter and price. Just trying to understand what are the drivers here that are driving the outsized growth, and have they changed over the past several quarters? Thanks.

Hi, Allen. This is Nate. I can start talking through that. So when we think about our growth drivers at the front, we have new modules, which sometimes tap into new budgets. We have both cross-selling within our manufacturer partners and health system partners, but also expanding to new brands. And then we have audience members, both on the engagement side as well as how our partners look to reach expanded audiences, which could be everything from therapies that are reaching larger groups due to their therapeutic impacts, to look like audiences that are more intelligent, to surround sound, to reinforce and help education at each part of a journey. I think -- one thing I'll call out is that the growth lever that we always put last on the list and, still is last on the list, is pricing. That's something that we do steadily, but is for so on that list by design because we see it as a long-term driver opportunity and we believe in keeping these trusted partnerships with our clients today. Now the portal will afford us the technology and the models to get more sophisticated around pricing and increasingly give us advantage, particularly with the highest demand users and at different times of the year as we link that to real ROI. However, we're pleased that it hasn't been a necessity in our growth, and that our products and our engagement and our relationships with our partners have been the levers that drive our growth today.

Great. Thanks, Nate.

We'll take the next question from Elizabeth Anderson, Evercore ISI.

Hi, guys. Thanks so much for the question, and congrats on a nice quarter. Maybe piggybacking off of some of the earlier questions where you're talking about sort of the new product contribution ramp. How do we think about that versus the outperformance or the sort of the cadence we should expect on the gross margins going forward? Because obviously, with that contribution in the current quarter or the quarter you just reported, you had some nice gross margin expansion and we typically think of those things as sort of new products is reducing those margins, at least in the short term? Thanks.

Yes. Thanks, Elizabeth. The great thing about our new products is they are very high incremental margin products. And some of the enhancements that we've made have actually made it easier for these new products to launch using existing video content. So that in itself is helping with leverage there. So that actually allows these new products to work well, not only during the upfront, but also during the upsell. So they definitely help to contribute to some of our margin expansion. But I will note that Q1 was certainly a strong revenue outperformance quarter as well. And as we kind of look ahead, there is a natural ramp to the year typically that we see with hiring and some of the new investments that we're going to continue to make. So I wouldn't expect that margin that we saw in Q1 to continue, and you could see that in our guidance. But these new products are definitely potential for margin expansion as they continue to grow over time.

Got it. And maybe as a follow-up. In terms of the content creation, obviously, that's a very interesting advancement in sort of the offerings you have there. But how do we think about that versus some of the MLR reviews that clients require for either the content or the audience expansion recommendations? Any comments there you could give would be helpful. Thank you.

Yes. This is Jeff, Elizabeth. That's a great question. Actually, I think having the portal be the place where they can more easily output their content into the MLR process will actually make that more streamlined than all of the e-mail ping pong that we do with them today. So we're excited that I think it will be an MLR accelerant for us to be able to have more portal-based approach to this. But I think, Anna, another comment I want to repeat, and that is we really have, I think, worked out some of the kinks of these new products in the last year, specifically with regard to being able to use the same video content that's been approved for one product for another product. And that has allowed the margins to be very high. It has required us making some technical changes on our side, but I think we've harmonized our formats in a way that our clients have really appreciated. And we've also gone through and gotten the pioneer's battle scars on getting the first MLR reviews on some of these products and now have enough of the top 20 who reviewed it that it gets easier and easier with each subsequent review, again, for our new products.

And your next question comes from Jessica Tassan, Piper Sandler.

Hi, guys. Thanks for taking the question and congrats on the really nice quarter. So I just -- I wanted to ask 2 things. First off, are your top 20 customers using the portal today, and I apologize if I missed that. And then just can you walk us through the spending patterns there? It was impressive to hear that they're growing twice as fast. So just, is it causing their programs to run faster or accelerate? Are customers paying higher prices? Or are they just deploying like multiple programs concurrently? What's driving the 2x growth?

Thanks, Jess. This is Jeff. Yes, we have rolled out the portal to most of our top clients. But to be clear, there are some top clients who won't use the portal. There's going to be 10% to 20% we expect who will continue to prefer to have a meeting, to give us a call, to work with us directly. But then on our end, we'll be using the portal again, to make our internal processes, I think, more efficient. It hasn't had an impact on that 21% growth in top 20 clients in terms of pricing. So to be clear, we haven't really been pricing the programs that are already live and in market with our top 20 clients using this portal yet. Those are programs that were sold probably several quarters ago. But I do get a whole process more streamlined and again, make it easier to go and add additional audiences, test different message types and to see your ROI, again, on a more molecular level which we think over time enhances our ability to continue to gain share because the more we can treat this like performance marketing, where I'm seeing my ROI each week, the more that they'll come to spend with us.

And we'll go to our next question from Michael Cherny, Leerink Partners.

Good afternoon. Thank you for taking the question. I just have one quick one, I think. Just trying to understand. I know, Anna, especially, you've talked about how you're seeing different buying patterns, seeing customers buy differently. If I look at your guidance for 2Q versus the 1Q outperformance, it does seem like a little bit less of a seasonal step-up the first what you normally expect. Can you maybe just dive a little bit into the formulation of the 2Q guidance? Was there anything that you'd consider clause hole forward in 1Q? Or is this just a better understanding and a different pattern for how you expect to see the engagement that you've talked about in the past?

Yes. Thanks for the question, Mike. Yes, as I mentioned earlier when Scott asked, the way our customers purchase and launch their programs has and likely will continue to evolve. So we do see some variations in the shape of the year. As far as what we're seeing between Q1 and Q2, we definitely had a lot of larger programs starting in the spring, and we also saw more upsells this Q1 than we did last year. So that contributed to a really strong 17% year-over-year revenue growth. I'll say that while the quarter-over-quarter step up between Q1 and Q2 isn't quite as high as last year, one of the things I want to point to is that the growth rate for Q2 is acceleration over last year. So last year's Q2, we only saw about 11% growth. And right now, we're guiding to 12% growth, which we think will begin just an indication of the momentum in our business right now.

That's helpful. Thanks, nice job.

Craig Hettenbach from Morgan Stanley has the next question.

Yes, thank you. Just circling back to the comments on the macro. When looking at guidance is nearly 15% year-over-year growth expected in the first half of the year, implied guide is 5% in the second half. So can you just talk about how much you think that reflects conservatism in the approach or anything else you're hearing from customers or year-over-year dynamics and comps to consider first half to second half?

Yes. Thanks for the question, Craig. And I'll piggyback a little bit on the answer I was giving with Mike. We definitely see some quarterly variations in our revenue. And so we really try to focus on our annual revenue growth, which we're guiding to at 9%. And as we said before, we believe our pharma business will certainly grow faster than that. As we think about the rest of the year, we are absolutely excited by where we sit today and what we're seeing from an upsell perspective. But it is just too soon for us to kind of push that through the rest of the year as we do have continued macro certainty. And then the other thing I'll point to is as it pertains to our Q4 revenue growth, we're certainly excited by the potential for another strong annual buying cycle. But it is too soon for us to know what the mix of new brands might look like or if new products continue to ramp the way they've been ramping. It is possible we could see higher growth there. And we definitely want to make sure that we're baking them plenty of time for those to launch.

Got it. Thank you.

And the next question comes from Jailendra Singh, Truist Securities.

This is Jenny on for Jailendra. Just a question on the self-portal. Can you remind us whether the self-portal was a complementary product? Or were you -- your pharma companies be paying for this? And so on that, how are you thinking about the growth versus cost savings opportunities for Doximity?

This is Jeff. Thanks, Jenny. Yes, it is a complementary product. Certain features of it are only available to large clients. So there is an incentive to be a larger client to get access to more of the insights, more of the data. But it's not something that we are going to charge an explicit fee for not in a software licensing business model or mode. So there's no incremental fees there. And it is more efficient for us, obviously, to have clients uploading their content and looking at their reports as opposed to having to write them an e-mail with all that information.

Got it. And then just during your last buying season, you saw a higher mix of products and new brands that require more time to launch, so with an expected launch of Q1. How much of that contributed to a strong Q1 versus more upfront buying from pharma, as you said, allocate less dollars to mid-year purchases? And thanks for taking my questions.

Yes. Thanks for the question. That certainly was a part of the outperformance that we saw in Q1. These larger programs starting in spring definitely contributed to the strong growth that we're seeing there. But I would also note that it was our best upsell season so far over the last 3 years. So while I would say that the larger contributor to the upside is the program starting in spring, these upsells were certainly ahead of our expectations. And we're really encouraged that we have seen that reaccelerating growth there so far.

Next up, we'll take a question from Stan Berenshteyn, Wells Fargo Securities.

Hi, thanks for taking my questions. Regarding the portal. So the portal is pushing campaign creation somewhat away from you and on to the client. I'm curious, who on the client side is using the portal? What kind of training is needed to use the portal? And will you need to build out a support group if the portal usage expands in order for you to ensure that client engagement with the portal remains active? Thanks.

Stan, yes, this is Jeff. I'll answer that. It's a very good question. The short answer is that today, they're not doing content creation on the portal. We're still doing it. So it's still done in-house. But it's is still more seamless for them to be able to log in at 10 p.m. at night and see their daily reports and how they're doing, then having again to e-mail us and have us e-mail them back saves a lot of time. On an ongoing basis, as we mentioned in the prepared remarks, we do see ourselves working with agencies here as well, which actually, I think, is a big part of the larger go-to-market motion. So to be clear, today, we really don't work with agencies that much and I think it's a real opportunity for us, I think, to work with them more. So we're doing a little bit mini roadshow with some agencies later this quarter and excited that they've been excited to work with us more because they've seen these tech and portals be great for their business as well. So we're excited to align with agencies more and work with this. I think clients at the end of the day, if you're on a big brand, if you're on a $1 billion brand, you're going to be looking at your return on investment, but you're probably not going to be in the day-to-day of changing the headlines and split tests that will be done at a lower level, either by your team or your agency. But again, that will require some training at our end and I think it will be really high leverage work for us to open up our ecosystem a little bit and not do everything ourselves.

Thanks. And maybe a quick follow-up on medical recruitment. Anna, can you just comment on the performance in the quarter from this segment?

Yes. Thanks for the question, Stan. We did see a strong quarter-over-quarter growth there in our curative business. So that's the one part of our business that is broken out in our 10-Q as other revenue. One of the things we've been focusing on there is leaning more into AI for recruiting, and that's already kind of proven to be beneficial. So I'd say we're excited about where that could go longer term. But there is still the macro considerations amongst our health system clients there.

And we'll take the next question from Jenny Shen, BTIG.

Hi, this is Jenny on for Dave Larson. Congrats on the quarter. I just wanted to ask more about pharma digital advertising budget. We've seen some reports. We've talked to some brand managers at some large pharma companies who say that they expect to cut digital ad spend by as much as 10% to 20% in the year. I'm wondering if you're seeing that at all in your conversations. It sounds like you're not. Some of the brand managers told us that they're actually looking to move some dollars away from digital ads over to traditional sales reps because they think they can get more value out of in-person face-to-face meetings. Are you seeing any of that trend? And just any discussions with your pharma customers? Thanks.

Jenny, this is Jeff. I'll take that. So keep in mind, we target to work with about 877 different pharma brands in the U.S. that are millions of dollars in sales. There are 440 pharma brands that are over $100 million in U.S. sales. Those are what we call our mega brand clients. And within those 440, there are some brands that are in the launch phase and some that are in a more mature phase and some that are nearing the end of patent life. And so doing a check with any two of them or 5 of them or even 20 of them, there's a lot of selection bias, I think, in who you might hear from because some brands are nearing that end of life where they are moving more towards a clinical argument and more of a personalized sale based on price and so on and so on. I would just say that in general, across the entire industry, we see a continued shift to digital. Certainly not at the pace that it was during COVID, but it still is the most efficient, highest ROI, most effective way to market products. And the number of physicians that see reps has never been lower. So the number of what they call no-see doctors continues to grow. It did go through, I think, a bit of a blip in 2022 where some doctors started seeing reps live again after two years off during COVID or three years off. But again, now that's turned back, and I think doctors are protective of their time. They need to see more patients. They don't have time to see reps like they used to. So the general thesis, a shift to digital we think will continue. Again, if you talk to a handful of brand managers, you may hear a different story. But you have to keep in mind that these are all products at different stages in their life cycles. Five does not represent a good enough sample of 440 mega brands.

Got it. Thanks. And if I could ask a quick question about competition. Just who else you're seeing in the space in those discussions with customers. I'm guessing that a lot of pharma companies use multiple platforms, so you can all coexist this together. Just any thoughts on competition?

Yes. We're gaining share, again, against our competition. We don't talk about our competition specifically. So I don't know, we're not going to comment on any particular names here on this call. But suffice to say, we feel proud of our position. I don't think anyone else is growing at double-digit percentages in terms of the daily active users or has the sort of footprint that we do. But again, we're not going to name specific competitors.

And everyone, at this time, that does conclude the question-and-answer session. I would like to hand things back to Mr. Jeff Tangney, CEO, for any additional or closing remarks.

We just want to thank everyone for joining the call. We appreciate the time and the questions and look forward to continuing to deliver for you all as shareholders over the coming years. Thank you.