Doximity, Inc. (DOCS)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and accompanying notes that are included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, as described under the heading “Special Note Regarding Forward-Looking Statements” in this Annual Report on Form 10-K. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” or in other parts of this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

A discussion regarding our financial condition and results of operations for the fiscal year ended March 31, 2025 compared to the fiscal year ended March 31, 2024 is presented below. A discussion regarding our financial condition and results of operations for the fiscal year ended March 31, 2024 compared to the fiscal year ended March 31, 2023 can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024 and filed with the SEC on May 23, 2024.

Overview

We are the leading digital platform for U.S. medical professionals, as measured by the number of members. Our members include more than 80% of U.S. physicians, spanning all 50 states and every medical specialty.

Our mission is to help every physician be more productive and provide better care for their patients. We are physicians-first, putting technology to work for doctors instead of the other way around. That guiding principle has enabled Doximity to become an essential and trusted professional platform for physicians and their colleagues. Doximity puts modern software in the hands of physicians and other medical professionals. We provide our members with digital tools specifically built for medicine, enabling our members to collaborate with colleagues, stay up to date with the latest medical news and research, manage their careers and on-call schedules, streamline documentation and administrative paperwork, and conduct virtual patient visits.

At the core of our platform is the largest medical professional network in the nation, which creates proximity within our community of doctors and other medical professionals. Verified members can search and connect with colleagues and specialists, which allows them to better coordinate patient care and streamline referrals. Our newsfeed addresses the ever increasing sub-specialization of medical expertise and volume of medical research by delivering news and information that is relevant to each physician's clinical practice. We also support physicians in their day-to-day practice of medicine with mobile-friendly and easy-to-use workflow tools such as voice and video dialer, secure messaging, digital faxing, and our AI-powered workflow tools. Our business model is designed to both respect and support physicians while driving value for our customers through our Marketing, Hiring, and Workflow Solutions. Our revenue-generating customers, primarily pharmaceutical manufacturers and health systems, have access to a suite of commercial solutions that benefit from broad physician usage.

Our business model has delivered high revenue growth at scale with profitability. For the fiscal years ended March 31, 2025, 2024 and 2023, we recognized revenue of $570.4 million, $475.4 million, and $419.1 million, respectively, representing year-over-year growth rates of 20% and 13%, respectively. Our net income was $223.2 million, $147.6 million, and $112.8 million for the fiscal years ended March 31, 2025, 2024, and 2023, respectively. For the fiscal years ended March 31, 2025, 2024 and 2023, we generated adjusted EBITDA of $313.8 million, $230.5 million, and $184.0 million, respectively. We have accomplished this while focusing on our core mission to help every physician be more productive and provide better care for their patients.

Key Business and Financial Metrics

We monitor a number of key business and financial metrics to assess the health and success of our business, including:

Customers with Trailing 12-Month Subscription Revenue Greater than $500,000. The number of customers with trailing 12-month, or TTM subscription revenue greater than $500,000 is a key indicator of the scale of our business, and is calculated by counting the number of customers that contributed more than $500,000 in subscription revenue in the TTM period. Our customer count is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity, and we present our total customer count for historical periods reflecting these adjustments.

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The number of customers with at least $500,000 of revenue has grown steadily in recent years as we have engaged new customers and expanded within existing ones. This cohort of customers accounted for approximately 84% of our revenue in fiscal 2025.

Net Revenue Retention Rate. Net revenue retention rate is calculated by taking the TTM subscription-based revenue from our customers that had revenue in the prior TTM period and dividing that by the total subscription-based revenue for the prior TTM period. For the purposes of this calculation, subscription revenue excludes subscriptions for individuals and small practices and other non-recurring items. Our net revenue retention rate compares our subscription revenue from the same set of customers across comparable periods, and reflects customer renewals, expansion, contraction, and churn. Our net revenue retention rate is directly tied to our revenue growth rate and thus fluctuates as that growth rate fluctuates.

Components of Results of Operations

Revenue

Marketing Solutions. Our customers purchase a subscription to Marketing Solutions, either directly or through marketing agencies, for the ability to share tailored content on the Doximity platform via a variety of modules for defined time periods. We generally bill customers a portion of the contract upon contract execution and then bill throughout the remainder of the contract based on various time-based milestones. Generally, we bill in advance of revenue recognition. When revenue is recognized in advance of billings, we record unbilled revenue. Unbilled revenue is recorded on the consolidated balance sheets within prepaid expenses and other current assets. Subscriptions to Marketing Solutions include the following contractual arrangements:

•Subscriptions for specific modules delivered on a monthly basis to a consistent number of targeted Doximity members during the subscription period.

•Integrated and other subscriptions that are not tied to a single module per month but allow customers to utilize a given module or combination of modules during the subscription period, subject to limits on the total number of modules launched in a given period of time, active at any given time, and members targeted.

For these subscription-based contractual arrangements, pricing is based on the number and composition of the targeted Doximity members, and on the specific modules purchased. We recognize revenue over time as control of the service is transferred to the customer.

Hiring and Workflow Solutions. We provide Hiring Solutions customers access to our platform which enables them to post job openings or deliver a fixed number of monthly messages to our network of medical professionals. We offer Workflow Solutions customers access to telehealth tools, on-call scheduling, and our AI writing assistant during the subscription period. Hiring and Workflow Solutions contracts are noncancelable and customers are billed in annual, quarterly, or monthly installments in advance of the service period, and revenue is recognized ratably over the contractual term.

We also generate revenue from temporary and permanent medical recruiting services which we charge on an hourly-fee, and retainer and placement-fee basis, respectively. For the fiscal years ended March 31, 2025, 2024, and 2023, the revenue from temporary and permanent medical recruiting services was not significant to our total revenue.

Cost of Revenue

Cost of revenue is primarily comprised of expenses related to cloud hosting, personnel-related expenses for our customer success team, costs for third-party platform access, information technology, software subscription costs, contractors, and other services used in connection with the delivery and support of our platform. Our cost of revenue also includes the amortization of internal-use software development costs, editorial and other content-related expenses, and allocated overhead. Cost of revenue is driven by the growth of our member network and utilization of our workflow tools. We intend to continue to invest additional resources in our cloud infrastructure and our customer support organizations to support the growth of our business.

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Gross Profit and Gross Margin

Gross profit is total revenue less total cost of revenue. Gross margin is gross profit expressed as a percentage of total revenue. Gross profit and gross margin has been and will continue to be affected by a number of factors, including the timing of our acquisition of new customers and sales of additional solutions to existing customers, the timing and extent of our investments in our operations, cloud hosting costs, growth in our customer success team, and the timing of internal-use software development costs amortization. We expect our gross margin to remain relatively steady over the near term, although our quarterly gross margin is expected to fluctuate from period to period depending on the interplay of these and other factors.

Operating Expenses

Our operating expenses consist of research and development, sales and marketing, general and administrative, and restructuring and impairment charges.

Research and Development

Research and development expense is primarily comprised of personnel-related expenses associated with our engineering and product teams who are responsible for building new products and improving existing products. Research and development expense also includes costs for information technology, software-related costs, contractors, third-party services, and allocated overhead. Other than internal-use software development costs that qualify for capitalization, research and development costs are expensed as incurred. We expect research and development expenses will increase on an absolute dollar basis as we continue to grow our platform and product offerings.

Sales and Marketing

Sales and marketing expense is primarily comprised of personnel-related expenses, sales incentive compensation, advertising costs, travel, and other event expenses. Sales and marketing expense also includes costs for information technology, software-related costs, contractors, third-party services, allocated overhead, intangible assets amortization, and change in fair value of contingent earn-out consideration liability. We capitalize sales incentive compensation that is considered to be an incremental and recoverable cost of obtaining a contract with a customer. These sales incentive compensation costs are amortized over the period of benefit. We expect sales and marketing expense to increase and to be our largest expense on an absolute basis.

General and Administrative

General and administrative expense is primarily comprised of personnel-related expenses associated with our executive, finance, legal, human resources, information technology, and facilities employees. General and administrative expense includes fees for third-party legal and accounting services, insurance expense, information technology, software-related costs, and allocated overhead. We expect that general and administrative expense will increase on an absolute dollar basis as we incur compliance costs associated with being a publicly-traded company, including legal, audit, and consulting fees.

Restructuring and Impairment Charges

Restructuring expenses primarily consist of severance payments, employee benefits, and stock-based compensation in relation to the modification of equity awards associated with the management-approved plan. One-time employee termination benefits are recognized at the time of communication of the terms of the plan to the employees, unless future service is required, in which case the costs are recognized over the future service period. Impairment charges primarily include impairment of right-of-use assets and other property and equipment recognized upon the execution of a sublease for a portion of our office space.

Other Income, Net

Other income, net consists primarily of interest income earned on our cash equivalents and marketable securities.

Provision for Income Taxes

Provision for income taxes consists primarily of income taxes in U.S. federal, state, and local jurisdictions in which we conduct business. We continue to maintain a valuation allowance related to specific net deferred tax assets where it is not more likely than not that the deferred tax assets will be realized, which includes Arizona research and development credits and capital loss carryforwards. Our effective income tax rate generally differs from the U.S. statutory tax rate of 21.0% primarily due to U.S. federal and state research and development tax credits, stock-based compensation related tax benefits, and state income taxes.

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Results of Operations

The following tables set forth our consolidated results of operations data and such data as a percentage of revenue for the periods presented.

_______________

(1)Cost of revenue and operating expenses include stock-based compensation expense as follows:

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Comparison of the Fiscal Years Ended March 31, 2025 and 2024.

Revenue

Revenue for the fiscal year ended March 31, 2025 increased $95.0 million as compared to the fiscal year ended 2024. The increase was primarily driven by a $93.7 million increase in subscription revenue. Of the increase in subscription revenue, $10.4 million was driven by the addition of new subscription customers1 and $83.3 million was due to the expansion of existing customers. The expansion of existing customers was primarily driven by average revenue per existing Marketing Solutions customer increasing by 22% as a result of adding new and growing existing brands and service lines. Approximately 95% of our revenue for the fiscal year ended March 31, 2025 was derived from subscription customers.

Cost of revenue, gross profit, and gross margin

Cost of revenue for the fiscal year ended March 31, 2025 increased $5.2 million as compared to the fiscal year ended 2024, primarily driven by a $1.9 million increase in third-party costs in connection with the delivery of our services, a $1.5 million increase in stock-based compensation as a result of new awards granted to existing employees, a $1.0 million increase in third-party software costs to support revenue growth, and a $0.8 million increase in amortization of internally developed software.

The gross margin for the fiscal year ended March 31, 2025 increased due to growth in our revenue outpacing the growth in our cost of revenue.

Operating Expenses

Research and development

Research and development expense for the fiscal year ended March 31, 2025 increased $11.1 million as compared to the fiscal year ended 2024, primarily driven by an $8.2 million increase in stock-based compensation as a result of new awards granted to new hires and existing employees, a $2.2 million increase in personnel costs as a result of merit increases, a $1.1 million increase in third-party contractor costs, and a $0.8 million increase in employee events and travel-related expenses. These increases were partially offset by a $1.6 million increase in capitalization of internally-developed software costs.

Sales and marketing

Sales and marketing expense for the fiscal year ended March 31, 2025 increased $12.6 million as compared to the fiscal year ended 2024, primarily driven by a $9.5 million increase in stock-based compensation as a result of new awards granted to new hires and existing employees, a $2.5 million increase in sales incentive compensation due to an increase in bookings, and a

1 We define new subscription customers as revenue generating subscription customers in the current fiscal period who did not contribute any revenue for the same period in the prior fiscal year.

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$2.3 million increase in marketing activities. These increases were partially offset by a $1.8 million decrease in personnel costs due to a reduction in average headcount.

General and administrative

General and administrative expense for the fiscal year ended March 31, 2025 increased $7.8 million as compared to the fiscal year ended 2024, primarily driven by a $6.6 million increase in stock-based compensation as a result of new awards granted to existing employees. The remaining increase was primarily due to an increase in personnel costs due to merit increases.

Restructuring and impairment charges

During the fiscal year ended March 31, 2025, the Company executed a sublease for its Curative office space in Irving, Texas, which resulted in a $2.3 million impairment charge for the subleased asset group.

In August 2023, the Company initiated a restructuring plan to better align the Company’s resources with its priorities, and reduced its workforce by 10%. The $7.9 million in restructuring charges incurred during the fiscal year ended March 31, 2024 consisted of $4.3 million of severance payments and employee benefits and $3.6 million of stock-based compensation expense for the accelerated vesting of equity awards.

Other income, net

Other income, net for the fiscal year ended March 31, 2025 increased $14.5 million as compared to the fiscal year ended 2024, primarily driven by increases in interest income due to higher yields earned on our cash equivalents and marketable securities portfolio and a higher average portfolio balance.

Provision for income taxes

Income tax expense for the fiscal year ended March 31, 2025 increased $2.8 million as compared to the fiscal year ended 2024, primarily driven by higher income before taxes, offset by tax deductions from stock award activities.

Liquidity and Capital Resources

Since inception, we have financed operations primarily through proceeds received from sales of equity securities and payments received from our customers. As of March 31, 2025, our principal sources of liquidity were cash and cash equivalents and marketable securities of $915.7 million. Our marketable securities consist of U.S. government and agency securities, corporate notes and bonds, and commercial paper.

Prior to March 31, 2024, the Company’s board of directors authorized various programs to repurchase up to $410 million of the Company’s Class A common stock. Under these programs, the Company repurchased and retired 16,480,514 shares of Class A common stock. All of these programs were completed as of April 2024.

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On May 1, 2024 the Company’s board of directors authorized a program to repurchase up to $500 million of the Company’s Class A common stock with no expiration date. As of March 31, 2025, the Company repurchased and retired 1,875,226 shares of Class A common stock under this program for an aggregate purchase price of $76.0 million and $424.0 million remained available and authorized for repurchase.

All repurchases are subject to general business and market conditions and other investment opportunities and may be executed through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. Immediately upon the repurchase of any shares of Class A common stock, such shares shall be retired by the Company and shall automatically return to the status of authorized but unissued shares of Class A common stock.

Effective January 1, 2023, the Company’s share repurchases in excess of allowable share issuances are subject to a 1% excise tax as a result of the Inflation Reduction Act of 2022. As of March 31, 2024 the Company had accrued excise taxes of $1.5 million, all of which were paid during fiscal 2025. As of March 31, 2025, the Company had no accrued excise taxes.

We believe that our existing cash and cash equivalents and marketable securities will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months.

Our future capital requirements will depend on many factors, including our revenue growth rate, the timing and the amount of cash received from customers, the expansion of sales and marketing activities, timing of share repurchases, and the timing and extent of spending to support research and development efforts. Further, we may in the future enter into arrangements to acquire or invest in businesses and technologies. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, financial condition, and results of operations could be adversely affected.

We have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities.

For further details regarding our cash requirements from noncancelable operating lease obligations and other contractual commitments, see Note 14—Commitments and Contingencies and Note 15—Leases included in Part II, Item 8 of this Annual Report on Form 10-K.

Cash Flows

Net cash provided by operating activities

Cash provided by operating activities was $273.3 million for the fiscal year ended March 31, 2025. This consisted of net income of $223.2 million, adjusted for non-cash items of $74.2 million and a net outflow from operating assets and liabilities of $24.1 million. Non-cash items primarily consisted of stock-based compensation expense of $72.4 million, depreciation and amortization expense of $10.7 million, amortization of deferred contract costs of $10.0 million, non-cash lease expense of $1.8 million, and impairment of long-lived assets of $2.3 million, partially offset by deferred income taxes of $11.6 million and accretion of discount on marketable securities of $11.7 million. The net outflow from operating assets and liabilities was driven by a $27.2 million increase in accounts receivable due to the timing of billings and collections, a $12.1 million increase in deferred contract costs due to increased sales activity, and a $2.1 million decrease in operating lease liabilities. These outflows were partially offset by a $15.2 million increase in deferred revenue due to billing outpacing revenue recognition, and a $2.8 million decrease in prepaid expenses and other assets. During the fiscal years ended March 31, 2025 and 2024, the Company made $55.7 million and $51.3 million, respectively, in payments for taxes. The increase in cash paid for income taxes was partially related to the Tax Cuts and Jobs Act of 2017, which eliminated the option to deduct research and development expenditures and required taxpayers to capitalize and amortize them over five or fifteen years. The requirement may also reduce our cash flows from operating activities in future periods, the amounts and specific periods of which we are unable to estimate at this time.

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Cash provided by operating activities was $184.1 million for the fiscal year ended March 31, 2024. This consisted of net income of $147.6 million, adjusted for non-cash items of $61.0 million and a net outflow from operating assets and liabilities of $24.5 million. Non-cash items primarily consisted of stock-based compensation expense of $51.1 million, depreciation and amortization expense of $10.3 million, amortization of deferred contract costs of $8.9 million, non-cash lease expense of $2.1 million, partially offset by deferred income taxes of $8.6 million and accretion of discount on marketable securities of $5.2 million. The net outflow from operating assets and liabilities was driven by a $20.5 million increase in prepaid expenses and other assets primarily due to the prepayment of taxes, an $8.6 million increase in deferred contract costs due to increased sales activity, a decrease of $6.1 million in deferred revenue due to the timing of customer billings and program launches. The outflows were partially offset by an $8.3 million increase in accounts payable, accrued expenses, and other liabilities which was primarily due to the timing of transferable tax credit payments and a $4.0 million decrease in accounts receivable due to the timing of billings and collections.

Net cash provided by (used in) investing activities

Cash used in investing activities was $29.3 million for the fiscal year ended March 31, 2025, which primarily consisted of $675.6 million of marketable securities purchases and $6.5 million for internal-use software development costs. These outflows were partially offset by proceeds from the maturities of marketable securities of $635.4 million and proceeds from the sale of marketable securities of $17.4 million.

Cash provided by investing activities was $31.2 million for the fiscal year ended March 31, 2024, which primarily consisted of proceeds from the maturities of marketable securities of $435.2 million and proceeds from the sale of marketable securities of $74.7 million. These inflows were partially offset by $472.9 million of marketable securities purchases and $5.7 million for internal-use software development costs.

Net cash used in financing activities

Cash used in financing activities was $131.1 million for the fiscal year ended March 31, 2025, which primarily consisted of common stock repurchases of $120.3 million, $27.2 million of taxes paid related to the net share settlement of equity awards, $5.5 million of payments for contingent consideration related to the AMiON acquisition, and $1.5 million of excise tax payments. These payments were partially offset by $19.7 million of proceeds from the exercise of stock options and common stock warrants and $3.6 million of proceeds from the issuance of common stock related to the employee stock purchase plan.

Cash used in financing activities was $276.5 million for the fiscal year ended March 31, 2024, which primarily consisted of common stock repurchases of $280.7 million, $6.8 million of taxes paid related to the net share settlement of equity awards, and $5.4 million of payments for contingent consideration related to the AMiON acquisition. These payments were partially offset by $12.9 million of proceeds from the exercise of stock options and common stock warrants and $3.4 million of proceeds from the issuance of common stock related to the employee stock purchase plan.

Non-GAAP Financial Measures

We use adjusted EBITDA and free cash flow to measure our performance, identify trends, formulate financial projections, and make strategic decisions.

Adjusted EBITDA

We define adjusted EBITDA as net income before interest, income taxes, depreciation, and amortization, and as further adjusted for acquisition and other related expenses, stock-based compensation expense, restructuring and impairment charges, change in fair value of contingent earn-out consideration liability, and other income, net. Net income margin represents net income as a percentage of revenue and adjusted EBITDA margin represents adjusted EBITDA as a percentage of revenue.

Adjusted EBITDA is a key measure we use to assess our financial performance and is also used for internal planning and forecasting purposes. We believe adjusted EBITDA is helpful to investors, analysts, and other interested parties because it can assist in providing a more consistent and comparable overview of our operations across our historical financial periods.

Adjusted EBITDA and adjusted EBITDA margin are non-GAAP measures and are presented for supplemental informational purposes only and should not be considered as alternatives or substitutes to the financial information presented in accordance with GAAP. These measures have certain limitations in that they do not include the impact of certain expenses that are reflected in our consolidated statements of operations that are necessary to run our business. Other companies, including other companies in our industry, may not use these measures or may calculate these measures differently than as presented in this Annual Report on Form 10-K, limiting their usefulness as comparative measures.

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The following table presents a reconciliation of net income to adjusted EBITDA, adjusted EBITDA margin, and net income margin (in thousands, except percentages):

Free Cash Flow

Free cash flow is a key performance measure that our management uses to assess our overall performance. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by our business that can be used for strategic opportunities, including investing in our business, making strategic acquisitions, and strengthening our financial position.

We calculate free cash flow as cash flow from operating activities less purchases of property and equipment and internal-use software development costs.

Although we believe free cash flow is a useful indicator of business performance, free cash flow is presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP. Free cash flow has limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of other GAAP financial measures, such as net cash provided by operating activities. Some of the limitations of free cash flow are that it may not properly reflect future contractual commitments that have not been realized in the current period. Our free cash flow may not be comparable to similarly titled measures of other companies because they may not calculate free cash flow in the same manner as we calculate the measure, limiting its usefulness as a comparative measure.

The following table presents a reconciliation of our free cash flow to the most comparable GAAP measure, net cash provided by operating activities, for each of the periods indicated (in thousands):

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Critical Accounting Policies and Estimates

Our consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K are prepared in accordance with GAAP. The preparation of our financial statements also requires us to make estimates and assumptions that affect the amounts stated in the consolidated financial statements and accompanying notes. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results could differ significantly from the estimates made by management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.

We believe that of our significant accounting policies, which are described in Note 2—Summary of Significant Accounting Policies included in Part II, Item 8 of this Annual Report on Form 10-K, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, we believe the below policies are the most critical to aid in fully understanding and evaluating our consolidated financial statements.

Revenue Recognition

Marketing Solutions customers may purchase a subscription for a specific module to be used over a defined period of time. These customers may purchase more than one module with either the same or different subscription periods. Each module targets a consistent number of Doximity members per month for the duration of the subscription period. The Company treats each subscription to a specific module as a distinct performance obligation because each module is capable of being distinct as the customer can benefit from the subscription to each module on their own and each subscription can be sold standalone. The subscription to each module is treated as a series of distinct performance obligations because it is distinct and substantially the same, satisfied over time, and has the same measure of progress. The total transaction price is allocated to the individual module subscriptions, which represent separate performance obligations, based on the relative standalone selling price. We commence revenue recognition when the first content for the specific module is launched on the platform for the initial monthly period and revenue is recognized over time as each subsequent content period is delivered.

Marketing Solutions customers may also purchase integrated and other subscriptions for a fixed fee that are not tied to a single module per month but allow customers to utilize a given module or combination of modules during the subscription period subject to limits on the total number of modules launched in a given period of time, active at any given time, and members targeted. These represent stand-ready obligations in that the delivery of the underlying sponsored content is within the control of the customer and the extent of use in any given period does not diminish the remaining services. For these subscriptions, we record revenue ratably over the subscription period commencing with either the beginning of the subscription term or first launch.

Stock-Based Compensation

Stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense in the consolidated statements of operations over the requisite service period, which is generally the vesting period of the respective award.

Determining the grant-date fair value of stock options, warrants, and purchase rights under the employee stock purchase plan, or ESPP, requires judgment. We estimate the fair value of restricted stock units, or RSUs, at our stock price on the grant date. We use the Black-Scholes option-pricing model to determine the fair value of stock options, warrants, and ESPP rights. The determination of the grant-date fair value using the Black-Scholes model is affected by the fair value of our common stock and assumptions regarding a number of other complex and subjective variables. These assumptions include the expected term of the award, the expected stock price volatility over the expected term of the award, the risk-free interest rate for the expected term of the award, and expected dividends.

Business Combinations

The results of businesses acquired in business combinations are included in our consolidated financial statements from the date of the acquisition. Purchase accounting results in assets and liabilities of an acquired business being recorded at their estimated fair values on the acquisition date. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill. The purchase price allocation process requires management to make significant judgment and estimates, including the selection of valuation methodologies, estimates of future expected cash flows, future revenue growth, margins, customer retention rates, technology life, royalty rates, expected use of acquired assets, and discount rates. These factors are also considered in determining the useful life of the acquired intangible assets. These estimates are based in part on historical experience, market conditions and information obtained from management of the acquired companies and are

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inherently uncertain. We engage the assistance of valuation specialists in concluding on fair value measurements in connection with determining fair values of assets acquired and liabilities assumed in business combinations.

Contingent earn-out consideration payable in cash arising from business combinations is recorded at fair value as a liability on the acquisition date and remeasured at each reporting date. Changes in fair value are recorded in sales and marketing expenses in the consolidated statements of operations. Determining the fair value of the contingent earn-out consideration each period requires management to make assumptions and judgments. These estimates involve inherent uncertainties, and if different assumptions had been used, the fair value of contingent consideration could have been materially different from the amounts recorded. The significant inputs used in the fair value measurement of the contingent earn-out consideration liability are the discount rate and the timing and amounts of the future payments, which are based upon estimates of future achievement of the performance metrics.

Transaction-related costs are expensed as incurred and are included in general and administrative expenses in the consolidated statements of operations.

Recent Accounting Pronouncements

Refer to Note 2—Summary of Significant Accounting Policies included in Part II, Item 8 of this Annual Report on Form 10-K for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and accompanying notes that are included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, as described under the heading “Special Note Regarding Forward-Looking Statements” in this Annual Report on Form 10-K. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” or in other parts of this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

A discussion regarding our financial condition and results of operations for the fiscal year ended March 31, 2024 compared to the fiscal year ended March 31, 2023 is presented below. A discussion regarding our financial condition and results of operations for the fiscal year ended March 31, 2023 compared to the fiscal year ended March 31, 2022 can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023 and filed with the SEC on May 26, 2023.

Overview

We are the leading digital platform for U.S. medical professionals, as measured by the number of members. Our members include more than 80% of U.S. physicians, spanning all 50 states and every medical specialty.

Our mission is to help every physician be more productive and provide better care for their patients. We are physicians-first, putting technology to work for doctors instead of the other way around. That guiding principle has enabled Doximity to become an essential and trusted professional platform for physicians. Our physician cloud puts modern software in the hands of physicians and other medical professionals, enabling our members to collaborate with colleagues, stay up to date with the latest medical news and research, manage their careers and on-call schedules, streamline documentation and administrative paperwork, and conduct virtual patient visits. Our revenue-generating customers, primarily pharmaceutical manufacturers and healthcare systems, have access to a suite of commercial solutions that benefit from broad physician usage.

At the core of our platform is the largest medical professional network in the nation, which creates proximity within our community of doctors and hundreds of thousands of other medical professionals. Verified members can search and connect with colleagues and specialists, which allows them to better coordinate patient care and streamline referrals. Our newsfeed addresses the ever increasing sub-specialization of medical expertise and volume of medical research by delivering news and information that is relevant to each physician's clinical practice. We also support physicians in their day-to-day practice of medicine with mobile-friendly and easy-to-use productivity tools such as voice and video dialer, secure messaging, digital faxing, and Doximity GPT. Our business model is designed to both respect and support physicians while driving value for our customers through our Marketing, Hiring, and Productivity Solutions. Our revenue-generating customers, primarily pharmaceutical manufacturers and health systems, have access to a suite of commercial solutions that benefit from broad physician usage.

Our business model has delivered high revenue growth at scale with profitability. For the fiscal years ended March 31, 2024, 2023 and 2022, we recognized revenue of $475.4 million, $419.1 million, and $343.5 million, respectively, representing year-over-year growth rates of 13% and 22%, respectively. Our net income was $147.6 million, $112.8 million, and $154.8 million for the fiscal years ended March 31, 2024, 2023, and 2022, respectively. For the fiscal years ended March 31, 2024, 2023 and 2022, we generated adjusted EBITDA of $230.5 million, $184.0 million, and $150.3 million, respectively. We have accomplished this while focusing on our core mission to help every physician be more productive and provide better care for their patients.

Key Business and Financial Metrics

We monitor a number of key business and financial metrics to assess the health and success of our business, including:

Customers with Trailing 12-Month Subscription Revenue Greater than $100,000 and $500,000. The number of customers with trailing 12-month (“TTM”) subscription revenue greater than $100,000 and $500,000 is a key indicator of the scale of our business, and is calculated by counting the number of customers that contributed more than $100,000 and $500,000, respectively, in subscription revenue in the TTM period. Our customer count is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity, and we present our total customer count for historical periods reflecting these adjustments.

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The number of customers with at least $100,000 and $500,000 of revenue has grown steadily in recent years as we have engaged new customers and expanded within existing ones. These cohorts of customers accounted for approximately 90% and 81%, respectively, of our revenue in fiscal 2024.

Net Revenue Retention Rate. Net revenue retention rate is calculated by taking the TTM subscription-based revenue from our customers that had revenue in the prior TTM period and dividing that by the total subscription-based revenue for the prior TTM period. For the purposes of this calculation, subscription revenue excludes subscriptions for individuals and small practices and other non-recurring items. Our net revenue retention rate compares our subscription revenue from the same set of customers across comparable periods, and reflects customer renewals, expansion, contraction, and churn. Our net revenue retention rate is directly tied to our revenue growth rate and thus fluctuates as that growth rate fluctuates.

Components of Results of Operations

Revenue

Marketing Solutions. Our customers purchase a subscription to Marketing Solutions, either directly or through marketing agencies, for the ability to share tailored content on the Doximity platform via a variety of modules for defined time periods. We generally bill customers a portion of the contract upon contract execution and then bill throughout the remainder of the contract based on various time-based milestones. Generally, we bill in advance of revenue recognition. When revenue is recognized in advance of billings, we record unbilled revenue. Unbilled revenue is recorded on the consolidated balance sheets within prepaid expenses and other current assets. Subscriptions to Marketing Solutions include the following contractual arrangements:

•Subscriptions for specific modules delivered on a monthly basis to a consistent number of targeted Doximity members during the subscription period. Pricing is based on the number and composition of the targeted Doximity members, and on the specific modules purchased.

•Integrated subscriptions for a fixed subscription fee that are not tied to a single module, allowing customers to utilize any combination of modules during the subscription period.

For these subscription-based contractual arrangements, we recognize revenue over time as control of the service is transferred to the customer.

Hiring Solutions. We provide customers access to our platform which enables them to post job openings or deliver a fixed number of monthly messages to our network of medical professionals. Hiring Solutions contracts are noncancelable and customers are billed in annual, quarterly, or monthly installments in advance of the service period, and revenue is recognized ratably over the contractual term.

We also generate revenue from temporary and permanent medical recruiting services which we charge on an hourly-fee, and retainer and placement-fee basis, respectively. For the fiscal years ended March 31, 2024, 2023, and 2022, the revenue from temporary and permanent medical recruiting services was not significant to our total revenue.

Cost of Revenue

Cost of revenue is primarily comprised of expenses related to cloud hosting, personnel-related expenses for our customer success team, costs for third-party platform access, information technology and software-related services and contractors, and other services used in connection with the delivery and support of our platform. Our cost of revenue also includes the amortization of internal-use software development costs, editorial and other content-related expenses, and allocated overhead. Cost of revenue is driven by the growth of our member network and utilization of our productivity tools. We intend to continue to invest additional resources in our cloud infrastructure and our customer support organizations to support the growth of our business.

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Gross Profit and Gross Margin

Gross profit is total revenue less total cost of revenue. Gross margin is gross profit expressed as a percentage of total revenue. Gross profit and gross margin has been and will continue to be affected by a number of factors, including the timing of our acquisition of new customers and sales of additional solutions to existing customers, the timing and extent of our investments in our operations, cloud hosting costs, growth in our customer success team, and the timing of amortization of internal-use software development costs. We expect our gross margin to remain relatively steady over the near term, although our quarterly gross margin is expected to fluctuate from period to period depending on the interplay of these and other factors.

Operating Expenses

Our operating expenses consist of research and development, sales and marketing, general and administrative, and restructuring expenses.

Research and Development

Research and development expense is primarily comprised of personnel-related expenses associated with our engineering and product teams who are responsible for building new products and improving existing products. Research and development expense also includes costs for third-party services and contractors, information technology and software-related costs, and allocated overhead. Other than internal-use software development costs that qualify for capitalization, research and development costs are expensed as incurred. We expect research and development expenses will increase on an absolute dollar basis as we continue to grow our platform and product offerings.

Sales and Marketing

Sales and marketing expense is primarily comprised of personnel-related expenses, sales incentive compensation, advertising costs, travel, and other event expenses. Sales and marketing expense also includes costs for third-party services and contractors, information technology and software-related costs, allocated overhead, amortization of intangible assets, and change in fair value of contingent earn-out consideration liability. We capitalize sales incentive compensation that is considered to be an incremental and recoverable cost of obtaining a contract with a customer. These sales incentive compensation costs are amortized over the period of benefit. We expect sales and marketing expense to increase and to be our largest expense on an absolute basis.

General and Administrative

General and administrative expense is primarily comprised of personnel-related expenses associated with our executive, finance, legal, human resources, information technology, and facilities employees. General and administrative expense includes fees for third-party legal and accounting services, insurance expense, information technology and software-related costs, and allocated overhead. We expect that general and administrative expense will increase on an absolute dollar basis as we incur compliance costs associated with being a publicly-traded company, including legal, audit, and consulting fees.

Restructuring

Restructuring expense primarily consists of severance payments, employee benefits, and stock-based compensation in relation to the modification of equity awards associated with the management-approved plan. One-time employee termination benefits are recognized at the time of communication of the terms of the plan to the employees, unless future service is required, in which case the costs are recognized over the future service period.

Other Income, Net

Other income, net consists primarily of investment income earned on our cash equivalents and marketable securities.

Provision for (Benefit from) Income Taxes

Provision for (benefit from) income taxes consists primarily of income taxes in U.S. federal, state, and local jurisdictions in which we conduct business. We continue to maintain a valuation allowance related to specific net deferred tax assets where it is not more likely than not that the deferred tax assets will be realized, which includes Arizona research and development credits, California alternative minimum tax credits, and capital loss carryforwards. Our effective income tax rate generally differs from the U.S. statutory tax rate of 21.0% primarily due to U.S. federal and state research and development tax credits, stock-based compensation related tax benefits, change in valuation allowance, and state income taxes.

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Results of Operations

The following tables set forth our consolidated results of operations data and such data as a percentage of revenue for the periods presented.

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(1)Costs and expenses include stock-based compensation expense as follows:

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Comparison of the Fiscal Years Ended March 31, 2024 and 2023.

Revenue

Revenue for the fiscal year ended March 31, 2024 increased $56.4 million as compared to the fiscal year ended 2023. The increase was primarily driven by a $60.3 million increase in subscription revenue. Of the increase in subscription revenue, $9.4 million was driven by the addition of new subscription customers1 and $50.9 million was due to the expansion of existing customers. The expansion of existing customers was primarily driven by average revenue per existing Marketing Solutions customer increasing by 19% as a result of adding new and growing existing brands and service lines. Approximately 95% of our revenue for the fiscal year ended March 31, 2024 was derived from subscription customers. The remaining change in revenue was due to a reduction in permanent placement recruiting services.

Cost of revenue, gross profit, and gross margin

Cost of revenue for the fiscal year ended March 31, 2024 decreased $2.8 million as compared to the fiscal year ended 2023, primarily driven by a decrease in personnel-related costs as a result of a reduction in average headcount due to the Company’s restructuring plan executed in August 2023 and a decrease in other third-party expenses.

The gross margin for the fiscal year ended March 31, 2024 increased due to growth in our revenue as well as a reduction in our costs of revenue as a result of the Company’s restructuring plan executed in August 2023.

Operating Expenses

Research and development

Research and development expense for the fiscal year ended March 31, 2024 increased $1.8 million as compared to the fiscal year ended 2023, primarily driven by a $1.2 million increase in third-party contractor costs and a $1.0 million increase in hosting and software license costs associated with running operations and ongoing projects and services to continuously improve and optimize our products and services.

Sales and marketing

Sales and marketing expense for the fiscal year ended March 31, 2024 increased $9.6 million as compared to the fiscal year ended 2023, primarily driven by a $3.9 million increase in market research and trade shows, a $1.6 million increase in personnel-related costs due to merit increases offset by reduction in average headcount as a result of the Company’s restructuring plan executed in August 2023, a $1.4 million increase in software-related costs, and a $0.9 million increase in employee events and travel-related expenses.

1 We define new subscription customers as revenue generating subscription customers in the current fiscal period who did not contribute any revenue for the same period in the prior fiscal year.

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General and administrative

General and administrative expense for the fiscal year ended March 31, 2024 increased $1.1 million as compared to the fiscal year ended 2023, primarily driven by a $1.0 million increase in accounting and legal fees.

Restructuring

In August 2023, the Company initiated a restructuring plan to better align the Company’s resources with its priorities and reduced its workforce by 10%. The $7.9 million in restructuring charges incurred during the fiscal year ended March 31, 2024 consisted of $4.3 million of severance payments and employee benefits and $3.6 million of stock-based compensation expense for the accelerated vesting of equity awards.

Other income, net

Other income, net for the fiscal year ended March 31, 2024 increased $13.3 million as compared to the fiscal year ended 2023, primarily driven by increases in interest income due to higher yields earned on our cash equivalents and marketable securities portfolio and a higher average portfolio balance.

Provision for income taxes

Income tax expense for the fiscal year ended March 31, 2024 increased $17.3 million as compared to the fiscal year ended 2023, primarily driven by higher income before taxes and decreased tax deductions from stock award activities, offset by transferable federal tax credits and the release of a valuation allowance associated with California research and development tax credits that are expected to be utilized.

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NM: Percentage not meaningful.

Liquidity and Capital Resources

Since inception, we have financed operations primarily through proceeds received from sales of equity securities and payments received from our customers. As of March 31, 2024, our principal sources of liquidity were cash and cash equivalents and marketable securities of $762.9 million. Our marketable securities consist of U.S. government and agency securities, corporate notes and bonds, commercial paper, asset-backed securities, and sovereign bonds.

In June 2021, we completed our IPO, in which we issued and sold 22,505,750 shares of our Class A common stock at $26.00 per share, including 3,495,000 shares issued upon the exercise of the underwriters’ option to purchase additional shares. We received proceeds of $548.5 million after deducting underwriting discounts and commissions as well as deferred offering costs.

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The Company’s board of directors authorized various programs to repurchase up to $340 million of the Company’s Class A common stock. Under these programs, the Company repurchased and retired 13,790,535 shares of Class A common stock. All of these programs were completed as of October 2023.

On October 26, 2023, the Company’s board of directors authorized a program to repurchase up to $70 million of the Company’s Class A common stock over a period of 12 months. The repurchases are subject to general business and market conditions and other investment opportunities and may be executed through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. Immediately upon the repurchase of any shares of Class A common stock, such shares shall be retired by the Company and shall automatically return to the status of authorized but unissued shares of Class A common stock. As of March 31, 2024, the Company repurchased and retired 1,119,014 shares of Class A common stock for an aggregate purchase price of $29.7 million. As of March 31, 2024, $40.3 million remained available and authorized for repurchase.

Effective January 1, 2023, the Company’s share repurchases in excess of allowable share issuances are subject to a 1% excise tax as a result of the Inflation Reduction Act of 2022. During the fiscal year ended March 31, 2024, the Company incurred excise taxes of $1.5 million, all of which remained unpaid as of March 31, 2024. The Company did not incur any excise taxes during the prior year.

We believe that our existing cash and cash equivalents and marketable securities will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months.

Our future capital requirements will depend on many factors, including our revenue growth rate, the timing and the amount of cash received from customers, the expansion of sales and marketing activities, timing of share repurchases, and the timing and extent of spending to support research and development efforts. Further, we may in the future enter into arrangements to acquire or invest in businesses and technologies. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, financial condition, and results of operations could be adversely affected.

We have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities.

For further details regarding our cash requirements from noncancelable operating lease obligations and other contractual commitments, see Note 15—Commitments and Contingencies and Note 16—Leases included in Part II, Item 8 of this Annual Report on Form 10-K.

Cash Flows

Net cash provided by operating activities

Cash provided by operating activities was $184.1 million for the fiscal year ended March 31, 2024. This consisted of net income of $147.6 million, adjusted for non-cash items of $61.0 million and a net outflow from operating assets and liabilities of $24.5 million. Non-cash items primarily consisted of stock-based compensation expense of $51.1 million, depreciation and amortization expense of $10.3 million, amortization of deferred contract costs of $8.9 million, non-cash lease expense of $2.1 million, partially offset by deferred income taxes of $8.6 million and accretion of discount on marketable securities of $5.2 million. The net outflow from operating assets and liabilities was driven by a $20.5 million increase in prepaid expenses and other assets primarily due to the prepayment of taxes, an $8.6 million increase in deferred contract costs due to increased sales activity, a decrease of $6.1 million in deferred revenue due to the timing of customer billings and program launches. The outflows were partially offset by an $8.3 million increase in accounts payable, accrued expenses, and other liabilities which was primarily due to the timing of transferable tax credit payments and a $4.0 million decrease in accounts receivable due to the timing of billings and collections. During the fiscal years ended March 31, 2024 and 2023, the Company made $51.3 million and $5.2 million, respectively, in payments for taxes. The increase in cash paid for income taxes was partially related to the Tax Cuts and Jobs Act of 2017, which eliminated the option to deduct research and development expenditures and required taxpayers to capitalize and amortize them over five or fifteen years. Although Congress is considering legislation that would defer the amortization requirement to later years, we have no assurance that the provision will be so deferred, repealed or

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otherwise modified. The requirement may also reduce our cash flows from operating activities in future periods, the amounts and specific periods of which we are unable to estimate at this time.

Cash provided by operating activities was $179.6 million for the fiscal year ended March 31, 2023. This consisted of net income of $112.8 million, adjusted for non-cash items of $87.8 million and a net outflow from operating assets and liabilities of $21.0 million. Non-cash items primarily consisted of stock-based compensation expense of $47.8 million, deferred income taxes of $13.2 million, depreciation and amortization expense of $10.3 million, amortization of deferred contract costs of $8.8 million, and amortization of the premium on marketable securities of $3.1 million. The net outflow from operating assets and liabilities was driven by a $26.2 million increase in accounts receivable due to the growth of our business and the timing of collections, an $8.5 million increase in deferred contract costs due to increased sales activity, and a $3.4 million increase in prepaid expenses and other assets. These outflows were partially offset by an increase of $17.5 million in deferred revenue due to the timing of customer billings and program launches.

Net cash provided by (used in) investing activities

Cash provided by investing activities was $31.2 million for the fiscal year ended March 31, 2024, which primarily consisted of proceeds from the maturities of marketable securities of $435.2 million and proceeds from the sale of marketable securities of $74.7 million. These inflows were partially offset by $472.9 million of marketable securities purchases and $5.7 million for internal-use software development costs.

Cash used in investing activities was $59.9 million for the fiscal year ended March 31, 2023, which primarily consisted of $190.6 million of marketable securities purchases, $53.5 million paid for the acquisition of AMiON, $4.5 million for internal-use software development costs, and $1.7 million for purchases of property and equipment. These payments were partially offset by proceeds from the sale of marketable securities of $107.2 million and proceeds from the maturities of marketable securities of $83.1 million.

Net cash provided by (used in) financing activities

Cash used in financing activities was $276.5 million for the fiscal year ended March 31, 2024, which primarily consisted of common stock repurchases of $280.7 million, $6.8 million of taxes paid related to the net share settlement of equity awards, and $5.4 million of payments for contingent consideration related to the AMiON acquisition. These payments were partially offset by $12.9 million of proceeds from the exercise of stock options and common stock warrants and $3.4 million of proceeds from the issuance of common stock related to the employee stock purchase plan.

Cash used in financing activities was $74.5 million for the fiscal year ended March 31, 2023, which primarily consisted of common stock repurchases of $85.3 million and $3.8 million of taxes paid related to the net share settlement of equity awards. These payments were partially offset by $9.9 million of proceeds from the exercise of stock options and common stock warrants and $4.8 million of proceeds from the issuance of common stock related to the employee stock purchase plan.

Non-GAAP Financial Measures

We use adjusted EBITDA and free cash flow to measure our performance, identify trends, formulate financial projections, and make strategic decisions.

Adjusted EBITDA

We define adjusted EBITDA as net income before interest, income taxes, depreciation, and amortization, and as further adjusted for acquisition and other related expenses, stock-based compensation expense, restructuring expense, change in fair value of contingent earn-out consideration liability, and other income, net. Net income margin represents net income as a percentage of revenue and adjusted EBITDA margin represents adjusted EBITDA as a percentage of revenue.

Adjusted EBITDA is a key measure we use to assess our financial performance and is also used for internal planning and forecasting purposes. We believe adjusted EBITDA is helpful to investors, analysts, and other interested parties because it can assist in providing a more consistent and comparable overview of our operations across our historical financial periods.

Adjusted EBITDA and adjusted EBITDA margin are non-GAAP measures and are presented for supplemental informational purposes only and should not be considered as alternatives or substitutes to the financial information presented in accordance with GAAP. These measures have certain limitations in that they do not include the impact of certain expenses that are reflected in our consolidated statements of operations that are necessary to run our business. Other companies, including other companies in our industry, may not use these measures or may calculate these measures differently than as presented in this Annual Report on Form 10-K, limiting their usefulness as comparative measures.

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The following table presents a reconciliation of net income to adjusted EBITDA, adjusted EBITDA margin, and net income margin (in thousands, except percentages):

Free Cash Flow

Free cash flow is a key performance measure that our management uses to assess our overall performance. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by our business that can be used for strategic opportunities, including investing in our business, making strategic acquisitions, and strengthening our financial position.

We calculate free cash flow as cash flow from operating activities less purchases of property and equipment and internal-use software development costs.

Although we believe free cash flow is a useful indicator of business performance, free cash flow is presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP. Free cash flow has limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of other GAAP financial measures, such as net cash provided by operating activities. Some of the limitations of free cash flow are that it may not properly reflect future contractual commitments that have not been realized in the current period. Our free cash flow may not be comparable to similarly titled measures of other companies because they may not calculate free cash flow in the same manner as we calculate the measure, limiting its usefulness as a comparative measure.

The following table presents a reconciliation of our free cash flow to the most comparable GAAP measure, net cash provided by operating activities, for each of the periods indicated (in thousands):

Critical Accounting Policies and Estimates

Our consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K are prepared in accordance with GAAP. The preparation of our financial statements also requires us to make estimates and assumptions that affect the amounts stated in the consolidated financial statements and accompanying notes. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results could differ significantly from the estimates made by management. To the extent that there are

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differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.

We believe that of our significant accounting policies, which are described in Note 2—Summary of Significant Accounting Policies included in Part II, Item 8 of this Annual Report on Form 10-K, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, we believe the below policies are the most critical to aid in fully understanding and evaluating our consolidated financial statements.

Revenue Recognition

Marketing Solutions customers may purchase a subscription for a specific module to be used over a defined period of time. These customers may purchase more than one module with either the same or different subscription periods. Each module targets a consistent number of Doximity members per month for the duration of the subscription period. The Company treats each subscription to a specific module as a distinct performance obligation because each module is capable of being distinct as the customer can benefit from the subscription to each module on their own and each subscription can be sold standalone. The subscription to each module is treated as a series of distinct performance obligations because it is distinct and substantially the same, satisfied over time, and has the same measure of progress. The total transaction price is allocated to the individual module subscriptions, which represent separate performance obligations, based on the relative standalone selling price. We commence revenue recognition when the first content for the specific module is launched on the platform for the initial monthly period and revenue is recognized over time as each subsequent content period is delivered.

Marketing Solutions customers may also purchase integrated subscriptions for a fixed subscription fee that are not tied to a single module but allow customers to utilize any combination of modules during the subscription period subject to limits on the total number of modules launched in a given period of time, active at any given time, and members targeted. These represent stand-ready obligations in that the delivery of the underlying sponsored content is within the control of the customer and the extent of use in any given period does not diminish the remaining services. For these integrated campaign subscriptions, we record revenue ratably over the subscription period commencing with the beginning of the subscription term.

Stock-Based Compensation

Stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense in the consolidated statements of operations over the requisite service period, which is generally the vesting period of the respective award.

Determining the grant-date fair value of stock options, warrants, and purchase rights under the employee stock purchase plan, or ESPP, requires judgment. We estimate the fair value of restricted stock units, or RSUs, at our stock price on the grant date. We use the Black-Scholes option-pricing model to determine the fair value of stock options, warrants, and the ESPP. The determination of the grant-date fair value using the Black-Scholes model is affected by the fair value of our common stock and assumptions regarding a number of other complex and subjective variables. These assumptions include the expected term of the award, the expected stock price volatility over the expected term of the award, the risk-free interest rate for the expected term of the award, and expected dividends.

Business Combinations

The results of businesses acquired in business combinations are included in our consolidated financial statements from the date of the acquisition. Purchase accounting results in assets and liabilities of an acquired business being recorded at their estimated fair values on the acquisition date. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill. The purchase price allocation process requires management to make significant judgment and estimates, including the selection of valuation methodologies, estimates of future expected cash flows, future revenue growth, margins, customer retention rates, technology life, royalty rates, expected use of acquired assets, and discount rates. These factors are also considered in determining the useful life of the acquired intangible assets. These estimates are based in part on historical experience, market conditions and information obtained from management of the acquired companies and are inherently uncertain. We engage the assistance of valuation specialists in concluding on fair value measurements in connection with determining fair values of assets acquired and liabilities assumed in business combinations.

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Contingent earn-out consideration payable in cash arising from business combinations is recorded at fair value as a liability on the acquisition date and remeasured at each reporting date. Changes in fair value are recorded in sales and marketing expenses in the consolidated statements of operations. Determining the fair value of the contingent earn-out consideration each period requires management to make assumptions and judgments. These estimates involve inherent uncertainties, and if different assumptions had been used, the fair value of contingent consideration could have been materially different from the amounts recorded. The significant inputs used in the fair value measurement of the contingent earn-out consideration liability are the discount rate and the timing and amounts of the future payments, which are based upon estimates of future achievement of the performance metrics.

Transaction-related costs are expensed as incurred and are included in general and administrative expenses in the consolidated statements of operations.

Recent Accounting Pronouncements

Refer to Note 2—Summary of Significant Accounting Policies included in Part II, Item 8 of this Annual Report on Form 10-K for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and accompanying notes that are included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, as described under the heading “Special Note Regarding Forward-Looking Statements” in this Annual Report on Form 10-K. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” or in other parts of this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

A discussion regarding our financial condition and results of operations for the fiscal year ended March 31, 2023 compared to the fiscal year ended March 31, 2022 is presented below. A discussion regarding our financial condition and results of operations for the fiscal year ended March 31, 2022 compared to the fiscal year ended March 31, 2021 can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022 and filed with the SEC on May 27, 2022.

Overview

We are the leading digital platform for U.S. medical professionals, as measured by the number of U.S. physician members. Our members include more than 80% of physicians across all 50 states and every medical specialty.

Our mission is to help every physician be more productive and provide better care for their patients. We are physicians-first, putting technology to work for doctors instead of the other way around. That guiding principle has enabled Doximity to become an essential and trusted professional platform for physicians. Our cloud-based platform provides our members with tools specifically built for medical professionals, enabling them to collaborate with their colleagues, securely coordinate patient care, conduct virtual patient visits, stay up-to-date with the latest medical news and research, monitor their work schedules, and manage their careers. Doximity membership is free for physicians. Our revenue-generating customers, primarily pharmaceutical manufacturers and healthcare systems, have access to a suite of commercial solutions that benefit from broad physician usage.

At the core of our platform is the largest medical professional network in the nation, which creates proximity within our community of doctors and hundreds of thousands of other medical professionals. Verified members can search and connect with colleagues and specialists, which allows them to better coordinate patient care and streamline referrals. Our newsfeed addresses the ever increasing sub-specialization of medical expertise and volume of medical research by delivering news and information that is relevant to each physician's clinical practice. We also support physicians in their day-to-day practice of medicine with mobile-friendly and easy-to-use clinical workflow tools such as voice and video dialer, secure messaging, and digital faxing.

Our business model has delivered high revenue growth at scale with profitability. For the fiscal years ended March 31, 2023, 2022 and 2021, we recognized revenue of $419.1 million, $343.5 million, and $206.9 million, respectively, representing year-over-year growth rates of 22% and 66%, respectively. Our net income was $112.8 million, $154.8 million, and $50.2 million for the fiscal years ended March 31, 2023, 2022, and 2021, respectively. For the fiscal years ended March 31, 2023, 2022 and 2021, we generated adjusted EBITDA of $184.0 million, $150.3 million, and $64.8 million, respectively. We have accomplished this while focusing on our core mission to help every physician be more productive and provide better care for their patients.

Key Business and Financial Metrics

We monitor a number of key business and financial metrics to assess the health and success of our business, including:

Customers with Trailing 12-Month Subscription Revenue Greater than $100,000. The number of customers with trailing 12-month (“TTM”) subscription revenue greater than $100,000 is a key indicator of the scale of our business, and is calculated by counting the number of customers that contributed more than $100,000 in subscription revenue in the TTM period. Our customer count is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity, and we present our total customer count for historical periods reflecting these adjustments.

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The number of customers with at least $100,000 of revenue has grown steadily in recent years as we have engaged new customers and expanded within existing ones. This cohort of customers accounted for approximately 87% of our revenue in fiscal 2023.

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1 The metric excludes the impact of the AMiON acquisition, which closed on April 1, 2022, including customers of, and subscription revenue generated from, the AMiON on-call scheduling and messaging application, and the impact of such acquisition was immaterial to the periods presented.

Net Revenue Retention Rate. Net revenue retention rate is calculated by taking the TTM subscription-based revenue from our customers that had revenue in the prior TTM period and dividing that by the total subscription-based revenue for the prior TTM period. Our net revenue retention rate compares our subscription revenue from the same set of customers across comparable periods, and reflects customer renewals, expansion, contraction, and churn. Our net revenue retention rate is directly tied to our revenue growth rate and thus fluctuates as that growth rate fluctuates.

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1 The metric excludes the impact of the AMiON acquisition, which closed on April 1, 2022, including customers of, and subscription revenue generated from, the AMiON on-call scheduling and messaging application, and the impact of such acquisition was immaterial to the periods presented.

Components of Results of Operations

Revenue

Marketing Solutions. Our customers purchase a subscription to Marketing Solutions, either directly or through marketing agencies, for the ability to share tailored content on the Doximity platform via a variety of modules for defined time periods. We generally bill customers a portion of the contract upon contract execution and then bill throughout the remainder of the contract based on various time-based milestones. Generally, we bill in advance of revenue recognition. When revenue is recognized in advance of billings, we record unbilled revenue. Unbilled revenue is recorded on the consolidated balance sheets within prepaid expenses and other current assets. Subscriptions to Marketing Solutions include the following contractual arrangements:

•Subscriptions for specific modules delivered on a monthly basis to a consistent number of targeted Doximity members during the subscription period. Pricing is based on the number and composition of the targeted Doximity members, and on the specific modules purchased.

•Integrated subscriptions for a fixed subscription fee that are not tied to a single module, allowing customers to utilize any combination of modules during the subscription period.

For these subscription-based contractual arrangements, we recognize revenue over time as control of the service is transferred to the customer.

Hiring Solutions. We provide customers access to our platform which enables them to post job openings or deliver a fixed number of monthly messages to our network of medical professionals. Hiring Solutions contracts are noncancellable and customers are billed in annual, quarterly, or monthly installments in advance of the service period, and revenue is recognized ratably over the contractual term.

Through our acquisition of Curative Talent, completed in fiscal 2021, we also generate revenue from temporary and permanent medical recruiting services which we charge on an hourly-fee, and retainer and placement-fee basis, respectively. Revenue for temporary placement services is recognized net of third-party contractor fees. For the fiscal years ended March 31, 2023, 2022, and 2021, the revenue from temporary and permanent medical recruiting services was not significant to our total revenue.

Cost of Revenue

Cost of revenue is primarily comprised of expenses related to cloud hosting, personnel-related expenses for our customer success team, costs for third-party platform access, software services and contractors, and other services used in connection with the delivery and support of our platform. Our cost of revenue also includes the amortization of internal-use software development costs, editorial and other content-related expenses, and allocated overhead. Cost of revenue is driven by the

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growth of our member network and utilization of our telehealth tools. We intend to continue to invest additional resources in our cloud infrastructure and our customer support organizations to support the growth of our business and expect these expenses to increase on an absolute dollar basis.

Gross Profit and Gross Margin

Gross profit is total revenue less total cost of revenue. Gross margin is gross profit expressed as a percentage of total revenue. Gross profit and gross margin has been and will continue to be affected by a number of factors, including the timing of our acquisition of new customers and sales of additional solutions to existing customers, the timing and extent of our investments in our operations, cloud hosting costs, growth in our customer success team, and the timing of amortization of internal-use software development costs and deferred contract costs. We expect our gross margin to remain relatively steady over the near term, although our quarterly gross margin is expected to fluctuate from period to period depending on the interplay of these and other factors.

Operating Expenses

Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses.

Research and Development

Research and development expense is primarily comprised of personnel-related expenses associated with our engineering and product teams who are responsible for building new products and improving existing products. Research and development expense also includes costs for third-party services and contractors, information technology and software-related costs, and allocated overhead. Other than internal-use software development costs that qualify for capitalization, research and development costs are expensed as incurred. We expect research and development expenses will increase on an absolute dollar basis as we continue to grow our platform and product offerings.

Sales and Marketing

Sales and marketing expense is primarily comprised of personnel-related expenses, sales incentive compensation, travel, and other event expenses. Sales and marketing expense also includes costs for third-party services and contractors, information technology and software-related costs, allocated overhead, amortization of intangible assets, and change in fair value of contingent earn-out consideration liability. We capitalize sales incentive compensation that is considered to be incremental and recoverable costs of obtaining a contract with a customer. These sales incentive compensation costs are amortized over the period of benefit. We expect sales and marketing expense to increase and to be our largest expense on an absolute basis.

General and Administrative

General and administrative expense is primarily comprised of personnel-related expenses associated with our executive, finance, legal, human resources, information technology, and facilities employees. General and administrative expense includes fees for third-party legal and accounting services, insurance expense, information technology and software-related costs, and allocated overhead. We expect that general and administrative expense will increase on an absolute dollar basis as we incur compliance costs associated with being a publicly-traded company, including legal, audit, and consulting fees.

Other Income, Net

Other income, net consists primarily of investment income earned on our cash equivalents and marketable securities.

Provision for (Benefit from) Income Taxes

Provision for (benefit from) income taxes consists primarily of income taxes in U.S. federal, state, and local jurisdictions in which we conduct business. We continue to maintain a valuation allowance related to specific net deferred tax assets where it is not more likely than not that the deferred tax assets will be realized, which includes California research and development credits, California alternative minimum tax credits, and capital loss carryforwards.

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Results of Operations

The following tables set forth our consolidated results of operations data and such data as a percentage of revenue for the periods presented.

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(1)Costs and expenses include stock-based compensation expense as follows:

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Comparison of the Fiscal Years Ended March 31, 2023 and 2022

Revenue

Revenue for the fiscal year ended March 31, 2023 increased $75.5 million as compared to the fiscal year ended 2022. The increase was primarily driven by a $70.4 million increase in subscription revenue. Of the increase in subscription revenue, $15.3 million was driven by the addition of new subscription customers1 and $55.1 million was due to the expansion of existing customers. The expansion of existing customers was primarily driven by average revenue per existing Marketing Solutions customer increasing by 21% as a result of adding new and growing existing brands and service lines. Approximately 93% of our revenue for the fiscal year ended March 31, 2023 was derived from subscription customers. The remaining increase in revenue was driven by an increase in medical recruiting services.

Cost of revenue, gross profit and gross margin

Cost of revenue for the fiscal year ended March 31, 2023 increased $13.7 million as compared to the fiscal year ended 2022. The increase in cost of revenue was primarily driven by a $5.4 million increase in personnel-related costs as a result of headcount growth of 24%, and a $5.2 million increase in expense related to the U.S. News partnership, of which $2.8 million related to the U.S. News Warrant granted in October 2021. In addition, there was an increase of $1.9 million in stock-based compensation expense, primarily due to headcount growth and awards granted to existing employees.

Gross margin for the fiscal year ended March 31, 2023 decreased primarily due to headcount growth and expenses related to our U.S. News partnership, offset by growth in revenues.

Operating Expenses

Research and development

Research and development expense for the fiscal year ended March 31, 2023 increased $17.8 million as compared to the fiscal year ended 2022. The increase in research and development expense was primarily driven by a $9.6 million increase in personnel-related costs as a result of headcount growth of approximately 12%. The increase was also driven by a $5.5 million increase in stock-based compensation primarily attributable to headcount growth and awards granted to existing employees. In addition, there was a $1.9 million increase in third-party software costs as a result of increased research and development activities and a $1.1 million increase in employee events and travel-related expenses as compared to the prior period.

1 We define new subscription customers as revenue generating subscription customers in the current fiscal period who did not contribute any revenue for the same period in the prior fiscal year.

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Sales and marketing

Sales and marketing expense for the fiscal year ended March 31, 2023 increased $31.4 million as compared to the fiscal year ended 2022. The increase in sales and marketing expense was primarily driven by a $9.5 million increase in personnel-related costs due to headcount growth of 17%. The increase was also driven by an $8.8 million increase in stock-based compensation expense, primarily due to headcount growth and awards granted to existing employees and a $4.9 million increase in costs related to employee events, travel, trade shows, conferences, and other marketing activities. There was also an increase of $3.2 million due to amortization expense for the intangible assets acquired in the AMiON acquisition. The remaining increase is primarily related to a $2.0 million increase in commissions and incentive compensation costs driven by an increase in sales activity and a $1.4 million increase in consulting services.

General and administrative

General and administrative expense for the fiscal year ended March 31, 2023 increased $1.0 million as compared to the fiscal year ended 2022. The increase in general and administrative expense was primarily driven by a $2.2 million increase in personnel-related costs due to headcount growth of 23%. These increases were offset by a $2.6 million decrease in stock-based compensation expense primarily due to lower expense from a market-based award which completed vesting in the first quarter of fiscal 2023 and lower expense from other performance-based awards. The remaining change was to support the growth of the business.

Other income, net

Other income, net for the fiscal year ended March 31, 2023 increased $7.6 million as compared to the fiscal year ended 2022, primarily driven by increases in interest income due to higher yields earned on our cash equivalents and marketable securities portfolio and a higher average portfolio balance in fiscal 2023 as compared to fiscal 2022.

Provision for (benefit from) income taxes

For the fiscal year ended March 31, 2023, we had income tax expense of $20.3 million compared to an income tax benefit of $40.8 million for the fiscal year ended 2022. This change was primarily driven by a decrease in stock option activities resulting in a decrease in tax deductions and research and development tax credits.

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NM: Percentage not meaningful.

Liquidity and Capital Resources

Since inception, we have financed operations primarily through proceeds received from sales of equity securities and payments received from our customers. As of March 31, 2023, our principal sources of liquidity were cash and cash equivalents

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and marketable securities of $841.0 million. Our marketable securities consist of U.S. government and agency securities, corporate notes and bonds, commercial paper, certificates of deposit, asset-backed securities, and sovereign bonds.

In June 2021, we completed our IPO, in which we issued and sold 22,505,750 shares of our Class A common stock at $26.00 per share, including 3,495,000 shares issued upon the exercise of the underwriters’ option to purchase additional shares. We received proceeds of $548.5 million after deducting underwriting discounts and commissions as well as deferred offering costs.

On May 12, 2022, the Company’s board of directors authorized a program to repurchase up to $70.0 million of the Company’s Class A common stock. As of September 30, 2022, the Company repurchased and retired 2,150,982 shares of Class A common stock for an aggregate purchase price of $70.0 million, thereby completing this share repurchase program.

On October 28, 2022, the Company’s board of directors authorized an additional program to repurchase up to $70.0 million of the Company’s Class A common stock. The repurchases may be executed from time to time over the next 12 months, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. Immediately upon the repurchase of any shares of Class A common stock, such shares shall be retired by the Company and shall automatically return to the status of authorized but unissued shares of Class A common stock. As of March 31, 2023, the Company repurchased and retired 523,647 shares of Class A common stock for an aggregate purchase price of $16.0 million, and $54.0 million remained available and authorized for repurchases.

We believe that our existing cash and cash equivalents and marketable securities will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months.

Our future capital requirements will depend on many factors, including our revenue growth rate, the timing and the amount of cash received from customers, the expansion of sales and marketing activities, timing of share repurchases, and the timing and extent of spending to support research and development efforts. Further, we may in the future enter into arrangements to acquire or invest in businesses and technologies. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, financial condition, and results of operations could be adversely affected.

We have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities.

For further details regarding our cash requirements from noncancelable operating lease obligations and other contractual commitments, see Note 14—Commitments and Contingencies and Note 15—Leases included in Part II, Item 8 of this Annual Report on Form 10-K.

Cash Flows

Net cash provided by operating activities

Cash provided by operating activities was $179.6 million for the fiscal year ended March 31, 2023. This consisted of net income of $112.8 million, adjusted for non-cash items of $87.8 million and a net outflow from operating assets and liabilities of $21.0 million. Non-cash items primarily consisted of stock-based compensation expense of $47.8 million, deferred income taxes of $13.2 million, depreciation and amortization expense of $10.3 million, amortization of deferred contract costs of $8.8 million, and amortization of the premium on marketable securities of $3.1 million. The net outflow from operating assets and liabilities was driven by a $26.2 million increase in accounts receivable due to the growth of our business and the timing of collections, an $8.5 million increase in deferred contract costs due to increased sales activity, and a $3.4 million increase in prepaid expenses and other assets. These outflows were partially offset by an increase of $17.5 million in deferred revenue due to the timing of customer billings and program launches.

Cash provided by operating activities was $126.6 million for the fiscal year ended March 31, 2022. This consisted of net income of $154.8 million, adjusted for non-cash items of $12.1 million and a net outflow in operating assets and liabilities of

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$40.3 million. Non-cash items primarily consisted of stock-based compensation expense of $31.4 million, amortization of deferred contract costs of $9.8 million, depreciation and amortization expense of $5.0 million, amortization of the premium on marketable securities of $4.3 million, offset by a negative non-cash adjustment for deferred tax benefit of $41.2 million. The net decrease in operating assets and liabilities was driven by a $31.0 million increase in accounts receivable due to the growth of our business and the timing of collections, a $9.6 million increase in deferred contract costs due to increased sales activity, and a $9.1 million increase in prepaid expenses and other assets. These decreases were partially offset by an increase of $8.7 million in accounts payable, accrued expenses and other liabilities, which was primarily a result of increased accrued payroll, bonus, and related expenses due to increased headcount and timing of payments and increased rebate liabilities due to higher sales combined with the timing of payments.

Net cash used in investing activities

Cash used in investing activities was $59.9 million for the fiscal year ended March 31, 2023, which primarily consisted of $190.6 million of marketable securities purchases, $53.5 million paid for the acquisition of AMiON, $4.5 million for internal-use software development costs, and $1.7 million for purchases of property and equipment. These payments were partially offset by proceeds from the sale of marketable securities of $107.2 million and proceeds from the maturities of marketable securities of $83.1 million.

Cash used in investing activities was $640.6 million for the fiscal year ended March 31, 2022, which primarily consisted of purchases of marketable securities of $1.3 billion, partially offset by proceeds from the sale of marketable securities of $633.8 million, proceeds from the maturities of marketable securities of $47.9 million, and capitalization of internal-use software development costs of $3.8 million.

Net cash provided by (used in) financing activities

Cash used in financing activities was $74.5 million for the fiscal year ended March 31, 2023, which primarily consisted of common stock repurchases of $85.3 million and $3.8 million of taxes paid related to the net share settlement of equity awards. These payments were partially offset by $9.9 million of proceeds from the exercise of stock options and common stock warrants and $4.8 million of proceeds from the issuance of common stock related to the employee stock purchase plan.

Cash provided by financing activities was $560.4 million for the fiscal year ended March 31, 2022, which primarily consisted of $553.9 million of proceeds from the issuance of common stock upon our initial public offering after deducting underwriting fees and commissions, $12.6 million of net proceeds from the exercise of stock options, and $1.4 million of proceeds from the issuance of common stock in connection with the employee stock purchase plan. These proceeds were partially offset by $4.0 million in payments for deferred offering costs and $2.7 million in payments from the repurchase and retirement of common stock.

Non-GAAP Financial Measures

We use adjusted EBITDA and free cash flow to measure our performance, identify trends, formulate financial projections, and make strategic decisions.

Adjusted EBITDA

We define adjusted EBITDA as net income before interest, income taxes, depreciation, and amortization, and as further adjusted for acquisition and other related expenses, stock-based compensation expense, change in fair value of contingent earn-out consideration liability, and other income, net. Net income margin represents net income as a percentage of revenue and adjusted EBITDA margin represents adjusted EBITDA as a percentage of revenue.

Adjusted EBITDA is a key measure we use to assess our financial performance and is also used for internal planning and forecasting purposes. We believe adjusted EBITDA is helpful to investors, analysts, and other interested parties because it can assist in providing a more consistent and comparable overview of our operations across our historical financial periods.

Adjusted EBITDA and adjusted EBITDA margin are non-GAAP measures and are presented for supplemental informational purposes only and should not be considered as alternatives or substitutes to the financial information presented in accordance with GAAP. These measures have certain limitations in that they do not include the impact of certain expenses that are reflected in our consolidated statements of operations that are necessary to run our business. Other companies, including other companies in our industry, may not use these measures or may calculate these measures differently than as presented in this Annual Report on Form 10-K, limiting their usefulness as comparative measures.

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The following table presents a reconciliation of net income to adjusted EBITDA, adjusted EBITDA margin, and net income margin (in thousands, except percentages):

Free Cash Flow

Free cash flow is a key performance measure that our management uses to assess our overall performance. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by our business that can be used for strategic opportunities, including investing in our business, making strategic acquisitions, and strengthening our financial position.

We calculate free cash flow as cash flow from operating activities less purchases of property and equipment and internal-use software development costs.

Although we believe free cash flow is a useful indicator of business performance, free cash flow is presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP. Free cash flow has limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of other GAAP financial measures, such as net cash provided by operating activities. Some of the limitations of free cash flow are that it may not properly reflect future contractual commitments that have not been realized in the current period. Our free cash flow may not be comparable to similarly titled measures of other companies because they may not calculate free cash flow in the same manner as we calculate the measure, limiting its usefulness as a comparative measure.

The following table presents a reconciliation of our free cash flow to the most comparable GAAP measure, net cash provided by operating activities, for each of the periods indicated (in thousands):

Critical Accounting Policies and Estimates