DocGo delivered what analysts at Canaccord called “mixed” results, but that was enough for the firm to reiterate its Buy rating and $13 price target.
“At first glance, DocGo's 1Q results can be seen as mixed,” analysts wrote. “Revenue beat our and consensus estimates, decreasing ~4% year-over-year, though grew ~40% when excluding Covid testing revenue.
“However, adjusted EBITDA came in below expectations due in large part to one customer contract requiring rapid implementation to replace an incumbent that pulled out faster than anticipated, though we note this benefited the top line as well.”
Shares of DocGo gained 0.4% Friday morning to $8.49.
The analysts noted that DocGo’s rapid normalization initiative appears to be on track, as the utilization rate of agency staff labor having declined from peak and overtime levels decreased.
“Overall, the growth story keeps building,” analysts said. “Demand for the company's services continues to be high as demonstrated by the growing backlog and doubling RFPs, which management noted have increasingly included greater mobile health opportunities.”
They continued, “The pipeline continues to be robust, with the backlog increasing ~$25M to $205M and the number of RFPs out for proposal doubling since the 4Q earnings call in March.”
Looking ahead, “remote patient monitoring (RPM) and chronic care management (CCM) opportunities will continue to build, with the expanded Fresenius partnership announced last month for chronic kidney disease and the tuck-in acquisition of Cardiac Remote Monitoring Solutions (CRMS) at the end of 1Q in cardiology at offering opportunities for margin expansion in FY'24 and beyond,” analysts said.
On the other hand, bears will point to the adjusted EBITDA miss, along with DocGo’s significant mobile health gross margin decline year-over-year.
Lower margins didn’t exactly come as a surprise as DocGo adds new business, analysts said, but mobile health revenue also came in lower than Canaccord’s estimate.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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