Doximity Inc

NYSE:DOCS

Earnings Call Analysis

Doximity Reports Strong Q2 Growth and Upgrades Revenue Guidance

In Q2 of fiscal 2025, Doximity achieved $137 million in revenue, marking a 20% increase year-over-year and exceeding guidance by $10 million. The company’s adjusted EBITDA also reached a record $76 million, with a margin of 56%, up from 48% the prior year. Looking ahead, Doximity projects Q3 revenue of $152-$153 million, reflecting 13% growth, and full-year revenue guidance has been raised to $535-$540 million. Key drivers included strong performance from their top clients and successful monetization of workflow tools, which now comprise 20% of pharma sales.

Strong Revenue Growth Amidst Market Stabilization

Doximity reported impressive revenue growth for the second quarter of the fiscal year 2025, reaching $137 million, reflecting a year-on-year increase of 20% and surpassing the upper range of guidance by 7%. This strong performance highlights the company's ability to capture market opportunities, particularly with its top 20 clients which grew by 24% year-over-year. The overall market appears to be stabilizing, contributing positively to Doximity's growth trajectory.

Record Profitability With High Margins

In addition to growing revenue, Doximity achieved a record adjusted EBITDA margin of 56%, amounting to $76 million, a staggering 41% growth compared to the previous year. This profitability surpasses the high end of guidance by 20% and underscores the company’s efficient operational management and strong incremental margins. For the fiscal year, Doximity expects to maintain a 51% adjusted EBITDA margin, indicating ongoing profitability.

Impressive User Engagement Metrics

User engagement metrics continued to break records, with unique active users increasing significantly across all metrics, showcasing the platform's expanding influence. The news feed, a key revenue driver, saw record engagement levels, while the comprehensive workflow tools attracted over 600,000 unique active prescribers. This user growth is essential as it enhances the company’s value proposition to pharma clients, especially through Doximity’s AI capabilities utilized in workflow enhancements.

Strategic Enhancements Through Client Portal

The recently launched client portal has seen positive market reception, significantly aiding upsell opportunities. Currently open to over 40% of pharma brand clients, the portal allows for better analytics and seamless access to data, which is imperative for effective marketing. The company plans to roll this out to all pharma clients by early next year, which is expected to boost revenue drive, particularly through targeting nurse practitioners who are becoming increasingly significant in the healthcare landscape.

Robust Free Cash Flow and Share Repurchase Program

Doximity showcased its strong cash flow position, generating free cash flow of $66.8 million, marking a remarkable 475% increase from the previous year. This robust cash generation enables the company to engage in share repurchase activities, with $22.1 million repurchased at an average price of $29.85, ultimately enhancing shareholder value by reducing the diluted share count by approximately 4% since last year.

Future Revenue Guidance Reflects Continued Growth

Looking ahead, Doximity is optimistic about the third fiscal quarter of 2025, expecting revenue between $152 million and $153 million, which equates to a 13% growth at the midpoint. For the full fiscal year, guidance has been raised to $535 million to $540 million, still reflecting a 13% growth rate. Notably, the adjusted EBITDA for the year is projected to be between $274 million and $279 million, indicating sustained profitability and performance enhancement against prior forecasts.

Navigating External Factors and Competition

Despite concerns about potential market pressure from budget-conscious pharma clients, Doximity’s management conveyed confidence in maintaining its competitive edge. They believe that enhancements made through the client portal, along with a long-term growth strategy, place them in a favorable position for future market share gains, especially as digital spending in pharma is expected to grow beyond the current cautious estimates.

Earnings Call Transcript 2025-Q2

[Operator]

Well, good day, everyone, and welcome to the Doximity Fiscal 2Q '25 Earnings Call. At this time, I would like to hand the call over to Mr. Perry Gold. Please go ahead, sir.

[Perry Gold, executive]

Thank you, operator. Hello, and welcome to Doximity Fiscal 2025 Second Quarter Earnings Call. With me on the call today are Jeff Tangney, Co-Founder and CEO of Doximity, Dr. Nate Gross, Co-Founder and CSO; and Anna Bryson, CFO.

A complete disclosure of our results can be found in our press release issued earlier today as well as in our related Form 8-K, along with a copy of our prepared remarks all available on our website at investors.doximity.com. As a reminder, today's call is being recorded, and a replay will be available on our website.

As part of our comments today, we will be making forward-looking statements. These statements are based on management's current views, expectations and assumptions, and are subject to various risks and uncertainties. Actual results may differ materially, and we disclaim any obligation to update any forward-looking statements or outlook.

Please refer to the risk factors in our annual report on Form 10-K, any subsequent Form 10-Qs in our other reports and filings with the SEC that may be filed from time to time, including our upcoming filing on Form 10-Q. Our forward-looking statements are based on assumptions that we believe to be reasonable as of today's date November 7, 2024. Of note, it is Doximity's policy to neither reiterate nor adjust the financial guidance provided on today's call, unless it's also done through a public disclosure such as a press release or through the filing of a Form 8-K.

Today, we will discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. A historical reconciliation to comparable GAAP metrics can be found in today's earnings release.

Finally, during the call, we may offer incremental metrics to provide greater insights into the dynamics of our business. These details may be onetime in nature, and we may or may not provide updates on those metrics in the future.

I would now like to turn the call over to our CEO and Co-Founder, Jeff Tangney. Jeff?

[Jeffrey Tangney, executive]

Thanks, Perry, and thank you, everyone, for joining our second quarter earnings call. We have 3 updates today: our financials, network growth and client portal.

First, our top line. We delivered $137 million in revenue for the second quarter of our fiscal 2025, which represents 20% year-on-year growth and a 7% beat from the high end of our guidance range.

Of note, our top 20 clients once again grew the fastest for us, up 24% on a trailing 12-month basis. These clients are the largest, most sophisticated pharma companies who employ entire teams of analysts to measure their marketing effectiveness. We believe our continued growth with them is proof of our value to the broader marketplace.

Our bottom line was also strong in Q2, with a record adjusted EBITDA margin of 56% or $76 million, which was 41% year-on-year growth and 20% above the high end of our guidance. In short, we had a better-than-expected first half of our fiscal year, with 19% top line growth and 54% margins. Our CFO, Anna, will provide details and guidance in a minute.

Okay. Turning now to our network growth and engagement. Q2 was another record engagement quarter for us. Our unique active users on a quarterly, monthly, weekly and daily basis were all up double-digit percentages year-over-year.

Drilling down to our biggest revenue driver, our news feed did particularly well in Q2, setting a new record for articles read. We're proud to put our 12 years of proprietary data to use to personalize each news feed for each of our more than 2 million members.

Our workflow tools also set new records in Q2, with over 600,000 unique active prescribers. As a reminder, our workflow tools include our telehealth, [ fax ], scheduling and AI assistance. Our AI tools grew the fastest, with over 1 million Doximity GPT prompts in Q2. But our telehealth tools grew nicely as well. In this age of increasing burnout, we're proud to help doctors save time, be more mobile and provide the best care for their patients.

While we're still in the early innings of monetizing these workflow tools, our point of care and formulary products continue to gain traction. Indeed, 20% of our pharma sales in Q2 came from our workflow-related modules. As health care shifts to be more digital, more mobile and more AI-powered, we're proud to be leading the way.

Okay. Turning now to our new client portal. In September, we hosted our annual pharma client showcase in New York City, where we were joined by over 150 marketing leaders from our largest brand and agency partners. The hit of the day was our panel of top digital doctors describing how our AI and point-of-care tools are already transforming their practices and lives for the better. Our clients were excited to hear how we allow doctors to focus more on patients and less on paper work.

Excitement was also high for our new client portal, which is now open to more than 40% of our pharma brand clients, among whom our sales growth has been the strongest. In part, that's because upsells are easier in our portal. Our best-selling add-on to date has been nurse practitioner or NP audience extensions. The portal identifies NPs who work for our clients' top positions, and then can add them at a modest cost to existing programs. NPs conducted over 1 billion patient visits in the U.S. last year, and pharma knows, they are an important high-growth audience to reach. Thankfully, they are also heavy Doximity users.

Over the last quarter, we've also seen that ad agencies can be key portal allies for us. They help existing clients use the portal and introduce us to new SMB clients as well. So we've created an agency partners program to offer them more training. We've signed a handful of agencies so far, and they've already referred us to new 6-figure clients.

Based on this positive feedback and sales growth, we plan to roll out our client portal to all of our pharma clients starting early next year. Of note, we are now prioritizing agency partnerships over SMB self-service as we see better sales leverage there. That said, our client portal remains a multiyear initiative, and we'll continue to learn and adapt as we onboard more clients and partners.

Okay. I'd like to end by thanking my Doximity teammates who continue to work incredibly hard to realize our mission to better health care. I personally have never been more excited or more proud about what we're building together.

And with that, I'll hand it over to our CFO, Anna Bryson, to discuss our financials and guidance. Anna?

[Anna Bryson, executive]

Thanks, Jeff, and thanks to everyone on the call today. Second quarter revenue grew to $136.8 million, up 20% year-over-year and exceeding the high end of our guidance range.

Similar to prior quarters, our existing customers continued to lead our growth. We finished the quarter with a net revenue retention rate of 116% on a trailing 12-month basis, up from 114% in Q2 of last year.

Our top 20 customers remained our fastest growing, with a net revenue retention rate of 124%, up from 119% in Q2 of last year. We ended the quarter with 103 customers, contributing at least $500,000 each in subscription-based revenue on a trailing 12-month basis. This is a 12% increase from the 92 customers we had in this cohort a year ago, and these customers accounted for 83% of our total revenue.

Turning to our profitability. Non-GAAP gross margin in the second quarter was 92% versus 91% in the prior year period. Adjusted EBITDA for the second quarter was $76.1 million, and adjusted EBITDA margin was 56% compared to $54.2 million and a 48% margin in the prior year period. This represents adjusted EBITDA growth of 41% year-over-year as we continue to run a very profitable business with high incremental margins.

Now turning to our balance sheet, cash flow and an update on our share repurchase program. We generated free cash flow in the second quarter of $66.8 million compared to $11.6 million in the prior year period, an increase of 475% year-over-year, primarily driven by higher profits and the timing of quarterly tax payments. Consistent with last year, we expect to pay roughly 20% to 25% in cash taxes annually. And given those payments may vary quarter-to-quarter, we believe annual free cash flow growth is the best measure of performance.

We ended the quarter with $806 million of cash, cash equivalents and marketable securities.

During the second quarter, we repurchased $22.1 million worth of shares at an average price of $29.85. We believe repurchasing our shares is a valuable use of the incremental cash we generate, above what's needed to reinvest in the business. These share repurchase efforts have decreased our fully diluted shares outstanding by roughly 4% since Q2 of last year. As of September 30, we had 470 million remaining in our existing repurchase program.

Now moving on to our outlook. For the third fiscal quarter of 2025, we expect revenue in the range of $152 million to $153 million, representing 13% growth at the midpoint. And we expect adjusted EBITDA in the range of $83 million to $84 million, representing a 55% adjusted EBITDA margin.

For the full fiscal year, we now expect revenue in the range of $535 million to $540 million, representing 13% growth at the midpoint. This is an increase of roughly 4% or $19 million at the midpoint after outperforming our Q2 guidance by roughly $10 million. We now expect adjusted EBITDA in the range of $274 million to $279 million, representing a 51% adjusted EBITDA margin. This is an increase of roughly 9% or $24 million at the midpoint after outperforming our Q2 guidance by roughly $13 million.

Our increased outlook is due to all businesses performing better than expected this past quarter as well as the continued momentum we are seeing into Q3. Specific to our pharma customers, our upsell season has shown strong growth driven by a combination of new product traction, client portal insights and market stabilization.

In Q2, sales for our new point of care and formulary products were each up more than 100% year-over-year. These products are becoming essential modules for our clients, and we are excited by the potential to see additional growth here during our upfront season.

We also continue to see success with the cohort of brands tapping into our client portal to track and enhance their program performance. From real-time insights to program expansion recommendations, our clients are leaning into new opportunities to scale their programs on Doximity. We're pleased that the [indiscernible] momentum has also continued into Q3.

As you consider our implied Q4 revenue guidance, please keep in mind 2 factors. First, as we've mentioned before, our customers are getting more disciplined about completing their annual programs and upsells by calendar year-end. Second, as we go to launch next year's programs, we anticipate we may see longer launch time lines due to the traction of our new workflow products.

Given the evolution in how our customers deploy their annual budgets, we continue to believe our annual growth rate is the best metric to measure the performance of our business. Looking ahead, we believe we are entering the upfront season in a strong competitive position, and we look forward to continuing to deliver value for both our customers and members.

With that, I will turn it over to the operator for questions.

[Operator]

[Operator Instructions] We'll go first to Glen Santangelo, Jefferies.

[Glen Santangelo, analyst]

Jeff, obviously, the results were great. And I think what everyone is trying to really basically figure out is how much of the upside is coming from maybe the market stabilizing, where the market getting better, maybe as Anna, you just suggested versus maybe some of these new product revenues really starting to contribute versus maybe share gains. So that's kind of the first question.

And the second question maybe is on that implied Q4 exit rate, Anna, that you were just talking about because if you look at 4Q, now you're sort of forecasting 3% revenue growth and 42% margins is sort of what we calculate, and you're kind of making the case that customers are getting more disciplined to complete their programs by year-end and customers are signing longer programs. But I guess I'm not clear as to why that would be impacting fiscal 4Q as much as it family is or maybe it's just a lot of conservatism built in there, not sure. And I'll stop there.

[Jeffrey Tangney, executive]

Glen, this is Jeff. I appreciate your question. I'll hand to Anna for the Q4 question. But to your first question, yes, we're pleased with our results. And we did see, as Anna said in her prepared remarks, over 100% growth from our new products, which was terrific. We have seen the market stabilize as well. And of course, we think we are gaining share in our core product suites as well.

So the short answer is really all of the above. Candidly, we don't know yet. I think how much of it really is market stabilization. But we can tell you, we feel really strong about how we're doing, again, relative to our competition and in terms of our user growth, which, again, at record levels on a daily, weekly, monthly, quarterly basis.

Anna?

[Anna Bryson, executive]

Glen, thanks for the question. So with regards to Q4 specifically, I'll just reiterate the 2 dynamics I mentioned in my prepared remarks. So first, digital HCP has become a bigger line item for our customers. They have set up more guardrails around how annual budgets can be deployed. And what they're wanting to do is limit budget dollars from crossing between calendar years. So what that means is that we're seeing less revenue dollars from calendar 2024 programs flow into our fiscal Q4.

And then the second dynamic is that while we are excited by the potential for another strong annual buying cycle, it is just too soon for us to know what the mix is going to look like in new brands and new products and what those launch time lines for next calendar year might look like, especially given the way new products are resonating with clients, it's likely we could see a stronger mix of sales come from those products, and those products typically do have longer launch time lines.

So I'll just like close it all together here and reiterate that this is a good example of how evolving industry dynamics or the product mix can lead to quarterly variations in revenue growth and changes in the shape of the year. And that's why we think it's critical to focus on our annual growth rate as the best metric to measure the success for our business. And we've seen strong momentum there over the past 6 months that we're really encouraged by.

[Operator]

The next question is from Brian Peterson, Raymond James.

[Unknown Analyst]

This is [ Jonathan McCarry ] on for Brian. Congrats on the quarter. So first on the self-serve portal, it's nice to hear about the continued progress there. I think you've sort of spoken to it in 3 waves before referencing a recommendations and pricing phase and then a content creation phase that was in beta in the past. Can you just explain what you expect to go live with all clients next year. Is that all of that functionality? Or can you just remind us on the road map on how you're monetizing that?

[Jeffrey Tangney, executive]

Yes. Thanks, Jonathan. This is Jeff. So I'm really pleased with our content portal or client portal and how that's been growing. As we mentioned in our prepared remarks, we're seeing really stronger growth from clients who are on that. We are over 40% clients on it today. And early next year, we plan to roll it out to all of our clients. So obviously, we are pleased with how it's doing. We want all of our clients to have it.

The key thing I think we've learned is that these recommendations, these easy packages that clients can just go see, like an NP extension package can be a great growth driver for us and again, really drove a good upsell season for us this past summer.

We do have the content creation capabilities coming online, and they're going well. But as we alluded in our prepared remarks, we're really seeing more growth opportunity in working with agency partners in the short term as opposed to going direct to small clients with a full end-to-end self-serve option.

And so we're going to prioritize working with those agency partners first, in part because it matches the land and expand go-to-market motion that's worked so well for us for the last decade, which, just to remind you, we would work with a top 20 pharma company, work with one of their brands and then expand to 15 or 20 of their brands.

So that land and expand -- and then the way we would get small clients in the past was really the lateral movement of a lot of our brand manager clients from big pharma going to small pharma. We see a similar land and expand motion, however, with these agencies, who do tend to work with dozens of different brands. And again, we can use the same sort of proof and trust of ROI when an agency works with us on Brand A to then also go work with them on Brand B and C.

So we're going to lean a little bit more into that motion. But overall, our product road map for this, I've been really excited by the growth and the team has been doing a great job on it. Our clients really do just prefer the ability to have this in-flight dashboard we call it, but in flight, the idea they're flying their plane on their program and seeing the results every day, which has built trust in our data and our ROI. And again, our clients are just more engaged. We're more top of mind with them every day.

So moving ahead, we're not going to give all sorts of product road map details, but suffice it to say, again, starting early next year, we'll have all of our clients on our client pool.

[Operator]

Stephanie Davis from Barclays is up next.

[Stephanie Davis, analyst]

Congrats on an awesome quarter. There were a lot of bright spots, but engagement was an especially bright one. So I wanted to hear a little bit more about what changed? So Jeff, is that tweak a platform? Did you engagement strategy? Or do you think we're just really seeing a change in help engage with the [ Docs MD ] portal itself?

[Jeffrey Tangney, executive]

Well, thanks, Stephanie. You -- really was a lot of bright spots in this quarter. I mean, I'll speak to the bright spots from a physician clinician engagement, and then I'll turn to Anna, maybe to speak to the client engagement of it.

But on the physician side, there are 2 things we highlighted. First, in our news feed had an all-time record high of articles tapped or articles read, which we're just really proud of. We're so proud to help doctors stay up to date on the clinical news that matters most to them, especially in this world that's increasingly [indiscernible] from a media landscape. And we're so proud to keep it clinical focused on what doctors need to provide better care for their patients. And again, for that to do well in a very heavy news cycle and other things, I think, is a sign that doctors are keeping their heads down and treating their patients and doing their best work. So we're proud to help with that.

The other record high stat was our number of workflow users, which was helped and aided -- so 600,000 in the quarter, the fastest-growing piece of which was our AI. So we're really excited to put multiple AI models to work for our doctors. We use perplexity to help them answer questions where they want to cite the sources, they know the [indiscernible], know where the guideline came from. We use open AI to help them write the letters or the prior authorization or the patient education. But the net result of all of that was a lot of growth. And we're really excited, I think, about the what AI can do for doctors specifically and for health care more broadly. I think the growth and opportunity there has been terrific.

Anna?

[Anna Bryson, executive]

Yes. And Steph, I think you're also asking a little bit about client engagement with the portal. And that's definitely something that we see reflected in the numbers. So our brands with access to our portal, once again, grew quite a bit faster than our overall pharma business in Q2. So that cohort of brand has certainly been responsible for helping to increase our revenue outlook.

Now in Q2, I think what we saw with these brands more was they were leaning heavily into the recommendations aspect of the portal. So Jeff mentioned in his prepared remarks, the NPs were one of the biggest add-ons that we saw. And these recommendations are helping our clients make easy upsell decisions and focus on maximizing ROI. So we're really pleased with the trajectory and the engagement that we've seen so far on client portal and how that's already helped our business.

And the other thing I'll say on that is I just think we're in the early innings here, too.

[Stephanie Davis, analyst]

Okay. Dovetailing on that question then. So when you think about how that portal maybe can optimize this higher level of engagement, is this a level you're thinking of pulling where maybe you can try to drive more sustained engagement or higher engagement? Or is this kind of still the comp?

[Jeffrey Tangney, executive]

I assume you're talking, Stephanie, about our clients' engagement. And I'll just say, prior to this portal that we've worked on so hard in the last year, really, the only way clients could work with us was the e-mail or call us. And there's just a lot of friction to all of that, and we've heard it from our agency partners now as well. And so it's just so much easier, better -- if I've got an 8 a.m. meeting on Thursday, and it's Wednesday afternoon, to go pull up our portal, get the latest stats, understand your ROI, see what's working, what's not working. So just -- they don't want to do another video call, another e-mail, another phone call. And again, we're making that all just a lot simpler and easier for them.

And our engagement, that is the amount of time our clients are spending in the portal, has been impressive higher than we would have expected. So I hope that answers your question.

[Operator]

The next question is from Jared Haase, William Blair.

[Jared Haase, analyst]

This is Jared on for Ryan Daniels. Maybe I'll just tack on a quick follow-up as it relates to the user engagement in the quarter. I'm curious, are you seeing any differences in engagement by, I guess, specialty? I think you talked a little bit about the dynamic with NPs, but just sort of beyond that, any differences by specialty or therapeutic area that would be incremental or different than what you experienced in the past?

[Jeffrey Tangney, executive]

Yes. Thanks, Jared. So as we've shared in the past, telehealth has also been a great growth factor and driver for us, and that was also at record highs this quarter. There, in terms of specialties, the one thing we've highlighted in endocrinologists, who are the core specialty for GLP-1s. So an important, I think, commercial audience for us. They are among the heaviest users of telehealth, and we have a high percentage of endocrinologists in the country who use us every week, every month to communicate and see their patients. It just really fits very well with that model of seeing folks titrating their meds, but again, doing that in a nice space to base visit that they can do from home.

The other thing I'd highlight is going back to the NPs for a moment. As we've said, NPs have been really popular in our portal, and we've been prioritizing them more in our growth strategies. They are one of the fastest-growing professions in the country according to the Bureau of Labor Statistics. And over 1 billion visits this past year.

So one of the new products that we're coming out with here is what we call NP Navigator, which is helping them find the right school to go to, to become an NP and to further their training as an NP, which is sort of complex. There's over 500 different programs out there. They have to get [indiscernible] with doctors in order to get the right training.

So we have thousands of reviews now that we've gathered up from NPs themselves about their programs. I'm pleased to announce that the #1 online school is Duke University, the #1 in-person school is the University of Miami. And again, we're providing a simple place like we've known with our residency navigator for medical school students, new graduates. And that product has gotten to 90% of graduating medical school students who use us. So our hope is with NP Navigator, we will have similar sort of ongoing evergreen use as they are finding the best training and sharing within their profession the best places to be trained.

[Jared Haase, analyst]

Okay. That's great to hear. And I appreciate all that color. And then, Anna, maybe for you. I just had one on the guidance. And maybe just to put a fine point on sort of the assumptions for the second half of the year because it looks like there's the implied sort of step-up in OpEx relative to, I think it was flat in the first and second quarter here. So just anything you'd share in terms of, I guess, investment areas? It sounds like obviously, with the rollout of the portal, maybe there's some incremental investment there or things around AI. Just anything you'd call out in the second half investment priorities?

[Anna Bryson, executive]

Yes, definitely. Thanks for the question. So a couple of things. First and foremost, since Q3 and Q4 are typically our highest sales quarters, they are also our highest commission quarters. And given the way we're pacing for the year, we are expecting strong commission payout. So that is a natural step-up that we see into Q3 and Q4 every year.

As far as some of the newer investment areas, as we mentioned last quarter, as of September 1, we're now buying weekly prescription data instead of monthly to provide even stronger real-time insights for our clients. So that's certainly a factor in the back half expense growth. And then we're also focusing on hiring commercial R&D, sales reps, sales leadership to continue to build on our client portal and enhance all of our other offerings. So it's very standard for us to see the [ CCAP ] step up.

And the other thing I'll note is that we are now guiding to a 49% EBITDA margin in the back half of the year. And so we think it's very consistent with our overall margin trajectory.

[Jared Haase, analyst]

Perfect. Yes, that makes sense. And congrats on all the momentum.

[Operator]

Your next question comes from Elizabeth Anderson, Evercore ISI.

[Elizabeth Anderson, analyst]

Congrats on the quarter. Very nice to see, and thank you for the question. I have a question about agency partnerships. I mean that's such an interesting opportunity and a way to further leverage not only your own sales efforts, but sort of the sort of TAM and the reach in there. How do you see, at least from the early learnings, the impact of that? And where have you sort of seen it both from the biggest impact from an efficiency internally perspective and then the types of customers that, that really has allowed you leverage into?

[Jeffrey Tangney, executive]

Yes. Thanks, Elizabeth. This is Jeff. I'll speak to that. Yes, the agencies, we've always worked with, at least in some degree, we contract directly with end clients who work directly with end brands, but agencies are involved in most of our work in business. But with the portal, I think we've really opened up a new place for them to really engage and look smart in front of their clients and have better reports on ROI and what sort of content is resonating and not resonating in insights.

So we really think it's a big win-win here for us with agencies, and we have worked on better agency alignment in our business. So part of that will be, as part of this agency partner programming, letting them author the content. We will still approve it. But having them author it within the portal, which should be a small lift to our overall margins since it would be work that we're not doing that they can do.

But interestingly, when we let them do that, we see that they actually get content approved faster. They understand the internal legal processes of these top 20 pharma better, and that's good news for us that gets programs launched faster. And actually, their ROI is slightly higher as well, which means that they're finding the right tone and the right resonance, I think, with their content.

So we think it's a real win-win for us to work with agencies. And as we said in our prepared remarks, we've already had multiple client referrals, new clients they brought us that we've never worked with before, that are 6-figure clients. So we're excited to do that and more of that.

We just got an email from one of them yesterday, one of our new program partners. They just signed their contract this week, and they send the e-mails that they are chomping at the bit to get access to the portal, which I think speaks to the excitement they have, I think, to have some of these analytics be done for them in a more seamless way because a lot of what agencies do is putting together a lot of spreadsheets, and that takes a lot of time. And you'd be surprised how manual a lot of that process is today. So having that pulled together all in one place, like you'd expect to do with Google or with other major portals, I think it's really exciting for them.

[Operator]

The next question comes from Allen Lutz, Bank of America.

[Allen Lutz, analyst]

Jeff, you mentioned that workflow tools drove 20% of the pharma revenue in the quarter. I think you called out telehealth, back scheduling, AI assistance. Can you talk about how the growth of those products has been over the past year? Kind of what was the contribution maybe a year ago?

And then you also mentioned you're in early innings monetizing these workflows, trying to understand how much larger can they get? Is it about penetrating more of your customers or growing share of wallet? Really trying to understand how big the specific pieces of the business can be?

[Anna Bryson, executive]

Yes. Thanks for the question, Allen. So what Jeff referenced in his prepared remarks is that we saw 20% of our sales in Q2 come from these new workflow products such as formulary and point of care. Now if we look back over the last 12 months, obviously, it's going to be a lower percentage of that, but it is growing faster than our overall business.

We think that we're still in the early innings here of the opportunity. Between the engagement we see in our workflow channels and the unmonetized white space, we believe our workflow modules could be on par with our news feed over the next 3 to 5 years.

Once again, we're still in the very early innings, but these modules are certainly helping to lead our growth. And we do think that over the next 3 to 5 years, they'll continue to become a higher percentage of our overall business.

[Allen Lutz, analyst]

Got it. That's really helpful, Anna. And then one for you. On the EBITDA margins, 56% in the quarter, really, really strong. How should we think about the incremental cost in the model? I mean, over the past year, you've invested in a lot of new products, point of care, peer-to-peer, the client portal. And obviously, you're managing OpEx growth incredibly well. And I think it was about maybe 1.5 years ago, you talked about 45% plus EBITDA margins. Is there any update to that specific target? Just trying to understand how you think about the incremental cost in the model?

[Anna Bryson, executive]

Yes. Thanks for the question, Allen. So as far as EBITDA expansion, I'd say 2 things here. So one, we're still in the early stages of learning how AI could make our business more efficient. And we're also still in the early stages of learning how our client portal could impact incremental margins.

At the same time, we're in the early stages of investments in these 2 areas. So it's just too soon for us to know exactly what medium to long-term margins could look like for us. There's no reason for us to believe that we will see margins decrease materially by any means of these investments, because we do think we have a lot of upside through AI and through the incremental margins that our client portal could drive. But we just want to get a better understanding on those 2 aspects of the business before we do give an updated long-term outlook.

[Operator]

Next, we'll take a question from Michael Cherny, Leerink.

[Daniel Christopher Clark, analyst]

Great. This is Dan Clark on for Mike. Just curious when you look at the quarterly outperformance you had revenue in 2Q, if there were any like common themes behind what drove the outperformance, if there are like specific drug classes that you saw a particular strength in marketing campaigns or anything like that, on [ accretion ].

[Anna Bryson, executive]

Mike, thanks for the question. So back to some of the things we said earlier, so it wasn't all businesses performed better than expected in Q2, our pharma business as well as our health system business. I would say most of the growth was led by pharma as we had a really strong upsell season, but the strength was broad-based. There wasn't anything specific class of drugs or therapeutic area that was unique that led the growth.

I would say kind of the 2 factors that we've pointed to are the client portal, helping to provide real-time insights and recommendations, and then also new product traction. But that, once again, has been broad-based across many of our pharma brands and clients.

[Operator]

Your next question is from Scott Schoenhaus, KeyBanc.

[Scott Schoenhaus, analyst]

So I kind of want to follow up on Jeff's question at the beginning of the Q&A session here. If you look back at last year, before you had the portal up and running, I think you maybe potentially lost some market share to competitors that had the portal. Now as you're successfully launching it, you're seeing some market share gains back. And then ultimately, into next year, when we have all of your clients on the portal, we should be really unlocking a lot of upselling opportunities here through the portal.

Just kind of wanted to understand where you think market conditions will be overall for next year? And how much more market share gains you can potentially do next year versus prior years with your portal.

[Jeffrey Tangney, executive]

Yes. Thanks, Scott. This is Jeff. So I'll begin and then maybe Anna can speak a little more to the longer term.

If we look back on it, yes, I think we had the best product, but we weren't the easiest to buy 1.5 years ago. And now the portal has helped us really fix that problem. And beyond just being easier to buy, I think we're also providing them additional insights that really are, I think, putting us again at that strategy table with our clients, where we've always been, but now even with, I think, a greater level of influence and insight. So I think that's been terrific.

So I'll let Anna speak to the market growth.

[Anna Bryson, executive]

Yes. Listen, it's still early. We're in our upfront season right now. We're having discussions with our clients. As of right now, we have no reason to believe that we're going to see much of a change in form of budget growth at least for this next year. We'll know a lot more in December. And we'll obviously give you a more robust update in February.

I'll just remind you that if we think about our industry, it's evolved a lot over the past 5 years, right? So pre-pandemic pharma was spending just about 17% of their budgets digitally. During the pandemic, we saw a massive acceleration to digital, with budget growth of roughly 30% to 40% a year. And then post-pandemic, we've seen a little bit of a digital detox, if you will. And we're seeing budget growth now in the mid-single digits.

So as we look ahead, we believe pharma is still very under indexed digitally. And we don't believe long term that mid-single digit is that long-term industry growth rate. But as far as we see in the near term, there's nothing that suggests that, that's going to change at least in the next year or so. But over the medium to longer term, we do think we'll see a higher growth rate for our overall pharma budgets.

[Nate Gross, executive]

Great, Anna. And I guess I would follow up with you. I think a couple of quarters ago, you outlined about no growth from the health care end market baked into your guidance for this year. Has that changed recently?

[Anna Bryson, executive]

Yes. We've definitely seen stability in our health system business over the past 6 months. And so if we look at our expectations today versus our expectations 6 months ago, we've definitely seen marginal improvement there. But I'll continue to reiterate that the majority of our outperformance has been led by our pharma business.

[Operator]

The next question is Scott Berg from Needham & Company.

[Scott Berg, analyst]

Super nice quarter here. I guess just one question for me. You're kind of through the first season using the portal, and I know not all your clients are on it yet, but any commentary in terms of what you're seeing pricing there? Would it hold up the same as if clients working with you directly and not on the portal? And then as you look back at the first several months on your customers using it, is there any lessons in terms of things you might tweak going forward that might be interesting to note as you get into next year?

[Jeffrey Tangney, executive]

Yes, Scott, Jeff here. It's probably too soon to be doing too many analyses around the pricing and the recommendations. But suffice it to say, I think -- we think we've given ourselves more granularity to hear more levers. And again, we made it easier for them to have these add-on packages.

In terms of things we would do different, I mean, of course, there's always things we learn as we go through this. I guess, I hesitate to get into too many specifics. But I will say, I think the agency angle that we found in the last quarter has been going really, really well. And again, I think folks on Wall Street have told us for a while that we need more agency alignment. Now I feel happy that I think we're finally finding it. We're making them look smart. We're looking smart. We're not just taking money out of their pocket, right, which is what we've done historically, and it feels nice to be working together with them.

[Operator]

Jailendra Singh from Truist has the next question.

[Jailendra Singh, analyst]

I had a quick question on just your larger spend customers. Have they become more and more robust in your growth performance? I know things are case by case, but when one of your companies or brands are in [indiscernible] M&A and given the potential for rate cuts coming on, when one of your customers are acquired, does [ Docs ] typically lose their revenue? What happens? Can you walk us through what typically happens in their digital marketing approach when the brand is being acquired?

[Anna Bryson, executive]

Right. Thanks for the question. I'll take the first part about our largest customers, and I'll let Nate chime in on the second part.

So we've definitely seen our largest customers continue to lead our growth. So specific to our top 20, we actually saw a net revenue retention rate of 124% over the past 12 months, comparing that to 119% in Q2 of last year. So we've seen pretty strong acceleration there in top 20. We're continuing to find ways for these customers to expand their programs such as adding point of care modules or adding NPs through a client portal recommendation. So we believe we're really in terms of the top 20 and doing very well, and very excited about where we can take the long tail with some of these agency partnerships and the client portal.

[Nate Gross, executive]

This is Nate. I'll just chime in and add. Certainly, M&A is something that's quite common in the industry, a lot of the top 20 clients have pretty robust pipeline strategies that involve M&A. And while we don't often name our clients or call out case studies on these calls, we have done a few in the past.

A good example here might be Biohaven. That was a company where we had great relationships, both with the brand, but also with the C-suite of the company, oftentimes with these smaller clients were able to have a relationship with both, because it's a tighter cohort of people. And because they were smaller, I think they were able to be a little more nimble when it came to adopting digital first or digital forward strategies that began with tactics like Doximity, rather than beginning with, say, reps or some of the more historical marketing methodologies that pharmas used over the decades. And so when M&A occurs, that often becomes a great sort of cultural trojan horse in many ways that can help us have new hotspots of digital-first strategies within these larger top 20 customers.

[Jailendra Singh, analyst]

That's very helpful color. And then just one quick question on pricing. What are you seeing any conversations with your pricing in terms of negotiations and such? We're hearing a lot from the similar end markets that there's a really tough pricing environment going on from budget-conscious pharma companies?

[Anna Bryson, executive]

Yes. Thanks for the question. So I'll be brief on it. But we continue to steadily increase our prices, but it isn't our primary growth lever today. So if we think about our key growth levers, pricing is on the lower row.

[Operator]

We'll take our next question from Eric Percher, Nephron.

[Eric Percher, analyst]

As you go into the upfront selling season, I'd love to get your take on the competitive environment. And going back to Anna's commentary earlier, does it feel like there was an increase in competition coming out of the pandemic, and you've clearly equalized some of the go-to-market and other elements here with the portal. So how do you feel about kind of external factors in competition and then balanced by the internal actions you're taking?

[Nate Gross, executive]

This is Nate. We feel good about our ability to gain share and our competitive positioning. I think a lot of that comes from the deep and high trust relationships we have with our clients.

We've heard from some of our clients that some of these competitive areas like programmatic, the share may have stabilized or some platforms may be leaving a bit of share. But really, our focus inward and is towards our clients. And our clients have had to go through a lot in the past few years, everyone is still learning, as Anna said, but our ability to have really high-quality product, reach, authentic engagement and doctor centricity to these commercial programs remains key. And we think when our clients sit down and take a breath and look at the ROI, we feel real good about our ability to come out on top.

[Eric Percher, analyst]

Okay. And you had a comment about next year's launches and perhaps longer time lines, I think that was going to new workflow products. Can you just go a level deeper on positive effect there?

[Anna Bryson, executive]

Yes, sure. So listen, any time we have a client buy a product for the first time, it takes a little bit longer to go live. We have to create the content. It goes through NLR. And we're still in a growth phase right now with our workflow products.

So when we look at our Q4 guidance, we're just trying to bake in plenty of time to get those programs live. And especially given the traction we've seen with our workflow products year-to-date, it is very possible that we'll see a higher mix of Q3 sales come from those products.

So that's what we're seeing, you're just baking in plenty of time to get these programs live just because they are newer programs for a lot of our clients.

[Operator]

[Operator Instructions] Next up is [ John Park ], Morgan Stanley.

[Unknown Analyst]

This is John stepping in for Craig. It's been about a year since the company withdrew the 5-year revenue growth target as well as the rule of [ 65 ] target. I was wondering if management or the Board had any intention to revisit those goals?

[Anna Bryson, executive]

Yes. Thanks for the question, John. Listen, it's -- we're still early in the evolution right now of our client portal and really what the long-term market growth rate is. So I'll kind of go back to my answer from an earlier question, that I think that we're in a phase here where we don't know what the long-term pharma digital market growth rate is. We think it's probably a little bit too low right now.

But until we get a little bit more stability on that long-term growth rate, and then we get a better sense of what our client portal could be long term and how much growth we could see theoretically from SMB long term, we're not going to give an update on those targets until then. So I wouldn't expect anything from us in the near term on that.

[Unknown Analyst]

Got it. And what are some ad agency partners saying about client spending landscape in the post-election world? Just trying to get a sense of a level of optimism or pessimism moving forward.

[Nate Gross, executive]

John, this is Nate. You're right, agencies do help us keep our finger on the pulse and get a little bit better of a view into the macro. And Jeff has commented a lot on the other benefits that we get from our agency partners.

With regards to the election, I'll say, it's still early. We continue to take a more cautious and longer approach to the overall market, and election results can certainly introduce new uncertainty to our partners. But in general, we're a relatively well insulated platform at the moment. I'm not sure our particular products are uniquely exposed in a positive or negative way to what were some of the leading substantial platform pillars that the candidates have.

I will highlight the iShares U.S. pharma EPS is up around 11% year-to-date. And if you look at it over the window that the election stabilized and concluded, it's remained pretty stable. So the people who spend all day thinking about this, aren't or haven't yet priced in much risk or upside even in a world with many complex ongoing layers.

[Operator]

Everyone at this time, there are no further questions. I'll hand things back to Jeff for any additional or closing remarks.

[Jeffrey Tangney, executive]

So I'd like to end just by thanking our entire Doximity team for their hard work, serving more doctors every day than ever before. Thank you, and thank you, everyone else, for joining. Bye now.

[Operator]

Once again, that does conclude today's conference. Thank you all for your participation. You may now disconnect.