DocGo Inc. (DCGO) Earnings Call Transcript

Good morning, everyone. My name is Mallika, and I'm an associate with the JPMorgan Healthcare Group. It is my pleasure to introduce to you today Anthony Capone, who is the CEO of DocGo. [Operator Instructions] I will hand it over to Anthony. Thank you, Anthony, for joining us today and sharing the DocGo story with us.

Thank you. And thanks for everybody for sticking it out, Thursday to listen to our presentation here. I really do appreciate your time and excited to bring towards JPM for the first time, the DocGo story. My name is Anthony Capone. And as introduced there, I'm Chief Executive Officer. We started the company about 6.5 years ago, I was Chief Technology Officer. My back, my grad degree is in computational learning theory. It's a subset of AI. So I'm the technology side. And as I'll go through our founder, is on the clinical side, and we bring the 2 together to deliver a true, true health care service that's built on top of very sophisticated technology backbone. But what is DocGo? I really want to run through that. Well, as you can see from the disclaimer here, we must be public because that's the key indicator there. We've been public for about 1 year. Today, DocGo is probably one of if not the largest fully mobile medical provider in the United States. What does that mean by fully mobile medical? I mean, all of the health care we deliver -- all of the health care we deliver is outside of the traditional fixed 4 walls of a health care institution. So we're delivering care through the various different segments, but we deliver care on site when people need it, where they need it. We operate today those mobile medical services in 29 states in the U.K. and in Canada. And the model by which we bring that care to the patients that I'm going to walk through is truly the differentiation. It is not just the fact that we do it and that we do it at scale, but it is exactly how we do it to generate significantly increased marginal accretion. But in addition to that, we're able to scale at a rate much, much faster than a traditional health care provider. Our 2021 revenues are about $318 million. When you take that out for this year, we're guiding to $430 million to $440 million in 2022 with $41 million to $46 million of adjusted EBITDA. Some people say that we're just -- although we're only 6.5 years old, we're a really old school company that we just -- I think that businesses should make money. So running with that kind of old school mentality about how we deliver the care, the care to the services and the patients that we deliver is traditionally very episodic. We deal with patients that need it the most. Deal with patients that needed the most, that could be chronic, episodic, inoculations. Our business is broken down into 2 health care verticals. The first one is ambulance transportation. That's where we bring somebody to care. The second is mobile health. We bring care to patients. So the full entire care continuum where a patient needs to get brought to care or we can bring care to a patient, DocGo can handle. And DocGo every single day does well over 10,000 patient encounters. Sometimes tens of thousands of patients by which we are treating and by which we are transporting. When you look at the actual revenue streams and the breakdown in the verticals -- before I go into the verticals, understand that these are just customer verticals. In actuality DocGo, where its simplistic level has 2 SKUs, has 2 products. The first product is what I said, which is ambulance transportation. The second product is mobile health care. And mobile health care in the sense that we deliver it where there is almost a labor arbitrage. So a traditional model is where you're going to bring in what's called an independent license practitioner, it's like a nurse practitioner or physician's assistant into the home. That's how many of these models work today. That individual is earning between $80 and $105 an hour to go into the home, because of drive time, you can usually do maybe 1 an hour. So you're just thinking about the basic unit economics of this business model, right? That's how a traditional model would work or even worse than that there's companies that will send a doctor, a physician to the home, that's even more. That's $250 an hour and still the same level of utilization. That's not how DocGo works. DocGo goes into the home and we bring in an LPN into the home. LPN is your kind of lowest level of your nursing qualification. LPN, LDN, depending on the state. That individual makes $30 to $32 an hour. Now when they go into the home, the entire clinical portion of the encounter is supervised over a video, over our iPad Pro, I have read it here, over an iPad Pro, they come in to the home. They come in to you as I'll go into the government institutions like homeless shelter, they'll go into a back of a mobile clinic that I'll walk you through. And they immediately bring on and into the clinical encounter that independent license practitioner. So the LPN is being supervised, being managed, being directed by an independent licensed practitioner that's operating under their own MPI for the entire duration of the clinical portion of the encounter. Now while they're in there, they're doing diagnostics, they're being instructed to give you a perfect example. Here is one of the devices. This is kind of like the -- one of the tool kits that we have. We use a title care device for the LPN when they're in the home. This then transmits from the LPN who is with the patient there in real time and transmits back to the physician assistant who is monitoring it. So it's how I want to listen to your heart rate, listen to the heart rate. I want to listen to lung sounds, listen to lung sounds. All transmitted back to the physician assistant or the nurse practitioner in real time. Now the reason why I set a labor arbitrage before is because obviously, the person that's going into the home is significantly less expensive, significantly more cost effective. But in addition to that, the person that's on the iPad also is cheaper because they get to work from home and they can be specialized. So rather than the traditional model where you bring in a general internal practitioner, internal PA, internal medicine, nurse practitioner, unless you can bring in a specialized, and so we're going to bring in a pediatric NP or a psychiatric NP. You can bring in a cardiology trained PA. So the actual person that's actually supervising the care is significantly more appropriate for the needs of that patient. And that's unique because we can do that with high degrees of utilization because they can -- their clinical portion encounters 8 to 11 minutes. So that independent license practitioner, they can do 5 to 6 of these an hour, as opposed to doing 1 an hour. And that is where the big arbitrage happens and the ability to deliver really high-quality care, very, very high-quality care at a very low and affordable rate. 60% of our mobile health care business comes from government, that's focusing on the underserved. We serve the underserved. That's the mission of the company. It's why we formed the company. Today, we serve the underserved. The lowest stratification in the socioeconomic tier of societies, you have unsheltered homeless, then you have your sheltered homeless. So in both cases, we are the ones providing that health care. I'll give you a perfect example of really practically how this works. For unsheltered homeless, we have a mobile clinic. That mobile clinic will go in areas with the predominance of unsheltered homeless. This is paid for by a municipal agency like the Department of Homeless Services. They pay us a flat rate per day. So maybe for that clinic, it might be $3,500 per day, $2,500 per day depending on the size of the clinic. The unsheltered homeless walk on, they can get primary urgent care services. They can get Narcan distribution, fentanyl strip testing. We launched the first ever mobile Suboxone program. The Suboxone is an opioid antagonist. So if you are on sheltered homeless and you are willing to give up your fentanyl addiction, the first thing you need to do is to take a medication to suppress the withdrawal symptoms that are hellish before you even can make it to detox. We do that. That program, right, those clinics, they also have a roving team. They rove a licensed social worker and a paramedic, they roam in a 2-mile radius around that bus and they'll treat unsheltered homeless right on the curb. If they'll see an unsheltered homeless individual with an abscess. They'll drain it, stuff it, suture it and provide antibiotics, never leaving the curb. To give you an idea of size and scope, that one program Street Health Outreach & Wellness. In one city, in New York City, has treated over 160,000 people in the last 13 months. Just as an idea of the size and scope that DocGo operates at. Few people in the country can scale as quickly and with as high quality as we can. The second largest vertical we have is hospitals. Hospitals, we obviously offer ambulance transportation to discharge services. Hospital pay us on an hourly rate for those ambulances. Again, DocGo does not do -- or the vast majority of DocGo's revenue is not fee-for-service reimbursement. DocGo does not believe in the concept of fee-for-service reimbursement. That is a flawed mentality in health care. And that is why majority health care companies tend not to make money because they're dependent on fee-for-service reimbursement, which means that you are subjected to the wins of demand, hospital census, seasonality, discharge, volume, your referral patterns. That's not how DocGo works. If a hospital would like DocGo's ambulance services, they say, I would like 5 ambulances and they pay us in an hourly rate for those ambulances. That's the way that we work. Somebody wants our mobile health care clinics, they want our urgent care services, they will pay us in an hourly rate, a daily rate, a team rate, a shift rate, maybe even a monthly rate, but a flat fixed rate. That allows us to ensure our margins. And most importantly, it allows us to pay our clinicians 25% to 30% more than industry average, which is why we're able to staff significantly better than anyone else that is in the country. Hospitals, we also do transition of care services, where we're trying to do post acute ER re-admission avoidance. That means the patient's discharge, hospitals at risk for 30 days. We do everything we can to make sure that the patient doesn't go back in. We have hospitals like MLK in Compton, one of the homes hard-hit hospitals in the United States. We've reduced rates of re-admission by over 60%. Astonishingly large impacts by our ability to visit the patient once a week and the 30-day period post acute when they're at risk. About 10% of -- a little less than 10% of revenue comes from payers and then also events. So like we do all of the medicine at the Barclays Center or Citi Field or Miami Heat or many of the biggest stadiums around. And studios, acting studios around, it's our teams that are providing the medicine for everyone that is at that event, at that arena. Now one of the key parts, and I like to talk about this quite a lot because it's my background, my graduate within computational learning theory is our technology. Everybody says they have technology. Everybody has got some app that they like to have. This is not that. The sophistication that it takes in order every single day, we have 1,200 to 1,400 different mobile clinical teams going out there to patients who have varying degrees of acuity, with clinicians that have varying degrees of competency, with varying equipments or varying medications and varying different types of vehicles. It could be a mobile urgent care clinic. It could be a first responder vehicle that's going into a home. It could be an ambulance transportation. And all of that happens every single day, tens of thousands sometimes of encounters in an automated capacity. The ability to manage that in a sophisticated manner requires incredible, incredibly accurate technology. This isn't like Amazon when your package doesn't arrive, right? And all of a sudden, you just get a little upset or your Uber driver isn't on time and you give them a 4-star rating. We hurt people if we're not right. We've done over 6 million patient encounters since we built the company and growing at a pretty, pretty rapid rate. And part of that technology is that we're embedded into hospital system EMRs. One of the things we live in reality, we don't have an ego. So we don't go and build an app and try and get people to use it. We say, what do you use today? Let me embed inside of it. So right now, we're the only ones in the Epic App Orchard where you can go and order ambulance transportation and mobile health care services right inside of Epic through the Epic App Orchard. You go in there, just like you're going to order labs, you go and say, "I want to order a post-acute visit from DocGo. I want to order a transport from DocGo. Transfers all that information through HL7 over into our system, so we have the most accurate demographic coverage details, HNP, all of it. And then we send all that data back into the hospital's EMR. So they have full transparency to how well we're doing. We believe that we are the highest quality because we are the most transparent in real-time transparency, whether or not we're doing our job or we're not doing our job. Technology is the foundation of how we build the company, but truly, it is our workforce. We can scale faster than everybody. We have projects where sometimes in 2, 3 weeks, we'll scale with 300-400 clinicians. Nobody else can do that. And most of these clinicians, there's almost 5,000 people that we have working for us. The vast majority are W2 employees of DocGo. Just like they're our ambulances, just like it's our technology, just like the medications are through our pharmacy or the tests are done by our lab or the contracts are through us directly. The clinicians are ours, our W2 employees. The reason for that is we want to ensure the highest degree of quality, but also we want to make sure we're doing that with the most financially responsible model. And to control the finances we need to control every part of that value chain. The benefits to who we have are myriad, and it seems as though when I mention all these different projects and programs we have that, maybe there is a lack of focus, but in reality, taking it step back. There are only 2 products, only 2 SKUs. There is ambulance transportation, and there is this clinical delivery model where you have a lower-level provider on site with a higher-level provider remotely. And now we may go on to 15 more different customer verticals over the next few years. I don't know, but it's only going to be so far as that clinical delivery model applies. So it's reproducible and it's highly scalable. And part of the reason why I keep saying scalable is because there are well over 3 million LPMs in the United States. There's a little over 1 million, like 1.3 million RNs. There's only a few hundred thousand of those APPs. So if you're building a clinical company that's dependent on nurse practitioners and physician assistants to go into the home and be very poorly utilized your ability to scale, your growth rate is going to be greatly inhibited. Whereas with us, there's 3 million of the most important valuable workers to us, which are the ones that are going into that home. Mobile Health right now, as I said, is about 75% of overall revenue. We charge fixed rates for all -- nearly all of our contracts. That allows us to go in knowing our margin ahead of time, protecting our margin and most importantly, being able to pay our people at frontline health care workers a very, very high rate. That allows us to get the best. And how I know that we get the best is when I look at our patient satisfaction scores, DocGo right now as of Friday of last week, our patient NPS with tens of thousands, tens of thousands of survey responses because every single clinical encounter, the patient is required to give us an NPS score because we can now go down to the provider level. Our NPS score as of Friday was an 81. Our audited NPS score at the end of 2022 was a 79. Health care tends to be like a negative 3% or a positive 4%, right? So -- that is how I know we are delivering the highest area of quality. We know that we're more expensive. DocGo knows that. We are a Mercedes Benz service. And because of that, we're able to -- we charge accordingly. We deliver high-quality health care, but we deliver that high-quality health care oftentimes and majority of our revenue comes to the most underserved populations. So we figured out how the people that needed the most can get the best. Very difficult to do because most health care companies could never make money off of an uninsured population or off of Medicaid populations. So this unique model allows us to really focus on driving real, real positive changes, real positive changes across the board. And thankfully, we have some of the most amazing partners that I'll go through in just a second. The medical transportation space, as I said, is about 25% of our revenue. It's on at least our model, least our model by which we're able to really, really give people a dedicated, dedicated ambulance transportation. We target a 50% gross margin on the mobile health side. We target about 35% gross margin on the transport side. We want to get to a blended 40% gross margin as our target on new contracts, follow according with that. It takes us 90 to 120 days to get normalized margins after a new project launch. Usually, the contracts that we're signing are on average about 3 years. Some contracts are 5 years with 5-year renewals. Some contracts are 1 year with a 1-year renewal. We will really sign a contract. It's less than 1 year with a 1-year renewal, just not really worth it, given the amount of initial investment that it takes from us. We've historically grown about 30% to 35% year-over-year. I think it's a comfortable growth rate, a definitely comfortable growth rate for -- not only is it comfortable growth rate from a financial perspective, meaning that we have the ability to continually show marginal accretion. But if you grow more than that, if you have companies that are in health care that are growing 50%, 60%, 100% a year, it's just simply not possible to maintain your clinical quality. It's just not. And we're never going to risk clinical quality for growth. That will never happen. That is not who we are as a company. We deliver high quality, and that's our MO. So you can't lose the brand of your company and potentially even worse, harm some people. And we are trusted by some of the most prestigious and well-renowned organizations in the country. On the government side, we contracted everybody from the federal government, the VA, and the IHS, CDC contract all the way down to state -- Department of Health. We're doing a population health for them. And then cities, we have some of the largest cities across the country where we're doing population health for them. These are very tailored specific populations. It could be a housing project. It could be a homeless shelter. It could be a senior living of -- a group of 5 or 6 senior living centers. It's places by which population health is critically important to ensure patients that normally who don't have proper access to health care, get access to that health care. And I already walked you through a little bit of our -- one of our projects with the Department of Homeless Services in New York. But today, not only do we have those mobile Street Health Outreach & Wellness units, but in addition to that, we also have -- we also do all the health care inside of those homeless shelters, inside of those homeless shelters. It's a big, big part of the health care. We started something that was just very simple, tailored and move that into primary and urgent care services for the underserved. Just giving you a quick look at our footprint right now. Like I said, 28 states in the U.S. and in the U.K., we are authorized to provide clinical services in 38. A lot of what DocGo does is we prepare the geography so that we're ready to launch. And then we wait until there's a revenue opportunity. You'll never see DocGo follow the model of build it and they will come. That's too risky. That's not what we do. We are a B2B company, B2B company. That means that if we're going to go and make an investment and launch somewhere, we already have a signed contract with guaranteed margins, with guaranteed revenue, with guarantee rollout and ramp. So we are -- but in order to do that sometimes oftentimes, somebody comes to you and they need you to launch quickly. But you can't go back to them and say, "Okay, well, let me register my PC that will take 6 months. Let me get a Medicare and let me get a Medicare number. Let me get my lab license, let me get my pharmacy license. So we get all of that prepared sitting dormant ready to go the second that we win a large enough opportunity we roll onto it. And because of that, we also have a tuck-in M&A acquisition strategy, which is like somebody wants us to launch into a market, we don't have the license, we don't have the clinical competency. We don't have the people. And so whenever we buy a company that's a day 1 revenue synergy, usually a material revenue opportunity. So we'll only, only buy the companies when there is that immediate instantaneous revenue synergy for us, synergy means cash. Not like one day, maybe we'll have a better sales pitch, and we can get some maybe technology synergies or lower cost, it means cash in the door, day 1, because we bought the company that's more than 1 plus 1. So 1 plus 1 must equal to 3. We also live within our own financial reality. We did in the first 3 quarters of last year, which we've reported on, we did about $35 million in M&A. We did $36 million in free cash flow. So we live within our financial constraints. A little bit on the kind of on those numbers as well. We finished Q3 in about -- I think it was about $172-ish million on the balance sheet. We have almost no debt except for some operating leases relative to our ambulances and some other vehicles and equipment. So almost no debt. We have $100 million line of credit from Citi with a very favorable terms with a $40 million. According there that we haven't drawn down at all. So the -- our balance sheet is extremely healthy. We have -- we generate free cash flow, and we have, I think, a good, good, solid, sustainable growth rate, which allows us to grow not only, I think, at a good pace, but also maintain that significant quality. A lot of it comes from our RFP channel. So most of the government contracts come from a public procurement process. And we've gotten pretty good at that. The ramp of the amount of public procurements that we're going after used to be 2 to 3 a month. Now we do about 2 to 3 a week, and they're much larger in that size. Some of those interesting things. And actually, I'm going to highlight one just because there was -- it was in the news this morning. So I might as well talk a little bit about it. But one of the most interesting pilots we have going on is with Dollar General. Dollar General is an example, they wanted to get into retail health care, just like Walmart and CVS. And in doing so, they -- but they don't have space, right? They're not like Walmart that's going to just build out a clinic inside of their store. They have a very, very specific business model that's extraordinarily effective and every square inch just spoken for. But what they do have is a lot of parking. And so we bring one of our mobile clinics into their parking lot, and we offer primary and urgent care services to their customers. They come in and they get it. And they -- we have the ability to give a lift to the health and wellness category. So that means that if somebody comes in, they have a rash. We look at that rash. We think and give them a coupon to go get calamine lotion and Benadryl inside of the store. That is an amazing and wonderful pilot that we're working on, which is our first foray into rural health care. We proved our mobile health care model, I think, quite well in urban settings. Can it work in a rural setting? And it only works if you can have somebody else eliminate your customer acquisition cost. So with this, Dollar General is what allows us to really, really focus on that. So it's an exciting pilot and more stuff to come in that regard. And the competitive mode is pretty significant. You've got your physicians practice that you have to get set up, your Medicare numbers, your lab licenses, your pharmacy licenses, the technology to do this entire thing at scale, the thousands of providers and all the insurance with all of that, the capital needed to make it all entire work very, very, very, complicated to do what we do. It took years and years no amount of money is going to accelerate that growth rate. I already kind of gave you an idea of where our revenues have gone from, into, and where we're looking at on our adjusted EBITDA side. But just a big summary of that is that we're old school, and we just think that businesses should make money. When we look into 2023, we got some amazing, amazing growth opportunities coming through. We got a bunch of those pilots that I mentioned to you on the RPM side, and the biggest growth is probably going to come from the fact we've seen extreme acceleration in our RFP channel, meaning that we're applying for more of these government awards. We're getting better at it. And the size of the awards are getting larger and larger. They used to be in the $2 million to $10 million in annualized revenue. Now they're in the $10 million to sometimes multi-hundred million dollars in annualized revenue that we're applying for. Last thing I'm just going to end with on this little bit of presentation is the thing I'm most proud of right now is our team. It took us years to get to this point because we have obviously had to build a company that was credible enough. But it took years to get to the point where the team that we have is absolutely astonishingly exceptional and a world-class executive team. We just brought in Lee Bienstock, our President and COO about a year ago. He's a senior executive at Google responsible for growth there, growing out their ads business in YouTube and was fine member on the fiber team and Pixel and he's come over. And he's the reason why that RFP team is now greatly expanded and has been so incredibly successful. Norman, our CFO, an amazing and amazing astonishing CFO, our Chief Compliance Officer, we right now have the best compliance department in all of our industry right now. It's where we're now, we're awarded for it. We speak it, conventions on how high quality our compliances, our whole team, our Chief Technology Officer, our Chief Product Officer, come from extraordinarily renowned companies where they were running all the technology there. So we've built an amazing team. We have a great balance sheet. We have an incredible story. We are just scratching the service of the addressable market. So 2023, I think it's going to be quite an exciting year. With that, I thank you again all for kind of taking the time to listen through the story. Bringing it down just really quickly. Remember, we have 2 products: ambulance transport in this lower level, higher-level clinical model. Majority of that model right there goes and serves the underserved on fixed rate reimbursement that allows us to get guaranteed margin and really protect ourselves against inflationary pressures. Thank you again.

Thank you, Anthony. And congratulations on all the very impressive work your team has accomplished in such a short period of time. We will now open up to audience Q&A. Please feel free to raise your hand, and we can hand the mic over to you.

It's only audio. For those of you who are listening remotely, but there's like 300 people in the room right now. They're all very engaged.

Dave [indiscernible] Can you talk a little bit more about how the business model works with Dollar General?

Sure. Yes. I mean that one is a pilot, just to be clear, and that is fee-for-service at the moment. So patients come in and we treat them. It's actually just the business model. The unit is it's one person. So it's that LPN on-site and then remotely is the physician assistant. And that LPN also has a CDL, because we -- the LPNs are the one that drives the bus and the one that does the care on site and does it all in there and they can do testing and they can dispense medications, everything in there. And it's really -- when you think about it, there's about 19,000 Dollar General stores. About 70% of them are rural. And so they're like in health care kind of deserts, where they're more than, let's say, 18, 19 miles from a health care -- traditional health care institution. So that's the addressable market. We generally -- the goal here is, you put one DocGo mobile clinic for every 5 Dollar General stores. Generally speaking, each one of those Dollar General pluses generate somewhere in the order of $1,200 per day, and they operate every day. So you can really determine the size of the opportunity. But again, we want -- we move slow here. We moved slow in our R&D. The rest of our business, I think we moved really, really quick, very, very aggressive. But on our R&D, it's a fee-for-service. This is also rural. It's not something we've done before. So we're about 4-ish months through the 6-month pilot. I think things are positive. We want to make sure every single thing is perfect there.

You mentioned you've got 5,000 clinicians. Is that what I heard?

Yes, a little less. Slightly less than 5,000. 5,000 total people, most -- nearly all of those are clinicians.

Can you say a little bit about, whether they are doing this part-time moonlighting, -- are they -- do they have to be in state? Do you have options of maybe offshoring some of that? I mean can you talk a little bit about the clinician footprint?

Yes, it's all of the above. We push very hard for everybody to be full time, because generally speaking, our cost per employee for new onboarding is about the same part-time versus full time. So obviously, there's a heavy incentive for us to bring people on full time. It's a balance. It depends on the type of project and where, obviously, licenses are state specific. So people need to be licensed in the state. You can't just operate as a nurse in a state you're not licensed in. We do, do a lot of offshoring. So like one of our largest partners is Carnival, Royal Caribbean, Norwegian. A lot of the health care that we provide for them is actually provided by individuals that aren't licensed in the U.S. They're still licensed. They're licensed in their home country. They're not necessarily licensed in the U.S. And that's important because they're much different pay rate.

Do you have plans for moving some of these like for radiology, for example. There's a lot of offshoring that happens. I mean, of course, they cannot sign it because these might not be licensed, but they can triage it in some ways. And that probably reduces the cost dramatically.

Yes, it does. When allowed -- again, we're an extension of usually an existing institution. So we do things collaboratively. So like the municipality as a department of health that we're working collaboratively, we will always present them with the lowest cost option, but it's up to them whether or not they want it. It's -- we're not the ones taking the risk. So we present options to our customers and they choose them.