DocGo Third Quarter Earnings Call - DOCGO INC

Financial Performance:

• Q3 2026 revenue reached $73.4 million, marking a 4% year-over-year increase (18% excluding migrant-related revenue in the prior year) and the first YoY growth since Q2 2023.
• Adjusted EBITDA loss narrowed significantly to $3.2 million in Q3, compared to $6.3 million in Q2 and $10.2 million in Q1; Q3 EBITDA loss was also an improvement over the $7.2 million loss in Q3 2025.
• Consolidated gross margin improved to 33.3% in Q3 from 30.5% in Q2, driven by operational optimization; medical transportation gross margin hit 34.7% (up from 31.7% YoY).
• Adjusted SG&A decreased sequentially to $28.7 million in Q3, down from $29.7 million in Q2 and $30.8 million in Q1, driven by workforce reductions and vendor renegotiations.
• Liquidity shows improvement: unrestricted cash was $19.1 million as of September 30, 2026; cash burn reduced to approximately $3-4 million in Q3 from higher burn in prior quarters.
• Debt facility closed: $12.5 million tranche from Perceptive Advisors added to balance sheet, with additional $12 million contingent on the HiQuity Health transaction closing and $25 million available upon maintaining $130 million in mobile health revenue.
• Receivables collection progressing on $19 million of outstanding amounts from the discontinued municipal population health business.

Guidance and Future Outlook:

• Full-year 2026 revenue guidance revised downward to approximately $300 million (previously $305–$310 million) to reflect the wind-down of unprofitable lines; this excludes revenue from the pending HiQuity Health acquisition.
• Full-year 2026 Adjusted EBITDA guidance reaffirmed at a loss of $17 million to $22 million.
• Q4 2026 revenue is expected to be approximately $77–$78 million, reflecting seasonal strength in mobile health and care-in-the-home, despite the partial wind-down of the upstate New York medical transportation business.
• Management anticipates achieving a profitable run rate by the end of 2026 and expects 2027 to be a year of positive EBITDA and solid revenue growth.
• 2027 strategic focus shifts from volume expansion to portfolio optimization, emphasizing higher margin mixes (e.g., ALS vs. BLS) and renegotiating legacy contracts.

Business Segments and Product Lines:

• Medical Transportation: Revenue $53.3 million in Q3 (+6.4% YoY), a record quarter; growth driven by NYC, Delaware, Wisconsin, and Tennessee; upstate New York business being wound down ($10M annualized revenue) to eliminate a ~$3M annual EBITDA loss.
• SteadyMD (Acquired Oct 2025): Contributed $7.8 million in Q3; subpar gross margins in the quarter due to aggressive hiring for Q4 seasonal volume, but margins normalized in September.
• Care-in-the-Home: Revenue declined due to a deliberate 26% reduction in visit volume in Q3 to optimize unit economics; transitioning clinician mix from LPNs only to include mobile phlebotomists and medical assistants; on track for positive contribution EBITDA late 2026/early 2027.
• Mobile Health: Total $20.2 million in Q3; non-migrant revenue surged 64% YoY, driven by remote patient monitoring (RPM), mobile phlebotomy, and SteadyMD.
• Product Initiatives: Launched AI voice agents for automated outreach, reducing cost per booking by over 50%; new Pennsylvania program leveraging existing transportation bases for mobile health services.

Market and Competitive Landscape:

• Fuel costs remain elevated (avg $4.18/gallon in Q3), constraining gross margins by 52 basis points YoY on transport and 38 basis points on consolidated results.
• Company is selectively expanding into new markets (e.g., Pennsylvania) while exiting non-profitable markets (upstate NY) and restructuring subpar contracts in existing markets.
• CMS Physician Fee Schedule updates requiring a well-visit for RPM enrollment align with DocGo's integrated model, creating a competitive advantage.
• Mobile health revenue (including high acuity) stands at >$150 million, providing a strong revenue base for debt covenants.

Risks and Challenges:

• Geopolitical/Economic: Rising fuel costs and geopolitical instability continue to pressure gross margins.
• Execution Risk: Transitioning from unprofitable growth to profitability involves winding down revenue streams, creating a risk of short-term revenue headwinds.
• Operational: Continued need to manage receivables from discontinued municipal business and execute the HiQuity Health transaction to unlock additional liquidity.
• Regulatory: Dependence on CMS reimbursement rates and fee schedule updates for mobile health services.

Management Commentary and Tone:

• CEO Transition: CEO Lee Beanstalk announced he is stepping down effective March 31, 2027, expressing pride in the company's foundational progress toward profitability and hybrid care model.
• Tone: Management displayed a confident, pragmatic, and disciplined tone, prioritizing margin over top-line growth. The tone regarding the business turnaround is optimistic, citing "considerable progress" and a clear path to positive EBITDA.
• Strategic Pivot: Emphasis placed on moving from an emergency response model to a vertically integrated hybrid care platform, leveraging acquisitions (PTI, SteadyMD, HiQuity) to create a holistic care continuum.

Analyst Questions and Answers:

• 2027 Outlook: Management confirmed 2027 will feature positive EBITDA and year-over-year revenue growth across all segments, with SteadyMD and HiQuity Health contributing incremental revenue.
• NY Wind-down Impact: The upstate NY exit is a gradual process; revenue impact will be spread over the remainder of 2026 and 2027, not a full quarter-over-quarter drop.
• Care-in-the-Home Optimization: Volume reduction in Q3 was deliberate to implement AI automation and adjust clinician mix, setting the stage for profitable scaling in Q4.
• Revenue Guidance Revision: The $5-10 million guidance reduction is attributed to the NY exit (~$1-1.5M impact), lower-than-expected SteadyMD run-rate, and paring back of lower-margin contracts in care-in-the-home.
• Acquisition Status: The HiQuity Health transaction is pending regulatory approval and is expected to close by month-end or early next month.
• Cash Flow Timing: While EBITDA is approaching break-even, positive operating cash flow is anticipated for Q1 or Q2 2027, dependent on the timing of large receivable collections.

Other Key Points:

• Profitability Thresholds: Approximately $240 million of the $300 million projected 2026 revenue is EBITDA-positive; the remaining $60 million will be either shut down (1/3) or restructured/renegotiated (2/3).
• Cost Structure Target: The profitability model relies on $28 million quarterly SG&A and mid-30s gross margins; the company is currently near the SG&A target and improving margins.
• Seasonality: Q4 is the strongest season for both medical transportation and mobile health, driven by backlogged contracts and seasonal demand.