DocGo Inc. (DCGO) Earnings Call Transcript & Summary

Hi. I'm Chris Brustuen from Morgan Stanley's healthcare group. Thank you for joining us. Before I start, I want to hit on the research disclosure. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. Today, we're joined by DocGo. Thank you again for joining us. Maybe any opening comments?

Thank you for having me. It's been a wonderful conference so far. Amazing investors we have the opportunity to meet here.

Sounds great. Well, thank you, Anthony. The first point I wanted to ask on is just on the mobile health side. You had significant growth in recent years. What types of services you're providing there? What's your end customer base like? Can you just expand on that a little?

Yes. So in DocGo, we kind of -- on the mobile health side, we really have two main divisions. One is we're focused on population health-related services for underserved groups. And usually, we're contracting with either municipality or state or federal government, we have contract with all of those today in order to focus on a kind of widespread care program for those underserved populations. That's kind of what we call our government vertical of mobile health. This could be anything from primary care to urgent care to life and social work and behavioral care, all of that can be grouped in there. Then you also have our payer division in mobile health. And the payer division of mobile health focuses predominantly today on care gap closure, remote patient monitoring, and chronic care management. So we work with payers. And when working with those payers, they will give -- they will assign lives to us. And in that assignment of the lives, we reach out and then we close these care gaps like a diabetic retinal exam or an annual A1C or a diabetic foot exam. Now there's maybe 20-plus of these, call it, HEDIS measures we can close. So that's kind of the two divisions of mobile health. mobile health is about 70% of our business, transport -- ambulance transport is about 30% of our business.

Can you discuss a little bit too about your strong track record of growth that you've seen outside of COVID? COVID is always a big driver historically and now you've migrated kind of away from that. Can you hit on that a little?

Yes. At this point right now, we have pretty much no -- almost no COVID revenue in the company at all. It was a part that allowed us to grow that government business. And so we began working with very rapidly with governments in order to work on a population who have contracts and we're testing, vaccinating. And then we expanded those programs to do a lot more than that. So as an example, we put one municipality where we were doing testing services for in homeless shelters. And then we evolved that from just doing testing to then delivering primary care. So we go to each one of these homeless shelters each week rotating through with our teams that come on-site and provide primary care to these homeless individuals. So COVID allowed us to kind of get our foot in the door and prove our value of these widespread massive programs to municipalities, but then expand those programs into something that was much more intensive and involved in the whole care continuum for these underserved populations.

That's helpful. The next point I want to hit on is migration-related programs, and that's grown considerably in recent quarters. Can you hit on that a little bit and what you expect kind of in the growth engine for that front?

The migrant programs that we've had to date were really drawn from existing programs that we have. So we were already delivering care in homeless shelters. We're already delivering care for not only sheltered homeless but also unsheltered homeless. And so we began using those teams to treat migrants as they were arriving into the cities. And then that expanded to be able to do more and more services, we had vaccinations for children before they would get into school, doing mental and behavioral health assessments, but expanding on these services that we would provide for these migrant, asylum-seeking populations and then expand into more involved programs by which we are fully responsible for both the life and social work, the case management and the medical for entire facilities. We've done that in many parts of -- New York State is an example. And to-date, we have thousands and thousands of these asylum seekers where they're in our care, we're responsible for their social work and we're responsible for their [ case management ], we're responsible for their medical care and we're trying to make sure that they have the ability to graduate into a life where they're self-sufficient and they're able to be independent. And that's really the goal of these programs is to take these sometimes-amazing people who come in that are from very vulnerable backgrounds and we get them through the process by which they have that self-sufficiency.

I want to spend a minute on the tech stack. You're fully integrated with Epic, C-Care. How does that impact some of the referrals you get from a technology basis but also just enhanced functionality with the caregivers?

It's a big difference, a massive difference. So when you have a provider or a health system who's trying to refer to you. And you have the ability to, with one click inside of their EMR, to order that transition of care visit to order that transport, automatically transfer overall demographics to payer details to have that full transparency back to the patient, to the patient's family. It makes a big difference, not only in the quality of the care being provided but also the efficiency of the care that is being utilized. So how many services can that provider do because they're not bogged down with inefficiency. It's been a big differentiator. And we've actually -- we have been awarded many contracts now where they referenced technology as really the differentiator. And one thing that doesn't always so much get appreciated from DocGo is software is almost a service within DocGo. It's a very significant material part of our business. We charge for software. And then we have the ability to license our software. We've invested $70 million, $80 million in building out these four really critical tech systems that we have. And we have one that is responsible on all the logistics and one of the largest logistics companies in the U.S. is moving around these medical professionals, optimizing, dispatching, coordinating, we call that our Dara system. Then we have one that's for HealthPoint, which is our system that manages massive population health contracts where you're dealing with thousands and thousands of individuals with very procedural clinical encounters and then it integrates with all the states across the U.S. to do things like vaccine registration and to be able to do things like you do a widespread group of lead testing for pediatrics like that handles these mass population health use cases. Then you have our third one, which is our remote patient monitoring and chronic care management system where you're being able to remotely observe and monitor people. And then the fourth one is really the newest one that we've built, which is this highly sophisticated system that allows to help for these asylum seekers that are coming into the U.S. to make it all the way from the point where they arrive to the point where they do become self-sufficient, there is 50 steps in that process. We built a sophisticated system that allows us to know what that workflow is and then to be able to coordinate with all of the other organizations that participate in that workflow and then very carefully in a controlled manner with the whole goal of making sure that an individual that enters the workflow has the ability to confidently successfully exit the workflow. So those four systems are highly sophisticated and very, very intensive with the development. And it's important to note that the actual -- the revenue generated from developing the software is significant.

Next point I want to hit on is on the profitability front. Your growth rate -- it's not really typical to see profitability with companies that are growing at your pace, particularly across these segments. Can you touch a little bit on that and how technology plays a part of that and how that -- just the interlay between that and what drives profitability?

Yes. I mean the main focus of our technology is to improve quality, to improve better patient outcomes. The second biggest benefit of our technology is it dramatically increases efficiency. So in my opinion, majority of the reason why healthcare companies struggle to make profit isn't because they're not necessarily charging enough. It's because they're just simply too inefficient. They have lots of idle time. They have lots of their resources that are not being utilized to the maximum ability. And so then you end up just simply having waste. And technology is critical for you to be able to track all of your resources to utilize those resources, to pair the resources with patient needs. That pairing together, that kind of what they call the traveling salesman problem in computer science, that inefficiency is -- tends to be why a lot of healthcare companies aren't able to make money. So we -- when we ever have really any challenge that we're trying to solve, our first step of the solution is the technical solution. It's how do we have the ability to write software and hardware that can improve the patient outcome but also deliver a much more -- do it on a much more reduced cost basis. So a good example is our clinical care delivery model across most of our mobile health home programs is where you have a lower-level provider like an LPN in the home, and they're remotely supervised by a mid-level provider that's remotely like a nurse practitioner or physician assistant. Well, that model where you have this nurse practitioner remotely and the LPN on-site ends up coming at a cost basis, which is 30% to 40% lower than if you had sent that nurse practitioner into the home. That efficiency is when you have the ability to pass on and it allows you to have much more sustainable financials but it also delivers better patient care because rather than sending in maybe an internally medicine-trained nurse practitioner into your home, you can say, I'm going into a home for a patient that has CHF, let me have a nurse practitioner that's worked in a cardiology practice for the last 10 years, who has specialized training with CHF to be the one who is guiding the LPN on what steps to do and is making diagnosis that is likely going to be far more accurate.

That's very interesting. Shifting to medical transport to that segment. Can you talk a little bit about any cross-selling opportunity there is with that with mobile health? Are they kind of symbiotic between them with the sales cycle?

As far as the value proposition goes, the transition of care is a good example. You're working with a hospital system and you're handling their discharges. Well, you're discharging their patients and you want to make sure that those patients don't get readmitted unnecessarily. Well, if you're already bringing those patients home, you already have that logistics footprint. It makes a lot of sense to then have your lower level [indiscernible] your EMT and paramedics or even a nurse visit them on a frequent basis maybe once a week for the -- during the 30 days post-discharge post-acute in that same group because you're already integrated with the EMR, because you already have the staff that's doing the discharge that already knows the patient visiting them makes a lot of sense in that continuity of care. We've seen amazing success. Some of our transition of care programs have the ability to reduce the rates of readmissions by 40% to 50%, which is a big, big delta compared to kind of the baseline of how most health systems work today. So they work synergistically as a value proposition because the logistics of it are very symbiotic.

Interesting. I want to shift a little bit to labor and the inflationary environment we're in right now. Many of your peers are having impacts of the staffing, being able to retain staff. Can you hit on a little bit on how you've been able to navigate through this environment and also any processes you've been able to automate to get through it?

A lot. I mean there's a few things that we don't -- even if we start it manually, we don't immediately begin to automate. We have a very, very large engineering team. We deploy code to production between 4 and 8 times every day. So we're constantly, constantly iterating on the software deploying new software in order to be more efficient to the programs that we do. A lot of things have to go on the reimbursement side, which can get really complicated. And you have many, many payers, you have many types of business, whether it's transport or primary care, urgent care codes, RPM, CCM codes, you have to track all of that. The good one is on the RPM. You're doing remote patient monitoring and you're getting these readings and you're being able to use a more sophisticated learning systems that can determine whether or not there are abnormal vitals or patient is rapidly decompensating such that you don't need a human intervention initially, and so you can more efficiently determine whether or not patient needs an intervention. Those are some big examples right now where we've invested a lot into ensuring that the patients get that quality care without having to layer on additional cost.

Shifting to the M&A front, particularly in mobile health, but I guess mobile would -- or transport would be included in this, too. But what are areas you think about when you build your war chest specific areas of focus from an M&A standpoint?

Our M&A strategy has been fairly simple for the last -- pretty much the entirety of the company, which is we'll have a customer that comes to us, usually an existing customer who has a need and we say, I need you to -- I would -- I'm asking, can you provide these clinical services, whether that be maybe transition of care services, maybe that be primary care services or even transport services in this geography. And then we say, well, I don't -- I'm not actually licensed in that geography. I don't have the staff in that geography right now. And then we'll go and do a tuck-in acquisition to be able to acquire a license to be able to acquire staff that have that competency because that might save us 6 months, 12 months if we wanted to do a de novo. And that's been nearly all of our acquisitions or in certain cases, we have customers like we have a large national customer that we announced with the Fresenius, who has -- we've become their kind of a preferred partner to do remote patient monitoring for. So we brought -- we in -- right at the end of Q1, we purchased a company that does cardiac and RPM monitoring services. And in bringing them on, we've basically been able to pair it together. This need demand from Fresenius and the nephrology clinics or they're participating in nephrology clinics with the competencies of CRMS in order to bring RPM to them. So it's usually, generally speaking, doing an acquisition for when you have a DocGo customer that has a very specific need and ask and we're bringing in the supply for servicing that customer from an acquired entity.

Okay.

But usually, a small tuck-in.

Shifting to RFPs in that process. Can you spend a little time talking about what is the typical RFP process like? Are you going after bigger contracts these days? Do you partner sometimes going into these RFPs? Just a little bit more about what that's like.

Yes. Without question, the RFPs we are going after are larger, larger, much larger than they were in the past. Every year, it seems that we've gone higher and higher in that because we now have more experience that gives us the background to go for these larger contracts. Increasingly so, whether that's in a municipal aid or a stage or even some of the federal government contracts that we go after. It's because we now have more competencies. We have more experience. We have more people. We may have done that service now a lot more. So they're getting larger. The team is growing with them, and we're submitting a few every single week, we submit RFPs to a wide range. And we -- our success rate has been fairly consistent right now. And I think a lot of it has to do with its, I wouldn't say self-fulfilling, but the more that you're able to win and then prove, the better track record you have to win and to prove in the future.

I want to talk a little bit about market expansion and entering into a new market. You've entered into a number of new markets over the last 12 months. Can you hit a little bit on how you choose to enter into a new market and what you're looking for there and kind of puts and takes about decision points before you'd enter into a new market?

We are pretty simple and that we'll enter into a new market when you have a customer that is requesting us. We don't really do a whole, build it and they will come, mentality. We follow more of a, if somebody have a need, if somebody has a need, we will work to service that need. The entire company that we have today with the many thousands of providers across 10 states and multiple countries is built because we have somebody who is requesting assistance. Now I consider an RFP to be requesting assistance is a public request for assistance, but if somebody has specifically made a request for assistance and then we go and we respond to that and they say, okay, we would like you to be the one that assists us and then we launch into a market. We don't really have a mentality of we evaluate a state or a country and we say, well, we think that with 2 years of investment, we could eventually get good unit economics here. That's just never who we are. We really follow need. If there's a need, if somebody asks us to provide a service, we're going to provide that service as best as we possibly can. But if somebody is not asking us to do the service, then that probably means that they already have the service being provided by somebody and they're happy with it. And if a customer is happy with their current provider, who are we to try and displace them, that's not us. We're not trying to -- there's so much need out there. Let's focus on those that have the need. And if anybody changes from not having a need to having a need, we'll be there. But our model is not to go out there and try and kind of take business away from -- or take business from customers that are already happy with their current provider.

Yes. And what I didn't appreciate is that your scale, it makes you very nimble to be able to react very quickly to these demands or these requests. That's impressive.

That's part of the reason why in many of the contracts we have, we're just simply the only one that could do the service because you don't find groups that will, with a couple of days' notice end up standing up hundreds of -- a site with hundreds of people that have the ability to leverage all of their technology, to leverage their pharmacy license, leverage their CLIA testing license, to leverage this really comprehensive logistics backbone that brings together a one-stop solution and can do so with almost no notice. There's really nobody that can do that today. And so that's a unique value that DocGo provides. And a lot of it has to do with the fact that we just have an incredible staffing model with incredible staff who work really hard and they can scale quickly because everything you do is built on a technology backbone that creates that transparency, that efficiency.

Interesting. I want to spend a minute on the sales cycle and go-to-market strategy across your customer segments, government, enterprise, corporate, bigger health systems. Can you spend a minute on what that sales cycle is like to sell into these different pockets?

On the health systems side, for us, we've been very fortunate that it's nearly a 100% of the health systems, not all, but nearly 100% of the health systems are just by referral. So they will just simply reach out to us and they'll say, hey, we're unhappy with our current provider. Can you help us come in? And we'll get our foot in the door with one service. And then as an example, we have some large health systems where we just started doing one service for them and now we offer 20 different services for them, clinical services. And so that's how that sales cycle really works entirely and that is growing at a very, very significant [ clip ] every quarter without the need for a big sales team. The payer contract ones, we have a team of people that reach out, and we have a pretty specific niche that we follow with payers, which is we focus on the payer patients that have not seen their PCP in over a year and who have chronic conditions, at least one chronic condition. So we go to them and we say, this is the patient population that we focus on that we can help with them. It's maybe 12%, 13% of your average Medicare plan. Those sales cycles can be as quick as 3 months. It can be as long as 6 plus months and they're usually dealing with very large numbers of people. When we deal with that usually, we're being assigned 10,000 to 50,000 members, and they give us those members and then we begin kind of building care programs for them. And then on the transport side as well, that's pretty much really baked into the health system side. So it's the same cycle there. And the government side is almost always through a kind of procurement process. Sometimes you'll have one contract that extends into another contract, which is kind of similar to some of the stuff that we've done with municipalities today. But almost all public procurements eventually become or all public municipal contracts eventually become a public procurement process. Sometimes you have an emergency award initially because you only -- you have to stand something up in a couple of days or a couple of weeks and a public procurement process might take 3 months. But eventually, all of the government-related work goes through a public procurement process. And usually, that public procurement process can be 3 months to 6 months.

I guess so now hitting on kind of TAM and the growth of these markets. So specific to mobile health to start, where do you see kind of the value drivers for these different channel partners that you have, so for the hospitals, municipalities, payers? I know you spent some time in the events segment as well. Where do you kind of see that market grow into?

The biggest area that the mobile health segment is going to grow in is going to be on the payer side. I think that you're going to see us having hundreds of thousands of members assigned to us with a high degree of confidence in our ability to truly dramatically improve their care because the ones we're focused on, their care is not being provided if there are accessibility issues. That could be social determinants of health that are accessibility issues, it could be mobility issues. But for whatever reason, if the care is brought to them, they will be far more likely to have to perceive that care than if they have to go to care. And so with that population, you're going to see it grow dramatically and you're going to see the return on investment for the payers to be substantial, very, very material. The other piece that you're going to see growing is on our software side. Today, we've built out our software, those four different software applications that we have and we license those. So we give those to our existing partners. And it is a big, big software division of the company. You're going to see us licensing out that software where you can see us -- you're going to see us really allowing more and more people to use this highly sophisticated software because it delivers unprecedented results.

I guess shifting to medical transportation side then. Can you talk a little bit about that market opportunity? So you've got strong partnerships with Fresenius that you hit on before, Jefferson, Northwell, HCA, just to name a few. How big do you see this market growing and where are kind of the key value drivers in that segment?

So a little bit different. On the health system side, we continue out on transport, transition of care services. Those are the really big key components. And I think that those are going to continue to grow. That business line, I really expect that you're more than 20% growth every single year. We've blown that out of the water so far. But the -- on the Fresenius side, that kind of -- that goes into our RPM and chronic care management product focus. We've already communicated that for all monitoring, which is not [ RPM ] but all monitoring, we'll have about -- we'll have over 50,000 patients by the end of the year, which we're on track for. We have over 50,000 total monitoring patients by the end of the year. And that is the next phase in being able to deliver proactive health care because we want to -- we need to be able to have the data, the information, the state of the patient in order to then to be able to act accordingly and say, okay, we are going to titrate your meds or we are going to rapidly respond and treat you on scene. We need to have all the data to be able to act accordingly.

I guess hitting on the telehealth front, it's a pretty competitive environment there, just given how many new entrants have entered into that market over the last couple of years. Can you talk about that as a kind of a driving force for your care delivery when you're treating a patient in a home or if that is an impact point?

Yes. I mean it's definitely an impact point for sure. It's -- when you're going into the home and you're delivering the care to individuals who have chronic conditions, it's important to understand that they're almost always complex, not just one, it's very rarely one chronic condition. It's multiple chronic conditions. And so our ability to be able to have the monitoring chronic care management, but also have that lab license to have that pharmacy so we can deliver the medication on-site, it makes a big difference because 30-ish percent of people never pick up their prescription. So if we have the ability to go on-site into a SaaS diagnose and treat in a one-stop shop, the outcomes that you get from those patients are much, much greater. So one of the biggest value add of DocGo is that we have -- we are comprehensive in our solutions, whether we need to transport somebody to a higher-level care or we need to deliver urgent primary care or medications to monitor and we can do it all under just one umbrella of DocGo.

Interesting. I guess we're almost up on time. Any closing comments?

Yes. I would just say that right now, because of the incredible investments that we put into the foundation of the company, the foundation in the technology, the foundation in the 6,000-plus people, all the licenses that we have, we are seeing substantial growth, very substantial growth in every single line of business in our company. There's no exceptions to that. All of our markets, all of our divisions are growing dramatically. And that, I don't see stopping. DocGo has a unique value proposition, which allows us to deliver incredible value to our customers, and we're seeing the demand for that only increasing every single month.

Impressive. Anthony, thank you again for joining today.

Thank you. Appreciate it.