What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-07 compared with 2024-05-08 · 209 added, 106 removed, 322 unchanged (49% of the section changed)

25 unchanged sentences

objectives and intentions with respect to future operations, services and products, including our geographic expansion;

our margin normalization initiative;

new and existing contracts and backlog;

new and existing contracts;

M&A activity;

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Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

DocGo is a mobile healthcare services company that uses proprietary dispatch and communication technology to help provide (i) quality mobile, in-person medical treatment directly to patients in the comfort of their homes, workplaces and other non-traditional locations;

The Company is a mobile healthcare services company that uses proprietary dispatch and communication technology to help provide (i) quality mobile, in-person medical treatment directly to patients in the comfort of their homes, workplaces and other non-traditional locations;

and (ii) medical transportation in major metropolitan cities in the United States and the United Kingdom.

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Net revenue from Transportation Services is derived from the transportation of patients based on billings to third party payors and healthcare facilities.

For the three months ended March 31, 2024, the Company recorded net income of $10.6 million, compared to net loss of $3.9 million in the three months ended March 31, 2023.

For the three months ended June 30, 2024, the Company recorded net income of $5.8 million, compared to net income of $1.3 million in the three months ended June 30, 2023.

For the six months ended June 30, 2024, the Company recorded net income of $16.5 million, compared to net loss of $2.6 million in the six months ended June 30, 2023.

Factors Affecting Our Results of Operations

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and continued desire on the part of government and municipal entities to fund programs to assist currently underserved patient segments via “population health” programs.

These programs have increased in number, scale and scope since the beginning of the COVID-19 pandemic.

These programs have increased in number, scale and scope since the beginning of COVID-19.

While COVID-19 testing and vaccination programs have been scaled back from their levels at the pandemic’s peak, there have been expansions of these population health programs into other areas, such as the provision of healthcare and related services to recent migrants and asylum seekers.

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The Company primarily focuses on the non-emergency medical transport market, which includes services that are provided to patients who need assistance getting to and from medical appointments.

Key drivers of this market are the increase in chronic conditions and the number of elective surgeries as well as the ongoing

aging of the population, as the older demographics tend to be much more frequent consumers of medical transportation services.

The market will also grow if hospitals and other healthcare facilities continue to outsource more of their transportation needs to independent providers, such as the Company, allowing these facilities to concentrate their efforts on their core competencies.

Key drivers of this market are the increase in chronic conditions and the number of elective surgeries as well as the ongoing aging of the population, as the older demographics tend to be much more frequent consumers of medical transportation services.

We believe the market will also grow if hospitals and other healthcare facilities continue to outsource more of their transportation needs to independent providers, such as the Company, allowing these facilities to concentrate their efforts on their core competencies.

Overall Economic Conditions in the Markets in Which We Operate

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Federal Reserve implemented four interest rate hikes in 2023, raising its benchmark rate to the current level of 5.25%-5.50%, which remained unchanged as of the date of the filing of this Quarterly Report on Form 10-Q.

Inflation has remained elevated to this point in 2024, with a rate of 3.5% being recorded for March, but looking to the remainder of 2024, we anticipate a continued moderation of the inflation rate.

Inflation has moderated in the first half of 2024, with a rate of 3.0% being recorded for June.

Looking to the remainder of 2024, we anticipate a continued moderation of the inflation rate, with an interest rate cut now being viewed as a possibility before the end of the year.

If inflation is above the levels that the Company anticipates, gross margins could be below plan and our business, operating results and cash flows may be adversely affected.

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Future acquisitions may also include companies that may help drive revenue, profitability, cash flow and stockholder value.

During the three months ended March 31, 2024, the Company did not complete any acquisitions.

During the three months ended March 31, 2023, the Company completed one acquisition for an aggregate purchase price of $25.8 million.

During the six months ended June 30, 2024, the Company did not complete any acquisitions.

During the six months ended June 30, 2023, the Company completed three acquisitions for an aggregate purchase price of $34.2 million.

Investing in R&D and Enhancing Our Customer Experience

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Some of these services were provided pursuant to a contract with an ending date during the second quarter of 2024.

A portion of that contract has been extended through December 31, 2024, while other services are expected to wind down, beginning in the second quarter of 2024.

While the specific timing and the rate of the wind-down of services is still uncertain, the Company expects that the revenues from these projects will be somewhat lower in the second half of 2024 than in the first half of the year.

A portion of that contract has been extended through December 31, 2024, while other services began to wind down in May 2024.

While the specific timing and the rate of the wind-down of the remaining services is still uncertain, the Company expects that the revenues from these migrant-related projects will be lower in the second half of 2024 than in the first half of the year.

In addition, government contract work subjects the Company to government audits, investigations and proceedings, which could lead to the Company to being barred from government work or subjected to fines if it is determined that a statute, rule, regulation, policy or contractual provision has been violated.

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General and Administrative Expenses

General and administrative expense consists primarily of salaries, bad debt expense, insurance expense, consultant fees and professional fees for accounting services.

We expect our general and administrative expense to increase as we continue to scale our business and grow headcount and as a result of operating as a public company, including our compliance with SEC rules and regulations, audit activities, additional insurance expenses, investor relations activities and other administrative and professional services.

General and administrative expenses consist primarily of salaries, bad debt expense, insurance expense, consultant fees and professional fees for accounting services.

We expect our general and administrative expenses to increase as we continue to scale our business and grow headcount and as a result of operating as a public company, including our compliance with SEC rules and regulations, audit activities, additional insurance expenses, investor relations activities and other administrative and professional services.

Depreciation and Amortization

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Technology and Development Expenses

Technology and development expense, net of capitalization consists primarily of costs incurred in the design and development of the Company’s proprietary technology, third-party software and technologies.

We expect technology and development expense to increase in future periods to support our growth, including our intent to continue investing in the optimization, accuracy and reliability of our dispatch and communication platform and driving efficiency in our operations.

Technology and development expenses, net of capitalization, consist primarily of costs incurred in the design and development of the Company’s proprietary technology, third-party software and technologies.

We expect technology and development expenses to increase in future periods to support our growth, including our intent to continue investing in the optimization, accuracy and reliability of our dispatch and communication platform and driving efficiency in our operations.

These expenses may vary from period to period as a percentage of revenue, depending primarily upon when we choose to make more significant investments, particularly when entering new business lines or customer sales channels.

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Results of Operations

Comparison of the Three Months Ended March 31, 2024 and 2023

Three Months Ended March 31, Change

Comparison of the Three Months Ended June 30, 2024 and 2023

Three Months Ended June 30, Change

$ in Millions 2024 2023

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Total expenses 154.8 93.9 % 123.9 98.7 % 30.9 24.9 %

Income from operations 10.1 6.1 % 1.6 1.3 % 8.5 531.2 %

Other income (expense):

Interest (expense) income, net (0.5) (0.3) % 0.5 0.4 % (1.0) (200.0) %

Change in fair value of contingent liability (0.3) (0.2) % — — % (0.3) (100.0) %

Loss on equity method investments (0.1) (0.1) % (0.1) (0.1) % — — %

Loss on remeasurement of operating and finance leases — — % — — % — — %

Gain (loss) on disposal of fixed assets — — % (0.1) (0.1) % 0.1 100.0 %

Other income (expense) 0.3 0.2 % (0.9) (0.7) % 1.2 133.3 %

Total other income (expense) (0.6) (0.4) % (0.6) (0.5) % — — %

Net income before income tax provision 9.5 5.8 % 1.0 0.8 % 8.5 850.0 %

(Provision for) benefit from income taxes (3.7) (2.2) % 0.3 0.2 % (4.0) (1333.3) %

Net income 5.8 3.5 % 1.3 1.0 % 4.5 346.2 %

Net income (loss) attributable to noncontrolling interests (0.7) (0.4) % 3.3 2.6 % (4.0) (121.2) %

Net income (loss) attributable to stockholders of DocGo Inc.

and Subsidiaries $ 6.5 3.9 % $ (2.0) (1.6) % $ 8.5 425.0 %

For the three months ended June 30, 2024, total revenues were $164.9 million, an increase of $39.4 million, or 31.4%, compared to the three months ended June 30, 2023.

Mobile Health Services

For the three months ended June 30, 2024, Mobile Health Services revenues were $116.7 million, an increase of $36.7 million, or 45.8%, compared to the three months ended June 30, 2023.

The increase in revenues was primarily due to an expansion in services offered by the Mobile Health Services segment, particularly in the government customer sector.

Specifically, starting in the second quarter of 2023, the Company began providing services to the recently arrived migrant population in New York City and in upstate New York.

These projects, which included both medical and non-medical services, such as shelter and security, expanded throughout the second half of 2023 and into the first quarter of 2024.

However, some of these services were provided pursuant to a contract with an ending date during the second quarter of 2024.

A portion of that contract has been extended through December 31, 2024, while other services began to wind down in May 2024.

As such, while we expect to launch new Mobile Health Services projects during the second half of the year, these will be outweighed by a decline in revenues from migrant-related projects and we expect that overall Mobile Health Services revenues will be lower in the second half of 2024 than in the first half of the year.

Transportation Services

For the three months ended June 30, 2024, Transportation Services revenues were $48.2 million, an increase of $2.8 million, or 6.1%, compared to the three months ended June 30, 2023.

This increase was due to a 17.2% increase in trip volumes, to 73,722 trips in the three months ended June 30, 2024, from 62,907 trips for the three months ended June 30, 2023.

The increase in trip volumes was due to a combination of growth in the Company’s customer base in certain core markets and increased volumes with existing customers.

Our average trip price increased to $393 in the three months ended June 30, 2024, from $390 in the three months ended June 30, 2023.

Cost of Revenues

For the three months ended June 30, 2024, total cost of revenues (exclusive of depreciation and amortization) increased by 30.5% compared to the three months ended June 30, 2023, while revenues increased by approximately 31.4%.

Cost of revenues as a percentage of revenues decreased to 66.2% in the three months ended June 30, 2024 from 66.6% in the three months ended June 30, 2023.

Total cost of revenues in the three months ended June 30, 2024 increased by $25.5 million compared to the same period in 2023.

This increase was primarily attributable to a $0.7 million increase in total compensation, due to higher headcount for both the Mobile Health Services and Transportation Services segments;

a $13.4 million increase in subcontracted labor costs, primarily driven by projects in both segments that required more personnel than the Company was able to initially provide through its existing staff;

a $4.9 million increase in medical and related supplies;

a $2.8 million increase in lab fees;

a $2.2 million increase in vehicle costs;

and a $1.5 million net increase in other cost of revenues categories.

For the Mobile Health Services segment, cost of revenues (exclusive of depreciation and amortization) in the three months ended June 30, 2024 amounted to $74.9 million, up 43.8% from $52.1 million in the three months ended June 30, 2023.

Cost of revenues as a percentage of revenues decreased to 64.2% from 65.1% in the prior year period, due to a significant increase in revenues and the absence of certain project ramp-up costs in the form of higher overtime rates and a greater proportion of subcontracted labor that were recorded in the prior year period.

For the Transportation Services segment, cost of revenues (exclusive of depreciation and amortization) in the three months ended June 30, 2024 amounted to $34.2 million, up 8.6% from $31.5 million in the three months ended June 30, 2023.

Cost of revenues as a percentage of revenues increased to 71.0% from 69.3% in the prior year quarter, as the increase in cost of revenues outpaced the increase in revenues.

Total compensation remained largely unchanged year-over-year, but there were higher costs for subcontractors and vehicles in the second quarter of 2024 due to a larger number of ambulance trips that were completed by subcontractors in instances where the Company did not have sufficient personnel capacity to provide the requested services, and due to an increase in the size of the vehicle fleet.

Operating Expenses

For the three months ended June 30, 2024, the Company recorded $45.7 million of operating expenses compared to $40.3 million for the three months ended June 30, 2023, an increase of 13.4%.

As a percentage of revenue, operating expenses decreased from 32.1% in the second quarter of 2023 to 27.7% in the second quarter of 2024, reflecting the increase in revenues described above.

The increase of $5.4 million of operating expenses related primarily to a $0.5 million increase in depreciation and amortization due to an increase in assets to support revenue growth, capitalized software amortization and

assets that were added as part of acquisitions that the Company completed during 2023;

a $0.1 million increase in IT infrastructure, driven by the Company’s business and headcount expansion and acquisitions;

a $1.4 million increase in professional fees, including higher audit fees resulting from the growth of the business;

a $0.5 million increase in bad debt expense, reflecting the growth of the business and related increase in accounts receivable;

and a net $2.9 million increase spread across a variety of other operating expense categories.

The Company anticipates that operating expenses will continue to fluctuate based upon the levels of revenues that are generated.

For the Mobile Health Services segment, operating expenses in the three months ended June 30, 2024 were $15.8 million, up from $9.9 million in the three months ended June 30, 2023.

Operating expenses as a percentage of revenues increased to 13.5% in the second quarter of 2024, from 12.3% in the second quarter of 2023, reflecting significant expenditures that have been made in recent quarters in the expansion of services, particularly in relation to the migrant-related projects in New York as well as the continued build out of the Mobile Health Services management infrastructure.

For the Transportation Services segment, operating expenses in the three months ended June 30, 2024 were $16.1 million, compared to $14.6 million in the three months ended June 30, 2023.

Operating expenses as a percentage of revenues increased to 33.4% for the three months ended June 30, 2024 from 32.1% in the three months ended June 30, 2023, despite the increased revenues in the current year period, reflecting increases in non-field headcount, such as dispatch and back office departments, as well as higher insurance costs, due to a larger vehicle fleet.

For the Corporate segment, which represents primarily shared services that are not contained within the entities included in either the Mobile Health Services or Transportation Services segments, operating expenses in the three months ended June 30, 2024 were $13.8 million, compared to $15.9 million in the three months ended June 30, 2023.

Corporate expenses amounted to approximately 8.4% of total consolidated revenues in the second quarter of 2024, compared to 12.6% in the second quarter of 2023, reflecting the significant increase in total consolidated revenues as well as some corporate expense reduction programs implemented at the end of 2023 and in early 2024.

Interest (expense) income, net

For the three months ended June 30, 2024, the Company recorded $0.5 million of interest expense, net compared to $0.5 million of interest income, net in the three months ended June 30, 2023.

Interest expenses on borrowings under the Revolving Facility outweighed interest earned on balances in the Company’s interest-bearing accounts in the three months ended June 30, 2024, while average cash balances in these accounts were also lower when compared to the three months ended June 30, 2024.

Change in fair value of contingent liability

During the three months ended June 30, 2024, the Company recorded a loss for the change in fair value of contingent consideration of $0.3 million.

There was no related change in fair value recorded in the three months ended June 30, 2023.

Loss on equity method investments

During the three months ended June 30, 2024, the Company recorded a loss on equity method investments of $0.1 million, representing its share of the losses incurred by an entity in which the Company has a minority interest.

During the three months ended June 30, 2023, the Company also recorded a loss on equity method investments of $0.1 million.

Gain (loss) on disposal of fixed assets

During the three months ended June 30, 2024, the Company recorded a gain on the disposal of fixed assets of $12,563, compared to a loss on the disposal of fixed assets of $98,630 during the three months ended June 30, 2023.

(Provision for) benefit from income taxes

During the three months ended June 30, 2024, the Company recorded an income tax provision of $3.7 million, compared to an income tax benefit of $0.4 million in the three months ended June 30, 2023.

The increased tax expense in the 2024 period was due to the recording of higher pretax income in the 2024 period, as well as increased state and local taxes in the jurisdictions in which the Company did business in the 2024 period.

Net income (loss) attributable to noncontrolling interests

For the three months ended June 30, 2024, the Company had net loss attributable to noncontrolling interests of

approximately $0.7 million, compared to net income attributable to noncontrolling interests of approximately $3.3 million for the three months ended June 30, 2023.

Comparison of the Six Months Ended June 30, 2024 and 2023

Six Months Ended June 30, Change

$ in Millions 2024 2023

Actual Results % of Total Revenues Actual Results % of Total Revenues

Revenues, net $ 357.0 100.0 % $ 238.5 100.0 % $ 118.5 49.7 %

Cost of revenues (exclusive of depreciation and amortization, which is shown separately below) 233.9 65.5 % 164.8 69.1 % 69.1 41.9 %

Operating expenses:

General and administrative 74.9 21.0 % 60.0 25.2 % 14.9 24.8 %

Depreciation and amortization 8.4 2.4 % 7.5 3.1 % 0.9 12.0 %

Legal and regulatory 8.3 2.3 % 6.0 2.5 % 2.3 38.3 %

Technology and development 4.8 1.3 % 4.4 1.8 % 0.4 9.1 %

Sales, advertising and marketing 0.7 0.2 % 1.0 0.4 % (0.3) (30.0) %

Total expenses 331.0 92.7 % 243.8 102.2 % 87.2 35.8 %

Income (loss) from operations 26.0 7.3 % (5.3) (2.2) % 31.3 590.6 %

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Gain (loss) on disposal of fixed assets 0.1 — % (0.2) (0.1) % 0.3 150.0 %

Other income 0.2 0.1 % 0.2 0.2 % — — %

Other income (expense) 0.5 0.1 % (0.7) (0.3) % 1.2 171.4 %

Total other income (expense) (0.7) (0.2) % 0.2 0.1 % (0.9) (450.0) %

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Net income (loss) 16.5 4.6 % (2.6) (1.1) % 19.1 734.6 %

Net loss attributable to noncontrolling interests (0.6) (0.3) % (0.5) (0.4) % (0.1) (20.0) %

Net income (loss) attributable to noncontrolling interests (1.3) (0.4) % 2.9 1.2 % (4.2) (144.8) %

Net income (loss) attributable to stockholders of DocGo Inc.

and Subsidiaries $ 17.8 5.0 % $ (5.5) (2.3) % $ 23.3 423.6 %

For the three months ended March 31, 2024, total revenues were $192.1 million, an increase of $79.1 million, or 70.0%, compared to the three months ended March 31, 2023.

For the six months ended June 30, 2024, total revenues were $357.0 million, an increase of $118.5 million, or 49.7%, compared to the six months ended June 30, 2023.

Mobile Health Services

For the three months ended March 31, 2024, Mobile Health Services revenues were $143.9 million, an increase of $71.0 million, or 97.3%, compared to the three months ended March 31, 2023.

For the six months ended June 30, 2024, Mobile Health Services revenues were $260.7 million, an increase of $107.7 million, or 70.4%, compared to the six months ended June 30, 2023.

The increase in revenues was primarily due to an expansion in services offered by the Mobile Health Services segment, particularly in the government customer sector.

Specifically, starting in the second quarter of 2023, the Company began providing services to the recent migrant population in New York City and in upstate New York.

Specifically, starting in the first half of 2023, the Company began providing services to the recently arrived migrant population in New York City and in upstate New York.

These projects, which included both medical and non-medical services, such as shelter and security, expanded throughout the second half of 2023 and into the first quarter of 2024.

However, some of these services were provided pursuant to a contract with an ending date during the second quarter of 2024.

A portion of that contract has been extended through December 31, 2024, while other services are expected to wind down, beginning in the second quarter of 2024.

A portion of that contract has been extended through December 31, 2024, while other services began to wind down in May 2024.

Transportation Services

For the three months ended March 31, 2024, Transportation Services revenues were $48.2 million, an increase of $8.2 million, or 20.2%, compared to the three months ended March 31, 2023.

This increase was due to a 20% increase in trip volumes, to 69,977 trips in the three months ended March 31, 2024, from 58,176 trips for the three months ended March 31, 2023.

For the six months ended June 30, 2024, Transportation Services revenues were $96.4 million, an increase of $10.9 million, or 12.7%, compared to the six months ended June 30, 2023.

This increase was due to a 18.7% increase in trip volumes, to 143,699 trips in the six months ended June 30, 2024, from 121,083 trips for the six months ended June 30, 2023.

The increase in trip volumes was due to a combination of growth in the Company’s customer base in certain core markets and increased volumes with existing customers.

Our average trip price declined to $400 in the three months ended March 31, 2024, from $415 in the three months ended March 31, 2023.

The decline in the average trip price in the 2024 period reflected a shift in mix toward lower-priced transports when compared to the first quarter of 2023.

Our average trip price declined to $396 in the six months ended June 30, 2024, from $402 in the six months ended June 30, 2023.

The decline in the average trip price in the 2024 period reflected a shift in mix toward lower-priced transports when compared to the first half of 2023.

However, the average trip price remains well above the levels of early 2022, reflecting a shift in mix toward higher-priced transports with existing customers, as well as the acquisition of licenses to provide higher acuity transports that earn higher prices per trip.

Cost of Revenues

For the three months ended March 31, 2024, total cost of revenues (exclusive of depreciation and amortization) increased by 53.7% compared to the three months ended March 31, 2023, while revenues increased by approximately 70.0%.

Cost of revenues as a percentage of revenues decreased to 65.0% in the three months ended March 31, 2024 from 71.9% in the three months ended March 31, 2023.

Total cost of revenues in the three months ended March 31, 2024 increased by $43.6 million compared to the same period in 2023.

For the six months ended June 30, 2024, total cost of revenues (exclusive of depreciation and amortization) increased by 41.9% compared to the six months ended June 30, 2023, while revenues increased by approximately 49.7%.

Cost of revenues as a percentage of revenues decreased to 65.5% in the six months ended June 30, 2024 from 69.1% in the six months ended June 30, 2023.

Total cost of revenues in the six months ended June 30, 2024 increased by $69.1 million compared to the same period in 2023.

This increase was primarily attributable to a $8.3 million increase in total compensation, due to higher headcount for both the Mobile Health Services and Transportation Services segments;

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a $1.5 million increase in travel costs for field personnel and other clinicians who traveled out of their home regions to provide Mobile Health Services;

and a $4.3 million net increase in other cost of revenues categories.

These items were partially offset by a $1.9 million decline in vehicle costs, as the Company exited certain rental agreements during 2023.

For the Mobile Health Services segment, cost of revenues (exclusive of depreciation and amortization) in the three months ended March 31, 2024 amounted to $92.9 million, up 76.3% from $52.7 million in the three months ended March 31, 2023.

Cost of revenues as a percentage of revenues decreased to 64.5% from 72.3% in the prior year period, due to a significant increase in revenues, and in the absence of certain project ramp-up costs, in the form of higher overtime rates and a greater proportion of subcontracted labor, that were recorded in the prior year period.

For the Transportation Services segment, cost of revenues (exclusive of depreciation and amortization) in the three months ended March 31, 2024 amounted to $31.9 million, up 11.9% from $28.5 million in the three months ended March 31, 2023.

Cost of revenues as a percentage of revenues decreased to 66.3% from 71.1% in the prior year quarter, reflecting the impact of increased revenues from standby contracts (for which we are paid a daily or hourly rate) and the overall increase in revenue, as well as a decline in the average fuel price.

a $2.8 million increase in lab fees;

and a $5.7 million net increase in other cost of revenues categories, including insurance.

For the Mobile Health Services segment, cost of revenues (exclusive of depreciation and amortization) in the six months ended June 30, 2024 amounted to $167.7 million, up 59.9% from $104.9 million in the six months ended June 30, 2023.

Cost of revenues as a percentage of revenues decreased to 64.3% from 68.5% in the prior year period, due to a significant increase in revenues and the absence of certain project ramp-up costs in the form of higher overtime rates and a greater proportion of subcontracted labor that were recorded in the prior year period.

For the Transportation Services segment, cost of revenues (exclusive of depreciation and amortization) in the six months ended June 30, 2024 amounted to $66.1 million, up 10.4% from $59.9 million in the six months ended June 30, 2023.

Cost of revenues as a percentage of revenues decreased to 68.6% from 70.2% in the prior year quarter, reflecting the impact of increased revenues from standby contracts (for which we are paid a daily or hourly rate) and the overall increase in revenue.

Operating Expenses

For the three months ended March 31, 2024, the Company recorded $51.4 million of operating expenses compared to $38.7 million for the three months ended March 31, 2023, an increase of 32.8%.

As a percentage of revenue, operating expenses decreased from 34.3% in the first quarter of 2023 to 26.8% in the first quarter of 2024, reflecting the increase in revenues

described above.

For the six months ended June 30, 2024, the Company recorded $97.1 million of operating expenses compared to $78.9 million for the six months ended June 30, 2023, an increase of 23.1%.

As a percentage of revenue, operating expenses decreased from 33.1% in the first six months of 2023 to 27.2% in the first six months of 2024, reflecting the increase in

revenues described above.

The increase of $18.2 million of operating expenses related primarily to a $1.1 million increase in depreciation and amortization due to an increase in assets to support revenue growth, capitalized software amortization and assets that were added as part of acquisitions that the Company completed during 2023;

a $0.9 million increase in insurance costs, primarily being driven by the Mobile Health segment;

a $0.7 million increase in IT infrastructure, driven by the Company’s business and headcount expansion and acquisitions;

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The Company anticipates that operating expenses will continue to fluctuate based upon the levels of revenues that are generated.

For the Mobile Health Services segment, operating expenses in the three months ended March 31, 2024 were $18.9 million, up from $7.2 million in the three months ended March 31, 2023.

Operating expenses as a percentage of revenues increased to 13.1% in the first quarter of 2024, from 9.8% in the first quarter of 2023, reflecting significant expenditures that have been made in recent quarters in the expansion of services and geographic areas of operation, as well as the continued buildout of the Mobile Health Services management infrastructure.

For the Transportation Services segment, operating expenses in the three months ended March 31, 2024 were $15.2 million, compared to $10.5 million in the three months ended March 31, 2023.

Operating expenses as a percentage of revenues increased to 31.5% for the three months ended March 31, 2024 from 26.1% in the three months ended March 31, 2023, despite the increased revenues in the current year period, reflecting increases in non-field headcount, such as dispatch and back office departments, as well as higher insurance costs, due to a larger vehicle fleet.

For the Corporate segment, which represents primarily shared services that are not contained within the entities included in either the Mobile Health Services or Transportation Services segments, operating expenses in the three months ended March 31, 2024 were $17.3 million, compared to $21.1 million in the three months ended March 31, 2023.

Corporate expenses amounted to approximately 9.0% of total consolidated revenues in the first quarter of 2024, compared to 18.7% in the first quarter of 2023, reflecting the significant increase in total consolidated revenues as well as some corporate expense reduction programs implemented at the end of 2023 and in early 2024.

For the Mobile Health Services segment, operating expenses in the six months ended June 30, 2024 were $34.7 million, up from $17.2 million in the six months ended June 30, 2023.

Operating expenses as a percentage of revenues increased to 13.3% in the first six months of 2024, from 11.2% in the first six months of 2023, reflecting significant expenditures that have been made in recent quarters in the expansion of services, particular in relation to the migrant-related projects in New York;

as well as the continued buildout of the Mobile Health Services management infrastructure.

For the Transportation Services segment, operating expenses in the six months ended June 30, 2024 were $31.3 million, compared to $25.2 million in the six months ended June 30, 2023.

Operating expenses as a percentage of revenues increased to 32.5% for the six months ended June 30, 2024 from 29.4% in the six months ended June 30, 2023, despite the increased revenues in the current year period, reflecting increases in non-field headcount, such as dispatch and back office departments, as well as higher insurance costs, due to a larger vehicle fleet.

For the Corporate segment, which represents primarily shared services that are not contained within the entities included in either the Mobile Health Services or Transportation Services segments, operating expenses in the six months ended June 30, 2024 were $31.1 million, compared to $36.6 million in the six months ended June 30, 2023.

Corporate expenses amounted to approximately 8.7% of total consolidated revenues in the first half of 2024, compared to 15.4% in the first half of 2023, reflecting the significant increase in total consolidated revenues as well as some corporate expense reduction programs implemented at the end of 2023 and in early 2024.

Interest (expense) income, net

For the three months ended March 31, 2024, the Company recorded $0.4 million of interest expense, net compared to $0.8 million of interest income, net in the three months ended March 31, 2023.

Interest expenses on borrowings under the Company's revolving credit line outweighed interest earned on balances in the Company’s interest-bearing accounts in the three months ended March 31, 2024, while average cash balances in these accounts were also lower when compared to the three months ended March 31, 2024.

For the six months ended June 30, 2024, the Company recorded $0.9 million of interest expense, net compared to $1.3 million of interest income, net in the six months ended June 30, 2023.

Interest expenses on borrowings under the Revolving Facility outweighed interest earned on balances in the Company’s interest-bearing accounts in the six months ended June 30, 2024, while average cash balances in these accounts were also lower when compared to the six months ended June 30, 2024.

Change in fair value of contingent liability

During the six months ended June 30, 2024, the Company recorded a loss for the change in fair value of contingent consideration of $0.3 million.

There was no related change in fair value recorded in the six months ended June 30, 2023.

Loss on equity method investments

During the three months ended March 31, 2024, the Company recorded a loss on equity method investments of $0.1 million representing its share of the losses incurred by an entity in which the Company has a minority interest.

During the three months ended March 31, 2023, the Company also recorded a loss on equity method investments of $0.1 million.

During the six months ended June 30, 2024, the Company recorded a loss on equity method investments of $0.1 million, representing its share of the losses incurred by an entity in which the Company has a minority interest.

During the six months ended June 30, 2023, the Company recorded a loss on equity method investments of $0.2 million.

Gain (loss) on disposal of fixed assets

During the three months ended March 31, 2024, the Company recorded a gain on the disposal of fixed assets of $0.1 million, compared to a loss on the disposal of fixed assets of $0.1 million during the three months ended March 31, 2023.

During the six months ended June 30, 2024, the Company recorded a gain on the disposal of fixed assets of $0.1 million, compared to a loss on the disposal of fixed assets of $0.2 million during the six months ended June 30, 2023.

(Provision for) benefit from income taxes

During the three months ended March 31, 2024, the Company recorded an income tax provision of $5.1 million, compared to an income tax benefit of $2.1 million in the three months ended March 31, 2023.

During the six months ended June 30, 2024, the Company recorded an income tax provision of $8.8 million, compared to an income tax benefit of $2.5 million in the six months ended June 30, 2023.

The increased tax expense in the 2024 period was due to the recording of pretax income in the 2024 period, as compared to a pretax loss in the 2023 period.

Net loss attributable to noncontrolling interests

For the three months ended March 31, 2024, the Company had net loss attributable to noncontrolling interests of approximately $0.6 million, compared to a net loss attributable to noncontrolling interests of approximately $0.5 million for the three months ended March 31, 2023.

Net income (loss) attributable to noncontrolling interests

For the six months ended June 30, 2024, the Company had a net loss attributable to noncontrolling interests of

approximately $1.3 million, compared to net income attributable to noncontrolling interests of approximately $2.9 million for the six months ended June 30, 2023.

Liquidity and Capital Resources

Between the inception of DocGo’s wholly owned subsidiary Ambulnz and the Business Combination, Ambulnz completed three equity financing transactions as its principal source of liquidity.

Between the inception of the Company’s wholly owned subsidiary Ambulnz and the Business Combination, Ambulnz completed three equity financing transactions as its principal source of liquidity.

In November 2021, upon the completion of the Business Combination and the PIPE Financing, the Company received proceeds of approximately $158.1 million, net of transaction expenses.

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The Company has also funded these activities through operating cash flows.

Despite the fact that the Company generated positive net income for the three months ended March 31, 2024, operating cash flows are not always sufficient to meet immediate obligations arising from current operations.

Despite the fact that the Company generated net income for the six months ended June 30, 2024, operating cash flows are not always sufficient to meet immediate obligations arising from current operations.

For example, as the business has grown, the Company’s expenditures for human capital and supplies has expanded accordingly, and the timing of the payments for payroll and to associated vendors, compared to the timing of receipts of cash from customers, frequently results in the need to use existing cash balances to fund working capital needs.

During the three months ended March 31, 2024, as a greater proportion of the Company’s overall revenues were generated through services provided to municipal customers with long payment cycles, and expenditures made by the Company to allow for the provision of these services were substantial, operating cash flows were not sufficient to meet these demands for working capital, leading to a continued decline in the Company’s cash balances.

During the six months ended June 30, 2024, as a greater proportion of the Company’s overall revenues were generated through services provided to municipal customers with long payment cycles, and expenditures made by the Company to allow for the provision of these services were substantial, near-term operating cash flows were not always sufficient to meet these demands for working capital, leading to fluctuations in the Company’s cash balances.

As these invoices are collected, the Company expects cash flows to be sufficient for near term working capital needs.

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If the Company’s growth rate is higher than is currently anticipated, resulting in greater-than-anticipated capital requirements, the Company might need to, or choose to, raise additional capital through debt or equity financings.

This last factor has been evident at different times during the second half of 2023 and the first quarter of 2024, leading to a draw down in the Company’s credit line during the fourth quarter of 2023 and the first quarter of 2024, as described below.

This last factor has been evident at different times during the second half of 2023 and during the first quarter of 2024, leading to a draw down in the Company’s credit line during the fourth quarter of 2023 and during the first quarter of 2024, as described below.

On November 1, 2022, the Company entered into the Credit Agreement, which provides for the Revolving Facility in the initial aggregate principal amount of $90.0 million.

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However, in March 2024, the Company once again drew down under the Revolving Facility, and there was a total of $30.0 million outstanding as of the date of this Quarterly Report on Form 10-Q.

Considering the foregoing, DocGo anticipates that its existing balances of cash and cash equivalents, future expected cash flows generated from its operations and its available line of credit under the Revolving Facility will be sufficient to satisfy operating requirements for at least the next twelve months.

Looking beyond the next twelve months, DocGo anticipates that expected future cash flows, its available line of credit and proceeds from potential additional financings will be sufficient to satisfy any operating and potential investing requirements.

Considering the foregoing, the Company anticipates that its existing balances of cash and cash equivalents, future expected cash flows generated from its operations and amounts available under the Revolving Facility will be sufficient to satisfy operating requirements for at least the next twelve months.

Looking beyond the next twelve months, the Company anticipates that expected future cash flows, amounts available under the Revolving Facility and proceeds from potential additional financings will be sufficient to satisfy any operating and potential investing requirements.

Capital Resources

Working capital as of March 31, 2024 and December 31, 2023 was as follows:

March 31 December 31 Change

Working capital as of June 30, 2024 and December 31, 2023 was as follows:

June 30 December 31 Change

$ in Millions 2024 2023

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Total working capital $ 174.6 $ 168.8 $ 5.8 3.4 %

As of March 31, 2024, available cash totaled $41.2 million, which represented a decrease of $18.0 million compared to December 31, 2023, reflecting a significant increase in accounts receivable during the three months ended March 31, 2024.

As of March 31, 2024, working capital amounted to $175.0 million, which represented an increase of $6.2 million compared to December 31, 2023, as the decreased cash balance was outweighed by higher accounts receivable and a decline in accrued liabilities.

Increased accounts receivable in the three months ended March 31, 2024, which reflected the growth of the business and a shift towards higher credit quality customers who have longer payment terms, were outweighed by the decline in cash and a reduction in prepaid expenses and other assets, resulting in a small decline in current assets as of March 31, 2024 compared to December 31, 2023.

However, this was outweighed by the decline in current liabilities in the three months ended March 31, 2024, due to lower accrued liabilities, reflecting lower invoices and accrued liabilities in the current period for certain expenses, such as subcontracted labor, and as the Company paid down a significant amount of its accrued liabilities during the quarter.

Cash flows as of the three months ended March 31, 2024 and 2023 were as follows:

Three Months Ended

March 31, Change

As of June 30, 2024, available cash totaled $66.1 million, which represented an increase of $6.8 million compared to December 31, 2023, reflecting a small decline in accounts receivable during the six months ended June 30, 2024, as the Company collected some of its larger invoices.

As of June 30, 2024, working capital amounted to $174.6 million, which represented an increase of $5.8 million compared to December 31, 2023, as an increase in cash and a decline in accrued liabilities outweighed a decline in accounts receivable.

Current assets declined by $10.2 million, due to a drop in prepaid expenses.

However, this was outweighed by the decline in current liabilities in the six months ended June 30, 2024, due to lower accrued liabilities, reflecting lower invoices and accrued liabilities in the current period for certain expenses, such as subcontracted labor, and as the Company paid down a significant amount of its accrued liabilities during the quarter.

Cash flows as of the six months ended June 30, 2024 and 2023 were as follows:

Six Months Ended June 30, Change

$ in Millions 2024 2023

Cash flow summary

Net cash used in operating activities $ (10.6) $ (23.1) $ 12.5 54.1 %

Net cash provided by (used in) operating activities $ 26.4 $ (12.4) $ 38.8 312.9 %

Net cash used in investing activities (3.8) (25.4) 21.6 85.0 %

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Effect of exchange rate changes (0.1) 0.7 (0.8) (114.3) %

Net decrease in cash $ (13.3) $ (36.6) $ 23.3 63.7 %

Net increase (decrease) in cash $ 13.6 $ (40.3) $ 53.9 133.7 %

Operating Activities

During the three months ended March 31, 2024, operating activities used $10.6 million of cash, despite net income of $10.6 million.

Non-cash charges amounted to $9.5 million and included $2.5 million in depreciation of property and equipment and right-of-use assets, $1.7 million from amortization of intangible assets, $4.0 million of stock compensation expense, bad debt expense of $1.4 million, and a loss of $0.1 million from an investment that is accounted for under the equity method.

These were partially offset by a $0.1 million gain on the disposal of assets and $0.1 million in deferred taxes.

Changes in assets and liabilities resulted in approximately $30.7 million in negative operating cash flow, as a $22.4 million increase in accounts receivable, primarily driven by an increased amount of business with municipalities, which tend to have longer payment cycles, a $20.7 million decrease in accrued liabilities, due to payment of certain payables, and a $0.1 million increase in other assets were partially offset by a $5.8 million increase in accounts payable and a $6.7 million decrease in prepaid expenses and other current assets.

During the three months ended March 31, 2023, operating activities used $23.1 million of cash, driven by a net loss of $3.9 million.

Non-cash charges amounted to $9.4 million and included $2.3 million in depreciation of property and equipment and right-of-use assets, $1.4 million from amortization of intangible assets, $8.5 million of stock compensation expense and a $0.1 million loss on an equity investment.

These were partially offset by a $1.9 million reduction in bad debt expense related to an adjustment in the provision for potential uncollectible accounts receivable and a $1.0 million gain from a deferred tax asset.

Changes in assets and liabilities resulted in approximately $28.6 million in negative cash flow, as a

$24.7 million increase in accounts receivable, a $2.6 million decrease in accounts payable, a $1.5 million decrease in accrued liabilities and a $0.2 million increase in prepaid expenses outweighed a $0.3 million reduction in other assets.

During the six months ended June 30, 2024, operating activities provided $26.4 million of cash, aided by net income of $16.5 million.

Non-cash charges amounted to $16.2 million and included $5.1 million in depreciation of property and equipment and right-of-use assets, $3.3 million from amortization of intangible assets, $6.6 million of stock compensation expense, bad debt expense of $2.8 million, a loss of $0.1 million from an investment that is accounted for under the equity method and a change in the fair value of contingent consideration of $0.3 million.

These were partially offset by $2.0 million in deferred taxes.

Changes in assets and liabilities resulted in approximately $6.3 million in negative operating cash flow, as a $1.6 million increase in accounts receivable, primarily driven by an increased amount of business with municipalities, which tend to have longer payment cycles, and a $27.9 million decrease in accrued liabilities due to payment of certain payables were partially offset by a $10.9 million increase in accounts payable and a $12.3 million decrease in prepaid expenses and other current assets.

During the six months ended June 30, 2023, operating activities used $12.4 million of cash, due in part to a net loss of $2.6 million.

Non-cash charges amounted to $19.4 million and included $4.7 million in depreciation of property and equipment and right-of-use assets, $2.8 million from amortization of intangible assets, $1.0 million in bad debt expense primarily related to a provision for potential uncollectible accounts receivable, $11.8 million of stock compensation expense, a $0.2 million loss on the disposal of assets and a loss of $0.2 million from an investment that is accounted for under the equity method.

These were partially offset by a non-cash gain of $1.3 million from a deferred tax asset.

Changes in assets and liabilities resulted in approximately $29.2 million in negative operating cash flow, as a $15.4 million increase in accounts receivable, driven by an increased amount of business with municipalities, who tend to have longer payment cycles;

a $14.9 million decrease in accounts payable;

and a $0.2 million decrease in prepaid expenses outweighed a $1.2 million increase in accrued liabilities.

Investing Activities

During the three months ended March 31, 2024, investing activities used $1.7 million of cash and consisted of the acquisition of property and equipment totaling approximately $1.0 million and the acquisition of intangibles in the amount of $0.8 million, slightly offset by $25,000 in proceeds from the disposal of property and equipment.

During the three months ended March 31, 2023, investing activities used $1.7 million of cash and consisted of the acquisition of property and equipment totaling $2.0 million and the acquisition of intangibles in the amount of $1.4 million, partially offset by $1.6 million in cash added via an acquisition and $0.1 million in proceeds from the disposal of property and equipment.

During the six months ended June 30, 2024, investing activities used $3.8 million of cash and consisted of the acquisition of property and equipment totaling approximately $2.2 million and the acquisition of intangibles in the amount of $1.6 million.

During the six months ended June 30, 2023, investing activities used $25.4 million of cash and consisted of the acquisition of property and equipment totaling approximately $3.6 million, the acquisition of intangibles in the amount of $1.9 million and $20.2 million from the acquisition of businesses, partially offset by $0.3 million in cash from the disposal of property and equipment.

Financing Activities

During the three months ended March 31, 2024, financing activities used $0.9 million of cash, as $45.0 million in proceeds from the Company’s Revolving Facility were mostly offset by $40.0 million in repayments of the Revolving Facility.

In addition, the Company spent approximately $4.9 million on its share repurchase program and $1.0 million in payments under the terms of a finance lease.

During the three months ended March 31, 2023, financing activities used $12.0 million of cash, due to a reduction of $11.5 million in amounts due to seller, as deferred payments were made under the terms of previously-closed acquisitions;

$0.8 million in payments under the terms of finance leases;

During the six months ended June 30, 2024, financing activities used $8.9 million of cash, as $45.0 million in proceeds from the Revolving Facility were mostly offset by $40.0 million in repayments of the Revolving Facility.

In addition, the Company spent approximately $9.8 million on its share repurchase program, $2.0 million in payments under the terms of a finance lease, $1.6 million in earnout payments on contingent liabilities, $0.2 million in dividends paid to a noncontrolling interest and $0.3 million in taxes related to shares withheld for employee taxes.

During the six months ended June 30, 2023, financing used $3.2 million of cash, primarily due to a $2.6 million decrease in amounts due to seller, relating to payments made for acquisitions that were completed in the second half of 2022 and early 2023;

$1.5 million in payments on obligations under the terms of finance leases;

and $0.2 million in repayments of notes payable.

These items were partially offset by $0.4 million in proceeds from the exercise of stock options.

Future minimum annual maturities of notes payable as of March 31, 2024 are as follows (in thousands):

These were partially offset by $1.1 million in proceeds from the exercise of stock options.

Future minimum annual maturities of notes payable as of June 30, 2024 are as follows (in thousands):

Notes Payable

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Long-term portion of notes payable $ 27.3

Future minimum lease payments under finance leases as of March 31, 2024 are as follows (in millions):

Future minimum lease payments under finance leases as of June 30, 2024 are as follows (in millions):

Finance Leases

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Present value of future minimum lease payments $ 13.4

Future minimum lease payments under operating leases as of March 31, 2024 are as follows (in millions):

Future minimum lease payments under operating leases as of June 30, 2024 are as follows (in millions):

2024, remaining $ 1.7

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The Company has determined that it is the primary beneficiary of its VIEs and therefore appropriately consolidates its VIEs.

Net loss for the Company's VIEs was $275,905 and $186,637 for the three months ended March 31, 2024 and 2023, respectively.

The total assets amounted to $5,364,950 and $4,364,274 as of March 31, 2024 and December 31, 2023, respectively.

Total liabilities were $6,088,439 and $4,811,857 as of March 31, 2024 and December 31, 2023, respectively.

The Company's VIEs' total stockholders’ deficit was $723,489 and $447,583 as of March 31, 2024 and December 31, 2023, respectively.

Net income (loss) for the Company’s VIEs was $(81,978) and $306,854 for the three months ended June 30, 2024 and 2023, respectively.

and $(357,883) and $120,217 for the six months ended June 30, 2024 and 2023, respectively.

Total assets amounted to $6,798,202 and $4,364,274 as of June 30, 2024 and December 31, 2023, respectively.

Total liabilities were $7,603,668 and $4,811,857 as of June 30, 2024 and December 31, 2023, respectively.

The Company’s VIEs’ total stockholders’ deficit was $805,466 and $447,583 as of June 30, 2024 and December 31, 2023, respectively.

Business Combination

The Company accounts for its business combinations under the provisions of ASC 805-10, Business Combinations (“ASC 805-10”), which requires that the acquisition method of accounting be used for all business combinations.

The Company accounts for its business combinations under the provisions of ASC 805-10, which requires that the acquisition method of accounting be used for all business combinations.

Assets acquired and liabilities assumed, including noncontrolling interests, are recorded at the date of acquisition at their respective fair values.

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Prior to commencing the ABC, Health ceased business operations and all of its employees were terminated and treated in accordance with California law.

In the ABC, all of Health’s assets were transferred to the Assignee, who acted as a fiduciary for creditors and in a capacity equivalent to that of a bankruptcy trustee.

The Assignee was responsible for liquidating the assets.

In the ABC, all of Health’s assets were transferred to the Assignee, who acts as a fiduciary for creditors and in a capacity equivalent to that of a bankruptcy trustee.

The Assignee is responsible for liquidating the assets.

Similar to a bankruptcy case, there was a claims process.

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Revenue Recognition

On January 1, 2019, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”), as amended.

On January 1, 2019, the Company adopted ASC 606.

To determine revenue recognition for contractual arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:

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For both Mobile Health Services and Transportation Services, the customer simultaneously receives and consumes the benefits provided by the Company as the performance obligations are fulfilled.

Therefore, the Company satisfies performance obligations immediately.

Therefore, the Company satisfies performance

obligations immediately.

The Company has utilized the “right to invoice” expedient, which allows an entity to recognize revenue in the amount of consideration to which the entity has the right to invoice when the amount that the Company has the right to invoice corresponds directly to the value transferred to the customer.

Revenues are recorded net of an estimated contractual allowances for claims subject to contracts with responsible paying entities.

The Company estimates contractual allowances at the time of billing based on contractual terms, historical collections or other arrangements.

All transaction prices are fixed and determinable which includes a fixed base rate, fixed mileage rate and an evaluation of historical collections by each payor.

Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach.

The transaction price associated with the Company’s contracts with customers is generally determined based on fixed and determinable amounts of consideration as specified in a contract, which includes a fixed base rate and fixed mileage rate.

For transportation services arrangements with billings to third party payors and healthcare facilities, this may also include variable consideration in instances where it is considered probable that a significant reversal of cumulative revenue recognized will not occur.

For these services, revenues are recorded net of estimated contractual allowances for claims subject to contracts with responsible paying entities.

The Company estimates contractual allowance at the time of billing based on contractual terms, historical collections or other arrangements.

The Company also estimates the amount unbilled at month end and recognizes such amounts as revenue, based on available data and customer history.

The Company utilizes the expected value method when estimating its variable consideration.

The assumptions utilized in estimating variable consideration include the Company’s previous experience with similar contracts and history of collection rates on prior trips that have been performed.

The Company reevaluates its variable consideration at each reporting period.

Income taxes are recorded in accordance with ASC 740, which provides for deferred taxes using an asset and liability approach.

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or its tax returns.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis