DocGo Inc. (DCGO)

Executive Summary / Key Takeaways

• Strategic Transition in Progress: DocGo is executing a deliberate pivot away from volatile, low-margin migrant services (which drove 77% of Mobile Health revenue decline in Q3 2025) toward stable, higher-margin payer/provider contracts and transportation services, creating near-term pain for potential long-term gain.

• Margin Inflection Underway: While Q3 2025 revenue fell 49% year-over-year, the non-migrant business grew 8% and Transportation segment gross margins hit 31.7% (highest since 2024). The Care Gap closure business—currently a margin drag—is scaling rapidly (quadrupling year-over-year) and management expects it to become the highest-margin line at 50%+ gross margins.

• Cash Flow Resilience Provides Runway: Despite operating losses, DocGo generated $45 million in operating cash flow through the first nine months of 2025, is now debt-free for the first time since late 2023, and holds $95 million in cash with a $55 million undrawn revolver, providing financial flexibility during the transition.

• 2026 Path to Profitability: Management guided to $280-300 million in 2026 revenue (12-20% base business growth) with an adjusted EBITDA loss of $15-25 million, expecting to exit the year at positive EBITDA run-rate. The guidance assumes sequential revenue improvement after Q1 and considerable SG&A reduction from 2025 levels.

• Critical Execution Risks: The thesis hinges on three factors: (1) achieving $10 million in annualized cost savings while reinvesting in growth, (2) converting a pipeline of 10 pending payer proposals into scaled contracts, and (3) maintaining Transportation's 15% growth trajectory while expanding margins to a 12% EBITDA contribution target.

Setting the Scene: A Mobile Health Provider at an Inflection Point

DocGo Inc. traces its origins to Ambulnz, LLC, founded in Delaware on June 17, 2015, and transformed into a public company through a November 2021 business combination with Motion Acquisition Corp. The company operates a two-pronged business model: Mobile Health Services (in-home care, event medical services, and remote monitoring) and Transportation Services (ambulance and wheelchair transport), supported by proprietary dispatch and communication technology that calculates arrival times and coordinates care across major metropolitan markets in the U.S. and U.K.

The company's place in the healthcare value chain is as a technology-enabled last-mile delivery provider, bridging the gap between traditional facility-based care and the growing demand for at-home services. This positioning benefits from powerful demographic and regulatory tailwinds: CMS projects at-home healthcare expenditures will double from 2021 to 2031 to $250 billion, while the aging population and rising chronic disease burden drive increased medical transportation utilization. DocGo's core strategy has been to leverage technology to reach underserved populations and provide cost-effective alternatives to emergency department visits and hospital readmissions.

However, 2024 marked a strategic inflection point. The company made a decisive shift away from migrant-related services—historically a significant revenue contributor but volatile and lower-margin—toward "evergreen" contracts with payers, providers, and municipalities. This transition accelerated through 2025, with the HPD contract winding down by mid-December 2024 and remaining migrant work with New York City Health and Hospitals expected to substantially complete by mid-2025. The strategic rationale is clear: replace episodic, politically sensitive revenue with recurring, scalable, higher-margin relationships. The execution challenge is equally clear: manage the revenue cliff while building new capabilities and cost structures aligned with the target business model.

Technology, Products, and Strategic Differentiation

DocGo's proprietary dispatch platform represents more than operational infrastructure—it is the central nervous system that coordinates over 15 million estimated arrival times annually, 8.8 million miles traveled by clinicians, and 1.5 million patient interactions. The system integrates with leading EHRs like Epic, providing transparency and a single source of truth for transportation management across vendors. This technology creates measurable efficiency gains: the company estimates it assigned over 26,000 trips to competitors in the last twelve months due to capacity constraints, representing millions in foregone revenue that it can capture as it scales staffing.

The vertical integration of transportation, mobile clinicians, and virtual care (via the October 2025 SteadyMD acquisition) creates a unique value proposition. SteadyMD provides a 50-state virtual care footprint, 3 million patients under service, and an expected $25 million revenue run rate in 2025. This acquisition significantly expands clinical capacity and positions DocGo to extend its offering to both payers and providers. The combination of last-mile physical delivery with virtual care unlocks telehealth's potential by solving the access barrier—patients can receive diagnostics, monitoring, and follow-up in a single integrated experience.

The Care Gap closure business exemplifies this differentiation. The program quadrupled its volume from Q3 2024 to Q3 2025, now serving over 1.2 million assigned lives (up from 900,000 a quarter ago). Management estimates this business would achieve 50%+ gross margins at scale, though it currently drags overall Mobile Health margins down to 36.2% (from 38.8% in Q3 2024). The investment in product development, training, and technology was substantial in 2025 but is expected to decline considerably in 2026, aiding profitability goals.

Remote patient monitoring, focused initially on cardiology implantable devices, operates at a $15 million annual run rate with greater than 10% adjusted EBITDA contribution, expected to trend higher in 2026. The mobile phlebotomy business (PTI Health) is on track for 125,000 blood draws in 2025, scaling to over 200,000 in 2026. These services demonstrate the platform's extensibility into adjacent high-margin verticals.

AI integration provides another layer of differentiation. DocGo's engineering team built a text-based AI agent that automates appointment reminders, confirmations, and rescheduling in seven languages, already confirming over 3,000 appointments and rescheduling 350, saving roughly 10% of live operators' time. The agent is being trained to sign patients up for care gap services, potentially reducing customer acquisition costs and improving engagement.

Financial Performance & Segment Dynamics: Evidence of Strategy

The Q3 2025 results provide clear evidence of the strategic transition's impact. Total revenue decreased 49% to $70.8 million, entirely due to the wind-down of migrant-related programs. However, excluding these programs, revenue increased 8% to $62.4 million, driven by record volumes across all base business offerings. This bifurcation tells the story: the old model is collapsing while the new model builds momentum.

Mobile Health Services revenue plummeted 77.2% to $20.7 million, yet non-migrant mobile health revenues increased more than 20% year-over-year, driven by care gap closures, remote patient monitoring, and mobile phlebotomy. The segment's adjusted gross margin was 36.2%, down from 38.8% in Q3 2024 but up from 32.5% in Q1 2025, showing sequential improvement as the mix shifts. Management explicitly stated that excluding the Care Gap closure business, the adjusted gross margin would have been above 40% in Q3 2025, highlighting the drag from early-stage investments.

Transportation Services revenue grew 4.4% to $50.1 million, driven by a 2.5% increase in U.S. trip volumes to 71,541 and a rise in average trip price to $411 from $404. Adjusted gross margins reached 31.7%, the highest since 2024, demonstrating pricing power and operational leverage. The segment is profitable on a stand-alone basis, with management targeting a 12% adjusted EBITDA contribution margin over the next two to three years, up from mid-single digits currently. The business is expected to generate over $200 million in revenue in 2025, making it a strong foundational asset.

Corporate segment expenses ballooned to $10.5 million in Q3 2025 from $6.3 million in Q3 2024. This increase reflects stranded costs from the migrant wind-down, higher stock compensation, insurance costs, and professional fees. Management expects SG&A to decline in absolute dollar terms sequentially in Q4 2025 and into 2026, but to remain elevated as a percentage of revenues in the near term due to the transition.

The cost structure reveals the transition's mechanics. Total cost of revenues decreased 40.7% in Q3 2025, less than the 49% revenue decline, causing gross margin compression. This was driven by a $7 million decrease in compensation, $24.7 million decline in subcontracted labor, and $4.8 million decline in medical supplies—all migrant-related—partially offset by a $2.7 million increase in vehicle costs due to prior-year insurance claims and increased reserves. Operating expenses increased 51% to $20.3 million, including $16.7 million in non-cash impairment charges for Rapid Temps intangible assets and goodwill, reflecting the sustained reduction in revenue forecasts for that acquisition.

Cash flow performance provides crucial validation. Despite operating losses, DocGo generated $1.7 million in operating cash flow in Q3 2025 and nearly $45 million through the first nine months. The company is now debt-free for the first time since late 2023, with $95.2 million in cash and $55 million in undrawn revolver capacity. Working capital management improved dramatically, with migrant-related accounts receivable falling from $150 million (71% of total AR) at year-end 2024 to $37 million (33% of total) at Q3 2025. The company has collected approximately 96% of all migrant-related receivables from inception and remains confident in collecting the remainder.

Outlook, Management Guidance, and Execution Risk

Management's guidance frames the transition trajectory. For 2025, revenue is projected at $315-320 million (including $68-70 million from migrant projects), with an adjusted EBITDA loss of $25-28 million. The 2026 guidance calls for $280-300 million in revenue—representing 12-20% base business growth excluding any acquisitions or new contract wins—and an adjusted EBITDA loss of $15-25 million, with the majority of the loss in the first half of the year. At the top end of the revenue range, DocGo expects to exit 2026 at an adjusted EBITDA positive run rate.

The segment breakdown of the 2026 guidance is telling: approximately two-thirds transportation and one-third mobile health. This implies Transportation revenue in 2026 will be in the range of $187-200 million, while the payer/provider vertical (part of Mobile Health) grows from $50 million in 2025 (including $5 million from SteadyMD) to $85 million in 2026 ($25 million from SteadyMD, $60 million from baseline business). The guidance explicitly excludes any contribution from 10 pending proposals in the business development pipeline, representing potential upside.

The quarterly progression is critical. Management expects Q1 2026 to be the revenue low point, with sequential improvement through Q2, Q3, and Q4. Consequently, the EBITDA loss will be concentrated in the first half, with improvement each quarter. This pattern implies that investors should expect continued pressure through mid-2026 before potential inflection.

Key operational milestones underpin this outlook. Transportation is accelerating talent acquisition to hire hundreds of additional EMS staff to capture the estimated 26,000 trips annually assigned to competitors due to capacity constraints. In Mobile Health, the Care Gap closure business is expected to complete over 11,500 visits in Q4 2025 and scale to more than 54,000 by end of 2026. Primary care visits are projected to grow from 10,000 in 2025 to over 40,000 in 2026. Mobile phlebotomy is on track for 125,000 draws in 2025, exceeding 200,000 in 2026.

The SteadyMD acquisition, completed in October 2025 for $12.5 million cash plus $12.5 million in deferred consideration, significantly expands clinical capacity across all 50 states. With over 3 million patients and $25 million in expected 2025 revenue, SteadyMD provides the virtual care infrastructure to complement DocGo's physical delivery network, enabling more efficient patient care and supporting the payer/provider vertical's expansion.

Risks and Asymmetries: What Could Break the Thesis

The investment thesis faces several material risks that could derail the path to profitability. Customer concentration remains a primary concern. The migrant services wind-down demonstrates how quickly a single contract can impact revenue, and while the company is diversifying, success in the payer/provider vertical could create new concentration risks. The government population health vertical faces "substantial uncertainty and indecisiveness" due to ongoing policy changes and budget cuts in Washington, leading DocGo to remove these revenues from 2025 guidance entirely.

Margin volatility from self-insurance creates unpredictability. The company incurred $5.2 million in increased insurance costs in Q3 2025 from workers' compensation premiums for 2022-2023 (driven by the migrant program employee base) and settlement of a large auto insurance claim from 2022. As a self-insured operator, DocGo faces inherent uncertainty in these costs compared to fully-insured competitors. Management acknowledges this volatility but expects to be better reserved going forward.

The Care Gap closure business, while scaling rapidly, is currently diluting overall margins. Management estimates Mobile Health gross margins would exceed 40% excluding this business, yet they project it will become the highest-margin segment at 50%+ gross margins at scale. This transition requires continued investment in product development, training, and technology through 2025, with benefits not materializing until 2026. If scaling takes longer than expected or margins fail to expand, the consolidated margin recovery could stall.

Competitive scale disadvantages pose ongoing threats. DocGo's $616.6 million in TTM revenue is substantially smaller than ModivCare 's $2.79 billion and Addus HomeCare 's $1.15 billion, limiting bargaining power with national payers and constraining geographic expansion. While the proprietary technology provides differentiation, larger competitors can invest more in R&D and customer acquisition. The SteadyMD acquisition helps level the playing field in virtual care, but DocGo remains a niche player in a fragmented market.

Technology disruption risk from pure-play telehealth companies like Teladoc and Amwell could erode DocGo's virtual care moat. These competitors focus exclusively on digital delivery and may innovate faster in AI-driven diagnostics or remote monitoring. DocGo's hybrid model is defensible for services requiring physical intervention, but virtual-only solutions could commoditize the telehealth component and pressure pricing.

Execution risk is paramount. The company must simultaneously wind down migrant operations, reduce SG&A by an estimated $10 million annually, scale new business lines, integrate SteadyMD, and maintain service quality. Any misstep in this complex transition could extend losses beyond 2026 or consume more cash than projected, testing the balance sheet's resilience.

Valuation Context: Pricing in Transition Risk

At $0.92 per share, DocGo trades at a market capitalization of $89.86 million, reflecting a net cash position. The stock trades at 0.15 times TTM sales of $616.6 million, a significant discount to healthcare service peers. Price-to-operating cash flow is 1.55x and price-to-free cash flow is 1.73x, indicating the market is pricing in substantial distress despite positive cash generation.

Balance sheet strength provides downside protection. With zero debt, $95.2 million in cash, and $55 million in undrawn revolver capacity, DocGo has over $150 million in liquidity against a projected 2026 EBITDA loss of $15-25 million. This implies multiple years of runway even if the transition takes longer than guided. Working capital of $116.6 million and a current ratio of 2.58 demonstrate solid short-term financial health.

Peer comparisons highlight the valuation disconnect. ModivCare trades at effectively 0.00x sales with negative margins and faces bankruptcy overhang. Teladoc (TDOC) trades at 0.53x sales with -8.8% profit margins and larger scale but persistent losses. Amwell (AMWL) trades at 0.28x sales with -42.8% profit margins and minimal scale. Addus HomeCare (ADUS), the only profitable peer, trades at 1.57x sales with 6.4% profit margins and 9.5% operating margins. DocGo's 0.15x sales multiple places it near the bottom of the peer range despite a clearer path to profitability than loss-making telehealth peers and better growth prospects than ModivCare (MODV).

Key metrics to monitor include the EV/revenue multiple relative to peers as the transition progresses, quarterly cash burn rate, and progression toward EBITDA positivity. The market appears to be valuing DocGo as a distressed asset, ignoring the $45 million in year-to-date operating cash flow and the strategic value of its technology platform. If management executes on 2026 guidance, the valuation gap could close rapidly as the company demonstrates sustainable profitability.

Conclusion: A Transition Story with Asymmetric Risk/Reward

DocGo is executing a strategic reset that trades near-term revenue for long-term margin durability and business quality. The 49% revenue decline in Q3 2025 is not a sign of business deterioration but rather the deliberate wind-down of a volatile vertical that masked the underlying strength of the transportation and payer/provider businesses. These core segments are growing, expanding margins, and scaling operations that address fundamental healthcare delivery challenges.

The investment thesis hinges on execution. Management must deliver the $10 million in annualized cost savings, convert its pipeline of payer proposals into scaled contracts, and achieve the Care Gap closure margin expansion from current drag to 50%+ gross margins. The balance sheet provides a comfortable cushion, with over $150 million in liquidity and positive operating cash flow funding the transition without external capital needs.

The asymmetry lies in the valuation. At 0.15x sales and with a net cash position, the market prices DocGo as a failing business rather than a transforming one. If the company achieves its 2026 guidance and exits the year at an EBITDA positive run rate, the multiple expansion potential is substantial. Conversely, if execution falters, the cash cushion limits downside risk relative to the current market capitalization.

For investors, the critical variables are sequential SG&A reduction, Care Gap closure margin progression, and Transportation segment EBITDA margin expansion toward the 12% target. The SteadyMD acquisition and AI integration provide additional upside options. DocGo's story is not about navigating disruption—it is about completing a deliberate strategic pivot from commoditized services to technology-enabled, integrated care delivery. The transition will be messy, but the destination appears increasingly clear and valuable.