Rocket Doctor AI Inc.
U.S. Expansion Accelerates Despite Earnings Headwinds
ByFRC Analysts
Disclosure: Rocket Doctor AI Inc. has paid FRC a fee for research coverage and distribution of reports. See last page for other important disclosures, rating, and risk definitions.
- Patient Volumes: Q1 growth was driven by higher patient volumes. Canadian visits increased 9% QoQ and 24% YoY to ~48k. U.S. visits were ~1.3k in Q1-2026 vs negligible activity in Q4-2025. April U.S. visits totaled ~1.1k, up 160% from the Q1 monthly average (~0.4k).
- Higher Costs: Operating expenses were 34% above our estimate, reflecting higher-than-expected Rocket Doctor integration, and scaling costs.
- Earnings: Adjusted EBITDA weakened QoQ due to higher operating expenses, while EPS improved on lower depreciation expense; both metrics remained negative.
- Balance Sheet: Ended Q1 with $3.5M in cash and minimal debt. While we estimate a potential ~$2.5M working capital requirement, in-the-money options could generate up to $2.3M in proceeds, likely limiting any financing requirement to a small raise.
- U.S. Expansion: Canada represented 77% of Q1-2026 revenue (90% in 2025), while U.S. growth accelerated through new insurer partnerships. RD's U.S. network now reaches ~21M individuals across ~20 insurers/payers.
- Valuation: RD trades at a 54% discount to peers on forward revenue (1x vs. 3x), and a 42% discount on forward EBITDA (9x vs. 16x). Despite our lower 2026–2027 forecasts following higher Q1 costs, we continue to expect strong YoY improvement across key metrics.
Price and Volume (1-year)
* Rocket Doctor AI has paid FRC a fee for research coverage and distribution of reports. See last page for other important disclosures, rating, and risk definitions. All figures in C$ unless otherwise specified.
Company Overview
B2C: Physician-Funded Model (Primary Revenue Driver)
B2B: Institutions license AI tools for training and care
The Rocket Doctor Process
Source: FRC
Offers a streamlined virtual care experience from patient intake to payment
Generates revenue from doctors through monthly subscriptions and per-appointment platform fees
Target Markets
Source: FRC / Company
Operating in Canada since 2020; currently focused on U.S. expansion
RD’s current target pool includes ~46M people across its target regions in the U.S. and Canada
Source: Company
Primarily targets patients using government-funded health insurance (provincial in Canada and Medicaid / Medicare in the U.S.)
Partnerships with ~20 insurers in the U.S.
Financials
Q1- 2025 and Q1-2026 results are not comparable, as material revenue commenced only after the Rocket Doctor acquisition in April 2025.
1.Excluding stock-based compensation (SBC) / 2.Excluding unusual items + SBC
Q1 revenue of $0.74M (+6% QoQ), continuing sequential growth; 14% below our estimate
Growth driven by higher patient volumes; Canadian visits up 9% QoQ and 24% YoY to ~48k
U.S. visits were ~1.3k vs negligible activity in Q4-2025
Strong Q2 momentum: April U.S. visits of ~1.1k, up 160% from the Q1 monthly average (~0.4k)
The above table shows a QoQ decline in Canadian revenue in Q1-2026. However, Q4-2025 benefited from unusually high government grant revenue. Excluding grants, management indicated that Canadian revenue would have continued to grow sequentially.
Gross margins declined QoQ to 75% from 84%, primarily due to the growing contribution of U.S. operations rather than any structural change in the business model. In the U.S., the company records the full revenue per patient visit as revenue, and physician fees as direct costs, resulting in gross margins of approximately 15–20%. In Canada, revenue is reported net of physician payments, resulting in gross margins of 85–90%.
The difference in reporting stems from the payment flow: in the U.S., insurers pay RD directly, which then compensates physicians, while in Canada, physicians receive reimbursements directly from provincial healthcare plans , and pay RD service fee.
Operating expenses were 34% above our estimate, reflecting our underestimation of costs associated with integrating and scaling Rocket Doctor
Adjusted EBITDA weakened QoQ on higher OPEX, while EPS improved on lower depreciation expenses; both remained negative
Ended Q1 with $3.50M cash, and minimal debt
We estimate the company will require ~$2.5M in additional funding this year; however, in-the-money options could generate up to $2.3M in proceeds, likely eliminating the need for a significant equity financing
Source: FRC / Company
FRC Valuation and Rating
Given higher-than-expected Q1 expenses, we are lowering our 2026 and 2027 EPS forecasts; we are lowering our revenue estimates as well
As a result, our DCF model returned a fair value estimate of $1.82/share (previously $1.96/share)
Source: FRC
Comparables Valuation
*We use the present value of our 20 30 EBITDA estimate for RD in this calculation.
Source: FRC / S&P Capital IQ
RD is trading at 1x forward revenue vs the sector average of 3x, a 54% discount
RD is trading at 9x forward EBITDA vs the sector average of 16x, a 42% discount
Our comparables valuation declined to $1.41/share from $1.75/share, primarily due to our lower revenue and EBITDA forecasts
We reiterate our BUY rating, and adjust our fair value estimate from $1.86 to $1.55/share (the average of our DCF and comparables valuations). While Q1 results were impacted by higher costs and lower-than-expected patient volumes, we believe underlying growth trends remain intact. Supported by U.S. expansion, rising patient volumes, and sufficient liquidity, we expect meaningful operational and financial improvement over the coming quarters. The current valuation discount to peers does not, in our view, fully reflect its growth potential.
Risks
We believe the company is exposed to the following key risks (not exhaustive):
- Competition from established telehealth providers
- Regulatory changes Early-stage operations; not yet profitable
- New entrant in the U.S.; high customer acquisition costs and uncertain adoption
- Cybersecurity and data privacy risks , including patient data breaches
- Scaling challenges in building doctor and patient networks
- Need to raise equity to fund marketing and growth, with potential for share dilution
We are maintaining a risk rating of 4 (Speculative)
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