Q2 2025 Domo Inc Earnings Call
Speaker Change: [inaudible]
Speaker Change: Greetings and welcome.
Speaker Change: 2, the DOMO Q2 fiscal year, 2025 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
Peter Lowry: and with that I will hand it over to Peter Lowry, Domo's Vice President of Vester Relations. Thank you. You may begin.
Peter Lowry: Good afternoon. On the call today, we have Josh James, our founder and CEO and David Jolley, or Chief Financial Officer.
Peter Lowry: Andrew. I'll lead off their safe harbor statement and then on to call.
Speaker Change: or press release was issued after the market closed and is posted on the investor-relation section of our website where this calls also being webcast.
Speaker Change: David Smith made on this call, including forward-looking statements relating to our business under federal security's laws.
Speaker Change: The statements are subject to a variety of risks uncertainties and assumptions.
Speaker Change: These include that are not limited to statements about our future and prospects or financial projections and cash position.
Speaker Change: Stateman's regard in the potential of our consumption model, statements about our sales team and technology, our expectations for new business opportunities, transactions, and initiatives.
Speaker Change: State Minister Gardening, our Channel of Communication and Upcoming Events.
Speaker Change: Stamets regarding the potential of artificial intelligence and its impact on our business and Stamets regarding the impact of macroeconomic and other conditions on our business.
Speaker Change: For a discussion of these risks and uncertainties, please refer to documents we filed with SEC, in particular, today's press release, are most recently filed annual report on Form 10K, and are most recently filed quarterly report on Form 10Q.
Speaker Change: These documents contain an identify, important risk factors and other information that may cause our actual results to differ materially from those contained in our full looking statements.
Speaker Change: In addition, during today's call, we will discuss non-gap financial measures, which we believe are useful as supplemental measures, abdominals for performance.
Speaker Change: Other than revenue, unless otherwise stated, we will be discussing our results of operations on a non-gap basis.
Speaker Change: These non-gap measures should be considered in addition to, and not as a substitute for, or an isolation from, or a gap results.
Speaker Change: Please refer to the tables in our earnings press release for a reconciliation of our non-gap financial measures so they're most directly comparable gap measure.
Speaker Change: which we have posted in the Investor Relations section of our website at domoinvestors.com.
Speaker Change: with that I'll turn over to Josh.
Speaker Change: Josh
Josh James: Thank you, Pete. Hello everyone, and thanks for joining us on the call today.
Josh James: I'll start with our quarterly results.
Speaker Change: and Q2, we exceeded our revenue gains.
Josh James: Our gross retention bounced back to 88 percent at the high end of our guidance, which was a highlight for the quarter and a dramatic improvement over the last few quarters.
Josh James: While we aspire to return to north of 90% for the long term, I'm very pleased with this progress.
Josh James: On our biggest deal of the quarter, it was that our option to secure an additional year on the contract term if we agreed to accommodate a quarterly billing schedule.
Josh James: This strategic decision caused our billings to be just below guidance this quarter. Otherwise, we would have met our get had this customer been built annually.
Josh James: I'm particularly excited about this customer story and our first contract ever with an eighth figure total value and I'll talk about that a little bit later.
Josh James: Additionally, in order to give us more runway for the initiatives we've been pursuing, we decided to extend the maturity of our debt to August 28th.
Josh James: And in connection with this amendment, we also were able to reduce our overall interest rate and reduce our cash interest rate by a substantial amount.
Speaker Change: We'd like to thank BlackRock for their continued support of our business.
Speaker Change: We also make good progress on our growth initiatives, including our partnership efforts and our shift to consumption.
Speaker Change: I believe these are absolutely the right moves, and while it may take some time from to translate into top-wing growth, the signs are very encouraging that we are better positioned that ever to pursue a huge market opportunity.
Speaker Change: I'll start by sharing more about this opportunity and the great response from our strategic partnership initiatives.
Speaker Change: Don't want us found it to help organizations leverage their data more effectively.
Speaker Change: To achieve this, we developed a comprehensive modern analytic stack that lets users store prepare, analyze, visualize and distribute data, amplify by AI, providing a complete agile cloud-based data solution for our customers.
Speaker Change: But as the industry evolved, companies started anchoring their data strategies around cloud-based data warehouses or CDWs.
Speaker Change: Recognizing the shift, we advance our platform to seamlessly integrate with these CDWs.
Speaker Change: Positioning ourselves as a partner rather than a competitor.
Speaker Change: This approach has enabled us to engage in more strategic conversations with our customers.
Speaker Change: One of the primary benefits of the CDW partnerships is that instead of cobbling together solutions from four or five different vendors, a customer can achieve the same outcome just with their preferred CDW and no one.
Speaker Change: We've been told that no one can get data into the CDW's faster than Domo
Speaker Change: The speed and scale in which customers get value from their data has always been one of our key differentiators and is something we think makes us unique player in today's ecosystem.
Speaker Change: Let me share a win from Q2 that highlight the opportunity with CDWs.
Speaker Change: We had previously engaged with a brand communications business that unfortunately ruled the route after deciding to implement Snowflake.
Speaker Change: However, soon after launching Domo's Magic ETL on Snowflake in May,
Speaker Change: We were reintroduced to the conversation with this customer by one of Snowflakes' important integration partners who strongly recommended us over the other choices the customer was considering.
Speaker Change: and that customer is now using Domo alongside Snowflake.
Speaker Change: Clearly, we're very excited by the ecosystem and other partner opportunities in front of us.
Speaker Change: We acknowledge that the results of these efforts aren't impacting our numbers yet, but they're affecting our pipeline. So let me give you some color around the partner pipeline that we're building.
Speaker Change: The number of joint deals that are pipeline being worked between us and CDW partners has increased from zero to over 60 deals over just the last two quarters.
Speaker Change: We closed five new customers from Don't Everwhere Partners during the year 2. This represents a completely new source of deal flow, and although it is small right now, we believe this represents a channel that will grow rapidly.
Speaker Change: We signed 26 brand new channel partner agreements recently, several of which are elite service partners of snowflake and data bricks.
Speaker Change: We've trained five sales teams at CDW partners with another five sales teams on the calendar. This is where the rubber really hits the road and we are thrilled to be invited to train these sales organizations.
Speaker Change: We are in advanced conversations with other partners, including two of the global top 10 software companies by Revenue.
Speaker Change: One of the world's largest cloud ERP providers.
Speaker Change: to deliver joint solutions to their expansive customer bases, enabling their customers to get fast and actionable insights from their data.
Speaker Change: is extremely convenient, but two of their biggest competitors are also our two biggest competitors. As we believe, the alignment will naturally drive the market behavior it advantageous to us.
Speaker Change: One other partner shared that we have helped him win more than 20 new opportunities.
Speaker Change: and the other wise would have lost, cementing our relationship with him, of course.
Speaker Change: and then another company recently expressed urgency in getting a partner agreement signed with us.
Speaker Change: Because they found an opportunity with a nationwide retailer that operates over 800 stores and they believe the Linchpin to them closing their deal is the Domo platform.
Speaker Change: This past quarter, we also had a big presence at the Snowflake and Databricks user conferences.
Speaker Change: I have so many great conversations, introducing dullness capabilities and the tremendous value we can deliver to our mutual customers.
Speaker Change: I came away from these conversations feeling more excited than ever about Domo's place in the ecosystem.
Speaker Change: In conclusion, we are seeing great signals that ecosystem partnership strategy is working and starting to produce results.
Speaker Change: So we're going to run this play and if it turns out like we believe it will, then we should get back to meaningful growth.
Speaker Change: and as I indicated last quarter, it may take 12 to 24 months for that growth to show what our finance results, as we evaluate our strategic options and become much closer to the players of the ecosystem.
Speaker Change: At this point, we are only one quarter in from going live with Snowflake. And just doing the math, we still have seven more quarters to play the strategy out before I want our place in the world to be true to find.
Speaker Change: Our Shits of Consumption based pricing is also fundamental to capitalizing on this partner opportunity and driving expansion with existing customers.
Speaker Change: This strategy goes beyond the science and assumption agreement.
Speaker Change: Our goal is more customers fully embracing animal across their entire organization.
Speaker Change: Whether it's consumption contracts, or an enterprise-wide license agreement with the data cap, we want to put our customers in a position where they can quickly achieve wall-to-wall adoption of Doma.
Speaker Change: Last quarter, we discussed the positive impact the consumption has had on our customer retention.
Speaker Change: And again, for the Q2 consumption pull-words.
Speaker Change: We saw even better growth and net retention rates on a substantially larger renewal base than we did into one.
Speaker Change: Today we have over 45% of our ARR on consumption contracts.
Speaker Change: and expect to achieve our goal of having a majority of our ARR on consumption by year ends.
Speaker Change: Now let me remind you what transitioning to consumption is a key strategy for our business.
Speaker Change: It aligns realized value with price.
Speaker Change: As it allows our customers to have company-wide exploration of our products with very little risk of France.
Speaker Change: It makes it easier to work with partners.
Speaker Change: They removed hurdles that delay product lead growth and use case expansion.
Speaker Change: The protects our customer accounts as customers will now openly standardize on us, thereby limiting the number of accounts that have us for a few departments and a few of our competitors for other departments, which is never as stable as we would like.
Speaker Change: It makes it easier to explore the full breadth of our platform.
Speaker Change: To build use cases from actually using the product versus from a sales pitch. And if this facilitates the sun setting of legacy competing solutions that our customers may still be using in various parts of their organization.
Speaker Change: The new multinational customer we acquired in Q2 described consumption as a no-brainer, because instead of adopting domino in one country, consumption facilitated a global rule out across six countries.
Speaker Change: While sending them up for rapid expansion going forward.
Speaker Change: Another story from Q2 was with one of our earliest consumption customers.
Speaker Change: They were recently acquired by a much larger company that was a power BI shop and we were very much at risk of losing the customer.
Speaker Change: and whoever.
Speaker Change: Because that customer was on consumption, the acquiring company was able to explore Domo and quickly found that they were able to do things with analytics that they didn't think were possible.
Speaker Change: Now, instead of canceling, we're exploring up-sell opportunities.
Speaker Change: And our biggest deal of the quarter, which I mentioned in my introduction, is a great story about the opportunity created by our consumption model.
Speaker Change: It was a seventh figure upsell and an eighth figure total contract value with a Fortune 500 company that originally chose Domo when they were searching for a partner that could meet the complex integration, collaboration and security needs of their multinational business a few years ago.
Speaker Change: We won the opportunity two years ago when the company's BI leadership recognized the range of sophisticated tools don't offer for global enterprise businesses.
Speaker Change: It didn't take long before the team realized that those tools created benefits they hadn't experienced before.
Speaker Change: For example, they completed their first date of migration from a legacy tool into Delo in just one week.
Speaker Change: They also quickly realized they could replace more expensive legacy technologies with domeau.
Speaker Change: In the two years since, they replied those benefits broadly across the organization.
Speaker Change: What started as a use case for 300 analysts has expanded to more than 10,000 users across multiple use cases, including financial planning and analysis, sales forecasting, data science and AI.
Speaker Change: Looking ahead, they have planned to expand more than 50,000 users by the end of 2025.
Speaker Change: I just love this example because it puts the impact of our strategic priorities on full display and provides a blueprint of how consumption can transform the way Domo is adopted in an enterprise.
Speaker Change: We've got him adores an extremely innovative and collaborative customer with vast growth potential.
Speaker Change: Thanks to consumption, we got much earlier expansion to users across the organization.
Speaker Change: and Reven to Claire as the global standard, and this customer now has a four-year term, eight-figure total contract value.
Speaker Change: This is actually the first eight figure contract we've ever had. We've had larger annual customers, but this is the first eight figure multi-year contract we've ever had.
Speaker Change: and we believe they're still room to grow this customer.
Speaker Change: The speed and scope of expansion would have been terribly difficult, if not impossible with seat licenses.
Speaker Change: In summary, we were very excited about the traction we're seeing with partners and the customer growth we're seeing as a result of consumption and these partners.
Speaker Change: And extremely optimistic about the growth opportunities with these initiatives as the backdrop.
Speaker Change: Now, before I turn things over to David, I want to let you know that as a result of some health issues that David has been experiencing over the last year, he has decided to transition to a different role in the organization.
Speaker Change: David Jolley, don't worry during a time of transition and he's been absolutely fantastic.
Speaker Change: I appreciate so much the contributions he's made over the past year and a half.
Speaker Change: Well, David will be transitioning out of the CFO role at the end of the third quarter. He'll be staying at Donnell in the role of Senior Advisor to the Executive Team.
Speaker Change: where we will actively continue to leverage his background and experience going forward.
Speaker Change: Ultimately, I would be thrilled if David is able to join our Board of Directors when the time is right.
Speaker Change: The taking over in David's place, I'm happy to announce that Todd Crane, almost current senior VP of finance, will be assuming the role of CFO.
Speaker Change: Todd is a well-to-experience at Domo and understands the financial dynamics of our business as well as anyone.
Speaker Change: He has been here for nearly a decade and held a number of finance leadership rules over that time.
Speaker Change: As became apparent that David's eyes surgery were not as successful as he'd hoped, and that his time in the CFO seat might become shorter than we had anticipated.
Speaker Change: We have had taught very closely with David in all aspects of the CFO function, for meetings with investors, to meetings with our board, to refinancing our debt, to being an active member of the Executive Team.
Speaker Change: During this time and even before that, Todd and I have worked very closely and I have often expressed to him that I would love to see him as our CFO someday.
Speaker Change: I'm truly excited to have Todd's experience and insight as we position Domo to get back to growth.
Speaker Change: I think it's important to note that Todd has broad support for our executive team and for our board as he steps into this role.
Speaker Change: and with that, I'll hand it over one last time to Mr. Jolley.
Speaker Change: David?
David: Thanks, Josh. Many of you that know me know that I've been experiencing issues with my vision over the past year or so. Unfortunately, I've now lost over 90% of the vision in my ride eye and after a bunch of surgeries, I've recently been informed by my doctors that it isn't going to get much better.
David: As a matter of fact, with the retina issues I've had in the other eye, I've been told that there's a higher than normal likelihood that my other eye will lose vision as well.
Speaker Change: The loss of vision has made it challenging to do my day-to-day duties as CFO without serious eye strain ahead eggs.
Speaker Change: After a lot of personal reflection and some discussions with Josh, I've decided that it's time for me to move out of the day-to-day role of CFO, so I can enjoy more time with my family, while I still have at least half my vision. I hope to not lose the other half, but if I do, there's still a lot of stuff I want to see before that happens.
Josh James: Now, that said, I am not leaving Domo and I'm grateful that Josh has given me an opportunity to stay involved in a senior advisory role.
Speaker Change: I'm excited for Todd to be stepping into the CFO role and have the utmost confidence in him, given his experience and deep financial knowledge of Domo. I fully intend to see this turnaround through, no pun intended, and I'm looking forward to a very long relationship with the company.
Speaker Change: Now on to our Q2 results. While we're still seeing a challenging market environment, we slightly exceeded our revenue guidance.
Speaker Change: Total Revenue was 78.4 million, a year over year decrease of 2%, subscription revenue represented 90% of total revenue and was flat year over year.
Speaker Change: Q2 Billings were 68.6 million. As discussed, we had one large customer that we agreed to quarterly billing terms and exchanged for a longer contractual term. Had we build this customer annually in advance, our Billings would have met our guidance?
Speaker Change: A highlight in the quarter was our gross retention of 88% at the high end of our guidance and up from 83% in Q1. As a reminder, our gross retention is a measure of in-quarter retention, while our net retention is based on our ARR retained year over year.
Speaker Change: Our year over year net retention was 90% on an in-quarter basis, our net retention was closer to 100%.
Speaker Change: For the consumption cohort, our gross retention was 98%, and our net retention was 118% up from Q1 on a substantially larger renewal base.
Speaker Change: As we mentioned last quarter, this is not something we planned to disclose regularly, but think it's important to highlight this quarter as the consumption customer base performs substantially better than the rest of our business and it will be 50 to 60 percent of the overall business by the end of the year.
Speaker Change: I'm also very pleased that we were re-financed our debt to extend the maturity date to August 2028 and reduced our overall interest rate and our cash interest rate. We believe this provides improved financial flexibility as we pursue our growth objectives.
Speaker Change: Now let me review some of the other Q2 metrics.
Speaker Change: Current RPO was 225.4 million and as a reflection of our customers standardizing on the Doma platform and making longer-term commitments, our total RPO was importantly up year over year to 358.9 million as of July 31, 2024.
Speaker Change: Coincidentally, this improvement and longer-term contracts will also help us improve retention. Also in the good news department, our average contract duration for deals closing Q2 was up more than 10% year over year.
Speaker Change: On a dollar-weighted measure, we continue to have approximately 2-thirds of our customers under multi-year contracts. Multi-year contracts benefit us in a number of ways, particularly on the retention front.
Speaker Change: Moving on to margins and profitability, our subscription gross margin was 82.4%. Because we believe consumption will better line revenue with costs, we expect gross margin to stabilize over the next few quarters at about the current level and then to improve to the mid-80s longer term.
Speaker Change: Non-gap operating margin was 2.5% as we strive to keep our costs in line with our revenue. Non-gap net loss was 2.7 million compared to 0.8 million a year ago. Net loss per share was 7 cents based on 38.4 million weighted average shares outstanding.
Speaker Change: because we're in a one-net-loss position, all share and per share amounts are the same for basic and diluted.
Speaker Change: In Q2, adjusted free cash flow was negative 5.6 million resulting in a cash balance of 55.7 million.
Speaker Change: We previously commented on our priest cash flow objectives for the year, noting that there would be variability from quarter to quarter and we will continue to manage our cost structure and cash balance in response to our financial performance and take action as necessary.
Speaker Change: Now, let me talk about guidance. Looking forward for Q3, we're expecting non-gat buildings of 70 to 75 million.
Speaker Change: We expect two three-gap revenue to be in the range of 77 to 78 million. We expect non-gap net loss per share of 14 to 18 cents, assuming 38.9 million weighted average shares outstanding.
Speaker Change: For the full year, we have spent billions of approximately 305 to 315 million and Gaper Avenue of 313 to 315 million.
Speaker Change: For the full year we expect non-gap, net loss per share, basic and diluted of 69 to 77 cents. This assumes 38.5 million weighted average shares outstanding basic and diluted.
Operator: Greetings and welcome to the Domo Q2 fiscal year 2025 earnings call. At this time, all participants are in a listen only mode. A question and answer session will follow the presentation. If anyone should require operator systems during the conference, please press star zero on your telephone keypad as our mind or this conference is being recorded.
Speaker Change: Our guidance range reflects the variability that may result from making decisions that will benefit longer-term growth at the expense of short-term buildings as we did this quarter with the eight-figure contract.
Speaker Change: We believe the longer-term opportunity for growth lies in the ecosystem and we're confident we're on the right path. Our customers love the product, we've got a durable business with close to 300 million in annual recurring revenue, and that's a substantial foundation from which to build.
Peter Lowry: And with that, I will hand it over to Peter Lowry, Domo's vice president of investor relations. Thank you.
Unknown Executive: You may begin. Good afternoon.
Speaker Change: We're executing on our partner strategy and we're going to take more than a quarter or two to meaningfully impact our financial results, we believe that growth will follow. With that, let me turn it back to Josh for some closing comments.
Unknown Executive: On the call today, we have Josh James, our founder and CEO and David Jolley, our chief financial officer. All lead up to our safe harbor statement and then on the call. Our press release was issued after the market close and is posted on the investor relations section of our website, where this call is also being webcast statements made on this call include forward looking statements related to our business under federal security laws.
Josh James: Thank you, David.
Josh James: As you know, we've been shifting our efforts in investment over the last several quarters towards ecosystem lead growth.
Josh James: Well, those efforts are not yet making a market difference in our reported financial metrics. We are beginning to see promising early results. For example, just this last week, we had a new partner bring us into a deal on Friday and it closed the following Monday.
Unknown Executive: These statements are subject to a variety of risks, uncertainties and assumptions. These include, but are not limited to statements about our future and prospects or financial projections and cash position. Statements regarding the potential of our consumption model, statements about our sales team and technology or expectations for new business opportunities, transactions and initiatives. Statements regarding our channel of communication and upcoming events, statements regarding the potential of artificial intelligence and its impact on our business and statements regarding the impact of macro economic and other conditions on our business.
Josh James: This deal never even hit our pipeline. It went from nothing to closed in one business day. This sort of opportunity would not be possible without our ecosystem partner strategy, and as the type of signal that gives us great confidence in the strategy.
Josh James: To accelerate us being even more tightly aligned on our ecosystem-oriented strategic growth initiatives. I'm excited today to announce some natural progressions taking place in our sales organization, which will better position us for future success.
Unknown Executive: For a discussion of these risks and uncertainties, please refer to documents we filed with the SEC in particular today's press release are most recently filed annual report on form 10K and are most recently filed quarterly report on form 10Q. These documents contain and identify important risk factors and other information that may cause our actual results to differ materially from those contained in our forward looking statements. In addition, during today's call, we will discuss non-gap financial measures which we believe are useful as supplemental measures of homeless performance.
Josh James: RJTracy, our STP of Strategic Development and Channel, has been leading our ecosystem and consumption efforts.
Speaker Change: Given the early successes there, as well as the fact that RJ has been one of our most successful leaders to date over the last 10 years. We see it as a natural evolution to move RJ into the expanded role of CRO.
Speaker Change: R.J. is absolutely the right individual to take on these elevated responsibilities, aligned our strategic initiatives between partner and sales and lead a spactor growth.
Speaker Change: In conjunction with that promotion, I'm also very excited to announce that Josh Gauss was moving into the role of President of Worldwide Sales and Field Operations.
Unknown Executive: Other than revenue, unless otherwise stated, we will be discussing our results of operations on a non-gap basis. These non-gap measures should be considered in addition to and not as a substitute for or an isolation from our gap results. Please refer to the tables in our earnings press release for a reconciliation of our non-gap financial measures to their most directly comparable gap measure, which we have posted in the Investor Relations section of our website at dummoinvestors.com.
Speaker Change: I've been working with Jeff for the better part of 30 years. He's a strong leader and was the one who hired RJ and identified him as the next year old.
Speaker Change: The CRO Responsibilities will roll up to Jeff and he will continue to own international growth while supporting our ecosystem initiatives, consumption conversion and mentoring RJ throughout the process.
Speaker Change: As we look forward, I believe that leveraging partnerships in the broader ecosystem is the best path to return us to growth.
Josh James: With that, I'll turn it over to Josh. Josh? Thank you Pete.
Josh James: Hello everyone and thanks for joining us on the call today. I'll start with our quarterly results. In Q2, we exceeded our revenue guidance. Our gross retention bounced back to 88% at the high end of our guidance, which was a highlight for the quarter and a dramatic improvement over the last few quarters. While we aspire to return to north of 90% for the long term, I'm very pleased with this process. Douglas. On our biggest deal of the quarter, it was at our option to secure an additional year on the contract term if we agreed to accommodate a quarterly billing schedule.
Speaker Change: and I'm excited to see the impact of these initiatives and the broad, passionate, innovative and dedicated efforts of our entire team at Domo.
Speaker Change: and with that, we will open up the call for questions.
Speaker Change: Operator
Speaker Change: Thank you.
Speaker Change: and we'll now conduct our question and answer session. If you would like to ask a question press star 1 on your telephone keypad. A confirmation tunnel in the gate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. Go part of this up and do the speaker equipment and maybe necessary to pick up your handset before pressing the star keys.
Josh James: This strategic decision caused our billings to be just below guidance this quarter. Otherwise, we would have met our target had this customer been billed annually. I'm particularly excited about this customer story and our first contract ever with an eighth figure total value. And I'll talk about that a little bit later.
Speaker Change: And our first question comes from Derek Wood with TD Cowen, please take a question.
Derek Wood: Great, thanks for taking my question, congrats on the P&L performance and David, it's been great to work with you, best of luck and tackling your health challenges and Todd, great to reconnect and congrats on the new role.
Josh James: Additionally, in order to give us more runway for the initiatives we've been pursuing, we decided to extend the maturity of our debt to August 2028. And in connection with this amendment, we also were able to reduce our overall interest rate and reduce our cash interest rate by a substantial amount. We'd like to thank Black Rock for their continued support of our business. We also make good progress on our growth initiatives, including our partnership efforts and our shift to consumption.
Speaker Change: I'll start with you. You've indicated that you're now having more strategic conversations with customers given.
Speaker Change: Founding your partnership status with CDW's
Speaker Change: Can you drill down a little more on why this helps change the perception of Domo? And I know you guys have always tried to evolve how you engage with CIOs. Is this helping you strengthen the partnership on the CIO front?
Josh James: I believe these are absolutely the right moves. And while it may take some time to translate into top lane growth, the signs are very encouraging that we are better positioned than ever to pursue a huge market opportunity.
Speaker Change: Yeah, for sure, it helps to address the relationship with the CIOs. In many cases, we walk in and we want to talk about the broader data strategy, but we haven't historically been the vendor, especially in the enterprises that they want to have that conversation with.
Josh James: I'll start by sharing more about this opportunity and the great response from our strategic partnership initiatives. Domo was founded to help organizations leverage their data more effectively. To achieve this, we developed a comprehensive modern analytics stack that lets users store, prepare, analyze, visualize and distribute data amplified by AI, providing a complete agile cloud-based data solution for our customers. But as the industry evolved, companies started anchoring their data strategies around cloud-based data warehouses or CDWs.
Speaker Change: The CDW is on the other hand, that is where they're centering those conversations.
Speaker Change: and what we found is...
Speaker Change: Optin, we go in and we think that we're competing against just...
Speaker Change: You know, one of our smaller competitors.
Speaker Change: or again, somebody that's focused just on visualization and we think that's the competition. The reality is, the competition might be snowflake, plus their integration partner, plus their, you know...
Josh James: Recognizing the shift, we've advanced our platform to seamlessly integrate with these CDWs, positioning ourselves as a partner rather than a competitor. This approach has enabled us to engage in more strategic conversations with our customers. One of the primary benefits of these CDW partnerships is that instead of cobbling together solutions from four or five different vendors, a customer can achieve the same outcome just with their preferred CDW and Domo. We've been told that no one can get data into the CDWs faster than Domo. The speed and scale and which customers get value from their data has always been one of our key differentiators and is something we think makes us a unique player in today's ecosystem.
Speaker Change: their equal system of
Speaker Change: of partners who are all in their selling together.
Speaker Change: and we don't realize that there's a selling motion that is four or five times the effort than the one that we're putting in.
Speaker Change: So being aligned with the snowflakes and data bricks of the world we think is going to have.
Speaker Change: I'm meaningful impact, you know, as justified by these experiences that we were describing. And including the one where we got kicked out early on, and we got brought back in because it wasn't even snowflake, but it was the integration partner of snowflake.
Speaker Change: who was installing Snowflake, said to the customer, these other choices that you're making to integrate with Snowflake, they're not the right choices, it's almost the right choice.
Speaker Change: and you know we got the phone call we got the deal so it does change things dramatically the CDWs are definitely a big strategic component of every CIOs data strategy.
Speaker Change: and we're just excited to be so...
Speaker Change: Not broadly accepted now from the CDW, I mean the excitement is palpable.
Josh James: Let me share a win from Q2 that highlights the opportunity with CDWs. We had previously engaged with a brand communications business that unfortunately ruled Domo out after deciding to implement Snowflake. However, soon after launching Domo's Magic ETL on Snowflake in May, we were reintroduced to the conversation with this customer by one of Snowflake's important integration partners who strongly recommended us over the other choices the customer was considering. And that customer is now using Domo alongside and Mike Snowflake. Clearly we're very excited by the ecosystem and other partner opportunities in front of us.
Speaker Change: The fact that we talked about five sales teams being educated and five more coming on. Those aren't.
Speaker Change: The entire sales, and that's not how it happens, it's hey, here's the Eastern Mid-Market sales team, we won't have an off-site won't you guys come in and do a training and it kind of happened one by one and you have to build those relationships.
Speaker Change: But then as you develop those relationships, we're starting to see reps that went through a training, they call us, they dip to the water, they brought us into a deal, we close a deal, they call us immediately the next day for being introduced into another deal. So that's the kind of attraction and progression that we're getting, which is a very different
Speaker Change: Kack.
Speaker Change: Then, you know, spend a more money on Google to put a meter pipeline to go in with, you know, buy yourself.
Josh James: We acknowledge that the results of these efforts aren't impacting our numbers yet but they are affecting our pipeline. So let me give you some color around the partner pipeline that we're building. The number of joint deals on our pipeline being worked between us and CDW partners has increased from zero to over 60 deals over just the last two quarters. We close five new customers from Domo ever where partners during Q2. This represents a completely new source of deal flow and although it is small right now, we believe this represents a channel that will grow rapidly.
Speaker Change: and tried to compete and create the value proposition. It's much easier when you have four or five other people touting what you can do for those customers. So it's been just a totally different experience and one that really excited about.
Speaker Change: Yeah, I mean, it sounds like the partnership.
Speaker Change: kind of well beyond just the CDWs with a lot more of the ecosystem partners in there. And I guess on that, let me go in for zero to 60 deals in the pipeline with partners.
Josh James: We signed 26 brand new channel partner agreements recently, several of which are elite service partners of snowflake and data bricks. We've trained five sales teams at CDW partners with a new other five sales teams on the calendar. This is where the rubber really hits the road and we are thrilled to be invited to train these sales organizations.
Speaker Change: How are you thinking about the time frame and going from pipeline build to deal closure? A kind of sensor color on what average deal sizes could look like?
Speaker Change: Hamdic quarters are, you know, that the start's saying more conversion on those deals.
Speaker Change: Yeah, there's nothing more than that we want than being able to say, you know, two quarters out, you're going to start seeing an uptick in buildings.
Josh James: We are in advanced conversations with other partners, including two of the global top 10 software companies by revenue, one of which is one of the world's largest cloud ERP providers to deliver joint solutions to their expansive customer bases enabling their customers to get fast and actionable insights from their data. It is extremely convenient that two of their biggest competitors are also our two biggest competitors as we believe the alignment will naturally drive market behavior advantageous to us.
Speaker Change: We want to say it so desperately, but we still need some more data. In terms of the deal size, we do have...
Reverend: Thank you, Reverend, some of these other partners in the ecosystem, not just the CDWs. It's really been fun, because...
Speaker Change: They feel like they're extremely defensible partners.
Speaker Change: and we go in, we help them create a joint solution.
Speaker Change: Dave got 500 customers, 2000 customers, 20,000 customers, and we've got a joint offering.
Speaker Change: In some of those cases, the ASP might be smaller, but then again, you know, in other cases, it's higher than our average deal. So I think overall it'll probably average out. We also have customers that are coming to us and saying,
Josh James: One other partner shared that we have helped them win more than 20 new opportunities than they otherwise would have lost, cementing our relationship with them of course. And then another company recently expressed urgency in getting a partner agreement signed with us because they found an opportunity with a nationwide retailer that operates over 800 stores and they believe the Linchpin to them closing their deal is the doma platform.
Speaker Change: Can we work on a freemium type solution for 8,000 customers that we can introduce this to next quarter and we're just looking at our jobs because that's exactly the kind of relationship that we want because one of the challenges that you have is
Speaker Change: How does that customer get that first bit of value? What's the time to value for having that integrated data visualized, showing up in executives, in an executive's phones in their apps, getting alerts?
Josh James: This past quarter we also had a big presence at the snowflake and data brick user conferences. I had so many great conversations introducing doma's capabilities and the tremendous value we can deliver to our mutual customers. I came away from these conversations filling more excited than ever about doma's place in the ecosystem.
Speaker Change: and that first bit of data connections always hard. We have a partner, they've got the data, you do the integration, they were going without to 8,000 customers, we're just really excited about what's going to happen as we start integrating with some of these types of partners as well, beyond the CDWs.
Josh James: In conclusion, we are seeing great signals that our ecosystem partnership strategy is working and starting to produce results. So we are going to run this play and if it turns out like we believe it will then we should get back to meaningful growth. And as I indicated last quarter, it may take 12-24 months for that growth to show up in our finance results as we evaluate our strategic options and become much closer to the players in the ecosystem.
Speaker Change: Yeah, if I can squeeze one more in for David.
Speaker Change: The sales and marketing expenses drop down quite a bit. I know there's some dumb up loser expenses that come out, but it seems like perhaps there were other cost controls that came in a play. Can you just talk about anything that you guys did to drive additional efficiencies in sales and marketing in the quarter?
Josh James: At this point, we are only one quarter in from going live with snowflake and just doing the math, we still have seven more quarters to play the strategy out before I want our place in the world to be truly defined. Our ships are consumption-based pricing is also fundamental to capitalizing on this partner of.., and driving expansion with existing customers. This strategy goes beyond assigned consumption agreement. Our goal is more customers fully embracing Domo across their entire organization.
Speaker Change: Yeah, sure, in sales and marketing, I mean, a lot of that that we saw in Q2 has had count related. And so we've had, you know, some natural attrition and then we've been a bit active on some others and really trying to get that dialed in.
Speaker Change: You know, right now we're balancing that as we're moving into, you know, moving into this partner motion.
Speaker Change: and I think over time we expect to see that as a much more efficient.
Speaker Change: Sales Process, so you know that should bring our takdown naturally as we shift more into the partnership and the ecosystem. So I don't see that as sort of a one-time blip in terms of...
Josh James: Whether it's consumption contract or an enterprise wide license agreement with the data cap, we want to put our customers in a position where they can quickly achieve wall-to-wall adoption of Domo. The current impact the consumption has had on our customer retention. And again, for the Q2 consumption cohorts, we saw even better gross and net retention rates on a substantially larger renewal base than we did in T1. Today, we have over 45% of our ARR on consumption contracts and expect to achieve our goal of having a majority of our ARR on consumption by year ends.
Speaker Change: You know, efficiencies and cost reduction, so now that's said, you know, if we get a lot, a lot of leads and opportunities, you know, I think it'll, you know, commensurate with pro-rata at heads as we need them, but right now I think we're in a pretty good place.
Speaker Change: Got it, okay, thanks.
Derek Wood: Thank you, Derek.
Speaker Change: Our next question comes from Patrick Wal-Ravens with Citizens JMP, please stay your question.
Patrick Wal-Ravens: Oh, great. Thank you. And David, first of all, I really love working with you and I'm praying for your vision to stabilize and improve.
Josh James: Now let me remind you why transitioning to consumption is a key strategy for our business. It aligns realized value with price as it allows our customers to have company-wide exploration of our products with very little risk upfront. It makes it easier to work with partners. It removes hurdles that delay product-led growth and use case expansion. It protects our customer accounts as customers will now openly standardize on us, thereby limiting the number of accounts that have us for a few departments and a few of our competitors for other departments which is never as stable as we would like.
Patrick Wal-Ravens: Thank you for your time. So, yeah, it will. I believe it will. So number one, congrats on the refinancing.
Speaker Change: What can you tell us about the terms of the new loan and the covenant? Josh, you mentioned a couple quarters ago that you weren't happy with some of the other offers you had around.
Josh James: I'm around the COVID-19.
Speaker Change: So I'll take the point on the deal so we're able to extend it out from four years from closing so four years from August. And we think that gives us the kind of runway that we need to do what we want to with partners and see some of that success.
Speaker Change: and so we were able to bring the interest rate down a bit but we were able to bring the cash interest component down to what is it so far plus 300.
Josh James: It makes it easier to explore the full breadth of our platform to build use cases from actually using the product versus from a sales pitch. And it facilitates the sun setting of legacy competing solutions that our customers may still be using in various parts of their organization.
Speaker Change: So about eight and a quarter on cash interest and that's a considerable cash savings over where we have been and then we've got about 500 basis points of pick on top of that.
Josh James: A new multinational customer we acquired in Q2 described consumption as a no-brainer because instead of adopting Domo in one country, consumption facilitated a global rule out across six countries while setting them up for rapid expansion going forward. Another story from Q2 was with one of our earliest consumption customers. They were recently acquired by a much larger company that was a power BI shop and we were very much at risk of losing the customer.
Speaker Change: and that will be on file, many green will be on file, but those are the general terms.
Speaker Change: and Josh for you on the
Speaker Change: on the partnerships with the CDW and to the extent you can be more specific. I mean, snowflakes, you guys clearly have, dude.
Josh James: However, because that customer was on consumption, the acquiring company was able to explore Domo and quickly found that they were able to do things with analytics that they didn't think were possible. Now instead of canceling, we're exploring upsell opportunities.
Speaker Change: Well, can you name it?
Speaker Change: I mean, Databricks, that one public who are the ones that you can tell us who they are. Yeah, snowflake Databricks, Google, Oracle, IBM.
Speaker Change: Drainio, we're working with all of them. You know, they love cars all light.
Speaker Change: They're all live in one form or another. We start off with being able to read the data, then we can write the data, then we have magic.
Josh James: And our biggest deal of the quarter, which I mentioned in my introduction, is a great story about the opportunity created by our consumption model. It was a seven-figure upsell and an eighth-figure total contract value with a Fortune 500 company that originally chose Domo when they were searching for a partner that could meet the complex integration collaboration, and Security Needs of their multinational business a few years ago. We won the opportunity two years ago when the company's BI leadership recognized the range of sophisticated tools Domo offers for global enterprise businesses.
Speaker Change: Our magic ETL incorporated into their backend and being able to drive consumption in their backend.
Speaker Change: and leave the data on their back end. And as we kind of go through those steps, we get more and more appealing to them.
Speaker Change: Right now Snowflake is the furthest along and, you know, dear bricks.
Speaker Change: Big Query, I guess Amazon is well.
Speaker Change: Oracle IBM to all be in the next, you know, one, two months.
Speaker Change: So it's coming hot and heavy for sure and it's allowed us to start the conversation because it's just right around the corner, you know and again it's stuff that we've been working on for years and as we started seeing the traction that we were getting on the business side.
Josh James: It didn't take long before the team realized that those tools created benefits they hadn't experienced before. For example, they completed their first data migration from a legacy tool into Domo in just one week. They also quickly realized they could replace more expensive legacy technologies with Domo. In the two years since, they've applied those benefits broadly across the organization. What started as a use case for 300 analysts has expanded to more than 10,000 users across multiple use cases, including financial planning and analysis, sales forecasting, data science, and AI. Looking ahead, they have plans to expand to more than 50,000 users by the end of 2025.
Speaker Change: Excuse me, and with customers, and you know, one of the things that's really fun, we love gong around here and being able to leverage gong, you know, instead of having to go visit...
Speaker Change: A bunch of customers, you can listen to the gong calls instead of having to go and shadow a bunch of reps, you can listen to the gong calls. You can type keywords into the gong calls and one of our favorite things to do.
Speaker Change: is to type snowflake or data bricks or Google into gong and to see the frequency that those conversations are appearing and then to dive in and listen to how the reps are talking about those things.
Speaker Change: and here how we're being involved and incorporated into strategic conversations.
Speaker Change: I know that one of RJ's stated goals, who's now taking over CRO, is to make sure that every single deal we have.
Josh James: I just love this example because it puts the impact of our strategic priorities on full display and provides a blueprint of how consumption can transform the way Domo is adopted in an enterprise. We've gotten the doors and extremely innovative and collaborative customer with vast growth potential. Thanks to consumption, we got much earlier expansion to users across the organization. We were then declared as the global standard, and this customer now has a four-year term eight-figure total contract value.
Speaker Change: We have a partner in there, and I thought December from where Jeff was at as well.
Speaker Change: But this is going to be, you know, this is the flag that he's carrying and we're really excited about it because
Speaker Change: It does change the dynamic dramatically when it feels like you're on the team of everybody that's in there trying to pitch that customer and the most important team to be honest is that CDW. So we feel very optimistic about how things are going to evolve over the next couple quarters.
Speaker Change: Alright great, thank you both.
Josh James: This is actually the first eight-figure contract we've ever had. We've had larger annual customers, but this is the first eight-figure multi-year contract we've ever had. We believe they're still room to grow this customer. The speed and scope of expansion would have been terribly difficult, it's not impossible, with seat licenses.
Pat: Thank you, Pat.
Speaker Change: Thank you in our next question, comes from San Jit Singh with Morgan Stanley, please stay here.
Speaker Change: Yeah, hi, thanks for taking the questions in the third month at the top of the call.
Speaker Change: That's the data brick summit earlier this month and saw the demo present since the time at the demo booth and sounds like some siding development. I don't think the official part of partnership enough to do not stand, but certainly a lot of work you're doing with the data brick and certainly been a theme of this call.
Josh James: In summary, we're very excited about the traction we're seeing with partners and the customer growth we're seeing as a result of consumption and these partners. I'm extremely optimistic about the growth opportunities with these initiatives as the backdrop.
Speaker Change: When you look at what their product roadmap is, they do seem to want to lean into sort of the modern B.I. use case, you know, whether it's modern dashboards or...
Josh James: Now, before I turn things over to David, I want to let you know that as a result of some health issues that David has been experiencing over the last year, he has decided to transition to a different role in the organization. David joined Domo during a time of transition and he has been absolutely fantastic. I appreciate so much the contributions he's made over the past year and a half. While David will be transitioning out of the CFO role at the end of the third quarter, he'll be staying at Domo in the role of senior advisor to the executive team, where we will actively continue to leverage his background and experience going forward. Ultimately, I would be thrilled if David is able to join our board of directors when the time is right.
Speaker Change: We'll talk about this at the learning. The stuff that Domo has done historically the past.
Speaker Change: To what extent does, like, how is it through the, I guess, the company, how do you see them through the competitive elements as you partner with the CDW, like over time, are you fine with them?
Speaker Change: Taking maybe the BIEs case and you guys become the you know ETL matches with ETL layer. Just want to say through how you're speaking some of those co-authentician dynamics with the TWS.
Speaker Change: and the next episode of the show.
Speaker Change: Yeah, that's exactly right. Each of these relationships is a little bit different and yeah, one more than happy just to provide whatever it is that helps the customer get the solution that they need.
Speaker Change: You know, the CVWs are definitely focused on consumption of their data warehouse.
Josh James: Taking over in David's place, I'm happy to announce that Todd Crane, Domo's current senior VP of finance, will be assuming the role of CS... Todd has a wealth of experience at Domo and understands the financial dynamics of our business as well as anyone. He has been here for nearly a decade and held a number of finance leadership rules over that time.
Speaker Change: and there's something that have more of an AI focus.
Speaker Change: and in that case, we've had customers tell us that we had one recently told us that besides Databricks, we had the best AI strategy solution and products to work at the native scene. And so you'll write in the middle of these conversations.
Josh James: As became apparent that David's eye surgeries were not as successful as he hoped and that his time in the CFO seat might become shorter than we had anticipated. We have had Todd work very closely with David in all aspects of the CFO function. For meetings with investors, to meetings with our board, to refinancing our debt, to being an active member of the executive team. During this time and even before that, Todd and I have worked very closely and I have often expressed to him that I would love to see him as our CFO someday.
Speaker Change: and one thing that the CDWs are not focused on is
Speaker Change: How do you distribute all this information out to the end users in the organization? What's all the governance around all that data? They want governance around AI data, but what's all the governance about who gets to see what?
Speaker Change: What's the governance around the alerts that happen? What's the governance around when police will off?
Speaker Change: How do you make sure that I don't have access to all that information?
Speaker Change: How do you take that data and extend out into an app? How do you make that app that show up on someone's phone?
Speaker Change: and that's the stuff that we've been doing for 10 plus years.
Speaker Change: and so all of these people recognize that we really are, you know, extremely complementary.
Josh James: I'm truly excited to have Todd's experience and insight as the position Domo to get back to growth. I think it's important to note that Todd has broad support from our executive team and from our board as he steps into this role.
Speaker Change: and your questions right on because, you know, the puzzle piece fits a little bit differently.
Speaker Change: for each ACDW, but once we're tied in and we hydrate.
David Jolley: And with that, I'll hand it over one last time to Mr Jolley. David?
Speaker Change: There's CDW, they just get really excited because the time to value is quick as with us. Do you want to sign up for five vendors to help you get your solution along with a CDW or just us from a CDW? And we saw that...
David Jolley: Thanks, Josh. Many of you that know me know that I've been experiencing issues with my vision over the past year or so. Unfortunately, I've now lost over 90% of the vision in my right eye and after a bunch of surgeries, I've recently been informed by my doctors that it isn't going to get much better. As a matter of fact, with the retina issues I've had in the other eye, I've been told that there's a higher than normal likelihood that my other eye will lose vision as well. The loss of vision has made it challenging to do my day-to-day duties as CFO without serious eye strain and headaches.
David Jolley: After a lot of personal reflection and some discussions with Josh, I've decided that it's time for me to move out of the day-to-day role of CFO so I can enjoy more time with my family while I still have at least half my vision. I hope to not lose the other half, but if I do, there's still a lot of stuff I want to see before that happens. Now that said, I am not leaving Domo and I'm grateful that Josh has given me an opportunity to stay involved in a senior advisory role.
Speaker Change: Hi!
Speaker Change: I think the other thing is just seeing that...
Speaker Change: You know, these CDWs are mostly excited about.
Speaker Change: who can help them build solutions and apps as well.
Speaker Change: and that's another area where, you know, we've been talking about apps for seven eight years, been building apps for seven eight years. And one of those examples that we highlighted in the, in the, in the prepared remarks.
Speaker Change: We talked about a customer that in the last two years has gone from zero users to 10,000 users, kicked out all the other legacy vendors, you know, is multi-million dollar customer for us, eight-figure contract and is planning on moving to 50,000 users.
Speaker Change: That's not on the road map for any CDW, but the CDW is love it because when you've got 50,000 people looking at the data that's in the CDW, it makes that data much more valuable and there's a lot of people driving consumption. So that's kind of how we've get into it. That's a very stupid question though.
David Jolley: I'm excited for Todd to be stepping into the CFO role and have the utmost confidence in him given his experience and deep financial knowledge of Domo. I fully intend to see this turnaround through, no pun intended, and I'm looking forward to a very long relationship with the company.
Speaker Change #100: Thank you for sharing the James, that's what I'm talking about.
David Jolley: Now on to our Q2 results. While we're still seeing a challenging market environment, we slightly exceeded our revenue guidance. Total revenue was 78.4 million a year over your decrease of 2%, subscription revenue represented 90% of total revenue and was flat year over year. Q2 Billings were 68.6 million. As discussed, we had one large customer that we agreed to quarterly billing terms in exchange for a longer contractual term. Had we built this customer annually in advance, our Billings would have met our guidance.
Speaker Change #101: Thank you. In our next question comes from Eric Martinute with Lake Street Capital Market to please the question.
Eric Martinute: Yes, I'm best wishes on your health care journey, David, certainly disappointed to hear your moving on, but I know you're still being around in an advisory role, so...
Eric Martinute: Good afternoon, David. I appreciate it very good.
Eric Martinute: and David Jolley, Joshua James, and David Jolley,
Eric Martinute: My questions here. So given that the Billings' expectation, I guess the...
David Jolley: A highlight in the quarter was our gross retention of 88% at the high end of our guidance and up from 83% in Q1. As a reminder, our gross retention is a measure of in-quarter retention while our net retention is based on our ARR retained year over year. Our year over year net retention was 90% on an in-quarter basis, our net retention was closer to 100%. For the consumption cohort, our gross retention was 98%, and our net retention was 108%.
Speaker Change #103: It's a pretty substantial reset versus what you guys were thinking I know when we entered
Speaker Change #104: You know, coming out of Q1, we were expecting to see growth in the buildings in the back half of the year. Obviously, you guys are having terrific traction with consumption-based pricing. You're having good...
Speaker Change #105: Traction with the C.G.W. Parker shifts and that is, along.
Speaker Change #106: That is the long play there, but it feels like more of a dramatic reset for the back half of the year that I was expecting. Just wondering, you know, what is the key one or two reasons for that reset? Was it just a little bit closer to the end? We've got a better feel, or is there something else?
David Jolley: 18% up from Q1 on a substantially larger renewal base. As we mentioned last quarter, this is not something we plan to disclose regularly, but think it's important to highlight this quarter as the consumption customer base performs substantially better than the rest of our business, and it will be 50 to 60% of the overall business by the end of the year. I'm also very pleased that we were refinanced our debt to extend the maturity date to August 2028 and reduced our overall interest rate and our cash interest rate. We believe this provides improved financial flexibility as we pursue our growth objectives.
Speaker Change #107: to be thinking about here.
Speaker Change #108: Yeah, part of it is that we're a little close to the end and we have a better feel, but the reason for that is as you're describing.
Speaker Change #109: The beginning of the year, we had zero visibility into how this CDW play was going to go. Zero.
Speaker Change #109: and there's not a soul over here at the company that doesn't see it every day. I can't remember any time in our history when people have been this excited to be here.
David Jolley: Now let me review some of the other Q2 metrics. Current RPO was 225.4 million and as a reflection of our customers standardizing on the Domo platform and making longer term commitments. Our total RPO was importantly up year over year to 358.9 million as of July 31st, 2024. Coincidentally, this improvement and longer term contracts will also help us improve retention. Also in the Good News Department, our average contract duration for deals close in Q2 was up more than 10% year over year.
Speaker Change #109: and it's primarily because of what we're seeing in the ecosystem, with how all of these partners are like with open arms.
Speaker Change #109: Bring this in. We've got one partner that we've been working on in agreement for the last three months, negotiating different components of it, and all of a sudden they call us in a panic.
Speaker Change #109: because they have a customer who's got 800 stores, and they can't close it without us being in there, and we're thrilled by that. That's exactly the value that we want to provide to our partner. But seeing the customer solution.
David Jolley: On a dollar weighted measure, we continue to have approximately two thirds of our customers under multi-year contracts. Multi-year contracts benefit us in a number of ways, particularly on the retention front. Moving on to margins and profitability, our subscription gross margin was 82.4%. Because we believe consumption will better line revenue with costs, we expect gross margin to stabilize over the next few quarters at about the current level and then to improve to the mid 80s longer term.
Speaker Change #109: and the Dollars associated with that.
Speaker Change #109: Driving these relationships.
Speaker Change #109: Versus some press releases that are going out because we're trying to align two brands. There's nothing to do with that. Customers are driving this.
Speaker Change #109: and that's really exciting. So yeah at the beginning of the year, we had no idea how that was going to turn out. We thought we were just going to pull out a long, build our pipe, watch the conversion funnel, and it's going to spit out a billing number.
David Jolley: Non-gap operating margin was 2.5% as we strive to keep our costs in line with our revenue. Non-gap net losses 2.7 million compared to 0.8 million a year ago. Net loss per share was 7 cents based on 38.4 million weighted average shares outstanding. Because we're in net loss position, all share and per share amounts are the same for basic and deluded. In Q2, adjusted free cash flow was negative 5.6 million resulting in a cash balance of 55.7 million.
Speaker Change #109: and as soon as we started seeing traction, we started reallicating assets and...
Speaker Change #110: People, and, you know, you've seen that with the announcement that we made today.
Speaker Change #110: with RJ, you know, who was running ecosystem and...
RJ: was a part of the sales organization, but not dominating the sales organization, whereas now we need this to be our entire sales organization.
RJ: and so we've reallocated salespeople that had a quota and we said, you know, we need to go invest over here and develop these relationships with all these different partners. And that's not optimizing Q3 and not optimizing Billings for Q4.
David Jolley: We previously commented on our free cash flow objectives for the year noting that there would be variability from quarter to quarter and we will continue to manage our cost structure and cash balance in response to our financial performance and take action as necessary.
RJ: But it's also not trying to optimize five years down the road. It's just optimizing next year. And that will also optimize five years down the road. So I think that was the biggest piece, it's just as we've seen.
David Jolley: Now let me talk about guidance. Looking forward for Q3, we're expecting non-gap billings of 70 to 75 million. We expect Q3 gap revenue to be in the range of 77 to 78 million. We expect non-gap net loss per share of 14 to 18 cents, assuming 38.9 million weighted average shares outstanding. For the full year, we expect billings of approximately 305 to 315 million and gap revenue of 313 to 315 million. For the full year, we expect non-gap net loss per share basic and deluded of 69 to 77 cents.
RJ: Such encouraging signs with the ecosystem.
RJ: We decided to redeploy assets to places where we think we're gonna get a much better bang for our buck.
RJ: and a much better mid-term, long-term result and so in conjunction with that and as we've gotten closer we're like yeah we should probably bring this number into the range that we described and
Speaker Change #112: Wait, you know, at the same time when we haven't been this thrilled, I haven't been this confident about our business since we started, I haven't seen the past.
David Jolley: This assumes 38.5 million weighted average shares outstanding, basic and deluded. Our guidance range reflects the variability that may result from making decisions that will benefit longer-term growth at the expense of short-term billings as we did this quarter with the eight-figure contract. We believe the longer-term opportunity for growth lies in the ecosystem and we're confident we're on the right path. Path. Our customers love the product. We've got a durable business with close to 300 million in annual recurring revenue, and that's a substantial foundation from which to build. We're executing on our partner strategy, and what's going to take more than a quarter or two to meaningfully impact our financial results, we believe that growth will follow.
Speaker Change #112: You know, it was kind of like more, we're going to figure it out one way or the other. I know the people around us will figure it out one way or the other. To Big Market we'll figure it out one way or the other. And finally we're like, oh, we figured it out. There's the pass.
Speaker Change #112: Let's go and that's what our call today and our guidance reflects.
Speaker Change #113: Okay, and then just on the Q3 Outlook given the revenue range and the loss per share range. The revenue range, I mean, we're kind of within spin distance of where we were in Q2. So just curious to know why the the 7th cent, 9-dap loss in Q2, why that becomes kind of midpoint 16 cents.
Josh James: With that, let me turn it back to Josh for some closing comments. Thank you, David. As you know, we've been shifting our efforts and investment over the last several quarters towards ecosystem led growth. While those efforts are not yet making a market difference in our reported financial metrics, we are beginning to see promising early results. For example, just this last week, we had a new partner bring us into a deal on Friday and it closed the following Monday.
Speaker Change #114: and Q3, where our expenses may be creeping up, Q3 versus Q2.
Speaker Change #115: You know, I think in response to that, in Q2, we've certainly been trying to monitor and sort of moderate our costs.
Speaker Change #116: Just based on where we're at, where there are buildings in cash and everything and so
Josh James: This deal never even hit our pipeline. It went from nothing to closed in one business day. This sort of opportunity would not be possible without our ecosystem partner strategy, and as the type of signal that gives us great confidence in the strategy.
Speaker Change #116: You know, we'll continue to do that in the Q3 and so we've got some backfills that we want to do in Q3.
Speaker Change #116: with some of our future trips, but it's just, you know, it's a process going forward and we'll continue to, you know, kind of moderate those costs and make sure that we have alignment between our buildings, our revenue and our, our cost structure as we go through Q3 and Q4.
Josh James: To accelerate us being even more tightly aligned on our ecosystem-oriented strategic growth initiatives, I'm excited today to announce some natural progressions taking place in our sales organization, which will better position us for future success.
Speaker Change #117: We got it. Thanks for taking my questions.
Speaker Change #118: Thank you.
Speaker Change #119: Thank you, and ladies and gentlemen, there are no further questions at this time. So with that, we will conclude today's call. Thank you all for your participation. I'll part it. May now disconnect.
Josh James: RJ Tracy, our SVP of Strategic Development and Channel, has been leading our ecosystem in consumption efforts.
Josh James: Given the early successes there, as well as the fact that RJ has been one of our most successful leaders to date over the last 10 years, we see it as a natural evolution to move RJ into the expanded role of CRO. RJ is absolutely the right individual to take on these elevated responsibilities, align our strategic initiatives between partner and sales and lead us back to growth.
Josh James: In conjunction with that promotion, I'm also very excited to announce that Jeff Scalzen is moving into the role of president of worldwide sales and field operations. I've been working with Jeff for the better part of 30 years. He's a strong leader and was the one who hired RJ and identified him as the next CRO. The CRO responsibilities will roll up to Jeff and he will continue to own international growth, while supporting our ecosystem initiatives, consumption conversion, and mentoring RJ throughout the process.
Josh James: As we look forward, I believe that leveraging partnerships in the broader ecosystem is the best path to return us to growth and I'm excited to see the impact of these initiatives and the broad, passionate, innovative, and dedicated efforts of our entire team at Domo.
Unknown Executive: And with that, we will open up the call for questions.
Operator: Operator?
Derek Wood: Thank you, and we'll now conduct our question and answer session. If you would like to ask a question, press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two.
Operator: If you would like to remove your question from the queue, for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Derek Wood: And our first question comes from Derek Wood with TD Cowan. Please take the question. Great. Thanks for taking my question. Congrats on the P&L performance and David, it's been great to work with you. Best of luck in tackling your health challenges and Todd, great to reconnect Congrats on the new role.
Josh James: Joshua, I'll start with you. You indicated that you're now having more strategic conversations with customers given out of your partnership status with CDWs. Can you drill down a little more on why this helps change the perception of Domo? And I know you guys have kind of always tried to evolve how you engage with CIOs. Is this helping you strengthen the partnership on the CIO front? Yeah, for sure it helps to address the relationship with the CIOs.
Josh James: In many cases, we walk in and we want to talk about the broader data strategy, but we haven't historically been the vendor, especially in the enterprises that they want to have that conversation with the CDWs on the other hand, that is where they're centering those conversations. And what we've found is often we go in and we think that we're competing against just one of our smaller competitors, or against somebody that's focused just on visualization, and we think that's the competition.
Josh James: The reality is the competition might be a snowflake plus their integration partner plus their, you know, their ecosystem of partners who are all in there selling together. And we don't realize that there's a selling motion that is four or five times the effort than the one that we're putting in. So being aligned with with the snowflakes and Databricks of the world, we think it's going to have a meaningful impact, you know, as justified by these these experiences that we were describing including the one where we got kicked out early on.
Speaker Change #119: [inaudible]
Josh James: And we got brought back in because it wasn't even snowflake, but it was the integration partner of snowflake who was installing snowflake said to the customer, these other choices that you're making to integrate with snowflake, they're not the right choices, Domo's the right choice. And, you know, we got the phone call, we got the deal. So it does change things dramatically. The CDWs are definitely a big strategic component of every CIO's data strategy.
Josh James: And we're just excited to be so broadly accepted now from the CDWs. I mean the excitement is palpable. The fact that we talked about five sales teams being being educated and five more coming on. Those aren't the entire sales team. That's not how it happens. It's, hey, here's the east, you know, the eastern mid-market sales team, we're having an offsite. We want you guys to come in and do a training. And it kind of happened one by one and you have to build those relationships.
Speaker Change #119: [inaudible]
Josh James: But then as you develop those relationships, we're starting to see reps that you went through a training, they call us, they dip their toe in the water, they brought us into a deal, we close a deal, they call us immediately the next day for being introduced into another deal. So that's the kind of attraction and progression that we're getting. It's just a very different cack than, you know, spend more money on Google to put in your pipeline to go in with, you know, by yourself and try to compete and create the value proposition. It's much easier when you have four or five other people touting what you can do for those customers. So it's been, it's been just a totally different experience and one that we're all really excited about.
Speaker Change #119: [inaudible]
Josh James: Yeah, I mean, it sounds like the partnership kind of well beyond just the CDWs, but with a lot more the ecosystem partners in there. And I guess on that, I mean, going from zero to 60 deals in the pipeline with partners, how are you thinking about the time frame and going from pipeline build to deal closure? A kind of sensor color on kind of what average deal sizes could look like or how many quarters are you know that they start seeing more conversion on those deals?
Josh James: Yeah, there's nothing more than than that we want than being able to say, you know, two quarters out, you're going to start seeing an uptick in buildings. We want to say it so desperately, but we just we still need some more data. In terms of the deal size, we do have like you referenced some of these other partners in the ecosystem, not just the CDWs. It's extremely defensible partners. You know, we go in, we help them create a joint solution.
Speaker Change #119: [inaudible]
Josh James: They've got 500 customers, 2000 customers, 20,000 customers, and we've got a joint offering. In some of those cases, you know, the the the ASP might be smaller, but then again, you know, in other cases, it's higher than our average deal. So I think overall, it'll it'll probably average out. We also have customers that are coming to us and saying, can we work on a premium type solution for 8,000 customers that we can introduce, introduce this to next quarter?
Josh James: You know, and we're just looking at our jobs because it just that's exactly the kind of relationship that we want because one of the challenges that you have is how does that customer get that first bit of value? What's the time to value for having that integrated data visualized, showing up in executives in on executives phones in their apps, getting alerts, and that that first bit of data connection is always hard.
Josh James: We have a partner, they've got the data, you do the integration, they were going out to 8,000 customers. We're just really excited about what's going to happen as we start integrating with some of these types of partners as well, beyond the CDWs.
David Jolley: Yeah, if I could squeeze one more in for David, the sales and marketing expenses dropped down quite a bit. I know there's some Delma blusa expenses that come out, but it seems like perhaps there were other cost controls that came into play. Can you just talk about anything that you guys did to drive additional efficiencies in sales and marketing in this quarter? Yeah, sure. In sales and marketing, I mean, a lot of that that we saw in Q2s had count related.
David Jolley: And so we've had some natural attrition and then we've been a little bit active on some others and really trying to get that dialed in. It's you know, and right now we're balancing that as we're moving into moving into this partner motion. And I think over time, we expect to see that as a much more efficient sales process. So you know, that should bring our countdown naturally as we shift more into the into the partnership and the ecosystem.
David Jolley: So I don't I don't see that as sort of a one-time blip in terms of, you know, efficiencies and cost reduction. So now now that said, you know, if we get a lot a lot of leads and opportunities, you know, I think it'll, you know, come measure will pro-rata ad heads as we need them. But right now, I think we're in a pretty good place.
Derek Wood: Thank you, Derek.
Patrick Walravens: Our next question comes from Patrick Walravens with Citizens' JMP. Please state your question. Oh, great. Thank you. And David, first of all, I really love working with you and I'm praying for your vision to stabilize and improve. Appreciate that, Paul. So, yeah, it will. I believe it will.
Patrick Walravens: All right, so number one, congrats on the refinancing. What can you tell us about the terms of the new loan and the Covenant? And Josh, you mentioned a couple quarters because you weren't happy with some of the other offers you had around the Covenant. Yeah, so I'll take the point on the deal. So, you know, we're able to extend it out from four years from closing, so four years from August. And we think that gives us the kind of runway that we need to do what we want to with partners and see some of that success.
Patrick Walravens: And so, we were able to bring the interest rate down a bit, but we were able to bring in the cash interest component down to what sofa plus 300. So, about eight and a quarter on cash interest, and that's a considerable cash savings over where we have been. And then we've got about 500 basis points of pick on top of that. And that'll be on file.
Josh James: I mean, the agreement will be on file, but those are the general terms. Okay, great. And then Josh, for you on the on the partnerships with the CDW, and to the extent, you could be more specific. I mean, snowflakes, you guys clearly have, do you, who else can you name it? Do you have, I mean, Databricks? That one, public. Who are the ones that you can't tell us who they are? Yeah, snowflake Databricks, Google, Oracle, IBM, Dremio, we're working with all of them.
Josh James: You know, they love all life. They're all live in one form or another. You know, we start off with being able to read the data, then we can write the data, then we have magic, our magic ETL incorporated into into their back end and being able to drive consumption on their back end and leave the data on their back end. And as we kind of go through those steps, we get more and more appealing to them.
Josh James: So, right now snowflake is the furthest along. And, you know, Databricks, big query, I guess Amazon as well, Oracle, IBM, they'll all be in the next, you know, one, two months. So, it's, it's, it's coming hot, hot and heavy for sure. And it's allowed us to start the conversations because it's just right around the corner. You know, and again, it's stuff that we've been working on for years. And as we started seeing the traction that we were getting on the business side, excuse me, and with customers.
Josh James: And, you know, one of the things that's really fun, we love GONG around here and being able to leverage GONG. You know, instead of having to go visit a bunch of customers, you can listen to the GONG calls. Instead of having to go and shadow a bunch of reps, you can listen to the GONG calls. You can type keywords into the GONG calls. And one of our favorite things to do, is to type snowflake or data bricks or Google into GONG and to see the frequency that those conversations are appearing and then to dive in and listen to how the reps are talking about those things and to hear how we're being involved and incorporated into strategic conversations.
Josh James: And I know that, you know, one of RJ's stated goals, who's now taking over CRO is to make sure that every single deal we have, you know, we have a partner in there. And that's not dissimilar from where Jeff was at as well, but this is going to be, you know, this is the flag that he's carrying and we're really excited about it because it does, it does change the dynamic dramatically when it feels like you're on the team of everybody that's in there trying to pitch that customer and the most important team to be honest is that is that CDW.
Josh James: So we feel very optimistic about, you know, how things are going to evolve over the next couple of quarters.
Patrick Walravens: All right. Great. Thank you both. Thanks, Pat.
Sanjit Singh: Thank you. And our next question comes from Sanjit Singh with Morgan Stanley. Please state your question. Yeah. Hi. Thanks for taking the questions. Sorry, Mr. Top of the call. That's a data brick summit earlier this month and saw the Domo president spend some time at the Domo booth and sounds like some, you know, some exciting developments. I don't think the official sort of partnership enough to not stand, but certainly a lot of work you're doing with a state of written, certainly been a game of this call.
Sanjit Singh: When you look at what their product real back is, they do seem to want to lean into sort of the modern BI use case, you know, whether it's modern dashboards or real time business learning. The stuff that Domo has done historically in the past, to what extent does like how is sort of the, I guess, the competitive, how do you see the competitive elements as you partner with the CDW, like over time?
Sanjit Singh: Are you fine with them taking maybe the BI use case and you guys become the, you know, ETL magic ETL layer. I just want to see through how you're speaking from those co-authenticians dynamics with it with the TVW. Yeah, that's exactly right. Each of these relationships is a little bit different and yeah, we're more than happy just to provide whatever it is that helps the customer get the solution that they need.
Sanjit Singh: You know, the CDWs are definitely focused on consumption of their, their data warehouse and there's some that have more of an AI focus. And in that case, we've had customers tell us that we had one recently tell us that, you know, besides Databricks, we have the best AI strategy solution and products to market than they had seen. And so, you know, right in the middle of these conversations and, you know, one thing that these, the CDWs are not focused on is, how do you distribute all this information out to, you know, the end users in the organization?
Sanjit Singh: What's all the governance around all that data? They want governance around AI data, but what's all the governance about who gets to see what? What's the governance around the alerts that happen? What's the governance around when employees roll off? How do you make sure they don't have access to all that information? How do you take that data and extend out into an app? How do you make that app that show up on someone's phone?
Sanjit Singh: Yeah, that's the stuff that we've been doing for 10 plus years. And so, all of these people recognize that we, we really are, you know, extremely complimentary. And your question is right on because, you know, the puzzle piece fits a little bit differently for each CDW. But once we're tied in and, you know, we hydrate their CDW, they just get really excited because the time to value as quickest with us. Do you want to sign up for five vendors to help you get your solution along with the CDW or just us in the CDW?
Sanjit Singh: And, you know, we saw that. I think the other thing is just seeing that, you know, these CDWs are mostly excited about who can help them build solutions and apps as well. And that's another area where, you know, we've been talking about apps for seven, eight years, been building apps for seven, eight years. And one of those examples that we highlighted in the, in the prepare remarks, we talked about a customer that in the last two years has gone from zero users to 10,000 users, kicked out all the other legacy vendors, you know, is multi-million dollar customer for us, eight figure contract, and is planning on moving to 50,000 users.
Sanjit Singh: That's not on the roadmap for any CDW, but the CDWs love it because when you got 50,000 people looking at the data that's in the CDW, it makes that data much more valuable. And there's a lot of people driving consumption. So that's kind of how we fit into that. That's a very astute question, though. Thank you, appreciate it James, thanks for having me. Thank you.
Eric Martinuzzi: And our next question comes from Eric Martinuzzi with Lake Street Capital Markets, please state your question. Yeah, best wishes on your health care journey, David. Certainly disappointed to hear you're moving on, but I know you're still going to be around in advisory roles, so. We appreciate it. My questions here. So given that the building's expectation, I guess it's a pretty substantial reset versus what you guys were thinking, I know when we entered.
Eric Martinuzzi: You know, coming out of Q1, we were expecting to see growth in the buildings in the back half of the year. Obviously, you guys are having terrific traction with consumption based pricing. You're having good traction with the CDW partnerships and that is along. That is the long play there, but just it feels like more of a dramatic reset for the back half of the year than I was expecting. Just wondering, you know, what is I guess the key one or two reasons for that reset was to just say we're a little bit closer to the end.
Eric Martinuzzi: We've got a better feel or is there something else to be thinking about here? Yeah, part of it is that we're a little closer to the end and we have a better feel, but the reason for that is, you know, as you were describing the beginning of the year, we had zero visibility into how this CDW play was going to go zero. And there's not a, there's not a soul over here at the company that doesn't see it every day.
Eric Martinuzzi: I can't remember anytime in our history when people have been this excited to be here. And it's primarily because of what we're seeing in the ecosystem with how all of these partners are like with open arms bringing us in. And how, you know, we've got one partner that we've been working on an agreement for the last three months negotiating different components of it. And all of a sudden they call us in a panic because they have a customer who's got 800 stores and they can't close it without us being in there.
Eric Martinuzzi: And we're thrilled by that. That's exactly the value that we want to provide to our partner. But seeing, you know, the customer solution and the dollars associated with that, driving these relationships versus some press releases that are going out because, you know, we're trying to align to brands. There's nothing to do with that. Customers are driving this and that's really exciting. So yeah, at the beginning of the year, we had no idea how that was going to turn out.
Eric Martinuzzi: We thought we were just going to pull out along, build our pipe, watch the conversion funnel, and it's going to spit out a billing number. And as soon as we started seeing traction, we started reallocating assets and people. And you know, you've seen that with the announcement that we made today with RJ, you know, who was running ecosystem and was, you know, a part of the sales organization, but not dominating the sales organization.
Eric Martinuzzi: Whereas now we're like, we need this to be our entire sales organization. And so we've reallocated sales people that, you know, had a quota. And we said, you know, we need to go invest over here and develop these relationships with all these different partners. And that's not optimizing Q3 and not optimizing billing for Q4. But it's also not trying to optimize five years down the road. It's just optimizing next year. And that will also optimize five years down the road.
Eric Martinuzzi: So I think that was the biggest piece is just as we've seen such encouraging signs with the ecosystem. We've decided to redeploy assets to places where we think we're going to get a much better bang for our buck and a much better midterm long term result. And so, you know, in conjunction with that. And as we've gotten closer, we're like, yeah, we should probably bring, bring this number into, you know, into the range that we, that we described.
Eric Martinuzzi: And, you know, at the same time, we haven't been this thrilled. I haven't been this confident about our business since we started. I haven't seen the past, you know, it was kind of like more, we're going to figure it out one way or the other. I know the people around us will figure it out one way or the other to big market will figure it out one way or the other. And finally, we're like, oh, we figured it out.
Eric Martinuzzi: There's the path. Let's go. And, you know, that's what our call today and our guidance reflect. Okay, and then just on the Q3 outlook, given the revenue range and the loss per share range, the revenue range, I mean, we're kind of within spend distance of where we were in Q2. So, just curious to know why the 7.9 debt loss in Q2, why that becomes going to midpoint 16 cents in Q3, where are our expenses maybe creep in the Q3 versus Q2.
Eric Martinuzzi: You know, I think in response to that, in Q2, we certainly, you know, have been trying to monitor and sort of moderate our costs just based on where we're at with our billings and cash and everything. And so, you know, we'll continue to do that into Q3. And so, we've got some back bills that we want to do in Q3 with some of our Q2 at risk, but it's just, you know, it's a process going forward and we'll continue to, you know, kind of moderate those costs and make sure that we have alignment between our billings, our revenue, and our cost structure as we go through Q3 and Q4. Yeah, thanks for taking my questions. Thank you.
Operator: And ladies and gentlemen, there are no further questions at this time. So, with that, we will conclude today's call. Thank you all for your participation. All parties.