Q3 2025 Domo Inc Earnings Call
Greetings welcome to demos Q3 fiscal year 2025 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Please note that this conference is being recorded.
Speaker Change: I will now turn the conference over to your host Peter Lowry, Vice President Investor Relations. Thank you you may begin.
Speaker Change: Good afternoon on the call today, we have Josh James our founder and CEO and Todd trained our Chief Financial Officer, I'll lead off with our Safe Harbor statement and then onto 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.
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Speaker Change: Statements made on this call include forward looking statements related to our business under federal Securities laws.
Speaker Change: These statements are subject to a variety of risks uncertainties and assumptions.
Speaker Change: These include but are not limited to statements about our future and prospects, our financial projections and cash position.
Speaker Change: Statements regarding the potential of our consumption model.
Speaker Change: Statements about our sales team and technology are expectations for new business opportunities transactions and initiatives.
Speaker Change: Statements regarding their channel of communication and the upcoming events.
Speaker Change: Statements regarding the potential of artificial intelligence and its impact on our business.
Speaker Change: And statements 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 the SEC.
Speaker Change: In particular today's press release, our most recently filed annual report on Form 10-K, and our most recently filed quarterly report on Form 10-Q.
Speaker Change: 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-GAAP financial measures, which we believe are useful as supplemental measures.
Speaker Change: Abdominal performance.
Speaker Change: Other than revenue unless otherwise stated we will be discussing our results of operations on a non-GAAP basis. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results.
Speaker Change: Please refer to the tables in our earnings press release for a reconciliation of our non-GAAP financial measures to their most directly comparable GAAP measure, which we have posted to the Investor Relations section of our website at them all investors dotcom.
Speaker Change: With that I'll turn it over to Josh Josh.
Josh James: Hello, everyone and thanks for joining us on the call today.
Josh James: In Q3, we exceeded our billings revenue and non-GAAP EPS guidance.
Josh James: And I'm, particularly excited to report that we grew our subscription or P. O by 3% year over year, and our subscription or a P. O beyond 12 months grew 14% year over year.
Josh James: This is an exciting celebration from last quarter and from Q3 last year, which we believe is a leading indicator of progress from our strategic priorities.
Josh James: An astoundingly in just one quarter.
Josh James: Across our entire book of business.
Josh James: Our average contract length increased by 13%.
Josh James: Demonstrating the long term commitments, our customers are making to domo.
Josh James: When you see contract links increase across the entire customer base.
Josh James: R P O increase and our customers, making strategic long term commitments in a difficult macro environment.
Josh James: It truly highlights the strength of the relationships, we have with our customers.
Josh James: In fact, we now have 19 customers with over 5000 unique users and over 100 customers with over 1000 unique users further reinforcing this point.
Josh James: It seems like the headwinds we have navigated are shifting to our backs and filling our sales.
Josh James: You are more confident than ever that our continued focus on ecosystem led growth consumption pricing and AI is absolutely the right direction for Domo.
Let me give you more detail on the promising momentum we saw with ecosystem partners in Q3.
Josh James: Although nascent or partner source contribution to billings was up more than 20% from Q2.
Josh James: As a sign of things to come the number of partner opportunities in our current North American pipeline is up more than 90% compared to Q2 compared to Q2.
Josh James: Almost half of our partner sourced new logos were both created and closed in Q3.
Josh James: Overall partner sourced new logos closed in 80 days versus over 100 days for our non partner sourced deals.
And the close rate for these deals was also much higher than for non partner sourced deals.
Josh James: We're seeing more and more signal a partner success throughout the business and we're finding our AI solutions make domo and even more compelling partner thinks to how quickly. We can help our shared customers turn AI and data into products that deliver measurable returns.
Josh James: We've been highly attuned to the lead flow coming in from partners.
Josh James: And he has been picking up considerably.
Josh James: A few weeks ago I asked the team how many partner leads we had received that week.
Josh James: He told me too.
Josh James: And then the following week I asked the same question.
Josh James: The answer was six.
Josh James: Then the next week same question and.
Josh James: And they reported 11 partner sourced leads including six from just one CD partner alone.
Josh James: With that same CD partner CDW partner, we've identified over 250 common customers and have over 150, new logo opportunities in our pipeline.
Josh James: We also have closed 615 deals that we jointly sold and all of that since we kicked off the partnership less than six months ago.
That's just one of our partners. We currently have close to 400 partner related opportunities in our pipeline representing over 80 unique partners.
Josh James: 30 of which are new par.
Josh James: Partners in the last six months.
Josh James: As we look at our partner ecosystem, we're seeing higher average contract sizes. As these tend to be larger enterprise customers. The deals are bigger faster convert at a higher percentage and are also higher quality.
By virtue of the way that they were sourced we believe they will be more stable and retain at a higher rate.
Josh James: We are continuing to invest in our partnership strategy to capitalize on this opportunity and have redirected sales capacity from our traditional go to market motion.
Josh James: This means we may see some impact on our near term billings, but ultimately it would be irresponsible of us to ignore the opportunity to build a durable repeatable efficient growth engine, which is clearly in the best long term interest of our company and shareholders.
Josh James: As we said last quarter, we are more focused on optimizing for next year and beyond versus optimizing for last quarter and this quarter.
Josh James: We don't know precisely when next year all of this is going to start having a meaningful impact on our numbers, but the momentum is very real as I indicated it's happening now and we couldnt be more excited about it.
Josh James: By the time, we report earnings for Q4, we think that will have a much better feel for how and when we'll see this partner momentum play out specifically and we look forward to giving you that color an update.
Josh James: I'm also happy to report that we reached our goal of converting the majority of our customers to consumption by the end of the year a quarter early.
Josh James: In Q3, 100% of our new logo deals were structured as consumption contracts, which now represent 55% of our a R. R.
This is almost an unbelievable transformation of our business model that in the little over 18 months, we've gone from 5% to what we expect to be over 60% by year end.
I'd like to congratulate the entire domo team on their trainings and efforts and look forward to seeing this approach 90, 90% over the next year.
Josh James: We discussed this on our Q2 call, but as a reminder, consumption aligns pricing with value delivered facilitates more rapid adoption allows wider deployment.
Josh James: Encourages cause customers to include Domo as part of their global data strategy enables product led growth and aligns with our partners pricing models.
Josh James: We've definitely seen a recent trend of consumption encouraging vendor consolidation in our favor.
Josh James: Consumption, where naturally exposes customers to our entire platform, which is much broader than many realize once they see everything we can do they often discover our solutions are superior to their existing vendors, what's more the transparency of consumption lets them quickly do the math and see the domo is a more cost effective solution compared to some of the other vendors.
Josh James: So with value and performance landing on our side they replaced their other solutions with Domo.
I'll share a couple of times, we saw this vendor consolidation in Q3.
Josh James: First was the significant upsell with a fortune 500 entertainment company that migrated to consumption last year. Thanks to the influence of a new CDW partner and the appeal of increased product access as we rollout our AI roadmap.
Josh James: As a result.
Josh James: We are helping this customer G vendor consolidation as they now can replace hundreds of data analysts seats from a legacy competitor and we're in discussions about replacing another competitor in the different divisions, as well, which started as a marketing use case and under a contract that was under.
Josh James: Under six figures has now grown tenex across multiple use cases.
Josh James: Another example from a significant legacy replacement happened with a retail analytics company that initially chose domo to gain insights about consumer behaviors preferences and trends.
Josh James: After seeing what was available under consumption. The company converted its contract to include unlimited expansion for internal reporting.
Josh James: And to replace its legacy embedded analytics vendor with domo everywhere, which lets the company share insights with its retail customers and its suppliers.
Consolidation and expansion opportunities like these are happening more and more since we started our ship to consumption and it will be an even more powerful opportunity as customers begin to discover domo advantages with AI.
Josh James: We've been working on AI for a long time and.
Josh James: And we see early insights into features customers need to really capitalize on AI.
It has inspired many capabilities in a platform like workflows, which has set us up perfectly for this time when AI is emerging as a priority for businesses everywhere.
Josh James: Now customers are rapidly adopting domo as AI solutions, which shows us that these early investments are having a meaningful impact on our business.
Josh James: I'm really excited about this so I want to tell you more about how we get we got into this advantageous position with AI.
Josh James: My vision for Domo started with the belief that businesses can and should get more value from their data. So we build domo as an independent mobile first cloud native data platform on which you could build various data products ideas that were completely new and gave us the agility scale and speed, we need to continuously add new capabilities.
Josh James: Time and time again proved to be ahead of the game.
Josh James: That's why as businesses pursue and Rois from practical applications of AI, they're learning they can do that right now with domo.
Josh James: It starts with AI readiness, which is a critical need for every business today.
Thanks to our history and the unique strengths of our platform don't makes it easy for customers to get all their data in one place with the tools they need to get it ready for AI.
Josh James: We also launched Domo workflows engine more than two years ago to help our customers automate business processes with low code tools anyone could used to harness human and artificial intelligence to drive results.
Josh James: Next the proliferation of L. O EMS inspired our AI service layer, which lets customers use any AI model, they choose and our well governed secure environment now.
Josh James: Now, we're entering a new wave of artificial intelligence and our innovations have converge into a critical frameworks that gives us the edge and delivering value from a gentex AI, which is available today for domo customers.
Josh James: Our customers are creating and deploying AI agents in domo that produce results. So quickly theyre, telling us its almost unbelievable one customer builds an agent to deliver an analytics reports that was so complex.
Josh James: Historically would have taken his team four weeks to complete.
Josh James: The agent work through cross Domo is a a service layer and workflows engine to analyze several datasets with all the required guardrails.
Josh James: And it delivered accurate reliable and verifiable results in under two and a half minutes.
Josh James: This is nothing short of remarkable.
Josh James: While some companies are planning seven figure investments in competitive offerings to build an AI agent over the next six to 12 months, our customers are already getting meaningful and measurable outcome outcomes from Domo ski Gentex AI capabilities were.
Josh James: We're also leveraging AI agents in domo for our own business and it has saved our support team.
Josh James: <unk> of hours by creating an agent that automates customer support requests.
Josh James: All of this is possible because we had the foresight to know that AI would reshape the future of business intelligence AI.
Josh James: AI is only as good as the data you put in.
Josh James: In most cases, it's garbage in garbage out so.
Josh James: So we built a complete tightly integrated platform with connectors E. T. L. CDW integrations governance lineage usage, new frequencies and data products, we pioneered building this stack.
Josh James: Microsoft Smartly, followed the same strategy and other competitors have spent billions of dollars splashing together components of our stack. It's proving we were right. We have at all and it makes a ice smoking good.
Josh James: In other words Domo was built for this AI moment.
Josh James: Now, let me share some specific real world. Examples we're hearing from customers that validate our leading position in AI.
And insurance company, the compared us against many of our common competitors concluded the dome was absolutely the partner to keep their data safe and secure environment and.
Josh James: And I T services company shared are utilizing domo has enabled them to integrate AI seamlessly across all their data warehouses.
Professional association told us the transparency of Domo as AI solutions, which show all the steps it took to arrive at results is critical and their regulatory environment.
Josh James: And education services company told us that they saved money by using domo as a centralized solution instead of paying multiple vendors for a I add ons.
Josh James: Our media agency told us they accomplish more with Domo in two weeks, then with one of our competitors in a whole year.
Josh James: Our real estate development company said, they saw more functionality and features they need from AI with domo than any other competitor a marketing agency told as Domo has all the easy to use features they need to execute the AI roadmap.
Josh James: Our marketing software company told us that it's the actions and behaviors. They can drive with that data that translates into success and also reinforce that they like the past Domo is heading on with AI and people tell US we are one of the top two companies with market ready AI.
Josh James: Earlier this week, we hosted an agentic AI launch event showcasing how our customers use domo AI to provide unparalleled efficiency and insights across their business I encourage you to visit domo that dot AI to learn more.
We feel really optimistic about our momentum and the opportunities ahead of us our customer relationships are very strong our average country contract length is dramatically improving.
The conversations about products and use case expansion are increasing as our AI capabilities are bringing tremendous value to our customers.
And our ecosystem led opportunities are driving substantial new growth in our pipeline.
In summary, we believe we're in a very strong position to capitalize on this moment that domo was made for and with that I'll hand, it over to our Chief Financial Officer, Todd Crane for his inaugural earnings call script Todd.
Todd Crane: Thanks, Josh.
After almost a decade of Domo I'm excited for this opportunity to lead a fantastic finance team and play a part in the strategic direction of the company like Josh I'm as optimistic as ever about the future of del Mar.
Speaker Change: We exceeded our Q3 guidance for billings revenue and non-GAAP U P. S T.
Speaker Change: Total revenue was $79.8 million up slightly year over year with subscription revenue, representing 89% of that amount Q.
Speaker Change: Q3, billings were 73.4 million.
Speaker Change: The team executed well in Q3, which was shown by the year over year percentage improvement in sales Rep productivity. It was the best we've seen in four years.
Speaker Change: We also saw strength in bookings and in the quarter with total subscription or P. O of 354.1 million up 3% year over year.
Speaker Change: This is our best our P O growth result in two years.
Speaker Change: We see our P O growth as an indicator that our customers view us as a strategic long term partner.
Speaker Change: And a core element of their data strategies.
Speaker Change: Further highlighting this subscription or P. O beyond 12 months grew 14% year over year and the average contract length across our entire customer base increased by 13% year over year, and more impressively, 10% quarter over quarter.
Speaker Change: Our in quarter gross retention was 85% we continue to see some variability in our retention numbers due to a tight budgetary environment and expect our gross retention to fluctuate between 85 and 90% over the short to midterm.
Speaker Change: As we've said our long term goal is to have gross retention of at least 90% ideally higher.
Speaker Change: Our year over year are our net retention was 90% up sequentially for the first time in almost three years, we believe the R. P. O growth. We saw last quarter is a sign that both gross and net retention are primed to improve.
Speaker Change: In addition, we are passing the earmark on some larger churn events, which should be a further tailwind to our net retention rate.
Speaker Change: Our adjusted free cash flow was more negative than we wanted it to be in Q3, and I would like to spend a moment addressing that.
While Q3 has historically been a seasonally low cash flow quarter. This result was lower than we normally see due to eight to 10 million of delayed cash receipts related to consumption migrations the.
Speaker Change: The good news is that the majority of these invoices have already been collected in Q4, which highlights that this was a timing issue.
Speaker Change: We are expecting to generate positive adjusted free cash flow of at least $4 million to $5 million in Q4, and expect that our cash balance will increase next quarter and over the long term.
Speaker Change: We believe that the cash we have on hand is sufficient to operate the business and support our key initiatives.
Moving on to margins and profitability our subscription gross margin was 82.4%.
Gross margin has stabilized around the current level and we expect it to increase to the mid eighties in the long term.
Speaker Change: non-GAAP operating margin was positive 2.5%. The result of concerted efforts to keep our costs in line with our revenue while maintaining our most important initiatives.
Speaker Change: non-GAAP net loss was 3.2 million.
Speaker Change: Non <unk> net loss per share was eight cents based on 38.8 million weighted average shares outstanding.
Speaker Change: Because we are in a net loss position all share and per share amounts are the same for basic and diluted.
Speaker Change: As for guidance for Q4, we are expecting billings of $98 million to $104 million we.
Speaker Change: We expect Q4 GAAP revenue to be in the range of 77.5 to 78.5 million.
Speaker Change: We expect non-GAAP net loss per share of 13 to 17 cents.
Speaker Change: Assuming 39.3 million weighted average shares outstanding.
For the full year, we expect billings of 305.5 to 311.5 million and GAAP revenue of 315.5 to 316.5 million.
Speaker Change: For the full year, we expect non-GAAP net loss per share of 60 to 64 cents.
Speaker Change: This assumes 38.5 million weighted average shares outstanding.
In conclusion, we believe we are on the precipice of the ecosystem, becoming a tailwind to growth our customers love our product and we have a durable business with close to 300 million in annual recurring revenue, which gives us a substantial foundation to build on.
Speaker Change: With that we will open the call to questions operator.
Speaker Change: Thank you.
Speaker Change: And at this time, we will conduct our question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue you.
Speaker Change: You May press Star two 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, one moment, please while we poll for questions.
Speaker Change: And our first question comes from Sanjeev Singh with Morgan Stanley. Please state your question.
Speaker Change: Great.
Speaker Change: So you really want the and quite a little bit more about.
Speaker Change: Yes.
Speaker Change: Bringing in customers.
Speaker Change: The consumption based model.
Speaker Change: I was curious if you can shed some more light on the growth that you're seeing within the consumption Cold war at 55% versus the rest of your customers and then if you're seeing any difference.
Speaker Change: Generally where are those customers that are spending more or less on in terms of the products that you're offering.
Speaker Change: Question.
Speaker Change: We're definitely seeing a lot of strength, but those consumption customers as we mentioned on the call in particular, we're seeing consumption that our customers up for wider adoption faster adoption, we're seeing them consolidate away from legacy products onto the platform all of which is really setting them setting those customers ought to be.
Speaker Change: You know more to retain better and be stickier going forward Hello, Michael.
Speaker Change: Mentioned in his prepared remarks, it's more aligned with the ecosystem so their pricing model.
Speaker Change: When we're when they see our consumption model that aligns with ours and so as we're approaching customers jointly it makes those deals go much faster. We've got some great quote that we've received from sales managers at some of the Cdw's.
And there you know like Domo helped us better than any other partner last quarter are on myself and my sales team drove domo drove more consumption of our of our product than any of my other partners. So we're really starting to see the groundswell.
Speaker Change: You talked about it a few times in the prepared remarks, but it's still not a whole lot of numbers that show up in our financial statements, but you know pipeline. There are some substantial numbers in pipeline and we understand the conversion rates are there and we actually know that wants from the ecosystem.
Speaker Change: Better and they're bigger deals. So we're very excited I think by next quarter, we'll be able to.
Speaker Change: Indicate and have a prognosis of what how that's going to translate into our numbers for the next year.
Speaker Change: Great. Thank you.
Speaker Change: And our next question comes from Derrick Wood with TD Cowen. Please state your question.
Speaker Change: Great. Thanks, Scott with his call on for Derek.
Speaker Change: Josh one for you it's nice to hear that Gentex is already in the market and doing well how can we think about this driving consumption going forward and then do you think that business could be.
Speaker Change: Be a tailwind to help convert the remaining 45% of the base onto their consumption quicker than expected.
Speaker Change: Yeah, it's been really enjoyable and AI has picked up steam.
Speaker Change: I think when it first started to make a lot of noise and everyone's day, what's the strategy to GPT thing with open AI I think everyone had to look at their business and say are we going to be consumed by AI is this going to facilitate our business is going to be a tailwind and for us because we have the stack.
Speaker Change: We have the ability to make sure that is not garbage in garbage out, but it's really organize data with controls around it with governments with transparency.
Speaker Change: And you know Agentic AI is really one of those components that it's a data product really that allows you to take advantage of all the work that you've done with domo.
Speaker Change: So we definitely see it driving it's in it's in a lot of our deals right now is driving close rates to be higher whenever AI shows up because we do so well.
Speaker Change: You know the ecosystem that we're in and the other players that are around the table and.
Speaker Change: I think.
Speaker Change: The companies that you would reign is probably the highest in terms of you know has stuff. That's working right now on the market with AI, they're coming to us and saying you guys have better offering than everybody except for maybe us.
Speaker Change: So it's nice to see validation of across the board and I'll ask J R. E. R O to comment on how he thinks it's going to affect our ability to be successful.
Speaker Change: So as Josh mentioned, you know in order for AIG be successful companies need to invest in other data products and you know Fortunately domo has those data products and they're all things that drive consumption for domo, so as customers connect into more data because they want to create these different agents out that can solve business challenges.
Speaker Change: <unk> problems.
Speaker Change: They've got a way that you need to wait to get to the data we need a way to clean that data.
Speaker Change: And then they need a way to get all of that out to the masses and these are all things that domo monetizing well drive consumption for domo and value to our customers.
Speaker Change: Great. Thanks, that's Super helpful. And then Todd one for you on that.
Speaker Change: Gross retention rate that stepped down takes a little bit this quarter. I know you mentioned there is some variability there could you just unpack the drivers of that was that churn in the base.
Speaker Change: Similar to what you saw in the first half or is there anything different going on.
Speaker Change: Nothing.
Different from what we've seen in the first half of the year as we mentioned on the call continuing to deal with some some budgetary constraints with some of our customers.
Speaker Change: But overall being really positive signs, especially with the deals coming through from partner and the customers that are really strong on consumption.
Speaker Change: Little highlight.
You know, obviously with AI tailwind, but the real highlight of this quarter that we hope it came through loud and clear is we have real leads coming in at an accelerating pace.
Speaker Change: From our ecosystem does not just one partner at dozens of partners, we've focused our energy more towards two or three to begin with and.
Speaker Change: We're starting to see a whole lot of momentum and that's really the thing that one of the most exciting about it is not conversations.
Speaker Change: We're trying to extrapolate or good meetings that we had or hey, we went to the show and it seems like people are receptive no. It's passed that we're closing deals are not at a big not a big amount yet, but the pace of those of pipeline building and were up 90%.
Speaker Change: Over a quarter ago.
And and these deals are bigger half of them were enterprise deals, we've never been able to get an enterprise needs.
Effectively.
Speaker Change: The CAC perspective, everyone shall it struggles with that build this ecosystem is really set up pretty well right now with the CDW has been the center of gravity and learning a whole lot of credence to the conversation that we've been trying to have with CIO. So we're extremely excited about that that said to your question are you know part of the.
Speaker Change: Of the story and you know why the stock is unbelievably trading at a little over onex.
Then if buybacks are six ex Tac revenue.
Has been and what's going on with China, and what's going on with the long term prospects of the business.
Speaker Change: How is Microsoft hurting their business and.
Speaker Change: And we've been telling you all along like Theres a portion of our business that was kind of waiting to work through we didn't have the right pricing model, we didn't charge for we charged per seat we didn't allow.
Speaker Change: Our customers to be able to use it across every division and what we've seen with that now is.
Speaker Change: We've gone from being the one that was you know consol.
Speaker Change: Consolidated when companies are doing vendor consolidation too in many many cases now we're seeing.
Customers say huh.
Speaker Change: We like this consumption model.
Speaker Change: You don't get rid of these other three vendors that we have that we're paying are hungry granted or 300 Grand to 500 ranking.
Speaker Change: And now we have a slew of possibly that 5000 plus users.
Speaker Change: And if you are in the room that we're in we got all of our most important metrics up on the wall and one of the lift that we have is what are our top 40 customers break by a R and just so we're all familiar with it. It's just an interesting data point, we thought it was time to take a look at it.
And I'll tell you.
12 months ago 18 months ago, if we looked at that list and we color coded which ones. We were worried about there had been a lot of read on that list and we were hopeful that we can go and save a bunch of them, but we just knew there was a bunch of pressure with.
Speaker Change: With the macro environment, and and with People's desire to do vendor consolidation.
Speaker Change: And we had a lot of contracts that were coming up that are were shorter contracts and now if you take a look at that same list.
Speaker Change: Two or three that were a little bit worried about.
Speaker Change: That's it the rest of the people on that and the rest of the companies on that top 40 list.
We still we feel really good about and that's so much more exciting to be in that spot. So our cost our company feels much more stable than.
Speaker Change: Then it did.
And we've got the right pricing model, we've got the right relationships with our customer we demonstrated that this quarter I mean, it's insane how much we increased our average contract length in just a quarter.
Speaker Change: Over 10% sequentially the average contract length across our entire customer base. So you think about just the portion of customers that we redid contracts with that we take the new ones. We did some upsells with some old ones.
Speaker Change: And some of those were five year deals four year deals and that's how you increase the total base by 10%. So this feels like the majority of our business is so much more stable than it's been.
Speaker Change: And Omar I'm, a lookout because theres a couple of exciting things that are on the that are on the horizon and now we're getting real metrics that we can use to demonstrate that that's exactly the case. So we're more excited than we'd been in a long time that's for sure.
Speaker Change: Yeah.
Speaker Change: Great really helpful. Thanks, Josh.
Speaker Change: You bet.
Speaker Change: Thank you and our next question comes from Patrick Wall Ravens with citizens JMP. Please state your question.
Speaker Change: Alright. Thank you for taking my question. This is Nick on for Pat Josh What does the macro environment look like in regards to customer behavior and are there any implications post election.
Speaker Change: I think the macro.
You know it doesn't feel like things have changed too much.
I think you know a lot of stuff happening at the beginning.
Speaker Change: You have companies that are like we're going to consolidate vendor, so basically which one of these vendors in the space, we have five of them, which ones coming up for contract renewal next.
Speaker Change: And those are the ones that get consolidated in large part.
Speaker Change: So <unk>.
Speaker Change: Increasing our average you know our contact link.
Speaker Change: The way that we have we think that can help a lot when we look out in future quarters, and think about where our retention is because youre only going to have a portion of that are coming up for renewal every every year instead of the majority of your business coming up for renewal.
Speaker Change: We will have a minority of our business coming up for renewal based on the contracts that we're doing now. So we're excited about that we love the fact that when customers get on consumption.
Speaker Change: It feels like to your point about macro it feels like.
Speaker Change: They're able to say alright.
Speaker Change: We've kind of made the strategic decision here.
Speaker Change: Donlin is going to be the platform that we use.
Speaker Change: And.
I guess, we can't get rid of these are the things that are happening here, let's go ahead and build it out they'll move back in the charges or anything for that and can we start using it so let's test it and if it works then we can cut that other contracts and we're seeing that happen over and over again and then equally important the fact on the ecosystem now that we have these cdw's.
Speaker Change: And dozens and dozens of other partners.
Speaker Change: Just really strengthens our relationship with our customer I mean, he has happened today argues that next to me sent me a text from one of our reps who was in a deal and were getting pushed around.
Speaker Change: By one of the by one of the other vendors that was in there and then and S. I got brought in and the S. I said Oh no. We're gonna use Domo you guys need to use them there theres a company used with us and the relationship changed dramatically. So we just we've never had people in a corner before.
And we got a lot of them in a corner and they're realizing it's a lot easier to go to market with you guys. Then five other vendors that we'd have to scrap together to try to do what you guys deal. So that's been it.
Speaker Change: Resonating with with most importantly, with the reps at these cdw's, they're the ones that drive this and our customers are having a great experience and that that information spreading like wildfire.
Speaker Change: Great. Thank you.
Speaker Change: You bet. Thank you.
Speaker Change: Thank you and our next question comes from Eric Martin Nuzzi with Lake Street. Please state your question.
Speaker Change: I wanted to kind of pull it back to a higher level here for based on the billings outlook, you've given for Q4 it.
Speaker Change: It speaks to a about a 4% contraction if we take the midpoint of that billings guide for Q4 and that would be.
We were down 1% last year, if we hit the midpoint, we're down 4% this year.
Is the expectation based on the good momentum that youre seeing with all the partners and the AI.
Speaker Change: The ecosystem success that you are talking about is it your expectation that hey, we're going to get back to growth in FY 'twenty six or we're going to get back to EBIT in FY 'twenty six what's your gut telling you about the coming year.
Speaker Change: Yeah. Thanks for the thanks for the question Eric right now, we're not giving any guidance for FY 'twenty six but.
Speaker Change: We do as we talked about in the call see a lot of positive momentum in our pipeline, particularly from the partner motion.
Speaker Change: We just got the number of metrics there that are that are really causing us to be optimistic.
Speaker Change: So yes.
Speaker Change: You'll take that bore for for what it's worth but we are not commenting on next year at this time.
Speaker Change: We had it right.
Speaker Change: The contraction in the billings rate of March right.
Speaker Change: <unk> seven comp in Q1 minus three in Q2.
Speaker Change: Q3, and now we're guiding to a minus four in Q4 and I was just is that conservatism or do you feel like you know.
Speaker Change: And we're just going to kind of bump around here for awhile.
Speaker Change: Yes, I think we've tried to emphasize we've talked about it last quarter we.
Speaker Change: We had modeled again this quarter that.
Speaker Change: Instead of allocating all the marketing dollars in sales dollars that we have towards let's say a Google AD spend we're out on an island. We know we can close those customers we understand what the cap rate is for that.
Speaker Change: But instead of that we found something that's repeatable this.
Speaker Change: A sustainable that's defensible and that is the ecosystem play and so we've been definitely allocating dollars to that as fast as we can and we are seeing you know you're talking about a couple of metrics.
Speaker Change: And I think if we're thinking about those metrics. We also need to think about the other metrics that we talked about today, including how quickly that pipeline is growing.
Speaker Change: The ecosystem, which is where we're allocating those dollars and like we mentioned last quarter that meant that we werent trying to over index are optimized for last quarter or this quarter's billings number but.
Speaker Change: But we are definitely optimizing for next year's billings number.
Speaker Change: And I think you know as we mentioned I think by the end of this quarter and when we're doing our call three months from now we will actually have very specific specific information about what kind of growth. We think we can squeeze out of next year and I would suspect that we'll be sitting there looking at our pipeline and be like Okay. Now, we still don't know enough to.
Draw a real deal.
Speaker Change: Dark line in the sand and saying here's how aggressive we can get but I think we will know enough to say yeah. We're definitely you'll see growth and we still don't have enough to tell you for Q1 and Q2 that we can grow a lot, but I would suspect that we're going to be pretty comfortable about saying that we think we can grow in a meaningful way towards the latter half of next year.
Speaker Change: But like Todd said, we can't give any specific guidance, but again there are metrics there that we did share with with everyone. So that you can see now in contrast to the other metrics that we always report on Ah Theres. Some actual numbers here that are very encouraging and that should lead to growth for next year.
Speaker Change: Got it thank you Todd.
Speaker Change: Yeah, I mean, just one more note there Erik on that I mean, as part of that that that shift and that focus on building a repeatable durable growth engine for the future.
Speaker Change: Our sales capacity isn't.
Speaker Change: What it was a year ago, but thats intentional, where we're trying to get down to a core of sales reps that we feel really good about that have the right skills. The right mindset for what we're trying to build going forward and we're going to continue to augment that team with people with the right background the right skill set.
Speaker Change: Capitalize on this partner opportunity that's a good point to highlight one of those examples.
Speaker Change: We have some partners there.
Speaker Change: We're getting leads from them right now.
Speaker Change: We've done all the work we've invested all the money into.
Speaker Change: Into the product, having a product to be ready for a bunch of these partners and then.
Speaker Change: We went and we spent millions of dollars sponsoring their various marketing activities.
Speaker Change: Partners that we've gone we've done joint marketing activities.
Speaker Change: Awful lot of money flying people around answering.
Speaker Change: The booth go in and have them doing all the right things.
Speaker Change: And.
Speaker Change: It's the majority of that upfront investment has been done.
Speaker Change: Now where the weather has slowed is meets the road as we got to go out and we've got a mine those sales organization.
Speaker Change: We have to build relationships with those sales managers.
Speaker Change: And we look into we look at some of these new partners of ours and we have very specific examples where we're getting several leads a month from a partner and again, we've done all the work.
Speaker Change: It's just the relationship with those sales managers and we know specifically, we only have two people allocated to that organization and so we're only covering.
Speaker Change: Two or three of their sales managers out of 'twenty.
Speaker Change: And it's just you know, it's just a little bit of incremental work.
Speaker Change: She get needs from those from those other sales managers, where we just need to go and build that relationship but again, we've done the majority of work. So just putting these other things in place and Thats, what makes us feel so comfortable we just need to do more of a thing that we did the hard work, we just need to do more of the same and we shouldnt see yeah. These leads come through at an.
Speaker Change: Right.
Speaker Change: Got it so really more of a timing issue.
Speaker Change: Yes for sure.
Speaker Change: Sure for sure.
Thank you.
Speaker Change: And a reminder, say audits to ask a question press star one on your telephone keypad. Our next question comes from E Food Lee with Cantor Fitzgerald. Please state your question.
Speaker Change: Thank you for taking my question, Josh and Todd Congrats on the shelf as a result of stabilizing performance.
Speaker Change: So my first question revolves around the one two punch Stonewall plus CVA CDW partner.
Speaker Change: I was wondering if you could give us some metrics on like how much faster when when a CDW partner at the law as a partner.
Speaker Change: And then second part of question is last quarter, you spoke about two large independent software providers.
Potential interest partner any update on that channel and then I'll have some follow ups as well.
Speaker Change: Yeah.
Speaker Change: Or do you want to talk about that.
Speaker Change: On the first one yes.
Yeah, we're seeing right now I think the metric. We gave was about 20 days faster on average than were seeing deals close.
Speaker Change: And part of that is because we've got an army of you know our rep and rep from the CDW.
Speaker Change: Maybe an S. I. That's in there that are you know we're out promoting each other and so customers get value faster as Josh mentioned, you don't have to bring five vendors in and so that expedites the process as well because the customer doesn't have to do as many evaluations and they don't have to ink paper with as many vendors. So I'll probably wouldnt surprise you, there's there's a <unk>.
Speaker Change: Many instances.
Speaker Change: That have happened already where.
Speaker Change: We get brought into a deal in a few days later closes because the partner already did all the work. So it's been fun to see those no. We haven't we haven't had those experiences for a while around here. So that's been really nice as well and then the large independent software companies that we've talked about as partners.
Speaker Change: All of our conversations are going very well, we're making progress I would say on on every front.
Speaker Change: We've got.
Speaker Change: We have one.
Speaker Change: The partner that we invested a couple hundred thousand box into a bunch of marketing activities.
Speaker Change: And really just over the last month.
Speaker Change: And just since we started we already had.
Speaker Change: One seven figure deal close.
Speaker Change: It's a five year deal seven figures.
Speaker Change: They're paid for those activities many times over and three other deals have already closed from that particular that particular partner marketing activities and there's a whole slew of them in the pipe. So.
Speaker Change: It's just it really is don't get on every front and and you know with.
Speaker Change: With one of those questions was asked earlier it does feel like the core part of our business is much healthier than it was here for the last several years.
Speaker Change: We've got the concentric circles, if you will.
Speaker Change: And where they overlap of consumption.
Speaker Change: AI and our ecosystem and they all seem to map and Mary pretty well to each other and it feels like we're in a good spot from a.
Speaker Change: Future growth perspective.
Future in years, but like I said next quarter, I think we'll be able to get some muscle specific.
Speaker Change: Specific guideline about when we can see that that all constructive.
Our growth rate.
Speaker Change: You put out and then I was able to listen into the Belmont, Yeah, I got yesterday that CTO Darrin, what I noticed it's still too early in terms of the AI ops and he was wondering like what.
When do we think we're going to get better inflections into the financials I know you're going to probably give us a better in domo pillow close up in March of next year.
I was wondering like maybe the highlights monetization.
Speaker Change: Yeah, I mean, there's a couple of things that we're seeing.
Speaker Change: That I think are going to show up in the results sooner than later as we mentioned we are in particular on our net retention rate. We're gonna start to eclipse some of those bigger churn events, we had a year ago, that's going to it's going to help that that metric start to go the right direction.
The partner initiative, you talked about at length, that's going to help out AI as well as providing a nice tailwind so.
Speaker Change: As Josh mentioned, we will have a lot more information to give here.
Speaker Change: On the next report and retention.
Speaker Change: Yeah, Yeah, Yeah, Yeah that was there with retention there that are that are going to bear out sooner than later.
Speaker Change: Thank you for that I appreciate for that great job for us.
Speaker Change: Yeah.
Speaker Change: Thank you and we do not have any further questions at this time.
Speaker Change: So with that we will close out the almost Q3 fiscal year 2025 earnings call. All parties can now disconnect have a good day. Thank you.