Q1 2026 Domo Inc Earnings Call
Greetings and welcome to the Domo Q1 fiscal year 'twenty 26 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Speaker Change: Anyone requires operator assistance during the conference. Please press Star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce your host Peter Lowry Vice President of Investor Relations. Thank you Peter you may begin.
Josh James: Good afternoon on the call today, we're joined by Josh James Our founder and CEO and Todd Crane, Our Chief Financial Officer.
Speaker Change: I'll lead off with our Safe Harbor statement, and then onto the call.
Speaker Change: Our press release was issued after the market close and is available on the Investor Relations section of our website.
Josh James: Please note. This call contains forward looking statements about our business as defined under federal Securities laws.
Josh James: These statements involve risks uncertainties and assumptions, including but not limited to <unk>.
Josh James: Statements and projections about our future financial performance.
Josh James: Growth prospects cash position sales efforts technology developments, new business opportunities transactions and initiatives the potential impact of artificial intelligence and other macroeconomic factors on our business.
Josh James: For a detailed discussion of these risks and uncertainties. Please refer to our public filings, including today's press release. Our most recent annual report on Form 10-K, and quarterly report on Form 10-Q, all available on the SEC website.
Josh James: These documents list important risk factors that could cause our actual results to differ materially from our forward looking statements.
Josh James: We will also discuss non-GAAP financial measures during the call, which we use as supplemental indicators abdominal as performance.
Josh James: Other than revenue unless otherwise stated we will be discussing our results of operations on a non-GAAP basis.
Josh James: These measures should be viewed as complements to not substitute for our GAAP results.
Josh James: Please see the reconciliation of our non-GAAP results to their most directly comparable GAAP measure on our Investor Relations website, a domo investors dot com with that I'll turn it over to Josh Josh. Thank you, Pete and Hello, everyone and thanks for joining us on the call today I am pleased to report that in Q1.
Josh James: We demonstrated substantial operating leverage in the business showing that our model is truly working.
Josh James: Once again, we exceeded guidance on billings revenue and non-GAAP EPS and generated positive adjusted free cash flow.
Josh James: Notably this marks the first time, we've achieved a positive operating margin in a Q1.
Josh James: We saw a significant increase in pipeline activity generated by our ecosystem a dramatic increase in our sales efficiency.
Josh James: A substantial lengthening of our contracts.
Josh James: And an acceleration in our P O growth all reflecting the durable trusted relationships, we have with their customers.
Josh James: As a direct result of this momentum and due to continued strength in the business, we are raising our full year guidance.
Todd: Todd will have more to say about that shortly.
Josh James: We are confident that we have finally achieved a business model that will provide continued operating leverage for years to come.
Josh James: As you'll recall a few years ago, we identified cracks forming in her business and knew we needed to institute changes to our model, we rapidly converting our business to consumption based pricing and reconfigured our technology and go to market motion to become very ecosystem friendly.
Josh James: The substantial changes our team has made over the last few years have led to measurably improve performance with the following metrics highlighting that the new model is working.
Josh James: Subscription remaining performance obligations were our P O growth accelerated to 24% year over year.
Josh James: Subscription total contract value or T. C V was up 69% year over year.
Josh James: Long term subscription or P O was up 61% year over year.
Josh James: Net retention was up sequentially for the third consecutive quarter in a R. R was also up sequentially.
Josh James: Sales force productivity was up over 60% year over year.
Josh James: And up for the third consecutive quarter.
Josh James: Gross retention improved to 86% from 85% last quarter.
Josh James: All of these metrics support my belief that we are taking the right steps to return to sustainable long term profitable growth.
Josh James: And give me confidence in our Q2 and FY 'twenty six outlook for billings growth.
Josh James: Our growth in our P. O is a direct result of our unwavering commitment to our customers' success.
Josh James: By prioritizing their needs and building trusted collaborative relationships, we consistently deliver meaningful outcomes that lead to higher satisfaction.
Josh James: This customer first approach has led to longer term contractual commitments underscoring the trust our clients place in domo as their strategic partner.
Josh James: The loyalty and confidence of our customers not only drive our P. O growth, but also strengthen retention a strong proof point that the model is working.
Josh James: Our sales force productivity increased over 60% in Q1, and although we won't update this metric every quarter I wanted to share because it further reinforces my confidence in our ability to grow efficiently.
Josh James: This metric highlights the success of the model.
Josh James: Retention improved to Q1, and we see ample opportunity for continued progress.
Josh James: Gross retention for consumption customers in Q1 was significantly higher than for seat based customers.
Josh James: <unk> customers now represent over 70% of our a R. R.
Josh James: Adding toward 90% by the end of the year.
Josh James: And as our renewal base increasingly shifts towards consumption, we expect it to be another tailwind to positive retention results.
Josh James: The consumption engine is an integral component that drives the success of this model.
Josh James: Over the past several quarters, we've made significant progress transitioning from cash burn to achieving free cash flow positivity and expanding our operating margin.
Josh James: As we look ahead, we expect to exit this year at 5% billings growth and 5% operating margin and we anticipate exiting FY 'twenty, 7% to 10% billings growth and 10% operating margin.
Josh James: These achievements demonstrate not only our strengthening fundamentals, but also substantial progress on our rule of 40 profile.
Josh James: This shows that our model is working.
Josh James: And positions us for sustained profitable profitable growth going forward.
Josh James: We held our annual user conference Domo Palooza earlier, this year and I'm consistently inspired by the powerful ways Domo is driving transformation and delivering meaningful impact for our customers.
Josh James: We heard from our global technology and services firm, which highlighted the remarkable journey toward transformative data integration.
Josh James: Over just the past year, they have rapidly expanded their data capabilities by transitioning from fragmented legacy systems to a cohesive AI enhanced platform powered by Domo.
Josh James: This transformation has significantly boosted decision, making abilities for over 100000 people across the organization.
Speaker Change: The CEO of file vine, a leading legal technology platform highlighted the transformative impact of AI on the legal industry.
Speaker Change: Emphasizing the company's innovative strides with products like chat with your case, which efficiently manages vast amounts of structured and unstructured legal data to allow its customers to effectively manage their cases at scale.
Josh James: File Levine enhances its customers' operations with an analytics offering powered by Domo everywhere.
Speaker Change: The CEO mentioned that file binds impressive retention rate of over 95% climbs to nearly 100% when domo is integrated showcasing domo as vital role in optimizing data driven decision making.
Josh James: At Domo Palooza, we also outlined our strategic priorities for FY, 'twenty, six including driving adoption.
Josh James: Innovating with AI across the platform.
Josh James: Continuing to focus customer relationships.
Josh James: And multi year contracts and developing our ecosystem of partners.
Josh James: I've already discussed the incredibly impact that multiyear contracts are having on our business, which is evidenced by the growth we're seeing in metrics like our P O and the corresponding impact on retention.
Josh James: I'd now like to give a brief update on each of the other three areas of focus.
Josh James: As it relates to adoption the demand for our advanced product capabilities is greater than ever we continue to accelerate customer adoption by focusing on AI agent deployment governance best practices workflow automation and data pipeline optimization, which are driving deeper engagement.
Josh James: And increasing the overall impact domo has on our customers.
Josh James: Our ongoing initiatives, including strategic consulting packages and extensive AI Academy Webinar series and expanded technical enablement are empowering customers and partners to build sophisticated AI driven solutions, while reinforcing governance and security practices.
Josh James: We are seeing a notable difference in the usage of our products by customers, who are actively engaged with their technical teams and we are actively working to provide more of that support across our customer base.
Josh James: On the AI front, we launched agent catalyst at Domo Puzo.
Josh James: Which leverages our existing E T L data governance security and workflow capabilities to allow our customers to rapidly innovate with AI agents.
Josh James: Our customers are AI curious and have a sense of urgency about adopting AI, but they struggled with how to drive real business value.
Josh James: We are leaning into show how domo is an ideal solution to capitalize on the promise of AI in fact in one of the general sessions that don't Palooza, we offered to build a free a gentex AI solution for attendees.
Josh James: Unbelievably over 200 customers signed up on the first day.
Josh James: It's amazing to see what some of those customers have been able to accomplish so quickly with agent catalyst.
Josh James: In fact, just today, we hosted in a gentle AI innovation summit for data AI and tech leaders focused on advancing intelligent AI agents that automate workflows and decision, making featuring expert speakers from Google AWS Domo and more.
Josh James: With over 6000 people registering the event was a key gathering to explore how agentic AI is reshaping the future of work.
Josh James: With the rapid success and the rapidly building momentum we've already seen customers build agents that do the following.
Josh James: Accelerate the ability to spot classifying take action based on anomalies at solar farms reduce dropout rates in schools by working with students that are at risk of not graduating streamlining.
Josh James: Streamlining their charitable operations by making it easier to capture and process tax information.
Josh James: Optimize the performance of hotel locations by providing better summarization and indicators on ways to improve.
Josh James: Redefining the future of their business.
Josh James: With AI efficiencies related to data inventory taxi equipment and sales management.
Josh James: We also heard from leading data and AI consultants, who showcase that they were able to use agent catalysts to build powerful agents in less than two weeks.
Speaker Change: Our quota a leading snowflake systems integrator showcased agent catalysts impact by creating an agent that revolutionized his conference networking through intelligent attendee matching based on shared interests and complementary skills going beyond just a job titles.
Speaker Change: <unk>, a leading data bricks S. I highlighted their success in using domo as agent catalyst to optimize fleet management operations.
Speaker Change: By integrating with data bricks for real time analytics Quantic has adopted proactive strategies and ensure vehicle uptime and enhance route efficiency.
Speaker Change: This has been especially critical in a delivery driven economy, where timely operations are paramount.
Speaker Change: After many years of effort and investment we have built a robust platform that includes seamless data access.
Speaker Change: Advanced E T L capabilities.
Speaker Change: Comprehensive data governance and security <unk>.
Speaker Change: Streamlined workflows.
Speaker Change: Automated alerts approvals and powerful visualization tools.
Speaker Change: This strong infrastructure positions us uniquely to support the development of AI driven solutions that address real world business challenges near.
Speaker Change: Nearly every customer conversation that we're having aligns with some form of AI, driven workflow or agentic exploration.
Speaker Change: Now moving on to the ecosystem.
Speaker Change: I'm very happy to report that we continue to make significant improvements to our integrations with their cloud data warehouse, where CDW partners, including Snowflake data bricks.
Josh James: <unk> Oracle, Google and others.
Josh James: We are seeing very encouraging trends and the partner metrics that we track.
Josh James: Conversion rates for partner sourced deals remains well above those for traditional marketing source suites.
Josh James: Our early stage partner pipeline continues to grow at a very rapid pace.
Josh James: Partner sourced leads and the number of deals that moved from top of the funnel to later stages in the pipeline were up more than 200% from last quarter.
Josh James: That's from just one CDW partner.
Josh James: And we have several more partners. We are just beginning to go to market with so.
Josh James: So just imagine where that could lead the model is working.
Josh James: Additionally, we build strong relationships with system integrators linked to several of these cdw's expanding our ecosystem and market reach even more.
Josh James: Our domo everywhere solution has also helped us form new customer relationships by enabling domo customers to securely share data with their customers just like file vine, who we mentioned earlier.
Josh James: Now, let me highlight a few of our customer wins in the quarter driven by our complete platform advanced features and consumption model.
Josh James: First in terms of new logos, a geospatial services company chose domo after completing a thorough self guided POC that highlighted our extensive capabilities, including AI ml brokered features like bricks Jupiter notebooks, along with our strong technical expertise of our engagement team.
Josh James: This was a former prospect that returned to domo following a failed Microsoft fabric implementation.
Josh James: <unk>.
Josh James: Another new logo win was with a mortgage company that chose domo to gain deeper insights into their loan portfolios branch performance and risk management.
Josh James: Addressing limitations in their current legacy reporting systems.
Josh James: The value of the company wide analytics with unlimited user licenses provided under a consumption model.
Josh James: In terms of Upsells of Transportation Technology company chose to expand with Domo by 10 times. Its original contract's value. Following a successful consulting projects that build trust and enabled the company wide rollout of thousands of datasets and dashboards.
Josh James: They value the most flexible consumption model, which allow them to scale to 600 users following an acquisition without traditional licensing constraints and leveraged advanced features like workflows governance and domo everywhere.
Josh James: And lastly, a health care company expanded with Domo to support wide scale deployment and accelerated project implementation.
Speaker Change: Our consumption model was critical because the full platform access and unlimited licenses are enabling rapid adoption and integration into core strategic business initiatives.
Josh James: With strong momentum from successful deployments. The company is positioned to expand further with domo into new business units and embed domo deeper in the organization through workflow automation and AI ml projects.
Josh James: Domo is earned top honors across several leading industry reports and awards. We were the top ranked vendor in three Dresner advisory services market reports the.
Josh James: 2025 wisdom of crowds cloud computing and be a market study for the ninth consecutive year. The 2025 self service be a market study for the seventh consecutive year in the 2025 collective insights report for the fourth time and C. R. N recognized domo on its 2025 Big data 100 list in the big data business.
Josh James: Analytics category.
Josh James: The effectiveness of our model is clearly on display.
Josh James: The business delivered beats on all the important metrics and facilitated raises to our annual guidance.
Josh James: Virtually every important internal metric is improving.
Josh James: Our sales efficiency was stellar this quarter.
Josh James: The pipeline generated through our ecosystem partners has increased just like we said it would.
Josh James: The strength of our customer relationships delivered outsized improvements in our P O and contract length.
Josh James: Which should lead to substantial measurable improvements in gross and net retention.
Josh James: The transition to consumption is delivering higher usage higher customer satisfaction and higher retention and our customers are leveraging AI agents at a rapid pace.
Josh James: Demonstrating that our technology stack is perfectly set up to capitalize on the a and momentum in the marketplace.
Josh James: The model is dramatically different from three years ago and has us poised for profitable growth.
Speaker Change: I'm thrilled to be able to.
Speaker Change: Save that were going to exit this year at 5% billings growth and 5% operating margin on our way to exiting next year at 10% billings growth and 10% operating margin and with that I'll hand, it over to our Chief Financial Officer, Todd Crane.
Todd Crane: Thanks, Josh.
Todd Crane: We exceeded our Q1 guidance for billings revenue and non-GAAP EPS and were adjusted free cash flow positive.
Todd Crane: Total revenue was $80 1 million in billings were 63.9 million.
Speaker Change: As a company and in my role as CFO. Our primary focus is driving operational efficiency and managing the company to achieve positive operating margins and free cash flow.
Speaker Change: As we leverage the early stage success with our ecosystem partners. It further positions us for growth, while maintaining disciplined control over costs.
Speaker Change: It allows us to continue to scale, our sales efforts effectively and achieve a stronger return on sales investments supporting sustainable and profitable growth.
Speaker Change: Gross retention improved to 86% from 85% in Q4, and 83% a year ago.
Speaker Change: This is the fourth consecutive quarter at 85% or above and we continue to expect a two percentage point improvement in gross retention for FY 'twenty six compared to the prior year.
Speaker Change: Our year over year net retention was 94% up sequentially for the third consecutive quarter and up more than four percentage points year over year.
Speaker Change: Our improving retention rates are another important factor because profitable growth is difficult when retention rates are low retaining customers is far more cost effective than acquiring new ones.
Speaker Change: R. R. P O growth is also significant.
Speaker Change: Current subscription or P. O grew 5% year over year to $226 million and our total subscription or P. O grew 24% to 408 million an acceleration from 14% growth in Q4.
Speaker Change: Improved sales force productivity higher retention rates and accelerating our P. O growth all support my confidence that we are well positioned to accelerate our billings growth over the remainder of the year, while also expanding our operating margin.
Speaker Change: In addition to improving operating margin generating positive free cash flow remains a key focus.
Speaker Change: In Q1, adjusted free cash flow was $1 3 million a significant improvement from Q1 last year.
Speaker Change: Our cash balance increased from $45 3 million in Q4 to 45 $47 2 million at the end of Q1.
Speaker Change: Looking forward, we expect our adjusted free cash flow to be slightly positive in Q2 and positive for the year.
Speaker Change: Moving onto margins and profitability.
Speaker Change: Our non-GAAP subscription gross margin increased sequentially to 81, 6% a level, we expect to maintain in the near term and improve over time.
Speaker Change: non-GAAP operating margin was one 3% and non-GAAP net loss was $3 6 million.
Speaker Change: non-GAAP net loss per share was nine cents based on $39 7 million weighted average shares outstanding because.
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 Q2, we expect billings of $69 million to $70 million, which represents growth of 1% to 2% year over year.
Speaker Change: We expect GAAP revenue of 77.5 to $78 5 million and non-GAAP net loss per share of three cents to seven cents, assuming $40 5 million weighted average shares outstanding.
Speaker Change: For the full year, we are raising our guidance for billings revenue and non-GAAP net loss per share.
Speaker Change: We expect billings of $312 million to $322 million GAAP revenue of $312 million to $320 million and non-GAAP net loss per share of 18 to 26 cents, assuming 41 million weighted average shares outstanding.
Speaker Change: In conclusion, I am very pleased with both our internal metrics and the results. We have discussed today, which indicate that we are on the path towards sustained long term profitable growth with that we will open the call for questions operator.
Speaker Change: Thank you we will now.
Speaker Change: I'll be conducting a Q&A session.
Speaker Change: I would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: For me Shinto will indicate your line is in the question queue. 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.
Speaker Change: One moment please poll for questions.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Our first question comes from the line of <unk> with Cantor Fitzgerald. Please proceed.
Speaker Change: Thank you for taking my question and congrats on a very strong five Josh Todd and team.
Speaker Change: Maybe like Josh and Todd maybe can you just flip back to the macro environment.
Speaker Change: Just Jason just to start up cost is it does seem like with all the I'll say parasite.
Speaker Change: <unk> negotiated that that's come along that's affecting that business as the fundamentals clearly and second positively and then all the domo Peru's off and Thats, obviously, well attended as well can.
Speaker Change: Can you comment more on the I guess like the when you talked about one of the partners group to act in terms of.
Speaker Change: No.
Speaker Change: <unk> the top assets, how do you get the other partners to.
Speaker Change: Be on the same track maybe start with that and also I have a couple more follow ups.
Speaker Change: Yeah, so from a macro perspective.
Speaker Change: It's definitely not a great environment.
Speaker Change: But it's in our team seems building marketing through it I think that the way that customers view us as a way a path forward when it comes to AI like we mentioned almost every conversation we're having with customers right now is how to leverage the data that they have inside domo and how they can create agents. So that's been a very positive development and you know it's it's.
Speaker Change: It's driving activity I think you are from a macro perspective people are definitely more hesitant than they were.
Speaker Change: Five years ago, but I don't think has changed a lot in the last 12 months, we have a few customers that talk about tariffs but.
Speaker Change: Hasn't it hasn't been a large issue I think when it comes to that.
Speaker Change: The partners that you're talking about.
Speaker Change: We do have one partner that is moving faster than the other ones. So far but that's been mostly tied to where we've made the investment and.
Speaker Change: Our product was most ready for and we kind of had to cereal you go through in and get it ready for different partners and so we've.
Speaker Change: We've had a lot of activity with snowflake and <unk>.
Speaker Change: That activity, we expect also with with data bricks N and with Oracle and with IBM and with Google and.
Speaker Change: And others internationally, so we're having actually a lot of success and a lot of stuff in the pipeline already it's just that one's further ahead. So we do expect to see the same kind of activity from the other partners and expect that.
Speaker Change: Our partners are going to end up in.
Speaker Change: You know an equal amount of new logo activity as all the other marketing activities combined.
Speaker Change: And then Jeff can you just tell me a little bit more like a thick X increase on sales productivity, obviously feel free to have RJ comment as well like in terms of.
Speaker Change: If you could break it out what is it that you know if fixed et cetera. This quarter that is it is it cuts you're working well with the pardon me ecosystem or is it a combination with a consumption model that's driving it.
Speaker Change: The thing I can say and then flipping back to them a close eye in terms of the I pad building activity. Obviously, we were on the floor sticking with all oil projects in some of their customers as well.
Speaker Change:
Speaker Change: How is the pipeline building efforts on that and how does it present in the second half closure.
Speaker Change: Yeah. So consumption is definitely an important component of our model and I think we're seeing in this in this Q1, just really leveraging the model. The models work, we worked really hard on on changing our model over the last several years and we're really starting to see the fruits of that actually getting operational leverage at the same time, So we think theres going be.
Speaker Change: Good profitable growth from here and the efficiency that we're seeing in the sales organization.
Speaker Change: As you know first of all obviously interest because of what we're doing from an AI perspective, and then also what we're doing with the Cdw's.
Speaker Change: That really has made our business more defensible and it's created more opportunities and relationships and when we look at our pipeline.
Speaker Change: This will be the quarter that we actually see a meaningful amount of of deals close.
Speaker Change: That have been in the pipeline for the last few quarters.
Speaker Change: And so you know close rates or higher deals are a little bit bigger we think retention is going to be higher and we go in with relationships with a partner who's espousing the the positive attributes of our business and how we help the customer. So that's been a really positive development that we've been talking about for a while this quarter, we're seeing the numbers.
Speaker Change: Actually hit and we will see those numbers in billings.
Speaker Change: And with the with the pipeline that we also see building for Q3 and Q4 we.
Speaker Change: We feel very good about the fact that.
Speaker Change: As we enter next year well.
Speaker Change: We will probably have the same amount of business that's being generated from our partners as we do from all of our other marketing activities. That's kind of what we're that's what we're seeing right now and as that plays out we'll give more guidance around that but I think that's what that's what gives us the confidence that we can say hey for the last three years, we've been saying we're going to be.
Speaker Change: Configure the model, we're going to invest and we're going to get back to growth.
Speaker Change: And you saw us this last quarter, we first time ever we've been positive in Q1 at net operating now.
Speaker Change: Net margin positive and then the other thing is you know we're sitting here, saying not only that we're gonna be 5% margin positive and 5% growth exiting this year and double those numbers for exiting next year and there's a lot of upside to that but we're finally in a different category of company than where we've been the last three years and it's just because of all the.
Speaker Change: The reconfiguration that consumption model being able to get the multiyear deals as customers love, what we're doing with them and then also all the efforts we put into those those partnerships with cdw's.
Speaker Change: Thanks for that Josh and just one last one on the technology fastest firewall to Todd on the financial side is obviously, you've talked a lot about a lot about authentic AI. We saw catalyst you liked at thermo fluids.
Speaker Change: And then there was another thing call ml bottle manage debt can you discuss what are you. Most excited about in terms of the law.
Speaker Change: Part of adoption and we are still a tie in to my question Vegas facade at the IPO.
Speaker Change: What is it that the customers are adopting in terms of what's wall that leads to the longer duration long contract sizes.
Speaker Change: Yes, I think the thing that I'm. Most excited is that we're teaching customers how to build their own agents.
Speaker Change: And they're doing it and there's a text message I got just this morning from our team and it was a customer that said I just want to provide some feedback on the recent AI agent training.
Speaker Change: Hosted by you guys last Wednesday, I, followed along the video I pause only to make a few datasets to us and by the time I got to the 37 minute Mark I actually had a working AI agent that was looking at my datasets invoices intakes contracts and composing and delivering a combined weekly category management summary for <unk>.
Speaker Change: <unk> managers based on a little bit of direction I gave it so boom 37 minutes. They got an agent working inside their organization because theyre already using domo. The data's already governed it's already secure we allow them to use L. L. M inside their organization and then this guy goes honest says I tried another one today from scratch specifically.
Speaker Change: To see if I could just ask the AI to iterate through a list of items Permian Act on each one.
Speaker Change: It is nearly production ready a few hours later this AI agent access is a data set of associates had been recently transferred to another manager and who are corporate and card corporate cardholders. The agent looks at a raw data containing the new manager the old manager and the worker who was transferred it then generates an email based on the prompt I gave it. It then sends the email then it does it.
Speaker Change: Again until it's done with all the rows. It worked beautifully as first time it can pose an absolutely lovely email even identifying more information from the data.
Speaker Change: Without me, telling you too so I mean, you see that kind of stuff as two <unk>. There's two agents that were created by an individual they got trained on our Egencia platform and all of that is driving consumption of our products and they are much happier and we're not seen as you know a visualization tool. So we are definitely here primetime ready for for the.
Speaker Change: AI agent World.
Josh: Excellent excellent Josh I'm going to move out.
Todd Crane: With that I'm going to move out to Todd on the financial side, obviously archaeology assistant <unk> is a key focus right.
Walter: Short term is up 24% this quarter up from 14% last quarter, and Walter even better fixed and 1% can you help us break it down part.
Josh: Now why is this metric.
Josh: Is that going so much better.
Josh: Now what are the factors thats driving customer goal in our long term with Domo and also you also offer guidance right in terms of like eating it at all as you base. It little on the EPS side. What gives you confidence that you are able to gain operating efficiency for the rest of it.
Josh: And how how conservative I think with the model and data from the U S government for taking all my questions.
Speaker Change: Yeah. Thanks for the question Yeah, our P O.
Speaker Change: Very happy with the result, there coming in at over 400 million for subscription or P. O. That's growth of 24% year over year with current growing 5% longterm right, 61% I think the.
Speaker Change: The technology and the things that the example that Josh just gave is very powerful in terms of the ability of our customers to get value from our product very very quickly.
Speaker Change: And then you pair that with consumption, which allows them to quickly unlock that value not being limited by seats not being limited by not having access to the full platform. They can they can try anything they can go in there and explore so we're seeing kind of that powerful combination of our good technology our consumption model.
Speaker Change: <unk>, the stronger customer relationships, which has in turn allowing us to get longer term contracts.
Speaker Change: So that's the story with RP are very happy with the growth there in terms of the the leverage in the model.
Speaker Change: If you look at our operating expenses over the last four or five quarters theres been kind of a steady improvement and a steady city demonstration that we're getting leverage there. We're continuing to do that we've made great progress there and as we look ahead and model out what the rest of this year. It looks like we see an opportunity to continue to expand margins and we will continue to do that.
Speaker Change: Okay. Thanks again guys congrats.
Speaker Change: Thank you Thanks Heath.
Speaker Change: Thank you.
Speaker Change: Next question comes from the line of Derrick Wood with TD Cowen. Please proceed.
George Undrawn: Hi, Tim This is George Undrawn on for Derik one.
Speaker Change: As we incorporate new consumption dynamics.
Speaker Change: I I'll mention to your cost of goods sold how should we be thinking about gross margin trajectory over the medium term.
Speaker Change: Yeah. So we were at 81.6% subscription gross margin this quarter, we expect it to remain around that level for the near term with the long term goal of having an increase from there in terms of the dynamic related to consumption.
Speaker Change: You know it does tie the revenue more closely with the costs. So.
Speaker Change: That's that's the large part of the reason why we're expecting that to increase over time going forward.
Speaker Change: Awesome I appreciate that color.
Speaker Change: And then can you talk to some of the trends you're seeing in your enterprise space versus commercial base and then maybe how does he is evolving partnerships impact better are you seeing these partnership deals skew larger or.
Speaker Change: Just some color there.
Speaker Change: Yeah, I'll jump in on that one and Joshua free to chime in too.
Speaker Change: Yeah on the enterprise side I mean, it's it's Ed.
Speaker Change: Large portion of our business, it's an important part part of our business. We had great success. There over the years, we have a lot of great enterprise customers and if we look at the leads that are coming in from partner.
Speaker Change: Significant portion of those are enterprise Lisa So we're seeing this as a real opportunity to continue to expand our presence in the enterprise and to continue to add success. There. So we're definitely encouraged by that.
Speaker Change: Awesome awesome.
Speaker Change: And then.
Speaker Change: As you gain more traction of these cloud partners and get adopted into modern stack what area of your solution set are you are you seeing these customers really dive into.
Speaker Change: Yeah, one of the biggest thing with the clouds is.
Speaker Change: They're looking to get more and more information into their clouds. They want a hydrate their clouds and we have a unique ability to do that we have more connectors than anybody in the industry and we will have a very robust system to be able to help them manage the G. L and when we walk into an account instead of the 100 or so people that might be using a <unk>.
Speaker Change: CDW.
Speaker Change: When we're in an account we might see 10000 50000, even 100000 users.
Speaker Change: And so if you can have all of those people also accessing that data and formats that they want in a secure way then it just drives more adoption of that CDW and secures a cdw's relationship even more most of the CDW as you're out there trying to.
Speaker Change: Build other use cases.
Speaker Change: And they're all trying to expand beyond I T central functions and go into creating marketing use cases, and and sales use cases and operations use cases, and that's that's our bread and butter. So it really is a good combination of us with the Cdw's and one of the things that we get out of that as we get a C. I O.
Speaker Change: Bless relationship, which makes our our a.
Speaker Change: Our relationship with that customer are much stronger and ability to weather different changes that have gone through and we're seeing where we're kind of a you have an ability to sit on top of multiple cdw's and that's actually something that CIO is like as well as people are shifting their strategies, we're adopting one CDW and moving to others and it really.
Speaker Change: It puts us in a unique position.
Speaker Change: Awesome I'll just finish up with one last one.
Speaker Change: Real real positive commentary around the guidance and what Youre seeing out of the CDW ecosystem and given that sort of strength in commentary I'm wondering how you're thinking of investing in growth versus investing in margins, you've obviously factored in a little bit of op margin expansion, but maybe just talk to that a little.
Speaker Change: Yes, it's a great question.
Speaker Change: There's always a balancing act.
Speaker Change: We feel confident that we're getting the right investments in place and that we have an opportunity to keep that momentum going with the cdw's, while still expanding margins. So we're we're not trying to get to 30% margins overnight, you know, where we're going to slow and steady expansion towards that five and in that 10% level over the next couple of years, but that's going to allow us plenty of room to continue to invest in these partnerships.
Speaker Change: Thank you. Our next question comes from the line of Eric Mark Kinsey with Lake Street. Please proceed.
Speaker Change: Curious to learn a little bit more about your pricing policy on your consumption based contracts.
Speaker Change: <unk> got as you've been at this for now I guess we're in.
Speaker Change: Our third year or so the the consumption based pricing contracts as they come up for renewal is there an opportunity to raise prices or is it really just more there's a natural as the as the customer uses the product more they consume more and that's what kind of drives.
Speaker Change: Our higher year over year growth and that consumption based installed base.
Speaker Change: Yeah, So our focus on consumption pricing is to make sure that Oh.
RJ Tracy: This is RJ Tracy C R O with Domo.
Speaker Change: So.
Speaker Change: Our our real growth consumption is to align the value that customers get with how they pay and so its a natural motion for us to go work with customers and help them get more value out of the platform. So solve more use cases get them using agentic AI solutions that help them to take action on the data and as they use the product and it drives the usage up which which we.
Speaker Change: Want to go in and then help them get a better a better rate on their on their consumption price. So it's a pretty natural motion for us and we're still figure out the best methods for adoption, but.
Speaker Change: But it's a real natural motion for customers, because they get more value than they pay more.
Speaker Change: Gotcha.
Speaker Change: And then the <unk>.
Speaker Change: Cohorts.
Speaker Change: Again, we're looking at this as a consumption based question as you've seen those cohorts come back for renewal you already talked about hey, we're up to 70% of the install of the E. R. R is that on a consumption based pricing metric as those cohorts.
Speaker Change: Are you seeing the consumption based cohorts as more likely to adopt the newer products or is it kind of equal mix between the folks who arent on consumption base.
Speaker Change: That are on the per seat based pricing.
Speaker Change: Yeah, there are a lot more likely to adopt because there's not a restriction or a paywall in front of them before they adopt so when you buy domo the entire platform is available to our customers to use.
Speaker Change: When we were on seat based pricing any feature that they hadn't paid for was hidden behind the paywall and so it created a barrier of entry for customers to go in and adopt that technology, where now if they want to try like the customer example that Josh read if they want to try out one agent. It can go in and in 37 minutes build an agent and that might have.
Speaker Change: Let me take a couple of credits and then they'll decide whether they're getting value from that or not and if they keep it running than it will consume more and more over the year and if not they can shut it off and they paid maybe a couple of credits to try something out so.
Speaker Change: Significant increase in adoption across the entire platform, including users.
Speaker Change: Got it and then last question is around the I guess the progression of the billings growth implied in the guidance. If I take your Q2 billings growth midpoint looks like a little over 1% growth, but you're talking about exiting the year. So our Q4 billings growth rate of.
Speaker Change: 5% is that based on things that you already have in the pipeline or is that kind of yet to yet to.
Speaker Change: Be filled in at the top of the funnel.
Speaker Change: It's based on a number of factors, we consider a number of different inputs in RF in our financial models pipeline is certainly one of them the trajectory of the pipeline pipeline generation quality of the pipeline and then just you know historical trends, what we're seeing in terms of rep productivity those kind of increases.
Speaker Change: But yes based on everything we're seeing we have confidence that we'll exit at five.
Speaker Change: And so you can kind of do the math between what we guided for Q2 and the five for Q4 and get too.
Speaker Change: What we're gonna be out to be around for Q3.
Speaker Change: Gotcha, Thanks for taking my question.
Speaker Change: No problem. Thanks, Eric.
Speaker Change: Thank you. Our last question comes from the line of Patrick Wahl reasons with citizens JMP. Please proceed.
Speaker Change: Great. This is Nick on for Pat. Thank you for taking my question and congrats on the quarter, Josh at Thermo fluids and on the call. Today, you mentioned that 200 customers, who wanted to try agent catalyst and I was wondering if you could speak a little on what demand looks like today for that offering.
Speaker Change: And then Todd one for you it's been almost nine months since you stepped into the role of CFO. What is one thing that's been harder than you thought and what is one thing that has been easier than you thought since assuming your new role.
Speaker Change: Yeah, I talked a little bit about you know the.
Speaker Change: The kind of conversations we're having with our customers. They are just ongoing and continual.
Speaker Change: And.
Speaker Change: They're not just exploratory right like I mentioned, they're actually making things in these trainings and and in these conversations but I'm gonna have RJ chop a bit more about the opportunities in and some of the activities that we're seeing in our pipeline.
RJ Tracy: Yeah, so as.
RJ Tracy: As we get leads especially from the ecosystem you know, we're seeing a ton of customers that want to dive into AI and figure out what that looks like within their company within their org.
Speaker Change: And a lot of those AI use cases require hydration they need access to data they need to be able to transform that data they.
Speaker Change: They need a way to to surface it out or embed it towards their users are out or that our customers are at so.
Speaker Change: We're seeing use cases, all across our stack and the great thing is is that they can come in and buy just the components that they need and the entire stacks available to them. So it anytime they can start to use other components that help them and will help drive consumption to give more value to our customers or from an AI perspective and the agents.
Speaker Change: Talking about like the surface now stuff that we're seeing as well, yes. So we have a customer right now that's.
Speaker Change: They're surfacing particular use cases in service now, but it requires a human intervention to come in and actually do all the work. So we're supplementing some of what they're doing in service now with our Agentic workflow. So one of the use cases was helping get data to hydrate a warehouse.
Speaker Change: And in this example customers can start a ticket in service now they want to bring data into their warehouse and typically that requires now of a person to then take that ticket go out do an integration upload data. We're now domo is automating that entire process, but we still allow for that human in the loop to improve or or.
Speaker Change: To reject a request, but if they were approve it then the data is uploaded immediately in that process now takes.
Speaker Change: 30 seconds to a minute instead of sometimes several days or weeks to get that human ready, we're seeing customers that want to automate labor management, what do they want to automate the ability to to help customer their employees that maybe can't work the next day.
Speaker Change: And need it need to fill in AI is helping them find a replacement it's automating the process for that it's immediately notifying people and asked them that they can accept a shift that they werent expecting to work and that entire process can happen in seconds. Instead of having someone have to go manage thousands of employees to figure out who can cover shifts.
Speaker Change:
Speaker Change: So there's some of the examples and use cases that we're seeing.
Speaker Change: Got it. Thank you Arthur Thank you Josh.
Speaker Change: Yep.
Speaker Change: Yeah, and then on your other question in terms of harder and easier.
Speaker Change: I'll I'll, probably characterize that a little bit differently. If that's okay, I'll probably put it in categories of things I really wanted something I really want to fix and things that I've been happy with how they been going so for me. We're obviously pleased with the improvement in gross retention over last year and over last quarter, but that's a big big focus for us as an executive team to continue that that March towards 90% plus.
Speaker Change: Retention so that's.
Speaker Change: The one thing that I'm really focused on in terms of improving very very happy with our RP O performance, we've talked about that already a few times, but that 5% current RPI growth not a huge number but it does point to that the 5% exit rate that we talked about earlier and derisk that and then that longer term portion of our PL also derisked our Ford.
Speaker Change: Looking revenue in our in our forecast beyond this year.
Speaker Change: Got it thank you for that and congrats again on the quarter.
Speaker Change: Thank you. Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: With that that concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
Speaker Change: [music].