Release Date: August 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Domo Inc (DOMO, Financial) exceeded its revenue guidance for Q2 fiscal year 2025.
- Gross retention improved to 88%, reaching the high end of the company's guidance.
- The company secured its first-ever eight-figure total contract value, highlighting significant customer expansion.
- Domo Inc (DOMO) extended the maturity of its debt to August 2028 and reduced its overall interest rate.
- The number of joint deals in the pipeline with CDW partners increased from zero to over 60 deals in the last two quarters.
Negative Points
- Total revenue decreased by 2% year-over-year, indicating a challenging market environment.
- Q2 billings were below guidance due to a strategic decision to accommodate a quarterly billing schedule for a major customer.
- Non-GAAP net loss increased to $2.7 million compared to $0.8 million a year ago.
- Adjusted free cash flow was negative $5.6 million, resulting in a cash balance of $55.7 million.
- The company anticipates a non-GAAP net loss per share of $0.14 to $0.18 for Q3, reflecting ongoing financial challenges.
Q & A Highlights
Q: Josh, you've indicated that you're now having more strategic conversations with customers given your partnership status with CDWs. Can you drill down a little more on why this helps change the perception of Domo? And I know you guys have always tried to evolve how you engage with CIOs, is this helping you strengthen the partnership on the CIO front?
A: Yeah, for sure. It helps to address the relationship with the CIOs. In many cases, we walk in and we want to talk about their broader data strategy, but we haven't historically been the vendor, especially in the enterprises that they want to have that conversation with. The CDWs on the other hand, that is where they're settling those conversations and what we found is often when we go in and we think that we're competing against just one of our smaller competitors or against somebody that's focused just on visualization, and we think that's the competition. The reality is the competition might be Snowflake plus their integration partner plus their ecosystem of partners who are all in there selling together. And we don't realize that there's a selling motion that is 4 or 5 times the effort than the one that we're putting in. So being aligned with the Snowflake and Databricks of the world, we think it's going to have a meaningful impact as justified by these experiences that we were describing and including the one where we got kicked out early on. And we got brought back in because it wasn't even Snowflake, but it was the integration partner of Snowflake who is installing Snowflake said to the customer. These other choices that you're making to integrate with Snowflake. They're not the right choices. Domo is the right choice, and we got the phone call. We got the deal. So it does change things dramatically. The CDWs are definitely a big strategic component of every CIO's data strategy, and we're excited to be so broadly accepted now from the CDW. I mean, the excitement is palpable. The fact that we talked about five sales teams being educated and five more coming on. Those are the entire sales team, that's not how it happens. It's -- hey, here's the Eastern mid-market sales team, we will have an off-site, when you guys come in and do a training and it kind of happened one by one, and you have to build those relationships. But then as you build those relationships, we're starting to see reps that went through a training. They call us to dip their toe in the water. They brought us into a deal, we close a deal, they call us immediately the next day for being introduced into another deal. So that's the attraction and progression that we're getting. It's just very different CAC. Then you spend more money on Google to put them in your pipeline to go in by yourself and try to compete and create the value proposition. It's much easier when you have four or five other people touting what you can do for those customers. So it's been just a totally different experience and one that we're all really excited about.
Q: I mean, it sounds like the partnership or kind of well beyond just the CDWs, but with a lot more of the ecosystem partners in there. And I guess on that? I mean going from 0 to 60 deals in the pipeline with partners, how are you thinking about the timeframe and going from pipeline build to deal closure. Any sense or color on what average deal sizes could look like? Or how many quarters are you now that you start seeing more conversion on those deals?
A: Yeah. There's nothing more than that we want than being able to say, two quarters out, you're going to start seeing an uptick in billings. We want to say it so desperately, but we still need some more data. In terms of the deal size, we do have -- like you referenced some of these other partners in the ecosystem not just CDWs. It's really been fun because they feel like they're extremely defensible partners and we go in we help them create a joint solution. They've got 500 customers, 2,000 customers, 20,000 customers, and we've got a joint offering. In some of those cases, the ASP might be smaller. But then again, in other cases, it's higher than our average deal. So I think overall, it will probably average out. We also have customers that are coming to us and saying, can we work on a freemium type solution for 8,000 customers that we can introduce this to next quarter. And we're just licking our chops because it just -- that's exactly the kind of relationship that we want because one of the challenges that you have is how does that customer get that first bit of value? What's the time to value for having that integrated data visualize showing up on executives' phones in their apps getting alerts and that first bit of data connections always hard. We have a partner, they've got the data, you do the integration, they roll it out to 8,000 customers. We're just really excited about what's going to happen as we start integrating with some of these types of partners well beyond CDWs.
Q: If I could squeeze one more in for David. The sales and marketing expenses dropped down quite a bit. I know there's some Doma pools expenses that come out, but it seems like perhaps there were other cost controls that came into play. Can you just talk about anything that you guys did to drive additional efficiencies in sales and marketing this quarter?
A: Yeah. Sure. In sales and marketing, I mean, a lot of that that we saw in Q2 is headcount related. And so, we've had some natural attrition. And then we've been a little bit active on some others and really trying to get that dialed in. And right now, we're balancing that as we're moving into this partner motion. And I think over time, we expect to see that as a much more efficient sales process. So that should bring our CAC down naturally as we shift more into the partnership and the ecosystem. So I don't see that as a onetime blip in terms of efficiencies and cost reductions. So now, that said, if we get a lot of leads and opportunities, I think it'll come in pro rata, that hedges we need them. But right now, I think we're in a pretty good place.
Q: Congrats on the refinancing. What can you tell us about the terms of the new loan and the covenants? And Josh, you mentioned a couple of quarters ago that you weren't happy with some of the other offers you had around the covenant?
A: Yeah. So I'll take the point on the deal. So we're able to extend it out from four years from closing. So four years from August. We think that gives us the kind of runway that we need to do what we want to with partners and see some of that success. And so, we were able to bring the interest rate down a bit, but we were able to bring in the cash interest component down to what is it -- so for [plus 300, so about 8] and a quarter on cash interest net to considerable cash savings over where we
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
