10-Q: Domo Inc. Reports Second Quarter Results, Revenue Slightly Down Year-Over-Year

Domo Inc.'s second quarter results show a slight decrease in revenue compared to the same period last year, alongside continued net losses.

Summary

• Domo Inc. reported a total revenue of $78.4 million for the three months ended July 31, 2024, a 2% decrease compared to $79.7 million in the same period of 2023.
• Subscription revenue was $70.9 million, slightly down from $71.2 million year-over-year, while professional services and other revenue decreased to $7.5 million from $8.5 million.
• The company experienced a net loss of $19.5 million for the quarter, compared to a net loss of $16.1 million in the same quarter of the previous year.
• For the six months ended July 31, 2024, total revenue was $158.5 million, a slight decrease from $159.1 million in the same period of 2023, with a net loss of $45.5 million compared to $40.5 million.
• The company's trailing twelve-month gross retention rate was 84% as of July 31, 2024, down from 88% in the previous year, but with a sequential improvement in gross retention during the three months ended July 31, 2024.
• As of July 31, 2024, over 45% of Domo's annual recurring revenue (ARR) is on consumption-based agreements or enterprise-wide subscription-based agreements (ELAs).
• The company had over 2,600 customers as of July 31, 2024, with enterprise customers accounting for 46% of revenue for both the three and six months ended July 31, 2024.

Sentiment

Score: 4

Explanation: The document presents a mixed picture with some positive developments, such as the growth in consumption-based agreements and the focus on efficiency, but the negative financial results and the challenges in the current macroeconomic environment weigh heavily on the overall sentiment. The company is facing significant headwinds and needs to demonstrate improved performance in the coming quarters.

Positives

• The company saw a sequential improvement in gross retention during the three months ended July 31, 2024.
• Gross retention for the consumption-based cohort is greater than 90%.
• The company is expanding its partner ecosystem to drive growth.
• The company is focused on increasing the efficiency of its sales force and marketing activities.
• The company is leveraging research and development investments for future growth.

Negatives

• Total revenue decreased by 2% year-over-year.
• Net loss increased to $19.5 million for the quarter.
• Gross retention rate declined year-over-year.
• The company is experiencing a negative impact on revenue due to the macroeconomic environment.
• The company has a history of losses and may not be able to achieve or sustain profitability.
• The company has experienced management and board turnover, which creates uncertainties.

Risks

• The company may not be able to generate sufficient revenue to achieve or maintain profitability.
• Failure to manage growth effectively could adversely affect the business and operating results.
• The company's ability to raise capital in the future may be limited.
• Adverse events or perceptions affecting the financial services industry could negatively impact the company.
• The company faces intense competition and may not be able to compete effectively.
• Breaches in network, application, or computer systems could lead to loss of customers and reputational damage.
• Third-party claims of intellectual property infringement could lead to costly litigation.
• Economic uncertainties or downturns could materially adversely affect the business.
• The dual class structure of the common stock concentrates voting control with the CEO.

Future Outlook

The company expects its revenue to be negatively impacted in the near term due to the effects of the macroeconomic environment, which has elongated the software sales cycle and increased deal scrutiny. The company expects to continue to take steps to better align its sales team and focus on controlling costs, which it expects will result in improved margins, sustained positive cash flow and efficient growth in the long term.

Management Comments

• The company is focused on increasing the efficiency of its sales force and marketing activities.
• The company plans to continue to make investments in areas of its business to continue to expand its platform functionality.

Industry Context

The document indicates a challenging environment for SaaS companies, with elongated sales cycles and increased deal scrutiny, which is consistent with broader industry trends. The shift to consumption-based pricing models is also a notable trend in the industry, which Domo is actively pursuing.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards or competitors, but it does mention that the company faces intense competition from large software companies, business analytics software companies, and SaaS-based products or cloud-based analytics providers.
• The company's gross retention rate of 84% is below the industry average for SaaS companies, which is typically around 90% or higher, but the company notes a sequential improvement in the most recent quarter.
• The company's shift to consumption-based pricing models is a common strategy in the SaaS industry to align pricing with customer usage and value, but the document notes that the company has limited experience with this model.

Legal Proceedings

• The Company is involved in legal proceedings from time to time arising in the normal course of business.
• Management believes that the outcome of these proceedings will not have a material impact on the Company's financial condition, results of operations, or liquidity.

Stakeholder Impact

• Shareholders may be concerned about the decrease in revenue and increase in net loss.
• Employees may be affected by the company's efforts to control costs and align its sales team.
• Customers may be impacted by the company's shift to consumption-based pricing models.
• Creditors may be concerned about the company's ability to repay its debt.

Next Steps

• The company plans to continue to take steps to better align its sales team and focus on controlling costs.
• The company plans to continue to make investments in areas of its business to continue to expand its platform functionality.
• The company will continue to expand its partner ecosystem to drive growth.

Key Dates

Keywords

SaaS, cloud-based platform, business intelligence, data analytics, subscription revenue, consumption-based pricing, enterprise customers, gross retention, financial results, net loss