Release Date: December 05, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Domo Inc (NASDAQ:DOMO) exceeded its Q3 guidance for billings, revenue, and non-GAAP EPS.
• Subscription RPO grew by 3% year over year, with RPO beyond 12 months increasing by 14%.
• The company reported a significant increase in average contract length, demonstrating strong customer commitment.
• Partner-sourced contributions to billings increased by more than 20% from Q2, with a 90% increase in partner opportunities in the North America pipeline.
• Domo Inc (NASDAQ:DOMO) successfully converted the majority of its customers to a consumption-based model, with 100% of new logo deals structured as consumption contracts.

Negative Points

• Adjusted free cash flow was more negative than expected in Q3 due to delayed cash receipts related to consumption migrations.
• Gross retention fluctuated between 85% and 90%, with some variability due to a tight budgetary environment.
• The company's sales capacity is not at the level it was a year ago, which could impact near-term billings.
• There is uncertainty about when the partner momentum will have a meaningful impact on financial results.
• The company is not providing specific guidance for FY26, indicating uncertainty about future growth prospects.

Q & A Highlights

• Warning! GuruFocus has detected 6 Warning Signs with DOMO.

Q: Can you provide more details on the success of transitioning customers to the consumption-based model and how it impacts customer spending? A: We are seeing significant strength with our consumption customers. The model facilitates wider and faster adoption, leading to vendor consolidation onto our platform. This sets up these customers for better retention and stickiness moving forward. (Respondent: Unidentified_6)

Q: How is Agentic AI contributing to driving consumption, and could it accelerate the conversion of the remaining customer base to the consumption model? A: Agentic AI is a data product that leverages organized data with governance and transparency, enhancing our offering. It is present in many deals, increasing close rates and aligning with our ecosystem. This is expected to drive consumption and help convert the remaining customer base to the consumption model. (Respondent: Unidentified_7)

Q: What are the implications of the macro environment on customer behavior, and are there any post-election impacts? A: The macro environment hasn't changed significantly. Customers are consolidating vendors, and our longer contract lengths should help with retention. The consumption model allows strategic decisions, enabling customers to test and potentially replace other vendors with Domo. Our ecosystem partnerships are strengthening customer relationships. (Respondent: Unidentified_7)

Q: With the billings outlook for Q4 indicating a contraction, what is the expectation for growth in FY26? A: While we are not providing specific guidance for FY26, we see positive momentum in our pipeline, particularly from partner motions. We are optimizing for next year's billings, and by the next earnings call, we expect to have more specific information on growth prospects. (Respondent: Unidentified_6)

Q: Can you provide metrics on the impact of CDW partnerships on deal closure times and any updates on large independent software provider partnerships? A: Deals with CDW partners close about 20 days faster due to collaborative efforts. We have seen instances where deals close within days because the partner has already done the groundwork. Regarding large independent software providers, we are making progress, with significant deals already closed and more in the pipeline. (Respondent: Unidentified_9)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.