Domo, Inc.

Greetings and welcome to the Domo first quarter 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Peter Lowery. Vice President, Investor Relations. Thank you. You may begin.

Good afternoon. On the call today, we have Josh James, our founder and CEO, and David Jolly, our Chief Financial Officer. I'll lead off with our safe harbor statement and then on to the call. Our press release was issued after the market closed and is posted on the Investor Relations section of our website, where this call is also being webcast. Statements made on this call include forward-looking statements related to our business under federal securities laws. These statements are subject to a variety of risks, uncertainties, and assumptions. These include, but are not limited to, statements about our future and prospects, our financial projections, and cash position, statements regarding the potential of our consumption model, statements about our sales team and technology, our expectations for new business opportunities, transactions, and initiatives, statements regarding our channel of communication and upcoming events, statements regarding the potential of artificial intelligence and its impact on our business, and statements regarding the impact of macroeconomic and other conditions on our business. For a discussion of these risks and uncertainties, please refer to documents we file with the SEC, 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. 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 of Domo's performance. 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. 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 in the investor relations section of our website at demoinvestors.com. With that, I'll turn it over to Josh. Josh?

Thank you, Pete. Hello, everyone, and thanks for joining us on the call today. I'll start with our quarterly results. In Q1, we exceeded our revenue guidance and achieved positive adjusted free cash flow. Our billings were not on target, though we would have substantially met our guidance if it weren't for one large non-renewal. With the exception of that one contract, our gross retention would have been 6 percentage points higher and come in closer to 89%. While our near-term results are not where I want them to be, I do remain confident that we're focused on and executing in the right areas, which should have us back to growth in the near future. We continue to get positive signals from our consumption customers. more and more consumption deals are coming up for renewal. And while it's still a small sample size, we think it's big enough to be directionally indicative. Gross and net retention for consumption renewals in Q1 were significantly higher than our seat-based customers. In fact, net retention for the consumption cohort was greater than 115% in Q1, which is higher than we've ever seen. and gross retention was 96%. As we look forward to Q2, we have three times the sample size and the numbers are equally encouraging. With results like these, we are very focused on converting our customer base to consumption as fast as possible. In Q1, over 90% of our new contract dollar value was on consumption, and now we have over 30% of our total ARR on consumption. We continue to believe this number will be over 50% by the end of the year. Diving into consumption, several years ago, we noticed that the relationships with some of our customers weren't as strong as we wanted them to be. We were having trouble getting in front of the CIO and had competitors and other departments also signing big contracts. As a result, we sometimes found ourselves stuck in a single use case. And even when customers wanted to try to expand to other use cases, the permissions required internally for our customers on a seat-based model made it difficult to do so. It limited our ability to spread virally and impeded our growth. This made it clear that something needed to change, which is why we began exploring a consumption model. More recently, as we saw the economy turn, leading to CFOs putting pressure on CIOs to cut spend, particularly software spend. Decisions were made based on which vendor could be most aggressive on costs, and vendor consolidation became the mantra of the day. We won some of these battles and we lost some. But even when we won, we often had to cut the price dramatically if it were in a situation where we had a single use case and not a wall-to-wall enterprise license agreement installation or ELA. So if we were not embraced as a strategic multi-use case solution with multiple departments with the CIO's blessing, we became vulnerable. And that's exactly what happened with our large non-renewal this quarter. They were a customer for eight years and had renewed seven times, but we'd struggled to break out of that single use case. As a result, we lost that account due to a CFO driven cost cutting directive focused on tech consolidation. These factors have played a large part in our retention dropping from our historic rates of about 90% to recent results in the low 80s. Over the last three quarters, we had 16 renewals over a million dollars, of which we lost two, and had varying degrees of downsells at seven. Of the remaining seven, we either retained or expanded our relationship. For the losses and downsells, the common theme was being vulnerable to budget cuts and tech consolidation because we were only being utilized for a single use case or lacking wall-to-wall adoption. As we've said numerous times, getting more customers to embrace Domo for multiple use cases with ELAs is the only model to move forward with. Unfortunately, we didn't get this model implemented soon enough to mitigate some of the churn we've experienced. But it's in place now, and as I mentioned earlier, we are seeing great retention numbers from our consumption customers. Also, as we look ahead, we want to make it clear that we think we have truly turned the corner when it comes to retention. As we look at the landscape of customers renewing, It's markedly different than it has been the last four quarters. We feel confident in our Q2 retention forecast and are guiding to gross retention for the first time ever. We expect Q2 gross retention to be increasing and up in the range of 87% to 88%, up from 83% in Q1. We don't plan on providing this guidance every quarter, but we wanted to do this to demonstrate our confidence that the recent trend of low 80s is not expected to be the case for Q2. What we've seen play out is a tale of two types of customers. On the one side, there are customers with a single use case where Domo is used in only one department and there is lack of CIO support. On the other side, we have fiercely loyal customers who embrace Domo as a broad, strategic solution in their organization. They've adopted us as their preferred solution, there are limited competitive offerings in the account, and they have multiple gear plans centered around our platform. Those customers love Domo, and actually, nothing reinforced it more than their engagement at our annual customer conference, Domo Palooza, which was held in March. For the first time since Omniture, I'm seeing customers that are truly raving fans, and they're excited to talk about their multi-year plans with Domo. It was starkly noticeable at Domo Palooza, partly because we hadn't been in person with our customers en masse for five years. I heard dozens and dozens of companies talking emphatically about Domo being at the core of their data strategy. and how our platform fits into their three or five year plans. The energy was phenomenal and it was so exciting to hear story after story about customers transforming their businesses by fully embracing Domo. We heard from customers like Regional One Health, a level one trauma center, which has used Domo to reduce its average patient stay by almost two days and free up hospital beds to an additional 12,000 patients every year. They've also used Domo to improve their pharmacy program, driving $6 million in incremental profit from that use case alone. thanks to domo they have everything they need to leverage extend and act on data securely and transparently as well as automate actions that lead to important outcomes this customer has also become a valuable partner and contributed to multiple new logo deals for domo another example allied universal a global security services company that transformed from a hundred million dollar company into a 20 billion dollar company with 800,000 employees operating over 100 countries just eight years after launching with Domo. This outstanding growth was possible because they are using Domo to easily and quickly leverage, extend, and act on insights that drive tangible results. But nothing stood out more to me than the incredible praise we saw our customers publicly share with their professional networks following the event. For example, these are some of the posts. A strategy and analytics expert from Ticketmaster said that Domo's current tech stack and where we're headed are at the leading edge and extremely easy to use and called Domo, quote, a hidden gem of a company. An IT leader from Freddy's Frozen Custard and Steakburger said, if you've ever heard me talk about my love of data, you've probably heard me talk about Domo. We use Domo for so many things and yet we may actually underutilize it. Another example of customer momentum came just last week. We were speaking with a long-term customer who's been on an ELA contract for years. They were extremely excited to share their five-year data strategy with us, which centers around Domo. As part of this, they were looking at a significant upsell. They were also a little surprised by the lack of appreciation for the value we create and made a comment that they should invest in our stock. While we certainly appreciate the sentiment, we do actually believe the level of affinity from our customers is evidence that our recent retention numbers aren't reflective of the incredible traction we're seeing with them. Now, we've mentioned a few times how much this space has evolved. Over the past several years, Cloud data warehouses, or CDWs, have really emerged as a center of gravity in the broader data landscape. Unfortunately, as all the activity and momentum built up around the space, we were kind of left on the sideline because we had already created capabilities that directly competed with the CDWs. As these cloud data warehouses rapidly expanded their businesses and impact, it became clear we needed to change our backend to align with these CDWs and remove the friction that existed, which brings us to today. It's only been one month since we launched Cloud Amplifier with our first CDW partner, and we have four more in queue for the next few months. Astonishingly, we already have 47 opportunities in pipeline with 12 net new relationships where a CDW brought us into customer conversations that would have traditionally gone to one of our competitors. Let me tell you about the other momentum we're seeing with partners, and this is all very recent. In the last few months, we participated in more than a dozen partner events. Since April 1st, we have led over a dozen partner-enabled trainings and also conducted more than 90 account planning and joint customer calls. And just in April alone, we held more than 300 sales calls where the prospect mentioned a CDW partner, which is a significant increase over prior months as our customers and our sales executives start to understand and realize the benefit that comes by aligning with these CDW partners. Across the board, the feedback is extremely positive. In fact, one CDW told us they have never been able to get data into their product as quickly and easily as they did using Domo, providing access to data that they thought was out of reach. The reps are starting to close deals with us and quickly calling us again to introduce us to their other accounts because it speeds up their time to close. Here are several examples of how becoming a better ecosystem partner is helping us win in the market. One new logo win this quarter was with a manufacturing company that chose Domo and Databricks over Microsoft Fabric. That choice lets the customer easily leverage existing investment in their cloud data warehouse while giving businesses and their users the real-time insights they need to run their business. Another new logo win this quarter was with a pet care company where a former Domo customer became their head of operations. And as a condition of her employment, she required that she would be able to deploy Domo company-wide for data management. Another example of the affinity that comes when customers embrace broader use cases with Domo. The deal closed within one month of an on-site meeting with the executive team. In this case, Domo will sit on Google Cloud and data will be distributed throughout the line of business with Domo. Another example is a very well-known restaurant chain that chose Domo to replace Tableau this quarter. The company historically used Tableau on Snowflake but switched to Domo because we easily scale across hundreds of users, offer compelling mobile capabilities, and delivering outcomes quickly all while leaving their data in Snowflake. And then the last example I want to share is where we have continued to see strong momentum in upsells on consumption conversions as well. One customer that converted to our consumption model that I want to highlight this quarter was with an account-based marketing firm where we had a 30% upsell, primarily because of our ability to integrate with another well-known CDW. Our ecosystem investments are producing results, and we're very excited to see the extent to which it impacts our top line over the next few quarters. I'm extremely pleased with the progress we are making as we start closing deals and seeing more and more pipeline generation. And with that, I'll hand it over to Mr. Jolly. David.