Domo, Inc.

to the Domo Q2 fiscal year 2025 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the 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. And with that, I will hand it over to Peter Lowry, Domo's Vice President of 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 domoinvestors.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 Q2, we exceeded our revenue guidance. Our gross retention bounced back to 88% at the high end of our guidance, which was a highlight for the quarter and a dramatic improvement over the last few quarters. While we aspire to return to north of 90% for the long term, I'm very pleased with this progress. On our biggest deal of the quarter, it was at our option to secure an additional year on the contract term if we agreed to accommodate a quarterly billing schedule. This strategic decision caused our billings to be just below guidance this quarter. Otherwise, we would have met our target had this customer been billed annually. I'm particularly excited about this customer story and our first contract ever with an eight figure total value. And I'll talk about that a little bit later. Additionally, In order to give us more runway for the initiatives we've been pursuing, we decided to extend the maturity of our debt to August, 2028. And in connection with this amendment, we also were able to reduce our overall interest rate and reduce our cash interest rate by a substantial amount. We'd like to thank BlackRock for their continued support of our business. We also make good progress on our growth initiatives, including our partnership efforts and our shift to consumption. I believe these are absolutely the right moves, and while it may take some time for them to translate into top lane growth, the signs are very encouraging that we are better positioned than ever to pursue a huge market opportunity. I'll start by sharing more about this opportunity and the great response from our strategic partnership initiatives. DOMA was founded to help organizations leverage their data more effectively. To achieve this, we developed a comprehensive modern analytics stack that lets users store, prepare, analyze, visualize, and distribute data amplified by AI, providing a complete agile cloud-based data solution for our customers. But as the industry evolved, companies started anchoring their data strategies around cloud-based data warehouses, or CDWs. Recognizing this shift, we've advanced our platform to seamlessly integrate with these CDWs, positioning ourselves as a partner rather than a competitor. This approach has enabled us to engage in more strategic conversations with our customers. One of the primary benefits of these CDW partnerships is that instead of cobbling together solutions from four or five different vendors, a customer can achieve the same outcome just with their preferred CDW And Domo, we've been told that no one can get data into the CDWs faster than Domo. The speed and scale at which customers get value from their data has always been one of our key differentiators and is something we think makes us a unique player in today's ecosystem. Let me share a win from Q2 that highlights the opportunity with CDWs. We had previously engaged with a brand communications business that unfortunately ruled Domo out after deciding to implement Snowflake. However, soon after launching Domo's Magic ETL on Snowflake in May, we were reintroduced to the conversation with this customer by one of Snowflake's important integration partners, who strongly recommended us over the other choices the customer was considering. And that customer is now using Domo alongside Snowflake. Clearly, we're very excited by the ecosystem and other partner opportunities in front of us. We acknowledge that the results of these efforts aren't impacting our numbers yet, but they are affecting our pipeline. So let me give you some color around the partner pipeline that we're building. The number of joint deals in our pipeline being worked between us and CDW partners has increased from zero to over 60 deals over just the last two quarters. We closed five new customers from Domo Everywhere partners during Q2. This represents a completely new source of deal flow. And although it is small right now, we believe this represents a channel that will grow rapidly. We signed 26 brand new channel partner agreements recently, several of which are elite service partners of Snowflake and Databricks. We've trained five sales teams at CDW partners, with another five sales teams on the calendar. This is where the rubber really hits the road, and we are thrilled to be invited to train these sales organizations. We are in advanced conversations with other partners, including two of the global top 10 software companies by revenue, one of which is one of the world's largest cloud ERP providers, to deliver joint solutions to their expansive customer bases enabling their customers to get fast and actionable insights from their data. It is extremely convenient that two of their biggest competitors are also our two biggest competitors, as we believe the alignment will naturally drive market behavior advantageous to us. One other partner shared that we have helped them win more than 20 new opportunities than they otherwise would have lost, cementing our relationship with them, of course. And then another company recently expressed urgency in getting a partner agreement signed with us because they found an opportunity with a nationwide retailer that operates over 800 stores. And they believe the linchpin to them closing their deal is the Domo platform. This past quarter, we also had a big presence at the Snowflake and Databricks user conferences. I had so many great conversations introducing Domo's capabilities and the tremendous value we can deliver to our mutual customers. I came away from these conversations feeling more excited than ever about Domo's place in the ecosystem. In conclusion, we are seeing great signals that our ecosystem partnership strategy is working and starting to produce results. So we are going to run this play, and if it turns out like we believe it will, then we should get back to meaningful growth. And as I indicated last quarter, It may take 12 to 24 months for that growth to show up in our financial results as we evaluate our strategic options and become much closer to the players in the ecosystem. At this point, we are only one quarter in from going live with Snowflake. And just doing the math, we still have seven more quarters to play the strategy out before I want our place in the world to be truly defined. Our shift to consumption-based pricing is also fundamental to capitalizing on this partner opportunity. and driving expansion with existing customers. This strategy goes beyond a signed consumption agreement. Our goal is more customers fully embracing Domo across their entire organization. Whether it's a consumption contract or an enterprise-wide license agreement with a data cap, we want to put our customers in a position where they can quickly achieve wall-to-wall adoption of Domo. Last quarter, we discussed the positive impact that consumption has had on our customer retention. And again, for the Q2 consumption cohort, we saw even better gross and net retention rates on a substantially larger renewal base than we did in Q1. Today, we have over 45% of our ARR on consumption contracts. and expect to achieve our goal of having a majority of our ARR on consumption by year end. Now let me remind you why transitioning to consumption is a key strategy for our business. It aligns realized value with price as it allows our customers to have company-wide exploration of our product with very little risk upfront. It makes it easier to work with partners. It removes hurdles that delay product led growth and use case expansion. It protects our customer accounts as customers will now openly standardize on us, thereby limiting the number of accounts that have us for a few departments and a few of our competitors for other departments, which is never as stable as we would like. It makes it easier to explore the full breadth of our platform. to build use cases from actually using the product versus from a sales pitch. And it facilitates the sunsetting of legacy competing solutions that our customers may still be using in various parts of their organization. A new multinational customer we acquired in Q2 described consumption as a no-brainer because instead of adopting Domo in one country, consumption facilitated a global rollout across six countries, while setting them up for rapid expansion going forward. Another story from Q2 was with one of our earliest consumption customers. They were recently acquired by a much larger company that was a Power BI shop, and we were very much at risk of losing the customer. However, because that customer was on consumption, the acquiring company was able to explore Domo and quickly found that they were able to do things with analytics that they didn't think were possible. Now, instead of canceling, we're exploring upsell opportunities. And our biggest deal of the quarter, which I mentioned in my introduction, is a great story about the opportunity created by our consumption model. It was a seven-figure upsell and an eight-figure total contract value with a Fortune 500 company that originally chose Domo when they were searching for a partner that could meet the complex integration, collaboration, and security needs of their multinational business a few years ago. We won the opportunity two years ago when the company's BI leadership recognized the range of sophisticated tools Domo offers for global enterprise businesses. It didn't take long before the team realized that those tools created benefits they hadn't experienced before. For example, They completed their first data migration from a legacy tool into Domo in just one week. They also quickly realized they could replace more expensive legacy technologies with Domo. In the two years since, they've applied those benefits broadly across the organization. What started as a use case for 300 analysts has expanded to more than 10,000 users across multiple use cases, including financial planning and analysis, sales forecasting, data science, and AI. Looking ahead, they have plans to expand to more than 50,000 users by the end of 2025. I just love this example because it puts the impact of our strategic priorities on full display and provides a blueprint of how consumption can transform the way Donal is adopted in an enterprise. We got in the door with an extremely innovative and collaborative customer with vast growth potential. Thanks to consumption, we got much earlier expansion to users across the organization. We were then declared as the global standard, and this customer now has a four-year term, eight-figure total contract value. This is actually the first eight-figure contract we've ever had. We've had larger annual customers, but this is the first eight-figure contract. multi-year contract we've ever had. And we believe there's still room to grow this customer. The speed and scope of expansion would have been terribly difficult, if not impossible, with seat licenses. In summary, we are very excited about the traction we're seeing with partners and the customer growth we're seeing as a result of consumption and these partners. I'm extremely optimistic about the growth opportunities with these initiatives as the backdrop. Now, before I turn things over to David, I want to let you know that as a result of some health issues that David has been experiencing over the last year, he has decided to transition to a different role in the organization. David joined Domo during a time of transition and he has been absolutely fantastic. I appreciate so much the contributions he's made over the past year and a half. While David will be transitioning out of the CFO role at the end of the third quarter, He will be staying at Domo in the role of senior advisor to the executive team, where we will actively continue to leverage his background and experience going forward. Ultimately, I would be thrilled if David is able to join our board of directors when the time is right. Taking over in David's place, I'm happy to announce that Todd Crane, Domo's current senior VP of finance, will be assuming the role of CFO. Todd has a wealth of experience at Domo and understands the financial dynamics of our business as well as anyone. He has been here for nearly a decade and held a number of finance leadership roles over that time. As it became apparent that David's eye surgeries were not as successful as he'd hoped and that his time in the CFO seat might become shorter than we had anticipated, we have had Todd work very closely with David in all aspects of the CFO function, from meetings with investors to meetings with our board, to refinancing our debt, to being an active member of the executive team. During this time and even before that, Todd and I have worked very closely and I've often expressed to him that I would love to see him as our CFO someday. I'm truly excited to have Todd's experience and insight as we position Domo to get back to growth. I think it's important to note that Todd has broad support from our executive team and from our board as he steps into this role. And with that, I'll hand it over one last time to Mr. Jolly.