Business Overview and History
Domo, Inc. (NASDAQ:DOMO) is an innovative technology company that has been at the forefront of data analytics and business intelligence solutions for over a decade. Founded in 2010 by Joshua G. James, Domo has established itself as a leader in the rapidly evolving landscape of cloud-based data platforms, empowering organizations of all sizes to unlock the full potential of their data and drive strategic decision-making.
Domo was founded in 2010 with the vision of digitally connecting everyone within the enterprise with real-time, rich, relevant data. The company recognized that many organizations were unable to access the massive amounts of data they were collecting in siloed cloud applications and on-premise databases. Even for organizations that could access their data, the process was time-consuming, costly, and often resulted in the data being out-of-date by the time it reached decision makers.
To address these challenges, Domo provided a modern cloud-based data experience platform that digitally connects everyone at an organization from the CEO to frontline employees with all the people, data, and systems in an organization, giving them access to real-time data and insights. Historically, Domo offered its platform to customers as a subscription-based service, with fees based on the chosen Domo package and usage.
As Domo expanded, the company experienced significant growth in its customer base. However, the company also incurred substantial net losses since its inception, including net losses of $105.6 million and $75.6 million for the fiscal years ended January 31, 2023 and 2024, respectively. Domo attributed these losses to investments in sales and marketing, research and development, and other areas to support its growth.
Despite the losses, Domo made progress in enhancing its platform and expanding its customer relationships. The company introduced consumption-based pricing options to provide more flexibility and increase customer adoption. Domo also worked to develop partnerships with cloud data warehouses and system integrators to better integrate its platform with customers' data infrastructures. These efforts aimed to improve the company's customer retention and expansion over time.
Financial Performance and Ratios
Domo's financial performance has been a mixed bag in recent years. For the fiscal year ended January 31, 2024, the company reported annual revenue of $319 million, with a net loss of $75.6 million. The company's annual operating cash flow was $2.58 million, while its annual free cash flow stood at -$9.18 million. This financial performance reflects Domo's continued investment in growth initiatives, particularly in research and development and sales and marketing.
In the most recent quarter (Q4 2024), Domo reported revenue of $78.8 million, representing a year-over-year decline of 1.8%. The company attributed this slight revenue decline primarily to a $4.4 million net decrease from existing customers, partially offset by a $4.2 million increase from new customers. Notably, subscription revenue remained flat during this period.
Domo's key financial ratios paint a nuanced picture of the company's financial health. The current ratio stands at 0.65, indicating a relatively low level of liquidity, while the debt-to-equity ratio of -0.74 suggests a highly leveraged capital structure. Domo's gross profit margin of 73.1% highlights the company's ability to generate strong gross profits, though its overall profitability remains a challenge.
As of January 31, 2024, Domo reported cash and cash equivalents of $57.2 million. The company also has access to a credit line of $123 million, which had been fully drawn as of October 31, 2024. This liquidity position provides Domo with some financial flexibility as it continues to invest in growth and innovation.
Geographic Revenue Distribution
Domo's revenue is primarily generated in the United States, with domestic customers accounting for 80% and 79% of total revenue for Q4 2023 and Q4 2024, respectively. No single country outside the United States exceeded 10% of total revenue, highlighting the company's potential for international expansion.
Transition to Consumption-Based Pricing Model
One of the key strategic initiatives undertaken by Domo in recent years has been its transition to a consumption-based pricing model. Historically, the company's revenue was primarily driven by subscription-based agreements, with customers paying a fixed fee for access to the platform. However, in recognition of the evolving needs of its customer base, Domo has shifted towards a consumption-based model, where customers pay based on their actual usage of the platform.
This shift has the potential to drive increased customer adoption and better align Domo's pricing with the value it delivers. By offering a more flexible and scalable pricing structure, the company aims to remove barriers to entry and encourage wider usage of its platform across organizations. Early indications suggest that the consumption-based model is gaining traction, with Domo reporting that its consumption customers had a gross retention rate of over 90% and a net retention rate of over 100% in the most recent fiscal year.
Partnerships and Ecosystem Development
Domo has placed a strong emphasis on building a robust partner ecosystem to complement its own product offerings and drive growth. The company has forged strategic alliances with leading cloud-based data warehouses, such as Snowflake and Databricks, allowing customers to seamlessly integrate Domo's data visualization and analytics capabilities with their preferred data storage solutions.
Additionally, Domo has been actively expanding its network of system integrators (SIs) and value-added resellers (VARs). These partnerships not only provide Domo with access to new customer segments but also serve to streamline the implementation process and ensure successful deployments for its customers.
One notable partnership is with Koantek, a global provider of technology services and data solutions. The collaboration between Domo and Koantek is focused on enhancing the integration between Domo's platform and the Databricks Data Intelligence Platform, enabling customers to harness the full potential of their data assets through improved data integration, advanced analytics, and intuitive visualization tools.
Domo's focus on ecosystem development has been a key driver of its growth, as it allows the company to leverage the expertise and customer relationships of its partners while providing a more comprehensive and integrated solution to its clients.
AI and Data Products Platform
Domo's vision extends beyond being a mere data visualization and analytics platform. The company has made significant investments in developing its AI and data products capabilities, positioning itself as a leader in the rapidly evolving field of artificial intelligence-powered business intelligence.
Domo's AI services layer allows customers to seamlessly integrate and apply a variety of AI models, including those hosted on leading cloud platforms like Snowflake, Databricks, and Google Cloud. This flexibility enables customers to leverage the latest advancements in machine learning and natural language processing to gain deeper insights and automate decision-making processes.
Moreover, Domo's platform features advanced capabilities such as the ability to create AI agents and AI-driven workflows. These intelligent agents can perform automated tasks independently, driving significant efficiencies for Domo's customers. The company's focus on AI-powered solutions has not gone unnoticed, with Domo receiving multiple industry awards in recognition of its innovative AI and data products platform.
Product Segments and Revenue Breakdown
Domo's revenue is primarily derived from two main segments:
1. Subscription Revenue: This segment accounts for the majority of Domo's revenue and consists of subscription-based agreements and consumption-based agreements for the company's cloud-based platform. In the most recent quarter (Q4 2024), subscription revenue was $71.1 million, representing 89% of total revenue. Subscription agreements typically vary in length between one and three years and may be subject to automatic renewal or renewal at the customer's discretion.
2. Professional Services and Other Revenue: This segment includes implementation services sold with new subscriptions, as well as professional services sold separately, such as training and education. In Q4 2024, professional services and other revenue was $8.7 million, accounting for 11% of total revenue. Revenue from professional services arrangements is recognized as the services are provided, generally based on hours incurred.
Recent Performance and Future Guidance
Domo's recent performance has shown some positive trends despite ongoing challenges. The company exceeded its Q4 FY2025 guidance for billings, revenue, non-GAAP EPS, and adjusted free cash flow. Notably, Domo's subscription RPO growth accelerated to 14% year-over-year, while long-term subscription RPO growth accelerated to 38% year-over-year. The company's gross retention rate has also improved, reaching 85% in Q4, marking the third consecutive quarter at 85% or above.
Looking ahead, Domo has provided guidance for FY2026:
- Full year billings are expected to be between $310 million and $320 million. - GAAP revenue is projected to be between $310 million and $318 million. - Non-GAAP net loss per share is anticipated to be between $0.29 and $0.39, assuming 40.9 million weighted average shares outstanding.
For Q1 FY2026, Domo expects:
- Billings of $62 million to $63 million. - GAAP revenue of $77.5 million to $78.5 million. - Non-GAAP net loss per share of $0.18 to $0.22, assuming 39.7 million weighted average shares outstanding.
The company noted that its Q1 billings guidance reflects the impact of approximately $5 million of renewals shifting out of Q1 to other quarters in FY2026 due to consumption conversions in FY2025. Domo anticipates low single-digit billings growth in Q2 FY2026, followed by a steady acceleration in billings growth for the remainder of the year. Importantly, the company expects to be cash flow positive in both Q1 and FY2026.
Risks and Challenges
While Domo has demonstrated impressive growth and innovation, the company faces several risks and challenges that investors should consider.
One of the primary concerns is Domo's ability to achieve profitability and maintain a sustainable financial footing. The company's heavy investments in research and development, sales and marketing, and other growth initiatives have resulted in consistent net losses, which could potentially weigh on investor confidence if not addressed.
Additionally, Domo operates in a highly competitive market, with established players like Microsoft, Tableau, and Qlik, as well as emerging cloud-based competitors, vying for market share. The business intelligence software market is characterized by rapid technological changes and evolving industry standards, requiring continuous innovation and adaptation.
Domo's transition to a consumption-based pricing model also carries inherent risks, as the company must ensure that this new approach aligns with customer needs and expectations while driving sustainable revenue growth. The shift in pricing model has already impacted the timing of some renewals, as evidenced by the company's Q1 FY2026 guidance.
Furthermore, Domo's reliance on a limited number of large customers and its exposure to macroeconomic conditions could pose challenges to its business operations and financial performance. The company's geographic concentration, with 79% of revenue coming from the United States in the most recent quarter, also presents both opportunities and risks in terms of international expansion.
Industry Trends and Market Outlook
The business intelligence software market, in which Domo operates, is experiencing robust growth driven by the increasing adoption of cloud-based BI solutions and the growing demand for data-driven decision making. Industry estimates suggest a compound annual growth rate (CAGR) of around 10-12% over the next 5 years for the overall market.
This positive market outlook presents significant opportunities for Domo, particularly as organizations increasingly recognize the value of real-time data analytics and AI-powered insights. However, the company will need to continue innovating and differentiating its offerings to capitalize on this growth potential and compete effectively in the evolving landscape.
Conclusion
Domo, Inc. (NASDAQ:DOMO) has positioned itself as a leading player in the rapidly evolving data analytics and business intelligence landscape. The company's innovative cloud-based platform, which seamlessly integrates data from multiple sources and delivers real-time, AI-powered insights, has garnered significant attention and adoption among organizations of all sizes.
Domo's strategic shift towards a consumption-based pricing model, coupled with its focus on building a robust partner ecosystem and enhancing its AI and data products capabilities, suggests a company positioning itself for long-term growth and success. The recent financial performance, while mixed, shows some encouraging trends, particularly in terms of customer retention and the acceleration of subscription RPO growth.
However, the company's persistent net losses, competitive landscape, and reliance on large customers present ongoing challenges that Domo must navigate effectively. The company's ability to execute on its growth strategy while moving towards profitability will be crucial in the coming years.
As Domo continues to evolve and adapt to the changing market dynamics, investors will be closely monitoring the company's ability to achieve profitability, maintain a strong customer base, and capitalize on the growing demand for advanced data analytics and AI-driven solutions. With its innovative approach, clear vision for the future, and positive industry trends, Domo remains a compelling player in the data-driven business landscape, albeit one that still faces significant challenges on its path to sustained profitability and market leadership.