Summary
Domo's fiscal 2024 second quarter revenue was $79.7 million, up 5.5% year over year. For the six months ended July 31, 2023, revenue was $159.1 million, up 6.1% from the prior-year period. Gross profit in the quarter was $60.6 million, up 5.9%, and gross margin was 76.0%, up 0.3 percentage points from the prior-year quarter. The company still posted an operating loss of $10.6 million, but that loss narrowed 58.6% from the prior-year quarter. Operating margin was -13.3%, up 20.6 percentage points from the prior-year quarter.
Net loss for the quarter was $16.1 million, and the net loss narrowed 44.9% from the prior-year quarter. Diluted EPS was -$0.45, up 47.7% from the prior-year quarter. For the six months ended July 31, 2023, net loss was $40.5 million, and the net loss narrowed 34.8% from the prior-year period. Diluted EPS was -$1.14, up 38.0% from the prior-year period. On a non-GAAP basis, net loss was $0.8 million, or $0.02 per diluted share. Non-GAAP operating margin was 6%, and non-GAAP subscription gross margin was 85%.
Cash generation improved. Operating cash flow was $0.64 million in the quarter, up 126.9% from the prior-year quarter. Year-to-date operating cash flow was $1.46 million, up 192.8% from the prior-year period. Capital expenditures were $2.92 million in the quarter, up 97.7% from the prior-year quarter. Deferred revenue was $167.61 million at July 31, 2023, up 1.0% from the prior-year quarter. Billings, a non-GAAP metric, were $70.6 million, down 2% year over year. Adjusted free cash flow was negative $2.3 million for the quarter, a non-GAAP measure.
Operational metrics were mixed. Domo ended the quarter with over 2,600 customers, and customer count increased 5% from July 31, 2022 to July 31, 2023. Gross retention rate was 88% for the 12 months ended July 31, 2023, down from 89% for the 12 months ended July 31, 2022. Enterprise customers accounted for 47% of revenue for the quarter, down from 50% for the prior-year quarter. The company highlighted product recognition, including a number one ranking in the Dresner Advisory Services 2023 Self-Service Business Intelligence Market Study for the fifth consecutive year. Domo also announced its placement in the Q2 2023 Constellation Research ShortList for Multicloud Analytics and Business Intelligence Platforms for the eighth consecutive year.
Guidance points to slower growth. For the third fiscal quarter, Domo expects revenue of $78.5 million to $79.5 million and a non-GAAP net loss per share of $0.10 to $0.14 based on 36.3 million weighted-average shares. For full year fiscal 2024, the company expects revenue of $316.0 million to $320.0 million, representing year-over-year growth of 2% to 4%, and a non-GAAP net loss per share of $0.39 to $0.47 based on 36.1 million weighted-average shares.
Risks remain. Domo said macroeconomic conditions have elongated software sales cycles, increased deal scrutiny, and made renewal discussions more challenging. The transition to consumption-based pricing carries uncertainty because the company has limited experience with that model. Domo has incurred significant net losses since inception and expects to incur losses for the foreseeable future. The credit facility is fully drawn, matures on April 1, 2025, and carried an interest rate of approximately 11.1% as of July 31, 2023. The company was in compliance with the financial covenant terms of the credit facility on July 31, 2023. Management also noted that adverse events affecting the financial services industry could limit access to existing cash.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2024 | Q1 FY2024 | QoQ | Q2 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $79.7M | $79.5M | +0.3% | $75.5M | +5.5% |
| Gross profit | $60.6M | $60.9M | -0.5% | $57.2M | +5.9% |
| Gross margin | 76.0% | 76.6% | -0.6 pp | 75.8% | +0.3 pp |
| Research & development | $20.8M | $23.4M | -11.4% | $25.3M | -18.0% |
| Sales & marketing | $41.0M | $43.2M | -4.9% | $44.7M | -8.2% |
| General & administrative | $9.4M | $14.0M | -33.0% | $12.8M | -26.9% |
| Total operating expenses | $71.2M | $80.6M | -11.7% | $82.9M | -14.1% |
| Operating income (loss) | -$10.6M | -$19.7M | +46.2% | -$25.6M | +58.6% |
| Operating margin | -13.3% | -24.8% | +11.5 pp | -34.0% | +20.6 pp |
| Net income (loss) | -$16.1M | -$24.4M | +34.2% | -$29.1M | +44.9% |
| Net margin | -20.2% | -30.7% | +10.5 pp | -38.6% | +18.4 pp |
| Diluted EPS | -$0.45 | -$0.69 | +$0.24 | -$0.86 | +$0.41 |
Risks
MD&A states that the macroeconomic environment has elongated the software sales cycle, increased deal scrutiny, and made renewal discussions more challenging, and expects revenue to be negatively impacted in the near term. Risk factors also cite elevated inflation, recession risk, and possible customer delays or cancellations.
Enterprise sales cycles range from approximately six months to multiple years, and quarterly sales are weighted toward the last few weeks of the quarter, increasing the likelihood that sizable transactions extend beyond the forecasted quarter. This harms forecasting accuracy and can adversely affect billings and new customer acquisition metrics.
Domo has begun shifting to consumption-based pricing but has limited experience with it; customers may use less data than originally contemplated, resulting in lower net retention in future years. The transition also requires aligning sales and marketing and compensation structures, and analysts may misinterpret metrics tied to the subscription model.
A majority of annual recurring revenue is up for renewal during the fiscal year ending January 31, 2024, and gross retention rate was 89% and 88% for the 12 months ended July 31, 2022 and 2023, respectively. Failure to renew or reduced usage would cause revenue to decline.
MD&A expects total revenue growth rate to decrease for the remainder of fiscal 2024, after total revenue increased 5% for the quarter ended July 31, 2023 and 6% for the six months ended July 31, 2023. Billings were $70.6 million for the three months ended July 31, 2023 compared with $72.3 million for the prior-year period.
As of July 31, 2023, the $100 million credit facility was fully drawn, the interest rate was approximately 11.1%, and the facility is secured by substantially all assets with restrictive covenants and a minimum unrestricted cash covenant. In August 2023, Domo obtained a waiver for defaults on technical non-financial covenants related to collateral, and inability to meet covenants could accelerate repayment.
Domo's platform uses machine learning and artificial intelligence technologies, and the filing warns that AI algorithms may be flawed, datasets may be insufficient or biased, and outputs may appear correct but be inaccurate. Evolving laws such as the proposed E.U. Artificial Intelligence Act could impose additional requirements and lead to regulatory scrutiny, legal liability, and reputational harm.
Domo recently experienced CEO, CFO, and COO transitions and significant board changes, including the re-appointment of Joshua G. James as CEO and appointment of David Jolley as CFO. Management and board turnover creates uncertainty, causes loss of institutional knowledge, and can negatively affect strategy and execution.
Joshua G. James beneficially controlled approximately 80% of voting power as of July 31, 2023, and has pledged his Class A and Class B shares to secure a loan. If the pledged shares were sold or transferred upon default, the market price of Class B common stock could decline or be volatile.
The filing describes exposure to financial institution failures, including that Domo had approximately $12.4 million in deposits and $18.3 million in sweep arrangements with Silicon Valley Bank before its closure and regained access through government intervention. There is no guarantee of similar intervention in future bank failures, and such events could impair access to cash and dampen demand.
Domo faces intense competition from large software companies such as Microsoft, Oracle, SAP, and IBM that may bundle data and analytics products into larger deals at significant discounts or no charge. Increased competition may lead to price cuts, longer sales cycles, reduced gross margins, and loss of market share.
Domo must recruit, train, and retain direct sales personnel and sales leadership as it aligns its sales organization with the consumption-based model, but new hires may not become productive as quickly as desired and compensation changes could hurt productivity. Competition for top technical and sales talent is intense.
SaaS KPIs
All quarters →Total Customers
Remaining Performance Obligations (RPO)
Summary, forecast, risks and KPIs are extracted from Huckleberry.ai, Inc.'s SEC filings for Q2 FY2024 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.