Summary
Domo closed its fiscal third quarter with $53.6 million in total revenue, up 19.8% from the same quarter a year earlier. Subscription revenue was $46.9 million, up 24%, and represented 87% of the total. Gross profit rose 29.3% to $39.17 million, and gross margin expanded 5.3 percentage points to 73.0%. Management tied the gain to continued optimization of third-party hosting costs and better use of internal services resources. Subscription gross margin on a GAAP basis reached 80%, an improvement of 4 percentage points from the prior-year quarter.
The bottom line improved but stayed deeply negative. Domo reported a net loss of $22.2 million for the quarter, with the loss narrowing 23.6% year over year. Diluted loss per share was $0.75, an improvement of $0.30. The operating loss narrowed 29.2% to $18.88 million, and operating margin improved 24.3 percentage points to negative 35.2%. Stock-based compensation of $10.3 million remains the largest gap between GAAP and non-GAAP results. On a non-GAAP basis, the net loss was $11.9 million, or $0.40 per share, on 29.5 million weighted-average shares.
Cost discipline drove much of the improvement. Sales and marketing expense fell to 55% of total revenue, down from 67% a year earlier, and research and development expense fell to 31% of revenue from 39%. Total operating expenses rose 2% to $58.04 million, held back by a 24% jump in general and administrative expense to $11.9 million.
The headline operational milestone was cash. Operating cash flow was negative $1.7 million for the quarter, an improvement of 91.2% from the prior-year quarter, while adjusted net cash provided by operating activities turned positive at $1.4 million. Cash and cash equivalents stood at $83.8 million as of October 31, 2020. Capital expenditures fell 34.3% to $1.10 million. Year to date, operating cash flow was negative $19.42 million, an improvement of 70.1%. CEO Josh James framed the result as delivering on the commitment made at the company's IPO to grow revenue while reaching cash-flow positive with the cash on hand.
Forward-looking indicators were solid. Billings reached $55.7 million, a 25% increase year over year. Remaining performance obligations totaled $248.8 million as of October 31, 2020, up 21%, and $153.9 million of that is expected to be recognized as revenue in the next twelve months, up 22%. Deferred revenue rose 16.8% to $106.26 million. Domo counted over 1,900 customers, an 8% increase from a year earlier, and 59% were on multi-year contracts, up from 55% as of January 31, 2020. Enterprise customers supplied 50% of revenue for the quarter. Gross retention for the twelve months ended October 31, 2020 was 89%.
Guidance points to modest near-term growth. For the fourth fiscal quarter, Domo expects revenue of $53.3 million to $54.3 million and a non-GAAP net loss per share between $0.42 and $0.46 on 30.1 million weighted-average shares. For the full fiscal year 2021, the company guided to a non-GAAP net loss per share of $1.83 to $1.87 on 29.3 million weighted-average shares.
Risks cluster around the pandemic and the balance sheet. Domo serves travel and hospitality, sports and leisure, and retail customers that COVID-19 has hit hard, and it warned that retention for customers in those industries could be lower in fiscal 2021 and fiscal 2022. Some customers have pursued concessions such as longer payment terms or shorter contracts. The company also booked $4.6 million of annual recurring revenue this fiscal year from government entities responding to the pandemic, contracts it flagged as at higher risk of not renewing. Other expense, net rose 36% to $3.2 million on lower interest income, and the accumulated deficit reached $1,102.8 million. Domo has drawn all $100 million of its credit facility and must keep at least $10.0 million of unrestricted cash to satisfy its covenant.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $53.6M | $51.1M | +4.9% | $44.8M | +19.8% |
| Gross profit | $39.2M | $37.5M | +4.5% | $30.3M | +29.3% |
| Gross margin | 73.0% | 73.3% | -0.3 pp | 67.7% | +5.3 pp |
| Research & development | $16.5M | $15.9M | +3.7% | $17.6M | -6.1% |
| Sales & marketing | $29.6M | $27.4M | +8.1% | $29.8M | -0.6% |
| General & administrative | $11.9M | $9.6M | +24.8% | $9.6M | +24.4% |
| Total operating expenses | $58.0M | $52.9M | +9.8% | $57.0M | +1.9% |
| Operating income (loss) | -$18.9M | -$15.4M | -22.8% | -$26.6M | +29.2% |
| Operating margin | -35.2% | -30.1% | -5.1 pp | -59.5% | +24.3 pp |
| Net income (loss) | -$22.2M | -$17.9M | -24.1% | -$29.1M | +23.6% |
| Net margin | -41.4% | -35.0% | -6.4 pp | -65.0% | +23.6 pp |
Risks
The COVID-19 pandemic has caused travel restrictions and remote work, and MD&A states customers in travel and hospitality, sports and leisure, and retail have been severely impacted. Certain customers pursued concessions such as lengthened payment terms or reduced contract length, and $4.6 million of annual recurring revenue from government COVID-19 response contracts may be at higher risk of not renewing.
A majority of annual recurring revenue is up for renewal during the fiscal year ending January 31, 2021, and gross retention rate was 89% for the twelve months ended October 31, 2020. MD&A anticipates retention for customers in industries particularly impacted by COVID-19 may be lower in fiscal 2021 and fiscal 2022.
Enterprise sales cycles range from approximately six months to multiple years, and quarterly sales are weighted toward the last few weeks and days of the quarter. This compression increases the likelihood that sizeable transactions extend beyond the forecasted quarter, harming forecasting accuracy and billings.
As of October 31, 2020, the $100 million credit facility was fully drawn, cash and cash equivalents were $83.8 million, and no amounts were available to draw. The facility contains restrictive covenants, including a minimum unrestricted cash covenant of $10.0 million and a debt-to-annualized-recurring-revenue ratio, and is secured by substantially all assets.
The market is intensely competitive, with large software companies such as Microsoft, Oracle, SAP, and IBM, and analytics providers such as Tableau/Salesforce and Looker/Alphabet. Competitors may bundle products at significant discounts or no charge, leading to price cuts, longer sales cycles, and loss of market share.
The company recently experienced turnover in senior sales leadership, which may adversely affect operating results and prospects. New sales hires require significant training and time before full productivity, and competition for direct sales personnel with the required skills is significant.
Net loss narrowed to $22.2 million for the quarter ended October 31, 2020 from $29.1 million in the prior-year quarter, and to $65.0 million for the nine months ended October 31, 2020 from $95.8 million in the prior-year period. However, accumulated deficit was $1,102.8 million at October 31, 2020, and the company expects to incur losses for the foreseeable future.
Domo's Mr. Roboto uses machine learning, predictive analytics, and other AI technologies. AI algorithms may be flawed, datasets may be insufficient or biased, and inappropriate data practices could impair acceptance, subjecting the company to competitive harm, legal liability, and reputational harm.
The platform depends on customers' ability to access data maintained on third-party software and service platforms. The company generally does not have agreements guaranteeing access, and third parties may restrict or prevent integration or limit data connector functionality.
Cocolalla, LLC and founder/CEO Joshua G. James control approximately 83% of voting power. Mr. James has pledged all Class A shares to secure a loan, and default could result in lender sales of pledged shares, which are likely to adversely affect the stock price.
Securities class-action complaints are pending against the company and certain current and former directors and officers, asserting violations of federal securities laws and seeking unspecified damages. The company believes they are without merit and intends to defend vigorously.
As of January 31, 2020, federal and state NOL carryforwards were approximately $914.8 million and $1,141.0 million. An ownership change under Section 382 could limit the ability to utilize pre-change NOLs, and a lack of future taxable income could cause them to expire.
Channel partner relationships have resulted in limited revenue historically, and agreements are typically non-exclusive. Partners may offer competing products, cease marketing Domo with limited notice, and sales through partners are more likely to involve collectability concerns.
As international sales and operations increase, transactions in currencies other than the U.S. dollar expose the company to currency exchange losses. The company does not currently hedge transactional foreign currency exposures, and foreign currency gains and losses could become more pronounced.
SaaS KPIs
All quarters →Total Customers
Customer count growth (YoY)
Customers under multi-year contracts
Summary, forecast, risks and KPIs are extracted from Huckleberry.ai, Inc.'s SEC filings for Q3 FY2021 (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 2, 2026.