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01/10 22:41
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals strong financial metrics, such as record operating margin and improved free cash flow, alongside positive developments in partnerships and consumption-based models. While guidance remains cautious, the raised full-year billings guidance and optimistic outlook on partnerships and new customer growth indicate a favorable market sentiment. Despite some management ambiguity, the overall strategic focus and financial health suggest a positive stock reaction.
Total Revenue $79.7 million, with no specific year-over-year change mentioned.
Billings $70.3 million, with no specific year-over-year change mentioned.
New ACV Growth Approaching 20%, the highest in 3.5 years, after a double-digit decline in Q3 FY '25. This growth is attributed to improved sales productivity and a shift to a consumption-based model.
Sales Force Productivity Growth 67% in Q2 FY '26, up from 19% in Q3 FY '25. This improvement is due to a more efficient sales strategy and partner-centric approach.
Subscription RPO Growth 19% in Q2 FY '26, up from 3% in Q3 FY '25. This growth is driven by longer-term contracts and a focus on consumption-based renewals.
Gross Retention 85%, consistent over the past 5 quarters. Efforts to improve retention are ongoing, with expectations for meaningful improvement in Q4.
ARR Net Retention Over 94%, marking the fourth consecutive quarter of sequential improvement. This is attributed to the shift to consumption-based contracts.
Subscription Gross Margin 81.9%, with sequential improvement for the second consecutive quarter. This is expected to remain stable in the near term and expand over the longer term.
Operating Margin 7.7%, the highest in company history, driven by expense management and better-than-expected revenue performance.
Adjusted Free Cash Flow $1.4 million, an improvement of $7 million year-over-year, attributed to disciplined financial execution and cost management.
AI-driven business intelligence platform: Domo has built a complete integrated modern AI and analytics stack, designed for advanced AI solutions and end-to-end modern platforms. This includes seamless data access, robust ETL, semantic layer, workflow automation, security, and governance.
Consumption-based pricing model: Over 75% of ARR is now on consumption-based pricing, which removes user limits and enables broader access. This model has driven significant customer adoption and long-term contracts.
International expansion: Japan showed strong momentum with new ACV nearly doubling year-over-year and TCV hitting all-time highs. Renewals in Japan saw an NRR of close to 130%.
Ecosystem partnerships: Domo strengthened integrations with Snowflake, Databricks, Oracle, and Google, leading to expanded collaborations and co-selling opportunities. These partnerships have driven significant lead generation and new business.
Sales productivity: Year-over-year sales force productivity grew by 67% in Q2 FY '26, with new ACV growth accelerating to 20%, the highest in 3.5 years.
Financial performance: Domo achieved its first-ever positive non-GAAP EPS and positive free cash flow. Subscription RPO grew 19% year-over-year to $409.8 million.
Focus on AI and partnerships: Domo streamlined its R&D and go-to-market strategies to focus on AI solutions and ecosystem partnerships, resulting in longer-term contracts and fueling RPO growth.
Shift to consumption model: Domo transitioned from a seat-based licensing model to a consumption-based model, which has driven higher retention and customer satisfaction.
Macroeconomic Factors: The company acknowledges risks related to macroeconomic factors that could impact their business, as mentioned in the forward-looking statements.
Customer Retention: Gross retention has been stagnant at 85% for the past five quarters, and improving retention remains a key focus area. This poses a risk to long-term revenue stability.
Partner Investments: Upcoming investments in partner events may temporarily affect operating margins, which could impact short-term profitability.
Consumption Model Transition: While the transition to a consumption-based model has shown progress, it still poses risks related to customer adoption and the potential for variability in revenue.
Regulatory and Compliance Risks: The company mentions risks related to regulatory and compliance issues in their forward-looking statements, which could impact operations.
Competitive Pressures: The company faces competition from other analytics and AI solution providers, as highlighted by customer evaluations against competitors like Power BI, Tableau, and Looker.
Supply Chain and Operational Risks: Although not explicitly mentioned, operational risks could arise from the company's reliance on partnerships and integrations with cloud data warehouse (CDW) providers.
Revenue Expectations: For Q3, the company expects GAAP revenue of $78.5 million to $79.5 million. For the full fiscal year 2026, the guidance is raised to $316 million to $320 million.
Billings Projections: Q3 billings are expected to be $75.5 million to $76.5 million. Full-year billings guidance is raised to $317 million to $321 million.
Non-GAAP Net Loss Per Share: For Q3, the company expects a non-GAAP net loss per share of $0.03 to $0.07. For the full year, the guidance is raised to a non-GAAP net loss per share of $0.11 to $0.19.
Rule of 40 Metrics: The company raised its guidance for exiting fiscal year 2026 with billings growth and non-GAAP operating margin of 6%, up from the previously stated 5%. It also expects to exit fiscal year 2027 with both metrics at 10%, with potential for further increases.
Adjusted Free Cash Flow: The company expects slightly positive adjusted free cash flow for Q3 and Q4 of fiscal year 2026, and for the full fiscal year 2026.
Gross Retention: Gross retention is expected to remain at around 85% in Q3 and increase meaningfully in Q4, driven by longer-term consumption contracts.
ARR Under Consumption: The company expects to end fiscal year 2026 with over 85% of ARR under consumption, approaching the goal of 90%.
Subscription Gross Margin: Subscription gross margin is expected to remain stable in the near term and expand over the longer term.
Investments in Partnerships: The company plans to make investments in Q3 to support and strengthen growing partnerships, which may temporarily affect margins.
The selected topic was not discussed during the call.
The earnings call highlights a strong Q3 revenue close to guidance, a strategic focus on retention, and optimistic future projections with improved gross retention and net revenue retention. Despite a shortfall in Q3 billings due to longer sales cycles, the company shows confidence in Q4. The focus on AI and strategic partnerships adds a positive outlook. However, slight gross margin decline and lack of detailed future guidance are concerns, balancing the overall sentiment to positive.
The earnings call reveals strong financial metrics, such as record operating margin and improved free cash flow, alongside positive developments in partnerships and consumption-based models. While guidance remains cautious, the raised full-year billings guidance and optimistic outlook on partnerships and new customer growth indicate a favorable market sentiment. Despite some management ambiguity, the overall strategic focus and financial health suggest a positive stock reaction.
The earnings call summary indicates positive financial performance, with revenue and retention improvements. The transition to a consumption model and AI integration are promising, though there are risks. The Q&A showed optimism in product adoption and sales productivity, despite some vague responses. Guidance is optimistic with improved retention and operating margins. The lack of a share repurchase program is a minor negative. Overall, the sentiment is positive, with expected stock price movement in the 2% to 8% range.
The earnings call reflects a positive sentiment overall, with strong financial performance, improved customer retention, and significant sales productivity gains. The transition to a consumption model and AI integration are driving growth, and the company is maintaining operational efficiency with a positive operating margin. Despite macroeconomic challenges, the company is building momentum, with optimistic guidance and strategic partnerships enhancing its market position. The Q&A section supports this positive outlook, with management addressing key growth drivers and maintaining confidence in margin expansion.
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