Domo - Earnings Call - Q3 2021

Transcript

Speaker 0

Welcome to Domo's Third Quarter Fiscal Year twenty twenty one Earnings Call. At this time, participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. And with that, I will hand it over to Peter Lowry, Domo's Vice President of Investor Relations.

Please go ahead.

Speaker 1

Good afternoon and welcome. On the call today, have Josh Stames, our Founder and CEO Bruce Felt, our CFO and Julie Kehoe, our Chief Communications Officer. Julie will lead off with our safe harbor statement and then on to the call. Julie?

Speaker 2

Thanks, Pete. 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, including statements about financial projections, the plans and expectations for our go to market strategy, our expectations for our sales and new business initiatives, the impact of COVID-nineteen on our business and our financial condition. These statements are subject to a variety of risks, uncertainties and assumptions. For a discussion of these risks and uncertainties, please refer to the documents we file with the SEC, in particular, today's press release, our most recently filed annual report on Form 10 ks 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 Delma'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 GAAP results. Please refer to the tables in our earnings press release for a reconciliation of our non GAAP financial measures to the most directly comparable measure.

With that, let me hand it over to Josh. Josh?

Speaker 1

Thank you, Julie. Hello, everyone. Thanks for joining the call. First, I hope that everyone's in good health. As we all know, this year has presented unimaginable health and economic challenges across the globe, and we indeed hope this pandemic is a once in a lifetime event.

On the call today, I'm gonna focus on a few items. First, a huge financial milestone that we've been working toward for years and the implications of our recent success, increased financial flexibility in our plans to drive efficient revenue growth. Second, how Domo's differentiated platform uniquely positions us to help our customers with their digital transformation initiatives and third, I'll cover Q3 highlights, including several significant upsells and wins across a variety of industries. And I'll touch on some recent industry recognition. So I'm going to start with sharing how ecstatic I am that we achieved a significant milestone.

As of Q3, Domo is a recurring revenue, cash flow positive company that has happy customers with gross retention north of 90% and is growing subscription revenue north of 20% with a total annualized revenue run rate of over $200,000,000 This is the culmination of over a thousand people, including several 100 that are here today, and we have been working on this for over ten years. This is the culmination of listening to customers and building what they need. This is the culmination of putting our hearts and souls into our customers and our vision, and we are only just getting started. We are the only publicly traded independent cloud based BI company, and we have countless opportunities in front of us. So a huge thank you to our customers and a huge thank you to our team members, my partners, and our investors who've always believed in us.

Now we are going to return that belief with greatness. Not many, if any, believed we would get to cash flow positive this fast after our IPO two years ago. I put it on the calendar for Q3 fiscal year twenty one, and I adamantly believe we would make it one way or another. And despite ups and downs and pandemics, earthquakes, unrest, political upheaval, cuts and losses, great people and wonderfully innovative customers banded together to create what is now a world class organization. I recently put up a billboard that says simply, there's a pony in there somewhere.

The reference is from president Ronald Reagan. He often told a story. The story concerns twin boys of five or six. Worried that the boys had developed extreme personalities, one was a total pessimist. The other a total optimist.

Their parents took him to a psychiatrist. Well, first, the psychiatrist treated the pessimist. Trying to bite brighten his outlook, the psychiatrist took him to a room piled to the ceiling with brand new toys. But instead of yelping with delight, the little boy burst into tears. What's the matter?

The psychiatrist asked, baffled. Don't you wanna play with any of the toys? Yes, the little boy bawled. But if I did, I'd only break them. Next, the psychiatrist treated the optimist.

Trying to dampen his outlook, the psychiatrist took him to a room piled to the ceiling with horse manure. But instead of wrinkling his nose in disgust, the optimist emitted just the yelp of delight and clambered to the top of the pile, dropped to his knees, and began gleefully digging out scoop after scoop with his bare hands. What do you think you're doing? The psychiatrist asked, just as baffled by the optimist as he had been by the pessimist. With all this manure, the little boy replied, beaming, there must be a pony in here somewhere.

Well, I think president Ronald Reagan certainly could have been referring to eternal but hopefully measured optimism for entrepreneurs. And so for good luck, I put up that billboard at the beginning of this quarter that repeated that phrase, there's a pony in there somewhere. We've been through our shares of ups and downs, but I was always 100 convinced this would eventually turn into a fantastic, even world class company. Maybe it's my entrepreneurial optimism shining through, but we found the pony, a big recurring revenue, fast growing, cash flow positive company with all kinds of happy customers, innovations and market positions to go out and capitalize on. Since our IPO, we've been committed to getting to adjusted cash flow positive with the cash on our balance sheet without raising a dime.

And I'm thrilled to announce today that in Q3, we achieved it. And in fact, we achieved it with $84,000,000 remaining in the bank, substantially more than anyone imagined. In Q3, we posted 25% billings growth, an acceleration from 23% last quarter. The continued growth in our base of recurring revenue and reaching cash flow positive status gives us increased financial flexibility to pursue the tremendous growth opportunity in front of us. Now let me talk a little bit about our unique positioning in helping our customers with their digital transformation initiatives.

As we all know, what has happened this year has forced companies, their employees, customers and supply chains to reimagine how they operate. The need for real time information, speed, and business agility that digital transformation provides has only accelerated. These elements have always been crucial, and are the reason we founded the company. But in this climate, these business priorities have moved to the forefront. Our customers have challenged us to solve their business problems with data at an unprecedented speed, and we've delivered for them.

Domo's unique platform has three pillars that drive our differentiation. The first is our data integration capabilities that solve back end integration at cloud scale without moving data. Second is our ability to drive insights and action with AI and to put well governed business intelligence power into the hands of business users in an easy to use self-service and mobile first solution. Third is the ability to build data driven apps in a low code, no code way that can modernize business processes at high speed and extend the value of data analytics and insights outside the organization to customers and partners. Our platform's ability to solve at scale and in record time, the back end and front end challenges to make data more valuable internally and externally for customers is a huge key to our differentiation.

Our most significant wins this quarter were driven by proof of concepts, POCs, where we were able to demonstrate our ability to deliver better solutions faster than the competition. The reason we can compose solutions so quickly is part of the inherent flexibility and scalability of the Domo Cloud First platform, which brings all the services needed, integration, data management, data science, AI and machine learning, governance, distribution to citizen developers and more to the data and apps. Through intelligent analytics based applications built on the Domo platform in a low code, no code environment, we are helping customers to rapidly modernize business processes, leveraging artificial intelligence and automating workflows. Our platform through our Domo Everywhere offering also goes beyond traditional embedded analytics capabilities and enables customers to extend their analytics and the value of their data to external stakeholders such as customers and supply chain partners while also generating new revenue models. I'll share a couple examples of this in just a few minutes.

Our view is that the demand for speed, business agility, and real time analytics is not something that goes away after the pandemic, and we will continue to deliver this to our customers. Now let me discuss how we are thinking about our increased financial flexibility and our plans to drive efficient growth. I'm particularly proud of how our employees have delivered during the pandemic. I would point out that our recent performance occurred against the backdrop of pretty significant cost reduction this year and a severe economic downturn. Our employee headcount in Q3 was down year over year, yet we've continued to grow our recurring revenue with the reduced expenses.

We've also been relentlessly focused on customer success, which is reflected in our higher retention rates. Going forward, we plan to invest in client services and other areas of our business that directly support our ability to serve and grow existing accounts. So now let me talk about some of the business highlights in Q3. One highlight was the 7 figure annual upsell I mentioned on last quarter's call with a Fortune Global five hundred retail conglomerate. We won this deal based on our outperformance and speed and scale compared to the competition.

Domo was chosen to help the organization integrate massive volumes of data from its existing systems without replacing or rearchitecting them so business decision makers could understand critical time sensitive business metrics. One of the key factors in our selection was not just Domo's ability to access and integrate data, but our ability to provide data governance at scale and do so without adding burden to already strained IT teams. Like most large organizations, this customer has multiple related technologies in use, but none were built to perform at cloud scale and in record time like Domo. Another highlight in The U. S.

Federal space, where we leveraged a partner relationship to close an almost 7 figure annual new lower contract to power PRAC, a public facing website that gives taxpayers the ability to see and explore pandemic relief spending data. Several of our large expansions this quarter demonstrate the success of customers having with Domo and how we can grow with the success. For example, we closed a 7 figure upsell with technology and media conglomerate that is using our Domo Everywhere solution to extend the value of its analytics and data and the full power of Domo externally to its community of tens of thousands of partners. We were initially chosen based on our superior speed and scale. The significant expansion was based on the successful rollout to a subset of the company's massive partner network.

We also signed a large upsell deal for Domo Everywhere that gives the Learning Management System or LMS software company the ability to embed and monetize LMS analytics into its software solution for its growing customer base. Before the initial contract, this customer had evaluated numerous solutions and also built a homegrown option that just didn't completely fit their vision. After a POC, the customer selected Domo because it was the only solution that allowed the company to extend the interactive analytics and data experience it wanted for their customers at scale. The most recent expansion was driven by demand the company has seen across the rest of its customer base for its Domo powered analytics, which the company has also turned into a new revenue stream. Now let me talk about some recent industry recognition.

Our team continues to receive accolades that reflect our commitment to product innovation, customer success, and our corporate culture. Most recently, Domo, with our customer Unilever, was named a winner in Ventana Research's Digital Leadership Awards for the support that data and the Domo platform played in Unilever's national philanthropic initiative, United for America, which provided more than $25,000,000 worth of support to local communities. In addition, Domo was named an overall experience and credibility leader in the Dresner Advisory Services 2020 SME BI study. And lastly, Domo was named for the ninth year in a row as a Utah Business Best Company to Work For. In closing, I continue to be impressed by the work our team is doing to help customers thrive, and I'm impressed by our employees' performance in this environment.

It is extremely rewarding as well to know we achieved our quarterly results while also hitting the significant milestone of getting cash flow positive in the quarter with plenty of cash in the bank. I'm looking forward to continuing to execute on our tremendous growth opportunity, and I sincerely thank our employees for their commitment. And I'm so excited to take a moment and celebrate this milestone with them. I'm so incredibly proud of all that they've accomplished. And with that, I will turn it over to the Bruce.

Bruce?

Speaker 3

Thank you, Josh. We had a strong Q3 and at the same time, we milestones this quarter. As Josh mentioned, we've got our commitment to reach positive operating cash flow without the need to raise additional capital. In fact, we reached this milestone with 84,000,000 in the bank, substantially ahead of our plans at the IPO, and we intend to stay operating cash flow positive going forward. Another milestone is that our gross retention rate increased to over 90% and represents a record high.

A third milestone is record subscription gross margins at 81%, an important metric in driving long term profitability. These achievements are a result of many incremental internal improvements we have made across the business enhanced by the market shifting towards solutions such as ours that provide modern ways to create, distribute, and use data to run businesses. I will now review the details behind our performance and then discuss fourth quarter and fiscal twenty twenty one full year guidance. Our Q3 billings of 55,700,000.0, a year over year increase of more than 25% was driven by strong new customer count growth, up sales and expansions, and high retention rates. We delivered these results overcoming a tough year over year large deal comparison by generating a much higher volume of transactions than one year ago.

At the same time, we maintained our standard billing terms even against the backdrop of pandemic driven challenges in some segments of our customer base. We have 59% of our customers under multiyear contracts at the end of Q3. Our remaining performance obligations or RPO grew 21 compared to the same quarter last year. Current RPO or RPO expected to be recognized as revenue over the next twelve months grew 22% year over year. Q3 total revenue was $53,600,000 a year over year increase of 20%.

Subscription revenue grew 24% year over year and represented 87% of total revenue. International revenue in the quarter represented 24% of total revenue consistent with Q2. Our subscription gross margin was 81%, up more than four percentage points from 76% in q three of last year and a slight improvement from last quarter. We continue to be successful managing our data center costs even as volumes continue to increase. In q three, operating expenses decreased by 6% from last year even though revenue increased by 20%.

The net effect of increased revenue while being cost efficient improved our operating margin by 31 percentage points from the same quarter last year. Now let me comment briefly on our investment and margin approach going forward. Now that we have hit the milestone of becoming adjusted cash flow positive, we plan to continue to generate positive operating cash flow. At the same time, since we have cushion on the balance sheet and have demonstrated leverage in the business, we believe we can safely take some of that leverage and invest more in growth than we have over the last two years. We're already building our Salesforce capacity and plan to make additional investments in some new product areas in order to support our growth plans.

We can make these investments yet continue to expand margins. Although we expect margin improvement to occur at a lesser rate than we have demonstrated recently as we sought to achieve cash flow profitability. We will provide specific guidance and more color around these things when we announce our q four results. Our net loss was 11,900,000.0, and our net loss per share was 40¢. This is based on twenty nine point five million weighted average shares outstanding basic and diluted.

In q three, we reported adjusted cash flow from operations of 1,400,000, an improvement of 6,200,000 over last quarter. Adjusted cash flow from operations excludes 3,100,000.0 of share purchases in Q3 under our employee stock purchase plan. The amount is included as a positive amount in our GAAP cash flow from financing section of our cash flow statement and an offsetting negative amount in our GAAP cash flow from operations section with no effect on our cash balance. Turning now to our balance sheet. As of October 31, we have cash and cash equivalents of approximately 84,000,000.

Now to discuss what we expect in q four and the full fiscal year '21. For q four, we are expecting billings of about $72,000,000 as we are experiencing strength in our business and have good visibility as we head into the remainder of Q4. For the current fiscal year, we now expect billings of about $222,000,000 up from $2.00 $8,000,000 that we guided to last quarter and well above our initial outlook of $190,000,000 based on our COVID-nineteen downside case that we used for reducing costs. On expenses, we're planning on our Q4 operating expenses to increase modestly from Q3 levels. While we expect to see decrease in operating expenses in fiscal year twenty one, we expect them to increase in fiscal year twenty two.

We expect Q4 adjusted net cash provided by operations of approximately 1,500,000.0. And expect full year adjusted net cash used in operations of approximately 11,000,000. Now the formal guidance. For the fourth quarter of fiscal year twenty one, we expect GAAP revenue to be in the range of $53,300,000 to $54,300,000 We expect non GAAP net loss per share basic and diluted of $0.42 to $0.46 This assumes 30,100,000 weighted average shares outstanding basic and diluted. For the full year of fiscal twenty one, we expect GAAP revenue to be in the range of $206,600,000 to $207,600,000 representing year over year growth of 19 to 20%.

We expect non GAAP net loss per share basic and diluted of $1.83 to $1.87 This assumes 29,300,000.0 weighted average shares outstanding basic and diluted. In closing, we're pleased with our execution in Q3 and are optimistic about our financial position and growth opportunities as we close out fiscal year twenty twenty one and head into next year. With that, we'll open up the call for questions. Operator?

Speaker 0

And your first question comes from the line of Sanjit Singh from Morgan Stanley. Your line is open. Hi. Thank you for taking the questions. Congrats to you both on the cash flow positive.

It was a long road. I mean, you got there, and that was quite achievement. In terms of thinking about the quarter, the 20% billings growth against a tougher comp was it's really impressive. So, Bruce, I was wondering if

Speaker 1

you could sort of

Speaker 0

sort of talk about the the velocity of deals. I think in your script, you mentioned a higher volume of deals compared to last year. Can you just sort of describe what where that demand is coming from from a vertical perspective? Or just from a sales perspective, how you're driving that, that increased volume of blocking and tackling business?

Speaker 3

Sure. Happy to. So this was an extremely high transaction volume quarter, led by a one of the highest growth in percentages year over year on new customers, what we call new logo account. And it was also just high transact high transaction volumes within our current customer base as well. And I think that has to do with just the on the one hand, increased operational rigor that we're using to manage the Salesforce.

And we really picked it up with the pandemic just assuming we just needed to work harder. But that's absolutely paid off for us. And then at the same time, our offering just fits nicely into what our customers need today. I mean, they need a product that's easy to use, easy to install, to roll out to end users that's in the cloud, that's on your phone, and that can scale. And just the general trend toward digital transformation within businesses is what we feed feed nicely into.

So between the operational rigor and and the fact that our solutions really meet what the market needs just drove very healthy transaction volumes this quarter. So we're really we're really pleased with that. It's a very healthy quarter.

Speaker 0

That's that's very promising. And then, Josh, if I think about I was sort of looking at the website earlier today. Kind of the messaging just seems so much more targeted in CRISPR sort of positioning Domo as, one, a data integration platform, two, a, business intelligence solution, and three, an intelligent app platform. Can you talk to me about, where you're seeing sort of traction? I'm sure, like, the the the BI case is sort of obvious, but both on the data integration side and on the intelligent app side, where you're sort of seeing customer traction on on those, of those parts of, of the use cases?

Speaker 1

Yeah. And I talked about a little bit in my comments, you know, the the fact that we're seeing, these POCs where we'll go in and work with a big customer, someone has usually many experiences trying out other things, usually many experiences with alternatives that are already installed at their place of business. And there's still one or two things they can't get done. And they call us in for a POC, and we connect the data they haven't been able to connect to before. And then, of course, we're able to distribute that data in such a timely, quick manner to so many people in the organization.

And in most cases, there'll be these apps that we end up, helping facilitate low code, no code apps, they really end up, you know, helping out with with workflow and accomplishing things that they had teams of people, that it took to accomplish before or they weren't even accomplishing it. And so it it is a combination of those three things, and it's been exciting to see the pace picking up. Another thing that we mentioned is Domo Everywhere. We'll have these large customers that will come in, start using our products and services, and find so much benefit from being able to distribute that information so easily with real time data no matter the size of the data to all their internal constituents. That's then, of course, the the next question that that begs is, can we get this to our partners?

Can we get this to our vendors? Can we get this to our suppliers? And we highlighted largest ones that we work with today with literally tens of thousands of partners that they're distributing data to, and it's the lifeblood of their business. The relationship with their 10,000 partners is the lifeblood of their business, And they're using us to to manage all of those communications now and making those partners so much more adept at reacting to what's taking place in this ever changing digital world. So digital transformation is definitely the way that we're writing, and it's at least three simple things that we we happen to do better than anyone else.

Speaker 0

That's great. And if I could just speak one last one, going toggling back to Bruce. If I look at the q four guidance, obviously, all year, you've been beating and raising that number. Even the original guide for the year, we're now above that. But Q4 does imply, a slowdown back to sort of 10% to 11% growth.

Can you walk us through some of the underlying assumptions behind your billings guidance as we get into sort of year end from a closure rate or from a demand environment perspective just to put some context on on the billings guidance for Q4?

Speaker 3

Sure. Well, first, let me highlight that we basically brought up our guidance from q four by about 6,000,000 off our implied guidance from last quarter. And what drove that was the fact that we are off to get a very good start to Q. Four. Maybe one of our best starts ever for a month.

And on top of that, we just have good visibility into our pipeline, and it's also supported by the fact we just came off high transaction volumes, which you could get very, very healthy. I mean, particularly in this environment to have that many new customers and sales and transactions in your current customers is so which is very healthy. And we, you know, we obviously seek to do better than that number. You know, we use the same approach that we've always used. We provide guidance on what we know.

And I just have to repeat myself. We know a lot now, and that's why we brought the number up by 6,000,000. And, what we hope for is for us are usually very active. And, we can only we can only guide by what we know, but most of what's gonna happen to the rest of the quarter is still before us, but we like what we see so far. So, you know, that's the basic thoughts behind our guidance, and we're happy that we brought it up like a significant amount from last quarter.

And we we would we would love to do better. And everything stays the same. We we send it over tender.

Speaker 0

That's very clear. Thank you, Peter. Appreciate it.

Speaker 1

Congrats. Also, then I'll say something that I've said a few times in the last few quarters. You know, our our goal right now is to get consistently above 20%, and then it'll be get consistently above 30%. And, yeah, I think when you look at this one, like Bruce said, I mean, it's a substantial it's a substantial raise from where it was a quarter ago. And so I think that's something that should be definitely taken into account.

We crushed your number, hit cash flow positive, did it with lower expenses, and, you know, brought up guidance by a substantial amount. And we said, like, there's a lot of gas in the tank there. And, you know, you know what our goals and our our goals are and what we're trying to accomplish, and we wanna consistently be able to, deliver but also guide you. And right now, you know, we're hoping we can deliver to it, but feel like this is the best place to guide. You know, we we don't have.

We haven't had, as many quarters of the current situation we're sitting in. We like to be comfortable enough to, to guide up as high as we'd like to, but definitely see deals and opportunities out there. Looks like this is the appropriate, you know, appropriate guidance to do, and then hopefully, some some things will fall our way, and, you know, we'll we'll continue to be north of the 20% grower as we have been the last few quarters.

Speaker 0

Appreciate it, Josh. Thank you. Your next question comes from the line of Brad Zelnick from Credit Suisse. Your line is open.

Speaker 1

Great. Thank you so much for taking the question. Congrats. It's really great to see two quarters in a row now greater than 20% growth and hitting this milestone. You know, there were a lot of naysayers that didn't think you could pull it off.

And, you know, I'm really proud of you guys. So it's great to see this accomplishment. Yeah. For sure. Maybe my first question, if I may.

You know, I know we still got to get through Q4, but I imagine you all are doing your planning and thinking forward into next year. And understanding that the beginning of a new fiscal year is usually a good time to make some adjustments to your go to market and strategy. You know, I used to work for sales leader many years ago that would say whatever you did this year to be successful, you gotta change it up. It's not for work next year. So, you know, what are some of the changes that you might be contemplating?

And and how might you be able to mix it up, even if just slightly correcting course, to drive real sustainable 20% growth into '22? Well, I think some of the things that we are doing to mix it up, you know, we will we just started, many of them. But, you know, having Ian as a new sales leader is something that's been a big mix up, in terms of how, you know, it's affected, the team. It's it's you know, the way he manages is dramatically different than what we've seen before, and it's proven to be effective. And, know, you his leaders that work for him like him, and the team's really kinda snapped into it.

So that's been something that I think is gonna have an impact for a long time. I think that alone is gonna give us sort of 20% growth for a long time. Then we've got Mellor who's who John Mellor has been leading the marketing organization and, those two leaders coming together. Again, I think that's gonna just that alone and better execution is gonna be north of 20%. I think beyond that, you know, it's been looking at these pockets, where when we go to markets, you know, what pockets do we have today that we could double down on and triple down on?

And we've tried to highlight some of those things, but apps, for instance, is one thing that we see as a big big differentiator. These low code, no code apps and solving business problems. That's what enables us to enabled us to get these state deals and these federal deals. That's what enabled us, to get the really large retailer that we talked about, global retailer. And then you see Domo everywhere.

That's what's enabling us to get some really large upsells with some of our customers. But, you know, our entire sales team's not trained on all of those things. And so it's saying, okay. What are the three or four things that we can really train the sales team on that are applicable to every single customer? And it's taken some time to gather all that information.

So I think that's another area that, you know, as as Ian and and John, know, dictate which things we're going to train the team on and go to market with, we're gonna see some additional performance there. And then the next the last thing I would say is, you know, finding, partners. And we highlighted it last quarter and this quarter for the first time seeing some real traction with partners in the marketplace where, you know, we're delivering big deals, 7 figure deals from partners. And that's something something that we haven't had before. So we'll we'll be seeing, you know, our partner efforts continue to increase and now not just noise, but also deals.

And we're excited about, you know, what can happen with Snowflake over the long term. We're excited about our position in the marketplace. We're excited that people are coming to us as as, you know, a large independent public traded, business intelligence company that's a cloud based with only one. And so that's, you know, facilitating conversations as well. No.

It's it's and it it shows that a lot of out of these investments that you've been making, talking about the partner channel, they're really beginning to bear fruit in a meaningful way. And along those lines, Josh, I always felt like there's been this opportunity to become more of a standard inside of your accounts. I feel like some of the early success that we would hear about it. And I know going back to Target and others, like, you

Speaker 3

had some of these massive commitments.

Speaker 1

But but as well, you know, a lot of customers that we would speak to were more, hey. It's it's a division. It's a specific use case. You know, just so just maybe being be something beyond a great solution for that particular use case around data aggregation and analytics. Are there any proof points that you can speak to just in maybe, you know, capturing more success in driving that expansion in these large organizations and becoming that standard?

Oh, yeah. If you look at I mean, I think that's the other shoe to drop, to be honest with you. Something I think about a lot. If you look at our top 10 customers, you know, the revenue we're receiving from our top 10 customers today is is, almost double what it was a year ago. And so we're seeing massive expansion inside these accounts where, yeah.

This has been a long journey. I always kinda felt like, the size of this company, you know, it behaves still like it's, you know, one fifth the size. We're still figuring things out as $200,000,000 run rate. And, you know, when you look at some of these accounts, like you said, initially, we got in. We made some great progress.

We had a hard time expanding beyond the department that we were in to become the de facto solution because there's all there were all these competing components. And so then it took us a long time to figure out how to speak the right language to the different constituents in the organization. We had to get we took, you know, a year or two figuring out how to speak to CIOs more effectively. But now we're good at that. And so once we got good at all those things, Ben, to your point, where's the proof points?

You know, when I was looking at the top 10 customers earlier today, you know, when we have customers paying us several million dollars a year, and one of them is still just expanding. Our second largest customer is a customer that we went into a few years ago. We got a good deal, then we got another good deal, and then finally, we got, you know, corporate wide deal. And then we got a corporate wide deal for all of their for all of their vendors. So it does happen.

And as we get more and more customers like that that we can talk to, what I'm excited about is being able to one of these quarters soon say, alright. Here's five new names. Here's the journey that we just had with them for the last four years, and these are representative of what we think every customer can and should look like. Because here's the five things that we can do for them that no one else can do. You know?

And they're great brands, and they're extremely intelligent companies. We have those customers and those proof points, just not enough that we're out there publicly talking about yet. But they had been happening. They've happened. They're signed, and more of them are in the pipeline.

And as those come to fruition, you know, then having the sales and marketing organization and what they need to go and tell the customers is gonna be I mean, we can all just almost just sit there and mine our current customer base without setting up any new customers, you know, and have years and years of explosive growth. But I think that is what's happening. You've really hit the nail on the head with that question. Thanks so much, Josh. And if I could sneak in one quick one for the Bruce.

Bruce, as we think about this milestone of reaching operating cash flow profitability, obviously, if we think about the factors, it's going to be bookings, billings, top line growth. But it's also going to be, at least in this year, you've had some COVID related savings. But are there any other key areas of of productivity or optimization to call out that that we should be thinking about?

Speaker 3

Yeah. I mean, I think I think we have a kind of a two for working for us right now. I think on the one hand, there's still a lot more we can get out of, our investment, platform we have right now in in marketing and product. I mean, we're we still have the ability to get a lot more out of that. But at the same time, we also are in, I would say, a pretty comfortable position to start adding resources.

For example, we've already started hiring sales reps. And this year has been a year of of down reps compared to last year, and that's because, you know, we are very cautious when COVID nineteen hit. And we've kept the cost cautious posture, but we've already started. Adding more more reps and layering them in. And so if we didn't get and and and we were also quite pleased with the productivity that we've got from the reps that we've had.

So we don't we feel very comfortable putting that layer in. And if we get if we get additional bang out of the bucket already exists and then and then be able to add that in and still generate positive cash flow, we think that's a pretty good spot to be in. But our main focus is really we really think that we're well positioned to grow. And we want to take advantage of it but do it prudently continue to generate positive cash flow. And you know what watch.

Watch the return we get on those investments watching carefully. And so far, the indication is that we'll get a great yield from them, but we'll still continue to be very careful about it at the same time.

Speaker 1

Thanks so much guys for taking the questions and congrats again.

Speaker 3

Thank you.

Speaker 0

Your next question comes from the line of Derrick Wood from Cowen and Company. Your line is open.

Speaker 1

Great. Nice to talk to you

Speaker 4

guys and I'll echo my congratulations on lots of good milestones here. Josh, wanted to touch on Domo everywhere because it's interesting. Night, Snowflake talked about seeing a lot of traction with with data sharing, and that it's really a transformational capability companies are starting to embrace. You guys also have a unique position to serve this kind of capability, and it clearly sounds like you're seeing some similar demand. So I guess if you look at your installed base, mean, can you any way to kind of size up the opportunity you think you have to really cross sell Domo Everywhere and and and and how you're gonna lean into this, you know, going out over the next year?

Speaker 1

Yeah. Domo Everywhere is something that's applicable to, almost all of our customers. And it's something that, you know, we've put a lot of, product effort into, especially over the last year as we've seen more and more progress there on the sales side. And it's our high priority right now as well, from a product perspective. So we continue to see huge opportunities there in in meeting the needs of the customers and the opportunity there in the marketplace, really, in a way that no one else can.

So, you know, there's there's embed, which is what a lot of people talk about when they talk about this kind of an an opportunity, and that's what our competitors do. But truly taking our whole platform and making that available for our customers to offer to their partners and their vendors and that kind of an experience versus just an embedded analytics, it is it is a highly complex set of software that really creates an experience that's untouchable. So we feel we we feel really good about our unique selling proposition, about our differentiators, about our defensibility in that space. And, you're gonna see some more efforts from us from a product perspective and definitely a lot more efforts from us, from a sales perspective and, you know, having sales leaders and salespeople that are dedicated to to this opportunity. That's part of Ian's plans.

Speaker 4

Yeah. Okay. Makes sense. Then the the great to hear. So you're seeing such a pickup in new logo growth.

Can can you unpack that a little bit more? Is that is that driven by better sales productivity? Are are you getting leads from different channels that you didn't have before? And does this suggest you're seeing increased win rates against the competition? Would would be great to hear more detail on the underlying drivers.

Speaker 1

Yeah. I mean, we're getting more referenceable customers and customers that are employees that are moving to other companies and saying, can't be here without Domo. That's definitely led to a bunch of logos. We've we've had, the execution that I was talking about earlier from Ian and his management team. They've been doing, a lot of sales blitzes and a lot of,

Speaker 3

I

Speaker 1

guess, monthly moving to a monthly cadence from a quarterly cadence. And having the team, you know, on that kind of a cadence, especially when you're kind of in a remote workforce, has actually been really positive for us, because you don't get to see everybody all the time. You're not walking around cube to cube. And so having everybody really focused on a monthly number has been, part of team strategy that's worked really effectively. So those are two of the ways that, you know, we've been getting more logos.

And I'd say the third is just that, you know, marketing is continuing to find opportunities and ways to efficiently bring in, new logos. And so that seems to be that seems to be working out for us in terms of, you know, picking up the pace and and the rate that we can generate new logos for us.

Speaker 4

Great. Alright. And if I could squeeze one more. Bruce, I think you did mention that that you you may be off to the to the best start, of a quarter ever. Anything anything more to elaborate in terms of what you guys are saying?

Speaker 3

Well I would just say that- the momentum that we experience in Q. Three- seems to be continuing. And it makes sense given you know again what Josh is pointed to operationally- the rigors there, and we're still applying it and on the sales side, on the marketing side, again, focused on branding and messaging on certain product areas, getting more clarity, providing better sales tools the list goes on and on. And the fortunately you know we've always been worried and then cautious given. Economic environment- but that that just seems to be the same- it hasn't it hasn't And what we said last quarter that just stays where it is we're in pretty good shape.

And it's- manifesting itself and- just a great you know great start to the quarter I mean it's always not my comfort me to have a great start to not- but- yeah, this is this is just a continuation of what we've been saying. So it gave us the ability to raise guidance by $6,000,000 per quarter, which frankly is a lot. It's more than we've done in a very, very long time. And, I I just I just think, we can count on reasonable high level transaction volumes. We can continue to sell.

You know, it's good about getting, a lot more new customers is we already know we can sell into them. It doesn't matter the size. We can continue to sell into them. So that just provides more fertile ground for the upsell business. So we just have everything seem to be going our way, and we're gonna we're gonna keep working pretty hard at even doing a better job At you know, acquiring customers at a reasonable cost.

We don't feel we're anywhere near our potential. And if we can just keep it up to the record this quarter and the next year, we're gonna have a good quarter and look forward to a good next year. Sounds good. Well done. Thanks.

Thanks a lot.

Speaker 0

Your next question comes from the line of Jennifer Lowe from UBS. Your line is open.

Speaker 5

Great. Thank you. Maybe, Bruce, can I just follow-up on the last discussion there and just dig in fully deeper? Because I know you're always very, very conservative on forecasting large deals. And it's great to see this high level of transactions, which seem to really be supporting the guidance.

But maybe just sort of specifically, I mean, how's the large deal pipeline looking going into q q four, which is normally a pretty strong quarter for that? And is any of that in the guide, or is that sort of upside to even what we're talking about here?

Speaker 3

Yeah. We still are building, a large deal pipeline. We have the ability to do that given the size of our customers. The big customers seem to just keep buying more and more. We keep finding more and more use cases.

So that's comforting. So we have the ability to to keep building a large deal pipeline. But I will say in guidance, it does not assume, a significant number of large deals, and maybe you're gonna need to go further. It really doesn't, assume any single, I'll say, reasonably sized deal. So that's good to know because in q fours, we tend to have just lots of activity.

It's just the nature of q fours. So, the guidance is founded on transaction volume, line of sight for what we see. A good start, with a little bit of upside if we are able to, you know, close some larger sized deals.

Speaker 5

Great. And maybe just taking a step back, you know, I think from one of the other standouts was just the the larger upsell deals that you're doing within your base. And given sort of the discussion around, you know, being a bit more flexible, how you get into those organizations and then expand once you're in there, it seems to really be playing out. But I'm curious, you know, as you get these 7 figure type deals that are up sells on your existing footprint, is it still largely carving out opportunities around the existing BI footprint? Are you starting to displace some of those categories as those deals get bigger and bigger a bit more?

Speaker 3

Well, we're we're really we're really well, first of all, I'll say, at all our large customers, they have every product out there in the BI space and the reporting space and the data space. So we're able we're able to just solve problems that aren't solved also that haven't been solved by, other technologies or sets of technologies or combinations of technologies. And that's pretty that's pretty comforting. It means it means we are very unique in our ability to bring that whole stack and then just record time, get data delivered to create data and deliver it in ways that customers just have don't have the ability to do it. And that generally comes out of, you know, a wide variety of budget and budget areas.

Some of these are revenue enhancing. So they kinda create their own budgets. But over time over time, we do start eating into the available budgets for other technologies. It's our own customers. I mean, this is what we've got that early.

It's our own customers that figured this out, and they determine what technologies they can turn off or decommission or roll back. We don't have to do that. Yeah. We used to we used to do that. We found that's kind of productive.

Why would you let the customer do that? Why don't we just bring a solution they don't have with the staff they have today? And they'll find all kinds of ways to use it and expand whether or not it's eating into another budget. But we are finding they are able to start using parts of marketing budget, sales budget, and the IT budget itself. And our our IT friendly message, keep everything you have and just extend it, allows the IT department to embrace it or even the BI To embrace it and sometimes they have this excess budget sometimes they're able to like rearrange things in our favor.

But we like them to figure that out and- so so that's been our approach and it's working for us and it's it's it's you know it's not the

Speaker 1

same thing we did a

Speaker 3

few years ago. We think it's a much better way to approach the market a very friendly way a better partner friendly way the better customer friendly way certainly a more friendly IT way. To go about approaching our customers.

Speaker 5

Great. Thank you.

Speaker 0

Your next question comes from the line of Patrick Walravens from JMP. Your line is open.

Speaker 3

Oh, great. Thank you. And let me add my congratulations. So, Josh, what do you want your software to be able to do in the future that it can't do today?

Speaker 1

It's a good question. That there's just some additional things. I'd number one, you know, be more and more partner friendly. So be able to integrate even more seamlessly with partners than we do. We've been able to identify some partners that we have had great successes with with our customers, but it's taken, you know, a little more back end work than maybe, if possible.

And so seeing those possibilities and trying to identify them and really do more of that, I think, is is an opportunity for us on the upside. And then from a usability perspective, you know, I think once you get all of these executives using these products, there really isn't another there is not other software in the world that enterprise CXOs use to run their business besides, you know, Word, Excel, PowerPoint, email, and social media. So this is actually, like, the real business tool that they use to run their business. And when you're the first company to have those people actually logging in and getting things on their phone and getting text messages and, you know, in app messages, that's some real opportunity and and power to leverage in the platform. And I know that we're the first ones to to do that at scale, and we've seen that at these customers.

Like that question I was answering earlier, you know, about what happens when you get in there and you finally start expanding and seeing these CXOs use these products has been really fun. So I would say there's more opportunity there as well, Pat. Cool. Thanks. And then, you know, as we see some of these some of

Speaker 3

these other companies that are focusing on particular verticals in AI and, you know, sometimes extracting really enormous amounts of money, how much of a part of the vision for Domo is that? You know, commercial IoT or government for the intelligence agencies or, you know, the media industry?

Speaker 1

Yeah. I think, you know, we've seen some of the efforts there with with our data science and, with our AI and ML, and there's certainly more opportunities there. IoT, we we put a lot of effort into, and it was one of those things that there still needed to be four or five pieces to really finish the solution up. And there has been some, you know, players that have taken a really, deep approach to very specific niche verticals that, you know, they've been really successful and and more power to them. It's been awesome to watch them and inspiring, certainly.

And, you know, you can see some of the ways that the world's gonna evolve, and you can see someone get so deep in an organization. And so I think there's opportunities there as well. And we're continuing to and I mentioned one of our big efforts in product right now is going everywhere. The other really big effort underway is just continuing more and more advanced analytics. Because as we get into these big customers, that's one of the things that they look for from us.

You know, if they're gonna replace everything else that they have inside their organization, they wanna see more and more advanced analytics and, you know, more data science opportunities and more machine learning opportunities. And those are some of the partners that I was talking about where, you know, I think we have more opportunities to really partner up and become closer to to, others in the ecosystem, and that'll help us understand that better.

Speaker 3

Awesome. Thanks a lot.

Speaker 0

Your next question comes from the line of Jack Andrews from Needham. Your line is open.

Speaker 1

Great. Thanks for taking my question and congratulations again on

Speaker 6

the results. It was nice to see the uptick in gross retention. And I just wanted to flush that out a little bit, if we could. You talked about investing in customer success a bit more. Is this should we think

Speaker 1

of this as sort of

Speaker 6

a new dedicated team? And what do you think the impact from gross retention rates could be moving forward given some of these investments?

Speaker 1

Yeah. Retention has been awesome. This is so fun to watch that climb up to numbers that I think we're more used to. It was just, you know, a long time coming in terms of their this is a really complex space, and we've taken a really broad approach. And so there were a lot of things that we needed to shore up to really prevent I mean, to create the right kind of experience that we wanted our customers to have, and we've done that with the product.

And then it was getting, you know, the leadership, correct there. And we have a new leader there that's been doing a great job, and, his next stable of leaders have are just on fire. They're having a lot of fun. They're excited about what they do. They love our customers.

They love Domo. They're passionate. You know, they love telling me anytime I do anything wrong, and it's just awesome. They're so passionate about what they do, and we're seeing that reflection in the way that they fight for our customers to make sure that the customers get everything that they need in order to, you know, return to us and and buy more and more products from us. And we're seeing we talked about our upsells, but, you know, a big swath of our customer base is is upselling and buying additional products and services.

And, you know, whether that's buying an extra dollar or an extra million dollars, it's a pretty good sign that they're they're happy when they're investing more and more into your products. So I think that's the best thing that we're seeing there. And the incremental investments are just, you know, as the product as the revenue base grows, you need to continue to invest there. And, you know, we'll do some innovative things as well, but we have the we have the expense base, that's, you know, mapped to that revenue base to be able to do that. So they're not large incremental investments.

It's more just, you know, as the revenue grows, we'll continue making investments there because we love seeing the results that we're getting out of that team. Great. Thanks for your perspective, and and thanks for fitting me into the call. You bet.

Speaker 3

You're welcome.

Speaker 0

Your next question comes from the line of Kamil Mukherjee from William Blair. Your line is open.

Speaker 7

Hey guys, it's Bhavan here. Thanks for taking the question. Hey, Bhavan. Hey, congrats on the billing number. That was that was really good.

You know, may maybe one for Josh here. We we touched on partners, and and I wanna focus on the SI partners a little bit. And it's really exciting to start to see them deliver implementations of that scale. I guess, have you seen any of them, Josh, start to implement applications on behalf of customers where they're starting to monetize those themselves a little bit? Is is is that is that something that could happen or or should happen, over time?

Speaker 1

It should definitely happen over time, and we're starting to see some of that. I mean, the, you know, the federal deal that we talked about, that's definitely one of those situations where, you know, they're they're they're really happy to go to market with us. They chose us. It was a big takeoff. They went, and then they took their their combined proposal in and were successful at selling that to the federal government.

And so that was really nice to see. We think there's a lot more of these to come. I I really think that that question was asked early on in the call was really apropos for where we're at right now. It's the other shoe just hasn't dropped in terms of people understanding how successful we really are at our big accounts and how we really do, you know, a takeover, and they sunset all of their other tools eventually, and really, you know, centering on us from top to bottom in their organization and then, you know, expanding out from the organization to their vendors and suppliers. So I think as that kind of messaging gets out there more, you know, hopefully, as analysts write more favorable, industry analysts write more favorable reports about us when, you know, as they as they get their their quadrants to map more, I think, you know, where the the market is going, which is where we've always been, then, you know, we'll see some more success in those areas.

But there's been some headwinds there historically for sure.

Speaker 7

Yeah. Yeah. Because ultimately, that that I think becomes a really interesting flywheel, long term because they have such high, CX level relationships. It's good to hear, though, that it's starting to happen a little bit. A quick one for Bruce.

Actually, two quick ones for Bruce. One, you guys have talked about sort of continuously improving enterprise sales productivity. Obviously, it improved, given you've cut the number of sales reps, but but but but the billings, etcetera, have been really strong. I guess, you know, are you at a point where you don't think you have room for more productivity given you wanna ramp up more salespeople? Or is there still room for productivity in the rapid salespeople sort of over a twelve month period as left to layer in on top of the improved productivity?

I'd to understand the the dynamics between those two pieces of the sales investment coming up.

Speaker 3

Well, we measure the productivity on the concept of a ramp head, a ramp rep, and that's been nice and healthy. So we give, depending on whether it's a corporate rep or an enterprise rep, six months to nine months, sometimes twelve months. So in answer to your question, there's act there is absolutely built in ramping on the reps we have. So that really sets up sets up growth for us. And then on top of that, we plan to hire more reps.

And, yeah, they they need to they need to ramp, and we have a ramping schedule. So as we layer them in, that's kind of another, layer of of growth. And then we still have even though we're we're we're pleased with the overall productivity of Salesforce, We still think there's even room to improve that over time. And so, you know, we have that that way we have, like, like, three ways to, you know, grow if we if we focus on the just the concept of, you know, productivity per rep. So that's that's how we think about it.

Speaker 7

Gotcha. Gotcha. And then and one quick one for for both of you, or even if Ian is there, but visibility, you know, this question has come up with investors, which is, you know, as people have seen, demand pick up in the back half of this year, and people accelerated digital transformation initiatives, analytics initiatives, We need to get data to to executives on their mobile devices faster, etcetera. As you look forward, I know you're not giving guidance, but as you look forward, do you worry that there's an air pocket, you know, q one, q two next year where people then take a pause? How do you think about that vis a vis visibility may maybe compared to where it was a year ago, two years ago?

I just want to get understand how you're thinking about that. Thanks.

Speaker 3

Well, I mean, what we have what we have going for Us is just a whole portfolio of, like, industries, customer sizes, types of customers, types of use cases that are just common sense use out of our platform such as ours to just simply get data to people in ways they just can't get today. And I I don't I don't see why that's gonna change at any any time in the future. And we certainly argue as the economy gets better, it ought to get better. Maybe the the activity Yeah. Ought to pick up in those troubled industries.

Finally, can start purchasing from us, because they I mean, we've had success with troubled industries, but not nearly what we would have had had had we not had this economic downturn.

Speaker 1

So Not only that, think for that. One of the Bruce, me say one of the, I think, hesitations around calling some of the big deals is one of my reps just texted me an answer if they're listening to the questions. And I got a text message, and it says, tell them the answer is cure COVID. You know, COVID has been great great from the sense that, you know, it's really helped, I think, accelerate a lot of digital transformation, and it's helped us pick up new partners and really prove our ability to be to rapidly respond and have a very flexible no code, low code offering, etcetera, etcetera. At the same time, you know, there's still just there's still just unknowns out there.

And you're talking to big customers about really large deals, and you know it's not a normal environment. So, you know, as much as you know that they need us, it just gets really hesitant to, you know, to start calling those deals, when it would meaningfully impact your your guidance. So I think that is, in fact, one of the answers. But, you know, pipelines pipeline is looking good. I mean, you know, we have really interesting conversations with customers that we've known for a long time, and there's a really big upsells that are out there.

And, you know, we're also seeing, you know, new customers come in that know what we've done for other customers because, you know, our our customer left their former employer and went to a new one and brings us, you know, a big juicy deal. So there's deals out there for sure. And, you know, like Bruce said earlier, we've had a good beginning of our of our quarter, and we brought in some decent sized deals already. It'll just be interesting to see how the rest of this quarter plays out. But, you know, we've been a 20% grower for the last few quarters, and, you know, we're gonna do our damnedest to make sure that that's the case again.

Just given the environment that we're all living in, you know, it feels appropriate to be a little conservative.

Speaker 7

Yeah. Yeah. And Bruce's serving metric pacing, as you guys said, seems to be doing well. Well, congrats, guys. Thanks for squeezing me in.

Appreciate it.

Speaker 3

Yeah. Thanks a Thank you.

Speaker 0

Ladies and gentlemen, this concludes Duomo's third quarter fiscal year twenty twenty one earnings call. Thank you for participating. You may now disconnect.