Domo, Inc. (DOMO) Q2 2019 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. And welcome to the Domo Q2 Fiscal Year 2019 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to introduce your host for today's call Ms. Julie Kehoe, Vice President of Communications. Ms. Kehoe, you may begin.

Thank you and welcome everyone. On the call today, we have Josh James, our Founder and CEO; and Bruce Felt, our CFO. Our press release was issued after the close of market and is posted on our IR website at www.domo.com/ir where this call is being simultaneously webcast. Statements made on this call may include forward-looking statements regarding our financial results, applications, customer demand, operations and other matters. These statements are subject to risks, uncertainties and assumptions. Please refer to the press release and the risk factors and documents we file with the securities and exchange commission, including our registration statement on Form S-1 that was filed with the SEC and the Form 10-Q that will be filed for information on risks, uncertainties and assumptions that may cause actual results to differ materially from those set forth in such statements. In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of Domo's performance. Unless otherwise stated, we will be discussing results of operations data, other than revenue, on a non-GAAP basis. These non-GAAP measures, including our guidance for the third quarter and full year 2019 excludes stock-based compensation, amortization of intangible assets and reversal of the contingent liability. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results in our earnings press release and on the Investor Relations page of our website where a webcast replay of this call will also be available until midnight Eastern Time on September 20, 2018. With that, let me hand it over to Josh. Josh?

Thank you, Julie. Before we begin, given his passing today, I would like be missed if I didn’t give a share to Burt Reynolds. So just want to say thanks for the last fixed memory, I think for inspiring the first move out with my family in 77 Trans Am with pickles and peanuts on the road of course. Rest in peace, Burt. Now to the call. I’d like to begin by extending a big thank you to our employees, our customers and our investors for their hard work and dedication in helping us reach this important milestone of becoming a public company. On our first quarterly earnings call I am happy to report that we are off to a great start. During our IPO roadshow I made it clear that two of our top priorities are to focus on customers and to grow the top-line more efficiently. This quarter we saw a 35% year-over-year increase in billings compared to 22% year-over-year last quarter and year-over-year revenue growth of 32% with notable growth in our international business. We achieved these billings and revenue growth rates while demonstrating significant improvement in sales and marketing productivity, resulting in a 2% year-over-year decrease in sales and marketing expense. Our Q2 sales performance was healthy across the board with strong performance in both enterprise and corporate, in all geographies and in all industries. Our new customer acquisitions included great brands such as Aston Martin, Conair, Hunter Douglas and one of the world's largest manufacturing companies. As for customers who have revenues greater than $1 billion, we added 24 new logos during Q2, bringing our total to 409 and our land-and-expand strategy continued to be a strong contributor to growth as some of the most recognizable names in financial services, healthcare, high-tech, health and beauty, and retail continue to grow their use of Domo across their organizations. Additionally, as of July 31, 2018, our top 20 customers by annual recurring revenue have grown their ARR with us now by 10x since their initial purchase compared to 9x as stated in our IPO prospectus. Our new CRO, Dean Germeyer; and our new CMO, Shane Atchison, have been evolving our sales and marketing strategy to more effectively sell business value to more senior executives at larger enterprises. We’re also continuing to generate new logo revenue through strong enterprise referrals. While we are still very early in this journey, I am happy with the initial progress. And last month, we brought on a new GM of North American enterprise, Jim Kowalski, recently a mark headway in Oracle, to keep driving this forward. Almost eight years ago, we founded Domo to transform the way businesses manage by delivering a platform that serves as the operating system for business, allowing customers to run their entire business from their phones. It brings together all the people, all the data and all the systems to finally deliver a digitally connected business. From the beginning, we targeted CEOs and decision-makers as key users who naturally want to extend usage to full C-Suite and then ultimately every employee. Today, we have more than 400 active CEO users over the platform. It's rare that an enterprise software company can make that claim. We believe we are one of very few enterprise software companies that have the ability to have every employee in a company use our products, and I am particularly pleased about how our customers are using it. I recently met with a CEO of a multinational financial services company and she showed me how she was using Domo to run her monthly and quarterly meetings. We have a Fortune 100 technology company using Domo in marketing to bring together 80 disparate business systems to create one complete view of the customer experience. With Domo, more than 1,200 marketers from the CMO down, have a single place and performance metrics, collaborate and make decisions in real-time based on their data and then take actions to improve marketing performance. The CMO was using Domo to demonstrate the ROI -- sorry the CEO -- the CMO is also using Domo to demonstrate the ROI of her marketing spend to her management. A Fortune Global 200 CPG company is using Domo cross-functionality as part of their global CIO’s digital transformation initiative to optimize the supply chain and improve sales forecasting. In just a few months, hundreds of employees are actively using Domo to obtain insights into the business that they never had before and to make better decisions. This customer is also leveraging Domo with one of its top customers, a Fortune 50 retailer that also happens to be another Domo customer to share inventory data, improved sales forecasting, and optimized inventory levels. These are just a few examples and you will see us post new customer examples and new customer videos to our website from time-to-time. Our proven ease-of-use and ability to directly support business decision-makers while handling large volumes of data and transactions particularly compared to traditional or point solutions, continue to be big differentiators for us. On typical business day, our customers in the aggregate query between 100 trillion to 200 trillion rows of data. Even with this volume of data, we maintain a sub-second average query response time. For me, there is no better leading indicator of our potential than what customers are doing with and saying about Domo. On Gartner Peer Insights, an online customer review site, in the Willingness to Recommend category, Domo is rated by end users with the highest score compared to the vendors we most regularly compete with in deals. In Q2, Dresner Advisory Services for the second consecutive year recognized us with an industry excellence award for receiving excellent customer ratings across all its key measures, including products and technology, sales and services, and value and confidence. Dresner also noted that Domo received a perfect recommendation score for the second time, meaning every single Domo customer in their survey said they would recommend Domo to others. I would now like to spend a few minutes talking about innovation, which is one of our core values and has been integral to us, delivering a platform that simplifies the highly complex challenge of wrangling, preparing and delivering data in a way that empowers anyone to run their business from their phone. We made significant investments over the past almost eight years to build an enterprise grade platform that serves as the operating system to power the digitally connected business and enables organizations to manage, govern and distribute information at massive scale. To accomplish this, as we said during a roadshow, we invested more than $350 million since our inception in building seven major technology pillars that we effectively have rolled into one platform. And this is what we believe truly differentiates us and sets us up for long-term growth. As we look forward to the rest of fiscal year '19 and beyond, we will continue our focus on our customers doing what is rare for any enterprise software company to do, to help Fortune 500 companies transform the way business is managed and run their business from their phone. While keeping customers as our North Star, we expect to see continued momentum and growing our top-line with more efficiency. All-in-all, this quarter was a strong start to a -- as a public company. And I will now turn it over to Bruce Felt, our CFO. Over to you, Bruce.

Thank you, Josh. I’m also pleased to be speaking with you this afternoon. I'll begin with our second quarter performance, followed by our third quarter and 2019 full year guidance. In summary, we had a strong quarter. Billings grew 35% driven by 47% improvement in sales force productivity compared to last quarter. We realized this productivity against the backdrop of Q2, typically being our seasonally weakest quarter. We experienced across the board contribution without any single deal representing more than 5% of new business. We’re particularly pleased with the amount of new business, given we believe we have not fully realized the benefits about focusing more of our attention on our enterprise business. Also, we have been able to increase our rep count by 10% in Q2 over Q1. These new additions have not fully benefited us as they are in their early stages of ramping. For Q3 billings, we expect the results to be about the same as our Q2 results. Revenue was $34.3 million, a year-over-year increase of 32%. More importantly, subscription revenue grew 34% and represented 82% of total revenue. Revenue growth was primarily driven by new customer additions. And because of our focus and investment in our international operations, we saw an 83% growth in our international business, representing 23% of our Q2 revenue. Our dollar-based net revenue retention rates are in line with the prior quarter. Our subscription gross margin was over 70%. When you add in our services business, our total gross margin was 63.8%, which is in line with the first quarter of 2019, an improvement compared to 59% gross margin in the second quarter of the prior year. On the roadshow, we made it clear that we would realize leverage in our cost structure and we delivered on that commitment this quarter. Not only did we see leverage, we actually were able to decrease our operating expenses rate by 3%, while accelerating billings and revenue growth. Consequently, our operating margin improved by 62 full percentage points. You should expect to see more leverage out of our cost structure. We believe we can grow billings and revenue without an equivalent growth in operating expenses, and we are currently targeting to keep Q3 operating expenses just modestly above Q2 operating expenses. Our net loss was $36.2 million and our net loss per share was $3.44. This is based on 10.51 million weighted-average shares outstanding, basic and dilutive. Turning now to our balance sheet. As of July 31, we had cash and cash equivalents of $238.8 million compared to $71.9 million as of April 30, 2018 due to the successful completion of our IPO, with net proceeds of approximately 200 million. On cash burn, recall our prior statements that our burn is a byproduct of significant investments in research and development that are voluntary, but we believe value additive as we pursue such a large market opportunity. At the same time, we are continuing heavy investment in sales and marketing that we believe will yield much better productivity in the future. We used cash from operations of $36.1 million which was in line with our targets and within the boundaries of a fully-funded business plan. We are planning to reduce our cash burn from operations in Q3 compared to Q2 by about $2.5 million. We have implemented employee stock purchase plan in Q2 that had no impact on our cash balances that may need to be included in our cash flow from operations in the future. Any discussions about cash flow exclude any impact of this program. Now to guidance. For the third quarter of 2019, we expect GAAP revenue in the range of $34.8 million to $35.2 million. We expect our non-GAAP operating loss to be about $33 million, and non-GAAP net loss per share basic and dilutive of $1.37 to $1.39. This assumes 26.35 million weighted-average shares outstanding basic and dilutive. For the full year of 2019, we expect GAAP revenue in the range of $136.7 million to $137.1 million, representing year-over-year growth of approximately 25%. We now expect our non-GAAP operating loss to be approximately $144 million and non-GAAP net loss per share basic and dilutive of $9.50 to $9.55. This assumes 16.35 million weighted-average shares outstanding basic and dilutive. Note that all share counts are impacted by the fact that we issued 10.6 million shares at the IPO and also had 14.1 million shares of preferred stock convert to common stock on June 29th and are therefore only outstanding for part of Q2 and part of the full year. In closing, we are pleased with our execution during the quarter and we will continue to focus on realizing more leverage out of our cost structure next quarter. With that, we will open up the call for questions. Operator, can you please take it from here?

Thank you. [Operator Instructions]. Our first question comes from Sanjit Singh with Morgan Stanley.

Hi. Thank you for taking the questions, and congrats on the nice start to the -- as a public company, and welcome back to the public markets, Josh and Bruce. Maybe my first question is for Josh. As we think about the solid results this quarter, can you give us a sense of what your sort of go-to-market sales playbook is for the balance of the year? To what extent you expect Q3 and Q4 to be different than Q2 whether it’s in terms of your commercial traction versus the greater resources you're putting on the enterprise, if you could give a sense of how you expect the rest of the year to play out from a go-to-market perspective?

Yes, so as we described I think on the roadshow as well, we’re just getting into the beginning notions of really transitioning this to as much of an enterprise play as we wanted to be. We’ve had that success with the big enterprise customers and we are kind waiting for that success. If we can really go ahead into the enterprise, the most important thing is having the referenceable customers. And now that we have these referenceable customers, we’re using our product at scale with the CEOs, and in many cases, thousands of additional users. We really felt like we're in the spot where we can flex that enterprise muscle. And so I think in Q3 and Q4 you’re going to continue to see us move more aggressively, more efficiently, and with a lot more I guess programs that have been well-thought out and our playbook where you’re really are doing account-based marketing and selling with these big enterprise customers, whether it's building smaller accounts into really large accounts where we see tremendous upside in some of these big enterprises and then also finding new logos and what are the ways in each of those accounts, and continue to follow through and follow through the right targeted employees of those big organizations. So you are going to see us just to do a lot more of that in being really thoughtful and really efficient but definitely focused.

That's super helpful, Josh. And then maybe for Bruce. If I look at the results this quarter, particularly comments around sales productivity, that was very encouraging, I think subscription gross margins were above 70%. So if I wrapped up under the banner of unit economics, those look to be improving. To what extent do you think these are sustainable, whether we look at it from the variables of your expansion rates, your retention rates and subscription gross margins from here, should we expect further improvements along those dimensions as well?

Yes, we are pleased with the results. We think there's a lot that we saw that we believe is very sustainable. As we described on the roadshow, we just saw many, many points of improvements and leverage in the entire business. So for example, we’re very pleased with the amount of production that we got from our sales reps. That certainly was a big driver for the quarter. What helped drive that was increasing close rates which we’re very pleased with, increasing close rates of these and new pipeline that came into the quarter. We’re pleased with the amount of pipeline exiting the quarter. We’re pleased with the fact that it was made up of many deals and no particularly large deal. We think we're seeing just the beginning of all the effort that we’ve put into enterprise sales, enterprise sales management and marketing and marketing focus. So when you step back and look at all of that, even though as Josh said,, we’re very, very early, because we frankly just haven't had enough time to let the entire organization mature to a point that they need to be to fully realize the potential, I mean we’re very pleased with the signs of what we saw this quarter and there is no reason to doubt or believe that it won’t be as good next quarter and beyond.

Our next question comes from Brad Zelnick with Credit Suisse.

Excellent. Thank you so much and congratulations as well, really strong start as a public company. Josh, you mentioned 24 new logos with greater than a 1 billion in revenue which is really solid and better than we had expected. And your value proposition for the C-level executive to run their business on their mobile device, it sounds like it’s resonating well and consistent with the research we have done talking to your customers. If we look at the new business, right, that's the pointed end of the spear, how much of the new logo adds are happening top-down versus lower within the organization? And how would you characterize your performance overall if you were to think about it at longer dimensions of net new customer acquisition versus expansion within some of these large enterprises?

Yes, the customer -- new customer acquisition versus expansion is about where we thought it would be and I think the good spot relative to the type of company that we have where we talk about land-and-expand. You want to see the expansion? Our land-and-expand story isn’t one you can bake on but since we see that expansion there is definitely a focus on the logos and we want to get better flex in that muscle and being able to drive as many logos as possible. And it's great to see the enterprise business grow. In terms of that expansion and how we get it, that’s one of the things that’s almost happened by happenstance and I think it's a real testament to the product that we have. The product that we have is -- it really is phenomenal. In prepared remarks every time I come up with the words that I would use to describe it, they all get struck by lawyers and -- but the way I feel about the product, it is one of a kind. There is nothing else like this. And we see it in instance after instance after instance where we are going into a customer and we are solving really complex problems that they haven't been able to solve for in some cases decades and we come in there and we solve it. But at the same time, one thing that we are not greyed out at saying okay, we are going to walk in, we are going to close a deal for 100,000, 200,000 bucks and we know that precisely four months later we are going to get another up-sell and in eight months later we are going to get another up-sell and here is the three places that we are going to run in order to get those up-sells and make them really predictable. They just tend to happen because we are interacting with our customers and we are helping them along and we are doing what they ask. But now that we have this table of customers and we have watched how they have grown, to your question about top-down, we finally have the ability to go and do top-down because we have these used cases and these case studies and these referenceble CXOs who are more than happy to get on a call. I had -- I got a text message just yesterday from one of our really big customers and he said that the CEO was just at an investor conference and in the investor conference with 38 different investors and a bunch of analysts, he showed -- he demoed Domo for 10 minutes and it’s when you see CXOs and CEOs use the product like that you know there is a lot more behind those deals. But we still haven’t seen the huge deals that we know are out there, because within our pipeline we just can't predict when they are going to close regularly yet. But it’s exciting to see that there’s tons more upside. And I quoted the 9x going to 10x in terms of the ARR from the original contracts signed for our 20 biggest customers. 10x going to what? I don't know but it’s going to be a lot bigger than that number. So top-down, we are starting to see more of -- and I think we will continue to see more of that. We will get better at selling to CXOs and we are also getting a lot better at selling to CIOs who have been in many cases people that have been -- that have prevented us from expanding as quickly as we wanted to but now we have enough CIOs also. And I quoted one of those in one of references who are promoting us. And so now we can take those experiences also, and make other CIOs feel really comfortable about getting behind us, and having their entire company adopt this as a platform.

It’s awesome. Thank you so much Josh and by the way I’m a Burt Reynolds fan as well, Cannonball Run was a favorite of mine when I was a young kid but on that note I appreciate the reference and kicking off the call that way. Real one quick question just for Bruce, back to that comment around 47% sales force productivity improvement versus last quarter, which in fairness I think you had been very transparent in letting us tell last quarter, I think you felt you could've had greater productivity. So I'm not sure how to understand that comment in context but maybe to phrase it as a question, when you think about the predictability and the rhythm of the business, now that you have been there for months not weeks and you think about forecasting, and the guidance you’ve given us in the context of pipeline conversion, maybe if you could talk a bit about your forecasting methodology, conversion rates and conservatism as we should think about the outlook? Thanks.

Sure, well I will still go back to, I think we are still very early in what we need to do to fully realize our potentially and Dean and Shane have been on Board, yes, months and quarters. So we are just very, very early in it. But what did happen this quarter is very early in the quarter we analyzed the pipeline, we made a call what the quarter was going to be and we’re right on target. And that's a very good time. And so, we’re already seeing a difference in the posture of our sales force as they are engaging a little bit differently with the enterprise customers. We’re seeing -- again because we think it’s attributed to a little bit different messaging, much higher value messaging focused on larger customers that all seems to be building up the pipeline and it’s too early to really be able to make it mathematically perfect, but the calls that we’re getting are pretty firm and they are holding true across as the quarter develops. The other thing that we were quite pleased with is, even that we’re moving to larger and larger customers, it’s all the activities that we’re doing there, seem to be benefiting the, what we call, the corporate business, the business under 1 billion. And we’re very pleased with that. They are starting to participate in larger companies than what they’ve done in the past. We have changed how we build our pipeline. That arguably kind of dramatically be pretty good the pipeline was but there we’ll still to be able to build pipeline and close deal. And so we’re able to keep that up and continue to expand the capabilities of sales and marketing team towards really, really hitting the -- and communicating the value proposition through the C-Suite, through the office of the CIO which is a big focus for us. Then we think we’re in good shape to deliver on certainly everything that we effectively communicated up to this point and obviously we’re playing to do better than that at this point. And, well just so far so good and we just have to roll up our sleeves and dig in into this quarter and try to make it be another good quarter.

Our next question comes from Bhavan Suri with William Blair.

Hey, guys. Thank you for taking my questions. I guess I just want to start -- and I know that sounds like always probably questions have been on sales fronts, but when you think about the wins where the CIOs or CEOs sorry, are using the products and they also are very specific to the industry, so the metrics that I run my business in financial service is different than the metric that I run my business in from a retailer, who came to have serviced for itself. And so in those sorts of situation vertical -- verticalization of sort of some of the storyboarding or dashboard, the template makes a lot of sense. And then obviously you all talk each other and I could see one looking at his Domo app and his mobile app sort of speaks up and sort of talking about it. So I guess with all said, I'm wondering where you are in terms of verticalization approach given some of the changes you made in sales and sort of how we should think about that playing out over the next say two to three years?

Yes, it’s a great question, definitely feels like a leading question, because that’s what we are thinking about a lot internally and talking about a lot and spending a lot of resources on actually is building up those templates and building what we would like to call apps because we have spent an incredible amount of R&D, making this so that it really is a platform that can easily have apps built on top of it, and these apps are vertical specific and are role specific. And in the coming quarters we will talk more about them and the traction that we are seeing from them. But we are really starting to make a concerted effort in taking to market different applications. And we are starting to get some great response out of them as well. The cool thing for us is the investment required to make something verticalized or role-based is very minimal because of the platform that we build. So you're right, it's one thing to go and take a generic product to them. It's another thing to go and say here is your industry, here is your role, here is the 25 metrics that you should care about in your role, in your industry. And then when they had a referenceable customer that’s also in their role and in their industry, the conversation moves along fairly rapidly. And so, as we bring those things to market we are hoping that we will continue to get more and more efficiency out of the team.

Then a quick one for Bruce, more tactical here. As we went through the filing of the IPO process and thing out, sort of could you how to look at multiyear contracts you are seeing an uptick there. Just wondering sort of what that's trending to and what duration looks like?

Yes, we were -- last year was the first year where we really went hard at multiyear, it was much an experiment to see what the appetite was and we were pleasantly surprised. This year, we’ve been in [orient] that can’t plan it strongly toward multiyear, but we are still seeing very strong multiyear contract. So on average it’s about 18 month duration this quarter. And we think that’s fine given it’s always the second quarter we really tried multiyear. And so that answers the question specifically I guess.

Our next question comes from Pat Walravens with JMP Securities.

Oh, great. Thanks and let me add my congratulations. So Josh …

Thanks, Pat.

…:

Usually what brings me into Domo is alerts that I get on my phone. So I get all kinds of different alert. I get alerts that someone is above a quarter I get alerts, when deals close -- I get alerts when deals close with the cell phone number of the rep who closed it and I send a lot of messages out. And so those are types of things that bring me in. And you look at a deal close, it’s a big deal, you’re like who is this rep, you go and research the rep, you see how that rep is performing. You then look at how that region is performing. You then go and look at their customers and look at the retention rate. You can go and see who is billing the support tickets, how many support tickets each customer is asking for. So those are the types of things that I will look at on a day-to-day basis. I was wondering today looking at product information and product suggestions, so we get a variety of things. Just a few days ago we went over to see one of our customers who literally had -- in their executive offices they had 25 screens up of every metric imaginable. And when you walked in, they told us that one of the tenants of their business and pillars of their business was transparency. And it was really fun to see how it's truly transforming companies and turning into real time data and we had a -- we’re talking with an auditor about getting real time data out. And they said the auditors are thinking about what we are going to have, eventually auditors are systems that put out data because we have to go to just audit the data. And I think that’s where the world is going and we're the ones who are significantly there, so that’s fun.

And Bruce, what does fully funded mean, when should we expect free cash flow breakeven and how should we think about -- I think the first $50 million debt repayment is January 2021, so in whatever order you think makes the more sense?

Sure, well fully funded means we raised enough money that according to kind of the business plan we had at the time that we shared with you, and some of the analysts and talked about in reference to that with investors that that we would execute that plan, which we’re highly confident we can execute, we would not need to raise money to run the business. So the quarter -- in this case, we over performed on the top-line. We did not spend more money; we actually over performed on the spending line. So that’s kind of a, I will call that, we’re well on our way to executing a fully funded business plan, we kind of made a down payment on the burn by doing that. So it should continue to be like that with the only exception being what if, what if we find that our sales and marketing machine is dialed up so well, so well that the growth trajectory of the business just changes dramatically and that would just be the only situation where we have to go back and look at any funding requirement but that would only be in the case where it was outsized top-line performance. So the base plan right now is a very -- we know we can hit and if we do hit that then we don't need to raise the money to fund this. The assumption in that is, that that we have we have rollover? That's true. We already had preliminary discussions with the debt holder that that was possible. By the time that we would actually execute on that our ARR would be substantially higher than at the point in time that it was that we took on the debt. So we are highly confident either to the current holder who is already predisposed to work with us, or any new holder that we are in a good position to make the claim that we will be able to roll that over.

And then are you okay with giving us a timeframe for when should see free cash flow breakeven?

Well, I mean all the models kind of had a multiyear timeframe to do so which gave us plenty of time to do that. I think that’s just where we need to leave it for right now. And we are happy that we will always be looking at this. And soon is better than later on higher growth, soon is better than later on bringing down the burn, so we know that. But we are only one quarter in, so we want to just stick to the plans that we had already kind of advertised to everybody. And we will just give you updates as we feel confident that we can put a stake on the ground and some of the timeframe at this point.

Our next question comes from Derek Wood with Cowen and Company.

Josh, you mentioned strong referral based business. I'm curious is this what SIs or what partners are driving that, maybe give us an update on how some of your early efforts are tracking with respect to channel leverage?

Yes, great question. We are seeing it across the board, I mean not just with partners but also with employees of customers that move over to new companies and drag us with them and others. One customer has taken us into three different accounts and that’s nice -- that’s one of the nice things about having happy customers and a lot of happy daily active users and weekly active users as they go to the new job and like I can't do my job without Domo and they bring us in, so that’s been nice. In terms of partners, one thing that we -- haven’t talked much about it in the prepared comments is the international business and Paul Harapin and Ian Tickle and Tom Kawasaki who are running our businesses over there, have just done a phenomenal job. And they -- the business over there is not only growing very rapidly but we have invested a lot of new -- in lot of new heads over there as well. And so it will be exciting to see how they continue to perform but everything looks great in terms of the customer bases that they have and the referrals that they are getting. And they have made this year the year of the partner, the year of the channel partner. And so we are seeing a lot of channel activity in our international markets and preparing in the US to have next year be the year we really go after channel in a big way. So it’s important to see those referral partners. We have one customer that -- one of very recognizable strategic consultancies brought us into an account and we got into that account and next thing the CEO of that account, a big bank, is very happily using us. And excited about how they are transforming their business by having access to all this data in real time and with they are able to manage their business towards goals and because of that it changed the strategic consultancy. Their value was changed in the CEO’s mind and the CEO’s eyes. And so, as that relationship has evolved, that strategic consultancy said, hey we need to take you into much more account because when we bring you in good things happen for both of us. So I think there is maybe a lot of that. It’s always really hard to get into the CXOs. You rarely see it in enterprise software. I can count on one hand the number of things that I have logged into and most of things are once, so when you get in there and you get somebody actually using your app often and where they'll say things like it’s my bottom right app, I rollover in the morning and pull out Domo, CEO is saying those kind of things, definitely affects your ability to getting close with strategic consultants and other channel partners. So we’re excited about the progress we’re making there. It’s not a meaningful part of our business yet, but we certainly see a lot of upside if we just do more of what we’re already doing.

Great color. And we have been hearing very positive feedback with respect to the newer predictive analytics capabilities inside your platform. Do you -- I mean do you see advanced analytics as a new use case and how are you trying to address the opportunity around predictive and advance?

On yes, in a huge way, mostly because -- I mean I don't typically get too excited about buzzwords and hot topics. I have been around long enough to see people make a lot of noise about things and then not getting substance or utility out of it. That said we know predictive is going to have a big impact on companies and we know that identifying correlation to your business is going to have a big impact on your ability to run the business. But in order to do that, and in order to have machine learning have a big impact, what matters is the amount of data that you’re looking at. And we happen to be the only company that I am aware of that truly brings together all of your data in one platform and we know what that data is. We have metadata around that data. We know where it came from. It’s not some data piled into some database that no one knows about. We actually are able to architect and understand what it is as it goes in and because of that when you talk about things like predictive and machine learning and artificial intelligence, it’s not very hard to extrapolate out all of the interesting -- all the interesting value that we can provide to customers because they're sitting there with all of their data in a highly scalable data warehouse that we’re managing on their behalf. So we’re starting to -- like you said, I’m glad you’ve heard good things about it already, but we got a lot more things in the work where we’re bringing more predictive capabilities to the market and more abilities to just feed the -- it's one thing to give them reports about what happened. It's another thing to tell them what might happen or what’s about to happen or how they can expect what’s about to happen. And that’s where the real values is going to be, I have seen that once in my career and we’re going to see that here, instead of just about online marketing, we’re going to see about your entire business and we’re seeing that all over the place with customer starting to not only take data in but then write back to those applications and roll into few platforms around, they can do that.

Thank you. And our final question comes from Jennifer Lowe with UBS.

I guess for my first question, I just want to have a quick clarification question. Bruce in your prepared remarks you mentioned that billings in Q3 -- I think you mentioned billings in Q3, should be similar to Q2 and I wasn’t sure if you meant similar on a dollar basis or similar on a growth basis?

Similar on a dollar basis.

Okay, great. And I also want to ask about the reps growing 10% quarter-over-quarter, which is maybe a little more than what I would have thought, given where you’re in the transition. So first I just wanted to see if that was in line with your plans and/or whether it was a response to the improvements you have been seeing in productivity? And secondly, should we assume that those are mostly international or are you adding reps in the US as well?

Yes, so, no, those were in the plan and even on the roadshow we gave indications of where we were on sales headcount. A lot of that is in international. We -- they have had the green light all year, although there is some in US and international as we’ve described has been doing an excellent job at building their business, building it in a manner that’s very sustainable and building as that they can -- we can count on continued high growth from them. So we will continue -- and in fact we continue to allow them to grow the headcount out there. And we are glad we were able to add the headcount this quarter because it’s building more capacity for us. And as I stated, we didn't have the chance to realize it yet because they are still ramping. But it’s nice to have just ramping alone kind of some nice built in growth that sets us up well going into next year.

And then just one last one from me. As you land more of these larger enterprise accounts, I'm curious how much of that is displacement of legacy BI at this point versus sitting alongside existing BI systems versus areas that there just weren’t tools at all. I imagine most enterprises have something. And if that’s -- as your story sort of gels in the market place whether that’s been shifting at all?

Well, the -- our primary view today is it’s fundamentally a greenfield opportunity because we are putting data in the hands of business users, business decision makers, managers, line employees, they frankly never had direct access to data like that they had before. So there really is not a displacement argument and nor a major value proposition. However, what we're finding is as we are expanding within the enterprise, basically on the department-by-department basis, this is more and more often doubling up to the C-Suite. And when that happens, we are finding that we are engaging more and more with the office of the CIO. In that case, because our platform is so deep, it’s so scalable, it’s secure and it’s consistent with many of these large enterprises wanting to go through the cloud, really not having the best mechanism to do so, in those cases, then we are getting both the chance that even expand more rapidly and more of a greenfield opportunity getting in the hands of people that haven't had this kind of data or access to data in the way we provide and they are finding that they can do less with other tools and/or platforms that they are using. So we often find the most prevalent cases they are realizing that they are over-licensed or over-provisioned with other software products, we are finding that more and more often. I wouldn’t call that an outright replacement but we see the writing on law of how ultimately a big part of our target market can be the existing spend that is going to other products. So we think we’re fortunate to have both a retail market opportunity by getting just in the hands of every employee of the company and having the chance ultimately to replace other systems or at least free up budget in our favor by reducing over-licensed under-provided kind of software products that they already have.

Ladies and gentleman, thank you for participating in the question-and-answer portion of today’s call. I would now like to turn the call back to Mr. Josh James for any closing remarks.

Hi, well, thank you. We’re pleased to -- I am pleased to be here with Bruce and Julie and the rest of our team that’s still sitting in. I also want to thank [Derrick Long] and [Matt Ryan] and others around the world who called in. We want to reiterate our belief that we have a unique value proposition and very large market opportunity. And most importantly, we’re just getting started. Because Domo can digitally connect any organization and empower each of its employees, we believe our market potential is every working person with a mobile device. We’re well-positioned for future growth. Future results demonstrate we’re tapping into that potential more effectively and we have the right strategies with these enterprise customers and their digital business transformation. I think we’re off to a good start and our focus will continue to be on the customers and the amazing things that they're doing with Domo. We look forward to hosting many more calls just wanting getting to know our investors, analysts and the financial communities better. A big thanks again to our employees for their continued commitment to our customers for innovating with us and thanks to all of you for your support.

Ladies and gentleman thank you for participating in today’s conference. This does conclude the program. You may all disconnect and have a wonderful day.