Good day, ladies and gentlemen. And welcome to the Domo First Quarter Fiscal Year 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session and instructions will follow at that time [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's call, Mr. Peter Lowry, Vice President of Investor Relations. Sir, you may now begin.

Good afternoon and welcome. I've enjoyed getting meet most of you, and looking forward to meeting the rest of you. On the call today, we have Josh James, 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 onto our call. Julie?

Thanks Pete. A press release was issued after the market closed, and is posted in the Investor Relations section of our website where this call is also being webcast. Statements made on this call may include forward-looking statements related to our business under federal securities laws. These statements are subject to a variety of risks, uncertainties and assumptions. For discussion of these risks and uncertainties, please refer to the documents we file with the SEC, in particular, today's press release and our most recently filed annual report on Form 10-K. 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 Domo'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 an isolation from GAAP results. Please refer to the tables in our earnings press release for a reconciliation of our non-GAAP financial measures to their most directly comparable GAAP measure. And with that, let me hand it over to Josh.

Thank you, Julie. Hello everyone. It's good to be back with you again for our Q1 fiscal year 2020 earnings call. Before I jump in, I want to congratulate the team for their work for acquisition, underscores the value of helping businesses, use their data, as well as the challenge and expense that even the world's largest technology vendors face in delivering just a few of the capabilities in our platform. For today's call, I will focus on three things; first, our strong business execution; second, customers leveraging the power of our platform for our enterprise apps, and additional advanced data offerings; and then third, the strength of our ecosystem and the defensible business it creates. On my first point, our strong execution has helped us sustain growth and achieve operating leverage. In Q1, we saw 28% year-over-year growth in revenue and 22% year-over-year growth in billings. And at the same time, we realized a 19% year-over-year decrease in sales and marketing expense, and a 15% decrease in overall operating expenses. We continue to make clear and significant progress towards making our commitment to being cash flow positive without having to raise any additional capital a reality. We focused on the power of the platform and growing and selling into enterprise base. Our platform message is resonating in the market. We see this in the customer conversations we were having, and as evidenced by a pipeline that is larger than ever with more seven figure opportunities than we've ever seen. In the past quarter, we'd be piloting a new pricing model that focuses on the value of the components of the platform and its design so that per sit pricing doesn't hamper our customers' ability to expand Domo across their organization. This allows them to drive more value from increased…

Thank you, Josh. I'll begin with our first quarter performance followed by our second quarter and fiscal 2020 full year guidance. We had another solid quarter, and as Josh mentioned, we're executing well against our plan, billings grew 22% to $41.1 million. Our billings growth was supported by our dollar based net revenue retention rate that continues to be greater than 100% and was slightly higher than last quarter. We also continue to see more customers entering into multiyear contracts with 45% of our customers now on multiyear contracts at the end of Q1 compared to 35% at the end of Q1 last year. This drove our remaining performance obligation, our lower RPO to grow 34% compared to the same quarter last year. Q1 revenue was $48.8 million, a year-over-year increase of 28%. Subscription revenue grew 29%, and represented 84% of total revenue. Year-over-year, subscription revenue growth was driven primarily by new customers and we now have over 1,800 customers. International revenue represented 26% of total revenue, up from 22% in Q4. Our subscription gross margin was 77%, up 270 basis points for 74.3% in Q4, and up over 74 percentage points from 69.8% in of last year. We plan to get additional leverage out of our subscription costs of revenue as we continue to effectively manage our data center operations to finding efficiencies and better utilizing certain services. Including our services business, our total gross margin was 69.1%, a 60 basis point improvement compared to 68.5% in the fourth quarter of last year and a 520 basis point improvement compared to 63.9% gross margin in the first quarter of last year. In addition to our revenue growth and improving gross margin, I'm pleased that we were able to deliver these results once again with a further decrease in operating…

[Operator Instructions]. Our first quarter comes from Sanjit Singh with Morgan Stanley. Your line is now open.

This is Josh on for Sanjit. Congrats on 73% op margin improvement year-over-year. Over the last three quarters, we've seen a bit more upside, I think, and more in line top-line this quarter. So I'm just wondering, have you seen any changes this quarter in the competitive environment or customer purchasing behavior or demand or anything else?

Hi, it's Bruce. No, I mean mostly the data points that we see engagement with our customer base, further reinforce the fact that this is extremely differentiated product compared to anything out there, primarily because it's a complete platform designed for business users to get access to the data they need. And then we're even, in addition to that, we're finding that the customers are embracing the fact that they can do -- they can build upon the platform and use different components of the platform in ways that really enhance the operations of their business. So I think that we are in a extremely good competitive position. Just to your point on over- performance, our Q1s just tend to be the seasonally low quarter. And we did not see that out performance that we've seen in the past. But all the operations, all the metrics still point in the right direction. And again, we're mostly excited about the fact that the customer engagement that we find with our product and platform, particularly is evident that our large conference that we're seeing such positive embracing of it and this robust use cases that we're pretty optimistic about how this is going to play out through the future quarters.

And then one thing I’d add to that is, if you look at its Q1, typically seasonally low, lot of the big deals that come through, are going to come through and Q4. And as we look at things, we didn't have any of the big deals come through Q1, but like I mentioned in the scripts, we have more seven figure deals in our pipeline than we've ever had by a meaningful amount. And it just feel like there's a lot of really interesting conversations that we're having with brand new customers, with customers are signed within the last year. And then also with customers who've been with us for three years. We're having very big strategic conversations with them where they recognize the value of all the things that we're doing. Maybe not just some components, or just one piece like Looker does, for instance, but really leveraging all of the things that we do and having big strategic conversations with us. So hopefully, we'll see some of that outperformance like we did in previous quarters but we knew Q1 is always tight, just because we have a big clean-out in Q4.

And are you still looking to increase sales capacity by 30% this year? And are you seeing the productivity improvements to justify that? And then with that in mind, can you just comment on the potential to accelerate new ACV in FY20? Thanks.

I'll answer initially. Yes, definitely still pushing forward and on track in terms of hiring the reps and getting the reps in place. Still really encouraged by the underlying metrics like productivity, pipeline coverage in the different regions. Also like we mentioned, not only in the outer regions but also just incorporate here retention rates are starting to look similar to enterprise retention rates, productivity is looking really positive, which is why, about a quarter ago, we said we need to start hiring more reps in all the regions. So we're very encouraged by that. And now it'll be a matter of getting that capacity in place. And then before I turn to Bruce to answer this question as well, the other thing that I was really encouraged by in Q1 even though we didn't outperform on some of the -- on the billings metrics, we certainly did on the cash flow metric. And that's something that's just important to us right now is really getting this by sometime, and I guess I can't give any timeline, but sometime in the near future getting us to where we are close to breakeven and then growing as rapidly as we can from that point forward.

And I'll just add, we did make the comment last quarter that we believe for this fiscal year, we should see new ACV accelerate, and we are on track to deliver on that expectation that we've put out there last quarter.

Thank you. And our next question comes from Brad Zelnick with Credit Suisse. Your line is now open.

This is [Saeed] on for Brad. Congrats on a strong quarter. I just had a very quick question. I wanted to see what is driving the increase in corporate deal sizes. Is it more driven by big initial deployments, or do you -- or is this just a sign of more traction that you're getting off market?

Yes. I think we have very strategic relationships with these customers. So even if it's $100 million, $500 million, $1 billion business in that corporate area. And like I've said many times before to me half of that business feels like enterprise business. And contracts that we're seeing the new pricing that we talked their ability to go in, and they've always have been a leader in and going in and trying to sell the value of that platform. But really switching hard to that definitely helps. And they're also taking cues from some other successes we've had where they'll go and they'll sell in addition to selling the platform and selling minimums and getting longer contracts. Also selling some multiyear services to go along with that help them to get the most out of the products and the platform.

Also, as a follow-up, it seems as if services growth rate is now decelerating. So can you actually give us a little bit of idea if we should expect that to continue? And why is that and why that deceleration is not actually going to be a little indicator for subscription?

I didn’t hear the first part of it. But we put out what we think we will to this year and underlying it is accelerating ACV. And you don't necessarily see that right away in billings or revenue, so there is underlying I guess factor that would cause us not to be able to deliver again on accelerating ACV.

And the biggest piece that we indicated to everybody to show that we're going to demonstrate that. We believe it's going to accelerator the commitment to hiring the reps and adding the heads, because we're seeing the productivity that we want. But you can't just turn it on overnight, you got to get the reps, you got to get it ramped-up and then they got to close the ACV. And then you had to wait for that ACV to hit your GAAP accounting revenue, and billings in some cases, depending on whether it's annual or not. So yes, we're definitely optimistic about the future.

Thank you. And our next question comes from Jennifer Lowe with UBS. Your line is now open.

I wanted to just talk about how we should think about the big deals, going forward. Can you just give us a little color on how the sales cycles for those types of deals look relative to some of the smaller deals you've done traditionally. And maybe specifically for Bruce, how do you forecast close rates and linearity around those? Because is there an extra degree of conservatism there how do you think about forecasting when some of these big deals can maybe swing things around a bit? Thanks.

So the big deals in most cases are places where we've had a relationship, we had some positive experiences with us. And now they want to roll it out across their organization. In addition to buying more capacity, whether its data capacity or seat capacity in the old pricing model, or adding additional applications, it's usually a combination of the two. And it's been really fun to sit down with CIOs. As we mentioned, we started really going out and talking to more CIOs, because the users of Tableau and Qlik and Looker, that's not our target audience in terms of whom we sell to but they can be blockers. And so we've tried to make a concerted effort to make sure we get out there and talk to the CIO or the COOs [indiscernible]. And as we've had those conversations, it's been really fun. Because like I mentioned in my comments, you really do -- everybody really does know someone that has a great idea for an app, probably it seems like I get two or three text messages a week from somebody that has a great idea for an app but they're hard to get made, all these same people are having great ideas for apps in their business, but no one has a clue how to do anything with it. And when you get in there and talk to the CIOs, there's been multiple times where you start showing them the power of the platform, the apps that can be built on top of that, configure all these enterprise apps that we have. And they start telling you about three projects, four projects, five projects that they have, and they had no idea how to sort through those projects without them being just custom development initiatives. And now they're like we can do all that for Domo. So it really is a differentiated solution that we have. And these big customers, it's just looking at what we've done smaller and doubling it or 10x-ing it. And as we get bigger and bigger into the bigger and bigger enterprise customers, we're seeing people that we're talking to. And they're like, we're thinking about putting 50,000 employees on this or 75,000 employees on this and those are the deals that we're looking at in the pipeline.

And then in terms of forecast stability, one element of business that we really like is the fact that the corporate business. And again, that focuses on company sizes less than $1 billion in revenue, is doing very well. Productivity remains extremely high, on a per rep basis, deal size are high. And they are, they're growing. And so that's the foundation actually and that has very good visibility for in fact at very fast sales cycles. So we like that. It's maybe a slower growth that we have in the business. When it comes to the enterprise business and again part of what we see in Q1 and the reason why it's seasonally low is the enterprise business tends to be a back-end of the year business generally. And on top of that, that's a big focus of our sales hiring. On top of that, the deal sizes are getting very large, or larger than we've seen ever in history of the company, which adds complexity to it. And then on top of that, we're talking significantly to the CIO now compared to before that that adds complexity in general. But we do watch these deals extremely carefully and get updates constantly on the progress and that does give us the ability to forecast. And we finally have enough volume where you can never predict every single deal how it's going to play out. But you can, as a whole, get a good feel for where you believe we will land in terms of new business. And so that -- the raw volume and the fact that we have the highest pipeline ever in the company is extremely -- is conducive to given us confidence to forecast what we think will happen in Q2 and optimism for what we think we will see in Q3 and Q4.

Maybe just one more for you, Bruce. I think in your prepared remarks as you were talking about the growth in subscription revenue. I think you made a comment along lines of the big lever on growth there was new business. And you also mentioned over 100% net retention. So there's a great space in there that's up-sell. So I guess the question I had was putting in context, when you talked about new business as being the driver of the subscription revenue growth. What are you seeing on the up sell side? Was it a little bit less or are you lumping that into that new business categorization?

Well, the new business from new customers was the highest growth component, between that and selling into the installed base. We just had a lot of that Q4 and I think that just did have some impact on Q1. But a lot of the larger deals that are in the pipeline are up-sell deals, because they're much more strategic transactions with very large current customers. So that could easily change and will most likely change toward the back end of the year as those relationships come to closure and we complete the transactions with them.

And our next question comes from Derek Wood with Cowen and Company. Your line is now open.

Josh, I wanted to dive into the pricing changes a little bit more, I had a couple questions on that. First, can you give us a sense for how you're rolling it out? Is it with new customers? Is it with renewals? And then what's the idea in terms of how it helps the cadence of your deal flow to you? Do you think it'll help create less friction at the front end of the funnel? Or you think it helps bigger initial gate engagements out of the gate? Just curious what you think there?

So it definitely changes the conversation in a few different ways. I think with renewals, it certainly helps, because you don't want other customer asks you. Do you get the same value and the same functionality, if we drop our seats in half, that's a bad conversation to have. We don’t want to have that conversation with customers and we had one or two of them and those conversations freak you out. So we're recovering from all those and so we've got to roll-out this new pricing approach. And that was a few quarters ago when we got that indicator. And so as we started looking at it, also our sales managers were out there saying, this is an opportunity for us to build more value in that initial contract, and it sets us up to get even more sales. And like I said in my prepared remarks, instead of putting this gating item in front of the customer that says you're not going to really find value until you get more users on here. But we're going to put a big gating item and prevent you from rapidly expanding your users. And then another byproduct of the old pricing model was they would look at what we charge them for the first couple hundred users and say we've got 10,000 employees. And think to themselves this is not going to foot, and that wasn't a way that we wanted to think about it as well. So charging them based on the platform having data charges associated with it, being able to charge for the apps that sit on top of it, being able to charge for data science, seems to resonate with them much better. And because IT is generally involved with this as the contracts increase. They're used…

Make sense, that that's great. And my second question is just around the Google, Looker acquisition. I'd be nice to get your thoughts on how you guys fit in the market with Looker and what you think this means for the space. And maybe remind us on the on your AWS partnership and what you've been doing to strengthen that.

So I think this is a case where one of the things that's challenging is getting data into places like Big Query, or AWS, or Microsoft's Azure Cloud. And Looker provides one of those functions. We actually don't see them a ton, they're down the list on competitors that we've seen frequently. And they provide of the competitors that we normally talk about, they provide the smallest amount of the stack, but it's a good technology. And IT peoples really like it and it's an admirable technology. Some of those things that they didn't put together are things that we've talked about doing as well. It is further down that stack in terms of just connecting data, being able to visualize that data. And I'm sure for Google is going to be a great thing for them. What they've already said in their acquisition notes. The CEO of Looker came out and said, Hey, this is -- we're still going to be partnering with all the other vendors out there. And Google is still going to be open to every other vendor, in no way changes any of the dynamics or approaches that we've taken there. Which, I think it's important to make that statement from them. But it also is indicative of the fact that no vendor controls data anymore. The data is owned by the customers. Customers figured that out about 10 years ago. And any vendor that says anything, otherwise, you've really raised the eye of your customers. So from that perspective, Google's a great partner of ours. We do connect to over 1,000 different enterprise applications and databases, with pre-built connectors, thousands upon thousands with some of the generic connectors that we have. And Google, I think we have over 19 pre-built connectors that we use.…

Thank you. And our next question comes from Pat Walravens with JMP Securities. Your line is now open.

So my question would be -- given all the moving parts here and how dynamic the space is, for each of you. Josh, I mean what's the number one thing you're focused on right now in terms of what you're personally trying to accomplish? And Bruce for you what's your number one focus?

So my number one focus right now is the one that we stated at the time of IPO, and that's going to continue to be our number one focus, probably another 12 months, which is just trying to find the most efficient way possible to identify new customers and close those new customers, acquiring new customers. Once we get our nose in the tent, we do heck of a job retaining that customer, and selling them additional products and services. Actually once we even get in where we have a real opportunity on the line, we have great close rates. We just need to continue to find customers more efficiently, which is why things like the Looker acquisition just continued to help us, because it raises more eyes that are saying "hey what am I supposed to do in this space? What’s my strategic move here?" And you're seeing companies like Google start to put together more of the stack that we built. And we'll find at the end of August, whether or not we should have built the whole thing of not, but we did. And it really resonates with the forward thinking customers that we have and that gives us the a lot of confidence that overtime that will end up being the right thing because these are the forward thinking customers that are looking at our whole stack and realizing how they can change the way they run their business. Secondary, the other thing that a lot of effort -- that we're focusing right now is our ecosystem and our partners. We've got a lot of technology partners. We don’t have as many go-to-market partners. And we just hired a new VP, Rob Davy, who is going to help us out. He was at Microsoft for12 years…

Yeah, for me, it's support -- support all the growth initiatives, including hiring new reps, building new apps, supporting new customers…

And closing deals. Bruce, closes a lot of deals.

Thank you.

He visits a lot of CFOs. And it's a pretty interesting demo, he says, here's how I run my public company. And the CFO's mouth usually drops. So that's been probably Bruce’s big focus.

And on that point, I've yet to say, let me say it, I need it. They've always said I need it. But it's to support all that within the same cost down below. Like, we want to do all these things, but we can't spend any more money. So me and my team spend a lot of time working on, how do you fund it because in total cannot go up. And it automatically drives down cash, automatically, recurring revenue model where you're building layers and layers of new business that's highly profitable, it just drives you to be cash flow positive, naturally without doing anything unnatural. So that's just a lot of my effort. And, I have a whole company kind of working with me. So it's not an impossible task by any means, in fact, we've shown this in numbers. We are able to keep growing the business, and we're able to do it with even fewer costs than what we have done in the past.

All right, super helpful. Thank you guys.

Thank you. [Operator Instructions] Our next question comes from Jack Andrews, Needham & Company. Your line is now open.

Good afternoon, and thanks for taking my questions. I was wondering if you could shed some light on the pricing scheme with your verticalized applications like marketing suite in IoT, cloud and maybe how these compared to your core platform?

Yeah, so there's an incremental fee associated with configuring those enterprise apps. We've built hundreds and hundreds of apps for our customers. We have thousands of apps being used by our customers, some of which they've built themselves. And so we're able to go off the shelf and pull these different building blocks and put them together for our customers. And so there's a fee associated with that and then there's an ongoing ACV component. So, you might have an app, like Digital360, it might be $200,000 to set it up and $200,000 a year, depending on how many users they have. By the time we've gotten to that point, they've identified which users they want. And so that's one way that we can charge but generally, whatever it is, that we're selling is an annual fee associated with that app. There are some apps that are small, that that don't have tons of technology behind them that might only charge $25,000 to $50,000 a year for and then there's others that will charge $250,000, $400,000, $500,000 a year for it.

Great, thanks. And then just sort of moving forward, thinking about the apps you've introduced so far. I mean, is it fair to think that you may become perhaps more verticalized over time around this initiative?

Yeah, I think, specialized whether it's verticalized or for a particular function in your organization. We have a very, certainly a very well-known brand that’s in the news all the time, and they're a customer of ours, and they are in the pipeline right now, have a travel and expense application that they're looking to meet. And it's a good-sized contract. So sometimes it's verticalized, sometimes it's a function. Like I mentioned, there's the app that will show Domopalooza around HR and retaining your employees. So I think really over any function in your company, and that's why I say, our customers look at us and say, hey we've got these -- all these employees, we're trying to figure out how to give them real time commissions on what they're selling, because they sell so many things. And we're losing employees, because our reps can't actually make sense of the commission spreadsheets that we send to them. Can we give them an app, that helps them see it in real time? And it feels kind of next generation, feels like we're being transparent and open with them, because they get in real time. And we're able to, again, pull those building blocks off the shelf, put a skin on it that looks like their brand, and they get really cool custom software application that we just pulled-off the shelf that looks custom to all their employees. So yes, I think we'll see more verticalization and more specialization for sure.

Thank you. Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program and you may all disconnect. Everyone have a wonderful day.