Ladies and gentlemen, thank you for standing by, and welcome to the Domo Fourth Quarter Fiscal Year 2020 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Peter Lowry, Domo Vice President, Investor Relations. Please go ahead.

Good morning, and welcome. 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 the call. Julie?

Thanks, Pete. Our press release was issued before market open 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, 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 documents we file with the SEC, in particular, today's press release and our most recently filed annual report on Form 10-K and our most recently filed quarterly report on Form 10-Q. In addition, our business faces risks associated with the COVID-19 outbreak. 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. With that, let me hand it over to Josh. Josh?

Thank you, Julie, and hello, everyone. Thanks for joining the call. We know it's short notice, but we think it's important to share our strong Q4 performance with you as soon as possible, particularly given this crazy time that we're in. We know, as it relates to COVID-19, this is a trying time. And in times like these, our most important focus is on our people and their families. In regard to everyone's health and well-being, weeks ago, we implemented common sense protocols, including putting restrictions on nonessential travel, supporting work-from-home initiatives and changing the format of our annual user conference to online only. Our thoughts are certainly with everyone who's affected at this time. I'm going to keep my section short and sweet. I want to make -- take a -- I want to take a more reflective view and highlight the progress we have made since we became a public company, and then Bruce will cover this quarter's details. So this is our seventh reported quarter as a public company. In the last 7 quarters alone, we have made significant progress on a number of metrics. Number one, our year-over-year subscription revenue growth has averaged 28% and has never been below 24% for any quarter. Number two, our subscription gross margins have improved from 71% when we went public to 77% today. Number three, our gross retention rate has improved from 82% to 91% this quarter. Number four, our contracted annualized recurring revenue is now over $160 million, a size and scale that gives us the ability to get to cash flow positive quickly if we need to. Number five, our customers under multiyear contracts have increased from 38% of our customer base when we went public to 55% today. Number six, over that same time period, our operating expenses have decreased from $55 million per quarter to $53 million per quarter, despite our growth in recurring revenue. Number seven, we have decreased our quarterly cash burn from $36 million a quarter to now $15 million. And lastly, number eight, we've been able to accomplish all of this with the same headcount level we had about 4 years ago, and we still have sufficient capacity to continue to deliver significant value to our customers, also with an ample amount of cash to run our business however we need to, in whatever environment we are in. I'm very pleased with these accomplishments in this past quarter, including signing one of the world's largest companies, Amazon, as a customer, and I look forward to continuing to execute well against this large market opportunity before us. The path to achieving a cash flow positive position with the cash on our balance sheet has become clear every quarter. And with that, I'll turn it over to Bruce.

Thank you, Josh. We're pleased to deliver a solid Q4 against across all guided metrics. I'll now review the details behind this performance followed by providing first quarter and fiscal 2021 full year guidance. Our better-than-expected Q4 was driven by higher renewal rates, strong upselling into our installed base and the entirety of our business delivering above expectations. Our enterprise team capped off a record-breaking second half of the year, our corporate team produced the largest amount of new ACV business for the company and was well above our beginning of the quarter expectation. It is noteworthy that we achieved our results with minimal contribution from large deals, with our top 5 new business deals comprising only 5% of our billings this quarter. Our focus has been on increasing our recurring revenue base, and I'm pleased that our subscription revenue grew 24% year-over-year, driven by an improved mix of new subscription versus services revenue. And by improving retention rates. I also want to highlight how encouraged I am by the continued improvement in our existing customer lifetime value, or LTV, profile, as both retention and recurring gross margin continue to show incremental improvement. A significant benefit of the SaaS model is that strong improving LTV fundamentals provide a core financial visibility in periods of external market uncertainty. Our recurring revenue base is broadly spread across a wide range of industries. We do not have significant concentration in any one industry with no industry representing more than 15% of ARR and most representing significantly less than that. As Josh also mentioned, our gross retention rate was 91%. In addition to better-than-expected retention, Q4 billings benefited from about $2 million of renewals in connection with upsells. We had expected these renewals to come in the first quarter of fiscal year 2021. This…

[Operator Instructions] Our first question comes from the line of Sanjit Singh with Morgan Stanley.

Congrats on the beat on billings this quarter. Bruce, I wanted to talk a little bit about guidance, and thank you for walking through some of the assumptions on Q1 and for the full year. Specifically, as it relates to the enterprise sales team, how are you thinking about the potential travel disruptions? I understand you have quite a lot of carry -- quota-carry capacity on doing inside sales. But in terms of just the enterprise sales force, how much of -- how much contribution sort of assumed in full year guidance? And what sort of disruptions are you anticipating in terms of the ability to close deals because of people not in the office or just not getting enough face time in front of customers?

Yes. So we -- one of the nice assets we have going into the quarter is just a strong pipeline that's been building nicely up to this point. And we think those activities that we've been doing ought to continue to build the pipeline, even against the fact that our -- some of our sales team, not all of it, but some of it has historically conducted the meetings in person. We think in this environment, given corporate America and maybe across the world generally, is all facing the same issue. And we are all making the best efforts we can to run the business as normal. So I think -- and part of it is I hope, part of it is think, is that we're all going to be quite accommodating of doing business over the telephone. In fact, it might generate a new normal that's even more healthy than the historical way we've done business. The other comforting fact is that a lot of the business, particularly in the enterprise, we get from our current customers. And that's very -- that's so much easier to do over the phone because the relationship's already developed. So we are very aware of what the pipeline is for enterprise, what the activity levels are. We think we've just baked in normal caution into the numbers. Nobody really knows how the current environment is going to play out, but we generally think we're well positioned, have a lot going for us. And we'll continue to keep the business activity as high as possible even against this travel slowdown, but it's not a travel stop, it's a travel slowdown.

Understood. And maybe for my follow-up, it's just to follow up on your remarks. In a more adverse scenario, can you just sort of walk through the levers you have at the -- at your disposal to sort of continue to make progress on the cash, cash burn side of the equation?

Yes. Well, on the top line, we're just going to really step up the activity from the telesales efforts and just get even more aggressive on what we think we can do and probably deploy more resources to protect the top line. On the cost structure, we have just ample room to operate today, which really translates into, we have the capacity to cut back the costs if we need to. I'll note that Josh and I have been through this before. We know when we get to a point where there's a real slowdown facing us. It was pretty clear in '08 it was going to happen, and we took aggressive action. And if we get to that point, we'll have to do the same. We hope it doesn't play out that way. But the reality is, if the world is going to slow down, then we're going to have to react to it. So we're looking at the cost structure very aggressively. And as I pointed out in my notes, we had already made a move when we did not like the return we were getting on our investment. And when we redeploy it, we'll do that with a different lens, if we find a slowdown -- if we're facing a slowdown.

Our next question comes from the line of Bhavan Suri with William Blair & Company.

Let me echo my congrats, especially on the LTV CAC metrics. That was really good to see. I guess I wanted to just push a little bit on Sanjit's question, just on guidance. Josh, you touched on no quarter has seen growth of less than 24%. The guide to both revenue and billings seems conservative. Just any more color on what else you baked in there. Sort of I know, Bruce, you said sort of normal conservatism but if you think about the pipeline is 20% higher than what it's been, you've seen net dollar retention rates go to 120% for enterprise. Just trying to understand sort of the conservatism, or the level of conservatism that's baked in here, given you're not expecting sort of a global slowdown? Just trying to understand that part.

Yes, this is Josh. I'd say, first, that we are -- the metrics that you just quoted are the ones that we're seeing that are really positive. We're seeing a lot of great positivity also coming from the sales plays that we're running, the new messaging that's really resonating with our team and how they get out in front of our customers, the way that customers are talking to us about their future plans and how you go through and look at the big deals that you get in a quarter. And most of them are customers that have been a customer for a few years. And they're standardizing on you. So there's a lot of great things taking place. But at the same time, we're definitely aware that the world is a different place than it was 2 months ago. So although we haven't seen a material impact on our business, we haven't seen things happen to the contrary, like Bruce mentioned in Japan, where they are in much more of a lockdown than we are in the U.S., all the kids got sent home, all of our 50 employees over there are calling us saying, we're going to work from home because no one's watching our kids. So we were very curious about how that business was going to perform. And yet, we're getting new deals and new contracts. So I think -- I don't know if that's exactly how the U.S. responds if we're in a similar situation, but business is still getting done. So as Bruce mentioned, I think people are going to be pretty open to trying to do business over the phone. This is a different kind of an environment than the bubble bursting in 2000 or the bank meltdown that we had in 2008. This is, I think, kind of a call to human kind. Like we've got to band together and figure this thing out. And I think we're going to see a different response when it comes to that. That doesn't mean it's not going to be negative and overwhelming, but I think it's going to be a different kind of set of experiences than we've had before in other downturns.

Yes. I think I just have to take this moment just to say, we set guidance the way we normally do. But it would be very imprudent for us sitting here today, seeing what's going on in the environment to expect a big beat. So I'm just kind of stating the obvious, given the market, it's really just based on the macro environment.

Got it. Got it. That's super helpful. And then I just want to touch a little bit on bake offs, specifically. You talked over the last couple of quarters of doing more bake offs, seeing really good win rates on those opportunities where you can demonstrate the nature of the platform. Just love to understand how that was in Q4. And how much of a focus area you guys are sort of thinking about that in 2021? As you think about your sales plays, the idea of bake offs, bringing data in, how are you thinking sort of about investing in that area given the win rate? So I'd love just to know how the quarter was and sort of the plan around sort of those POCs bake offs for 2021?

Yes, those POCs definitely go well for us, and it's not necessarily a huge area of investment relative to anything new that we're doing other than the expense associated with doing it. But it's a motion that we certainly understand it. I think it was more getting the sales reps to have that be one of the steps that they automatically go to, making sure that they don't shy away from it, making sure that they all understand that, hey, when we do this, our close rates go up. And so I think it's a motion that you're seeing the sales team and the management team -- the sales management team really understand that this is extremely helpful for us. And so you'll continue to see us do it more and more. And if you look at the big contracts that we won last quarter, and the same thing, the big ones in our pipeline today, in almost all those cases, there's a POC that's taking place as well that really helps convince those customers and get them comfortable with standardizing in a meaningful way.

Our next question comes from the line of Pat Walravens with JMP Securities.

Great. And congratulations on Q4, you guys. So Josh, I guess, my first question would be, are you seeing -- and it may be too soon, but so are you seeing any of your customers or prospects cut budgets or delay projects yet because of the current environment?

We haven't seen them cut projects and -- or delay projects yet. We've just seen a lack of travel, we've seen a lack of conferences, and that's definitely something that I think I'm sure everyone's trying to adjust to. You look at your marketing pipeline and your budget and the way it's allocated, and you've got a bunch of events in there. And that means you've got to generate those leads a different way. So flexing other muscles that you have. And business is still getting done. There are still individual meetings that are taking place. People aren't going to conferences and not going to where there's a ton of people that are in close contact with each other, but -- especially in the enterprise space, the big meetings are still taking place. So it's not something that we're seeing affect our business yet. It's just -- you'd kind of be ignorant to not recognize that a change is taking place. But hopefully, there's a new normal and we get to a new normal relatively quickly. If there's not a new normal quickly, then we're prepared for that as well. But that's why I highlighted Japan. It was fascinating to me and actually shocking to me when I'm laying there in my bed at night and I get an alert on my phone from Domo and I pick it up and oh, you just closed a deal in Japan. I'm like, what? I didn't think we'd close a deal in Japan. And 2 days later, the same thing happened again. I'm like, this is kind of crazy, and one of them was a new logo even. So I think the great comfort we also have is something that Bruce mentioned. But the fact that a big chunk of our new revenue that comes in every quarter is upsells from our current customer base that we invested a lot to build. But that, I think, gives us some -- not as much risk as you might see otherwise since you can go back to that customer base, where they're already familiar with you, and you can do business over the phone and through video conferencing.

Awesome. And then can you just talk about the -- you mentioned that you did a deal with Amazon. And in that same vein, what's going on with the partnership with Microsoft? And what's going on with Snowflake?

Yes. So our ecosystem continues to evolve and develop. We're very excited about it. We're continuing to invest into it. With those acquisitions that all took place in a short period of time, it created an opportunity for a lot of people looking for a new dance partner. We also have had many customers come to us and say, we really like what you've been doing with us for the last couple of years, can you help us do this with -- and get this data out to all of our customers? So it's -- the ecosystem is really starting to become a part of our business that we have a lot of confidence in the future of, and Microsoft is part of that, Amazon is a part of this. And then the -- Amazon as a customer mention that I made, that's outside of the ecosystem. That's just them as a traditional customer.

Our next question comes from the line of Brad Zelnick with Crédit Suisse.

Congrats as well on a nice close to the year. I was hoping to get an update on your go to market, and it was surprising actually to hear that your top 5 deals in the quarter represented no more than 5% of bookings just because for most software companies that are selling valuable solutions into enterprises, you would think Q4 is actually when the magic happens, that's when you're seeing the large deals. So just as you think about the target market and how you're going after it and we think about the stratification from large enterprise down to SMB, where are you making the investments and focusing the reps? And where are you incentivizing them to go this year?

Well, we've got our reps split up into a few teams. So we have a strategic accounts team, which is essentially the Fortune 500 and the Private 100. And so that's their patch and they go in to sell into there. And if you look at our big customers, yes, this last quarter, I think that was more making the point that we were able to hit our numbers without anybody swinging it in a meaningful way, and maybe it would have even been larger had we had any monster deals in there. But if you look at our top 10 customers by ARR, they grew -- the total number grew pretty substantially. We have some really big customers. We have all 10 of our customers of more than $1 million in ARR of our top 10. So we have definitely a really healthy, strong, big, strategic enterprise business. And then we also have a business that's focused on the $1 billion to $5 billion in revenue band and a bunch of folks that are focused on that. And then we have a corporate team that's focused on sub-$1 billion. That's 100% done over the phone. And then we have our international business after that. So that's how we break it down and when you put butts in seats, focus on different patches and you end up getting sales in those areas. So it's not really about incentives that we put, it's more about the people that we put in those seats.

That makes sense, Josh. And maybe if I can follow-up with 1 for Bruce. It's great to hear all of the evidence that's driving strong net expansion and retention that you talked about. Can you maybe give us a sense of the different levers, whether it's price increases, number of seats for existing use cases, new use cases and company divisions that you're breaking into? How should we think about the dimensions there?

Yes, the 2 big drivers are within a certain use case, certainly expanding the number of users. We're getting better and better at making that move be much more substantial than we have in the past. And the other is, certainly, I would say, almost unlimited number of use cases. So we're finding, once we're in an account and they really experience, I call it the magic of Domo, that they can finally do things on their phone they could never do before and get information they never thought was available to them in real time, that just spills over to the executives who are sponsoring those counterparts. And that, we're getting very, very good at, making the case internally and helping our champion kind of spread the use within groups. And then when we do that, we're obviously, very good at bundling that into a reasonable size deal, and our deal sizes have been going up on average. So those are 2 big levers. And yes, we intend to be -- pursue those quite aggressively, particularly given this environment because, again, it's just so much easier to work with the customer you already have. And we know we have use case after use case after use case that demonstrates very high value with support from the business people within our customer base. So those are 2 of the big key levers we have that we'll certainly take advantage of going forward.

Our next question comes from the line of Derrick Wood with Cowen & Company.

Congratulations on the quarter. First one, Josh, obviously, you had some consolidation in the space in 2019. I mean, how are you feeling about the competitive landscape? And I'm wondering, obviously, you guys are seeing strength on the corporate side. Do you think that has anything to do with kind of the change in the competitive landscape, some of the independent vendors getting acquired and that opening up more opportunity for you?

Yes. I mean, we're -- definitely, the consolidation has made us the strong independent and the one also that's agnostic for our customers in terms of where they can store their data. And they want to have someone that can partner with all of the big vendors because most of our customers use all of those vendors. And as you know, some of our competitors went to those big vendors. So that's definitely made us the -- I think, a very attractive partner when it comes to the ecosystem. And then I think it's just also been really fun to have people recognize our business. I mean, we have customers and partners who seem to recognize some of those metrics that I talked about at the beginning. The fact that we've never had a quarter grow less than 24% our subscription revenue; that we have our gross margin of 77%; gross retention rate, 91%, and we're getting to be a decent size in terms of scale. We've got a lot of multiyear contracts, more than 55%, and then to also see that -- all that take place when we've got our cash burn down to $15 million, where there's clearly a huge focus on getting that number as low as possible as quickly as possible. I think we're just in a really good spot to be great partners for our customers and our partners over the long haul.

Got it. And Bruce, maybe 1 for you. Services revenue was down year-over-year. I think there was a tough comp with some one-times in there a year ago. But how are you thinking about your services business? And whether you want to grow or perhaps shrink it and try to leverage more partners? But -- what's the assumption as you look at your guidance for the new year?

Yes. I mean, we really don't think of it as a separate business. I mean, services is there to make sure that we deliver the value to the customer they expect as fast as possible. And that just -- you're right in that it had a tough compare, compared to last year because of some of the onetime items that we reported on. So we'll just -- I mean, generally, it will be steady state, the same percentage roughly because there's just not a lot of variability in what customers generally ask for. It's pretty standard. So our real focus is just get the recurring revenue up because that's really the margin-rich, cash-generating engine and services is just there to support it. So model-wise, it can change as a percentage of revenue on the new business side from time to time, but there's not a big focus on it. We don't want to see a lot of variability in it. We don't mind if it shrinks, actually, because if we're able to deliver this value with less services, that's actually good for business, in our opinion. So that's just -- that's our philosophy behind how we think about that line item.

Our next question comes from the line of Jennifer Lowe with UBS.

Great. I wanted to follow-up on the question that Brad asked a little bit earlier, around the different roles within the sales organization. You'd mentioned that there were some cost savings in Asia Pac that were being reinvested into the U.S. So maybe to get more specific on that, as you invest into the U.S. sales organization, how are you apportioning those investments between the different strata of sales personnel? And is that being informed at all by some of the uncertainty on the macro side, where potentially telesales might be a little bit more durable? Or is it -- how are you thinking about the appropriate places to put those investments?

The real metric that we're focusing on is CAC. I mean, so we know high return items versus low. And we're just going to rebalance kind of the CAC portfolio to just optimize what we get out of it, and that's across both sales and marketing. So the problem with APAC was it was -- they had nice growth. And then we demanded we get CAC in line with certain benchmarks, and it did not happen. And so we just had to be brutal with the dollars and say we're just going to reallocate it to other areas of business that have high returns on our money. And that's the basic way we do it. And it could be across a portfolio of 50 different things. And we're going to continue to do that because we just have to get CAC in a position that lets us get the growth this business deserves. So we're just going to keep iterating and iterating and iterating. And I'm very impressed with what I'm seeing. What we're doing in the sales plays and marketing operations, that's just putting so much more rigor into that. And then we have a new Chief Revenue Officer, who is just extremely disciplined with data, metrics and cadence. And between the 2, that gives us a lot of input in determining where the dollar is ought to go and we're really going to be aggressive about it this year.

And also, again, following up on Brad, good questions, Brad, I was also a little surprised to not see more large deals in Q4. And I know you've talked in the past about some of these deals that slipped out as earlier in the year that we're kind of kicking around out there. So maybe 2 questions on that. First, did some of those deals that have been in the pipeline convert in Q4? Are those still in the pipe heading into fiscal '21? And second, to the extent that some of those large deals didn't necessarily land in Q4, is that sort of a purposeful thing on your perspective and just in terms of how you're selling and sort of some of the revamps being made in the go-to-market strategy, and we should expect that going forward? Or is it just the idiosyncrasy of when things close?

Yes. I think we're over-indexing on that comment that we made, we shouldn't -- we made it with a different intention. But when you look at the business, we have more large deals in our pipeline than we've ever had. So that's a big part of our business going forward. And most of it's driven because customers are using our product and they're coming to us and saying, we need to standardize on what we're doing with you. And we have a handful of really large POCs that are taking place right now. So that's definitely a big part of our business and will continue to be a big part of our business. And the particular -- on that quarter that you're referencing, I think one of those deals had no decision, but the rest of those deals either closed or are in the pipeline still.

And I would add, going into this uncertain environment, for us to be able to post the numbers we did without the big deals, which is actually what I want to see happen, I want to see basic, basic growth, not relying on them, and then when they come in, I'd like to see outsized growth.

Yes.

So the fact that we have smaller transactions, higher volumes, not overly reliant on the monster deals just to kind of hit our guidance, I think, just a very positive attribute of our financial profile as we sit here today.

Can I get an amen?

Our next question comes from the line of Jack Andrews with Needham & Company.

I was wondering if you could just drill down a little bit more on what sales plays books are really resonating for you these days. Is it something focusing specifically on the office of the CFO or CMO? Or what else is really helping you these days?

Yes. I think -- Jack, this is John Mellor, the Chief Strategy Officer. Let me take that a little bit. This is an initiative that I've been driving. So a couple of things. One is, we've really kind of been able to solidify the messaging for the company down to some key value propositions. And we just tell our customers that we offer them BI leverage at cloud scale in record time. And each of those 3 components of that statement are really core value propositions that Domo's selling into customers. And where we're seeing that matter is in the lines of business where we've been focusing the sales team. So those would be the finance organization, the sales organization, the marketing organization, and the product organization. And these organizations are all driven by the need to get results very, very fast. And they have to do it at scale, and they do that by leveraging these systems that they've got in place, in the investments that they've already made. So as we work with the sales team to hone the value proposition into those 4 lines of business, I wouldn't say that there's one that's standing out in particular, they're all moving quite nicely, and the sales team is absorbing those value props to go directly to those lines of business and solve business problems that deliver these kinds of business results at really incredible speed, unlike any other systems that they're using.

Great. Well, I appreciate the perspective on that. Just as a follow-up then. Could you maybe just update us in terms of maybe some of the processes that you have now to ensure that IT is not necessarily an impediment to your sales cycle? And how do you make sure that IT doesn't view Domo as potentially competitive to what they're doing?

Sure. Good question. Well, I'll go back to that statement, BI leverage at cloud scale in record time. When we talk about leverage, what we mean is that the systems and investments that IT has put in place or other investments that are in place around your employees, other processes, in the vast majority of cases, there's not a reason to rip those statements -- those investments out. It's about getting leverage from them. A lot of those systems are great at what they do. They've either got a first mile problem or a last mile problem. How do I get data into them more efficiently, how do I get data out of them more efficiently and in a more insightful, actionable way. And so there's a very strong complement there. And so our position with IT is a very complementary one where we're helping them leverage their investments and get a time to value that's much shorter than they've experienced in the past. So we view it very complementary.

Thank you. We have no further questions in the queue at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.