Greetings. And welcome to the Domo Fourth Quarter Fiscal Year 2024 Earnings Call. At this time all participants are in a listen only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. And it is now my pleasure to introduce to you, Peter Lowry, Vice President of Investor Relations. Thank you, Peter. You may begin.

Good afternoon. On the call today we have Josh James, our Founder and CEO; and David Jolley, our Chief Financial Officer. I’ll lead off with our Safe Harbor statement and then on to the call. Our press release was issued after the market closed and is posted on the Investor Relations section of our website, where this call is also being webcast. Statements made on this call include forward-looking statements related to our business under federal securities laws. These statements are subject to a variety of risks, uncertainties and assumptions. These include, but are not limited to, statements about our future end prospects, our financial projections and cash position. Statements regarding the potential of our consumption model; statements about our sales team and technology, our expectations for new business opportunities, transactions and initiatives; statements regarding our channel of communication and upcoming events; statements regarding the potential of artificial intelligence and its impact on our business; and statements regarding the impact of macroeconomic and other conditions on our business. For discussion of these risks and uncertainties, please refer to documents we file with the SEC. In particular, today’s press release, our most recently filed annual report on Form 10-K and our most recently filed quarterly report on Form 10-Q. These documents contain and identify important risk factors and other information that may cause our actual results to differ materially from those contained in our forward-looking statements. In addition, during today’s call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of 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 in isolation from our 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, which we have posted to the Investor Relations section of our website at domoinvestors.com. With that, I’ll turn it over to Josh. Josh?

Thank you, Pete. Hello, everyone, and thanks for joining us on the call today. I’ll start with our quarterly results, including some positive financial results and positive improvements in our financial position, despite a challenging macro environment. We exceeded guidance for key topline metrics in Q4, including revenue, subscription revenue and billings. We had record positive free cash flow in the quarter, and for the first time, we were operating margin positive for the full fiscal year. Importantly, we have also extended the maturity of our debt and we are bullish on closing a more economically advantageous longer term refinancing option. Now, looking ahead, of course, my top priority is getting Domo back to growth. I started Domo 14 years ago to disrupt practices that were limiting the potential of data in business. Previously, as the Co-Founder and CEO of a category-leading publicly-traded web analytics platform, I just didn’t understand why I couldn’t also access the online and offline data that all live digitally, and that I needed to answer all my questions about the business. I wondered how much more could I do if I had all the data I needed at my fingertips, on my phone, with alerts and the ability to get the whole company rallied around real-time information. In fact, how much more could all of us do with better access to data? Innovation starts with questions like these, but how often do we dismiss our curiosity just because we don’t have a way to explore it or because we’ve been beaten up for so many years with massive costs, inaccurate data, late data, siloed data or data that was only accessible through gatekeepers, and then just being told over and over and over it just wasn’t possible. That’s why at Domo we’re building AI-driven data…

Thanks, Josh. Like you, I’m excited about the growth initiatives we have laid out for FY 2025. Before I get into the details, let me provide some of the highlights for the quarter. We exceeded our billings guidance, generated record free cash flow, and for the first time, we were operating margin positive for the full fiscal year. Before I get into more details on these metrics, let me give you an update on our debt refinancing. We’ve extended the maturity of our debt with BlackRock to April 2026, a little over two years from now. Additionally, we’re currently considering options to refinance this debt on more favorable terms with a longer term facility to improve our overall financial position. While we’re still seeing a challenging macro environment, we were able to exceed the billings guidance we provided at the beginning of the quarter. We delivered Q4 billings of $105.4 million, a year-over-year increase of 1%. Total revenue was $80.2 million, also a year-over-year increase of 1%. Subscription revenue represented 90% of total revenue and grew at 2% year-over-year. In reviewing the metrics that will impact fiscal year 2025, current RPO was $243.4 million, consistent with last year and our total RPO grew 1% to $380.1 million as of January 31, 2024. On a dollar-weighted measure, we continue to have approximately two-thirds of our customers under multiyear contracts. As we had anticipated, in Q4, we had some down-sells at three enterprise customers that, combined with more normal churn, led to gross retention of 82% and net retention of 91%. Moving on to margins and profitability, our subscription gross margin was 83.9%, down 1.8 percentage points from Q4 of last year, due primarily to costs associated with new product features and functionality. We expect these costs to stabilize and our gross…

Thank you. [Operator Instructions] One moment please while we pull for questions. And the first question comes from the line of Patrick Walravens with JMP Securities. Please proceed with your question.

Oh! Great. Thank you. Josh, two for you. But the first one is, what are these investments that you’re planning on making and it seems like more so in the beginning of the year than the rest of the year?

Well, first half of the year we have Domopalooza, so that’s a meaningful expense that’s going to hit this quarter.

Okay. Got it.

And then beyond that, the investments that we’re making are around building out our ecosystem and the go-to-market component of that. There’s some marketing dollars and obviously some people associated with all the opportunities that we’re seeing in the ecosystem. And then just some additional investments in AI and some SPFs and other incentives around transitioning our customers to the consumption model throughout the CSM organization and the sales organization. That’s a big part of the focus as well.

And when you say like investments in AI, does that basically mean hiring people with those skill sets or is it something else?

Yeah. Yeah. A bunch of engineers focused on -- a bunch of our best engineers focused on that and some backfills as they’ve transitioned from other areas.

Okay. Great. And then where would you say that Domo has the best product market fit today?

I would say there’s two components. The biggest is just an understanding of you look at that full stack, it’s really a modular full stack. And if you’re looking at your different AI opportunities that you have, how are you going to be able to take advantage of those AI services? Once you, let’s say you go into, let’s say you’re an OpenAI, you’re an enterprise OpenAI. And we had a customer just tell us this, you can upload, you can drag and drop your data files and start asking questions, but there’s zero governance around it. There’s zero ability to distribute that out. There’s zero ability to say, I want to start receiving these weekly and we have that infrastructure and that governance in place. So whether it’s extending AI intelligence or building an app and taking action off of that data that you have inside your organization, that’s where we really fit in distributing that information, governing that information and then taking action on that information.

All right. Awesome. And then David, a quick one for you and then a longer one for you. The quick one was, I think last quarter you told us consumption was 20% of ARR. Did I miss it? Did you give us a new number for that?

No. I don’t think we did, but actually we’re a little over 25% at this point.

Okay. Great. Great. And then on the debt, I think you mentioned that you’re bullish about closing on more advantageous terms. Can you just give us a little more color on that, roughly -- I mean, I realize it’s hard to predict a deal, but roughly what timeframe are we talking about and what’s the risk that it doesn’t happen?

I’ll just say broadly in process. So we’re looking at some opportunities right now, relatively kind of near-term, but looking at opportunities currently and the terms look to be, I would say, a little improved in what we have in place today.

All right. Great. Thank you very much.

And the next question comes from the line of Max Michaelis with Lake Street Capital Markets. Please proceed with your question.

Hey, guys. Thanks for taking my question. First one on the related to the consumption model. I know you mentioned around half of your customers on the consumption model have already, I think, approached or surpassed the contracted credits. Maybe if we look at that other half of the customers there, maybe what have you done or what are you doing to kind of drive greater usage out of that other half of the customer base on the consumption model?

Yeah. I think the biggest component of that and what’s interesting to us about it is, they’re only six months into it. So a lot of those are new customers and so they’re working through the installation, they’re just rolling it out to people, they’re just connecting the data for the first time. So we were surprised that already at six months, there were people that were already trending above where they had contracted with us. And it’s what we were hoping for, and frankly, what we -- why we’ve been pushing so hard consumption, because we think the long-term net revenue retention is going to be much higher than we’ve ever had here before. And then what we’re doing is, now instead of focusing on trying to go and pitch a use case to a customer and hoping that they can get budget allocation for a concept, now we’re going into our customers and saying, hey, we’re not coming in to try to get any dollars for you or get any additional contracts, but let us come and show you some use cases and you can try them out. And you can click on these buttons and it might cost you $5, but go try it out and see if you get benefit out of it. And let us show you how to use our AI services. And let us show you how to build automated workflow apps. And those kinds of conversations are much more well-received than what they’ve been historically. We’ll go to an organization that maybe has a marketing use case and they -- we have a great relationship with them, and we’ll say, hey, why don’t you introduce us to the finance team, and we’re going to show you, we’ll introduce you to the CFO at one of our other customers who’s in a similar industry as you guys and just let us share with you what that CFO is doing in their org and how they’re using Domo. And again, you already have all the users, you could do this tomorrow, you already have it in the contract, so go ahead and start using it. And so it’s more focusing on adoption and trying to help those customers consume the credits, because when they do, they’re clearly and automatically getting value from it.

All right. Another one for me, maybe for you, Josh. So I’m not sure if I missed on the call here or in the prepared remarks, but we think about timelines, especially on AI. I know it’s early, you guys are hiring out engineers, but I mean, if we think about a timeline on when you could see the benefit from this investment in AI, what are you thinking?

I mean, most of our conversations that we’re having with our customers right now are around AI. All of our current customers are interested in buying additional products and services and helping them manage the various AI investments that they’re looking at. So, like we said in the prepared remarks, it used to be democratizing data and now it’s really democratizing that intelligence. And it’s -- there is -- because AI is moving so fast, when you take an AI model, you want to apply it to data, but it can’t be just a run of the store. It has to be organized. It has to be a private LLM. It has to have governance around it. You need to have the lineage around what was created, what was queried, who was it distributed to. And so you need to have a layer like Domo that allows you to understand that and govern that, manage that, distribute that. At the same time, what happens if that service that you were excited about last month is all of a sudden not very innovative and behind the times, and a brand new one comes out that is helping you, let’s say, optimize your pricing, and you want to be able to take advantage of that, and you need to switch from the old one to the new one. Now, how are you going to do that? Again, if you have a layer like Domo sitting on top of everything and that has view into the data that helps you organize and manage your data, let it sit wherever you want, let it stay in Snowflake, let it stay in Databricks, let it stay at AWS. We don’t care. We just help you manage, govern it, control it and distribute it, and that’s where we’re seeing AI really bring the strengths and advantages that we have to the forefront. So it’s actually something that we’re doing right now. We have some great product announcements coming out of Domopalooza around AI. We’ve been making investments there for quite some time. We’ve been in predictive analytics, machine learning, which are both components of what AI is today. So we’ve been doing this for a long time and it’s actually great that now the market’s moving there, it’s really highlighting the distinct advantages that we have.

All right. Thanks, guys. And then last one for me, David, maybe for you. How should we be thinking about cash flow at the end of 2025 -- fiscal year 2025?

Yeah. So we’re very committed to be free cash flow positive. So our plan has us achieving that, and the extent that we vary from that a little bit, we’ll take whatever actions we need to make sure that we are free cash flow positive. So that’s our plan going in here at the beginning of fiscal 2025…

All right. Thanks, guys.

And that’s what we expect to end up with.

Yeah. Okay. All right. Thank you.

And the next question comes from the line of Derrick Wood with TD Cowen. Please proceed with your question.

Great. Thanks, guys. This is Cole on for Derrick. David, one for you, maybe. Just looking at NRR [ph] down ticking again, sounds like the new investments in consumption and freemium could help that kind of run up over time. But as we think about it over the next couple of quarters, is this kind of the bottom here? Do you think that, looking at deals and potential down sales, it could go lower before it starts to accelerate?

Yeah. I mean, as we look at the plan that we’ve got in place for this next year, I mean, this should be sort of the low point. And the way to think about it, when you look at billings and either they’re flat or growing, there’s about a there’s about a two-quarter lag on that. So if we look back a couple of quarters ago, billings were flat. We’ve had a couple of very low single-digit billings gross. But that that should start to turn and as we add to billings, again, if we see an increase in billings, then that ARR is going to go up. So and that’s what we’ve got in the plan.

Great. Thanks. And then Josh, one for you would love an update on go to market, rep productivity, pipeline into the first quarter or second quarter here? That’d be great. Thanks.

Yeah. Yeah. I mean, we’ve definitely seen since Q4 of a year ago, the macro headwinds definitely took place in terms of rep productivity, pipeline conversion and it definitely weakened throughout the year. I think it started to stabilize in Q4. So, again, to David’s last comment, hopefully we’ve hit the trough and we have hit the divot and we’re coming back out of it, but definitely still feel macro headwinds and we’ve optimized towards the most efficient sales executives that we have. So, we know we have people that can produce and we’re doing everything we can to optimize their ability to be successful. We’ve had some successes overseas and in different pockets as well. And I think the investments that we’ve made in AI and the investments that we’ve made converting this over to consumption, we’re going to start seeing some of those things start to affect our ability to be more successful. So, not only, well, I think, the macro conditions changed things pretty dramatically and just with macro recovering alone, I think, we’d get back to the profile that we were at 24 months ago. But in addition to that, we think there’s some really cool tailwinds that we have as well with our ability to uniquely help customers out with AI and then with the change and the transformation and the model and how that affects our customers and their ability to grow with us and adapt with us and also find that return on their investment before they have to go and get a contract approved. So, we’re excited about the position. We haven’t seen it yet in the financial results, but I can say that, everybody here at the company is as excited as we’ve been about our long-term prospects. We feel like…

Helpful guys. Thanks.

You bet. Thank you.

And there are no further questions at this time. And that concludes the question-and-answer session and that also concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.