Greetings and welcome to the Domo Q2 Fiscal Year 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the presentation. [Operator Instructions]. As a reminder, this conference is being recorded. And with that, I will hand it over to Peter Lowry, Domo's Vice President of Investor Relations. Thank you. 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 and 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 a discussion of these risks and uncertainties, please refer to documents we filed 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. In Q2, we exceeded our revenue guidance. Our gross retention bounced back to 88% at the high end of our guidance, which was a highlight for the quarter and a dramatic improvement over the last few quarters. While we aspire to return to north of 90% for the long-term, I'm very pleased with this progress. On our biggest deal of the quarter, it was at our option to secure an additional year on the contract term if we agreed to accommodate a quarterly billing schedule. This strategic decision caused our billings to be just below guidance this quarter. Otherwise, we would have met our target had this customer been billed annually. I'm particularly excited about this customer story and our first contract ever with an eight-figure total value. And I'll talk about that a little bit later. Additionally, in order to give us more runway for the initiatives we've been pursuing, we decided to extend the maturity of our debt to August 2028. And in connection with this amendment, we also were able to reduce our overall interest rate and reduce our cash interest rate by a substantial amount. We'd like to thank BlackRock for their continued support of our business. We also make good progress on our growth initiatives, including our partnership efforts and our shift to consumption. I believe these are absolutely the right moves, and while it may take some time for them to translate into top-line growth, the signs are very encouraging that we are better positioned than ever to pursue a huge market opportunity. I'll start by sharing more about this opportunity and the great response from our strategic partnership initiatives. Domo was founded to…

Thanks, Josh. Many of you that know me know that I've been experiencing issues with my vision over the past year or so. Unfortunately, I've now lost over 90% of the vision in my right eye and after a bunch of surgeries, I've recently been informed by my doctors that it isn't going to get much better. As a matter of fact, with the retina issues I've had in the other eye, I've been told that there's a higher-than-normal likelihood that my other eye will lose vision as well. The loss of vision has made it challenging to do my day-to-day duties as CFO without serious eye strain and headaches. After a lot of personal reflection and some discussions with Josh, I've decided that it's time for me to move out of the day-to-day role of CFO so I can enjoy more time with my family, while I still have at least half my vision. I hope to not lose the other half, but if I do, there's still a lot of stuff I want to see before that happens. Now, that said, I am not leaving Domo, and I'm grateful that Josh has given me an opportunity to stay involved in a senior advisory role. I'm excited for Todd to be stepping into the CFO role and have the utmost confidence in him given his experience and deep financial knowledge of Domo. I fully intend to see this turnaround through, no pun intended, and I'm looking forward to a very long relationship with the company. Now on to our Q2 results. While we're still seeing a challenging market environment, we slightly exceeded our revenue guidance. Total revenue was $78.4 million, a year-over-year decrease of 2%. Subscription revenue represented 90% of total revenue and was flat year-over-year. Q2 billings were…

Thank you, David. As you know, we've been shifting our efforts and investment over the last several quarters towards ecosystem-led growth. While those efforts are not yet making a marked difference in our reported financial metrics, we are beginning to see promising early results. For example, just this last week, we had a new partner bring us into a deal on Friday, and it closed the following Monday. This deal never even hit our pipeline. It went from nothing to closed in one business day. This sort of opportunity would not be possible without our ecosystem partner strategy and is the type of signal that gives us great confidence in this strategy. To accelerate us being even more tightly aligned on our ecosystem-oriented strategic growth initiatives, I'm excited today to announce some natural progressions taking place in our sales organization, which will better position us for future success. RJ Tracy, our SVP of Strategic Development and Channel, has been leading our ecosystem and consumption efforts. Given the early successes there, as well as the fact that RJ has been one of our most successful leaders to date over the last 10 years, we see it as a natural evolution to move RJ into the expanded role of CRO. RJ is absolutely the right individual to take on these elevated responsibilities, align our strategic initiatives between partner and sales and lead us back to growth. In conjunction with that promotion, I'm also very excited to announce that Jeff Skousen is moving into the role of President of Worldwide Sales and Field Operations. I've been working with Jeff for the better part of 30 years. He's a strong leader and was the one who hired RJ and identified him as the next CRO. The CRO responsibilities will roll up to Jeff and he will continue to own international growth while supporting our ecosystem initiatives, consumption conversion, and mentoring RJ throughout the process. As we look forward, I believe that leveraging partnerships in the broader ecosystem is the best path to return us to growth. And I'm excited to see the impact of these initiatives and the broad, passionate, innovative, and dedicated efforts of our entire team at Domo. With that, we will open up the call for questions. Operator?

Thank you. And we'll now conduct our question-and-answer session. [Operator Instructions] And our first question comes from Derrick Wood with TD Cowen. Please state your question.

Congrats on the P&L performance. And, David, it's been great to work with you. Best of luck in tackling your health challenges. And, Todd, great to reconnect. Congrats on the new role. Josh, I'll start with you. You've indicated that you're now having more strategic conversations with customers given kind of your partnership status with CDWs. Can you drill down a little more on why this helps change the perception of Domo? And I know you guys have kind of always tried to evolve how you engage with CIOs. Is this helping you strengthen the partnership on the CIO front?

Yes. For sure it helps to address the relationship with the CIOs. In many cases we walk in and we want to talk about their broader data strategy, but we haven't historically been the vendor, especially in the enterprises, that they want to have that conversation with. The CDWs, on the other hand, that is where they're centering those conversations. And what we've found is often we go in and we think that we're competing against just one of our smaller competitors or against somebody that's focused just on visualization, and we think that's the competition. The reality is the competition might be a Snowflake plus their integration partner, plus their ecosystem of partners who are all in there selling together. And we don't realize that there's a selling motion that is four or five times the effort than the one that we're putting in. So being aligned with the Snowflakes and Databricks of the world we think is going to have a meaningful impact, as justified by these experiences that we were describing, including the one where we got kicked out early on and we got brought back in because it wasn't even Snowflake. But it was the integration partner of Snowflake who was installing Snowflake, said to the customer, these other choices that you're making to integrate with Snowflake, they're not the right choices. Domo was the right choice. And we got the phone call, we got the deal. So it does change things dramatically. The CDWs are definitely a big strategic component of every CIO's data strategy, and we're just excited to be so broadly accepted now from these CDWs. I mean, the excitement is palpable. The fact that we talked about five sales teams being educated and five more coming on, those aren't the entire sales team. That's not how it happens. It's, hey, here's the Eastern mid-market sales team. We're having an offsite. We want you guys to come in and do a training. And it kind of happened one by one, and you have to develop those relationships. But then as you develop those relationships, we're starting to see reps that went through a training. They call us. They dipped their toe in the water. They brought us into a deal. We close a deal. They call us immediately the next day for being introduced into another deal. So that's the kind of traction and progression that we're getting, which is a very different tack than spending more money on Google to put them in your pipeline, to go in by yourself and try to compete and create the value proposition. It's much easier when you have four or five other people touting what you can do for those customers. So it's been just a totally different experience and one that we're all really excited about.

Yes. I mean, it sounds like the partnership are kind of well beyond just the CDWs, but with a lot more of the ecosystem partners in there. And I guess on that, I mean, going from zero to 60 deals in the pipeline with partners, how are you thinking about the timeframe and going from pipeline build to deal closure? Any kind of sense or color on kind of what average deal sizes could look like or how many quarters to start seeing more conversion on those deals?

Yes, there's nothing more than that we want than being able to say, two quarters out, you're going to start seeing an uptick in billings. We want to say it so desperately, but we still need some more data. In terms of the deal size, we do have, like you referenced, some of these other partners in the ecosystem, not just the CDWs. It's really been fun because they feel like they're extremely defensible partners. We go in, we help them create a joint solution. They've got 500 customers, 2,000 customers, 20,000 customers, and we've got a joint offering. In some of those cases, the ASP might be smaller, but then again, in other cases, it's higher than our average deal. So I think overall, it'll probably average out. We also have customers that are coming to us and saying, can we work on a freemium type solution for 8,000 customers that we can introduce this to next quarter? And we're just licking our chops because that's exactly the kind of relationship that we want because one of the challenges that you have I,s how does that customer get that first bit of value? What's the time to value for having that integrated data visualized, showing up on executives' phones in their apps, getting alerts? And that first bit of data connection is always hard. When you have a partner, they've got the data. You do the integration. They roll it out to 8,000 customers. We're just really excited about what's going to happen as we start integrating with some of these types of partners as well beyond the CDWs.

Got it. If I could squeeze one more in for David. The sales and marketing expenses dropped down quite a bit. I know there's some Domopalooza expenses that come out, but it seems like perhaps there were other cost controls that came into play. Can you just talk about anything that you guys did to drive additional efficiencies in sales and marketing this quarter?

Yes, sure. In sales and marketing, a lot of that that we saw in Q2 is headcount related. And so we've had some natural attrition, and then we've been a little bit active on some others and really trying to get that dialed in. Right now we're balancing that as we're moving into this partner motion. And I think over time, we expect to see that as a much more efficient sales process. So that should bring our tack down naturally as we shift more into the partnership and the ecosystem. So I don't see that as sort of a one-time blip in terms of efficiencies and cost reduction. Now, that said, if we get a lot of leads and opportunities, I think it'll measure pro-rata ad heads as we need them. But right now I think we're in a pretty good place.

Our next question comes from Patrick Walravens with Citizens JMP. Please state your question.

And, David, first of all, I really love working with you, and I'm praying for your vision to stabilize and improve.

I appreciate that, Pat.

Yes, it will. I believe it will. All right, so number one, congrats on the refinancing. What can you tell us about the terms of the new loan and the covenants? Josh, you mentioned a couple quarters ago that you weren't happy with some of the other offers you had around the covenants.

Yes, so I'll take the point on the deal. So, we were able to extend it out from four years from closing, so four years from August, and we think that gives us the kind of runway that we need to do what we want to with partners and see some of that success. And so we were able to bring the interest rate down a bit, but we were able to bring in the cash interest component down to, what is it, SOFR plus 300, so about eight and a quarter on cash interest, and that's a considerable cash savings over where we have been. And then we've got about 500 basis points of PIC on top of that. And that will be on file. I mean, the agreement will be on file, but those are the general terms.

Okay, great. And then, Josh, for you, on the partnerships with the CDWs, I mean, to the extent you could be more specific, I mean, Snowflake, you guys clearly have. Who else can you name? Do you have, I mean, Databricks, is that one public? Who are the ones that you can actually tell us who they are?

Snowflake, Databricks, Google, Oracle, IBM, Dremio, we're working with all of them.

And are those all live?

They're all live in one form or another. We started off with being able to read the data, then we can write the data, then we have our Magic ETL incorporated into their backend and being able to drive consumption on their backend and leave the data on their backend. And as we kind of go through those steps, we get more and more appealing to them. So right now, Snowflake is the furthest along. And Databricks, BigQuery, I guess Amazon as well, Oracle, IBM, they'll all be in the next, one, two months. So it's coming hot and heavy for sure. And it's allowed us to start the conversations because it's just right around the corner. And again, it's stuff that we've been working on for years. And as we started seeing the traction that we were getting on the business side and with customers, and one of the things that's really fun, we love Gong around here and being able to leverage Gong. Instead of having to go visit a bunch of customers, you can listen to the Gong calls. Instead of having to go and shadow a bunch of reps, you can listen to the Gong calls. You can type keywords into the Gong calls. And one of our favorite things to do is to type Snowflake or Databricks or Google into Gong and to see the frequency that those conversations are appearing and then to dive in and listen to how the reps are talking about those things and to hear how we're being involved and incorporated into strategic conversations. And I know that, one of RJ's stated goals, who's now taking over CRO, is to make sure that every single deal we have, we have a partner in there. And that's not dissimilar from where Jeff was at as well. But this is going to be -- this is the flag that he's carrying. And we're really excited about that because it does change the dynamic dramatically. When it feels like you're on the team of everybody that's in there trying to pitch that customer and the most important team to be honest is that CDW. So we feel very optimistic about how things are going to evolve over the next couple quarters.

Thank you. And our next question comes from Sanjit Singh with Morgan Stanley. Please state your question.

Sorry I missed the top of the call. I was at the Databricks Summit earlier this month and saw the Domo press and spent some time at the Domo booth. And it sounds like some exciting developments. I don't think the official sort of partnership announcement was announced then, but certainly a lot of work you were doing with Databricks has certainly been a theme of this call. When you look at what their product roadmap is, they do seem to want to lean into sort of the modern BI use case, whether it's modern dashboards or real-time business alerting, the stuff that Domo has done historically in the past. To what extent does, like, how do you think through the competitive elements as you partner with the CDWs, like over time? Are you fine with them taking maybe the BI use case and you guys become the Magic ETL layer? I just want to think through how you're thinking some of those coopetition dynamics with the CDW ecosystem.

Yes, that's exactly right. Each of these relationships is a little bit different. And, yes, we're more than happy just to provide whatever it is that helps the customer get the solution that they need. The CDWs are definitely focused on consumption of their data warehouse. And there's some that have more of an AI focus. And in that case, we've had customers tell us that, we had one recently tell us that, besides Databricks, we have the best AI strategy solution and products to market than they had seen. And so, we're right in the middle of these conversations. And one thing that these CDWs are not focused on is, how do you distribute all this information out to, you know, the end users in the organization? What's all the governance around all that data? They want governance around AI data. But what's all the governance about who gets to see what? What's the governance around the alerts that happen? What's the governance around when employees roll off? How do you make sure they don't have access to all that information? How do you take that data and extend it out into an app? How do you make that app show up on someone's phone? Yes, that's the stuff that we've been doing for 10-plus years. And so all of these people recognize that we really are extremely complementary. And your question is right on because, the puzzle piece fits a little bit differently for each CDW. But once we're tied in and we hydrate their CDW, they just get really excited because the time to value is quickest with us. Do you want to sign up for five vendors to help you get your solution along with the CDW or just us and the CDW? And we saw that I think the other thing is just seeing that, these CDWs are mostly excited about who can help them build solutions and apps as well. And that's another area where we've been talking about apps for seven, eight years, been building apps for seven, eight years. And one of those examples that we highlighted in the prepared remarks, we talked about a customer that in the last two years has gone from zero users to 10,000 users, kicked out all the other legacy vendors, is multimillion dollar customer for us, eight figure contract and is planning on moving to 50,000 users. That's not on the roadmap for any CDW, but the CDWs love it because when you've got 50,000 people looking at the data that's in the CDW, it makes that data much more valuable and there's a lot of people driving consumption. So that's kind of how we fit into that. That's a very astute question though.

Thank you. And our next question comes from Eric Martinuzzi with Lake Street Capital Markets. Please state your question.

Best wishes on your healthcare journey, David. Certainly disappointed to hear you're moving on, but I know you're still going to be around in an advisory role. So --.

Appreciate it, Eric.

My question's here. Given the billings expectation, I guess it's a pretty substantial reset versus what you guys were thinking. I know when we entered, coming out of Q1, we were expecting to see growth in the billings in the back half of the year. Obviously you guys are having terrific traction with consumption-based pricing. You're having good traction with the CDW partnerships, and that is the long play there. But it feels like more of a dramatic reset for the back half of the year than I was expecting. Just wondering what is, I guess, the key one or two reasons for that reset. Was it just, hey, we're a little bit closer to the end, we've got a better feel, or is there something else to be thinking about here?

Yes. Part of it is that we're a little closer to the end and we have a better feel. But the reason for that is, as you were describing, the beginning of the year we had zero visibility into how this CDW play was going to go. Zero. And there's not a soul over here at the company that doesn't see it every day. I can't remember any time in our history when people have been this excited to be here. And it's primarily because of what we're seeing in the ecosystem with how all of these partners are like with open arms bringing us in, how we've got one partner that we've been working on an agreement for the last three months negotiating different components of it. And all of a sudden they call us in a panic because they have a customer who has got 800 stores and they can't close it without us being in there. And we're thrilled by that. That's exactly the value that we want to provide to our partner. But seeing the customer solution and the dollars associated with that driving these relationships versus some press releases that are going out because we're trying to align two brands. It has nothing to do with that. Customers are driving this and that's really exciting. So yes, at the beginning of the year we had no idea how that was going to turn out. We thought we were just going to plod along, build our pipe, watch the conversion funnel and it's going to spit out a billing number. And as soon as we started seeing traction, we started reallocating assets and people. And you've seen that with the announcement that we made today with RJ who was running ecosystem and was a part of…

Okay. And then just on the Q3 outlook given the revenue range and the loss per share range, the revenue range, I mean, we're kind of within spitting distance of where we were in Q2. So just curious to know why the $0.07 non-GAAP loss in Q2, why that becomes kind of mid-point $0.16 in Q3. Where are our expenses maybe creeping up Q3 versus Q2?

I think in response to that, in Q2 we certainly have been trying to monitor and sort of moderate our costs just based on where we're at with our billings and cash and everything. And so, you know, we'll continue to do that into Q3. And so we've got some back bills that we'll want to do in Q3 with some of our Q2 attrits, but it's a process going forward and we'll continue to kind of moderate those costs and make sure that we have alignment between our billings, our revenue, and our cost structure as we go through Q3 and Q4.

Thank you. And ladies and gentlemen, there are no further questions at this time. So with that, we will conclude today's call. Thank you all for your participation. All parties may now disconnect.