Domo Inc. Earnings Call Reveals Positive Outlook

Domo Inc ((DOMO)) has held its Q3 earnings call. Read on for the main highlights of the call.TipRanks Cyber Monday Sale Claim 60% off TipRanks Premium for data-backed insights and research tools you need to invest with confidence. Subscribe to TipRanks' Smart Investor Picks and see our data in action through our high-performing model portfolio - now also 60% off Domo Inc. Earnings Call Highlights Strong Positive Outlook The recent earnings call for Domo Inc. was marked by a strong positive sentiment, underscored by significant improvements in cash flow, operating margin, and the expansion of the partner ecosystem. The company also highlighted substantial adoption of AI features. Despite facing challenges such as billing shortfalls and a slight decline in gross margin, Domo’s strategic initiatives and industry recognition signal a robust future. Positive Adjusted Free Cash Flow In the third quarter, Domo Inc. achieved a positive adjusted free cash flow of $2.1 million, representing a remarkable $15.8 million improvement over the previous year. This milestone sets the company on track to end the year with positive adjusted free cash flow for the first time in its history. Operating Margin and EPS Achievements Domo reported an operating margin of 6.8%, which exceeded guidance and is on pace to achieve the highest full-year operating margin ever. Additionally, the company posted positive earnings per share for the second consecutive quarter, marking a first in its history. Partner Ecosystem Expansion The company experienced a 25% increase in leads from strategic partners in Q3 compared to Q2, with leads more than doubling from Q1. This growth indicates a strengthening of Domo’s partner relationships. Consumption Model Success Domo’s shift to a consumption-based model is proving successful, with 80% of its annual recurring revenue now on consumption contracts, a significant increase from single digits two years ago. The number of monthly active users also grew by over 10% year over year. AI Feature Adoption The adoption of AI features has been robust, with the number of unique accounts using these features increasing by over 60% year over year. Additionally, the number of unique users has more than doubled, reflecting strong usage trends. Industry Recognition Domo Inc. received numerous accolades, being named a leader in several industry reports and winning awards for its AI and data analytics capabilities, further cementing its reputation in the industry. Billing Shortfalls Despite the positive developments, Domo faced billing shortfalls in Q3, with billings at $73.2 million, falling below guidance due to longer-than-expected sales cycles for certain partner-related deals. Gross Margin Decline The company’s gross margin was 75.4%, a decline of 90 basis points year over year. This was primarily due to ecosystem-focused improvements to the platform. Forward-Looking Guidance During the earnings call, Domo provided significant forward-looking guidance, highlighting expectations for continued positive free cash flow for the full fiscal year. The company anticipates achieving the highest full-year operating margin ever and aims for a 5% operating margin for the fiscal year. Domo also targets 10% billings growth and a 10% operating margin by the end of FY 2027, focusing on deepening partnerships, accelerating consumption, and leveraging AI to drive growth and profitability. In conclusion, Domo Inc.’s earnings call painted a positive picture of the company’s future, with strong financial performance and strategic initiatives that promise continued growth. Despite some challenges, the overall sentiment was optimistic, driven by improvements in cash flow, operating margin, and AI adoption.