Domo(DOMO) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3, the company exceeded its guidance for billings, revenue, and non-GAAP EPS, with total revenue at $79.8 million, slightly up year over year, and subscription revenue representing 89% of that amount [42] - Q3 billings were$ 73.4 million, and total subscription RPO was $354.1 million, up 3% year over year, marking the best RPO growth result in two years [42][44] - The average contract length increased by 13% year over year and 10% quarter over quarter, indicating stronger long-term commitments from customers [11][44] Business Line Data and Key Metrics Changes - Subscription RPO beyond 12 months grew 14% year over year, reflecting a positive trend in long-term customer relationships [10][44] - The company achieved a gross retention rate of 85%, with expectations for fluctuations between 85% and 90% in the short to mid-term [45] - Year-over-year ARR net retention was 90%, showing improvement for the first time in almost three years [46] Market Data and Key Metrics Changes - The partner-sourced contribution to billings was up more than 20% from Q2, with a 90% increase in partner opportunities in the North America pipeline compared to Q2 [13] - The company closed 15 deals jointly sold with partners, indicating a growing ecosystem and collaboration [17] Company Strategy and Development Direction - The company is focusing on ecosystem-led growth, consumption pricing, and AI as strategic priorities, which are expected to drive future growth [12][19] - A significant transformation to a consumption-based model has been achieved, with 100% of new logo deals structured as consumption contracts, representing 55% of ARR [21][22] - The company is investing in its partnership strategy, redirecting sales capacity to build a durable, repeatable growth engine [19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the momentum from ecosystem partners and the impact of AI on business growth [20][40] - The macro environment remains challenging, but the company is seeing positive signs, particularly with partner-driven deals [68][82] - Management anticipates that the shift to consumption will lead to vendor consolidation in favor of Domo, enhancing customer retention [23][25] Other Important Information - Adjusted free cash flow was more negative than expected in Q3 due to delayed cash receipts related to consumption migrations, but positive cash flow is expected in Q4 [47][48] - The company expects to generate billings of$ 98 million to $104 million in Q4 and GAAP revenue in the range of$ 77.5 million to $78.5 million [50] Q&A Session Summary Question: Inquiry about success with consumption-based model - Management noted strong performance with consumption customers, leading to wider and faster adoption, and consolidation away from legacy products [56][57] Question: Impact of Agentic AI on consumption - Management indicated that Agentic AI is driving higher close rates and is expected to facilitate quicker conversions to the consumption model [61][64] Question: Drivers of gross retention rate variability - Management explained that variability in retention is due to budgetary constraints but highlighted positive signs from partner deals [68] Question: Outlook for FY '26 - Management refrained from providing specific guidance for FY '26 but expressed optimism based on positive momentum in the pipeline [92] Question: Customer behavior in the macro environment - Management observed that customers are consolidating vendors and making strategic decisions to adopt Domo as their primary platform [82][86]