Domo, Inc. (DOMO 37.26, +6.06, +19.42%) is trading sharply higher today after the
company reported upside results and guidance for its quarter ended in January.
Domo is a recent IPO, having made its debut in late June of 2018. It operates
an online/mobile platform that brings massive amounts of data from all
departments of a business together to provide real-time data insights.
The company is still a long way from profitability, but the company’s Q4 (Jan) non-GAAP loss was much narrower than had been expected: $(0.94) per share vs prior guidance of $(1.27)-(1.23). Revenue rose 30.9% year/year to $39.4 mln vs prior guidance of $37.5-37.9 mln -- per that metric, it should be apparent that Domo is still a relatively small company. Domo also issued upside guidance for Q1 (Apr) at EPS of ($1.30)-($1.26) and revenue of $40-$41 mln. Full year revenues are expected at $173-174 mln.
The pairing of just modest revenue upside with much stronger than expected EPS signals to us that Domo executed well on the expense side. The company has decreased its North American sales headcount in connection with its efforts toward “rightsizing” its expenditures on marketing and sales during its shift to a more enterprise-focused model, a transformation that has been in progress for Domo since before its IPO. Domo also waited for increased sales rep productivity before starting to again hire further sales reps. It also trimmed marketing expenditures significantly by using a more targeted approach to reach larger customers. Basically, it has worked to make its sales and marketing team more efficient without curbing its effectiveness. In the midst of those changes, the quarter’s billings rose 26% year/year to $37.2 mln.
Domo's decision to focus more on enterprise customers has been paying off. During the quarter, it added 17 enterprise customers, bringing its total number of customers with more than $1 bln in revenue to 447, up from 375 year/year. New enterprise customers this quarter include Uber, a well-known North American auto aftermarket retail and service chain, and a U.S.-based financial services firm with more than $1 trillion in assets under management.
Approximately 80% of Domo’s annual recurring revenue, said the company in its earnings call, “is comprised of customers paying [Domo] more than $50,000 in recurring revenue, and [the] corporate [business] is a big part of that.” Beyond success with huge customers, Domo saw a 62% increase in business from customers with between $250 mln and $1 bln in revenue this quarter.
In addition to targeting larger enterprise accounts, the company has also aimed to dig deeper into current customers, practicing a “land-and-expand” model. For example, the CIO of Vivint, a $1 bln-plus smart home company, recently signed an expansion deal with Domo to give its 5,000 salespeople a real-time view on pay and progress toward goals through a custom Domo mobile app.
This stock struggled soon after its IPO debut. The deal priced at $21 and opened at $23.80 but was trading in the mid-teens a month later. The stock has come on strongly since late December, doubling from $17 to near $37 today, which is a new post-IPO high.
While Domo is still a long way from profitability, its field continues to be burgeoning. As a play on a broader trend of what is known as self-service analytics, Domo seeks to meet companies’ demand for analytics tools and platforms that enable better and more connected harnessing of data in a manner that is accessible to everyday employees. High data volumes invite high demand from companies. Amid this environment, Domo’s increasing targeting of enterprise customers should be a smart move.
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