Domo(DOMO) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for the period Item 1. Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements for Domo, Inc., including the balance sheets, statements of operations, comprehensive loss, stockholders' deficit, and cash flows, along with detailed notes explaining the accounting policies and specific financial line items Condensed Consolidated Balance Sheets This section provides a snapshot of the company's assets, liabilities, and stockholders' deficit at specific points in time Condensed Consolidated Balance Sheets | Metric | As of Jan 31, 2022 (in millions) | As of Apr 30, 2022 (in millions) | | :-------------------------- | :------------------------------- | :------------------------------- | | Total Assets | $244.589 | $231.872 | | Total Liabilities | $370.567 | $363.826 | | Total Stockholders' Deficit | $(125.978) | $(131.954) | - Total assets decreased by approximately $12.7 million, while total liabilities decreased by approximately $6.7 million, leading to an increased stockholders' deficit of approximately $6 million from January 31, 2022, to April 30, 2022[11] Condensed Consolidated Statements of Operations This section details the company's revenues, expenses, and net loss over a specific reporting period Condensed Consolidated Statements of Operations | Metric | Three Months Ended Apr 30, 2021 (in millions) | Three Months Ended Apr 30, 2022 (in millions) | Change ($) | Change (%) | | :-------------------------- | :-------------------------------------------- | :-------------------------------------------- | :--------- | :--------- | | Total Revenue | $60.062 | $74.464 | $14.402 | 24% | | Gross Profit | $44.904 | $56.803 | $11.899 | 26% | | Total Operating Expenses | $59.858 | $85.438 | $25.580 | 43% | | Loss from Operations | $(14.954) | $(28.635) | $(13.681) | 91% | | Net Loss | $(18.104) | $(32.888) | $(14.784) | 82% | | Net Loss per Share (basic & diluted) | $(0.580) | $(0.990) | $(0.410) | 71% | - Total revenue increased by 24% year-over-year, driven by subscription and professional services growth. However, total operating expenses increased by 43%, leading to a significant increase in net loss by 82% and net loss per share by 71%[14] Condensed Consolidated Statements of Comprehensive Loss This section presents the net loss and other comprehensive income or loss components, leading to the total comprehensive loss Condensed Consolidated Statements of Comprehensive Loss | Metric | Three Months Ended Apr 30, 2021 (in millions) | Three Months Ended Apr 30, 2022 (in millions) | | :----------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net Loss | $(18.104) | $(32.888) | | Foreign currency translation adjustments | $(0.004) | $(0.703) | | Comprehensive Loss | $(18.108) | $(33.591) | - Comprehensive loss significantly increased from $(18.1) million in 2021 to $(33.6) million in 2022, primarily due to the higher net loss and a substantial increase in negative foreign currency translation adjustments[18] Condensed Consolidated Statements of Stockholders' Deficit This section outlines changes in the components of stockholders' deficit, including accumulated deficit and additional paid-in capital Condensed Consolidated Statements of Stockholders' Deficit | Metric | As of Jan 31, 2022 (in millions) | As of Apr 30, 2022 (in millions) | | :-------------------------------------- | :------------------------------- | :------------------------------- | | Total Stockholders' Deficit | $(125.978) | $(131.954) | | Additional Paid-in Capital | $1,098.084 | $1,125.699 | | Accumulated Deficit | $(1,224.483) | $(1,257.371) | | Accumulated Other Comprehensive Income (Loss) | $0.388 | $(0.315) | - The accumulated deficit increased by approximately $32.9 million from January 31, 2022, to April 30, 2022, reflecting the net loss for the period. Additional paid-in capital increased by $27.6 million, partly due to stock-based compensation expense[23] Condensed Consolidated Statements of Cash Flows This section reports the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows | Metric | Three Months Ended Apr 30, 2021 (in millions) | Three Months Ended Apr 30, 2022 (in millions) | | :-------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash (used in) provided by operating activities | $(2.728) | $0.781 | | Net cash used in investing activities | $(1.778) | $(1.937) | | Net cash (used in) provided by financing activities | $(1.457) | $2.287 | | Net (decrease) increase in cash and cash equivalents | $(5.968) | $0.434 | | Cash and cash equivalents at end of period | $84.826 | $83.995 | - The company shifted from net cash used in operating activities ($2.7 million) in Q1 2021 to net cash provided by operating activities ($0.8 million) in Q1 2022. Net cash from financing activities also turned positive, contributing to a net increase in cash and cash equivalents in Q1 2022, compared to a decrease in Q1 2021[27] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations of the accounting policies, significant estimates, and specific line items within the financial statements - Domo, Inc. provides a cloud-based platform that digitally connects everyone from the CEO to the frontline employee with all the data, systems and people in an organization, giving them access to real-time data and insights and allowing them to manage their business from their smartphones[29] - The preparation of the condensed consolidated financial statements requires management to make estimates, judgments and assumptions that affect the amounts reported, including for revenue recognition, contract acquisition costs, and stock-based compensation[33] - Revenue is primarily derived from subscriptions to its cloud-based platform (recognized ratably over the contractual term) and professional services (recognized as services are provided)[61][64][67] - Amortization expense related to contract acquisition costs was $4.3 million for the three months ended April 30, 2022, up from $3.9 million in the prior year[43] - Total stock-based compensation expense was $25.3 million for the three months ended April 30, 2022, a significant increase from $10.1 million in the prior year[149] - The company has a credit facility permitting up to $100.0 million in term loan borrowings, all of which had been drawn as of April 30, 2022. The interest rate was approximately 7% as of April 30, 2022[119][121] - Total remaining performance obligations (RPO) were $351.5 million as of April 30, 2022, representing a year-over-year growth of 24%. Approximately $205.7 million of subscription RPO and $19.3 million of professional services RPO are expected to be recognized in the next twelve months[181][115] - Revenue from customers with billing addresses in the United States comprised 79% of total revenue for the three months ended April 30, 2022, up from 77% in the prior year. Japan accounted for 9% and other regions 12%[118] - The financial statements are unaudited and prepared in conformity with GAAP, reflecting all necessary adjustments for fair presentation[31] - The company's fiscal year ends on January 31[30] - Results for the three months ended April 30, 2022, are not necessarily indicative of results to be expected for the fiscal year ending January 31, 2023, or any other future period[31] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, highlighting key trends, factors affecting performance, and future outlook. It also includes a discussion of the impact of COVID-19 and critical accounting policies - Domo's vision is to digitally connect everyone within the enterprise with real-time, rich, relevant data, enabling collaboration and business management from smartphones[178] - As of April 30, 2022, 64% of customers were under multi-year contracts on a dollar-weighted basis, up from 62% as of January 31, 2022, which has enhanced the predictability of subscription revenue[180] - Total revenue increased by 24% year-over-year to $74.5 million for the three months ended April 30, 2022[182] - The company incurred net losses of $32.9 million for the three months ended April 30, 2022, and expects to incur losses for the foreseeable future, with an accumulated deficit of $1,257.4 million[184] - The COVID-19 pandemic's full impact is uncertain, potentially affecting customer acquisition, retention, and technology spending. Sales and professional services activities have largely shifted to remote work[186][189][190] - The company had over 2,400 customers as of April 30, 2022. Enterprise customers (over $1 billion in revenue) accounted for 49% of revenue in Q1 2022, down from 55% in Q1 2021[192] - Gross retention rate improved to 93% for the 12 months ended April 30, 2022, from 89% in the prior year[197] - Sales and marketing expense as a percentage of total revenue increased to 61% for Q1 2022 from 56% for Q1 2021, with plans to continue hiring more sales representatives[201][199] - The company plans to continue investments in machine learning algorithms, predictive analytics, and other artificial intelligence technologies. Research and development expense as a percentage of total revenue increased to 31% for Q1 2022 from 27% for Q1 2021[202][203] - Billings increased to $72.9 million for the three months ended April 30, 2022, from $58.2 million in the prior year[206] - As of April 30, 2022, cash and cash equivalents were $84.0 million, and the $100 million credit facility was fully drawn. Management believes existing cash will be sufficient for at least the next 12 months[232][234] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section discusses the company's exposure to market risks, specifically interest rate risk and foreign currency exchange rate risk, and how these risks are managed - As of April 30, 2022, the company had $84.0 million in cash and cash equivalents, primarily in money market funds and certificates of deposit, with no material exposure to changes in fair value from interest rate fluctuations due to their short-term nature[258] - The company had $105.1 million in total debt outstanding as of April 30, 2022. A hypothetical 10% change in interest rates would not have a material impact on the fair value of outstanding debt or returns on cash[260] - A portion of the interest on the $100 million credit facility accrues at a floating rate (approximately 7% as of April 30, 2022), while another portion is capitalized at a fixed rate of 2.5%[259] - The company is exposed to foreign currency risks related to revenue and operating expenses denominated in Japanese Yen, British Pound Sterling, and Australian Dollar. No hedging program is currently in place, but it is under consideration[261][262] Item 4. Controls and Procedures Management, including the principal executive and financial officers, evaluated the effectiveness of disclosure controls and procedures, concluding they were effective at a reasonable assurance level as of April 30, 2022. No material changes to internal control over financial reporting were identified - Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of April 30, 2022[264] - There were no material changes in internal control over financial reporting during the period covered by this report[265] - Management acknowledges the inherent limitations of control systems, which can only provide reasonable assurance and may not prevent all errors or fraud[266] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, and other miscellaneous information pertinent to the company's operations and financial health Item 1. Legal Proceedings This section details ongoing legal proceedings, including a securities class action and a shareholder derivative lawsuit, and management's assessment of their potential impact - A securities class action complaint (Volonte v. Domo, Inc., et. al) alleging violations of securities laws related to the June 2018 IPO is currently on appeal after initial dismissal. Management believes the lawsuit is without merit[269] - A shareholder derivative complaint (Zalvin v. James, et al.) was filed in August 2021, alleging breaches of fiduciary duties by the former CEO and certain directors regarding excessive equity awards. A motion to dismiss has been filed[271][272] - Management believes that the outcome of other legal proceedings will not have a material impact on the company's financial condition, results of operations, or liquidity[273] Item 1A. Risk Factors This extensive section outlines numerous risks and uncertainties that could materially affect the company's business, operating results, and financial condition, categorized into risks related to financial position, customer relationships, products, personnel, privacy/cybersecurity, intellectual property, and corporate governance - The ongoing COVID-19 pandemic presents inherent uncertainties, potentially impacting customer acquisition, retention, technology spending, and overall business operations, with sales and professional services largely conducted remotely[277][281] - The company has a history of net losses and an accumulated deficit of $1,257.4 million as of April 30, 2022, and expects to incur losses for the foreseeable future, making profitability uncertain[286] - A limited operating history makes forecasting future operating results difficult and subjects the company to uncertainties in planning future growth, market adoption, and competition[288] - The ability to raise future capital may be limited, and failure to secure needed funds could prevent growth or force delays/elimination of product development efforts[298] - The company faces intense and increasing competition from large software companies and business analytics providers, which could reduce demand for its platform and adversely affect business, growth, revenue, and market share[349][350][351] - Success depends on adapting to rapidly changing technology, evolving industry standards, and changing customer needs, requiring continuous enhancements and investments in R&D, including AI technologies[364] - As a cloud service provider, the company's operations involve storing and transmitting sensitive customer data, making it vulnerable to cyber-attacks, breaches, and data loss, which could damage reputation and incur significant liabilities[431][435] - The company's success is dependent on protecting its proprietary technology, including 119 issued U.S. patents. However, patents may be challenged, and enforcement of intellectual property rights can be costly and time-consuming[458][462] - The dual class structure of common stock concentrates voting control with Joshua G. James (approximately 81% voting power), limiting other stockholders' ability to influence important transactions, including a change in control[465] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including various certifications and interactive data files - The exhibits include certifications of the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1)[496][497][500] - Interactive Data Files in Inline XBRL format are provided, including Instance, Schema, Calculation, Definition, Label, and Presentation Linkbase Documents (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE)[498] - Management contracts related to Joshua James, including a Letter Agreement, Separation and Transition Agreement, and Registration Rights Agreement, are listed as exhibits[500] Signatures This section contains the official signatures, confirming the submission of the report by Domo, Inc. - The report was signed by Bruce Felt, Chief Financial Officer (Principal Financial and Accounting Officer) of Domo, Inc. on June 7, 2022[505]