Domo(US:DOMO)2025-12-04 23:00Financial Data and Key Metrics Changes - In Q3, the company generated positive adjusted free cash flow of $2.1 million, a $15.8 million improvement year-over-year, and is on track to finish the year with positive adjusted free cash flow for the first time ever [4][19] - The operating margin was 6.8%, exceeding guidance and positioning the company for its highest full-year operating margin ever [4][20] - Positive EPS was reported for the second consecutive quarter, marking the second time in company history [4][20] - Total revenue reached $79.4 million, near the high end of guidance, with a gross margin of 75.4%, down 90 basis points year-over-year [23] Business Line Data and Key Metrics Changes - The company has transitioned to a consumption model, with 80% of annual recurring revenue (ARR) now on consumption contracts, a significant increase from single digits two years ago [8][9] - Monthly active users across the customer base increased over 10% year-over-year, reflecting growing engagement and adoption [9][10] - Current subscription RPO grew 3% year-over-year to $214.1 million, while total subscription RPO grew 15% to $405.9 million [21] Market Data and Key Metrics Changes - Leads from strategic partners increased over 25% compared to Q2 and more than doubled from Q1, indicating rapid expansion of partner relationships [7] - The company expects billings of $107.5-$109.5 million in Q4, representing 6% year-over-year growth, which would be the highest billings growth in over three years [24] Company Strategy and Development Direction - The company is focused on deepening its partner ecosystem, accelerating consumption, and leveraging AI capabilities [4][12] - A composable approach to selling platform components is being embraced, allowing customers to engage with Domo in a way that meets their immediate needs [10] - The company is seeing strong adoption of AI features, with unique accounts using AI increasing over 60% year-over-year [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term model's durability, citing strong adoption trends as leading indicators of future financial performance [12] - The company anticipates that the work done over the past few years is paying off, positioning it for meaningful, profitable growth in the future [18] - Management acknowledged the challenges of longer sales cycles due to the complexity of partner-related deals but emphasized the strength of relationships built through CIO-level engagement [20][27] Other Important Information - The company received strong industry recognition, being named a leader in various categories related to AI and data products [17] - Management highlighted the importance of governance in AI usage, ensuring customers can leverage AI while maintaining control over their data [47] Q&A Session Summary Question: What caused the negative billing surprise in Q3? - Management noted that the ecosystem business has grown larger, leading to longer sales cycles for complex deals involving multiple stakeholders, particularly CIOs [27][30] Question: How is the company addressing the longer sales cycles? - Management indicated that while the sales cycles are longer, they result in stronger, more durable customer relationships, which ultimately benefits the company [20][27] Question: What is the outlook for net revenue retention? - Management expects improvements in net revenue retention as gross retention increases and as the company better realizes the potential of the consumption model [35][56] Question: How is the company leveraging learnings from the Snowflake partnership? - The company is applying insights gained from the Snowflake partnership to build stronger relationships with new partners, enhancing both technology integration and go-to-market strategies [48] Question: What are the expectations for future investments? - Management indicated that while there are areas for potential investment, they are also focused on maintaining efficiency and leveraging AI to enhance operations [54][55]