Domo(US:DOMO)2025-12-04 23:02Financial 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 achieve positive adjusted free cash flow for the full year for the first time in company history [4][20] - The operating margin for Q3 was 6.8%, exceeding guidance and positioning the company for its highest full-year operating margin ever [4][21] - Positive EPS was reported for the second consecutive quarter, marking only the second time in company history [4][22] - 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 [25] 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 momentum in user engagement [9][10] - Current subscription RPO grew 3% year-over-year to $214.1 million, while total subscription RPO grew 15% to $405.9 million, indicating strong customer relationships [23] Market Data and Key Metrics Changes - Leads from strategic partners increased over 25% compared to Q2 and more than doubled from Q1, demonstrating rapid expansion of partner relationships [7] - The company expects billings for Q4 to be between $107.5 million and $109.5 million, representing a 6% year-over-year growth, which would be the highest billings growth in over three years [26] Company Strategy and Development Direction - The company is focused on deepening its partner ecosystem, accelerating consumption, and leveraging AI capabilities [4][18] - A composable approach to selling platform components is being embraced, allowing customers to engage with the platform in a modular fashion [10] - The company is seeing strong adoption of AI features, with unique accounts using AI increasing over 60% year-over-year [11][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the pipeline for Q4, despite longer sales cycles for partner-related deals, emphasizing the strength of relationships built with CIO-level engagement [32][70] - The company anticipates continued improvement in gross retention rates, projecting an increase to approximately 87% in Q4, with potential to approach 90% in future quarters [24][80] - Management highlighted the importance of governance in AI usage, ensuring customers can leverage AI while maintaining control over their data [57] Other Important Information - The company received multiple industry recognitions for its leadership in AI and data products, including being named a leader in agentic AI and receiving awards for best business intelligence technology [17] - The CEO publicly addressed personal challenges related to alcohol use and emphasized a commitment to recovery while maintaining responsibilities as CEO [84][85] Q&A Session Summary Question: What caused the negative billing surprise in Q3? - Management indicated that the longer sales cycles associated with the ecosystem business contributed to the billing shortfall, but expressed confidence in the pipeline for Q4 [30][32] Question: How are things looking for Q4? - Management reported that Q4 started well, with some deals that had slipped already closing, and expressed optimism about the pipeline [33][34] Question: Can you elaborate on opportunities with CDWs? - Management noted that partners are considering OEM deals, indicating strong interest in deeper collaborations [36][39] Question: What is the outlook for net revenue retention? - Management expects improvements in net revenue retention as gross retention increases and as the company capitalizes on the consumption model [40][41] Question: How is the conversation around AI evolving? - Management emphasized a proactive approach to AI, focusing on improving customer delivery and developing an agentic platform [53][54]