Domo Inc ((DOMO)) has held its Q4 earnings call. Read on for the main highlights of the call.
The recent earnings call for Domo Inc. painted a generally positive picture of the company’s financial health and strategic direction. The company has made significant strides in transitioning to a consumption model, demonstrated robust growth in subscription RPO, and forged strategic partnerships that enhance its AI capabilities. Despite facing challenges in the software spending environment and experiencing reduced margins, Domo’s focus on efficient growth and cash generation remains promising.
Exceeded Guidance and Positive Free Cash Flow
Domo exceeded its guidance for several key financial metrics, including billings, revenue, non-GAAP EPS, and adjusted free cash flow. The company reported a positive adjusted free cash flow for Q4 and anticipates this trend to continue into Q1 and fiscal year 2026. This financial performance underscores Domo’s ability to manage its resources effectively and deliver on its financial commitments.
Subscription RPO Growth
The company reported an acceleration in subscription RPO growth, reaching 14% year over year, with long-term subscription RPO growth hitting 38% year over year. For the first time, RPO surpassed the $400 million mark, highlighting the strength and appeal of Domo’s subscription offerings.
Transition to Consumption Model
Domo has made significant progress in its transition to a consumption model, with 65% of ARR now on this model, up from just 5% two years ago. The company aims to increase this to 90% by the end of fiscal year 2026, reflecting a strategic shift that is expected to drive future growth and customer retention.
AI and Partner Ecosystem Strategy
Domo’s strategic focus on AI and partnerships, particularly with cloud-based data warehouses, has resulted in new strategic deals and industry recognition. The company’s AI capabilities have received industry awards and are viewed as a key growth driver, enhancing its competitive edge in the market.
Improved Retention Rates
The company reported improved gross retention rates, which stood at 85% for the third consecutive quarter. Customers on the consumption model experienced even higher retention, with gross retention over 90% and net retention over 100%, indicating strong customer satisfaction and loyalty.
Challenges in Software Spending Environment
Despite the positive developments, Domo acknowledged the challenging software spending environment. However, there is a noted willingness among customers to invest in AI enablement, which could mitigate some of these challenges.
Reduced Subscription Gross Margin
The subscription gross margin was reported at 81.4%, down sequentially due to the timing of capitalized software amortization. The company expects margins to remain in the low eighties in the near term, reflecting ongoing adjustments in its financial strategy.
Net Loss and Earnings Guidance
Domo reported a non-GAAP net loss of $1.8 million, with a non-GAAP net loss per share of $0.05. For fiscal year 2026, the company provided guidance for a non-GAAP net loss per share ranging from $0.29 to $0.39, while expecting positive cash flow both in Q1 and throughout the fiscal year.
Forward-Looking Guidance
Looking ahead, Domo’s executives provided guidance for fiscal year 2026, with expected billings between $310 to $320 million and GAAP revenue of $310 to $318 million. The company anticipates a non-GAAP net loss per share of $0.29 to $0.39 and expects to maintain positive cash flow throughout the fiscal year. This forward-looking guidance reflects Domo’s confidence in its strategic initiatives and financial management.
In conclusion, Domo Inc.’s earnings call highlighted a positive outlook with significant achievements in transitioning to a consumption model and strong growth in subscription RPO. The company’s strategic focus on AI and partnerships, along with its commitment to efficient growth and cash generation, positions it well for future success despite challenges in the software spending environment.