Business Context and Reporting Period
Company: DOMO, INC.
Filing Type: Form 10-Q (Unaudited)
Period Ended: July 31, 2025 (Second Quarter of Fiscal Year 2026)
Business Overview: Domo provides a cloud-based AI and data products platform that connects enterprise users with real-time data and insights. The company is transitioning its business model toward consumption-based pricing, which accounted for 76% of Annual Recurring Revenue (ARR) as of the end of the period.
Key Financial Metrics
| Metric (in thousands) | Three Months Ended July 31, 2025 | Six Months Ended July 31, 2025 |
|---|---|---|
| Total Revenue | $79,718 | $159,829 |
| Gross Profit | $59,643 | $119,086 |
| Gross Margin | 75% | 75% |
| Operating Loss | $(7,251) | $(21,597) |
| Net Loss | $(22,932) | $(40,984) |
| Net Loss Per Share (Basic & Diluted) | $(0.56) | $(1.02) |
| Cash and Cash Equivalents (End of Period) | $47,143 | |
| Long-Term Debt (Carrying Amount) | $121,940 | |
| Operating Cash Flow (Six Months) | $7,319 |
Material Changes vs. Prior Comparable Period
- Revenue Growth: Total revenue increased slightly by 2% ($1.3 million) for the three months ended July 31, 2025, compared to the same period in 2024. Subscription revenue grew 3% ($1.8 million), while professional services revenue declined 7% ($0.5 million).
- Operating Expenses: Total operating expenses decreased by 8% ($5.9 million) year-over-year for the quarter. This reduction was driven by lower headcount and reduced stock-based compensation across Sales & Marketing, R&D, and G&A.
- Net Loss Expansion: Despite lower operating expenses, the Net Loss increased by 18% ($3.4 million) for the quarter. This was primarily due to a $10.4 million non-cash expense from the remeasurement of warrant liability associated with the company's credit facility.
- Cash Flow Improvement: Operating cash flow turned positive, providing $7.3 million for the six months ended July 31, 2025, compared to a use of $4.3 million in the prior year period.
Guidance, Outlook, Risks, and Unusual Items
- Unusual Items: The financial results were significantly impacted by the remeasurement of warrant liability, which resulted in a $10.4 million expense in Q2 2025 and a $9.3 million expense for the six-month period. This is a non-cash item driven by changes in the fair value of warrants issued in connection with the credit facility.
- Outlook: Management expects to continue incurring losses for the foreseeable future. The company is focusing on aligning sales and marketing spending to improve efficiency and margins. They anticipate subscription gross margins to remain stable in the near term and increase in the long term as the consumption-based model matures.
- Liquidity and Debt: The company has a credit facility with a total capacity of $125.3 million, all of which was drawn as of July 31, 2025. The facility matures on August 19, 2028. The company is subject to financial covenants, including minimum annualized recurring revenue and trailing 12-month consolidated EBITDA, and was in compliance as of the reporting date.
- Risks: Key risks include the inability to achieve profitability, intense competition from large software companies (e.g., Microsoft, Salesforce), reliance on third-party cloud infrastructure, and cybersecurity threats. Additionally, the dual-class stock structure concentrates voting control with the CEO, limiting shareholder influence.
Investor Verification Checklist
- Warrant Liability Volatility: Verify the sensitivity of the warrant liability remeasurement to stock price fluctuations, as this significantly impacts reported net loss without affecting cash flow.
- Debt Covenant Compliance: Monitor the company's ability to maintain the minimum annualized recurring revenue and EBITDA covenants required by the fully drawn credit facility.
- Customer Churn vs. New Sales: Review the breakdown of revenue growth, noting that subscription revenue growth was partially offset by a net decrease from existing customers (churn) in both the three and six-month periods.
- Consumption Model Transition: Assess the long-term impact of the shift to consumption-based pricing (76% of ARR) on revenue predictability and gross margins.
- Cash Burn vs. Generation: Confirm the sustainability of the positive operating cash flow trend ($7.3M for six months) against the backdrop of a $1.5 billion accumulated deficit.