Ladies and gentlemen, thank you for standing by, and welcome to the Domo Second Quarter Fiscal Year 2022 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please also be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Vice President of Investor Relations, Mr. Peter Lowry. Thank you. Please go ahead.

Good afternoon, and welcome. On the call today, we have Josh James, our Founder and CEO; Bruce Felt, our CFO; and Julie Kehoe, our Chief Communications Officer. Julie will lead off with our Safe Harbor statement and then onto the call. Julie?

Thanks, Pete. Our press release was issued after the market closed and is posted on the Investor Relations section of our website, where this call is also being webcast. Statements made on this call include forward-looking statements related to our business under federal securities laws, including statements about financial projections and the plans and expectations for our go-to-market strategy, our expectations for our sales and new business initiatives, the impact of COVID-19 on our business and our financial condition. These statements are subject to a variety of risks, uncertainties, and assumptions. For a discussion of these risks and uncertainties, please refer to the documents we filed with the SEC, in particular, today's press release, our most recently filed annual report on Form 10-K and our most recently filed quarterly report on Form 10-Q. These documents contain and identify important risk factors and other information that may cause our actual results to differ materially from those contained in our forward-looking statements. In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of Domo's performance. Other than revenue, unless otherwise stated, we will be discussing our results of operations on a non-GAAP basis. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. Please refer to the tables in our earnings press release for a reconciliation of our non-GAAP financial measures to their most directly comparable GAAP measure. With that, let me hand it over to Josh. Over to you, Josh?

Thank you, Julie. Hello, everyone. Thanks for joining the call. As everyone is still dealing with COVID at different levels, depending on the pocket of the country or world you live in, we hope that you and your loved ones remain safe and healthy. In Q2, our business momentum continued. As the first cloud native modern BI platform, Domo posted 26% billings growth. I hope to see us about at this level or higher the next several quarters as we strive toward getting a three handle in front of our growth numbers for the long term. We posted 22% subscription revenue growth and 23% total revenue growth as well. Obviously, I'm very pleased with our continued strong execution. Now let me talk about a few things that I think contributed to our recent success and why we expect it to continue. First, we see that market forces have really been working in our favor. Digital transformation initiatives remain a key area of investment and a strategic necessity for organizations of all sizes. We are also seeing favorable trends because companies are wanting a cloud-first, open-agnostic partner for their data platform. We are truly benefiting from the building momentum for the breadth of apps that are built on our platform, including those that are powered by our data science and Domo Everywhere technologies. For all intents and purposes, when we are selling apps, or when we're in app-assisted deals, our traditional head-to-head competitors effectively drop to zero. To touch on our recent big deal that we closed last quarter, we are already seeing increased revenue and success there as well. Our ability to deliver BI leveraging cloud scale in record time is a successful formula. As a validation of our approach, in Q1 of the 2021 Gartner Magic Quadrant for analytics and BI platforms, Domo moved up to the challenger quadrant. Additionally, in Q2, in the new 2021 Forrester Wave for augmented BI platforms, Domo was named a leader and a quote rising star for full stack BI, translytical, and no-code applications. This will be a boon to our sales organization, I would think. Now, let me talk about a few of our recent customer wins. Q2 was a strong new global quarter with accelerating customer count growth, momentum with partners, and legacy replacements as customers modernize their BI systems. Many of our significant wins this quarter included our sales plays targeting IT and BI groups directly, as well as business leaders. We are seeing dramatic accelerating pick up of our apps, especially those derived from our Domo Everywhere and data science technologies. One of the new logo wins this quarter was a division of a multinational asset management firm, which has over $1 trillion in assets. This division provides digital wealth management technology solutions to its financial advisor clients. They created an app leveraging our Domo Everywhere technology to provide self-service analytics for these clients, allowing the sharing of its real-time data with financial advisor customers through its proprietary advisor portal. In this case, we are serving our customers' customer. Another new logo win was with a pharmaceutical provider to long-term care facilities to provide analytics to its customers. They had invested in a legacy data warehouse that was expensive to maintain and could not meet their internal or external data needs, and they required an embedded self-service, easy-to-use app for pharmacy and nurse consultants that only Domo could provide through our app framework and Domo Everywhere technology. One of our significant upsells this quarter was a seven-figure deal with a European-based life sciences company to measure marketing ROI and to provide a data science app that could deliver marketing insights at a global scale across countries and brands to optimize marketing spend. We also had a significant $0.5 million upsell with one of our current seven-figure customers, a diversified technology company, which is continuing to modernize its customer-facing fleet management analytic solution from a legacy on-premise offering to a modern cloud-based app enabled by our Domo Everywhere technology. This customer can provide real-time KPIs for their transportation customers, who can also add data and customize their own reports using Domo, which the legacy provider could not provide. Another notable upsell was with a healthcare company that needed an app for vaccination administration and scheduling for millions of people in a variety of states. We were able to deliver this highly robust multi-layered application in the quarter they needed it, using off-shelf components and tools from our Domo application development framework. Applications built off our data science technology also drove notable upsells in the quarter. For example, one medical technology and professional services company built a data science application to determine a forecasting model to better predict the likelihood of claims payment in their customer base. A luxury retailer created a low-code, no-code app leveraging our data science technology to help them predict customer churn and lifetime value, allowing them to focus their resources. One of the world’s leading management consultancies recently doubled their investment in Domo to expand their ability to use Domo in more of their client engagements. They wanted to ensure they have access to a sufficient number of licenses and all the capabilities that Domo offers their clients as they continue to identify new use cases where Domo makes sense over the other technologies available in the tool chest. In addition to these stamps of customer approval, industry recognition continues to pour in, as you saw in our press release. We were highlighted for the Parity.org Best Companies to Work For list for the second consecutive year. In closing, I am thrilled that as a business, we can continue to invest in the vast opportunity in front of us. I'm excited that we have already added the desired sales capacity in FY '22. I'm confident that our differentiated products and strong execution should enable our growth for a long time to come. I'm very proud of the team for producing accelerating growth this year. Given what I'm seeing in the marketplace, I'm looking forward to providing you guidance for the next year when the time comes. With that, I’ll hand it over to Bruce.

Thank you, Josh. I'm pleased with our Q2 performance. We continue to execute well and make good progress against our growth initiatives. Let me spend a few minutes on those items. On growth initiatives, we made good progress on the sales hiring front. We have met our 20% increased capacity goal, and because of the good performance we've seen from our sales teams, we're building even more capacity through the rest of the year. On execution, we had high transaction volumes across both new customers and selling to existing customers in Q2. In addition to good sales management and adding sales reps, we believe this is a result of our continued improving position in the market as noted by all the industry acknowledgments, which Josh highlighted. Our North American corporate business, which focuses on companies with less than $1 billion in annual revenue, performed particularly well. We attribute this success to excellent sales execution, a lead generation process that engages well with that target market, and the Greenfield nature of the opportunity. Given we provide a full technology stack, that is a superior choice against the tool vendors that offer point solutions in this space. We delivered Q2 billings of $60 million, a strong year-over-year increase of 26% driven by an over 90% gross retention rate, new customer additions, and expansions into existing customers. Net retention remained above 100% and was slightly up from Q1, and gross retention was also up slightly from Q1. On a dollar-weighted basis, we now have 60% of our customers under multi-year contracts at the end of Q2, up from 58% a year ago. Our remaining performance obligations, or RPO, which consists of all future revenue under contract, grew 24% compared to the same quarter last year, and current RPO grew 23% year-over-year. Q2 total revenue was $52.8 million, a year-over-year increase of 23%. Subscription revenue grew 23% year-over-year and represented 87% of total revenue. International revenue in the quarter represented 24% of total revenue and was up from 23% in Q1. Our subscription gross margin was 83%, up from 80% in Q2 of last year and roughly in line with last quarter. We continue to be successful in managing our data center costs even as volumes increase. In Q2, operating expenses increased 16% from last year, primarily as we invest in our sales capacity, this lags our revenue growth of 23% as we are able to get leverage out of our cost structure. This resulted in an improvement in our operating margin of over 600 basis points from the same quarter of last year. Our net loss was $9.6 million, down from $10.7 million a year ago, and our net loss per share was $0.30. This is based on 31.9 million weighted average shares outstanding, basic and diluted. In Q2, we reported net cash provided by operations of $2.2 million, our cash balance was approximately $86 million, up slightly from last quarter. Q2 represents the fifth consecutive quarter of greater than 20% billings growth, and that, in turn, gives us the confidence to continue to invest in our growth opportunity as our investments are yielding positive returns. Now to discuss what we expect in Q3 and the full year FY '22. For Q3, we're expecting year-over-year billings growth of approximately 20%. As we previously discussed, we have many growth drivers in play that could help us achieve an even higher growth rate. For the current fiscal year, we expect billings growth of about 21% year-over-year, up from our previous guidance of 18%. On expenses, we're planning for Q3 operating expenses to increase from Q2 levels as we continue to pursue our growth initiatives. We are particularly focused on continuing to invest in sales capacity. We plan for Q3 and the full year adjusted net cash provided by operations to be positive. Now the formal guidance. For the third quarter of FY '22, we expect GAAP revenue to be in the range of $63.5 million to $64.5 million. We expect non-GAAP net loss per share, basic and diluted, of $0.33 to $0.37. This assumes 32.4 million weighted average shares outstanding, basic and diluted. For the full year of FY '22, we expect GAAP revenue to be in the range of $252 million to $256 million, representing year-over-year growth of 20% to 22%. We expect non-GAAP net loss per share, basic and diluted, of $1.31 to $1.39. This assumes 32 million weighted average shares outstanding, basic and diluted. In closing, we're pleased with our strong performance in Q2, and we believe we remain very well positioned to execute against our growth plans. With that, we'll open up the call for questions.

Your first question comes from the line of Sanjit Singh from Morgan Stanley.

Thank you for taking the questions and congratulations on the 26% billings growth. I wanted to follow up on that sales capacity.

So I think we're close. The one thing that we haven't had is building sales capacity. We’ve been adding sales capacity, Bruce and I both touched on that, but having sales capacity and the productivity per rep, stay in the same ballpark where it's been will definitely put us in that range where you'll see that 30%. So I'm feeling excited and good about that, where we've got great managers in place. The team is performing, we're seeing the deals, the marketing organizations generating leads, our customer service reps are taking care of customers. And we're really seeing the market transform, where we went from people not understanding how we're not just visualization or traditional BI; we're like, no, we're modern BI. That includes a lot of other things, and what that enables are all these apps. That's why I highlighted all those customer examples of new deals and upsells that we got; we're seeing absolute success in many of our deals and we don't have competition when we're doing that. I think as long as we just do more of that and add some sales heads, so we have more people selling, then we'll be seeing the three in front of our growth numbers.

It sounds like you're making growth easier for Domo. The gross retention rate continuing to pick up is certainly helpful there. I was wondering in terms of creating that high velocity blocking and tackling businesses that are driven by digital lead generation, can that be a driver going into calendar ‘22? It seems like lead generation was one of the challenges for the company before, but seems like that's taking off now. I want to understand the corporate market opportunity.

Yes. We'll continue to invest in the corporate market. It's a good market, good business, good average deal size. We're important to those customers. A lot of our customers, even if they may only have $250 million in revenue, when you think about companies, you know they have $250 million in their real businesses, we become a very important part of their business. We interact with their CEOs, COOs, CFOs, and CMOs; we're an important part of that relationship. There's plenty of opportunity there for us to continue to grow and add reps. It's not just with new logos, which we're seeing the new logo count tick up. Our ability to generate leads has improved. The other thing we've seen a lot of success from is splitting those teams out into teams that go out and generate new logos and then teams that work with our current customers and upsell, and we've been very effective that way. When you look at the productivity of those teams, it's off the charts. There is a lot more product and opportunity we can go back and sell to our current customers. We have thousands of customers and an opportunity to go back and sell them a lot of products and services. We feel really good about the opportunities in the corporate market, with Jeff Skousen running it and his very capable group of managers.

Well, thanks, Josh.

Thank you very much.

Your next question comes from the line of Derrick Wood from Cowen.

Great. Thanks for taking the questions, and congrats on another great quarter. I wanted to follow up on that new customer generation. It sounds like you guys have been doing well with your own marketing lead-gen. But Josh, I know you've talked about some of the bigger deals you've landed recently creating a kind of viral market awareness, maybe particularly in the retail vertical, you've got the move that you made up in the Gartner Magic Quadrant. I'm just curious how those kinds of activities are translating and impacting new customer generation and how that's getting you more market awareness?

Yes, I think it just gives us more credibility with the customer when you go in there. We've figured out the right way to approach the customer. One of the big things that happens, people buy from people they like and have confidence in. When our reps are walking in, they have a lot of confidence because we have a lot of referenceable customers. We're not just helping one small group; we're providing apps to these customers that are transforming the way they run their business. We were just looking at a customer that I didn't know a lot about, and we delved into a little bit: they're paying us north of $1 million a year, they just signed a three-year renewal, and increased their contract by $0.5 million a year. It's because we're providing an app to them that helps them manage all their employees and their billable hours more effectively. It's through this app built in our low-code, no-code framework. We had one of the states we work with; we started out with a COVID relationship and helped them do testing. It was something we needed to put together over the weekend, and we built an app for them. We just heard from them two days ago—they're looking at a multi-year deal with a big upsell. The commentary they gave us was, 'We had no idea how easy it was to build apps; there are so many things we need to accomplish here internally, and we're starting to look at you guys a lot more seriously for other applications we need to build as well.'

Great, thanks. On the flipside, regarding large deal activity, the last few quarters, you've highlighted some nice, really big strategic wins. Is your pipeline coverage today for larger deals better than a year ago, especially as we move into this seasonally stronger second half?

Yes, we will see what happens in Q4. We've got a lot of deals that are cooking. It's not dominated by large deals, which is a good and a bad thing. We want to see more large deals out there. I think they'll accrue to us as we have more success in the enterprise space. Our pipeline isn't lumpy; it's a game of numbers here, and when there are no big lumpy numbers, you feel really confident about what you're looking at. If you look at the top 10 customers we have right now, in the last quarter, four or five of them we got upsells from. Our average revenue per top 10 customers will continue to grow. I don't think there is anyone in the top 10 where we've maxed out our relationship.

Okay, thanks.

Thank you.

Your next question comes from the line of Jack Andrews from Needham and Company.

Good afternoon. Thanks for taking my question. I was wondering if you could just dig a little bit deeper into the success and differentiation you're seeing in your app business. Is there a way to maybe decouple what you're doing in apps from the platform itself, or is it the power of Domo's platform that allows your apps to resonate well? Is there a way to break these apart, or is it the combination of both that's really helping you?

It's the combination that's helping us. Every single one of these apps has a data component. If you want to run a digital business, if you want to run a business in the environment that we're in now that interacts with your customers and employees in a digital way, then you need a data platform first and foremost. We have the ability to put all of your data in a location where we can access it. Once we can access it and distribute it to all the people that need to see that information, then our customers start asking if they can take these components and these elements of data and create an application that can be distributed. All of those apps have a need for data. If you were an app developer tasked with going to do that, you'd have to go figure out where the data is. We already know where the data is. When a customer comes to us and asks if we can build an app, we can. $1 million or $2 million later, they've got a fully functioning app customized for their business. We're seeing significant success from the apps we've built together for our customers.

That's really helpful. If I may, could you frame the number of strategic C-level conversations you're having now versus six to twelve months ago and how important these conversations are for expansions moving forward?

Yes, that number has definitely increased. It's not a dramatic increase because we've always had CXO relationships. We had a meeting where we went around e-staff and raised hands for people who actually log into those applications provided by the big cloud vendors. Some of those had no one on e-staff logging in; on the other hand, multiple CXOs in our relationships have access to the data, logging in and reviewing it many times a day. This occurrence doesn't happen anywhere else with any other software vendor. We feel good about where we're positioned and the resources that are coming online with our products and the customer experiences that we already have.

I appreciate the color. Thank you.

Thank you.

Your next question comes from the line of Pat Walravens from JMP Securities.

Great. Thank you. So Josh, what would it take for this business to grow much faster?

Well, if we get into the 30s we'll tell you. You look at what Bruce talked about on the Analyst Day and the growth drivers that are there. We need like one of those growth drivers to hit in the 3s. I think sales capacity is one of those drivers. We've already started adding good managers, but we need to keep pushing sales capacity and the partner network.

I'll just say we're making fantastic progress against a couple of those. Sales hiring is really picking up, and we are in a fantastic position to bring reps on board, ramp them, and get them working effectively, which has been going extremely well. Brand awareness continues to improve, which puts us in a very good position to keep the growth going.

Awesome. Thank you.

Thanks, Pat.

Your next question comes from the line of Kamil Mielczarek from William Blair.

Hi, congrats on the great continued execution and thanks for taking my question. I want to better understand your comments around continued sales capacity investments. You met your 20% hiring growth targets in the quarter, but you said you plan to build more capacity through the rest of the year. Are you still expecting sales headcount to be up 20% at the end of the fiscal year or is productivity finally reaching a point where you can accelerate that pace of additions? How do you decide if that growth should eventually be 25% or even 30%?

The basic model was to count on rep count growing but not to rely on increased productivity. We are just being cautious about how we come up with our plans, especially around guidance. We charged through 20% and it's going to stay that way through the end of the year. We've yet to find the threshold where we aren't getting the returns we should. So we're going to keep going.

I think the summary is we have been playing defense for several years. In the last 12 months, we've been playing offense, which is a lot of fun. We've exceeded our initial sales capacity targets in one quarter, and we see the numbers going up significantly. We have the ability to hire more reps and invest in the future, so hopefully, that’s our direction moving forward.

That's great to hear on the progress. If I could just follow up on the partner channel, can you give us an update on the traction you're seeing there, who are some of the biggest contributors today, and what are your next steps to drive towards your long-term targets?

We've built relationships through a whole group that goes out and works with different partners. We talked about a deal won this quarter from one of the large consulting firms that made an even bigger bet on Domo. More new opportunities in the pipeline from Snowflake than we've ever had. That relationship continues to evolve, and we're building stronger ties. We know there's opportunity; goodness will accrue to us as we get larger and better recognized. It’s going to take investment in that area, and we’re committed to it.

It's good to hear. Thanks again.

Thank you.

There are no more questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.