HUCK 10-Q
Huckleberry.ai, Inc. (HUCK)
10-Q
2026-09-03
For: 2026-07-31
View Original
Added on
September 04, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________
Form 10-Q
__________________________
| (Mark One) | |||||
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended | |||||
| OR | |||||
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For transition period from to
Commission File Number 001-38553
(Exact Name of Registrant as Specified in its Charter)
__________________________
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of principal executive offices, including zip code)
(801 ) 899-1000
(Registrant's telephone number, including area code)
__________________________
| Securities registered pursuant to Section 12(b) of the Act: | ||||||||||||||
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||||||||||||
__________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | ☒ | ||||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒
As of September 1, 2026, there were approximately 3,263,659 shares of the registrant's Class A common stock and 43,772,502 shares of the registrant’s Class B common stock outstanding.
1
TABLE OF CONTENTS
| Page | |||||
| Introductory Note | |||||
| Summary Risk Factors | |||||
| PART I. FINANCIAL INFORMATION | |||||
| Item 1. Financial Statements (unaudited) | |||||
| Condensed Consolidated Balance Sheets | |||||
| Condensed Consolidated Statements of Operations | |||||
| Condensed Consolidated Statements of Comprehensive Loss | |||||
Condensed Consolidated Statements of Stockholders’ Deficit | |||||
| Condensed Consolidated Statements of Cash Flows | |||||
| Notes to Condensed Consolidated Financial Statements | |||||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||||
| Item 3. Quantitative and Qualitative Disclosures about Market Risk | |||||
| Item 4. Controls and Procedures | |||||
| PART II. OTHER INFORMATION | |||||
| Item 1. Legal Proceedings | |||||
| Item 1A. Risk Factors | |||||
| Item 5. Other Information | |||||
| Item 6. Exhibits | |||||
| Signatures | |||||
2
INTRODUCTORY NOTE
On July 22, 2026, Domo, Inc., a Delaware corporation (the Company), and Progress Software Corporation, a Delaware corporation (Progress), entered into an Asset Purchase Agreement (the Purchase Agreement), pursuant to which Progress has agreed to acquire substantially all of the assets and employees, excluding the Company’s net operating loss (NOL) carryforwards, and assume certain liabilities of the Company including its operating business, technology platform, customer contracts, intellectual property, vendor relationships, foreign subsidiaries, and other assets and obligations related to the business for $400 million in cash, subject to customary purchase price adjustments (the Asset Sale). Concurrently with the execution and delivery of the Purchase Agreement, Progress entered into a Voting and Support Agreement (the Support Agreement) with stockholders of the Company holding sufficient voting power to approve the Asset Sale under applicable law and the Company's organizational documents. No further approval of the stockholders of the Company is required to approve the Asset Sale.
At the closing of the Asset Sale, the Company will pay off its existing credit facility in full. The Company expects to have a net cash balance of approximately the amount of net proceeds from the Asset Sale less amounts paid to its credit facility. Following the closing of the transaction, Domo, Inc., the Delaware holding company, will change its name and expects to begin trading under a new Nasdaq ticker symbol and remain a separate publicly-listed entity with limited operating expenses and a debt-free balance sheet. The Board intends to use the proceeds from the transaction to identify opportunities to monetize its NOLs. The Company plans to consider potential transactions where the company can employ its expertise in AI and automation to enhance profitability as well as options to return capital to shareholders.
i
SUMMARY RISK FACTORS
Our business is subject to numerous risks and uncertainties, as described further in the section of this report captioned “Risk Factors,” which may cause us not to realize the full benefits of our strengths or may cause us to be unable to successfully execute all or part of our strategy. Some of the most significant challenges and risks include the following:
•we have entered into a definitive Asset Purchase Agreement to sell substantially all of our assets, and the failure to complete this transaction, or delays in closing this transaction, could have an adverse effect on our business, results of operations and financial condition;
•following the closing of the Asset Sale, we will no longer have an operating business, and our future success will depend on our ability to identify a use of the proceeds from the Asset Sale;
•our credit facility remains subject to a covenant breach and forbearance agreement, and if the Asset Sale is not completed or we fail to maintain compliance with the forbearance agreement, our lenders could accelerate our indebtedness;
•our recently adopted Tax Benefits Preservation Plan is intended to protect our NOLs but may not prevent an ownership change, and it has anti-takeover effects that could adversely affect holders of our common stock;
•we have a history of losses, and we may not be able to generate sufficient revenue to achieve or maintain profitability in the future;
•we expect to continue to invest in our growth for the foreseeable future, and if we fail to manage this growth effectively, our business and operating results will be adversely affected;
•our ability to raise capital in the future may be limited, and if we fail to raise capital when needed in the future, we could be prevented from growing or could be forced to delay or eliminate product development efforts or other operations;
•we were not in compliance with a financial covenant under our secured credit facility as of April 30, 2026 and July 31, 2026, which gives our lenders the right to accelerate our indebtedness, and there is substantial doubt about our ability to continue as a going concern; although our lenders have not waived the underlying default, they have agreed to a forbearance subject to certain contingencies;
•adverse events or perceptions affecting the financial services industry could adversely affect our operating results, financial condition and prospects;
•if we are unable to attract new customers in a manner that is cost-effective, our revenue growth could be slower than we expect and our business may be harmed;
•if customers do not renew their contracts with us or reduce their use of our platform, our revenue will decline and our operating results and financial condition may be adversely affected;
•if customers do not expand their use of our platform or adopt additional use cases, our growth prospects, operating results and financial condition may be adversely affected;
•we face intense competition, and we may not be able to compete effectively, which could reduce demand for our platform and adversely affect our business, growth, revenue and market share;
•if our or our customers’ access to data becomes limited, our business, results of operations and financial condition may be adversely affected;
•if we fail to effectively align, develop and expand our sales and marketing capabilities with our pricing structure and increase sales efficiency, our ability to increase our customer base and increase acceptance of our platform could be harmed;
•we have experienced and may continue to experience changes to our management and board, which may create uncertainties and could harm our business;
•we are subject to governmental laws, regulation and other legal obligations, particularly those related to privacy, data protection and cybersecurity, and any actual or perceived failure to comply with such obligations could impair our efforts to maintain and expand our customer base, causing our growth to be limited and harming our business;
•if our network, application, or computer systems are breached or unauthorized access to customer data or other sensitive data is otherwise obtained or if we experience any other type of security incident, our platform may be perceived as insecure and we may lose existing customers or fail to attract new customers, operations may be disrupted if systems or data become unavailable, our reputation may be damaged and we may incur significant remediation costs or liabilities, including regulatory fines for violation of compliance requirements;
ii
•third-party claims that we are infringing or otherwise violating the intellectual property rights of others, whether successful or not, could subject us to costly and time-consuming litigation or require us to obtain expensive licenses, and our business could be harmed;
•the success of our business depends in part on our ability to protect and enforce our intellectual property rights;
•the dual class structure of our common stock has the effect of concentrating voting control with Joshua G. James, our founder and chief executive officer, which will limit your ability to influence the outcome of important transactions, including a change in control; and
•economic uncertainties or downturns could materially adversely affect our business.
iii
(unaudited)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Domo, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except per share amounts)
(unaudited)
| As of January 31, | As of July 31, | ||||||||||
| 2026 | 2026 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
Cash and cash equivalents(1) | $ | $ | |||||||||
Accounts receivable, net of allowances of $ | |||||||||||
Contract acquisition costs, net(1) | |||||||||||
Prepaid expenses and other current assets(1) | |||||||||||
| Total current assets | |||||||||||
Property and equipment, net(1) | |||||||||||
Right-of-use assets(1) | |||||||||||
Contract acquisition costs, noncurrent, net(1) | |||||||||||
Intangible assets, net(1) | |||||||||||
Goodwill(1) | |||||||||||
Other assets(1) | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and stockholders' deficit | |||||||||||
| Current liabilities: | |||||||||||
Accounts payable(1) | $ | $ | |||||||||
| Warrant liability | |||||||||||
Accrued expenses and other current liabilities(1) | |||||||||||
Lease liabilities(1) | |||||||||||
| Current debt | |||||||||||
Deferred revenue(1) | |||||||||||
| Total current liabilities | |||||||||||
Lease liabilities, noncurrent(1) | |||||||||||
Deferred revenue, noncurrent(1) | |||||||||||
Other liabilities, noncurrent(1) | |||||||||||
| Long-term debt | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 13) | |||||||||||
1
Domo, Inc.
Condensed Consolidated Balance Sheets (Continued)
(in thousands, except per share amounts)
(unaudited)
| Stockholders' deficit: | |||||||||||
Preferred stock, $ | |||||||||||
Class A common stock, $ | |||||||||||
Class B common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated other comprehensive income | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total stockholders' deficit | ( | ( | |||||||||
| Total liabilities and stockholders' deficit | $ | $ | |||||||||
(1)Includes certain assets and liabilities held for sale. See Note 3, "Assets and Liabilities Held for Sale" for more further details and information.
See accompanying notes to condensed consolidated financial statements.
2
Domo, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2025 | 2026 | 2025 | 2026 | ||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Subscription | $ | $ | $ | $ | |||||||||||||||||||
| Professional services and other | |||||||||||||||||||||||
| Total revenue | |||||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Subscription | |||||||||||||||||||||||
| Professional services and other | |||||||||||||||||||||||
| Total cost of revenue | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Loss from operations | ( | ( | ( | ( | |||||||||||||||||||
| Other expense, net: | |||||||||||||||||||||||
| Remeasurement of warrant liability | ( | ( | ( | ||||||||||||||||||||
| Other expense, net | ( | ( | ( | ( | |||||||||||||||||||
| Total other expense, net | ( | ( | ( | ( | |||||||||||||||||||
| Loss before income taxes | ( | ( | ( | ( | |||||||||||||||||||
| Provision for income taxes | |||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Net loss per share, basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Weighted-average number of shares used in computing net loss per share, basic and diluted | |||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
3
Domo, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2025 | 2026 | 2025 | 2026 | ||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Foreign currency translation adjustments | ( | ( | ( | ||||||||||||||||||||
| Comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
See accompanying notes to condensed consolidated financial statements.
4
Domo, Inc.
Condensed Consolidated Statements of Stockholders' Deficit
(in thousands, except share amounts)
(unaudited)
| Six Months Ended July 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||
| Class A Common Stock | Class B Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders' Deficit | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
Balance as of January 31, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Shares repurchased for tax withholdings on vesting of restricted stock | — | — | ( | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under employee stock purchase plan | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Balance as of April 30, 2025 | $ | $ | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Shares repurchased for tax withholdings on vesting of restricted stock | — | — | ( | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Balance as of July 31, 2025 | $ | $ | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
5
Domo, Inc.
Condensed Consolidated Statements of Stockholders' Deficit (Continued)
(in thousands, except share amounts)
(unaudited)
| Six Months Ended July 31, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||
| Class A Common Stock | Class B Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Stockholders' Deficit | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance as of January 31, 2026 | $ | $ | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Shares repurchased for tax withholdings on vesting of restricted stock | — | — | ( | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under employee stock purchase plan | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Balance as of April 30, 2026 | $ | $ | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Balance as of July 31, 2026 | $ | $ | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
6
Domo, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Six Months Ended July 31, | |||||||||||
| 2025 | 2026 | ||||||||||
| Cash flows from operating activities | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Non-cash lease expense | |||||||||||
| Amortization of contract acquisition costs | |||||||||||
| Stock-based compensation expense | |||||||||||
| Remeasurement of warrant liability | ( | ||||||||||
| Other, net | |||||||||||
| Change in operating assets and liabilities: | |||||||||||
| Accounts receivable, net | |||||||||||
| Contract acquisition costs | ( | ( | |||||||||
| Prepaid expenses and other assets | ( | ||||||||||
| Accounts payable | ( | ||||||||||
| Operating lease liabilities | ( | ( | |||||||||
| Accrued expenses and other liabilities | ( | ( | |||||||||
| Deferred revenue | ( | ( | |||||||||
| Net cash provided by (used in) operating activities | ( | ||||||||||
| Cash flows from investing activities | |||||||||||
| Purchases of property and equipment | ( | ( | |||||||||
| Proceeds from sale of intangible assets | |||||||||||
| Purchases of intangible assets | ( | ||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities | |||||||||||
| Payments of deferred offering costs for registration statement | ( | ||||||||||
| Proceeds from shares issued in connection with employee stock purchase plan | |||||||||||
| Shares repurchased for tax withholdings on vesting of restricted stock | ( | ( | |||||||||
| Payment of debt forbearance fee | ( | ||||||||||
| Debt issuance costs, net | ( | ||||||||||
| Proceeds from short-term payable financing | |||||||||||
| Payments on short-term payable financing | ( | ( | |||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | ( | ||||||||||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | ( | ||||||||||
| Cash, cash equivalents, and restricted cash at beginning of period | |||||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | $ | |||||||||
| Supplemental disclosures of cash flow information | |||||||||||
| Cash paid for income taxes, net | $ | ( | $ | ||||||||
| Cash paid for interest | $ | $ | |||||||||
7
Domo, Inc.
Condensed Consolidated Statements of Cash Flows (Continued)
(in thousands)
(unaudited)
| Non-cash investing and financing activities | |||||||||||
| Operating lease right-of-use assets obtained for lease liabilities | $ | $ | |||||||||
| Purchases of property and equipment included in accounts payable and lease liabilities | $ | $ | |||||||||
| Stock-based compensation capitalized as internal-use software | $ | $ | |||||||||
8
Domo, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Overview and Basis of Presentation
Description of Business and Basis of Presentation
Domo, Inc. (the Company) provides a cloud-based platform that digitally connects everyone from the CEO to the frontline employee with all the data, systems and people in an organization, giving them access to real-time data and insights and allowing them to put data to work for everyone so they can multiply their impact on the business. The Company is incorporated in Delaware. The Company's headquarters is located in American Fork, Utah and the Company has subsidiaries in the United Kingdom, Australia, Japan, Hong Kong, Singapore, New Zealand, Canada, Spain, and India.
Unaudited Condensed Consolidated Financial Statements
The accompanying condensed consolidated balance sheet as of July 31, 2026, and the condensed consolidated statements of operations, comprehensive loss, and stockholders' deficit for the three and six months ended July 31, 2025 and 2026 and condensed consolidated statements of cash flows for the six months ended July 31, 2025 and 2026 are unaudited. The unaudited condensed consolidated financial statements have been prepared on a basis consistent with the annual consolidated financial statements and, in the opinion of management, reflect all adjustments necessary to state fairly the Company's financial position as of July 31, 2026, its results of operations for the three and six months ended July 31, 2025 and 2026 and condensed consolidated statements of cash flows for the six months ended July 31, 2025 and 2026. The financial data and the other financial information disclosed in the notes to these condensed consolidated financial statements related to the three-month and six-month periods are also unaudited. The results of operations for the three and six months ended July 31, 2026 are not necessarily indicative of the results to be expected for the fiscal year ending January 31, 2027 or for any other future year or interim period.
The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended January 31, 2026, included in the Company's Annual Report on Form 10-K.
Liquidity and Going Concern
The accompanying condensed consolidated financial statements have been prepared in accordance with GAAP assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The Company has incurred recurring losses from operations, including a net loss of $23.8 million for the six months ended July 31, 2026, and has an accumulated deficit of $1,570.7 million and a total stockholders' deficit of $187.3 million as of July 31, 2026. The Company's credit facility, which is secured by substantially all of the Company's assets, contains financial covenants that include a minimum annualized recurring revenue covenant and a minimum trailing twelve month consolidated EBITDA covenant, each tested quarterly, and a minimum liquidity covenant tested monthly. As of April 30, 2026, the Company was not in compliance with the minimum annualized recurring revenue covenant, and as of July 31, 2026 the Company remained out of compliance with that covenant. As a result, the lenders had the right to declare the outstanding balance of $138.3 million of principal and $8.6 million related to the Second PIK amendment fee immediately due and payable and the related term loan and associated fees were classified as a current liability as of April 30, 2026. The term loan and associated fees continued to be classified as a current liability as of July 31, 2026. The Company had cash and cash equivalents of $25.1 million as of July 31, 2026, which would not be sufficient to repay the term loan upon any such
9
Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
1. Overview and Basis of Presentation (Continued)
acceleration. As such, substantial doubt exists about the Company's ability to continue as a going concern within one year after the date these condensed consolidated financial statements are issued.
In connection with the covenant noncompliance described above, the Company entered into a forbearance agreement with its lenders, under which the lenders agreed to forbear from exercising their rights and remedies with respect to the noncompliance and certain other specified and anticipated defaults during a limited forbearance period, subject to certain conditions. The forbearance does not waive the underlying default and does not change the classification of the term loan, which remains a current liability, and upon its expiration the lenders may exercise their rights and remedies, including acceleration. See Note 12, "Debt," for further details. The forbearance period is contingent on the Company's pursuit and completion of a strategic transaction, including the Company's entry into a definitive purchase agreement by July 31, 2026 and the completion of a transaction no later than November 30, 2026.
On July 22, 2026, the Company entered into a definitive Purchase Agreement with Progress for the Asset Sale. The transaction was unanimously approved by the Company's board of directors and by the holders of a majority of the voting power of the Company's outstanding capital stock, who delivered a written consent adopting the Purchase Agreement on July 22, 2026. No further approval of the Company's stockholders is required to complete the transaction. Completion of the transaction remains subject to the satisfaction or waiver of certain closing conditions, as set forth in the Purchase Agreement. The Purchase Agreement contains no financing condition. The transaction is expected to close by the end of September 2026 and no later than November 30, 2026.
Management's plans to mitigate the going concern condition described above are focused on completing the Asset Sale. The completion of the Asset Sale depends on factors outside the Company's control, and there can be no assurance that any of these plans will be entered into or completed on acceptable terms, or at all. Accordingly, management has concluded that these plans do not alleviate the substantial doubt about the Company's ability to continue as a going concern.
The condensed consolidated financial statements do not include any adjustments to the carrying amounts or classification of assets and liabilities that might be necessary if the Company were unable to continue as a going concern.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes. The Company bases its estimates on historical experience and on other assumptions that its management believes are reasonable under the circumstances. Actual results could differ from those estimates. The Company’s estimates and judgments include the determination of standalone selling prices for the Company’s services, which are used to determine revenue recognition for arrangements with multiple performance obligations; the amortization period for deferred contract acquisition costs; valuation of the Company’s stock-based compensation and related service period; useful lives of fixed assets; the fair value of warrants; capitalization and estimated useful life of internal-use software; the incremental borrowing rate used to calculate the present value of capitalized leases; evaluation for impairment of long-lived and intangible assets including goodwill; and the allowance for doubtful accounts and expected credit losses.
Foreign Currency
The functional currencies of the Company’s foreign subsidiaries are the respective local currencies. The cumulative effect of translation adjustments arising from the use of differing exchange rates from period to period is included in accumulated other comprehensive income within the condensed consolidated balance sheets. Changes in the cumulative foreign translation adjustment are reported in the condensed consolidated statements of stockholders’ deficit and the condensed consolidated statements of comprehensive loss. Transactions denominated in currencies other than the functional currency are remeasured at the end of the period and when the related receivable or payable is settled, which may result in transaction gains or losses. Foreign currency transaction gains and losses are included in other expense, net in the condensed consolidated statements of operations. All assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the exchange rate on the balance sheet date. Revenue and expenses are translated at the average exchange rate during the period, and equity balances are translated using historical exchange rates.
10
Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
1. Overview and Basis of Presentation (Continued)
Segment Information
The Company operates as one operating segment. The Company’s chief operating decision maker (CODM) is its chief executive officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance and allocating resources. This financial information primarily includes consolidated GAAP and non-GAAP measures of profit and loss as well as certain consolidated balance sheet and cash flow measures. The measures most consistent with GAAP used by the CODM are consolidated net income (loss) and operating cash provided by (used in) operating activities. As a result of the CODM being regularly provided these measures on a consolidated basis, any significant financial segment information is inherently reflected in the Company's consolidated financial statements and related notes.
2. Summary of Significant Accounting Policies
Cash and Cash Equivalents
Accounts Receivable
Accounts receivable are recorded at the invoiced amount (net of allowance), do not require collateral, and do not bear interest. The Company’s payment terms generally provide that customers pay within 30 days of the invoice date.
Included in accounts receivable are unbilled receivables, which are amounts that have not yet been invoiced to the customers as of the balance sheet date but are contractually owed to the Company from its customers.
Contract Acquisition Costs
Contract acquisition costs, net are stated at cost net of accumulated amortization and primarily consist of deferred sales commissions, which are considered incremental and recoverable costs of obtaining a contract with a customer. Contract acquisition costs for initial contracts are deferred and then amortized on a straight-line basis over the period of benefit, which the Company has determined to be approximately four years . The period of benefit is determined by taking into consideration contractual terms, expected customer life, changes in the Company's technology and other factors. Contract acquisition costs for renewal contracts are not commensurate with contract acquisition costs for initial contracts and are recorded as expense when incurred if the period of benefit is one year or less. If the period of benefit is greater than one year, costs are deferred and then amortized on a straight-line basis over the period of benefit, which the Company has determined to be two years . Contract acquisition costs related to professional services and other performance obligations with a period of benefit of one year or less are recorded as expense when incurred. Amortization of contract acquisition costs is included in sales and marketing expenses in the accompanying condensed consolidated statements of operations.
Amortization expense related to contract acquisition costs was $4.6 million and $4.8 million for the three months ended July 31, 2025 and 2026, respectively, and $9.1 million and $9.7 million for the six months ended July 31, 2025 and 2026, respectively. There was no
Property and Equipment, Net
Property and equipment, net, are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets or over the related lease terms (if shorter). Repairs and maintenance costs are expensed as incurred.
11
Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
2. Summary of Significant Accounting Policies (Continued)
The estimated useful lives of property and equipment are as follows:
| Computer equipment and software | |||||
| Furniture, vehicles and office equipment | |||||
| Leasehold improvements | Shorter of remaining lease term or estimated useful life | ||||
Leases
At the inception of a contract, the Company determines whether the contract is or contains a lease. Leases with a term greater than one year are recognized on the balance sheet as right-of-use (ROU) assets and lease liabilities. The Company has elected the short-term leases practical expedient which allows any leases with a term of 12 months or less to be considered short-term and thus not have an ROU asset or lease liability recognized on the balance sheet.
ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As these leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate incurred to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment. The operating lease ROU asset also includes any lease payments made in advance of lease expense and excludes lease incentives and initial direct costs incurred. Certain lease terms include options to terminate or extend the lease for periods of to three years . The Company does not include these optional periods in its minimum lease terms or in the determination of the ROU assets and lease liabilities associated with these leases unless the options are reasonably certain to be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. ROU assets are subject to evaluation for impairment or disposal on a basis consistent with other long-lived assets.
The Company has lease agreements with lease and non-lease components which the Company has elected to account for as a single lease component. On the lease commencement date, the Company establishes assets and liabilities for the present value of estimated future costs to retire long-lived assets at the termination or expiration of a lease. Such assets are depreciated over the lease term to operating expense.
Capitalized Internal-Use Software Costs
The Company capitalizes certain costs related to development of its platform incurred during the application development stage. Costs related to preliminary project activities and post-implementation activities are expensed as incurred. Maintenance and training costs are also expensed as incurred. Capitalized costs are included in property and equipment.
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired. Goodwill and indefinite-lived intangible assets are not amortized, but rather tested for impairment at least annually on November 1 or more often if and when circumstances indicate that the carrying value may not be recoverable. Finite-lived intangible assets are amortized over their useful lives.
Goodwill is tested for impairment based on reporting units. The Company periodically reevaluates the business and has determined that it continues to operate in one segment, which is also considered the sole reporting unit. Therefore, goodwill is tested for impairment at the consolidated level.
12
Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
2. Summary of Significant Accounting Policies (Continued)
The Company reviews its long-lived assets, including property and equipment, finite-lived intangible assets, and ROU assets for impairment whenever an event or change in facts and circumstances indicates that their carrying amounts may not be recoverable. Recoverability of these assets is measured by comparing the carrying amount to the estimated undiscounted future cash flows expected to be generated. If the carrying amount exceeds the undiscounted cash flows, the assets are determined to be impaired and an impairment charge is recognized as the amount by which the carrying amount exceeds fair value.
There was no no
Assets and Liabilities Held for Sale
The Company classifies long-lived assets or disposal groups to be sold as held for sale in the period in which all of the following criteria are met: (1) management, having the authority to approve the action, commits to a plan to sell the asset or disposal group; (2) the asset or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets or disposal groups; (3) an active program to locate a buyer and other actions required to complete the plan to sell the asset or disposal group have been initiated; (4) the sale of the asset or disposal group is probable, and transfer of the asset or disposal group is expected to qualify for recognition as a completed sale within one year, except if events or circumstances beyond the Company's control extend the period of time required to sell the asset or disposal group beyond one year; (5) the asset or disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (6) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
The Company initially measures a long-lived asset or disposal group that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held-for-sale criteria are met. Conversely, gains are not recognized on the sale of a long-lived asset or disposal group until the date of sale. The Company assesses the fair value of a long-lived asset or disposal group less any costs to sell each reporting period it remains classified as held for sale and reports any subsequent changes as an adjustment to the carrying value of the asset or disposal group, as long as the new carrying value does not exceed the carrying value of the asset at the time it was initially classified as held for sale.
Upon determining that a long-lived asset or disposal group meets the criteria to be classified as held for sale, the Company ceases depreciation and reports long-lived assets and the assets and liabilities of the disposal group, if material, in the line items assets held for sale and liabilities held for sale, respectively in the Company's condensed consolidated balance sheet. On July 22, 2026, we entered into and announced the Asset Sale to Progress which met the held for sale criteria on that date. As the separate presentation of substantially all assets and certain liabilities would not be meaningful to financial statement users, we have continued to present all assets and liabilities in their usual categories on the balance sheet and noted those that include assets and liabilities held for sale. See Note 3, "Assets and Liabilities Held for Sale" for further details and information.
Discontinued Operations
A disposal group is classified as a discontinued operation when the following criteria are met: (1) the disposal group is a component of an entity; (2) the component of the entity meets the held-for-sale criteria in accordance with our policy described above; and (3) the component of the entity represents a strategic shift in the entity's operating and financial results. Alternatively, if a business meets the criteria for held for sale on the acquisition date, the business is accounted for as a discontinued operation. The Asset Sale did not result in the Company's operations meeting the criteria for discontinued operations. The operations being disposed as part of the Asset Sale were not clearly distinguishable from the rest of the Company.
Revenue Recognition
The Company derives revenue primarily from subscription revenue, which consists of consumption-based agreements and subscription-based agreements for its cloud-based platform. The Company also sells professional services. Revenue is
13
Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
2. Summary of Significant Accounting Policies (Continued)
recognized when control of these services is transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those services, net of sales taxes.
For sales through channel partners, the Company considers the channel partner to be the end customer for the purposes of revenue recognition as the Company's contractual relationships with channel partners do not depend on the sale of the Company's services to their customers and payment from the channel partner is not contingent on receiving payment from their customers. The Company's contractual relationships with channel partners do not allow returns, rebates, or price concessions.
Pricing is generally fixed at contract inception and therefore, the Company's contracts do not contain a significant amount of variable consideration.
Revenue recognition is determined through the following steps:
•Identification of the contract, or contracts, with a customer
•Identification of the performance obligations in the contract
•Determination of the transaction price
•Allocation of the transaction price to the performance obligations in the contract
•Recognition of revenue when, or as, performance obligations are satisfied
Subscription Revenue
Subscription revenue primarily consists of fees paid by customers to access the Company’s cloud-based platform, including support services, through both consumption-based agreements and subscription-based agreements. The majority of these agreements have multi-year contractual terms and a smaller percentage have annual contractual terms. Consumption-based agreements utilize a tiered pricing structure for an annual purchase commitment based upon an estimated volume of usage. Revenue from the annual purchase commitment in consumption-based agreements is recognized ratably over the related contractual term of the contract. Amounts for the annual purchase commitments do not carry over beyond each annual commitment period. Revenue for subscription-based agreements is a function of customers, platform tier, number of users, price per user, and transaction and data volumes. Revenue for subscription-based agreements is also recognized ratably over the related contractual term beginning on the date that the platform is made available to a customer. Access to the platform represents a series of distinct services as the Company continually provides access to and fulfills its obligation to the end customer over the subscription term. The series of distinct services represents a single performance obligation that is satisfied over time. The Company recognizes revenue ratably because the customer receives and consumes the benefits of the platform throughout the contract period. The Company's contracts are generally non-cancelable.
Professional Services and Other Revenue
Professional services revenue consists of implementation services sold with new subscriptions as well as professional services sold separately. Other revenue includes training and education. Professional services arrangements are billed in advance, and revenue from these arrangements is recognized as the services are provided, generally based on hours incurred. Training and education revenue is also recognized as the services are provided.
Contracts with Multiple Performance Obligations
Most of the Company's contracts with new customers contain multiple performance obligations, generally consisting of subscriptions and professional services. For these contracts, individual performance obligations are accounted for separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. Standalone selling prices are determined based on historical standalone selling prices, taking into consideration overall pricing objectives, market conditions and other factors, including contract value, customer demographics, platform tier, and the number and types of users within the contract.
14
Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
2. Summary of Significant Accounting Policies (Continued)
Deferred Revenue
The Company's contracts are typically billed annually in advance. Deferred revenue includes amounts collected or billed in excess of revenue recognized. Deferred revenue is recognized as revenue as the related performance obligations are satisfied. Deferred revenue that will be recognized during the succeeding twelve-month period is recorded as a current liability and the remaining portion is recorded as a noncurrent liability.
Cost of Revenue
Cost of subscription revenue consists primarily of third-party hosting services and data center capacity; employee-related costs directly associated with cloud infrastructure and customer support personnel, including salaries, benefits, bonuses and stock-based compensation; amortization expense associated with capitalized software development costs; depreciation expense associated with computer equipment and software; certain fees paid to various third parties for the use of their technology and services; and allocated overhead. Allocated overhead includes items such as information technology infrastructure, rent, and employee benefit costs.
Advertising Costs
Insurance Recovery
The Company maintains insurance coverage for its business and operations. Insurance related to property, equipment, automobile, and general liability, is subject to a deductible or deductibles. If a claim arises and a potential insurance recovery becomes probable, the recovery is evaluated separately from the related loss. The recovery is recognized up to the amount of the loss once the recovery of the claim is deemed probable and any recovery in excess of the loss is a gain contingency and is not recognized until realized. The Company does not net insurance recoveries against the related claim liability as the claim liability is determined without regard to any anticipated recovery from third parties.
During the three months ended July 31, 2026, the Company received $2.0 million in insurance proceeds for a claim related to certain losses incurred. The Company recognized the recovery within operating expenses, in the same line items in which the related losses were originally recorded, offsetting a cumulative loss that exceeded the amount recovered. No gain was recognized in connection with this recovery.
Research and Development
Research and development expenses consist primarily of employee-related costs for the design and development of the Company's platform, contractor costs to supplement staff levels, third-party web services, consulting services, and allocated overhead. Research and development expenses, other than software development costs qualifying for capitalization, are expensed as incurred.
Stock-Based Compensation
The Company has granted stock-based awards, consisting of stock options and restricted stock units, to its employees, certain consultants and members of its board of directors. The Company records stock-based compensation based on the grant date fair value of the awards, which include restricted stock units and stock options, and generally recognizes the fair value of those awards as expense using the straight-line method over the requisite service period of the award.
For awards subject to market conditions, the fair value is determined using a Monte Carlo simulation model, which requires the use of various estimates, corresponding to the length of time remaining in the performance period. Stock-based
15
Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
2. Summary of Significant Accounting Policies (Continued)
compensation expense for awards with market conditions is recognized over the requisite service period using the accelerated attribution method and is not reversed if the market condition is not met.
Stock-based compensation expense related to purchase rights issued under the 2018 Employee Stock Purchase Plan, as amended (ESPP) is based on the Black-Scholes option-pricing model fair value of the estimated number of awards as of the beginning of the offering period. Stock-based compensation expense is recognized using the straight-line method over the offering period.
Income Taxes
The Company accounts for income taxes in accordance with the liability method of accounting for income taxes. Under this method, the Company recognizes a liability or asset for the deferred income tax consequences of all temporary differences between the tax basis of assets and liabilities and their reported amounts in the condensed consolidated financial statements that will result in taxable or deductible amounts in future years when the reported amounts of the assets and liabilities are recovered or settled. These deferred income tax assets or liabilities are measured using the enacted tax rates that will be in effect when the differences are expected to affect taxable income.
Valuation allowances are provided when it is more-likely-than-not that some or all of the deferred income tax assets may not be realized. In assessing the need for a valuation allowance, the Company has considered its historical levels of income, expectations of future taxable income and ongoing tax planning strategies. Because of the uncertainty of the realization of its deferred tax assets, the Company has a full valuation allowance for domestic net deferred tax assets, including net operating loss carryforwards, and tax credits related primarily to research and development. Realization of its deferred tax assets is dependent primarily upon future U.S. taxable income.
Tax positions are recognized in the condensed consolidated financial statements when it is more-likely-than-not the position will be sustained upon examination by the tax authorities. The Company’s policy for recording interest and penalties related to income taxes, including uncertain tax positions, is to record such items as a component of the provision for income taxes.
Concentrations of Credit Risk and Significant Customers
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, and accounts receivable. Cash denominated in currencies other than the United States dollar represented 24 % and 33 % of total cash and cash equivalents as of January 31, 2026 and July 31, 2026, respectively.
The Company maintains its cash accounts with financial institutions where, at times, deposits exceed federal insured limits. The Company may invest its excess cash in money market funds, certificates of deposit, or in short-term investments consisting of highly-rated debt securities.
No single customer accounted for more than 10% of revenue for the three and six months ended July 31, 2025 and 2026 or more than 10% of accounts receivable as of January 31, 2026 and July 31, 2026.
The Company is primarily dependent upon third parties in order to meet the uptime and performance requirements of its customers. Any disruption of or interference with the Company's use of these third parties would impact operations.
Net Loss per Share
The Company computes net loss per share using the two-class method required for multiple classes of common stock and participating securities. The rights, including the liquidation and dividend rights, of the Class A common stock and Class B common stock are substantially identical, other than voting rights. Accordingly, the Class A common stock and Class B common stock share equally in the Company’s net losses.
Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period increased by
16
Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
2. Summary of Significant Accounting Policies (Continued)
common shares that could be issued upon conversion or exercise of other outstanding securities to the extent those additional common shares would be dilutive. The dilutive effect of potentially dilutive securities is reflected in diluted net loss per share by application of the treasury stock method. During periods when the Company is in a net loss position, basic net loss per share is the same as diluted net loss per share as the effects of potentially dilutive securities are anti-dilutive.
Recent Accounting Pronouncements
In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disaggregated disclosures of relevant income statement expenses to improve financial reporting by enhancing transparency in the notes to the financial statements, specifically regarding expense categories. For public business entities, this ASU is effective for annual reporting periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027. The Company is currently evaluating the impact of adopting ASU 2024-03.
In September 2025, the FASB issued ASU No. 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which removes developmental stage-based framework and replaces them with a more principles-based model. Under this ASU, capitalization of internal-use software costs begins when management authorizes commits to funding the project and it is probable that the project will be completed and the software will be used as intended. ASU 2025-06 also aligns disclosure requirements with those in ASC 360-10 for property, plant, and equipment. The amendments in this Update are effective for all entities for annual reporting periods beginning after December 15, 2027 and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2025-06.
In November 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Improvements to Interim Disclosure Requirements. The amendments in this Update clarify disclosure requirements for interim financial statements. The amendments can be applied on either a prospective or retrospective basis. This ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2025-11.
3. Assets and Liabilities Held for Sale
Asset Purchase Agreement
On July 22, 2026, Domo, Inc., a Delaware corporation (the Company), and Progress Software Corporation, a Delaware corporation (Progress), entered into an Asset Purchase Agreement (the Purchase Agreement), pursuant to which Progress has agreed to acquire substantially all of the assets and employees, excluding the Company’s net operating loss (NOL) carryforwards, and assume certain liabilities of the Company including its operating business, technology platform, customer contracts, intellectual property, vendor relationships, foreign subsidiaries, and other assets and obligations related to the business for $400 million in cash, subject to certain purchase price adjustments. The transaction will be effected through the transfer of the equity interests of certain of the Company's subsidiaries, including its principal operating subsidiary and certain foreign subsidiaries, together with a transfer of assets held directly by the Company. The purchase price is subject to a downward adjustment to the extent the cash acquired at closing is less than $25.0 million, and to an adjustment for any certain indebtedness of the business or the acquired assets that remains outstanding and is not repaid at or prior to closing, as well as customary post-closing adjustments.
On August 24, 2026, the Company filed a definitive information statement on Schedule 14C with the Securities and Exchange Commission and commenced mailing it to stockholders of record as of July 22, 2026. Under the Asset Purchase
17
Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
3. Assets and Liabilities Held for Sale (Continued)
Agreement, the closing may not occur until at least 20 calendar days after that mailing. No further action by the Company's stockholders is required.
The Company's net operating loss carryforwards and certain other assets are excluded from the transaction and will be retained by the Company. The Company's existing credit facility is not being assumed by Progress. The Company will repay the credit facility in full at the closing of the Asset Sale.
The Company does not intend to liquidate following the closing, but expects to continue as a publicly traded company under a new name and ticker. The Purchase Agreement may be terminated under special circumstances, and in certain of those circumstances the Company would be required to pay Progress a termination fee of $13.5 million.
Assets and Liabilities Held for Sale
The Company evaluated the criteria for classification of the assets and liabilities to be sold as held for sale and concluded that those criteria were met as of July 22, 2026. However, because they represent substantially all of the Company's net assets, the Company does not present them as a single held-for-sale line item on the condensed consolidated balance sheet, as that presentation would not provide meaningful information to financial statement users. Instead, the Company continues to
18
Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
3. Assets and Liabilities Held for Sale (Continued)
present all of its assets and liabilities within their normal balance sheet classifications and provides the disclosures below regarding the assets and liabilities subject to sale.
The following table summarizes the carrying amounts of the major classes of assets and liabilities to be sold and assumed as part of the Asset Sale.
| As of July 31, | |||||
| 2026 | |||||
| Assets | |||||
| Current assets: | |||||
| Cash | $ | ||||
Accounts receivable, net of allowances of $ | |||||
| Contract acquisition costs, net | |||||
| Prepaid expenses and other current assets | |||||
| Total current assets | |||||
| Property and equipment, net | |||||
| Right-of-use assets | |||||
| Contract acquisition costs, noncurrent, net | |||||
| Intangible assets, net | |||||
| Goodwill | |||||
| Other assets | |||||
| Total assets held for sale | $ | ||||
| Liabilities | |||||
| Current liabilities: | |||||
| Accounts payable | $ | ||||
| Accrued expenses and other current liabilities | |||||
| Lease liabilities | |||||
| Deferred revenue | |||||
| Total current liabilities | |||||
| Lease liabilities, noncurrent | |||||
| Deferred revenue, noncurrent | |||||
| Other liabilities, noncurrent | |||||
| Total liabilities held for sale | $ | ||||
The Purchase Agreement specifies assets and liabilities that are excluded from the Asset Sale and retained by the Company. Retained assets include the Company's net operating loss carryforwards and other tax attributes, insurance policies, assets of certain foreign retained entities, and certain other assets detailed in the Purchase Agreement and disclosure schedules. Retained liabilities include the Company's term loan and related warrant liabilities, accrued payroll and commissions, liabilities of certain foreign retained entities, and certain other liabilities related to the retained assets and other contracts and matters identified in the Purchase Agreement and disclosure schedules.
4. Cash and Cash Equivalents
The amortized cost and estimated fair value of the Company’s cash and cash equivalents as of January 31, 2026 and July 31, 2026 were as follows (in thousands):
19
Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
4. Cash and Cash Equivalents (Continued)
| January 31, 2026 | |||||||||||||||||||||||
| Amortized Cost | Unrealized Gain | Unrealized Loss | Estimated Fair Value | ||||||||||||||||||||
| Cash | $ | $ | — | $ | — | $ | |||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | — | — | |||||||||||||||||||||
| Total cash and cash equivalents | $ | $ | — | $ | — | $ | |||||||||||||||||
| July 31, 2026 | |||||||||||||||||||||||
| Amortized Cost | Unrealized Gain | Unrealized Loss | Estimated Fair Value | ||||||||||||||||||||
| Cash | $ | $ | — | $ | — | $ | |||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | — | — | |||||||||||||||||||||
| Total cash and cash equivalents | $ | $ | — | $ | — | $ | |||||||||||||||||
5. Fair Value Measurements
Assets Measured at Fair Value on a Recurring Basis
Financial instruments recorded at fair value in the financial statements are categorized as follows:
•Level 1: Observable inputs that reflect quoted prices for identical assets or liabilities in active markets.
•Level 2: Observable inputs, other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3: Unobservable inputs reflecting management's assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
The following tables summarize the assets measured at fair value on a recurring basis as of January 31, 2026 and July 31, 2026 by level within the fair value hierarchy (in thousands):
| January 31, 2026 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | |||||||||||||||||||
Financial liability: | |||||||||||||||||||||||
| Warrant liability | $ | $ | $ | $ | |||||||||||||||||||
| July 31, 2026 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | |||||||||||||||||||
| Financial liability: | |||||||||||||||||||||||
| Warrant liability | $ | $ | $ | $ | |||||||||||||||||||
20
Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
5. Fair Value Measurements (Continued)
Level 3 instruments consisted of a liability related to warrants to purchase Class B common stock, which were issued in connection with the credit facility. See Note 12, "Debt" for further details surrounding this issuance. The warrant liability was recorded at fair value upon issuance and is remeasured at each subsequent quarterly period end date as long as the warrants are outstanding. Generally, increases (decreases) in the fair value of the underlying stock and estimated term would result in a directionally similar impact to the fair value measurement, and are recognized in other income (expense), net in the condensed consolidated statements of operations.
The changes in the fair value of the warrant liability were as follows (in thousands):
| Balance as of January 31, 2026 | $ | |||||||
| Change in fair value of Class B common stock warrants | ( | |||||||
| Balance as of April 30, 2026 | ||||||||
| Change in fair value of Class B common stock warrants | ||||||||
| Balance as of July 31, 2026 | $ | |||||||
The value of the warrant liabilities are estimated using the Black-Scholes option-pricing model with the following assumptions:
| Six Months Ended July 31, | |||||
| 2026 | |||||
| Expected stock price volatility | |||||
| Expected term | |||||
| Risk-free interest rate | |||||
| Expected dividend yield | |||||
During the three and six months ended July 31, 2025 and 2026, the Company had no transfers between levels of the fair value hierarchy of its assets and liabilities measured at fair value.
Fair Value of Other Financial Instruments
The carrying amounts of certain financial instruments, including cash held in banks, accounts receivable, accounts payable, accrued liabilities, and other liabilities approximate fair value due to their short-term maturities and are excluded from the fair value tables above.
21
Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
6. Property and Equipment
Property and equipment, net consisted of the following (in thousands):
| As of January 31, | As of July 31, | ||||||||||
| 2026 | 2026 | ||||||||||
Capitalized internal-use software development costs | $ | $ | |||||||||
Computer equipment and software | |||||||||||
Leasehold improvements | |||||||||||
Furniture, vehicles and office equipment | |||||||||||
Less accumulated depreciation and amortization | ( | ( | |||||||||
| $ | $ | ||||||||||
Depreciation and amortization expense related to property and equipment was $2.2 million and $2.2 million for the three months ended July 31, 2025 and 2026, respectively, and $4.3 million and $4.7 million for the six months ended July 31, 2025 and 2026, respectively.
The Company capitalized $3.0 million and $2.0 million in software development costs during the three months ended July 31, 2025 and 2026, respectively, and $6.0 million and $4.2 million during the six months ended July 31, 2025 and 2026, respectively. Amortization of capitalized software development costs was $1.6 million and $1.7 million for the three months ended July 31, 2025 and 2026, respectively, and $3.3 million and $3.7 million for the six months ended July 31, 2025 and 2026, respectively.
7. Intangible Assets
Intangible assets consisted of the following (in thousands):
| As of January 31, | As of July 31, | ||||||||||
| 2026 | 2026 | ||||||||||
Intellectual property excluding patents | $ | $ | |||||||||
Patents | |||||||||||
Less accumulated amortization | ( | ( | |||||||||
| $ | $ | ||||||||||
Amortization expense related to intangible assets was $0.2 million and $0.1 million for the three months ended July 31, 2025 and 2026, respectively, and $0.3 million and $0.3 million for the six months ended July 31, 2025 and 2026. The patents were acquired and are being amortized over a weighted-average remaining useful life of approximately 1.3 years. Intellectual property excluding patents is being amortized over a remaining useful life of 2.5 years.
22
Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
8. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
| As of January 31, | As of July 31, | ||||||||||
| 2026 | 2026 | ||||||||||
Accrued expenses | $ | $ | |||||||||
Accrued payroll and benefits | |||||||||||
Accrued commissions | |||||||||||
| Accrued bonus | |||||||||||
Accrued payroll taxes | |||||||||||
Sales and other taxes payable | |||||||||||
Employee stock purchase plan liability | |||||||||||
Short-term payable financing liability | |||||||||||
Other accrued liabilities | |||||||||||
| $ | $ | ||||||||||
Short-term Payable Financing
From time to time the Company has entered into short-term payable financing agreements pursuant to which the counterparty assumes responsibility for payables for approximately 30 -60 days to designated suppliers at the discretion of the Company.
9. Leases
The Company leases office space under non-cancelable operating leases with various expiration dates through 2028. These leases require monthly lease payments that may be subject to annual increases throughout the lease term.
Components of lease expense are summarized as follows (in thousands):
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2025 | 2026 | 2025 | 2026 | ||||||||||||||||||||
| Operating lease expense | $ | $ | $ | $ | |||||||||||||||||||
| Short-term lease expense | |||||||||||||||||||||||
| Total lease expense | $ | $ | $ | $ | |||||||||||||||||||
| Sublease income | $ | $ | $ | $ | |||||||||||||||||||
Lease term and discount rate information are summarized as follows:
23
Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
9. Leases (Continued)
| As of July 31, 2026 | |||||
| Weighted average remaining lease term (years) | |||||
| Weighted average discount rate | |||||
Maturities of lease liabilities as of July 31, 2026 were as follows (in thousands):
| Year Ending January 31: | |||||
| 2027 | $ | ||||
| 2028 | |||||
| 2029 | |||||
| Total lease payments | |||||
| Less imputed interest | ( | ||||
| Present value of lease liabilities | $ | ||||
Cash paid for operating leases was $1.1 million and $2.2 million during the three months ended July 31, 2025 and 2026, respectively, and $2.7 million and $4.8 million during the six months ended July 31, 2025 and 2026, respectively, and was included in net cash used in operating activities in the condensed consolidated statements of cash flows.
10. Deferred Revenue and Performance Obligations
Deferred Revenue
Significant changes in the Company's deferred revenue balance for the six months ended July 31, 2026 were as follows (in thousands):
| Balance as of January 31, 2026 | $ | |||||||
| Revenue recognized that was included in the deferred revenue balance at the beginning of the period | ( | |||||||
| Increase due to billings excluding amounts recognized as revenue during the period | ||||||||
| Balance as of July 31, 2026 | $ | |||||||
Unbilled Receivables
The timing of revenue recognition may differ from the timing of invoicing to customers, and these timing differences result in unbilled receivables. Unbilled receivables are recorded when there is an unconditional right to payment and invoicing has not yet occurred. As of January 31, 2026 and July 31, 2026, unbilled receivables were $2.8 million and $3.6 million, respectively. Unbilled receivables are included in accounts receivable, net on the Company's condensed consolidated balance sheets.
Transaction Price Allocated to Remaining Performance Obligations
Transaction price allocated to remaining performance obligations represents the remaining amount of revenue the Company expects to recognize from existing non-cancelable contracts, whether billed or unbilled. As of July 31, 2026, approximately $387.6 million of revenue was expected to be recognized from remaining performance obligations for subscription contracts. The Company expects to recognize approximately $214.4 million of this amount during the twelve months following July 31, 2026, with the balance recognized thereafter. As of July 31, 2026, approximately $23.2 million of revenue was expected to be recognized from remaining performance obligations for professional services and other contracts, $17.0 million of which is expected to be recognized during the twelve months following July 31, 2026, and the balance recognized thereafter.
24
Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
11. Geographic Information
Revenue by geographic area is determined by the billing address of the customer. The following table sets forth revenue by geographic area (in thousands):
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2025 | 2026 | 2025 | 2026 | ||||||||||||||||||||
| United States | $ | $ | $ | $ | |||||||||||||||||||
| International | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
| Percentage of revenue by geographic area: | |||||||||||||||||||||||
| United States | % | % | % | % | |||||||||||||||||||
| International | |||||||||||||||||||||||
Other than the United States, no other individual country exceeded 10% of total revenue for the three and six months ended July 31, 2025 and 2026. As of July 31, 2026, substantially all of the Company’s property and equipment was located in the United States.
12. Debt
Credit Facility
The Company has a credit facility that permits up to $125.3 million in term loan borrowings, all of which had been drawn as of July 31, 2026. The credit facility is secured by substantially all of the Company's assets.
In February 2024, the Company entered into an amendment to the credit facility which extended the maturity date for the outstanding loan from April 1, 2025 to April 1, 2026 and made certain modifications to the financial covenants. In conjunction with this amendment, the Company issued 189,036 fully-vested warrants to purchase shares of its Class B common stock. These warrants have an exercise price of $0.01 per share and expire on February 17, 2028.
In August 2024, the Company entered into an amendment to the credit facility which refinanced the existing term loans, extended the maturity date from April 1, 2026 to August 19, 2028, revised interest amounts payable in cash and payable in kind, and made certain modifications to the financial covenants. Furthermore, certain lenders participating in the credit facility were paid in full for their portion of the principal, PIK interest, and amendment fee and were replaced by new lenders who refinanced those amounts. The Company paid and subsequently refinanced the $7.0 million closing fee associated with the credit facility, resulting in no net impact to its cash balance. Additionally, the $5.0 million amendment fee from the August 2020 amendment plus $2.3 million of accrued PIK interest, totaling $7.3 million, was refinanced as the Second PIK Amendment Fee per the August 2024 amendment. The Second PIK Amendment Fee accrues interest at a rate of 9.5 % per year and is due upon maturity, along with the related capitalized interest. Also in conjunction with this amendment, the Company issued 1,022,918 fully-vested warrants to purchase shares of its Class B common stock. These warrants have an exercise price of $0.01 per share and expire on August 19, 2028.
The credit facility requires interest-only payments on a portion of the accrued interest until the maturity date. This payable portion of the interest accrues on the outstanding principal of the term loan and is due in cash on a monthly basis, which, as of July 31, 2026, accrued at a floating rate equal to the greater of (1) 8.0 % and (2) Adjusted Term SOFR. Adjusted Term SOFR is defined as the greater of (a) 2.5 % and (b) three-month term SOFR. In the event that SOFR is unavailable, interest will accrue at a floating rate equal to the greater of (1) 7.0 % and (2) the Alternate Base Rate plus 2.75 % per year. The Alternate Base Rate is defined as the greatest of (a) the Prime Rate (b) Federal Funds Effective Rate plus 0.5 % and (c) Adjusted Term SOFR plus 1.0 %. The Federal Funds Effective rate is defined as the rate published by the Federal Reserve System as the overnight rate, or, if such rate is not so published, the average of the quotations for the day for such transaction
25
Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
12. Debt (Continued)
received by Administrative Agent from three Federal funds brokers. As of July 31, 2026, the cash interest rate was approximately 6.6 %. In addition to the 6.6 % cash interest rate, a fixed rate equal to 5.0 % per year accrues on the outstanding principal of the term loan. This capitalized portion of the interest is added to the principal amount of the outstanding term loan on a monthly basis and is due upon maturity. During the three months ended July 31, 2025 and 2026, $1.7 million and $1.7 million of interest was capitalized, respectively, and $3.3 million and $3.4 million of interest was capitalized during the six months ended July 31, 2025 and 2026, respectively.
The credit facility also requires payment upon maturity of the $7.3 million Second PIK amendment fee, plus capitalized interest, as mentioned above per the August 2024 amendment. The amendment fee accrues interest at a rate of 9.5 % per year. Due to the long-term nature of the Second PIK Amendment Fee, it was recorded at present value as an increase to other liabilities, noncurrent and an increase to debt issuance costs. The liability will be accreted to its full value over the term of the loan, with such accretion recorded as interest expense in other expense, net in the condensed consolidated statements of operations. Debt issuance costs are presented as an offset to the outstanding principal balance of the term loan on the condensed consolidated balance sheets and are being amortized as interest expense in other expense, net in the condensed consolidated statements of operations over the term of the loan using the effective interest rate method.
Warrants issued in connection with the credit facility were recorded as an increase to other accrued liabilities with a corresponding increase to debt issuance costs, which is included in long-term debt on the Company's condensed consolidated balance sheets. Related interest expense is recognized in other expense, net in the condensed consolidated statements of operations using the effective interest method. See Note 14, "Stockholders' Deficit" for further details and outstanding balances regarding Class B common stock warrants.
The balances in long-term debt as of January 31, 2026 consisted of the following (in thousands):
| As of January 31, | |||||
| 2026 | |||||
| Principal | $ | ||||
| Less: unamortized debt issuance costs | ( | ||||
| Net carrying amount | $ | ||||
The credit facility contains customary conditions to borrowing, events of default and covenants, including covenants that restrict the Company's ability to dispose of assets, make material changes to the nature, control or location of the business, merge with or acquire other entities, incur indebtedness or encumbrances, make distributions to holders of the Company's capital stock, make certain investments or enter into transactions with affiliates. In addition, the Company is required to comply with a minimum annualized recurring revenue covenant, (as defined by the credit facility) tested quarterly. The credit facility defines annualized recurring revenue as four times the Company's aggregate revenue for the immediately preceding quarter (net of recurring discounts and discounts for periods greater than one year ) less the annual contract value of any customer contracts pursuant to which the Company was advised during such quarter would not be renewed at the end of the current term plus the annual contract value of existing customer contract increases during such quarter. The Company is also required to comply with a minimum trailing 12-month consolidated EBITDA covenant (as defined by the credit facility), which is tested quarterly, and adhere to a monthly minimum liquidity covenant (as defined by the credit facility) that requires unrestricted cash on a consolidated basis of $25.0 million deposited in pledged accounts located in the United States. Noncompliance with these covenants, or the occurrence of certain other events specified in the credit facility, could result in an event of default under the loan agreement. If an event of default has occurred and the Company is unable to obtain a waiver, any outstanding principal, interest and fees could become immediately due and payable. The Company was in compliance with the covenant terms of the credit facility on January 31, 2026. As of April 30, 2026, the Company was not in compliance with the minimum annualized recurring revenue covenant, and as of July 31, 2026 the Company remained out of compliance with that covenant. The Company is in compliance with its minimum trailing 12-month consolidated EBITDA covenant. This noncompliance gives the lenders the right to accelerate repayment, and the Company has not obtained a waiver or amendment that cures the noncompliance or extends the repayment date by more than twelve months from the balance sheet date. As a result, the related long-term debt and associated Second PIK amendment fee continue to be classified as current liabilities. As described below, the Company subsequently entered into a forbearance agreement with its lenders with respect to this noncompliance.
26
Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
12. Debt (Continued)
The balances in current debt as of July 31, 2026 consisted of the following (in thousands):
| As of July 31, | |||||
| 2026 | |||||
| Principal | $ | ||||
| Less: unamortized debt issuance costs | ( | ||||
| Net carrying amount | |||||
Carrying value of second PIK amendment fee | |||||
Current debt | $ | ||||
Effective June 12, 2026, the Company entered into a forbearance agreement with its lenders and agents, under which the lenders agreed to forbear from exercising their rights and remedies with respect to the noncompliance described above and certain other specified and anticipated defaults during a forbearance period. The forbearance agreement does not waive the underlying defaults and does not change the stated interest rate, principal, or the maturity of the term loan. The forbearance period ends on the earliest of specified events, including the Company's failure to enter into a definitive agreement for a sale of the Company by July 31, 2026, the failure to consummate such a transaction by November 30, 2026, the failure to maintain $10.0 million of unrestricted cash on a consolidated basis deposited in pledged accounts located in the United States, and the occurrence of other events of default. The forbearance agreement also requires the net proceeds of a qualifying sale transaction to be applied to repay the term loan in full. Upon expiration of the forbearance period the lenders may exercise their rights and remedies, including acceleration.
On July 22, 2026, prior to the July 31, 2026 deadline described above, the Company entered into a definitive asset purchase agreement for a qualifying sale transaction. As a result, the forbearance period is anticipated to continue to its November 30, 2026 date. See Note 3, "Assets and Liabilities Held for Sale" for further details regarding the Asset Sale.
The Company evaluated the forbearance agreement and concluded that it represented a modification, rather than an extinguishment, of the term loan. Accordingly, no gain or loss was recognized. In connection with the forbearance agreement, the Company paid fees of approximately $5.9 million in cash upon effectiveness, of which, $5.8 million was paid to lenders and is being referred to as the "Forbearance Fee." The Forbearance Fee was recorded as an increase to debt issuance costs against the carrying amount of the term loan and is recognized over the remaining life of the debt. As a result of the modification, the maturity date of the debt was adjusted to be November 30, 2026, which is the earliest date at which the lenders would be able to call the debt. All remaining debt issuance costs, along with the Second PIK Amendment Fee, are being amortized over this period.
The Company incurred interest expense of $5.1 million and $7.4 million for the three months ended July 31, 2025 and 2026, respectively, and $9.9 million and $12.3 million for the six months ended July 31, 2025 and 2026, respectively.
13. Commitments and Contingencies
Litigation
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.
The Company is involved in legal proceedings from time to time arising in the normal course of business. Management believes that the outcome of these proceedings will not have a material impact on the Company's financial condition, results of operations, or liquidity.
Warranties and Indemnification
The Company’s subscription services are generally warranted to perform materially in accordance with the terms of the applicable customer service order under normal use and circumstances. Additionally, the Company’s arrangements generally include provisions for indemnifying customers against liabilities if its subscription services infringe a third party’s intellectual
27
Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
13. Commitments and Contingencies (Continued)
property rights. Furthermore, the Company may also incur liabilities if it breaches the security or confidentiality obligations in its arrangements. To date, the Company has not incurred significant costs and has not accrued a liability in the accompanying condensed consolidated financial statements as a result of these obligations.
The Company has entered into service-level agreements with some of its customers defining levels of uptime reliability and performance and permitting those customers to receive credits for prepaid amounts related to unused subscription services if the Company fails to meet certain of the defined service levels. In very limited instances, the Company allows customers to early terminate their agreements if the Company repeatedly or significantly fails to meet those levels. If the Company repeatedly or significantly fails to meet contracted upon service levels, a contract may require a refund of prepaid unused subscription fees. To date, the Company has not experienced any significant failures to meet defined levels of uptime reliability and performance as set forth in its agreements and, as a result, the Company has not accrued any liabilities related to these agreements in the condensed consolidated financial statements.
Other Purchase Commitments
The Company has also entered into certain non-cancelable contractual commitments related to cloud infrastructure services in the ordinary course of business. There have been no material changes in these commitments as disclosed in the Annual Report on Form 10-K.
14. Stockholders' Deficit
Preferred Stock
The Company's Board of Directors has the authority, without further action by the Company's stockholders, to issue up to 10,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, and privileges thereof, including voting rights. As of January 31, 2026 and July 31, 2026, no
Common Stock
The Company has two classes of common stock, Class A and Class B. Each share of Class A common stock is entitled to 40 votes per share and is convertible at any time into one share of Class B common stock. Each share of Class A common stock will convert automatically into one share of Class B common stock upon any transfer, whether or not for value. Each share of Class B common stock is entitled to one vote per share. Holders of Class A common stock and Class B common stock vote together as a single class on all matters (including the election of directors) submitted to a vote of stockholders, unless otherwise required by law or the Company's certificate of incorporation. Subject to preferences that may be applicable to any then-outstanding preferred stock, holders of Class A common stock and Class B common stock are entitled to receive dividends, if any, as may be declared by the Company's board of directors.
At January 31, 2026 and July 31, 2026, there were 3,263,659
At January 31, 2026 and July 31, 2026, there were 500,000,000 39,186,549 43,772,502
On September 6, 2024, the Company entered into a Controlled Equity OfferingSM Sales Agreement (Sales Agreement) with Cantor Fitzgerald & Co. (Cantor). Pursuant to the Sales Agreement, the Company may sell, from time to time up to an aggregate of $150.0 million of our Class B common stock through an “at-the-market” offering defined in Rule 415 under the Securities Act. The Company will pay Cantor a commission equal to 3.0 % of the gross proceeds from the sale of shares of its Class B common stock under the Sales Agreement. The $150.0 million of Class B common stock that may be offered, issued and sold under the Sales Agreement is included in the $300.0 million of securities that may be offered, issued and sold by the Company under its registration statement on Form S-3 that was effective on September 20, 2024. No shares have been sold pursuant to the Sales Agreement to date.
28
Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
14. Stockholders' Deficit (Continued)
Class B Common Stock Warrants
In connection with a line of credit signed in July 2016, the Company issued warrants to purchase 3,333 shares of its Class B common stock, which were exercisable at $34.35 per share. These warrants expired in July 2026 and were no longer outstanding as of July 31, 2026.
15. Equity Incentive Plans
In April 2011, the Company established the 2011 Equity Incentive Plan (2011 Plan), which was amended in September 2011 to provide for the issuance of stock options and other stock-based awards. In June 2018, the Company adopted the 2018 Equity Incentive Plan (2018 Plan). The 2018 Plan provides for the grant of incentive and nonstatutory stock options, restricted stock, RSUs, stock appreciation rights, performance units, and performance shares to employees, consultants, and members of the Company's board of directors.
The number of shares available for issuance under the 2018 Plan includes an annual increase on the first day of each fiscal year equal to the least of: (1) 3,500,000 shares; (2) 5 % of the outstanding shares of Class A and Class B common stock as of the last day of the immediately preceding fiscal year; and (3) such other amount as the Company's board of directors may determine no later than the last day of the immediately preceding year. During the six months ended July 31, 2026, the number of shares available for grant under the 2018 Plan was increased by 2,122,510 shares. As of July 31, 2026, there were 245,883 shares available for grant under the 2018 Plan.
In connection with the IPO, the 2011 Plan was terminated. With the establishment of the 2018 Plan, the Company no longer grants equity-based awards under the 2011 Plan and any shares that expire, terminate, are forfeited or repurchased by the Company, or are withheld by the Company to cover tax withholding obligations, under the 2011 Plan, will become available for future grant under the 2018 Plan.
The Company recognized stock-based compensation expense related to its equity incentive plans as follows (in thousands):
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2025 | 2026 | 2025 | 2026 | ||||||||||||||||||||
Cost of revenue: | |||||||||||||||||||||||
Subscription | $ | $ | $ | $ | |||||||||||||||||||
Professional services and other | |||||||||||||||||||||||
Sales and marketing | |||||||||||||||||||||||
Research and development | |||||||||||||||||||||||
General and administrative | |||||||||||||||||||||||
Other expense, net | |||||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
29
Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
15. Equity Incentive Plans (Continued)
Stock Options
Stock options typically vest over a four-year period and have a term of ten years from the date of grant. There were no
The following table sets forth the outstanding common stock options and related activity for the six months ended July 31, 2026:
| Shares Subject to Outstanding Options | Weighted- Average Exercise Price per Share | Weighted-Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (in thousands) | ||||||||||||||||||||
| Outstanding as of January 31, 2026 | $ | $ | |||||||||||||||||||||
| Expired | ( | $ | |||||||||||||||||||||
| Outstanding as of July 31, 2026 | $ | $ | |||||||||||||||||||||
The aggregate intrinsic value of options exercised was $0 no
As of July 31, 2026, all outstanding stock options were vested and exercisable and stock-based compensation expense related to all outstanding stock options has been recognized.
Restricted Stock Units
Restricted stock units (RSUs) granted under the Plan primarily vest and settle upon the satisfaction of a service-based condition. The service-based condition for these awards is generally satisfied over or four years with a cliff vesting period of or two years and quarterly vesting thereafter. RSUs include performance-based restricted stock units (PSUs), which are subject to a market condition and settle upon the satisfaction of a service-based condition. Disclosures related to RSU activity include the impact of PSUs.
During the year ended January 31, 2026, the Company granted its chief executive officer 450,000 PSUs that contain both a market and service-based condition. The PSUs are separated into four tranches, which are all eligible to vest on the one-year anniversary of the grant date and upon the Company's Class B common stock achieving various stock price hurdles based on a 30 -trading day average closing price. The grant date fair values, and in part, the requisite service periods, were determined by a Monte Carlo simulation model. Stock-based compensation related to these PSUs will be recognized over the
30
Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
15. Equity Incentive Plans (Continued)
requisite service period and expire on the four-year anniversary of the grant date. In the event that the stock price hurdle is not met for any given tranche within four years of the grant date, those respective awards are forfeited entirely.
The details of this award are summarized as follows:
Minimum Time Vest | Number of Shares | Stock Price Hurdle | Grant Date Fair Value | Requisite Service (in years) | ||||||||||||||||||||||||||||
| Tranche 1 | One-year anniversary of grant date | $ | $ | |||||||||||||||||||||||||||||
| Tranche 2 | One-year anniversary of grant date | |||||||||||||||||||||||||||||||
| Tranche 3 | One-year anniversary of grant date | |||||||||||||||||||||||||||||||
| Tranche 4 | One-year anniversary of grant date | |||||||||||||||||||||||||||||||
The following table sets forth the outstanding RSUs and related activity for the six months ended July 31, 2026:
| Number of Shares | Weighted- Average Grant Date Fair Value | ||||||||||
| Outstanding as of January 31, 2026 | $ | ||||||||||
| Granted | $ | ||||||||||
| Vested | ( | $ | |||||||||
| Canceled | ( | $ | |||||||||
| Outstanding as of July 31, 2026 | $ | ||||||||||
As of July 31, 2026, there was $37.0 million of unrecognized stock-based compensation expense related to outstanding RSUs which is expected to be recognized over a weighted-average period of 2.4 years.
Pursuant to the Purchase Agreement dated July 22, 2026, the Company is permitted to accelerate the vesting of any Company equity awards outstanding as of the date of the Purchase Agreement, effective as of immediately prior to closing, subject to the employee's continuous service to the Company at the date of acceleration. On August 11, 2026, the Company's Compensation Committee approved the accelerated vesting of RSUs as of the closing date held by employees, who are not party to Change in Control Severance Agreements that would have otherwise vested through March 20, 2027. As a result, approximately 1.0 million shares of the Company's Class B common stock will vest upon the acceleration.
Employee Stock Purchase Plan
In June 2018, the Company's board of directors adopted the ESPP. The number of shares of Class B common stock available for issuance under the ESPP increases on the first day of each fiscal year equal to the least of: (1) 1,050,000 shares of Class B common stock, (2) 1.5 % of the outstanding shares of Class A and Class B common stock of the Company on the last day of the immediately preceding fiscal year, and (3) such other amount as the administrator of the ESPP may determine on or before the last day of the immediately preceding year. During the six months ended July 31, 2026, the number of shares available under the ESPP was increased by 636,753 shares. As of July 31, 2026, there were 1,361,993 shares available under the ESPP.
The ESPP generally provides for consecutive overlapping 12-month offering periods comprising two six-month purchase periods. The offering periods are scheduled to start on the first trading day on or after April 1 and October 1 of each year. The ESPP is intended to qualify as a tax-qualified plan under Section 423 of the Internal Revenue Code and permits participants to elect to purchase shares of Class B common stock through payroll deductions of up to 25 % of their eligible compensation. Under the ESPP, a participant may purchase a maximum of 300 shares during each purchase period.
Amounts deducted and accumulated by the participant will be used to purchase shares of Class B common stock at the end of each purchase period. The purchase price of the shares will be 85 % of the lower of the fair market value of Class B
31
Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
15. Equity Incentive Plans (Continued)
common stock on the first trading day of each offering period or the fair market value of Class B common stock on the applicable exercise date. If the fair market value of a share of Class B common stock on the exercise date of an offering period is less than it was on the first trading day of that offering period, participants automatically will be withdrawn from that offering period following their purchase of shares on the exercise date and will be re-enrolled in a new offering period. Participants may end their participation at any time during an offering period and will be paid their accrued contributions that have not yet been used to purchase shares of Class B common stock. Participation ends automatically upon termination of employment.
As of July 31, 2026, a total of approximately 185,147 shares were issuable to employees based on estimated shares available and contribution elections made under the ESPP. Estimated shares available were estimated assuming that the plan will be increased by an amount approximating 1.5 % of shares outstanding as of January 31, 2026. As of July 31, 2026, total unrecognized stock-based compensation related to the ESPP was $0.3 million, which is expected to be recognized over a weighted-average period of 0.4 years.
Subsequent to July 31, 2026, the board of directors approved the current ESPP purchase period to end on September 1, 2026. Amounts deducted and accumulated by the participant were used to purchase 0.1 million shares of Class B common stock on this date. As of September 1, 2026, the plan is suspended and no re-enrollment will take place for a new offering period.
16. Income Taxes
The Company calculated the year-to-date income tax provision by applying the estimated annual effective tax rate to the year-to-date pre-tax income for each applicable jurisdiction and adjusted for discrete tax items in the period. The Company's tax expense was $0.2 million and $0.1 million for the three months ended July 31, 2025 and 2026, respectively, and $0.4 million and $0.5 million for the six months ended July 31, 2025 and 2026, respectively. The income tax for these periods was primarily attributable to foreign and state taxes.
For the periods presented, the difference between the U.S. statutory rate and the Company's effective tax rate is primarily due to the full valuation allowance on its U.S. tax assets. The effective tax rate is also impacted by earnings realized in foreign jurisdictions.
17. Net Loss Per Share
The Company computes net loss per share using the two-class method required for multiple classes of common stock and participating securities. The rights, including the liquidation and dividend rights, of the Class A common stock and Class B common stock are substantially identical, other than voting rights. Accordingly, the Class A common stock and Class B common stock share equally in the Company’s net losses.
The following table sets forth the calculation of basic and diluted net loss per share during the periods presented (in thousands, except per share amounts):
| Three Months Ended July 31, | |||||||||||||||||||||||
| 2025 | 2026 | ||||||||||||||||||||||
| Class A | Class B | Class A | Class B | ||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average number of shares used in computing net loss per share, basic and diluted | |||||||||||||||||||||||
| Net loss per share, basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
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Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
17. Net Loss Per Share (Continued)
| Six Months Ended July 31, | |||||||||||||||||||||||
| 2025 | 2026 | ||||||||||||||||||||||
| Class A | Class B | Class A | Class B | ||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average number of shares used in computing net loss per share, basic and diluted | |||||||||||||||||||||||
| Net loss per share, basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods as the inclusion of all potential common shares outstanding would have been anti-dilutive. The weighted-average impact of potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive was as follows (in thousands):
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2025 | 2026 | 2025 | 2026 | ||||||||||||||||||||
| Restricted stock units | |||||||||||||||||||||||
| Employee stock purchase program | |||||||||||||||||||||||
| Common stock warrants | |||||||||||||||||||||||
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This discussion contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements containing words such as “may,” “believe,” “could,” "will,” “seek,” “depends,” “anticipate,” “expect,” “intend,” “plan,” “project,” “projections,” “business outlook,” “estimate,” or similar expressions constitute forward-looking statements. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition or state other “forward-looking” information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. They include, but are not limited to, statements about:
•our ability to satisfy the conditions to, and consummate the transactions contemplated by the Purchase Agreement, including the receipt of required regulatory approvals, on the anticipated timeline or at all;
•the risk that the Purchase Agreement may be terminated in circumstances requiring us to pay Progress a termination fee of $13.5 million;
•our ability to maintain relationships with our employees, customers, licensees, and other business partners during the pendency of the transactions contemplated by the Purchase Agreement;
•disruptions to our business, including diversion of management attention, resulting from the pendency of the Purchase Agreement;
•our plans for the use of the net cash proceeds from the transactions contemplated by the Purchase Agreement, including our ability to complete the intended use of such proceeds;
•our ability to preserve our net operating loss carryforwards and other tax attributes, including the effectiveness of our Tax Benefits Preservation Plan in deterring an “ownership change” under Section 382 of the Internal Revenue Code;
•our expectations regarding our status and operations as a public company following the closing of the transactions contemplated by the Purchase Agreement, including any change in our corporate name and trading symbol;
•the impact of the forbearance agreement with our lenders under our credit facility, and the risk of default or acceleration of our indebtedness, pending the closing of the transactions contemplated by the Purchase Agreement;
•our ability to attract new customers and retain and expand our relationships with existing customers;
•our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit, operating expenses, key metrics, ability to generate cash flow and ability to achieve and maintain future profitability;
•the potential impact on our business transitioning to a consumption-based pricing model;
•the anticipated trends, market opportunity, growth rates and challenges in our business and in the business intelligence software market;
•the efficacy of our sales and marketing efforts;
•our ability to compete successfully in competitive markets;
•our ability to respond to and capitalize on rapid technological changes;
•our expectations and management of future growth;
•our ability to enter new markets and manage our expansion efforts, particularly internationally;
•our ability to develop new product features;
•our ability to attract and retain key employees and qualified technical and sales personnel;
•our ability to effectively and efficiently protect our brand;
•our ability to timely scale and adapt our infrastructure;
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•the effect of general economic and market conditions, including changes in regulations and customs, tariffs and trade barriers, on our business and on our customers;
•our ability to protect our customers’ data and proprietary information;
•our ability to maintain, protect, and enhance our intellectual property and not infringe upon others’ intellectual property; and
•our ability to comply with all governmental laws, regulations and other legal obligations.
Our actual results may differ materially from those contained in or implied by any forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this report, including those factors discussed in Part II, Item 1A (Risk Factors).
In light of the significant uncertainties and risks inherent in these forward-looking statements, you should not regard these statements as a representation or warranty by us or anyone else that we will achieve our objectives or plans in any specified time frame, or at all, or as predictions of future events. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Overview
We founded Domo in 2010 with the vision of digitally connecting everyone within the enterprise with real-time, rich, relevant data and then enabling all employees to collaborate and act on that data. We realized that many organizations were unable to access the massive amounts of data that they were collecting in siloed cloud applications and on-premise databases. Furthermore, even for organizations that were capable of accessing their data, the process for doing so was time-consuming, costly, and often resulted in the data being out-of-date by the time it reached decision makers. The delivery format, including alert functionality, and devices were not adequate for the connected and real-time mobile workforce. Based on these observations, it was apparent that all organizations, regardless of size or industry, were failing to unlock the power of all of their people, data, and systems. To address these challenges, we provide a modern cloud-based AI and data products platform that digitally connects everyone at an organization – from the CEO to frontline employees – with all the people, data and systems in an organization, giving them access to real-time data and insights and allowing them to build data products that generate measurable value for the business.
Business leaders, department heads and managers are typically initial subscribers to our platform, deploying Domo to solve a business problem or enable departmental access. Over time, as customers recognize the value of our platform, we engage with CIOs and other executives to facilitate broader adoption.
We primarily offer our platform, which customers can adopt in whole or in part, as a consumption-based service, which includes consumption-based agreements and enterprise-wide agreements (ELAs) with unlimited users and a data cap. Customers with consumption-based agreements have an annual purchase commitment based on estimated usage, utilizing a tiered pricing structure, which is paid upfront. Historically, we also offered subscription-based agreements, under which subscription fees are based upon the chosen Domo package which includes tier-based platform capabilities or usage. As of the end of our most recent fiscal quarter, 91% of our annual recurring revenue (ARR) was utilizing the platform as a consumption-based service.
As of July 31, 2026, 77% of our customers were under multi-year contracts on a dollar-weighted basis, compared to 76% of customers as of January 31, 2026. The high percentage revenue from multi-year contracts, among both new and existing customers, has enhanced the predictability of our subscription revenue, which includes both subscription-based and consumption-based agreements. We typically invoice our customers annually in advance for subscriptions to our platform.
Remaining performance obligations (RPO) represents the remaining amount of revenue we expect to recognize from existing non-cancelable contracts, whether billed or unbilled. As of July 31, 2025 and 2026, total RPO was $430.9 million and $410.8 million, respectively. The amount of RPO expected to be recognized as revenue in the next twelve months was $236.4 million and $231.5 million as of July 31, 2025 and 2026, respectively.
We had total revenue of $79.7 million and $76.8 million for the three months ended July 31, 2025 and 2026, respectively. For the six months ended July 31, 2025 and 2026, we had total revenue of $159.8 million and $156.2 million, respectively. For the six months ended July 31, 2025 and 2026, no single customer accounted for more than 10% of our total
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revenue, nor did any single organization when accounting for multiple subsidiaries or divisions which may have been invoiced separately. Revenue from customers with billing addresses in the United States comprised 80% and 79% or our total revenue for the three months ended July 31, 2025 and 2026, respectively.
We have incurred significant net losses since our inception, including net losses of $22.9 million and $9.6 million for the three months ended July 31, 2025 and 2026, respectively, and had an accumulated deficit of $1,570.7 million at July 31, 2026.
Impact of Macroeconomic Conditions
Prevailing macroeconomic conditions have elongated the software sales cycle, increased deal scrutiny and made renewal discussions more challenging. These conditions may continue to impact our business and those of our customers in a manner that we may not be able to quantify or isolate from other drivers of our performance, and may negatively impact our revenue growth in the near term. Ongoing concerns about the health of the U.S. and global economies may cause certain of our current and potential customers to reduce or delay technology spending or seek payment or other concessions from us. These conditions, along with the ongoing uncertainty in the SaaS sector, may materially and negatively impact our operating results, financial condition and prospects. In response to these dynamics, we have taken and intend to continue to take steps to better align our sales team and focus on controlling costs.
Factors Affecting Performance
Continue to Attract New Customers
We believe that our ability to expand our customer base is an important indicator of market penetration, the growth of our business, and future business opportunities. We define a customer at the end of any particular quarter as an entity that generated revenue greater than $2,500 during that quarter. In situations where an organization has multiple subsidiaries or divisions, each entity that is invoiced at a separate billing address is treated as a separate customer. In cases where customers purchase through a reseller, each end customer is counted separately. We define enterprise customers as companies with over $1 billion in revenue, and companies with less than $1 billion in revenue are corporate customers. In order to maintain comparability, companies who become customers with revenue below $1 billion and subsequently exceed that threshold are considered enterprise customers for all periods presented.
As of July 31, 2026, we had over 2,300 customers. Enterprise customers accounted for 44% of our revenue for both the three and six months ended July 31, 2025 and 2026. To drive growth among both our enterprise and corporate customers, we intend to further develop our partner ecosystem by establishing agreements with more software resellers, systems integrators and other partners to provide broader customer and geographic coverage. We believe we are underpenetrated in the overall market and have significant opportunity to expand our customer base over time.
Customer Upsell and Retention
We employ a land, expand, and retain sales model, and our performance depends on our ability to retain customers and expand the use of our platform at existing customers over time. It currently takes multiple years for our customers to fully embrace the power of our platform. We are still in the early stages of expanding within many of our customers. Under consumption-based pricing, our customers have access to all features offered on our platform, which allows for increased discoverability across the entire customer organization. We believe that as customers continue to deploy greater volumes and sources of data for multiple use cases under our consumption-based pricing model, the unique features of our platform can address the needs of everyone within their organization.
Our ability to successfully upsell and the impact of cancellations may vary from period to period. The extent of this variability depends on a number of factors including the size and timing of upsells and cancellations relative to the initial subscriptions.
We have invested in platform capabilities and online support resources that allow our customers to expand the use of our platform in a self-guided manner. Our professional services, customer support and customer success functions also support our sales force by helping customers to successfully deploy our platform and implement additional use cases. In addition, our partner ecosystem has become increasingly important over time. We work closely with our customers to drive increased engagement with our platform by identifying new use cases through our customer success teams, as well as in-platform, self-guided experiences. We actively engage with our customers to assess whether they are satisfied and fully realizing the benefits of our platform. While these efforts often require a substantial commitment and upfront costs, we believe our
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investment in product, customer support, customer success and professional services will create opportunities to expand our customer relationships over time.
Our ability to drive growth and generate incremental revenue depends heavily on our ability to retain our customers and increase their usage of our platform. With that objective in mind, we allocate our customer success and customer support resources to align with maximizing the retention and expansion of our subscription revenue.
An important metric that we use to evaluate our performance in retaining customers is gross retention rate. We calculate our gross retention rate by taking the dollar amount of annual contract value (ACV) that renews in a given period divided by the ACV that was up for renewal in that same period. The ACV of multi-year contracts is also considered in the calculation based on the period in which the annual anniversary of the contract falls. Our trailing twelve month gross retention rate was 85% and 86% as of July 31, 2025 and 2026, respectively. Our gross retention has been affected in part due to macroeconomic conditions and challenging renewals from customers with COVID-19 use cases of our platform.
Sales and Marketing Efficiency
We are focused on increasing the efficiency of our sales force and marketing activities by enhancing account targeting, messaging, field sales operations and sales training in order to accelerate the adoption of our platform. Our sales strategy depends on our ability to continue to attract and retain top talent, to increase our pipeline of business, and to enhance sales productivity. We focus on productivity per quota-carrying sales representative and the time it takes our sales representatives to reach full productivity.
We manage our pipeline by sales representative to ensure sufficient coverage of our sales targets. Our ability to manage our sales productivity and pipeline are important factors to the success of our business. We have taken steps to better align our sales and marketing spending and headcount to efficiently grow and attract new customers.
Sales and marketing expense as a percentage of total revenue was 44% for the three months ended July 31, 2025 compared to 38% for the three months ended July 31, 2026.
Leverage Research and Development Investments for Future Growth
We plan to continue to make investments in areas of our business to continue to expand our platform functionality. This may include investing in machine learning algorithms, predictive analytics, and other artificial intelligence technologies to create alerts, detect anomalies, optimize queries, and suggest areas of interest to help people focus on what matters most. These investments may also include extending the functionality and effectiveness of our platform through improvements to the Domo Appstore and developer toolkits, which enable customers and partners to quickly build and deploy custom applications. The amount of new investments as a percentage of revenue required to achieve our plans is expected to increase slightly in the near term then remain consistent in the long term.
Research and development expense as a percentage of total revenue was 24% for the three months ended July 31, 2025 compared to 23% for the three months ended July 31, 2026.
Key Business Metric
Billings
Billings represent our total revenue plus the change in deferred revenue in a period. Billings reflect sales to new customers plus subscription renewals and upsells to existing customers, and represent amounts invoiced for subscription, support and professional services. We typically invoice our customers annually in advance for subscriptions to our platform. Because we generate most of our revenue from customers who are invoiced on an annual basis and have a wide range of annual contract values, we may experience variability due to typical enterprise buying patterns and timing of large initial contracts, renewals and upsells.
The following table sets forth our billings for the three and six months ended July 31, 2025 and 2026:
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2025 | 2026 | 2025 | 2026 | ||||||||||||||||||||
| Billings (in thousands) | $ | 70,333 | $ | 61,043 | $ | 134,236 | $ | 121,473 | |||||||||||||||
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Components of Results of Operations
Revenue
We derive our revenue primarily from subscription revenue, which consists of consumption-based agreements and subscription-based agreements for our cloud-based platform. We also sell professional services.
Consumption-based agreements utilize a tiered pricing structure for an annual purchase commitment based upon an estimated volume of usage. Revenue from the annual purchase commitment in consumption-based agreements is recognized ratably over the related contractual term of the contract. Amounts for the annual purchase commitments do not carry over beyond each annual commitment period. Revenue from subscription-based agreements is a function of customers, platform tier, number of users, price per user, and transaction and data volumes. Revenue is recognized ratably over the related contractual term beginning on the date that the platform is made available to a customer. We recognize revenue ratably because the customer receives and consumes the benefits of the platform throughout the contract period.
Professional services and other revenue primarily consists of implementation services sold with new subscriptions, as well as professional services sold separately, including training and education. Professional services are generally billed in advance and revenue from these arrangements is recognized as the services are performed. Our professional services engagements typically span from a few weeks to several months.
Cost of Revenue
Cost of subscription revenue consists primarily of third-party hosting services and data center capacity; salaries, benefits, bonuses and stock-based compensation, or employee-related costs, directly associated with cloud infrastructure and customer support personnel; amortization expense associated with capitalized software development costs; depreciation expense associated with computer equipment and software; certain fees paid to various third parties for the use of their technology and services; and allocated overhead. Allocated overhead includes items such as information technology infrastructure, rent, and certain employee benefit costs.
Cost of professional services and other revenue consists primarily of employee-related costs directly associated with these services, third-party consultant fees, and allocated overhead.
Operating Expenses
Sales and Marketing. Sales and marketing expenses consist primarily of employee-related costs directly associated with our sales and marketing staff and commissions. Other sales and marketing costs include digital marketing programs and promotional events to promote our brand, including Domopalooza, our annual user conference, as well as tradeshows, advertising and allocated overhead. Contract acquisition costs, including sales commissions, are deferred and then amortized on a straight-line basis over the period of benefit, which we have determined to be approximately four years for initial contracts. Contract acquisition costs related to renewal contracts and professional services are recorded as expense when incurred if the period of benefit is one year or less. If the period of benefit is greater than one year, costs are deferred and then amortized on a straight-line basis over the period of benefit, which we have determined to be two years.
Research and Development. Research and development expenses consist primarily of employee-related costs for the design and development of our platform, contractor costs to supplement staff levels, third-party web services, consulting services, and allocated overhead. Our cycle of frequent updates has facilitated rapid innovation and the introduction of new product features throughout our history. We capitalize certain software development costs that are attributable to developing new features and adding incremental functionality to our platform, and amortize such costs as costs of subscription revenue over the estimated life of the new feature or incremental functionality, which is generally three years.
General and Administrative. General and administrative expenses consist of employee-related costs for executive, finance, legal, human resources, recruiting and administrative personnel; professional fees for external legal, accounting, recruiting and other consulting services; and allocated overhead costs.
Total Other Expense, Net
Total other expense, net consists of remeasurement of warrant liability, and other expense, net. Other expense, net consists primarily of interest expense related to long-term debt. It also includes the effect of exchange rates on foreign currency transaction gains and losses, foreign currency gains and losses upon remeasurement of intercompany balances, and
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interest income. The transactional impacts of foreign currency are recorded as foreign currency losses (gains) in the consolidated statements of operations.
Income Taxes
Income taxes consist primarily of income taxes related to foreign and state jurisdictions in which we conduct business. Because of the uncertainty of the realization of the deferred tax assets, we have a full valuation allowance for domestic net deferred tax assets, including net operating loss carryforwards and tax credits related primarily to research and development.
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Results of Operations
The following tables set forth selected condensed consolidated statements of operations data and such data as a percentage of total revenue for each of the periods indicated:
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2025 | 2026 | 2025 | 2026 | ||||||||||||||||||||
| Revenue: | (in thousands) | ||||||||||||||||||||||
| Subscription | $ | 72,730 | $ | 70,360 | $ | 144,119 | $ | 140,137 | |||||||||||||||
| Professional services and other | 6,988 | 6,423 | 15,710 | 16,049 | |||||||||||||||||||
| Total revenue | 79,718 | 76,783 | 159,829 | 156,186 | |||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
Subscription(1) | 14,143 | 11,409 | 27,930 | 25,134 | |||||||||||||||||||
Professional services and other(1) | 5,932 | 6,151 | 12,813 | 13,286 | |||||||||||||||||||
| Total cost of revenue | 20,075 | 17,560 | 40,743 | 38,420 | |||||||||||||||||||
| Gross profit | 59,643 | 59,223 | 119,086 | 117,766 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
Sales and marketing(1)(3) | 35,300 | 28,865 | 74,961 | 66,448 | |||||||||||||||||||
Research and development(1) | 18,952 | 17,759 | 38,913 | 36,407 | |||||||||||||||||||
General and administrative(1)(2) | 12,642 | 14,988 | 26,809 | 28,265 | |||||||||||||||||||
| Total operating expenses | 66,894 | 61,612 | 140,683 | 131,120 | |||||||||||||||||||
| Loss from operations | (7,251) | (2,389) | (21,597) | (13,354) | |||||||||||||||||||
| Other expense, net: | |||||||||||||||||||||||
| Remeasurement of warrant liability | (10,441) | (259) | (9,283) | 1,824 | |||||||||||||||||||
Other expense, net(1) | (5,006) | (6,841) | (9,679) | (11,771) | |||||||||||||||||||
| Total other expense, net | (15,447) | (7,100) | (18,962) | (9,947) | |||||||||||||||||||
| Loss before income taxes | (22,698) | (9,489) | (40,559) | (23,301) | |||||||||||||||||||
| Provision for income taxes | 234 | 128 | 425 | 486 | |||||||||||||||||||
| Net loss | $ | (22,932) | $ | (9,617) | $ | (40,984) | $ | (23,787) | |||||||||||||||
________________
(1)Includes stock-based compensation expense as follows:
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2025 | 2026 | 2025 | 2026 | ||||||||||||||||||||
| Cost of revenue: | (in thousands) | ||||||||||||||||||||||
| Subscription | $ | 947 | $ | 562 | $ | 1,617 | $ | 1,378 | |||||||||||||||
| Professional services and other | 511 | 272 | 789 | 696 | |||||||||||||||||||
| Sales and marketing | 3,864 | 1,944 | 8,265 | 7,991 | |||||||||||||||||||
| Research and development | 4,206 | 2,578 | 9,108 | 5,724 | |||||||||||||||||||
| General and administrative | 3,700 | 3,684 | 8,686 | 8,015 | |||||||||||||||||||
| Other expense, net | — | — | 218 | — | |||||||||||||||||||
| Total | $ | 13,228 | $ | 9,040 | $ | 28,683 | $ | 23,804 | |||||||||||||||
(2)Includes amortization of certain intangible assets of $0.2 million and $0.1 million for the three months ended July 31, 2025 and 2026, respectively, and $0.3 million and $0.3 million for the six months ended July 31, 2025 and 2026, respectively.
(3) Includes transaction-related costs of $5.0 million for the three and six months ended July 31, 2026.
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| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2025 | 2026 | 2025 | 2026 | ||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Subscription | 91 | % | 92 | % | 90 | % | 90 | % | |||||||||||||||
| Professional services and other | 9 | 8 | 10 | 10 | |||||||||||||||||||
| Total revenue | 100 | 100 | 100 | 100 | |||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Subscription | 18 | 15 | 17 | 16 | |||||||||||||||||||
| Professional services and other | 7 | 8 | 8 | 9 | |||||||||||||||||||
| Total cost of revenue | 25 | 23 | 25 | 25 | |||||||||||||||||||
| Gross margin | 75 | 77 | 75 | 75 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Sales and marketing | 44 | 38 | 48 | 43 | |||||||||||||||||||
| Research and development | 24 | 23 | 24 | 23 | |||||||||||||||||||
| General and administrative | 16 | 19 | 17 | 18 | |||||||||||||||||||
| Total operating expenses | 84 | 80 | 89 | 84 | |||||||||||||||||||
| Loss from operations | (9) | (3) | (14) | (9) | |||||||||||||||||||
| Other expense: | |||||||||||||||||||||||
| Remeasurement of warrant liability | (13) | — | (6) | 1 | |||||||||||||||||||
| Other expense, net | (5) | (9) | (6) | (8) | |||||||||||||||||||
| Total other expense | (18) | (9) | (12) | (7) | |||||||||||||||||||
| Loss before income taxes | (27) | (12) | (26) | (16) | |||||||||||||||||||
| Provision for income taxes | — | — | — | — | |||||||||||||||||||
| Net loss | (27) | % | (12) | % | (26) | % | (16) | % | |||||||||||||||
Discussion of the Three Months Ended July 31, 2025 and 2026
Revenue
| Three Months Ended July 31, | |||||||||||||||||||||||
| 2025 | 2026 | $ Change | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Subscription | $ | 72,730 | $ | 70,360 | $ | (2,370) | (3) | % | |||||||||||||||
| Professional services and other | 6,988 | 6,423 | (565) | (8) | |||||||||||||||||||
| Total revenue | $ | 79,718 | $ | 76,783 | $ | (2,935) | (4) | ||||||||||||||||
| Percentage of revenue: | |||||||||||||||||||||||
| Subscription | 91 | % | 92 | % | |||||||||||||||||||
| Professional services and other | 9 | 8 | |||||||||||||||||||||
| Total | 100 | % | 100 | % | |||||||||||||||||||
Subscription revenue decreased primarily due to a $8.3 million net decrease from existing customers, partially offset by a $5.9 million increase from new customers. Our total customer count decreased from July 31, 2025 to July 31, 2026. For the purposes of this comparison, new customers are defined as those added since the end of the prior year quarter, and revenue from existing customers is presented net of churn. Professional services and other revenue decreased primarily due to the delivery of certain other contracts recognized in the prior year quarter.
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Cost of Revenue, Gross Profit and Gross Margin
| Three Months Ended July 31, | |||||||||||||||||||||||
| 2025 | 2026 | $ Change | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Subscription | $ | 14,143 | $ | 11,409 | $ | (2,734) | (19) | % | |||||||||||||||
| Professional services and other | 5,932 | 6,151 | 219 | 4 | |||||||||||||||||||
| Total cost of revenue | $ | 20,075 | $ | 17,560 | $ | (2,515) | (13) | ||||||||||||||||
| Gross profit | $ | 59,643 | $ | 59,223 | $ | (420) | (1) | ||||||||||||||||
| Gross margin: | |||||||||||||||||||||||
| Subscription | 81 | % | 84 | % | |||||||||||||||||||
| Professional services and other | 15 | 4 | |||||||||||||||||||||
| Total gross margin | 75 | 77 | |||||||||||||||||||||
The decrease in subscription cost of revenue was primarily due to a $2.1 million decrease in our third-party web hosting services, partially as a result of a one-time credit received and a $1.2 million decrease in employee-related costs, partially offset by other minor increases.
The increase in professional services and other cost of revenue was primarily due to a $0.2 million increase in employee-related costs.
Subscription gross margin increased primarily due to a decrease in costs related to third-party web hosting services.
Services gross margin declined primarily due to the delivery of certain other high-margin contracts recognized in the prior year quarter and an increase in outsourced services during the three months ended July 31, 2026.
Operating Expenses
| Three Months Ended July 31, | |||||||||||||||||||||||
| 2025 | 2026 | $ Change | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Sales and marketing | $ | 35,300 | $ | 28,865 | $ | (6,435) | (18) | % | |||||||||||||||
| Research and development | 18,952 | 17,759 | (1,193) | (6) | |||||||||||||||||||
| General and administrative | 12,642 | 14,988 | 2,346 | 19 | |||||||||||||||||||
| Total operating expenses | $ | 66,894 | $ | 61,612 | $ | (5,282) | (8) | ||||||||||||||||
| Percentage of revenue: | |||||||||||||||||||||||
| Sales and marketing | 44 | % | 38 | % | |||||||||||||||||||
| Research and development | 24 | 23 | |||||||||||||||||||||
| General and administrative | 16 | 19 | |||||||||||||||||||||
Sales and marketing expenses decreased primarily due to a $2.9 million decrease in employee-related costs, driven by lower stock-based compensation and lower headcount. Marketing expense decreased by $2.5 million, primarily due to a decrease in demand generation. Our sales and marketing expense as a percentage of revenue decreased from 44% to 38%.
Research and development expenses decreased primarily due to a $2.1 million decrease in employee-related costs, partially offset by a $1.1 million increase in software costs. Our research and development costs decreased as a percentage of revenue from 24% to 23%.
General and administrative expenses increased primarily due to a $4.1 million increase in professional and legal fees, primarily driven by a $5.0 million increase in transaction-related costs. This was partially offset by a $0.5 million decrease in
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travel-related costs, a $0.2 million decrease in employee related costs, a $0.2 decrease in contract labor, and other minor decreases. Our general and administrative expenses increased as a percentage of revenue from 16% to 19%.
Total Other Expense, Net
| Three Months Ended July 31, | |||||||||||||||||||||||
| 2025 | 2026 | $ Change | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Other expense, net: | |||||||||||||||||||||||
| Remeasurement of warrant liability | $ | (10,441) | $ | (259) | $ | 10,182 | 98 | % | |||||||||||||||
| Other expense, net | (5,006) | (6,841) | (1,835) | (37) | |||||||||||||||||||
| Total other expense, net | $ | (15,447) | $ | (7,100) | $ | 8,347 | 54 | ||||||||||||||||
Remeasurement of warrant liability increased due to a revaluation of warrant liability, which resulted in a $10.2 million net change during the three months ended July 31, 2026.
Other expense, net increased primarily due to a $2.2 million increase in interest expense related to the increased amortization from the Forbearance Fee and accelerated amortization period arising from the debt modification.
We expect interest expense to increase in the near term due to an increasing principal balance and as a result of the June 2026 modification to the credit facility and related amortization of the forbearance fee over its remaining life.
Income Taxes
| Three Months Ended July 31, | |||||||||||||||||||||||
| 2025 | 2026 | $ Change | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Provision for income taxes | $ | 234 | $ | 128 | $ | (106) | (45) | % | |||||||||||||||
Income taxes decreased primarily due to lower taxable income from our international subsidiaries during the three months ended July 31, 2026.
Discussion of the Six Months Ended July 31, 2025 and 2026
Revenue
| Six Months Ended July 31, | |||||||||||||||||||||||
| 2025 | 2026 | $ Change | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Subscription | $ | 144,119 | $ | 140,137 | $ | (3,982) | (3) | % | |||||||||||||||
| Professional services and other | 15,710 | 16,049 | 339 | 2 | |||||||||||||||||||
| Total revenue | $ | 159,829 | $ | 156,186 | $ | (3,643) | (2) | ||||||||||||||||
| Percentage of revenue: | |||||||||||||||||||||||
| Subscription | 90 | % | 90 | % | |||||||||||||||||||
| Professional services and other | 10 | 10 | |||||||||||||||||||||
| Total | 100 | % | 100 | % | |||||||||||||||||||
The decrease in subscription revenue was primarily due to a $12.5 million net decrease from existing customers, partially offset by a $8.5 million increase from new customers. Our total customer count decreased from July 31, 2025 to July 31, 2026. For the purposes of this comparison, new customers are defined as those added since the end of the prior year quarter,
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and revenue from existing customers is presented net of churn. The decrease in professional services and other revenue was primarily due to the delivery of certain other contracts recognized in the prior year quarter.
Cost of Revenue, Gross Profit and Gross Margin
| Six Months Ended July 31, | |||||||||||||||||||||||
| 2025 | 2026 | $ Change | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Subscription | $ | 27,930 | $ | 25,134 | $ | (2,796) | (10) | % | |||||||||||||||
| Professional services and other | 12,813 | 13,286 | 473 | 4 | |||||||||||||||||||
| Total cost of revenue | $ | 40,743 | $ | 38,420 | $ | (2,323) | (6) | ||||||||||||||||
| Gross profit | $ | 119,086 | $ | 117,766 | $ | (1,320) | (1) | ||||||||||||||||
| Gross margin: | |||||||||||||||||||||||
| Subscription | 81 | % | 82 | % | |||||||||||||||||||
| Professional services and other | 18 | 17 | |||||||||||||||||||||
| Total gross margin | 75 | 75 | |||||||||||||||||||||
The decrease in cost of subscription revenue was primarily due to a $2.7 million decrease in expense related to third-party web hosting services, partially as a result of a one-time credit received during the period.
Cost of professional services and other revenue decreased primarily due to an increase in employee-related costs, partially offset by a decrease in outsourced services.
Subscription gross margin improved primarily due to a decrease in third-party web hosting costs. Professional services and other gross margin declined slightly primarily due to a lower amount of revenue recognized from the delivery of custom apps and an increase in outsourced services during the six months ended July 31, 2026.
Operating Expenses
| Six Months Ended July 31, | |||||||||||||||||||||||
| 2025 | 2026 | $ Change | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Sales and marketing | $ | 74,961 | $ | 66,448 | $ | (8,513) | (11) | % | |||||||||||||||
| Research and development | 38,913 | 36,407 | (2,506) | (6) | |||||||||||||||||||
| General and administrative | 26,809 | 28,265 | 1,456 | 5 | |||||||||||||||||||
| Total operating expenses | $ | 140,683 | $ | 131,120 | $ | (9,563) | (7) | ||||||||||||||||
| Percentage of revenue: | |||||||||||||||||||||||
| Sales and marketing | 48 | % | 43 | % | |||||||||||||||||||
| Research and development | 24 | 23 | |||||||||||||||||||||
| General and administrative | 17 | 18 | |||||||||||||||||||||
Sales and marketing expenses decreased primarily due to a $4.9 million decrease in commission expense, partially driven by certain commissions paid out in the form of fully vested restricted stock units (RSUs) during the current period and also due in part to lower commissions. The decrease in commission expense is partially offset within employee-related costs where the expense for those fully-vested RSUs are included in stock-based compensation; however, employee-related costs had a net increase of $0.6 million due to other decreases in stock-based compensation. Marketing expense decreased by $3.7 million, driven by lower demand generation.
Research and development expenses decreased primarily due to a $4.1 million decrease in employee-related costs, driven by lower stock-based compensation. This was partially offset by a $1.5 million increase to software costs and a $1.5 million
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decrease in capitalized software (increases expense). During the period, a $0.9 million benefit was recognized related to an insurance recovery (decreases expense).
General and administrative expenses increased primarily due to a $4.3 million increase in professional and legal fees, driven by $5.0 million of transaction-related costs. This was partially offset by a $0.9 million increase in travel costs and various other minor decreases.
Total Other Expense, Net
| Six Months Ended July 31, | |||||||||||||||||||||||
| 2025 | 2026 | $ Change | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Remeasurement of warrant liability | $ | (9,283) | $ | 1,824 | $ | 11,107 | 120 | ||||||||||||||||
| Other expense, net | (9,679) | (11,771) | (2,092) | (22) | |||||||||||||||||||
| Total other expense, net | $ | (18,962) | $ | (9,947) | $ | 9,015 | 48 | ||||||||||||||||
Remeasurement of warrant liability increased due to a revaluation of warrant liability, which resulted in a $11.1 million net change during the six months ended July 31, 2026.
Other expense, net increased primarily due to a $2.4 million increase in interest expense related to the increased amortization from the Forbearance Fee and accelerated amortization period arising from the debt modification.
Income Taxes
| Six Months Ended July 31, | |||||||||||||||||||||||
| 2025 | 2026 | $ Change | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Provision for income taxes | $ | 425 | $ | 486 | $ | 61 | 14 | % | |||||||||||||||
Income taxes increased primarily due to higher taxable income from our international subsidiaries during the six months ended July 31, 2026.
Liquidity and Capital Resources
As of July 31, 2026, we had $25.1 million of cash and cash equivalents, which were held for working capital purposes. Our cash and cash equivalents consist primarily of cash and money market funds. We have a $125.3 million credit facility, all of which had been drawn as of July 31, 2026.
Since inception, we have financed operations primarily from cash collected from customers for our subscriptions and services, periodic sales of convertible preferred stock, our initial public offering and to a lesser extent, debt financing. Our principal uses of cash have consisted of employee-related costs, marketing programs and events, payments related to hosting our cloud-based platform and purchases of short-term investments.
As of July 31, 2026, we were not in compliance with the minimum annualized recurring revenue covenant under our credit facility. As a result, the lenders have the right to accelerate repayment of the $138.3 million of principal and related fees, and we have classified the related term loan and fees as a current liability as of July 31, 2026. Our cash and cash equivalents of $25.1 million as of July 31, 2026 would not be sufficient to repay the term loan upon any such acceleration. As a result, substantial doubt exists about our ability to continue as a going concern.
In connection with the covenant noncompliance described above, the Company entered into a forbearance agreement with its lenders, under which the lenders agreed to forbear from exercising their rights and remedies with respect to the noncompliance and certain other specified and anticipated defaults during a limited forbearance period, subject to certain conditions. The forbearance does not waive the underlying default and does not change the classification of the term loan, which remains a current liability, and upon its expiration the lenders may exercise their rights and remedies, including acceleration. See Note 12, "Debt," for further details.
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The forbearance period is contingent on the Company's pursuit and completion of a potential transaction, including the Company's entry into a definitive purchase agreement by July 31, 2026 and the completion of a transaction no later than November 30, 2026.
On July 22, 2026, the Company entered into a definitive Purchase Agreement with Progress for the Asset Sale. The transaction was unanimously approved by the Company's board of directors and by the holders of a majority of the voting power of the Company's outstanding capital stock, who delivered a written consent adopting the Purchase Agreement on July 22, 2026. No further approval of the Company's stockholders is required to complete the transaction. Completion of the transaction remains subject to the satisfaction or waiver of certain closing conditions, as set forth in the Purchase Agreement. The Purchase Agreement contains no financing condition. The transaction is expected to close by the end of September 2026 and no later than November 30, 2026.
Management's plans to mitigate the going concern condition described above are focused on completing the Asset Sale. The execution of the Asset Sale depends on factors outside the Company's control, and there can be no assurance that any of these plans will be entered into or completed on acceptable terms, or at all. Accordingly, management has concluded that these plans do not alleviate the substantial doubt about the Company's ability to continue as a going concern. See Note 1, "Liquidity and Going Concern," to our condensed consolidated financial statements. If we are unable to obtain sufficient liquidity, the lenders could accelerate our indebtedness and foreclose on our assets, and our business, financial condition and ability to continue operations would be materially and adversely affected.
On September 6, 2024, we entered into a Controlled Equity OfferingSM Sales Agreement (Sales Agreement) with Cantor Fitzgerald & Co. (Cantor). Pursuant to the Sales Agreement, we may sell, from time to time up to an aggregate of $150.0 million of our Class B common stock through an “at-the-market” offering defined in Rule 415 under the Securities Act. We will pay Cantor a commission equal to 3.0% of the gross proceeds from the sale of shares of our Class B common stock under the Sales Agreement. The $150.0 million of Class B common stock that may be offered, issued and sold under the Sales Agreement is included in the $300.0 million of securities that may be offered, issued and sold by us under our registration statement on Form S-3 that was effective on September 20, 2024. No shares have been sold pursuant to the Sales Agreement to date.
Credit Facility
We have a credit facility that permits up to $125.3 million in term loan borrowings, all of which had been drawn as of July 31, 2026. The credit facility is secured by substantially all of our assets.
In February 2024, we entered into an amendment to the credit facility which extended the maturity date for the outstanding loan from April 1, 2025 to April 1, 2026 and made certain modifications to the financial covenants. In conjunction with this amendment, we issued 189,036 fully-vested warrants to purchase shares of our Class B common stock.
In August 2024, we entered into an amendment to the credit facility which refinanced the existing term loans, extended the maturity date from April 1, 2026 to August 19, 2028, revised interest amounts payable in cash and payable in kind, and made certain modifications to the financial covenants. Furthermore, certain lenders participating in the credit facility were paid in full for their portion of the principal, PIK interest, and amendment fee and were replaced by new lenders who refinanced those amounts. We paid and subsequently refinanced the $7.0 million closing fee associated with the credit facility, resulting in no net impact to our cash balance. Additionally, the $5.0 million amendment fee from the August 2020 amendment plus $2.3 million of accrued PIK interest, totaling $7.3 million, was refinanced as the Second PIK Amendment Fee per the August 2024 amendment. The Second PIK Amendment Fee accrues interest at a rate of 9.5% per year and is due upon maturity, along with the related capitalized interest. Also in conjunction with this amendment, we issued 1,022,918 fully-vested warrants to purchase shares of our Class B common stock. These warrants have an exercise price of $0.01 per share and expire on August 19, 2028.
The credit facility requires interest-only payments on a portion of the accrued interest until the maturity date. This payable portion of the interest that accrues on the outstanding principal of the term loan is due in cash on a monthly basis, which, as of July 31, 2026, accrued at a floating rate equal to the greater of (1) 8.0% and (2) Adjusted Term SOFR. Adjusted Term SOFR is defined as the greater of (a) 2.5% and (b) Term SOFR. In the event that SOFR is unavailable, interest will accrue at a floating rate equal to the greater of (1) 7.0% and (2) the Alternate Base Rate plus 2.75% per year. The Alternate Base Rate is defined as the greatest of (a) the Prime Rate (b) Federal Funds Effective Rate plus 0.5% and (c) Adjusted Term SOFR plus 1.0%. The Federal Funds Effective rate is defined as the rate published by the Federal Reserve System as the overnight rate, or, if such rate is not so published, the average of the quotations for the day for such transaction received by Administrative Agent from three Federal funds brokers. As of July 31, 2026, the cash interest rate was approximately 6.6%.
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In addition to the 6.6% cash interest rate, a fixed rate equal to 5.0% per year accrues on the outstanding principal of the term loan. This capitalized portion of the interest is added to the principal amount of the outstanding term loan on a monthly basis and is due upon maturity.
The credit facility contains customary conditions to borrowing, events of default and covenants, including covenants that restrict our ability to dispose of assets, make material changes to the nature, control or location of the business, merge with or acquire other entities, incur indebtedness or encumbrances, make distributions to holders of our capital stock, make certain investments or enter into transactions with affiliates. In addition, we are required to comply with a minimum annualized recurring revenue covenant (as defined by the credit facility), tested quarterly. The credit facility defines annualized recurring revenue as four times our aggregate revenue for the immediately preceding quarter (net of recurring discounts and discounts for periods greater than one year) less the annual contract value of any customer contracts pursuant to which we were advised during such quarter would not be renewed at the end of the current term plus the annual contract value of existing customer contract increases during such quarter. We are also required to comply with a minimum trailing 12-month consolidated EBITDA covenant (as defined by the credit facility), which is tested quarterly, and adhere to a monthly minimum liquidity covenant (as defined by the credit facility) that requires unrestricted cash on a consolidated basis of $25.0 million deposited in pledged accounts located in the United States. Noncompliance with these covenants, or the occurrence of certain other events specified in the credit facility, constitutes an event of default under the loan agreement, upon which the lenders may declare any outstanding principal, interest and fees immediately due and payable. We were in compliance with the covenant terms of the credit facility on January 31, 2026. As of July 31, 2026, we were not in compliance with the minimum annualized recurring revenue covenant and we have not obtained a waiver. As a result, we have classified the outstanding term loan as a current liability as of April 30, 2026 and we continued to classify it as a current liability as of July 31, 2026. See Note 1, "Liquidity and Going Concern," and Note 12, "Debt," to our condensed consolidated financial statements.
Historical Cash Flow Trends
| Six Months Ended July 31, | |||||||||||
| 2025 | 2026 | ||||||||||
| (in thousands) | |||||||||||
| Net cash provided by (used in) operating activities | $ | 7,319 | $ | (1,212) | |||||||
| Net cash used in investing activities | (5,276) | (3,530) | |||||||||
| Net cash used in financing activities | (1,353) | (12,786) | |||||||||
Operating Activities
Our operating activities consisted primarily of payments received from our customers, cash we invest in our personnel, timing and amounts we use to fund marketing programs and events to expand our customer base, and the costs to provide our cloud-based platform and related outsourced professional services to our customers.
Net cash provided by operating activities during the six months ended July 31, 2025 consisted of cash collected from customers of $161.8 million exceeding $154.5 million of cash outflows. Significant components of cash outflows included $85.0 million for personnel costs and $38.1 million for marketing programs and events, third-party costs to provide our platform and outsourced professional services, outsourced professional services, and other operating expenditures.
Net cash used in operating activities during the six months ended July 31, 2026 consisted of $163.9 million of cash outflows, exceeding cash collected from customers of $162.7 million. Significant components of cash outflows included $83.2 million for personnel costs and $43.8 million for marketing programs and events, third-party costs to provide our platform and outsourced professional services, and other operating expenditures.
Investing Activities
Our investing activities consisted primarily of property and equipment purchases, which included capitalized development costs related to internal-use software.
Net cash used in investing activities during the six months ended July 31, 2025 consisted primarily of $4.9 million of capitalized development costs related to internal-use software and $0.4 million of purchased property and equipment.
Net cash used in investing activities during the six months ended July 31, 2026 consisted primarily of $3.3 million of capitalized development costs related to internal-use software and $0.2 million of purchased property and equipment.
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Financing Activities
Our financing activities consisted primarily of proceeds received from our employee stock purchase plan, net change in short-term payable financing, and to a lesser extent, stock option exercises and outflows used to repurchase shares for tax withholdings on vesting of restricted stock.
Net cash used in financing activities for the six months ended July 31, 2025 consisted primarily of $7.0 million of payments on short-term payable financing, $1.6 million used to repurchase shares for tax withholdings on vesting of restricted stock, $0.2 million in debt-issuance costs, and $0.2 million in deferred costs for registration statement. These were partially offset by $7.0 million of proceeds from short-term payable financing and $0.7 million of proceeds from shares issued in connection with our employee stock purchase plan.
Net cash used in financing activities for the six months ended July 31, 2026 consisted primarily of a $5.8 million payment of a debt forbearance fee, $3.8 million of payments on short-term payable financing, and $3.4 million used to repurchase shares for tax withholdings on vesting of restricted stock. These were partially offset by $0.3 million of proceeds from shares issued in connection with our employee stock purchase plan.
Contractual Obligations and Commitments
Our principal commitments consist of long-term debt, obligations under operating leases for office space, and non-cancelable contracts for cloud infrastructure services. There have been no material changes in our contractual obligations and commitments, as disclosed in our Annual Report on Form 10-K.
Critical Accounting Policies and Estimates
We prepare our condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States or GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that are inherently uncertain and that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Critical accounting policies and estimates are those that we consider critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
There have been no material changes to our critical accounting policies and estimates as previously disclosed in our Annual Report on Form 10-K. See Note 2, "Summary of Significant Accounting Policies" of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information regarding our significant accounting policies.
Recent Accounting Pronouncements
See Note 2, "Summary of Significant Accounting Policies" of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information regarding recent accounting pronouncements.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to certain market risks in the ordinary course of our business. These risks primarily include interest rate, foreign currency exchange rate, and inflation sensitivities as follows:
Interest Rate Risk
As of July 31, 2026, we had $25.1 million of cash and cash equivalents, which were held for working capital purposes. Our cash and cash equivalents consist primarily of cash, money market funds, and certificates of deposit. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of these instruments, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. Decreases in interest rates, however, would reduce future interest income.
We have a credit facility that permits us to incur up to $125.3 million in term loan borrowings, all of which had been drawn as of July 31, 2026. As of July 31, 2026 the term loan maturity date was August 19, 2028. The credit facility requires interest-only payments on a portion of the accrued interest until the maturity date. This payable portion of the interest that accrues on the outstanding principal of the term loan is due in cash on a monthly basis, which, as of July 31, 2026, accrued at a floating rate equal to the greater of (1) 8.0% and (2) Adjusted Term SOFR. Adjusted Term SOFR is defined as the greater of (a) 2.5% and (b) Term SOFR. In the event that SOFR is unavailable, interest will accrue at a floating rate equal to the greater of (1) 7.0% and (2) the Alternate Base Rate plus 2.75% per year. The Alternate Base Rate is defined as the greatest of (a) the Prime Rate (b) Federal Funds Effective Rate plus 0.5% and (c) Adjusted Term SOFR plus 1.0%. The Federal Funds Effective rate is defined as the rate published by the Federal Reserve System as the overnight rate, or, if such rate is not so published, the average of the quotations for the day for such transaction received by Administrative Agent from three Federal funds brokers. As of July 31, 2026, the cash interest rate was approximately 6.6%. In addition to the 6.6% cash interest rate, a fixed rate equal to 5.0% per year accrues on the outstanding principal of the term loan. This capitalized portion of the interest is added to the principal amount of the outstanding term loan on a monthly basis and is due upon maturity.
Interest rate risk also reflects our exposure to movements in interest rates associated with our borrowings. At July 31, 2026, we had total debt outstanding with a carrying amount of $137.2 million, which approximates fair value. A hypothetical change in interest rates of 100 basis points after July 31, 2026 would not have a material impact on the fair value of our outstanding debt, even at the borrowing limit, or in the returns on our cash.
Foreign Currency Exchange Risk
Due to our international operations, we have foreign currency risks related to revenue and operating expenses denominated in currencies other than the U.S. dollar, primarily the Japanese Yen, British Pound Sterling, and the Australian Dollar. Our subscriptions and services contracts are primarily denominated in the local currency of the customer making the purchase. In addition, a portion of operating expenses are incurred outside the United States and are denominated in foreign currencies. Changes in the relative value of the U.S. dollar to other currencies may negatively affect revenue and other operating results as expressed in U.S. dollars. We do not believe that an immediate 10% increase or decrease in the relative value of the U.S. dollar to other currencies would have a material effect on operating results.
We have experienced and will continue to experience fluctuations in net loss as a result of transaction gains or losses related to remeasuring certain current asset and current liability balances that are denominated in currencies other than the functional currency of the entities in which they are recorded. We have not engaged in the hedging of foreign currency transactions to date. We are considering the costs and benefits of initiating such a program and may in the future hedge balances and transactions denominated in currencies other than the U.S. dollar as we expand international operations.
Inflation Risk
We do not believe that inflation has had a material effect on our business, financial condition or results of operations to date. For example, our subscription contracts often contain pricing terms that are tied to the Consumer Price Index (CPI), and our pricing policy for renewals not tied to CPI is designed to approximate changes in CPI. If our costs were to become subject to significant inflationary pressure, we may not be able to fully offset these higher costs with price increases. Our inability or failure to do so could adversely affect our business, financial condition and results of operations.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedures were effective at a reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Disclosure Controls and Procedures
Our management, including our principal executive officer and principal financial officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Due to inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in legal proceedings from time to time arising in the normal course of business. Management believes that the outcome of these proceedings will not have a material impact on the Company’s financial condition, results of operations, or liquidity. See Note 13, "Commitments and Contingencies" of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information regarding our legal proceedings.
Item 1A. Risk Factors
You should carefully consider the following risk factors, in addition to the other information contained in this report, including the section of this report captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes. If any of the events described in the following risk factors or the risks described elsewhere in this report occurs, our business, operating results and financial condition could be seriously harmed. This report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of factors that are described below and elsewhere in this report.
Risks Related to the Proposed Transaction with Progress
We have entered into a definitive Asset Purchase Agreement to sell substantially all of our assets, and the failure to complete this transaction, or delays in closing this transaction, could have an adverse effect on our business, results of operations and financial condition.
In February 2026, we announced that our board of directors initiated a formal process to explore strategic alternatives to maximize shareholder value. On July 22, 2026, we entered into an Asset Purchase Agreement (Purchase Agreement) with Progress Software Corporation (Progress), pursuant to which Progress agreed to acquire substantially all of our assets and assume certain liabilities for $400 million in cash (Asset Sale). We cannot provide assurance that the Asset Sale will be completed on the timeline currently anticipated or at all. Concurrently with the execution and delivery of the Purchase Agreement, Progress entered into a Voting and Support Agreement (Support Agreement) with stockholders of the Company holding sufficient voting power to approve the transaction under applicable law and the Company’s organizational documents (Majority Stockholders), pursuant to which the Majority Stockholders agreed, among other things, to execute and deliver a written consent approving and adopting the Purchase Agreement and the transactions thereunder and to comply with certain transfer and other restrictions with respect to their shares of our common stock, in each case subject to the terms and conditions of the Support Agreement. The closing of the Asset Sale is also subject to satisfaction or waiver of certain customary conditions.
The Purchase Agreement includes customary “no-shop” restrictions, subject to an exception permitting our board of directors to consider unsolicited competing proposals, which means the Asset Sale could still be superseded, delayed, or disrupted by a competing bid. The Purchase Agreement also provides for a downward adjustment to the $400 million purchase price if the cash acquired by Progress at closing is below a specified $25.0 million threshold, and requires us to pay Progress a termination fee of $13.5 million if the Purchase Agreement is terminated under specified circumstances, including our termination following an uncured breach that prevents closing by November 30, 2026, or in connection with a competing proposal. The pursuit of the Asset Sale or any other such strategic transactions could involve risks to our operations and financial results, whether or not such transaction is ultimately consummated. Such risks could include:
•Diversion of management’s attention away from our business;
•Significant transaction costs (potentially including any termination fees), which may or may not be recovered in the future and which may be incurred even if such strategic transaction fails to close or is otherwise unsuccessful;
•Dilution of our equity interests or a decrease in the value of our common stock;
•A change in control or a shareholder’s acquisition of a controlling stake in our business, which could trigger certain rights and remedies available to our contractual counterparties;
•Restrictions on our ability to raise additional capital, incur indebtedness or control decisions regarding our operations and management;
•Loss of key management personnel or employees, or the deterioration of our relationships with our employees;
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•Disruption to our relationships with customers, contract counterparties and other stakeholders;
•Negative publicity or harm to our reputation; and
•Legal proceedings and substantial costs associated with litigation.
Any one or more of these factors or other risks could have a material adverse effect on our financial condition.
Following the closing of the Asset Sale, we will no longer have an operating business, and our future success will depend on our ability to identify a use of the proceeds from the Asset Sale.
If we complete the Asset Sale, we will sell substantially all of our operating assets and will retain, among other things, cash proceeds from the Asset Sale and our net operating loss carryforwards (NOLs) and certain other tax attributes. We do not intend to liquidate following the closing, and our board of directors will evaluate alternatives for the use of the cash proceeds from the Asset Sale. Those alternatives are currently expected to include using such cash proceeds to fund, at least in part, the acquisition of assets that will allow us to potentially derive a benefit from our NOLs and certain other tax attributes. There is no assurance that our board of directors will be able to identify, negotiate and complete any such transaction, or that any such transaction, if completed, will be successful. We may also incur substantial costs in connection with our efforts to identify and evaluate potential transactions, whether or not any such transaction is completed.
Our credit facility remains subject to a covenant breach and forbearance agreement, and if the Asset Sale is not completed or we fail to maintain compliance with the forbearance agreement, our lenders could accelerate our indebtedness.
We were not in compliance with the minimum annualized recurring revenue covenant under our secured credit facility as of April 30, 2026, which gives our lenders the right to accelerate approximately $137.2 million of outstanding principal and fees. Our lenders have not waived this default but have agreed to a forbearance, pursuant to which they have agreed to refrain from exercising remedies, subject to our satisfaction of certain conditions, including entry into a definitive agreement with respect to a strategic transaction and completion of that transaction within specified timeframes. If the Asset Sale is not completed on the anticipated timeline, if the forbearance agreement terminates or expires without replacement or extension, or if we otherwise fail to satisfy the conditions of the forbearance agreement, our lenders could declare all outstanding obligations under the credit facility immediately due and payable, which would have a material adverse effect on our liquidity and financial condition, and there is substantial doubt about our ability to continue as a going concern.
Our recently adopted Tax Benefits Preservation Plan is intended to protect our NOLs but may not prevent an ownership change, and it has anti-takeover effects that could adversely affect holders of our common stock.
On July 22, 2026, in light of the significance of our NOLs and other tax attributes following the Asset Sale, our board of directors adopted a Tax Benefits Preservation Plan (Preservation Plan) with Equiniti Trust Company, LLC, as rights agent, and declared a dividend of one preferred stock purchase right for each outstanding share of our Class A common stock and Class B common stock held of record as of the close of business on August 4, 2026. This protects against a possible limitation on the Company’s ability to use its NOLs and certain other tax attributes to reduce potential future U.S. federal income tax obligations. The NOLs and certain other tax attributes are valuable assets to us, which may inure to the benefit of us and our stockholders. However, if we experience an “ownership change,” as defined in Section 382 of the Code, our ability to fully utilize the NOLs and certain other tax attributes will be substantially limited and the timing of the usage of the NOLs and other tax attributes could be substantially delayed, which could significantly impair the value of those assets. Generally, an “ownership change” occurs if the percentage of our stock owned by one or more of our “5-percent shareholders” (as such term is defined in Section 382 of the Code) increases by more than 50 percentage points over the lowest percentage of stock owned by such stockholder or stockholders at any time over a three-year period. The Preservation Plan is intended to prevent such an “ownership change” by deterring any person or group, together with its affiliates and associates, from acquiring beneficial ownership of 4.9% (Specified Percentage) or more of our securities. The Preservation Plan is not expected to interfere with the Asset Sale or any other merger or business combination approved by our board of directors. There can be no assurance that the Tax Benefits Preservation Plan will prevent an “ownership change” within the meaning of Sections 382 and 383 of the Code, in which case we may lose all or most of the anticipated tax benefits associated with our prior losses.
Risks Related to Our Financial Position and Capital Needs
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We have a history of losses, and we may not be able to generate sufficient revenue to achieve or maintain profitability in the future.
We incurred net losses of $41.0 million and $23.8 million for the six months ended July 31, 2025 and 2026, respectively, and had an accumulated deficit of $1,570.7 million at July 31, 2026. We may not be able to generate sufficient revenue to achieve or sustain profitability. We expect to continue to incur losses for the foreseeable future and we expect costs to increase in future periods as we expend substantial financial and other resources on, among other things:
•sales and marketing, including any expansion of our direct sales organization, which will require time before these investments generate sales results;
•technology and data center infrastructure, enhancements to cloud architecture, improved disaster recovery protection, and increasing cybersecurity, compliance and operations expenses;
•data center costs as customers increase the amount of data that is available to our platform and usage on our platform;
•other software development, including enhancements and modifications related to our platform;
•international expansion in an effort to increase our customer base and sales;
•general and administration, including significantly increasing expenses in accounting and legal related to the increase in the sophistication and resources required for public company compliance and other work arising from the growth and maturity of the company;
•competing with other companies, custom development efforts and open source initiatives that are currently in, or may in the future enter, the markets in which we compete;
•maintaining high customer satisfaction and ensuring quality and timely releases of platform enhancements and applications;
•developing our indirect sales channels and strategic partner network;
•maintaining the quality of our cloud and data center infrastructure to minimize latency when using our platform;
•increasing market awareness of our platform and enhancing our brand;
•maintaining compliance with applicable governmental regulations and other legal obligations, including those related to intellectual property and international sales; and
•attracting and retaining top talent in a competitive market.
These expenditures may not result in additional revenue or the growth of our business. If we fail to continue to grow revenue or to achieve or sustain profitability, the market price of our Class B common stock could be adversely affected.
We expect to continue to invest in our growth for the foreseeable future. If we fail to manage this growth effectively, our business and operating results will be adversely affected.
We intend to grow our business. If we cannot adequately train new employees, including our direct sales force, or if new employees are not as productive as quickly as we would like, sales may decrease or customers may lose confidence in the knowledge and capability of our employees. In addition, we may make direct investments in our international business, and increase the number of employees outside the United States. We must successfully manage growth to achieve our objectives. Although our business has experienced significant growth in the past, we cannot provide any assurance that our business will continue to grow at any particular rate, or at all.
Our ability to effectively manage the growth of our business will depend on a number of factors, including our ability to do the following:
•effectively recruit, integrate, train and motivate new employees and make them productive, including our direct sales force, while retaining existing employees, maintaining the beneficial aspects of our corporate culture and effectively executing our business plan;
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•attract new customers, and retain and increase usage by existing customers;
•recruit and successfully leverage channel partners and app developers;
•successfully enhance our platform;
•continue to improve our operational, financial and management controls;
•protect and further develop strategic assets, including intellectual property rights; and
•manage market expectations and other challenges associated with operating as a public company.
These activities will require significant financial resources and allocation of valuable management and employee resources, and growth will continue to place significant demands on management and our operational and financial infrastructure.
Our future financial performance and ability to execute our business plan will depend, in part, on our ability to effectively manage any future growth. There are no guarantees we will be able to do so. In particular, any failure to successfully implement systems enhancements and improvements will likely negatively impact our ability to manage our expected growth, ensure uninterrupted operation of key business systems and comply with the rules and regulations that are applicable to public reporting companies. Moreover, if we do not effectively manage the growth of our business and operations, the quality of our platform could suffer, which could negatively affect our brand, operating results and business.
Our ability to raise capital in the future may be limited, and if we fail to raise capital when needed in the future, we could be prevented from growing or could be forced to delay or eliminate product development efforts or other operations.
Our business and operations may consume resources faster than we anticipate. We have incurred cumulative and recurring losses from operations since inception and had an accumulated deficit of $1,570.7 million as of July 31, 2026. We have also experienced negative or close to breakeven cash flows from operating activities, including cash provided by operating activities of $7.3 million and cash used in operating activities of $1.2 million for the six months ended July 31, 2025 and 2026, respectively. As of July 31, 2026, we had $25.1 million of cash and cash equivalents, which were held for working capital purposes. Additionally, no amounts were available to draw under our credit facility. Our need to raise additional capital or complete a potential transaction is heightened by our noncompliance with a financial covenant under our credit facility as of July 31, 2026 and the resulting substantial doubt about our ability to continue as a going concern, as described above.
We may need to raise additional funds to invest in growth opportunities, to continue product development and sales and marketing efforts, and for other purposes. We filed: (i) on September 6, 2024, a shelf registration statement on Form S-3 with the SEC that became effective on September 20, 2024 and allows us to undertake various equity and debt offerings up to $300.0 million; and (ii) on September 20, 2024, a prospectus supplement to the shelf registration statement that covers the offering, issuance and sale of up to $150.0 million of our Class B common stock from time to time through an “at-the-market” program under the Securities Act. Additional financing may not be available on favorable terms, if at all. If adequate funds are not available on acceptable terms, we may be unable to meet our obligations, invest in future growth opportunities, or continue operations at anticipated levels, which could harm our business and operating results. In addition, current and future debt instruments may impose restrictions on our ability to dispose of property, make changes in our business, engage in mergers or acquisitions, incur additional indebtedness, and make investments and distributions. Furthermore, if we issue additional equity securities, stockholders will experience dilution, and the new equity securities could have rights senior to those of our common stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any such future offerings. As a result, stockholders bear the risk that future securities offerings reduce the market price of our Class B common stock and dilute their interest.
Future operating results and key metrics may fluctuate significantly due to a wide range of factors, which makes our future results difficult to predict.
Our operating results and key metrics could vary significantly from quarter to quarter as a result of various factors, some of which are outside of our control, including:
•the expansion of our customer base;
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•the size, duration and terms of our contracts with both existing and new customers;
•the introduction of products and product enhancements by competitors, and changes in pricing for products offered by us or our competitors;
•customers delaying purchasing decisions in anticipation of new products or product enhancements by us or our competitors or otherwise;
•changes in customers’ budgets;
•seasonal variations in our sales, which have generally historically been highest in our fourth fiscal quarter and lowest in the first fiscal quarter;
•the timing of satisfying revenue recognition criteria, particularly with regard to large transactions;
•the amount and timing of payment for expenses, including infrastructure costs to deliver our platform, research and development, sales and marketing expenses, employee benefit and stock-based compensation expenses and costs related to Domopalooza, our annual user conference that occurs in our first fiscal quarter;
•costs related to the hiring, training and maintenance of our direct sales force;
•the timing and growth of our business, in particular through the hiring of new employees and international expansion; and
•general economic and political conditions, both domestically and internationally, including the impacts of pandemics or other catastrophic events, military conflicts (including the Russian invasion of Ukraine and hostilities in the Middle East), inflation, and adverse impacts to the financial services industry, as well as economic conditions specifically affecting industries in which our customers operate.
Any one of these or other factors discussed elsewhere in this report may result in fluctuations in our operating results, meaning that quarter-to-quarter comparisons may not necessarily be indicative of our future performance.
Because we recognize revenue from subscriptions ratably over the terms of our subscription agreements, near-term changes in sales may not be reflected immediately in our operating results.
We offer our platform primarily through agreements which typically vary in length between one and five years, and in many cases may be subject to automatic renewal or renewal only at a customer’s discretion. We generally invoice our customers in annual installments at the beginning of each year in the subscription period. Amounts that have been invoiced are initially recorded as deferred revenue and are recognized ratably over the subscription period. As a result, most of the revenue that we report in each period is derived from the recognition of deferred revenue relating to subscriptions entered into during previous periods. A decline in new or renewed subscriptions in any one quarter is not likely to have a material impact on results for that quarter. However, declines would negatively affect revenue and deferred revenue balances in future periods, and the effect of significant downturns in sales and market acceptance of our platform, and potential changes in our rate of renewals, may not be fully reflected in our results of operations until future periods. Our subscription model also makes it difficult for us to rapidly increase our total revenue through additional sales in any period, as revenue from new customers and higher subscription renewals from existing customers is recognized over the applicable subscription term. We may be unable to adjust our cost structure to reflect the changes in revenue. In addition, a significant majority of our costs are expensed as incurred, while revenue is generally recognized over the life of the customer agreement. As a result, increased growth in the number of our customers could result in our recognition of more costs than revenue in the earlier periods of the terms of our agreements.
The length, cost and uncertainty associated with sales cycles for enterprise customers may result in fluctuations in our operating results and our failure to achieve the expectations of investors.
Our sales efforts to enterprise customers, which we define as companies with over $1 billion in revenue, face long sales cycles, complex customer requirements, substantial upfront sales costs, and a relatively low and difficult to predict volume of sales on a quarter-by-quarter basis. This makes it difficult to predict with certainty our sales and related operating performance in any given period. Our sales cycle for new enterprise customers varies from approximately six months to multiple years. Customers often undertake a prolonged evaluation of our platform, including assessing their own readiness, scoping the professional services involved, and comparing our platform to products offered by competitors and their ability to
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solve the problem internally. Events may occur during this period that affect the size or timing of a purchase or even cause cancellations, which may lead to greater unpredictability in our business and operating results. Moreover, customers often begin to use our platform on a limited basis with no guarantee that they will expand their use of our platform widely enough across their organization to justify the costs of our sales efforts. We may also face unexpected implementation challenges with enterprise customers or more complicated installations of our platform. It may be difficult to deploy our platform if the customer has unexpected database, hardware or software technology issues.
Adherence to our financial plan in part depends on managing the mix of customers, the rate at which customers increase their use of our platform within their organizations, the number of use cases they employ, and the timing and amount of upsells, all of which affect annual contract value. Our financial performance and the predictability of our quarterly financial results may be harmed by failures to secure the higher value enterprise agreements in a timely manner or at all, or changes in the volume of transactions overall, compared to our forecasts, and depends in large part on the successful execution of our direct sales team. The predictability of billings may be adversely impacted by fluctuations in the proportion of contracts that are not billed annually in advance.
Additionally, our quarterly sales cycles are generally more heavily weighted toward the end of the quarter with an increased volume of sales in the last few weeks and days of the quarter. This impacts the timing of recognized revenue and billings, cash collections and delivery of professional services. Furthermore, the concentration of contract negotiations in the last few weeks and days of the quarter could require us to expend more in the form of compensation for additional sales, legal and finance employees and contractors. Compression of sales activity to the end of the quarter also greatly increases the likelihood that sales cycles will extend beyond the quarter in which they are forecasted to close for some sizeable transactions, which will harm forecasting accuracy and adversely impact billings and new customer acquisition and renewal metrics for the quarter in which they are forecasted to close.
Increased sales to customers outside the United States or paid for in currency other than the U.S. dollar exposes us to potential currency exchange losses.
As our international sales and operations increase, so too will the number and significance of transactions, including intercompany transactions, occurring in currencies other than the U.S. dollar. In addition, our international subsidiaries may accumulate assets and liabilities that are denominated in currencies other than the U.S. dollar, which is the functional reporting currency of these entities. Accordingly, changes in the value of foreign currencies relative to the U.S. dollar can affect our revenue and operating results due to foreign currency gains and losses that are reflected in our earnings. We do not currently maintain a program to hedge transactional exposures in foreign currencies. However, in the future, we may use derivative instruments, such as foreign currency forward and option contracts, to hedge certain exposures to fluctuations in foreign currency exchange rates. The use of such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place. Moreover, the use of hedging instruments may introduce additional risks if we are unable to structure effective hedges with such instruments.
We were not in compliance with a financial covenant under our secured credit facility as of April 30, 2026 and July 31, 2026, which gives our lenders the right to accelerate our indebtedness, and there is substantial doubt about our ability to continue as a going concern; although our lenders have not waived the underlying default, they have agreed to a forbearance subject to certain contingencies.
As of July 31, 2026, we were not in compliance with the minimum annualized recurring revenue covenant under our credit facility, which is secured by substantially all of our assets. This noncompliance gives our lenders the right to accelerate repayment of the $138.3 million of principal and related fees, and we have classified the related term loan and fees as current liabilities as of July 31, 2026. Our cash and cash equivalents of $25.1 million as of July 31, 2026 would not be sufficient to repay the term loan upon any such acceleration. As a result, substantial doubt exists about our ability to continue as a going concern, and our plans to address these conditions do not alleviate that doubt.
Our lenders have not waived the noncompliance, but have entered into a forbearance agreement with us under which they agreed to forbear from exercising their rights and remedies with respect to the noncompliance and certain other specified and anticipated defaults for a limited period that is subject to certain conditions, including our entry into a definitive purchase agreement by July 31, 2026 and the completion of a potential transaction no later than November 30, 2026. We satisfied the July 31, 2026 milestone by entering into the Purchase Agreement with Progress on July 22, 2026, as described above under “—We have entered into a definitive Asset Purchase Agreement to sell substantially all of our assets, and the failure to complete this transaction, or delays in its completion, could have an adverse effect on our business, results of operations and
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financial condition”; however, the forbearance remains conditioned on our completing the Asset Sale by November 30, 2026, and there can be no assurance that we will do so. The forbearance does not waive the underlying default and does not change the classification of the term loan, which remains a current liability, and upon its expiration the lenders may exercise their rights and remedies, including acceleration. See Note 12, "Debt" to our condensed consolidated financial statements, for further details.
Our plans to mitigate these conditions are focused on completing a potential transaction. We also have access to an at-the-market equity offering program under which we may sell up to $150.0 million of our Class B common stock. The completion of a potential transaction and our ability to raise capital under the at-the-market program depend on factors outside our control, including the actions of our lenders, potential counterparties, and investors, as well as market conditions, and there can be no assurance that any of these plans will be entered into or completed on acceptable terms, or at all. If we are unable to complete a potential transaction, or if the forbearance terminates, our lenders could accelerate our indebtedness and foreclose on our assets, and we could be required to curtail or cease operations, seek bankruptcy protection, or pursue a transaction on unfavorable terms, and our stockholders could lose all or a substantial portion of their investment.
Our credit facility contains restrictive covenants that limit our ability to, among other things, transfer or dispose of assets, merge with other companies or consummate certain changes of control, acquire other companies, open new offices that contain a material amount of assets, pay dividends, incur additional indebtedness and liens and enter into new businesses. We therefore may not be able to engage in any of the foregoing transactions unless we obtain the consent of the lenders or terminate the credit facility, which may limit our operating flexibility. In addition, our credit facility is secured by all of our assets, including our intellectual property, and requires us to satisfy certain financial covenants. If we do not meet the financial covenants as specified in the credit facility, we may require forbearance or relief from our financial covenant violations from the lenders or be required to arrange alternative financing.
There is no guarantee that we will be able to generate sufficient cash flow or sales to meet these financial covenants or pay the principal and interest on any such debt. Furthermore, there is no guarantee that future working capital, borrowings or equity financing will be available to repay or refinance any such debt. A breach of any of these covenants or the occurrence of certain other events (including a material adverse effect) specified in the credit facility and/or the related collateral documents could result in an event of default under the loan agreement. If an event of default has occurred and is continuing, the lenders could elect to declare all amounts outstanding under the credit facility immediately due and payable. If we are unable to repay those amounts, the lenders could foreclose on the collateral granted to them to secure such indebtedness. If the lenders accelerate the repayment of borrowings, if any, we may not have sufficient funds to repay our existing debt.
Our ability to meet the financial covenants could be affected by events beyond our control. Any inability to make scheduled payments or meet the financial covenants on our credit facility would adversely affect our business.
We may be subject to additional obligations to collect and remit sales tax and other taxes, and we may be subject to tax liability for past transactions, which could harm our business.
We do not collect sales and use, value-added and similar taxes in all jurisdictions in which we have sales, based on our belief that such taxes are not applicable in certain jurisdictions. State, local and foreign jurisdictions have differing rules and regulations governing sales, use, value-added and other taxes, and these rules and regulations are subject to varying interpretations that may change over time. In particular, the applicability of such taxes on subscriptions to our platform in various jurisdictions is unclear. Further, rules regarding tax nexus are complex and vary significantly across state, local and foreign jurisdictions. As a result, we could face the possibility of audits that could result in tax assessments, including associated interest and penalties. A successful assertion that we should be collecting additional sales, use, value-added or other taxes in those jurisdictions where we have not historically done so could result in substantial tax liabilities and related penalties for past transactions, discourage customers from purchasing our application or otherwise harm our business and operating results. In addition, we are required to withhold and timely remit payroll-related taxes for which we are also subject to the possibility of audits that could result in tax assessments, including associated interest and penalties.
Changes in tax laws or regulations that are applied adversely to us or our customers could increase the costs of our platform and adversely impact our business.
New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could affect the tax treatment of our (and our subsidiaries’) domestic and foreign financial results. Any new taxes could adversely affect our domestic and international business operations and our business and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. For example, the Tax Cuts & Jobs Act of 2017 eliminated the ability to deduct research and development expenditures
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annually and instead required taxpayers to capitalize and amortize those expenditures over five or fifteen years. Further, the Inflation Reduction Act of 2022 introduced a non-deductible excise tax of 1% on the value of certain share repurchases by publicly traded corporations, which may increase the costs to us of any share repurchases. The One Big Beautiful Bill Act (or OBBBA), enacted on July 4, 2025, made a number of changes to U.S. federal income tax law, including allowing taxpayers to deduct certain U.S. research and development expenditures (while continuing to require taxpayers to capitalize and amortize foreign research and development expenditures), changing the calculation and deductibility of global intangible low-taxed income (renamed Net CFC Tested Income) and foreign derived intangibles income (renamed Foreign-Derived Deduction Eligible Income) for taxable years beginning after December 31, 2025, reinstating 100% deductibility of bonus depreciation for property placed in service after January 19, 2025, and changing the calculation of deductible business interest expense to include depreciation and amortization, among other changes. While we do not anticipate any material impact to our financial statements, primarily due to the full valuation allowance on net deferred tax assets, and no material permanent tax differences are expected, we are continuing to analyze the potential impact of the OBBBA and other legislation on our operations, business and financial performance.
In addition, taxation of cloud-based software is constantly evolving as many state and local jurisdictions consider the taxability of software services provided remotely. For example, California has recently amended its tax laws to subject certain retail sales of digital prewritten software, cloud-based applications, and software services to sales tax in California, effective January 1, 2027. These events could require us or our customers to pay additional tax amounts on a prospective or retroactive basis, as well as require us or our customers to pay fines or penalties and interest for past amounts deemed to be due. If we raise our prices to offset the costs of these changes, existing and potential future customers may elect not to continue to use or purchase subscriptions to our platform in the future. Additionally, new, modified or newly interpreted or applied tax laws could increase our customers’ and our compliance, operating and other costs, as well as the costs of our platform. Any or all of these events could harm our business and operating results.
We are a multinational organization faced with increasingly complex tax issues in many jurisdictions, and we could be obligated to pay additional taxes in various jurisdictions.
As a multinational organization, we are subject to taxation in several jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain, and significant judgment and estimates are required in determining our provision for income taxes. Our tax expense may be impacted if our intercompany transactions, which are required to be computed on an arm’s-length basis, are challenged and successfully disputed by tax authorities. Our policies governing transfer pricing may be determined to be inadequate and could result in additional tax assessments. The amount of taxes we pay in these jurisdictions could increase substantially as a result of changes in the applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents, which could harm our liquidity and operating results. In addition, the authorities in these jurisdictions could review our tax returns and impose additional tax, interest and penalties, and the authorities could claim that various withholding requirements or other taxes apply to us or our subsidiaries or assert that benefits of tax treaties are not available to us or our subsidiaries, any of which could adversely affect our operating results.
Further, many countries and the Organization for Economic Cooperation and Development (or OECD) have proposed to reallocate some portion of profits of large multinational companies to markets where sales arise, known as “Pillar One,” as well as enact a global minimum tax rate of at least 15% for multinationals with global revenue exceeding certain thresholds, known as “Pillar Two,” and many countries have adopted or intend to adopt these proposals. The OECD and participating jurisdictions have agreed to a “side-by-side” elective safe harbor that exempts electing U.S.-parented multinational entities from certain provisions of Pillar Two for fiscal years beginning on or after January 1, 2026. Changes to these and other areas in relation to international tax reform, including future actions taken by foreign governments could increase uncertainty and may adversely affect our tax rate and operating results in future years.
Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.
As of January 31, 2026, we had net operating loss (NOL) carryforwards for federal and state income tax purposes of approximately $1,289.3 million and $1,414.7 million, respectively, which may be available to offset taxable income in the future. The federal NOLs will begin to expire in various years beginning in 2032 if not utilized. The state NOLs will expire depending on the various rules in the state jurisdictions in which we operate. A lack of future taxable income could adversely affect our ability to utilize these NOLs before they expire.
In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the Code), a corporation that undergoes an “ownership change” (as defined under Section 382 of the Code and applicable Treasury Regulations) is subject to limitations on its ability to utilize its pre-ownership change NOLs to offset its future taxable income. An ownership change under Section 382 of the Code could affect our ability to utilize the NOLs to offset our income. Furthermore, our ability to
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utilize NOLs of companies that we have acquired or may acquire in the future may be subject to limitations. We have historically contracted third parties to perform a Section 382 analysis to evaluate limitations on our NOLs due to ownership changes, with the most recent analysis being through June 30, 2026. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to reduce future income tax liabilities for federal and state tax purposes. Limitations may also apply under state law. For example, recently enacted California legislation limits the use of state NOL carryforwards for tax years beginning on or after January 1, 2024 and before January 1, 2027. As a result of this legislation or other unforeseen reasons, we may not be able to utilize some or all of our NOL carryforwards, even if we attain profitability.
Adverse events or perceptions affecting the financial services industry could adversely affect our operating results, financial condition and prospects.
Limited liquidity, defaults, non-performance or other adverse developments affecting financial institutions or parties with which we do business, or perceptions regarding these or similar risks, have in the past and may in the future lead to market-wide liquidity problems. Such developments, and their effects on the broader financial system, could result in a variety of material and adverse impacts on our business operations and financial conditions, including, but not limited to:
•delayed access to deposits or other financial assets or the uninsured loss of deposits or other financial assets;
•loss of access to revolving existing credit facilities or other working capital sources or the inability to refund, roll over or extend the maturity of, or enter into new credit facilities or other working capital resources;
•potential or actual breach of obligations, including U.S. federal and state wage laws and contracts that may require us to maintain letters or credit or other credit support arrangements; and
•termination of cash management arrangements or delays in accessing or actual loss of funds subject to cash management arrangements.
Concerns regarding the U.S. or international financial systems could impact the availability and cost of financing, thereby making it more difficult for us to acquire financing on acceptable terms or at all. In addition, instability in the financial services industry could spur a deterioration in the macroeconomic environment and dampen demand for our products.
Any of these risks could materially impact our operating results, liquidity, financial condition and prospects.
Risks Related to Our Relationships with Customers and Third Parties
If we are unable to attract new customers in a manner that is cost-effective, our revenue growth could be slower than we expect and our business may be harmed.
To increase our revenue, we must add new customers. Demand for our platform is affected by a number of factors, many of which are beyond our control, such as continued market acceptance of our platform for existing and new use cases, the timing of development and release of new applications and features, technological change, growth or contraction in our addressable market, and accessibility across mobile devices, operating systems, and applications, and macroeconomic changes, including the impact of public health epidemics or pandemics, on the demand for technology solutions like ours. In addition, if competitors introduce lower cost or differentiated products or services that are perceived to compete with our features, our ability to sell our features based on factors such as pricing, technology and functionality could be impaired. As a result, we may be unable to attract new customers at rates or on terms that would be favorable or comparable to prior periods, which could negatively affect the growth of our revenue.
Even if we do attract customers, the cost of new customer acquisition may prove so high as to prevent us from achieving or sustaining profitability. We recognize subscription revenue ratably over the term of the contract period. In general, customer acquisition costs and other upfront costs associated with new customers are much higher in the first year than the aggregate revenue we recognize from those new customers in the first year. As a result, the profitability of a customer to our business in any particular period depends in part upon how long a customer has been a subscriber and the degree to which it has expanded its usage of our platform. Additionally, we intend to continue to hire additional sales personnel to grow our domestic and international operations. If our sales and marketing efforts do not result in substantial increases in revenue, our business, results of operations, and financial condition may be adversely affected.
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If customers do not renew their contracts with us or reduce their use of our platform, our revenue will decline and our operating results and financial condition may be adversely affected.
The initial terms of our customer contracts typically vary in length between one and five years, and our customers have no obligation to renew their subscriptions after the expiration of their initial subscription periods. In some cases, the contracts automatically renew (with each party having the option to elect not to renew), but in circumstances where that is not the case, our customers may unilaterally elect not to renew, may seek to renew for lower subscription amounts or for shorter contract lengths, or may choose to renew for the same or fewer applications over time. Our renewal rates may decline or fluctuate as a result of a number of factors, including leadership changes within our customers resulting in loss of sponsorship, limited customer resources, pricing changes by us or competitors, customer satisfaction with our platform and related applications, the acquisition of customers by other companies, procurement or budgetary decisions, and deteriorating general economic conditions, including as a result of public health epidemics or pandemics. To the extent our customer base continues to grow, renewals and additional subscriptions by renewing customers will become an increasingly important part of our results. If our customers do not renew their subscriptions, or decrease the amount they spend with us, revenue will decline and our business will be harmed.
If customers do not expand their use of our platform or adopt additional use cases, our growth prospects, operating results and financial condition may be adversely affected.
Our future success depends on our ability to increase the deployment of our platform within and across our existing customers and future customers. Many of our customers initially deploy our platform to specific groups or departments within their organization or for a limited number of use cases. Our growth prospects depend on our ability to persuade customers to expand their use of our platform to additional groups, departments and use cases across their organization. Historically, we have made significant investments in research and development to build our platform and to offer enterprise customers the features and functionality that they require.
If our future operating results are significantly below the expectations of investors, it could harm the market price of our Class B common stock.
The loss of one or more of our key customers, or a failure to renew our subscription agreements with one or more of our key customers, could negatively affect our ability to market our platform.
We rely on our reputation and recommendations from key customers in order to promote subscriptions to our platform. The loss of, or failure to renew by, any of our key customers could have a significant effect on our revenue, reputation and our ability to obtain new customers. In addition, acquisitions of our customers could lead to cancellation of such customers’ contracts, thereby reducing the number of our existing and potential customers.
If we are unable to develop and maintain successful relationships with channel partners, our business, operating results, and financial condition could be adversely affected.
To date, we have been primarily dependent on our direct sales force to sell subscriptions to our platform. Although we have developed relationships with some channel partners, such as referral partners, resellers, and integration partners, these channels have resulted in limited revenue historically. We believe that continued growth in our business is dependent upon identifying, developing, and maintaining strategic relationships with additional channel partners that can drive substantial revenue. If we fail to identify additional channel partners in a timely and cost-effective manner, or at all, or are unable to assist our current and future channel partners in independently selling and deploying our products, our business, results of operations, and financial condition could be adversely affected. Typically, agreements with channel partners are non-exclusive, meaning our channel partners may offer customers the products of several different companies, including products that compete with our platform. They may also cease marketing our platform with limited or no notice and with little or no penalty. Additionally, customer retention and expansion attributable to customers acquired through our channel partners may differ significantly from customers acquired through our direct sales efforts. If our channel partners do not effectively market and sell our products, or fail to meet the needs of our customers, our reputation and ability to grow our business may also be adversely affected.
Sales by channel partners are more likely than direct sales to involve collectability concerns. In particular, sales by our channel partners into developing markets, and accordingly, variations in the mix between revenue attributable to sales by channel partners and revenue attributable to direct sales, may result in fluctuations in our operating results.
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We rely upon data centers and other systems and technologies provided by third parties, and technology systems and electronic networks supplied and managed by third parties, to operate our business and interruptions or performance problems with these systems, technologies and networks may adversely affect our business and operating results.
We rely on data centers and other technologies and services (including artificial intelligence) provided by third parties in order to manage our cloud-based infrastructure and operate our business. If any of these services becomes unavailable or otherwise is unable to serve our requirements due to extended outages, interruptions, facility closure, or because it is no longer available on commercially reasonable terms, expenses could increase, our ability to manage finances could be interrupted and our operations otherwise could be disrupted or otherwise impacted until appropriate substitute services, if available, are identified, obtained, and implemented.
We do not control, or in some cases have limited control over, the operation of the data center facilities we use, and they are vulnerable to damage or interruption from earthquakes, floods, fires, power loss, telecommunications failures and similar events. They may also be subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct, to adverse events caused by operator error, and to interruptions, data loss or corruption, and other performance problems due to various factors, including introductions of new capabilities, technology errors, infrastructure changes, distributed denial of service attacks, cyberattacks, or other security related incidents. We may not be able to rapidly switch to new data centers or move customers from one data center to another in the event of any adverse event. Despite precautions taken at these facilities, the occurrence of a natural disaster, an act of terrorism or other act of malfeasance, a security incident of any kind, a decision to close the facilities without adequate notice or other unanticipated problems at these facilities could result in lengthy interruptions in our service and the loss or corruption of, or unauthorized access to or acquisition of, customer data.
In addition, if we do not accurately predict our infrastructure capacity requirements, customers could experience service shortfalls. The provisioning of additional cloud hosting capacity and data center infrastructure requires lead time. As we continue to add data centers, restructure our data management plans, and increase capacity in existing and future data centers, we may be required to move or transfer our data and customers’ data. Despite precautions taken during such processes and procedures, any unsuccessful data transfers may impair customers’ use of our platform, and we may experience costs or downtime in connection with the transfer of data to other facilities, which may lead to, among other things, customer dissatisfaction and non-renewals. The owners of our data center facilities have no obligation to renew their agreements with us on commercially reasonable terms, or at all. If we are unable to renew these agreements on commercially reasonable terms, we may be required to transfer to new data center facilities, and we may incur significant costs and possible service interruption in connection with doing so.
Our ability to provide services and solutions to customers also depends on our ability to communicate with customers through the public internet and electronic networks that are owned and operated by third parties. In addition, in order to provide services on-demand and promptly, our computer equipment and network servers must be functional 24 hours per day, which requires access to telecommunications facilities managed by third parties and the availability of electricity, which we do not control. A severe disruption of one or more of these networks or facilities, including as a result of utility or third-party system interruptions, could impair our ability to process information and provide services to our customers.
Any unavailability of, or failure to meet our requirements by, third-party data centers or other third-party technologies or services, or any disruption of the internet or the third-party networks or facilities that we rely upon, could impede our ability to provide services to customers, harm our reputation, result in a loss of customers, cause us to issue refunds or service credits to customers, subject us to potential liabilities or investigations, result in contract terminations, and adversely affect our renewal rates. Any of these circumstances could adversely affect our business and operating results.
Contractual disputes with our customers could be costly, time-consuming and harm our reputation.
Our business is contract intensive and we are party to contracts with our customers all over the world. Our contracts can contain a variety of terms, including service levels, security obligations, indemnification and regulatory requirements. Contract terms may not always be standardized across our customers and can be subject to differing interpretations, which could result in disputes with our customers from time to time. If our customers notify us of an alleged contract breach or otherwise dispute any provision under our contracts, the resolution of such disputes in a manner adverse to our interests could negatively affect our operating results.
Additionally, if customers fail to pay us under the terms of our agreements, we may be adversely affected both from the inability to collect amounts due and the cost of enforcing the terms of our contracts, including litigation. The risk of such negative effects increases with the term length of our customer arrangements. Furthermore, some of our customers may seek
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bankruptcy protection or other similar relief and fail to pay amounts due to us, or pay those amounts more slowly, either of which could adversely affect our operating results, financial position and cash flow.
Risks Related to Our Products, Solutions and Industry
We face intense competition, and we may not be able to compete effectively, which could reduce demand for our platform and adversely affect our business, growth, revenue and market share.
The market for our platform is intensely and increasingly competitive and subject to rapidly changing technology and evolving standards. In addition, many companies in our target market are offering, or may soon offer, products and services that may compete with our platform. If we are unable to maintain and enhance our digital platforms, cloud platforms, and artificial intelligence related tools to keep pace with competitors and align with evolving customer expectations and demands, it could adversely impact our sales revenues and ability to retain existing and attract new customers. Furthermore, many potential customers have made significant investments in legacy software systems and may be unwilling to invest in new solutions.
Our current primary competitors generally fall into the following categories:
•large enterprise software and cloud platform vendors, including suppliers of traditional business intelligence and cloud services that provide one or more capabilities competitive with our products, such as Microsoft Corporation, Amazon Web Services, Inc., Oracle Corporation, SAP SE, Salesforce, Inc. (Salesforce), and International Business Machines Corporation.
•specialized business analytics software companies, such as Tableau Software, Inc. (Tableau Software) (acquired by Salesforce, Inc.), Qlik Technologies, Inc., Looker Data Sciences (acquired by Alphabet, Inc. (Alphabet)), Strategy Inc. (formerly MicroStrategy), ThoughtSpot, Inc., Alteryx, Inc., Informatica Inc., Sisense Inc., and Tibco Software, Inc.
•cloud-native data integration and analytics providers, such as Sigma Computing, Fivetran, Inc., Matillion Limited, Databricks, Inc., and Infor, Inc.
We expect competition to increase as other established and emerging companies enter the markets in which we compete, as customer requirements evolve and as new products and technologies are introduced. For example, Salesforce acquired Tableau Software in August 2019 and Alphabet acquired Looker Data Sciences in February 2020.
Many competitors, particularly the large software companies named above, have longer operating histories, significantly greater financial, technical, research and development, marketing, distribution, professional services or other resources and greater name recognition than we do. In addition, many competitors have strong relationships with current and potential customers, channel partners and development partners and extensive knowledge of markets in which we compete. As a result, they may be able to respond more quickly to new or emerging technologies and changes in customer requirements, for example by devoting greater resources to the development, promotion and sale of their products than we do.
Moreover, many of these competitors may bundle their data management and analytics products into larger deals or maintenance renewals, often at significant discounts or at no charge. Increased competition may lead to price cuts, alternative pricing structures or the introduction of products available for free or a nominal price, fewer customer orders, reduced gross margins, longer sales cycles and loss of market share. We may not be able to compete successfully against current and future competitors, and our business, operating results and financial condition will be harmed if we fail to meet these competitive pressures. Even if we are successful in acquiring and retaining customers, those customers may continue to use our competitors’ products in addition to our products.
Our ability to compete successfully depends on a number of factors, both within and outside of our control. Some of these factors include ease and speed of platform deployment and use, accessibility across mobile devices, operating systems, and applications, discovery and visualization capabilities, analytical and statistical capabilities, performance and scalability, the quality of our cybersecurity infrastructure, the quality and reliability of our customer service and support, total cost of ownership, return on investment and brand recognition. Any failure by us to compete successfully in any one of these or other areas may reduce the demand for our platform, as well as adversely affect our business, operating results and financial condition.
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As part of our ongoing strategic initiative, we have collaborated with and may in the future collaborate with companies with whom we also compete from time to time, in order to leverage shared expertise and enhance our collective ability to innovate and address evolving market demands. However, current and future competitors have also made and may continue to make strategic acquisitions or establish cooperative relationships among themselves or with others. By doing so, these competitors may increase their ability to meet the needs of customers. These relationships may limit our ability to sell or certify our platform through specific distributors, technology providers, database companies and distribution channels and allow competitors to rapidly gain significant market share. These developments could limit our ability to obtain revenue from existing and new customers. If we are unable to compete successfully against competitors, our business, operating results and financial condition would be harmed.
We continue to evolve our subscription and pricing models and changes could adversely affect our operating results.
Our pricing and subscription models have evolved over time and will continue to evolve in the future. While 91% of our annual recurring revenue is now utilizing the platform as a consumption-based service, it is relatively new to our business and therefore contains inherent risks. Revenue recognized for certain customers may be negatively impacted due to our consumption-based pricing model. For example, certain customers may end up using less data than originally contemplated in their initial consumption-based contract resulting in lower net retention in future years. Additionally, as we implement artificial intelligence tools on our platform, we may not be able to accurately predict customer demand of these tools, and if certain customers use these tools more than we anticipate, we may incur increased operational costs that may not be recovered in an appropriate timeframe. We believe our partner ecosystem will become increasingly important to our business as we continue its expansion. If our partners decide to internally adopt tools that we provide or find other ways that will reduce their need for our platform, such as by adopting artificial intelligence tools offered by our competitors in lieu of purchasing our services, that could result in lower volume of usage, which could adversely impact our financial performance. The success of our pricing model transition is subject to numerous variables, including, but not limited to, customer demand, renewal and expansion rates, our ability to capture upside from over-usage of volume in future contracts, our ability to further develop and scale infrastructure, the ability of our sales force to successfully execute new sales strategies and drive adoption of our platform, tax and accounting implications, pricing, and our costs. Moreover, changes in our pricing and subscription models subject us to a number of uncertainties, including our ability to plan for and model future growth and make accurate projections regarding our future performance. Changes to our pricing and subscription models may also expose us to unexpected or unintended effects, including increased user dissatisfaction, reputational harm and difficulty obtaining or retaining customers. Further, large customers, which are the focus of our direct sales efforts, may demand greater price discounts. In an inflationary environment, our costs may increase and we may not be able to adjust our pricing models accordingly, which could adversely impact our financial performance.
As we expand internationally, we also must determine the appropriate price to enable us to compete effectively internationally. In addition, if the mix of features we sell changes, then we may need to, or choose to, revise our pricing. As a result, in the future we may be required to reduce our prices or offer shorter contract durations, which could adversely affect our revenue, gross margin, profitability, financial condition and cash flow.
In addition, our competitors may offer different subscription or pricing models, which may be more attractive to potential customers. We may be required to adjust our subscription or pricing models in response to these changes, which could adversely affect our financial performance.
If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards and changing customer needs or requirements, our solutions may become less competitive.
Our success depends on our customers’ willingness to adopt and use our platform, including on their smartphone or mobile device, as well as our ability to adapt and enhance our platform. To attract new customers and increase revenue from existing customers, we need to continue to enhance and improve our platform, to meet customer needs at prices that customers are willing to pay. Such efforts will require adding new features, expanding related applications and responding to technological advancements, which will increase our research and development costs. If we are unable to develop solutions that address customers’ needs, or enhance and improve our platform in a timely manner, we may not be able to increase or maintain market acceptance of our platform.
Further, we may make changes to our platform that customers do not find useful. We may also discontinue certain features, begin to charge for certain features that are currently free or increase fees for any features or usage of our platform.
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We may also face unexpected problems or challenges in connection with new applications or feature introductions. Enhancements and changes to our platform could fail to attain sufficient market acceptance for many reasons, including:
•failure to predict market demand accurately in terms of platform functionality and capability or to supply features that meets this demand in a timely fashion;
•inability to operate effectively with the technologies, systems or applications of existing or potential customers;
•defects, errors or failures;
•negative publicity about their performance or effectiveness;
•delays in releasing new enhancements and additional features to our platform to the market;
•the introduction or anticipated introduction of competing products;
•an ineffective sales force;
•poor business conditions for our end-customers, causing them to delay purchases;
•challenges with customer adoption and use of our platform on mobile devices or problems encountered in developing or supporting enhancements to our mobile applications; and
•the reluctance of customers to purchase subscriptions to software incorporating open source software.
Because our platform is designed to operate on and with a variety of systems, we will need to continuously modify and enhance our platform to keep pace with changes in technology, and we may fail to do so.
In addition, the use of artificial intelligence tools on our platform may raise novel and complex issues that could result in liability, regulatory inquiry or reputational harm. Domo’s suite of data science leverages machine learning algorithms, predictive analytics, and other artificial intelligence technologies to identify trends, anomalies and correlations, provide alerts and initiate business processes. Artificial intelligence presents risks and challenges that could affect its adoption, and therefore our business. Artificial intelligence algorithms may be, or be perceived to be, deficient, inaccurate, biased, unethical or otherwise flawed. Datasets may be insufficient or contain biased information. Artificial intelligence technologies that we make use of may produce or create outputs that may appear correct but are factually inaccurate or otherwise flawed. Inappropriate or controversial data practices by us or others could impair the acceptance of artificial intelligence solutions. These actual or perceived deficiencies could undermine the decisions, predictions, inferences, analysis or other outputs that artificial intelligence applications produce, or this could be believed or reported to occur, subjecting us to competitive harm, legal liability, and brand or reputational harm. Additionally, artificial intelligence technologies are complex and rapidly evolving, and we face significant competition from other companies.
Artificial intelligence technologies also are subject to evolving legal and regulatory landscapes. Laws and regulations applicable to artificial intelligence continue to develop and may be inconsistent from jurisdiction to jurisdiction. For example, the Artificial Intelligence Act (EU AI Act), an E.U. regulation which came into effect on August 1, 2024, prohibits certain artificial intelligence applications and systems and imposes disclosure, transparency, and other requirements on the use of certain applications or systems. The EU AI Act could require us to alter or restrict our use of AI both in features or products available to our users and in our systems that interact with our users, depending on respective levels of risk-categorization, types of systems and manner of use. The EU AI Act also may require us to comply with monitoring and reporting requirements. We may need to devote substantial time and resources to evaluate our obligations under the EU AI Act and to develop and execute planned measures designed to comply with it. There have been numerous other laws and bills proposed at the U.S. federal and state level, as well as internationally, aimed at regulating the deployment or provision of AI systems and services or otherwise addressing aspects of the development or use of artificial intelligence. This includes the Utah Artificial Intelligence Policy Act, which, among other things, imposes disclosure requirements on entities using generative artificial intelligence with customers, and other similar regulatory schemes enacted by other states in the United States.
The use of artificial intelligence technologies in our platform and otherwise in our business may result in new or enhanced governmental or regulatory scrutiny, new or modified laws or regulations applicable to our development and use of artificial intelligence, claims, demands, and litigation, confidentiality, privacy, data protection, or security risks, security or safety incidents, ethical concerns, or other complications that could adversely affect our business, financial condition, results of operations and prospects. Uncertainty around new and emerging artificial intelligence technologies may require additional
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investment in the development and maintenance of proprietary datasets and machine learning models, development of new approaches and processes to provide attribution or remuneration to creators of training data, and development of appropriate protections, safeguards, and policies for handling the processing of data with artificial intelligence technologies, which may be costly and could impact our expenses. More generally, as use of artificial intelligence becomes more prevalent, we anticipate that it will continue to present new or unanticipated ethical, reputational, technical, operational, legal, competitive, and regulatory issues, among others. We expect that our incorporation of artificial intelligence within our platform and business will require additional resources, including the incurrence of additional costs, to develop and maintain our platform offerings, services, and features in efforts to minimize potentially harmful or unintended consequences, to comply with applicable and emerging laws and regulations, to maintain or extend our competitive position, and to address any ethical, reputational, technical, operational, legal, competitive or regulatory issues that may arise as a result of any of the foregoing. As a result, the challenges presented with our use of artificial intelligence could adversely affect our business, financial condition and results of operations.
Our platform also provides real-time write-back capabilities to customer environments, including to the internet of things (IoT) products and services. The development of IoT presents security, privacy and execution risks. Many IoT devices have limited interfaces and ability to be updated or patched. IoT solutions may collect large amounts of data, and our handling of IoT data may not satisfy customers or regulatory requirements. IoT scenarios may increasingly affect personal health and safety. If IoT solutions that include our technologies do not work as intended, violate the law, or harm individuals or businesses, we may be subject to legal claims or enforcement actions. These risks, if realized, may increase our costs, damage our reputation or brand, or negatively impact our business and operating results.
Moreover, many competitors expend a considerably greater amount of funds on their research and development programs, and those that do not may be acquired by larger companies that would allocate greater resources to competitors’ research and development programs. If we fail to maintain adequate research and development resources or compete effectively with the research and development programs of competitors, our business could be harmed. Our ability to grow is also subject to the risks and opportunities presented by future disruptive technologies. If new technologies, such as those relating to artificial intelligence, emerge or improve such that they are, or are perceived to be, able to deliver business intelligence solutions or otherwise perform similar functions as our platform at lower prices, more efficiently, more conveniently or more securely, such technologies could adversely affect our ability to compete. Market and consumer perceptions of the future competitiveness of the SaaS industry are uncertain, which could negatively impact the market price or volatility of our stock and impair our ability to raise capital.
We may not timely and effectively scale our existing technology, including our computing architecture, to meet the performance and other requirements placed on our systems, which could increase expenditures unexpectedly and create risk of outages and other performance and quality of service issues for our customers.
Our future growth and renewal rates depend on our ability to meet customers’ expectations with respect to the speed, reliability and other performance attributes of our platform, and to meet the expanding needs of customers as their use of our platform grows. The number of users, the amount and complexity of data ingested, created, transferred, processed and stored by us, the number of locations where our platform is being accessed, and the number of processes and systems managed by us on behalf of these customers, among other factors, separately and combined, can have an effect on the performance of our platform. In order to ensure that we meet the performance and other requirements of customers, we continue to make significant investments to develop and implement new technologies in our platform and infrastructure operations. These technologies, which include database, application and server advancements, revised network and hosting strategies, and automation, are often advanced, complex, and sometimes broad in scope and untested through industry-wide usage. We may not be successful in developing or implementing these technologies. To the extent that we do not develop offerings and scale our operations in a manner that maintains performance as our customers expand their use, our business and operating results may be harmed.
We may not accurately assess the capital and operational expenditures required to successfully fulfill our objectives and our financial performance may be harmed as a result. Further, we may make mistakes in the technical execution of these efforts to improve our platform, which may affect our customers. Issues that may arise include performance, data loss or corruption, outages, and other issues that could give rise to customer satisfaction issues, loss of business, and harm to our reputation. If any of these were to occur there would be a negative and potentially significant impact to our financial performance. Lastly, our ability to generate new applications, and improve our current solutions may be limited if and to the extent resources are necessarily allocated to address issues related to the performance of existing solutions.
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If we fail to meet our service level commitments, our business, results of operations and financial condition could be adversely affected.
Our subscription agreements with many of our customers, including most of our top customers, provide certain service level commitments. If we are unable to meet the stated service level commitments or suffer extended periods of downtime that exceed the periods allowed under our subscription agreements, we may be obligated to provide these customers with service credits, or we could face subscription terminations, which could significantly impact our revenue. Any extended service outages could also adversely affect our reputation, which would also impact our future revenue and operating results.
Our customers depend on our customer support organization to resolve technical issues relating to our platform. We may be unable to respond quickly enough to accommodate short-term increases in customer demand for support services. Increased customer demand for these services, without corresponding revenue, could increase costs and adversely affect our operating results. In addition, our sales process is highly dependent on the ease of use of our services, on our reputation and on positive recommendations from our existing customers. Any failure to maintain high-quality customer support, or a market perception that we do not maintain high-quality support, could adversely affect our reputation and our ability to sell our services to existing and prospective customers.
If our or our customers' access to data becomes limited, our business, results of operations and financial condition may be adversely affected.
The success of our platform is dependent in large part on our customers’ ability to access data maintained on third party software and service platforms. Generally, we do not have agreements in place with these third parties that guarantee access to their platforms, and any agreements that we do have in place with these third parties are typically terminable for convenience by the third party. If these third parties restrict or prevent our ability to integrate our platform with their software or platform, including but not limited to, by limiting the functionality of our data connectors, our ability to access the data maintained on their systems or the speed at which such data is delivered, customers’ ability to access their relevant data in a timely manner may be limited, and our business and operating results may be adversely affected.
Our business depends on continued and unimpeded access to the internet and mobile networks.
Our customers who access our platform and services through mobile devices, such as smartphones, laptops and tablet computers, must have a high-speed internet connection to use our services. Currently, this access is provided by telecommunications companies and internet access service providers that have significant and increasing market power in the broadband and internet access marketplace. In the absence of government regulation, these providers could take measures that affect their customers’ ability to use our products and services, such as degrading the quality of the data packets we transmit over their lines, giving our packets low priority, giving other packets higher priority than ours, blocking our packets entirely, or attempting to charge their customers more for using our platform and services. To the extent that internet service providers implement usage-based pricing, including meaningful bandwidth caps, or otherwise try to monetize access to their networks, we could incur greater operating expenses and customer acquisition and retention could be negatively impacted. Furthermore, to the extent network operators were to create tiers of internet access service and either charge us for or prohibit our services from being available to our customers through these tiers, our business could be negatively impacted.
On February 26, 2015, the Federal Communications Commission (the FCC) reclassified broadband internet access services in the United States as a telecommunications service subject to some elements of common carrier regulation, including the obligation to provide service on just and reasonable terms, and adopted specific net neutrality rules prohibiting the blocking, throttling or “paid prioritization” of content or services. However, in December 2017, the FCC once again classified broadband internet access service as an unregulated information service and repealed the specific rules against blocking, throttling or “paid prioritization” of content or services. It retained a rule requiring internet service providers to disclose their practices to consumers, entrepreneurs and the FCC. A number of parties have already stated they would appeal this order and it is possible Congress may adopt legislation restoring some net neutrality requirements. The elimination of net neutrality rules and any changes to the rules could affect the market for broadband internet access service in a way that impacts our business, for example, if internet access providers begin to limit the bandwidth and speed for the transmission of data from independent software vendors.
Incorrect or improper implementation or use of our platform could result in customer dissatisfaction and negatively affect our business, results of operations, financial condition, and growth prospects.
Our platform is deployed in a wide variety of technology environments. Increasingly, our platform has been deployed in large scale, complex technology environments, and we believe our future success will depend on our ability to increase sales
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of our platform for use in such deployments. We must often assist our customers in achieving successful implementations of our platform, which we do through our professional services organization. The time required to implement our platform can vary. For complex deployments, implementation can take multiple months. If our customers are unable to implement our platform successfully, or unable to do so in a timely manner, customer perceptions of our platform may be harmed, our reputation and brand may suffer, and customers may choose to cease usage of our platform or not expand their use of our platform. Our customers and third-party partners may need training in the proper use of and the variety of benefits that can be derived from our platform to maximize its benefits. If our platform is not effectively implemented or used correctly or as intended, or if we fail to adequately train customers on how to efficiently and effectively use our platform, our customers may not be able to achieve satisfactory outcomes or may experience increased risks of security incidents. Such outcomes or incidents, even if caused by customer error, could result in negative publicity and legal claims against us, which may cause us to generate fewer sales to new customers and reductions in renewals or expansions of the use of our platform with existing customers, any of which would harm our business and results of operations.
Our use of “open source” software could negatively affect our ability to offer our platform and subject us to possible litigation.
Our platform uses “open source” software that we, in some cases, have obtained from third parties. Open source software is generally freely accessible, usable and modifiable, and is made available to the general public on an “as-is” basis under the terms of a non-negotiable license. Use and distribution of open source software may entail greater risks than use of third-party commercial software. Open source licensors generally do not provide warranties or other contractual protections regarding infringement claims or other claims relating to violation of intellectual property rights or the quality of the software. In addition, certain open source licenses, like the GNU Affero General Public License, may require us to offer for no cost the components of our platform that incorporate the open source software, to make available source code for modifications or derivative works we create by incorporating or using the open source software, or to license our modifications or derivative works under the terms of the particular open source license. If we are required, under the terms of an open source license, to release our proprietary source code to the public, competitors could create similar products with lower development effort and time, which ultimately could result in a loss of sales for us.
We may also face claims alleging noncompliance with open source license terms or infringement, misappropriation or other violation of open source technology. These claims could result in litigation or require us to purchase a costly license, devote additional research and development resources to re-engineer our platform, discontinue the sale of our products if re-engineering could not be accomplished on a timely or cost-effective basis, or make generally available our proprietary code in source code form, any of which would have a negative effect on our business and operating results, including being enjoined from the offering of the components of our platform that contained the open source software. We could also be subject to lawsuits by parties claiming ownership of what we believe to be open source software. Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition and require us to devote additional research and development resources to re-engineer our platform.
Although we monitor our use of open source software and try to ensure that none is used in a manner that would subject our platform to unintended conditions, few courts have interpreted open source licenses, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our platform. We cannot guarantee that we have incorporated open source software in our platform in a manner that will not subject us to liability, or in a manner that is consistent with our current policies and procedures.
Risks Related to Our Personnel and Operations
If we fail to effectively align, develop and expand our sales and marketing capabilities with our pricing structure and increase sales efficiency, our ability to increase our customer base and increase acceptance of our platform could be harmed.
To increase the number of customers and increase the market acceptance of our platform, we will need to align and expand our sales and marketing operations, including our domestic and international sales force, with our pricing structure and increase sales efficiency. We are aligning our cost structure to better reflect significant product and business model innovation with the expectation that go-to-market operations in our consumption-based business model will be more efficient and require less investment. We will continue to dedicate significant resources to sales and marketing programs. We believe that there is significant competition for direct sales personnel with the sales skills and technical knowledge that we require. Our ability to achieve significant revenue growth in the future will depend, in large part, on our success in recruiting, training and retaining a sufficient number of direct sales personnel and sales leadership. New hires require significant training and
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time before they achieve full productivity, particularly in new sales territories. Recent hires and planned hires may not become as productive as quickly as we would like, changes in sales leadership could adversely affect our existing sales personnel, and we may be unable to hire or retain sufficient numbers of qualified individuals in the future in the markets where we do business. The effectiveness of our sales and marketing has also varied over time and, together with the effectiveness of any partners or resellers we may engage, may vary in the future. Our business and operating results may be harmed if our efforts do not generate a correspondingly significant increase in revenue. We may not achieve revenue growth from expanding our sales force if we are unable to hire, develop and retain talented sales personnel, if our new sales personnel are unable to achieve desired productivity levels in a reasonable period of time, or if our sales and marketing programs are not effective. In particular, we may in the future need to further adjust our go-to-market cost structure and target metrics, particularly as they relate to how we structure, effect, and compensate our direct sales personnel to become more efficient and effective at selling under a consumption-based business model. Any adjustments in compensation structure could negatively affect the productivity of our direct sales personnel, and there is no assurance that we will be able to successfully implement the adjustments in a timely or cost-effective manner, or that we will be able to realize all or any of the expected benefits from such adjustments.
We may be subject to litigation in the future, which will require significant management attention, could result in significant legal expenses and may result in unfavorable outcomes, all or any of which could adversely affect our operating results, harm our reputation or otherwise negatively impact our business.
We may in the future become subject to litigation or claims arising in or outside the ordinary course of business that could negatively affect our business operations and financial condition, including securities class actions and shareholder derivative actions, both of which are typically expensive to defend.
The outcome of any litigation, regardless of its merits, is inherently uncertain. Any claims and lawsuits, and the disposition of such claims and lawsuits, could be time-consuming and expensive to resolve, divert management attention and resources, and lead to attempts on the part of other parties to pursue similar claims. Any adverse determination related to litigation could adversely affect our operating results, harm our reputation or otherwise negatively impact our business. In addition, depending on the nature and timing of any such dispute, a resolution of a legal matter could materially affect our future operating results, our cash flows or both.
We have experienced and may continue to experience changes to our management and board, which may create uncertainties and could harm our business.
We have experienced changes to our management and board in recent years. Changes to strategic or operating goals, which can often occur with the appointment of executives and directors can create uncertainty, can negatively impact our ability to execute quickly and effectively, and may ultimately be unsuccessful. In addition, executive leadership and director transition periods are often difficult as such executives and directors gain more detailed knowledge of our operations, and friction can result from changes in strategy and management style. Management and board changes may inherently cause some loss of institutional knowledge, which can negatively affect strategy and execution. In addition, to the extent we experience management turnover, competition for top management is high and it may take months to find a candidate that meets our requirements. If we are unable to attract and retain qualified management personnel, our business could suffer.
If we are unable to attract, integrate and retain additional qualified personnel, including top technical talent, our business could be adversely affected.
Future success depends in part on our ability to identify, attract, integrate and retain highly skilled technical, managerial, sales and other personnel. We face intense competition for qualified individuals from numerous other companies, including other software and technology companies, many of whom have greater financial and other resources than we do. These companies also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates than those we have to offer. In addition, new hires often require significant training and, in many cases, take significant time before they achieve full productivity. We may incur significant costs to attract and retain qualified personnel, including significant expenditures related to salaries and benefits and compensation expenses related to equity awards, and we may lose new employees to competitors or other companies before we realize the benefit of our investment in recruiting and training them. Moreover, new employees may not be or become as productive as we expect, as we may face challenges in adequately or appropriately integrating them into our workforce and culture. As we move into new geographies, we will need to attract and recruit skilled personnel in those areas and may face additional challenges in attracting, integrating and retaining international employees. If we are unable to attract, integrate and retain suitably qualified individuals who are capable of meeting our growing technical, operational and managerial requirements, on a timely basis or at all, our business will be adversely affected.
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Volatility or lack of positive performance in our stock price may also affect our ability to attract and retain our key employees. Employees may be more likely to leave us if the shares they own or the shares underlying their equity awards have significantly appreciated or depreciated in value. In addition, the authorized shares remaining under our 2018 Equity Incentive Plan may be insufficient to continue to provide equity incentives at levels that would be meaningful. If we are unable to appropriately incentivize and retain our employees through equity compensation, or if we seek to increase the authorized shares under our equity incentive plan or increase our compensation expenses in order to appropriately incentivize and retain our employees, our business, operating results, financial condition and cash flows would be adversely affected and the ownership of existing shareholders would be diluted.
If we fail to offer high-quality professional services and support, our business and reputation may suffer.
High-quality professional services and support, including training, implementation and consulting services, are important for the successful marketing, sale and use of our platform and for the renewal of subscriptions by existing customers. Professional services may be provided by us or by a third-party partner. The importance of high-quality professional services and support will increase as we expand our business and pursue new customers. If we or our third-party partners do not provide effective ongoing support, our ability to retain and expand use of our platform and related applications to existing customers may suffer, and our reputation with existing or potential customers may be harmed.
We continue to pursue strategies to reduce the amount of professional services required for a customer to begin to use and gain value from our platform, lower the overall costs of professional service fees to our customers, and improve the gross margin of our professional services business. If we are unable to successfully accomplish these objectives, our operating results, including our profit margins, may be harmed.
Catastrophic events may disrupt our business and impair our ability to provide our platform to customers, resulting in costs for remediation, customer dissatisfaction, and other business or financial losses.
Our operations depend, in part, on our ability to protect our facilities against damage or interruption from natural disasters, power or telecommunications failures, criminal acts and similar events. Despite precautions taken at our facilities, the occurrence of a natural disaster, epidemic or pandemic (such as the COVID-19 pandemic), an act of terrorism, vandalism or sabotage, spikes in usage volume or other unanticipated problems at a facility could result in lengthy interruptions in the availability of our platform. Even with current and planned disaster recovery arrangements, our business could be harmed. Also, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. These factors in turn could further reduce revenue, subject us to liability and cause us to issue credits or cause customers to fail to renew their subscriptions, any of which could harm our business.
Our long-term growth may depend in part on being able to expand internationally on a profitable basis.
Historically, we have generated a substantial majority of our revenue from customers inside the United States. For example, approximately 80% and 79% of our total revenue for the six months ended July 31, 2025 and 2026, respectively, was derived from sales within the United States. We continue to expand internationally and plan to continue to expand our international operations as part of our growth strategy. Expanding our international operations will subject us to a variety of risks and challenges, including:
• the need to make significant investments in people, solutions and infrastructure, typically well in advance of revenue generation;
• the need to localize and adapt our application for specific countries, including translation into foreign languages and associated expenses;
• potential changes in public or customer sentiment regarding cloud-based services or the ability of non-local enterprises to provide adequate data protection, particularly in the European Union (the E.U.);
• technical or latency issues in delivering our platform;
• dependence on certain third parties, including resellers with whom we do not have extensive experience;
• the lack of reference customers and other marketing assets in regional markets that are new or developing for us, as well as other adaptations in our market generation efforts that we may be slow to identify and implement;
• unexpected changes in regulatory requirements or taxes;
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• actual or anticipated changes in international trade policies, including those resulting from tariffs, trade barriers and other trade regulations, as well as the actual or anticipated effect of such policies on us and our customers;
• differing labor regulations, especially in the E.U., where labor laws are generally more advantageous to employees as compared to the United States, including deemed hourly wage and overtime regulations in these locations;
• challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits and compliance programs;
• difficulties in maintaining our company culture with a dispersed and distant workforce;
• difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems and regulatory systems;
• currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions if we choose to do so in the future;
• limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries;
• limited or insufficient intellectual property protection, or the risk that our products may conflict with, infringe or otherwise violate foreign intellectual property;
• political instability, terrorist activities or military conflicts (including Russia’s invasion of Ukraine and hostilities in the Middle East);
• requirements to comply with foreign privacy, cybersecurity, and data protection laws and regulations and the risks and costs of noncompliance;
• likelihood of potential or actual violations of domestic and international anticorruption laws, such as the U.S. Foreign Corrupt Practices Act (the FCPA), and the U.K. Bribery Act, or of U.S. and international export control and sanctions regulations, which likelihood may increase with an increase of sales or operations in foreign jurisdictions and operations in certain industries;
• requirements to comply with U.S. export control and economic sanctions laws and regulations and other restrictions on international trade;
• likelihood that the United States and other governments and their agencies impose sanctions and embargoes on certain countries, their governments and designated parties, which may prohibit the export of certain technology, products, and services to such persons;
• adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash should we desire to do so; and
• our ability to recruit and engage local channel and implementation partners.
Any of these risks could adversely affect our international operations, reduce our international revenue or increase our operating costs, adversely affecting our business, operating results and financial condition and growth prospects. Our limited experience operating our business in certain geographies outside of the United States increases the risk that recent and any potential future expansion efforts will not be successful. If substantial time and resources invested to expand our international operations do not result in a successful outcome, our operating results and business may suffer.
In addition, compliance with laws and regulations applicable to our international operations increases the cost of doing business in foreign jurisdictions. We may be unable to keep current with changes in government requirements as they change from time to time. Failure to comply with these regulations could have adverse effects on our business. In addition, in many foreign countries it is common for others to engage in business practices that are prohibited by our internal policies and procedures or U.S. laws and regulations applicable to us. There can be no assurance that all of our employees, contractors, and agents will comply with the formal policies we will implement, or applicable laws and regulations. Violations of laws or key control policies by our employees, contractors, channel partners or agents could result in delays in revenue recognition, financial reporting misstatements, fines, penalties, or the prohibition of the importation or exportation of our software and services and could adversely affect our business and operating results.
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Some of our business partners also have international operations and are subject to the risks described above. Even if we are able to successfully manage the risks of international operations, our business may be adversely affected if our business partners are not able to successfully manage these risks.
Future changes in the regulations and laws of the United States, or those of the international markets in which we do business, could harm our business.
We are subject to general business regulations and laws, as well as regulations and laws specifically governing the internet and software, in the United States as well as the international markets in which we do business. These regulations and laws may cover employment, taxation, tariffs, privacy, cybersecurity, data protection, pricing, content, copyrights and other intellectual property, mobile communications, electronic contracts and other communications, consumer protection, unencumbered internet access to our services, the design and operation of websites, artificial intelligence, and the characteristics and quality of software and services. It is possible changes to these regulations and laws, as well as compliance challenges related to the complexity of multiple, conflicting and changing sets of applicable regulations and laws, may impact our sales, operations, and future growth.
Future acquisitions could disrupt our business and adversely affect our operating results, financial condition and cash flows.
We may make acquisitions that could be material to our business, operating results, financial condition and cash flows. Our ability as an organization to successfully acquire and integrate technologies or businesses is unproven. Acquisitions involve many risks, including the following:
•an acquisition may negatively affect our operating results, financial condition or cash flows because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition;
•we may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel or operations of any company that we acquire, particularly if key personnel of the acquired company decide not to work for us;
•an acquisition may disrupt our ongoing business, divert resources, increase our expenses and distract our management;
•an acquisition may result in a delay or reduction of customer purchases for both us and the company we acquired due to customer uncertainty about continuity and effectiveness of service from either company;
•we may encounter difficulties in, or may be unable to, successfully sell any acquired products;
•an acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions;
•the potential strain on our financial and managerial controls and reporting systems and procedures;
•potential known and unknown liabilities, compliance risks, cybersecurity risks, privacy risks, or other risks associated with an acquired company;
•if we incur debt to fund such acquisitions, such debt may subject us to material restrictions on our ability to conduct our business as well as financial maintenance covenants;
•the risk of impairment charges related to potential write-downs of acquired assets or goodwill in future acquisitions;
•to the extent that we issue a significant amount of equity or convertible debt securities in connection with future acquisitions, existing stockholders may be diluted and earnings per share may decrease; and
•managing the varying intellectual property protection strategies and other activities of an acquired company.
We may not succeed in addressing these or other risks or any other problems encountered in connection with the integration of any acquired business. The inability to integrate successfully the business, technologies, products, personnel or
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operations of any acquired business, or any significant delay in achieving integration, could have a material adverse effect on our business, operating results, financial condition and cash flows.
Governmental export or import controls could limit our ability to compete in foreign markets and subject us to liability if we violate them.
Our software is subject to U.S. export controls, and we incorporate encryption technology into our platform. These products and the underlying technology may be exported only with the required export authorizations, including by license, a license exception or other appropriate government authorizations. U.S. export controls may require submission of a product classification and annual or semi-annual reports. Governmental regulation of encryption technology and regulation of imports or exports of encryption products, or our failure to obtain required import or export authorization for our platform, when applicable, could harm our international sales and adversely affect our revenue. Compliance with applicable regulatory requirements regarding the export of our platform, including with respect to new releases of our platform, may create delays in the introduction of our product releases in international markets, prevent customers with international operations from deploying our platform or, in some cases, prevent the export of our platform to some countries altogether. Furthermore, U.S. export control laws and economic sanctions prohibit the shipment of certain products and services to countries, governments and persons targeted by U.S. sanctions. If we fail to comply with export and import regulations and such economic sanctions, we may be fined or other penalties could be imposed, including a denial of certain export privileges. Moreover, any new export or import restrictions, new legislation or shifting approaches in the enforcement or scope of existing regulations, or in the countries, persons or technologies targeted by such regulations, could result in decreased use of our platform by, or in our decreased ability to export or sell subscriptions to our platform to, existing or potential customers with international operations. Any decreased use of our platform or limitation on our ability to export or sell subscriptions to our platform would likely adversely affect our business, financial condition and operating results.
Failure to comply with anti-bribery, anti-corruption, and anti-money laundering laws could subject us to penalties and other adverse consequences.
We are subject to the FCPA, the U.K. Bribery Act and other anti-corruption, anti-bribery and anti-money laundering laws in various jurisdictions both domestic and abroad. Anti-corruption, anti-bribery, and anti-money laundering laws have been enforced aggressively in recent years and are interpreted broadly and generally prohibit companies and their directors, officers, employees and agents from promising, authorizing, making or offering improper payments or other benefits to government officials and others in the private sector. Such laws apply to our agents/third parties, and we leverage third parties, including channel partners, to sell subscriptions to our platform and conduct our business abroad. We and our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and may be held liable for the corrupt or other illegal activities of these third-party business partners and intermediaries, our employees, representatives, contractors, channel partners, and agents, even if we do not explicitly authorize such activities. While we have policies and procedures to address compliance with such laws, we cannot assure you that all of our employees and agents will not take actions in violation of our policies and applicable law, for which we may be ultimately held responsible. Any violation of the FCPA or other applicable anti-bribery, anti-corruption laws, and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions, a significant diversion of management’s resources and attention or suspension or debarment from U.S. government contracts, all of which may have a material adverse effect on our reputation, business, operating results and prospects.
Risks Related to Privacy and Cybersecurity
We are subject to governmental laws, regulation and other legal obligations, particularly those related to privacy, data protection and cybersecurity, and any actual or perceived failure to comply with such obligations could impair our efforts to maintain and expand our customer base, causing our growth to be limited and harming our business.
We receive, store, and otherwise process personal information and other data from and about customers and other individuals in addition to our employees and service providers. Our handling of data is subject to a variety of laws and regulations, including regulation by various government agencies, such as the U.S. Federal Trade Commission (the FTC) and various state, local, and foreign agencies. Our data handling also is subject to contractual obligations and may be alleged or deemed to be subject to industry standards, including certain industry standards that we undertake to comply with.
In the United States, various laws and regulations apply to the collection, disclosure, and other processing of certain types of data, including with respect to security measures used to protect such data. Additionally, the FTC and many state attorneys general are interpreting federal and state consumer protection laws as imposing standards for the collection, use,
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dissemination, security, and other processing of data. The laws and regulations relating to privacy and cybersecurity are evolving, can be subject to significant change, and may result in ever-increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions. For example, California in 2018 enacted the California Consumer Privacy Act (CCPA), which went into effect on January 1, 2020. The CCPA requires covered companies to, among other things, provide disclosures to California consumers and afford such consumers new abilities to opt-out of certain sales of personal information. Additionally, the California Privacy Rights Act (CPRA) was approved by California voters in November 2020 and became effective January 1, 2023. The CPRA amended and expanded the CCPA in numerous respects, including by expanding the CCPA’s private right of action. Following enactment of the CCPA, many other states have adopted or considered privacy legislation, many of which are comprehensive laws similar to the CCPA and CPRA. For example, Virginia, Colorado, Utah, and Connecticut have adopted such legislation that became effective in 2023, Texas, Montana, Oregon, and Florida have adopted such legislation that became effective in 2024, Delaware, Iowa, Maryland, Minnesota, Nebraska, New Hampshire, New Jersey, and Tennessee have adopted such legislation that became effective in 2025, Indiana, Kentucky, and Rhode Island have adopted such legislation that has become effective in 2026, Alabama and Oklahoma have adopted such legislation that becomes effective in 2027; and Vermont has adopted such legislation that becomes effective in 2028. Broad federal privacy legislation has also been proposed. In 2025, the U.S. Department of Justice issued a rule entitled the Preventing Access to U.S. Sensitive Personal Data and Government-Related Data by Countries of Concern or Covered Persons, which places restrictions on data transactions involving sensitive personal data and certain “Countries of Concern” and “Covered Persons” (i.e., individuals and entities located in or controlled by individuals or entities located in those jurisdictions). Additionally, states have adopted other laws and regulations relating to privacy and cybersecurity, such as Washington’s My Health, My Data Act, which includes a private right of action. These and other new and evolving laws and regulations relating to privacy in the U.S. could increase our potential liability and adversely affect our business. Aspects of these laws and regulations and their interpretation and enforcement remain uncertain. We cannot fully predict the impact of these or other new and evolving laws and regulations relating to privacy and cybersecurity on our business or operations, but they may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply.
In addition, several foreign countries and governmental bodies, including the E.U., as well as the United Kingdom, Australia, India, and Japan, where we maintain offices or other operational presences, have laws and regulations dealing with the handling and processing of personal data obtained from their residents, which in certain cases are more restrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, access, use, storage, security, disclosure, and other processing of various types of data, including data that identifies or may be used to identify an individual. Such laws and regulations may be modified or subject to new or different interpretations, and new laws and regulations may be enacted in the future. Within the E.U., in May 2018, a far-reaching regulation governing data and privacy practices called the General Data Protection Regulation (GDPR) became effective. The GDPR includes stringent operational requirements for processors and controllers of personal data and imposes significant penalties for noncompliance of up to the greater of €20 million or 4% of global annual revenues. Complying with the GDPR, the CCPA, and other laws and regulations governing privacy, data protection, and cybersecurity may cause us to incur substantial operational costs or require us to modify our data handling practices. Actual or alleged noncompliance could result in proceedings against us by governmental authorities or others (including a private right of action for affected individuals in certain instances) and substantial penalties, fines, and other liabilities, and may otherwise adversely impact our business, financial condition, and operating results.
Further, the United Kingdom has enacted a Data Protection Act and a version of the GDPR referred to as the UK GDPR that, collectively, substantially implement the GDPR in the United Kingdom and provide for penalties of up to the greater of £17.5 million and 4% of total annual revenue. Uncertainty remains, however, regarding aspects of data protection in the United Kingdom in the medium to long term. The United Kingdom made targeted amendments to its data protection regime in the UK Data (Use and Access) Act 2025, causing the United Kingdom’s data protection regime to differ more significantly from the GDPR. On June 28, 2021, the European Commission announced a decision of “adequacy” concluding that the United Kingdom ensures an equivalent level of data protection to the GDPR, which generally permitted personal data flows from the European Economic Area to the United Kingdom. This adequacy determination was renewed in December 2025 to extend through December 2031, but it may be modified or revoked in the interim. Further, United Kingdom data protection law imposes restrictions on personal data transfers to the U.S., similar to those imposed by the GDPR, and the United Kingdom’s Information Commissioner’s Office issued new standard contractual clauses, effective March 21, 2022, that are required to be implemented.
We previously were certified under the E.U.-U.S. Privacy Shield and the Swiss-U.S. Privacy Shield with respect to our transfer of certain personal data from the E.U. and Switzerland to the United States. The E.U.-U.S. Privacy Shield framework and the use of E.U. Standard Contractual Clauses (the SCCs) to protect data exports between the E.U. and the U.S. have been subject to legal challenges in the E.U, and on July 16, 2020, the Court of Justice of the European Union (the CJEU), Europe’s
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highest court, held in the “Schrems II” case that the E.U.-U.S. Privacy Shield was invalid, and imposed additional obligations in connection with the use of the SCCs. The Swiss data protection and information commissioner subsequently concluded that the Swiss-U.S. Privacy Shield was invalid on similar grounds. The European Commission issued new SCCs on June 4, 2021, addressing aspects of the CJEU’s opinion in the Schrems II case, which were required to be implemented. The European Commission and United States agreed in principle in March 2022 to a new EU-U.S. Data Privacy Framework (DPF), with respect to the European Commission adopted an adequacy decision in July 2023, allowing the DPF to be implemented and available for participating entities to use to legitimize transfers of personal data from the E.U. to the U.S. We have self-certified to the DPF, the Swiss-U.S. Data Privacy Framework, and the United Kingdom Extension to the DPF. The DPF has faced legal challenge, and each of these frameworks may be subject to legal challenge in the future. Additionally, the European Commission’s adequacy decision regarding the DPF provides that it will be subject to future reviews and may be subject to suspension, amendment, repeal, or limitations to its scope by the European Commission. Numerous laws and regulations in other jurisdictions also have been enacted or modified in manners imposing data transfer restrictions, and we and many other companies may need to implement different or additional measures to establish or maintain legitimate means for the transfer and receipt of personal data from the E.U., Switzerland, the United Kingdom, or other countries or regions to the U.S., and we may, in addition to other impacts, be required to engage in additional contractual negotiations and experience additional costs associated with increased compliance burdens, and we and our customers face the potential for regulators to apply different standards to the transfer of personal data from the E.U., Switzerland, the United Kingdom, or other regions to the U.S., and to block or require additional measures taken with respect to certain data flows from the E.U., Switzerland, the United Kingdom, or other regions to the U.S. We and our customers may face a risk of enforcement actions or other proceedings by regulatory authorities relating to personal data transfers. Any such proceedings could result in substantial costs and diversion of resources, distract management and technical personnel and negatively affect our business, operating results, and financial condition. We may be at risk of experiencing reluctance or refusal of European or multi-national customers to use our solutions and being subject to regulatory action or incurring penalties. Any of these developments may have an adverse effect on our business.
Other jurisdictions have adopted laws and regulations addressing privacy, data protection, and cybersecurity, many of which share similarities with the GDPR. For example, Law no. 13.709/2018 of Brazil, the Lei Geral de Proteção de Dados Pessoais (LGPD) entered into effect in 2020, authorizing a private right of action for violations. Penalties include fines of up to 2% of the organization’s revenue in Brazil in the previous year or 50 million Brazilian reais. The LGPD applies to businesses (both inside and outside Brazil) that process the personal data of users who are located in Brazil. The LGPD provides users with similar rights as the GDPR regarding their data. Additionally, the Personal Information Protection Law (PIPL) of the People’s Republic of China (PRC) was adopted and went into effect in 2021. The PIPL shares similarities with the GDPR, including extraterritorial application, data minimization, data localization, and purpose limitation requirements, and obligations to provide certain notices and rights to PRC citizens. The PIPL allows for fines of up to 50 million renminbi or 5% of a covered company’s revenue in the prior year.
Additionally, we may be or become subject to data localization laws mandating that data collected in a foreign country be processed only within that country. These or other laws relating to privacy or data protection could require us to expand data storage facilities in foreign jurisdictions or to obtain new local data storage in such countries. The expenditures this would require, as well as costs of compliance generally, could harm our financial condition. The regulatory environment applicable to the collection, use, and other processing of, and security measures with respect to, personal data of residents of the E.U., United Kingdom, Switzerland, Brazil, the PRC, and other foreign jurisdictions, and our actions taken in response, may cause us to be required to undertake additional contractual negotiations, modify policies and procedures, and otherwise to assume additional liabilities or incur additional costs, and could result in harm to our business, operating results, and financial condition.
We enter into business associate agreements with our customers who require them in order to comply with the U.S. Health Insurance Portability and Accountability Act (HIPAA) and the Health Information Technology for Economic and Clinical Health Act, and therefore we are directly subject to certain provisions of HIPAA applicable to business associates. We may collect and process protected health information as part of our designated service, which may subject us to a number of data protection, security, privacy, and other government- and industry-specific requirements. In addition, if we are unable to comply with our obligations relating to the protection and processing of protected health information, we could be found to have breached our contracts with customers with whom we have a business associate relationship. Noncompliance with laws and regulations relating to privacy and security of personal information, including HIPAA, or with contractual obligations, including under any business associate agreement, may lead to significant fines, civil and criminal penalties, and other liabilities. The U.S. Department of Health and Human Services (HHS) audits the compliance of business associates and enforces HIPAA privacy and security standards. HHS enforcement activity has increased in recent years and HHS has
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signaled its intent to continue this trend. Implementing rules under HIPAA addressing privacy, and a related statute addressing security, are the subject of final and proposed modifications, respectively. In addition to HHS, state attorneys general are authorized to bring civil actions seeking either injunctions or damages to the extent violations implicate the privacy of state residents.
We expect laws, regulations, industry standards and other obligations worldwide relating to privacy, data protection, and cybersecurity to continue to evolve, and that there will continue to be new, modified, and re-interpreted laws, regulations, standards, and other obligations in these areas. For example, the Network and Information Security Directive II (NIS2), adopted in 2023, aims to enhance cybersecurity across critical infrastructure and essential services in the E.U. It expands the scope of the 2016 NIS Directive to include additional sectors while enforcing stricter governance and accountability requirements. NIS2 requires all 27 E.U. member states to issue implementing legislation by October 2024; however, several E.U. member states have not finalized their respective legislation and guidance. Additionally, the Digital Operational Resiliency Act (DORA) became effective on January 17, 2025, and aims to establish a universal framework for managing and mitigating information and communication technology risk that will apply to entities in the financial sector and their third-party cloud service providers.
Federal, state, and foreign laws, regulations, and other actual or asserted obligations relating to privacy, data protection, or cybersecurity may be interpreted and applied in manners that are, or are alleged to be, inconsistent with our practices. Any failure or perceived failure by us to comply with federal, state, or foreign laws, regulations, policies, legal or contractual obligations, industry standards, regulatory guidance or other actual or asserted obligations relating to privacy, data protection, cybersecurity, marketing, or consumer communications may result in governmental investigations and enforcement actions, claims, demands, and litigation by private entities, fines, penalties, and other liabilities, harm to our reputation and adverse publicity, and could cause our customers and partners to lose trust in us, which could materially affect our business, operating results, and financial condition. We expect that there will continue to be new laws, regulations, industry standards and other actual and asserted obligations relating to privacy, data protection, cybersecurity, marketing, and consumer communications proposed and enacted or otherwise implemented in the United States, the E.U., and other jurisdictions, and we cannot fully predict the impact such future laws, regulations, standards, and obligations may have on our business. Future laws, regulations, standards, and other actual or asserted obligations, or any changed interpretation of existing laws or regulations could impair our ability to develop and market new features and maintain and grow our customer base and increase revenue. Future restrictions on the collection, use, sharing, disclosure, or other processing of data could require us to incur additional costs or modify our platform, possibly in a material manner, which we may be unable to achieve in a commercially reasonable manner or at all, and which could limit our ability to develop new features.
In addition to the privacy and data protection regulations described above, our business is also subject to contractual obligations to maintain compliance with leading security frameworks and standards such as SOC 1 and SOC 2 (with HIPAA validation); International Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC) standards for ISO 27001 and ISO 27018; HITRUST Alliance’s HITRUST CSF (with HIPAA validation); and Texas Department of Information Resources’ TX-RAMP certification. Any failure or perceived failure by us to comply with these contractual obligations, industry standards, regulatory guidance or other actual or asserted obligations relating to privacy, data protection and cybersecurity may result in loss of certification, governmental investigations and enforcement actions, claims, demands, and litigation by private entities, fines, penalties, and other liabilities, harm to our reputation and adverse publicity, and could cause our customers and partners to lose trust in us, which could materially affect our business, operating results, and financial condition.
If our network, application, or computer systems are breached or unauthorized access to customer data or other sensitive data is otherwise obtained or if we experience any other type of security incident, our platform may be perceived as insecure and we may lose existing customers or fail to attract new customers, operations may be disrupted if systems or data become unavailable, our reputation may be damaged and we may incur significant remediation costs or liabilities, including regulatory fines for violation of compliance requirements.
As a provider of cloud-based platform services, our operations involve the storage, transmission, and other processing of large amounts of our customers’ confidential and proprietary information, and we also collect, store, transmit, and otherwise process sensitive corporate, personal, and other information relating to our business and operations, including intellectual property, proprietary business information, personally identifiable information, and other confidential information. Cyber-attacks and other malicious internet-based activity continue to increase generally in both frequency and sophistication (including through the use of emerging artificial intelligence technologies which may dramatically increase the number and impact of such activity), and cloud-based platform providers of software and services have been targeted. Many of our employees work remotely at least part of the time, which may pose additional cybersecurity risks. Within cloud service
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delivery organizations, there is an increased threat from both targeted and non-targeted activities. These activities may originate from threat actor groups with various motivations, including cyber espionage, financial or ideological motivations. We may also face numerous types of attacks, including financial attacks in the form of ransomware/cyber extortion, artificial intelligence-assisted deepfake attacks and disinformation campaigns, fraud, misappropriation of resources (such as, for instance, cryptocurrency mining operations using Domo resources), and malicious attacks such as distributed denial of service with the intention to cause extended period of service downtime, as well as other types of security incidents which could prevent customers from accessing our products and services. Attackers may, in addition to other motivations, seek to render unavailable, destroy, or modify, access, or disclose without authorization the various types of data we store or otherwise process, including our own data, our customers’ data generally, or data of specific customers. Our employees and contractors who have access to our customers’ data as well as customer personal information and/or company data could be a victim of social engineering tactics such as phishing and business email compromise, which could further lead to malware and/or ransomware being installed on our company assets and which could cause a potential compromise of systems and information. In addition, as we host our platform on third-party cloud hosting services offered by the leading cloud hosting providers, any misconfiguration in the cloud due to our own unintentional error or lack of understanding, or any exploitation of vulnerabilities on those cloud hosting providers’ technology, could lead to unauthorized access, misuse, acquisition, disclosure, loss, alteration, destruction, or other unauthorized processing of our and our customers’ data, including confidential, sensitive, and personal information.
We engage third-party hosting and other service providers to store and otherwise process some of our and our customers’ data, including confidential, sensitive, and personal information relating. Our service providers may also be the targets of cyberattacks and other malicious activity, or may experience security incidents caused by other factors. While we have established a formal third-party security risk assessment process to address security risks for our company relating to our key third-party service providers, our ability to monitor our service providers’ security measures is limited, and, in any event, third parties or insider threats may be able to circumvent those security measures or our own security measures, resulting in unavailability of or unauthorized access to, misuse, acquisition, disclosure, loss, alteration, destruction, or other unauthorized processing of our and our customers’ data, including confidential, sensitive, and personal information. We also use and rely on several open source libraries and packages while developing our product and if such libraries or packages are vulnerable and are exploited, our ability to address such vulnerabilities in a timely manner may be limited and may result in disruptions to our platform or operations and in unavailability of or unauthorized access to, misuse, acquisition, disclosure, loss, alteration, destruction, or other unauthorized processing of our and our customers’ data, including confidential, sensitive, and personal information. We also deploy code generated by artificial intelligence (AI) tools, and improper or inadequate vetting of AI-generated code for any security related vulnerabilities may result in exploitation of such vulnerabilities leading to disruption, unauthorized access to our infrastructure, our confidential data or our customers' data.
Additionally, there have been and may continue to be significant supply chain cyber-attacks generally, and our third-party service providers and business partners may be targeted or impacted by such attacks. We cannot guarantee that our systems and networks or those of our vendors, service providers, or business partners have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach or compromise of or disruption to our systems and networks or the systems and networks of third parties that support us and our services. Malicious actors may be able to circumvent security measures, resulting in unavailability of, unauthorized access to, misuse, disclosure, loss, unavailability, destruction, or other unauthorized processing of our and our customers’ data, including confidential, sensitive, and personal information. We and our service providers may also face difficulties or delays in identifying, remediating, and otherwise responding to cyberattacks and other security breaches and incidents. Because the techniques used and vulnerabilities exploited to obtain unauthorized access or to sabotage systems change frequently and generally are not identified until they are launched against a target, we and our third-party service providers may be unable to anticipate these techniques or vulnerabilities or implement adequate preventative measures. We and our third-party service providers may also experience security breaches and incidents that remain undetected for an extended period.
Use of generative artificial intelligence (GenAI) technologies may result in GenAI providers having access to and processing sensitive information, intellectual property, source code, trade secrets, and other data, through direct user input or the API, including customer confidential information. Such exposure can result from contractual (for example, with customers) or regulatory obligations (such as CCPA, GDPR, HIPAA). Furthermore, if the GenAI platform’s own systems and infrastructure are not secure, or do not function as intended, security breaches or incidents may occur and lead to the unauthorized exposure of confidential information such as customer data, financial information, and proprietary business information, or it may be believed or asserted that one or more of these has occurred. Any of these circumstances may impact our ability to realize the benefit of, or adequately maintain, protect and enforce our intellectual property or confidential information, harming our competitive position and business. Threat actors could also use GenAI and other forms of artificial intelligence for malicious purposes, increasing the frequency or intensity of attacks and the complexity level some are currently capable of, e.g. phishing attacks, fraud, social engineering, and other possible malicious use, such as with
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identification or exploitation of vulnerabilities or writing malware. Code generated by GenAI could potentially be used and deployed without a proper security audit or code review to find vulnerable or malicious components. This could cause widespread deployment of vulnerable code within our systems.
In addition, insider threats pose significant risks to our business, potentially compromising the confidentiality, integrity, and availability of customer data, our business information and the overall reputation of the organization. As employees or trusted individuals have authorized access to our systems and customer data, malicious insiders may intentionally abuse their privileges, leading to actual or perceived security breaches or incidents, intellectual property theft or misappropriation, or unauthorized access to, or use of, systems or data. Additionally, insiders may inadvertently access, use, expose, or otherwise process without authorization customer data or confidential, sensitive, or personal information, or engage in unauthorized access to or use of company devices, networks, systems, or other resources, due to error, negligence, lack of awareness, or otherwise. We have suffered certain of these incidents in the past and expect that they will occur in the future.
From time to time, third parties have published, and may publish, unauthorized websites that give a false impression of being official Domo websites. Purveyors of these unauthorized websites may deceive job applicants, potential customers, and other third parties into believing they are interacting with us and may, among other things, collect and misuse their personal information or purport to charge them money in connection with submitting a job application, or performing a task pertaining to the Domo application, such as testing the application to optimize performance. These activities may disrupt our sales, human resources, and other functions, significantly harm our brand, reputation and market position, and result in claims, demands, inquiries, and potential liabilities.
Any security breach, security incident, or similar event impacting our platform, our networks or systems, or any systems or networks of our service providers, whether as a result of third-party action, insider attacks, employee or service provider error or malfeasance, phishing or smishing attacks, ransomware or other malware, social engineering, or otherwise, could result in unauthorized access to or use of our platform, disruptions to our platform or other aspects of our operations, the loss, alteration or unavailability of, or unauthorized access to or acquisition or other processing of, data or intellectual property of ourselves or our customers. Additionally, any such breach or incident, or unauthorized use of company resources, or any perception that any such event has occurred, may result in a loss of business, severe reputational or brand damage adversely affecting customer, partner, or investor confidence, regulatory investigations, demands, and orders, litigation or other claims, demands, or proceedings by governmental authorities or private parties, indemnity obligations, damages for contract breach, penalties for violation of applicable laws, regulations, or contractual obligations, and significant costs for remediation that may include liability for stolen assets or information and repair of system damage that may have been caused, incentives offered to customers or other business partners in an effort to maintain business relationships after a breach, incident, or other event, and other liabilities, as well as harm to our sales efforts and expansion into existing and new markets.
We could be required to expend significant capital and other resources to alleviate problems caused by actual or perceived security breaches, incidents, or other events and to remediate our systems, we could be exposed to a risk of loss, litigation or regulatory action and possible liability, and our ability to operate our business may be impaired. Additionally, actual, potential, or anticipated attacks, security breaches or incidents, or other events, may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants.
Due to political and macroeconomic uncertainty and military actions associated with geopolitical events such as Russia’s invasion of Ukraine and hostilities in the Middle East, we and our third-party service providers may be vulnerable to a heightened risk of cybersecurity attacks, phishing attacks, viruses, malware, ransomware, hacking, distributed denial of service, or similar breaches and incidents from nation-state and affiliated actors, including attacks that could materially disrupt our systems, operations, and platform. In addition, if the security measures of our customers are compromised, even without any actual compromise of our platform or systems or any networks or systems of our service providers, we may face negative publicity or reputational harm if customers or others incorrectly attribute the blame for such security breaches or other incidents to us, our platform, our systems or networks, or those of our service providers. Similarly, we may face reputational harm if any security breach or incident is caused by or otherwise attributed to our employees, vendors, or service providers as a result of inadvertent error, malfeasance, an insider attack, or otherwise. If customers or partners believe that our platform does not provide adequate security for the storage of personal or other sensitive information or its transmission over the internet, our business will be harmed. Customers’ concerns about security or privacy may deter them from using our platform for activities that involve personal or other sensitive information.
Our insurance covering certain security and privacy damages and claim expenses may not be sufficient to compensate for all liability. Although we maintain insurance for liabilities incurred as a result of certain matters relating to privacy and
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cybersecurity, we cannot be certain that our coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results, and reputation.
Additionally, with cybersecurity a critical competitive factor in our industry, we make public statements in our privacy policies, on our website, and elsewhere describing the security of our platform. Should any of these statements be untrue, become untrue, or be perceived to be untrue, even if through circumstances beyond our reasonable control, we may face claims, including claims of unfair or deceptive trade practices, and related investigations, enforcement actions or other proceedings, brought by the FTC, state, local, or foreign regulators, and private litigants, which may result in fines, penalties, and other liabilities, and which may have a material adverse effect on our business, including our financial condition, operating results, and reputation.
Real or perceived errors, failures, or bugs in our platform could adversely affect our operating results and growth prospects.
We update our platform on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our platform until after the update is deployed to our customers. We have discovered and expect we will continue to discover errors, failures and bugs in our platform and anticipate that certain of these errors, failures and bugs will only be discovered and remediated after deployment to customers. Real or perceived errors, failures or bugs in our platform could result in negative publicity, government inquiries, loss of or delay in market acceptance of our platform, loss of competitive position, or claims by customers for losses sustained by them. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct the problem.
We implement bug fixes and upgrades as part of our regular system maintenance, which may lead to system downtime. Even if we are able to implement the bug fixes and upgrades in a timely manner, any history of inaccuracies in the data we process for our customers, or the loss, damage, unauthorized access to or acquisition of, or inadvertent release or exposure of customer data could cause our reputation to be harmed and result in claims against us, and customers may elect not to purchase or renew their agreements with us or we may incur increased insurance costs. The costs associated with any material defects or errors in our software or other performance problems may be substantial and could harm our operating results
Interruptions or performance problems associated with our technology and infrastructure may adversely affect our business and operating results.
Our continued growth depends in part on the ability of existing and potential customers to access our platform at any time. We have experienced, and may in the future experience, disruptions, outages, and other performance problems due to a variety of factors, including infrastructure changes, introductions of new capabilities, human or technology errors, distributed denial of service attacks, or other security related incidents. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time. It may become increasingly difficult to maintain and improve our performance, especially during peak usage times and as our platform becomes more complex and user traffic increases. If our platform is unavailable or if users are unable to access our platform within a reasonable amount of time, or at all, our business will be harmed.
We also rely on SaaS and other technologies from third parties (including artificial intelligence technologies and services) in order to operate critical functions of our business. To the extent that our third-party service providers experience outages, disruptions, or other performance problems, or to the extent we do not effectively address capacity constraints, upgrade our systems as needed, and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business and operating results may be adversely affected. In addition, if our agreements with third-party software or services vendors are not renewed or the third-party software or services become obsolete, fail to function properly, are incompatible with future versions of our products or services, are defective or otherwise fail to address our needs, there is no assurance that we would be able to replace the functionality provided by the third-party software or services with software or services from alternative providers.
We have taken steps to increase redundancy in our platform and infrastructure and have plans in place to mitigate events that could disrupt our platform’s service. However, there can be no assurance that these efforts would protect against interruptions or performance problems.
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Risks Related to Our Intellectual Property
Our business is highly dependent upon our brand recognition and reputation, and the failure to maintain or enhance our brand recognition or reputation would likely adversely affect our business and operating results.
We believe that maintaining and enhancing the Domo brand identity and our reputation are critical to our relationships with customers and channel partners and to our ability to attract new customers and channel partners. We also believe that the importance of our brand recognition and reputation will continue to increase as competition in our market continues to develop. Our success in this area will depend on a wide range of factors, some of which are beyond our control, including the following:
•the efficacy of our marketing efforts;
•our ability to maintain a high-quality, innovative and error- and bug-free platform;
•our ability to obtain new customers and retain and increase usage by existing customers;
•our ability to maintain high customer satisfaction;
•the quality and perceived value of our platform;
•our ability to obtain, maintain and enforce trademarks and other indicia of origin that are valuable to our brand;
•our ability to successfully differentiate our platform from competitors’ products;
•actions of competitors and other third parties;
•our ability to provide customer support and professional services;
•any actual or perceived security breach or data loss, or misuse or perceived misuse of our platform;
•positive or negative publicity;
•interruptions, delays or attacks on our platform;
•challenges with customer adoption and use of our platform on mobile devices or problems encountered in developing or supporting enhancements to our mobile applications; and
•litigation or regulatory related developments.
If our brand promotion activities are not successful, our operating results and growth may be harmed.
Independent industry analysts often provide reviews of our platform, as well as competitors’ products, and perception of our platform in the marketplace may be significantly influenced by these reviews. If these reviews are negative, or less positive as compared to those of competitors’ products and services, our brand may be adversely affected.
Furthermore, negative publicity, whether or not justified, relating to events or activities attributed to us, our current or former employees, partners or others associated with any of these parties, may tarnish our reputation and reduce the value of our brand. Damage to our reputation and loss of brand equity may reduce demand for our platform, make it difficult for us to attract and retain employees, and have an adverse effect on our business, operating results and financial condition. Moreover, any attempts to rebuild our reputation and restore the value of our brand may be costly and time consuming, and such efforts may not ultimately be successful.
Third-party claims that we are infringing or otherwise violating the intellectual property rights of others, whether successful or not, could subject us to costly and time-consuming litigation or require us to obtain expensive licenses, and our business could be harmed.
The technology industry is characterized by the existence of a large number of patents, copyrights, trademarks, trade secrets and other intellectual property rights. Companies in the technology industry must often defend against litigation claims based on allegations of infringement or other violations of intellectual property rights. Third parties, including our competitors, may own patents or other intellectual property rights that cover aspects of our technology or business methods and may assert patent or other intellectual property rights against us and others in the industry. In addition, our customers’
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development and use of artificial intelligence may result in increased claims of infringement or other claims, including those based on unauthorized use of third-party technology or content. Moreover, in recent years, individuals and groups that are non-practicing entities, commonly referred to as “patent trolls,” have purchased patents and other intellectual property assets for the purpose of making claims of infringement or other violation of intellectual property rights in order to extract settlements. From time to time, we have received and may receive in the future threatening letters, notices or “invitations to license,” or may be the subject of claims that our technology and business operations infringe or otherwise violate the intellectual property rights of others. Responding to such claims, regardless of their merit, can be time consuming, costly to defend in litigation, divert management’s attention and resources, damage our reputation and brand and cause us to incur significant expenses. Claims of intellectual property infringement or other violations of intellectual property rights might require us to stop using technology found to infringe or violate a third party’s rights, redesign our platform, which could require significant effort and expense and cause delays of releases, enter into costly settlement or license agreements or pay costly damage awards, or face a temporary or permanent injunction prohibiting us from marketing or selling our platform. If we cannot or do not license the infringed or otherwise violated technology on commercially reasonable terms or at all, or substitute similar technology from another source, we could be forced to limit or stop selling our platform, we may not be able to meet our obligations to customers under our customer contracts, revenue and operating results could be adversely impacted, and we may be unable to compete effectively. Even if we are successful in defending against allegations of intellectual property infringement, litigation may be costly and may divert the time and other resources of our management. Additionally, customers may not purchase our platform if they are concerned that they may infringe or otherwise violate third-party intellectual property rights. The occurrence of any of these events may harm our business.
Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses.
Our agreements with customers and other third parties may include indemnification provisions under which we agree to indemnify them for losses suffered or incurred as a result of claims of intellectual property infringement or other violations of intellectual property rights, damages caused by us to property or persons, or other liabilities relating to or arising from our software, services or other contractual obligations. Large indemnity payments could harm our business, results of operations and financial condition. Any dispute with a customer with respect to such obligations could have adverse effects on our relationship with that customer and other existing customers and new customers and harm our business and results of operations.
The success of our business depends in part on our ability to protect and enforce our intellectual property rights.
Our success is dependent, in part, upon protecting our proprietary technology. Our current patents, and any patents issued in the future, may not provide us with any competitive advantages or may be challenged by third parties. Additionally, the process of obtaining patent protection is expensive and time-consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. Even if issued, there can be no assurance that these patents will adequately protect our intellectual property, as the legal standards relating to the validity, enforceability and scope of protection of patent and other intellectual property rights are uncertain.
Any patents that are issued may subsequently be invalidated or otherwise limited, allowing other companies to develop offerings that compete with ours, which could adversely affect our competitive business position, business prospects and financial condition. In addition, issuance of a patent does not guarantee that we have a right to practice the patented invention. Patent applications in the United States are typically not published until 18 months after filing or, in some cases, not at all, and publications of discoveries in industry-related literature lag behind actual discoveries. We cannot be certain that we were the first to use the inventions claimed in our issued patents or pending patent applications or otherwise used in our platform, that we were the first to file for protection in our patent applications, or that third parties do not have blocking patents that could be used to prevent us from marketing or practicing our patented technology. Effective patent, trademark, copyright and trade secret protection may not be available to us in every country in which our platform is available. The laws of some foreign countries may not be as protective of intellectual property rights as those in the United States (in particular, some foreign jurisdictions do not permit patent protection for software), and mechanisms for enforcement of intellectual property rights may be inadequate. Additional uncertainty may result from changes to intellectual property legislation enacted in the United States, including the America Invents Act, and other national governments and from interpretations of the intellectual property laws of the United States and other countries by applicable courts and agencies. Accordingly, despite our efforts, we may be unable to prevent third parties (including artificial intelligence technologies and services) from infringing upon or misappropriating our intellectual property.
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Although we generally enter into confidentiality and invention assignment agreements with our employees and consultants that have access to material confidential information and enter into confidentiality agreements with our customers and the parties with whom we have strategic relationships and business alliances, no assurance can be given that these agreements will be effective in controlling access to and distribution of our platform and propriety information or prevent reverse engineering. Further, these agreements may not prevent competitors from independently developing technologies that are substantially equivalent or superior to our platform, and we may be unable to prevent this competition. In addition, from time to time, we have engaged consultants and developers located outside of the United States to assist with the development of our technology and intellectual property. Each jurisdiction has different rules regarding the language and procedures required to effectively assign to us certain intellectual property rights, and we may not have effectively implemented such language and procedures in each jurisdiction on every occasion, which may also limit our ability to perfect and protect our technology and intellectual property rights.
Unauthorized use of our intellectual property may have already occurred or may occur in the future. Furthermore, given intellectual property ownership and license rights surrounding artificial intelligence, such as generative artificial intelligence, are currently not fully addressed by courts or regulators, we may not be able to protect our intellectual property against infringing use and our use or adoption of artificial intelligence may result in exposure to claims by third parties. We may be required to spend significant resources to monitor and protect our intellectual property rights. Litigation may be necessary in the future to enforce our intellectual property rights. Such litigation could be costly, time consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. We may not prevail in any lawsuits that we initiate. Any litigation, whether or not resolved in our favor, could subject us to substantial costs, divert resources and the attention of management and technical personnel from our business and adversely affect our business. Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation, could delay further sales or the implementation of our platform, impair the functionality of our platform, delay introductions of new features or enhancements, result in our substituting inferior or more costly technologies into our platform, or injure our reputation.
We may initiate claims or litigation against third parties for infringement or other violation of our proprietary rights or to establish the validity of our proprietary rights. Litigation also puts our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing. Additionally, we may provoke third parties to assert counterclaims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially viable. Any litigation, whether or not it is resolved in our favor, could result in significant expense to us and divert the efforts of our technical and management personnel, which may adversely affect our business, operating results, financial condition and cash flows.
Risks Related to Our Corporate Governance
The dual class structure of our common stock has the effect of concentrating voting control with Joshua G. James, our founder and chief executive officer, which will limit your ability to influence the outcome of important transactions, including a change in control.
Our Class A common stock has 40 votes per share, and our Class B common stock has one vote per share. Joshua G. James, our founder and chief executive officer, beneficially owns all of our outstanding shares of Class A common stock through Cocolalla, LLC, of which he is the managing member, and as of July 31, 2026, beneficially controlled approximately 76% of the voting power of our outstanding capital stock and therefore is able to control all matters submitted to our stockholders for approval. Mr. James may have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. This concentrated control may have the effect of delaying, preventing or deterring a change in control of our company, could deprive our stockholders of an opportunity to receive a premium for their capital stock as part of a sale of our company and might ultimately affect the market price of our Class B common stock.
Future transfers by the holder of Class A common stock will generally result in those shares converting into shares of Class B common stock, subject to limited exceptions, such as certain transfers effected for estate planning or charitable purposes. Mr. James has informed us he and Cocolalla, LLC have entered into arrangements under which he has pledged all of such shares in addition to Class B shares held by him to secure a loan with a financial institution. If these shares were to be sold or otherwise transferred upon default of the underlying loan, the market price of our Class B common stock could decline or be volatile or certain governance provisions in our certificate of incorporation may be triggered, resulting in changes to our corporate governance structure. For additional information, see the section of this report captioned “—Other
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Risks Related to Ownership of Our Class B Common Stock—Future sales of our Class B common stock in the public market could cause our stock price to fall.”
We are a "controlled company" within the meaning of Nasdaq rules, and as a result may choose to rely on exemptions from certain corporate governance requirements.
We qualify as a “controlled company” under the corporate governance rules of The Nasdaq Stock Market because our founder and chief executive officer, and entities beneficially owned by him, control more than fifty percent of the voting power of our outstanding common stock. Although, as of the date of this report, the composition of our board of directors and its committees currently complies with applicable corporate governance rules of The Nasdaq Stock Market, we have previously, and may in the future rely, on the foregoing exemptions provided to controlled companies under the corporate governance rules of The Nasdaq Stock Market. If we, in the future, rely on these “controlled company” exemptions, we may not have a majority of independent directors on our board of directors, an entirely independent nominating and corporate governance committee, an entirely independent compensation committee or perform annual performance evaluations of the nominating and corporate governance and compensation committees unless and until such time as we are required to do so. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of these corporate governance requirements. If we cease to be a “controlled company” and our shares continue to be listed on The Nasdaq Global Market, we will be required to comply with these provisions within the applicable transition periods.
We cannot predict the impact our dual class structure may have on our stock price or our business.
We cannot predict whether our dual class structure, combined with the concentrated control of our stockholders who held our capital stock prior to the completion of our initial public offering, including our executive officers, employees and directors and their affiliates, will result in a lower or more volatile market price of our Class B common stock or in adverse publicity or other adverse consequences. For example, certain index providers have announced restrictions on including companies with multiple-class share structures in certain of their indexes. In July 2017, FTSE Russell announced that it plans to require new constituents of its indexes to have greater than 5% of the company’s voting rights in the hands of public stockholders, and S&P Dow Jones announced that it will no longer admit companies with multiple-class share structures to certain of its indexes. Because of our dual class structure, we will likely be excluded from these indexes and we cannot assure you that other stock indexes will not take similar actions. Given the sustained flow of investment funds into passive strategies that seek to track certain indexes, exclusion from stock indexes would likely preclude investment by many of these funds and could make our Class B common stock less attractive to other investors. As a result, the market price of our Class B common stock could be adversely affected.
Risks Related to Our Financial Reporting and Disclosure
Our reported financial results may be harmed by changes in the accounting principles generally accepted in the United States.
Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board, the Securities and Exchange Commission (the SEC) and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and may even affect the reporting of transactions completed before the announcement or effectiveness of a change. Other companies in our industry may apply these accounting principles differently than we do, adversely affecting the comparability of our financial statements.
We have incurred and will continue to incur increased costs by being a public company, including costs to maintain adequate internal control over our financial and management systems.
As a public company, we have incurred and will continue to incur significant legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting requirements.
We have also incurred and will continue to incur costs associated with corporate governance requirements, including requirements of the SEC and The Nasdaq Stock Market. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We also expect these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, we may have more difficulty attracting and retaining qualified individuals to serve on our board of
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directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules, and we cannot predict or estimate the additional costs we may incur or the timing of such costs.
The Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control over financial reporting annually and the effectiveness of our disclosure controls and procedures quarterly. In particular, Section 404 of the Sarbanes-Oxley Act (Section 404) requires us to perform system and process evaluation and testing of our internal controls over financial reporting to allow management to report on, and our independent registered public accounting firm potentially to attest to, the effectiveness of our internal controls over financial reporting. Our compliance with applicable provisions of Section 404 will require that we incur substantial accounting expense and expend significant management time on compliance-related issues as we implement additional corporate governance practices and comply with reporting requirements. Moreover, if we are not able to comply with the requirements of Section 404 applicable to us in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.
Other Risks Related to Ownership of Our Class B Common Stock
The market price of our Class B common stock may be volatile, and the value of your investment could decline significantly.
The trading price of our Class B common stock may be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. The following factors, in addition to other risks described in this report, may have a significant effect on our Class B common stock price:
•the pendency, terms or anticipated timing of the closing of the Asset Sale, including any failure to complete or delay in completing the Asset Sale;
•market perception of our prospects after the completion of the Asset Sale;
•actual or anticipated fluctuations in revenue and other operating results, including as a result of the addition or loss of any number of customers;
•announcements by us or competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments;
•the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;
•failure of securities analysts to initiate or maintain coverage of us, changes in ratings, key metrics and financial estimates and the publication of other news by any securities analysts who follow our company, or our failure to meet these analyst estimates or the expectations of investors;
•changes in operating performance and stock market valuations of cloud-based software or other technology companies, or those in our industry in particular;
•the size of our public float;
•price and volume fluctuations in the trading of our Class B common stock and in the overall stock market, including as a result of trends in the economy as a whole or in the technology industry;
•new laws or regulations or new interpretations of existing laws or regulations applicable to our business or industry, including those relating to privacy, data protection, and cybersecurity;
•lawsuits threatened or filed against us for claims relating to intellectual property, employment issues or otherwise;
•actual or perceived data breach or data loss, or misuse or perceived misuse of our platform;
•changes in our board of directors or management;
•short sales, hedging and other derivative transactions involving our Class B common stock;
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•sales of large blocks of our common stock including sales by our executive officers, directors and significant stockholders; and
•other events or factors, including those resulting from war, incidents of terrorism, public health epidemics or pandemics, bank failures, changes in general economic, industry and market conditions and trends, natural disasters or responses to any of these events or factors that may affect our operations.
In addition, the stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may seriously affect our stock price, regardless of our actual operating performance. In addition, in the past, securities class action litigation has often been instituted against companies whose stock prices have declined, especially following periods of volatility in the overall market. Securities class action litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.
If securities or industry analysts do not publish research reports about our business, or if they issue an adverse opinion about our business, our stock price and trading volume could decline.
The trading market for our Class B common stock and customer demand for our platform is influenced by the research and reports that securities and industry analysts publish about us or our business. If one or more of the analysts who cover us do not publish positive reports about our company, platform and value proposition, do not view us as a market leader, or cease or fail to regularly publish reports on us, our stock price or trading volume would likely decline. In addition, industry analysts may influence current and potential customers; if any of the foregoing were to occur, customer demand for our platform, operating results and prospects may be adversely impacted. Further, we have transitioned primarily to a consumption-based pricing model and to the extent that analysts fail to appreciate the benefits of such a model, misinterpret key performance indicators associated with such a model or continue to focus on metrics unduly associated with a subscription-based model, our stock price and trading volume may decline or our business may suffer.
Future sales of our Class B common stock in the public market could cause our stock price to fall.
Our stock price could decline as a result of sales of a large number of shares or the perception that these sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. For example, we filed: (i) on September 6, 2024, a shelf registration statement on Form S-3 with the SEC that became effective on September 20, 2024 and allows us to undertake various equity and debt offerings up to $300.0 million; and (ii) on September 20, 2024, a prospectus supplement to the shelf registration statement that covers the offering, issuance and sale of up to $150.0 million of our Class B common stock from time to time through an “at-the-market” program under the Securities Act. To date, we have not sold any shares under our “at-the-market” program.
We register the offer and sale of all shares of common stock that we may issue under our equity compensation plans; as a result, these shares can generally be freely sold in the public market upon issuance, subject to compliance with applicable securities laws. Additionally, “sell-to-cover” transactions are utilized in connection with the vesting and settlement of restricted stock units so that shares of our common stock are sold on behalf of our employees in an amount sufficient to cover the tax withholding obligations associated with these awards. As a result of these transactions, a significant number of shares of our stock may be sold over a limited time period in connection with significant vesting events.
Further, we have been advised that Mr. James has pledged the shares of Class A common stock and Class B common stock beneficially owned by him to secure a loan with a financial institution, which loan has or will have various requirements to repay all or a portion of the loan upon the occurrence of various events, including when the price of the Class B common stock goes below certain specified levels. Mr. James has informed the Company that he is negotiating an extension of the loan, including a partial pay down of the principal, with new lenders and that his existing lenders have extended the repayment deadline to allow for this refinancing. Although Mr. James has indicated his intention to sell other assets if necessary, shares of our common stock may need to be sold or otherwise transferred to meet these repayment requirements. Upon a default under such loan, the lenders could sell the pledged shares into the market. Sales or transfers of such shares to reduce the loan balance or by the lenders upon foreclosure are likely to adversely affect our stock price. Mr. James has also indicated to us that he may in the future from time to time refinance such indebtedness, enter into derivative transactions based on the value of our Class B common stock, dispose of shares of common stock, otherwise monetize shares of his common stock and/or engage in other transactions relating to shares of our common stock and/or other securities of the company. Any of these activities may adversely affect the price of our common stock. Mr. James has also indicated that he intends to (1) continue to beneficially own a majority of the Class A common stock that he currently beneficially owns and (2) continue to control at least a majority of the voting power of our company.
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In addition, in the future, we may issue additional shares of Class B common stock or other equity or debt securities convertible into common stock in connection with a financing, acquisition, litigation settlement, employee arrangement or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and could cause our stock price to decline.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us difficult, limit attempts by our stockholders to replace or remove our current management and limit our stock price.
Provisions of our certificate of incorporation and bylaws may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. These provisions include the following:
•our dual-class common stock structure, which provides our holders of Class A common stock with the ability to significantly influence the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A common stock and Class B common stock;
•when the outstanding shares of Class A common stock represent less than a majority of the total combined voting power of our Class A and Class B common stock, or the voting threshold date, our board of directors will be classified into three classes of directors with staggered three-year terms, and directors will only be able to be removed from office for cause;
•our amended and restated bylaws provide that, following the voting threshold date, approval of stockholders holding two-thirds of our outstanding voting power voting as a single class will be required for stockholders to amend or adopt any provision of our bylaws;
•our stockholders are able to take action by written consent for any matter until the voting threshold date;
•following the voting threshold date, vacancies on our board of directors will be able to be filled only by our board of directors and not by stockholders;
•only the chairman of our board of directors, chief executive officer, a majority of our board of directors or, until the voting threshold date, a stockholder (or group of stockholders) holding at least 50% of the combined voting power of our Class A and Class B common stock are authorized to call a special meeting of stockholders;
•certain litigation against us can only be brought in Delaware;
•our amended and restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established and shares of which may be issued, without the approval of the holders of common stock; and
•advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder.
Our amended and restated bylaws designate a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers, or employees.
Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our stockholders, (3) any action arising pursuant to any provision of the Delaware General Corporation Law, or the certificate of incorporation or the amended and restated bylaws, (4) any action to interpret, apply, enforce, or determine the validity of our certificate of incorporation or bylaws or (5) other action asserting a claim that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another state court in Delaware
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or the federal district court for the District of Delaware), in all cases subject to the court having jurisdiction over indispensable parties named as defendants.
Any person or entity purchasing, holding or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to this provision. This exclusive-forum provision may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees. If a court were to find this exclusive-forum provision in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm our results of operations.
General Risk Factors
Economic uncertainties or downturns could materially adversely affect our business.
Current or future economic uncertainties or downturns could adversely affect our business and operating results. Negative general macroeconomic conditions both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, rising inflation, a recession, political deadlock, natural catastrophes, pandemics, military conflict (including the Russian invasion of Ukraine and hostilities in the Middle East) and terrorist attacks, whether in the United States, Europe, the Asia Pacific region or elsewhere, could cause a decrease in business investments, including corporate spending on business intelligence software in general and negatively affect the rate of growth of our business.
General worldwide economic conditions may experience significant downturns and may be unstable. These conditions make it extremely difficult for our customers and us to forecast and plan future business activities accurately, and they could cause customers to reevaluate their decisions to subscribe to our platform, which could delay and lengthen our sales cycles or result in cancellations of planned purchases. Furthermore, during challenging economic times customers may tighten their budgets and face issues in gaining timely access to sufficient credit, which could result in an impairment of their ability to make timely payments to us. In turn, we may be required to increase our allowance for doubtful accounts, which would adversely affect our financial results.
For example, during 2025, the United States experienced an inflation rate of approximately 2.7%, according to data from the U.S. Department of Labor, significantly higher than recent norms. If inflation rates remain elevated or increase further, our expenses and operating costs are likely to increase. Inflation may also result in higher interest rates and otherwise adversely impact the macroeconomic environment, which in turn could adversely impact our customers and their ability or willingness to spend on our platform. Additionally, in recent periods the U.S. has experienced a labor shortage, which has contributed to an environment of escalating wages and salaries, which may also adversely affect our expenses and operating costs.
To the extent subscriptions to our platform are perceived by customers and potential customers to be discretionary, our revenue may be disproportionately affected by delays or reductions in general information technology spending. Also, customers may choose to develop in-house software as an alternative to using our platform. Moreover, competitors may respond to market conditions by lowering prices and attempting to lure away our customers. In addition, the increased pace of consolidation in certain industries may result in reduced overall spending on our platform.
We cannot predict the timing, strength or duration of any economic slowdown, instability or recovery, generally or within any particular industry. If the economic conditions of the general economy or industries in which we operate do not improve, or worsen from present levels, our business, operating results, financial condition and cash flows could be adversely affected.
Item 5. Other Information
Securities Trading Plans of Directors and Executive Officers.
During our last fiscal quarter, no director or officer, as defined in Rule 16a-1(f), adopted terminated
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Item 6. Exhibits
| Incorporated by Reference | ||||||||||||||||||||||||||||||||||||||
| Exhibit Number | Description | Form | File No. | Exhibit | Date | Filed Herewith | ||||||||||||||||||||||||||||||||
| 2.1** | 8-K | 001-38553 | 2.1 | July 22, 2026 | ||||||||||||||||||||||||||||||||||
| 3.1 | 8-K | 001-38553 | 3.1 | July 3, 2023 | ||||||||||||||||||||||||||||||||||
| 3.2 | 8-K | 001-38553 | 3.1 | May 8, 2023 | ||||||||||||||||||||||||||||||||||
| 3.3 | 8-A | 001-38553 | 3.1 | July 22, 2026 | ||||||||||||||||||||||||||||||||||
| 3.4 | 8-A | 001-38553 | 3.2 | July 22, 2026 | ||||||||||||||||||||||||||||||||||
| 4.1 | 8-A | 001-38553 | 4.1 | July 22, 2026 | ||||||||||||||||||||||||||||||||||
| 10.1 | Forbearance Agreement, dated as of June 12, 2026, by and among Domo, Inc. (Delaware), Domo, Inc. (Utah), the lenders from time to time party to the Amended and Restated Loan and Security Agreement and Lender Joinder, as amended, Wilmington Trust, National Association, as administrative agent, and Obsidian Agency Services, Inc., as collateral agent | X | ||||||||||||||||||||||||||||||||||||
| 31.1 | X | |||||||||||||||||||||||||||||||||||||
| 31.2 | X | |||||||||||||||||||||||||||||||||||||
| 32.1* | X | |||||||||||||||||||||||||||||||||||||
| 99.1** | 8-K | 001-38553 | 99.1 | July 22, 2026 | ||||||||||||||||||||||||||||||||||
| 101.INS | Inline XBRL Instance Document | X | ||||||||||||||||||||||||||||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | X | ||||||||||||||||||||||||||||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | X | ||||||||||||||||||||||||||||||||||||
________________
* The certifications attached as Exhibit 32.1 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Domo, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-Q, irrespective of any general incorporation language contained in such filing.
** Schedules and exhibits to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The registrant will furnish copies of any such schedules and exhibits to the SEC upon its request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| DOMO, INC. | ||||||||||||||
| Date: September 3, 2026 | By: | /s/ Tod Crane | ||||||||||||
Tod Crane | ||||||||||||||
| Chief Financial Officer | ||||||||||||||
| (Principal Financial and Accounting Officer) | ||||||||||||||
Exhibit 10.1
Execution Version
FORBEARANCE AGREEMENT
This FORBEARANCE AGREEMENT (this “Forbearance Agreement”), dated as of June 12, 2026, is entered into by and among Domo, Inc., a Delaware corporation (the “Borrower”), Domo, Inc., a Utah corporation (the “Co-Borrower”), the Lenders (as defined below) party hereto, (collectively constituting the Required Lenders), Wilmington Trust, National Association, in its capacity as administrative agent for the Lenders (the “Administrative Agent”), and Obsidian Agency Services, Inc., a California corporation, as collateral agent for the Lenders (the “Collateral Agent” and, together with the Administrative Agent, the “Agents”).
RECITALS
A.The Borrower and the Co-Borrower are party to that certain Amended and Restated Loan and Security Agreement, dated as of August 8, 2023 (as amended by that certain First Amendment to Amended and Restated Loan and Security Agreement, dated as of February 17, 2024, that certain Second Amendment to Amended and Restated Loan and Security Agreement and Lender Joinder, dated as of August 19, 2024, and as further amended, restated, supplemented and/or otherwise modified from time to time, the “Loan Agreement”), by and among the Borrower, the Co-Borrower, the lenders from time to time party thereto (each a “Lender” and collectively, the “Lenders”) and the Agents, pursuant to which the Lenders have made certain credit extensions and other financial accommodations available to the Borrower and the Co-Borrower on the terms and subject to the conditions set forth therein.
B.The Borrower anticipates that defaults and/or Events of Default will potentially occur under (i) Section 7.2(a) of the Loan Agreement as a result of a potential failure to meet the financial covenants set forth in (x) Section 5.11(a) of the Loan Agreement for the fiscal quarter ending on April 30, 2026 and for each subsequent fiscal quarter ending thereafter until (but not including) the date that is the end of the Forbearance Period (as defined below) and (y) Section 5.11(b) of the Loan Agreement for the months ending on or after the Forbearance Agreement Effective Date (as defined below) until (but not including) the date that is the end of the Forbearance Period (collectively, the “Initial Defaults”) and
(ii) Section 7.2(b) of the Loan Agreement with respect to (I) any potential incorrect representations, warranties and certifications regarding that no default or Event of Default has occurred, exists or is continuing as they relate solely to the Initial Defaults and (II) any other potential breach or non-performance of any other term, provision, condition, covenant or agreement contained in the Loan Documents, in each case of clauses (I) and (II) above, resulting solely from the potential occurrence or existence of any of the Initial Defaults (all such defaults and Events of Default being the “Forbearance Defaults”).
C.Notwithstanding the potential occurrence or existence of the Forbearance Defaults, the Borrower has requested that the Agents and the Lenders forbear, and the Agents (acting at the direction of the Required Lenders) and Lenders are willing to forbear, from exercising any rights or taking any remedial actions under the Loan Agreement and the other Loan Documents, under law, in equity or otherwise, in respect of the Forbearance Defaults.
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Defined Terms.
Exhibit 10.1
1.1As used in this Forbearance Agreement, each of the terms defined in the opening paragraph and the Recitals above shall have the meanings assigned to such terms therein. Each term defined in the
Exhibit 10.1
Loan Agreement and used herein without definition shall have the meaning assigned to such term in the Loan Agreement unless expressly provided to the contrary. Article, Section, Schedule, and Exhibit references are to Articles and Sections of and Schedules and Exhibits to the Loan Agreement, unless otherwise specified. The words “hereof”, “herein”, and “hereunder” and words of similar import when used in this Forbearance Agreement shall refer to this Forbearance Agreement as a whole and not to any particular provision of this Forbearance Agreement. The term “including” means “including, without limitation”. Section headings have been inserted in this Forbearance Agreement for convenience of reference only, are not part of this Forbearance Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Forbearance Agreement.
1.2The following terms shall have the following meanings:
“Forbearance Period” shall mean the period beginning on the Forbearance Agreement Effective Date and ending on the earliest to occur of: (i) July 31, 2026 (as such date may be extended by the Borrower and the Required Lenders in their sole and absolute discretion pursuant to the Extension Option in accordance with the terms of Section 3.6(a) below, the “Initial Stop Date”) if, as of such date, a definitive and binding agreement in respect of a Qualified Sale Transaction (a “Definitive Purchase Agreement”) has not been (x) entered into with a party (other than the Borrower, the Co-Borrower or any of their respective Affiliates) or (y) made publicly available by the Borrower by filing a Form 8-K attaching such Definitive Purchase Agreement with the U.S. Securities and Exchange Commission, (ii) the date of the consummation of a Qualified Sale Transaction or any other sale of all or substantially all of the business and assets of the Borrower, the Co-Borrower and their respective subsidiaries (a “Sale Transaction”), (iii) the outside date or other similar date certain set forth in the Definitive Purchase Agreement for a Qualified Sale Transaction (or alternative Definitive Purchase Agreement for a replacement Qualified Sale Transaction) by which the transaction contemplated by such Definitive Purchase Agreement must be consummated or else such Definitive Purchase Agreement for such transaction shall terminate or may be terminated, (iv) the termination in accordance with its terms of a Definitive Purchase Agreement (unless an alternative Definitive Purchase Agreement for a replacement Qualified Sale Transaction is executed with a party (other than the Borrower, the Co-Borrower or any of their respective Affiliates) and made publicly available by the Borrower by filing a Form 8-K attaching such Definitive Purchase Agreement with the U.S. Securities and Exchange Commission, in each case, prior to or concurrent with such termination), (v) November 30, 2026 (as such date may be extended by the Required Lenders in their sole and absolute discretion) and
(vi) the occurrence and continuance of any Event of Default under this Forbearance Agreement, the Loan Agreement or any other Loan Documents (other than the Forbearance Defaults).
“Qualified Sale Transaction” means a sale, merger or other strategic transaction that, in each case
(i) represents a sale of all or substantially all of the business and assets of the Borrower, the Co-Borrower and their respective subsidiaries and (ii) results in the Borrower or the Co-Borrower receiving net cash proceeds sufficient to repay the Outstanding Obligations (as defined below) in full in cash, and shall include, for the avoidance of doubt, any replacement or alternative transaction that otherwise satisfies all of the terms of this definition.
Section 2. Conditions Precedent. This Forbearance Agreement shall become effective upon the satisfaction of the following conditions (such date upon which each of the following conditions are satisfied, the “Forbearance Agreement Effective Date”):
Each of the Collateral Agent and the Administrative Agent shall have received from each other Agent, the Lenders party hereto (collectively constituting the Required Lenders), the Borrower and the Co-Borrower counterparts of this Forbearance Agreement duly signed on behalf of each such Person;
2 | ||
Exhibit 10.1
1.3The representations and warranties set forth in this Forbearance Agreement shall be true and correct in all material respects on the Forbearance Agreement Effective Date;
1.4No Event of Default (other than the Forbearance Defaults) shall have occurred and be continuing as of the Forbearance Agreement Effective Date; and
1.5The Borrower shall have paid (i) the Forbearance Fee (as defined below) to the Lenders in full and in cash in accordance with the terms and conditions of Section 3.3 and (ii) to the Agents and the Lenders all amounts due and payable under the Loan Documents, including, to the extent invoiced, all out-of-pocket expenses required to be reimbursed or paid by the Borrower or Co-Borrower under any Loan Document.
Section 3. Outstanding Obligations, Default Interest, Forbearance Fee, Etc.
1.1Acknowledgment of Obligations; Default Interest. Each Loan Party that is party hereto hereby acknowledges, confirms, and agrees that all outstanding Obligations, including all Credit Extensions, together with all unpaid interest and fees accrued and accruing thereon, and all other fees, costs, expenses, charges, and other Obligations now and hereafter payable by any Loan Party to the Agents and the Lenders, as such Obligations may be increased by the Extension Fee referred to below (collectively, the “Outstanding Obligations”) are owing by the Loan Parties, in each case without offset, defense or counterclaim of any kind, nature or description whatsoever. Each Loan Party that is party hereto further hereby acknowledges, confirms and agrees that the Agents and the Lenders reserve the right (a) upon the occurrence and during the continuance of any Event of Default (other than the Forbearance Defaults, with respect to which the Lenders hereby agree that any application of such default rate of interest is waived in full solely during the Forbearance Period, except as otherwise provided in clause (b) below) to implement the default rate of interest pursuant to Section 1.3(c) of the Loan Agreement and (b) from and after the end of the Forbearance Period, to implement the default rate of interest pursuant to Section 1.3(c) of the Loan Agreement with respect to any Forbearance Default, in each case, retroactively to the earliest occurrence of any such Forbearance Default (it being acknowledged and agreed that no such default rate of interest shall be retroactively applied to the Obligations in the event the Forbearance Period ends as a result of the consummation of a Qualified Sale Transaction pursuant to clause (ii) of the definition thereof).
1.2Other Defaults. Except as expressly provided herein with respect to the Forbearance Defaults during the Forbearance Period, nothing in this Forbearance Agreement shall constitute a modification or consent to, or waiver or relinquishment of (a) any default or Event of Default under any of the Loan Documents, (b) any of the agreements, terms or conditions contained in any of the Loan Documents, (c) any rights or remedies of any Agent or Lender with respect to the Loan Documents, or (d) the rights of any Agent or Lender to collect the full amounts owing to it under the Loan Documents. This Forbearance Agreement does not constitute a novation of rights, obligations and liabilities of the respective parties existing under the Loan Documents.
Forbearance Fee. In order to induce the Lenders to enter into this Forbearance Agreement, the Borrower hereby agrees to pay to the Administrative Agent, for the ratable benefit of the Lenders, a fee (the “Forbearance Fee”) equal to $5,834,964.91 (i.e., 4.0% of the aggregate outstanding Credit Extensions as of the Forbearance Agreement Effective Date), which Forbearance Fee shall be fully earned, due and payable in cash on the Forbearance Agreement Effective Date. Payment of the Forbearance Fee is in addition to, and shall not offset or otherwise affect, the amount of any other interest, fees, costs and expenses payable by any Loan Party pursuant to the Loan Agreement and the other Loan
3 | ||
Exhibit 10.1
Documents. The Loan Parties, the Agents and the Lenders agree that the Forbearance Fee is not paid in consideration of services rendered by the Agents or the Lenders to the Borrower or any other Loan Party.
1.3Forbearance. Subject to the terms and conditions hereof, the Agents (acting at the direction of the Required Lenders) and the Lenders (collectively constituting the Required Lenders) hereby agree, solely during the Forbearance Period, to forbear from the exercise of any and all rights or remedies under the Loan Agreement and the other Loan Documents and applicable law, in equity or otherwise (including, but not limited to, (i) initiating any proceedings to collect the Obligations or (ii) initiating or repossessing or commencing a foreclosure of any Collateral; provided that, the Agents shall be permitted (without obligation) to file financing statements in accordance with the Loan Documents to perfect or maintain the perfection of its Liens on the Collateral and take all other actions (without obligation) to perfect or maintain the perfection of its Liens on the Collateral to the extent not prohibited by the Loan Documents), in each case, solely in respect of the Forbearance Defaults. Additionally, the Agents and the Lenders and each of the Borrower and the Co-Borrower agree that during the Forbearance Period, this Forbearance Agreement shall satisfy any notice requirements in the Loan Agreement and any other Loan Documents with respect to, or in connection with, the Forbearance Defaults.
1.4Termination of Forbearance. Upon the expiration of the Forbearance Period, the forbearance provided for herein (including Section 3.4) shall immediately and automatically terminate and be of no further force and effect. From and after the expiration of the Forbearance Period, the agreement of the Agents and the Lenders to forbear from exercising their respective rights and remedies shall immediately terminate without the requirement of any demand, presentment, protest or notice of any kind, all of which the Borrower and the Co-Borrower waive. The Borrower and the Co-Borrower acknowledge and agree that at any time from and after the expiration of the Forbearance Period, the Agents or the Lenders, or both, will be free, in accordance with the applicable Loan Documents and applicable law, to exercise any and all of their respective rights and remedies under any or all of the Loan Documents and applicable law available to them at that time on account of any Forbearance Defaults that have occurred and are continuing (and, for the avoidance of doubt, without prejudice to the reservation of rights in this Forbearance Agreement, any other Events of Default under the Loan Documents that have occurred and are continuing), as if this Forbearance Agreement had not been entered into.
1.5Extension Option and Extension Fee.
The Borrower and the Required Lenders (in their sole and absolute discretion) shall have the right (the “Extension Option”) to jointly extend the Initial Stop Date from July 31, 2026 to August 31, 2026 in writing (and notified to the Administrative Agent in writing) at any time prior to the July 31, 2026 (the date of such extension, the “Extension Option Exercise Date”). To the extent the Borrower and the Required Lenders elect to exercise the Extension Option, the Borrower and the Co-Borrower agree to pay to the Lenders a fee (the “Extension Fee”) equal to (a) 10.0% times (b) the outstanding principal amount of all Credit Extensions under the Loan Agreement (without giving effect to (i) any repayment or prepayment of any Credit Extension or (ii) any fees or expenses off-set against any Credit Extension). The Extension Fee shall bear interest on the outstanding amount thereof at the Term Loan Interest Rate on the same terms as the Term Loan pursuant to Section 1.3(b), from the Extension Option Exercise Date until the date the Extension Fee is paid in full. Interest charged on the Extension Fee shall be added to increase the balance of such Extension Fee on each Interest Payment Date. The Extension Fee shall be fully earned on the Extension Option Exercise Date (notwithstanding its receipt at a different time) and shall be due and payable at the earliest of (i) the date all of the Term Loans are repaid or prepaid in full (including in connection with the consummation of a Qualified Sale Transaction), (ii) the Term Loan Maturity Date, (iii) the date the Term Loan becomes due and payable or are accelerated (whether as a result of an Event of Default, by operation of law or otherwise), or (iv) the date on which there shall occur any satisfaction, release, payment, restructuring, reorganization, replacement, reinstatement, defeasance or compromise of
4 | ||
Exhibit 10.1
any of the Obligations in any bankruptcy, insolvency proceeding, foreclosure (whether by power of judicial proceeding or otherwise) or deed in lieu of foreclosure or the making of a distribution of any kind in any bankruptcy or insolvency proceeding to any Agent or any Lender in full or partial satisfaction of the
Obligations. The Extension Fee shall constitute an Obligation and shall be due and payable by the Loan Parties immediately prior to and notwithstanding the automatic acceleration of the outstanding principal of the Term Loans and all other accrued liabilities contemplated hereunder and under the other Loan Documents.
(a)Notwithstanding anything to the contrary in this Forbearance Agreement or any other Loan Document, it is understood and agreed that if any Loans are accelerated or terminated (in each case, whether as a result of the occurrence and continuance of any Event of Default, by operation of law or otherwise), the Extension Fee, determined as of the date of acceleration or termination, will also be due and payable and will be treated and deemed as though the applicable Loans were repaid as of such date, and shall constitute part of the Obligations for all purposes herein. The Extension Fee shall also be payable in the event the Obligations, the Credit Extensions and the Loan Documents are satisfied or released by foreclosure (whether by power of judicial proceeding), deed in lieu of foreclosure or by any other similar means. The Loan Parties expressly waive the provisions of any present or future statute or law that prohibits or may prohibit the collection of the applicable premium in connection with any such acceleration. The parties hereto further acknowledge and agree that the Extension Fee is not intended to act as a penalty or to punish the Loan Parties for any repayment or redemption of the Credit Extensions. The Loan Parties expressly agree that (1) the Extension Fee is reasonable and is the product of an arm’s length transaction between sophisticated business people, ably represented by counsel, (2) the Extension Fee shall be payable notwithstanding the then prevailing market rates at the time payment is made, (3) there has been a course of conduct between the Lenders and the Loan Parties giving specific consideration in this transaction for such agreement to pay the Extension Fee, (4) the Loan Parties shall be estopped hereafter from claiming differently than as agreed to in this Section, (5) the agreement of the Loan Parties to pay the Extension Fee is a material inducement to the Lenders to enter into this Forbearance Agreement and to provide extension contemplated under the Extension Option, and (6) the Extension Fee represents a good-faith, reasonable estimate and calculation of the lost profits or damages of the Lenders and that it would be impractical and extremely difficult to ascertain the actual amount of damages to any Lender or profits lost by such Lender as a result of any Exit Event.
Section 4. Representations and Warranties. Each of the Borrower and the Co-Borrower represents and warrants to the Agents and the Lenders, as of the date hereof, that:
1.1Execution and Delivery; Enforceability. Each of the Borrower and the Co-Borrower has the requisite power and authority, and has taken all necessary organizational action, to authorize the execution, delivery and performance of this Forbearance Agreement. This Forbearance Agreement has been duly executed and delivered by the Borrower and the Co-Borrower and constitutes the legal, valid and binding obligation of the Borrower and the Co-Borrower, enforceable in accordance with its terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally.
1.2No Contravention. The execution and delivery by each of the Borrower and the Co-Borrower of this Forbearance Agreement and the performance by it of this Forbearance Agreement do not (i) require any action, consent or approval of, registration or filing with or any other action by any Governmental Authority that has not been obtained, (ii) violate any provision of law, statute, rule or regulation, or of the certificate or articles of incorporation or other constitutive documents or by-laws of
5 | ||
Exhibit 10.1
the Borrower and the Co-Borrower, (iii) conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under, or give rise to any right to accelerate or to require the prepayment, repurchase or redemption of any obligation under any such material indenture, agreement or other instrument to which the Borrower and the Co-Borrower is a party, or (iv) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by the Borrower and the Co-Borrower (other than the Liens created under the Loan Documents).
6 | ||
Exhibit 10.1
1.3Representations and Warranties. Except with respect to the Forbearance Defaults, the representations and warranties set forth in Section 4 of the Loan Agreement, and in each of the other Loan Documents, are true and correct in all material respects on the date hereof as if made on and as of the date hereof (or, if any such representation or warranty is expressly stated to have been made as of a specific date, such representation or warranty is true and correct as of such specific date), and as if each reference in said Section 4 to “this Agreement” included reference to this Forbearance Agreement.
1.4No Defaults or Events of Default. Except with respect to the Forbearance Defaults, there exists no default or Event of Default.
Section 5. Affirmative Covenants.
1.1The Borrower and the Co-Borrower shall (until all Obligations, other than contingent indemnification or reimbursement obligations, have been satisfied in full and Lenders are under no further obligation to make Credit Extensions):
(a)comply with the terms, conditions, covenants and agreements set forth in this Forbearance Agreement, the Loan Agreement and other Loans Documents (in each case, other than the Forbearance Defaults);
(b)maintain at all times, on a consolidated basis, Unrestricted Cash (deposited in Pledged Accounts located in the United States of America) in an aggregate amount equal to at least
$10,000,000;
(c)provide, and use reasonable best efforts to cause its officers, directors, employees and advisors to provide, the Collateral Agent and the Lenders updates, information and access to the process of arranging, negotiating and consummating a Qualified Sale Transaction, including promptly (i) granting the Collateral Agent, the Lenders and their respective officers, directors, employees, advisors and designees (the “Lender Representatives”) access to the virtual dataroom(s) maintained by the Borrower or its advisors to facilitate any Qualified Sale Transaction; provided that, as a condition to such access, the Collateral Agent or such Lender, as applicable, shall have executed a customary confidentiality agreement or non-disclosure agreement (or agreed to be bound by confidentiality obligations no less restrictive than those applicable to the Loan Parties), (ii) furnishing to the Collateral Agent and the Lenders all written due diligence materials or memoranda and financial information provided to any prospective buyers (which shall be satisfied, for the avoidance of doubt, by uploading such materials and information to the virtual dataroom(s) pursuant to the foregoing clause (i)), (iii) providing the Collateral Agent and the Lenders with copies of all sale offers and bids provided to the Loan Parties, (iv) sharing with the Collateral Agent and the Lenders each material or proposed final draft of the Definitive Purchase Agreement, and (v) furnishing to the Collateral Agent and the Lenders such other information relating to any Qualified Sale Transaction, any similar transaction or any Definitive Purchase Agreement as the Collateral Agent or the Lenders may reasonably request in writing, including any material process updates or other material materials provided to the Loan Parties or management by Jefferies (or any of its Affiliates); provided, further, that in no event shall any Loan Party be required to furnish or disclose any information pursuant to this clause (c) if the Borrower determines, in good faith, that doing so would reasonably be expected to (x) based on advice of counsel, waive the protection of an attorney-client privilege or attorney work product (and such document, information or otherwise cannot be redacted to preserve such attorney client or attorney work product), (y) breach any confidentiality obligations binding on any Loan Party or any of their respective officers, directors, employees or advisors (unless the Collateral Agent or such Lender, as applicable, shall also execute a customary confidentiality agreement
7 | ||
Exhibit 10.1
or non-disclosure agreement or agreed to be bound by confidentiality obligations no less restrictive than those applicable to the Loan Parties, in which case such
8 | ||
Exhibit 10.1
information shall not be withheld in reliance on this clause (y)) or (z) violate any applicable law, rule or regulation; and
(d)apply 100% of the net cash proceeds of any Qualified Sale Transaction or other Sale Transaction to make a mandatory prepayment of all Outstanding Obligations and all other amounts owed to the Agents and the Lenders under the Loan Documents, until paid in full in cash.
1.2Each of the Borrower and the Co-Borrower agrees with each Agent and each Lender that the failure of the Borrower or the Co-Borrower to perform any of its obligations under this Section 5 shall constitute an Event of Default under the Loan Agreement.
Section 6. Release. As a material part of the consideration for the Agents and Lenders entering into this Forbearance Agreement, the Borrower and the Co-Borrower agree as follows:
1.1By their respective signatures below, each of the Borrower and the Co-Borrower hereby absolutely, unconditionally and irrevocably releases, remises and forever discharges the Agents, the Lenders and each of their respective successors and permitted assigns, and each of their respective present and former shareholders, affiliates, subsidiaries, directors, officers, attorneys, employees, agents and other representatives (collectively, the “Releasees”), from all claims, demands or causes of action of any kind, whether arising in law or equity or under contract or tort or under any state or federal law or otherwise, which any of the Borrower, the Co-Borrower or any of their respective successors, assigns or other legal representatives has had, now has or has made claim to have against any Releasee by reason of any act, omission, or cause arising on or prior to the date hereof (collectively, “Claims”), whether such Claims are matured or unmatured or known or unknown. Each of the Borrower and the Co-Borrower, on behalf of itself and its successors, assigns, heirs, and other legal representatives, hereby absolutely, unconditionally and irrevocably covenants in favor of each Releasee that it will not sue (at law, in equity, in any regulatory proceeding or otherwise) any Releasee on the basis of any Claim released, remised and discharged pursuant to this Section 6.1 (this Section 6.1, the “Release Provision”).
1.2The Borrower and the Co-Borrower hereby acknowledge, represent and warrant to the Releasees as of the date hereof that:
(a)They have read and understand the effect of the Release Provision. The Borrower and the Co-Borrower have had the assistance of independent counsel of its own choice, or has had the opportunity to retain such independent counsel, in reviewing, discussing and considering all the terms of the Release Provision; and if counsel was retained, counsel for the Borrower and the Co-Borrower has read and considered the Release Provision and advised such Obligor with respect to the same. Before execution of this Forbearance Agreement, the Borrower and the Co-Borrower have had adequate opportunity to make whatever investigation or inquiry it may deem necessary or desirable in connection with the subject matter of the Release Provision.
(b)In connection with providing the release set forth in Section 6.1, the Borrower and the Co-Borrower is not acting in reliance on any representation, understanding or agreement not expressly set forth herein. The Borrower and the Co-Borrower acknowledge that the Releasees has not made any representation with respect to the Release Provision except as expressly set forth herein.
The Borrower and the Co-Borrower have executed this Forbearance Agreement and the Release Provision thereof as their free and voluntary act, without any duress, coercion or undue influence exerted by or on behalf of any Person.
9 | ||
Exhibit 10.1
(c)The Borrower and the Co-Borrower are the sole owner of the claims released by the Release Provision, and the Borrower and the Co-Borrower have not heretofore conveyed or assigned any interest in any such claim to any other Person.
1.3The Borrower and the Co-Borrower understand that the Release Provision was a material consideration in the agreement of the Agents and the Lenders party hereto to enter into this Forbearance Agreement. The Release Provision shall be in addition to any rights, privileges and immunities granted to the Agents and the Lenders under the Loan Documents.
Section 7. Miscellaneous.
1.1Waivers, Amendments, Etc. The provisions of this Forbearance Agreement may from time to time be amended, modified or waived, or deviation from in accordance with Section 13.7 of the Loan Agreement.
1.2Counterparts. This Forbearance Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Forbearance Agreement in electronic format shall be effective as delivery of a manually executed counterpart of this Forbearance Agreement. Each party hereto agrees and acknowledges that (i) the transaction consisting of this Forbearance Agreement may be conducted by electronic means,
(ii) it is such party’s intent that, if such party signs this Forbearance Agreement using an electronic signature, it is signing, adopting and accepting this Forbearance Agreement and that signing this Forbearance Agreement using an electronic signature is the legal equivalent of having placed its handwritten signature on this Forbearance Agreement on paper and (iii) it is being provided with an electronic or paper copy of this Forbearance Agreement in a usable format
1.3Severability of Provisions. Each provision of this Forbearance Agreement is severable from every other provision in determining the enforceability of any provision.
1.4Governing Law, Venue, Waiver of Jury Trial. THIS FORBEARANCE AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN AS EXPRESSLY SET FORTH IN OTHER LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. The provisions of Section 11 of the Loan Agreement are hereby incorporated by reference herein, mutatis mutandis.
Loan Document. This Forbearance Agreement shall constitute a Loan Document for purposes of the Loan Agreement and the other Loan Documents, and except as specifically modified by this Forbearance Agreement, the Loan Agreement and the other Loan Documents shall remain unchanged and shall remain in full force and effect. Each Loan Party hereby (a) acknowledges the terms of this Forbearance Agreement and (b) ratifies and affirms its obligations under and acknowledges its continued liability under each Loan Document to which it is a party and agrees that each Loan Document to which it is a party remains in full force and effect as expressly forborne hereby. Without limiting the foregoing, each Loan Party hereby ratifies, confirms, acknowledges and agrees that its obligations under the Loan Documents are in full force and effect and that each Loan Party continues to unconditionally and irrevocably remain liable for the full and punctual payment, when due, whether at stated maturity or earlier by acceleration or otherwise, all of the Obligations and its execution and delivery of this
10 | ||
Exhibit 10.1
Forbearance Agreement does not indicate or establish an approval or consent requirement by such Loan Party under any Loan Document in connection with the execution and delivery of amendments, consents or waivers to the Loan Agreement or any of the other Loan Documents. Each of the Loan Parties has granted to the Collateral Agent, valid, binding, perfected, enforceable, first priority Liens in the Collateral and the proceeds thereof
and such Liens are not subject to avoidance, subordination, recharacterization, recovery, attack, offset, counterclaim or defense of any kind, and each Loan Party hereby confirms and ratifies all of such Liens.
1.5Lender Direction and Waiver. By their execution and delivery of their signature pages hereto, each of the undersigned Lenders, collectively constituting the Required Lenders, is hereby authorizing and directing the Administrative Agent and the Collateral Agent to execute and deliver this Forbearance Agreement, and hereby also waives any requirements under the Loan Documents for any Agent to deliver any notices in connection with the Initial Defaults or the Forbearance Defaults prior to the end of the Forbearance Period unless otherwise directed in writing by the Required Lenders.
1.6Rights, Protections, Immunities and Indemnities of the Agents. The Loan Parties and the undersigned Lenders, constituting the Required Lenders, hereby acknowledge and agree that the Agents shall have the benefit of the exculpatory provisions provided by Section 12 of the Loan Agreement including, without limitation, the reimbursement and indemnity obligations provided by Section 13.2, in connection with the delivery of this Forbearance Agreement and the actions contemplated by this Forbearance Agreement.
[SIGNATURES BEGIN NEXT PAGE]
11 | ||
Exhibit 10.1
IN WITNESS WHEREOF, the parties hereto have caused this Forbearance Agreement to be duly executed as of the date first written above.
BORROWER:
DOMO, INC., a Delaware corporation
By: /s/ Name: Tod Crane
Title: Chief Financial Officer
CO-BORROWER:
DOMO, INC., a Utah corporation
By: /s/ Name: Tod Crane
Title: Chief Financial Officer
SIGNATURE PAGE TO FORBEARANCE AGREEMENT
Exhibit 10.1
ADMINISTRATIVE AGENT:
WILMINGTON TRUST, NATIONAL ASSOCIATION, as
Administrative Agent
By: /s/
Name: Joseph B. Feil
Title: Vice President
SIGNATURE PAGE TO FORBEARANCE AGREEMENT | ||
Exhibit 10.1
COLLATERAL AGENT:
OBSIDIAN AGENCY SERVICES, INC., as Collateral
Agent
By: /s/ Name: Dan Worrell
Title: Managing Director
SIGNATURE PAGE TO FORBEARANCE AGREEMENT | ||
Exhibit 10.1
LENDERS:
BCIC MERGER SUB, LLC
By its Member: Special Value Continuation Partners LLC
By its Member: BlackRock TCP Capital Corp. By its Investment Adviser: Tennenbaum Capital Partners, LLC
By: /s/ Name: Dan Worrell
Title: Managing Director
BLACKROCK DIRECT LENDING FUND 2025-C AGGREGATOR 1 FUNDING 2, LP
By: BlackRock Capital Investment Advisors, LLC Its: Collateral Manager
By: /s/ Name: Dan Worrell
Title: Managing Director
BLACKROCK DLF IX ICAV,
an umbrella type Irish collective asset management vehicle
acting solely for and on behalf of its sub-fund BLACKROCK DIRECT LENDING FUND IX-L (IRELAND)
By: Blackrock Capital Investment Advisors, LLC Its: Investment Manager acting as attorney-in-fact
By: /s/ Name: Dan Worrell
Title: Managing Director
SIGNATURE PAGE TO FORBEARANCE AGREEMENT | ||
Exhibit 10.1
BLACKROCK DLF IX ICAV,
an umbrella type Irish collective asset management vehicle
acting solely for and on behalf of its sub-fund BLACKROCK DIRECT LENDING FUND IX-U (IRELAND)
By: Blackrock Capital Investment Advisors, LLC Its: Investment Manager acting as attorney-in-fact
By: /s/ Name: Dan Worrell
Title: Managing Director
BLACKROCK DIRECT LENDING FUND IX-U (LUXEMBOURG) SCSP
By: BlackRock Capital Investment Advisors, LLC, Its: Manager
By: /s/ Name: Dan Worrell
Title: Managing Director
BLACKROCK DIRECT LENDING FUND X-U (LUXEMBOURG) SCSP
By: BlackRock Capital Investment Advisors, LLC, Its: Investment Manager
By: /s/ Name: Dan Worrell
Title: Managing Director
SIGNATURE PAGE TO FORBEARANCE AGREEMENT | ||
Exhibit 10.1
BLACKROCK DLF IX 2019-G CLO, LLC BLACKROCK DLF IX CLO 2021-1, LLC BLACKROCK DLF IX CLO 2021-2, LLC BLACKROCK DLF X CLO 2022-1, LLC BLACKROCK SHASTA SENIOR LOAN FUND VII, LLC
By: BlackRock Capital Investment Advisors, LLC Its: Collateral Manager
By: /s/ Name: Dan Worrell
Title: Managing Director
BLACKROCK DLF IX-L CLO, LP
By: BlackRock Capital Investment Advisors, LLC Its: Investment Manager
By: /s/ Name: Dan Worrell
Title: Managing Director
BLACKROCK MT. LASSEN SENIOR LOAN FUNDING XII, LLC, SERIES 2
By: BlackRock Capital Investment Advisors, LLC, as its Collateral Manager
By: /s/ Name: Dan Worrell
Title: Managing Director
SIGNATURE PAGE TO FORBEARANCE AGREEMENT | ||
Exhibit 10.1
SPECIAL VALUE CONTINUATION PARTNERS, LLC
TCP DIRECT LENDING FUND VIII-A, LLC TCPC FUNDING I, LLC
On behalf of each of the above entities:
By: TENNENBAUM CAPITAL PARTNERS, LLC
Its: Investment Manager
By: /s/ Name: Dan Worrell
Title: Managing Director
SIGNATURE PAGE TO FORBEARANCE AGREEMENT | ||
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Joshua G. James, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Domo, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: September 3, 2026
/s/ Joshua G. James
Joshua G. James
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Tod Crane, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Domo, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: September 3, 2026
/s/ Tod Crane
Tod Crane
Chief Financial Officer
(Principal Accounting and Financial Officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing of the Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2026, as filed with the Securities and Exchange Commission on the date hereof (the "Report") by Domo, Inc. (the "Company"), Joshua G. James, as the Chief Executive Officer of the Company, and Tod Crane, as the Chief Financial Officer of the Company, each hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:
| 1. | the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and | ||||
| 2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. | ||||
Date: September 3, 2026
/s/ Joshua G. James | |||||
Joshua G. James | |||||
Chief Executive Officer (Principal Executive Officer) | |||||
/s/ Tod Crane | |||||
| Tod Crane | |||||
Chief Financial Officer (Principal Accounting and Financial Officer) | |||||
This certification accompanies the Report to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Domo, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.
-1-