Let’s Read Domo’s Earnings Together

Morning Report: Good morning. Let’s peek at what Domo did last quarter.

Utah-based Domo reported its second quarter, fiscal 2019 financial results at the end of last week.

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During the run-up to its IPO, Domo became an object of curiosity in the startup world. Its revealed financials showed smaller-than-expected revenues, larger-than-expected losses, and growth that underwhelmed. To get public, Domo underwent a dramatic repricing. The firm finally went public at $21 per share.

After reporting revenue and adjusted losses that bested Wall Street expectations, Domo’s stock rocketed higher last week. A share in the subscription-based software company rose from around $21 per share to nearly $27 per share after its earnings report went live.

However, by the end of Friday, they were underwater, and this Monday morning they are off a fraction more. As of the time of writing, Domo is worth just $19 per share.

Let’s examine its recent financial results to get our hands around Domo’s current health, and what drove its shares higher before they settled to a local minimum.

Financial Results

Domo beat revenue and profit expectations, but still had GAAP (inclusive of all costs) and adjusted losses that were greater than its revenue. The firm’s revenue growth rate was also light for a subscription software (SaaS) company of its scale, and fundraising history.

In its second quarter of its fiscal 2019, Domo reported revenue of $34.3 million, an adjusted net loss of $36.2 million ($3.44 per share), and a GAAP net loss of $46.4 million ($4.41 per share). Wall Street had expected revenue of just over $32 million and a steeper $3.95 per-share adjusted net loss.

Domo’s revenue grew 32 percent year-over-year. Billings expanded a similar 35 percent from the year-ago period.

The business intelligence firm also reported improving gross margins for its subscription business (82 percent of revenue in the quarter). Domo’s GAAP and non-GAAP gross margins grew to 71 percent apiece, up from 64 percent each in the year-ago period.

That’s the good news. The bad news: Domo consumed more cash to fund its operations in its most recent quarter than it generated in revenue. The company’s “net cash used in operating activities” was $36.1 million, an improvement from its year-ago operating cash burn of $44.7 million. Still, having negative operating cash flow of greater than your revenue is an impressive anti-profit result.

Domo also consumed cash to fund its investing activities. Happily, $206.6 million in positive financing cash flow, stemming from its IPO, led to the firm’s cash balance growing to $238.8 at the end of the quarter.

Domo forecasts essentially no sequential growth in the third quarter, stating that it expects revenue “to be in the range of $34.8 million to $35.2 million.”

And that’s that! We’ll be back for another update in three months.

Top Image Credit: Li-Anne Dias