DOMO, INC. — Call Transcript 2023

Good afternoon. My name is Emma, and I will be your conference operator today. At this time, I would like to welcome everyone to the Domo Second Quarter Fiscal Year 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. Peter Lowry, Domo Vice President of Investor Relations, you may begin your conference. Good afternoon, and welcome. On the call today, we have Josh James, our founder and CEO, and David Jolley, our Chief Financial Officer. I'll lead off with our safe harbor statement and then on to the call. Our press release was issued after the market closed and is posted on the investor relations section of our website, where this call is also being webcast. Statements made on this call include forward-looking statements related to our business under federal securities laws. These statements are subject to a variety of risks, uncertainties, and assumptions. These include, but are not limited to, statements about future and prospects, our financial projections and cash position, statements regarding the potential of our consumption-based pricing, statements about our sales team and technology, our expectations for new business opportunities, transactions, and initiatives. Statements regarding our channel of communication and upcoming events, statements regarding the potential of artificial intelligence and its impact on our business, and statements regarding the impact of macroeconomic and other conditions on our business. For a discussion of these risks and uncertainties, please refer to documents we file with the SEC. In particular, today's press release, our most recently filed annual report on Form 10-K, and our most recently filed quarterly report on Form 10-Q. These documents contain and identify important risk factors and other information that may cause our actual results to differ materially from those contained in our forward-looking statements. In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of Domo's performance. Other than revenue, unless otherwise stated, we will be discussing results of operations on a non-GAAP basis. These non-GAAP measures should be considered in addition to, and not as a substitute for or an isolation from, our GAAP results. Please refer to the tables in our earnings press release for a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP measure, which we have posted to the investor relations section of our website at investors.domo.com. With that, I'll turn it over to Josh. Josh? Thank you, Pete, and thank you everyone for joining the call today. In Q2, even in a tough macroeconomic environment, our year-over-year total revenue growth was still at 5%. Our subscription revenue growth was 6%, and billings declined 2%. Our results for Q2 were in line or better than our guidance, and I'm pleased with the progress we've made in the past few quarters, particularly with our consumption-based pricing, our AI strategy offerings and roadmap, and our sales force retention. That being said, I expect our return to growth may take longer than we would all have hoped for due to some macro headwinds that seem to be affecting most companies we're familiar with. Let me give you an update on some of the progress we've made and what gives me confidence in our longer-term growth prospects. First, I'm confident we have the people and technology to get back to the growth we've experienced in the past, and to do so responsibly by managing our costs. I continue to spend my time on the road with our current and our prospective customers, and the conversations I'm having in the market reinforced by optimism. We hear time and time again that Domo can solve complex data problems that our competitors simply can't, and we do it in record time. Many of these promising interactions are happening through our Customer Connections Tour, where we've gained some candid insight into why organizations choose Domo over leading competition. One customer from a large publicly traded advertising group expressed that Domo offers superior speed and computing power, and significantly reduces the effort to create reports, freeing their data specialists to focus on higher value business deliverables. I believe there is potential for conversations like this to translate into significant transactions for Domo in the near to midterm that could drive upside to our guidance. Second, I believe our increased focus on consumption-based pricing can be a growth driver and create stronger relationships with our customers as we remove the limitation on number of seats in an account by granting access to all employees of a customer and only charging for data usage, similar to Snowflake, AWS, and others. Because we can charge for usage while offering seat licenses and visualization for free, consumption pricing solves many of our historic barriers to adoption and more directly aligns our pricing to the value realized by our, by our customers. Thanks to this, consumption pricing is opening more doors for upsell opportunities. One of the very encouraging trends we see with our consumption customers is an increase across key metrics, including data flows and connector runs, which represent a significant source of potential growth. Over the past year, we have seen almost a 30% increase in contract size for new logos going on consumption-based pricing, compared to new logo customers going on seat-based pricing. Also, for customers renewing who have converted to consumption pricing from seat-based pricing, we are seeing almost a 60% increase in the number of user accounts created, and somewhat surprisingly, a higher login rate of the total users on the consumption model versus the seat-based pricing model. We're also seeing momentum in increasing the percentage of new logo customers who choose consumption pricing. 50% of our new logos in Q2 were priced on a consumption basis. That's up from about 30% of our logos, of our new logos in Q1, and we are targeting 75% this quarter in Q3 and even higher in Q4, setting us up well to have a substantial impact on the way we go to market and even convert renewing customers to the consumption model aggressively next year. We have over 250 customers on our consumption pricing model as of July 31, which represents over 10% of our customer base and over 13% of our ARR. Another benefit to Domo is that our consumption pricing contracts are structured as subscription contracts. This means the revenue is recognized ratably, mitigating some of the lack of predictability associated with pure consumption-based models. Beyond these direct benefits for Domo and our customers, our consumption pricing is also expected to improve our competitive positioning. Some customers see our competitors' visualization offerings as essentially free because their visualization tool is included as part of an enterprise license agreement. We think including visualization with the free seats under our consumption model is a compelling selling point for enterprise and corporate customers and prospects, and positions us better against some of our competitors. Another positive in the quarter was that we once again had much lower than forecasted attrition in the sales force. Year to date, we have stemmed the sales force attrition we saw last year when 30% of the sales team churned. Next, I continue to be excited about the potential for AI to be a growth driver for Domo. I believe we are strongly positioned to be a leader in delivering AI-powered data experiences, in governing those data experiences, and in enabling businesses to achieve the data readiness required to capitalize on the broader possibilities of AI. Domo gives you the ability to apply the power of AI to your business now. For capacity planning, if a company needs to know the number, and type, and timing of employees they need to hire to achieve a business goal, they can do that right now. If a company wants to run simulations to dynamically price and bundle their offerings, they can apply AI to that problem in Domo now. If a lender wants to perform a risk assessment model on patterns of behavior and other factors, they can use AI to apply that to the data they have in Domo right now. This month, we announced progress, showcasing our commitment to this ongoing ambition, including mobilizing the full force of Domo's AI technology, expertise, and vision as Domo.AI. Data and technology are important foundations, but real transformation comes from making them useful and reliable in the hands of many. Domo.AI is championing a future where AI-powered data experiences truly transform business by amplifying a very powerful asset, human curiosity. The hurdle I think many businesses will need to overcome is building the safety and efficiency required to effectively democratize AI. That's why Domo's approach goes beyond wiring OpenAI to the end-user experience. It's about embedding AI responsibly into the very fabric of the entire business. Let me tell you about some of the ways we're making this possible through Domo.AI. Our suite of AI tools empowers users with chat style data exploration and provides flexible model creation, efficient model management, seamless deployment, and superior governance and security. Domo's AI service layer lets businesses capitalize on the power of AI without getting bogged down by its complexities. Users can easily manage, deploy, and optimize any AI model they choose right in our data experience platform to support real-world use cases that matter to everyone. AI is now easily accessible in Domo Bricks, Domo's App Dev framework, and in workflows. Even low-code tools, such as Magic ETL, are designed to tap into AI model management, making the power of AI accessible even to those without technical expertise. All of this and more is featured in our newly launched Domo.AI website, where we'll continue to share our progress in creating a new future for data and AI. We're also excited to be hosting our first-ever innovation summit focused on AI this month, a free online event that will highlight just how Domo.AI solutions are already helping businesses overcome real-world challenges to accelerate innovation and growth. AI is only as powerful as the data connected to it. We have a well-connected end-to-end data stack, opening up many possibilities for Domo to reimagine what data can do for business. I encourage all of our investors to follow Domo's AI journey, starting with visiting the website and attending our Virtual Innovation Summit on August 29th in North America and EMEA, and August 31st in Asia Pacific, where almost 3,000 people have already registered. While we're optimistic about these significant long-term growth drivers, the IT spending environment remains challenging. Enterprises are carefully scrutinizing vendors, and many are consolidating their spend among fewer vendors. We're seeing sales cycles elongate, and even satisfied customers are being asked by their IT and finance departments to evaluate their spend upon renewal. David will go into more detail, but we're also evaluating our renewals on a granular basis, and while each one is unique, we do see some risk to some of the larger renewals, which we have incorporated into our guidance for the second half of the year. We would not expect to see some of these discussions in a more normal spending environment or in an environment where these customers were already in a consumption model. And then on the new business front, as an indication that this is purely macro-driven, we saw conversion rates fall across each stage of the funnel, which is further evidence of the challenging IT spend environment that we're facing. However, we continue to find opportunities to deliver significant value to our customers, and we do have several notable wins to share from the quarter. We closed a very significant upsell with a Fortune 500 US financial institution to provide a custom app for wealth management operations, powered by our data platform. Domo stood out for automating previously manual, time-consuming workflows and offering custom smart content that is specific to each employee across thousands of employees. Ultimately, the customer chose Domo because our platform provided a complete, elegant solution to a business challenge at scale. Another example, we work with a nonprofit subsidiary of a high-profile private university, and we drove a significant upsell to support their digital corporate learning solutions. This customer rolled out the entire Domo Data Experience platform to 600 new users after successfully improving learning experiences, thanks to real-time insights into course interactions. This win is a strong endorsement of our impact and a great example of how our consumption-based pricing model is opening doors to grow existing business. We also won a significant new logo with a global healthcare leader that chose Domo to provide a unified view of their marketing performance. We are in this business after a successful proof of concept trial to improve marketing performance across multiple brands and countries. In addition to the fantastic customer wins, we also continue to create movement within our industry. This quarter, Domo was ranked the number one self-service business intelligence vendor by Dresner Advisory Services. Domo was also recognized as an overall leader in Dresner's 2023 Wisdom of Crowds study, which included our perfect recommendation score for the seventh consecutive year. Among our best-in-class categories were integrations with third-party technologies, our ease of installation, and our ease of administration, all of which showcase our readiness to help businesses seize the imminent opportunities for data. In addition to this outstanding recognition, Domo was also included on two Constellation ShortLists, which are published to help organizations search for technologies to meet their digital transformation goals. Domo's placement on two shortlists, the list for multi-cloud analytics and BI platforms, and the list for embedded analytics, is a strong endorsement for our reputation of driving customer success. I'm also proud to share that Domo was once again named to the Parity.org list of Best Companies for Women to Advance. This marks our fourth consecutive year of being recognized for our commitment to support women through career advancing opportunities. We believe that diversity makes organizations stronger and view our continued progress in this commitment as a factor in Domo's future success. In closing, while there are certainly some near-term challenges driven by the macro and current IT spending environment, I'm as confident as ever in our team, our technology, and our long-term growth opportunity. With that, I'll turn it over to David. Thanks, Josh. In Q2, we posted 6% subscription revenue growth and 5% total revenue growth. We exceeded the billings guidance we provided at the beginning of the quarter and delivered Q2 billings of $70.6 million, a year-over-year decrease of 2%. In reviewing the metrics that will impact the remainder of the year, current RPO was $232.1 million, an increase of 3% year-over-year, and our total RPO grew 2% to $357.6 million as of July 31st, 2023. Our ARR grew in line with subscription revenue growth. An area where we saw continued success was multi-year contracts. On a dollar-weighted measure, we now have 67% of our customers under multi-year contracts at the end of Q2, up from 64% a year ago. Our gross retention improved from Q1 and was just under 90%, while our net retention was just below 100%, down from Q1. Our net retention was driven by a challenging upsell environment, which I'll talk about in a moment. Q2 total revenue was $79.7 million, a year-over-year increase of 5%. Subscription revenue represented 89% of total revenue and grew 6% year-over-year. International revenue in the quarter represented 21% of total revenue, down slightly from Q2 of last year. Our subscription gross margin was 84.9%, down 0.4 percentage points from Q2 of last year, and down 1.1 percentage points from Q1, primarily due to our move from a fully depreciated data center. We would expect to remain in this range in the near term. I'm also pleased that in Q2, our non-GAAP operating margin was positive 5.7%, up 12.2 percentage points from a year ago. Our non-GAAP operating margin primarily excludes stock-based compensation as well as executive severance, which was related to the transition of C-level executives. Our net loss was about $800,000, an improvement from $8.2 million a year ago, and our net loss per share was $0.02. This is based on 35.9 million weighted average shares outstanding, basic and diluted. In Q2, cash provided by operations was approximately $600,000. In total, our cash balance declined $2.1 million from last quarter to $63.9 million. We expect Q3 cash from operations to be near breakeven, and we continue to expect full year fiscal 2024 cash from operations to be positive. We believe we've got adequate cash in order to continue to pursue our business objectives. In terms of guidance, well, let me share some thoughts. As Josh mentioned, the IT spending environment has been challenging for us, similar to some others in our sector. There are two factors I'd like to highlight. First, while our sales rep attrition has been less than forecast in Q1 and Q2, and we continue to build our sales capacity, our conversion rates, new leads, and resulting new business has also been less than forecast. Part of what we're seeing is a sense of caution, even greater than six months ago, across the board, with customers looking carefully at their software spend. While we believe we have a superior technology, some customers and prospects are already paying for another solution as a part of a broader enterprise-wide license agreement, where their BI tool can be perceived as incrementally free. They may be already using that BI tool for a big portion of their organization, leading some customers and prospects to consolidate their spend on these solutions. As Josh mentioned, I think our consumption-based pricing helps our positioning against this specific challenge. The second factor is that ongoing uncertainties about the macroeconomic environment are presenting challenges with renewals with some large customers. Oftentimes, this is due to the conflicting objectives of business use cases versus the overall IT spending mandates. Based on what we're seeing, we believe our return to growth will take longer than originally anticipated, and as a result, we've lowered our new business and gross retention forecast for the remainder of the year. To put this in context, for the entire fiscal 2024, our reforecast has resulted in a downward adjustment of about 7.5% in billings and 2.5% in revenue. For Q3, we're guiding the billings of $72 million-$73 million, down 2% year-over-year. For full year billings, we're providing a range of $313.5 million-$321.5 million, representing a year-over-year decline of 1% - 3%. Now to guidance for our GAAP metrics. For the Q3 of fiscal 2024, we expect GAAP revenue to be in the range of $78.5 million-$79.5 million. We expect non-GAAP net loss per share, basic and diluted, of $0.10-$0.14 for Q3. This assumes 36.3 million weighted average shares, outstanding, basic and diluted. For the full year of fiscal 2024, we expect GAAP revenue to be in the range of $316 million-$320 million, representing year-over-year growth of 2% - 4%. We expect non-GAAP net loss per share, basic and diluted, of $0.39-$0.47. This assumes 36.1 million weighted average shares, outstanding, basic and diluted. Our EPS guidance implies a positive operating margin for the full year. In summary, in spite of the challenges we've discussed, we are committed to remain operating margin positive for the year and near cash flow breakeven through the second half of the year, and I'm confident we've got the right people and technology to execute against our market opportunity. With that, we'll open the call for questions. Operator? Thank you. As a reminder, if you would like to ask a question, press Star, then one on your telephone keypad. Your first question comes from the line of Derek Wood with TD Cowen. Your line is open. Okay, thank you. Yeah, it sounds like a challenging environment out there, and I'm just wanting to kind of parse out the macro versus potentially internal changes that you guys have made. And really one of the big initiatives for you guys was to go after this consumption-based pricing model. And it sounds like you've had good success and conversion when I guess when succeeding at that. But has that been a factor in you know leading to longer sales cycles, more investor education? Just trying to get a sense for, you know, how much is external versus how much is internal, 'cause on the macro front, it generally feels like things haven't changed a whole lot in the last six months, but it sounds like you guys have seen some more change. Yeah, we've definitely seen more change from our customers. Like we said, you know, our conversion rates have dropped quite a bit over those six months. And from a consumption standpoint, that's actually been a great tailwind. So, you know, our sales cycle is not longer from consumption. They're pretty similar. In fact, they're a little bit better when we do consumption deals. Our upsells are faster when we do consumption deals, so you know, the repeat business comes in a little bit quicker. Our deal sizes are bigger when we do consumption deals. And like we mentioned, 50% of our deals this last quarter were consumption deals of the new logos. And we're shooting for 75% this quarter. And, you know, that's with only still a portion of the teams trained. So we think by the end of the year, we can get that up, you know, in the 90s. And the other thing that's great about consumption, so it's—they're higher—they're bigger deals, happier customers, higher retention, and, you know, quicker upsells. And then, I think most importantly, there's, you know, two components. Number one, we have a much bigger footprint inside those organizations. So, you know, instead of having a customer that's got, you know, us in one room and the competitor in the next room, it gives an ability to get more users, since we don't charge based on users. So we have seen literally a 60% increase in the number of users that we get when customers convert over to our consumption model. So they had X number of users, and then after they move to consumption, you know, they have 60% higher. So that's been, that's been great. And then not only that, they're actually logging in more frequently as well. So they're becoming. You know, they get adopted by the whole organization. So that's one piece that's really exciting. And then the other piece is just the opportunity to, you know, wake up the first of the year and know that you've got growth in your accounts that you don't have to go in and upsell. It's just consumption. And we're seeing good growth from a consumption standpoint. It's still early to talk about exactly what kind of uptick we're gonna see in those consumption deals. And we need to go through a couple more quarters of that, but we're very sure that there is an uptick from consumption. And as we work with customers and go through, you know, a big chunk of renewals, then we'll understand exactly what that number is. Okay. I guess, that is the silver lining. It sounds like on the other side, you're seeing some headwinds from vendor consolidation, and I'm just wondering if you can tease that out. 'Cause you guys beat your Q2 number, but there's a, you know, pretty big guide down for second half, and you're alluding to some tougher renewals. Is that more on the enterprise side, where you potentially are seeing more contract losses? Or is it corporate? And is it concentrated? Is it more prevalent? Like, and what's informing you on that potential risk in the second half? Just if you could give more color, that would be great. Yeah, it's with some of our enterprise customers that, you know, we've usually seen some pretty good stability there, better than with corporate, in fact. But, you know, enterprise customers are more susceptible to having multiple vendors in there. So when you look at vendor consolidation, which is definitely a theme, I think, across the broader IT industry, our enterprise business is more susceptible to that, for sure. So, you know, thankfully, over the last five years, we've been working on this consumption model, and we're really excited about what that's gonna do for the business. You know, with the enterprises, in particular, because, you know, what we'll see is we'll go into an account, they'll switch over to consumption, and what was happening to us before is now happening to the other vendors. And what I mean by that is, our customers will come to us and say, "Yeah, there's these other four projects that we have, and now, since we're not paying you for seats, I guess we could go eliminate this other vendor, where we have this, you know, this, this data project that we're doing, and we can go eliminate vendor B, where we have this small project in this other division. And then, you know, vendor C, we're gonna have to see how that plays out with you guys." So that's been a, you know, a huge boon to us and our relationships with our big enterprise customers. But there's a handful where, you know, that happened to us, or we think it may happen to us. And just, you know, the idea that it might force us to say, "You know, we gotta be conservative here in our guidance as we get that new information." I think that in conjunction with, with just seeing, yes, we had more sales capacity, but, you know, the conversion rates being down in the, you know, in the process through the pipeline, forces you to look and say, "Do you wanna spend that incremental marketing dollars to feed the sales team?" And it doesn't seem like that's, you know, the right way to go, because we wanna make sure that we're staying really fiscally sound, staying cash flow positive, and staying net operating margin positive. You know, we can do that with this great, you know, I think, awesome transition that's gonna happen in our business as we move more and more to consumption, and as we're able to take advantage of things like freemium, because we now have a consumption model, and we'll be seeing that over the next quarter as well. Okay. And one - just one for David. I mean, how well can net revenue retention rate go in the second half? And I guess to Josh's point about staying break even, do you need to make any kind of OpEx cuts or headcount cuts or how are you feeling about the initiatives for second half around OpEx spend? Yeah, I think, you know, to that point, specifically, you know, we've sat down, taking a look at the business for the second half to say, "Okay, if we, you know, if we don't produce the same number of billings that we originally forecast, and we don't have that cash as a result, you know, how do we manage that?" And we're confident that we can. You know, bring, bring down costs in areas that aren't gonna affect, you know, our ability to go out and compete effectively in the market and win in the market. A lot of it was incremental spend that we had originally forecasted. So we just take the incremental spend out. You know, you don't hire a bunch of new folks. You know, you be careful with your spend on outside consultants, and I think that's where, you know, the cost savings that we needed. And then we found some efficiencies. I mean, really, since we got here, we've been finding efficiencies, and with those efficiencies that we've already found, we feel really good about our ability to hit the margin number. Yeah. Okay. All right, thank you. Thank you. Your next question comes from the line of Patrick Walravens with JMP Securities. Your line is open. Oh, great. Oh, great, thank you. So I guess, first of all, with respect to the large renewals in H2, have some of those large renewals already informed you of their intention not to renew? No, we've got—I mean, there's certainly a couple of them that we know about, and that's why the guide is where the guide is. And then there's others that, yeah, we just—we're seeing a low renewal rate with the vendor consolidation. So, you know, as we get further into conversations, just trying to, you know, figure out what's the right percentage to apply to that as we're doing our forecast. And, you know, that's where we came up with what we came up with. Okay. And then, I mean, if you look at those large renewals and take them as a whole, I mean, just rough ballpark, what percentage of the business are we talking about? You know, if you look at- 1%, 5%, 10%? Yeah. You know, if you go look at our top 50 customers, there's only a handful. You know, it's only five, six customers that you're worried about, and you have great relationships with the rest of them. We have great relationships with the four or five that we're worried about, but the four or five that we're worried about, you know, we know there's other vendors in there. We know that, you know, that they're talking about vendor consolidation. We know that they're beating us up on price, that they're negotiating. And so, again, just trying to, you know, hedge the right amount and make sure that we're being conservative enough. So it doesn't feel like a it definitely doesn't feel like a, you know, holistic we gotta be worried about the enterprise business at all. In fact, I'd say it's just, there's a handful of deals. There's still, you know, one deal in there that's COVID-related, that, you know, we're definitely worried about, and that's on the list. That's one of the four or five. So it doesn't feel like it's, you know, some kind of systemic problem that we have. It's just a handful of deals that are dealing with their IT consolidation and, you know, these big enterprises. Yeah, the CIO, there's one CIO we talked to, and he said to me that he had a several billion dollar IT spend, and that when the CEO called him, he said, "Hey, you have several billion dollars of IT spend. I want $1 billion out." So, Mm. Those are the marching orders, and, you know, that's, that's the only conversation we've had thus far. But, you know, we know that that means, hey, we gotta be really careful here about forecasting that renewal. And I think just from a, just one thing I might add to that, from a defensive standpoint, you know, when we're sitting in, you know, 300 or 400 seats in that account, and we know that our competitors are virtually enterprise-wide, it just really drives home the point that we need to be in a similar position defensively. And as we move to a consumption model, that allows us to be in that same position where we've got seats across the entire enterprise. So that really kind of pushes us to accelerate the move to consumption and try to get all of our accounts over there. Okay, great. And so, Josh, I always ask you, you know, under what circumstances this business might be sold, and the way the, the shares work at Domo, that's basically your decision. So does this consolidation trend impact how you think about that? I mean, I think about that the same way always. Just depends on, you know, if anybody ever brought us an offer, and then we would take a look at it and evaluate that relative to the opportunity we have in the marketplace and relative to what we think the, the long-term value of the shares should be. And, you know, right now, I'd say, you know, despite some of the short-term headwinds that, you know, I think most people are dealing with, there's certainly a few exceptions as you read everybody's earnings calls, but, you know, most people are dealing with a lot of these similar things. Despite that, you know, like we tried to indicate on the call, we're actually pretty excited about the future. We're really excited about the people that we have here. And we're really excited about, you know, the opportunity where we're sitting. You know, we talk a lot about AI. I mean, you know, when ChatGPT starts getting exciting and everyone's talking about it, and, you know, you wanna have- you wanna have prompts to enable, you know, instead of using Beast Mode or using SQL, you can do it in ChatGPT. That's cool. It's really interesting, it's exciting, and we're definitely excited about that. But the fact that you can take any BI, any AI model that's out there, and you can automate the whole process inside Domo, you can apply any particular model that's sitting out there in Hugging Face, and you wanna get a bunch of data that you have in your business, and you wanna apply those models to that data set, how do you do that? Well, we happen to have the first mile done, and then we can allow you to do the second, you know, to take that model and apply that AI power to your business right now, and then we have the last mile. You wanna go get the benefit out of that and distribute that out to people in your organization. You wanna have that continue to automatically work inside your organization with updated data as it comes through. We're one of the few places you can do that, so we're really excited about that as well. Okay, last one. I'm sorry to go so long. So what steps do you think you guys can take to help build back shareholder value, you know, until we get through this tough macro and until we get through this consumption shift? Yeah, I mean, I think, the consumption shift is not. There's nothing negative about that in our business. So I don't think that's, you know, any—in fact, that's just positive. It's positive as we go through it, it's positive every step of the way. We don't have to wait for the benefit. We're getting the benefit, you know, each every time we incrementally improve that, we're getting a benefit. And I think, you know, the other thing that's really important in this kind of an environment is that you make sure that you're not burning cash, you make sure that you're- Yeah -have positive operating margin. You know, I think we're being really judicious about that. We have a lot of levers that we could still pull, that we don't need to pull yet, and hopefully, we don't have to. I think just, you know, continue to hang around the hoop, keep the capacity there, and keep building great products, and we feel really good about our prospects on that front. Okay, thank you. Yeah, you bet. Thanks, Pat, for your time. Your next question comes from the line of Sanjit Singh with Morgan Stanley. Your line is open. Yeah, thanks for taking the questions. Going back to the topic of consumption, I was wondering with, you know, the 10% of the base that has moved on to consumption, is there any sort of accounting, rev rec, headwind that's associated with? So if you're bringing a customer on via subscription versus consumption, is there any sort of rev rec differences that we should be aware of that could also be ahead of the revenue? I know you said deal sizes are bigger with consumption, so it doesn't sound like on a TCV basis, that there isn't any impact there. But just wanted to, you know, gut check if there was any headwinds as customers come on board via consumption versus subscription. Yeah, yeah. Thanks for that question, and it's an important observation. So the way that we have structured our contracts, and then the way that we have structured our consumption model, that still allows us to have ratable revenue recognition. So, you know, providing the same level of predictability that we've got today. We've spent a lot of time working together with our outside accountants to make sure that our contracts are structured in a way that will allow us to retain that. And so we don't really see anything on the near term or even medium-term horizon that would cause that to change. You know, unless the rev rec rules change somehow, but we're pretty comfortable with the way we've structured it and the resulting ratable recognition. Great. Josh, I've covered a couple of companies who have gone through a transition to consumption. You know, some of the things that have come up in the past is around the customer incentive to move to consumption. I get the idea that you know there's no shelfware, and things like that. But when you talk about deal sizes being larger via you know in consumption versus subscription, like, what's sort of in it for the customer? Because in a sense, they're still outlay more dollars up front, and I get the removal of the seat-based you know friction. But, like, what's in it for the customer to make that initial conversion, particularly the existing customer base, from subscription to consumption? Yeah, it's a great question. I think the first thing is, again, there's lots of projects internally that they're like, "Oh, we can apply this to all these different projects. We don't have to worry about the incremental cost of having to go back and get more seats." And then the other big piece is they get access to the whole platform. So there's lots of pieces of our platform that we charge incrementally for. And on consumption, we charge incrementally, but we charge it as you use it. So for instance, you know, our data science functionality is used four times more frequently by our consumption customers than it is by our seat-based customers. Because it's an incremental expense that you have to go through a budgeting process, you have to call us. And now on consumption, you just click on it and start using it, and if you like it, you keep using it. And they like it, and they keep using it, and they're using it at 4x the rate. And that's great because it drives consumption for us. So I think having access to the full, you know, to all the benefits that we offer, to being able to have apps and building apps for all the different projects that you have internally, just it increases their commitment to us because they see the future that they can build with us. Understood. I really appreciate the thought. Thank you. Yeah, thank you. Your next question comes from the line of Eric Martinuzzi with Lake Street Capital. Your line is open. Yeah, I was curious on the billings reset for the year. I was just looking at the midpoint of your prior outlook on billings at $344 million, and then comparing that to the new midpoint at roughly $318 million. So about an 8% lower number, and I wanted to try and size that up between new logo and renewal. Did we get more pessimistic on new logo, or is it the same level of, you know, conservatism that we had 90 days ago, and it's really more about the renewals? Yeah, it, I mean, there's definitely an impact to both of those. I would probably, at this point, you know, on a waiting perspective, it might wait a little bit more towards the renewals, for the second half of the year. Okay. Then you talked about ramped capacity historically, that, and it sounds like you're pretty happy with the progress, but what metrics can you give us as far as maybe a percentage of the total sales force that's ramped versus 90 days ago, versus a year ago? Because it was a year ago that it first came to light that we were having issues with the ramped capacity. Yeah, so if we go back and look a year ago, you know, when we lost essentially, in a relatively short period of time, about 30% of the overall capacity, and that was kind of ramped and unramped. But, you know, you figure that that walked out the door over a short period of time, so we had to rebuild the headcount and then get them ramped. We're to a point now where we're, I would say, relatively highly ramped. We're continuing to ramp some of those folks through the rest of the Q3 and a little bit into the Q4. But we feel pretty comfortable with where we're at in terms of the overall headcount. We have the capacity to hit the numbers that, you know, that are out there. It's just that we've seen, again, the productivity levels have not been what they have historically. And so that's been, that's where the challenge is. But in terms of the headcount and the ramped capacity, we feel pretty good about where we're at from that standpoint. Got it. Thank you. This concludes our Q&A session and today's conference call. Thank you for attending. You may now disconnect.

Speaker 5: Good afternoon. My name is Emma, and I will be your conference operator today. At this time, I would like to welcome everyone to the Domo Second Quarter Fiscal Year 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. Peter Lowry, Domo Vice President of Investor Relations, you may begin your conference. Good afternoon. good afternoon My name is Emma, and I will be your conference operator today. my name is emma and i will be your conference operator today At this time, I would like to welcome everyone to the Domo Second Quarter Fiscal Year 2024 earnings call. at this time i would like to welcome everyone to the domo second quarter fiscal year 2024 earnings call All lines have been placed on mute to prevent any background noise. all lines have been placed on mute to prevent any background noise After the speaker's remarks, there will be a question and answer session. after the speaker's remarks there will be a question and answer session If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. if you would like to ask a question during this time simply press star followed by the number one on your telephone keypad If you would like to withdraw your question, again, press the star one. if you would like to withdraw your question again press the star one Thank you. thank you Peter Lowry, Domo Vice President of Investor Relations, you may begin your conference. peter lowry domo vice president of investor relations you may begin your conference

Speaker 7: Good afternoon, and welcome. On the call today, we have Josh James, our founder and CEO, and David Jolley, our Chief Financial Officer. I'll lead off with our safe harbor statement and then on to the call. Our press release was issued after the market closed and is posted on the investor relations section of our website, where this call is also being webcast. Statements made on this call include forward-looking statements related to our business under federal securities laws. These statements are subject to a variety of risks, uncertainties, and assumptions. These include, but are not limited to, statements about future and prospects, our financial projections and cash position, statements regarding the potential of our consumption-based pricing, statements about our sales team and technology, our expectations for new business opportunities, transactions, and initiatives. Good afternoon, and welcome. good afternoon and welcome On the call today, we have Josh James, our founder and CEO, and David Jolley, our Chief Financial Officer. on the call today we have josh james our founder and ceo and david jolley our chief financial officer I'll lead off with our safe harbor statement and then on to the call. i'll lead off with our safe harbor statement and then on to the call Our press release was issued after the market closed and is posted on the investor relations section of our website, where this call is also being webcast. our press release was issued after the market closed and is posted on the investor relations section of our website where this call is also being webcast Statements made on this call include forward-looking statements related to our business under federal securities laws. statements made on this call include forward-looking statements related to our business under federal securities laws These statements are subject to a variety of risks, uncertainties, and assumptions. these statements are subject to a variety of risks uncertainties and assumptions These include, but are not limited to, statements about future and prospects, our financial projections and cash position, statements regarding the potential of our consumption-based pricing, statements about our sales team and technology, our expectations for new business opportunities, transactions, and initiatives. these include but are not limited to statements about future and prospects our financial projections and cash position statements regarding the potential of our consumption-based pricing statements about our sales team and technology our expectations for new business opportunities transactions and initiatives Statements regarding our channel of communication and upcoming events, statements regarding the potential of artificial intelligence and its impact on our business, and statements regarding the impact of macroeconomic and other conditions on our business. For a discussion of these risks and uncertainties, please refer to documents we file with the SEC. In particular, today's press release, our most recently filed annual report on Form 10-K, and our most recently filed quarterly report on Form 10-Q. These documents contain and identify important risk factors and other information that may cause our actual results to differ materially from those contained in our forward-looking statements. In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of Domo's performance. Other than revenue, unless otherwise stated, we will be discussing results of operations on a non-GAAP basis. Statements regarding our channel of communication and upcoming events, statements regarding the potential of artificial intelligence and its impact on our business, and statements regarding the impact of macroeconomic and other conditions on our business. statements regarding our channel of communication and upcoming events statements regarding the potential of artificial intelligence and its impact on our business and statements regarding the impact of macroeconomic and other conditions on our business For a discussion of these risks and uncertainties, please refer to documents we file with the SEC. for a discussion of these risks and uncertainties please refer to documents we file with the sec In particular, today's press release, our most recently filed annual report on Form 10-K, and our most recently filed quarterly report on Form 10-Q. in particular today's press release our most recently filed annual report on form 10-k and our most recently filed quarterly report on form 10-q These documents contain and identify important risk factors and other information that may cause our actual results to differ materially from those contained in our forward-looking statements. these documents contain and identify important risk factors and other information that may cause our actual results to differ materially from those contained in our forward-looking statements In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of Domo's performance. in addition during today's call we will discuss non-gaap financial measures which we believe are useful as supplemental measures of domo's performance Other than revenue, unless otherwise stated, we will be discussing results of operations on a non-GAAP basis. other than revenue unless otherwise stated we will be discussing results of operations on a non-gaap basis These non-GAAP measures should be considered in addition to, and not as a substitute for or an isolation from, our GAAP results. Please refer to the tables in our earnings press release for a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP measure, which we have posted to the investor relations section of our website at investors.domo.com. With that, I'll turn it over to Josh. Josh? These non-GAAP measures should be considered in addition to, and not as a substitute for or an isolation from, our GAAP results. these non-gaap measures should be considered in addition to and not as a substitute for or an isolation from our gaap results Please refer to the tables in our earnings press release for a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP measure, which we have posted to the investor relations section of our website at investors.domo.com. please refer to the tables in our earnings press release for a reconciliation of our non-gaap financial measures to the most directly comparable gaap measure which we have posted to the investor relations section of our website at investors.domo.com With that, I'll turn it over to Josh. with that i'll turn it over to josh Josh? josh

Speaker 4: Thank you, Pete, and thank you everyone for joining the call today. In Q2, even in a tough macroeconomic environment, our year-over-year total revenue growth was still at 5%. Our subscription revenue growth was 6%, and billings declined 2%. Our results for Q2 were in line or better than our guidance, and I'm pleased with the progress we've made in the past few quarters, particularly with our consumption-based pricing, our AI strategy offerings and roadmap, and our sales force retention. That being said, I expect our return to growth may take longer than we would all have hoped for due to some macro headwinds that seem to be affecting most companies we're familiar with. Let me give you an update on some of the progress we've made and what gives me confidence in our longer-term growth prospects. Thank you, Pete, and thank you everyone for joining the call today. thank you pete and thank you everyone for joining the call today In Q2, even in a tough macroeconomic environment, our year-over-year total revenue growth was still at 5%. in q2 even in a tough macroeconomic environment our year-over-year total revenue growth was still at 5% Our subscription revenue growth was 6%, and billings declined 2%. our subscription revenue growth was 6% and billings declined 2% Our results for Q2 were in line or better than our guidance, and I'm pleased with the progress we've made in the past few quarters, particularly with our consumption-based pricing, our AI strategy offerings and roadmap, and our sales force retention. our results for q2 were in line or better than our guidance and i'm pleased with the progress we've made in the past few quarters particularly with our consumption-based pricing our ai strategy offerings and roadmap and our sales force retention That being said, I expect our return to growth may take longer than we would all have hoped for due to some macro headwinds that seem to be affecting most companies we're familiar with. that being said i expect our return to growth may take longer than we would all have hoped for due to some macro headwinds that seem to be affecting most companies we're familiar with Let me give you an update on some of the progress we've made and what gives me confidence in our longer-term growth prospects. let me give you an update on some of the progress we've made and what gives me confidence in our longer-term growth prospects First, I'm confident we have the people and technology to get back to the growth we've experienced in the past, and to do so responsibly by managing our costs. I continue to spend my time on the road with our current and our prospective customers, and the conversations I'm having in the market reinforced by optimism. We hear time and time again that Domo can solve complex data problems that our competitors simply can't, and we do it in record time. Many of these promising interactions are happening through our Customer Connections Tour, where we've gained some candid insight into why organizations choose Domo over leading competition. One customer from a large publicly traded advertising group expressed that Domo offers superior speed and computing power, and significantly reduces the effort to create reports, freeing their data specialists to focus on higher value business deliverables. First, I'm confident we have the people and technology to get back to the growth we've experienced in the past, and to do so responsibly by managing our costs. first i'm confident we have the people and technology to get back to the growth we've experienced in the past and to do so responsibly by managing our costs I continue to spend my time on the road with our current and our prospective customers, and the conversations I'm having in the market reinforced by optimism. i continue to spend my time on the road with our current and our prospective customers and the conversations i'm having in the market reinforced by optimism We hear time and time again that Domo can solve complex data problems that our competitors simply can't, and we do it in record time. we hear time and time again that domo can solve complex data problems that our competitors simply can't and we do it in record time Many of these promising interactions are happening through our Customer Connections Tour , where we've gained some candid insight into why organizations choose Domo over leading competition. many of these promising interactions are happening through our customer connections tour where we've gained some candid insight into why organizations choose domo over leading competition One customer from a large publicly traded advertising group expressed that Domo offers superior speed and computing power, and significantly reduces the effort to create reports, freeing their data specialists to focus on higher value business deliverables. one customer from a large publicly traded advertising group expressed that domo offers superior speed and computing power and significantly reduces the effort to create reports freeing their data specialists to focus on higher value business deliverables I believe there is potential for conversations like this to translate into significant transactions for Domo in the near to midterm that could drive upside to our guidance. Second, I believe our increased focus on consumption-based pricing can be a growth driver and create stronger relationships with our customers as we remove the limitation on number of seats in an account by granting access to all employees of a customer and only charging for data usage, similar to Snowflake, AWS, and others. Because we can charge for usage while offering seat licenses and visualization for free, consumption pricing solves many of our historic barriers to adoption and more directly aligns our pricing to the value realized by our, by our customers. Thanks to this, consumption pricing is opening more doors for upsell opportunities. I believe there is potential for conversations like this to translate into significant transactions for Domo in the near to midterm that could drive upside to our guidance. i believe there is potential for conversations like this to translate into significant transactions for domo in the near to midterm that could drive upside to our guidance Second, I believe our increased focus on consumption-based pricing can be a growth driver and create stronger relationships with our customers as we remove the limitation on number of seats in an account by granting access to all employees of a customer and only charging for data usage, similar to Snowflake, AWS, and others. second i believe our increased focus on consumption-based pricing can be a growth driver and create stronger relationships with our customers as we remove the limitation on number of seats in an account by granting access to all employees of a customer and only charging for data usage similar to snowflake aws and others Because we can charge for usage while offering seat licenses and visualization for free, consumption pricing solves many of our historic barriers to adoption and more directly aligns our pricing to the value realized by our, by our customers. because we can charge for usage while offering seat licenses and visualization for free consumption pricing solves many of our historic barriers to adoption and more directly aligns our pricing to the value realized by our by our customers Thanks to this, consumption pricing is opening more doors for upsell opportunities. thanks to this consumption pricing is opening more doors for upsell opportunities One of the very encouraging trends we see with our consumption customers is an increase across key metrics, including data flows and connector runs, which represent a significant source of potential growth. Over the past year, we have seen almost a 30% increase in contract size for new logos going on consumption-based pricing, compared to new logo customers going on seat-based pricing. Also, for customers renewing who have converted to consumption pricing from seat-based pricing, we are seeing almost a 60% increase in the number of user accounts created, and somewhat surprisingly, a higher login rate of the total users on the consumption model versus the seat-based pricing model. We're also seeing momentum in increasing the percentage of new logo customers who choose consumption pricing. 50% of our new logos in Q2 were priced on a consumption basis. One of the very encouraging trends we see with our consumption customers is an increase across key metrics, including data flows and connector runs, which represent a significant source of potential growth. one of the very encouraging trends we see with our consumption customers is an increase across key metrics including data flows and connector runs which represent a significant source of potential growth Over the past year, we have seen almost a 30% increase in contract size for new logos going on consumption-based pricing, compared to new logo customers going on seat-based pricing. over the past year we have seen almost a 30% increase in contract size for new logos going on consumption-based pricing compared to new logo customers going on seat-based pricing Also, for customers renewing who have converted to consumption pricing from seat-based pricing, we are seeing almost a 60% increase in the number of user accounts created, and somewhat surprisingly, a higher login rate of the total users on the consumption model versus the seat-based pricing model. also for customers renewing who have converted to consumption pricing from seat-based pricing we are seeing almost a 60% increase in the number of user accounts created and somewhat surprisingly a higher login rate of the total users on the consumption model versus the seat-based pricing model We're also seeing momentum in increasing the percentage of new logo customers who choose consumption pricing. 50% of our new logos in Q2 were priced on a consumption basis. we're also seeing momentum in increasing the percentage of new logo customers who choose consumption pricing 50% of our new logos in q2 were priced on a consumption basis That's up from about 30% of our logos, of our new logos in Q1, and we are targeting 75% this quarter in Q3 and even higher in Q4, setting us up well to have a substantial impact on the way we go to market and even convert renewing customers to the consumption model aggressively next year. We have over 250 customers on our consumption pricing model as of July 31, which represents over 10% of our customer base and over 13% of our ARR. Another benefit to Domo is that our consumption pricing contracts are structured as subscription contracts. This means the revenue is recognized ratably, mitigating some of the lack of predictability associated with pure consumption-based models. Beyond these direct benefits for Domo and our customers, our consumption pricing is also expected to improve our competitive positioning. That's up from about 30% of our logos, of our new logos in Q1, and we are targeting 75% this quarter in Q3 and even higher in Q4, setting us up well to have a substantial impact on the way we go to market and even convert renewing customers to the consumption model aggressively next year. that's up from about 30% of our logos of our new logos in q1 and we are targeting 75% this quarter in q3 and even higher in q4 setting us up well to have a substantial impact on the way we go to market and even convert renewing customers to the consumption model aggressively next year We have over 250 customers on our consumption pricing model as of July 31, which represents over 10% of our customer base and over 13% of our ARR. we have over 250 customers on our consumption pricing model as of july 31 which represents over 10% of our customer base and over 13% of our arr Another benefit to Domo is that our consumption pricing contracts are structured as subscription contracts. another benefit to domo is that our consumption pricing contracts are structured as subscription contracts This means the revenue is recognized ratably, mitigating some of the lack of predictability associated with pure consumption-based models. this means the revenue is recognized ratably mitigating some of the lack of predictability associated with pure consumption-based models Beyond these direct benefits for Domo and our customers, our consumption pricing is also expected to improve our competitive positioning. beyond these direct benefits for domo and our customers our consumption pricing is also expected to improve our competitive positioning Some customers see our competitors' visualization offerings as essentially free because their visualization tool is included as part of an enterprise license agreement. We think including visualization with the free seats under our consumption model is a compelling selling point for enterprise and corporate customers and prospects, and positions us better against some of our competitors. Another positive in the quarter was that we once again had much lower than forecasted attrition in the sales force. Year to date, we have stemmed the sales force attrition we saw last year when 30% of the sales team churned. Next, I continue to be excited about the potential for AI to be a growth driver for Domo. Some customers see our competitors' visualization offerings as essentially free because their visualization tool is included as part of an enterprise license agreement. some customers see our competitors' visualization offerings as essentially free because their visualization tool is included as part of an enterprise license agreement We think including visualization with the free seats under our consumption model is a compelling selling point for enterprise and corporate customers and prospects, and positions us better against some of our competitors. we think including visualization with the free seats under our consumption model is a compelling selling point for enterprise and corporate customers and prospects and positions us better against some of our competitors Another positive in the quarter was that we once again had much lower than forecasted attrition in the sales force. another positive in the quarter was that we once again had much lower than forecasted attrition in the sales force Year to date, we have stemmed the sales force attrition we saw last year when 30% of the sales team churned. year to date we have stemmed the sales force attrition we saw last year when 30% of the sales team churned Next, I continue to be excited about the potential for AI to be a growth driver for Domo. next i continue to be excited about the potential for ai to be a growth driver for domo I believe we are strongly positioned to be a leader in delivering AI-powered data experiences, in governing those data experiences, and in enabling businesses to achieve the data readiness required to capitalize on the broader possibilities of AI. Domo gives you the ability to apply the power of AI to your business now. For capacity planning, if a company needs to know the number, and type, and timing of employees they need to hire to achieve a business goal, they can do that right now. If a company wants to run simulations to dynamically price and bundle their offerings, they can apply AI to that problem in Domo now. If a lender wants to perform a risk assessment model on patterns of behavior and other factors, they can use AI to apply that to the data they have in Domo right now. I believe we are strongly positioned to be a leader in delivering AI-powered data experiences, in governing those data experiences, and in enabling businesses to achieve the data readiness required to capitalize on the broader possibilities of AI. i believe we are strongly positioned to be a leader in delivering ai-powered data experiences in governing those data experiences and in enabling businesses to achieve the data readiness required to capitalize on the broader possibilities of ai Domo gives you the ability to apply the power of AI to your business now. domo gives you the ability to apply the power of ai to your business now For capacity planning, if a company needs to know the number, and type, and timing of employees they need to hire to achieve a business goal, they can do that right now. for capacity planning if a company needs to know the number and type and timing of employees they need to hire to achieve a business goal they can do that right now If a company wants to run simulations to dynamically price and bundle their offerings, they can apply AI to that problem in Domo now. if a company wants to run simulations to dynamically price and bundle their offerings they can apply ai to that problem in domo now If a lender wants to perform a risk assessment model on patterns of behavior and other factors, they can use AI to apply that to the data they have in Domo right now. if a lender wants to perform a risk assessment model on patterns of behavior and other factors they can use ai to apply that to the data they have in domo right now This month, we announced progress, showcasing our commitment to this ongoing ambition, including mobilizing the full force of Domo's AI technology, expertise, and vision as Domo.AI. Data and technology are important foundations, but real transformation comes from making them useful and reliable in the hands of many. Domo.AI is championing a future where AI-powered data experiences truly transform business by amplifying a very powerful asset, human curiosity. The hurdle I think many businesses will need to overcome is building the safety and efficiency required to effectively democratize AI. That's why Domo's approach goes beyond wiring OpenAI to the end-user experience. It's about embedding AI responsibly into the very fabric of the entire business. Let me tell you about some of the ways we're making this possible through Domo.AI. This month, we announced progress, showcasing our commitment to this ongoing ambition, including mobilizing the full force of Domo's AI technology, expertise, and vision as Domo.AI. this month we announced progress showcasing our commitment to this ongoing ambition including mobilizing the full force of domo's ai technology expertise and vision as domo.ai Data and technology are important foundations, but real transformation comes from making them useful and reliable in the hands of many. data and technology are important foundations but real transformation comes from making them useful and reliable in the hands of many Domo.AI is championing a future where AI-powered data experiences truly transform business by amplifying a very powerful asset, human curiosity. domo.ai is championing a future where ai-powered data experiences truly transform business by amplifying a very powerful asset human curiosity The hurdle I think many businesses will need to overcome is building the safety and efficiency required to effectively democratize AI. the hurdle i think many businesses will need to overcome is building the safety and efficiency required to effectively democratize ai That's why Domo's approach goes beyond wiring Open AI to the end-user experience. that's why domo's approach goes beyond wiring open ai to the end-user experience It's about embedding AI responsibly into the very fabric of the entire business. it's about embedding ai responsibly into the very fabric of the entire business Let me tell you about some of the ways we're making this possible through Domo.AI. let me tell you about some of the ways we're making this possible through domo.ai Our suite of AI tools empowers users with chat style data exploration and provides flexible model creation, efficient model management, seamless deployment, and superior governance and security. Domo's AI service layer lets businesses capitalize on the power of AI without getting bogged down by its complexities. Users can easily manage, deploy, and optimize any AI model they choose right in our data experience platform to support real-world use cases that matter to everyone. AI is now easily accessible in Domo Bricks, Domo's App Dev framework, and in workflows. Even low-code tools, such as Magic ETL, are designed to tap into AI model management, making the power of AI accessible even to those without technical expertise. All of this and more is featured in our newly launched Domo.AI website, where we'll continue to share our progress in creating a new future for data and AI. Our suite of AI tools empowers users with chat style data exploration and provides flexible model creation, efficient model management, seamless deployment, and superior governance and security. our suite of ai tools empowers users with chat style data exploration and provides flexible model creation efficient model management seamless deployment and superior governance and security Domo's AI service layer lets businesses capitalize on the power of AI without getting bogged down by its complexities. domo's ai service layer lets businesses capitalize on the power of ai without getting bogged down by its complexities Users can easily manage, deploy, and optimize any AI model they choose right in our data experience platform to support real-world use cases that matter to everyone. users can easily manage deploy and optimize any ai model they choose right in our data experience platform to support real-world use cases that matter to everyone AI is now easily accessible in Domo Bricks, Domo's App Dev framework, and in workflows. ai is now easily accessible in domo bricks domo's app dev framework and in workflows Even low-code tools, such as Magic ETL, are designed to tap into AI model management, making the power of AI accessible even to those without technical expertise. even low-code tools such as magic etl are designed to tap into ai model management making the power of ai accessible even to those without technical expertise All of this and more is featured in our newly launched Domo.AI website, where we'll continue to share our progress in creating a new future for data and AI. all of this and more is featured in our newly launched domo.ai website where we'll continue to share our progress in creating a new future for data and ai We're also excited to be hosting our first-ever innovation summit focused on AI this month, a free online event that will highlight just how Domo.AI solutions are already helping businesses overcome real-world challenges to accelerate innovation and growth. AI is only as powerful as the data connected to it. We have a well-connected end-to-end data stack, opening up many possibilities for Domo to reimagine what data can do for business. I encourage all of our investors to follow Domo's AI journey, starting with visiting the website and attending our Virtual Innovation Summit on August 29th in North America and EMEA, and August 31st in Asia Pacific, where almost 3,000 people have already registered. While we're optimistic about these significant long-term growth drivers, the IT spending environment remains challenging. Enterprises are carefully scrutinizing vendors, and many are consolidating their spend among fewer vendors. We're also excited to be hosting our first-ever innovation summit focused on AI this month, a free online event that will highlight just how Domo.AI solutions are already helping businesses overcome real-world challenges to accelerate innovation and growth. we're also excited to be hosting our first-ever innovation summit focused on ai this month a free online event that will highlight just how domo.ai solutions are already helping businesses overcome real-world challenges to accelerate innovation and growth AI is only as powerful as the data connected to it. ai is only as powerful as the data connected to it We have a well-connected end-to-end data stack, opening up many possibilities for Domo to reimagine what data can do for business. we have a well-connected end-to-end data stack opening up many possibilities for domo to reimagine what data can do for business I encourage all of our investors to follow Domo's AI journey, starting with visiting the website and attending our Virtual Innovation Summit on August 29th in North America and EMEA, and August 31st in Asia Pacific, where almost 3,000 people have already registered. i encourage all of our investors to follow domo's ai journey starting with visiting the website and attending our virtual innovation summit on august 29th in north america and emea and august 31st in asia pacific where almost 3,000 people have already registered While we're optimistic about these significant long-term growth drivers, the IT spending environment remains challenging. while we're optimistic about these significant long-term growth drivers the it spending environment remains challenging Enterprises are carefully scrutinizing vendors, and many are consolidating their spend among fewer vendors. enterprises are carefully scrutinizing vendors and many are consolidating their spend among fewer vendors We're seeing sales cycles elongate, and even satisfied customers are being asked by their IT and finance departments to evaluate their spend upon renewal. David will go into more detail, but we're also evaluating our renewals on a granular basis, and while each one is unique, we do see some risk to some of the larger renewals, which we have incorporated into our guidance for the second half of the year. We would not expect to see some of these discussions in a more normal spending environment or in an environment where these customers were already in a consumption model. And then on the new business front, as an indication that this is purely macro-driven, we saw conversion rates fall across each stage of the funnel, which is further evidence of the challenging IT spend environment that we're facing. We're seeing sales cycles elongate, and even satisfied customers are being asked by their IT and finance departments to evaluate their spend upon renewal. we're seeing sales cycles elongate and even satisfied customers are being asked by their it and finance departments to evaluate their spend upon renewal David will go into more detail, but we're also evaluating our renewals on a granular basis, and while each one is unique, we do see some risk to some of the larger renewals, which we have incorporated into our guidance for the second half of the year. david will go into more detail but we're also evaluating our renewals on a granular basis and while each one is unique we do see some risk to some of the larger renewals which we have incorporated into our guidance for the second half of the year We would not expect to see some of these discussions in a more normal spending environment or in an environment where these customers were already in a consumption model. we would not expect to see some of these discussions in a more normal spending environment or in an environment where these customers were already in a consumption model And then on the new business front, as an indication that this is purely macro-driven, we saw conversion rates fall across each stage of the funnel, which is further evidence of the challenging IT spend environment that we're facing. and then on the new business front as an indication that this is purely macro-driven we saw conversion rates fall across each stage of the funnel which is further evidence of the challenging it spend environment that we're facing However, we continue to find opportunities to deliver significant value to our customers, and we do have several notable wins to share from the quarter. We closed a very significant upsell with a Fortune 500 US financial institution to provide a custom app for wealth management operations, powered by our data platform. Domo stood out for automating previously manual, time-consuming workflows and offering custom smart content that is specific to each employee across thousands of employees. Ultimately, the customer chose Domo because our platform provided a complete, elegant solution to a business challenge at scale. Another example, we work with a nonprofit subsidiary of a high-profile private university, and we drove a significant upsell to support their digital corporate learning solutions. This customer rolled out the entire Domo Data Experience platform to 600 new users after successfully improving learning experiences, thanks to real-time insights into course interactions. However, we continue to find opportunities to deliver significant value to our customers, and we do have several notable wins to share from the quarter. however we continue to find opportunities to deliver significant value to our customers and we do have several notable wins to share from the quarter We closed a very significant upsell with a Fortune 500 US financial institution to provide a custom app for wealth management operations, powered by our data platform. we closed a very significant upsell with a fortune 500 us financial institution to provide a custom app for wealth management operations powered by our data platform Domo stood out for automating previously manual, time-consuming workflows and offering custom smart content that is specific to each employee across thousands of employees. domo stood out for automating previously manual time-consuming workflows and offering custom smart content that is specific to each employee across thousands of employees Ultimately, the customer chose Domo because our platform provided a complete, elegant solution to a business challenge at scale. ultimately the customer chose domo because our platform provided a complete elegant solution to a business challenge at scale Another example, we work with a nonprofit subsidiary of a high-profile private university, and we drove a significant upsell to support their digital corporate learning solutions. another example we work with a nonprofit subsidiary of a high-profile private university and we drove a significant upsell to support their digital corporate learning solutions This customer rolled out the entire Domo Data Experience platform to 600 new users after successfully improving learning experiences, thanks to real-time insights into course interactions. this customer rolled out the entire domo data experience platform to 600 new users after successfully improving learning experiences thanks to real-time insights into course interactions This win is a strong endorsement of our impact and a great example of how our consumption-based pricing model is opening doors to grow existing business. We also won a significant new logo with a global healthcare leader that chose Domo to provide a unified view of their marketing performance. We are in this business after a successful proof of concept trial to improve marketing performance across multiple brands and countries. In addition to the fantastic customer wins, we also continue to create movement within our industry. This quarter, Domo was ranked the number one self-service business intelligence vendor by Dresner Advisory Services. Domo was also recognized as an overall leader in Dresner's 2023 Wisdom of Crowds study, which included our perfect recommendation score for the seventh consecutive year. This win is a strong endorsement of our impact and a great example of how our consumption-based pricing model is opening doors to grow existing business. this win is a strong endorsement of our impact and a great example of how our consumption-based pricing model is opening doors to grow existing business We also won a significant new logo with a global healthcare leader that chose Domo to provide a unified view of their marketing performance. we also won a significant new logo with a global healthcare leader that chose domo to provide a unified view of their marketing performance We are in this business after a successful proof of concept trial to improve marketing performance across multiple brands and countries. we are in this business after a successful proof of concept trial to improve marketing performance across multiple brands and countries In addition to the fantastic customer wins, we also continue to create movement within our industry. in addition to the fantastic customer wins we also continue to create movement within our industry This quarter, Domo was ranked the number one self-service business intelligence vendor by Dresner Advisory Services. this quarter domo was ranked the number one self-service business intelligence vendor by dresner advisory services Domo was also recognized as an overall leader in Dresner's 2023 Wisdom of Crowds study, which included our perfect recommendation score for the seventh consecutive year. domo was also recognized as an overall leader in dresner's 2023 wisdom of crowds study which included our perfect recommendation score for the seventh consecutive year Among our best-in-class categories were integrations with third-party technologies, our ease of installation, and our ease of administration, all of which showcase our readiness to help businesses seize the imminent opportunities for data. In addition to this outstanding recognition, Domo was also included on two Constellation ShortLists, which are published to help organizations search for technologies to meet their digital transformation goals. Domo's placement on two shortlists, the list for multi-cloud analytics and BI platforms, and the list for embedded analytics, is a strong endorsement for our reputation of driving customer success. I'm also proud to share that Domo was once again named to the Parity.org list of Best Companies for Women to Advance. This marks our fourth consecutive year of being recognized for our commitment to support women through career advancing opportunities. Among our best-in-class categories were integrations with third-party technologies, our ease of installation, and our ease of administration, all of which showcase our readiness to help businesses seize the imminent opportunities for data. among our best-in-class categories were integrations with third-party technologies our ease of installation and our ease of administration all of which showcase our readiness to help businesses seize the imminent opportunities for data In addition to this outstanding recognition, Domo was also included on two Constellation ShortLists , which are published to help organizations search for technologies to meet their digital transformation goals. in addition to this outstanding recognition domo was also included on two constellation shortlists which are published to help organizations search for technologies to meet their digital transformation goals Domo's placement on two shortlists, the list for multi-cloud analytics and BI platforms, and the list for embedded analytics, is a strong endorsement for our reputation of driving customer success. domo's placement on two shortlists the list for multi-cloud analytics and bi platforms and the list for embedded analytics is a strong endorsement for our reputation of driving customer success I'm also proud to share that Domo was once again named to the Parity.org list of Best Companies for Women to Advance. i'm also proud to share that domo was once again named to the parity.org list of best companies for women to advance This marks our fourth consecutive year of being recognized for our commitment to support women through career advancing opportunities. this marks our fourth consecutive year of being recognized for our commitment to support women through career advancing opportunities We believe that diversity makes organizations stronger and view our continued progress in this commitment as a factor in Domo's future success. In closing, while there are certainly some near-term challenges driven by the macro and current IT spending environment, I'm as confident as ever in our team, our technology, and our long-term growth opportunity. With that, I'll turn it over to David. We believe that diversity makes organizations stronger and view our continued progress in this commitment as a factor in Domo's future success. we believe that diversity makes organizations stronger and view our continued progress in this commitment as a factor in domo's future success In closing, while there are certainly some near-term challenges driven by the macro and current IT spending environment, I'm as confident as ever in our team, our technology, and our long-term growth opportunity. in closing while there are certainly some near-term challenges driven by the macro and current it spending environment i'm as confident as ever in our team our technology and our long-term growth opportunity With that, I'll turn it over to David. with that i'll turn it over to david

Speaker 1: Thanks, Josh. In Q2, we posted 6% subscription revenue growth and 5% total revenue growth. We exceeded the billings guidance we provided at the beginning of the quarter and delivered Q2 billings of $70.6 million, a year-over-year decrease of 2%. In reviewing the metrics that will impact the remainder of the year, current RPO was $232.1 million, an increase of 3% year-over-year, and our total RPO grew 2% to $357.6 million as of July 31st, 2023. Our ARR grew in line with subscription revenue growth. An area where we saw continued success was multi-year contracts. On a dollar-weighted measure, we now have 67% of our customers under multi-year contracts at the end of Q2, up from 64% a year ago. Thanks, Josh. thanks josh In Q2, we posted 6% subscription revenue growth and 5% total revenue growth. in q2 we posted 6% subscription revenue growth and 5% total revenue growth We exceeded the billings guidance we provided at the beginning of the quarter and delivered Q2 billings of $70.6 million, a year-over-year decrease of 2%. we exceeded the billings guidance we provided at the beginning of the quarter and delivered q2 billings of $70.6 million a year-over-year decrease of 2% In reviewing the metrics that will impact the remainder of the year, current RPO was $232.1 million, an increase of 3% year-over-year, and our total RPO grew 2% to $357.6 million as of July 31st, 2023. in reviewing the metrics that will impact the remainder of the year current rpo was $232.1 million an increase of 3% year-over-year and our total rpo grew 2% to $357.6 million as of july 31st 2023 Our ARR grew in line with subscription revenue growth. our arr grew in line with subscription revenue growth An area where we saw continued success was multi-year contracts. an area where we saw continued success was multi-year contracts On a dollar-weighted measure, we now have 67% of our customers under multi-year contracts at the end of Q2, up from 64% a year ago. on a dollar-weighted measure we now have 67% of our customers under multi-year contracts at the end of q2 up from 64% a year ago Our gross retention improved from Q1 and was just under 90%, while our net retention was just below 100%, down from Q1. Our net retention was driven by a challenging upsell environment, which I'll talk about in a moment. Q2 total revenue was $79.7 million, a year-over-year increase of 5%. Subscription revenue represented 89% of total revenue and grew 6% year-over-year. International revenue in the quarter represented 21% of total revenue, down slightly from Q2 of last year. Our subscription gross margin was 84.9%, down 0.4 percentage points from Q2 of last year, and down 1.1 percentage points from Q1, primarily due to our move from a fully depreciated data center. We would expect to remain in this range in the near term. Our gross retention improved from Q1 and was just under 90%, while our net retention was just below 100%, down from Q1. our gross retention improved from q1 and was just under 90% while our net retention was just below 100% down from q1 Our net retention was driven by a challenging upsell environment, which I'll talk about in a moment. our net retention was driven by a challenging upsell environment which i'll talk about in a moment Q2 total revenue was $79.7 million, a year-over-year increase of 5%. q2 total revenue was $79.7 million a year-over-year increase of 5% Subscription revenue represented 89% of total revenue and grew 6% year-over-year. subscription revenue represented 89% of total revenue and grew 6% year-over-year International revenue in the quarter represented 21% of total revenue, down slightly from Q2 of last year. international revenue in the quarter represented 21% of total revenue down slightly from q2 of last year Our subscription gross margin was 84.9%, down 0.4 percentage points from Q2 of last year, and down 1.1 percentage points from Q1, primarily due to our move from a fully depreciated data center. our subscription gross margin was 84.9% down 0.4 percentage points from q2 of last year and down 1.1 percentage points from q1 primarily due to our move from a fully depreciated data center We would expect to remain in this range in the near term. we would expect to remain in this range in the near term I'm also pleased that in Q2, our non-GAAP operating margin was positive 5.7%, up 12.2 percentage points from a year ago. Our non-GAAP operating margin primarily excludes stock-based compensation as well as executive severance, which was related to the transition of C-level executives. Our net loss was about $800,000, an improvement from $8.2 million a year ago, and our net loss per share was $0.02. This is based on 35.9 million weighted average shares outstanding, basic and diluted. In Q2, cash provided by operations was approximately $600,000. In total, our cash balance declined $2.1 million from last quarter to $63.9 million. We expect Q3 cash from operations to be near breakeven, and we continue to expect full year fiscal 2024 cash from operations to be positive. I'm also pleased that in Q2, our non-GAAP operating margin was positive 5.7%, up 12.2 percentage points from a year ago. i'm also pleased that in q2 our non-gaap operating margin was positive 5.7% up 12.2 percentage points from a year ago Our non-GAAP operating margin primarily excludes stock-based compensation as well as executive severance, which was related to the transition of C-level executives. our non-gaap operating margin primarily excludes stock-based compensation as well as executive severance which was related to the transition of c-level executives Our net loss was about $800,000, an improvement from $8.2 million a year ago, and our net loss per share was $0.02. our net loss was about $800,000 an improvement from $8.2 million a year ago and our net loss per share was $0.02 This is based on 35.9 million weighted average shares outstanding, basic and diluted. this is based on 35.9 million weighted average shares outstanding basic and diluted In Q2, cash provided by operations was approximately $600,000. in q2 cash provided by operations was approximately $600,000 In total, our cash balance declined $2.1 million from last quarter to $63.9 million. in total our cash balance declined $2.1 million from last quarter to $63.9 million We expect Q3 cash from operations to be near breakeven, and we continue to expect full year fiscal 2024 cash from operations to be positive. we expect q3 cash from operations to be near breakeven and we continue to expect full year fiscal 2024 cash from operations to be positive We believe we've got adequate cash in order to continue to pursue our business objectives. In terms of guidance, well, let me share some thoughts. As Josh mentioned, the IT spending environment has been challenging for us, similar to some others in our sector. There are two factors I'd like to highlight. First, while our sales rep attrition has been less than forecast in Q1 and Q2, and we continue to build our sales capacity, our conversion rates, new leads, and resulting new business has also been less than forecast. Part of what we're seeing is a sense of caution, even greater than six months ago, across the board, with customers looking carefully at their software spend. We believe we've got adequate cash in order to continue to pursue our business objectives. we believe we've got adequate cash in order to continue to pursue our business objectives In terms of guidance, well, let me share some thoughts. in terms of guidance well let me share some thoughts As Josh mentioned, the IT spending environment has been challenging for us, similar to some others in our sector. as josh mentioned the it spending environment has been challenging for us similar to some others in our sector There are two factors I'd like to highlight. there are two factors i'd like to highlight First, while our sales rep attrition has been less than forecast in Q1 and Q2, and we continue to build our sales capacity, our conversion rates, new leads, and resulting new business has also been less than forecast. first while our sales rep attrition has been less than forecast in q1 and q2 and we continue to build our sales capacity our conversion rates new leads and resulting new business has also been less than forecast Part of what we're seeing is a sense of caution, even greater than six months ago, across the board, with customers looking carefully at their software spend. part of what we're seeing is a sense of caution even greater than six months ago across the board with customers looking carefully at their software spend While we believe we have a superior technology, some customers and prospects are already paying for another solution as a part of a broader enterprise-wide license agreement, where their BI tool can be perceived as incrementally free. They may be already using that BI tool for a big portion of their organization, leading some customers and prospects to consolidate their spend on these solutions. As Josh mentioned, I think our consumption-based pricing helps our positioning against this specific challenge. The second factor is that ongoing uncertainties about the macroeconomic environment are presenting challenges with renewals with some large customers. Oftentimes, this is due to the conflicting objectives of business use cases versus the overall IT spending mandates. While we believe we have a superior technology, some customers and prospects are already paying for another solution as a part of a broader enterprise-wide license agreement, where their BI tool can be perceived as incrementally free. while we believe we have a superior technology some customers and prospects are already paying for another solution as a part of a broader enterprise-wide license agreement where their bi tool can be perceived as incrementally free They may be already using that BI tool for a big portion of their organization, leading some customers and prospects to consolidate their spend on these solutions. they may be already using that bi tool for a big portion of their organization leading some customers and prospects to consolidate their spend on these solutions As Josh mentioned, I think our consumption-based pricing helps our positioning against this specific challenge. as josh mentioned i think our consumption-based pricing helps our positioning against this specific challenge The second factor is that ongoing uncertainties about the macroeconomic environment are presenting challenges with renewals with some large customers. the second factor is that ongoing uncertainties about the macroeconomic environment are presenting challenges with renewals with some large customers Oftentimes, this is due to the conflicting objectives of business use cases versus the overall IT spending mandates. oftentimes this is due to the conflicting objectives of business use cases versus the overall it spending mandates Based on what we're seeing, we believe our return to growth will take longer than originally anticipated, and as a result, we've lowered our new business and gross retention forecast for the remainder of the year. To put this in context, for the entire fiscal 2024, our reforecast has resulted in a downward adjustment of about 7.5% in billings and 2.5% in revenue. For Q3, we're guiding the billings of $72 million-$73 million, down 2% year-over-year. For full year billings, we're providing a range of $313.5 million-$321.5 million, representing a year-over-year decline of 1% - 3%. Now to guidance for our GAAP metrics. Based on what we're seeing, we believe our return to growth will take longer than originally anticipated, and as a result, we've lowered our new business and gross retention forecast for the remainder of the year. based on what we're seeing we believe our return to growth will take longer than originally anticipated and as a result we've lowered our new business and gross retention forecast for the remainder of the year To put this in context, for the entire fiscal 2024, our reforecast has resulted in a downward adjustment of about 7.5% in billings and 2.5% in revenue. to put this in context for the entire fiscal 2024 our reforecast has resulted in a downward adjustment of about 7.5% in billings and 2.5% in revenue For Q3, we're guiding the billings of $72 million-$73 million, down 2% year-over-year. for q3 we're guiding the billings of $72 million-$73 million down 2% year-over-year For full year billings, we're providing a range of $313.5 million-$321.5 million, representing a year-over-year decline of 1% - 3%. for full year billings we're providing a range of $313.5 million-$321.5 million representing a year-over-year decline of 1% - 3% Now to guidance for our GAAP metrics. now to guidance for our gaap metrics For the Q3 of fiscal 2024, we expect GAAP revenue to be in the range of $78.5 million-$79.5 million. We expect non-GAAP net loss per share, basic and diluted, of $0.10-$0.14 for Q3. This assumes 36.3 million weighted average shares, outstanding, basic and diluted. For the full year of fiscal 2024, we expect GAAP revenue to be in the range of $316 million-$320 million, representing year-over-year growth of 2% - 4%. We expect non-GAAP net loss per share, basic and diluted, of $0.39-$0.47. This assumes 36.1 million weighted average shares, outstanding, basic and diluted. Our EPS guidance implies a positive operating margin for the full year. For the Q3 of fiscal 2024, we expect GAAP revenue to be in the range of $78.5 million-$79.5 million. for the q3 of fiscal 2024 we expect gaap revenue to be in the range of $78.5 million-$79.5 million We expect non-GAAP net loss per share, basic and diluted, of $0.10-$0.14 for Q3. we expect non-gaap net loss per share basic and diluted of $0.10-$0.14 for q3 This assumes 36.3 million weighted average shares, outstanding, basic and diluted. this assumes 36.3 million weighted average shares outstanding basic and diluted For the full year of fiscal 2024, we expect GAAP revenue to be in the range of $316 million-$320 million, representing year-over-year growth of 2% - 4%. for the full year of fiscal 2024 we expect gaap revenue to be in the range of $316 million-$320 million representing year-over-year growth of 2% - 4% We expect non-GAAP net loss per share, basic and diluted, of $0.39-$0.47. we expect non-gaap net loss per share basic and diluted of $0.39-$0.47 This assumes 36.1 million weighted average shares, outstanding, basic and diluted. this assumes 36.1 million weighted average shares outstanding basic and diluted Our EPS guidance implies a positive operating margin for the full year. our eps guidance implies a positive operating margin for the full year In summary, in spite of the challenges we've discussed, we are committed to remain operating margin positive for the year and near cash flow breakeven through the second half of the year, and I'm confident we've got the right people and technology to execute against our market opportunity. With that, we'll open the call for questions. Operator? In summary, in spite of the challenges we've discussed, we are committed to remain operating margin positive for the year and near cash flow breakeven through the second half of the year, and I'm confident we've got the right people and technology to execute against our market opportunity. in summary in spite of the challenges we've discussed we are committed to remain operating margin positive for the year and near cash flow breakeven through the second half of the year and i'm confident we've got the right people and technology to execute against our market opportunity With that, we'll open the call for questions. with that we'll open the call for questions Operator? operator

Speaker 5: Thank you. As a reminder, if you would like to ask a question, press Star, then one on your telephone keypad. Your first question comes from the line of Derek Wood with TD Cowen. Your line is open. Thank you. thank you As a reminder, if you would like to ask a question, press Star, then one on your telephone keypad. as a reminder if you would like to ask a question press star then one on your telephone keypad Your first question comes from the line of Derek Wood with TD Cowen. your first question comes from the line of derek wood with td cowen Your line is open. your line is open

Speaker 2: Okay, thank you. Yeah, it sounds like a challenging environment out there, and I'm just wanting to kind of parse out the macro versus potentially internal changes that you guys have made. And really one of the big initiatives for you guys was to go after this consumption-based pricing model. And it sounds like you've had good success and conversion when I guess when succeeding at that. But has that been a factor in you know leading to longer sales cycles, more investor education? Just trying to get a sense for, you know, how much is external versus how much is internal, 'cause on the macro front, it generally feels like things haven't changed a whole lot in the last six months, but it sounds like you guys have seen some more change. Okay, thank you. okay thank you Yeah, it sounds like a challenging environment out there, and I'm just wanting to kind of parse out the macro versus potentially internal changes that you guys have made. yeah it sounds like a challenging environment out there and i'm just wanting to kind of parse out the macro versus potentially internal changes that you guys have made And really one of the big initiatives for you guys was to go after this consumption-based pricing model. and really one of the big initiatives for you guys was to go after this consumption-based pricing model And it sounds like you've had good success and conversion when I guess when succeeding at that. and it sounds like you've had good success and conversion when i guess when succeeding at that But has that been a factor in you know leading to longer sales cycles, more investor education? but has that been a factor in you know leading to longer sales cycles more investor education Just trying to get a sense for, you know, how much is external versus how much is internal, 'cause on the macro front, it generally feels like things haven't changed a whole lot in the last six months, but it sounds like you guys have seen some more change. just trying to get a sense for you know how much is external versus how much is internal 'cause on the macro front it generally feels like things haven't changed a whole lot in the last six months but it sounds like you guys have seen some more change

Speaker 4: Yeah, we've definitely seen more change from our customers. Like we said, you know, our conversion rates have dropped quite a bit over those six months. And from a consumption standpoint, that's actually been a great tailwind. So, you know, our sales cycle is not longer from consumption. They're pretty similar. In fact, they're a little bit better when we do consumption deals. Our upsells are faster when we do consumption deals, so you know, the repeat business comes in a little bit quicker. Our deal sizes are bigger when we do consumption deals. And like we mentioned, 50% of our deals this last quarter were consumption deals of the new logos. And we're shooting for 75% this quarter. Yeah, we've definitely seen more change from our customers. yeah we've definitely seen more change from our customers Like we said, you know, our conversion rates have dropped quite a bit over those six months. like we said you know our conversion rates have dropped quite a bit over those six months And from a consumption standpoint, that's actually been a great tailwind. and from a consumption standpoint that's actually been a great tailwind So, you know, our sales cycle is not longer from consumption. so you know our sales cycle is not longer from consumption They're pretty similar. they're pretty similar In fact, they're a little bit better when we do consumption deals. in fact they're a little bit better when we do consumption deals Our upsells are faster when we do consumption deals, so you know, the repeat business comes in a little bit quicker. our upsells are faster when we do consumption deals so you know the repeat business comes in a little bit quicker Our deal sizes are bigger when we do consumption deals. our deal sizes are bigger when we do consumption deals And like we mentioned, 50% of our deals this last quarter were consumption deals of the new logos. and like we mentioned 50% of our deals this last quarter were consumption deals of the new logos And we're shooting for 75% this quarter. and we're shooting for 75% this quarter And, you know, that's with only still a portion of the teams trained. So we think by the end of the year, we can get that up, you know, in the 90s. And the other thing that's great about consumption, so it's—they're higher—they're bigger deals, happier customers, higher retention, and, you know, quicker upsells. And then, I think most importantly, there's, you know, two components. Number one, we have a much bigger footprint inside those organizations. So, you know, instead of having a customer that's got, you know, us in one room and the competitor in the next room, it gives an ability to get more users, since we don't charge based on users. And, you know, that's with only still a portion of the teams trained. and you know that's with only still a portion of the teams trained So we think by the end of the year, we can get that up, you know, in the 90s. so we think by the end of the year we can get that up you know in the 90s And the other thing that's great about consumption, so it's—they're higher—they're bigger deals, happier customers, higher retention, and, you know, quicker upsells. and the other thing that's great about consumption so it's—they're higher—they're bigger deals happier customers higher retention and you know quicker upsells And then, I think most importantly, there's, you know, two components. and then i think most importantly there's you know two components Number one, we have a much bigger footprint inside those organizations. number one we have a much bigger footprint inside those organizations So, you know, instead of having a customer that's got, you know, us in one room and the competitor in the next room, it gives an ability to get more users, since we don't charge based on users. so you know instead of having a customer that's got you know us in one room and the competitor in the next room it gives an ability to get more users since we don't charge based on users So we have seen literally a 60% increase in the number of users that we get when customers convert over to our consumption model. So they had X number of users, and then after they move to consumption, you know, they have 60% higher. So that's been, that's been great. And then not only that, they're actually logging in more frequently as well. So they're becoming. You know, they get adopted by the whole organization. So that's one piece that's really exciting. And then the other piece is just the opportunity to, you know, wake up the first of the year and know that you've got growth in your accounts that you don't have to go in and upsell. It's just consumption. And we're seeing good growth from a consumption standpoint. So we have seen literally a 60% increase in the number of users that we get when customers convert over to our consumption model. so we have seen literally a 60% increase in the number of users that we get when customers convert over to our consumption model So they had X number of users, and then after they move to consumption, you know, they have 60% higher. so they had x number of users and then after they move to consumption you know they have 60% higher So that's been, that's been great. so that's been that's been great And then not only that, they're actually logging in more frequently as well. and then not only that they're actually logging in more frequently as well So they're becoming. so they're becoming You know, they get adopted by the whole organization. you know they get adopted by the whole organization So that's one piece that's really exciting. so that's one piece that's really exciting And then the other piece is just the opportunity to, you know, wake up the first of the year and know that you've got growth in your accounts that you don't have to go in and upsell. and then the other piece is just the opportunity to you know wake up the first of the year and know that you've got growth in your accounts that you don't have to go in and upsell It's just consumption. it's just consumption And we're seeing good growth from a consumption standpoint. and we're seeing good growth from a consumption standpoint It's still early to talk about exactly what kind of uptick we're gonna see in those consumption deals. And we need to go through a couple more quarters of that, but we're very sure that there is an uptick from consumption. And as we work with customers and go through, you know, a big chunk of renewals, then we'll understand exactly what that number is. It's still early to talk about exactly what kind of uptick we're gonna see in those consumption deals. it's still early to talk about exactly what kind of uptick we're gonna see in those consumption deals And we need to go through a couple more quarters of that, but we're very sure that there is an uptick from consumption. and we need to go through a couple more quarters of that but we're very sure that there is an uptick from consumption And as we work with customers and go through, you know, a big chunk of renewals, then we'll understand exactly what that number is. and as we work with customers and go through you know a big chunk of renewals then we'll understand exactly what that number is

Speaker 2: Okay. I guess, that is the silver lining. It sounds like on the other side, you're seeing some headwinds from vendor consolidation, and I'm just wondering if you can tease that out. 'Cause you guys beat your Q2 number, but there's a, you know, pretty big guide down for second half, and you're alluding to some tougher renewals. Is that more on the enterprise side, where you potentially are seeing more contract losses? Or is it corporate? And is it concentrated? Is it more prevalent? Like, and what's informing you on that potential risk in the second half? Just if you could give more color, that would be great. Okay. okay I guess, that is the silver lining. i guess that is the silver lining It sounds like on the other side, you're seeing some headwinds from vendor consolidation, and I'm just wondering if you can tease that out. 'Cause you guys beat your Q2 number, but there's a, you know, pretty big guide down for second half, and you're alluding to some tougher renewals. it sounds like on the other side you're seeing some headwinds from vendor consolidation and i'm just wondering if you can tease that out 'cause you guys beat your q2 number but there's a you know pretty big guide down for second half and you're alluding to some tougher renewals Is that more on the enterprise side, where you potentially are seeing more contract losses? is that more on the enterprise side where you potentially are seeing more contract losses Or is it corporate? or is it corporate And is it concentrated? and is it concentrated Is it more prevalent? is it more prevalent Like, and what's informing you on that potential risk in the second half? like and what's informing you on that potential risk in the second half Just if you could give more color, that would be great. just if you could give more color that would be great

Speaker 4: Yeah, it's with some of our enterprise customers that, you know, we've usually seen some pretty good stability there, better than with corporate, in fact. But, you know, enterprise customers are more susceptible to having multiple vendors in there. So when you look at vendor consolidation, which is definitely a theme, I think, across the broader IT industry, our enterprise business is more susceptible to that, for sure. So, you know, thankfully, over the last five years, we've been working on this consumption model, and we're really excited about what that's gonna do for the business. You know, with the enterprises, in particular, because, you know, what we'll see is we'll go into an account, they'll switch over to consumption, and what was happening to us before is now happening to the other vendors. Yeah, it's with some of our enterprise customers that, you know, we've usually seen some pretty good stability there, better than with corporate, in fact. yeah it's with some of our enterprise customers that you know we've usually seen some pretty good stability there better than with corporate in fact But, you know, enterprise customers are more susceptible to having multiple vendors in there. but you know enterprise customers are more susceptible to having multiple vendors in there So when you look at vendor consolidation, which is definitely a theme, I think, across the broader IT industry, our enterprise business is more susceptible to that, for sure. so when you look at vendor consolidation which is definitely a theme i think across the broader it industry our enterprise business is more susceptible to that for sure So, you know, thankfully, over the last five years, we've been working on this consumption model, and we're really excited about what that's gonna do for the business. so you know thankfully over the last five years we've been working on this consumption model and we're really excited about what that's gonna do for the business You know, with the enterprises, in particular, because, you know, what we'll see is we'll go into an account, they'll switch over to consumption, and what was happening to us before is now happening to the other vendors. you know with the enterprises in particular because you know what we'll see is we'll go into an account they'll switch over to consumption and what was happening to us before is now happening to the other vendors And what I mean by that is, our customers will come to us and say, "Yeah, there's these other four projects that we have, and now, since we're not paying you for seats, I guess we could go eliminate this other vendor, where we have this, you know, this, this data project that we're doing, and we can go eliminate vendor B, where we have this small project in this other division. And then, you know, vendor C, we're gonna have to see how that plays out with you guys." So that's been a, you know, a huge boon to us and our relationships with our big enterprise customers. But there's a handful where, you know, that happened to us, or we think it may happen to us. And what I mean by that is, our customers will come to us and say, "Yeah, there's these other four projects that we have, and now, since we're not paying you for seats, I guess we could go eliminate this other vendor, where we have this, you know, this, this data project that we're doing, and we can go eliminate vendor B, where we have this small project in this other division. and what i mean by that is our customers will come to us and say "yeah there's these other four projects that we have and now since we're not paying you for seats i guess we could go eliminate this other vendor where we have this you know this this data project that we're doing and we can go eliminate vendor b where we have this small project in this other division And then, you know, vendor C, we're gonna have to see how that plays out with you guys." So that's been a, you know, a huge boon to us and our relationships with our big enterprise customers. and then you know vendor c we're gonna have to see how that plays out with you guys." so that's been a you know a huge boon to us and our relationships with our big enterprise customers But there's a handful where, you know, that happened to us, or we think it may happen to us. but there's a handful where you know that happened to us or we think it may happen to us And just, you know, the idea that it might force us to say, "You know, we gotta be conservative here in our guidance as we get that new information." I think that in conjunction with, with just seeing, yes, we had more sales capacity, but, you know, the conversion rates being down in the, you know, in the process through the pipeline, forces you to look and say, "Do you wanna spend that incremental marketing dollars to feed the sales team?" And it doesn't seem like that's, you know, the right way to go, because we wanna make sure that we're staying really fiscally sound, staying cash flow positive, and staying net operating margin positive. And just, you know, the idea that it might force us to say, "You know, we gotta be conservative here in our guidance as we get that new information." I think that in conjunction with, with just seeing, yes, we had more sales capacity, but, you know, the conversion rates being down in the, you know, in the process through the pipeline, forces you to look and say, "Do you wanna spend that incremental marketing dollars to feed the sales team?" And it doesn't seem like that's, you know, the right way to go, because we wanna make sure that we're staying really fiscally sound, staying cash flow positive, and staying net operating margin positive. and just you know the idea that it might force us to say "you know we gotta be conservative here in our guidance as we get that new information." i think that in conjunction with with just seeing yes we had more sales capacity but you know the conversion rates being down in the you know in the process through the pipeline forces you to look and say "do you wanna spend that incremental marketing dollars to feed the sales team?" and it doesn't seem like that's you know the right way to go because we wanna make sure that we're staying really fiscally sound staying cash flow positive and staying net operating margin positive You know, we can do that with this great, you know, I think, awesome transition that's gonna happen in our business as we move more and more to consumption, and as we're able to take advantage of things like freemium, because we now have a consumption model, and we'll be seeing that over the next quarter as well. You know, we can do that with this great, you know, I think, awesome transition that's gonna happen in our business as we move more and more to consumption, and as we're able to take advantage of things like freemium, because we now have a consumption model, and we'll be seeing that over the next quarter as well. you know we can do that with this great you know i think awesome transition that's gonna happen in our business as we move more and more to consumption and as we're able to take advantage of things like freemium because we now have a consumption model and we'll be seeing that over the next quarter as well

Speaker 2: Okay. And one - just one for David. I mean, how well can net revenue retention rate go in the second half? And I guess to Josh's point about staying break even, do you need to make any kind of OpEx cuts or headcount cuts or how are you feeling about the initiatives for second half around OpEx spend? Okay. okay And one - just one for David. and one - just one for david I mean, how well can net revenue retention rate go in the second half? i mean how well can net revenue retention rate go in the second half And I guess to Josh's point about staying break even, do you need to make any kind of OpEx cuts or headcount cuts or how are you feeling about the initiatives for second half around OpEx spend? and i guess to josh's point about staying break even do you need to make any kind of opex cuts or headcount cuts or how are you feeling about the initiatives for second half around opex spend

Speaker 4: Yeah, I think, you know, to that point, specifically, you know, we've sat down, taking a look at the business for the second half to say, "Okay, if we, you know, if we don't produce the same number of billings that we originally forecast, and we don't have that cash as a result, you know, how do we manage that?" And we're confident that we can. Yeah, I think, you know, to that point, specifically, you know, we've sat down, taking a look at the business for the second half to say, "Okay, if we, you know, if we don't produce the same number of billings that we originally forecast, and we don't have that cash as a result, you know, how do we manage that?" And we're confident that we can. yeah i think you know to that point specifically you know we've sat down taking a look at the business for the second half to say "okay if we you know if we don't produce the same number of billings that we originally forecast and we don't have that cash as a result you know how do we manage that?" and we're confident that we can You know, bring, bring down costs in areas that aren't gonna affect, you know, our ability to go out and compete effectively in the market and win in the market. A lot of it was incremental spend that we had originally forecasted. So we just take the incremental spend out. You know, you don't hire a bunch of new folks. You know, you be careful with your spend on outside consultants, and I think that's where, you know, the cost savings that we needed. And then we found some efficiencies. I mean, really, since we got here, we've been finding efficiencies, and with those efficiencies that we've already found, we feel really good about our ability to hit the margin number. Yeah. You know, bring, bring down costs in areas that aren't gonna affect, you know, our ability to go out and compete effectively in the market and win in the market. you know bring bring down costs in areas that aren't gonna affect you know our ability to go out and compete effectively in the market and win in the market A lot of it was incremental spend that we had originally forecasted. a lot of it was incremental spend that we had originally forecasted So we just take the incremental spend out. so we just take the incremental spend out You know, you don't hire a bunch of new folks. you know you don't hire a bunch of new folks You know, you be careful with your spend on outside consultants, and I think that's where, you know, the cost savings that we needed. you know you be careful with your spend on outside consultants and i think that's where you know the cost savings that we needed And then we found some efficiencies. and then we found some efficiencies I mean, really, since we got here, we've been finding efficiencies, and with those efficiencies that we've already found, we feel really good about our ability to hit the margin number. i mean really since we got here we've been finding efficiencies and with those efficiencies that we've already found we feel really good about our ability to hit the margin number Yeah. yeah

Speaker 2: Okay. All right, thank you. Okay. okay All right, thank you. all right thank you

Speaker 4: Thank you. Thank you. thank you

Speaker 5: Your next question comes from the line of Patrick Walravens with JMP Securities. Your line is open. Your next question comes from the line of Patrick Walravens with JMP Securities. your next question comes from the line of patrick walravens with jmp securities Your line is open. your line is open

Speaker 6: Oh, great. Oh, great, thank you. So I guess, first of all, with respect to the large renewals in H2, have some of those large renewals already informed you of their intention not to renew? Oh, great. oh great Oh, great, thank you. oh great thank you So I guess, first of all, with respect to the large renewals in H2, have some of those large renewals already informed you of their intention not to renew? so i guess first of all with respect to the large renewals in h2 have some of those large renewals already informed you of their intention not to renew

Speaker 4: No, we've got—I mean, there's certainly a couple of them that we know about, and that's why the guide is where the guide is. And then there's others that, yeah, we just—we're seeing a low renewal rate with the vendor consolidation. So, you know, as we get further into conversations, just trying to, you know, figure out what's the right percentage to apply to that as we're doing our forecast. And, you know, that's where we came up with what we came up with. No, we've got—I mean, there's certainly a couple of them that we know about, and that's why the guide is where the guide is. no we've got—i mean there's certainly a couple of them that we know about and that's why the guide is where the guide is And then there's others that, yeah, we just—we're seeing a low renewal rate with the vendor consolidation. and then there's others that yeah we just—we're seeing a low renewal rate with the vendor consolidation So, you know, as we get further into conversations, just trying to, you know, figure out what's the right percentage to apply to that as we're doing our forecast. so you know as we get further into conversations just trying to you know figure out what's the right percentage to apply to that as we're doing our forecast And, you know, that's where we came up with what we came up with. and you know that's where we came up with what we came up with

Speaker 6: Okay. And then, I mean, if you look at those large renewals and take them as a whole, I mean, just rough ballpark, what percentage of the business are we talking about? Okay. okay And then, I mean, if you look at those large renewals and take them as a whole, I mean, just rough ballpark, what percentage of the business are we talking about? and then i mean if you look at those large renewals and take them as a whole i mean just rough ballpark what percentage of the business are we talking about

Speaker 4: You know, if you look at- You know, if you look at- you know if you look at-

Speaker 6: 1%, 5%, 10%? Yeah. 1%, 5%, 10%? 1% 5% 10% Yeah. yeah

Speaker 4: You know, if you go look at our top 50 customers, there's only a handful. You know, it's only five, six customers that you're worried about, and you have great relationships with the rest of them. We have great relationships with the four or five that we're worried about, but the four or five that we're worried about, you know, we know there's other vendors in there. We know that, you know, that they're talking about vendor consolidation. We know that they're beating us up on price, that they're negotiating. And so, again, just trying to, you know, hedge the right amount and make sure that we're being conservative enough. You know, if you go look at our top 50 customers, there's only a handful. you know if you go look at our top 50 customers there's only a handful You know, it's only five, six customers that you're worried about, and you have great relationships with the rest of them. you know it's only five six customers that you're worried about and you have great relationships with the rest of them We have great relationships with the four or five that we're worried about, but the four or five that we're worried about, you know, we know there's other vendors in there. we have great relationships with the four or five that we're worried about but the four or five that we're worried about you know we know there's other vendors in there We know that, you know, that they're talking about vendor consolidation. we know that you know that they're talking about vendor consolidation We know that they're beating us up on price, that they're negotiating. we know that they're beating us up on price that they're negotiating And so, again, just trying to, you know, hedge the right amount and make sure that we're being conservative enough. and so again just trying to you know hedge the right amount and make sure that we're being conservative enough So it doesn't feel like a it definitely doesn't feel like a, you know, holistic we gotta be worried about the enterprise business at all. In fact, I'd say it's just, there's a handful of deals. There's still, you know, one deal in there that's COVID-related, that, you know, we're definitely worried about, and that's on the list. That's one of the four or five. So it doesn't feel like it's, you know, some kind of systemic problem that we have. It's just a handful of deals that are dealing with their IT consolidation and, you know, these big enterprises. So it doesn't feel like a it definitely doesn't feel like a, you know, holistic we gotta be worried about the enterprise business at all. so it doesn't feel like a it definitely doesn't feel like a you know holistic we gotta be worried about the enterprise business at all In fact, I'd say it's just, there's a handful of deals. in fact i'd say it's just there's a handful of deals There's still, you know, one deal in there that's COVID-related, that, you know, we're definitely worried about, and that's on the list. there's still you know one deal in there that's covid-related that you know we're definitely worried about and that's on the list That's one of the four or five. that's one of the four or five So it doesn't feel like it's, you know, some kind of systemic problem that we have. so it doesn't feel like it's you know some kind of systemic problem that we have It's just a handful of deals that are dealing with their IT consolidation and, you know, these big enterprises. it's just a handful of deals that are dealing with their it consolidation and you know these big enterprises Yeah, the CIO, there's one CIO we talked to, and he said to me that he had a several billion dollar IT spend, and that when the CEO called him, he said, "Hey, you have several billion dollars of IT spend. I want $1 billion out." So, Yeah, the CIO, there's one CIO we talked to, and he said to me that he had a several billion dollar IT spend, and that when the CEO called him, he said, "Hey, you have several billion dollars of IT spend. yeah the cio there's one cio we talked to and he said to me that he had a several billion dollar it spend and that when the ceo called him he said "hey you have several billion dollars of it spend I want $1 billion out." So, i want $1 billion out." so

Speaker 6: Mm. Mm. mm

Speaker 4: Those are the marching orders, and, you know, that's, that's the only conversation we've had thus far. But, you know, we know that that means, hey, we gotta be really careful here about forecasting that renewal. Those are the marching orders, and, you know, that's, that's the only conversation we've had thus far. those are the marching orders and you know that's that's the only conversation we've had thus far But, you know, we know that that means, hey, we gotta be really careful here about forecasting that renewal. but you know we know that that means hey we gotta be really careful here about forecasting that renewal

Speaker 1: And I think just from a, just one thing I might add to that, from a defensive standpoint, you know, when we're sitting in, you know, 300 or 400 seats in that account, and we know that our competitors are virtually enterprise-wide, it just really drives home the point that we need to be in a similar position defensively. And as we move to a consumption model, that allows us to be in that same position where we've got seats across the entire enterprise. So that really kind of pushes us to accelerate the move to consumption and try to get all of our accounts over there. And I think just from a, just one thing I might add to that, from a defensive standpoint, you know, when we're sitting in, you know, 300 or 400 seats in that account, and we know that our competitors are virtually enterprise-wide, it just really drives home the point that we need to be in a similar position defensively. and i think just from a just one thing i might add to that from a defensive standpoint you know when we're sitting in you know 300 or 400 seats in that account and we know that our competitors are virtually enterprise-wide it just really drives home the point that we need to be in a similar position defensively And as we move to a consumption model, that allows us to be in that same position where we've got seats across the entire enterprise. and as we move to a consumption model that allows us to be in that same position where we've got seats across the entire enterprise So that really kind of pushes us to accelerate the move to consumption and try to get all of our accounts over there. so that really kind of pushes us to accelerate the move to consumption and try to get all of our accounts over there

Speaker 6: Okay, great. And so, Josh, I always ask you, you know, under what circumstances this business might be sold, and the way the, the shares work at Domo, that's basically your decision. So does this consolidation trend impact how you think about that? Okay, great. okay great And so, Josh, I always ask you, you know, under what circumstances this business might be sold, and the way the, the shares work at Domo, that's basically your decision. and so josh i always ask you you know under what circumstances this business might be sold and the way the the shares work at domo that's basically your decision So does this consolidation trend impact how you think about that? so does this consolidation trend impact how you think about that

Speaker 4: I mean, I think about that the same way always. Just depends on, you know, if anybody ever brought us an offer, and then we would take a look at it and evaluate that relative to the opportunity we have in the marketplace and relative to what we think the, the long-term value of the shares should be. And, you know, right now, I'd say, you know, despite some of the short-term headwinds that, you know, I think most people are dealing with, there's certainly a few exceptions as you read everybody's earnings calls, but, you know, most people are dealing with a lot of these similar things. Despite that, you know, like we tried to indicate on the call, we're actually pretty excited about the future. We're really excited about the people that we have here. I mean, I think about that the same way always. i mean i think about that the same way always Just depends on, you know, if anybody ever brought us an offer, and then we would take a look at it and evaluate that relative to the opportunity we have in the marketplace and relative to what we think the, the long-term value of the shares should be. just depends on you know if anybody ever brought us an offer and then we would take a look at it and evaluate that relative to the opportunity we have in the marketplace and relative to what we think the the long-term value of the shares should be And, you know, right now, I'd say, you know, despite some of the short-term headwinds that, you know, I think most people are dealing with, there's certainly a few exceptions as you read everybody's earnings calls, but, you know, most people are dealing with a lot of these similar things. and you know right now i'd say you know despite some of the short-term headwinds that you know i think most people are dealing with there's certainly a few exceptions as you read everybody's earnings calls but you know most people are dealing with a lot of these similar things Despite that, you know, like we tried to indicate on the call, we're actually pretty excited about the future. despite that you know like we tried to indicate on the call we're actually pretty excited about the future We're really excited about the people that we have here. we're really excited about the people that we have here And we're really excited about, you know, the opportunity where we're sitting. You know, we talk a lot about AI. I mean, you know, when ChatGPT starts getting exciting and everyone's talking about it, and, you know, you wanna have- you wanna have prompts to enable, you know, instead of using Beast Mode or using SQL, you can do it in ChatGPT. That's cool. It's really interesting, it's exciting, and we're definitely excited about that. But the fact that you can take any BI, any AI model that's out there, and you can automate the whole process inside Domo, you can apply any particular model that's sitting out there in Hugging Face, and you wanna get a bunch of data that you have in your business, and you wanna apply those models to that data set, how do you do that? And we're really excited about, you know, the opportunity where we're sitting. and we're really excited about you know the opportunity where we're sitting You know, we talk a lot about AI. you know we talk a lot about ai I mean, you know, when ChatGPT starts getting exciting and everyone's talking about it, and, you know, you wanna have- you wanna have prompts to enable, you know, instead of using Beast Mode or using SQL, you can do it in ChatGPT. i mean you know when chatgpt starts getting exciting and everyone's talking about it and you know you wanna have- you wanna have prompts to enable you know instead of using beast mode or using sql you can do it in chatgpt That's cool. that's cool It's really interesting, it's exciting, and we're definitely excited about that. it's really interesting it's exciting and we're definitely excited about that But the fact that you can take any BI, any AI model that's out there, and you can automate the whole process inside Domo, you can apply any particular model that's sitting out there in Hugging Face, and you wanna get a bunch of data that you have in your business, and you wanna apply those models to that data set, how do you do that? but the fact that you can take any bi any ai model that's out there and you can automate the whole process inside domo you can apply any particular model that's sitting out there in hugging face and you wanna get a bunch of data that you have in your business and you wanna apply those models to that data set how do you do that Well, we happen to have the first mile done, and then we can allow you to do the second, you know, to take that model and apply that AI power to your business right now, and then we have the last mile. You wanna go get the benefit out of that and distribute that out to people in your organization. You wanna have that continue to automatically work inside your organization with updated data as it comes through. We're one of the few places you can do that, so we're really excited about that as well. Well, we happen to have the first mile done, and then we can allow you to do the second, you know, to take that model and apply that AI power to your business right now, and then we have the last mile. well we happen to have the first mile done and then we can allow you to do the second you know to take that model and apply that ai power to your business right now and then we have the last mile You wanna go get the benefit out of that and distribute that out to people in your organization. you wanna go get the benefit out of that and distribute that out to people in your organization You wanna have that continue to automatically work inside your organization with updated data as it comes through. you wanna have that continue to automatically work inside your organization with updated data as it comes through We're one of the few places you can do that, so we're really excited about that as well. we're one of the few places you can do that so we're really excited about that as well

Speaker 6: Okay, last one. I'm sorry to go so long. So what steps do you think you guys can take to help build back shareholder value, you know, until we get through this tough macro and until we get through this consumption shift? Okay, last one. okay last one I'm sorry to go so long. i'm sorry to go so long So what steps do you think you guys can take to help build back shareholder value, you know, until we get through this tough macro and until we get through this consumption shift? so what steps do you think you guys can take to help build back shareholder value you know until we get through this tough macro and until we get through this consumption shift

Speaker 4: Yeah, I mean, I think, the consumption shift is not. There's nothing negative about that in our business. So I don't think that's, you know, any—in fact, that's just positive. It's positive as we go through it, it's positive every step of the way. We don't have to wait for the benefit. We're getting the benefit, you know, each every time we incrementally improve that, we're getting a benefit. And I think, you know, the other thing that's really important in this kind of an environment is that you make sure that you're not burning cash, you make sure that you're- Yeah, I mean, I think, the consumption shift is not. yeah i mean i think the consumption shift is not There's nothing negative about that in our business. there's nothing negative about that in our business So I don't think that's, you know, any—in fact, that's just positive. so i don't think that's you know any—in fact that's just positive It's positive as we go through it, it's positive every step of the way. it's positive as we go through it it's positive every step of the way We don't have to wait for the benefit. we don't have to wait for the benefit We're getting the benefit, you know, each every time we incrementally improve that, we're getting a benefit. we're getting the benefit you know each every time we incrementally improve that we're getting a benefit And I think, you know, the other thing that's really important in this kind of an environment is that you make sure that you're not burning cash, you make sure that you're- and i think you know the other thing that's really important in this kind of an environment is that you make sure that you're not burning cash you make sure that you're-

Speaker 6: Yeah Yeah yeah

Speaker 4: -have positive operating margin. You know, I think we're being really judicious about that. We have a lot of levers that we could still pull, that we don't need to pull yet, and hopefully, we don't have to. I think just, you know, continue to hang around the hoop, keep the capacity there, and keep building great products, and we feel really good about our prospects on that front. -have positive operating margin. -have positive operating margin You know, I think we're being really judicious about that. you know i think we're being really judicious about that We have a lot of levers that we could still pull, that we don't need to pull yet, and hopefully, we don't have to. we have a lot of levers that we could still pull that we don't need to pull yet and hopefully we don't have to I think just, you know, continue to hang around the hoop, keep the capacity there, and keep building great products, and we feel really good about our prospects on that front. i think just you know continue to hang around the hoop keep the capacity there and keep building great products and we feel really good about our prospects on that front

Speaker 6: Okay, thank you. Okay, thank you. okay thank you

Speaker 4: Yeah, you bet. Thanks, Pat, for your time. Yeah, you bet. yeah you bet Thanks, Pat, for your time. thanks pat for your time

Speaker 5: Your next question comes from the line of Sanjit Singh with Morgan Stanley. Your line is open. Your next question comes from the line of Sanjit Singh with Morgan Stanley. your next question comes from the line of sanjit singh with morgan stanley Your line is open. your line is open

Speaker 8: Yeah, thanks for taking the questions. Going back to the topic of consumption, I was wondering with, you know, the 10% of the base that has moved on to consumption, is there any sort of accounting, rev rec, headwind that's associated with? So if you're bringing a customer on via subscription versus consumption, is there any sort of rev rec differences that we should be aware of that could also be ahead of the revenue? I know you said deal sizes are bigger with consumption, so it doesn't sound like on a TCV basis, that there isn't any impact there. But just wanted to, you know, gut check if there was any headwinds as customers come on board via consumption versus subscription. Yeah, thanks for taking the questions. yeah thanks for taking the questions Going back to the topic of consumption, I was wondering with, you know, the 10% of the base that has moved on to consumption, is there any sort of accounting, rev rec, headwind that's associated with? going back to the topic of consumption i was wondering with you know the 10% of the base that has moved on to consumption is there any sort of accounting rev rec headwind that's associated with So if you're bringing a customer on via subscription versus consumption, is there any sort of rev rec differences that we should be aware of that could also be ahead of the revenue? so if you're bringing a customer on via subscription versus consumption is there any sort of rev rec differences that we should be aware of that could also be ahead of the revenue I know you said deal sizes are bigger with consumption, so it doesn't sound like on a TCV basis, that there isn't any impact there. i know you said deal sizes are bigger with consumption so it doesn't sound like on a tcv basis that there isn't any impact there But just wanted to, you know, gut check if there was any headwinds as customers come on board via consumption versus subscription. but just wanted to you know gut check if there was any headwinds as customers come on board via consumption versus subscription

Speaker 4: Yeah, yeah. Thanks for that question, and it's an important observation. So the way that we have structured our contracts, and then the way that we have structured our consumption model, that still allows us to have ratable revenue recognition. So, you know, providing the same level of predictability that we've got today. We've spent a lot of time working together with our outside accountants to make sure that our contracts are structured in a way that will allow us to retain that. And so we don't really see anything on the near term or even medium-term horizon that would cause that to change. Yeah, yeah. yeah yeah Thanks for that question, and it's an important observation. thanks for that question and it's an important observation So the way that we have structured our contracts, and then the way that we have structured our consumption model, that still allows us to have ratable revenue recognition. so the way that we have structured our contracts and then the way that we have structured our consumption model that still allows us to have ratable revenue recognition So, you know, providing the same level of predictability that we've got today. so you know providing the same level of predictability that we've got today We've spent a lot of time working together with our outside accountants to make sure that our contracts are structured in a way that will allow us to retain that. we've spent a lot of time working together with our outside accountants to make sure that our contracts are structured in a way that will allow us to retain that And so we don't really see anything on the near term or even medium-term horizon that would cause that to change. and so we don't really see anything on the near term or even medium-term horizon that would cause that to change You know, unless the rev rec rules change somehow, but we're pretty comfortable with the way we've structured it and the resulting ratable recognition. You know, unless the rev rec rules change somehow, but we're pretty comfortable with the way we've structured it and the resulting ratable recognition. you know unless the rev rec rules change somehow but we're pretty comfortable with the way we've structured it and the resulting ratable recognition

Speaker 8: Great. Josh, I've covered a couple of companies who have gone through a transition to consumption. You know, some of the things that have come up in the past is around the customer incentive to move to consumption. I get the idea that you know there's no shelfware, and things like that. But when you talk about deal sizes being larger via you know in consumption versus subscription, like, what's sort of in it for the customer? Because in a sense, they're still outlay more dollars up front, and I get the removal of the seat-based you know friction. But, like, what's in it for the customer to make that initial conversion, particularly the existing customer base, from subscription to consumption? Great. great Josh, I've covered a couple of companies who have gone through a transition to consumption. josh i've covered a couple of companies who have gone through a transition to consumption You know, some of the things that have come up in the past is around the customer incentive to move to consumption. you know some of the things that have come up in the past is around the customer incentive to move to consumption I get the idea that you know there's no shelfware, and things like that. i get the idea that you know there's no shelfware and things like that But when you talk about deal sizes being larger via you know in consumption versus subscription, like, what's sort of in it for the customer? but when you talk about deal sizes being larger via you know in consumption versus subscription like what's sort of in it for the customer Because in a sense, they're still outlay more dollars up front, and I get the removal of the seat-based you know friction. because in a sense they're still outlay more dollars up front and i get the removal of the seat-based you know friction But, like, what's in it for the customer to make that initial conversion, particularly the existing customer base, from subscription to consumption? but like what's in it for the customer to make that initial conversion particularly the existing customer base from subscription to consumption

Speaker 4: Yeah, it's a great question. I think the first thing is, again, there's lots of projects internally that they're like, "Oh, we can apply this to all these different projects. We don't have to worry about the incremental cost of having to go back and get more seats." And then the other big piece is they get access to the whole platform. So there's lots of pieces of our platform that we charge incrementally for. And on consumption, we charge incrementally, but we charge it as you use it. So for instance, you know, our data science functionality is used four times more frequently by our consumption customers than it is by our seat-based customers. Because it's an incremental expense that you have to go through a budgeting process, you have to call us. Yeah, it's a great question. yeah it's a great question I think the first thing is, again, there's lots of projects internally that they're like, "Oh, we can apply this to all these different projects. i think the first thing is again there's lots of projects internally that they're like "oh we can apply this to all these different projects We don't have to worry about the incremental cost of having to go back and get more seats." And then the other big piece is they get access to the whole platform. we don't have to worry about the incremental cost of having to go back and get more seats." and then the other big piece is they get access to the whole platform So there's lots of pieces of our platform that we charge incrementally for. so there's lots of pieces of our platform that we charge incrementally for And on consumption, we charge incrementally, but we charge it as you use it. and on consumption we charge incrementally but we charge it as you use it So for instance, you know, our data science functionality is used four times more frequently by our consumption customers than it is by our seat-based customers. so for instance you know our data science functionality is used four times more frequently by our consumption customers than it is by our seat-based customers Because it's an incremental expense that you have to go through a budgeting process, you have to call us. because it's an incremental expense that you have to go through a budgeting process you have to call us And now on consumption, you just click on it and start using it, and if you like it, you keep using it. And they like it, and they keep using it, and they're using it at 4x the rate. And that's great because it drives consumption for us. So I think having access to the full, you know, to all the benefits that we offer, to being able to have apps and building apps for all the different projects that you have internally, just it increases their commitment to us because they see the future that they can build with us. And now on consumption, you just click on it and start using it, and if you like it, you keep using it. and now on consumption you just click on it and start using it and if you like it you keep using it And they like it, and they keep using it, and they're using it at 4x the rate. and they like it and they keep using it and they're using it at 4x the rate And that's great because it drives consumption for us. and that's great because it drives consumption for us So I think having access to the full, you know, to all the benefits that we offer, to being able to have apps and building apps for all the different projects that you have internally, just it increases their commitment to us because they see the future that they can build with us. so i think having access to the full you know to all the benefits that we offer to being able to have apps and building apps for all the different projects that you have internally just it increases their commitment to us because they see the future that they can build with us

Speaker 8: Understood. I really appreciate the thought. Thank you. Understood. understood I really appreciate the thought. i really appreciate the thought Thank you. thank you

Speaker 4: Yeah, thank you. Yeah, thank you. yeah thank you

Speaker 5: Your next question comes from the line of Eric Martinuzzi with Lake Street Capital. Your line is open. Your next question comes from the line of Eric Martinuzzi with Lake Street Capital. your next question comes from the line of eric martinuzzi with lake street capital Your line is open. your line is open

Speaker 3: Yeah, I was curious on the billings reset for the year. I was just looking at the midpoint of your prior outlook on billings at $344 million, and then comparing that to the new midpoint at roughly $318 million. So about an 8% lower number, and I wanted to try and size that up between new logo and renewal. Did we get more pessimistic on new logo, or is it the same level of, you know, conservatism that we had 90 days ago, and it's really more about the renewals? Yeah, I was curious on the billings reset for the year. yeah i was curious on the billings reset for the year I was just looking at the midpoint of your prior outlook on billings at $344 million, and then comparing that to the new midpoint at roughly $318 million. i was just looking at the midpoint of your prior outlook on billings at $344 million and then comparing that to the new midpoint at roughly $318 million So about an 8% lower number, and I wanted to try and size that up between new logo and renewal. so about an 8% lower number and i wanted to try and size that up between new logo and renewal Did we get more pessimistic on new logo, or is it the same level of, you know, conservatism that we had 90 days ago, and it's really more about the renewals? did we get more pessimistic on new logo or is it the same level of you know conservatism that we had 90 days ago and it's really more about the renewals

Speaker 4: Yeah, it, I mean, there's definitely an impact to both of those. I would probably, at this point, you know, on a waiting perspective, it might wait a little bit more towards the renewals, for the second half of the year. Yeah, it, I mean, there's definitely an impact to both of those. yeah it i mean there's definitely an impact to both of those I would probably, at this point, you know, on a waiting perspective, it might wait a little bit more towards the renewals, for the second half of the year. i would probably at this point you know on a waiting perspective it might wait a little bit more towards the renewals for the second half of the year

Speaker 3: Okay. Then you talked about ramped capacity historically, that, and it sounds like you're pretty happy with the progress, but what metrics can you give us as far as maybe a percentage of the total sales force that's ramped versus 90 days ago, versus a year ago? Because it was a year ago that it first came to light that we were having issues with the ramped capacity. Okay. okay Then you talked about ramped capacity historically, that, and it sounds like you're pretty happy with the progress, but what metrics can you give us as far as maybe a percentage of the total sales force that's ramped versus 90 days ago, versus a year ago? then you talked about ramped capacity historically that and it sounds like you're pretty happy with the progress but what metrics can you give us as far as maybe a percentage of the total sales force that's ramped versus 90 days ago versus a year ago Because it was a year ago that it first came to light that we were having issues with the ramped capacity. because it was a year ago that it first came to light that we were having issues with the ramped capacity

Speaker 4: Yeah, so if we go back and look a year ago, you know, when we lost essentially, in a relatively short period of time, about 30% of the overall capacity, and that was kind of ramped and unramped. But, you know, you figure that that walked out the door over a short period of time, so we had to rebuild the headcount and then get them ramped. We're to a point now where we're, I would say, relatively highly ramped. We're continuing to ramp some of those folks through the rest of the Q3 and a little bit into the Q4. But we feel pretty comfortable with where we're at in terms of the overall headcount. We have the capacity to hit the numbers that, you know, that are out there. Yeah, so if we go back and look a year ago, you know, when we lost essentially, in a relatively short period of time, about 30% of the overall capacity, and that was kind of ramped and unramped. yeah so if we go back and look a year ago you know when we lost essentially in a relatively short period of time about 30% of the overall capacity and that was kind of ramped and unramped But, you know, you figure that that walked out the door over a short period of time, so we had to rebuild the headcount and then get them ramped. but you know you figure that that walked out the door over a short period of time so we had to rebuild the headcount and then get them ramped We're to a point now where we're, I would say, relatively highly ramped. we're to a point now where we're i would say relatively highly ramped We're continuing to ramp some of those folks through the rest of the Q3 and a little bit into the Q4 . we're continuing to ramp some of those folks through the rest of the q3 and a little bit into the q4 But we feel pretty comfortable with where we're at in terms of the overall headcount. but we feel pretty comfortable with where we're at in terms of the overall headcount We have the capacity to hit the numbers that, you know, that are out there. we have the capacity to hit the numbers that you know that are out there It's just that we've seen, again, the productivity levels have not been what they have historically. And so that's been, that's where the challenge is. But in terms of the headcount and the ramped capacity, we feel pretty good about where we're at from that standpoint. It's just that we've seen, again, the productivity levels have not been what they have historically. it's just that we've seen again the productivity levels have not been what they have historically And so that's been, that's where the challenge is. and so that's been that's where the challenge is But in terms of the headcount and the ramped capacity, we feel pretty good about where we're at from that standpoint. but in terms of the headcount and the ramped capacity we feel pretty good about where we're at from that standpoint

Speaker 3: Got it. Thank you. Got it. got it Thank you. thank you

Speaker 5: This concludes our Q&A session and today's conference call. Thank you for attending. You may now disconnect. This concludes our Q&A session and today's conference call. this concludes our q&a session and today's conference call Thank you for attending. thank you for attending You may now disconnect. you may now disconnect