Data visualisation and business intelligence company Domo (NASDAQ:DOMO) reported strong growth in the Q2 FY2022 earnings announcement, with revenue up 22.8% year on year to $62.8 million. Domo made a GAAP loss of $22.2 million, down on its loss of $17.9 million, in the same quarter last year.
Is now the time to buy Domo? Access our full analysis of the earnings results here, it's free.
Domo (DOMO) Q2 FY2022 Highlights:
- Revenue: $62.8 million vs analyst estimates of $60.8 million (3.22% beat)
- EPS (non-GAAP): -$0.30 vs analyst estimates of -$0.36
- Revenue guidance for Q3 2022 is $64 million at the midpoint, above analyst estimates of $63.3 million
- The company lifted revenue guidance for the full year, from $249 million to $254 million at the midpoint, a 2% increase
- Free cash flow of $529 thousand, up from negative free cash flow of -$373 thousand in previous quarter
- Gross Margin (GAAP): 74%, in line with previous quarter
"We have seen the demand for modern BI continue as companies look to unlock and democratize data for every person and every action that moves their business forward,” said Josh James, founder and CEO, Domo. "
Founded in 2010, Domo provides business intelligence software that allows managers to access and visualize critical business metrics in real-time, using their smartphones.
It's no secret that corporations everywhere are producing and monitoring more and more data sources for insights about their business. As this trend continues, the demand for business intelligence tools is expected to increase.
Sales Growth
As you can see below, Domo's revenue growth has been strong over the last year, growing from quarterly revenue of $51.1 million, to $62.8 million.
This quarter, Domo's quarterly revenue was once again up a very solid 22.8% year on year. But the growth did slow down a little compared to last quarter, as Domo increased revenue by $2.76 million in Q2, compared to $3.21 million revenue add in Q1 2022. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.
Analysts covering the company are expecting the revenues to grow 16.6% over the next twelve months, although we would expect them to review their estimates once they get to read these results.
There are others doing even better than Domo. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. You can find it on our platform for free.
Profitability
What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Domo's gross profit margin, an important metric measuring how much money there is left after paying for servers, licences, technical support and other necessary running expenses was at 74% in Q2.
That means that for every $1 in revenue the company had $0.74 left to spend on developing new products, marketing & sales and the general administrative overhead. This is around the average of what we typically see in SaaS businesses, but it is good to see that the gross margin is staying stable which indicates that Domo is doing a good job controlling costs and is not under a pressure from competition to lower prices.
Key Takeaways from Domo's Q2 Results
With a market capitalization of $3.06 billion Domo is among smaller companies, but its more than $86.3 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.
It was good to see Domo outperform Wall St’s revenue expectations this quarter. And we were also glad that the revenue guidance for the rest of the year was upgraded. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is down -3.49% on the results and currently trades at $94.4 per share.
Should you invest in Domo right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.
One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.
The author has no position in any of the stocks mentioned.