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Domo (NASDAQ:DOMO) Reports Q1 In Line With Expectations


Radek Strnad /
2022/05/26 4:30 pm EDT
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Data visualisation and business intelligence company Domo (NASDAQ:DOMO) reported results in line with analyst expectations in Q1 FY2023 quarter, with revenue up 23.9% year on year to $74.4 million. Guidance for the full year also exceeded estimates, coming in at $317 million at the midpoint. Domo made a GAAP loss of $32.8 million, down on its loss of $18.1 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) Q1 FY2023 Highlights:

  • Revenue: $74.4 million (small beat)
  • EPS (non-GAAP): -$0.23 vs analyst estimates of -$0.40
  • Revenue guidance for Q2 2023 is $76.5 million at the midpoint, roughly in line with what analysts were expecting
  • The company reconfirmed revenue guidance for the full year, at $317 million at the midpoint
  • Free cash flow of $407 thousand, up from negative free cash flow of $643 thousand in previous quarter
  • Gross Margin (GAAP): 76.2%, up from 74.7% same quarter last year

“In today's environment, business agility remains as important as ever," said John Mellor, CEO, Domo.

Founded by Josh James after selling his former business Omniture to Adobe, Domo (NASDAQ:DOMO) provides business intelligence software that allows managers to access and visualize critical business metrics in real-time, using their smartphones.

Organizations generate a lot of data that is stored in silos, often in incompatible formats, making it slow and costly to extract actionable insights, which in turn drives demand for modern cloud-based data analysis platforms that can efficiently analyze the silo-ed data.

Sales Growth

As you can see below, Domo's revenue growth has been strong over the last year, growing from quarterly revenue of $60 million, to $74.4 million.

Domo Total Revenue

This quarter, Domo's quarterly revenue was once again up a very solid 23.9% year on year. Quarter on quarter the revenue increased by $4.47 million in Q1, which was in line with Q4 2022. This steady quarter-on-quarter growth shows the company is able to maintain its steady growth trajectory.

Guidance for the next quarter indicates Domo is expecting revenue to grow 21.7% year on year to $76.5 million, in line with the 22.8% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 22.1% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. 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, licenses, technical support and other necessary running expenses was at 76.2% in Q1.

Domo Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.76 left to spend on developing new products, marketing & sales and the general administrative overhead. Significantly up from the last quarter, this is a good gross margin that allows companies like Domo to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity.

Key Takeaways from Domo's Q1 Results

With a market capitalization of $1 billion Domo is among smaller companies, but its more than $83.9 million in cash and the fact it is operating close to free cash flow break-even put it in a robust financial position to invest in growth.

We enjoyed seeing Domo’s improve their gross margin materially this quarter. And we were also glad to see good revenue growth. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is flat on the results and currently trades at $30.14 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.

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The author has no position in any of the stocks mentioned.