Data visualisation and business intelligence company Domo (NASDAQ:DOMO) reported results in line with analyst expectations in Q1 FY2024 quarter, with revenue up 6.71% year on year to $79.5 million. The company expects that next quarter's revenue would be around $79 million, which is the midpoint of the guidance range. That was roughly in line with analyst expectations. Domo made a GAAP loss of $24.4 million, improving on its loss of $32.9 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) Q1 FY2024 Highlights:
- Revenue: $79.5 million vs analyst estimates of $78.9 million (small beat)
- EPS (non-GAAP): -$0.17 vs analyst estimates of -$0.17
- Revenue guidance for Q2 2024 is $79 million at the midpoint, below analyst estimates of $79.7 million
- The company reconfirmed revenue guidance for the full year, at $326.5 million at the midpoint
- Free cash flow was negative $2.75 million, compared to negative free cash flow of $5.75 million in previous quarter
- Gross Margin (GAAP): 76.6%, in line with same quarter last year
“Domo helps companies of all sizes capitalize on the full potential of their data by empowering each employee to be a multiplier of business impact,” said Josh James, founder and 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 solid over the last two years, growing from quarterly revenue of $60.1 million in Q1 FY2022, to $79.5 million.
Domo's quarterly revenue was only up 6.71% year on year, which might disappoint some shareholders. But the revenue actually decreased by $166 thousand in Q1, compared to $598 thousand increase in Q4 2023.Shareholders might want to pay closer attention to this as the management is guiding for the decline in sales to continue in the coming quarter
Guidance for the next quarter indicates Domo is expecting revenue to grow 4.59% year on year to $79 million, slowing down from the 20.2% 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 6.26% 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 76.6% in Q1.
That means that for every $1 in revenue the company had $0.77 left to spend on developing new products, marketing & sales and the general administrative overhead. 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. 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 pressure from competition to lower prices.
Key Takeaways from Domo's Q1 Results
Since it has still been burning cash over the last twelve months it is worth keeping an eye on Domo’s balance sheet, but we note that with a market capitalization of $531.4 million and more than $66 million in cash, the company has the capacity to continue to prioritise growth over profitability.
There were small beats for topline metrics like billings, subscription revenue, and total revenue. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations, although full year guidance was roughly in line. Overall, this quarter's results were not the best we've seen from Domo. The company is down 0.81% on the results and currently trades at $14.69 per share.
Domo may have had a tough quarter, but does that actually create an opportunity to invest 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.