Data visualisation and business intelligence company Domo (NASDAQ:DOMO) reported results in line with analysts' expectations in Q2 FY2024, with revenue up 5.48% year on year to $79.7 million. However, next quarter's revenue guidance of $79 million was less impressive, coming in 3.74% below analysts' estimates. Domo made a GAAP loss of $16.1 million, improving from its loss of $29.1 million in the same quarter last year.
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Domo (DOMO) Q2 FY2024 Highlights:
- Revenue: $79.7 million vs analyst estimates of $78.9 million (0.98% beat)
- EPS (non-GAAP): -$0.02 vs analyst estimates of -$0.09
- Revenue Guidance for Q3 2024 is $79 million at the midpoint, below analyst estimates of $82.1 million
- The company dropped revenue guidance for the full year from $326.5 million to $318 million at the midpoint, a 2.6% decrease
- Free Cash Flow was -$2.29 million compared to -$2.75 million in the previous quarter
- Gross Margin (GAAP): 76%, in line with the same quarter last year
“Domo’s data experience platform helps companies of all sizes put data to work for everyone so they can multiply their impact on the business with real-time insights and action,” 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.
As you can see below, Domo's revenue growth has been mediocre over the last two years, growing from $62.8 million in Q2 FY2022 to $79.7 million this quarter.
Domo's quarterly revenue was only up 5.48% year on year, which might disappoint some shareholders. However, its revenue increased $214 thousand quarter on quarter, a strong improvement from the $166 thousand decrease in Q1 2024. This is a sign of acceleration of growth and very nice to see indeed.
Next quarter, Domo is guiding for a 0.03% year-on-year revenue decline to $79 million, a further deceleration from the 21.4% year-on-year decrease it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 6.8% over the next 12 months before the earnings results announcement.
While most things went back to how they were before the pandemic, a few consumer habits fundamentally changed. One founder-led company is benefiting massively from this shift and is set to beat the market for years to come. The business has grown astonishingly fast, with 40%+ free cash flow margins, and its fundamentals are undoubtedly best-in-class. Still, its total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.
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's left after paying for servers, licenses, technical support, and other necessary running expenses, was 76% in Q2.
That means that for every $1 in revenue the company had $0.76 left to spend on developing new products, sales and marketing, and general administrative overhead. Domo's impressive gross margin allows it to fund large investments in product and sales during periods of rapid growth and achieve profitability when reaching maturity. It's also comforting to see its gross margin remain stable, indicating that Domo is controlling its costs and not under pressure from its competitors to lower prices.
Key Takeaways from Domo's Q2 Results
With a market capitalization of $608.5 million, Domo is among smaller companies, but its more than $63.9 million in cash on hand and near break-even free cash flow margins puts it in a stable financial position.
We struggled to find many strong positives in these results. This quarter's revenue was in line with expectations but it lowered its full-year revenue guidance, missing analysts' estimates. Overall, this was a mixed quarter for Domo and the market is punishing the stock for a slower growth outlook. The company is down 17.9% on the results and currently trades at $13.99 per share.
Domo may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
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The author has no position in any of the stocks mentioned in this report.