Domo's (NASDAQ:DOMO) Posts Q3 Sales In Line With Estimates, Stock Soars

Max Juang /
2023/11/30 4:30 pm EST

Data visualization and business intelligence company Domo (NASDAQ:DOMO) reported Q3 FY2024 results beating Wall Street analysts' expectations, with revenue flat year on year at $79.68 million. The company expects next quarter's revenue to be around $79.5 million, in line with analysts' estimates. It made a non-GAAP loss of $0 per share, improving from its loss of $0.69 per share in the same quarter last year.

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Domo (DOMO) Q3 FY2024 Highlights:

  • Revenue: $79.68 million vs analyst estimates of $79.02 million (0.8% beat)
  • EPS (non-GAAP): $0 vs analyst estimates of -$0.12 ($0.12 beat)
  • Revenue Guidance for Q4 2024 is $79.5 million at the midpoint, roughly in line with what analysts were expecting
  • Free Cash Flow was -$7.04 million compared to -$2.29 million in the previous quarter
  • Gross Margin (GAAP): 76.4%, in line with the same quarter last year

“In Q3, we exceeded guidance for key top-line metrics and delivered record operating margin. I am confident we are focused on the right initiatives--such as driving consumption and offering a true freemium model--to help accelerate our path to long-term, profitable growth,” 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.

Data Analytics

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 mediocre over the last two years, growing from $65.08 million in Q3 FY2022 to $79.68 million this quarter.

Domo Total Revenue

Domo's quarterly revenue was only up 0.8% year on year, which might disappoint some shareholders. Additionally, its growth did slow down compared to last quarter as the company's revenue increased by just $3,000 in Q3 compared to $214,000 in Q2 2024. While we'd like to see revenue increase by a greater amount each quarter, a one-off fluctuation is usually not concerning.

Next quarter's guidance suggests that Domo is expecting revenue to grow 0.2% year on year to $79.5 million, slowing down from the 13.8% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 0.4% 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.

Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Domo burned through $7.04 million of cash in Q3 , increasing its cash burn by 13.5% year on year.

Domo Free Cash Flow

Domo has burned through $17.83 million of cash over the last 12 months, resulting in a negative 5.6% free cash flow margin. This below-average FCF margin stems from Domo's poor unit economics or a continuous need to reinvest in its business to penetrate the market.

Key Takeaways from Domo's Q3 Results

With a market capitalization of $346.4 million, Domo is among smaller companies, but its more than $57.39 million in cash on hand and near break-even free cash flow margins puts it in a stable financial position.

It was great to see Domo top analysts' EPS and operating cash flow estimates this quarter. Its revenue and RPO (remaining performance obligations) also slightly beat Wall Street's projections, and its EPS guidance for next quarter came in better than expected. Zooming out, we think this was a decent quarter, showing that the company is on target. The market is likely rewarding the stock for better bottom-line performance. Domo is up 7.7% after reporting and currently trades at $10.2 per share.

So should you invest in Domo 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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