Domo (NASDAQ:DOMO) Posts Better-Than-Expected Sales In Q4 But Stock Drops 13.3% On Weak Guidance

Full Report / March 07, 2024

Data visualization and business intelligence company Domo (NASDAQ:DOMO) reported Q4 FY2024 results topping analysts' expectations, with revenue flat year on year at $80.18 million. The company expects 2024 revenue to be around $319 million, missing analysts' estimates. It made a non-GAAP loss of $0.05 per share, down from its loss of $0.02 per share in the same quarter last year.

Domo (DOMO) Q4 FY2024 Highlights:

  • Revenue: $80.18 million vs analyst estimates of $79.54 million (0.8% beat)
  • EPS (non-GAAP): -$0.05 vs analyst expectations of -$0.05
  • Revenue Guidance for Q1 2025 is $79.5 million at the midpoint, roughly in line with what analysts were expecting
  • Management's revenue guidance for the upcoming financial year 2025 is $319 million at the midpoint, missing analyst estimates by 1.5% and implying 0% growth (vs 3.4% in FY2024)
  • Free Cash Flow of $2.93 million is up from -$5.67 million in the previous quarter
  • Gross Margin (GAAP): 76.3%, down from 77.2% in the same quarter last year
  • Market Capitalization: $427 million

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.

Serial entrepreneur Josh James founded the company, after selling his prior company, Omniture, to Adobe (NASDAQ:ADBE). He had noticed that it was very difficult for the management to understand the vital signs of their company since data around various metrics such as staff numbers, retention rates, and customer acquisition costs were often held in disparate systems.

Today, Domo allows decision makers to monitor all these things and more from their phone and can draw data from thousands of sources, such as disparate points of sales across a large franchisee network.

For example, pharmaceutical companies rely on Domo's software to track the temperature of perishable products as they travel through the supply chain via real time updates. This helps them to test different refrigeration systems to know which one performs best, ensuring they save costs and deliver their products faster to users.

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.

In the business intelligence space, Domo is competing with Tableau (owned by Salesforce), Microsoft (NASDAQ:MSFT), and SAP (NYSE:SAP).

Sales Growth

As you can see below, Domo's revenue growth has been unremarkable over the last two years, growing from $69.99 million in Q4 FY2022 to $80.18 million this quarter.

Domo Total Revenue

Domo's quarterly revenue was only up 0.7% year on year, which might disappoint some shareholders. However, we can see that the company's revenue grew by $509,000 quarter on quarter, accelerating from $3,000 in Q3 2024.

Next quarter's guidance suggests that Domo is expecting revenue to grow 0.1% year on year to $79.5 million, slowing down from the 6.7% year-on-year increase it recorded in the same quarter last year. For the upcoming financial year, management expects revenue to be $319 million at the midpoint, growing 0% year on year compared to the 3.4% increase in FY2024.


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 76.3% in Q4.

Domo Gross Margin (GAAP)

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.

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's free cash flow came in at $2.93 million in Q4, turning positive over the last year.

Domo Free Cash Flow

Domo has burned through $5.75 million of cash over the last 12 months, resulting in a negative 1.8% free cash flow margin. This low FCF margin stems from Domo's constant need to reinvest in its business to stay competitive.

Key Takeaways from Domo's Q4 Results

Domo's free cash flow came in positive but revenue barely grew in Q4 andĀ full-year revenue guidance was below expectations and suggests a slowdown in demand. Overall, this was a weak quarter for Domo. The company is down 13.3% on the results and currently trades at $9.85 per share.

Is Now The Time?

When considering an investment in Domo, investors should take into account its valuation and business qualities as well as what's happened in the latest quarter.

We cheer for everyone who's making the lives of others easier through technology, but in case of Domo, we'll be cheering from the sidelines. Its revenue growth stalled, and analysts don't expect that to change. And while its strong gross margins suggest it can operate profitably and sustainably, the downside is its customer acquisition is less efficient than many comparable companies. On top of that, its growth is coming at a cost of significant cash burn.

Domo's price-to-sales ratio based on the next 12 months is 1.3x, suggesting that the market does have lower expectations of the business, relative to the high growth tech stocks. While we have no doubt one can find things to like about the company, we think there might be better opportunities in the market and at the moment don't see many reasons to get involved.

Wall Street analysts covering the company had a one-year price target of $15.30 per share right before these results (compared to the current share price of $9.85).

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