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Domo (DOMO) Q4 Loss Narrows, Revenues Up on Customer Wins

Zacks Equity Research

Domo Inc. DOMO reported fourth-quarter fiscal 2019 non-GAAP loss of 94 cents per share, much narrower than the year-ago quarter’s loss of $23.96 per share. Post the announcement of the company’s solid results, shares jumped 21.2% in the last two-trading sessions.

Revenues of $39.4 million increased 31% on a year-over-year basis, primarily driven by customer additions. International accounted for 23% of total revenues.

Quarter Details

Billings increased 26% to $57.2 million, primarily driven by solid dollar-based net revenue retention rates that were more than 100%.

During the quarter, Domo’s solutions were selected by 17 new enterprise customers. The number of customers with more than $1 billion in revenues at the end of the quarter was 447, up from 375 at the end of the year-ago quarter.

Subscription revenues (81% of total revenues) were $31.9 million, up 29.1% year over year. Professional services and other revenues (19% of total revenues) increased 38.8% year over year to $7.5 million.

Management stated that 80% of annual recurring revenues in the reported quarter consisted of customers paying more than $50,000.

Domo’s EMEA business billing doubled year over year. The company’s North American enterprise business exceeded expectations.

Domo, Inc. Price, Consensus and EPS Surprise

Domo, Inc. Price, Consensus and EPS Surprise | Domo, Inc. Quote

Operating Details

In fourth-quarter fiscal 2019, gross profit surged 50.3% year over year to $26.9 million. Gross margin expanded 880 basis points (bps) to 65.2%. driven by a $1.1 million one-time revenue transaction and improved average billing rates.

Notably, subscription gross margin was 74% in the reported quarter compared with 64% in the year-ago quarter.

GAAP sales & marketing (S&M) expenses decreased 6.1% year over year to $29.4 million. While GAAP research & development (R&D) expenses declined 13.8% to $16.9 million, GAAP general & administrative (G&A) expenses increased 9.3% year over year to $8.3 million.

Non-GAAP operating loss of $22.9 million was narrower than the year-ago quarter’s $38.3 million.

Guidance

For first-quarter fiscal 2020, revenues are anticipated between $40 million and $41 million. Non-GAAP net loss is expected between $1.26 and $1.30 per share.

Domo expects operating expenses to grow sequentially driven by seasonally higher payroll taxes, and hiring of sales reps and supporting personnel. The company expects representative headcount to increase another 30% in fiscal 2020, while maintaining efficiency.

For fiscal 2020, billings are expected to reach $198 million. Meanwhile, billings are expected to stay in the range of $40 million to $41 million in first-quarter fiscal 2020.

For fiscal 2020, revenues are anticipated between $173 million and $174 million. Non-GAAP net loss is expected between $3.99 and $4.07 per share.

Zacks Rank & Stocks to Consider

Currently, Domo has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same sector include Symantec Corporation SYMC, eGain Corporation EGAN and Synopsys, Inc. SNPS. All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Long-term earnings growth rate for Symantec, eGain and Synopsys is projected to be 7.9%, 30% and 10%, respectively.

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