Domo, Inc. (DOMO) Earnings Call Transcript & Summary

Okay. Hello, and good afternoon, everyone. My name is Taylor McGinnis, and I'm one of the software analysts here at Deutsche Bank. This session of Deutsche Bank's Virtual Technology Conference is with Bruce Felt, who is CFO of Domo. Bruce, really appreciate you joining and great to have you here.

My pleasure. Thanks for inviting us.

Perfect. So before we start Q&A, I just want to remind everyone that you can submit a question via the chat box, which is on the left-hand side of the screen. So with that, let's dive in.

Bruce, for those that aren't as familiar with Domo, can you first start by offering a brief background on the company and perhaps yourself as well?

Okay, thank you. So I'm Bruce Felt, CFO of Domo, been here a little bit over 5 years. It's the third company I've taken public. The one prior to that was Success Factors that had an exit rate for $3.4 billion. What attracted me to Domo was compared to what I experienced with Success Factors was: One, a much larger TAM, and at the same time, I would say, a much more transformational product. And what makes Domo so different is simply our point of view on day 1, which was despite the fact that BI and reporting and big data has been around for decades, the satisfaction rate of business leaders and even frontline employees and how they get data, how they consume it, their -- the timeliness of it, how responsive they can be, how data-driven they can be, was extremely unsatisfactory despite tens of billions of investment made in the space. So at Domo, we have to solve that problem, which is the light VM users. And as far as I can tell, even as we sit here today, we're the only company that has really delivered what business users need. And we do it with speed. We do with scale. It's mobile, it's self-service, and fundamentally, we give execs and front line employees the ability to run their business from their pocket. And it's what people have aspired to do for a long time, but Domo delivered it, and it was very hard to do. It was very expensive, but now as we find, as the world has changed dramatically because of COVID-19 and the macro slowdown, the business is being challenged, left and right. The need for speed, which we absolutely provide because we connect straight to data sources, combine them, clean it and deliver it to you. The need for speed is paramount today. So it explains why we could be doing reasonably well in a very challenging environment. So anyway, let me just stop there at the basic introduction to myself and the Domo.

Yes. That was a great introduction. And I'd love to dig a little bit further. So you touched on this a little bit, but the business intelligence and analytics market is obviously very fragmented, and there are several vendors in this space. So what specific use cases or verticals does Domo target? And I guess I'm just looking for more examples of how you guys really differentiate?

It's extremely fragmented. And that's basically the reason why nobody gets the data they want. I mean if you have a -- most companies, particularly the large enterprises, they have dozens and dozens of technologies just to get data pulled together and made available and then other than many different technologies on how to deliver it. So that's the problem actually. And the reason why the problem has not been solved is out of necessity, the IT departments and the BI groups have had to work with them that framework of multiple technologies because it took a lot of specialties and specialists to be able to even make data clean and available. And so it's that fragmentation that's really caused dissatisfaction. So Domo has a complete platform that connects data, cleans it, visualizes it, you can put ABS and AI on top of it, and it's mobile and self-service and very easy to use. The C-suite uses it and interacts with it. I'd say, unlike any other polytechnology, other than maybe e-mail. And so that's what makes it a difference. So when you think of use cases, I mean it's unlimited what use cases are, where we shine, and it's just by the nature of the fact that this space has been around for a long time, where we shine is when companies absolutely have to have real-time data. And even with all the technologies that they have, and there are many, they come to Domo. And so our use cases are fundamentally anything where you need real-time data. I mean, some of the most recent big wins, as an example, were 3 state deals where we delivered -- we basically developed a solution in 48 hours and pretty much sold it in 48 hours after that, which was just simply giving them a crisis command center so that they could monitor how they are managing the COVID-19 crisis. And that went from understanding tests, understanding case counts, understanding the supply chain for PP&E and other logistical information that they need just to be able to manage the pandemic. And I mean these states have every technology that's already been developed, but nothing could match the speed by which we were able to deliver it. We had a nice retail win this last quarter. And there was, again, all the large incumbents. It happened to be a huge Microsoft shop. And believe me, Microsoft made the case that between their platform and power beyond top of it, they could do anything that the customer wanted, but they couldn't. The customer needed real-time information about what was going on in the retail stores and their distribution network, what was going on in websites, and we were able to develop that -- well, over time, we just demonstrated that use case after use case, speed and availability of data. We were able to provide a sense that nobody else could do that. And so it could be weather data. It could be pandemic data, supply chain data. We have Unilever and Targets connected together via Domo where Unilever uses our AI, artificial intelligence framework to predict a stock out and to prevent the stock out. And so I want to surprise you that we actually have strength in retail even through this pandemic. We had a -- we actually had a furniture company that had literally shut its doors by Domo so that they could understand how to reopen. We had a cruise line by Domo who has already had no customer traffic, but they had to target who would use the cruise line during this time. And so Domo was part of that solution. So the number of use cases are unlimited, but the common themes are easy to use, fast, mobile, big data. I mean, we have fundamentally unlimited capacity because it's all in the cloud. And so those are the use cases that I mean it's simply unlimited. So let me just stop there for now.

Yes. That's all really interesting. So it sounds like there needs to be some standardization in this space, and that's clearly a problem, which is what you're talking about. So I guess what's the risk also associated with standardization? And today, how widely used is Domo across organizations relative to competing solutions? So we've seen some consolidation in the space with Google acquiring Looker and Salesforce acquiring Tableau. Just curious to follow-up if you've seen any shifts in the competitive dynamics because of that as well?

Yes. Well, first, let me start with -- the Fed were so unique and can do the undoable, happens to be our problem actually because we came to market with the ultimate answer in data, like businesses just get it to them so they can run their business better. We solved the problem. It was our problem. Because of the history of how the space developed, nobody was really -- at the end of the day, was fundamentally looking for an end-to-end solution. The infrastructures of the largest companies in the world did not think that was possible. So they basically used all the tools that were out there. So when Domo came on the scene, we did not fit into the way customers bought BI. Hence, our basic problem, build it and they will buy it as a philosophy because you can't help us buy it once you see it was proven wrong. So that's been a major challenge for us. The way we have solved it is instead of being competitive with our own customers and suggesting to them that they use Domo instead of the infrastructure that they've already built. Instead of doing that, we have softened the message and just proposed that you can keep your infrastructure and just let Domo sit on top of it and unlock all the value that you've already created, get leverage out of your BI infrastructure. And this is one of the many, many go-to-market changes we're making in response to the fact that we developed a product that did not fit into the way that big enterprises bought the product. And so we've had to reengineer and re-architect pretty much our whole entire go-to-market for this reason, but we made a lot of progress, and we have a lot of progress to go, but I think one of the reasons why we're doing reasonably well today is because, one, the market needs the speed; and two, we have made enough progress against our go-to-market requirements that we're able to put them together and again, do well when it wasn't obvious at the beginning of the pandemic, a company like us would do well. Now to your other point on what's going on in the market, as demonstrated by the business consolidation. I think that's a demonstration that this problem is far from solved. As you might recall, Salesforce declared being -- having developed Domo effectively 5 years ago when they announced Wave. They said that was running your business on your phone. So here's a company with a visionary, all the vision in the world, all the money in the world and all the cloud engineering talent in the world. And at the end of the day, what did they do? They didn't deliver Domo, they deliver -- they bought Tableau and MuleSoft and others. So it took them $22 billion just to be able to present the case that they can solve the analytic needs, and we already know by history, you cannot put the parts together and get the solution that Domo's done. So good for them that they realized how important the analytics market is, good for them for making progress with respect to their customers, but we still stand alone in the ability to pull together sales force data and Oracle data and SAP Data and Facebook, LinkedIn, Twitter data, and combine it, clean it and deliver it, pretty much at lightning speed to our customers. And then Google buying Looker, just shows, again, how important the space is -- how large the space is and how unmet the need is.

Right. I think that makes sense. And my last question that I just have on the competitive landscape is I'm curious if you've found it tougher to compete against some of these larger companies in this environment, when they can bundle and potentially offer greater contract flexibility. I'm wondering if you've seen any pricing pressure in this environment. And then maybe a second question on this is you've seen Microsoft's success with Teams and the -- and it sounds like they're doing a lot of integrations between it and Power BI. So is that a potential threat at all as well?

Hey, Bruce?

Yes. Hi. Josh, let me introduce you to Josh James.

Yes, I've been on in the beginning, but I guess my line was muted. So I'll give you a breather, Bruce, on that one.

Okay.

The -- yes, I would say on the competitive landscape, it's -- the best approach that we can take when we're talking to our customers is yes, if you've got Power BI, great. If you have a couple of users that want to keep using it, keep using it. If you've got Tableau, trying to use for some visualization, that's fine. What we can come and do is really be a data platform at scale, and we can rapidly adapt to the different business environments that you have. We can help you with this digital transformation, the way that Bruce really adeptly described the entire platform. And the -- in terms of how they affect us, it really hasn't really affected us from a pricing standpoint because we win deals. When we do a POC when the customer sees what we can do, when they realize how different we are than anything else that's out there because of the scale of the speed, the mobile-first and the cloud-first experience that we provide. And once the customer goes to the POC, then we do have pricing power. So I think the deals that we closed, we closed at pricing that we're really happy with. And Microsoft changes with Teams, that doesn't really affect us, Tableau being acquired by Salesforce has not affected us. It's affected us in a positive way. We've seen them less, but I think the biggest thing that we're seeing, and Bruce touched on a couple of these things, but the fact that we can move as fast as we move, and we can help people with their digital transformation. One of the biggest questions you have when you're getting ready to do a deal is, who else is using you? And we just signed one of the largest apparel manufacturers in the world. And as we were talking to another large apparel manufacturer, Fortune 100 company, I was talking to their CFO, and we're pretty far down the path, and he said, "so who else do you guys have that's similarly sized?" And I said, "Oh, you know your competitor that's larger than you in this area, they just became a customer." And he's like, "oh, okay. Well, I guess that puts that to rest." So the other thing you always see in enterprise businesses, who's the referenceable customers that you have. And that's a piece that we just didn't have as effectively as we do now. And the fact that we can have really top 3 companies in virtually any space now serve as referenceable customers to other companies in those spaces really is the big thing that, I think, propels us forward.

Great. I appreciate those insights, Josh, it's really helpful. Maybe switching gears a little bit. Let's talk about the impact that pandemic is having on business intelligence and analytic tools in general. So you mentioned on your most recent earnings call that Domo expected a significant decrease in new business, but that, that actually didn't materialize in 1Q and 2Q. So why do you think net new logo additions for Domo have been more durable than others? I guess what areas exceeded your expectations? I know earlier you talked about even strength in retail and cruise lines. So maybe you could just elaborate a little bit more on that?

Yes. I think the biggest thing is it's accelerating people's need for data. It's accelerating people's need for digital transformation. They're not in the office. They can't go see the person they want to find out what's taking place. And then business is changing fast. So you've got really large multinational companies coming back to work, and they think they're opening up offices in China, how are they doing? Retail stores, how are they doing? Oh, we have to close them again? How are you doing? What's our supply chain likely? Are we getting that? Are we not getting that? Did that get through? And this real-time data becomes so important. And so one of the other Fortune 500 companies that we're talking to right now, it's a Fortune 100 company as well, and they went through and looked at their top IT projects and we've done POCs there. We've made it through all the approvals. And they have 130 different projects that have been green lit as projects that they're going to do at their company. And they went through and ranked them. And we -- our budget with them used to be down in the 50s out of 130, which still meant it was going to be done, which still meant we were going to be funded, but as the environment is changing, they went through and they re-ranked everything, and we shot up to #7. It's still not #1, but #7 out of 130 is not bad. And so the pandemic, I think, has just really accelerated people's needs for digital transformation. It's not a 3-year, 5-year timeline anymore, it's now. And I think that's something that continues because one of the biggest things like I mentioned here that we didn't have was just these big, big referenceable customers. We had a handful, but now any industry, anybody we're talking to, we have those. And I think, like Bruce talked about with these state deals, and other people that are coming up with vaccines and coming up with testing. Many of them are customers, and they call us and say, here's the next thing that we need to do. We need to do it now, can you respond? And the fact that over the weekend, over the course of a couple of days, we can help them put together a solution in a timeframe that is literally quarters faster than anything else they've ever seen, just really starts highlighting the differences between us and everyone else. And it starts to make their CIO and their CDO, their Chief Data Officer or their Chief Digital Officer, really start to elevate how -- where we sit in their eyes.