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

Good morning, everyone. Welcome back. We're lucky to have Chris and Peter with us this lovely morning. Unfortunately, we're still inside. We'll go and check out the sun soon. But welcome and then coming…

Thank you, Tim.

Maybe to kick it off, Chris, you've been with the company from the very beginning. So would love to hear about the journey you've had, the journey the company has had and really help us understand kind of the culture and how that's evolved over time as well.

Yes. I appreciate that. So I don't know how many of you are familiar with Domo or what Domo is. Maybe I should start there, which is we call Domo our business cloud, and it is a platform that allows you to leverage your BI analytics at cloud scale in record time. That's our pitch. And it took us about 10 years to build this thing. This is a massive project that took a lot of vision, a lot of resources and just a lot of hard work as we were talking about earlier. A little bit about the journey, Josh James, our CEO, started a company called Omniture, some of you might have heard that. It was a really successful SaaS company. It was an analytics company for advertising. And at the end of the day, I think it was -- he sold it to Adobe for close to $2 billion and he was so-called retired. And Josh is not the kind of guy who retires easily. And so, I think he -- his wife said he retired for about 18 hours and got a little ante. And what he got ante about was he had this very successful SaaS company, had -- it was an analytics SaaS company on top of that. And yet at the end of the day, he felt like he couldn't answer the most basic questions that a CEO should be able to answer. How many people are working here? How much money is in the bank, right? How well is product being developed? He couldn't answer the most basic questions. And that's when I ran into him. I mean, I was literally -- I had another start-up across The Street from him, which got purchased and I had nothing to do. So he's like, why don't you come on down, let's talk. And I think it's kind of an interesting partnership, in that you have kind of a titan of business who's innovating around SaaS in the very, very early days. So we're talking like -- was it 2003, I think for -- when Omniture was started. And then sort of infusing a different way of thinking about the problem. And one of the things that really attracted me to Josh, and I think this infused our culture was, a lot of times, start-ups focus on and their founders focus on having an original idea. This was about solving a problem. That's what really attracted me to Josh, which was, look, the problem we're trying to solve for that CEO is the same problem that organizations across the globe are now trying to solve for everyone within the organization. In a way, everyone is kind of a mini CEO, but they can't get their jobs done because they don't have the data, they don't have the awareness of the situation or the applications that are being pushed out to make better decisions at the edges of the organization. And if there's one thing that we've seen, and because we have -- we get a lot of -- well, I love as a designer, I get a front seat at the bus, I get to see what all of the top companies and even some of the smaller companies are doing. And you're looking for companies from the future. And what you see time and time again is that there's a lot of potential in data, in the systems and in their people that remains unlocked. And I think for us, the vision of creating a platform of capability to help connect both legacy systems together and also provide a complete end-to-end solution very quickly is starting to create some really exciting things within our customers' sort of spheres of influence.

And this has obviously been an incredibly fast-moving space. I think if you look at the rate at product innovation coming out of Domo and just the broader space, it's been pretty incredible. Maybe help us understand a little bit as you think about the next 3 years, but then also longer-term, what are the key areas where you feel like you can create the most value for customers, maybe help us quantify those?

Sure. Well, I can give you an example of one thing that is creating new kinds of value because, to your point, when you say it's a fast-moving space, and when you think 3 to 5 or more years out, you're really trying to stare into a crystal ball. Right? I mean, COVID, we didn't hear about that, like no one knew about that. Right now, we're sitting here in a very different spot. Right? And we're responding to it in a very different way and we're doing business in different ways. What are we seeing? We are absolutely starting to see companies wanting to leverage their data in new kinds of ways, both internally and externally. And so, one of our very successful sort of product offerings is something called Domo Everywhere, which is -- I think some people might call it like embedded analytics, but it's much more than that. It's much more than that, in that you can use your data to quickly communicate with your customers, communicate with your customers' customers. We have people -- there's a financial asset management company. They use it to communicate with their customers' customers' customers. Right? So you can -- you see the pattern. It might sound kind of funny, but you can start to leverage data in a platform model versus, I think, the traditional business model that we're all familiar with, right, which is you have your inputs and you have your outputs. And all of the BI analytic tools are designed to help you kind of microscopically look at optimizing parts of your business. And to your question, what's changing, it's going from a value chain, a very linear sort of business model to a digital platform model. And I think that is what is sort of in the vision of Domo along and you're seeing this with like Domo Everywhere, where companies are, like, well, maybe we didn't think about it this way, but we're starting to see a lot of uptake. We're starting to see a lot of ways for us to either experiment or provide value to our customers that we just couldn't do. Because the way customers -- our customers typically have to work is they have to create yet another system in their sort of legacy system framework and they have to maintain that, they have to design it, they have to get funding for it, they have to get -- show ROI on it, et cetera, et cetera, there's a lot of drag. How do you move faster? And that's really what we've been trying to do with Domo is to create just greater value, much more agility safely with built-in governance and compliance. These are the things that are typically not sexy. One of the things we joke about a little bit is that if you look at -- I'm sure a lot of you have seen these, you're like, show me your diagram, your architectural diagram, how does this whole thing work, and it's boxes and arrows. Right? And everyone typically focuses on the boxes. I think there's really no one who kind of has an end-to-end solution at all like Domo does, but it's not necessarily the boxes that are important, it's the arrows. Right? It's the ability to integrate across all of those different features and make that a seamless, powerful experience, such that you can do the things that aren't really sexy, but essential, like governance and compliance. If you want to make sure that this group has access to this data across all of the -- this type of data across all of the data, you can't do that in a very scattered kind of ad-hoc built platform. You have to make sure all that's built in from the get-go. And that was kind of the vision very early on. To your point, it was we need to do the hard stuff. In fact, we kind of joked, we don't do easy. Like if there's a problem out there that we're seeing, and it's not difficult enough, we are very skeptical that we should pursue it. And it's taken us 10 years to do that.

One of the things you mentioned is you're starting to see your customers build products for their customers with Domo Everywhere and other products. Maybe help us understand to what degree that's been an intentional feature of the product and to what degree you're starting to see that flywheel going.

Yes. So I would say, early on, I'll definitely speak for myself, I was very naive. I thought this was an easier problem to solve, right, i.e., how do you turn data into something actionable? How do you make that shift from the trend that data is just the bits and pieces that you use to -- for something else till data becomes the product, right? And so, what are the things that you have to do? And I thought it was going to be a lot easier, in that how hard can it be, right? We already have the data, where it's sitting in spreadsheets, it's sitting on servers, we have different kinds of technologies and we have AI and ML that we can apply to these things. To your point, there are constant barriers to turning data into something useful. So we try to break those down. And what we're starting to see -- I'll give you one example. A very large Fortune 100 CPG company took the data that they had and then took other data that they had. So this is one of the things that we see a lot is that companies -- I'm trying to think of a good way to say this. I think that many times, there's a lot of internal skepticism. They're not used to necessarily winning on a frequent basis, right, because there's a lot of things getting in the way. And that gets sort of misinterpreted as maybe it's hard for us to innovate. But what we've seen is, once you start to remove some of those barriers, they mature very, very quickly. And companies start to move very, very quickly. So in the case of this very large CPG company, they took data and shared it not just with their retailers to understand sort of stock and inventory in real-time, and that's wonderful because that was really core to the Domo value, which was you have -- I don't know where I put my phone, but that you have your data right at your fingertips. And when you push it to the edges, that means you can change things. You can make a decision, you can have that conversation. In the case of this company, they started looking more upstream, and they're like, oh, wait a minute, we can now blend other types of data that we would call this dark data that we normally wouldn't talk to each other that we couldn't combine and figure things out. And they created an ensemble machine learning method, where constantly all the data coming in around shipments, inventory, how things are selling, so now they're getting data from our another Domo customer that -- so they can now share data, and this is back to the sort of more of a platform ecosystem versus just your typical value chain. Now, that system is constantly voting to see which one of the models is going to be most predictive, and we'll use that. And when something like COVID hits, that's really important because you're using data not just in a historical sense, you're using it to understand how the market -- how customer behaviors are changing in real-time. And so, we need sort of more early warning awareness. That is just one of like many examples, where you think you know what you have and you think you know what you can know, but then all of a sudden, you start seeing more and then you want more. And that's one of the things that gets really exciting because our customers start really pushing us. And that's -- I don't know what to call it, but there's almost like this data maturity curve. Right? And it's more than data, it's data, it's people, it's culture, it's systems, it's mindset. And that's what gets really exciting.

Yes. Sounds like you almost have to ship your -- shift your mindset as an organization and then realize the value of Domo. So I'd be curious, as you look to the enterprises out there today, how penetrated is that mindset? Where are we in adoption curve?

Yes. That's a great question. In fact, Peter and I were just talking about that earlier today. So in terms of -- well, I feel like there is this sort of maturity curve, right, which is a lot of organizations, if you don't solve that sort of singular source of pain first, they have a hard time looking past it. I've seen that time and time again. And that might be -- I kind of feel like sometimes my job is not just as an entrepreneur or a technologist, but it's more like being an anthropologist, right, like a corporate anthropologist. When you look and you -- like I worked -- for example, I worked at Deloitte Touche -- sorry, Deutsche Bank. I was on Wall Street at Deutsche Bank. And I remember just trying to figure out simple answers to questions that seemed like I should be able to find someone to answer this for me. I couldn't find that person, I couldn't find the way to get through the multiple systems to maybe contact that person. There was always a lot of sort of cultural things getting in the way of those. And I get that. I understand that. So culture is kind of like the software of the organization. And one of the things we've tried to do with Domo is make sure that it's an open enough platform that you can plug and play sort of not just existing systems or cloud systems, but that it can work the way your culture works best. So back to your question, the kind of problems that people are trying to solve to us sometimes seem fairly rudimentary. Right? It's like you might have spent all this money on your legacy system, but the data you're getting out of it is not in the form or timely enough. That is one of the #1 things, which seems kind of strange. Right? Like as consumers, and this is another trend we see, we're used to getting almost instant gratification. In the enterprise space, it doesn't always work that way. And in fact, from the CEO level all the way down, you have people going like, okay, I asked a question, I don't know when I'm going to get the answer, I don't know how the answer is going to be sort of spun or presented to me, I just want to know what this is. So for us, we're seeing once companies start to unlock some of the -- or get through some of that pain, then they become very open to kind of innovating and the mindset begins to change. And unfortunately, there's not necessarily one -- we kind of joke that sometimes we need like a -- along with corporate anthropologists, we need like a corporate therapist. Someone going like, it's okay to ask the question because a lot of executives don't want to ask the question because they've been told not to ask the question, they've been slapped so many times. We've also seen that happen at other levels in the organization. So how do you sort of desilo-ize information, right? I mean, we talk about democratizing information. But to your point, I think the mindset is really important because a lot of times, and I've heard this many, many times, executives saying, I was just taught never to ask that question. And we're trying to challenge that, say, you can. But to your point, you have to do other things. Right? You have to understand how it affects the business. You have to understand what it -- how it's been used in the business previously. Data trust is always a big issue. Just because someone gives you a spreadsheet doesn't mean that's valid.

Yes. It's almost -- you have to make the investment up front and then you'll get a big ROI, but it's maybe a little bit more back-end loaded. Given that dynamic, I would imagine your customers, once they make that investment, are pretty sticky. Maybe talk to us a little bit about what you're seeing in terms of churn and just the stickiness of your customer base. And I think recently, you've talked about your churn rates going up. Maybe help us understand how your go-to-market motion or maybe your willingness to acquire new customers has changed as your retention rate has gone up?

Yes. Yes. And I might throw some of this over to Peter, but I would say, in general, like our -- and we have an earnings call tomorrow, obviously, so stay tuned. But in general, we have done a much better job at reducing that churn. Early on -- I mean, this is a 10-year process. So we look at a very, very long -- we have a very sort of long view. At the start, building such a complicated system, there were certain things that we needed to do better. And it's almost like a telephone network in a way. Right? Like 1 phone is great, but it's pretty much useless. It might look good. But if you can't call anybody, it's useless. Right? 2 is good, but the value of networks goes up at like 2 to the end. And I think in some ways, we had that same sort of issue, which is like, okay, you're doing great visualizations and you're doing this and you're doing this, but we need this. And we now have what I feel is -- I mean, it's an offering that's unmatched. To your point, I think one of the things is trying to help companies kind of understand, okay, how can I use this to solve this problem and then recognize it as a way to solve this whole class of problems because that's the way we've done it. I don't know if you want to add anything about…

I'll just say in general what we've gotten better at is focus at landing more strategically. So like Chris was talking about, the platform is so powerful that we can do almost anything. And in the past, we used to do almost anything. And that could range from something that might be lower value to the higher value. Right? We're getting better at identifying where the most valuable use cases are. At the same time, we've focused on larger customers. So our churn -- we used to have a lot of smaller customers. The churn rate in our smaller customer base is definitely higher. We've landed with more seats on average. So if we have less than 50 seats, our churn used to be higher. Right? As we move past that, it's lower. Right? So we're landing more strategically, more focused, we have sales plays, we have identified pain points, which makes the sales cycle easier because we know the problem, we know the person we need to target, we know the solution. So if we land in that way, it's going to be very sticky. That's what…

Yes. No, I think that's absolutely right. So to your point, I think it kind of ties very well with that earlier point, which is the mindset. And so, if you have a -- we sell a lot -- we have a lot of engagement from CEOs because there -- it was kind of funny. I remember early on, it was like, Josh, are you saying I need to design something to empower the most powerful person at the company? That's my job. But in a way, you have to, right, because there are still hierarchies. Right? There's still top down. And when we get those kind of sort of our data evangelist, whether it's the CEO or the Head of IT or a Chief Transformation Officer or someone like that, those things move very quickly. But we even see -- even at like some of the most advanced companies on the planet, we'll still see things like we just want to use -- at the start, we want to use Domo to just reduce the amount of hours we're spending creating reports. Like, that's great. But once they do that, to Peter's point, it's kind of a joke, but we can do just about anything. And I think that's actually one of the challenges because you have to bring a certain level of creativity and go like, oh, we're in the problem-solving business ourselves. And so, that's where coming with like the proper sort of sales plays and sort of preventing -- providing sort of packaged kind of verticals, we're like, okay, solution, solution, solution. But when COVID hit, we already -- I think within like a week or 2, we had what we called our Safe Worker App, and we were using it internally, which we built on top of our own platform, right…

Within a week?

Yes. And so, we had already been working on another one for like remote work. But I think maybe Salesforce or ServiceNow, we're the only other ones that can possibly do that. Again, when I talk about some of our competitors, those are designed as BI applications. We do BI very well, but the broader vision of Domo was much greater. It was how can you leverage this data to read and react what's happening in your marketplace, what's happening in your organization? And at the end of the day, it's just data. Right? And so, if you can help people access it, understand the relationship to the data, to each other, then I think you start unlocking a lot of potential within organizations.

So maybe help us understand that maybe competitive dynamic a little bit more. You're competing with a couple of companies or products like Power BI and Tableau, which are housed within a much larger organization. So help us understand how you're positioned, how you're nimble enough such that you are able to continue to compete?

Yes, that's a great question. Early on, when we were building this out, it was just kind of a sea of other competitors and we weren't sure like who we were kind of competing against. And then we went public. And when we went public, it was exciting, but it wasn't nearly as exciting as I think we had all hoped. We went a little early. Right? And so, that was a little disappointing, but I think in hindsight, that was actually really important for us. Because, again, it's a long view. Right? We spent 10 years doing this. And if you didn't have that vision and don't have 10 years in the resources to build it, you're not going to catch up to us. And so, that was, I think, in a way, kind of a blessing that it -- let's say, our stock had gone bonkers, people are like, oh, we got to get into this space, we got to figure this out, what is Domo doing, let's do this. No one asked that question. Right? But at the end of the day, who are we competing against? We're competing against huge players, right, Power BI, Tableau. The way I would differentiate us is fairly straightforward, which is, 1, we have the complete end-to-end solution. So if you're a legacy system, and I think this is, to Peter's point, we've kind of learned on the way. I think at the start, we were -- maybe it was a little bit of hubris, where we thought maybe it was kind of like, don't worry, don't worry about the stuff you've already invested millions of dollars in, just use us and we'll take care of the rest. Right? And that's not necessarily something leaders of IT want to hear. We had to really understand what the IT leaders need and what's their role in the organization. And then we had designed an open platform to connect to all of those existing systems, but we can also provide an end-to-end solution for those who don't or want to replace it. And I think to your point, that's what a Power BI and Tableau don't have. Right? Tableau is a wonderful visualization tool, but is it a digital transformation tool? Is it a digital platform to build your new platform business upon? I don't think so at all. I don't know if you want to add anything to that?

Yes. Just a couple more. I mean, at the most basic level, we're cloud.

Yes, yes.

Right? So we talk about BI leverage at cloud scale in record time. So we used to spend a lot of time talking about this platform. People's eyes glaze over it. They're like, so what? And plus, it looks like it's competitive with everything. Right? It's what the platform allows. So we're in POCs with those competitors and others. Right? We have a lot of speed for one, for sure. So they'll give us a problem and they'll give our competitors a problem to solve. And the feedback is, well, you guys turn out a solution a lot faster. Well, that's because we can connect to all the systems. They're not built to do that. They assume the data is already somewhere. They're in a preconfigured architecture, right? So it's speed, it's agility. Cloud is also scale. So sometimes they look, look our problem is so big. We have some data other competitors that don't know everywhere. We went on scale. They're like we have so much that they can't do. So that's BI leverage at cloud scale in record time. These are things like mobile. Tableau is built before mobile. We were fortunate to be built after. So when you develop something in Domo, it renders natively in mobile. Everyone else, it's kind of -- they're working on it, but we won deals strictly on that. One of our largest competitors, they said, we needed world-class mobile only Domo has. So it's generally the platform. The platform is fundamentally it, but it's also -- it's really what it allows.

Yes, yes, that's absolutely right. to Peter's point, it's kind of funny because, again, being here so long, I remember the early days when nobody wanted their data in the cloud, right? And then all of a sudden...

Everyone does.

Everyone does, right? And it takes a while to get there. And I think what you're seeing is competitors are kind of Frankensteining together, again, the boxes. But if you don't have that vision about cloud early on -- and by the way, that I mean, again, when we went public and like, okay, this maybe people don't get it, they were doing the wrong thing. We're like, no, no, this is absolutely the right thing. Because if you want to turn that data into something that's actionable that affects what organizations and people can do, it has to be in the cloud, it has to be mobile first. I mean we would be walking around meeting with executives. No one's using a desktop. It doesn't exist. They're all iPads, right? They're all on their phones. They want to be able to manage by exception. Just -- I don't want to be looking at dashboards. We can do dashboards, but you can also move beyond the dashboards and create other great applications. I just want to be notified when I need to be notified by something. And that might change day to day, right? So yes, that's absolutely right.

Do we have any questions from the audience?

So one of the more powerful things that's happening in enterprise software today some movement of data to the cloud and being centralized in like a warehouse or a [indiscernible]. So how does Domo kind of get that data to the end of the season the enterprise that you're trying to...

Yes, great point. So a few things, and Pete, feel free to jump in on there because we do have some partnerships. But one of the things that we did very early on, and again, this was back to the sort of naivete, I would mention 10 years ago, which was we thought it would be easy to connect to data. It wasn't. It was very, very difficult. We're like, oh, shoot. And we spent a lot of money, and we have a large team that constantly builds and maintains over 1,000 connectors. That's the biggie. I think that's one of our sort of parts of our special sauce, which is we have more connectors than I think anyone else. I mean I can't imagine. I know we were just kind of talking about some other folks in that space. That is one part of 11 other parts of the Domo platform, right? it's like the connecting part. So we like the connected data. Obviously, we allow you to visualize it and do everything beyond that. But that connector framework is very intense. There -- because connectors to these different sorts of cloud services are not static. So we monitor them constantly, right? We allow you to sort of track how updates are happening in the Domo platform because in Domo, you actually have a data warehouse. So we show you in real time what information is coming from all of those systems, what kind of information it is and what kind of activity is happening around it. I don't know if you want to add anything about...

Yes, I would just say 1 key thing we're agnostic to multi-cloud. So if you're a Google, if you're a looker, you'll tend to want to sit on Google Cloud. If you're a Microsoft, you intend BI, you intend to want to see it on Azure Snowflake. We have a great partnership with our customers love it. But like you can get a seamless Domo experience and the Snowflake could be your back end. So the point is you could put putting it anywhere, right, and we just connect to it. Snowflake, great. So Snowflake in particular, you mission connectors, no other BI vendors don't have a platform like ours. So we target business users, we connect the data. So we can connect to the data, bringing in the Snowflake, you can do the ETL in Domo with the data that's sitting on Snowflake, and then ultimately send it out to business users. So we think that could be a great partnership, and it's a differentiation versus our competition. definitely.

I think that's a great term, it's like agnostic, right? Agnostic and open. Because, again, you don't necessarily know where your business or where the world is going to be going at any given point or who's going to be the best -- which cloud provider you're going to use. You don't have to make that decision with us. It could be on-premise. We can use -- we have on-premise tools. So if you want to like take stuff from your existing systems and meld that with whatever cloud provider you're using, great. I think that's one of those kind of things. We're not -- that's a great point. We're not tied to anyone. And it was -- it's by design. That's a great question. You had a question over there. We can take it.

What do you speak to the sales and implementation especially...

I'll give that one to Peter.

The implementation is going to be as quick. We'll do a 1-hour proof of concept. It's not really an implementation. It's a -- here's the -- here's Domo, start using it, right? That doesn't mean that you're automatically going to connect all your data like a Fortune 500 company that has like 40,000 data sets. That could take months not like a day, but it's really the implementation time is extremely rapid.

Yes, that's a great point. Just to sort of wrap up on it. So 1 of the things we do is I think we do things that a lot of other companies would never consider doing, which is, yes, we'll do a quick POC for you, proof of concept. Give us some data, within a few moments we have something working. I think we did something for, again, another large CPG that they had no idea how to figure out. And we had it up and implemented on-site within 2 or 3 weeks. It was a vehicle tracking and shipment tracking, environmental tracking. So where are the trucks, what's the environmental conditions of the truck, warn us, show us maps, et cetera, and it was just like phenomenal. And we tested it on site, and it worked. And it was like what else do you want? Like what do those kind of drop the mic moments. But yes, that's a great question.

Thank you so much.

Yes, Tim, this is great.

Thanks, everyone.