Company Quick10K Filing
Quick10K
Domo
10-Q 2019-07-31 Quarter: 2019-07-31
10-Q 2019-04-30 Quarter: 2019-04-30
10-K 2019-01-31 Annual: 2019-01-31
10-Q 2018-10-31 Quarter: 2018-10-31
10-Q 2018-07-31 Quarter: 2018-07-31
8-K 2019-09-20 Officers
8-K 2019-09-05 Earnings, Exhibits
8-K 2019-06-06 Earnings, Exhibits
8-K 2019-06-06 Regulation FD
8-K 2019-06-04 Shareholder Vote
8-K 2019-05-08 Officers, Exhibits
8-K 2019-04-19 Officers
8-K 2019-03-29 Officers
8-K 2019-03-13 Officers, Other Events
8-K 2019-03-13 Earnings, Exhibits
8-K 2019-01-07 Shareholder Rights, Other Events
8-K 2019-01-04 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2018-12-06 Earnings, Exhibits
8-K 2018-09-17 Officers
8-K 2018-09-06 Earnings, Exhibits
ORCL Oracle 173,296
NOW ServiceNow 49,235
TYL Tyler Technologies 9,817
BLKB Blackbaud 4,326
LPSN Liveperson 2,590
CLDR Cloudera 1,925
PRGS Progress Software 1,663
INST Instructure 1,467
AMSWA American Software 439
NTWK Netsol Technologies 70
DOMO 2019-07-31
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.1 fy20q2exhibit311.htm
EX-31.2 fy20q2exhibit312.htm
EX-32.1 fy20q2exhibit321.htm

Domo Earnings 2019-07-31

DOMO 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 domofy20q210-q.htm 10-Q Document
 
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________
Form 10-Q
__________________________
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2019
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For transition period from to .
Commission File Number 001-38553.

DOMO, INC.
(Exact Name of Registrant as Specified in its Charter)
__________________________
Delaware
(State or Other Jurisdiction
of Incorporation or Organization)
 
27-3687433
(I.R.S. Employer
Identification Number)
772 East Utah Valley Drive
American Fork, UT 84003
(Address of principal executive office, including zip code)

(801) 899-1000
(Registrant's telephone number, including area code)
__________________________
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
 
Accelerated filer o
Non-accelerated filer ý
 
Smaller reporting company o
 
 
Emerging growth company ý
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes o No ý
Securities registered pursuant to Section 12(b) of the Act:
 
 
 
 
 
Title of each class
 
Trading symbol(s)
  
Name of each exchange on which registered
Class B Common Stock, par value $0.001 per share
 
DOMO
 
The Nasdaq Global Market
As of August 30, 2019, there were approximately 3,263,659 shares of the registrant's Class A common stock and 24,241,269 shares of the registrant's Class B common stock outstanding.



TABLE OF CONTENTS
 
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Operations
Condensed Consolidated Statements of Comprehensive Loss
Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit)
Condensed Consolidated Statements of Cash Flows
Notes to Condensed Consolidated Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
Signatures



PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Domo, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except per share amounts)
(unaudited)
 
As of January 31,
 
As of July 31,
 
2019
 
2019
Assets
 
 
 

Current assets:
 
 
 

Cash and cash equivalents
$
176,973

 
$
97,939

Short-term investments

 
35,927

Accounts receivable, net of allowances of $3,387 and $2,719 as of January 31, 2019 and July 31, 2019, respectively
48,421

 
31,136

Contract acquisition costs, net
10,425

 
11,349

Prepaid expenses and other current assets
10,935

 
13,617

Total current assets
246,754

 
189,968

Property and equipment, net
12,595

 
12,677

Contract acquisition costs, noncurrent, net
18,030

 
16,334

Intangible assets, net
4,415

 
4,108

Goodwill
9,478

 
9,478

Other assets
1,360

 
1,964

Total assets
$
292,632

 
$
234,529

Liabilities and stockholders' equity (deficit)
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
2,609

 
$
2,023

Accrued expenses and other current liabilities
48,139

 
40,856

Deferred revenue
88,959

 
87,616

Total current liabilities
139,707

 
130,495

Deferred revenue, noncurrent
4,943

 
3,687

Other liabilities, noncurrent
6,210

 
6,140

Long-term debt
97,245

 
99,113

Total liabilities
248,105

 
239,435

Commitments and contingencies (Note 11)


 


Stockholders' equity (deficit):
 
 
 
Preferred stock, $0.001 par value per share; 10,000 shares authorized as of January 31, 2019 and July 31, 2019; no shares issued and outstanding as of January 31, 2019 and July 31, 2019

 

Class A common stock, $0.001 par value per share; 3,264 shares authorized as of January 31, 2019 and July 31, 2019; 3,264 shares issued and outstanding as of January 31, 2019 and July 31, 2019
3

 
3

Class B common stock, $0.001 par value per share; 500,000 shares authorized as of January 31, 2019 and July 31, 2019; 23,435 and 24,235 shares issued and outstanding as of January 31, 2019 and July 31, 2019, respectively
23

 
24

Additional paid-in capital
956,145

 
973,473

Accumulated other comprehensive income
438

 
372

Accumulated deficit
(912,082
)
 
(978,778
)
Total stockholders' equity (deficit)
44,527

 
(4,906
)
Total liabilities and stockholders' equity (deficit)
$
292,632

 
$
234,529

See accompanying notes to condensed consolidated financial statements.

1


Domo, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2018
 
2019
 
2018
 
2019
Revenue:
 
 
 

 
 
 
 
Subscription
$
28,166

 
$
34,873

 
$
54,829

 
$
69,264

Professional services and other
6,101

 
6,787

 
11,383

 
13,194

Total revenue
34,267

 
41,660

 
66,212

 
82,458

Cost of revenue:
 
 
 
 
 
 
 
Subscription
8,265

 
8,816

 
16,321

 
16,851

Professional services and other
4,253

 
5,395

 
7,763

 
10,164

Total cost of revenue
12,518

 
14,211

 
24,084

 
27,015

Gross profit
21,749

 
27,449

 
42,128

 
55,443

Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
34,002

 
29,501

 
73,658

 
65,450

Research and development
20,919

 
17,046

 
39,983

 
34,145

General and administrative
10,207

 
9,275

 
14,851

 
17,292

Total operating expenses
65,128

 
55,822

 
128,492

 
116,887

Loss from operations
(43,379
)
 
(28,373
)
 
(86,364
)
 
(61,444
)
Other expense, net
(2,898
)
 
(2,482
)
 
(4,817
)
 
(4,807
)
Loss before income taxes
(46,277
)
 
(30,855
)
 
(91,181
)
 
(66,251
)
Provision for income taxes
107

 
305

 
710

 
445

Net loss
$
(46,384
)
 
$
(31,160
)
 
$
(91,891
)
 
$
(66,696
)
Net loss per share, basic and diluted
$
(4.41
)
 
$
(1.14
)
 
$
(14.94
)
 
$
(2.45
)
Weighted-average number of shares used in
computing net loss per share, basic and diluted
10,509

 
27,418

 
6,151

 
27,196

See accompanying notes to condensed consolidated financial statements.

2


Domo, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2018
 
2019
 
2018
 
2019
Net loss
$
(46,384
)
 
$
(31,160
)
 
$
(91,891
)
 
$
(66,696
)
Foreign currency translation adjustments
(55
)
 
(8
)
 
(92
)
 
(66
)
Unrealized gains on securities available for sale

 
(2
)
 

 

Comprehensive loss
$
(46,439
)
 
$
(31,170
)
 
$
(91,983
)
 
$
(66,762
)
See accompanying notes to condensed consolidated financial statements.

3


Domo, Inc.
Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit)
(in thousands, except share amounts)
(unaudited)
 
Six Months Ended July 31, 2018
 
 
 
 
 
 
Stockholders' Equity (Deficit)
 
Convertible Preferred Stock
 
 
Class A Common Stock
 
Class B Common Stock
 
Additional
Paid-in Capital
 
Accumulated
Other
Comprehensive
Income
 
Accumulated
Deficit
 
Total
Stockholders'
Equity (Deficit)
 
Shares
 
Amount
 
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Balance as of January 31, 2018
14,098,937

 
$
693,158

 
 

 
$

 
1,638,648

 
$
2

 
$
35,301

 
$
506

 
$
(757,773
)
 
$
(721,964
)
Exercise of stock options

 

 
 

 

 
16,221

 

 
212

 

 

 
212

Stock-based compensation expense

 

 
 

 

 

 

 
2,076

 

 

 
2,076

Other comprehensive loss

 

 
 

 

 

 

 

 
(37
)
 

 
(37
)
Net loss

 

 
 

 

 

 

 

 

 
(45,507
)
 
(45,507
)
Balance as of April 30, 2018
14,098,937

 
693,158

 
 

 

 
1,654,869

 
2

 
37,589

 
469

 
(803,280
)
 
(765,220
)
Initial public offering, net of offering costs of $4,201

 

 
 

 

 
10,580,000

 
10

 
202,416

 

 

 
202,426

Conversion of convertible preferred stock
(14,098,937
)
 
(693,158
)
 
 
3,263,659

 
3

 
10,835,278

 
11

 
693,144

 

 

 
693,158

Exercise of stock options

 

 
 

 

 
3,464

 

 
60

 

 

 
60

Stock-based compensation expense

 

 
 

 

 

 

 
10,387

 

 

 
10,387

Issuance of common stock warrants

 

 
 

 

 

 

 
126

 

 

 
126

Other comprehensive loss

 

 
 

 

 

 

 

 
(55
)
 

 
(55
)
Net loss

 

 
 

 

 

 

 

 

 
(46,384
)
 
(46,384
)
Balance as of July 31, 2018

 
$

 
 
3,263,659

 
$
3

 
23,073,611

 
$
23

 
$
943,722

 
$
414

 
$
(849,664
)
 
$
94,498



4


Domo, Inc.
Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) (Continued)
(in thousands, except share amounts)
(unaudited)
 
Six Months Ended July 31, 2019
 
 
 
 
 
 
Stockholders' Equity (Deficit)
 
Convertible Preferred Stock
 
 
Class A Common Stock
 
Class B Common Stock
 
Additional
Paid-in Capital
 
Accumulated
Other
Comprehensive
Income
 
Accumulated
Deficit
 
Total
Stockholders'
Equity (Deficit)
 
Shares
 
Amount
 
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Balance as of January 31, 2019

 
$

 
 
3,263,659

 
$
3

 
23,434,542

 
$
23

 
$
956,145

 
$
438

 
$
(912,082
)
 
$
44,527

Vesting of restricted stock units

 

 
 

 

 
357,565

 

 

 

 

 

Shares repurchased for tax withholdings on vesting of restricted stock

 

 
 

 

 
(20,726
)
 

 
(900
)
 

 

 
(900
)
Issuance of common stock under employee stock purchase plan

 

 
 

 

 
253,104

 
1

 
4,518

 

 

 
4,519

Exercise of stock options

 

 
 

 

 
61,844

 

 
1,338

 

 

 
1,338

Stock-based compensation expense

 

 
 

 

 

 

 
7,653

 

 

 
7,653

Exercise of common stock warrants

 

 
 

 

 
3,130

 

 

 

 

 

Other comprehensive loss

 

 
 

 

 

 

 

 
(56
)
 

 
(56
)
Net loss

 

 
 

 

 

 

 

 

 
(35,536
)
 
(35,536
)
Balance as of April 30, 2019

 

 
 
3,263,659

 
3

 
24,089,459

 
24

 
968,754

 
382

 
(947,618
)
 
21,545

Vesting of restricted stock units

 

 
 

 

 
143,893

 

 

 

 

 

Shares repurchased for tax withholdings on vesting of restricted stock

 

 
 

 

 
(3,677
)
 

 
(112
)
 

 

 
(112
)
Exercise of stock options

 

 
 

 

 
4,928

 

 
93

 

 

 
93

Stock-based compensation expense

 

 
 

 

 

 

 
4,738

 

 

 
4,738

Other comprehensive loss

 

 
 

 

 

 

 

 
(10
)
 

 
(10
)
Net loss

 

 
 

 

 

 

 

 

 
(31,160
)
 
(31,160
)
Balance as of July 31, 2019

 
$

 
 
3,263,659

 
$
3

 
24,234,603

 
$
24

 
$
973,473

 
$
372

 
$
(978,778
)
 
$
(4,906
)
See accompanying notes to condensed consolidated financial statements.

5


Domo, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
Six Months Ended July 31,
 
2018
 
2019
Cash flows from operating activities
 
 
 
Net loss
$
(91,891
)
 
$
(66,696
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation and amortization
4,562

 
3,616

Amortization of contract acquisition costs
3,633

 
5,495

Stock-based compensation expense
12,259

 
12,266

Other, net
(2,576
)
 
(3
)
Change in operating assets and liabilities:
 
 
 
Accounts receivable, net
8,218

 
17,285

Contract acquisition costs
(5,782
)
 
(4,986
)
Prepaid expenses and other
(2,393
)
 
(3,388
)
Accounts payable
(1,288
)
 
(558
)
Accrued expenses and other liabilities
(891
)
 
(5,854
)
Deferred revenue
3,166

 
(2,599
)
Net cash used in operating activities
(72,983
)
 
(45,422
)
Cash flows from investing activities
 
 
 
Purchases of property and equipment
(3,205
)
 
(3,177
)
Purchases of securities available for sale

 
(78,944
)
Proceeds from maturities of securities available for sale

 
43,500

Net cash used in investing activities
(3,205
)
 
(38,621
)
Cash flows from financing activities
 
 
 
Proceeds from initial public offering, net of underwriting discounts and commissions
206,627

 

Payments of costs related to initial public offering
(3,413
)
 

Proceeds from issuance of convertible preferred stock, net of issuance costs
(87
)
 

Proceeds from shares issued in connection with employee stock purchase plan

 
4,518

Shares repurchased for tax withholdings on vesting of restricted stock

 
(1,012
)
Debt proceeds, net of issuance costs
49,651

 

Proceeds from exercise of stock options
272

 
1,431

Principal payments on capital lease obligations
(44
)
 

Net cash provided by financing activities
253,006

 
4,937

Effect of exchange rate changes on cash and cash equivalents
12

 
72

Net increase (decrease) in cash and cash equivalents
176,830

 
(79,034
)
Cash and cash equivalents at beginning of period
61,972

 
176,973

Cash and cash equivalents at end of period
$
238,802

 
$
97,939

Supplemental disclosures of cash flow information
 
 
 
Cash paid for income taxes
$
436

 
$
17

Cash paid for interest
$
2,723

 
$
4,915

Non-cash investing and financing activities
 
 
 
Stock-based compensation capitalized as internal-use software
$
195

 
$
259

Deferred initial public offering costs in accounts payable and accrued liabilities
$
86

 
$

Issuance of warrants in connection with credit facility
$
166

 
$

See accompanying notes to condensed consolidated financial statements.

6


Domo, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Overview and Basis of Presentation
Description of Business and Basis of Presentation
Domo, Inc. (the Company) provides a cloud-based platform that digitally connects everyone from the CEO to the frontline employee with all the data, systems and people in an organization, giving them access to real-time data and insights and allowing them to manage their business from their smartphones. The Company is incorporated in Delaware. The Company's headquarters is located in American Fork, Utah and the Company has subsidiaries in the United Kingdom, Australia, Japan, Hong Kong, Singapore, New Zealand, and Canada.
The accompanying unaudited condensed consolidated financial statements, which include the accounts of the Company and its wholly owned subsidiaries, have been prepared in conformity with accounting principles generally accepted in the United States of America or GAAP. All intercompany balances and transactions have been eliminated in consolidation. The Company’s fiscal year ends on January 31.
Unaudited Condensed Consolidated Financial Statements
The accompanying condensed consolidated balance sheet as of July 31, 2019, the condensed consolidated statements of operations, comprehensive loss, and convertible preferred stock and stockholders' equity (deficit) for the three and six months ended July 31, 2019 and the condensed consolidated statements of cash flows for the six months ended July 31, 2018 and 2019 are unaudited. The unaudited condensed consolidated financial statements have been prepared on a basis consistent with the annual consolidated financial statements and, in the opinion of management, reflect all adjustments necessary to state fairly the Company's financial position as of July 31, 2019 and its results of operations for the three and six months ended July 31, 2018 and 2019 and its cash flows for the six months ended July 31, 2018 and 2019. The financial data and the other financial information disclosed in the notes to these condensed consolidated financial statements related to the three-month and six-month periods are also unaudited. The results of operations for the three and six months ended July 31, 2019 are not necessarily indicative of the results to be expected for the fiscal year ending January 31, 2020 or for any other future year or interim period.
The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended January 31, 2019, included in the Company's Annual Report on Form 10-K.
Stock Split
On June 15, 2018, the Company amended its amended and restated certificate of incorporation to effect a 15-to-one reverse stock split of its common stock and convertible preferred stock. All of the share and per share information referenced throughout the condensed consolidated financial statements and notes to the condensed consolidated financial statements have been retroactively adjusted to reflect this reverse stock split.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes. The Company bases its estimates on historical experience and on other assumptions that its management believes are reasonable under the circumstances. Actual results could differ from those estimates. The Company’s estimates and judgments include the determination of standalone selling prices for the Company’s services, which are used to determine revenue recognition for arrangements with multiple performance obligations; the amortization period for deferred contract acquisition costs; valuation of the Company’s stock-based compensation, including the underlying estimated fair value of common stock in periods prior to the date of the Company's IPO; useful lives of fixed assets; capitalization and estimated useful life of internal-use software; valuation estimates used when evaluating impairment of long-lived and intangible assets including goodwill; and the allowance for doubtful accounts.

7


Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
1. Overview and Basis of Presentation (Continued)

Foreign Currency
The functional currencies of the Company’s foreign subsidiaries are the respective local currencies. The cumulative effect of translation adjustments arising from the use of differing exchange rates from period to period is included in accumulated other comprehensive income within the condensed consolidated balance sheets. Changes in the cumulative foreign translation adjustment are reported in the condensed consolidated statements of convertible preferred stock and stockholders’ (deficit) equity and the condensed consolidated statements of comprehensive loss. Transactions denominated in currencies other than the functional currency are remeasured at the end of the period and when the related receivable or payable is settled, which may result in transaction gains or losses. Foreign currency transaction gains and losses are included in other expense, net in the condensed consolidated statements of operations. All assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the exchange rate on the balance sheet date. Revenue and expenses are translated at the average exchange rate during the period, and equity balances are translated using historical exchange rates.
Segment Information
The Company operates as one operating segment. The Company’s chief operating decision maker is its chief executive officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance and allocating resources.
2. Summary of Significant Accounting Policies
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, money market funds and highly liquid investments purchased with an original maturity date of 90 days or less from the date of purchase. The fair value of cash equivalents approximated their carrying value as of January 31, 2019 and July 31, 2019.
Short-Term Investments
The Company’s short-term investments are primarily comprised of commercial paper, U.S. treasury securities, asset-backed securities and corporate debt securities. The Company determines the appropriate classification of its short-term investments at the time of purchase and reevaluates such designation at each balance sheet date. The Company has classified and accounted for its short-term investments as available-for-sale securities as the Company may sell these securities at any time for use in its current operations or for other purposes, even prior to maturity. As a result, the Company classifies its short-term investments, including securities with stated maturities beyond twelve months, within current assets in the condensed consolidated balance sheets.
The Company's short-term investments are classified as available-for-sale securities and are recorded at fair value each reporting period. Unrealized gains and losses on these short-term investments are reported as a separate component of accumulated other comprehensive income in the condensed consolidated balance sheets until realized. Interest income is reported within other expense, net in the condensed consolidated statements of operations. The Company periodically evaluates its short-term investments to assess whether those with unrealized loss positions are other-than-temporarily impaired. The Company considers various factors in determining whether to recognize an impairment charge, including the length of time the investment has been in a loss position, the extent to which the fair value is less than the Company’s cost basis, and the financial condition and near-term prospects of the investee. If the Company determines that the decline in an investment’s fair value is other-than-temporary, the difference is recognized as an impairment loss in the condensed consolidated statements of operations. Realized gains and losses are reported in other expense, net in the condensed consolidated statements of operations.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the invoiced amount (net of allowances), do not require collateral, and do not bear interest. The Company’s payment terms generally provide that customers pay within 30 days of the invoice date. 
The Company maintains an allowance for doubtful accounts for amounts the Company does not expect to collect. In establishing the required allowance, management considers historical losses, current market conditions, customers’ financial

8


Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
2. Summary of Significant Accounting Policies (Continued)

condition, the age of the receivables, and current payment patterns. Account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
Contract Acquisition Costs
Contract acquisition costs, net are stated at cost net of accumulated amortization and primarily consist of deferred sales commissions, which are considered incremental and recoverable costs of obtaining a contract with a customer. Contract acquisition costs for initial contracts are deferred and then amortized on a straight-line basis over the period of benefit, which the Company has determined to be approximately four years. The period of benefit is determined by taking into consideration contractual terms, expected customer life, changes in the Company's technology and other factors. Contract acquisition costs for renewal contracts are not commensurate with contract acquisition costs for initial contracts and are recorded as expense when incurred if the period of benefit is one year or less. If the period of benefit is greater than one year, costs are deferred and then amortized on a straight-line basis over the period of benefit. Contract acquisition costs related to professional services and other performance obligations with a period of benefit of one year or less are recorded as expense when incurred. Amortization of contract acquisition costs is included in sales and marketing expenses in the accompanying condensed consolidated statements of operations.
Amortization expense related to contract acquisition costs was $1.9 million and $2.8 million for the three months ended July 31, 2018 and 2019, respectively, and $3.6 million and $5.5 million for the six months ended July 31, 2018 and 2019, respectively. There was no impairment charge in relation to contract acquisition costs for the periods presented.
Property and Equipment
Property and equipment, net, are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets or over the related lease terms (if shorter). Repairs and maintenance costs are expensed as incurred.
The estimated useful lives of property and equipment are as follows:
Computer equipment and software
2-3 years
Furniture, vehicles and office equipment
3 years
Leasehold improvements
Shorter of remaining lease term or estimated useful life
Capitalized Internal-Use Software Costs
The Company capitalizes certain costs related to development of its platform incurred during the application development stage. Costs related to preliminary project activities and post-implementation activities are expensed as incurred. Maintenance and training costs are also expensed as incurred. Capitalized costs are included in property and equipment.
Capitalized internal-use software is amortized as subscription cost of revenue on a straight-line basis over its estimated useful life, which is generally three years. Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired. Goodwill and indefinite-lived intangible assets are not amortized, but rather tested for impairment at least annually on November 1 or more often if and when circumstances indicate that the carrying value may not be recoverable. Finite-lived intangible assets are amortized over their useful lives.
Goodwill is tested for impairment based on reporting units. The Company periodically reevaluates the business and has determined that it continues to operate in one segment, which is also considered the sole reporting unit. Therefore, goodwill is tested for impairment at the consolidated level.

9


Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
2. Summary of Significant Accounting Policies (Continued)

The Company reviews its long-lived assets, including property and equipment and finite-lived intangible assets, for impairment whenever an event or change in facts and circumstances indicates that their carrying amounts may not be recoverable. Recoverability of these assets is measured by comparing the carrying amount to the estimated undiscounted future cash flows expected to be generated. If the carrying amount exceeds the undiscounted cash flows, the assets are determined to be impaired and an impairment charge is recognized as the amount by which the carrying amount exceeds fair value.
There was no goodwill acquired and no impairment charges for goodwill or long-lived assets recorded during the periods presented.
Revenue Recognition
The Company derives revenue primarily from subscriptions to its cloud-based platform and professional services. Revenue is recognized when control of these services is transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those services, net of sales taxes.
For sales through channel partners, the Company considers the channel partner to be the end customer for the purposes of revenue recognition as the Company's contractual relationships with channel partners do not depend on the sale of the Company's services to their customers and payment from the channel partner is not contingent on receiving payment from their customers. The Company's contractual relationships with channel partners do not allow returns, rebates, or price concessions.
The price of subscriptions is generally fixed at contract inception and therefore, the Company's contracts do not contain a significant amount of variable consideration.
Revenue recognition is determined through the following steps:
Identification of the contract, or contracts, with a customer
Identification of the performance obligations in the contract
Determination of the transaction price
Allocation of the transaction price to the performance obligations in the contract
Recognition of revenue when, or as, performance obligations are satisfied
Subscription Revenue
Subscription revenue primarily consists of fees paid by customers to access the Company’s cloud-based platform, including support services. The Company's subscription agreements generally have annual contractual terms and a smaller percentage have multi-year contractual terms. Revenue is recognized ratably over the related contractual term beginning on the date that the platform is made available to a customer. Access to the platform represents a series of distinct services as the Company continually provides access to and fulfills its obligation to the end customer over the subscription term. The series of distinct services represents a single performance obligation that is satisfied over time. The Company recognizes revenue ratably because the customer receives and consumes the benefits of the platform throughout the contract period. The Company's contracts are generally non-cancelable.
Professional Services and Other Revenue
Professional services revenue consists of implementation services sold with new subscriptions as well as professional services sold separately. Other revenue includes training and education. Professional services arrangements are billed in advance, and revenue from these arrangements is recognized as the services are provided, generally based on hours incurred. Training and education revenue is also recognized as the services are provided.

10


Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
2. Summary of Significant Accounting Policies (Continued)

Contracts with Multiple Performance Obligations
Most of the Company's contracts with new customers contain multiple performance obligations, generally consisting of subscriptions and professional services. For these contracts, individual performance obligations are accounted for separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. Standalone selling prices are determined based on historical standalone selling prices, taking into consideration overall pricing objectives, market conditions and other factors, including contract value, customer demographics and the number and types of users within the contract.
Deferred Revenue
The Company's contracts are typically billed annually in advance. Deferred revenue includes amounts collected or billed in excess of revenue recognized. Deferred revenue is recognized as revenue as the related performance obligations are satisfied. Deferred revenue that will be recognized during the succeeding twelve-month period is recorded as a current liability and the remaining portion is recorded as a noncurrent liability.
Cost of Revenue
Cost of subscription revenue consists primarily of third-party hosting services and data center capacity; employee-related costs directly associated with cloud infrastructure and customer support personnel, including salaries, benefits, bonuses and stock-based compensation; amortization expense associated with capitalized software development costs; depreciation expense associated with computer equipment and software; certain fees paid to various third parties for the use of their technology and services; and allocated overhead. Allocated overhead includes items such as information technology infrastructure, rent, and employee benefit costs.
Cost of professional services and other revenue consists primarily of employee-related costs associated with these services, including stock-based compensation; third-party consultant fees; and allocated overhead.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expense was $3.1 million and $2.0 million for the three months ended July 31, 2018 and 2019, respectively, and $10.4 million and $4.3 million for the six months ended July 31, 2018 and 2019, respectively.
Research and Development
Research and development expenses consist primarily of employee-related costs for the design and development of the Company's platform, contractor costs to supplement staff levels, third-party web services, consulting services, and allocated overhead. Research and development expenses, other than software development costs qualifying for capitalization, are expensed as incurred.
Stock-Based Compensation
The Company records stock-based compensation based on the grant date fair value of the awards, which include stock options and restricted stock units, and recognizes the fair value of those awards as expense using the straight-line method over the requisite service period of the award. For restricted stock units that contain performance conditions, the Company recognizes expense using the accelerated attribution method if it is probable the performance conditions will be met. The Company estimates the grant date fair value of stock options using the Black-Scholes option-pricing model.
Stock-based compensation expense related to purchase rights issued under the 2018 Employee Stock Purchase Plan (ESPP) is based on the Black-Scholes option-pricing model fair value of the estimated number of awards as of the beginning of the offering period. Stock-based compensation expense is recognized using the straight-line method over the offering period.

11


Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
2. Summary of Significant Accounting Policies (Continued)

The determination of the grant date fair value of stock-based awards is affected by the estimated fair value of the Company's common stock as well as other assumptions and judgments, which are estimated as follows:
Fair Value Per Share of Common Stock. Because there was no public market for the Company's common stock prior to the IPO, the board of directors determined the common stock fair value at the grant date by considering numerous objective and subjective factors, including contemporaneous valuations of the Company’s common stock, actual operating and financial performance, market conditions, and performance of comparable publicly traded companies, business developments, the likelihood of achieving a liquidity event, and transactions involving preferred and common stock, among other factors. Subsequent to the IPO, the Company determines the fair value of common stock as of each grant date using the market closing price of the Company's Class B common stock on the date of grant.
Expected Term. The expected term is determined using the simplified method, which is calculated as the midpoint of the option’s contractual term and vesting period. The Company uses this method due to limited stock option exercise history. For the ESPP, the expected term is the beginning of the offering period to the end of each purchase period.
Expected Volatility. Since a public market for the Company's common stock did not exist prior to the IPO and, therefore, the Company does not have sufficient trading history of its common stock, expected volatility is estimated based on the volatility of similar publicly held companies over a period equivalent to the expected term of the awards.
Risk-free Interest Rate. The risk-free interest rate is determined using U.S. Treasury rates with a similar term as the expected term of the option.
Expected Dividend Yield. The Company has never declared or paid any cash dividends and does not presently plan to pay cash dividends in the foreseeable future. Consequently, the Company uses an expected dividend yield of zero.
Income Taxes
The Company accounts for income taxes in accordance with the liability method of accounting for income taxes. Under this method, the Company recognizes a liability or asset for the deferred income tax consequences of all temporary differences between the tax basis of assets and liabilities and their reported amounts in the condensed consolidated financial statements that will result in taxable or deductible amounts in future years when the reported amounts of the assets and liabilities are recovered or settled. These deferred income tax assets or liabilities are measured using the enacted tax rates that will be in effect when the differences are expected to affect taxable income.
Valuation allowances are provided when it is more-likely-than-not that some or all of the deferred income tax assets may not be realized. In assessing the need for a valuation allowance, the Company has considered its historical levels of income, expectations of future taxable income and ongoing tax planning strategies. Because of the uncertainty of the realization of its deferred tax assets, the Company has a full valuation allowance for domestic net deferred tax assets, including net operating loss carryforwards, and tax credits related primarily to research and development. Realization of its deferred tax assets is dependent primarily upon future U.S. taxable income.
Tax positions are recognized in the condensed consolidated financial statements when it is more-likely-than-not the position will be sustained upon examination by the tax authorities. The Company’s policy for recording interest and penalties related to income taxes, including uncertain tax positions, is to record such items as a component of the provision for income taxes.
Concentrations of Risk and Significant Customers
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments and accounts receivable.

12


Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
2. Summary of Significant Accounting Policies (Continued)

The Company maintains its cash accounts with financial institutions where, at times, deposits exceed federal insurance limits. The Company invests its excess cash in money market funds and in short-term investments consisting of highly-rated debt securities.
No single customer accounted for more than 10% of revenue for the three and six months ended July 31, 2018 and 2019 or more than 10% of accounts receivable as of January 31, 2019 and July 31, 2019.
The Company is primarily dependent upon third parties in order to meet the uptime and performance requirements of its customers. Any disruption of or interference with the Company's use of these third parties would impact operations.
Net Loss per Share
The Company computes net loss per share using the two-class method required for multiple classes of common stock and participating securities. The rights, including the liquidation and dividend rights, of the Class A common stock and Class B common stock are substantially identical, other than voting rights. Accordingly, the Class A common stock and Class B common stock share equally in the Company’s net losses. Before the IPO, the Company’s participating securities also included convertible preferred stock. The holders of convertible preferred stock did not have a contractual obligation to share in the Company’s losses, and as a result net losses were not allocated to these participating securities.
Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period increased by common shares that could be issued upon conversion or exercise of other outstanding securities to the extent those additional common shares would be dilutive. The dilutive effect of potentially dilutive securities is reflected in diluted net loss per share by application of the treasury stock method. During periods when the Company is in a net loss position, basic net loss per share is the same as diluted net loss per share as the effects of potentially dilutive securities are anti-dilutive.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to record most leases on the balance sheet and recognize the expenses on the income statement in a manner similar to current practice. ASU 2016-02 states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term. The Company expects to adopt this standard for the year ending January 31, 2021, with interim periods being presented under the new standard beginning with the first quarter of the year ending January 31, 2022. The Company is currently evaluating the impact to its condensed consolidated financial statements and related disclosures, but expects assets and liabilities related to leases to increase as a result of adopting this standard.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires the measurement and recognition of expected credit losses for certain financial instruments, which includes the Company's accounts receivable and available-for-sale debt securities. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. For available-for-sale debt securities, credit losses should be recorded through an allowance for credit losses. ASU 2016-13 becomes effective for the Company for the fiscal year beginning February 1, 2021, assuming it remains an emerging growth company. The standard requires a cumulative effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective. The Company is evaluating the impact of the adoption of ASU 2016-13 on its condensed consolidated financial statements.
3. Cash, Cash Equivalents and Short-Term Investments
The amortized cost, unrealized gain (loss) and estimated fair value of the Company’s cash equivalents and short-term investments as of January 31, 2019 and July 31, 2019 were as follows (in thousands):

13


Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
3. Cash, Cash Equivalents and Short-Term Investments (Continued)


 
January 31, 2019
 
Amortized Cost
 
Unrealized Gain
 
Unrealized Loss
 
Estimated Fair Value
Cash
$
5,975

 
$

 
$

 
$
5,975

Cash equivalents:
 
 
 
 
 
 
 
Money market funds
170,998

 

 

 
170,998

Total cash and cash equivalents
$
176,973

 
$

 
$

 
$
176,973

 
July 31, 2019
 
Amortized Cost
 
Unrealized Gain
 
Unrealized Loss
 
Estimated Fair Value
Cash
$
11,096

 
$

 
$

 
$
11,096

Cash equivalents:
 
 
 
 
 
 
 
Money market funds
79,846

 

 

 
79,846

Reverse repurchase agreements
5,000

 
 
 
 
 
5,000

Commercial paper
1,997

 

 

 
1,997

Total cash and cash equivalents
$
97,939

 
$

 
$

 
$
97,939

Short-term investments:
 
 
 
 
 
 
 
Commercial paper
$
19,943

 
$

 
$

 
$
19,943

U.S. treasury securities
4,993

 
1

 

 
4,994

Asset-backed securities
4,996

 

 

 
4,996

Corporate debt securities
5,995

 

 
(1
)
 
5,994

Total short-term investments
35,927

 
1

 
(1
)
 
35,927

Total cash, cash equivalents and short-term investments
$
133,866

 
$
1

 
$
(1
)
 
$
133,866

All short-term investments were designated as available-for-sale securities and had contractual maturities due within less than one year as of July 31, 2019. The Company had no short-term investments as of January 31, 2019.
The Company had one short-term investment in an unrealized loss position as of July 31, 2019. There were no material gross unrealized gains or losses from available-for-sale securities and no realized gains or losses from available-for-sale securities that were reclassified out of accumulated other comprehensive income for the three months ended July 31, 2019.
For available-for-sale debt securities that have unrealized losses, the Company evaluates whether (1) it has the intention to sell any of these investments and (2) whether it is not more likely than not that it will be required to sell any of these available-for-sale debt securities before recovery of the entire amortized cost basis. Based on this evaluation, the Company determined that there were no other-than-temporary impairments associated with short-term investments as of July 31, 2019.
4. Fair Value Measurements
Assets Measured at Fair Value on a Recurring Basis
Financial instruments recorded at fair value in the financial statements are categorized as follows:
Level 1: Observable inputs that reflect quoted prices for identical assets or liabilities in active markets.
Level 2: Observable inputs, other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

14


Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
4. Fair Value Measurements (Continued)

Level 3: Unobservable inputs reflecting management's assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
The following table summarizes the assets measured at fair value on a recurring basis as of January 31, 2019 and July 31, 2019 by level within the fair value hierarchy (in thousands):
 
January 31, 2019
 
Level 1
 
Level 2
 
Level 3
 
Total
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
170,998

 
$

 
$

 
$
170,998

 
July 31, 2019
 
Level 1
 
Level 2
 
Level 3
 
Total
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
79,846

 
$

 
$

 
$
79,846

Reverse repurchase agreements

 
5,000

 

 
5,000

Commercial paper

 
1,997

 

 
1,997

Total cash equivalents
$
79,846

 
$
6,997

 
$

 
$
86,843

Short-term investments:
 
 
 
 
 
 
 
Commercial paper
$

 
$
19,943

 
$

 
$
19,943

U.S. treasury securities
4,994

 

 

 
4,994

Asset-backed securities

 
4,996

 

 
4,996

Corporate debt securities

 
5,994

 

 
5,994

Total short-term investments
4,994

 
30,933

 

 
35,927

Total cash equivalents and short-term investments
$
84,840

 
$
37,930

 
$

 
$
122,770

During the three and six months ended July 31, 2018 and 2019, the Company had no transfers between levels of the fair value hierarchy of its assets and liabilities measured at fair value.
Fair Value of Other Financial Instruments
The carrying amounts of certain financial instruments, including cash held in banks, accounts receivable, accounts payable, accrued liabilities, and other liabilities approximate fair value due to their short-term maturities and are excluded from the fair value tables above.

15


Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)

5. Property and Equipment
Property and equipment, net consisted of the following (in thousands):
 
As of January 31,
 
As of July 31,
 
2019
 
2019
Computer equipment and software
$
16,575

 
$
5,762

Capitalized internal-use software development costs
18,140

 
21,326

Leasehold improvements
2,849

 
944

Furniture, vehicles and office equipment
2,537

 
855

 
40,101

 
28,887

Less accumulated depreciation and amortization
(27,506
)
 
(16,210
)
 
$
12,595

 
$
12,677

Depreciation and amortization expense related to property and equipment was $2.3 million and $1.7 million for the three months ended July 31, 2018 and 2019, respectively, and $4.5 million and $3.3 million for the six months ended July 31, 2018 and 2019, respectively.
The Company capitalized $1.6 million and $1.6 million in software development costs during the three months ended July 31, 2018 and 2019, respectively, and $2.9 million and $3.2 million during the six months ended July 31, 2018 and 2019, respectively. Amortization of capitalized software development costs was $1.0 million and $1.0 million for the three months ended July 31, 2018 and 2019, respectively, and $1.9 million and $1.8 million for the six months ended July 31, 2018 and 2019, respectively.
6. Intangible Assets
Intangible assets consisted of the following (in thousands):
 
As of January 31,
 
As of July 31,
 
2019
 
2019
Intellectual property excluding patents
$
2,289

 
$
2,289

Software licenses
1,603

 
1,603

Patents
950

 
950

 
4,842

 
4,842

Less accumulated amortization
(427
)
 
(734
)
 
$
4,415

 
$
4,108

Amortization expense related to intangible assets was $20,000 and $153,000 for the three months ended July 31, 2018 and 2019, respectively, and $40,000 and $307,000 for the six months ended July 31, 2018 and 2019, respectively. Intellectual property excluding patents is considered an indefinite-lived asset due to the fact that it is renewable in perpetuity. Software licenses are amortized over an estimated useful life of three years. The patents were acquired and are being amortized over a weighted-average remaining useful life of approximately 8 years.

16


Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)

7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
 
As of January 31,
 
As of July 31,
 
2019
 
2019
Accrued payroll taxes
$
12,251

 
$
9,911

Accrued expenses
8,688

 
8,809

Accrued payroll and benefits
6,142

 
7,722

Accrued bonus
5,338

 
5,253

Employee stock purchase plan liability
3,848

 
2,763

Accrued commissions
6,495

 
2,554

Sales and other taxes payable
1,409

 
1,582

Other accrued liabilities
3,968

 
2,262

 
$
48,139

 
$
40,856

8. Deferred Revenue and Performance Obligations
Deferred Revenue
Significant changes in the Company's deferred revenue balance for the six months ended July 31, 2019 were as follows (in thousands):
Balance as of January 31, 2019
 
 
$
93,902

Revenue recognized that was included in the deferred revenue balance at the beginning of the period:
 
 
 
Subscription
$
(53,213
)
 
 
Professional services and other
(4,000
)
 
 
Total
 
 
(57,213
)
Increase due to billings excluding amounts recognized as revenue during the period
 
 
54,614

Balance as of July 31, 2019
 
 
$
91,303

Transaction Price Allocated to Remaining Performance Obligations
Transaction price allocated to remaining performance obligations represents the remaining amount of revenue the Company expects to recognize from existing noncancelable contracts, whether billed or unbilled. As of July 31, 2019, approximately $187.3 million of revenue was expected to be recognized from remaining performance obligations for subscription contracts. The Company expects to recognize approximately $69.0 million of this amount during the year ending January 31, 2020, with an additional $71.4 million being recognized during the year ending January 31, 2021, and the balance recognized thereafter. As of July 31, 2019, approximately $13.3 million of revenue was expected to be recognized from remaining performance obligations for professional services and other contracts, $9.4 million of which is expected to be recognized during the year ending January 31, 2020, and the balance recognized thereafter.

17


Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)

9. Geographic Information
Revenue by geographic area is determined by the billing address of the customer. The following table sets forth revenue by geographic area (in thousands): 
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2018
 
2019
 
2018
 
2019
United States
$
26,364

 
$
30,947

 
$
51,483

 
$
61,193

Japan
2,869

 
4,091

 
5,507

 
8,310

Other
5,034

 
6,622

 
9,222

 
12,955

Total
$
34,267

 
$
41,660

 
$
66,212

 
$
82,458

Percentage of revenue by geographic area:
 
 
 
 
 
 
 
United States
77
%
 
74
%
 
78
%
 
74
%
Japan
8

 
10

 
8

 
10

Other
15

 
16

 
14

 
16

Other than the United States and Japan, no other individual country exceeded 10% of total revenue for the three and six months ended July 31, 2018 and 2019. As of July 31, 2019, substantially all of the Company’s property and equipment was located in the United States.
10. Credit Facility
In December 2017, the Company entered into an $80.0 million credit facility and drew $50.0 million at closing, which was scheduled to mature on January 1, 2021. The Company had until April 30, 2018 to request an additional term loan of up to $30.0 million under the credit facility. In April 2018, the Company entered into an amendment to this credit facility pursuant to which the Company was able to incur an additional $20.0 million in term loan borrowings, for a total availability of $100.0 million under the amended facility. The Company drew the remaining $50.0 million during April 2018, which was scheduled to mature on May 1, 2021. The credit facility is secured by substantially all of the Company's assets.
Under the amended credit facility, the Company was required to pay a $2.0 million fee upon the earlier of (1) the closing of a transaction in which the Company was acquired by a third party and (2) December 4, 2027. The obligation to pay this $2.0 million fee terminated upon the closing of the IPO.
In January 2019, the Company entered into an amendment to this credit facility which extended the maturity date for both outstanding loans to October 1, 2022. The amendment also revised the maximum debt ratio financial covenant and increased the amount of the closing fee.
Each term loan under the credit facility requires interest-only payments until the maturity date. A portion of the interest that accrues on the outstanding principal of each term loan is payable in cash on a monthly basis, which portion accrues at a floating rate equal to the greater of (1) 7% and (2) three-month LIBOR plus 5.5% per year. This interest rate was approximately 7.9% as of July 31, 2019. In addition, a portion of the interest that accrues on the outstanding principal of each term loan is capitalized and added to the principal amount of the outstanding term loan on a monthly basis, which portion accrues at a fixed rate equal to 2.5% per year. During the three months ended July 31, 2018 and 2019, $0.3 million and $0.7 million of interest was capitalized, respectively, and $0.7 million and $1.3 million of interest was capitalized during the six months ended July 31, 2018 and 2019, respectively.
The amended credit facility requires a closing fee of $7.0 million to be paid on the earliest of (1) the date the term loan is prepaid, (2) the term loan maturity date, which is October 1, 2022, and (3) the date the term loan becomes due and payable. Due to the long-term nature of the closing fee, it was recorded at present value as an increase to other liabilities, noncurrent and an increase to debt issuance costs. The closing fee liability will be accreted to its full value over the term of the loan, with such accretion recorded as interest expense in other income (expense), net in the condensed consolidated statements of operations. Debt issuance costs are presented as an offset to the outstanding principal balance of the term loans on the condensed consolidated

18


Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
10. Credit Facility (Continued)


balance sheets and are being amortized as interest expense in other income (expense), net in the condensed consolidated statements of operations over the term of the loan using the effective interest rate method.
The balances in long-term debt consisted of the following:
 
As of January 31,
 
As of July 31,
 
2019
 
2019
Principal
$
102,494

 
$
103,789

Less: unamortized debt issuance costs
(5,249
)
 
(4,676
)
Net carrying amount
$
97,245

 
$
99,113

The $100.0 million credit facility as amended contains customary conditions to borrowing, events of default and covenants, including covenants that restrict the Company's ability to dispose of assets, make material changes to the nature, control or location of the business, merge with or acquire other entities, incur indebtedness or encumbrances, make distributions to holders of the Company's capital stock, make certain investments or enter into transactions with affiliates. In addition, the Company is required to comply with a financial covenant based on the ratio of outstanding indebtedness to annualized recurring revenue. Under the amended facility, the minimum ratio is 0.80 on July 31, 2019 and October 31, 2019; 0.75 on January 31, 2020 and April 30, 2020; 0.70 on July 31, 2020 and October 31, 2020; 0.65 on January 31, 2021 and April 30, 2021; and 0.60 on July 31, 2021 through the maturity date. The credit facility defines annualized recurring revenue as four times the Company's aggregate revenue for the immediately preceding quarter (net of recurring discounts and discounts for periods greater than one year) less the annual contract value of any customer contracts pursuant to which the Company was advised during such quarter would not be renewed at the end of the current term plus the annual contract value of existing customer contract increases during such quarter. This covenant is measured quarterly on a three-month trailing basis. Upon the occurrence of an event of default, such as non-compliance with covenants, any outstanding principal, interest and fees become due immediately. The Company was in compliance with the covenant terms of the credit facility at January 31, 2019 and July 31, 2019.
The Company incurred interest expense of $3.1 million and $3.2 million for the three months ended July 31, 2018 and 2019, respectively, and $4.8 million and $6.3 million for the six months ended July 31, 2018 and 2019, respectively.
Stock Warrants
In connection with the credit facility described above, in December 2017 the Company issued fully vested warrants to purchase 28,462 shares of Series D-2 convertible preferred stock (Series D-2 warrants) with an exercise price of $126.47 per share. The fair value of the Series D-2 warrants at the time of issuance was recorded as an increase to debt issuance costs. In connection with the April 2018 amendment, the Series D-2 warrants were amended to warrants to purchase 66,664 shares of Class B common stock with an exercise price of $45.00 per share (common warrants). Upon execution of the April 2018 amendment, unamortized debt issuance costs related to the Series D-2 warrants were adjusted based on the difference in fair value of the Series D-2 warrants and the common warrants at the time of the April 2018 amendment. In connection with the January 2019 amendment to the credit facility, the common warrants were amended to be exercisable for an aggregate of 125,000 shares of Class B common stock at an exercise price of $17.8736 per share (amended common warrants). Upon execution of the January 2019 amendment, unamortized debt issuance costs related to the common warrants were adjusted based on the difference in fair value of the common warrants and the amended common warrants at the time of the January 2019 amendment. See Note 12 for further details regarding stock warrants.
11. Commitments and Contingencies
Litigation
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

19


Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
11. Commitments and Contingencies (Continued)

The Company is involved in legal proceedings from time to time arising in the normal course of business. As of January 31, 2019 and July 31, 2019, there were no significant outstanding claims against the Company.
Warranties and Indemnification
The Company’s subscription services are generally warranted to perform materially in accordance with the terms of the applicable customer service order under normal use and circumstances. Additionally, the Company’s arrangements generally include provisions for indemnifying customers against liabilities if its subscription services infringe a third party’s intellectual property rights. Furthermore, the Company may also incur liabilities if it breaches the security or confidentiality obligations in its arrangements. To date, the Company has not incurred significant costs and has not accrued a liability in the accompanying condensed consolidated financial statements as a result of these obligations.
The Company has entered into service-level agreements with some of its customers defining levels of uptime reliability and performance and permitting those customers to receive credits for prepaid amounts related to unused subscription services if the Company fails to meet certain of the defined service levels. In very limited instances, the Company allows customers to early terminate their agreements if the Company repeatedly or significantly fails to meet those levels. If the Company repeatedly or significantly fails to meet contracted upon service levels, a contract may require a refund of prepaid unused subscription fees. To date, the Company has not experienced any significant failures to meet defined levels of uptime reliability and performance as set forth in its agreements and, as a result, the Company has not accrued any liabilities related to these agreements in the condensed consolidated financial statements.
Operating Leases
The Company has entered into noncancelable operating lease arrangements primarily for office space with various expiration dates through 2027. Certain of the leases include periods of free rent beginning with the lease effective date and increasing rental rates over the term of the leases. The Company recognizes rent expense on a straight-line basis over the lease period and has accrued for rent expense incurred but not paid. Rent expense under operating leases totaled $1.6 million and $1.7 million for the three months ended July 31, 2018 and 2019, respectively, and $3.2 million and $3.4 million for the six months ended July 31, 2018 and 2019, respectively.
Other Purchase Commitments
The Company has also entered into certain noncancelable contractual commitments related to cloud infrastructure services in the ordinary course of business. There have been no material changes in these commitments as disclosed in the Annual Report on Form 10-K.
12. Stockholders' Equity (Deficit)
Preferred Stock
The Company's Board of Directors has the authority, without further action by the Company's stockholders, to issue up to 10,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, and privileges thereof, including voting rights. As of January 31, 2019 and July 31, 2019, no shares of preferred stock were issued and outstanding.
Common Stock
The Company has two classes of common stock, Class A and Class B. Each share of Class A common stock is entitled to 40 votes per share and is convertible at any time into one share of Class B common stock. Each share of Class A common stock will convert automatically into one share of Class B common stock upon any transfer, whether or not for value. Each share of Class B common stock is entitled to one vote per share. Holders of Class A common stock and Class B common stock vote together as a single class on all matters (including the election of directors) submitted to a vote of stockholders, unless otherwise required by law or the Company's certificate of incorporation. Subject to preferences that may be applicable to any then-outstanding preferred stock, holders of Class A common stock and Class B common stock are entitled to receive dividends, if any, as may be declared by the Company's board of directors.

20


Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
12. Stockholders' Equity (Deficit) (Continued)

At January 31, 2019 and July 31, 2019, there were 3,263,659 shares of Class A common stock authorized. There were 3,263,659 shares of Class A common stock issued and outstanding at January 31, 2019 and July 31, 2019.
At January 31, 2019 and July 31, 2019, there were 500,000,000 shares of Class B common stock authorized and 23,434,542 and 24,234,603 shares of Class B common stock issued and outstanding, respectively.
Class B Common Stock Warrants
In connection with the amendment to the credit facility that occurred in April 2018, the warrants to purchase 28,462 shares of Series D-2 convertible preferred stock described in Note 10 were amended to warrants to purchase 66,664 shares of Class B common stock at an exercise price equal to $45.00 per share. The warrants are exercisable at any time prior to expiration, which was to occur on the earlier of the third anniversary of the IPO or December 2027. Due to the exercise price-related contingency that existed with the Class B common stock warrants, they were being accounted for as a liability and were included in other liabilities, noncurrent on the consolidated balance sheets. The liability was revalued each reporting period until the contingency was resolved and the change in fair value was recorded in other income (expense), net. The contingency was resolved on the effective date of the Company's IPO, at which time the liability was remeasured to fair value and the remaining liability balance was reclassified to additional paid-in capital within stockholders' equity.
In connection with the January 2019 amendment to the credit facility, the warrants to purchase 66,664 shares of Class B common stock were amended to be exercisable for an aggregate of 125,000 shares of Class B common stock at an exercise price of $17.8736 per share. The warrants are exercisable at any time prior to expiration, which occurs on June 28, 2021 (the third anniversary of the IPO). The difference in the fair value of the Class B common stock warrants at the time of the amendment to the credit facility in January 2019 associated with the increase in shares and the lower exercise price was recorded as an adjustment to additional paid-in capital and debt issuance costs.
In connection with a line of credit signed in July 2016, the Company issued a warrant to purchase 3,333 shares of Class B common stock with a strike price of $34.35 per share. The warrant expires ten years from the date of issuance.
In connection with a loan signed in November 2011 and for which the last principal payment was made in September 2015, the Company issued a warrant to purchase 3,729 shares of Class B common stock with a strike price of $4.80 per share. The warrant expires ten years from the date of issuance. This warrant was net exercised in February 2019, resulting in the issuance of 3,130 shares of Class B common stock.
At January 31, 2019, all warrants were outstanding and exercisable. At July 31, 2019, all warrants were outstanding and exercisable with the exception of the warrant exercised in February 2019.
13. Equity Incentive Plans
In April 2011, the Company established the 2011 Equity Incentive Plan (2011 Plan), which was amended in September 2011 to provide for the issuance of stock options and other stock-based awards. In June 2018, the Company adopted the 2018 Equity Incentive Plan (2018 Plan). The 2018 Plan provides for the grant of incentive and nonstatutory stock options, restricted stock, RSUs, stock appreciation rights, performance units, and performance shares to employees, consultants, and members of the Company's board of directors.
The number of shares available for issuance under the 2018 Plan includes an annual increase on the first day of each fiscal year equal to the least of: (1) 3,500,000 shares; (2) 5% of the outstanding shares of Class A and Class B common stock as of the last day of the immediately preceding fiscal year; and (3) such other amount as the Company's board of directors may determine no later than the last day of the immediately preceding year. During the six months ended July 31, 2019, the number of shares available for grant under the 2018 Plan was increased by 1,334,910 shares. As of July 31, 2019, there were 5,139,474 shares available for grant under the 2018 Plan.
In connection with the IPO, the 2011 Plan was terminated. With the establishment of the 2018 Plan, the Company no longer grants equity-based awards under the 2011 Plan and any shares that expire, terminate, are forfeited or repurchased by the Company, or are withheld by the Company to cover tax withholding obligations, under the 2011 Plan, will become available for future grant under the 2018 Plan.

21


Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
13. Equity Incentive Plans (Continued)

The Company recognized stock-based compensation expense related to its equity incentive plans as follows (in thousands):
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2018
 
2019
 
2018
 
2019
Cost of revenue:
 
 
 
 
 
 
 
Subscription
$
55

 
$
67

 
$
70

 
$
190

Professional services and other
70

 
60

 
78

 
153

Sales and marketing
3,744

 
2,041

 
4,049

 
6,049

Research and development
2,993

 
1,294

 
3,476

 
3,359

General and administrative
3,330

 
1,182

 
4,595

 
2,420

Interest expense
(26
)
 
47

 
(9
)
 
95

Total
$
10,166

 
$
4,691

 
$
12,259

 
$
12,266

Stock Options
Stock options typically vest over a four-year period and have a term of ten years from the date of grant. The weighted-average grant-date fair value of stock options granted was $14.95 per share for the six months ended July 31, 2019. No stock options were granted during the three and six months ended July 31, 2018 and the three months ended July 31, 2019. The grant-date fair value of stock options was estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions:
Expected stock price volatility
47 %
Expected life of options
6 years
Risk-free interest rate
2.47 %
Expected dividend yield
Fair value of common stock
$31.20
The following table sets forth the outstanding common stock options and related activity for the six months ended July 31, 2019:
 
Shares
Subject to Outstanding Options
 
Weighted- Average Exercise
Price per Share
 
Weighted-Average Remaining Contractual Term (years)
 
Aggregate Intrinsic Value (in thousands)
Outstanding as of January 31, 2019
1,856,339

 
$
23.64

 
5.6
 
$
8,443

Granted
25,000

 
31.20

 
 
 
 
Exercised
(66,772
)
 
21.54

 
 
 
 
Forfeited
(1,957
)
 
28.52

 
 
 
 
Expired
(10,118
)
 
44.32

 
 
 
 
Outstanding as of July 31, 2019
1,802,492

 
$
23.70

 
5.2
 
$
9,101

Vested and exercisable at July 31, 2019
1,692,444

 
$
23.37

 
5.0
 
$
9,093

The aggregate intrinsic value of options exercised was $27,000 and $42,000 for the three months ended July 31, 2018 and 2019, respectively, and $0.2 million and $1.1 million for the six months ended July 31, 2018 and 2019, respectively. The intrinsic value represents the excess of the estimated fair value of the Company's common stock on the date of exercise over the exercise price of each option. The intrinsic value of options as of July 31, 2019 is based on the market closing price of the Company's Class B common stock on that date.

22


Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
13. Equity Incentive Plans (Continued)

As of July 31, 2019, there was $1.4 million of unrecognized stock-based compensation expense related to outstanding stock options which is expected to be recognized over a weighted-average period of 1.3 years.
Restricted Stock Units
Restricted stock units (RSUs) granted under the Plan vest and settle upon the satisfaction of a service-based condition and, for RSUs granted prior to the IPO, a liquidity event-related performance vesting condition. The service-based condition for these awards is generally satisfied over three or four years with a cliff vesting period of one or two years and quarterly vesting thereafter. Some RSUs have a two-year vesting schedule, with one third of the RSUs vesting at twelve, eighteen, and twenty-four months. Upon the effectiveness of the registration statement for the Company's IPO, which was June 28, 2018, the liquidity event-related performance vesting condition associated with RSUs granted prior to the IPO was deemed probable of being satisfied.
The following table sets forth the outstanding RSUs and related activity for the six months ended July 31, 2019:
 
Number of Shares
 
Weighted- Average Grant Date Fair Value
Outstanding as of January 31, 2019
2,328,122

 
$
19.77

Granted
808,901

 
31.26

Vested
(501,458
)
 
23.98

Canceled
(135,119
)
 
20.84

Outstanding as of July 31, 2019
2,500,446

 
$
22.58

As of July 31, 2019, there was $42.8 million of unrecognized stock-based compensation expense related to outstanding RSUs which is expected to be recognized over a weighted-average period of 2.7 years.
Employee Stock Purchase Plan
In June 2018, the Company's board of directors adopted the ESPP. The number of shares of Class B common stock available for issuance under the ESPP increases on the first day of each fiscal year equal to the least of: (1) 1,050,000 shares of Class B common stock, (2) 1.5% of the outstanding shares of Class A and Class B common stock of the Company on the last day of the immediately preceding fiscal year, and (3) such other amount as the administrator of the ESPP may determine on or before the last day of the immediately preceding year. During the six months ended July 31, 2019, the number of shares available under the ESPP was increased by 400,473 shares. As of July 31, 2019, there were 1,195,053 shares available under the ESPP.
The ESPP generally provides for consecutive overlapping 24-month offering periods comprised of four six-month purchase periods; provided, however, that the first purchase period in the first offering period will have a duration of approximately nine months. The offering periods are scheduled to start on the first trading day on or after April 1 and October 1 of each year. The first offering period commenced on June 29, 2018 and is scheduled to end on the first trading day on or after October 1, 2020. The ESPP is intended to qualify as a tax-qualified plan under Section 423 of the Internal Revenue Code and permits participants to elect to purchase shares of Class B common stock through payroll deductions of up to 15% of their eligible compensation. A participant may purchase a maximum of 2,000 shares during each purchase period.
Amounts deducted and accumulated by the participant will be used to purchase shares of Class B common stock at the end of each purchase period. The purchase price of the shares will be 85% of the lower of the fair market value of Class B common stock on the first trading day of each offering period or the fair market value of Class B common stock on the applicable exercise date. If the fair market value of a share of Class B common stock on the exercise date of an offering period is less than it was on the first trading day of that offering period, participants automatically will be withdrawn from that offering period following their purchase of shares on the exercise date and will be re-enrolled in a new offering period. Participants may end their participation at any time during an offering period and will be paid their accrued contributions that have not yet been used to purchase shares of Class B common stock. Participation ends automatically upon termination of employment.

23


Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
13. Equity Incentive Plans (Continued)

As of July 31, 2019, a total of 575,754 shares were issuable to employees based on contribution elections made under the ESPP and 253,104 shares had been purchased. As of July 31, 2019, total unrecognized stock-based compensation related to the ESPP was $3.4 million, which is expected to be recognized over a weighted-average period of 1.3 years.
The fair value of the purchase rights for the ESPP are estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:
 
June 2018
 
April 2019
Expected stock price volatility
31% - 36%
 
43% - 52%
Expected term
0.75 - 2.25 years
 
0.5 - 2.0 years
Risk-free interest rate
2.22% - 2.54%
 
2.33% - 2.46%
Expected dividend yield
 
14. Income Taxes
The Company calculated the year-to-date income tax provision by applying the estimated annual effective tax rate to the year-to-date pre-tax loss and adjusted for discrete tax items in the period. The Company's income tax expense was $0.1 million and $0.3 million for the three months ended July 31, 2018 and 2019, respectively, and $0.7 million and $0.4 million for the six months ended July 31, 2018 and 2019, respectively. The income tax expense for these periods was primarily attributable to foreign taxes.
For the periods presented, the difference between the U.S. statutory rate and the Company's effective tax rate is primarily due to the full valuation allowance on its U.S. tax assets. The effective tax rate is also impacted by earnings realized in foreign jurisdictions with statutory tax rates lower than the federal statutory tax rate.
15. Net Loss Per Share
The Company computes net loss per share using the two-class method required for multiple classes of common stock and participating securities. The rights, including the liquidation and dividend rights, of the Class A common stock and Class B common stock are substantially identical, other than voting rights. Accordingly, the Class A common stock and Class B common stock share equally in the Company’s net losses. Before the IPO, the Company’s participating securities also included convertible preferred stock. The holders of convertible preferred stock did not have a contractual obligation to share in the Company’s losses, and as a result net losses were not allocated to these participating securities.
The following tables set forth the calculation of basic and diluted net loss per share during the periods presented. The shares issued in the IPO and the shares of Class A and Class B common stock issued upon conversion of the outstanding shares of convertible preferred stock in the IPO are included in the table below weighted for the period outstanding in the three and six months ended July 31, 2018 and 2019 (in thousands, except per share amounts):
 
Three Months Ended July 31,
 
2018
 
2019
 
Class A
 
Class B
 
Class A
 
Class B
Numerator:
 
 
 
 
 
 
 
Net loss
$
(5,182
)
 
$
(41,202
)
 
$
(3,709
)
 
$
(27,451
)
Denominator:
 
 
 
 
 
 
 
Weighted-average number of shares used in
computing net loss per share, basic and diluted
1,174

 
9,335

 
3,264

 
24,154

Net loss per share, basic and diluted
$
(4.41
)
 
$
(4.41
)
 
$
(1.14
)
 
$
(1.14
)

24


Domo, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
15. Net Loss Per Share (Continued)

 
Six Months Ended July 31,
 
2018
 
2019
 
Class A
 
Class B
 
Class A
 
Class B
Numerator:
 
 
 
 
 
 
 
Net loss
$
(8,889
)
 
$
(83,002
)
 
$
(8,005
)
 
$
(58,691
)
Denominator:
 
 
 
 
 
 
 
Weighted-average number of shares used in
computing net loss per share, basic and diluted
595

 
5,556

 
3,264

 
23,932

Net loss per share, basic and diluted
$
(14.94
)
 
$
(14.94
)
 
$
(2.45
)
 
$
(2.45
)
Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods as the inclusion of all potential common shares outstanding would have been anti-dilutive. The weighted-average impact of potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive was as follows:
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2018
 
2019
 
2018
 
2019
Convertible preferred stock on an if-converted basis
9,041,710

 

 
11,528,413

 

Options to purchase common stock
500,943

 
464,901

 
508,340

 
537,481

Restricted stock units
106,017

 
1,179,038

 
144,499

 
1,321,463

Employee stock purchase program

 
127,993

 

 
213,963

Common stock warrants
2,925

 
54,365

 
2,946

 
58,775

 
9,651,595

 
1,826,297

 
12,184,198

 
2,131,682

16. Related Party Transactions
Certain members of the Company's board of directors serve as directors of and/or are executive officers of and, in some cases, are investors in, companies that are customers or vendors of the Company. Certain of the Company’s executive officers also serve as directors of or serve in an advisory capacity to companies that are customers or vendors of the Company. As of January 31, 2019 and July 31, 2019, the Company had $0.6 million and $0.6 million receivable from these customers, respectively. As of January 31, 2019 and July 31, 2019, amounts payable to these vendors were immaterial. During the three months ended July 31, 2018 and 2019 and the six months ended July 31, 2018 and 2019, the Company recognized revenue of $0.5 million, $0.3 million, $0.9 million and $0.6 million, respectively, related to these customers. During the three months ended July 31, 2018 and 2019 and the six months ended July 31, 2018 and 2019, the Company recognized expense of $0.2 million, $0.1 million, $0.4 million and $0.2 million, respectively, related to these vendors.
The Company previously utilized an aircraft owned by one of the Company's executive officers on an as-needed basis. This arrangement was terminated in June 2018. The Company recorded expenses related to usage of the aircraft of $0.1 million, $0, $0.3 million and $0 during the three months ended July 31, 2018 and 2019 and the six months ended July 31, 2018 and 2019, respectively.

25


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This discussion contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements containing words such as “may,” “believe,” “could,” "will,” “seek,” “depends,” “anticipate,” “expect,” “intend,” “plan,” “project,” “projections,” “business outlook,” “estimate,” or similar expressions constitute forward-looking statements. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition or state other “forward-looking” information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. They include, but are not limited to, statements about:
our ability to attract new customers and retain and expand our relationships with existing customers;
our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit, operating expenses, key metrics, ability to generate cash flow and ability to achieve and maintain future profitability;
the anticipated trends, market opportunity, growth rates and challenges in our business and in the business intelligence software market;
the efficacy of our sales and marketing efforts;
our ability to compete successfully in competitive markets;
our ability to respond to and capitalize on rapid technological changes;
our expectations and management of future growth;
our ability to enter new markets and manage our expansion efforts, particularly internationally;
our ability to develop new product features;
our ability to attract and retain key employees and qualified technical and sales personnel;
our ability to effectively and efficiently protect our brand;
our ability to timely scale and adapt our infrastructure;
our ability to protect our customers' data and proprietary information;
our ability to maintain, protect, and enhance our intellectual property and not infringe upon others’ intellectual property; and
our ability to comply with all governmental laws, regulations and other legal obligations.
Our actual results may differ materially from those contained in or implied by any forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this report, including those factors discussed in Part II, Item 1A (Risk Factors).
In light of the significant uncertainties and risks inherent in these forward-looking statements, you should not regard these statements as a representation or warranty by us or anyone else that we will achieve our objectives or plans in any specified time frame, or at all, or as predictions of future events. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Overview
We founded Domo in 2010 with the vision of digitally connecting everyone within the enterprise with real-time, rich, relevant data and then encouraging all employees to collaborate and act on that data. We realized that many organizations were unable to access the massive amounts of data that they were collecting in siloed cloud applications and on-premise databases. Furthermore, even for organizations that were capable of accessing their data, the process for doing so was time-consuming, costly, and often resulted in the data being out-of-date by the time it reached decision makers. The delivery format, including alert functionality, and devices were not adequate for the connected and real-time mobile workforce. Based on these observations,

26



it was apparent that all organizations, regardless of size or industry, were failing to unlock the power of all of their data, systems and people. To address these challenges, we provide a cloud-based platform that digitally connects everyone from the CEO to the frontline employee with all the data, systems and people in an organization, giving them access to real-time data and insights and allowing them to manage their business from their smartphones.
We offer our platform to our customers as a subscription-based service. Subscription fees have historically been based on the number of users and the tier of package deployed. In order to foster rapid adoption among our customers, we are beginning to transition to a pricing model that focuses on the value of the platform with less emphasis on per user pricing. Business leaders and managers are typically the initial subscribers to our platform, deploying it for a specific use case or department. Over time, as customers recognize the value of our platform, we increasingly engage with CIOs and other executives to facilitate broad enterprise adoption. A majority of our customers subscribe to our services through one-year contracts, but recently a growing percentage of new and existing customers have entered into multi-year contracts. As of January 31, 2019 and July 31, 2019, 42% and 49% of our customers were under multi-year contracts, respectively. This transition to a higher percentage of multi-year contracts, among both new and existing customers, has enhanced the predictability of our subscription revenue. We typically invoice our customers annually in advance. Given the higher average annual contract value (ACV) and renewal rates we experience with larger customers, we are focused on customers with over $100 million in revenue, with a particular emphasis on enterprise customers with over $1 billion in revenue.
We had total revenue of $34.3 million and $41.7 million for the three months ended July 31, 2018 and 2019, respectively, reflecting a year-over-year increase of 22%. For the six months ended July 31, 2018 and 2019, we had total revenue of $66.2 million and $82.5 million, respectively, representing year-over-year growth of 25%. Our enterprise customers were a key driver of revenue growth, with revenue of $15.4 million and $19.8 million for the three months ended July 31, 2018 and 2019, respectively, or 29% year-over-year growth. For the six months ended July