DOMO, INC. [DOMO] Filings

10-Q 1 domo10q-20230731.htm 10-Q domo10q-20230731

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

__________________________

Form 10-Q

__________________________


(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2023
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 No.)

772 East Utah Valley Drive

American Fork, UT 84003

(Address of principal executive offices, including zip code)

(801) 899-1000

(Registrant's telephone number, including area code)

__________________________

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

__________________________

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

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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 ☐ No ☒

As of August 28, 2023 there were approximately 3,263,659 shares of the registrant's Class A common stock and 32,819,149 shares of the registrant's Class B common stock outstanding.

TABLE OF CONTENTS


			Page
PART I. FINANCIAL INFORMATION			1
Item 1. Financial Statements (unaudited)			1
Condensed Consolidated Balance Sheets			1
Condensed Consolidated Statements of Operations			2
Condensed Consolidated Statements of Comprehensive Loss			3
Condensed Consolidated Statements of Stockholders' Deficit			4
Condensed Consolidated Statements of Cash Flows			6
Notes to Condensed Consolidated Financial Statements			7
















Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			24











Item 3. Quantitative and Qualitative Disclosures about Market Risk			38
Item 4. Controls and Procedures			39
PART II. OTHER INFORMATION			40
Item 1. Legal Proceedings			40
Item 1A. Risk Factors			40

Item 5. Other Information			72
Item 6. Exhibits			73
Signatures			74

SUMMARY RISK FACTORS

Our business is subject to numerous risks and uncertainties, as described further in the section of this report captioned “Risk Factors,” which may cause us not to realize the full benefits of our strengths or may cause us to be unable to successfully execute all or part of our strategy. Some of the most significant challenges and risks include the following:

•we have a history of losses and may never achieve profitability;

•if we fail to manage our growth effectively, our business and operating results will be adversely affected;

•our ability to raise capital in the future may be limited, and, if we fail to raise capital when needed in the future, we could be prevented from growing or could be forced to delay or eliminate product development efforts or other operations;

•adverse events or perceptions affecting the financial services industry could adversely affect our operating results, financial condition and prospects;

•if we are unable to attract new customers in a manner that is cost-effective, our revenue growth could be slower than we expect, and our business may be harmed;

•if customers do not renew their contracts with us or reduce their use of our platform, our revenue will decline and our operating results and financial condition may be adversely affected;

•if customers do not expand their use of our platform or adopt additional use cases, our growth prospects, operating results and financial condition may be adversely affected;

•third parties could make it difficult or prevent us from accessing their systems;

•we face intense competition, and we may not be able to compete effectively, which could reduce demand for our platform and adversely affect our business, growth, revenue and market share;

•if we fail to effectively align, develop and expand our sales and marketing capabilities with our new pricing structure and increase sales efficiency, our ability to increase our customer base and increase acceptance of our platform could be harmed;

•we have recently experienced management and board turnover, which creates uncertainties and could harm our business;

•we are subject to governmental laws, regulation and other legal obligations, particularly those related to privacy, data protection and information security, and any actual or perceived failure to comply with such obligations could impair our efforts to maintain and expand our customer base, causing our growth to be limited and harming our business;

•if our network, application or computer systems are breached or unauthorized access to customer data or other sensitive data is otherwise obtained, our platform may be perceived as insecure and we may lose existing customers or fail to attract new customers, our reputation may be damaged and we may incur significant liabilities;

•third-party claims that we are infringing or otherwise violating the intellectual property rights of others, whether successful or not, could subject us to costly and time-consuming litigation or require us to obtain expensive licenses, and our business could be harmed;

•the success of our business depends in part on our ability to protect and enforce our intellectual property rights;

•the dual class structure of our common stock has the effect of concentrating voting control with Joshua G. James, our founder and chief executive officer, which will limit your ability to influence the outcome of important transactions, including a change in control; and

•economic uncertainties or downturns could materially adversely affect our business.

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,
	2023		2023
Assets
Current assets:
Cash, cash equivalents, and restricted cash	$	66,500	$	63,852

Accounts receivable, net of allowances of $2,084 and $2,203 as of January 31, 2023 and July 31, 2023, respectively	78,958		52,186
Contract acquisition costs, net	15,908		15,867
Prepaid expenses and other current assets	7,447		8,053
Total current assets	168,813		139,958
Property and equipment, net	21,375		23,998
Right-of-use assets	15,255		13,804
Contract acquisition costs, noncurrent, net	22,299		20,190
Intangible assets, net	2,794		2,780
Goodwill	9,478		9,478
Other assets	2,102		1,892
Total assets	$	242,116	$	212,100
Liabilities and stockholders' deficit
Current liabilities:
Accounts payable	$	12,120	$	9,155
Accrued expenses and other current liabilities	49,306		44,850
Lease liabilities	4,905		5,349
Deferred revenue	182,273		164,882
Total current liabilities	248,604		224,236
Lease liabilities, noncurrent	15,271		12,866
Deferred revenue, noncurrent	3,609		2,732
Other liabilities, noncurrent	12,425		13,105
Long-term debt	108,607		111,002
Total liabilities	388,516		363,941
Commitments and contingencies (Note 12)
Stockholders' deficit:
Preferred stock, $0.001 par value per share; 10,000 shares authorized as of January 31, 2023 and July 31, 2023; no shares issued and outstanding as of January 31, 2023 and July 31, 2023	—		—
Class A common stock, $0.001 par value per share; 3,264 shares authorized as of January 31, 2023 and July 31, 2023; 3,264 shares issued and outstanding as of January 31, 2023 and July 31, 2023	3		3
Class B common stock, $0.001 par value per share; 500,000 shares authorized as of January 31, 2023 and July 31, 2023; 31,573 and 32,819 shares issued and outstanding as of January 31, 2023 and July 31, 2023, respectively	32		33
Additional paid-in capital	1,183,921		1,218,604
Accumulated other comprehensive (loss) income	(322)		24
Accumulated deficit	(1,330,034)		(1,370,505)
Total stockholders' deficit	(146,400)		(151,841)
Total liabilities and stockholders' deficit	$	242,116	$	212,100

See accompanying notes to condensed consolidated financial statements.

Domo, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)


	Three Months Ended July 31,				Six Months Ended July 31,
	2022		2023		2022		2023
Revenue:
Subscription	$	67,406	$	71,211	$	131,981	$	142,301
Professional services and other	8,125		8,461		18,014		16,829
Total revenue	75,531		79,672		149,995		159,130
Cost of revenue:
Subscription	10,712		11,453		21,379		22,065
Professional services and other	7,601		7,637		14,595		15,594
Total cost of revenue	18,313		19,090		35,974		37,659
Gross profit	57,218		60,582		114,021		121,471
Operating expenses:
Sales and marketing	44,700		41,040		90,287		84,202
Research and development	25,334		20,767		48,525		44,202
General and administrative	12,825		9,378		29,485		23,379
Total operating expenses	82,859		71,185		168,297		151,783
Loss from operations	(25,641)		(10,603)		(54,276)		(30,312)
Other expense, net	(3,286)		(5,124)		(7,351)		(9,619)
Loss before income taxes	(28,927)		(15,727)		(61,627)		(39,931)
Provision for income taxes	212		341		400		540
Net loss	$	(29,139)	$	(16,068)	$	(62,027)	$	(40,471)
Net loss per share, basic and diluted	$	(0.86)	$	(0.45)	$	(1.84)	$	(1.14)
Weighted-average number of shares used in computing net loss per share, basic and diluted	33,973		35,884		33,640		35,558

See accompanying notes to condensed consolidated financial statements.

Domo, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(unaudited)


	Three Months Ended July 31,				Six Months Ended July 31,
	2022		2023		2022		2023
Net loss	$	(29,139)	$	(16,068)	$	(62,027)	$	(40,471)
Foreign currency translation adjustments	(386)		166		(1,089)		346

Comprehensive loss	$	(29,525)	$	(15,902)	$	(63,116)	$	(40,125)

See accompanying notes to condensed consolidated financial statements.

Domo, Inc.

Condensed Consolidated Statements of Stockholders' Deficit

(in thousands, except share amounts)

(unaudited)


	Six Months Ended July 31, 2022
	Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders' Deficit
	Shares	Amount		Shares	Amount
Balance as of January 31, 2022	3,263,659	$	3	29,729,822	$	30	$	1,098,084	$	388	$	(1,224,483)	$	(125,978)
Vesting of restricted stock units	—	—		527,423	—		—		—		—		—
Issuance of common stock under employee stock purchase plan	—	—		164,959	—		1,563		—		—		1,563
Exercise of stock options	—	—		37,727	—		724		—		—		724
Stock-based compensation expense	—	—		—	—		25,328		—		—		25,328
Other comprehensive loss	—	—		—	—		—		(703)		—		(703)
Net loss	—	—		—	—		—		—		(32,888)		(32,888)
Balance as of April 30, 2022	3,263,659	$	3	30,459,931	$	30	$	1,125,699	$	(315)	$	(1,257,371)	$	(131,954)








Vesting of restricted stock units	—	—		533,234	1		—		—		—		1

Exercise of stock options	—	—		4,605	—		81		—		—		81
Stock-based compensation expense	—	—		—	—		20,451		—		—		20,451
Other comprehensive loss	—	—		—	—		—		(386)		—		(386)
Net loss	—	—		—	—		—		—		(29,139)		(29,139)
Balance as of July 31, 2022	3,263,659	$	3	30,997,770	$	31	$	1,146,231	$	(701)	$	(1,286,510)	$	(140,946)

See accompanying notes to condensed consolidated financial statements.

Domo, Inc.

Condensed Consolidated Statements of Stockholders' Deficit (Continued)

(in thousands, except share amounts)

(unaudited)


	Six Months Ended July 31, 2023
	Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive (Loss) Income		Accumulated Deficit		Total Stockholders' Deficit
	Shares	Amount		Shares	Amount
Balance as of January 31, 2023	3,263,659	$	3	31,572,826	$	32	$	1,183,921	$	(322)	$	(1,330,034)	$	(146,400)
Vesting of restricted stock units	—	—		704,314	—		—		—		—		—
Issuance of common stock under employee stock purchase plan	—	—		169,801	—		2,032		—		—		2,032

Stock-based compensation expense	—	—		—	—		17,422		—		—		17,422
Other comprehensive income	—	—		—	—		—		180		—		180
Net loss	—	—		—	—		—		—		(24,403)		(24,403)
Balance as of April 30, 2023	3,263,659	$	3	32,446,941	$	32	$	1,203,375	$	(142)	$	(1,354,437)	$	(151,169)






Vesting of restricted stock units	—	—		371,892	1		—		—		—		1

Exercise of stock options	—	—		316	—		3		—		—		3
Stock-based compensation expense	—	—		—	—		15,226		—		—		15,226
Other comprehensive income	—	—		—	—		—		166		—		166
Net loss	—	—		—	—		—		—		(16,068)		(16,068)
Balance as of July 31, 2023	3,263,659	$	3	32,819,149	$	33	$	1,218,604	$	24	$	(1,370,505)	$	(151,841)

See accompanying notes to condensed consolidated financial statements.

Domo, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Six Months Ended July 31,
	2022		2023
Cash flows from operating activities
Net loss	$	(62,027)	$	(40,471)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	2,820		3,102
Non-cash lease expense	2,375		2,172
Amortization of contract acquisition costs	8,578		8,956
Stock-based compensation expense	45,657		31,532
Other, net	1,892		2,571
Change in operating assets and liabilities:
Accounts receivable, net	15,001		26,772
Contract acquisition costs	(7,282)		(6,905)
Prepaid expenses and other	781		(464)
Accounts payable	12,907		(1,964)
Operating lease liabilities	(2,139)		(2,817)
Accrued expenses and other liabilities	(15,399)		(2,753)
Deferred revenue	(4,741)		(18,268)
Net cash (used in) provided by operating activities	(1,577)		1,463
Cash flows from investing activities
Purchases of property and equipment	(3,416)		(6,500)


Purchases of intangible assets	—		(26)

Net cash used in investing activities	(3,416)		(6,526)
Cash flows from financing activities



Proceeds from shares issued in connection with employee stock purchase plan	1,563		2,032




Proceeds from exercise of stock options	805		3


Net cash provided by financing activities	2,368		2,035
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(1,042)		380
Net decrease in cash, cash equivalents, and restricted cash	(3,667)		(2,648)
Cash, cash equivalents, and restricted cash at beginning of period	83,561		66,500
Cash, cash equivalents, and restricted cash at end of period	$	79,894	$	63,852
Supplemental disclosures of cash flow information
Cash paid for income taxes, net of refunds	$	32	$	270
Cash paid for interest	$	3,852	$	6,077
Non-cash investing and financing activities

Operating lease right-of-use assets obtained for lease liabilities	$	2,203	$	687
Purchases of property and equipment included in accounts payable and lease liabilities	$	172	$	303
Stock-based compensation capitalized as internal-use software	$	756	$	1,016

See accompanying notes to condensed consolidated financial statements.

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 put data to work for everyone so they can multiply their impact on the business. 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, Canada, and India.

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 (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, 2023, and the condensed consolidated statements of operations, comprehensive loss, stockholders' deficit and cash flows for the three and six months ended July 31, 2022 and 2023 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, 2023 and its results of operations and its cash flows for the three and six months ended July 31, 2022 and 2023. 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, 2023 are not necessarily indicative of the results to be expected for the fiscal year ending January 31, 2024 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, 2023, included in the Company's Annual Report on Form 10-K.

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 and related service period; useful lives of fixed assets; capitalization and estimated useful life of internal-use software; the incremental borrowing rate used to calculate the present value of capitalized leases; evaluation for impairment of long-lived and intangible assets including goodwill; and the allowance for doubtful accounts and expected credit losses.

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 stockholders’ deficit and the

Domo, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

1. Overview and Basis of Presentation (Continued)

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, Cash Equivalents, and Restricted Cash

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, 2023 and July 31, 2023. Restricted cash relates to an outstanding letter of credit established in conjunction with an amendment to an existing lease agreement.

Accounts Receivable

Accounts receivable are recorded at the invoiced amount (net of allowance), 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 and expected credit losses for amounts the Company does not expect to collect. In establishing the required allowance, management considers historical losses, current market conditions, customers’ financial condition and credit quality, 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, which the Company has determined to be two years. 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 $4.3 million and $4.4 million for the three months ended July 31, 2022 and 2023, respectively, and $8.6 million and $9.0 million for the six months ended July 31, 2022 and 2023, respectively. There was no impairment charge in relation to contract acquisition costs for the periods presented.

Property and Equipment, Net

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.

Domo, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

2. Summary of Significant Accounting Policies (Continued)

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

Leases

At the inception of a contract, the Company determines whether the contract is or contains a lease. Leases with a term greater than one year are recognized on the balance sheet as right-of-use (ROU) assets and lease liabilities. The Company has elected the short-term leases practical expedient which allows any leases with a term of 12 months or less to be considered short-term and thus not have an ROU asset or lease liability recognized on the balance sheet.

ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As these leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate incurred to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment. The operating lease ROU asset also includes any lease payments made in advance of lease expense and excludes lease incentives and initial direct costs incurred. Certain lease terms include options to terminate or extend the lease for periods of one to three years. The Company does not include these optional periods in its minimum lease terms or in the determination of the ROU assets and lease liabilities associated with these leases unless the options are reasonably certain to be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. ROU assets are subject to evaluation for impairment or disposal on a basis consistent with other long-lived assets.

The Company has lease agreements with lease and non-lease components which the Company has elected to account for as a single lease component. On the lease commencement date, the Company establishes assets and liabilities for the present value of estimated future costs to retire long-lived assets at the termination or expiration of a lease. Such assets are depreciated over the lease term to operating expense.

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 generally as subscription cost of revenue, with a smaller portion related to operations amortized as research and development within operating expenses. All capitalized internal-use software is amortized 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.

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, finite-lived intangible assets, and ROU 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 during the periods presented.

Revenue Recognition

The Company derives revenue primarily from subscription revenue, which consists of subscription-based agreements and, to a lesser extent, consumption-based agreements for its cloud-based platform. The Company also sells 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.

Pricing 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

Revenue from subscription-based agreements primarily consists of fees paid by customers to access the Company’s cloud-based platform, including support services. The majority of the Company's subscription-based agreements have multi-year contractual terms and a smaller percentage have annual 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. Consumption-based agreements utilize a tiered pricing structure for an annual purchase commitment based upon an estimated volume of usage. Revenue from the annual purchase commitment in consumption-based contracts is also recognized ratably over the related contractual term of the contract. Amounts for the annual purchase commitments do not carry-over beyond each annual commitment period.

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.

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, platform tier, 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 $3.8 million and $3.3 million for the three months ended July 31, 2022 and 2023, respectively, and $7.7 million and $6.3 million for the six months ended July 31, 2022 and 2023, 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 has granted stock-based awards, consisting of stock options and restricted stock units, to its employees, certain consultants and certain members of its board of directors. 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 market conditions, the Company recognizes stock-based compensation based on the estimated grant date fair value of market condition awards using a Monte Carlo simulation, and the awards are expensed over the service period using an accelerated attribution method.

Stock-based compensation expense related to purchase rights issued under the 2018 Employee Stock Purchase Plan, as amended (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.

Domo, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

2. Summary of Significant Accounting Policies (Continued)

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 Credit Risk and Significant Customers

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, and accounts receivable. Cash denominated in currencies other than the United States dollar represented 26% and 28% of total cash, cash equivalents, and restricted cash as of January 31, 2023 and July 31, 2023, respectively.

The Company maintains its cash accounts with financial institutions where, at times, deposits exceed federal insured limits. The Company may invest its excess cash in money market funds, certificates of deposit, or 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, 2022 and 2023 or more than 10% of accounts receivable as of January 31, 2023 and July 31, 2023.

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.

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.

Recent Accounting Pronouncements

Domo, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

2. Summary of Significant Accounting Policies (Continued)

There have been no recent accounting pronouncements issued which are expected to have a material effect on the Company's financial statements. Management continues to monitor and review recently issued accounting guidance upon issuance.

3. Cash, Cash Equivalents, and Restricted Cash

The amortized cost and estimated fair value of the Company’s cash, cash equivalents, and restricted cash as of January 31, 2023 and July 31, 2023 were as follows (in thousands):


	January 31, 2023
	Amortized Cost		Unrealized Gain		Unrealized Loss		Estimated Fair Value
Cash	$	38,789	$	—	$	—	$	38,789
Cash equivalents:
Money market funds	8,591		—		—		8,591
Certificates of deposit	15,420		—		—		15,420




Restricted cash(1)	$	3,700	$	—	$	—	$	3,700
Total cash, cash equivalents, and restricted cash	$	66,500	$	—	$	—	$	66,500


	July 31, 2023
	Amortized Cost		Unrealized Gain		Unrealized Loss		Estimated Fair Value
Cash	$	53,397	$	—	$	—	$	53,397
Cash equivalents:
Money market funds	6,755		—		—		6,755





Restricted cash (1)	3,700		—		—		3,700
Total cash, cash equivalents, and restricted cash	$	63,852	$	—	$	—	$	63,852

(1)Related to an outstanding letter of credit. See Footnote 12 "Commitments and Contingencies" for further details regarding this letter of credit.

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.

•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.

Domo, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

4. Fair Value Measurements (Continued)

The following tables summarize the assets measured at fair value on a recurring basis as of January 31, 2023 and July 31, 2023 by level within the fair value hierarchy (in thousands):


	January 31, 2023
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	8,591	$	—	$	—	$	8,591
Certificates of deposit	—		15,420		—		15,420




Total cash equivalents	$	8,591	$	15,420	$	—	$	24,011


	July 31, 2023
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	6,755	$	—	$	—	$	6,755





Total cash equivalents	$	6,755	$	—	$	—	$	6,755

During the three and six months ended July 31, 2022 and 2023, 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.

5. Property and Equipment

Property and equipment, net consisted of the following (in thousands):


	As of January 31,		As of July 31,
	2023		2023
Capitalized internal-use software development costs	$	44,399	$	49,331
Computer equipment and software	2,038		2,059
Leasehold improvements	3,070		3,612
Furniture, vehicles and office equipment	813		872
	50,320		55,874
Less accumulated depreciation and amortization	(28,945)		(31,876)
	$	21,375	$	23,998

Depreciation and amortization expense related to property and equipment was $1.2 million and $1.6 million for the three months ended July 31, 2022 and 2023, respectively, and $2.8 million and $3.1 million for the six months ended July 31, 2022 and 2023, respectively.

The Company capitalized $1.8 million and $2.8 million in software development costs during the three months ended July 31, 2022 and 2023, respectively, and $3.7 million and $5.4 million during the six months ended July 31, 2022 and 2023, respectively. Amortization of capitalized software development costs was $1.2 million and $1.3 million for the three months ended July 31, 2022 and 2023, respectively, and $2.6 million and $2.6 million for the six months ended July 31, 2022 and 2023, respectively.

Domo, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

6. Intangible Assets

Intangible assets consisted of the following (in thousands):


	As of January 31,		As of July 31,
	2023		2023
Intellectual property excluding patents	$	2,458	$	2,484

Patents	950		950
	3,408		3,434
Less accumulated amortization	(614)		(654)
	$	2,794	$	2,780

Amortization expense related to intangible assets was immaterial for the periods presented. Intellectual property excluding patents is considered an indefinite-lived asset due to the fact that it is renewable in perpetuity. The patents were acquired and are being amortized over a weighted-average remaining useful life of approximately 3.8 years.

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,
	2023		2023
Accrued expenses	$	13,772	$	14,949
Accrued payroll and benefits	11,476		10,493
Accrued bonus	6,708		6,011
Accrued commissions	5,438		3,671
Accrued payroll taxes	2,841		2,465
Employee stock purchase plan liability	3,071		2,370
Sales and other taxes payable	1,111		995
Other accrued liabilities	4,889		3,896
	$	49,306	$	44,850

8. Leases

The Company leases office space under non-cancelable operating leases with various expiration dates through 2027. These leases require monthly lease payments that may be subject to annual increases throughout the lease term.

Components of lease expense are summarized as follows (in thousands):


	Three Months Ended July 31,				Six Months Ended July 31,
	2022		2023		2022		2023
Operating lease expense	$	1,771	$	1,494	$	3,483	$	3,127
Short-term lease expense	376		429		758		695
Total lease expense	$	2,147	$	1,923	$	4,241	$	3,822

Lease term and discount rate information are summarized as follows:

Domo, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

8. Leases (Continued)


			As of July 31, 2023
Weighted average remaining lease term (years)			3.6
Weighted average discount rate			10.0%

Maturities of lease liabilities as of July 31, 2023 were as follows (in thousands):


Year Ending January 31:
2024(1)	$	3,352
2025	5,762
2026	5,203
2027	5,343
2028	1,797
Total lease payments	21,457
Less imputed interest	(3,242)
Present value of lease liabilities	$	18,215

(1)Net of $0.3 million of tenant improvements which are expected to be utilized in fiscal 2024.

Cash paid for operating leases was $1.5 million and $1.8 million during the three months ended July 31, 2022 and 2023, respectively, and $2.3 million and $3.5 million during the six months ended July 31, 2022 and 2023, respectively, and was included in net cash used in operating activities in the condensed consolidated statements of cash flows.

Sublease income was $0.1 million and $0.4 million during the three months ended July 31, 2022 and 2023, respectively, and $0.3 million and $0.9 million during the six months ended July 31, 2022 and 2023, respectively.

9. Deferred Revenue and Performance Obligations

Deferred Revenue

Significant changes in the Company's deferred revenue balance for the six months ended July 31, 2023 were as follows (in thousands):


Balance as of January 31, 2023	$	185,882
Revenue recognized that was included in the deferred revenue balance at the beginning of the period	(123,489)
Increase due to billings excluding amounts recognized as revenue during the period	105,221
Balance as of July 31, 2023	$	167,614

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 non-cancelable contracts, whether billed or unbilled. As of July 31, 2023, approximately $329.7 million of revenue was expected to be recognized from remaining performance obligations for subscription contracts. The Company expects to recognize approximately $212.8 million of this amount during the twelve months following July 31, 2023, with the balance recognized thereafter. As of July 31, 2023, approximately $27.9 million of revenue was expected to be recognized from remaining performance obligations for professional services and other contracts, $19.3 million of which is expected to be recognized during the twelve months following July 31, 2023, and the balance recognized thereafter.

Domo, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

10. 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,
	2022			2023			2022			2023
United States	$	58,805		$	62,968		$	117,373		$	125,968

International	16,726			16,704			32,622			33,162
Total	$	75,531		$	79,672		$	149,995		$	159,130
Percentage of revenue by geographic area:
United States	78		%	79		%	78		%	79		%

International	22			21			22			21

Other than the United States, no other individual country exceeded 10% of total revenue for the three and six months ended July 31, 2022 and 2023. As of July 31, 2023, substantially all of the Company’s property and equipment was located in the United States.

11. Debt

Credit Facility

The Company has a credit facility that permits up to $100.0 million in term loan borrowings, all of which had been drawn as of July 31, 2023. The credit facility is secured by substantially all of the Company's assets.

In August 2020, the Company entered into an amendment to the credit facility which extended the maturity date for the outstanding loan from October 1, 2022 to April 1, 2025. Per the amendment, the Company is required to comply with a financial covenant requiring the Company to maintain a minimum balance of unrestricted cash and cash equivalents equal to $10.0 million until the Company’s six-month adjusted cash flow is greater than zero. The amendment also revised the maximum debt ratio financial covenant and included an amendment fee of $5.0 million, which accrues interest at a rate of 9.5% per year. The amendment fee, along with its accrued interest, is to be paid at the earlier of the payment date, maturity date, or the date the loan becomes payable.

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, as of July 31, 2023, accrued at a floating rate equal to the greater of (1) 7% and (2) three-month LIBOR plus 5.5% per year. As of July 31, 2023, in the event that LIBOR was unavailable, interest accrued at a floating rate equal to the greater of (1) 7% and (2) the U.S. prime rate plus 2.75% per year. LIBOR has been replaced as an index rate in financial transactions by an alternative reference rate. As of July 31, 2023, the interest rate was approximately 11.1%. In addition to the 11.1%, a fixed rate equal to 2.5% per year accrues on the outstanding principal of each term loan and is added to the principal amount of the outstanding term loan on a monthly basis. During the three months ended July 31, 2022 and 2023, $0.7 million and $0.7 million of interest was capitalized, respectively, and $1.4 million and $1.4 million of interest was capitalized during the six months ended July 31, 2022 and 2023, respectively.

The 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 April 1, 2025, and (3) the date the term loan becomes due and payable. Due to the long-term nature of the closing fee, and the amendment fee described above, these fees were recorded at present value as an increase to other liabilities, noncurrent and an increase to debt issuance costs. These liabilities will be accreted to their full value over the term of the loan, with such accretion recorded as interest expense in other 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 balance sheets and are being amortized as interest expense in other expense, net in the condensed consolidated statements of operations over the term of the loan using the effective interest rate method.

Domo, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

11. Debt (Continued)

The balances in long-term debt consisted of the following (in thousands):


	As of January 31,		As of July 31,
	2023		2023
Principal	$	113,427	$	114,860
Less: unamortized debt issuance costs	(4,820)		(3,858)
Net carrying amount	$	108,607	$	111,002

The $100.0 million credit facility 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 facility, the maximum ratio is 0.500 on January 31, 2023 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 financial covenant terms of the credit facility on January 31, 2023 and July 31, 2023.

The Company incurred interest expense of $3.6 million and $4.8 million for the three months ended July 31, 2022 and 2023, respectively, and $7.0 million and $9.3 million for the six months ended July 31, 2022 and 2023, respectively.

12. 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.

The Company is involved in legal proceedings from time to time arising in the normal course of business. Management believes that the outcome of these proceedings will not have a material impact on the Company's financial condition, results of operations, or liquidity.

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

Domo, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

12. Commitments and Contingencies (Continued)

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.

Letter of Credit

In conjunction with a September 2022 amendment to an existing lease agreement, the Company provided a $3.7 million letter of credit to secure the Company’s obligations to pay the landlord for the cost of improvements in excess of the landlord's contribution. No draws have been made on the letter of credit. The letter of credit expires September 2023 and contains an option for renewal. The amount underlying such letter of credit is reflected as restricted cash under cash, cash equivalents, and restricted cash in the Company's condensed consolidated balance sheets as of July 31, 2023.

Other Purchase Commitments

The Company has also entered into certain non-cancelable 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.

13. Stockholders' 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, 2023 and July 31, 2023, 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.

At January 31, 2023 and July 31, 2023, there were 3,263,659 shares of Class A common stock authorized, issued and outstanding.

At January 31, 2023 and July 31, 2023, there were 500,000,000 shares of Class B common stock authorized. At January 31, 2023 and July 31, 2023, there were 31,572,826 and 32,819,149 shares of Class B common stock issued and outstanding, respectively.

Class B Common Stock Warrants

In connection with a line of credit signed in July 2016, the Company issued warrants to purchase shares of Class B common stock. As of July 31, 2023, there were 3,333 shares of Class B common stock subject to issuance under outstanding warrants, which are exercisable at $34.35 per share.

14. 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.

Domo, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

14. Equity Incentive Plans (Continued)

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, 2023, the number of shares available for grant under the 2018 Plan was increased by 1,741,824 shares. As of July 31, 2023, there were 2,972,729 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.

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,
	2022		2023		2022		2023
Cost of revenue:
Subscription	$	778	$	670	$	1,509	$	1,288
Professional services and other	563		473		1,031		952
Sales and marketing	7,873		6,166		15,948		12,896
Research and development	6,283		4,618		13,287		9,593
General and administrative	4,707		2,960		13,512		6,468
Interest expense	189		173		370		335
Total	$	20,393	$	15,060	$	45,657	$	31,532

Stock Options

Stock options typically vest over a four-year period and have a term of ten years from the date of grant. No stock options were granted during the three and six months ended July 31, 2022 and the three and six months ended July 31, 2023.

The following table sets forth the outstanding common stock options and related activity for the six months ended July 31, 2023:


	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, 2023	876,284	$	26.40	1.9	$	59

Exercised	(316)	8.40

Expired	(73,087)	27.11
Outstanding as of July 31, 2023	802,881	$	26.34	1.3	$	76

The aggregate intrinsic value of options exercised was $0.1 million and $0.0 million for the three months ended July 31, 2022 and 2023, respectively, and $1.4 million and $0.0 million for the six months ended July 31, 2022 and 2023, respectively. The intrinsic value represents the excess of the market closing price 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, 2023 is based on the market closing price of the Company's Class B common stock on that date.

As of July 31, 2023, all outstanding stock options were vested and exercisable and stock-based compensation expense related to all outstanding stock options has been recognized.

Domo, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

14. Equity Incentive Plans (Continued)

Restricted Stock Units

Restricted stock units (RSUs) granted under the Plan primarily vest and settle upon the satisfaction of a service-based 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. RSUs include performance-based restricted stock units (PSUs), which are subject to a market condition and settle upon the satisfaction of a service-based condition. Disclosures related to RSU activity include the impact of PSUs.

During the three months ended April 30, 2022 the Company granted 71,667 PSUs with both a market and service-based condition. These awards were subsequently modified and related to the service-based condition, which resulted in a $1.1 million reversal of stock-based compensation expense during the six months ended July 31, 2023. Additionally, 23,889 of these PSUs were canceled during the six months ended July 31, 2023.

The following table sets forth the outstanding RSUs and related activity for the six months ended July 31, 2023:


	Number of Shares	Weighted- Average Grant Date Fair Value
Outstanding as of January 31, 2023	3,894,094	$	48.27
Granted	3,297,244	14.41
Vested	(1,076,206)	46.96
Canceled	(745,445)	38.81
Outstanding as of July 31, 2023	5,369,687	$	29.06

As of July 31, 2023, there was $132.8 million of unrecognized stock-based compensation expense related to outstanding RSUs which is expected to be recognized over a weighted-average period of 2.6 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, 2023, the number of shares available under the ESPP was increased by 522,547 shares. As of July 31, 2023, there were 353,053 shares available under the ESPP.

The ESPP generally provides for consecutive overlapping 12-month offering periods comprising two six-month purchase periods. The offering periods are scheduled to start on the first trading day on or after April 1 and October 1 of each year. 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 25% of their eligible compensation. Under the ESPP, a participant may purchase a maximum of 300 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.

Domo, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

14. Equity Incentive Plans (Continued)

As of July 31, 2023, a total of approximately 349,185 shares were issuable to employees based on estimated shares available and contribution elections made under the ESPP. Shares available were estimated assuming that the plan will be increased by an amount approximating 1.5% of shares outstanding as of January 31, 2024. As of July 31, 2023, total unrecognized stock-based compensation related to the ESPP was $1.1 million, which is expected to be recognized over a weighted-average period of 0.6 years.

15. 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 income for each applicable jurisdiction and adjusted for discrete tax items in the period. The Company's income tax expense was $0.2 million and $0.3 million for the three months ended July 31, 2022 and 2023, respectively, and $0.4 million and $0.5 million for the six months ended July 31, 2022 and 2023, respectively. The income tax for these periods was primarily attributable to foreign and state 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.

16. Net Loss Per Share

The following table sets forth the calculation of basic and diluted net loss per share during the periods presented (in thousands, except per share amounts):


	Three Months Ended July 31,
	2022				2023
	Class A		Class B		Class A		Class B
Numerator:
Net loss	$	(2,800)	$	(26,339)	$	(1,462)	$	(14,606)
Denominator:
Weighted-average number of shares used in computing net loss per share, basic and diluted	3,264		30,709		3,264		32,620
Net loss per share, basic and diluted	$	(0.86)	$	(0.86)	$	(0.45)	$	(0.45)


	Six Months Ended July 31,
	2022				2023
	Class A		Class B		Class A		Class B
Numerator:
Net loss	$	(6,018)	$	(56,009)	$	(3,715)	$	(36,756)
Denominator:
Weighted-average number of shares used in computing net loss per share, basic and diluted	3,264		30,376		3,264		32,294
Net loss per share, basic and diluted	$	(1.84)	$	(1.84)	$	(1.14)	$	(1.14)

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

Domo, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

16. Net Loss Per Share (Continued)

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 (in thousands):


	Three Months Ended July 31,		Six Months Ended July 31,
	2022	2023	2022	2023

Options to purchase common stock	156	4	308	4
Restricted stock units	336	256	607	175
Employee stock purchase program	—	—	32	—

	492	260	947	179

17. Subsequent Events

In August 2023, the Company entered into an amendment to the credit facility to update its borrowing benchmark from LIBOR to the term Secured Overnight Financing Rate and make conforming changes throughout the credit agreement. Additionally, the Company obtained a waiver for defaults on technical non-financial covenants related to collateral.

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 potential impact on our business transitioning to a consumption-based pricing model;

•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;

•the effect of general economic and market conditions on our business;

•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 enabling 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, it was apparent that all organizations, regardless of size or industry, were failing to unlock the power of all of their people, data, and systems. To address these challenges, we provide a modern cloud-based data experience platform that digitally connects everyone at an organization — from the CEO to frontline employees — with all the people, data, and systems in an organization, giving them access to real-time data and insights and allowing them to put data to work for everyone so they can multiply their impact on the business.

We typically offer our platform to our customers as a subscription-based service. Subscription fees are based upon the chosen Domo package which includes tier-based platform capabilities, or usage. Business leaders, department heads and managers are the typical initial subscribers to our platform, deploying Domo to solve a business problem or to enable departmental access. Over time, as customers recognize the value of our platform, we engage with CIOs and other executives to facilitate broad enterprise adoption.

We recently began offering our platform as a consumption-based service. Customers have an annual purchase commitment, utilizing a tiered pricing structure, which is paid upfront, and is based on an estimated volume of usage. We believe this model could increase customer adoption and allow us to better land, expand, and retain customers over the long term, and thereby have a positive impact on sales and marketing productivity. We believe this has potential to remove many of the barriers of adoption and better align our pricing to the value delivered to our customers. We expect an increase in the number of consumption-based agreements in future periods. However, we have limited experience with consumption-based agreements and changes in our pricing and subscription models subject us to a number of uncertainties.

As of July 31, 2023, 67% of our customers were under multi-year contracts on a dollar-weighted basis, compared to 65% of customers as of January 31, 2023. The high percentage revenue from 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 for subscriptions to our platform.

Remaining performance obligations (RPO) represents the remaining amount of revenue we expect to recognize from existing non-cancelable contracts, whether billed or unbilled. As of July 31, 2022 and 2023, total RPO was $349.1 million and $357.6 million, respectively, representing year-over-year growth of 2%. The amount of RPO expected to be recognized as revenue in the next twelve months was $225.3 million and $232.1 million as of July 31, 2022 and 2023, respectively, representing year-over-year growth of 3%.

We had total revenue of $75.5 million and $79.7 million for the three months ended July 31, 2022 and 2023, respectively, reflecting a year-over-year increase of 5%. For the six months ended July 31, 2022 and 2023, we had total revenue of $150.0 million and $159.1 million, respectively, representing year-over-year growth of 6%. For the six months ended July 31, 2022 and 2023, no single customer accounted for more than 10% of our total revenue, nor did any single organization when accounting for multiple subsidiaries or divisions which may have been invoiced separately. Revenue from customers with billing addresses in the United States comprised 78% and 79% or our total revenue for the three months ended July 31, 2022 and 2023, respectively.

Notwithstanding our ongoing shift to a consumption-based pricing model, we expect our revenue to be negatively impacted in the near term, due in part to the effects of the macroeconomic environment which has elongated the software sales cycle, increased deal scrutiny, and made renewal discussions more challenging. In response to these dynamics, we have taken and intend to continue to take steps to better align our sales team and focus on controlling costs, which we expect will result in improved margins, sustained positive cash flow and efficient growth in the long term.

We have incurred significant net losses since our inception, including net losses of $29.1 million and $16.1 million for the three months ended July 31, 2022 and 2023, respectively, and had an accumulated deficit of $1,370.5 million at July 31, 2023. We expect to incur losses for the foreseeable future and may not be able to achieve or sustain profitability.

Impact of Macroeconomic Conditions

Prevailing macroeconomic conditions have impacted, and may continue to impact, our business and those of our customers in a manner that we may not be able to quantify or isolate from other drivers of our performance. Ongoing concerns about the health of the U.S. and global economies may cause certain existing and potential customers to reduce or delay technology spending or, seek payment or other concessions from us, which may materially and negatively impact our operating results, financial condition and prospects. Furthermore, the United States has been experiencing historically elevated rates of inflation. This inflationary environment may cause us to incur higher operating costs that we may not be able to recoup through the pricing of our platform, and may further contribute to reduced or delayed technology spend by our customers in an effort to mitigate their own rising costs.

Factors Affecting Performance

Continue to Attract New Customers

We believe that our ability to expand our customer base is an important indicator of market penetration, the growth of our business, and future business opportunities. We define a customer at the end of any particular quarter as an entity that generated revenue greater than $2,500 during that quarter. In situations where an organization has multiple subsidiaries or divisions, each entity that is invoiced at a separate billing address is treated as a separate customer. In cases where customers purchase through a reseller, each end customer is counted separately. We define enterprise customers as companies with over $1 billion in revenue, and companies with less than $1 billion in revenue are corporate customers. In order to maintain comparability, companies who become customers with revenue below $1 billion and subsequently exceed that threshold are considered enterprise customers for all periods presented.

As of July 31, 2023, we had over 2,600 customers. Enterprise customers accounted for 50% and 47% of our revenue for the three months ended July 31, 2022 and 2023, respectively, and 50% and 47% for the six months ended July 31, 2022 and 2023, respectively. In order to accelerate customer growth, we intend to further develop our partner ecosystem by establishing agreements with more software resellers, systems integrators and other partners to provide broader customer and geographic coverage. We believe we are underpenetrated in the overall market and have significant opportunity to expand our customer base over time.

Customer Upsell and Retention

We employ a land, expand, and retain sales model, and our performance depends on our ability to retain customers and expand the use of our platform at existing customers over time. It currently takes multiple years for our customers to fully embrace the power of our platform. We believe that as customers deploy greater volumes and sources of data for multiple use cases, the unique features of our platform can address the needs of everyone within their organization. We are still in the early stages of expanding within many of our customers.

We have invested in platform capabilities and online support resources that allow our customers to expand the use of our platform in a self-guided manner. Our professional services, customer support and customer success functions also support our sales force by helping customers to successfully deploy our platform and implement additional use cases. In addition, we believe our partner ecosystem will become increasingly important over time. We work closely with our customers to drive increased engagement with our platform by identifying new use cases through our customer success teams, as well as in-platform, self-guided experiences. We actively engage with our customers to assess whether they are satisfied and fully realizing the benefits of our platform. While these efforts often require a substantial commitment and upfront costs, we believe our investment in product, customer support, customer success and professional services will create opportunities to expand our customer relationships over time.

Our ability to drive growth and generate incremental revenue depends heavily on our ability to retain our customers and increase their usage of our platform. With that objective in mind, we allocate our customer success and customer support resources to align with maximizing the retention and expansion of our subscription revenue.

An important metric that we use to evaluate our performance in retaining customers is gross retention rate. We calculate our gross retention rate by taking the dollar amount of annual contract value (ACV) that renews in a given period divided by the ACV that was up for renewal in that same period. The ACV of multi-year contracts is also considered in the calculation based on the period in which the annual anniversary of the contract falls. Our gross retention rate was 89% and 88% for the 12 months ended July 31, 2022 and 2023, respectively.

As we continue to enhance our product and develop methods to encourage wider and more strategic adoptions, we expect that customer retention will increase over the long term. Our ability to successfully upsell and the impact of cancellations may vary from period to period. The extent of this variability depends on a number of factors including the size and timing of upsells and cancellations relative to the initial subscriptions.

Sales and Marketing Efficiency

We are focused on increasing the efficiency of our sales force and marketing activities by enhancing account targeting, messaging, field sales operations and sales training in order to accelerate the adoption of our platform. Our sales strategy depends on our ability to continue to attract and retain top talent, to increase our pipeline of business, and to enhance sales productivity. We focus on productivity per quota-carrying sales representative and the time it takes our sales representatives to reach full productivity.

We manage our pipeline by sales representative to ensure sufficient coverage of our sales targets. Our ability to manage our sales productivity and pipeline are important factors to the success of our business. We have taken steps to better align our sales and marketing spending and headcount to efficiently grow and attract new customers.

Sales and marketing expense as a percentage of total revenue was 59% for the three months ended July 31, 2022 compared to 52% for the three months ended July 31, 2023.

Leverage Research and Development Investments for Future Growth

We plan to continue to make investments in areas of our business to continue to expand our platform functionality. This may include investing in machine learning algorithms, predictive analytics, and other artificial intelligence technologies to create alerts, detect anomalies, optimize queries, and suggest areas of interest to help people focus on what matters most. These investments may also include extending the functionality and effectiveness of our platform through improvements to the Domo Appstore and developer toolkits, which enable customers and partners to quickly build and deploy custom data applications. The amount of new investments required to achieve our plans is expected to decrease as a percentage of revenue compared to historical years.

Research and development expense as a percentage of total revenue was 34% for the three months ended July 31, 2022 compared to 26% for the three months ended July 31, 2023.

Key Business Metric

Billings

Billings represent our total revenue plus the change in deferred revenue in a period. Billings reflect sales to new customers plus subscription renewals and upsells to existing customers, and represent amounts invoiced for subscription, support and professional services. We typically invoice our customers annually in advance for subscriptions to our platform. Because we generate most of our revenue from customers who are invoiced on an annual basis and have a wide range of annual contract values, we may experience variability due to typical enterprise buying patterns and timing of large initial contracts, renewals and upsells.

The following table sets forth our billings for the three and six months ended July 31, 2022 and 2023:


	Three Months Ended July 31,				Six Months Ended July 31,
	2022		2023		2022		2023
Billings (in thousands)	$	72,328	$	70,563	$	145,254	$	140,862

Components of Results of Operations

Revenue

We derive our revenue primarily from subscription revenue, which consists of subscription-based agreements and, to a lesser extent, consumption-based agreements for our cloud-based platform. We also sell professional services.

Revenue from subscription-based agreements is a function of customers, platform tier, number of users, price per user, and transaction and data volumes. Revenue is recognized ratably over the related contractual term beginning on the date that the platform is made available to a customer. We recognize revenue ratably because the customer receives and consumes the benefits of the platform throughout the contract period. Consumption-based agreements utilize a tiered pricing structure for an annual purchase commitment based upon an estimated volume of usage. Revenue from the annual purchase commitment in consumption-based contracts is also recognized ratably over the related contractual term of the contract. Amounts for the annual purchase commitments do not carry-over beyond each annual commitment period.

Professional services and other revenue primarily consists of implementation services sold with new subscriptions, as well as professional services sold separately, including training and education. Professional services are generally billed in advance and revenue from these arrangements is recognized as the services are performed. Our professional services engagements typically span from a few weeks to several months.

Cost of Revenue

Cost of subscription revenue consists primarily of third-party hosting services and data center capacity; salaries, benefits, bonuses and stock-based compensation, or employee-related costs, directly associated with cloud infrastructure and customer support personnel; 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 certain employee benefit costs.

Cost of professional services and other revenue consists primarily of employee-related costs directly associated with these services, third-party consultant fees, and allocated overhead.

Operating Expenses

Sales and Marketing. Sales and marketing expenses consist primarily of employee-related costs directly associated with our sales and marketing staff and commissions. Other sales and marketing costs include digital marketing programs and promotional events to promote our brand, including Domopalooza, our annual user conference, as well as tradeshows, advertising and allocated overhead. Contract acquisition costs, including sales commissions, are deferred and then amortized on a straight-line basis over the period of benefit, which we have determined to be approximately four years for initial contracts. Contract acquisition costs related to renewal contracts and professional services 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, which we have determined to be two years.

Research and Development. Research and development expenses consist primarily of employee-related costs for the design and development of our platform, contractor costs to supplement staff levels, third-party web services, consulting services, and allocated overhead. Our cycle of frequent updates has facilitated rapid innovation and the introduction of new product features throughout our history. We capitalize certain software development costs that are attributable to developing new features and adding incremental functionality to our platform, and amortize such costs as costs of subscription revenue over the estimated life of the new feature or incremental functionality, which is generally three years.

General and Administrative. General and administrative expenses consist of employee-related costs for executive, finance, legal, human resources, recruiting and administrative personnel; professional fees for external legal, accounting, recruiting and other consulting services; and allocated overhead costs.

Other Expense, Net

Other expense, net consists primarily of interest expense related to long-term debt. It also includes the effect of exchange rates on foreign currency transaction gains and losses foreign currency gains and losses upon remeasurement of intercompany balances, and interest income. The transactional impacts of foreign currency are recorded as foreign currency losses (gains) in the condensed consolidated statements of operations.

Income Taxes

Income taxes consists primarily of income taxes related to foreign and state jurisdictions in which we conduct business. Because of the uncertainty of the realization of the deferred tax assets, we have a full valuation allowance for domestic net deferred tax assets, including net operating loss carryforwards and tax credits related primarily to research and development.

Results of Operations

The following tables set forth selected condensed consolidated statements of operations data and such data as a percentage of total revenue for each of the periods indicated:


	Three Months Ended July 31,				Six Months Ended July 31,
	2022		2023		2022		2023
Revenue:	(in thousands)
Subscription	$	67,406	$	71,211	$	131,981	$	142,301
Professional services and other	8,125		8,461		18,014		16,829
Total revenue	75,531		79,672		149,995		159,130
Cost of revenue:
Subscription(1)	10,712		11,453		21,379		22,065
Professional services and other(1)	7,601		7,637		14,595		15,594
Total cost of revenue	18,313		19,090		35,974		37,659
Gross profit	57,218		60,582		114,021		121,471
Operating expenses:
Sales and marketing(1)(3)	44,700		41,040		90,287		84,202
Research and development(1)	25,334		20,767		48,525		44,202
General and administrative(1)(2)(3)(4)	12,825		9,378		29,485		23,379
Total operating expenses	82,859		71,185		168,297		151,783
Loss from operations	(25,641)		(10,603)		(54,276)		(30,312)
Other expense, net(1)	(3,286)		(5,124)		(7,351)		(9,619)
Loss before income taxes	(28,927)		(15,727)		(61,627)		(39,931)
Provision for income taxes	212		341		400		540
Net loss	$	(29,139)	$	(16,068)	$	(62,027)	$	(40,471)

________________

(1)Includes stock-based compensation expense as follows:


	Three Months Ended July 31,				Six Months Ended July 31,
	2022		2023		2022		2023
Cost of revenue:			(in thousands)
Subscription	$	778	$	670	$	1,509	$	1,288
Professional services and other	563		473		1,031		952
Sales and marketing(a)	7,873		6,166		15,948		12,896
Research and development(a)	6,283		4,618		13,287		9,593
General and administrative(a)(b)	4,707		2,960		13,512		6,468
Other expense, net	189		173		370		335
Total	$	20,393	$	15,060	$	45,657	$	31,532

(a) Includes $3.6 million of stock-based compensation related to the settlement of certain fiscal 2022 bonuses during the six months ended July 31, 2022.

(b) Includes $2.6 million of stock-based compensation related to the modification of certain awards during the six months ended July 31, 2022.

(2)Includes amortization of certain intangible assets of $20,000 and $20,000 for the three months ended July 31, 2022 and 2023, respectively, and $40,000 and $40,000 for the six months ended July 31, 2022 and 2023, respectively.

(3)Includes executive officer severance as follows:


	Three Months Ended July 31,				Six Months Ended July 31,
	2022		2023		2022		2023
	(in thousands)
Sales and marketing	$	507	$	—	$	507	$	443
General and administrative	—		225		—		1,553
Total executive officer severance	$	507	$	225	$	507	$	1,996

(4)Includes a $2.4 million insurance reimbursement for legal fees during the three and six months ended July 31, 2023.


	Three Months Ended July 31,				Six Months Ended July 31,
	2022		2023		2022		2023
Revenue:
Subscription	89	%	89	%	88	%	89	%
Professional services and other	11		11		12		11
Total revenue	100		100

DOMO, INC. [DOMO] Filings
10-Q	[2023-09-05]
10-Q	[2023-06-09]
10-K	[2023-03-27]
10-Q	[2022-12-09]
10-Q	[2022-09-08]
10-Q	[2022-06-08]
10-K	[2022-03-23]
10-Q	[2021-12-10]
10-Q	[2021-09-09]
10-Q	[2021-06-09]
10-K	[2021-04-01]
10-Q	[2020-12-10]
10-Q	[2020-09-09]
10-Q	[2020-06-09]
10-K	[2020-04-13]
10-Q	[2019-12-12]
10-Q	[2019-09-12]
10-Q	[2019-06-13]
10-K	[2019-04-15]
10-Q	[2018-12-13]
10-Q	[2018-09-13]
S-1	[2018-06-01]