To rewind, its 9.2 mln share IPO priced merely in-line with expectations at $21 versus the $19-$22 projected range. It then opened for trading with a fairly modest 13% opening pop, which, along with the in-line pricing, could be deemed as a disappointing debut for a high growth tech IPO.
While the stock did trade as high as $28.86 on its first day, that did not translate into any sustained momentum -- in fact, just the opposite occurred. After its first day of trading, shares went on a month-long dive, sinking down to the $16 area by late July. But that is when the tide began to turn for DOMO.
Shares found support there, and as it became apparent that a floor was put in, buyers crept back in and took advantage of the cheap valuation. At that time, DOMO was trading with a forward P/S of about 2.5x. Momentum gradually swung back into the bull's favor, and on August 28, DOMO closed for trading back at its $21 IPO price. Now, with this upside report providing a tailwind, the stock could push back towards those highs seen on day 1.
Domo is an operating system that powers a business by bringing massive amounts of data from all departments of a business together to provide real-time data insights. Domo enables CEOs to manage their entire company from their phone. This is possible because Domo digitally connects all of the people, data, and systems in a company.
It has built connectors (DomoBots) to connect in real-time to all of the data within a company and to bring all of that data into a warehouse. It has also built visualization tools that enable users to explore the data on any device and to enable them to collaborate on the data in real time. Domo also created an artificial intelligence and machine learning engine that is able to find correlations within the data and invite users to action. Domo also built an app store with pre-built applications as well as the tools for users to build their own applications. These tools and technologies are typically provided by separate vendors today. Domo combines all of them in a single platform.
Domo's founder and CEO Josh James previously started Omniture, the online marketing cloud company that became Adobe Marketing Cloud. Domo says that he understood that real-time data powering the marketing cloud improved how online marketers ran their business, and he identified an opportunity to create and apply that same paradigm across businesses more broadly and not for just one department. This insight served as the impetus for Domo, which connects not just for one department or one person, but an entire company.
2Q19 Results & Guidance
Taking a closer look at its quarterly report, DOMO posted a loss per share of ($3.44), exceeding analysts' ($3.64) estimate by $0.20. Also, on a year/year basis, Non-GAAP operating loss showed a significant improvement coming in at ($33.2) mln compared to ($41.3) mln in the year ago quarter.
A major driver for the smaller operating loss was the sharp uptick in Non-GAAP subscription gross margin to 71% from 64%. Additionally, Non-GAAP operating expenses actually dropped slightly to $55.0 million from $56.5 mln in 2Q18. That is quite unusual for a high growth tech IPO, which typically are ramping up Sales & Marketing costs to build customer bases and drive top-line growth.
On the topic of top-line growth, revenue was up a healthy 32% to $34.3 mln, also edging the $32.0 mln consensus. That is also right in-line with 1Q19's revenue growth of 32%, so there was no drop-off from last quarter. Billings, which measure demand in the current quarter only, also exhibited solid growth at +37%.
To top off the solid quarter, DOMO also issued upside guidance for both Q3 and FY19. For Q3, it is projecting a loss per share of ($1.39)-($1.37) versus the ($1.43) consensus, and revenue of $34.8-$35.2 mln versus the $32.9 mln expectation. And, for FY19, it guided for a loss of ($9.55)-($9.50) compared to the ($9.57) consensus, on revenue of $136.7-$137.1 mln versus the $131.4 mln expectation.
Clearly, DOMO still has a lot of work to do in terms of profitability. But with margins on the rise, with solid cost containment, and with healthy double-digit top-line growth, DOMO is in position to make some meaningful strides in that regard. All in all, it was an encouraging and positive first quarterly report from the company.