Earnings preview: Resources expend to hurt Domo in Q2

Domo Inc. (NASDAQ: DOMO) is set to report its earnings results for the second quarter of fiscal 2020 on Thursday after the market closes. The results will be benefited by the subscriptions to its cloud-based platform and professional services. It also includes lower costs and expenses as well as higher weighted average shares outstanding.

The company believes customer base expansion is an important indicator of market penetration, business growth, and future business opportunities. In order to accelerate customer growth, the company plans to further develop the partner ecosystem by establishing agreements with more software resellers, systems integrators, and implementation partners.

Domo believes it is underpenetrated in the overall market and has significant opportunity to expand its customer base over time. The ability to retain customers and lift platform usage could drive growth and generate incremental revenue for the company. Over the long term, the company expects customer retention to increase backed by product enhancement and focusing on sales and marketing activities towards enterprise customers.

The growth in new and existing customers could drive subscription revenue higher while the volume of implementation and training services provided to customers are likely to drive professional services and other revenue higher. However, the company expects to continue incurring losses for the foreseeable future due to the consumption of substantial financial and other resources on costs and expenses.

As of April 30, 2019, Domo had $90.8 million of cash and cash equivalents and $63.2 million of short-term investments, which were held for working capital purposes. The company believes its existing cash and cash equivalents, together with short-term investments, will be sufficient to meet its projected operating requirements for at least the next 12 months.

Analysts expect the company to post a loss of $0.99 per share on revenue of $41.68 million for the second quarter. In comparison, during the previous year quarter, Domo posted a loss of $3.44 per share on revenue of $34.27 million. The company has surprised investors by beating analysts’ expectations in all of the past four quarters.

Read: PagerDuty Q2 earnings preview

For the first quarter, Domo reported a narrower loss helped to higher revenue, lower costs and expenses, as well as higher weighted average shares outstanding. Total revenue jumped by 28% year-over-year as strong business execution helped the company sustain growth and achieve operating leverage. Subscription revenue climbed by 29% and billings grew by 22%.

For the second quarter, the company expects revenue in the range of $41 million to $42 million and net loss in the range of $1.02 to $0.98 per share. For fiscal 2020, Domo predicts revenue in the range of $173 million to $174 million and net loss in the range of $3.87 to $3.79 per share.

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