DOMO - NASDAQ

Greetings, and welcome to the Domo First Quarter Fiscal Year 2025 Earnings Call. At this time all participants are in a listen only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Peter Lowry, Vice President, Investor Relations. Thank you. You may begin.

Good afternoon. On the call today, we have Josh James, our Founder and CEO; and David Jolley, our Chief Financial Officer. I'll lead off with our safe harbor statement and then on the call. Our press release was issued after the market close and is posted on the Investor Relations section of our website, where this call is also being webcast. Statements made on this call include forward-looking statements related to our business under federal securities laws. These statements are subject to a variety of risks, uncertainties and assumptions. These include, but are not limited to, statements about our future and prospects or financial projections and cash position, statements regarding the potential of our consumption model, statements about our sales team and technology, our expectations for new business opportunities, transactions and initiatives, statements regarding our channel communication and upcoming events, statements regarding the potential of artificial intelligence and its impact on our business and statements regarding the impact of macroeconomic and other conditions on our business. For a discussion of these risks and uncertainties, please refer to documents we file with the SEC, in particular, today's release, our most recently filed annual report on Form 10-K and our most recently filed quarterly report on Form 10-Q. These documents contain and identify important risk factors and other information that may cause our actual results to differ materially from those contained in our forward-looking statements. In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of Domo's performance. Other than revenue, unless otherwise stated, we will be discussing our results of operations on a non-GAAP basis. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. Please refer to the tables in our earnings press release for a reconciliation of our non-GAAP financial measures to their most directly comparable GAAP measure, which we have posted to the Investor Relations section of our website at domoinvestors.com. With that, I'll turn it over to Josh. Josh?

Thank you, Pete. Hello, everyone, and thanks for joining us on the call today. I'll start with our quarterly results. In Q1, we exceeded our revenue guidance and achieved positive adjusted free cash flow. Our billings were not on target that we would have substantially met our guidance if it weren't for one large non-renewal. With the exception of that one contract, our gross retention would have been 6 percentage points higher and coming closer to 89%. While our near-term results are not where I want them to be, I do remain confident that we're focused on and executing in the right areas, which should have us back to growth in the near future. We continue to get positive signals from our consumption customers. More and more consumption deals are coming up for renewal. And while it's still a small sample size, we think it's big enough to be directionally indicative. Gross and net retention for consumption renewals in Q1 were significantly higher than our seat-based customers. In fact, net retention for the consumption cohort was greater than 115% in Q1, which is higher than we've ever seen. And gross retention was 96%. As we look forward to Q2, we have 3x the sample size and the numbers are equally encouraging. With results like these, we are very focused on converting our customer base to consumption as fast as possible. In Q1, over 90% of our new contract dollar value was on consumption. And now we have over 30% of our total ARR on consumption. We continue to believe this number will be over 50% by the end of the year. Diving into consumption. Several years ago, we noticed that the relationships with some of our customers were as strong as we wanted them to be. We were having trouble getting in front of the CIO and had competitors and other departments also signing big contracts. As a result, we sometimes found ourselves stuck in a single use case. And even when customers wanted to try to expand to other use cases, the permissions required internally for our customers on a seat-based model made it difficult to do so. It limited our ability to spread virally and impeded our growth. This made it clear that something needed to change, which is why we began exploring a consumption model. More recently, as we saw the economy churn leading to CFO is putting pressure on CIOs to cut spend, particularly software spend. Decisions remain based on which vendor could be most aggressive on costs, and vendor consolidation became the mantra of the day. We won some of these battles and we lost some. But even when we won, we often had to cut the price dramatically if it were in a situation where we had a single use case and not a wall-to-wall enterprise license agreement installation or ELA. So if we were not embraced as a strategic multiuse case solution with multiple departments with the CIOs blessing, we became vulnerable, and that's exactly what happened with our large nonrenewal this quarter. They were our customer for eight years and had renewed 7 times, but we had struggled to break out of that single use case. As a result, we lost that account due to a CFO-driven cost-cutting directive, focused on tech consolidation. These factors have played a large part in our retention dropping from our historic rates of about 90% to recent results in the low 80s. Over the last three quarters, we had 16 renewals over $1 million, of which we lost to and had varying degrees of down sales at seven. Of the remaining seven, we either retained or expanded our relationship. For the losses and down sells, the common theme was being vulnerable to budget cuts and tech consolidation because we were only being utilized for a single use case or lacking wall-to-wall adoption. As we've said numerous times, getting more customers to embrace demo for multiple use cases with ELAs is the only model to move forward with. Unfortunately, we didn't get this model implemented soon enough to mitigate some of the churn we've experienced. But it's in place now. And as I mentioned earlier, we are seeing great retention numbers from our consumption customers. Also, as we look ahead, we want to make it clear that we think we have truly turned the corner when it comes to retention. As we look at the landscape of customers renewing, it's markedly different than it has been the last four quarters. We feel confident in our Q2 retention forecast and our guiding to gross retention for the first time ever. We expect Q2 gross retention to be increasing and up in the range of 87% to 88%, up from 83% in Q1. We don't plan on providing this guidance every quarter, but we wanted to do this to demonstrate our confidence that the recent trend of low 80s is not expected to be the case for Q2. What we've seen play out is a tale of 2 types of customers. On the one side, there are customers with a single use case where Domo is used in only one department, and there is lack of CIO support. On the other side, we have fiercely loyal customers who embrace Domo as a broad strategic solution in their organization. They've adopted us as their preferred solution. There are limited competitive offerings in the account, and they have multiple gear plans centered around our platform. Those customers love Domo. And actually, nothing reinforced it more than their engagement at our Annual Customer Conference, Domopalooza, which was held in March. For the first time since Omniture, I'm seeing customers that are truly raving fans, and they're excited to talk about their multi-year plans with Domo. It was starkly noticeable of Domopalooza, partly because we hadn't been in person with our customers in mass for five years. I heard dozens and dozens of companies talking emphatically about being -- Domo being at the core of their data strategy and how our platform fits into their three or five year plans. The energy was phenomenal, and it was so exciting to hear story after story about customers transforming their businesses by fully embracing Domo. We heard from customers like Regional One Health, a Level 1 trauma center, which has used Domo to reduce its average patient stay by almost two days and free up hospital beds to an additional 12,000 patients every year. They've also used Domo to improve their pharmacy program, driving $6 million in incremental profit from that use case alone. Thanks to Domo, they have everything they need to leverage, extend and act on data securely and transparently as well as automate actions that lead to important outcomes. This customer has also become a valuable partner and contributed to multiple new logo deals for Domo. Another example, Allied Universal, a global security services company that transformed from a $100 million company into a $20 billion company with 800,000 employees operating over 100 countries, just eight years after launching with Domo. This outstanding growth was possible because they are using Domo to easily and quickly leverage, extend and act on insights that drive tangible results. But nothing stood out more to me than the incredible phrase we saw our customers publicly share with their professional networks following the event. For example, these are some of the posts, a strategy and analytics expert from Ticketmaster said that Domo's current tech stack and where we're headed are at the leading edge and extremely easy to use and call Domo a hidden gem of a company. An IT leader from Freddy's Frozen Custard and Steakburger said, if you've ever heard me talk about my level of data, you've probably heard me talk about Domo. We use Domo for so many things, and yet, we may actually underutilize it. Another example of customer momentum came just last week. We were speaking with a long-term customer who's been on an ELA contract for years. They were extremely excited to share their 5-year data strategy with us, which centers around Domo. As part of this, they were looking at a significant upsell -- they were also a little surprised by the lack of appreciation for the value we create and made a comment that they should invest in our stock. While we certainly appreciate the sentiment, we do actually believe the level of affinity from our customers is evidence that our recent retention numbers aren't reflective of the incredible traction we're seeing with them. Now we mentioned a few times how much this space has evolved. Over the past several years, cloud data warehouses or CDWs, have really emerged as a center of gravity in the broader data landscape. Unfortunately, as all the activity and momentum built up around the space, we were kind of left on the sideline because we had already created capabilities that directly competed with the CDWs. As these cloud data warehouses rapidly expanded their businesses and impact, it became clear we needed to change our back end to align with the CDWs and remove the friction that existed, which brings us to today. It's only been one month since we launched Cloud Amplifier with our first CDW partner. And we have four more in queue for the next few months. Astonishingly, we already have 47 opportunities in pipeline with 12 net new relationships, whereas CDW brought us into customer conversations that would have traditionally gone to one of our competitors. Let me tell you about the other momentum we're seeing with partners, and this is all very recent. In the last few months, we participated in more than a dozen partner events. Since April 1, we have led over a dozen partner-enabled trainings and also conducting more than 90 account planning and joint customer calls. And just in April alone, we held more than 300 sales calls were the prospect mentioned a CDW partner, which is a significant increase over prior months as our customers and our sales executives start to understand and realize the benefit that comes by aligning with the CDW partners. Across the board, the feedback is extremely positive. In fact, one CDW told us they have never been able to get data into their product as quickly and easily as they did using Domo, providing access to data that they thought was out of reach. The reps are starting to close deals with us and quickly calling us again to introduce us to their other accounts because it speeds up their time to close. Here are several examples of how becoming a better ecosystem partner is helping us win in the market. One new level in this quarter was with a manufacturing company that chose Domo and Databricks over Microsoft Fabric. That choice lets the customer easily leverage existing investment in their cloud data warehouse, while giving businesses and their users, the real-time insights they need to run their business. Another new logo win this quarter was with a pet care company, where a former Domo customer became their head of operations. And as a condition of her employment she required that she would be able to deploy Domo company-wide for data management, another example of the affinity that comes when customers embrace broader use cases with Domo. The deal closed within one month of an on-site meeting with the executive team. In this case, Domo will sit on Google Cloud and data will be distributed throughout the line of business with Domo. Another example is a very well-known restaurant chain that chose Domo to replace Tableau this quarter. The company historically used Tableau on Snowflake but switched to Domo because we easily scale across hundreds of users, offer compelling mobile capabilities and delivering outcomes quickly, all while leaving their data in Snowflake. And then the last example I want to share is where we have seen -- we have continued to see strong momentum in upsells on consumption conversions as well. One customer that converted to our consumption model that I want to highlight this quarter was with an account-based marketing firm, where we had a 30% upsell primarily because of our ability to integrate with another well-known CDW. Our ecosystem investments are producing results, and we're very excited to see the extent to which it impacts our top line over the next few quarters. I'm extremely pleased with the progress we are making as we start closing deals and seeing more and more pipeline generation. And with that, I'll hand it over to Mr. Jolley. David?

Thanks, Josh. While we're still seeing a challenging market environment, we were able to slightly exceed our revenue guidance. Total revenue was $80.1 million, a year-over-year increase of 1%. Subscription revenue represented 90% of total revenue and also grew at 1% year-over-year. Q1 billings were $65.5 million. We have continued to see challenges in our traditional go-to-market channel which further highlights that the timing is right to lean into the partner channel. Reinforcing Josh's earlier point, our billings were primarily impacted by one large contract that didn't renew. Excluding this one renewal, we would have substantially met our billings guidance. Our gross retention was 83% and with the exception of that one large contract would have been 89%. Our net retention was 88%. That said, we expect our Q2 retention to be in the 87% to 88% range, which gives us a foundation to start to get back to growth. Now let me review some of the other Q1 metrics. Current RPO was $230.5 million, and our total RPO declined 3% year-over-year to $346.3 million as of April 30, 2024. On a dollar-weighted measure, we continue to have approximately 2/3 of our customers under multi-year contracts. Multi-year contracts benefit us in a number of ways, particularly on the retention front. We've recently taken actions to incentivize our reps and customers to enter into multi-year contracts and expect that this will help improve our retention results in future periods. Moving on to margins and profitability. Our subscription gross margin was 83.4%, down 2.6 percentage points from Q1 of last year, due primarily to customer data usage outpacing revenue growth. Historically, our contracts haven't had data caps, so this isn't surprising. In fact, we're glad to see customers using the product more and more. Thankfully, we're already well on our way to getting our customer base moved over to consumption contracts which will better align our revenue with customer data usage. We may see near-term fluctuations of a point or two, but over the long-term, we expect our subscription gross margin to stabilize in the mid-80s. Non-GAAP operating margin was negative 9.2%, down 7.2 percentage points from a year ago, primarily due to hosting Domopalooza as an in-person event this year and fees related to the extension of our debt facility. Non-GAAP net loss was $12.3 million compared to $6.1 million a year ago. Net loss per share was $0.33 based on 37.5 million weighted average shares outstanding. Because we're in a net loss position, all share and per share amounts are the same for basic and diluted. In Q1, cash flow from operations was $1.9 million, while adjusted free cash flow was $0.5 million and our cash balance increased $0.2 million from last quarter to $61.2 million. Now let me talk about guidance. As Josh discussed, we've been making foundational changes to our go-to-market. Consumption better aligns our pricing with the value provided to our customers and even more importantly, enables our ecosystem partnering with cloud-based data warehouse providers. In addition, research shows that deals done with partners tend to have stronger retention, shorter deal cycles and result in much more efficient customer acquisition. While we believe we're making the right moves, the returns on our traditional go-to-market have not been where we want them to be and we think it will take a few quarters to see significant impact to billings from our initiatives with ecosystem partners. Looking forward, for Q2, we're expecting billings of about $70 million. Given our Q1 billings performance, we expect Q2 GAAP revenue to be in the range of $76 million to $77 million. We expect non-GAAP net loss per share of $0.26 to $0.30 and assuming 38.4 million weighted average shares outstanding. As we stated before, we are committed to being free cash flow positive for the full year, and we'll make adjustments as necessary to achieve that goal. However, there will be variability in the interim quarters. I'll now hand it back to Josh for some concluding remarks. Josh?

Thanks, David. It's been fascinating to see how this space has evolved over the past 14 years. When we started, there were no complete integrated data platforms. Data was siloed offline, online and in hundreds of disjointed disconnected systems. We put all of the offerings required together in the cloud, so customers could finally have the right experience. And that meant we had to build the entire data staff. At the time, we didn't have the distribution of the biggest tech companies but we were solving problems that every CIO was trying to sort out. Now fast forward to today, the landscape in our space has dramatically changed. Over the past few years, a center of gravity in the broader data space has finally emerged, cloud-based data warehouses like Snowflake, Databricks, BigQuery, Redshift, Oracle, IBM and several others have taken on a central part of every CIO's data strategy. They're talking about their data strategy and they're talking about it with one of those vendors. If we are going to be a trusted long-term vendor with our customers, we need to be involved in those conversations. But historically, we haven't been. Now with our strong partnerships, we are being brought in to provide advice and perspective because we are a frictionless and integral part of the plan. And even as you probably saw, Snowflake mentioned us in the earnings call yesterday, saying that we were one of their partners, building software on top of their platform and bringing on entirely new capabilities and unlocking new use cases for them and their customers. More excitingly, we are now also able to initiate the conversations as well with our customers by bringing our partners to the table. Our customers love it. And of course, our partners are thrilled. So when we started Domo, we built the full data stack because it didn't exist. But now we've changed our architecture to be more partner-focused and to run Domo's back end on our cloud data warehouse partners. And the conversations are going extremely well. As I described earlier, this quarter, we went from zero leads from cloud data warehouse partners to being in dozens and dozens of conversations just in the last month. And that's basically with just one partner that's really on-boarded at this point. Several other partners are coming online over the next few months, as we have detailed. I'm really excited about the success and dramatic progress of these partner advancements. And the reality is, in my opinion, there's a significant chance that 1 of these cloud-based data warehouses is the likely acquire in the next 12 to 24 months. It's true we get interest from strategic or private equity shops all the time. Additionally, we do have over $1 billion of income tax NOLs or net operating losses. And there is obviously substantial financial value in the NOLs alone to most operating businesses that would be strategic buyers. We are one of the lowest revenue multiple companies in the entire SaaS landscape. In my opinion, the value is clearly misunderstood and/or underestimated. In the last two quarters, multiple potential buyers have said to me, we can pay you multiples of your current stock price. And of course, we are continuing to talk to them to explore the details of how we would fit together and create value. Additionally, we are demonstrating more value to the market, I believe, and to other potential suites as we successfully transition our business more and more to the consumption model. And as we strengthen our relationships in the ecosystem. That would help us maximize the value that we ultimately receive for the stock in an acquisition scenario. We want to have strategic conversations and the best way to do that is to successfully execute on these partnerships. We had to get through the pain, which we believe we have now and had to clean up our architecture, so we weren't at odds with many companies in our ecosystem. We have dramatically more wallet installations than we used to and have gone from just a handful of customers a year ago to over 30% of our customers on ELAs with the data consumption charge currently. And this should reach a meaningful majority by year-end. So the plan has been fixed retention and get back to growth. Looking forward, we believe we are on that trajectory finally. Our ecosystem efforts are showing great signs of life and I believe we'll either end up with several partnerships and revenue growth north of 20% or I believe we'll sell to one of several potential strategic parties at a substantial premium that is multiples of where our stock price is today or one of many interested private equity shops. To be clear, in my heart of hearts, we'd love to get back to running this thing north of 20% growth, while having a blast innovating and growing Domo in this ever exciting space. That said, if we shoot our shot, but we still believe the best move to optimize the long-term risk-adjusted stock price for shareholders is to sell the company, then that is absolutely what we will do just like I did last time with Omniture. With that, we will open the call for questions. Operator?

[Operator Instructions] Our first question comes from Sanjit Singh with Morgan Stanley.

I had a couple. First on, you guys talked in the script about the importance of being sort of wall-to-wall versus single use case. As -- given what the business stands today, what percentage of your ARR is tied to customers with single use cases versus non-single-use cases or wall-to-wall deployments?

We feel comfortable with in terms of the relationship that we have with our customers and the strategic things that they're doing internally. It's really -- creates a market difference when you are talking about the enterprise customers. And for those enterprise customers, I think the -- what we're excited about is, A, looking at the NRR for those consumption cohorts and seeing those be higher than we've ever seen from an NRR perspective for any cohort. So that's the first thing that we're excited about on that front. And then I think secondly, like we said in the script, we have we feel like we've been through a year of vendor consolidation conversations now. So the ones that were potentially problematic when we look out right now for the next four quarters, it feels very similar to what things look like when we were trying to project our retention three years ago, four years ago, it feels like it's normalized again. So we feel a lot better about the places where we had risk and it feels like it's a more normalized environment for us.

And then given what you are sort of projecting around improvement in gross retention and sort of consumption net retention being markedly higher. You guys didn't provide either a fiscal year revenue margin or billings guide. Just wanted to understand the lack of a full year guidance as well.

I think -- this is David, and I'll provide some thoughts there. There are a lot of variables right now. I mean, obviously, we had contracts didn't renew last quarter. That was kind of a one-off. But as we said, we're looking at improved retention. And then the thing that I think is most exciting. We've only been live on the CDW, I think Josh indicated in the script for a very short period of time. And I've been really -- I mean the activity has far exceeded my expectations. And I think given that variability, we don't believe that we've got the visibility to guide that at this point. And so we want to get some more insight into how this partner ecosystem play is working out before we provide some more insight there.

And then one last one, if I may, and I promise to see the floor. Josh, on your comments on potential exit options for the company in terms of a strategic sale or sale to PE. I'm wondering why that wasn't on the table sooner? Because in some sense, right, you guys have gone through multiple go-to-market transitions. What you're actually trying to attempt is pretty difficult on sort of the order of difficulty scale in terms of changing your go-to-market, investing in partnerships going through a business model position. None of that's particularly easy. And if you look at your peers in this space, they've all sort of gotten married with larger platforms, and there's no public sort of business intelligence companies sort of left in the market anymore. So I just want to understand like why hasn't that been the answer like earlier versus now when we're going through a downturn in the fundamentals that you're sort of highlighting that as the opportunity now.

Yes. I appreciate the question. I think the biggest thing is just clarifying it for folks because we do get so many follow-up questions when -- whether it's follow-up questions after earnings call, we're going to go to investor conferences or especially if I'm not in the room, there's a lot of questions to the rest of the team about, Josh could probably never actually sell. And we repeatedly say, no, we would and we're going to do everything we can to maximize the shareholder value. And since it just continues to be a question with an assumption that actually isn't the case that we wouldn't do it, we thought that we'd be very explicit about it. To your point about the number of independents that do what we do, we think that leads to the big opportunity that we're in. And of course, we poll make offers, we enter in these conversations and we continue to sort out, okay, what does that look like in a combination scenario? Where is the upside? How do we create the value? And one of the things that we've been certainly telling people and signaling is that because we are one of the few independents, there's a whole lot of companies that need our technologies. And when you look at these CDW companies, they're literally out there trying to sell a solution that starts just a data warehouse. They need a lot of other tools to actually close that solution. And so they're not just trying to close one deal with a customer. In almost every scenario, there's three or four vendors that are in there, sometimes five vendors when you include the consultant. And instead of talking to five vendors and trying to close a deal, now that we can have our back end be on the CDW, it's literally the CDW plus us and two vendors and you got your deal closed. So I think that's why the CDWs are falling in love with us and that's why they're excited about what we're doing. And I think that definitely accrues a lot of value to the organization. So it's not a difference in stance in terms of the willingness to be able to sell. It's just being really explicit about it because given the Common A, Common B, it's led to some confusion about what our willingness is. And so we just wanted to be really explicit about that. I think the other thing that you mentioned just about a variety of changes going on. You're right. There has been a lot of changes. It's been a lot of work internally. I'm super proud of the team that everyone -- all the work that we've gone through here. But the good news is those changes that you referenced, we're pretty far down the path on all of them now. We feel like on consumption, we cannot declare victory. We still have ways to go, but however, with 33% of our business that's transitioned in the last year. That's pretty good progress at a pretty rapid pace we think that pace is it has an opportunity to accelerate. And then secondly, when you think about the ecosystem, we've been working on that for well over a year as well, getting the back end so that we can put our back end on any of the CDW partners that we have. And as of three weeks ago, we have our first one, and we've get a tremendous amount of activity, deals closing lots of pipe and that's just one. We have four more coming online in the next two months. So we think that fact that we're still free cash flow positive, recurring revenue business of substantial size, the only independent one that can provide a lot of value to a bunch of potential acquirers is worth pointing out. And we think, like I said, over the next 12 to 24 months, especially as some of these benefits accrue to us and accrue to our business and people can -- and start to value that and also see the way that we're working with them, it provides a lot of opportunity to have those conversations.

And our next question comes from Derrick Wood with TD Cowen.

It's Andrew on for Derrick. A question on the consumption traction, which has clearly been pretty good. You've been growing at like 500 basis points the past couple of quarters. If I kind of blow that out, it would be 45 by year-end, but you're saying over 50. So maybe there's something in the back half that could kind of accelerate that. And kind of can that also accelerate billings and net rev retention?

I'll start and then David might have a few things to add as well. But given the success that we're seeing there, and again, highlighting what we see from that cohort of customers that are already renewing that have been on consumption for over a year, and it's a big enough sample size that we feel comfortable that is directionally accurate and indicative of the future. And then we look at it again for this quarter and seeing almost 3 times the sample size and also the same kind of high 90s gross retention north of 115% net retention, these are numbers. And so of course, we want to lean to it even more. And to your point, yes, we got some of the early wins we were able to train the sales executives and the team and they've been great about getting on board with helping our customers understand the benefit of being on consumption as well. So we got to where 90% of our new logo deals that we closed in the quarter will be on consumption. So now the big opportunity is what do you do with all the renewals. And we have kind of been letting that naturally happen. And since we've been seeing these great benefits that are accruing to the business permit, we've now gone and said, all right, let's be extremely declarative and deliberate about this as well. And so we've created incentives. We've created spiffs, we've created a lot of training, and I think you're going to see a big portion of our renewals start to transition at a much more rapid pace than they have been the last few quarters over to the consumption model, over to the ELA with a data consumption charge model. So we think that we do have an opportunity to accelerate that. And then I'll let David talk about what that does to billings and cash flow and stability and retention?

Yes. So just maybe to add just a little bit addition to what Josh -- I mean it's been a process. Certainly, when we started down this, we wanted to make sure that we had the motion right. And then there's a lot of little nuances to it that aren't just like super obvious at the outset, but it's making sure that all these customers have the visibility on their data usage and how can we help them optimize that and be efficient there as we transition them from seat license to a consumption model. And so there's a little bit more to it. And as we've gotten that motion in place, we now feel like we're at a point we can accelerate. And as Josh said, incentivizing our customers and putting some spiffs out there for our customer service people and salespeople to help accelerate that, that's been the process. And so we feel like we're in a pretty good place now to move even a little bit faster. I think we continue to see what we hoped that we would with this consumption cohort. And that is, as Josh indicated, better retention, better NRR. And then upon conversion, the one thing that we see consistently with our customers is that they continue to get more and more value out of this platform by seeing the increase in data that they're using. And so then it's just the process of getting them in the right size of contract and in most cases that includes upside in the contract and just helping them with their use cases. And again, that it's just a process of accelerating.

And David, appreciate the gross retention guide for Q2 kind of certainly a big improvement there would indicate your -- you do the worst on that front. But then back to Sanjit's question on the lack of full year guide. Can you just maybe spell out what the biggest components and variables are there and kind of help us get more comfortable with the second half numbers?

Yes. I think that probably the biggest variable as I'm looking at it is as we've expanded into this partner channel that is a substantial that is -- it opens the aperture our go-to-market aperture in a big way. And again, as Josh indicated, we went live on the first cloud data warehouse about three weeks ago. And we're being involved in so many more conversations today about data strategies and other things that are customers that we weren't even being invited to in the past as a result of these ecosystem partnerships. And so because we think there's so much potential there, I think to throw a number out there that just kind of increases the range probably doesn't give a lot of value to you guys at this point. So we want to wait and get a little bit more visibility over the next couple of months. And as we get that, we will provide some more discrete guidance.

And our next question comes from Patrick Walravens with Citizens JMP.

It was good to hear Snowflake, mentioned you guys. I totally agree with that, and it shows us the right direction. So David, just a couple of quick one for you. Why -- I mean, you guided EPS $0.21 to $0.25 and ended up at negative $0.33. What was the disconnect there? Revenue versus the guidance?

Well, yes, I think in terms of revenue, it stepped down a little bit from the revenue in the first quarter. And we're about $80 million-ish in revenue in GAAP revenue in the first quarter will come down a little bit in the second quarter. So that has an impact. And then as we make some of these investments into the partner channel, that's going to have an impact in Q2.

I'm just talking about Q1. So why did [indiscernible]

It was mostly Domopalooza having that in person for the first time in a long time, there was a significant investment associated with that. And so that certainly had an impact and we had some costs with our debt extension. We had some costs there and some professional fees that we paid out this quarter. And so that was kind of the sum of it. That was a lot to a large share of it.

Okay. And then on the large renewal, can you guys tell us maybe like what industry that company was in, I mean broadly enough so you don't give it away, but just give us a little more sense of who it was?

Yes. I think it's probably best to talk about it is when we have those single use cases. And the ones where we had single use cases, it wasn't really industry-specific. And in that industry, specifically, we have just as much success there. So I don't think it's indicative of anything other than we have the use case that had renewed several years in a row and it just didn't renew. So I think the thing that -- I don't know if you find it encouraging as well, Patrick, but the fact that the NRR from that consumption cohort over 115%, we haven't had a cohort ever do that before. So we're excited about that and then the fact that we are guiding to increase gross retention across the board. That's the formula for growth in the not-too-distant future, right?

Yes. No, I think you're doing the right things. It's just that the non-renewals keep happening when you don't necessarily expect them to. And so can you do it fast enough?

And on that front, I think it was something that was out there that was -- we didn't have green lights all around it, knowing that it was going to renew. It was one of those that was yellow. And a year ago, when we looked out on the forecast, there was a dozen-plus customers where we had yellow around them, and we were concerned about them, and it was a dramatic increase from what we had seen in any previous year. When I came back, we looked at the list, we're like, this is going to be a challenge, all hands on deck and we lost some of them. Compare that to today and we look out over the next 12 months and the list is substantially smaller. It's like it's normal. It's just -- there's a normal amount of accounts that are there now. So -- that part does feel dramatically different, which is why we went to the extent of saying, hey, we're actually going to guide to retention because it is different than what it's been in the last 12 months.

And then David, two more for you. Just -- I mean, rough order of magnitude because there's not that much cash, right? What will the cash burn look like in 2Q?

I think we're going to -- we're just going to say that our -- and we're committed to this that we will be free cash flow positive for the year. So there may be a little bit of variability over the next couple of quarters but the way we set our plan will be free cash flow positive and be adding to our cash balance this year. So I'm not concerned that we're going to dip down into a dangerous level or anything like that it's well within a reasonable range.

And then just last one. Just remind us, I know you extended the debt. But so what is the current amount, interest rate? And when does it actually come due?

Yes. I think -- I mean, the face amount is $100 million. It has some PIK interest that's accreted up a little bit beyond that to $115 million or so, $119 million actually, I think. And it's due in April of '26. So just under two years.

And our next question comes from Eric Martinuzzi with Lake Street.

I wanted to revisit the large non-renewal, do we know -- I mean, obviously, they were using the product and then made a decision, as you said, a CFO-driven decision that we got to consolidate on our tech spend here. But they still have business intelligence needs. Do we know what product they're using in the absence of Domo?

No. The feedback that we've gotten is all of our customers -- the quote that we got back was, they felt like mom and dad got a divorce. It's -- it really wasn't about what was good through the -- good for the kids, good for the business. It just was 100% CFO driven. They fired their CIO. They got a new CIO, they said, here's the metric that we got to hit from a finance perspective, had nothing to do with which vendor they were using where, what value they were getting from each vendor, there was a vendor that had a broader footprint than ours and that was it. That was the decision. I think broadly speaking to our enterprise business, it's actually still doing really well. I think one of the metrics is interesting. Over the last 12 months, the number of accounts that are paying us more than $500,000 to $1 million has actually increased by 33%. So it's still a really healthy business, there were just some a handful of customers that were somewhat loose and that we need to go through a renewal cycle on and either right size or it would lost a couple. But again, looking out in the future, we guided to a higher retention number and we feel really good about that. And it does feel like we've been through that year of vendor consolidation and things are much more stable.

Yes, Eric, I just want to point that focus on that one-off. I mean they had massive layoffs and other things. I mean, it was a big cost cut and they use tech as one of those areas that they were going to consolidate and reduced. So it wasn't -- it certainly wasn't a product market fit issue.

And you gave some good insight on the installed base, basically kind of boiling it down to one type of customer versus another type of customer. What about new business? What are you seeing as far as the, A, pipeline and then B, the length of the sales cycle?

Yes. I think the thing that we're probably most excited about there that's going to change is just as we add these partner leads, we've added -- there's dozens of partner leads that are in there that weren't there 60 days ago. And the likelihood of those deals closing, I think, improves, right? Because you're there you're part of the overall data strategy, you're bringing multiple vendors in there -- our partners are absolutely thrilled when we call them and say, hey, we got visibility into a deal and your name came up, you guys should come in with us. And you do that once and they turn around to do it 3 times back. So we definitely feel like our ability to close the pipeline is improving as we get better with this partner motion.

But that length of sales cycle, let's set aside the CDWs, any insight, any change versus 180 days ago?

Yes. It feels like things have kind of stabilized. People aren't -- they're still not customers that are out there looking to spend money on software every time you turn around the corner. But the deals that are happening, especially around AI, AI readiness, prepping your data that's where we're seeing opportunity for sure.

And our next question comes from Gil Luria with D.A. Davidson.

I appreciate the openness in talking about the willingness to sell. But especially on a public call since we do still have you on the public call. Can you help us with where you are in the process, usually, if you have a sense for how high a bid would be that means there was a specific number, possibly presented to you by the bankers for the buyer. Have you hired a banker to look at strategic options? It's a loaded question for us since we're not allowed to recommend bankers, but everybody on this call has a colleague and would be happy to share a phone number. But is that where you are in the process? Or was this just more at the point of willingness, as opposed to pulling the trigger on exploring strategic options.

Yes. It's -- we haven't hired a banker. It's conversations you have with relationships on either strategic side or the private equity side, and that's how the conversations start, right? You have a conversation and someone says, you say you're not -- that's not where you're focused your time. The company is not for sale. They come back they say, here's a range that we'd be thinking does this get your attention. That's something that we should explore and let's start talking about how things would look together and then often that turns into the best thing we could do is build a go-to-market motion as we build the go-to-market motion, then a we can get more comfortable about with the value that's going to be created because you see the take rates inside your organization. So it's still at the beginning of the conversations. We haven't hired bankers. But at the same time, I've been through these before. When they go, they go fast. And usually, it's somebody that's trying to not give everyone a chance to get to know the company as well as one may. So just again, the point was making sure that people know there's an absolute willingness there. And beyond the willingness, we think there's a chance to get this thing back to 20% revenue growth, and we think we can do it in the not-too-distant future. And as we go about that, hopefully, that's where things end up. But at the same time, we've got to be aware of what's going on in this space. As one of the questions referenced, there's not a lot of independent companies like ours that are out there. We're a very unique asset. And so since there was a perception that there wasn't a willingness to sell, we wanted to be really explicit about that so that we could reference it so that investors could reference it. And we do think there's a ton of value here, not only the strategic value but even in the financial value, like we mentioned, $1 billion of NOLs. And we think that there's an opportunity to get a lot closer to the CDWs and create a lot more value for the company. And as that value gets created, hopefully that gets delivered in the form of increase in stock prices, but if it gets delivered with premiums and a take out, then there's that opportunity as well.

Much appreciated. That makes sense. And I'm pretty sure you're going to get a lot of phone calls tonight and tomorrow.