DOMO - NASDAQ

Greetings. Welcome to Domo's Q3 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 Intuitions] Please note that this conference is being recorded. I will now turn the conference over to 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 Tod Crane, our Chief Financial Officer. I'll lead off with our Safe Harbor statement and then on to the call. Our press release was issued after the market closed 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, our 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 of 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 filed with the SEC. In particular, today's press 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 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. In Q3, we exceeded our billings, revenue, and non-GAAP EPS guidance, and I'm particularly excited to report that we grew our subscription RPO by 3% year over year, and our subscription RPO beyond 12 months grew 14% year over year. This is an exciting acceleration from last quarter and from Q3 last year, which we believe is the leading indicator of progress from our strategic priorities. And astoundingly, in just one quarter across our entire book of business, our average contract length increased by 13%, demonstrating the long-term commitments our customers are making to Domo. When you see contract lengths increase across the entire customer base, RPO increase, and our customers making strategic long-term commitments in a difficult macro environment, it truly highlights the strength of the relationships we have with our customers. In fact, we now have 19 customers with over 5,000 unique users and over 100 customers with over 1,000 unique users, further reinforcing this point. It seems like the headwinds we have navigated are shifting to our backs and filling our sales. I feel more confident than ever that our continued focus on ecosystem-led growth, consumption pricing, and AI is absolutely the right direction for Domo. Let me give you more detail on the promising momentum we saw with ecosystem partners in Q3. Although nascent our partner-sourced contribution to billings was up more than 20% from Q2. As a sign of things to come the number of partner opportunities in our current North America pipeline is up more than 90% compared to Q2 compared. Almost half of our partner-sourced new logos were both created and closed in Q3. Overall, partner-sourced new logos closed in 80 days versus over 100 days for our non-partner-sourced deals. And the close rate for these deals was also much higher than for no partner-sourced deals. We're seeing more and more signal of partner success throughout the business, and we're finding our AI solutions make Domo an even more compelling partner. Thanks to how quickly we can help our shared customers turn AI and data into products that deliver measurable returns. We've been highly attuned to the lead flow coming in from partners and it has been picking up considerably. A few weeks ago, I asked the team how many partner leads we had received that week. They told me two. Then the following week, I asked the same question. The answer was six. Then the next week, same question, and they reported 11 partner-sourced leads including six from just one CD partner alone. With that same CD partner -- CDW partner, we've identified over 250 common customers and have over 150 new logo opportunities in our pipeline. We also have closed 15 deals that we jointly sold and all that since we kicked off the partnership less than six months ago. That's just one of our partners. We currently have close to 400 partner-related opportunities in our pipeline representing over 80 unique partners, 30 of which are new partners in the last six months. As we look at our partner ecosystem, we're seeing higher average contract sizes as these tend to be larger enterprise customers. The deals are bigger, faster, convert at a higher percentage and are also higher quality. By virtue of the way that they were sourced, we believe they will be more stable and retain at a higher rate. We are continuing to invest in our partnership strategy to capitalize on this opportunity and have redirected sales capacity from our traditional go to market motion. This means we may see some impact on our near-term billings, but ultimately would be irresponsible of us to ignore the opportunity to build a durable, repeatable, efficient growth engine, which is clearly in the best long-term interest of our company and shareholders. As we said last quarter, we are more focused on optimizing for next year and beyond versus optimizing for last quarter and this quarter. We don't know precisely when next year all of this is going to start having a meaningful impact on our numbers. But the momentum is very real as I indicated. It's happening now and we couldn't be more excited about it. By the time we report earnings for Q4, we think that we'll have a much better feel for how and when we'll see this partner momentum play out specifically and we look forward to giving you that color and update. I'm also happy to report that we reached our goal of converting the majority of our customers to consumption by the end of the year, a quarter early. In Q3, 100% of our new logo deals were structured as consumption contracts, which now represent 55% of our ARR. This is almost an unbelievable transformation of our business model that in a little over 18 months we've gone from 5% to what we expect to be over 60% by year end. I'd like to congratulate the entire Domo team on their trainings and efforts, and look forward to seeing this approach 90% over the next year. We discussed this on our Q2 call, but as a reminder consumption aligns pricing with value delivered, facilitates more rapid adoption, allows wider deployment, encourages customers to include Domo as a part of their global data strategy, enables product led growth and aligns with our partners' pricing models. We've definitely seen a recent trend of consumption encouraging vendor consolidation in our favor. Consumption more naturally exposes customers to our entire platform which is much broader than many realize. Once they see everything we can do, they often discover our solutions are superior to their existing vendors. What's more the transparency of consumption lets them quickly do the math, and see that Domo is a more cost-effective solution compared to some of the other vendors they have. So, with value and performance landing on our side, they've replaced their other solutions with Domo. I want to share a couple of times we saw this vendor consolidation in Q3. First was a significant upsell with a Fortune 500 Entertainment company that migrated to consumption last year, thanks to the influence of a new CDW partner and the appeal of increased product access as we roll out our AI roadmap. As a result, we are helping this customer achieve vendor consolidation as they now can replace hundreds of data analyst seats from a legacy competitor, and we're in discussions about replacing another competitor in a different division as well. What started as a marketing use case and under a contract that was under six figures has now grown 10x across multiple use cases. Another example from a significant legacy replacement happened with a retail analytics company that initially chose Domo to gain insights about consumer behaviors, preferences, and trends. After seeing what was available under consumption, the Company converted its contract to include unlimited expansion for internal reporting and to replace its legacy embedded analytics vendor with Domo everywhere, which lets the Company share insights with its retail customers and its suppliers. Consolidation and expansion opportunities like these are happening more and more since we started our shift to consumption, and it will be an even more powerful opportunity as customers begin to discover Domo's advantages with AI. We've been working on AI for a long time, and we see early insights into features customers need to really capitalize on AI. It has inspired many capabilities in our platform like Workflows, which have set us up perfectly for this time when AI is emerging as a priority for businesses everywhere. Now customers are rapidly adopting Domo's AI solutions which early investments are having a meaningful impact on our business. I'm really excited about this, so I want to tell you more about how we get we got into this advantageous position with AI. My vision for Domo started with the belief that businesses can and should get more value from their data. So, we built Domo as an independent mobile first cloud native data platform on which you could build various data products. Ideas that were completely new and gave us the agility, scale and speed we needed to continuously add new capabilities that time and time again proved to be ahead of the game. That's why as businesses pursue an ROI from practical applications of AI. They're learning they can do that right now with Domo. It starts with AI readiness, which is a critical need for every business today. Thanks to our history and the unique strengths of our platform, Domo makes it easy for customers to get all their data in one place with the tools they need to get it ready for AI. We also launched Domo Workflows engine more than two years ago to help our customers automate business processes with low-code tools anyone could use to harness human and artificial intelligence to drive results. Next, the proliferation of LLMs inspired our AI service layer, which lets customers use any AI model they choose in our well-governed, secure environment. Now we're entering a new wave of artificial intelligence, and our innovations have converged into a critical framework that gives us the edge in delivering value from Agentic AI, which is available today for Domo customers. Our customers are creating and deploying AI agents in Domo that produce results so quickly, they're telling us it's almost unbelievable. One customer builds an agent to deliver an analytics report that was so complex, historically would have taken his team four weeks to complete. The agent worked across Domo's AI service layer and Workflows’ engine to analyze several datasets with all the required guardrails, and it delivered accurate, reliable, and verifiable results in under 2.5 minutes. This is nothing short of remarkable. While some companies are planning seven-figure investments in competitive offerings to build an AI agent over the next 6 to 12 months, our customers are already getting meaningful and measurable outcome outcomes from Domo's Agentic AI capabilities. We're also leveraging AI agents in Domo for our own business and have saved our support team 1,000 of hours by creating an agent that automates customer support requests. All of this is possible because we had the foresight to know that AI would reshape the future of business intelligence. AI is only as good as the data you put in. In most cases, it's garbage in garbage out. So, we built a complete tightly integrated platform with connectors ETL, CDW integrations, governance, lineage, usage, view frequencies, and data products. We pioneered building this stack. Microsoft smartly followed the same strategy and other competitors have spent billions lashing together components of our stack. It's proving we were right. We have it all and it makes AI smoking good. In other words, Domo was built for this AI moment. Now let me share some specific real-world examples we're hearing from customers that validate our leading position in AI. An insurance company that compared us against many of our common competitors concluded that Domo was absolutely the partner to keep their data safe in a secure environment. An IT services company shared that utilizing Domo has enabled them to integrate AI seamlessly across all their data warehouses. A professional association told us that the transparency of Domo's AI solutions, which show all the steps it took to arrive at results, is critical in their regulatory environment. An education services company told us that they save money by using Domo as a centralized solution instead of paying multiple vendors for AI add ons. A media agency told us they accomplished more with Domo in two weeks than with one of our competitors in a whole year. A real estate development company said they saw more functionality and features they need from AI with Domo than any other competitor. A marketing agency told us Domo has all the easy to use features they need to execute the AI roadmap. A marketing software company told us that it's the actions and behaviors they can drive with that data that translates into success and also reinforce that they like the path Domo is heading on with AI. And people tell us we are one of the top two companies with market ready AI. Earlier this week, we hosted an Agentic AI launch event showcasing how our customers use Domo AI to provide unparalleled efficiency and insights across their business. I encourage you to visit Domo.ai to learn more. We feel really optimistic about our momentum and the opportunities ahead of us. Our customer relationships are very strong. Our average contract length is dramatically improving. The conversations about products and use case expansion are increasing as our AI capabilities are bringing tremendous value to our customers and our ecosystem led opportunities are driving substantial new growth in our pipeline. In summary, we believe we're in a very strong position to capitalize on this moment that Domo was made for. And with that, I'll hand it over to our Chief Financial Officer, Tod Crane, for his inaugural earnings call script. Todd?

Thanks, Josh. After almost a decade at Domo, I'm excited for this opportunity to lead a fantastic finance team and play a part in the strategic direction of the Company. Like Josh, I am as optimistic as ever about the future of Domo. We exceeded our Q3 guidance for billings, revenue, and non-GAAP EPS. Total revenue was $79.8 million, up slightly year over year, with subscription revenue representing 89% of that amount. Q3 billings were $73.4 million. The team executed well in Q3, which was shown by the year over year percentage improvement in sales rep productivity. It was the best we've seen in four years. We also saw strength in bookings, ending the quarter with total subscription RPO of $354.1 million, up 3% year over year. This is our best RPO growth result in two years. We see RPO growth as an indicator that our customers view us as a strategic long-term partner and a core element of their data strategies. Further highlighting this, subscription RPO beyond 12 months grew 14% year over year, and the average contract length across our entire customer base increased by 13% year over year, and more impressively, 10% quarter over quarter. Our in quarter gross retention was 85%. We continue to see some variability in our retention numbers due to a tight budgetary environment and expect our gross retention to fluctuate between 85% and 90% over the short to mid-term. As we've said, our long-term goal is to have gross retention of at least 90%, ideally higher. Our year-over-year ARR net retention was 90%, up sequentially for the first time in almost three years. We believe the RPO growth we saw last quarter is a sign that both gross and net retention are primed to improve. In addition, we are passing the year mark on some larger churn events, which should be a further tailwind to our net retention rate. Our adjusted free cash flow was more negative than we wanted it to be in Q3, and I would like to spend a moment addressing that. While Q3 has historically been a seasonally low cash flow quarter, this result was lower than we normally see due to $8 million to $10 million of delayed cash receipts related to consumption migrations. The good news is that the majority of these invoices have already been collected in Q4, which highlights that this was a timing issue. We are expecting to generate positive adjusted free cash flow of at least $4 million to $5 million in Q4, and expect that our cash balance will increase next quarter and over the long term. We believe that the cash we have on hand is sufficient to operate the business and support our key initiatives. Moving on to margins and profitability, our subscription gross margin was 82.4%. Gross margin has stabilized around the current level and we expect it to increase to the mid-80s in the long term. Non-GAAP operating margin was positive 2.5%, the result of concerted efforts to keep our costs in line with our revenue while maintaining our most important initiatives. Non-GAAP net loss was $3.2 million. Non net loss per share was $0.08 based on $38.8 million weighted average shares outstanding. Because we are in a net loss position, all share and per share amounts are the same per basic and diluted. As for guidance, for Q4, we are expecting billings of $98 million to $104 million. We expect Q4 GAAP revenue to be in the range of $77.5 million to $78.5 million. We expect non-GAAP net loss per share of $0.13 to $0.17, assuming $39.3 million weighted average shares outstanding. For the full year, we expect billings of $305.5 million to $311.5 million and GAAP revenue of $315.5 million to $316.5 million. For the full year, we expect non-GAAP net loss per share of $0.60 to $0.64. This assumes $38.5 million weighted average shares outstanding. In conclusion, we believe we are on the precipice of the ecosystem becoming a tailwind to growth. Our customers love our product and we have a durable business with close to $300 million in annual recurring revenue, which gives us a substantial foundation to build on. With that, we will open the call to questions. Operator?

Thank you. [Operator Instructions] And our first question comes from Sanjit Singh with Morgan Stanley. Please state your question.

[indiscernible] on for Sanjit. I really want to inquire a little bit more about the success that you've had with bringing customers onto the consumption-based model. And particularly, I was curious if you can shed some more light on the growth that you're seeing within the consumption cohort of 55% versus the rest of your customers? And then, if you are seeing any difference, functionally, where are those customers sort of spending more or less on in terms of the products that you're offering?

Question. We're definitely seeing a lot of strength with those consumption customers. As we mentioned on the call, in particular, we're seeing consumption set our customers up for wider adoptions, faster adoptions. We're seeing them consolidate away from legacy products onto the Domo platform, all of which is really setting them -- setting those customers up to be more to retain better and be stickier going forward.

And then like we mentioned in the prepared remarks, it's more in line with the ecosystem. So, their pricing models, when they see our consumption model, it aligns with theirs. And so, as we're approaching customers jointly, it makes those deals go much faster. We've got some great quotes that we've received from sales managers at some of the CDWs, and they're like, Domo helped us better than any other partner last quarter, on my sales and my sales team. Domo drove more consumption of our product than any of my other partners. So, we're really starting to see the groundswell. We've talked about it a few times in the prepared remarks, but still not a whole lot of numbers that show up in our financial statements. But pipeline, there's some substantial numbers in pipeline, and we understand what the conversion rates are there. And we actually know that ones from the ecosystem, convert better and they're bigger deals. So, we're very excited. I think by next quarter we'll be able to indicate and have a prognosis of what how that's going to translate into our numbers for the next year.

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

Great. Thanks, guys. This is Cole on for Derrick. Josh, one for you. It's nice to hear that Agentic is already in the market and doing well. How can we think about this driving consumption going forward? And then do you think that this is could be a tailwind to help convert the remaining 45% of the base onto consumption quicker than expected?

Yes, it's been really enjoyable as you know AI has picked up steam. I think when it first started to make a lot of noise and everyone's hey, what's the ChatGPT thing? What's OpenAI? I think everyone had to look at their business and say, are we going to be consumed by AI? Is this going to facilitate our business? Is going to be a tailwind? And for us because we have the stack, we have the ability to make sure that it's not garbage in garbage out, but it's really organized data with controls around it, with governance, with transparency. And Agentic AI is really one of those components that it's a data product really that allows you to take advantage of all the work that you've done with Domo. And so, we definitely see it driving, it's in a lot of our deals right now. It's driving close rates to be higher whenever AI shows up because we do so well. The ecosystem that we're in and the other players that are around the table, and I think the companies that you would rate is probably the highest in terms of has stuff that's working right now in the market with AI. They're coming to us and saying, you guys have better offering than everybody except for maybe us. So, it's nice to see validation across the board. And I'll ask RJ, our CRO to comment on how he thinks this can affect our ability to be successful.

Yes, so as Josh mentioned in order for AI to be successful, companies need to invest in other data products. And fortunately, Domo has those data products, and they're all things that drive consumption for Domo. So, as customers connect into more data, as they want to create these different agents out that can solve business challenges and problems. They've got a way -- they need a way to get to the data, they need a way to clean that data, and then they need a way to get all that out to the masses. And these are all things that Domo monetizes, and will help drive consumption for Domo and value to our customers.

Great. Thanks. That's super helpful. And then Tod, one for you on the gross retention rate that down a little bit this quarter. I know you mentioned there was some variability there. Could you just unpack the drivers of that? Was that churn in the base similar to what you saw in the first half? Or is there anything different going on? Thanks.

Nothing vastly different from what we've seen in the first half of the year. As we mentioned on the call, we continue to deal with some budgetary constraints with some of our customers. But overall, seeing really positive signs, especially with the deals coming through from partner and the customers that are really strong on consumption.

Yes, so the real highlight, obviously is an AI tailwind, but the real highlight of this quarter that we hope came through loud and clear is, we have real leads coming in at an accelerating pace from our ecosystem. That's not just one partner, it's dozens of partners. We've focused our energy, more towards two or three to begin with, and we're starting to see a whole lot of momentum. And that's really the thing that's we're the most excited about. It's not conversations that we're trying to extrapolate, or good meetings that we had or we went to the show and it seems like people are receptive. No, it's past that. We're closing deals not at a big amount yet, but the pace of those pipeline building, we're up 90% over a quarter ago, and these deals are bigger. Half of them were enterprise deals. We've never been able to get enterprise leads very effectively from a CAC perspective. Everyone struggles with that. But this ecosystem is really set up pretty well right now with the CDWs being the center of gravity, and lending a whole lot of credence to the conversation that we've been trying to have with CIOs. So, we're extremely excited about that. That said, to your question part of the story and why the stock is unbelievably trading at a little over 1x, instead of 5x or 6x times revenue has been. What's going on with churn? What's going on with the long-term prospects of the business? Is Microsoft hurting their business? And we've been telling you all along like there's a portion of business that we're just kind of waiting to work through. We didn't have the right pricing model. We didn't charge for -- we charged for seats. We didn't allow customers to be able to use it across every division. And what we've seen with that now is we've gone from being the one that was consolidated when companies are doing vendor consolidation to in many cases now, we're seeing customers say, we're we like this consumption model. We should go get rid of these other three vendors that we have that we're paying $100 to or $300 to or $500 to and now we have a slew of customers that have 5,000 plus users. And if you're in the room that we're in, we've got all of our most important metrics up on the wall. And one of the lists that we have is what are our top 40 customers by ARR. And just so, we're all familiar with it, it's just an interesting data point, we've had we've had to take a look at it. And I'll tell you 12 months ago, 18 months ago, if we looked at that list, and we color coded which ones we were worried about, there has been a lot of red on that list. And we were hopeful that we could go and save a bunch of them, but we just knew there was a bunch of pressure with the macroenvironment and with people's desire to do vendor consolidation. And we had a lot of contracts that were coming up that, were shorter contracts. And now, if you take a look at that same list, now there's two or three that we're a little bit worried about, but that's it. The rest of the people on that the rest of the companies on that top 40 list, we still we feel really good about. And that's so much more exciting to be in that spot. So, our company feels much more stable than it did. And we've got the right pricing model. We've got the right relationships with our customer. We demonstrated that this quarter. I mean, it's insane how much we increased our average contract length in just a quarter over 10% sequentially the average contract length across our entire customer base. So, you think about just the portion of customers that we redid contracts with that we take the new ones, we did some upsells with some old ones, and some of those were five-year deals, four-year deals, and that's how you increase the total base by 10%. So, this feels like the majority of our business is so much more stable than it's been. And, [indiscernible] look out because there's a couple of exciting things that are on the horizon, and now we're getting real metrics that we can use to demonstrate that that's exactly the case. So, we're more excited than we've been in a long time that's for sure.

Thank you. And our next question comes from Patrick Walravens with Citizens JMP. Please state your question.

Hi. Thank you for taking my question. This is Nick on for Pat. Josh, what does the macro environment look like in regards to customer behavior and are there any implications post-election?

I think the macro, it doesn't feel like things have changed too much. I think a lot of stuff happened at the beginning. You have companies that are like, we're going to consolidate vendors. So basically, which one of these vendors in this space, we have five of them, which one's coming up for a contract renewal next? And those are the ones that get consolidated in large part. So, increasing our average our contract length, the way that we have, we think is going to help a lot when we look out in future quarters and think about our retention is. Because you're only going to have a portion of it coming up for renewal every year instead of the majority of your business coming up for renewal. We'll have a minority of our business coming up for renewal based on the contracts that we're doing now. So, we're excited about that. We love the fact that when customers get on consumption, it feels like to your point about macro, it feels like they're able to say, alright, we've kind of made a strategic decision here. Domo is going to be the platform that we use. And, I guess, we can get rid of these other things that are happening here. Let's go ahead and build it out. Domo's not going to charge us anything for that until we start using it. So, let's test it. And if it works, then we can cut that out of contract. And we're seeing that happen over and over again. And then equally important the fact in the ecosystem now that we have these CDWs and dozens and dozens of other partners, just really strengthens our relationship with our customer. I mean, it just happened today, RJ is sitting next to me, sent me a text from one of our reps who was in a deal, and was getting pushed around by one of the other vendors that was in there. And then, an SI got brought in, and the SI said, oh no, we're going to use Domo, you guys need to use them. They're the Company to use for this, and the relationship changed dramatically. So, we just -- we've never had people in our corner before. And we got a lot of them in our corner and they're realizing it's a lot easier to go to market with you guys than five other vendors that we'd have to strap together to try to do what you guys do. So, that's been -- it's certainly resonating with most importantly with the reps at the CDW. They're the ones that drive this and customers are having great experience and that information is spreading like wildfire.

Thank you. And our next question comes from Eric Martinuzzi with Lake Street. Please state your question.

I wanted to kind of pull it back to a higher level here for based on the billings outlook you've given for Q4. It speaks to about a 4% contraction, if we take the midpoint of that billings guide for Q4. And that would be we were down 1% last year. If we hit the midpoint, we're down 4% this year. Is the expectation based on the good momentum that you're seeing with all the partners, and the AI, it just the ecosystem success that you're talking about? Is the expectation that we're going to get back to growth in FY '26, or we're going to get back to even in FY '26? What's your gut telling you about the coming year?

Yes. Thanks for the question, Eric. Right now, we're not giving any guidance for FY '26. But we do, as we talked about on the call, see a lot of positive momentum in our pipeline, particularly from the partner motion. We discussed a number of metrics there that are really causing us to be optimistic. So, take that for what it's worth. Yes, we're not commenting on next year at this time.

Just because we had a good trend here, the contraction in the billings rate at March from with a minus 7 comp in Q1, minus 3 in Q2, Q3, and now, we're guiding to a minus 4 in Q4. And I was just is that conservatism or do you feel like we're just going to kind of pop around here for a while.

Yes, I think we tried to emphasize. We talked about it, last quarter. We highlighted again this quarter that instead of allocating all the marketing dollars and sales dollars that we have towards, let's say a Google ad spend, and we're out on an island. We know we can close those customers. We understand what the cap rate is for that. But instead of that, we found something that's repeatable, that's sustainable, that's defensible, and that is the ecosystem play. And so, we've been definitely allocating dollars to that as fast as we can. And we are seeing -- you're talking about a couple of metrics. And I think if we're thinking about those metrics, we also need to think about the other metrics that we talked about today Including how quickly that pipeline is growing from the ecosystem, which is where we're allocating those dollars. And like we mentioned last quarter, that meant that we weren't trying to over index or optimize for last quarter or this quarter's billings number, but we are definitely optimizing for next year's billings number. And I think, as we mentioned, I think by the end of this quarter and when we're doing a call three months from now, we'll actually have very specific information about what kind of growth we think we can squeeze out of next year. And I would suspect that we'll be sitting there looking at our pipeline and be like, okay, we still don't know enough to draw a real dark line in the sand and saying, here's how aggressive we can get. But I think we will know enough to say, yes, we're definitely going to see growth. And we still don't have enough to tell you for Q1 and Q2 that we can grow a lot. But I would suspect that we're going to be pretty comfortable about saying, this is how we think we can grow in a meaningful way towards the latter half of next year. But like Todd said, we can't give a specific guidance. But again, there are metrics there that we did share with everyone so that you can see in contrast to the other metrics that we always report on, there's some actual numbers here that are very encouraging and that should lead to growth for next year.

Got it.

Yes, I mean, just one more note there, Eric, on that. I mean, as part of that shift and that focus on building a repeatable durable growth engine for the future. Our sales capacity isn't what it was a year ago, but that's intentional. We're trying to get down to a core of sales reps that we feel really good about that have the right skill set, the right mindset for what we're trying to build going forward. And we're going to continue to augment that team with people with the right background, the right skill set to capitalize on this partner opportunity.

Yes. That's a good point. To highlight one of those examples, we have some partners where we're getting leads from them right now. We've done all the work. We've invested all the money into the product, into having the product be ready for a bunch of these partners. And then, we went and we've spent millions of dollars sponsoring their various marketing activities with several partners that we've gone we've done joint marketing activities with. And that costs a lot of money flying people around, sponsoring, getting the booths, going and having, doing all the right things. And the majority of the upfront investments been done. So, now where the rubber hits the road is meets the road is we've got to go out and we've got to mine those sales organizations. We have to build relationships with those sales managers. And we look into we look at some of these new partners of ours and we have very specific examples where we're getting several leads a month from a partner. And again, we've done all the work, but now it's just a relationship with those sales managers. And we know specifically, we only have two people allocated to that organization and so we're only covering two or three of their sales managers out of 20. And it's just a little bit of incremental work to get leads from those other sales managers where we just need to go and build that relationship. But again, we've done the majority of work. So, it's just putting these other things in place. And that's what makes us feel so comfortable. We just need to do more of the same. If we did the hard work, we just need to do more of the same and we should see these leads come through at an accelerated rate.

Got it. So really more of a timing issue?

Yes, for sure.

Thank you. [Operator Instructions] Our next question comes from Yi Fu Lee with Cantor Fitzgerald. Please state your question.

Thank you for taking my question, Josh and Todd. Congrats on the strong set of results and stabilizing performance. So, my first question revolves around the one, two plus Domo plus CDW partner. I was wondering if you could give us some metrics on like how much faster when a CDW partner had Domo as a partner during the deployment? And then the second part of the question is, last quarter you spoke about two large independent software providers as potential interest partner, any update on that channel? And then, I have some follow-up as well.

Tod, do you want to talk about that?

Yes, so on the first one, yes, we are seeing right now I think the metric we gave was about 20 days faster on average that we are seeing deals close. And part of that's because we've got an army of our reps, and the rep from the CDW. And maybe an SI that's in there that are we're all promoting each other and so, customers get value faster. As Josh mentioned, you don't have to bring five vendors in. And so that expedites the process as well because the customer doesn't have to do as many evaluations, and they don't have to ink paper with as many vendors.

And it probably wouldn't surprise you there's, many instances that have happened already where we get brought into a deal and a few days later it closes because the partner already did all the work. So, it's been fun to see those. We haven't had those experiences for a while around here. So that's been really nice as well. And then, the large independent software companies that we've talked about as partners. All of our conversations are going very well. We're making progress, I would say on every front. We've got -- we have one partner that we invested a couple of $100,000 into a bunch of marketing activities, and really over the just over the last month. And just since we started, we already had one, seven figure deal close. It's a five-year deal, seven figures, that paid for those activities many times over. And three other deals have already closed from that particular partner marketing activities and there's a whole slew of them in the pipe. So, it's just -- it really is feeling good on every front. And with one of those questions was asked earlier. It does feel like the core part of our business is much healthier than it was here for the last several years. We've got the concentric circles, if you will, and where they overlap of consumption, AI, and our ecosystem, and they all seem to map and marry pretty well to each other. And it feels like we're in a good spot from a future growth perspective and not future in years. But like I said next quarter, I think we'll be able to give some much more specific guideline about when we're going to see that arc start to hit a growth rate.

Thank you for that. And then I was able to listen in to the Domo AI event yesterday led by CTO Daren. Was that -- I know it's still too early in terms of the AI opportunity. I was wondering, like when do we think we're going to get like better inflections into the financials? I know you're going to probably give us a better update in Domopalooza in March of next year. I was wondering like maybe just how much monetization?

Yes, I mean, there's a couple of things that we're seeing that I think are going to show up in the results sooner than later. As we mentioned, we are in particular on our net retention rate. We're going to start to eclipse some of those bigger churn events we had a year ago that's going to help that metric start to go the right direction. The partnership we've been talking about at length that's going to help out AI as well is providing a nice tailwind. So, as Josh mentioned, we'll have a lot more information to give here on the next report, yes, and retention as well. Yes, what we have to tell was there is retention that are going to bear out sooner than later.