UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549__________________________Form 10-K__________________________(Mark One)☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended January 31, 2022OR☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For transition period from to .Commission File Number 001-38553.DOMO, INC.(Exact Name of Registrant as Specified in its Charter)__________________________Delaware(State or Other Jurisdictionof Incorporation or Organization)27-3687433(I.R.S. EmployerIdentification Number)772 East Utah Valley DriveAmerican Fork, UT 84003(Address of principal executive office, including zip code)(801) 899-1000(Registrant's telephone number, including area code)__________________________Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredClass B Common Stock, par value $0.001 per shareDOMOThe Nasdaq Global MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No ýIndicate by check mark if the registrant is not required to be file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No ýIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 ofthis chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ý No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.Large accelerated filer☒Accelerated filer☐Non-accelerated filer☐Smaller reporting company☐Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reportingunder Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒
As of July 31, 2021, the aggregate market value of the registrant’s common equity held by non-affiliates was approximately $2.5 billion. Shares of common stock held by each
executive officer and director and by each other person who may be deemed to be an affiliate of the registrant have been excluded from this computation. This determination of affiliate
status for this purpose is not necessarily a conclusive determination for other purposes.
As of March 14, 2022, there were approximately 3,263,659 shares of the registrant's Class A common stock and 29,730,155 shares of the registrant's Class B common stock
outstanding.
Portions of the registrant’s definitive proxy statement relating to its 2022 annual meeting of stockholders, or the 2022 Proxy Statement, are incorporated by reference into Part III of
this Annual Report on Form 10-K where indicated. The 2022 Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal
year to which this report relates.
DOCUMENTS INCORPORATED BY REFERENCE
Domo, Inc.
Form 10-K
For the Fiscal Year Ended January 31, 2022
TABLE OF CONTENTS
PART I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Reserved
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
PART IV
PART III
Item 15. Exhibits, Financial Statement Schedules
Item 16. Form 10-K Summary
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Our business is subject to numerous risks and uncertainties, as described further in the section of this report captioned “Risk Factors,” which may cause us not to
realize the full benefits of our strengths or may cause us to be unable to successfully execute all or part of our strategy. Some of the most significant challenges and risks
include the following:
SUMMARY RISK FACTORS
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the ongoing pandemic of coronavirus around the world could impact our business and operating results in volatile and unpredictable ways;
economic uncertainties or downturns could materially adversely affect our business;
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• we have a history of losses and may never achieve profitability;
• we have a limited operating history, which makes it difficult to evaluate our prospects and future operating results;
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our ability to raise capital in the future may be limited, and if we fail to raise capital when needed in the future, we could be prevented from growing or could
be forced to delay or eliminate product development efforts or other operations;
if we are unable to attract new customers in a manner that is cost-effective, our revenue growth could be slower than we expect;
if customers do not renew their contracts with us or reduce their committed subscription amount, our revenue will decline and our operating results and
financial condition may be adversely affected;
if customers do not expand their use of our platform or adopt additional use cases, our growth prospects, operating results and financial condition may be
adversely affected;
• we face intense competition, and we may not be able to compete effectively, which could reduce demand for our platform and adversely affect our business,
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growth, revenue and market share;
third parties could make it difficult or prevent us from accessing their systems;
if we fail to manage our growth effectively, our business and operating results will be adversely affected;
we have recently experienced management turnover, which creates uncertainties and could harm our business;
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• we are subject to laws, regulation and other legal obligations related to privacy, data protection and information security, and any actual or perceived failure to
comply with such obligations could impair our efforts to maintain and expand our customer base, causing our growth to be limited and harming our business;
if our network or computer systems are breached or unauthorized access to customer data or other sensitive data is otherwise obtained, our platform may be
perceived as insecure and we may lose existing customers or fail to attract new customers, our reputation may be damaged and we may incur significant
liabilities;
third-party claims that we are infringing or otherwise violating the intellectual property rights of others, whether successful or not, could subject us to costly
and time-consuming litigation or require us to obtain expensive licenses;
our ability to protect and enforce our intellectual property rights; and
the dual class structure of our common stock has the effect of concentrating voting control with Joshua G. James, our founder and former chief executive
officer.
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As used in this Annual Report on Form 10-K, unless expressly indicated or the context otherwise requires, references to “Domo,” “we,” “us,” “our,” “the
Company,” and similar references refer to Domo, Inc. and its consolidated subsidiaries.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, including the sections titled “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Statements containing words such as “may,” “believe,” “anticipate,” “expect,” “intend,” “plan,” “project,” “projections,”
“business outlook,” “estimate,” or similar expressions constitute forward-looking statements. You should read these statements carefully because they discuss future
expectations, contain projections of future results of operations or financial condition or state other “forward-looking” information. These statements relate to our future
plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. They include, but are not limited to, statements
about:
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our ability to attract new customers and retain and expand our relationships with existing customers;
our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit, operating expenses, key metrics, ability to
generate cash flow and ability to achieve and maintain future profitability;
the anticipated trends, market opportunity, growth rates and challenges in our business and in the business intelligence software market;
the efficacy of our sales and marketing efforts;
our ability to compete successfully in competitive markets;
our ability to respond to and capitalize on rapid technological changes;
our expectations and management of future growth;
our ability to enter new markets and manage our expansion efforts, particularly internationally;
our ability to develop new product features;
our ability to attract and retain key employees and qualified technical and sales personnel;
our ability to effectively and efficiently protect our brand;
our ability to timely scale and adapt our infrastructure;
our ability to protect our customers' data and proprietary information;
the effect of general economic and market conditions on our business;
the impact of the coronavirus outbreak, including on the global economy, our results of operations, enterprise software spending, and business continuity;
our ability to maintain, protect, and enhance our intellectual property and not infringe upon others’ intellectual property; and
our ability to comply with all governmental laws, regulations and other legal obligations.
Our actual results may differ materially from those contained in or implied by any forward-looking statements. Factors that could cause or contribute to these
differences include those discussed below and elsewhere in this report, including those factors discussed in Part I, Item 1A (Risk Factors).
In light of the significant uncertainties and risks inherent in these forward-looking statements, you should not regard these statements as a representation or
warranty by us or anyone else that we will achieve our objectives and plans in any specified time frame, or at all, or as predictions of future events. Moreover, neither
we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to publicly update any
forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
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Item 1. Business
Overview
PART I
At Domo, we believe people and data are an organization's most valuable assets in the cloud era. Our Business Cloud is a modern business intelligence software
platform that enables processes that are critically dependent on business intelligence data – which historically could take weeks, months or longer – to be done on-the-
fly, in as fast as minutes or seconds, at scale. From marketing to operations, HR to finance, IT to product development, supply chain to sales, Domo's Business Cloud is
designed to change the way organizations are managed and empower our customers to go fast, go big and go bold.
Through Domo’s Business Cloud, data from across the business is collected, stored, prepared, organized, analyzed, visualized, and shared. Algorithms and machine
learning can be applied to the data that allow alerts to be triggered and actions invited. Users can receive these notifications on any device and immediately act on the
invitation, after which the system can write back to the original system of record. Because Domo can digitally connect any organization and empower each of its
employees, we believe our market potential is every working person with a mobile device. Because we leverage the power of the cloud, our platform can process
extremely large volumes of quantitative and qualitative data while maintaining high performance levels. On a typical business day, our customers in the aggregate
typically query several hundred trillion rows from uncached queries. Even with this volume of data, we maintain a subsecond average query response time. In aggregate,
the data in Domo can be indexed anonymously.
We have made significant investments to build an enterprise-grade platform with the scale, speed and security to support the world's largest organizations,
regardless of where they are in their digital transformation journey. In many ways, building Domo was like building seven start-ups in one to solve gaps in data strategy,
which include the typical functions of connecting and transforming data, visualizing and analyzing it, and building apps and extending that data to teams, entire
organizations, partners and customers. That's why Domo is more than just a business intelligence, data warehouse, data discovery, analytics, collaboration,
dashboarding, visualization or reporting tool. These tools and technologies are typically provided by separate vendors today. Domo combines all of them in a single
platform that can augment a customer's existing infrastructure with the following:
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Connectors: Domo offers more than 1,000 powerful, first-class connectors which we define as read/write, API and standards based connectors that are
available in the Domo Appstore, as well as a library of very flexible universal connectors, enabling all users, regardless of technical ability, to connect to data
across a broad range of sources and facilitate initiation of business processes. These connectors enable data to be continuously synchronized in real time,
fostering visibility and interoperability across a broad range of data sources.
Data Warehouse: Our data warehouse, Adrenaline, stores massive amounts of data from across the business, organizes that data across many factors or
variables and employs a massive number of processors to query that data in parallel, enabling employees across the organization to simultaneously access the
same data for their various needs with subsecond response times on average. Domo's federated query functionality supports several top cloud data warehouse
engines and allows customers to query and visualize data that lives in their data warehouses without duplicating it.
Domo ETL: Fusion is our data transformation engine that sorts customer data, making it possible for any dataset connected to Domo to be cleansed, combined
and prepared for use leveraging Magic ETL, Data Flows and hygiene algorithms.
Data Analysis and Visualization: Our Explorer analytics suite allows users to analyze, display, share and interact with data through pixel-perfect
visualizations. Explorer is a data discovery tool that seamlessly works on mobile as well as on wall monitors in executive offices or manufacturing facility
floors. Domo Everywhere is a set of embedded analytics tools that enable organizations to easily and securely deliver data experiences to customers, partners
and vendors. Content can be shared in portals, web properties, or inside applications.
Collaboration: Buzz is our standalone collaboration and productivity suite that integrates seamlessly with Domo's other features. Chat, sharing, organizational
charts, profiles, and project management all help foster an engaged and curious workforce, so that anyone in an organization can participate in improving the
business.
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Artificial Intelligence Algorithms: Domo's Mr. Roboto leverages machine learning algorithms, predictive analytics, and other artificial intelligence
technologies to create alerts, detect anomalies, optimize queries, and suggest areas of interest to help people focus on what matters most. Mr. Roboto constantly
scans incoming data to identify trends, anomalies and correlations, providing alerts and initiating business processes.
Partner Ecosystem: With the Domo Appstore, APIs and developer tool kits, Domo enables an ecosystem of partners to quickly build intelligent applications on
the platform. We believe this will be a meaningful source of future lead generation as application creation investment thresholds are high.
As of January 31, 2022, we had more than 2,300 organizations as customers. We employ a land, expand, and retain business model and typically enter into
enterprises within a specific division or for a specific use case. As our users see the value of our platform and user engagement increases, we expand our footprint within
their organization. Our subscription net revenue retention rate, which compares the subscription revenue generated from a cohort of customers that generated
subscription revenue at the beginning of the same period in consecutive fiscal years (excluding customers from the cohort who canceled during the initial period), has
averaged over 105% for the years ended January 31, 2020, 2021 and 2022.
For the years ended January 31, 2020, 2021 and 2022, we had total revenue of $173.4 million, $210.2 million and $258.0 million, respectively, representing year-
over-year growth of 21% and 23%, respectively. For the years ended January 31, 2020, 2021 and 2022, our net loss was $125.7 million, $84.6 million and $102.1
million, respectively.
The Domo Solution
We believe business technology must be as easy-to-use and intuitive as mobile consumer applications, while providing enterprise-grade scalability and security
features. Everyone, from a CEO to a front-line employee, benefits from the functionality that Domo provides. Our Business Cloud platform fosters collaboration,
efficient decision making, increased organizational productivity, and generates improved business results. The platform also is designed to help IT leaders deliver value
rapidly to the business by seamlessly complementing their existing systems and infrastructure and unlocking value from their fragmented data and systems. While
developing our platform, we have been focused on four key pillars.
All of Your People
Our platform enables every type of employee to connect to, analyze, and leverage data from their smartphone. When everyone can use data, the value of the data
increases significantly and everyone is equipped with a common set of facts across all levels of an organization. As a result, data-driven knowledge proliferates
throughout an organization as more employees become capable of contributing to shared, collaborative analysis. When freed from the constraints of traditional business
intelligence tools, these employees tend to not only become increasingly productive, but also feel more connected to the broader organization.
All of Your Data in Real Time
Our platform provides real-time access to quantitative and qualitative data, including through more than 1,000 powerful first-class connectors as well as a library of
very flexible universal connectors. In addition, through Domo Workbench, organizations can connect to proprietary data sources regardless of where those data sources
reside within an organization. This comprehensive approach enables every type of employee to design customized, real-time views of data and data trends. For example,
a marketer can design a visualization that includes real-time data of the click-through rates of the online advertisements, the impact of regional marketing campaigns,
and the benchmarks of his organization's campaigns across the years.
Intelligence that Invites Actions
Our platform leverages artificial intelligence, including machine learning algorithms and predictive analytics, to continuously power more advanced insights,
recommendations and alerts. We thereby enable employees to be aware of what is happening on a real-time basis, and take appropriate action where necessary. As more
organizations and users adopt our platform, we have access to more data, and our indices become more powerful, resulting in more effective benchmarking. Our
platform, based on ongoing variance analysis, is capable of providing personalized, proactive alerts and recommended actions to every employee and writing back to
source applications based on predetermined actions triggered after certain thresholds or behavior has occurred. In the case of a bakery, for example, our platform can
alert the owner that she does not have enough flour to meet tomorrow’s demand and recommend a supply schedule to prevent future stock-outs.
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Domo Apps and Appstore
We, our development partners, and our users have built intelligent applications to create custom solutions for unique business needs. The goal of these applications
is to put data to work for everyone in an organization. Our data applications present data for a specific purpose and are meant to drive prescriptive behavior to achieve a
business outcome. These applications range from a real-time social index to evaluate an organization's engagement across various social media platforms to a predictive
analytics toolkit that allows users to analyze "what if" scenarios and forecast the direction of key business metrics to an aggregator for an organization’s relevant mobile
application statistics. Our platform enables applications to keep data in sync by updating source systems when users take action. To date, these applications have been
adopted across a broad range of industries. Many users are able to build applications with limited training and no or limited IT involvement. Additionally, through the
Domo Appstore, users have the option to make their applications available to all Domo users. This application ecosystem generates a powerful network for our platform
— as users build, adopt and use additional applications, usage increases within an organization, which enables our platform to deliver even more powerful insights to
those users.
Through the power of Domo’s comprehensive cloud-based platform, organizations can finally provide all of their data, to all of their employees, all of the time.
Key Benefits of Our Solution
Domo is more than just a business intelligence, data connection, data warehouse, data transformation or ETL, data discovery, analytics, collaboration,
dashboarding, visualization or reporting tool. These tools and technologies are typically provided by separate vendors today. Domo's Business Cloud brings all of them
together to help companies leverage their business intelligence across various processes, at scale, in as fast as minutes or seconds.
The Domo platform delivers six core benefits, and from the combination of these six, customers benefit from a seventh; a virtuous cycle of optimization.
Executive and Outcome Focused Mobile Solution
From the beginning, we targeted CEOs as key users of our platform. That concept has fundamentally influenced every aspect of the Domo platform from
architecture to user experience. CEOs have huge demands on their time, are constantly on the move, do not have time or desire to learn complex software, need answers
that quickly drive decisions, need to create alignment within their organization, need to focus on the exceptional items that should bubble up in their business instead of
turning over every stone to see if something is off, and hunger for as much collaborative and correlative signal as they can get. Our platform was designed to meet each
of these needs.
Our native mobile application enables all employees, not just CEOs, to effectively manage their businesses and responsibilities using any device. Employees can
see current status of business operations and receive automatic alerts for when they need to take action, delivered directly to their smartphone. Anyone can edit and
interact with data and share it with colleagues in real time directly from their smartphone. While Domo was designed with mobile users first in mind, it is automatically
accessible across laptops, TV screens, monitors, tablets and smartphones, via different browsers and visualization engines, which is a competitive differentiator.
Universal Data Model — Data Platform and Transformation
Domo is changing the way people think about data. Data is no longer a currency only to be banked, but is the fuel that drives the business. Domo puts data to work,
all of the data, together in an integrated, robust system, for all of the business’s employees. To accomplish this, Domo created a distributed data platform that was
engineered to ingest, process, clean, prepare and make queryable all of a business’s available data, and serve it back with a subsecond average query response time, not
just from a couple of databases or a single warehouse, or a few external cloud apps, but from all of the data, including systems that come online outside of IT’s influence
like the myriad of cloud software providers each department might be leveraging. We believe that all of a business’s quantitative and qualitative data must be brought
together, in one system, in order to deliver the types of encompassing views and timely insights today’s leaders must have. Our portfolio of connectors and cloud-based
data warehouse provides a massively scalable solution to enable businesses to connect to their data systems. Our cloud-based ETL suite allows all of that data to be
transformed and prepared together in a universal data format, enabling users to easily incorporate, change or discontinue different data sources without disruption. Our
fast query engine searches the data, enabling insights to be generated. Now business leaders can have fully comprehensive views of what is happening, across all
departments and across all systems.
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Digitally Connected Organization — Interconnecting and Orchestrating across Disparate Systems
Businesses use many separate software systems to facilitate core elements of managing their business. This means there is no natural opportunity to leverage a
broader, more holistic view of the state of the business or to take broadly informed actions and decision paths. It is very difficult to create alignment across the disparate
organizations that use the siloed systems. This often creates walled gardens of data inside the business and blocks departments and teams from being able to effectively
work full life cycle problems with each other. It also cripples the C-suite from being able to truly understand the nature of a problem or opportunity. Our comprehensive,
cloud-based platform weaves seven critical platform components together to exploit this opportunity to increase alignment, accuracy and effectiveness of business
leaders: data connections, data warehouse, data management, data analysis and visualization, artificial intelligence algorithms, and our partner ecosystem. An action in
one system can have its influence measured in another, combined together in the same view, such as when marketing automation affects sales revenue generation, which
in turn affects financial performance, to truly understand how best to guide the business.
Productivity — Fosters Getting Work Done Together
Our platform enables all employees to engage with each other with real-time data and business results at the center of the conversation. Employees can easily find
others in their organization who access similar data and invite them and others with the appropriate permissions to engage in richer conversations to achieve business
results. With Domo, users collaborate where the data lives, increasing everyone’s productivity and ability to act on the data. Our platform also enables organizations to
share their data and collaborate with customers, suppliers and other partners outside of the organization. Additionally, any user can schedule critical insights to be
delivered to the right inboxes, ensuring the right stakeholders are being kept up-to-date on relevant developments.
Enterprise Security, Scalability and Compliance
We have invested significantly to build security features in our platform that have enabled us to expand our presence within the enterprise. Because we connect
directly to data sources that hold companies’ CRM, HCM, ERP and other sensitive data in our system, we must maintain enterprise-grade security standards for data
access, privacy and administration. Our security protocols have enabled us to attract enterprise customers across a wide array of industries, including many in highly
regulated industries such as financial services and healthcare. Our security features, such as customer-controlled encryption key management, provide much needed
confidence that the data on our platform is secure.
Our native multi-tenant, web-scale, massive parallel processing capabilities and multi-dimensional architecture manage extremely large volumes of data and deliver
real-time analysis at scale. On a typical business day, our customers in the aggregate typically query several hundred trillion rows from uncached queries. Even with this
volume of data, we maintain a subsecond average query response time. We leverage an organization’s existing data systems, meaning IT does not have to re-architect
what has already been built and does not have to invest in new infrastructure to implement our platform.
We also provide IT departments with centralized governance and administration capabilities. Our platform enables IT departments to not only monitor the health of
all data within an organization, but also actively control who has access to that data on a real-time, continuous basis. Our platform provides robust controls down to row
level security that enable leaders to tailor data access based on a variety of categories, including role, geography or department. We provide the assurance of leading
security and compliance certifications, including those relating to SOC 1, SOC 2 + HITRUST, HIPAA and more.
Benchmarks and Applications — Ecosystem
We built the Domo platform with the explicit goal that it be extended and leveraged by a rich ecosystem of partners, developers, business experts and entrepreneurs.
Each of the core pieces of the Domo platform has been engineered from the ground up to be extensible and accessible through APIs and SDKs. We have also created the
Domo Appstore, a marketplace for the distribution of additive capabilities and pre-built content from the Domo ecosystem, such as a new data connector, a best-practice
dashboard, or a fully functioning custom solution, to extend their Domo experience. Third parties are able to rapidly develop rich applications that leverage the
collective power of the Domo platform. Each of the core tenets of the platform are offered as services and functionality used to build the types of products that typically
would be expensive and time-consuming to replicate.
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Virtuous Cycle of Optimization
The combination of these six core benefits drives a seventh factor, a virtuous cycle of optimization. A digitally connected organization is able to leverage all of the
data, people, systems, behaviors, automation, write-back, predictive analytics, machine learning, natural language processing and workflows to achieve its goals and
improve the entire business. Customers get more value from their workforce, and get more value from their data. We believe this is only the beginning; the network
effect of digitizing complex workflows, automating well known outcomes, suggesting courses of action, unlocking crowd wisdom effects within the business and
anomaly detection across the entire organization will continue to improve as more of an organization's people, data and systems are connected to the Domo platform.
Competitive Strengths
Our key competitive strengths include:
• Mobile Functionality. We designed Domo with mobile functionality front of mind. Domo’s native mobile applications unlock users’ ability to access data and
collaborate in real time, from anywhere. When data is in Domo, it is immediately available for consumption on smartphones and other mobile devices without
requiring separate versions or visualizations.
• Functionality That Can Be Used by Everyone. Employees can easily connect to relevant data sources, create powerful data transformations, analyze data, build
reports and applications, configure alerts, and collaborate through our desktop or mobile application. Employees without technical expertise can use all of the
features of our platform without involving a business analyst.
• Easy to Adopt. Employees can begin using our platform within minutes, without the need for heavy IT involvement to procure and implement. We offer a free
trial, through our website, in addition to traditional inside and field sales models for broad company deployments.
• Scale. Domo has been natively built on a cloud-based architecture that is capable of massive scale. The Domo data warehouse and our connector strategy allows
our platform to connect, house and make accessible all of the data within an organization and have a system that can make recommendations.
• Proven Economic Value. The comprehensive capabilities of our solution enable organizations to benefit from cost savings that result from their ability to
remove previously deployed, limited systems. Also, because our solution enables employees to spend less time tracking down data or preparing presentations for
meetings, employees are able to dedicate more time to value added activities. As a result, in addition to cost savings, organizations that deploy our solution are
often able to generate incremental revenue.
• Proven Enterprise Readiness. We have invested significantly to broaden our platform capabilities and enhance security and scalability requirements for the
enterprise.
• Continuous Product Innovation. From inception through January 31, 2022, we have invested $628.7 million in research and development to create our
comprehensive platform. These investments allowed us to create more than 1,000 first-class connectors as well as a library of very flexible universal connectors,
which enable everyone to connect and use all of the data within their organization in real time, through our data explorer and ETL engine. We invested in
creating our native mobile application, which empowers all employees to effectively manage their responsibilities using their mobile device. We also invested in
developing collaboration capabilities, resulting in our solution being able to aggregate all collaboration activity within an organization in a context-sensitive,
easily navigable view. These investments have also enabled us to build a comprehensive cloud-based platform with enterprise-grade features and to develop
machine learning algorithms that invite all employees to action, based on the real-time data that is accessible within our platform. We developed the Domo
Appstore on top of that, which offers hundreds of applications, developed internally and by an open ecosystem of partners, providing expertise across a variety
of industries. Developer tools and programmatic APIs enable the rapid development and delivery of custom apps leveraging the Domo platform and services.
Additionally, we believe that our significant investments in research and development will provide tremendous leverage in our financial model as our business
continues to scale.
• Strong Industry Recognition. Our brand is synonymous with the next generation of cloud-native, mobile-first data solutions. We have attracted and retained top
talent in our industry and have become a top choice for organizations looking for better ways to use data to run their businesses. We have received multiple
innovation awards and top-
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ranked recognition for ease-of-use and business value based on customer-based research from organizations such as Dresner Advisory Services, Gartner and
Ventana Research. In addition, Domo was named the BI and Analytics category winner in the 2021 Cloud Awards and received the 2020 DEVIES Award for
Best Innovation in IoT. We've also been recognized with workplace and growth awards including the Deloitte Technology Fast 500, Great Places to Work, Utah
Business Best Places to Work (nine consecutive years). Additionally, our annual conference, Domopalooza, attracts thousands of prospects and users.
• Expanding Third Party Ecosystem with Strong Network Effects. We have developed pre-built applications for specific use cases and provide everyone with the
necessary tools to build applications that run on our platform. These applications can be tailored to the specific needs of a specific role, organization or industry
and leverage all the benefits of our solution to enable everyone to improve decision making, business outcomes and financial results. Once built, users can share
these applications within their organization, but can also elect to open the application to all our users, across industries and geographies.
Growth Strategies
Key components of our growth strategy include:
• Increasing Our Overall Customer Base. The market for our platform is large and underpenetrated, as any organization of any size and in any industry is a
potential customer of Domo. We believe there is substantial opportunity to add additional customers both in the United States and internationally as the need for
all employees to access actionable, real-time data continues to drive market adoption of our platform. We are committed to further penetrating international
markets such as Japan, Asia Pacific and EMEA.
• Accelerate Expansion within Existing Customers. We employ a land, expand, and retain business model and typically enter into enterprises either within a
specific division or for a specific use case. As our users see the value of our platform and user engagement increases, we expand our footprint within the
enterprise. We are focused on helping our users quickly realize the value of our platform. We have substantial growth potential within our existing customer
base. We will continue to focus on showcasing the value of our platform to expand our footprint within our existing customers.
• Extend Platform Functionality and Value Proposition. Our goal is to continue to enhance and broaden the capabilities of our platform to address our users’
evolving needs. To that end, we plan to continue to invest in enhancing the ease of use and self-service capabilities, scalability, security and performance of our
platform and expanding the IoT, artificial intelligence and data management functionality of our platform. We will also continue to invest in additional features
and capabilities.
• Expand the Domo Ecosystem. The ecosystem for our platform includes customer influencers, which share valuable best practices for and serve as proof points
for other customers, strategic partners, which efficiently expand our reach, and third-party developers that create customized applications tailored for specific
customer use cases. We will continue to invest in establishing and strengthening these relationships to broaden this ecosystem.
• Leverage the Data. The Domo platform is uniquely positioned to generate performance benchmarks and indices across a wide array of organizations and
disciplines, and in time we plan to capitalize on that position to attract additional customers and broaden and deepen our relationships with them. Although no
customer will have access to the data of another, given that customers bring their data into the same cloud-based platform, we could enable performance
comparisons based on index derived from similarly-situated organizations.
Our Technology
Our solution is comprised of seven core elements:
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connectors;
data warehouse and fast query engine;
Domo ETL;
data analysis and visualization tools;
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collaboration tools;
artificial intelligence algorithms; and
apps and partner ecosystem.
These core elements were developed with two foundational considerations in mind:
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accessibility for all users, with a heavy emphasis on mobile-first functionality; and
access, and applicability to business of all sizes, including those requiring enterprise-grade governance and security.
Connectors
The foundation of our technology is the ability to connect all of an organization’s relevant business data and then combine, cleanse and transform that data into
formats that can be easily visualized and analyzed.
Our platform provides real-time access to data through a broad and flexible set of connection options, including through more than 1,000 first-class connectors,
which we define as read/write, API and standards-based connectors that are available in the Domo Appstore, as well as a library of very flexible universal connectors.
We also provide users an intuitive web-based toolkit, Connector Dev Studio, which allows users to build their own connectors.
Our platform allows organizations to integrate directly with almost any source of data required to answer key business questions. Whether the necessary data is
located in other third-party systems, on-premise data stores, or even local machines, Domo provides easy access across all platforms with no coding necessary in most
cases. Since Domo has built and maintains a large library of connectors, organizations no longer need to directly deal with the confusing and constantly changing
ecosystem. Typically, all that is necessary are the security credentials required to access the data. Additionally, the cloud-based nature of Domo means that not only is it
simple for an organization to import data, but such data will also be continually imported and updated creating a “living,” real-time dataset with no hardware investment
by the customer. For organizations with on-premises data solutions, or bespoke or legacy applications, we have developed Workbench, our secure data acquisition tool
designed to easily and securely connect on-premises data to our platform. We thereby enable organizations to connect to real-time proprietary data sources regardless of
where those data sources sit within the organization. QuickStart Apps help users load relevant data into a usable format with the click of a button. With a growing library
of popular data sources that draw from years of role and industry experience, Domo guides users on what KPIs they should be measuring from the day they connect.
Data Warehouse and Fast Query Engine
Adrenaline, the Domo data warehouse, stores massive amounts of data connected from across the business, enabling anyone to quickly access the data they need.
After data has been imported into Domo, it is important that it is safe, secure, and available. Adrenaline uses industry-leading technologies to ensure that customer
data is secure and encrypted while stored in the system. It is also stored in redundant systems to provide a safe and reliable retrieval. In the case of frequently changing,
or updated data, Domo additionally stores historical versions of past data available for catastrophic recovery.
Availability of the data is handled through Domo’s fast query layer. All data is prepared and available for querying through this feature. Adrenaline organizes the
data across any number of factors or variables and employs a massive number of processors to query that data in parallel. This service supports queries while building
simple cards as well as complex, custom queries and dataset joins on datasets comprised of billions of records. Our fast query layer eliminates the need for IT to perform
time-consuming data summarizations or other complex processes in order to maintain high query performance. On top of the flexibility, it provides subsecond average
query response time, enabling real-time consumption of information. The speed and flexibility at this layer differentiate between Domo from traditional solutions
offered by our competitors.
Domo's federated query functionality supports several top cloud data warehouse engines and allows customers to query and visualize data that lives in their data
warehouses without duplicating it.
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Domo ETL: Data Transformation
Our self-service ETL toolset, Fusion, enables users to easily join, aggregate and cleanse data from multiple sources. Unlike some solutions that require separate
tools to extract, transform and load, or ETL, data, Fusion permits users of all skill levels to clean and combine data within our platform.
With an intuitive, drag-and-drop interface, users with little or no expertise can easily combine all their data and transform it into a format that can be easily
manipulated, visualized and analyzed. For data analysts, our platform includes SQL-based dataflows, which allow more technical users to combine and transform raw
data sources for other users. Fusion also includes a variety of machine learning algorithm and predictive analytics tools to allow everyone to add intelligence to any
dataset, enabling a range of data science analysis, including:
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cluster analysis to perform cohort analysis and discover relationships to understand complex data;
predictive models built on a suite of regression algorithms to better understand core drivers and influencers of key business metrics;
forecasting models using common forecasting methods;
time-series, multivariate, parametric and non-parametric algorithms to reveal abnormal or “interesting” data in any dataset; and
intelligent models built on machine learning algorithms.
All algorithms can be implemented using a simple wizard for configuration.
Real-time Analysis and Visualization
Our Explorer analytics suite, consisting of Domo Analyzer, Domo Pages and Collections, Domo Stories, Publication Groups and Domo Everywhere, allows users to
analyze, display, share and interact with data through pixel-perfect visualizations.
Domo Analyzer allows users to analyze, display, share and interact with data across mobile devices and personal computers. Domo Analyzer combines an intuitive
simplicity that allows business users to find quick insights and advanced capabilities analysts expect. Analyzer allows users to create their own workspace:
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over 300 chart types and a robust mapping engine that enable users to immediately visualize area-specific data, even suggesting charts based on the data input
so users never start with a blank slate;
the ability to see and manipulate the data in all columns that are applied to charts, along with any other unused columns that should be shown;
out-of-the-box visualizations that make it easy to review numerous time periods to see trends and comparisons;
pre-defined filters for any visualization, making it easy for viewers to explore the data and see results in specific areas;
the ability to change options, colors, series, and even chart types on the fly and get instant feedback; and
tools to allow users to verify that data is flowing correctly and on time.
Domo Pages and Collections allow everyone to consume and organize data in ways that are meaningful and personalized to them. It’s easy to drag-and-drop, re-size
and group reports, which we refer to as cards, into collections, and build slideshows to share both internally or externally.
Domo Stories allows users to combine cards, text, and images in a dashboard to tell a powerful story about the data. Rather than simply arranging cards on a page,
users can customize page layouts to emphasize certain points and guide other users through analysis of the data.
Other sharing tools include Publication Groups, which enable everyone to securely share filtered views of data with other individuals and groups, send a single card
or a slideshow of cards through scheduled emails, enabling everyone to share valuable information with teams or external stakeholders.
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Domo Everywhere is a set of embedded analytics tools that enable organizations to easily and securely deliver data experiences to customers, partners and vendors,
without having to recreate new or special datasets. Content can be shared in portals, or web properties or even inside applications. Once embedded, any parameters
applied to a card can be reflected in the embedded report. In addition, user access can be controlled by using Single Sign On and personal data permissions, or PDPs, to
pass parameters back to Domo. Customers and partners have the power to edit and create content within the embedded environment using an intuitive, drag-and-drop
interface that requires no coding or technical expertise. They can also connect to their own proprietary data and utilize Domo's transformation layer to augment the data
being shared.
Real-time Collaboration
Domo connects all employees across an organization, while also allowing everyone to customize and create personalized experiences to help them learn and invite
action on those items that are uniquely important to them.
Our Org Explorer and Profiles features bring a social component and transparency to an organization, allowing all employees to see other employees’ role within
the organization, find their contact information and learn how they contribute to the organization. Everyone can see what cards their coworkers are following, and then
follow the same information, or share their own data with them proactively.
Once connected with the right people, Buzz aggregates all collaboration activity, in a single context-sensitive, easily navigable view. This allows an entire
organization to share and discuss data in real time, to make better decisions more quickly. With Buzz, users can:
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chat with individuals and teams around real-time data through both public and private channels and direct messages;
share alerts with other users; and
search for and share attachments with an easy-to-use drag-and-drop interface.
Other features to promote collaboration are included throughout our platform, including:
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Report Scheduler, which allows users to schedule delivery of a card or page to anyone;
Snapshot Annotation, which allows users to call out a specific spike or trends in data, annotate on any card to highlight it for others and initiate a conversation
from any device;
Projects and Tasks, which help users quickly take action with simple planning and assignment tools, including creating a task directly from a Buzz thread; and
Alerts, which prompt timely collaboration and action.
Artificial Intelligence Algorithms
Through Mr. Roboto, which leverages machine learning algorithms, artificial intelligence and predictive analytics, Domo creates alerts, detects anomalies,
optimizes queries, and suggests areas of interest to help people focus on what matters most. We are also developing additional artificial intelligence capabilities to
enable users to develop benchmarks and indexes based on data in the Domo platform, as well as automatic write back to other systems.
Domo was designed and built from the ground up to deliberately and seamlessly combine all the traditional disparate technologies into a single system. This
seamless combination allows our customers to apply advanced analytics and machine learning to their data for a variety of uses, including:
• modeling access patterns to allow for intelligent alerts that inform users of what is happening with both their data and their organization — even if the user
didn’t explicitly ask for it; and
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analyzing popular consumption paths to allow for customized recommendations for data, reports, and even conversations that users may find interesting or may
have missed.
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Partner Ecosystem: App Development Platform and Appstore
The Domo Appstore offers hundreds of apps, developed internally and by an open ecosystem of partners, providing expertise across a variety of industries.
Developer tools and programmatic APIs enable the rapid development and delivery of custom apps leveraging the Domo platform and services.
Domo’s developer portal provides all of the tools and documentation needed to build custom apps leveraging our platform. Our App Design Studio lets non-
technical users harness the power of Adobe Illustrator to build real-time infographics, and our App Dev Studio allows users to gain ultimate flexibility and develop
customer visualizations using HTML, CSS, JavaScript, and just about any web technology.
Underlying our technology approach are two key considerations:
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accessibility for all users, which includes a heavy emphasis on mobile; and
applicability to business of all sizes, requiring enterprise-grade governance.
Mobile-First Functionality
Domo’s native mobile applications for iOS and Android, and also mobile web browsers, enable employees to effectively manage their responsibilities using their
mobile device. Domo Mobile unlocks the ability for users to access their data and collaborate with their teams in real time, from anywhere.
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Build Once and Done. When data is loaded or content created in Domo, it is immediately available for consumption on mobile devices, tablets, and more.
There is no need to maintain separate mobile versions of visualizations.
Powerful Visualization Exploration. Domo’s powerful page filters tool is also available on mobile. Whether it’s an executive walking into a retail store or a
manufacturing manager looking at a specific product line, individuals can quickly filter a page to find the story they are interested in.
Collaborate on the Go. Just because users are out of the office doesn’t mean they can’t collaborate with their team around business. All the benefits of Buzz,
Domo’s powerful chat and collaboration platform, are available on any mobile device.
Share Key Metrics Internally and Externally. Data owners can share important information with internal or external collaborators while limiting their access to
sensitive or irrelevant data. Snapshot Annotations also help you make visuals clearer to your audience on mobile devices.
Browse Your Organization. As a platform for business management, understanding organizational structure is key. With Domo, an organization's contact list
and organizational chart are on any mobile device, for access to the people in the organization from anywhere, anytime.
Data Management, Governance, Security and Access Control
Domo's Business Cloud is designed to meet the enterprise security, compliance and privacy requirements of our customers, particularly in highly regulated
industries, such as financial services, government, health care, pharmaceuticals, energy and technology.
In addition to advanced internal security controls, Domo provides extensive self-service features that enable administrators to stay in control of and have full
transparency into data at all times. These features include access management, data governance and logging and monitoring tools.
Access Management
Creating users and granting access rights in Domo is the first layer in maintaining information security. PDPs allow users to create robust entitlement policies that
govern access to specific data, increasing data usage while simultaneously helping to ensure that sensitive or irrelevant information remains secure. Pre-defined security
profile options are included to allow organizations to easily deploy our platform. Each profile contains clearly defined access privileges, which can be turned on or off
by default, and privileges and roles can be fully tailored to align with an organization’s unique policy.
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Logging and Monitoring
Administrators can easily monitor global activity across Domo with our Activity Logs console. Authorized users can quickly access usage metrics like login
attempts, card views, card creation and card edits. The console also provides the times those events took place and by which user. Admins can filter and sort this data,
and export to an Excel spreadsheet or CSV file.
Data Governance
Once data is connected to Domo, the platform provides capabilities and tools to manage it across its lifecycle. The Domo Data Warehouse is a dynamic 3D
management console that enables IT professionals to interact with and curate every data source in Domo. Administrators can see which data sources are updating,
identify potential problems, understand existing data relationships, and gauge the size of each data source, all in one visually engaging platform.
Domo Bring Your Own Key, or BYOK, provides the ability to rotate encryption keys numerous times a day. Through this user-controlled encryption, organizations
can revoke encryption keys at any time, nullifying all data in the Domo platform and preventing access to their sensitive customer data.
Domo Sandbox enables the creation of new content without upsetting day-to-day operations. Using Sandbox, users can build and test new visualizations in a
separate testing environment and easily promote content once it’s ready for consumption, thereby avoiding disruptive downtime and maintenance.
Customers
As of January 31, 2022, we had over 2,300 customers. We have customers in a wide variety of industries, geographies, and sizes, ranging from small organizations
to large enterprises. We derived 77% of our revenue for the year ended January 31, 2022 from customers in the United States. We define a customer at the end of any
particular quarter as an entity that generated revenue greater than $2,500 during that quarter. In situations where an organization has multiple subsidiaries or divisions,
each entity that is invoiced at a separate billing address is treated as a separate customer. In cases where customers purchase through a reseller, each end customer is
counted separately. For the fiscal years ended January 31, 2020, 2021 and 2022, no single customer represented more than 10% of our revenue, nor did any single
organization when accounting for multiple subsidiaries or divisions which may have been invoiced separately.
We have invested in platform capabilities and online support resources that allow our customers to expand the use of our platform in a self-guided manner. Our
professional services, customer support and customer success functions also support our sales force by helping customers to successfully deploy our platform and
implement additional use cases. We work closely with our customers to drive increased engagement with our platform by identifying new use cases through our
customer success teams, as well as in-platform, self-guided experiences. We actively engage with our customers to assess whether they are satisfied and fully realizing
the benefits of our platform. While these efforts often require a substantial commitment and upfront costs, we believe our investment in product, customer support,
customer success and professional services will create opportunities to expand our customer relationships over time.
Sales and Marketing
We offer our platform to our customers as a subscription-based service. Subscription fees are based upon the chosen Domo package which includes tier-based
platform capabilities as well as the number of users. Business leaders, department heads and managers are the typical initial subscribers to our platform, deploying
Domo to solve a business problem or to enable departmental access to critical data. Over time, as customers recognize the value of our platform, we increasingly engage
with CIOs and other executives to facilitate broad enterprise adoption. A majority of our customers subscribe to our services through multi-year contracts. As of
January 31, 2022, 62% of our customers were under multi-year contracts, compared to 60% and 56% of customers as of January 31, 2021 and 2020, respectively. This
transition to a higher percentage of multi-year contracts, among both new and existing customers, has enhanced the predictability of our subscription revenue. We
typically invoice our customers annually in advance for subscriptions to our platform. Our one-year and multi-year contracts generally automatically renew for
additional one-year terms, with each party having the option to elect not to renew, and generally may not be canceled absent material breach by us or the customer. A
majority of our annual recurring revenue is up for renewal during the fiscal year ending January 31, 2023.
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We primarily generate sales through our direct sales team, which includes both inside sales and field sales personnel. We also make it easy for users and
organizations to sign up for free trials on our website, which can be converted to paid subscriptions by the user.
We generate customer leads, accelerate sales opportunities and build brand awareness through our marketing programs. Our marketing programs target C-level, and
senior line of business leaders spanning all functional areas of a business, including sales, marketing, finance, human resources and information technology. We also
host Domopalooza, our annual user conference for current customers and prospects.
We have also developed go-to-market partnerships with a number of key technology, system integrator and consultant partners both domestically and
internationally to help customers and potential customers validate our solutions and provide introductions to potential customers, and in some cases to resell or provide
professional services related to our platform. We anticipate that we will continue to develop a select number of third-party relationships to help grow our business.
Historically, a significant portion of field sales and professional services were conducted in person. Currently, as a result of the work and travel restrictions related
to the ongoing COVID-19 pandemic, a large portion of our sales and professional services activities are being conducted remotely. As of the date of this report, we do
not yet know the extent of the negative impact on our ability to attract, serve, retain or upsell customers. Furthermore, existing and potential customers may choose to
reduce or delay technology spending in response to the coronavirus outbreak, or attempt to renegotiate contracts and obtain concessions, which may materially and
negatively impact our operating results, financial condition and prospects.
Competition
Historically, software companies have not offered solutions that meet the needs of an organization with respect to providing real-time intelligence on business
operations to all users, from the CEO to the frontline. In many cases, organizations do not have any solution or otherwise rely on manual business processes such as
spreadsheets and reports, or combinations of single solution software. Certain features of our platform compete with products offered by various companies including
those that fall into the following categories:
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large software companies, including suppliers of traditional business intelligence products that provide one or more capabilities that are competitive with our
products, such as Microsoft Corporation, Oracle Corporation, SAP AG, salesforce.com, inc., and IBM;
business analytics software companies, such as Tableau Software, Inc. (acquired by salesforce.com, inc.), Qlik Technologies, Looker Data Sciences, Inc.
(acquired by Alphabet, Inc.), MicroStrategy, ThoughtSpot, Sisense, Inc., and Tibco Software, Inc.; and
SaaS-based products or cloud-based analytics providers such as salesforce.com, inc. and Infor, Inc.
We believe that the principal competitive factors in our markets include the following:
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user-centric design;
ease of adoption and use;
rapid time to value;
features and platform experience;
enterprise-grade performance, including scalability, reliability and query response time;
brand;
security, governance and privacy;
accessibility across mobile devices, operating systems, and applications;
breadth of data source connectivity through third-party integration;
customer support;
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continued innovation; and
pricing.
We believe that we compete effectively on each of the factors listed above; however, we expect competition to intensify in the future. It is possible that the large
software vendors who currently do not have a competitive offering, some of which operate in adjacent product categories today, may in the future bring such a solution
to market through product development, acquisitions or other means. In addition, several of our competitors have greater name recognition, much longer operating
histories, more and better-established customer relationships, larger sales forces, larger marketing and software development budgets and significantly greater resources
than we do. Therefore, it is possible that we may not compete favorably with respect to certain of the foregoing factors.
Current and future competitors may also continue to make strategic acquisitions or establish cooperative relationships among themselves or with others. By doing
so, these competitors may increase their ability to meet the needs of customers. These relationships may limit our ability to sell or certify our platform through specific
distributors, technology providers, database companies and distribution channels and allow competitors to rapidly gain significant market share. These developments
could limit our ability to obtain revenue from existing and new customers. If we are unable to compete successfully against competitors, our business, operating results
and financial condition would be harmed.
Data Center Operations
We rely heavily on data centers and other technologies and services provided by third parties in order to operate critical functions of our business. We serve our
customers from multiple data centers in the following geographies: North America, Western Europe, Canada and Australia. The data centers we use are designed to host
mission-critical computer systems with fully redundant subsystems and compartmentalized security zones. Our platform runs within third-party data centers. As of
January 31, 2022, we used Amazon Web Services, or AWS, data center facilities located in Western Europe, North America and Australia. We committed to spend an
aggregate of $60.0 million between January 2020 and December 2024 pursuant to our agreement with AWS. If we fail to meet the minimum purchase commitment
during any year, we are required to pay the difference. AWS may terminate the agreement upon written notice to us for cause, including any material breach by us. We
also use Microsoft Azure data centers in the United States to host customer data and partner with a third-party provider to maintain Company owned physical servers at
an Equinix data center in the United States.
We and our third-party data center providers maintain a formal and comprehensive security program designed to ensure the security and integrity of customer data,
protect against security threats or data breaches, and prevent unauthorized access to the data of our customers. We and our third-party data center providers strictly
regulate and limit all access to on-demand servers and networks at our production and remote backup facilities.
We apply a wide variety of strategies to achieve better than 99.9% systems availability for our subscription services, excluding scheduled maintenance. Our systems
are continually monitored for any signs of problems, and we strive to take preemptive action when necessary. Our data center facilities and the third-party data centers
employ advanced measures designed to ensure physical integrity, including redundant power and cooling systems, and advanced fire and flood prevention.
Research and Development
We focus our efforts on anticipating customer demand to remain competitive in the marketplace. Our ability to compete depends in large part on our continuous
commitment to research and development and our ability to introduce new platform enhancements, applications, technologies, features and capabilities in a timely
manner. Our research and development organization is responsible for design, development, testing, release and maintenance. Our efforts are focused on developing
new platform enhancements, use cases, and features and further enhancing the functionality, reliability, performance and flexibility of existing solutions.
Research and development expenses were $69.2 million, $66.5 million and $81.0 million for the fiscal years ended January 31, 2020, 2021 and 2022, respectively.
Intellectual Property
We rely on a combination of trade secret, copyright, trademark, patent and other intellectual property laws, contractual arrangements, such as assignment,
confidentiality and non-disclosure agreements, and confidentiality procedures and
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technical measures to gain rights to and protect the technology and intellectual property used in our business. We actively pursue registration of our trademarks and
service marks in the United States and abroad.
As of January 31, 2022, we owned 119 issued U.S. patents and five pending U.S. patent applications. We also owned ten patents in the European Union, five
patents in the People's Republic of China, one patent in Australia, one patent in Canada and one patent in Japan. The issued U.S. patents that we own have expiration
dates ranging from August 2022 to September 2035. We have sole ownership of all of our U.S. patents and pending U.S. patent applications.
Our applications use “open source” software. Open source software is made available to the general public in source code form for use, modification and
redistribution on an “as-is” basis under the terms of a non-negotiable license. We also rely on other technology that we license from third parties. Though such third-
party technology may not continue to be available to us on commercially reasonable terms, we believe that alternative technology would be available to us.
Our policy is to require employees and independent contractors to sign agreements assigning to us any inventions, trade secrets, works of authorship, and other
technology and intellectual property created by them on our behalf and agreeing to protect our confidential information, and all of our key employees and independent
contractors have done so. In addition, we generally enter into confidentiality agreements with our vendors and customers. We also control and monitor access to our
software, source code and other proprietary information.
Regulatory Matters
Data privacy, information security and data protection with respect to the collection, storage, and other processing of personal data continue to be focuses of
worldwide legislation and regulation. We are subject to data privacy, data protection and information security regulation by data protection authorities in the United
States (including the states in which we conduct our business) and in other countries where we conduct our business. These regulations include laws requiring holders of
personal data to maintain safeguards and to take certain actions in response to a data breach. In the European Union, the General Data Protection Regulation requires
comprehensive information privacy and security protections for natural persons with respect to personal data collected about them, and in the United Kingdom, the Data
Protection Act and UK GDPR require similar protections. Each of these regimes provides for substantial potential fines in the event of noncompliance. We post on our
website a privacy policy concerning the processing, use and disclosure of personal data, and certify adherence to and compliance with the U.S. Department of
Commerce’s Privacy Shield Principles and the E.U.-U.S. and Swiss-U.S. Privacy Shield Frameworks. Our publication of our Privacy Shield certification, our privacy
policy, and other statements we publish regarding privacy, data protection and information security may subject us to potential governmental action if they are found to
be deceptive or misrepresentative of our practices or in violation of applicable privacy law. We also may be bound from time to time by contractual obligations,
including model contract provisions approved by the European Commission, that impose additional restrictions on our handling of personal data.
The legal environment of internet-based businesses is evolving rapidly in the United States, the European Union and elsewhere. The manner in which existing laws
and regulations are applied in this environment, and how they will relate to our business in particular, both in the United States and internationally, is often unclear. For
example, we sometimes cannot be certain which laws will be deemed applicable to us given the global nature of our business, including with respect to such topics as
data privacy and security, pricing, advertising, taxation, content regulation, and intellectual property ownership and infringement or other violations of intellectual
property rights. In particular, the various privacy, data protection and data security legal obligations that apply to us may evolve in a manner that relates to our practices
or the features of our applications or platform, and we may need to take additional measures to comply with such changes in legal obligations and to maintain and
improve our information security posture in an effort to avoid information security incidents or breaches affecting personal data or other sensitive or proprietary
information.
Data Security
Domo is designed to meet enterprise security, compliance and privacy requirements of our customers, particularly in highly regulated industries, such as financial
services, health care, pharmaceuticals, energy and technology. Our architecture is designed to allow customers to maintain control of their data through various means
including: multiple logical and physical security layers; least privilege and separation of duties access model; threat assessments of each new feature; transport layer
encryption and encryption at rest that allows customers to manage their own encryption keys using Domo’s Bring Your Own Key, or BYOK; several self-service
security controls offered within the Domo platform for customers to implement their own security policies, and extensive logging and monitoring of network, system
and application events.
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We voluntarily engage independent third-party security auditors to test our systems and controls at least annually against several widely recognized security
standards and regulations.
We have completed a SOC 1 and SOC 2 + HITRUST Common Security Framework, or CSF, examination. Service Organization Controls, or SOC, are standards
established by the American Institute of Certified Public Accountants for reporting on internal control environments implemented within an organization. We have also
been certified as compliant with ISO 27001 and ISO 27018 standards. The ISO 27001 security standard specifies the requirements for establishing, implementing,
operating, monitoring, reviewing, maintaining and improving a documented Information Security Management System within the context of the organization’s overall
business risks. This standard addresses confidentiality, access control, vulnerability and risk assessment. ISO 27018 establishes commonly accepted control objectives,
controls and guidelines for implementing measures to protect personally identifiable information in accordance with the privacy principles in ISO/IEC 29100 for a cloud
computing environment. Furthermore, we have completed our annual third party validation of HIPAA Security and Privacy Risk Analysis. We sign business associate
agreements with our customers who require them in support of compliance with the Health Insurance Portability and Accountability Act, or HIPAA, and the Health
Information Technology for Economic and Clinical Health Act, or HITECH.
We have also completed our annual audits to evaluate our compliance with GDPR and CCPA requirements. Our datacenter facilities and services providers also
regularly undergo ISO 27001 or SOC 1 or SOC 2 audits and numerous other audits to verify their security practices.
We complete the two industry-leading information security questionnaires. This includes the Shared Assessments Standardized Information Gathering, or SIG,
questionnaire, as well as the Cloud Security Alliance Consensus Assessments Initiative Questionnaire, or CSA CAIQ. The SIG is composed of approximately 1,400
security questions spanning 17 domains. The CSA CAIQ is a set of security questions focused on cloud security controls, and it is mapped to numerous industry
programs and standards including ISO 27001, NIST SP 800-53, and COBIT, amongst others. Both of these information security industry questionnaires assist
organizations in evaluating a cloud provider's operations and processes.
Employees
As of January 31, 2022, we had 917 employees, of which 771 work in the United States. None of our employees are represented by a labor union, and we believe
our employee relations are good.
Corporate Information
We were originally incorporated in Delaware in September 2010 under the corporate name "Shacho, Inc." We changed our name to "Domo, Inc." in December
2011. Our principal executive offices are located at 772 East Utah Valley Drive, American Fork, UT 84003, and our telephone number is (801) 899-1000. Our website
address is www.domo.com. Information contained on, or that can be accessed through, our website does not constitute part of this Annual Report on Form 10-K.
Available Information
The following filings are available through our investor relations website after we file them with the Securities and Exchange Commission, or SEC: Annual Report
on Form 10-K, Quarterly Reports on Form 10-Q and our Proxy Statement for our annual meeting of stockholders. These filings are also available for download free of
charge on our investor relations website. Our investor relations website is located at www.domo.com/ir. The SEC also maintains an Internet website that contains
reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is http://www.sec.gov.
We webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website.
Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, and press and earnings
releases as part of our investor relations website. Further corporate governance information, including our corporate governance guidelines and code of conduct, is also
available on our investor relations website under the heading "Governance." The contents of our websites are not intended to be incorporated by reference into this
Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references
only.
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Item 1A. Risk Factors
You should carefully consider the following risk factors, in addition to the other information contained in this report, including the section of this report captioned
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes. If any of the events
described in the following risk factors or the risks described elsewhere in this report occurs, our business, operating results and financial condition could be seriously
harmed. This report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in
the forward-looking statements as a result of factors that are described below and elsewhere in this report.
Risks Related to Our Financial Position and Capital Needs
The ongoing pandemic of coronavirus around the world could impact our business and operating results in volatile and unpredictable ways.
A novel strain of coronavirus, COVID-19, emerged in China in December 2019 and began to spread globally, including to the United States, in early 2020. In
March 2020, COVID-19 was characterized by the World Health Organization as a global pandemic. The COVID-19 pandemic has resulted in travel restrictions and in
some cases, prohibitions of non-essential activities, disruption and shutdown of businesses and greater uncertainty in global financial markets.
The full impact of the COVID-19 pandemic on our business is inherently uncertain at the time of this report, and is highly dependent on inherently uncertain future
developments, including duration and scope of the pandemic (including any potential future waves of the pandemic as well as new and emerging variants) as well as
governmental, business and individual actions that have been and continue to be taken in response to the pandemic (including the availability, adoption and effectiveness
of COVID-19 vaccines). In geographies in which we or our customers, partners and service providers operate, these developments could result in economic, social or
labor instability or prolonged contractions in the industries in which our customers or partners operate, negatively impact our ability to attract, serve, retain or upsell
customers or result in customers not purchasing or renewing our products, failing to make payments or attempting to renegotiate contracts, any of which could have a
material adverse effect on our business and our results of operations and financial condition. Because our platform is offered as a subscription-based service, the effect
of the pandemic may not be fully reflected in our operating results until future periods, if at all.
Before the COVID-19 pandemic, a significant portion of field sales and professional services were conducted in person. Currently, as a result of the work and travel
restrictions related to the ongoing COVID-19 pandemic, substantially all of our sales and professional services activities are being conducted remotely. As we continue
to actively monitor issues arising from the COVID-19 pandemic, we may take further actions that alter our business operations, including those that may be required by
federal, state, local or foreign authorities or that we determine are in the best interests of our employees, customers and stockholders. Additionally, if and to the extent
work and travel restrictions related to COVID-19 are relaxed, we may begin shifting certain professional, sales and marketing activities from remote work to in-person
or hybrid models, which could result in us incurring additional operating expenses associated with business travel, office space leases and other factors.
Economic uncertainties or downturns could materially adversely affect our business.
Current or future economic uncertainties or downturns, including those caused by the ongoing COVID-19 pandemic (as discussed above), could adversely affect
our business and operating results. Negative conditions in the general economy both in the United States and abroad, including conditions resulting from changes in
gross domestic product growth, financial and credit market fluctuations, political deadlock, natural catastrophes, pandemics, military conflict (including the Russian
invasion of Ukraine) and terrorist attacks, whether in the United States, Europe, the Asia Pacific region or elsewhere, could cause a decrease in business investments,
including corporate spending on business intelligence software in general and negatively affect the rate of growth of our business.
General worldwide economic conditions may experience significant downturns and may be unstable. These conditions make it extremely difficult for our customers
and us to forecast and plan future business activities accurately, and they could cause customers to reevaluate their decisions to subscribe to our platform, which could
delay and lengthen our sales cycles or result in cancellations of planned purchases. Furthermore, during challenging economic times customers may tighten their
budgets and face issues in gaining timely access to sufficient credit, which could result in an impairment of their ability to make timely payments to us. In turn, we may
be required to increase our allowance for doubtful accounts, which would adversely affect our financial results.
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For example, the ongoing COVID-19 pandemic has resulted in travel restrictions and in some cases, prohibitions of non-essential travel, disruption and shutdown of
businesses and greater uncertainty in global financial markets. Health concerns or political or governmental developments in countries in which we or our customers,
partners and service providers operate could result in economic, social or labor instability, slow our sales process, result in customers not purchasing or renewing our
products or failing to make payments, and could otherwise have a material adverse effect on our business and our results of operations and financial condition. As
discussed above, the extent to which the coronavirus impacts our results will depend on future developments, which are highly uncertain. Any prolonged contractions in
the industries in which our customers or partners operate could materially and adversely impact our business, results of operations and financial condition.
To the extent subscriptions to our platform are perceived by customers and potential customers to be discretionary, our revenue may be disproportionately affected
by delays or reductions in general information technology spending. Also, customers may choose to develop in-house software as an alternative to using our platform.
Moreover, competitors may respond to market conditions by lowering prices and attempting to lure away our customers. In addition, the increased pace of consolidation
in certain industries may result in reduced overall spending on our platform.
We cannot predict the timing, strength or duration of any economic slowdown, instability or recovery, generally or within any particular industry. If the economic
conditions of the general economy or industries in which we operate do not improve, or worsen from present levels, our business, operating results, financial condition
and cash flows could be adversely affected.
We have a history of losses, and we may not be able to generate sufficient revenue to achieve or maintain profitability in the future.
We incurred net losses of $125.7 million, $84.6 million, and $102.1 million for the years ended January 31, 2020, 2021 and 2022, respectively, and had an
accumulated deficit of $1,224.5 million at January 31, 2022. We may not be able to generate sufficient revenue to achieve or sustain profitability. We expect to continue
to incur losses for the foreseeable future and we expect costs to increase in future periods as we expend substantial financial and other resources on, among other things:
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sales and marketing, including any expansion of our direct sales organization, which will require time before these investments generate sales results;
technology and data center infrastructure, enhancements to cloud architecture, improved disaster recovery protection, increasing data security, compliance and
operations expenses;
data center costs as customers increase the amount of data that is available to our platform and the number of users on our platform;
other software development, including enhancements and modifications related to our platform;
international expansion in an effort to increase our customer base and sales;
general and administration, including significantly increasing expenses in accounting and legal related to the increase in the sophistication and resources
required for public company compliance and other work arising from the growth and maturity of the company;
competing with other companies, custom development efforts and open source initiatives that are currently in, or may in the future enter, the markets in which
we compete;
• maintaining high customer satisfaction and ensuring quality and timely releases of platform enhancements and applications;
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developing our indirect sales channels and strategic partner network;
• maintaining the quality of our cloud and data center infrastructure to minimize latency when using our platform;
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increasing market awareness of our platform and enhancing our brand;
• maintaining compliance with applicable governmental regulations and other legal obligations, including those related to intellectual property and international
sales; and
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attracting and retaining top talent in a competitive market.
These expenditures may not result in additional revenue or the growth of our business. If we fail to continue to grow revenue or to achieve or sustain profitability,
the market price of our Class B common stock could be adversely affected.
We have a limited operating history, which makes it difficult to evaluate our prospects and future operating results.
We were incorporated in 2010 and publicly announced our platform in 2015. Our limited operating history makes our ability to forecast future operating results
difficult and subjects us to a number of uncertainties, including our ability to plan and model future growth. Historical revenue growth is not necessarily indicative of
future performance. Our revenue growth rate may decline in future periods due to a number of reasons, which may include the maturation of our business, increase in
overall revenue over time, slowing demand for our platform, increasing competition, a decrease in the growth of the markets in which we compete, or if we fail, for any
reason, to continue to capitalize on growth opportunities, a decrease in our renewal rates, or a decline in upsells.
We have encountered and will continue to encounter risks and uncertainties frequently experienced by growing companies in rapidly changing industries, such as
determining appropriate investments of our limited resources, market adoption of our platform, competition, acquiring and retaining customers, hiring, integrating,
training and retaining skilled personnel (including sales personnel), developing new platform enhancements and applications, determining prices and contract terms,
improving our internal controls and unforeseen expenses and challenges in forecasting accuracy. If our assumptions regarding these risks and uncertainties, which we
use to plan our business, are incorrect or change, or if we do not address these risks successfully, our prospects, operating results and business could be adversely
affected.
We have been growing and expect to continue to invest in our growth for the foreseeable future. If we fail to manage this growth effectively, our business and
operating results will be adversely affected.
We intend to continue to grow our business. If we cannot adequately train new employees, including our direct sales force, or if new employees are not as
productive as quickly as we would like, sales may decrease or customers may lose confidence in the knowledge and capability of our employees. In addition, we may
make direct investments in our international business. We must successfully manage growth to achieve our objectives. Although our business has experienced
significant growth in the past, we cannot provide any assurance that our business will continue to grow at any particular rate, or at all.
Our ability to effectively manage the growth of our business will depend on a number of factors, including our ability to do the following:
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effectively recruit, integrate, train and motivate new employees and make them productive, including our direct sales force, while retaining existing employees,
maintaining the beneficial aspects of our corporate culture and effectively executing our business plan;
attract new customers, and retain and increase usage by existing customers;
recruit and successfully leverage channel partners and app developers;
successfully enhance our platform;
continue to improve our operational, financial and management controls;
protect and further develop strategic assets, including intellectual property rights; and
• manage market expectations and other challenges associated with operating as a public company.
These activities will require significant financial resources and allocation of valuable management and employee resources, and growth will continue to place
significant demands on management and our operational and financial infrastructure.
Our future financial performance and ability to execute our business plan will depend, in part, on our ability to effectively manage any future growth. There are no
guarantees we will be able to do so. In particular, any failure to successfully implement systems enhancements and improvements will likely negatively impact our
ability to manage our expected growth, ensure uninterrupted operation of key business systems and comply with the rules and regulations that are
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applicable to public reporting companies. Moreover, if we do not effectively manage the growth of our business and operations, the quality of our platform could suffer,
which could negatively affect our brand, operating results and business.
Our ability to raise capital in the future may be limited, and if we fail to raise capital when needed in the future, we could be prevented from growing or could be
forced to delay or eliminate product development efforts or other operations.
Our business and operations may consume resources faster than we anticipate. We have incurred cumulative and recurring losses from operations since inception
and had an accumulated deficit of $1,224.5 million as of January 31, 2022. We have also experienced negative cash flows from operating activities, including cash used
in operating activities of $80.2 million, $15.9 million and cash provided by operating activities of $0.4 million for the years ended January 31, 2020, 2021 and 2022,
respectively. As of January 31, 2022, we had cash and cash equivalents of $83.6 million and no amounts available to draw under our credit facility.
We may need to raise additional funds to invest in growth opportunities, to continue product development and sales and marketing efforts, and for other purposes.
Additional financing may not be available on favorable terms, if at all. If adequate funds are not available on acceptable terms, we may be unable to meet our
obligations, invest in future growth opportunities, or continue operations at anticipated levels, which could harm our business and operating results. In addition, current
and future debt instruments may impose restrictions on our ability to dispose of property, make changes in our business, engage in mergers or acquisitions, incur
additional indebtedness, and make investments and distributions. Furthermore, if we issue additional equity securities, stockholders will experience dilution, and the
new equity securities could have rights senior to those of our common stock. Because our decision to issue securities in any future offering will depend on market
conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any such future offerings. As a result, stockholders bear
the risk that future securities offerings reduce the market price of our Class B common stock and dilute their interest.
Future operating results and key metrics may fluctuate significantly due to a wide range of factors, which makes our future results difficult to predict.
Our operating results and key metrics could vary significantly from quarter to quarter as a result of various factors, some of which are outside of our control,
including:
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the expansion of our customer base;
the size, duration and terms of our contracts with both existing and new customers;
the introduction of products and product enhancements by competitors, and changes in pricing for products offered by us or our competitors;
customers delaying purchasing decisions in anticipation of new products or product enhancements by us or our competitors or otherwise;
changes in customers’ budgets;
seasonal variations in our sales, which have generally historically been highest in our fourth fiscal quarter and lowest in the second and third fiscal quarters;
the timing of satisfying revenue recognition criteria, particularly with regard to large transactions;
the amount and timing of payment for expenses, including infrastructure costs to deliver our platform, research and development, sales and marketing
expenses, employee benefit and stock-based compensation expenses and costs related to Domopalooza, our annual user conference that occurs in our first fiscal
quarter;
costs related to the hiring, training and maintenance of our direct sales force;
the timing and growth of our business, in particular through the hiring of new employees and international expansion; and
general economic and political conditions, both domestically and internationally, including the impacts of the ongoing COVID-19 pandemic, the Russian
invasion of Ukraine, inflation, as well as economic conditions specifically affecting industries in which our customers operate.
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Any one of these or other factors discussed elsewhere in this report may result in fluctuations in our operating results, meaning that quarter-to-quarter comparisons
may not necessarily be indicative of our future performance.
Because we recognize revenue from subscriptions ratably over the term of the agreement, near-term changes in sales may not be reflected immediately in our
operating results.
We offer our platform primarily through subscription agreements, which typically vary in length between one and three years, and may in many cases be subject to
automatic renewal or renewal only at a customer's discretion. We generally invoice our customers in annual installments at the beginning of each year in the subscription
period. Amounts that have been invoiced are initially recorded as deferred revenue and are recognized ratably over the subscription period. As a result, most of the
revenue that we report in each period is derived from the recognition of deferred revenue relating to subscriptions entered into during previous periods. A decline in new
or renewed subscriptions in any one quarter is not likely to have a material impact on results for that quarter. However, declines would negatively affect revenue and
deferred revenue balances in future periods, and the effect of significant downturns in sales and market acceptance of our platform, and potential changes in our rate of
renewals, may not be fully reflected in our results of operations until future periods. Our subscription model also makes it difficult for us to rapidly increase our total
revenue through additional sales in any period, as revenue from new customers is recognized over the applicable subscription term. We may be unable to adjust our cost
structure to reflect the changes in revenue. In addition, a significant majority of our costs are expensed as incurred, while revenue is generally recognized over the life of
the customer agreement. As a result, increased growth in the number of our customers could result in our recognition of more costs than revenue in the earlier periods of
the terms of our agreements.
The length, cost and uncertainty associated with sales cycles for enterprise customers may result in fluctuations in our operating results and our failure to achieve
the expectations of investors.
We target sales efforts at enterprise customers, which we define as companies with over $1 billion in revenue, and face long sales cycles, complex customer
requirements, substantial upfront sales costs, and a relatively low and difficult to predict volume of sales on a quarter-by-quarter basis. This makes it difficult to predict
with certainty our sales and related operating performance in any given period. Our sales cycle for new enterprise customers varies from approximately six months to
multiple years. Customers often undertake a prolonged evaluation of our platform, including assessing their own readiness, scoping the professional services involved,
and comparing our platform to products offered by competitors and their ability to solve the problem internally. Events may occur during this period that affect the size
or timing of a purchase or even cause cancellations, which may lead to greater unpredictability in our business and operating results. Moreover, customers often begin to
use our platform on a limited basis with no guarantee that they will expand their use of our platform widely enough across their organization to justify the costs of our
sales efforts. We may also face unexpected implementation challenges with enterprise customers or more complicated installations of our platform. It may be difficult to
deploy our platform if the customer has unexpected database, hardware or software technology issues.
Adherence to our financial plan in part depends on managing the mix of customers, the rate at which customers increase their use of our platform within their
organizations, the number of use cases they employ, and the timing and amount of upsells, all of which affect annual contract value. Our financial performance and the
predictability of our quarterly financial results may be harmed by failures to secure the higher value enterprise agreements in a timely manner or at all, or changes in the
volume of transactions overall, compared to our forecasts, and depends in large part on the successful execution of our direct sales team. The predictability of billings
may be adversely impacted by fluctuations in the proportion of contracts that are not billed annually in advance.
Additionally, our quarterly sales cycles are generally more heavily weighted toward the end of the quarter with an increased volume of sales in the last few weeks
and days of the quarter. This impacts the timing of recognized revenue and billings, cash collections and delivery of professional services. Furthermore, the
concentration of contract negotiations in the last few weeks and days of the quarter could require us to expend more in the form of compensation for additional sales,
legal and finance employees and contractors. Compression of sales activity to the end of the quarter also greatly increases the likelihood that sales cycles will extend
beyond the quarter in which they are forecasted to close for some sizeable transactions, which will harm forecasting accuracy and adversely impact billings and new
customer acquisition and renewal metrics for the quarter in which they are forecasted to close.
Increased sales to customers outside the United States or paid for in currency other than the U.S. dollar exposes us to potential currency exchange losses.
As our international sales and operations increase, so too will the number and significance of transactions, including intercompany transactions, occurring in
currencies other than the U.S. dollar. In addition, our international subsidiaries may
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accumulate assets and liabilities that are denominated in currencies other than the U.S. dollar, which is the functional reporting currency of these entities. Accordingly,
changes in the value of foreign currencies relative to the U.S. dollar can affect our revenue and operating results due to foreign currency gains and losses that are
reflected in our earnings. We do not currently maintain a program to hedge transactional exposures in foreign currencies. However, in the future, we may use derivative
instruments, such as foreign currency forward and option contracts, to hedge certain exposures to fluctuations in foreign currency exchange rates. The use of such
hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time
the hedges are in place. Moreover, the use of hedging instruments may introduce additional risks if we are unable to structure effective hedges with such instruments.
Our credit facility contains restrictive covenants that may limit our operating flexibility.
Our credit facility contains restrictive covenants that limit our ability to transfer or dispose of assets, merge with other companies or consummate certain changes of
control, acquire other companies, open new offices that contain a material amount of assets, pay dividends, incur additional indebtedness and liens and enter into new
businesses. We therefore may not be able to engage in any of the foregoing transactions unless we obtain the consent of the lender or terminate the credit facility, which
may limit our operating flexibility. In addition, our credit facility is secured by all of our assets, including our intellectual property, and requires us to satisfy certain
financial covenants. There is no guarantee that we will be able to generate sufficient cash flow or sales to meet these financial covenants or pay the principal and interest
on any such debt. Furthermore, there is no guarantee that future working capital, borrowings or equity financing will be available to repay or refinance any such debt.
Any inability to make scheduled payments or meet the financial covenants on our credit facility would adversely affect our business.
We may be subject to additional obligations to collect and remit sales tax and other taxes, and we may be subject to tax liability for past transactions, which could
harm our business.
We do not collect sales and use, value added and similar taxes in all jurisdictions in which we have sales, based on our belief that such taxes are not applicable in
certain jurisdictions. State, local and foreign jurisdictions have differing rules and regulations governing sales, use, value added and other taxes, and these rules and
regulations are subject to varying interpretations that may change over time. In particular, the applicability of such taxes on subscriptions to our platform in various
jurisdictions is unclear. Further, these jurisdictions’ rules regarding tax nexus are complex and vary significantly. As a result, we could face the possibility of audits that
could result in tax assessments, including associated interest and penalties. A successful assertion that we should be collecting additional sales, use, value added or other
taxes in those jurisdictions where we have not historically done so could result in substantial tax liabilities and related penalties for past transactions, discourage
customers from purchasing our application or otherwise harm our business and operating results. In addition, we are required to withhold and timely remit payroll-
related taxes for which we are also subject to the possibility of audits that could result in tax assessments, including associated interest and penalties.
Changes in tax laws or regulations that are applied adversely to us or our customers could increase the costs of our platform and adversely impact our business.
New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could affect the tax treatment of our (and our
subsidiaries’) domestic and foreign financial results. Any new taxes could adversely affect our domestic and international business operations, and our business and
financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us.
Specifically, taxation of cloud-based software is constantly evolving as many state and local jurisdictions consider the taxability of software services provided remotely.
These events could require us or our customers to pay additional tax amounts on a prospective or retroactive basis, as well as require us or our customers to pay fines or
penalties and interest for past amounts deemed to be due. If we raise our prices to offset the costs of these changes, existing and potential future customers may elect not
to continue to use or purchase subscriptions to our platform in the future. Additionally, new, changed, modified or newly interpreted or applied tax laws could increase
our customers’ and our compliance, operating and other costs, as well as the costs of our platform. Any or all of these events could harm our business and operating
results.
We are a multinational organization faced with increasingly complex tax issues in many jurisdictions, and we could be obligated to pay additional taxes in various
jurisdictions.
As a multinational organization, we are subject to taxation in several jurisdictions around the world with increasingly complex tax laws, the application of which
can be uncertain, and significant judgment and estimates are required in determining our provision for income taxes. Our tax expense may be impacted if our
intercompany transactions, which are
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required to be computed on an arm’s-length basis, are challenged and successfully disputed by tax authorities. Our policies governing transfer pricing may be
determined to be inadequate and could result in additional tax assessments. The amount of taxes we pay in these jurisdictions could increase substantially as a result of
changes in the applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents, which could harm our
liquidity and operating results. In addition, the authorities in these jurisdictions could review our tax returns and impose additional tax, interest and penalties, and the
authorities could claim that various withholding requirements or other taxes apply to us or our subsidiaries or assert that benefits of tax treaties are not available to us or
our subsidiaries, any of which could adversely affect our operating results.
Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.
As of January 31, 2022, we had NOL carryforwards for federal and state income tax purposes of approximately $1,181.4 million and $1,334.9 million, respectively,
which may be available to offset taxable income in the future, and which expire in various years beginning in 2028 for federal purposes if not utilized. The state NOLs
will expire depending upon the various rules in the states in which we operate. A lack of future taxable income could adversely affect our ability to utilize these NOLs
before they expire. In general, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an "ownership change"
(as defined under Section 382 of the Code and applicable Treasury Regulations) is subject to limitations on its ability to utilize its pre-change NOLs to offset our future
taxable income. An ownership change under Section 382 of the Code could affect our ability to utilize the NOLs to offset our income. Furthermore, our ability to utilize
NOLs of companies that we have acquired or may acquire in the future may be subject to limitations. There is also a risk that due to regulatory changes, such as
suspensions on the use of NOLs or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to reduce future income tax liabilities,
including for state tax purposes. For these reasons, we may not be able to utilize a material portion of the NOLs, even if we attain profitability, which could potentially
result in increased future tax liability to us and could adversely affect our operating results and financial condition.
Risks Related to Our Relationships with Customers and Third Parties
If we are unable to attract new customers in a manner that is cost-effective, our revenue growth could be slower than we expect and our business may be harmed.
To increase our revenue, we must add new customers. Demand for our platform is affected by a number of factors, many of which are beyond our control, such as
continued market acceptance of our platform for existing and new use cases, the timing of development and release of new applications and features, technological
change, growth or contraction in our addressable market, and accessibility across mobile devices, operating systems, and applications, and macroeconomic changes,
including the impact of the COVID-19 pandemic, on the demand for technology solutions like ours. In addition, if competitors introduce lower cost or differentiated
products or services that are perceived to compete with our features, our ability to sell our features based on factors such as pricing, technology and functionality could
be impaired. As a result, we may be unable to attract new customers at rates or on terms that would be favorable or comparable to prior periods, which could negatively
affect the growth of our revenue.
Even if we do attract customers, the cost of new customer acquisition may prove so high as to prevent us from achieving or sustaining profitability. We recognize
subscription revenue ratably over the term of the subscription period. In general, customer acquisition costs and other upfront costs associated with new customers are
much higher in the first year than the aggregate revenue we recognize from those new customers in the first year. As a result, the profitability of a customer to our
business in any particular period depends in part upon how long a customer has been a subscriber and the degree to which it has expanded its usage of our platform.
Additionally, we intend to continue to hire additional sales personnel to grow our domestic and international operations. If our sales and marketing efforts do not result
in substantial increases in revenue, our business, results of operations, and financial condition may be adversely affected.
If customers do not renew their contracts with us or reduce their use of our platform, our revenue will decline and our operating results and financial condition
may be adversely affected.
The initial terms of our customer contracts typically vary in length between one and three years, and our customers have no obligation to renew their subscriptions
after the expiration of their initial subscription periods. In some cases, the contracts automatically renew (with each party having the option to elect not to renew), but in
circumstances where that is not the case, our customers may unilaterally elect not to renew, may seek to renew for lower subscription amounts or for shorter contract
lengths, or may choose to renew for the same or fewer applications over time. A majority of our annual recurring revenue is
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up for renewal during the fiscal year ending January 31, 2023. Our renewal rates may decline or fluctuate as a result of a number of factors, including leadership
changes within our customers resulting in loss of sponsorship, limited customer resources, pricing changes by us or competitors, customer satisfaction with our platform
and related applications, the acquisition of customers by other companies, procurement or budgetary decisions, and deteriorating general economic conditions, including
as a result of the COVID-19 pandemic. To the extent our customer base continues to grow, renewals and additional subscriptions by renewing customers will become an
increasingly important part of our results. If our customers do not renew their subscriptions, or decrease the amount they spend with us, revenue will decline and our
business will be harmed.
If customers do not expand their use of our platform or adopt additional use cases our growth prospects, operating results and financial condition may be adversely
affected.
Our future success depends on our ability to increase the deployment of our platform within and across our existing customers and future customers. Many of our
customers initially deploy our platform to specific groups or departments within their organization or for a limited number of use cases. Our growth prospects depend on
our ability to persuade customers to expand their use of our platform to additional groups, departments and use cases across their organization. Historically, we have
made significant investments in research and development to build our platform and to offer enterprise customers the features and functionality that they require.
Because our recent growth has resulted in the expansion of our business, we do not have a long history upon which to base forecasts of customer renewal rates,
customer upsells or future revenue. As a result, future operating results may be significantly below the expectations of investors, which could harm the market price of
our Class B common stock.
The loss of one or more of our key customers, or a failure to renew our subscription agreements with one or more of our key customers, could negatively affect our
ability to market our platform.
We rely on our reputation and recommendations from key customers in order to promote subscriptions to our platform. The loss of, or failure to renew by, any of
our key customers could have a significant effect on our revenue, reputation and our ability to obtain new customers. In addition, acquisitions of our customers could
lead to cancellation of such customers’ contracts, thereby reducing the number of our existing and potential customers.
If we are unable to develop and maintain successful relationships with channel partners, our business, operating results, and financial condition could be adversely
affected.
To date, we have been primarily dependent on our direct sales force to sell subscriptions to our platform. Although we have developed relationships with some
channel partners, such as referral partners, resellers, and integration partners, these channels have resulted in limited revenue historically. We believe that continued
growth in our business is dependent upon identifying, developing, and maintaining strategic relationships with additional channel partners that can drive substantial
revenue. If we fail to identify additional channel partners in a timely and cost-effective manner, or at all, or are unable to assist our current and future channel partners in
independently selling and deploying our products, our business, results of operations, and financial condition could be adversely affected. Typically, agreements with
channel partners are non-exclusive, meaning our channel partners may offer customers the products of several different companies, including products that compete
with our platform. They may also cease marketing our platform with limited or no notice and with little or no penalty. Additionally, customer retention and expansion
attributable to customers acquired through our channel partners may differ significantly from customers acquired through our direct sales efforts. If our channel partners
do not effectively market and sell our products, or fail to meet the needs of our customers, our reputation and ability to grow our business may also be adversely
affected.
Sales by channel partners are more likely than direct sales to involve collectability concerns. In particular, sales by our channel partners into developing markets,
and accordingly, variations in the mix between revenue attributable to sales by channel partners and revenue attributable to direct sales, may result in fluctuations in our
operating results.
We rely upon data centers and other systems and technologies provided by third parties, and technology systems and electronic networks supplied and managed by
third parties, to operate our business and interruptions or performance problems with these systems, technologies and networks may adversely affect our business
and operating results.
We rely on data centers and other technologies and services provided by third parties in order to manage our cloud-based infrastructure and operate our business. If
any of these services becomes unavailable or otherwise is unable to serve our requirements due to extended outages, interruptions, facility closure, or because it is no
longer available on commercially
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reasonable terms, expenses could increase, our ability to manage finances could be interrupted and our operations otherwise could be disrupted or otherwise impacted
until appropriate substitute services, if available, are identified, obtained, and implemented.
We do not control, or in some cases have limited control over, the operation of the data center facilities we use, and they are vulnerable to damage or interruption
from earthquakes, floods, fires, power loss, telecommunications failures and similar events. They may also be subject to break-ins, sabotage, intentional acts of
vandalism and similar misconduct, to adverse events caused by operator error, and to interruptions, data loss or corruption, and other performance problems due to
various factors, including introductions of new capabilities, technology errors, infrastructure changes, distributed denial of service attacks, or other security related
incidents. For instance, in December 2017, researchers identified significant CPU architecture vulnerabilities commonly known as “Spectre” and “Meltdown” that have
required software updates and patches, including for providers of public cloud services, to mitigate such vulnerabilities and such updates and patches have required
servers to be offline and potentially slow their performance. We may not be able to rapidly switch to new data centers or move customers from one data center to
another in the event of any adverse event. Despite precautions taken at these facilities, the occurrence of a natural disaster, an act of terrorism or other act of
malfeasance, a decision to close the facilities without adequate notice or other unanticipated problems at these facilities could result in lengthy interruptions in our
service and the loss or corruption of, or unauthorized access to or acquisition of, customer data.
In addition, if we do not accurately predict our infrastructure capacity requirements, customers could experience service shortfalls. The provisioning of additional
cloud hosting capacity and data center infrastructure requires lead time. As we continue to add data centers, restructure our data management plans, and increase
capacity in existing and future data centers, we may be required to move or transfer our data and customers’ data. Despite precautions taken during such processes and
procedures, any unsuccessful data transfers may impair customers’ use of our platform, and we may experience costs or downtime in connection with the transfer of
data to other facilities, which may lead to, among other things, customer dissatisfaction and non-renewals. The owners of our data center facilities have no obligation to
renew their agreements with us on commercially reasonable terms, or at all. If we are unable to renew these agreements on commercially reasonable terms, we may be
required to transfer to new data center facilities, and we may incur significant costs and possible service interruption in connection with doing so.
Our ability to provide services and solutions to customers also depends on our ability to communicate with customers through the public internet and electronic
networks that are owned and operated by third parties. In addition, in order to provide services on-demand and promptly, our computer equipment and network servers
must be functional 24 hours per day, which requires access to telecommunications facilities managed by third parties and the availability of electricity, which we do not
control. A severe disruption of one or more of these networks or facilities, including as a result of utility or third-party system interruptions, could impair our ability to
process information and provide services to our customers.
Any unavailability of, or failure to meet our requirements by, third-party data centers or other third-party technologies or services, or any disruption of the internet
or the third-party networks or facilities that we rely upon, could impede our ability to provide services to customers, harm our reputation, result in a loss of customers,
cause us to issue refunds or service credits to customers, subject us to potential liabilities, result in contract terminations, and adversely affect our renewal rates. Any of
these circumstances could adversely affect our business and operating results.
Contractual disputes with our customers could be costly, time-consuming and harm our reputation.
Our business is contract intensive and we are party to contracts with our customers all over the world. Our contracts can contain a variety of terms, including
service levels, security obligations, indemnification and regulatory requirements. Contract terms may not always be standardized across our customers and can be
subject to differing interpretations, which could result in disputes with our customers from time to time. If our customers notify us of an alleged contract breach or
otherwise dispute any provision under our contracts, the resolution of such disputes in a manner adverse to our interests could negatively affect our operating results.
Additionally, if customers fail to pay us under the terms of our agreements, we may be adversely affected both from the inability to collect amounts due and the cost
of enforcing the terms of our contracts, including litigation. The risk of such negative effects increases with the term length of our customer arrangements. Furthermore,
some of our customers may seek bankruptcy protection or other similar relief and fail to pay amounts due to us, or pay those amounts more slowly, either of which
could adversely affect our operating results, financial position and cash flow.
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Risks Related to Our Products and Solutions
We face intense competition, and we may not be able to compete effectively, which could reduce demand for our platform and adversely affect our business, growth,
revenue and market share.
The market for our platform is intensely and increasingly competitive and subject to rapidly changing technology and evolving standards. In addition, many
companies in our target market are offering, or may soon offer, products and services that may compete with our platform. Furthermore, many potential customers have
made significant investments in legacy software systems and may be unwilling to invest in new solutions.
Our current primary competitors generally fall into the following categories:
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large software companies, including suppliers of traditional business intelligence products that provide one or more capabilities that are competitive with our
products, such as Microsoft Corporation, Oracle Corporation, SAP AG and IBM;
business analytics software companies, such as Tableau Software, Inc., Qlik Technologies, Looker Data Sciences, Inc., Sisense, Inc., and Tibco Software, Inc.;
and
SaaS-based products or cloud-based analytics providers such as salesforce.com, Inc. and Infor, Inc.
We expect competition to increase as other established and emerging companies enter the markets in which we compete, as customer requirements evolve and as
new products and technologies are introduced. For example, salesforce.com, inc. acquired Tableau Software, Inc. in August 2019 and Alphabet Inc. acquired Looker
Data Sciences, Inc. in February 2020.
Many competitors, particularly the large software companies named above, have longer operating histories, significantly greater financial, technical, research and
development, marketing, distribution, professional services or other resources and greater name recognition than we do. In addition, many competitors have strong
relationships with current and potential customers, channel partners and development partners and extensive knowledge of markets in which we compete. As a result,
they may be able to respond more quickly to new or emerging technologies and changes in customer requirements, for example by devoting greater resources to the
development, promotion and sale of their products than we do.
Moreover, many of these competitors may bundle their data management and analytics products into larger deals or maintenance renewals, often at significant
discounts or at no charge. Increased competition may lead to price cuts, alternative pricing structures or the introduction of products available for free or a nominal
price, fewer customer orders, reduced gross margins, longer sales cycles and loss of market share. We may not be able to compete successfully against current and future
competitors, and our business, operating results and financial condition will be harmed if we fail to meet these competitive pressures. Even if we are successful in
acquiring and retaining customers, those customers may continue to use our competitors' products in addition to our products.
Our ability to compete successfully depends on a number of factors, both within and outside of our control. Some of these factors include ease and speed of
platform deployment and use, accessibility across mobile devices, operating systems, and applications, discovery and visualization capabilities, analytical and statistical
capabilities, performance and scalability, the quality of our data security infrastructure, the quality and reliability of our customer service and support, total cost of
ownership, return on investment and brand recognition. Any failure by us to compete successfully in any one of these or other areas may reduce the demand for our
platform, as well as adversely affect our business, operating results and financial condition.
Moreover, current and future competitors may also make strategic acquisitions or establish cooperative relationships among themselves or with others. By doing so,
these competitors may increase their ability to meet the needs of customers. These relationships may limit our ability to sell or certify our platform through specific
distributors, technology providers, database companies and distribution channels and allow competitors to rapidly gain significant market share. These developments
could limit our ability to obtain revenue from existing and new customers. If we are unable to compete successfully against competitors, our business, operating results
and financial condition would be harmed.
We do not have a long history with our subscription or pricing models and changes could adversely affect our operating results.
We do not have a long history with respect to determining the optimal prices and contract length for our platform. As the markets for our features grow, as new
competitors introduce new products or services that compete with ours or reduce their
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prices, or as we enter into new international markets, we may be unable to attract new customers or retain existing customers at the same price. Moreover, large
customers, which are the focus of our direct sales efforts, may demand greater price discounts.
In an inflationary environment, our costs may increase and we may not be able to increase the pricing of our subscription contracts accordingly, which could
adversely impact our financial performance.
As we expand internationally, we also must determine the appropriate price to enable us to compete effectively internationally. In addition, if the mix of features we
sell changes, then we may need to, or choose to, revise our pricing. As a result, in the future we may be required to reduce our prices or offer shorter contract durations,
which could adversely affect our revenue, gross margin, profitability, financial condition and cash flow.
In addition, our competitors may offer different subscription or pricing models, such as by number of queries or data size, which may be more attractive to potential
customers. We may be required to adjust our subscription or pricing models in response to these changes, which could adversely affect our financial performance.
If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards and changing customer needs or requirements, our solutions
may become less competitive.
Our success depends on our customers' willingness to adopt and use our platform, including on their smartphone or mobile device, as well as our ability to adapt
and enhance our platform. To attract new customers and increase revenue from existing customers, we need to continue to enhance and improve our platform, to meet
customer needs at prices that customers are willing to pay. Such efforts will require adding new features, expanding related applications and responding to technological
advancements, which will increase our research and development costs. If we are unable to develop solutions that address customers’ needs, or enhance and improve our
platform in a timely manner, we may not be able to increase or maintain market acceptance of our platform.
Further, we may make changes to our platform that customers do not find useful. We may also discontinue certain features, begin to charge for certain features that
are currently free or increase fees for any features or usage of our platform. We may also face unexpected problems or challenges in connection with new applications or
feature introductions. Enhancements and changes to our platform could fail to attain sufficient market acceptance for many reasons, including:
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failure to predict market demand accurately in terms of platform functionality and capability or to supply features that meets this demand in a timely fashion;
inability to operate effectively with the technologies, systems or applications of existing or potential customers;
defects, errors or failures;
negative publicity about their performance or effectiveness;
delays in releasing new enhancements and additional features to our platform to the market;
the introduction or anticipated introduction of competing products;
an ineffective sales force;
poor business conditions for our end-customers, causing them to delay purchases;
challenges with customer adoption and use of our platform on mobile devices or problems encountered in developing or supporting enhancements to our
mobile applications; and
the reluctance of customers to purchase subscriptions to software incorporating open source software.
Because our platform is designed to operate on and with a variety of systems, we will need to continuously modify and enhance our platform to keep pace with
changes in technology, and we may fail to do so.
In addition, issues in the use of artificial intelligence in our platform may result in reputational harm or liability. Domo’s Mr. Roboto leverages machine learning
algorithms, predictive analytics, and other artificial intelligence technologies to identify trends, anomalies and correlations, provide alerts and initiate business
processes. Artificial intelligence presents risks and challenges that could affect its adoption, and therefore our business. Artificial intelligence algorithms may be flawed.
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Datasets may be insufficient or contain biased information. Inappropriate or controversial data practices by us or others could impair the acceptance of artificial
intelligence solutions. These deficiencies could undermine the decisions, predictions, or analysis artificial intelligence applications produce, subjecting us to competitive
harm, legal liability, and brand or reputational harm.
Our platform also provides real-time write-back capabilities to customer environments, including to IoT products and services. The development of the internet of
things, or IoT, presents security, privacy and execution risks. Many IoT devices have limited interfaces and ability to be updated or patched. IoT solutions may collect
large amounts of data, and our handling of IoT data may not satisfy customers or regulatory requirements. IoT scenarios may increasingly affect personal health and
safety. If IoT solutions that include our technologies do not work as intended, violate the law, or harm individuals or businesses, we may be subject to legal claims or
enforcement actions. These risks, if realized, may increase our costs, damage our reputation or brand, or negatively impact our business and operating results.
Moreover, many competitors expend a considerably greater amount of funds on their research and development programs, and those that do not may be acquired by
larger companies that would allocate greater resources to competitors’ research and development programs. If we fail to maintain adequate research and development
resources or compete effectively with the research and development programs of competitors, our business could be harmed. Our ability to grow is also subject to the
risk of future disruptive technologies. If new technologies emerge that are able to deliver business intelligence solutions at lower prices, more efficiently, more
conveniently or more securely, such technologies could adversely affect our ability to compete.
We may not timely and effectively scale our existing technology, including our computing architecture, to meet the performance and other requirements placed on
our systems, which could increase expenditures unexpectedly and create risk of outages and other performance and quality of service issues for our customers.
Our future growth and renewal rates depend on our ability to meet customers’ expectations with respect to the speed, reliability and other performance attributes of
our platform, and to meet the expanding needs of customers as their use of our platform grows. The number of users, the amount and complexity of data ingested,
created, transferred, processed and stored by us, the number of locations where our platform is being accessed, and the number of processes and systems managed by us
on behalf of these customers, among other factors, separately and combined, can have an effect on the performance of our platform. In order to ensure that we meet the
performance and other requirements of customers, we continue to make significant investments to develop and implement new technologies in our platform and
infrastructure operations. These technologies, which include database, application and server advancements, revised network and hosting strategies, and automation, are
often advanced, complex, and sometimes broad in scope and untested through industry-wide usage. We may not be successful in developing or implementing these
technologies. To the extent that we do not develop offerings and scale our operations in a manner that maintains performance as our customers expand their use, our
business and operating results may be harmed.
We may not accurately assess the capital and operational expenditures required to successfully fulfill our objectives and our financial performance may be harmed
as a result. Further, we may make mistakes in the technical execution of these efforts to improve our platform, which may affect our customers. Issues that may arise
include performance, data loss or corruption, outages, and other issues that could give rise to customer satisfaction issues, loss of business, and harm to our reputation. If
any of these were to occur there would be a negative and potentially significant impact to our financial performance. Lastly, our ability to generate new applications, and
improve our current solutions may be limited if and to the extent resources are necessarily allocated to address issues related to the performance of existing solutions.
If we fail to meet our service level commitments, our business, results of operations and financial condition could be adversely affected.
Our subscription agreements with many of our customers, including most of our top customers, provide certain service level commitments. If we are unable to meet
the stated service level commitments or suffer extended periods of downtime that exceed the periods allowed under our subscription agreements, we may be obligated to
provide these customers with service credits, or we could face subscription terminations, which could significantly impact our revenue. Any extended service outages
could also adversely affect our reputation, which would also impact our future revenue and operating results.
Our customers depend on our customer support organization to resolve technical issues relating to our platform. We may be unable to respond quickly enough to
accommodate short-term increases in customer demand for support services. Increased customer demand for these services, without corresponding revenue, could
increase costs and adversely affect our operating results. In addition, our sales process is highly dependent on the ease of use of our services, on our reputation and
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on positive recommendations from our existing customers. Any failure to maintain high-quality customer support, or a market perception that we do not maintain high-
quality support, could adversely affect our reputation and our ability to sell our services to existing and prospective customers.
If our or our customers' access to data becomes limited, our business, results of operations and financial condition may be adversely affected.
The success of our platform is dependent in large part on our customers’ ability to access data maintained on third party software and service platforms. Generally,
we do not have agreements in place with these third parties that guarantee access to their platforms, and any agreements that we do have in place with these third parties
are typically terminable for convenience by the third party. If these third parties restrict or prevent our ability to integrate our platform with their software or platform,
including but not limited to, by limiting the functionality of our data connectors, our ability to access the data maintained on their systems or the speed at which such
data is delivered, customers’ ability to access their relevant data in a timely manner may be limited, and our business and operating results may be adversely affected.
Our business depends on continued and unimpeded access to the internet and mobile networks.
Our customers who access our platform and services through mobile devices, such as smartphones, laptops and tablet computers, must have a high-speed internet
connection to use our services. Currently, this access is provided by telecommunications companies and internet access service providers that have significant and
increasing market power in the broadband and internet access marketplace. In the absence of government regulation, these providers could take measures that affect
their customers’ ability to use our products and services, such as degrading the quality of the data packets we transmit over their lines, giving our packets low priority,
giving other packets higher priority than ours, blocking our packets entirely, or attempting to charge their customers more for using our platform and services. To the
extent that internet service providers implement usage-based pricing, including meaningful bandwidth caps, or otherwise try to monetize access to their networks, we
could incur greater operating expenses and customer acquisition and retention could be negatively impacted. Furthermore, to the extent network operators were to create
tiers of internet access service and either charge us for or prohibit our services from being available to our customers through these tiers, our business could be
negatively impacted.
On February 26, 2015, the Federal Communications Commission, or the FCC, reclassified broadband internet access services in the United States as a
telecommunications service subject to some elements of common carrier regulation, including the obligation to provide service on just and reasonable terms, and
adopted specific net neutrality rules prohibiting the blocking, throttling or “paid prioritization” of content or services. However, in December 2017, the FCC once again
classified broadband internet access service as an unregulated information service and repealed the specific rules against blocking, throttling or “paid prioritization” of
content or services. It retained a rule requiring internet service providers to disclose their practices to consumers, entrepreneurs and the FCC. A number of parties have
already stated they would appeal this order and it is possible Congress may adopt legislation restoring some net neutrality requirements. The elimination of net
neutrality rules and any changes to the rules could affect the market for broadband internet access service in a way that impacts our business, for example, if internet
access providers begin to limit the bandwidth and speed for the transmission of data from independent software vendors.
Incorrect or improper implementation or use of our platform could result in customer dissatisfaction and negatively affect our business, results of operations,
financial condition, and growth prospects.
Our platform is deployed in a wide variety of technology environments. Increasingly, our platform has been deployed in large scale, complex technology
environments, and we believe our future success will depend on our ability to increase sales of our platform for use in such deployments. We must often assist our
customers in achieving successful implementations of our platform, which we do through our professional services organization. The time required to implement our
platform can vary. For complex deployments, implementation can take multiple months. If our customers are unable to implement our platform successfully, or unable
to do so in a timely manner, customer perceptions of our platform may be harmed, our reputation and brand may suffer, and customers may choose to cease usage of our
platform or not expand their use of our platform. Our customers and third-party partners may need training in the proper use of and the variety of benefits that can be
derived from our platform to maximize its benefits. If our platform is not effectively implemented or used correctly or as intended, or if we fail to adequately train
customers on how to efficiently and effectively use our platform, our customers may not be able to achieve satisfactory outcomes. This could result in negative publicity
and legal claims against us, which may cause us to generate fewer sales to new customers and reductions in renewals or expansions of the use of our platform with
existing customers, any of which would harm our business and results of operations.
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Our use of “open source” software could negatively affect our ability to offer our platform and subject us to possible litigation.
Our platform uses “open source” software that we, in some cases, have obtained from third parties. Open source software is generally freely accessible, usable and
modifiable, and is made available to the general public on an “as-is” basis under the terms of a non-negotiable license. Use and distribution of open source software may
entail greater risks than use of third-party commercial software. Open source licensors generally do not provide warranties or other contractual protections regarding
infringement claims or other claims relating to violation of intellectual property rights or the quality of the software. In addition, certain open source licenses, like the
GNU Affero General Public License, or AGPL, may require us to offer for no cost the components of our platform that incorporate the open source software, to make
available source code for modifications or derivative works we create by incorporating or using the open source software, or to license our modifications or derivative
works under the terms of the particular open source license. If we are required, under the terms of an open source license, to release our proprietary source code to the
public, competitors could create similar products with lower development effort and time, which ultimately could result in a loss of sales for us.
We may also face claims alleging noncompliance with open source license terms or infringement, misappropriation or other violation of open source technology.
These claims could result in litigation or require us to purchase a costly license, devote additional research and development resources to re-engineer our platform,
discontinue the sale of our products if re-engineering could not be accomplished on a timely or cost-effective basis, or make generally available our proprietary code in
source code form, any of which would have a negative effect on our business and operating results, including being enjoined from the offering of the components of our
platform that contained the open source software. We could also be subject to lawsuits by parties claiming ownership of what we believe to be open source software.
Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition and require us to devote additional research and
development resources to re-engineer our platform.
Although we monitor our use of open source software and try to ensure that none is used in a manner that would subject our platform to unintended conditions, few
courts have interpreted open source licenses, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions
on our ability to commercialize our platform. We cannot guarantee that we have incorporated open source software in our platform in a manner that will not subject us
to liability, or in a manner that is consistent with our current policies and procedures.
Risks Related to Our Personnel and Operations
If we fail to effectively develop and expand our sales and marketing capabilities, our ability to increase our customer base and increase acceptance of our platform
could be harmed.
To increase the number of customers and increase the market acceptance of our platform, we will need to expand our sales and marketing operations, including our
domestic and international sales force. We will continue to dedicate significant resources to sales and marketing programs. We believe that there is significant
competition for direct sales personnel with the sales skills and technical knowledge that we require. Our ability to achieve significant revenue growth in the future will
depend, in large part, on our success in recruiting, training and retaining a sufficient number of direct sales personnel and sales leadership. New hires require significant
training and time before they achieve full productivity, particularly in new sales territories. Recent hires and planned hires may not become as productive as quickly as
we would like, changes in sales leadership could adversely affect our existing sales personnel, and we may be unable to hire or retain sufficient numbers of qualified
individuals in the future in the markets where we do business. The effectiveness of our sales and marketing has also varied over time and, together with the effectiveness
of any partners or resellers we may engage, may vary in the future. Our business and operating results may be harmed if our efforts do not generate a correspondingly
significant increase in revenue. We may not achieve revenue growth from expanding our sales force if we are unable to hire, develop and retain talented sales personnel,
if our new sales personnel are unable to achieve desired productivity levels in a reasonable period of time, or if our sales and marketing programs are not effective.
We are currently subject to securities class-action and shareholder derivative litigation and may be subject to similar or other litigation in the future, all of which
will require significant management attention, could result in significant legal expenses and may result in unfavorable outcomes, all or any of which could
adversely affect our operating results, harm our reputation or otherwise negatively impact our business.
We are, and may in the future become, subject to litigation or claims arising in or outside the ordinary course of business that could negatively affect our business
operations and financial condition, including securities class actions and shareholder derivative actions, both of which are typically expensive to defend. For example,
we currently have a securities class-action
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complaint pending against us and certain of our current and former directors and officers, asserting violations of federal securities laws and seeking unspecified
damages. We believe this lawsuit is without merit and intend to defend this case vigorously. We also currently have a shareholder derivative complaint pending against
certain of our current and former directors and our former CEO, asserting breaches of fiduciary duty and seeking rescission of certain equity awards, unspecified
damages, and attorney’s fees and costs. For more information about these complaints, see Part II, Item 1 (Legal Proceedings) of this report.
The outcome of any litigation, regardless of its merits, is inherently uncertain. Any claims and lawsuits, and the disposition of such claims and lawsuits, could be
time-consuming and expensive to resolve, divert management attention and resources, and lead to attempts on the part of other parties to pursue similar claims. Any
adverse determination related to litigation could adversely affect our operating results, harm our reputation or otherwise negatively impact our business. In addition,
depending on the nature and timing of any such dispute, a resolution of a legal matter could materially affect our future operating results, our cash flows or both.
We have recently experienced management turnover, which creates uncertainties and could harm our business.
In March 2022, we announced the resignation of Joshua G. James as our chairman and executive officer, and the appointment of John Mellor to succeed Mr. James
as chief executive officer. Changes to strategic or operating goals, which can often times occur with the appointment of new executives, can create uncertainty, may
negatively impact our ability to execute quickly and effectively, and may ultimately be unsuccessful. In addition, executive leadership transition periods are often
difficult as the new executives gain more detailed knowledge of our operations, and friction can result from changes in strategy and management style. Management
turnover inherently causes some loss of institutional knowledge, which can negatively affect strategy and execution. In addition, to the extent we experience additional
management turnover, competition for top management is high and it may take months to find a candidate that meets our requirements. If we are unable to attract and
retain qualified management personnel, our business could suffer.
If we are unable to attract, integrate and retain additional qualified personnel, including top technical talent, our business could be adversely affected.
Future success depends in part on our ability to identify, attract, integrate and retain highly skilled technical, managerial, sales and other personnel. We face intense
competition for qualified individuals from numerous other companies, including other software and technology companies, many of whom have greater financial and
other resources than we do. These companies also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics
may be more appealing to high-quality candidates than those we have to offer. In addition, new hires often require significant training and, in many cases, take
significant time before they achieve full productivity. We may incur significant costs to attract and retain qualified personnel, including significant expenditures related
to salaries and benefits and compensation expenses related to equity awards, and we may lose new employees to competitors or other companies before we realize the
benefit of our investment in recruiting and training them. Moreover, new employees may not be or become as productive as we expect, as we may face challenges in
adequately or appropriately integrating them into our workforce and culture. As we move into new geographies, we will need to attract and recruit skilled personnel in
those areas and may face additional challenges in attracting, integrating and retaining international employees. If we are unable to attract, integrate and retain suitably
qualified individuals who are capable of meeting our growing technical, operational and managerial requirements, on a timely basis or at all, our business will be
adversely affected.
Volatility or lack of positive performance in our stock price may also affect our ability to attract and retain our key employees. Employees may be more likely to
leave us if the shares they own or the shares underlying their vested options have significantly appreciated in value relative to the original purchase prices of the shares
or the exercise prices of the options, or, conversely, if the exercise prices of the options that they hold are significantly above the market price of our common stock. If
we are unable to appropriately incentivize and retain our employees through equity compensation, or if we need to increase our compensation expenses in order to
appropriately incentivize and retain our employees, our business, operating results, financial condition and cash flows would be adversely affected and the ownership of
existing shareholders would be diluted.
If we fail to offer high-quality professional services and support, our business and reputation may suffer.
High-quality professional services and support, including training, implementation and consulting services, are important for the successful marketing, sale and use
of our platform and for the renewal of subscriptions by existing customers. Professional services may be provided by us or by a third-party partner. The importance of
high-quality professional services and support will increase as we expand our business and pursue new customers. If we or our third-party partners do not
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provide effective ongoing support, our ability to retain and expand use of our platform and related applications to existing customers may suffer, and our reputation with
existing or potential customers may be harmed.
We continue to pursue strategies to reduce the amount of professional services required for a customer to begin to use and gain value from our platform, lower the
overall costs of professional service fees to our customers, and improve the gross margin of our professional services business. If we are unable to successfully
accomplish these objectives, our operating results, including our profit margins, may be harmed.
Before the COVID-19 pandemic, a significant portion of field sales and professional services were conducted in person. Currently, as a result of the work and travel
restrictions related to the ongoing COVID-19 pandemic, a large portion of our sales and professional services activities are being conducted remotely. As of the date of
this report, we do not yet know the extent of the negative impact on our ability to attract, serve, retain or upsell customers. Furthermore, existing and potential customers
may choose to reduce or delay technology spending in response to the coronavirus pandemic, or attempt to renegotiate contracts and obtain concessions, which may
materially and negatively impact COVID-19 operating results, financial condition and prospects.
Catastrophic events may disrupt our business and impair our ability to provide our platform to customers, resulting in costs for remediation, customer
dissatisfaction, and other business or financial losses.
Our operations depend, in part, on our ability to protect our facilities against damage or interruption from natural disasters, power or telecommunications failures,
criminal acts and similar events. Despite precautions taken at our facilities, the occurrence of a natural disaster, epidemic or pandemic (such as the COVID-19
pandemic), an act of terrorism, vandalism or sabotage, spikes in usage volume or other unanticipated problems at a facility could result in lengthy interruptions in the
availability of our platform. Even with current and planned disaster recovery arrangements, our business could be harmed. Also, in the event of damage or interruption,
our insurance policies may not adequately compensate us for any losses that we may incur. These factors in turn could further reduce revenue, subject us to liability and
cause us to issue credits or cause customers to fail to renew their subscriptions, any of which could harm our business.
Our long-term growth depends in part on being able to expand internationally on a profitable basis.
Historically, we have generated a substantial majority of our revenue from customers inside the United States. For example, approximately 75%, 76%, and 77% of
our total revenue for the years ended January 31, 2020, 2021 and 2022, respectively, was derived from sales within the United States. We have begun to expand
internationally and plan to continue to expand our international operations as part of our growth strategy. Expanding our international operations will subject us to a
variety of risks and challenges, including:
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the need to make significant investments in people, solutions and infrastructure, typically well in advance of revenue generation;
the need to localize and adapt our application for specific countries, including translation into foreign languages and associated expenses;
potential changes in public or customer sentiment regarding cloud-based services or the ability of non-local enterprises to provide adequate data protection,
particularly in the European Union, or the E.U.;
technical or latency issues in delivering our platform;
dependence on certain third parties, including resellers with whom we do not have extensive experience;
the lack of reference customers and other marketing assets in regional markets that are new or developing for us, as well as other adaptations in our market
generation efforts that we may be slow to identify and implement;
unexpected changes in regulatory requirements, taxes or trade laws;
differing labor regulations, especially in the E.U., where labor laws are generally more advantageous to employees as compared to the United States, including
deemed hourly wage and overtime regulations in these locations;
challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate
systems, policies, benefits and compliance programs;
difficulties in maintaining our company culture with a dispersed and distant workforce;
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difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems and regulatory systems;
currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions if we
choose to do so in the future;
limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries;
limited or insufficient intellectual property protection, or the risk that our products may conflict with, infringe or otherwise violate foreign intellectual property;
political instability, terrorist activities or military conflicts, including Russia's invasion of Ukraine;
requirements to comply with foreign privacy, information security, and data protection laws and regulations and the risks and costs of non-compliance;
likelihood of potential or actual violations of domestic and international anticorruption laws, such as the U.S. Foreign Corrupt Practices Act, or the FCPA, and
the U.K. Bribery Act, or of U.S. and international export control and sanctions regulations, which likelihood may increase with an increase of sales or
operations in foreign jurisdictions and operations in certain industries;
requirements to comply with U.S. export control and economic sanctions laws and regulations and other restrictions on international trade;
likelihood that the United States and other governments and their agencies impose sanctions and embargoes on certain countries, their governments and
designated parties, which may prohibit the export of certain technology, products, and services to such persons;
adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash should we desire to do so; and
our ability to recruit and engage local channel and implementation partners.
Any of these risks could adversely affect our international operations, reduce our international revenue or increase our operating costs, adversely affecting our
business, operating results and financial condition and growth prospects.
For example, compliance with laws and regulations applicable to our international operations increases the cost of doing business in foreign jurisdictions. We may
be unable to keep current with changes in government requirements as they change from time to time. Failure to comply with these regulations could have adverse
effects on our business. In addition, in many foreign countries it is common for others to engage in business practices that are prohibited by our internal policies and
procedures or U.S. laws and regulations applicable to us. There can be no assurance that all of our employees, contractors, and agents will comply with the formal
policies we will implement, or applicable laws and regulations. Violations of laws or key control policies by our employees, contractors, channel partners or agents
could result in delays in revenue recognition, financial reporting misstatements, fines, penalties, or the prohibition of the importation or exportation of our software and
services and could have a material adverse effect on our business and operating results.
Some of our business partners also have international operations and are subject to the risks described above. Even if we are able to successfully manage the risks
of international operations, our business may be adversely affected if our business partners are not able to successfully manage these risks.
Future changes in the regulations and laws of the United States, or those of the international markets in which we do business, could harm our business.
We are subject to general business regulations and laws, as well as regulations and laws specifically governing the internet and software, in the United States as well
as the international markets in which we do business. These regulations and laws may cover employment, taxation, privacy, data security, data protection, pricing,
content, copyrights and other intellectual property, mobile communications, electronic contracts and other communications, consumer protection, unencumbered
internet access to our services, the design and operation of websites, and the characteristics and quality of software and services. It is possible changes to these
regulations and laws, as well as compliance challenges related to the
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complexity of multiple, conflicting and changing sets of applicable regulations and laws, may impact our sales, operations, and future growth.
Future acquisitions could disrupt our business and adversely affect our operating results, financial condition and cash flows.
We may make acquisitions that could be material to our business, operating results, financial condition and cash flows. Our ability as an organization to
successfully acquire and integrate technologies or businesses is unproven. Acquisitions involve many risks, including the following:
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an acquisition may negatively affect our operating results, financial condition or cash flows because it may require us to incur charges or assume substantial
debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties,
including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the
acquisition;
we may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel or operations of any company that we
acquire, particularly if key personnel of the acquired company decide not to work for us;
an acquisition may disrupt our ongoing business, divert resources, increase our expenses and distract our management;
an acquisition may result in a delay or reduction of customer purchases for both us and the company we acquired due to customer uncertainty about continuity
and effectiveness of service from either company;
we may encounter difficulties in, or may be unable to, successfully sell any acquired products;
an acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger
market positions;
the potential strain on our financial and managerial controls and reporting systems and procedures;
potential known and unknown liabilities associated with an acquired company;
if we incur debt to fund such acquisitions, such debt may subject us to material restrictions on our ability to conduct our business as well as financial
maintenance covenants;
the risk of impairment charges related to potential write-downs of acquired assets or goodwill in future acquisitions;
to the extent that we issue a significant amount of equity or convertible debt securities in connection with future acquisitions, existing stockholders may be
diluted and earnings per share may decrease; and
• managing the varying intellectual property protection strategies and other activities of an acquired company.
We may not succeed in addressing these or other risks or any other problems encountered in connection with the integration of any acquired business. The inability
to integrate successfully the business, technologies, products, personnel or operations of any acquired business, or any significant delay in achieving integration, could
have a material adverse effect on our business, operating results, financial condition and cash flows.
Governmental export or import controls could limit our ability to compete in foreign markets and subject us to liability if we violate them.
Our software is subject to U.S. export controls, and we incorporate encryption technology into our platform. These products and the underlying technology may be
exported only with the required export authorizations, including by license, a license exception or other appropriate government authorizations. U.S. export controls
may require submission of a product classification and annual or semi-annual reports. Governmental regulation of encryption technology and regulation of imports or
exports of encryption products, or our failure to obtain required import or export authorization for our platform, when applicable, could harm our international sales and
adversely affect our revenue. Compliance with applicable regulatory requirements regarding the export of our platform, including with respect to new releases of our
platform, may create delays in the introduction of our product releases in international markets, prevent customers with international operations from
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deploying our platform or, in some cases, prevent the export of our platform to some countries altogether. Furthermore, U.S. export control laws and economic sanctions
prohibit the shipment of certain products and services to countries, governments and persons targeted by U.S. sanctions. If we fail to comply with export and import
regulations and such economic sanctions, we may be fined or other penalties could be imposed, including a denial of certain export privileges. Moreover, any new
export or import restrictions, new legislation or shifting approaches in the enforcement or scope of existing regulations, or in the countries, persons or technologies
targeted by such regulations, could result in decreased use of our platform by, or in our decreased ability to export or sell subscriptions to our platform to, existing or
potential customers with international operations. Any decreased use of our platform or limitation on our ability to export or sell subscriptions to our platform would
likely adversely affect our business, financial condition and operating results.
Failure to comply with anti-bribery, anti-corruption, and anti-money laundering laws could subject us to penalties and other adverse consequences.
We are subject to the FCPA, the U.K. Bribery Act and other anti-corruption, anti-bribery and anti-money laundering laws in various jurisdictions both domestic and
abroad. Anti-corruption, anti-bribery, and anti-money laundering laws have been enforced aggressively in recent years and are interpreted broadly and generally prohibit
companies and their directors, officers, employees and agents from promising, authorizing, making or offering improper payments or other benefits to government
officials and others in the private sector. Such laws apply to our agents/third parties, and we leverage third parties, including channel partners, to sell subscriptions to our
platform and conduct our business abroad. We and our third-party intermediaries may have direct or indirect interactions with officials and employees of government
agencies or state-owned or affiliated entities and may be held liable for the corrupt or other illegal activities of these third-party business partners and intermediaries, our
employees, representatives, contractors, channel partners, and agents, even if we do not explicitly authorize such activities. While we have policies and procedures to
address compliance with such laws, we cannot assure you that all of our employees and agents will not take actions in violation of our policies and applicable law, for
which we may be ultimately held responsible. Any violation of the FCPA or other applicable anti-bribery, anti-corruption laws, and anti-money laundering laws could
result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions, a significant diversion of
management's resources and attention or suspension or debarment from U.S. government contracts, all of which may have a material adverse effect on our reputation,
business, operating results and prospects.
Risks Related to Privacy and Cybersecurity
We are subject to governmental laws, regulation and other legal obligations, particularly those related to privacy, data protection and information security, and any
actual or perceived failure to comply with such obligations could impair our efforts to maintain and expand our customer base, causing our growth to be limited
and harming our business.
We receive, store and process personal information and other data from and about customers in addition to our employees and services providers. Also, in
connection with future feature offerings, we may receive, store and process additional types of data, including personally identifiable information, related to end
consumers. Our handling of data is subject to a variety of laws and regulations, including regulation by various government agencies, such as the U.S. Federal Trade
Commission, or FTC, and various state, local and foreign agencies. Our data handling also is subject to contractual obligations and may be deemed to be subject to
industry standards, including certain industry standards that we undertake to comply with.
The U.S. federal and various state and foreign governments have adopted or proposed limitations on the collection, distribution, use and storage of data relating to
individuals, including the use of contact information and other data for marketing, advertising and other communications with individuals and businesses. In the United
States, various laws and regulations apply to the collection, processing, disclosure, and security of certain types of data. Additionally, the FTC and many state attorneys
general are interpreting federal and state consumer protection laws as imposing standards for the online collection, use, dissemination and security of data. The laws and
regulations relating to privacy and data security are evolving, can be subject to significant change and may result in ever-increasing regulatory and public scrutiny and
escalating levels of enforcement and sanctions. For example, California in 2018 enacted the California Consumer Privacy Act, or CCPA, which went into effect on
January 1, 2020. The CCPA requires covered companies to provide new disclosures to California consumers, and afford such consumers new abilities to opt-out of
certain sales of personal information. Additionally, a new privacy law, the California Privacy Rights Act, or CPRA, was approved by California voters in the November
3, 2020 election. The CPRA will create additional obligations relating to consumer data beginning on January 1, 2022, with implementing regulations expected on or
before July 1, 2022, and enforcement beginning July 1, 2023. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent state
privacy legislation in the
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United States, and certain states have adopted or are considering legislation addressing privacy. Broad federal privacy legislation has also been proposed. Numerous or
stringent privacy laws in the U.S. could increase our potential liability and adversely affect our business. On March 2, 2021, Virginia enacted the Virginia Consumer
Data Protection Act, or CDPA, which becomes effective on January 1, 2023, and on June 8, 2021, Colorado enacted the Colorado Privacy Act, or CPA, which takes
effect on July 1, 2023. The CDPA and CPA are comprehensive privacy statutes that share similarities with the CCPA, CPRA, and legislation proposed in other states.
These statutes will require us to incur additional costs and expenses in an effort to comply with them at the times they become effective. Aspects of these statutes and
their interpretation and enforcement remain uncertain. We cannot fully predict the impact of these statutes on our business or operations, but they may require us to
modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply.
In addition, several foreign countries and governmental bodies, including the E.U., have laws and regulations dealing with the handling and processing of personal
information obtained from their residents, which in certain cases are more restrictive than those in the United States. Laws and regulations in these jurisdictions apply
broadly to the collection, use, storage, disclosure and security of various types of data, including data that identifies or may be used to identify an individual, such as
names, email addresses and in some jurisdictions, Internet Protocol, or IP, addresses. Such laws and regulations may be modified or subject to new or different
interpretations, and new laws and regulations may be enacted in the future. Within the E.U., in May 2018, a far-reaching regulation governing data and privacy practices
called the General Data Protection Regulation, or GDPR became effective and substantially replaced the data protection laws of the individual E.U. member states. The
GDPR includes stringent operational requirements for processors and controllers of personal data and imposes significant penalties for non-compliance of up to the
greater of €20 million or 4% of global annual revenues. Complying with the GDPR, the CCPA, and other data protection laws and regulations may cause us to incur
substantial operational costs or require us to modify our data handling practices. Actual or alleged non-compliance could result in proceedings against us by
governmental entities or others (including a private right of action for affected individuals in certain instances) and may otherwise adversely impact our business,
financial condition and operating results.
We have certified under the E.U.-U.S. Privacy Shield and the Swiss-U.S. Privacy Shield with respect to our transfer of certain personal data from the E.U. and
Switzerland to the United States. The E.U.-U.S. Privacy Shield framework and the use of E.U. Standard Contractual Clauses, or the SCCs, to protect data exports
between the E.U. and the U.S. have been subject to legal challenges in the E.U, and on July 16, 2020, the European Court of Justice, Europe's highest court, held in the
Schrems II case that the E.U.-U.S. Privacy Shield was invalid, and imposed additional obligations in connection with the use of the SCCs. The impact of this decision on
the ability to lawfully transfer personal data from the E.U. and Switzerland to the U.S. is being assessed and has been the subject of guidance from regulators and
advisory bodies. As a result of the Schrems II case and subsequent regulatory guidance, we and other companies must assess use of the SCCs on a case-by-case basis
taking into account numerous factors and, in certain cases, may need to implement supplemental measures with respect to personal data transfers under the SCCs. The
European Commission also issued new SCCs on June 4, 2021, which are required to be implemented over time. We and many other companies may need to implement
different or additional measures to establish or maintain legitimate means for the transfer and receipt of personal data from the E.U., Switzerland and the United
Kingdom to the U.S., and we may, in addition to other impacts, be required to engage in additional contractual negotiations and experience additional costs associated
with increased compliance burdens, and we and our customers face the potential for regulators to apply different standards to the transfer of personal data from the E.U.,
Switzerland and the United Kingdom to the U.S., and to block, or require ad hoc verification of measures taken with respect to, certain data flows from the E.U.,
Switzerland and the United Kingdom to the U.S. We and our customers may face a risk of enforcement actions by data protection authorities in the E.U., Switzerland
and the United Kingdom relating to personal data transfers. Any such enforcement actions could result in substantial costs and diversion of resources, distract
management and technical personnel and negatively affect our business, operating results and financial condition. We also may be at risk of experiencing reluctance or
refusal of European or multi-national customers to use our solutions and being subject to regulatory action or incurring penalties. Any of these developments may have
an adverse effect on our business.
Further, the United Kingdom formally withdrew from the E.U. effective January 2020, with a one-year transitional period that ended on December 31, 2020. The
United Kingdom has enacted a Data Protection Act and a version of the GDPR referred to as the UK GDPR that that, collectively, substantially implement the GDPR in
the United Kingdom and provides for penalties of up to the greater of £17.5 million and 4% of total annual revenue. Uncertainty remains, however, regarding how
aspects of data protection in the United Kingdom will be handled in the medium to long term. On June 28, 2021, the European Commission announced a decision of
“adequacy” concluding that the United Kingdom ensures an equivalent level of data protection to the GDPR, which provides some relief regarding the legality of
continued personal data flows from the European Economic Area to the United Kingdom. This adequacy determination must be renewed after four years, however,
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and may be modified or revoked in the interim. Further, United Kingdom data protection law imposes restrictions on personal data transfers to the U.S., similar to those
imposed by the GDPR, and on February 2, 2022, the United Kingdom’s Information Commissioner’s Office issued new standard contractual clauses to support personal
data transfers out of the United Kingdom. If approved by the United Kingdom Parliament, these standard contractual clauses will become effective March 21, 2022, and
will be required to be implemented. We may experience reluctance or refusal by current or prospective customers in Europe, including the United Kingdom, to use our
products, and we may find it necessary or desirable to make further changes to our handling of personal data of European residents and our related policies and
practices. The regulatory environment applicable to the handling of European residents’ personal data, and our actions taken in response, may cause us to be required to
undertake additional contractual negotiations and otherwise to assume additional liabilities or incur additional costs, and could result in our business, operating results
and financial condition being harmed. Additionally, we may be or become subject to data localization laws mandating that data collected in a foreign country be
processed only within that country. This could require us to expand data storage facilities there or to obtain new local data storage in such countries in order to comply.
The expenditure this would require, as well as costs of compliance generally, could harm our financial condition.
We also handle credit card and other personal information. Due to the sensitive nature of such information, we have implemented policies and procedures in an
effort to preserve and protect our data and our customers' data against loss, misuse, corruption, misappropriation caused by systems failures, unauthorized access or
misuse. Notwithstanding these policies, we could be subject to liability claims by individuals and customers whose data resides in our databases for the misuse of that
information. If we fail to meet appropriate compliance levels, this could negatively impact our ability to utilize credit cards as a method of payment, and/or collect and
store credit card information, which could disrupt our business.
We sign business associate agreements with our customers who require them in order to comply with the Health Insurance Portability and Accountability Act, or
HIPAA, and the Health Information Technology for Economic and Clinical Health Act, and therefore we are directly subject to certain provisions of HIPAA applicable
to business associates. We may collect and process protected health information as part of our HIPAA compliant service, which may subject us to a number of data
protection, security, privacy and other government- and industry-specific requirements. In addition, if we are unable to protect the privacy and security of protected
health information, we could be found to have breached our contracts with customers with whom we have a business associate relationship. Noncompliance with laws
and regulations relating to privacy and security of personal information, including HIPAA, or with contractual obligations under any business associate agreement may
lead to significant fines, civil and criminal penalties, or liabilities. The U.S. Department of Health and Human Services, or HHS, audits the compliance of business
associates and enforces HIPAA privacy and security standards. HHS enforcement activity has become more significant over the last few years and HHS has signaled its
intent to continue this trend. In addition to HHS, state attorneys general are authorized to bring civil actions seeking either injunctions or damages to the extent violation
implicate the privacy of state residents.
Any failure or perceived failure by us to comply with laws, regulations, policies, legal or contractual obligations, industry standards, or regulatory guidance relating
to privacy, data protection, information security, marketing or consumer communications may result in governmental investigations and enforcement actions, litigation,
fines and penalties or adverse publicity, and could cause our customers and partners to lose trust in us, which could have an adverse effect on our reputation and
business. We expect that there will continue to be new proposed laws, regulations and industry standards relating to privacy, data protection, marketing, consumer
communications and information security in the United States, the European Union and other jurisdictions, and we cannot determine the impact such future laws,
regulations and standards may have on our business. Future laws, regulations, standards and other obligations or any changed interpretation of existing laws or
regulations could impair our ability to develop and market new features and maintain and grow our customer base and increase revenue. Future restrictions on the
collection, use, sharing or disclosure of data or additional requirements for express or implied consent of our customers, partners or end consumers for the use and
disclosure of such information could require us to incur additional costs or modify our platform, possibly in a material manner, which we may be unable to achieve in a
commercially reasonable manner or at all, and which could limit our ability to develop new features. If our policies, procedures, or measures relating to privacy, data
protection, information security, marketing, or customer communications fail, or are perceived as failing, to comply with laws, regulations, policies, legal obligations or
industry standards, we may be subject to governmental enforcement actions, litigation, regulatory investigations, fines, penalties and negative publicity and could cause
our application providers, customers and partners to lose trust in us, which could materially affect our business, operating results and financial condition.
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If our network or computer systems are breached or unauthorized access to customer data or other sensitive data is otherwise obtained, our platform may be
perceived as insecure and we may lose existing customers or fail to attract new customers, our reputation may be damaged and we may incur significant liabilities.
As a provider of cloud services, our operations involve the storage and transmission of our customers’ sensitive and proprietary information, and we also collect,
store, transmit and otherwise process large amounts of sensitive corporate, personal and other information relating to our business and operations, including intellectual
property, proprietary business information and other confidential information. Cyber-attacks and other malicious internet-based activity continue to increase generally,
and cloud-based platform providers of software and services have been targeted. Many of our employees are working remotely, which may pose additional data security
risks. Within cloud service delivery organizations, there is an increased threat from both targeted and non-targeted activities. These activities may originate from threat
actor groups with various motivations, including cyber espionage, financial or ideological motivations. We may also face numerous types of attacks, including financial
attacks in the form of ransomware/cyber extortion, fraud, and misappropriation of resources (such as, for instance, cryptocurrency mining operations using Domo
resources). Attackers may, in addition to other motivations, seek to render unavailable, destroy, modify, or access without authorization the various types of data we
store or otherwise process, including our own data, our customers’ data generally, or data of specific customers.
We engage third-party service providers to store and otherwise process some of our and our customers’ data, including personal, confidential, sensitive, and other
information relating to individuals. Our service providers may also be the targets of cyberattacks and other malicious activity. While we have established a formal third
party security risk assessment process to ensure security risks for our company relating to our key third party providers are appropriately addressed, our ability to
monitor our service providers’ security measures is limited, and, in any event, third parties may be able to circumvent those security measures or our own security
measures, resulting in the unauthorized access to, misuse, acquisition, disclosure, loss, alteration, or destruction of our and our customers’ data, including confidential,
sensitive, and other information about individuals. If any unauthorized access to or security breach or security incident impacting our platform, our networks or systems,
or any systems or networks of our service providers, occurs, or is believed to have occurred, whether as a result of third-party action, insider attacks, employee or
service provider error or malfeasance, phishing attacks, ransomware or other malware, social engineering or otherwise, such an event or perceived event could result in
unauthorized access to or use of our platform, disruptions to our platform or other aspects of our operations, the loss, alteration or unavailability of, or unauthorized
access to or acquisition of, data or intellectual property of ourselves or our customers, loss of business, severe reputational or brand damage adversely affecting
customer or investor confidence, regulatory investigations and orders, litigation or other demands, indemnity obligations, damages for contract breach, penalties for
violation of applicable laws, regulations, or contractual obligations, and significant costs for remediation that may include liability for stolen assets or information and
repair of system damage that may have been caused, incentives offered to customers or other business partners in an effort to maintain business relationships after a
breach or other incident, and other liabilities. Additionally, any such event or perceived event could impact our reputation, harm customer confidence, hurt our sales and
expansion into existing and new markets, or cause us to lose existing customers. We could be required to expend significant capital and other resources to alleviate
problems caused by such actual or perceived breaches or other incidents and to remediate our systems, we could be exposed to a risk of loss, litigation or regulatory
action and possible liability, and our ability to operate our business may be impaired. Additionally, actual, potential or anticipated attacks may cause us to incur
increasing costs, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants.
Additionally, there have been and may continue to be significant supply chain cyber attacks generally, and our third-party service providers may be targeted or
impacted by such attacks. We cannot guarantee that our or our third-party vendors or other service providers’ systems and networks have not been breached or that they
do not contain exploitable defects or bugs that could result in a breach of or disruption to our systems and networks or the systems and networks of third parties that
support us and our services. Our ability to monitor our third-party service providers’ data security is limited, and, in any event, third parties may be able to circumvent
those security measures, resulting in the unauthorized access to, misuse, disclosure, loss or destruction of our and our customers’ data, including sensitive and personal
information. We and our service providers may also face difficulties or delays in identifying, remediating and otherwise responding to cyberattacks and other security
breaches and incidents. In addition, if the security measures of our customers are compromised, even without any actual compromise of our platform or systems, or any
networks or systems of our service providers, we may face negative publicity or reputational harm if customers or anyone else incorrectly attributes the blame for such
security breaches or other incidents to us, our platform, our systems or networks, or those of our service providers. Similarly, we may face reputational harm if any
security breach is attributed to our employees, vendors or contractors as a result of inadvertent error, malfeasance, an insider attack or otherwise. If customers believe
that our platform does not provide adequate security for the
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storage of personal or other sensitive information or its transmission over the internet, our business will be harmed. Customers’ concerns about security or privacy may
deter them from using our platform for activities that involve personal or other sensitive information.
Our errors and omissions insurance covering certain security and privacy damages and claim expenses may not be sufficient to compensate for all liability.
Although we maintain insurance for liabilities incurred as a result of some security and privacy damages, we cannot be certain that our coverage will be adequate for
liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to
any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance
policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including
our financial condition, operating results, and reputation.
Because the techniques used and vulnerabilities exploited to obtain unauthorized access or to sabotage systems change frequently and generally are not identified
until they are launched against a target, we may be unable to anticipate these techniques or vulnerabilities or implement adequate preventative measures. We may also
experience security breaches that may remain undetected for an extended period.
Additionally, with data security a critical competitive factor in our industry, we make public statements in our privacy policies, on our website, and elsewhere
describing the security of our platform. Should any of these statements be untrue, become untrue, or be perceived to be untrue, even if through circumstances beyond
our reasonable control, we may face claims, including claims of unfair or deceptive trade practices, brought by the FTC, state, local, or foreign regulators, and private
litigants.
Real or perceived errors, failures, or bugs in our platform could adversely affect our operating results and growth prospects.
We update our platform on a frequent basis. Despite efforts to test our updates, errors, failures or bugs may not be found in our platform until after it is deployed to
our customers. We have discovered and expect we will continue to discover errors, failures and bugs in our platform and anticipate that certain of these errors, failures
and bugs will only be discovered and remediated after deployment to customers. Real or perceived errors, failures or bugs in our platform could result in negative
publicity, government inquiries, loss of or delay in market acceptance of our platform, loss of competitive position, or claims by customers for losses sustained by them.
In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct the problem.
We implement bug fixes and upgrades as part of our regular system maintenance, which may lead to system downtime. Even if we are able to implement the bug
fixes and upgrades in a timely manner, any history of inaccuracies in the data we collect for our customers, or the loss, damage, unauthorized access to or acquisition of,
or inadvertent release or exposure of confidential or other sensitive data could cause our reputation to be harmed and result in claims against us, and customers may
elect not to purchase or renew their agreements with us or we may incur increased insurance costs. The costs associated with any material defects or errors in our
software or other performance problems may be substantial and could harm our operating results.
Interruptions or performance problems associated with our technology and infrastructure may adversely affect our business and operating results.
Our continued growth depends in part on the ability of existing and potential customers to access our platform at any time. We have experienced, and may in the
future experience, disruptions, outages, and other performance problems due to a variety of factors, including infrastructure changes, introductions of new capabilities,
human or technology errors, distributed denial of service attacks, or other security related incidents. In some instances, we may not be able to identify the cause or
causes of these performance problems within an acceptable period of time. It may become increasingly difficult to maintain and improve our performance, especially
during peak usage times and as our platform becomes more complex and user traffic increases. If our platform is unavailable or if users are unable to access our
platform within a reasonable amount of time, or at all, our business will be harmed.
We also rely on SaaS and other technologies from third parties in order to operate critical functions of our business. To the extent that our third-party service
providers experience outages, disruptions, or other performance problems, or to the extent we do not effectively address capacity constraints, upgrade our systems as
needed, and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business and
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operating results may be adversely affected. In addition, if our agreements with third-party software or services vendors are not renewed or the third-party software or
services become obsolete, fail to function properly, are incompatible with future versions of our products or services, are defective or otherwise fail to address our
needs, there is no assurance that we would be able to replace the functionality provided by the third-party software or services with software or services from alternative
providers.
We have taken steps to increase redundancy in our platform and infrastructure and have plans in place to mitigate events that could disrupt our platform's service.
However, there can be no assurance that these efforts would protect against interruptions or performance problems.
Risks Related to Our Intellectual Property
Our business is highly dependent upon our brand recognition and reputation, and the failure to maintain or enhance our brand recognition or reputation would
likely adversely affect our business and operating results.
We believe that maintaining and enhancing the Domo brand identity and our reputation are critical to our relationships with customers and channel partners and to
our ability to attract new customers and channel partners. We also believe that the importance of our brand recognition and reputation will continue to increase as
competition in our market continues to develop. Our success in this area will depend on a wide range of factors, some of which are beyond our control, including the
following:
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the efficacy of our marketing efforts;
our ability to maintain a high-quality, innovative and error- and bug-free platform;
our ability to obtain new customers and retain and increase usage by existing customers;
our ability to maintain high customer satisfaction;
the quality and perceived value of our platform;
our ability to obtain, maintain and enforce trademarks and other indicia of origin that are valuable to our brand;
our ability to successfully differentiate our platform from competitors’ products;
actions of competitors and other third parties;
our ability to provide customer support and professional services;
any actual or perceived security breach or data loss, or misuse or perceived misuse of our platform;
positive or negative publicity;
interruptions, delays or attacks on our platform;
challenges with customer adoption and use of our platform on mobile devices or problems encountered in developing or supporting enhancements to our
mobile applications; and
litigation or regulatory related developments.
If our brand promotion activities are not successful, our operating results and growth may be harmed.
Independent industry analysts often provide reviews of our platform, as well as competitors’ products, and perception of our platform in the marketplace may be
significantly influenced by these reviews. If these reviews are negative, or less positive as compared to those of competitors’ products and services, our brand may be
adversely affected.
Furthermore, negative publicity, whether or not justified, relating to events or activities attributed to us, our employees, partners or others associated with any of
these parties, may tarnish our reputation and reduce the value of our brand. Damage to our reputation and loss of brand equity may reduce demand for our platform and
have an adverse effect on our business, operating results and financial condition. Moreover, any attempts to rebuild our reputation and restore the value of our brand
may be costly and time consuming, and such efforts may not ultimately be successful.
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Third-party claims that we are infringing or otherwise violating the intellectual property rights of others, whether successful or not, could subject us to costly and
time-consuming litigation or require us to obtain expensive licenses, and our business could be harmed.
The technology industry is characterized by the existence of a large number of patents, copyrights, trademarks, trade secrets and other intellectual property rights.
Companies in the technology industry must often defend against litigation claims based on allegations of infringement or other violations of intellectual property rights.
Third parties, including our competitors, may own patents or other intellectual property rights that cover aspects of our technology or business methods and may assert
patent or other intellectual property rights against us and others in the industry. Moreover, in recent years, individuals and groups that are non-practicing entities,
commonly referred to as “patent trolls,” have purchased patents and other intellectual property assets for the purpose of making claims of infringement or other violation
of intellectual property rights in order to extract settlements. From time to time, we have received and may receive in the future threatening letters, notices or
“invitations to license,” or may be the subject of claims that our technology and business operations infringe or otherwise violate the intellectual property rights of
others. Responding to such claims, regardless of their merit, can be time consuming, costly to defend in litigation, divert management’s attention and resources, damage
our reputation and brand and cause us to incur significant expenses. Claims of intellectual property infringement or other violations of intellectual property rights might
require us to stop using technology found to infringe or violate a third party’s rights, redesign our platform, which could require significant effort and expense and cause
delays of releases, enter into costly settlement or license agreements or pay costly damage awards, or face a temporary or permanent injunction prohibiting us from
marketing or selling our platform. If we cannot or do not license the infringed or otherwise violated technology on commercially reasonable terms or at all, or substitute
similar technology from another source, we could be forced to limit or stop selling our platform, we may not be able to meet our obligations to customers under our
customer contracts, revenue and operating results could be adversely impacted, and we may be unable to compete effectively. Even if we are successful in defending
against allegations of intellectual property infringement, litigation may be costly and may divert the time and other resources of our management. Additionally,
customers may not purchase our platform if they are concerned that they may infringe or otherwise violate third-party intellectual property rights. The occurrence of any
of these events may harm our business.
Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses.
Our agreements with customers and other third parties may include indemnification provisions under which we agree to indemnify them for losses suffered or
incurred as a result of claims of intellectual property infringement or other violations of intellectual property rights, damages caused by us to property or persons, or
other liabilities relating to or arising from our software, services or other contractual obligations. Large indemnity payments could harm our business, results of
operations and financial condition. Any dispute with a customer with respect to such obligations could have adverse effects on our relationship with that customer and
other existing customers and new customers and harm our business and results of operations.
The success of our business depends in part on our ability to protect and enforce our intellectual property rights.
Our success is dependent, in part, upon protecting our proprietary technology. As of January 31, 2022, we had 119 issued U.S. patents covering our technology and
five patent applications pending for examination in the United States. Our issued patents, and any patents issued in the future, may not provide us with any competitive
advantages or may be challenged by third parties, and our patent applications may never be granted. Additionally, the process of obtaining patent protection is expensive
and time-consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. Even if issued, there
can be no assurance that these patents will adequately protect our intellectual property, as the legal standards relating to the validity, enforceability and scope of
protection of patent and other intellectual property rights are uncertain.
Any patents that are issued may subsequently be invalidated or otherwise limited, allowing other companies to develop offerings that compete with ours, which
could adversely affect our competitive business position, business prospects and financial condition. In addition, issuance of a patent does not guarantee that we have a
right to practice the patented invention. Patent applications in the United States are typically not published until 18 months after filing or, in some cases, not at all, and
publications of discoveries in industry-related literature lag behind actual discoveries. We cannot be certain that we were the first to use the inventions claimed in our
issued patents or pending patent applications or otherwise used in our platform, that we were the first to file for protection in our patent applications, or that third parties
do not have blocking patents that could be used to prevent us from marketing or practicing our patented technology. Effective patent, trademark, copyright and trade
secret protection may not be available to us in every country in which our platform is available. The laws
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of some foreign countries may not be as protective of intellectual property rights as those in the United States (in particular, some foreign jurisdictions do not permit
patent protection for software), and mechanisms for enforcement of intellectual property rights may be inadequate. Additional uncertainty may result from changes to
intellectual property legislation enacted in the United States, including the America Invents Act, and other national governments and from interpretations of the
intellectual property laws of the United States and other countries by applicable courts and agencies. Accordingly, despite our efforts, we may be unable to prevent third
parties from infringing upon or misappropriating our intellectual property.
Although we generally enter into confidentiality and invention assignment agreements with our employees and consultants that have access to material confidential
information and enter into confidentiality agreements with our customers and the parties with whom we have strategic relationships and business alliances, no assurance
can be given that these agreements will be effective in controlling access to and distribution of our platform and propriety information or prevent reverse engineering.
Further, these agreements may not prevent competitors from independently developing technologies that are substantially equivalent or superior to our platform, and we
may be unable to prevent this competition.
Unauthorized use of our intellectual property may have already occurred or may occur in the future. We may be required to spend significant resources to monitor
and protect our intellectual property rights. Litigation may be necessary in the future to enforce our intellectual property rights. Such litigation could be costly, time
consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, efforts to enforce our
intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. We
may not prevail in any lawsuits that we initiate. Any litigation, whether or not resolved in our favor, could subject us to substantial costs, divert resources and the
attention of management and technical personnel from our business and adversely affect our business. Our inability to protect our proprietary technology against
unauthorized copying or use, as well as any costly litigation, could delay further sales or the implementation of our platform, impair the functionality of our platform,
delay introductions of new features or enhancements, result in our substituting inferior or more costly technologies into our platform, or injure our reputation.
We may initiate claims or litigation against third parties for infringement or other violation of our proprietary rights or to establish the validity of our proprietary
rights. Litigation also puts our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing. Additionally, we may
provoke third parties to assert counterclaims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not
be commercially viable. Any litigation, whether or not it is resolved in our favor, could result in significant expense to us and divert the efforts of our technical and
management personnel, which may adversely affect our business, operating results, financial condition and cash flows.
Risks Related to Our Corporate Governance
The dual class structure of our common stock has the effect of concentrating voting control with Joshua G. James, our founder and former chief executive officer,
which will limit your ability to influence the outcome of important transactions, including a change in control.
Our Class A common stock has 40 votes per share, and our Class B common stock has one vote per share. Joshua G. James, our founder and former chief executive
officer, beneficially owns all of our outstanding shares of Class A common stock through Cocolalla, LLC, of which he is the managing member, and as of January 31,
2022, beneficially controlled approximately 82% of the voting power of our outstanding capital stock and therefore is able to control all matters submitted to our
stockholders for approval. Mr. James may have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your
interests. This concentrated control may have the effect of delaying, preventing or deterring a change in control of our company, could deprive our stockholders of an
opportunity to receive a premium for their capital stock as part of a sale of our company and might ultimately affect the market price of our Class B common stock.
Future transfers by the holder of Class A common stock will generally result in those shares converting into shares of Class B common stock, subject to limited
exceptions, such as certain transfers effected for estate planning or charitable purposes. Mr. James has informed us he and Cocolalla, LLC have entered into
arrangements under which he has pledged all of such shares to secure a loan with a financial institution. If these shares were to be sold or otherwise transferred upon
default of the underlying loan, the market price of our Class B common stock could decline or be volatile. For additional information, see the section of this report
captioned “—Other Risks Related to Ownership of Our Class B Common Stock—Future sales of our Class B common stock in the public market could cause our stock
price to fall.”
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We have elected to take advantage of the “controlled company” exemption to the corporate governance rules of The Nasdaq Stock Market, which could make our
common stock less attractive to some investors or otherwise harm our stock price.
Because we qualify as a “controlled company” under the corporate governance rules of The Nasdaq Stock Market, we are not required to have a majority of our
board of directors be independent, nor are we required to have an entirely independent compensation committee or an independent nominating function. Accordingly,
should the interests of Cocolalla, LLC, or of our founder and former chief executive officer, who controls Cocolalla, LLC, differ from those of other stockholders, the
other stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance rules of The Nasdaq
Stock Market. Our status as a controlled company could make our common stock less attractive to some investors or otherwise harm our stock price.
We cannot predict the impact our dual class structure may have on our stock price or our business.
We cannot predict whether our dual class structure, combined with the concentrated control of our stockholders who held our capital stock prior to the completion
of our initial public offering, including our executive officers, employees and directors and their affiliates, will result in a lower or more volatile market price of our
Class B common stock or in adverse publicity or other adverse consequences. For example, certain index providers have announced restrictions on including companies
with multiple-class share structures in certain of their indexes. In July 2017, FTSE Russell announced that it plans to require new constituents of its indexes to have
greater than 5% of the company's voting rights in the hands of public stockholders, and S&P Dow Jones announced that it will no longer admit companies with
multiple-class share structures to certain of its indexes. Because of our dual class structure, we will likely be excluded from these indexes and we cannot assure you that
other stock indexes will not take similar actions. Given the sustained flow of investment funds into passive strategies that seek to track certain indexes, exclusion from
stock indexes would likely preclude investment by many of these funds and could make our Class B common stock less attractive to other investors. As a result, the
market price of our Class B common stock could be adversely affected.
Risks Related to Our Financial Reporting and Disclosure
Our reported financial results may be harmed by changes in the accounting principles generally accepted in the United States.
Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board, the Securities and
Exchange Commission, or SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations
could have a significant effect on our reported financial results, and may even affect the reporting of transactions completed before the announcement or effectiveness of
a change. Other companies in our industry may apply these accounting principles differently than we do, adversely affecting the comparability of our financial
statements.
We have incurred and will continue to incur increased costs by being a public company, including costs to maintain adequate internal control over our financial
and management systems.
As a public company, we have incurred and will continue to incur significant legal, accounting and other expenses that we did not incur as a private company,
including costs associated with public company reporting requirements. We ceased to be an “emerging growth company” on January 31, 2021, and are no longer eligible
for reduced disclosure requirements and exemptions applicable to emerging growth companies. We expect that our loss of emerging growth company status will require
additional attention from management and will result in increased costs to us, which could include higher legal fees, accounting fees and fees associated with investor
relations activities, among others.
We have also incurred and will continue to incur costs associated with corporate governance requirements, including requirements of the SEC and The Nasdaq
Stock Market. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly.
We also expect these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be
required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, we may have more difficulty
attracting and retaining qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with
respect to these rules, and we cannot predict or estimate the additional costs we may incur or the timing of such costs.
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The Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control over financial reporting annually and the effectiveness
of our disclosure controls and procedures quarterly. In particular, Section 404 of the Sarbanes-Oxley Act, or Section 404, requires us to perform system and process
evaluation and testing of our internal controls over financial reporting to allow management to report on, and our independent registered public accounting firm
potentially to attest to, the effectiveness of our internal controls over financial reporting. As an emerging growth company, we availed ourselves of the exemption from
the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404.
However, we may no longer avail ourselves of this exemption since we ceased to be an “emerging growth company” on January 31, 2021. As a result, our independent
registered public accounting firm is required to undertake an assessment of our internal control over financial reporting and the cost of our compliance with Section 404
will correspondingly increase. Our compliance with applicable provisions of Section 404 will require that we incur substantial accounting expense and expend
significant management time on compliance-related issues as we implement additional corporate governance practices and comply with reporting requirements.
Moreover, if we are not able to comply with the requirements of Section 404 applicable to us in a timely manner, or if we or our independent registered public
accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could
decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management
resources.
Other Risks Related to Ownership of Our Class B Common Stock
The market price of our Class B common stock may be volatile, and the value of your investment could decline significantly.
The trading price of our Class B common stock may be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are
beyond our control. The following factors, in addition to other risks described in this report, may have a significant effect on our Class B common stock price:
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actual or anticipated fluctuations in revenue and other operating results, including as a result of the addition or loss of any number of customers;
announcements by us or competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments;
the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;
failure of securities analysts to initiate or maintain coverage of us, changes in ratings, key metrics and financial estimates and the publication of other news by
any securities analysts who follow our company, or our failure to meet these analyst estimates or the expectations of investors;
changes in operating performance and stock market valuations of cloud-based software or other technology companies, or those in our industry in particular;
the size of our public float;
price and volume fluctuations in the trading of our Class B common stock and in the overall stock market, including as a result of trends in the economy as a
whole or in the technology industry;
the impact of the COVID-19 pandemic, including on the global economy, our results of operations, enterprise software spending and business continuity;
new laws or regulations or new interpretations of existing laws or regulations applicable to our business or industry, including those relating to data privacy and
data security;
lawsuits threatened or filed against us for claims relating to intellectual property, employment issues or otherwise;
actual or perceived data breach or data loss, misuse or perceived misuse of our platform;
changes in our board of directors or management;
short sales, hedging and other derivative transactions involving our Class B common stock;
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sales of large blocks of our common stock including sales by our executive officers, directors and significant stockholders; and
other events or factors, including changes in general economic, industry and market conditions and trends, as well as any natural disasters that may affect our
operations.
In addition, the stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that have
often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may seriously affect our stock price,
regardless of our actual operating performance. In addition, in the past, securities class action litigation has often been instituted against companies whose stock prices
have declined, especially following periods of volatility in the overall market. This litigation, if instituted against us, could result in substantial costs and a diversion of
our management’s attention and resources.
If securities or industry analysts do not publish research reports about our business, or if they issue an adverse opinion about our business, our stock price and
trading volume could decline.
The trading market for our Class B common stock is influenced by the research and reports that industry or securities analysts publish about us or our business. If
one or more of the analysts who cover us issues an adverse opinion about our company, our stock price would likely decline. If one or more of these analysts ceases
coverage of us or fails to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to
decline.
Future sales of our Class B common stock in the public market could cause our stock price to fall.
Our stock price could decline as a result of sales of a large number of shares or the perception that these sales could occur. These sales, or the possibility that these
sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
As of January 31, 2022, 29,729,822 shares of our Class B common stock were outstanding. All shares of our Class B common stock sold in our initial public
offering are freely tradable without restriction or further registration under the Securities Act unless held by our “affiliates,” as that term is defined in Rule 144 under the
Securities Act. The shares of Class B common stock subject to outstanding options and warrants, of which 955,996 and 3,333 were exercisable as of January 31, 2022,
respectively, and the shares reserved for future issuance under our equity incentive plans will become available for sale immediately upon the exercise of such options,
subject to applicable securities law restrictions. Additionally, “sell-to-cover” transactions are utilized in connection with the vesting and settlement of restricted stock
units so that shares of our common stock are sold on behalf of our employees in an amount sufficient to cover the tax withholding obligations associated with these
awards. As a result of these transactions, a significant number of shares of our stock may be sold over a limited time period in connection with significant vesting
events. In June 2022, for example, approximately 558,715 restricted stock units are scheduled to vest and settle, which may increase the volume of our shares that would
otherwise be sold during this time. On June 29, 2018, we registered the offer and sale of all shares of common stock that we may issue under our equity compensation
plans. As a consequence, the sale of shares to be issued under our equity incentive plans can be freely sold in the public market upon issuance, subject to the lockup
agreements and the restrictions of Rule 144 under the Securities Act.
As of January 31, 2022, Cocolalla, LLC, an entity controlled by Mr. James, owned 3,263,659 shares of our Class A common stock and Mr. James owned 312,053
shares of Class B common stock. Collectively, these shares represent approximately 82% of the voting power of our company. These shares are eligible for resale into
the public market within the restrictions imposed by Rule 144 under the Securities Act. Sales of a significant amount of these shares could adversely affect the market
price for our Class B common stock. Mr. James has informed us he and Cocolalla, LLC have entered into an arrangement under which he has pledged all of such shares
to secure a loan with a financial institution, which Mr. James believes represents a convenient financial instrument. Mr. James has also indicated this loan has or will
have various requirements to repay all or a portion of the loan upon the occurrence of various events, including when the price of the Class B common stock goes below
certain specified levels. Mr. James has indicated that (1) he has substantial assets other than shares of our common stock and (2) if repayment of the loan is triggered
there is a cure period to sell assets or restructure the loan. Although Mr. James has indicated his intention to sell other assets if necessary, shares of our common stock
may need to be sold to meet these repayment requirements. Upon a default under such loan following any applicable cure period, the lender could sell the pledged
shares into the market without limitation on volume or manner of sale. Sales of such shares to reduce the loan balance or by the lender upon foreclosure are likely to
adversely affect our stock price. Mr. James has also indicated to us that he may in the future from time to time refinance such indebtedness, enter into derivative
transactions
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based on the value of our Class B common stock, dispose of shares of common stock, otherwise monetize shares of his common stock and/or engage in other
transactions relating to shares of our common stock and/or other securities of the company. Any of these activities may adversely affect the price of our common stock.
Mr. James has also indicated that he intends to (1) continue to beneficially own a majority of the Class A common stock that he currently beneficially owns and (2)
continue to control at least a majority of the voting power of our company.
In addition, in the future, we may issue additional shares of Class B common stock or other equity or debt securities convertible into common stock in connection
with a financing, acquisition, litigation settlement, employee arrangement or otherwise. Any such issuance could result in substantial dilution to our existing
stockholders and could cause our stock price to decline.
An active trading market for our Class B common stock may not develop.
Prior to our initial public offering, there was no public market for our Class B common stock, and an active trading market for our shares may not be sustained. In
addition, we may have one or more stockholders who continue to hold substantial blocks of our Class B common stock for sustained periods. As a result, the trading
volume of our stock may be low relative to our total outstanding shares. As a result of these and other factors, you may be unable to resell your shares of our Class B
common stock at a price that you consider reasonable.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us difficult, limit attempts by our stockholders to replace
or remove our current management and limit our stock price.
Provisions of our certificate of incorporation and bylaws may delay or discourage transactions involving an actual or potential change in our control or change in
our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise
deem to be in their best interests. These provisions include the following:
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our dual-class common stock structure, which provides our holders of Class A common stock with the ability to significantly influence the outcome of matters
requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A common stock and Class B common
stock;
when the outstanding shares of Class A common stock represent less than a majority of the total combined voting power of our Class A and Class B common
stock, or the voting threshold date, our board of directors will be classified into three classes of directors with staggered three-year terms, and directors will
only be able to be removed from office for cause;
our amended and restated bylaws provide that, following the voting threshold date, approval of stockholders holding two-thirds of our outstanding voting
power voting as a single class will be required for stockholders to amend or adopt any provision of our bylaws;
our stockholders are able to take action by written consent for any matter until the voting threshold date;
following the voting threshold date, vacancies on our board of directors will be able to be filled only by our board of directors and not by stockholders;
only the chairman of our board of directors, chief executive officer, a majority of our board of directors or, until the voting threshold date, a stockholder (or
group of stockholders) holding at least 50% of the combined voting power of our Class A and Class B common stock are authorized to call a special meeting of
stockholders;
certain litigation against us can only be brought in Delaware;
our amended and restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established and shares of which may
be issued, without the approval of the holders of common stock; and
advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally
prohibits a Delaware corporation from engaging in any of a broad range of
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business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder.
Our amended and restated bylaws designate a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes
between us and our stockholders, which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers, or
employees.
Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (1) any
derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other
employees to us or our stockholders, (3) any action arising pursuant to any provision of the Delaware General Corporation Law, or the certificate of incorporation or the
amended and restated bylaws or (4) any other action asserting a claim that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of
Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware), in all cases subject to the court having
jurisdiction over indispensable parties named as defendants.
Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to this provision. This
exclusive-forum provision may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers, or other
employees, which may discourage lawsuits against us and our directors, officers, and other employees. If a court were to find this exclusive-forum provision in our
amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions,
which could harm our results of operations.
Our amended and restated bylaws also provide that the federal district courts of the United States of America will be the exclusive forum for resolving any
complaint asserting a cause of action arising under the Securities Act. On December 19, 2018, the Delaware Court of Chancery issued a decision in Sciabacucchi v.
Salzberg et al., C.A. No. 2017-0931-JTL (Del. Ch.), finding that provisions such as our federal forum provision are not valid under Delaware law. Following this
decision, on January 7, 2019, we issued a Current Report on Form 8-K stating that we did not intend to enforce the federal forum provision unless the Sciabacucchi
decision was appealed and the Delaware Supreme Court reversed the decision. On March 18, 2020, the Delaware Supreme Court issued its decision in Salzburg et al. v.
Sciabacucchi, No. 346, 2019 (Del.), which reversed the Delaware Court of Chancery's decision. The Delaware Supreme Court found that provisions such as our federal
forum provision are facially valid under Delaware law. In light of this decision finally resolving the facial validity of such provisions, we intend to enforce the federal
forum provision in our amended and restated bylaws.
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Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our headquarters is located in American Fork, Utah. Our current facility has approximately 122,000 square feet under leases that expire between April 2022 and
May 2027. Excluded from this amount is approximately 152,000 square feet that is under construction and unoccupied as of January 31, 2022, which is part of a new
lease agreement that commenced May 1, 2021. We also lease space in various locations throughout the United States for sales and professional services personnel. Our
foreign subsidiaries lease office space for their operations and sales and professional services personnel.
We believe the facilities we lease are sufficient to meet our needs for the immediate future.
Item 3. Legal Proceedings
State Securities Class Action
In November 2019, a securities class action complaint captioned Volonte v. Domo, Inc., et. al, Case No. 19-04-01778, was filed by a stockholder of the Company in
the Fourth Judicial District Court for the County of Utah in the State of Utah against the Company, certain of the Company's current and former officers and directors,
and the underwriters of the Company's June 2018 initial public offering alleging violations of Sections 11, 12 and 15 of the Securities Act of 1933 in connection with the
Company's initial public offering and seeking unspecified damages. On August 19, 2020, the defendants filed a motion to dismiss the Volonte complaint. On April 13,
2021, the court granted the motion and dismissed the complaint. On April 25, 2021, the plaintiff filed a motion to amend or alter judgment or for reconsideration. On
June 2, 2021, the court denied the plaintiff's motion. On June 14, 2021, the plaintiff filed a notice of appeal. On October 14, 2021, the plaintiff/appellant filed his
principal brief. The appeal was fully briefed as of January 20, 2022. The Company believes this lawsuit is without merit and intends to defend the case vigorously.
The Company is unable to estimate a range of loss, if any, that could result were there to be an adverse final decision in this case. If an unfavorable outcome were to
occur, it is possible that the impact could be material to the Company's results of operations in the period(s) in which any such outcome becomes probable and
estimable.
Delaware Shareholder Derivative Lawsuit
In August 2021, a shareholder derivative complaint captioned Zalvin v. James, et al., Case No. 2021-0672-CM, purportedly brought on behalf of the Company, was
filed in the Delaware Court of Chancery against the Company’s former CEO and certain current and former directors alleging that they breached their fiduciary duties
by awarding the Company’s former CEO allegedly excessive equity awards in 2020 and 2021. The lawsuit seeks rescission of the equity awards, unspecified damages,
and attorney’s fees and costs.
Since the lawsuit is purportedly brought on behalf of the Company, and the Company is only a nominal defendant, the alleged damages were allegedly suffered by
the Company. A rescission of any equity awards would return the equity to the Company and a payment of any damages would be paid to the Company, minus any
attorney’s fees. The Company has indemnification and advancement obligations to the defendants in connection with this lawsuit. On October 6, 2021, defendants and
the Company, as nominal defendant, filed a motion to dismiss the Zalvin complaint. The motion was fully briefed as of February 4, 2022, and oral argument is
scheduled for March 25, 2022.
Other Litigation
The Company is involved in other legal proceedings from time to time arising in the normal course of business. Management believes that the outcome of these
proceedings will not have a material impact on the Company's financial condition, results of operations, or liquidity.
Item 4. Mine Safety Disclosures
Not applicable.
52
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information for Our Class B Common Stock
PART II
Our Class B common stock began trading on the Nasdaq Global Market under the symbol “DOMO” on June 29, 2018. Prior to that date, there was no public
trading market for our Class B common stock. Our Class A common stock is not listed or traded on any stock exchange.
Holders of Record
As of January 31, 2022, there was one holder of record of our Class A common stock and 102 holders of record of our Class B common stock. The actual number of
stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and
other nominees.
Dividend Policy
We have not paid, and in the foreseeable future do not intend to pay, cash dividends.
Stock Performance Graph
The following performance graph and related information is "furnished" and shall not be deemed to be "soliciting material" or "filed" for purposes of Section 18 of
the Exchange Act and Regulation 14A under the Exchange Act nor shall such information be incorporated by reference into any filing of Domo, Inc. under the Exchange
Act or the Securities Act, except to the extent we specifically incorporate it by reference in such filing.
The graph set forth below compares the cumulative total return to stockholders on our Class B common stock relative to the cumulative total returns of the Standard
& Poor’s 500 Index, or the S&P 500, and the S&P 500 Information Technology Index between June 29, 2018 (the date our Class B common stock commenced trading)
through January 31, 2022. All values assume a $100 initial investment at market close on June 29, 2018. The initial public offering price of our Class B common stock,
which had a closing stock price of $27.30 on June 29, 2018, was $21.00 per share. Data for the S&P 500 and the S&P 500 Information Technology Index assume
reinvestment of dividends. The comparisons are based on historical data and are not indicative of, nor intended to forecast, the future performance of our Class B
common stock.
53
Comparison of Cumulative Total Return
Company/Index
Domo, Inc.
S&P 500
S&P 500 Information
Technology
(1) Base period
Jun 29, 2018
(1)
Jul 31, 2018
Jan 31, 2019
Jul 31, 2019
Jan 31, 2020
Jul 31, 2020
Jan 31, 2021
Jul 31, 2021
Jan 31, 2022
$
$
100
100
100
$
61
104
102
$
99
101
96
$
102
112
118
$
89
122
141
$
118
125
164
$
232
144
193
$
324
171
230
172
177
244
Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
On May 25, 2021, we issued 100,000 shares of our Class B common stock to certain lenders pursuant to the cashless exercise of warrants. This issuance was not
registered under the Securities Act and we relied on an exemption from registration provided by Section 3(a)(9) of the Securities Act in making such issuance.
Issuer Purchases of Equity Securities
None.
54
Item 6.
Reserved
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This discussion contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Statements containing words such as “may,” “believe,” “could,” "will,” “seek,” “depends,” “anticipate,” “expect,”
“intend,” “plan,” “project,” “projections,” “business outlook,” “estimate,” or similar expressions constitute forward-looking statements. You should read these
statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition or state other “forward-looking”
information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these
statements. They include, but are not limited to, statements about:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
our ability to attract new customers and retain and expand our relationships with existing customers;
our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit, operating expenses, key metrics, ability to
generate cash flow and ability to achieve and maintain future profitability;
the anticipated trends, market opportunity, growth rates and challenges in our business and in the business intelligence software market;
the efficacy of our sales and marketing efforts;
our ability to compete successfully in competitive markets;
our ability to respond to and capitalize on rapid technological changes;
our expectations and management of future growth;
our ability to enter new markets and manage our expansion efforts, particularly internationally;
our ability to develop new product features;
our ability to attract and retain key employees and qualified technical and sales personnel;
our ability to effectively and efficiently protect our brand;
our ability to timely scale and adapt our infrastructure;
the effect of general economic and market conditions on our business;
the impact of the coronavirus pandemic, including on the global economy, our results of operations, enterprise software spending, and business continuity;
our ability to protect our customers' data and proprietary information;
our ability to maintain, protect, and enhance our intellectual property and not infringe upon others’ intellectual property; and
our ability to comply with all governmental laws, regulations and other legal obligations.
Our actual results may differ materially from those contained in or implied by any forward-looking statements. Factors that could cause or contribute to these
differences include those discussed below and elsewhere in this report, including those factors discussed in Part I, Item 1A (Risk Factors).
In light of the significant uncertainties and risks inherent in these forward-looking statements, you should not regard these statements as a representation or
warranty by us or anyone else that we will achieve our objectives or plans in any specified time frame, or at all, or as predictions of future events. Moreover, neither we
nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to publicly
55
update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and
related notes that are included elsewhere in this Annual Report on Form 10-K. Our fiscal year ends on January 31. References to fiscal 2022, for example, refer to the
fiscal year ended January 31, 2022.
Overview
We founded Domo in 2010 with the vision of digitally connecting everyone within the enterprise with real-time, rich, relevant data and then encouraging all
employees to collaborate and act on that data. We realized that many organizations were unable to access the massive amounts of data that they were collecting in siloed
cloud applications and on-premise databases. Furthermore, even for organizations that were capable of accessing their data, the process for doing so was time-
consuming, costly, and often resulted in the data being out-of-date by the time it reached decision makers. The delivery format, including alert functionality, and devices
were not adequate for the connected and real-time mobile workforce. Based on these observations, it was apparent that all organizations, regardless of size or industry,
were failing to unlock the power of all of their people, data, and systems. To address these challenges, we provide a modern cloud-based business intelligence platform
that digitally connects everyone at an organization – from the CEO to frontline employees – with all the people, data and systems in an organization, giving them access
to real-time data and insights and allowing them to manage their business from their smartphones.
We offer our platform to our customers as a subscription-based service. Subscription fees are based upon the chosen Domo package which includes tier-based
platform capabilities as well as users. Business leaders, department heads and managers are the typical initial subscribers to our platform, deploying Domo to solve a
business problem or to enable departmental access. Over time, as customers recognize the value of our platform, we increasingly engage with CIOs and other executives
to facilitate broad enterprise adoption.
A majority of our customers subscribe to our services through multi-year contracts. As of January 31, 2022, 62% of our customers were under multi-year contracts
on a dollar-weighted basis compared to 60% and 56% of customers as of January 31, 2021 and 2020, respectively. The high percentage revenue from multi-year
contracts, among both new and existing customers, has enhanced the predictability of our subscription revenue. We typically invoice our customers annually in advance
for subscriptions to our platform. A majority of our annual recurring revenue is up for renewal during the fiscal year ending January 31, 2023.
Remaining performance obligations (RPO) represents the remaining amount of revenue we expect to recognize from existing non-cancelable contracts, whether
billed or unbilled. As of January 31, 2021 and 2022, total RPO was $282.3 million and $339.0 million, respectively, representing year-over-year growth of 20%. The
amount of RPO expected to be recognized as revenue in the next twelve months was $178.2 million and $221.7 million as of January 31, 2021 and 2022, respectively,
representing year-over-year growth of 24%.
Our business model focuses on obtaining new customers and maximizing the lifetime value of those customer relationships. We recognize subscription revenue
ratably over the term of the subscription period. In general, customer acquisition costs and other upfront costs associated with new customers are higher in the first year
than the aggregate revenue we recognize from those new customers in the first year. Over the lifetime of the customer relationship, we also incur sales and marketing
costs to renew or increase usage per customer. However, these costs, as a percentage of revenue, are significantly less than those initially incurred to acquire the
customer. As a result, the profitability of a customer to our business in any particular period depends in part upon how long a customer has been a subscriber and the
degree to which it has expanded its usage of our platform.
Our platform addresses the diverse and evolving needs of employees. Historically, our sales and marketing efforts have been concentrated on initiatives, including
digital marketing, which allowed us to quickly attract a large number of customers and establish our platform in a crowded market. These initial efforts were primarily
targeted toward small and medium sized businesses, with smaller average annual contract values, or ACV, and lower renewal rates. Over time, the breadth of our
platform's capabilities has attracted an increasing number of enterprise customers, and we have continued to expand our presence within those customers.
From inception through January 31, 2022, we have invested $628.7 million in the development of our platform. As of January 31, 2022, we had 270 employees in
our research and development organization. While we expect to continue to invest in research and development, we anticipate that these expenses will decrease as a
percentage of revenue over time.
56
For the years ended January 31, 2020, 2021 and 2022, we had total revenue of $173.4 million, $210.2 million and $258.0 million, respectively, representing year-
over-year growth of 21% and 23% for the years ended January 31, 2021 and 2022, respectively. Our enterprise customers generated revenue of $93.3 million, $115.1
million, and $137.0 million for the years ended January 31, 2020, 2021 and 2022, respectively, or year-over-year growth of 23% and 19%, respectively. Our corporate
customers generated revenue of $80.1 million, $95.1 million, and $121.0 million for the years ended January 31, 2020, 2021 and 2022, respectively, or year-over-year
growth of 19% and 27%, respectively.
For the years ended January 31, 2020, 2021 and 2022, no single customer accounted for more than 10% of our total revenue, nor did any single organization when
accounting for multiple subsidiaries or divisions which may have been invoiced separately. Revenue from customers with billing addresses in the United States
comprised 75%, 76% and 77% of our total revenue for the years ended January 31, 2020, 2021 and 2022, respectively.
Our revenue growth rate may decline in future periods due to a number of reasons, which may include the maturation of our business, increase in overall revenue
over time, slowing demand for our platform, increasing competition, a decrease in the growth of the markets in which we compete, or if we fail, for any reason, to
continue to capitalize on growth opportunities, a decrease in our renewal rates, or a decline in upsells.
We have incurred significant net losses since our inception, including net losses of $125.7 million, $84.6 million and $102.1 million for the years ended January 31,
2020, 2021 and 2022, respectively, and had an accumulated deficit of $1,224.5 million at January 31, 2022. We have experienced improvements in net losses over the
periods presented; however, we expect to incur losses for the foreseeable future and may not be able to achieve or sustain profitability.
COVID-19 Impact
A novel strain of coronavirus, COVID-19, emerged in China in December 2019 and began to spread globally, including to the United States. In March 2020,
COVID-19 was characterized by the World Health Organization as a global pandemic. The full impact of the COVID-19 pandemic is inherently uncertain at the time of
this report. The COVID-19 pandemic has resulted in travel restrictions and in some cases, prohibitions of non-essential activities, disruption and shutdown of businesses
and greater uncertainty in global financial markets.
We cannot reasonably predict the extent to which the COVID-19 pandemic will impact our business or operating results, which is highly dependent on inherently
uncertain future developments, including the duration and scope of the pandemic (including any potential future waves of the pandemic as well as new and emerging
variants of COVID-19) as well as governmental, business and individual actions that have been and continue to be taken in response to the pandemic (including the
availability, adoption and effectiveness of COVID-19 vaccines). Because our platform is offered as a subscription-based service, the effect of the pandemic may not be
fully reflected in our operating results until future periods, if at all.
Before the COVID-19 pandemic, a significant portion of field sales and professional services were conducted in person. Currently, as a result of the ongoing
COVID-19 pandemic, a significant portion of our sales and professional services activities are being conducted remotely. These changes will likely extend into future
quarters. The impact, if any, of these and any additional operational changes we may implement is uncertain, but changes we have implemented have not affected and
are not expected to affect our ability to maintain operations, including financial reporting systems, internal control over financial reporting and disclosure controls and
procedures.
As of the date of this report, we do not yet know the full extent of the pandemic's impact on our ability to attract, serve, retain or upsell customers. We serve
customers in a wide variety of industries including travel and hospitality, sports and leisure, and retail which have been severely impacted by the COVID-19 pandemic.
Furthermore, existing and potential customers may choose to reduce or delay technology spending in response to the COVID-19 pandemic. In addition, certain
customers have pursued concessions such as lengthened payment terms or reduced contract length, and these concessions may materially and negatively impact our
operating results, financial condition and prospects. Additionally, if and to the extend work and travel restrictions related to COVID-19 are relaxed, we may begin
shifting certain professional, sales and marketing activities from remote work to in-person or hybrid models, which could result in us incurring additional operating
expenses associated with business travel, office space leases and other factors. See Item 1A “Risk Factors” in Part I of this Annual Report on Form 10-K for further
discussion of the possible impact of the COVID-19 pandemic on our business.
57
Factors Affecting Performance
Continue to Attract New Customers
We believe that our ability to expand our customer base is an important indicator of market penetration, the growth of our business, and future business
opportunities. We define a customer at the end of any particular quarter as an entity that generated revenue greater than $2,500 during that quarter. In situations where an
organization has multiple subsidiaries or divisions, each entity that is invoiced at a separate billing address is treated as a separate customer. In cases where customers
purchase through a reseller, each end customer is counted separately. We define enterprise customers as companies with over $1 billion in revenue, and companies with
less than $1 billion in revenue are corporate customers. In order to maintain comparability, companies who become customers with revenue below $1 billion and
subsequently exceed that threshold are considered enterprise customers for all periods presented.
As of January 31, 2022, we had over 2,300 customers. We focus our sales and marketing resources on obtaining customers with over $100 million in revenue. For
the years ended January 31, 2020, 2021 and 2022, our enterprise customers accounted for 54%, 55% and 53% of our revenue, respectively. In order to accelerate
customer growth, we intend to further develop our partner ecosystem by establishing agreements with more software resellers, systems integrators and other partners to
provide broader customer and geographic coverage. We believe we are underpenetrated in the overall market and have significant opportunity to expand our customer
base over time.
Customer Upsell and Retention
We employ a land, expand, and retain sales model, and our performance depends on our ability to retain customers and expand the use of our platform at existing
customers over time. It currently takes multiple years for our customers to fully embrace the power of our platform. We believe that as customers deploy greater
volumes and sources of data for multiple use cases, the unique features of our platform can address the needs of everyone within their organization. We are still in the
early stages of expanding within many of our customers.
We have invested in platform capabilities and online support resources that allow our customers to expand the use of our platform in a self-guided manner. Our
professional services, customer support and customer success functions also support our sales force by helping customers to successfully deploy our platform and
implement additional use cases. In addition, we believe our partner ecosystem will become increasingly important over time. We work closely with our customers to
drive increased engagement with our platform by identifying new use cases through our customer success teams, as well as in-platform, self-guided experiences. We
actively engage with our customers to assess whether they are satisfied and fully realizing the benefits of our platform. While these efforts often require a substantial
commitment and upfront costs, we believe our investment in product, customer support, customer success and professional services will create opportunities to expand
our customer relationships over time.
Our ability to drive growth and generate incremental revenue depends heavily on our ability to retain our customers and increase their usage of our platform. With
that objective in mind, we allocate our customer success and customer support resources to align with maximizing the retention and expansion of our subscription
revenue.
An important metric that we use to evaluate our performance in retaining customers is gross retention rate. We calculate our gross retention rate by taking the dollar
amount of annual contract value (ACV) that renews in a given period divided by the ACV that was up for renewal in that same period. The ACV of multi-year contracts
is also considered in the calculation based on the period in which the annual anniversary of the contract falls. Our gross retention rate was 87%, 88% and 90% for the 12
months ended January 31, 2020, 2021 and 2022, respectively.
Our subscription net revenue retention rate compares the subscription revenue in a given period from the cohort of customers that generated subscription revenue at
the beginning of the same period in the prior fiscal year. The subscription net revenue retention rate is the quotient obtained by dividing the subscription revenue
generated from that cohort in a period, by the subscription revenue generated from that same cohort in the corresponding prior year period.
The following table sets forth our subscription net revenue retention rate for each of the eight quarters in the period ended January 31, 2022:
All Customers
105 %
106 %
106 %
106 %
106 %
107 %
106 %
105 %
Q1 2021
Q2 2021
Q3 2021
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
58
The primary metric that we use to monitor customer retention and growth is annual recurring revenue (ARR) net retention rate. ARR represents the total annualized
contract value of active customer subscription contracts as of the measurement date. Our ARR net retention rate compares the ARR from a cohort of customers as of the
measurement date to ARR from that same cohort as of the same period in the prior fiscal year. The cohort is established based on customers who had greater than
$10,000 of ARR as of the end of the prior year period. ARR net retention rate is the quotient obtained by dividing the ARR of that cohort as of the measurement date by
the ARR of that same cohort as of the corresponding prior year period.
The following table sets forth our ARR net retention rate for each of the eight quarters in the period ended January 31, 2022:
All Customers
101 %
103 %
105 %
106 %
109 %
109 %
108 %
110 %
Q1 2021
Q2 2021
Q3 2021
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
ARR net retention rate enables measurement of the progress of our business initiatives and is used by management to make operational decisions. We believe ARR
net retention rate provides a more up-to-date view of customer retention and growth than subscription net revenue retention rate, which is a lagging indicator due to
subscription revenue being recognized ratably over time. As such, we plan to only report our ARR net retention rate in future periods. ARR net retention rate is a
performance metric and should be viewed independently of revenue and deferred revenue, and is not intended to be a substitute for, or combined with, any of these
items.
As we continue to enhance our product and develop methods to encourage wider and more strategic adoptions, including focusing our sales and marketing activities
towards enterprise customers, we expect that customer retention will increase over the long term. Our ability to successfully upsell and the impact of cancellations may
vary from period to period. The extent of this variability depends on a number of factors including the size and timing of upsells and cancellations relative to the initial
subscriptions.
Sales and Marketing Efficiency
We are focused on increasing the efficiency of our sales force and marketing activities by enhancing account targeting, messaging, field sales operations and sales
training in order to accelerate the adoption of our platform. Our sales strategy depends on our ability to continue to attract top talent, to increase our pipeline of business,
and to enhance sales productivity. We focus on productivity per quota-carrying sales representative and the time it takes our sales representatives to reach full
productivity. During fiscal 2022 we have hired, and plan to continue hiring, more sales representatives, which may have an adverse impact on productivity in the near
term.
We manage our pipeline by sales representative to ensure sufficient coverage of our sales targets. Our ability to manage our sales productivity and pipeline are
important factors to the success of our business. We have shifted marketing spending from broad-based initiatives to targeted account-based marketing campaigns and
user events that we believe will result in contracts with larger companies which we expect will result in more upsell ACV potential.
Sales and marketing expense as a percentage of total revenue was 74% and 56% for the years ended January 31, 2020 and 2021, respectively, compared to 56% for
the year ended January 31, 2022.
Leverage Research and Development Investments for Future Growth
We plan to continue to make investments in areas of our business to continue to expand our platform functionality. This may include investing in machine learning
algorithms, predictive analytics, and other artificial intelligence technologies to create alerts, detect anomalies, optimize queries, and suggest areas of interest to help
people focus on what matters most. These investments may also include extending the functionality and effectiveness of our platform through improvements to the
Domo Appstore and developer toolkits, which enable customers and partners to quickly build and deploy custom applications. The amount of new investments required
to achieve our plans is expected to decrease as a percentage of revenue compared to historical years.
Research and development expense as a percentage of revenue was 40% and 32% for the years ended January 31, 2020 and 2021, respectively, compared to 31%
for the year ended January 31, 2022.
59
Key Business Metric
Billings
Billings represent our total revenue plus the change in deferred revenue in a period. Billings reflect sales to new customers plus subscription renewals and upsells to
existing customers, and represent amounts invoiced for subscription, support and professional services. We typically invoice our customers annually in advance for
subscriptions to our platform. Because we generate most of our revenue from customers who are invoiced on an annual basis and have a wide range of annual contract
values, we may experience variability due to typical enterprise buying patterns and timing of large initial contracts, renewals and upsells.
The following table sets forth our billings for the years ended January 31, 2020, 2021 and 2022:
Billings (in thousands)
Year Ended January 31,
2020
2021
2022
$
189,237 $
232,688 $
296,464
There is a disproportionate weighting toward annual billings in the fourth quarter, primarily as a result of large enterprise account buying patterns. Our fourth
quarter has historically been our strongest quarter for new business and renewals. The year-on-year compounding effect of this seasonality in both billing patterns and
overall new and renewal business causes the value of invoices that we generate in the fourth quarter for both new business and renewals to increase as a proportion of
our total annual billings. The timing of renewal billings may vary due to our customers' requests to align end dates on multiple subscription contracts. The sequential
quarterly changes in billings, accounts receivable, and deferred revenue during the fourth quarter of our fiscal year are not necessarily indicative of the billing activity
that occurs for the following quarters.
Components of Results of Operations
Revenue
We offer subscriptions to our cloud-based platform. We derive our revenue primarily from subscriptions and professional services. Subscription revenue consists
primarily of fees to provide our customers access to our cloud-based platform, which includes online customer support resources at no additional cost. Professional
service fees include implementation services, optimization services, and training.
Subscription revenue is a function of the number of customers, platform tier, and number of users at each customer, and the price per user. Subscription revenue is
recognized ratably over the related contractual term beginning on the date the platform is made available to the customer. Our new business subscriptions typically have
a term of one to three years, and we generally invoice our customers in annual installments at the beginning of each year in the subscription period. Amounts that have
been invoiced are initially recorded as deferred revenue and are recognized ratably over the subscription period.
Professional services and other revenue primarily consists of implementation services sold with new subscriptions, as well as professional services sold separately,
including training and education. Professional services are generally billed in advance and revenue from these arrangements is recognized as the services are performed.
Our professional services engagements typically span from a few weeks to several months.
Cost of Revenue
Cost of subscription revenue consists primarily of third-party hosting services and data center capacity; salaries, benefits, bonuses and stock-based compensation, or
employee-related costs, directly associated with cloud infrastructure and customer support personnel; amortization expense associated with capitalized software
development costs; depreciation expense associated with computer equipment and software; certain fees paid to various third parties for the use of their technology and
services; and allocated overhead. Allocated overhead includes items such as information technology infrastructure, rent, and certain employee benefit costs.
Cost of professional services and other revenue consists primarily of employee-related costs directly associated with these services, third-party consultant fees, and
allocated overhead.
60
Operating Expenses
Sales and Marketing. Sales and marketing expenses consist primarily of employee-related costs directly associated with our sales and marketing staff and
commissions. Other sales and marketing costs include digital marketing programs and promotional events to promote our brand, including Domopalooza, our annual
user conference, as well as tradeshows, advertising and allocated overhead. Contract acquisition costs, including sales commissions, are deferred and then amortized on
a straight-line basis over the period of benefit, which we have determined to be approximately four years for initial contracts. Contract acquisition costs related to
renewal contracts and professional services are recorded as expense when incurred if the period of benefit is one year or less. If the period of benefit is greater than one
year, costs are deferred and then amortized on a straight-line basis over the period of benefit, which we have determined to be two years.
Research and Development. Research and development expenses consist primarily of employee-related costs for the design and development of our platform,
contractor costs to supplement staff levels, third-party web services, consulting services, and allocated overhead. Our cycle of frequent updates has facilitated rapid
innovation and the introduction of new product features throughout our history. We capitalize certain software development costs that are attributable to developing new
features and adding incremental functionality to our platform, and amortize such costs as costs of subscription revenue over the estimated life of the new feature or
incremental functionality, which is generally three years.
General and Administrative. General and administrative expenses consist of employee-related costs for executive, finance, legal, human resources, recruiting and
administrative personnel; professional fees for external legal, accounting, recruiting and other consulting services; and allocated overhead costs.
Other Expense, Net
Other expense, net consists primarily of interest expense related to long-term debt, It also includes the effect of exchange rates on foreign currency transaction gains
and losses, foreign currency gains and losses upon remeasurement of intercompany balances, and sublease income. The transactional impacts of foreign currency are
recorded as foreign currency losses (gains) in the consolidated statements of operations.
Provision for (Benefit from) Income Taxes
Provision for (benefit from) income taxes consists primarily of income taxes related to foreign and state jurisdictions in which we conduct business. Because of the
uncertainty of the realization of the deferred tax assets, we have a full valuation allowance for domestic net deferred tax assets, including net operating loss
carryforwards and tax credits related primarily to research and development.
61
Results of Operations
The following tables set forth selected consolidated statements of operations data and such data as a percentage of total revenue for each of the periods indicated:
Revenue:
Subscription
Professional services and other
Total revenue
Cost of revenue:
(1)
Subscription
Professional services and other
(1)
Total cost of revenue
Gross profit
Operating expenses:
(1)
Sales and marketing
Research and development
General and administrative
Total operating expenses
(1)
(1)(2)(3)
Loss from operations
(1)
Other expense, net
Loss before income taxes
Provision for (benefit from) income taxes
Net loss
________________
(1)
Includes stock-based compensation expense as follows:
Cost of revenue:
Subscription
Professional services and other
Sales and marketing
Research and development
General and administrative
Other expense, net
Total
2020
Year Ended January 31,
2021
(in thousands)
2022
$
$
146,837 $
26,558
173,395
35,366
20,564
55,930
117,465
127,567
69,224
35,941
232,732
(115,267)
(9,635)
(124,902)
754
(125,656) $
183,645 $
26,535
210,180
36,656
20,092
56,748
153,432
117,335
66,474
42,708
226,517
(73,085)
(11,140)
(84,225)
409
(84,634) $
223,010
34,951
257,961
40,907
26,239
67,146
190,815
143,722
81,027
54,536
279,285
(88,470)
(14,102)
(102,572)
(461)
(102,111)
2020
Year Ended January 31,
2021
(in thousands)
2022
$
$
$
507
404
10,770
6,339
5,637
190
23,847 $
$
1,213
843
10,936
9,095
11,218
444
33,749 $
2,819
1,753
21,241
15,853
18,155
705
60,526
(2)
Includes amortization of certain intangible assets of $0.1 million, $0.1 million and $0.1 million for the years ended January 31, 2020, 2021 and 2022, respectively.
(3)
Includes reversals of contingent tax-related accruals of $1.3 million for the year ended January 31, 2020
62
Revenue:
Subscription
Professional services and other
Total revenue
Cost of revenue:
Subscription
Professional services and other
Total cost of revenue
Gross margin
Operating expenses:
Sales and marketing
Research and development
General and administrative
Total operating expenses
Loss from operations
Other expense, net
Loss before income taxes
Provision for (benefit from) income taxes
Net loss
Year Ended January 31,
2020
2021
2022
85 %
15
100
20
12
32
68
74
40
20
134
(66)
(6)
(72)
—
(72)%
87 %
13
100
17
10
27
73
56
32
20
108
(35)
(5)
(40)
—
(40)%
86 %
14
100
16
10
26
74
56
31
21
108
(34)
(5)
(39)
—
(39)%
Discussion of the Years Ended January 31, 2021 and 2022
Revenue
Revenue:
Subscription
Professional services and other
Total revenue
Percentage of revenue:
Subscription
Professional services and other
Total
Year Ended January 31,
2021
2022
(in thousands)
$ Change
% Change
$
$
183,645
26,535
210,180
$
$
223,010
34,951
257,961
$
$
39,365
8,416
47,781
21 %
32
23
87 %
13
100 %
86 %
14
100 %
The increase in subscription revenue was primarily due to a $25.9 million increase from new customers and a $13.5 million net increase from existing customers.
Our customer count increased 14% from January 31, 2021 to January 31, 2022. For the purpose of this comparison, new customers are defined as those added since the
end of the prior year quarter. Revenue from existing customers is presented net of churn. The increase in professional services and other revenue was primarily due to a
higher volume of billable hours delivered.
63
Cost of Revenue, Gross Profit and Gross Margin
Cost of revenue:
Subscription
Professional services and other
Total cost of revenue
Gross profit
Gross margin:
Subscription
Professional services and other
Total gross margin
Year Ended January 31,
2021
2022
(in thousands)
$ Change
% Change
$
$
$
36,656
20,092
56,748
153,432
$
$
$
40,907
26,239
67,146
190,815
$
$
$
4,251
6,147
10,398
37,383
12 %
31
18
24
80 %
24
73
82 %
25
74
The increase in cost of subscription revenue was primarily due to a $4.3 million increase in employee-related costs attributable to higher headcount in our support
organization and stock-based compensation, of which $1.6 million related to stock-based compensation.
The increase in cost of professional services and other revenue is primarily due to a $3.3 million increase in outsourced services resulting from a higher volume of
services provided by third-party consultants related to implementation and a $2.9 million increase in employee-related costs attributable to higher headcount and stock-
based compensation, of which $0.9 million related to stock-based compensation.
Subscription gross margin improved due to economies of scale driven by increased subscription revenue and cost improvements from continued proactive
management and optimization of our third-party hosting services.
Services gross margin improved due to timing of projects with higher margins. We expect the gross margin for professional services and other to fluctuate from
period to period due to changes in the proportion of services provided by third-party consultants, seasonality, as well as timing of projects with higher margins.
Operating Expenses
Operating expenses:
Sales and marketing
Research and development
General and administrative
Total operating expenses
Percentage of revenue:
Sales and marketing
Research and development
General and administrative
Year Ended January 31,
2021
2022
(in thousands)
$ Change
% Change
$
$
117,335
66,474
42,708
226,517
$
$
143,722
81,027
54,536
279,285
$
$
26,387
14,553
11,828
52,768
22 %
22
28
23
56 %
32
20
56 %
31
21
The increase in sales and marketing expenses was primarily due to a $20.0 million increase in employee-related costs and allocated overhead, attributable to higher
headcount and stock-based compensation, of which $10.3 million related to stock-based compensation. Commission expense increased by $3.1 million due to higher
sales. Marketing expenses increased by $1.1 million primarily due to marketing events. Other increases included $0.8 million in software subscription, $0.7 million in
contract labor, and $0.6 million in travel expenses. Sales and marketing expense as a percentage of total revenue remained flat in the year ended January 31, 2022
compared to the year ended January 31, 2021. We expect sales and
64
marketing expense to increase in the near term as we continue to invest in the growth of our business. Over the long term, we expect sales and marketing expense to
decrease as a percentage of revenue.
Research and development expenses increased primarily due to a $13.5 million increase in employee-related costs, attributable to higher headcount and stock-based
compensation, of which $7.4 million related to stock-based compensation. Contract labor increased by $1.5 million. These increases were partially offset by a $1.1
million increase in capitalized software development costs (resulting in decreased expense). Research and development expense as a percentage of revenue decreased
from 32% in the year ended January 31, 2021 to 31% in the year ended January 31, 2022. In the near term, we expect research and development expense to increase, but
expect that it will decline as a percentage of total revenue in the long term as we leverage our research and development organization.
General and administrative expenses increased primarily due to a $8.8 million increase in employee-related costs driven by stock-based compensation, which made
up $6.9 million of the increase. Recruiting fees increased by $1.4 million and professional and legal expenses increased by $1.1 million. General and administrative
expenses as a percent of revenue increased from 20% in the year ended January 31, 2021 to 21% in the year ended January 31, 2022. In the near term, we expect general
and administrative expense to fluctuate from period to period, but expect that it will decline as a percentage of total revenue in the long term as we leverage previous
investments in our general and administrative organization.
Other Expense, Net
Year Ended January 31,
2021
2022
(in thousands)
$ Change
% Change
Other expense, net
$
(11,140) $
(14,102) $
(2,962)
27 %
Other expense, net increased due to a $1.8 million increase in expense related to changes in foreign exchange rates and a higher balance of cash denominated in
currencies other than the functional currency. Interest expense increased by $0.8 million. We expect foreign currency gains and losses could become more pronounced
due to currency market volatility and as we continue to expand our foreign operations. We expect interest expense to increase modestly due to an increasing principal
balance and anticipated higher market interest rates.
Income Taxes
Year Ended January 31,
2021
2022
(in thousands)
$ Change
% Change
Provision for (benefit from) income taxes
$
409 $
(461) $
(870)
(213)%
Provision for income taxes decreased due to larger allowable deductions during the year ended January 31, 2022. In the long term, we expect income tax expense to
increase in conjunction with growth in our international subsidiaries.
Discussion of the Years Ended January 31, 2020 and 2021
For a discussion of the year ended January 31, 2021 compared to the year ended January 31, 2020, please refer to Part II, Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended January 31, 2021.
Liquidity and Capital Resources
As of January 31, 2022, we had $83.6 million of cash and cash equivalents, which were held for working capital purposes. Our cash and cash equivalents consist
primarily of cash, money market funds, and certificates of deposit. We also have a $100 million credit facility, all of which had been drawn as of January 31, 2022.
Since inception, we have financed operations primarily from cash collected from customers for our subscriptions and services, periodic sales of convertible
preferred stock, our initial public offering and to a lesser extent, debt financing. Our principal uses of cash have consisted of employee-related costs, marketing
programs and events, payments related to hosting our cloud-based platform and purchases of short-term investments.
65
We believe our existing cash and cash equivalents will be sufficient to meet our projected operating requirements for at least the next 12 months. Over the longer
term, we plan to continue investing in, among other things, growth opportunities, product development, and sales and marketing. If available funds are insufficient to
fund our future activities or execute on our strategy, we may raise additional capital through equity, equity-linked and debt financing, to the extent such funding sources
are available. Alternatively, we may be required to reduce expenses to manage liquidity; however, any such reductions could adversely impact our business and
competitive position. Our future capital requirements will depend on many factors, including our growth rate; the level of investments we make in product development,
sales and marketing activities and other investments to support the growth of our business; the continuing market acceptance of our platform; and customer retention
rates, and may increase materially from those currently planned. If we raise additional funds through the incurrence of indebtedness, such indebtedness likely would
have rights that are senior to holders of our equity securities and could contain covenants that restrict operations in the same or similar manner as our credit facility. Any
additional equity financing likely would be dilutive to existing stockholders. We cannot assure you that any additional financing will be available to us on acceptable
terms, or at all.
Although we are not currently a party to any agreement or letter of intent with respect to potential investments in, or acquisitions of, complementary businesses,
services or technologies, we may enter into these types of arrangements in the future, which could also require us to seek additional equity financing, incur
indebtedness, or use cash resources. We have no present understandings, commitments or agreements to enter into any such acquisitions. We do not have any special
purpose entities and we do not engage in off-balance sheet financing arrangements.
Credit Facility
In August 2020, we entered into an amendment to the credit facility which extended the maturity date for the outstanding loan from October 1, 2022 to April 1,
2025. Per the amendment, we are required to comply with a financial covenant requiring us to maintain a minimum balance of unrestricted cash and cash equivalents
equal to $10.0 million until our six-month adjusted cash flow is greater than zero. The amendment also revised the maximum debt ratio financial covenant and included
an amendment fee of $5.0 million, which accrues interest at a rate of 9.5% per year. The amendment fee, along with its accrued interest, is to be paid at the earlier of the
payment date, maturity date, or the date the loan becomes payable.
The credit facility permits us to incur up to $100 million in term loan borrowings, all of which had been drawn as of January 31, 2022. The term loan maturity date
is April 1, 2025 with a closing fee of $7.0 million, which is in addition to the $5.0 million amendment fee described above. Each term loan requires that we pay only
interest until the maturity date. A portion of the interest that accrues on the outstanding principal of each term loan is payable in cash on a monthly basis, which portion
accrues at a floating rate equal to the greater of (1) 7% and (2) three-month LIBOR plus 5.5% per year. In the event that LIBOR is unavailable, interest will accrue at a
floating rate equal to the greater of (1) 7% and (2) the U.S. prime rate plus 2.75% per year. As of January 31, 2022, the interest rate was approximately 7%. In addition,
a portion of the interest that accrues on the outstanding principal of each term loan is capitalized and added to the principal amount of the outstanding term loan on a
monthly basis, which portion accrues at a fixed rate equal to 2.5% per year.
The credit facility contains customary conditions to borrowing, events of default and covenants, including covenants that restrict our ability to dispose of assets,
make material changes to the nature, control or location of our business, merge with or acquire other entities, incur indebtedness or encumbrances, make distributions to
holders of our capital stock, make investments or enter into transactions with affiliates. In addition, we are required to comply with a financial covenant based on the
ratio of our outstanding indebtedness to our annualized recurring revenue. The maximum ratio is 0.600 on January 31, 2021 and April 30, 2021; 0.575 on July 31, 2021
and October 31, 2021; 0.550 on January 31, 2022 and April 30, 2022; 0.525 on July 31, 2022 and October 31, 2022; and 0.500 on January 31, 2023 through the maturity
date.
The credit facility defines our annualized recurring revenue as four times our aggregate revenue for the immediately preceding quarter (net of recurring discounts
and discounts for periods greater than one year) less the annual contract value of any customer contracts pursuant to which we were advised during such quarter would
not be renewed at the end of the current term plus the annual contract value of existing customer contract increases during such quarter. This covenant is measured
quarterly on a three-month trailing basis. Upon the occurrence of an event of default, such as non-compliance with covenants, any outstanding principal, interest and
fees become due immediately. We were in compliance with the covenant terms of the credit facility at January 31, 2021 and January 31, 2022. The credit facility is
secured by substantially all of our assets.
66
Historical Cash Flow Trends
Net cash (used in) provided by operating activities
Net cash (used in) provided by investing activities
Net cash provided by (used in) financing activities
Operating Activities
2020
$
Year Ended January 31,
2021
(in thousands)
2022
(80,219) $
(23,815)
7,984
(15,872) $
12,240
13,095
379
(6,517)
(561)
Net cash used in operating activities is significantly influenced by the amount of cash we invest in our personnel, timing and amounts we use to fund marketing
programs and events to expand our customer base, and the costs to provide our cloud-based platform and related outsourced professional services to our customers.
These outflows are partially offset by the amount and timing of payments received from our customers.
Net cash used in operating activities during the year ended January 31, 2020 consisted of cash outflows of $274.5 million exceeding the $194.3 million of cash
collected from customers. Significant components of cash outflows included $148.4 million for personnel costs and $57.7 million for marketing programs and events,
third-party costs to provide our platform and outsourced professional services.
Net cash used in operating activities during the year ended January 31, 2021 consisted of cash outflows of $252.6 million exceeding the $236.7 million of cash
collected from customers. Significant components of cash outflows included $141.2 million for personnel costs and $55.2 million for marketing programs and events,
third-party costs to provide our platform and outsourced professional services.
Net cash provided by operating activities during the year ended January 31, 2022 consisted of cash collected from customers of $284.7 million exceeding the
$284.3 million of cash outflows. Significant components of cash outflows included $171.0 million for personnel costs and $55.0 million for marketing programs and
events, third-party costs to provide our platform and outsourced professional services.
Investing Activities
Our investing activities have consisted primarily of purchases of short-term investments and property and equipment purchases. Significant components of
purchased property and equipment include capitalized development costs related to internal-use software and computer equipment and software for our data center.
Net cash used in investing activities during the year ended January 31, 2020 consisted primarily of $102.1 million of purchases of short-term investments, offset by
$84.8 million from maturities of short-term investments. The remaining amount consisted primarily of $6.0 million of capitalized development costs related to internal-
use software and $0.5 million of purchased property and equipment.
Net cash provided by investing activities during the year ended January 31, 2021 consisted primarily of $29.2 million of maturities of short-term investments, offset
by $11.1 million of purchases of short-term investments. The remaining amount consisted primarily of $4.9 million of capitalized development costs related to internal-
use software and $0.8 million of purchased property and equipment.
Net cash used in investing activities during the year ended January 31, 2022 consisted primarily of $6.0 million of capitalized development costs related to internal-
use software and $0.5 million of purchased property and equipment.
Financing Activities
Our financing activities have consisted primarily of proceeds from our initial public offering, issuances of convertible preferred stock, proceeds from our credit
facility and to a lesser extent, proceeds received from stock option exercises.
Net cash provided by financing activities for the year ended January 31, 2020 consisted primarily of $7.8 million of proceeds from our employee stock purchase
plan and $1.6 million of proceeds received from stock option exercises, offset by $1.4 million used to repurchase shares for tax withholdings on release of restricted
stock.
67
Net cash provided by financing activities for the year ended January 31, 2021 consisted primarily of $8.1 million of proceeds received from stock option exercises
and $6.7 million of proceeds from our employee stock purchase plan, offset by $1.8 million used to repurchase shares for tax withholdings on release of restricted stock.
Net cash used in financing activities for the year ended January 31, 2022 consisted primarily of $10.3 million used to repurchase shares for tax withholdings on
release of restricted stock, offset by $5.6 million of proceeds received from stock option exercises and $4.1 million of proceeds from our employee stock purchase plan.
Contractual Obligations and Commitments
Contractual obligations are cash that we are obligated to pay as part of certain contracts that we have entered into during the normal course of business. Our primary
commitment is related to obligations under our credit facility. For more information regarding our credit facility, see Note 11 "Credit Facility" to the consolidated
financial statements in Item 8 of Part II. In addition, we have obligations under leases for office space. For more information regarding our lease obligations, see Note 8
"Leases" to the consolidated financial statements in Item 8 of Part II. We also have non-cancelable commitments related to our cloud infrastructure. As of January 31,
2022, we had contractual commitments of $34.7 million related to these services, $10.7 million of which is due in the next 12 months and the remaining balance due
thereafter.
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of
these consolidated financial statements requires us to make estimates and assumptions that are inherently uncertain and that affect the reported amounts of assets,
liabilities, revenue, costs and expenses, and related disclosures. To the extent that there are material differences between these estimates and actual results, our financial
condition or results of operations would be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the
circumstances, and we evaluate these estimates on an ongoing basis. Critical accounting policies and estimates are those that we consider critical to understanding our
historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates.
Revenue Recognition
We derive revenue primarily from subscriptions to our cloud-based platform and professional services. Revenue is recognized when control of these services is
transferred to customers in an amount that reflects the consideration to which we expect to be entitled to in exchange for those services, net of sales taxes.
For sales through channel partners, we consider the channel partner to be the end customer for the purposes of revenue recognition as our contractual relationships
with channel partners do not depend on the sale of our services to their customers and payment from the channel partner is not contingent on receiving payment from
their customers. Our contractual relationships with channel partners do not allow returns, rebates, or price concessions.
The price of subscriptions is generally fixed at contract inception and therefore, our contracts do not contain a significant amount of variable consideration.
Revenue recognition is determined through the following steps:
•
•
•
•
•
Identification of the contract, or contracts, with a customer
Identification of the performance obligations in the contract
Determination of the transaction price
Allocation of the transaction price to the performance obligations in the contract
Recognition of revenue when, or as, performance obligations are satisfied
Subscription Revenue
Subscription revenue primarily consists of fees paid by customers to access our cloud-based platform, including support services. The majority of our subscription
agreements have multi-year contractual terms and a smaller percentage have annual contractual terms. Revenue is recognized ratably over the related contractual term
beginning on the date that the
68
platform is made available to a customer. Access to the platform represents a series of distinct services as we continually provide access to and fulfill our obligation to
the end customer over the subscription term. The series of distinct services represents a single performance obligation that is satisfied over time. We recognize revenue
ratably because the customer receives and consumes the benefits of the platform throughout the contract period. Our contracts are generally non-cancelable.
Professional Services and Other Revenue
Professional services revenue consists of implementation services sold with new subscriptions as well as professional services sold separately. Other revenue
includes training and education. Professional services arrangements are billed in advance, and revenue from these arrangements is recognized as the services are
provided, generally based on hours incurred. Training and education revenue is also recognized as the services are provided.
Contracts with Multiple Performance Obligations
Most of our contracts with new customers contain multiple performance obligations, generally consisting of subscriptions and professional services. For these
contracts, individual performance obligations are accounted for separately if they are distinct. The transaction price is allocated to the separate performance obligations
on a relative standalone selling price basis. Standalone selling prices are determined based on historical standalone selling prices, taking into consideration overall
pricing objectives, market conditions and other factors, including contract value, customer demographics and the number and types of users within the contract.
Contract Acquisition Costs
Contract acquisition costs, net are stated at cost net of accumulated amortization and primarily consist of deferred sales commissions, which are considered
incremental and recoverable costs of obtaining a contract with a customer. Contract acquisition costs for initial contracts are deferred and then amortized on a straight-
line basis over the period of benefit, which we have determined to be approximately four years. The period of benefit is determined by taking into consideration
contractual terms, expected customer life, changes in our technology and other factors. Contract acquisition costs for renewal contracts are not commensurate with
contract acquisition costs for initial contracts and are recorded as expense when incurred if the period of benefit is one year or less. If the period of benefit is greater than
one year, costs are deferred and then amortized on a straight-line basis over the period of benefit. Contract acquisition costs related to professional services and other
performance obligations with a period of benefit of one year or less are recorded as expense when incurred. Amortization of contract acquisition costs is included in
sales and marketing expenses in the accompanying consolidated statements of operations.
Capitalized Internal-Use Software Costs
We capitalize certain costs related to development of our platform incurred during the application development stage. Costs related to preliminary project activities
and post-implementation activities are expensed as incurred. Maintenance and training costs are also expensed as incurred. Capitalized costs are included in property
and equipment.
Capitalized internal-use software is amortized mostly as subscription cost of revenue, with a smaller portion related to operations amortized as research and
development within operating expenses. All capitalized internal-use software is amortized on a straight-line basis over its estimated useful life, which is generally three
years. Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could
impact the recoverability of these assets.
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired. Goodwill and
indefinite-lived intangible assets are not amortized, but rather tested for impairment at least annually on November 1 or more often if and when circumstances indicate
that the carrying value may not be recoverable. Finite-lived intangible assets are amortized over their useful lives.
Goodwill is tested for impairment based on reporting units. We periodically reevaluate our business and have determined that it continues to operate in one
segment, which is also considered the sole reporting unit. Therefore, goodwill is tested for impairment at the consolidated level.
69
We review our long-lived assets, including property and equipment and finite-lived intangible assets, for impairment whenever an event or change in facts and
circumstances indicates that their carrying amounts may not be recoverable. Recoverability of these assets is measured by comparing the carrying amount to the
estimated undiscounted future cash flows expected to be generated. If the carrying amount exceeds the undiscounted cash flows, the assets are determined to be
impaired and an impairment charge is recognized as the amount by which the carrying amount exceeds fair value.
Stock-Based Compensation
We have granted stock-based awards, consisting of stock options and restricted stock units, to our employees, certain consultants and certain members of our board
of directors. We record stock-based compensation based on the grant date fair value of the awards, which include stock options and restricted stock units, and recognize
the fair value of those awards as expense using the straight-line method over the requisite service period of the award. For restricted stock units that contain performance
conditions, we recognize expense using the accelerated attribution method if it is probable the performance conditions will be met. We estimate the grant date fair value
of stock options using the Black-Scholes option-pricing model.
Stock-based compensation expense related to purchase rights issued under the 2018 Employee Stock Purchase Plan, or ESPP, is based on the Black-Scholes option-
pricing model fair value of the estimated number of awards as of the beginning of the offering period. Stock-based compensation expense is recognized using the
straight-line method over the offering period.
The determination of the grant date fair value of stock-based awards is affected by the estimated fair value of our common stock as well as other assumptions and
judgments, which are estimated as follows:
•
•
•
•
•
Fair Value Per Share of Common Stock. Because there was no public market for our common stock prior to the IPO, the board of directors determined the
common stock fair value at the grant date by considering numerous objective and subjective factors, including contemporaneous valuations of our common
stock, actual operating and financial performance, market conditions, and performance of comparable publicly traded companies, business developments, the
likelihood of achieving a liquidity event, and transactions involving preferred and common stock, among other factors. Subsequent to the IPO, we determine
the fair value of common stock as of each grant date using the market closing price of our Class B common stock on the date of grant.
Expected Term. The expected term is determined using the simplified method, which is calculated as the midpoint of the option’s contractual term and vesting
period. We use this method due to limited stock option exercise history. For the ESPP, the expected term is the beginning of the offering period to the end of
each purchase period.
Expected Volatility. Since a public market for our common stock did not exist prior to the IPO and, therefore, we do not have a sufficient trading history of our
common stock, expected volatility is estimated based on a weighted average of the volatility of similar publicly held companies and the Company's common
stock over a period equivalent to the expected term of the awards.
Risk-free Interest Rate. The risk-free interest rate is determined using U.S. Treasury rates with a similar term as the expected term of the option.
Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.
Consequently, we use an expected dividend yield of zero.
Recent Accounting Pronouncements
See Note 2 "Summary of Significant Accounting Policies" to the consolidated financial statements in Item 8 of Part II for more information regarding recent
accounting pronouncements.
70
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to certain market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities as follows:
Interest Rate Risk
As of January 31, 2022, we had $83.6 million of cash and cash equivalents, which were held for working capital purposes. Our cash and cash equivalents consist
primarily of cash, money market funds, and certificates of deposit. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of
these instruments, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates.
Decreases in interest rates, however, would reduce future interest income.
We have a credit facility that permits us to incur up to $100 million in term loan borrowings, all of which had been drawn as of January 31, 2022. The term loans
mature on April 1, 2025. A portion of the interest that accrues on outstanding principal of each term loan is payable in cash on a monthly basis, which portion accrues at
a floating rate equal to the greater of (1) 7% and (2) three-month LIBOR plus 5.5% per year. In the event that LIBOR is unavailable, interest will accrue at a floating
rate equal to the greater of (1) 7.0% and (2) the U.S. prime rate plus 2.75% per year. As of January 31, 2022, the interest rate was approximately 7%. In addition, a
portion of the interest that accrues on the outstanding principal of each term loan is capitalized and added to the principal amount of the outstanding term loan on a
monthly basis, which portion accrues at a fixed rate equal to 2.5% per year.
Interest rate risk also reflects our exposure to movements in interest rates associated with our borrowings. At January 31, 2022, we had total debt outstanding with a
carrying amount of $104.0 million, which approximates fair value. A hypothetical change in interest rates of 100 basis points after January 31, 2022 would not have a
material impact on the fair value of our outstanding debt, even at the borrowing limit, or in the returns on our cash.
Foreign Currency Exchange Risk
Due to our international operations, we have foreign currency risks related to revenue and operating expenses denominated in currencies other than the U.S. dollar,
primarily the Japanese Yen, British Pound Sterling, and the Australian Dollar. Our subscriptions and services contracts are primarily denominated in the local currency
of the customer making the purchase. In addition, a portion of operating expenses are incurred outside the United States and are denominated in foreign currencies.
Decreases in the relative value of the U.S. dollar to other currencies may negatively affect revenue and other operating results as expressed in U.S. dollars. We do not
believe that an immediate 10% increase or decrease in the relative value of the U.S. dollar to other currencies would have a material effect on operating results.
We have experienced and will continue to experience fluctuations in net loss as a result of transaction gains or losses related to remeasuring certain current asset and
current liability balances that are denominated in currencies other than the functional currency of the entities in which they are recorded. We have not engaged in the
hedging of foreign currency transactions to date. We are considering the costs and benefits of initiating such a program and may in the future hedge balances and
transactions denominated in currencies other than the U.S. dollar as we expand international operations.
71
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firm (Ernst & Young LLP, Salt Lake City, UT, Auditor Firm ID: 42)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Stockholders' Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Page
73
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77
78
79
81
82
72
To the Stockholders and the Board of Directors of Domo, Inc.
Opinion on the Financial Statements
Report of Independent Registered Public Accounting Firm
We have audited the accompanying consolidated balance sheets of Domo, Inc. (the Company) as of January 31, 2021 and 2022, the related consolidated statements of
operations, comprehensive loss, stockholders’ equity (deficit) and cash flows for each of the three years in the period ended January 31, 2022, and the related notes
(collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company at January 31, 2021 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended
January 31, 2022, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control
over financial reporting as of January 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) and our report dated March 22, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based
on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be
communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
account or disclosure to which it relates.
Revenue recognition
Description of the
Matter
As described in Note 2 to the consolidated financial statements, the Company derives its revenue primarily from subscriptions to its cloud-based
platform and from professional services. Subscription revenue primarily consists of fees paid by customers to access the Company’s cloud-based
platform, including support services. Professional services revenue consists of fees paid by customers for other services including
implementation, training and education. The Company evaluates its customer contracts to determine whether its services are considered distinct
performance obligations that should be accounted for separately or combined. When the Company determines that a customer contract contains
multiple performance obligations, the performance obligations are accounted for separately and revenue is allocated to each distinct performance
obligation based on its standalone selling price.
Auditing the Company's determination of distinct performance obligations and the allocation of the transaction price based on standalone selling
prices was challenging because of the judgment involved to determine the distinct performance obligations and estimate the standalone selling
price.
73
How We Addressed
the Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company's processes to identify
the distinct performance obligations and allocate the transaction price to those performance obligations, including the underlying assumptions
related to the determination of the standalone selling prices.
Our audit procedures to test the determination of performance obligations and standalone selling prices included, among others, obtaining an
understanding of the Company’s service offerings and testing a sample of customer contracts from which the Company generated revenue. For
each selection, we identified the services to be provided under the terms of the contract and assessed management’s determination of the
performance obligations. We tested management’s determination of standalone selling prices for performance obligations by evaluating the
appropriateness of the methodology applied, testing selections to corroborate the data underlying the Company’s calculations and testing the
calculations for accuracy.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2010.
Salt Lake City, Utah
March 22, 2022
74
To the Stockholders and the Board of Directors of Domo, Inc.
Opinion on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
We have audited Domo, Inc.’s internal control over financial reporting as of January 31, 2022, based on criteria established in Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Domo, Inc. maintained, in
all material respects, effective internal control over financial reporting as of January 31, 2022, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets
of Domo, Inc. as of January 31, 2021 and 2022, the related consolidated statements of operations, comprehensive loss, stockholders’ equity (deficit), and cash flows for
each of the three years in the period ended January 31, 2022, and the related notes and our report dated March 22, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an
opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to
be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
/s/ Ernst & Young LLP
Salt Lake City, Utah
March 22, 2022
75
Domo, Inc.
Consolidated Balance Sheets
(in thousands, except per share amounts)
As of January 31,
2021
2022
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net of allowances of $3,780 and $3,793 as of January 31, 2021 and January 31, 2022, respectively
Contract acquisition costs, net
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Right-of-use assets
Contract acquisition costs, noncurrent, net
Intangible assets, net
Goodwill
Other assets
Total assets
Liabilities and stockholders' deficit
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Lease liabilities
Deferred revenue
Total current liabilities
Lease liabilities, noncurrent
Deferred revenue, noncurrent
Other liabilities, noncurrent
Long-term debt
Total liabilities
Commitments and contingencies (Note 12)
Stockholders' deficit:
Preferred stock, $0.001 par value per share; 10,000 shares authorized as of January 31, 2021 and January 31, 2022; no shares
issued and outstanding as of January 31, 2021 and January 31, 2022
Class A common stock, $0.001 par value per share; 3,264 shares authorized as of January 31, 2021 and January 31, 2022; 3,264
shares issued and outstanding as of January 31, 2021 and January 31, 2022
Class B common stock, $0.001 par value per share; 500,000 shares authorized as of January 31, 2021 and January 31, 2022;
27,271 and 29,730 shares issued and outstanding as of January 31, 2021 and January 31, 2022, respectively
Additional paid-in capital
Accumulated other comprehensive income
Accumulated deficit
Total stockholders' deficit
Total liabilities and stockholders' deficit
See accompanying notes to consolidated financial statements.
76
$
$
$
$
$
$
$
90,794
48,272
13,894
12,216
165,176
14,745
3,663
18,605
3,356
9,478
1,415
216,438
1,085
51,950
3,808
129,079
185,922
1,556
3,173
9,637
99,609
299,897
—
3
27
1,038,006
877
(1,122,372)
(83,459)
216,438
$
83,561
64,149
15,417
9,975
173,102
17,584
16,392
23,177
2,875
9,478
1,981
244,589
4,770
59,976
3,439
168,335
236,520
16,757
2,420
10,882
103,988
370,567
—
3
30
1,098,084
388
(1,224,483)
(125,978)
244,589
Revenue:
Subscription
Professional services and other
Total revenue
Cost of revenue:
Subscription
Professional services and other
Total cost of revenue
Gross profit
Operating expenses:
Sales and marketing
Research and development
General and administrative
Total operating expenses
Loss from operations
Other expense, net
Loss before income taxes
Provision for (benefit from) income taxes
Net loss
Net loss per share, basic and diluted
Weighted-average number of shares used in
computing net loss per share, basic and diluted
Domo, Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts)
Year Ended January 31,
2020
2021
2022
$
$
$
146,837 $
26,558
173,395
35,366
20,564
55,930
117,465
127,567
69,224
35,941
232,732
(115,267)
(9,635)
(124,902)
754
(125,656) $
(4.57) $
183,645 $
26,535
210,180
36,656
20,092
56,748
153,432
117,335
66,474
42,708
226,517
(73,085)
(11,140)
(84,225)
409
(84,634) $
(2.89) $
See accompanying notes to consolidated financial statements.
27,520
29,308
77
223,010
34,951
257,961
40,907
26,239
67,146
190,815
143,722
81,027
54,536
279,285
(88,470)
(14,102)
(102,572)
(461)
(102,111)
(3.19)
32,021
Domo, Inc.
Consolidated Statements of Comprehensive Loss
(in thousands)
Net loss
Foreign currency translation adjustments
Unrealized losses on securities available for sale
Comprehensive loss
Year Ended January 31,
2020
2021
2022
$
$
(125,656) $
(51)
2
(125,705) $
(84,634) $
490
(2)
(84,146) $
(102,111)
(489)
—
(102,600)
See accompanying notes to consolidated financial statements.
78
Domo, Inc.
Consolidated Statements of Stockholders' Equity (Deficit)
(in thousands, except share amounts)
Stockholders' Equity (Deficit)
Accumulated
Other
Comprehensive
Income
Additional
Paid-in Capital
$
956,145 $
—
Accumulated
Deficit
(912,082) $
Total
Stockholders'
Equity (Deficit)
44,527
—
Class A Common Stock
Class B Common Stock
Balance as of January 31, 2019
Vesting of restricted stock units
Shares repurchased for tax
withholdings on vesting of
restricted stock
Issuance of common stock under
employee stock purchase plan
Exercise of stock options
Stock-based compensation
expense
Exercise of common stock
warrants
Other comprehensive loss
Net loss
Balance as of January 31, 2020
Vesting of restricted stock units
Shares repurchased for tax
withholdings on vesting of
restricted stock
Issuance of common stock under
employee stock purchase plan
Exercise of stock options
Stock-based compensation
expense
Exercise of common stock
warrants
Issuance of common stock
warrants
Other comprehensive loss
Net loss
Balance as of January 31, 2021
Vesting of restricted stock units
Shares repurchased for tax
withholdings on vesting of
restricted stock
Issuance of common stock under
employee stock purchase plan
Exercise of stock options
Stock-based compensation
expense
Exercise of common stock
warrants
Other comprehensive loss
Net loss
Shares
3,263,659 $
—
—
—
—
—
—
—
—
3,263,659
—
—
—
—
—
—
—
—
—
3,263,659
—
—
—
—
—
—
—
—
Balance as of January 31, 2022
3,263,659 $
Amount
Shares
Amount
23
—
—
2
—
—
—
—
—
25
—
—
2
—
—
—
—
—
—
27
3
—
—
—
—
—
—
—
30
3
—
—
—
—
—
—
—
—
3
—
—
—
—
—
—
—
—
—
3
—
—
—
—
—
—
—
—
3
23,434,542 $
982,591
(35,446)
506,278
94,603
—
3,130
—
—
24,985,698
1,032,063
(49,183)
860,300
374,049
—
68,508
—
—
—
27,271,435
1,678,215
(156,985)
505,020
332,137
—
100,000
—
—
29,729,822 $
79
(1,428)
7,810
1,600
24,014
—
—
—
988,141
—
(1,745)
6,746
8,092
33,674
—
3,098
—
—
1,038,006
—
(10,315)
4,133
5,621
60,639
—
—
—
$
438
—
—
—
—
—
—
(49)
—
389
—
—
—
—
—
—
—
488
—
877
—
—
—
—
—
—
—
—
—
—
—
—
(125,656)
(1,037,738)
—
—
—
—
—
—
—
—
(84,634)
(1,122,372)
—
—
—
—
—
(1,428)
7,812
1,600
24,014
—
(49)
(125,656)
(49,180)
—
(1,745)
6,748
8,092
33,674
—
3,098
488
(84,634)
(83,459)
3
(10,315)
4,133
5,621
60,639
—
(489)
—
—
—
(102,111)
—
(489)
(102,111)
$
1,098,084 $
388
$ (1,224,483) $
(125,978)
See accompanying notes to consolidated financial statements.
80
Domo, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Cash flows from operating activities
Net loss
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Year Ended January 31,
2020
2021
2022
$
(125,656)
$
(84,634)
$
(102,111)
Depreciation and amortization
Non-cash lease expense
Amortization of contract acquisition costs
Stock-based compensation expense
Other, net
Change in operating assets and liabilities:
Accounts receivable, net
Contract acquisition costs
Prepaid expenses and other
Accounts payable
Operating lease liabilities
Accrued expenses and other liabilities
Deferred revenue
Net cash (used in) provided by operating activities
Cash flows from investing activities
Purchases of property and equipment
Purchases of securities available for sale
Proceeds from maturities of securities available for sale
Purchases of intangible assets
Net cash (used in) provided by investing activities
Cash flows from financing activities
Proceeds from shares issued in connection with employee stock purchase plan
Shares repurchased for tax withholdings on vesting of restricted stock
Proceeds from exercise of stock options
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosures of cash flow information
Cash paid for income taxes
Cash paid for interest
Non-cash investing and financing activities
Operating lease right-of-use assets obtained for lease liabilities
Property and equipment acquired through tenant improvement allowance
Stock-based compensation capitalized as internal-use software
Debt issuance costs in other liabilities, noncurrent
Issuance of warrants in connection with credit facility
6,917
—
11,777
23,847
1,959
454
(13,178)
(1,739)
(292)
—
(150)
15,842
(80,219)
(6,466)
(102,084)
84,800
(65)
(23,815)
7,812
(1,428)
1,600
7,984
(80)
(96,130)
176,973
80,843
365
9,083
—
—
480
—
—
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
4,765
3,969
14,376
33,749
4,340
(305)
(16,775)
566
(1,341)
(3,685)
6,595
22,508
(15,872)
(5,706)
(11,149)
29,200
(105)
12,240
6,748
(1,745)
8,092
13,095
488
9,951
80,843
90,794
836
7,586
—
—
583
3,395
3,098
$
$
$
$
$
$
$
$
5,363
4,839
15,835
60,526
3,618
(15,877)
(22,258)
1,545
3,755
(3,065)
9,706
38,503
379
(6,517)
—
—
—
(6,517)
4,133
(10,315)
5,621
(561)
(534)
(7,233)
90,794
83,561
625
7,142
17,588
387
1,226
—
—
See accompanying notes to consolidated financial statements.
81
Domo, Inc.
Notes to Consolidated Financial Statements
1. Overview and Basis of Presentation
Description of Business and Basis of Presentation
Domo, Inc. (the Company) provides a cloud-based platform that digitally connects everyone from the CEO to the frontline employee with all the data, systems and
people in an organization, giving them access to real-time data and insights and allowing them to manage their business from their smartphones. The Company is
incorporated in Delaware. The Company's headquarters is located in American Fork, Utah and the Company has subsidiaries in the United Kingdom, Australia, Japan,
Hong Kong, Singapore, New Zealand, Canada, and India.
The accompanying consolidated financial statements, which include the accounts of the Company and its wholly owned subsidiaries, have been prepared in
conformity with accounting principles generally accepted in the United States of America (GAAP). All intercompany balances and transactions have been eliminated in
consolidation. The Company’s fiscal year ends on January 31.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect
the amounts reported in the consolidated financial statements and the accompanying notes. The Company bases its estimates on historical experience and on other
assumptions that its management believes are reasonable under the circumstances. Actual results could differ from those estimates. The Company’s estimates and
judgments include the determination of standalone selling prices for the Company’s services, which are used to determine revenue recognition for arrangements with
multiple performance obligations; the amortization period for deferred contract acquisition costs; valuation of the Company’s stock-based compensation; useful lives of
fixed assets; capitalization and estimated useful life of internal-use software; the incremental borrowing rate used to calculate the present value of capitalized leases;
valuation estimates used when evaluating impairment of long-lived and intangible assets including goodwill; and the allowance for doubtful accounts.
Foreign Currency
The functional currencies of the Company’s foreign subsidiaries are the respective local currencies. The cumulative effect of translation adjustments arising from
the use of differing exchange rates from period to period is included in accumulated other comprehensive income within the consolidated balance sheets. Changes in the
cumulative foreign translation adjustment are reported in the consolidated statements of stockholders’ equity (deficit) and the consolidated statements of comprehensive
loss. Transactions denominated in currencies other than the functional currency are remeasured at the end of the period and when the related receivable or payable is
settled, which may result in transaction gains or losses. Foreign currency transaction gains and losses are included in other expense, net in the consolidated statements of
operations. All assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the exchange rate on the balance sheet date. Revenue and
expenses are translated at the average exchange rate during the period, and equity balances are translated using historical exchange rates.
Segment Information
The Company operates as one operating segment. The Company’s chief operating decision maker is its chief executive officer, who reviews financial information
presented on a consolidated basis for purposes of making operating decisions, assessing financial performance and allocating resources.
82
Domo, Inc.
Notes to Consolidated Financial Statements (Continued)
2. Summary of Significant Accounting Policies
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, money market funds and highly liquid investments purchased with an original maturity date of 90 days or less
from the date of purchase. The fair value of cash equivalents approximated their carrying value as of January 31, 2021 and January 31, 2022.
Accounts Receivable
Accounts receivable are recorded at the invoiced amount (net of allowance), do not require collateral, and do not bear interest. The Company’s payment terms
generally provide that customers pay within 30 days of the invoice date.
The Company maintains an allowance for doubtful accounts and expected credit losses for amounts the Company does not expect to collect. In establishing the
required allowance, management considers historical losses, current market conditions, customers’ financial condition and credit quality, the age of the receivables, and
current payment patterns. Account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery is
considered remote.
Changes in the Company's allowance for doubtful accounts for the years ended January 31, 2020, 2021 and 2022 were as follows (in thousands):
Balance as of January 31, 2019
Additions
Write-offs
Balance as of January 31, 2020
Additions
Write-offs
Balance as of January 31, 2021
Additions
Write-offs
Balance as of January 31, 2022
Contract Acquisition Costs
$
$
3,387
5,508
(6,731)
2,164
7,362
(5,746)
3,780
5,673
(5,660)
3,793
Contract acquisition costs, net are stated at cost net of accumulated amortization and primarily consist of deferred sales commissions, which are considered
incremental and recoverable costs of obtaining a contract with a customer. Contract acquisition costs for initial contracts are deferred and then amortized on a straight-
line basis over the period of benefit, which the Company has determined to be approximately four years. The period of benefit is determined by taking into
consideration contractual terms, expected customer life, changes in the Company's technology and other factors. Contract acquisition costs for renewal contracts are not
commensurate with contract acquisition costs for initial contracts and are recorded as expense when incurred if the period of benefit is one year or less. If the period of
benefit is greater than one year, costs are deferred and then amortized on a straight-line basis over the period of benefit, which the Company has determined to be two
years. Contract acquisition costs related to professional services and other performance obligations with a period of benefit of one year or less are recorded as expense
when incurred. Amortization of contract acquisition costs is included in sales and marketing expenses in the accompanying consolidated statements of operations.
Amortization expense related to contract acquisition costs was $11.8 million, $14.4 million and $15.8 million for the years ended January 31, 2020, 2021 and 2022,
respectively. There was no impairment charge in relation to contract acquisition costs for the periods presented.
83
Domo, Inc.
Notes to Consolidated Financial Statements (Continued)
2. Summary of Significant Accounting Policies (Continued)
Property and Equipment, Net
Property and equipment, net, are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful
lives of the assets or over the related lease terms (if shorter). Repairs and maintenance costs are expensed as incurred.
The estimated useful lives of property and equipment are as follows:
Computer equipment and software
Furniture, vehicles and office equipment
Leasehold improvements
Leases
2-3 years
3 years
Shorter of remaining lease term or estimated useful life
At the inception of a contract, the Company determines whether the contract is or contains a lease. Leases with a term greater than one year are recognized on the
balance sheet as right-of-use (ROU) assets and lease liabilities. The Company has elected the short-term leases practical expedient which allows any leases with a term
of 12 months or less to be considered short-term and thus not have an ROU asset or lease liability recognized on the balance sheet.
ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising
from the lease. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the
lease term at commencement date. As these leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available
at commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate incurred to borrow on a collateralized basis over a
similar term and amount equal to the lease payments in a similar economic environment. The operating lease ROU asset also includes any lease payments made in
advance of lease expense and excludes lease incentives and initial direct costs incurred. Certain lease terms include options to terminate or extend the lease for periods
of one to three years. The Company does not include these optional periods in its minimum lease terms or in the determination of the ROU assets and lease liabilities
associated with these leases unless the options are reasonably certain to be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis
over the lease term. ROU assets are subject to evaluation for impairment or disposal on a basis consistent with other long-lived assets.
The Company has lease agreements with lease and non-lease components which the Company has elected to account for as a single lease component. On the lease
commencement date, the Company establishes assets and liabilities for the present value of estimated future costs to retire long-lived assets at the termination or
expiration of a lease. Such assets are depreciated over the lease term to operating expense.
Income from subleases is recorded in other expense, net in the accompanying consolidated statements of operations.
Capitalized Internal-Use Software Costs
The Company capitalizes certain costs related to development of its platform incurred during the application development stage. Costs related to preliminary project
activities and post-implementation activities are expensed as incurred. Maintenance and training costs are also expensed as incurred. Capitalized costs are included in
property and equipment.
Capitalized internal-use software is amortized generally as subscription cost of revenue, with a smaller portion related to operations amortized as research and
development within operating expenses. All capitalized internal-use software is amortized on a straight-line basis over its estimated useful life, which is generally three
years. Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could
impact the recoverability of these assets.
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired. Goodwill and
indefinite-lived intangible assets are not amortized, but rather tested for impairment
84
Domo, Inc.
Notes to Consolidated Financial Statements (Continued)
2. Summary of Significant Accounting Policies (Continued)
at least annually on November 1 or more often if and when circumstances indicate that the carrying value may not be recoverable. Finite-lived intangible assets are
amortized over their useful lives.
Goodwill is tested for impairment based on reporting units. The Company periodically reevaluates the business and has determined that it continues to operate in
one segment, which is also considered the sole reporting unit. Therefore, goodwill is tested for impairment at the consolidated level.
The Company reviews its long-lived assets, including property and equipment, finite-lived intangible assets, and ROU assets for impairment whenever an event or
change in facts and circumstances indicates that their carrying amounts may not be recoverable. Recoverability of these assets is measured by comparing the carrying
amount to the estimated undiscounted future cash flows expected to be generated. If the carrying amount exceeds the undiscounted cash flows, the assets are determined
to be impaired and an impairment charge is recognized as the amount by which the carrying amount exceeds fair value.
There was no goodwill acquired and no impairment charges for goodwill or long-lived assets recorded during the periods presented.
Revenue Recognition
The Company derives revenue primarily from subscriptions to its cloud-based platform and professional services. Revenue is recognized when control of these
services is transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those services, net of
sales taxes.
For sales through channel partners, the Company considers the channel partner to be the end customer for the purposes of revenue recognition as the Company's
contractual relationships with channel partners do not depend on the sale of the Company's services to their customers and payment from the channel partner is not
contingent on receiving payment from their customers. The Company's contractual relationships with channel partners do not allow returns, rebates, or price
concessions.
The price of subscriptions is generally fixed at contract inception and therefore, the Company's contracts do not contain a significant amount of variable
consideration.
Revenue recognition is determined through the following steps:
•
•
•
•
•
Identification of the contract, or contracts, with a customer
Identification of the performance obligations in the contract
Determination of the transaction price
Allocation of the transaction price to the performance obligations in the contract
Recognition of revenue when, or as, performance obligations are satisfied
Subscription Revenue
Subscription revenue primarily consists of fees paid by customers to access the Company’s cloud-based platform, including support services. The majority of the
Company's subscription agreements have multi-year contractual terms and a smaller percentage have annual contractual terms. Revenue is recognized ratably over the
related contractual term beginning on the date that the platform is made available to a customer. Access to the platform represents a series of distinct services as the
Company continually provides access to and fulfills its obligation to the end customer over the subscription term. The series of distinct services represents a single
performance obligation that is satisfied over time. The Company recognizes revenue ratably because the customer receives and consumes the benefits of the platform
throughout the contract period. The Company's contracts are generally non-cancelable.
85
Domo, Inc.
Notes to Consolidated Financial Statements (Continued)
2. Summary of Significant Accounting Policies (Continued)
Professional Services and Other Revenue
Professional services revenue consists of implementation services sold with new subscriptions as well as professional services sold separately. Other revenue
includes training and education. Professional services arrangements are billed in advance, and revenue from these arrangements is recognized as the services are
provided, generally based on hours incurred. Training and education revenue is also recognized as the services are provided.
Contracts with Multiple Performance Obligations
Most of the Company's contracts with new customers contain multiple performance obligations, generally consisting of subscriptions and professional services. For
these contracts, individual performance obligations are accounted for separately if they are distinct. The transaction price is allocated to the separate performance
obligations on a relative standalone selling price basis. Standalone selling prices are determined based on historical standalone selling prices, taking into consideration
overall pricing objectives, market conditions and other factors, including contract value, customer demographics, platform tier, and the number and types of users within
the contract.
Deferred Revenue
The Company's contracts are typically billed annually in advance. Deferred revenue includes amounts collected or billed in excess of revenue recognized. Deferred
revenue is recognized as revenue as the related performance obligations are satisfied.
Deferred revenue that will be recognized during the succeeding twelve-month period is recorded as a current liability and the remaining portion is recorded as a
noncurrent liability.
Cost of Revenue
Cost of subscription revenue consists primarily of third-party hosting services and data center capacity; employee-related costs directly associated with cloud
infrastructure and customer support personnel, including salaries, benefits, bonuses and stock-based compensation; amortization expense associated with capitalized
software development costs; depreciation expense associated with computer equipment and software; certain fees paid to various third parties for the use of their
technology and services; and allocated overhead. Allocated overhead includes items such as information technology infrastructure, rent, and employee benefit costs.
Cost of professional services and other revenue consists primarily of employee-related costs associated with these services, including stock-based compensation;
third-party consultant fees; and allocated overhead.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expense was $8.3 million, $12.0 million and $10.8 million for the years ended January 31, 2020, 2021 and
2022, respectively.
Research and Development
Research and development expenses consist primarily of employee-related costs for the design and development of the Company's platform, contractor costs to
supplement staff levels, third-party web services, consulting services, and allocated overhead. Research and development expenses, other than software development
costs qualifying for capitalization, are expensed as incurred.
Stock-Based Compensation
The Company has granted stock-based awards, consisting of stock options and restricted stock units, to its employees, certain consultants and certain members of
its board of directors. The Company records stock-based compensation based on the grant date fair value of the awards, which include stock options and restricted stock
units, and recognizes the fair value of those awards as expense using the straight-line method over the requisite service period of the award. For restricted stock units
that contain performance conditions, the Company recognizes expense using the accelerated attribution method if it is
86
Domo, Inc.
Notes to Consolidated Financial Statements (Continued)
2. Summary of Significant Accounting Policies (Continued)
probable the performance conditions will be met. The Company estimates the grant date fair value of stock options using the Black-Scholes option-pricing model.
Stock-based compensation expense related to purchase rights issued under the 2018 Employee Stock Purchase Plan (ESPP) is based on the Black-Scholes option-
pricing model fair value of the estimated number of awards as of the beginning of the offering period. Stock-based compensation expense is recognized using the
straight-line method over the offering period.
The determination of the grant date fair value of stock-based awards is affected by the estimated fair value of the Company's common stock as well as other
assumptions and judgments, which are estimated as follows:
•
•
•
•
•
Fair Value Per Share of Common Stock. The Company determines the fair value of common stock as of each grant date using the market closing price of the
Company's Class B common stock on the date of grant.
Expected Term. The expected term is determined using the simplified method, which is calculated as the midpoint of the option’s contractual term and vesting
period. The Company uses this method due to limited stock option exercise history. For the ESPP, the expected term is the beginning of the offering period to
the end of each purchase period.
Expected Volatility. Since a public market for the Company's common stock did not exist prior to the IPO and, therefore, the Company does not have sufficient
trading history of its common stock, expected volatility is estimated based on the weighted average of the volatility of similar publicly held companies and the
Company's common stock over a period equivalent to the expected term of the awards.
Risk-free Interest Rate. The risk-free interest rate is determined using U.S. Treasury rates with a similar term as the expected term of the option.
Expected Dividend Yield. The Company has never declared or paid any cash dividends and does not presently plan to pay cash dividends in the foreseeable
future. Consequently, the Company uses an expected dividend yield of zero.
Income Taxes
The Company accounts for income taxes in accordance with the liability method of accounting for income taxes. Under this method, the Company recognizes a
liability or asset for the deferred income tax consequences of all temporary differences between the tax basis of assets and liabilities and their reported amounts in the
consolidated financial statements that will result in taxable or deductible amounts in future years when the reported amounts of the assets and liabilities are recovered or
settled. These deferred income tax assets or liabilities are measured using the enacted tax rates that will be in effect when the differences are expected to affect taxable
income.
Valuation allowances are provided when it is more-likely-than-not that some or all of the deferred income tax assets may not be realized. In assessing the need for a
valuation allowance, the Company has considered its historical levels of income, expectations of future taxable income and ongoing tax planning strategies. Because of
the uncertainty of the realization of its deferred tax assets, the Company has a full valuation allowance for domestic net deferred tax assets, including net operating loss
carryforwards, and tax credits related primarily to research and development. Realization of its deferred tax assets is dependent primarily upon future U.S. taxable
income.
Tax positions are recognized in the consolidated financial statements when it is more-likely-than-not the position will be sustained upon examination by the tax
authorities. The Company’s policy for recording interest and penalties related to income taxes, including uncertain tax positions, is to record such items as a component
of the provision for income taxes.
Concentrations of Credit Risk and Significant Customers
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, and accounts receivable.
Cash denominated in currencies other than the United States dollar represented 14% and 20% of total cash and cash equivalents as of January 31, 2021 and January 31,
2022, respectively.
87
Domo, Inc.
Notes to Consolidated Financial Statements (Continued)
2. Summary of Significant Accounting Policies (Continued)
The Company maintains its cash accounts with financial institutions where, at times, deposits exceed federal insured limits. The Company may invest its excess
cash in money market funds, certificates of deposit, or in short-term investments consisting of highly-rated debt securities.
No single customer accounted for more than 10% of revenue for the years ended January 31, 2020, 2021 and 2022 or more than 10% of accounts receivable as of
January 31, 2021 and January 31, 2022.
The Company is primarily dependent upon third parties in order to meet the uptime and performance requirements of its customers. Any disruption of or
interference with the Company's use of these third parties would impact operations.
Net Loss per Share
The Company computes net loss per share using the two-class method required for multiple classes of common stock and participating securities. The rights,
including the liquidation and dividend rights, of the Class A common stock and Class B common stock are substantially identical, other than voting rights. Accordingly,
the Class A common stock and Class B common stock share equally in the Company’s net losses.
Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net
loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the
period increased by common shares that could be issued upon conversion or exercise of other outstanding securities to the extent those additional common shares would
be dilutive. The dilutive effect of potentially dilutive securities is reflected in diluted net loss per share by application of the treasury stock method. During periods when
the Company is in a net loss position, basic net loss per share is the same as diluted net loss per share as the effects of potentially dilutive securities are anti-dilutive.
Recent Accounting Pronouncements
There have been no recent accounting pronouncements issued which are expected to have a material effect on the Company's financial statements. Management
continues to monitor and review recently issued accounting guidance upon issuance.
3. Cash and Cash Equivalents
The amortized cost and estimated fair value of the Company’s cash and cash equivalents as of January 31, 2021 and January 31, 2022 were as follows (in
thousands):
Cash
Cash equivalents:
Money market funds
Certificates of deposit
Total cash and cash equivalents
Cash
Cash equivalents:
Money market funds
Certificates of deposit
Total cash and cash equivalents
Amortized Cost
Unrealized Gain
Unrealized Loss
Estimated Fair Value
January 31, 2021
$
$
$
$
24,928 $
50,725
15,141
90,794 $
— $
—
—
— $
January 31, 2022
— $
—
—
— $
24,928
50,725
15,141
90,794
Amortized Cost
Unrealized Gain
Unrealized Loss
Estimated Fair Value
42,500 $
25,878
15,183
83,561 $
— $
—
—
— $
— $
—
—
— $
42,500
25,878
15,183
83,561
88
Domo, Inc.
Notes to Consolidated Financial Statements (Continued)
4. Fair Value Measurements
Assets Measured at Fair Value on a Recurring Basis
Financial instruments recorded at fair value in the financial statements are categorized as follows:
•
•
•
Level 1: Observable inputs that reflect quoted prices for identical assets or liabilities in active markets.
Level 2: Observable inputs, other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other
inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3: Unobservable inputs reflecting management's assumptions incorporated in valuation techniques used to determine fair value. These assumptions are
required to be consistent with market participant assumptions that are reasonably available.
The following table summarizes the assets measured at fair value on a recurring basis as of January 31, 2021 and January 31, 2022 by level within the fair value
hierarchy (in thousands):
Cash equivalents:
Money market funds
Certificates of deposit
Total cash equivalents
Cash equivalents:
Money market funds
Certificates of deposit
Total cash equivalents
Level 1
Level 2
Level 3
Total
January 31, 2021
50,725 $
—
50,725 $
— $
15,141
15,141 $
— $
—
— $
Level 1
Level 2
Level 3
Total
January 31, 2022
25,878 $
—
25,878 $
— $
15,183
15,183 $
— $
—
— $
50,725
15,141
65,866
25,878
15,183
41,061
$
$
$
$
During the years ended January 31, 2021 and 2022, the Company had no transfers between levels of the fair value hierarchy of its assets and liabilities measured at
fair value.
Fair Value of Other Financial Instruments
The carrying amounts of certain financial instruments, including cash held in banks, accounts receivable, accounts payable, accrued liabilities, and other liabilities
approximate fair value due to their short-term maturities and are excluded from the fair value tables above.
89
Domo, Inc.
Notes to Consolidated Financial Statements (Continued)
5. Property and Equipment
Property and equipment, net consisted of the following (in thousands):
Capitalized internal-use software development costs
Computer equipment and software
Leasehold improvements
Furniture, vehicles and office equipment
Less accumulated depreciation and amortization
As of January 31,
2021
2022
$
$
29,816
5,097
1,373
842
37,128
(22,383)
14,745
$
$
37,088
4,426
2,129
764
44,407
(26,823)
17,584
Depreciation and amortization expense related to property and equipment was $6.3 million, $4.0 million and $4.9 million for the years ended January 31, 2020,
2021 and 2022, respectively.
The Company capitalized $6.5 million, $5.5 million and $7.3 million in software development costs during the years ended January 31, 2020, 2021 and 2022,
respectively. Amortization of capitalized software development costs was $3.7 million, $3.0 million and $4.3 million for the years ended January 31, 2020, 2021 and
2022, respectively.
6. Intangible Assets
Intangible assets consisted of the following (in thousands):
Intellectual property excluding patents
Software licenses
Patents
Less accumulated amortization
As of January 31,
2021
2022
$
$
2,458
1,603
950
5,011
(1,655)
3,356
$
$
2,458
—
950
3,408
(533)
2,875
Amortization expense related to intangible assets was $0.6 million, $0.6 million and $0.5 million for the years ended January 31, 2020, 2021 and 2022, respectively.
Intellectual property excluding patents is considered an indefinite-lived asset due to the fact that it is renewable in perpetuity. Software licenses are amortized over an
estimated useful life of three years. The patents were acquired and are being amortized over a weighted-average remaining useful life of approximately 5.2 years.
90
Domo, Inc.
Notes to Consolidated Financial Statements (Continued)
6. Intangible Assets (Continued)
As of January 31, 2022,
future amortization expense
for definite-lived
intangible assets
is estimated
to be as
follows
(in
thousands):
Year Ending January 31,
2023
2024
2025
2026
2027
Thereafter
7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
Accrued expenses
Accrued bonus
Accrued payroll and benefits
Accrued commissions
Accrued payroll taxes
Employee stock purchase plan
Sales and other taxes payable
Other accrued liabilities
8. Leases
$
$
As of January 31,
2021
2022
$
$
8,807
9,073
8,513
7,488
12,213
3,384
840
1,632
51,950
$
$
80
80
80
80
75
22
417
13,436
13,064
11,494
8,119
7,798
3,840
518
1,707
59,976
The Company leases office space under non-cancelable operating leases with various expiration dates through 2027. These leases require monthly lease payments
that may be subject to annual increases throughout the lease term.
Components of lease expense are summarized as follows (in thousands):
Operating lease expense
Short-term lease expense
Total lease expense
Year Ended January 31,
2020
2021
2022
$
$
7,277 $
—
7,277
$
5,748 $
2,266
8,014
$
6,451
1,263
7,714
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Domo, Inc.
Notes to Consolidated Financial Statements (Continued)
8. Leases (Continued)
Lease term and discount rate information are summarized as follows:
Weighted average remaining lease term (years)
Weighted average discount rate
As of January 31, 2022, the maturities of lease liabilities, net of lease incentives, were as follows (in thousands):
Year Ending January 31:
(1)
2023
2024
2025
2026
2027
Thereafter
Total lease payments
Less imputed interest
Present value of lease liabilities
As of January 31, 2022
4.7
10.0%
3,274
5,470
5,039
5,207
5,348
1,797
26,135
(5,939)
20,196
$
$
(1) Net of $2.8 million of tenant improvements which are expected to be utilized in fiscal 2023
Cash paid for operating leases was $4.8 million and $5.2 million during the years ended January 31, 2021 and 2022, respectively, and was included in net cash used
in operating activities in the consolidated statements of cash flows.
In November 2020, the Company entered into an agreement to lease office space from its current landlord. The lease term commenced on May 1, 2021 and is for a
period of approximately six years, with rent payments over the term of the lease totaling approximately $23.8 million. At the lease commencement date, the Company
classified the lease as an operating lease and recorded a lease liability of $13.6 million with a corresponding right-of-use asset.
92
Domo, Inc.
Notes to Consolidated Financial Statements (Continued)
9. Deferred Revenue and Performance Obligations
Deferred Revenue
Significant changes in the Company's deferred revenue balance for the years ended January 31, 2020, 2021 and 2022 were as follows (in thousands):
Balance as of January 31, 2019
Revenue recognized that was included in the deferred revenue balance at the beginning of the period
Increase due to billings excluding amounts recognized as revenue during the period
Balance as of January 31, 2020
Revenue recognized that was included in the deferred revenue balance at the beginning of the period
Increase due to billings excluding amounts recognized as revenue during the period
Balance as of January 31, 2021
Revenue recognized that was included in the deferred revenue balance at the beginning of the period
Increase due to billings excluding amounts recognized as revenue during the period
Balance as of January 31, 2022
Transaction Price Allocated to Remaining Performance Obligations
$
$
93,902
(88,693)
104,535
109,744
(106,070)
128,578
132,252
(129,207)
167,710
170,755
Transaction price allocated to remaining performance obligations represents the remaining amount of revenue the Company expects to recognize from existing non-
cancelable contracts, whether billed or unbilled. As of January 31, 2022, approximately $314.4 million of revenue was expected to be recognized from remaining
performance obligations for subscription contracts. The Company expects to recognize approximately $201.0 million of this amount during the twelve months following
January 31, 2022, with the balance recognized thereafter. As of January 31, 2022, approximately $24.6 million of revenue was expected to be recognized from
remaining performance obligations for professional services and other contracts, $20.7 million of which is expected to be recognized during the twelve months
following January 31, 2022, and the balance recognized thereafter.
10. Geographic Information
Revenue by geographic area is determined by the billing address of the customer. The following table sets forth revenue by geographic area (in thousands):
United States
Japan
Other
Total
Percentage of revenue by geographic area:
United States
Japan
Other
$
$
Year Ended January 31,
2020
2021
2022
130,044
17,334
26,017
173,395
$
$
75 %
10 %
15 %
159,462
22,157
28,561
210,180
$
$
76 %
11 %
13 %
198,040
25,046
34,875
257,961
77 %
10 %
13 %
Other than the United States and Japan, no other individual country exceeded 10% of total revenue for the years ended January 31, 2020, 2021 and 2022. As of
January 31, 2022, substantially all of the Company’s property and equipment was located in the United States.
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Domo, Inc.
Notes to Consolidated Financial Statements (Continued)
11. Credit Facility
The Company has a credit facility that permits up to $100.0 million in term loan borrowings, all of which had been drawn as of January 31, 2022. The credit facility
is secured by substantially all of the Company's assets.
In August 2020, the Company entered into an amendment to the credit facility which extended the maturity date for the outstanding loan from October 1, 2022 to
April 1, 2025. Per the amendment, the Company is required to comply with a financial covenant requiring the Company to maintain a minimum balance of unrestricted
cash and cash equivalents equal to $10.0 million until the Company’s six-month adjusted cash flow is greater than zero. The amendment also revised the maximum debt
ratio financial covenant and included an amendment fee of $5.0 million, which accrues interest at a rate of 9.5% per year. The amendment fee, along with its accrued
interest, is to be paid at the earlier of the payment date, maturity date, or the date the loan becomes payable.
The credit facility requires interest-only payments until the maturity date. A portion of the interest that accrues on the outstanding principal of each term loan is
payable in cash on a monthly basis, which portion accrues at a floating rate equal to the greater of (1) 7% and (2) three-month LIBOR plus 5.5% per year. In the event
that LIBOR is unavailable, interest will accrue at a floating rate equal to the greater of (1) 7% and (2) the U.S. prime rate plus 2.75% per year. This interest rate was
approximately 7% as of January 31, 2022. In addition, a portion of the interest that accrues on the outstanding principal of each term loan is capitalized and added to the
principal amount of the outstanding term loan on a monthly basis, which portion accrues at a fixed rate equal to 2.5% per year. During the years ended January 31, 2020,
2021 and 2022, $2.6 million, $2.7 million and $2.8 million of interest was capitalized, respectively.
The credit facility requires a closing fee of $7.0 million to be paid on the earliest of (1) the date the term loan is prepaid, (2) the term loan maturity date, which is
April 1, 2025, and (3) the date the term loan becomes due and payable. Due to the long-term nature of the closing fee, and the amendment fee described above, these
fees were recorded at present value as an increase to other liabilities, noncurrent and an increase to debt issuance costs. These liabilities will be accreted to their full
value over the term of the loan, with such accretion recorded as interest expense in other expense, net in the consolidated statements of operations. Debt issuance costs
are presented as an offset to the outstanding principal balance of the term loans on the consolidated balance sheets and are being amortized as interest expense in other
expense, net in the consolidated statements of operations over the term of the loan using the effective interest rate method.
The balances in long-term debt consisted of the following (in thousands):
Principal
Less: unamortized debt issuance costs
Net carrying amount
As of January 31,
2021
2022
$
$
107,826 $
(8,217)
99,609 $
110,599
(6,611)
103,988
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Domo, Inc.
Notes to Consolidated Financial Statements (Continued)
The $100.0 million credit facility contains customary conditions to borrowing, events of default and covenants, including covenants that restrict the Company's
ability to dispose of assets, make material changes to the nature, control or location of the business, merge with or acquire other entities, incur indebtedness or
encumbrances, make distributions to holders of the Company's capital stock, make certain investments or enter into transactions with affiliates. In addition, the
Company is required to comply with a financial covenant based on the ratio of outstanding indebtedness to annualized recurring revenue. Under the facility, the
maximum ratio is 0.600 on January 31, 2021 and April 30, 2021; 0.575 on July 31, 2021 and October 31, 2021; 0.550 on January 31, 2022 and April 30, 2022; 0.525 on
July 31, 2022 and October 31, 2022; and 0.500 on January 31, 2023 through the maturity date. The credit facility defines annualized recurring revenue as four times the
Company's aggregate revenue for the immediately preceding quarter (net of recurring discounts and discounts for periods greater than one year) less the annual contract
value of any customer contracts pursuant to which the Company was advised during such quarter would not be renewed at the end of the current term plus the annual
contract value of existing customer contract increases during such quarter. This covenant is measured quarterly on a three-month trailing basis. Upon the occurrence of
an event of default, such as non-compliance with covenants, any outstanding principal, interest and fees become due immediately. The Company was in compliance
with the covenant terms of the credit facility at January 31, 2021 and January 31, 2022.
The Company incurred interest expense of $12.6 million, $12.6 million and $13.4 million for the years ended January 31, 2020, 2021 and 2022, respectively.
Stock Warrants
In connection with the credit facility described above, the Company issued warrants which are exercisable for an aggregate of 125,000 shares of Class B common
stock at an exercise price of $17.8736 per share. These warrants were net exercised in September 2020, resulting in the issuance of 68,508 shares of Class B common
stock.
Upon execution of the August 2020 amendment, the Company issued an additional 100,000 fully vested warrants to purchase Class B common stock with an
exercise price of $0.01. These warrants were exercised in May 2021, resulting in the issuance of 100,000 shares of Class B common stock.
Warrants issued in connection with the credit facility were recorded as an increase to additional paid-in capital with a corresponding increase to debt issuance costs.
See Note 13 "Stockholders' Equity (Deficit)" for further details regarding stock warrants.
12. Commitments and Contingencies
Litigation
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability
has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.
In November 2019, a securities class action complaint was filed by a purported stockholder of the Company against the Company, certain of the Company's current
and former officers and directors, and the underwriters of the Company's June 2018 initial public offering alleging violations of securities laws and seeking unspecified
damages. The Company believes this lawsuit is without merit and intends to defend the case vigorously. The Company believes a loss related to this matter is reasonably
possible, but is unable to estimate a range of loss, if any, that could result were there to be an adverse final decision in this case. As of the date of this report, the
Company does not believe it is probable that this case will result in an unfavorable outcome; however, if an unfavorable outcome were to occur in these cases, it is
possible that the impact could be material to the Company's results of operations in the period(s) in which any such outcome becomes probable and estimable.
The Company is involved in other legal proceedings from time to time arising in the normal course of business. Management believes that the outcome of these
proceedings will not have a material impact on the Company’s financial condition, results of operations, or liquidity.
95
Domo, Inc.
Notes to Consolidated Financial Statements (Continued)
12. Commitments and Contingencies (Continued)
Warranties and Indemnification
The Company’s subscription services are generally warranted to perform materially in accordance with the terms of the applicable customer service order under
normal use and circumstances. Additionally, the Company’s arrangements generally include provisions for indemnifying customers against liabilities if its subscription
services infringe a third party’s intellectual property rights. Furthermore, the Company may also incur liabilities if it breaches the security or confidentiality obligations
in its arrangements. To date, the Company has not incurred significant costs and has not accrued a liability in the accompanying consolidated financial statements as a
result of these obligations.
The Company has entered into service-level agreements with some of its customers defining levels of uptime reliability and performance and permitting those
customers to receive credits for prepaid amounts related to unused subscription services if the Company fails to meet certain of the defined service levels. In very
limited instances, the Company allows customers to early terminate their agreements if the Company repeatedly or significantly fails to meet those levels. If the
Company repeatedly or significantly fails to meet contracted upon service levels, a contract may require a refund of prepaid unused subscription fees. To date, the
Company has not experienced any significant failures to meet defined levels of uptime reliability and performance as set forth in its agreements and, as a result, the
Company has not accrued any liabilities related to these agreements in the consolidated financial statements.
Other Purchase Commitments
The Company has also entered into certain non-cancelable contractual commitments related to cloud infrastructure services in the ordinary course of business. As of
January 31, 2022, the Company had non-cancelable commitments related to these services of $34.7 million.
13. Stockholders' Deficit
Preferred Stock
The Company's Board of Directors has the authority, without further action by the Company's stockholders, to issue up to 10,000,000 shares of preferred stock in
one or more series and to fix the rights, preferences, and privileges thereof, including voting rights. As of January 31, 2021 and January 31, 2022, no shares of preferred
stock were issued and outstanding.
Common Stock
The Company has two classes of common stock, Class A and Class B. Each share of Class A common stock is entitled to 40 votes per share and is convertible at
any time into one share of Class B common stock. Each share of Class A common stock will convert automatically into one share of Class B common stock upon any
transfer, whether or not for value. Each share of Class B common stock is entitled to one vote per share. Holders of Class A common stock and Class B common stock
vote together as a single class on all matters (including the election of directors) submitted to a vote of stockholders, unless otherwise required by law or the Company's
certificate of incorporation. Subject to preferences that may be applicable to any then-outstanding preferred stock, holders of Class A common stock and Class B
common stock are entitled to receive dividends, if any, as may be declared by the Company's board of directors.
At January 31, 2021 and January 31, 2022, there were 3,263,659 shares of Class A common stock authorized. At January 31, 2021 and January 31, 2022, there were
3,263,659 shares of Class A common stock issued and outstanding.
At January 31, 2021 and January 31, 2022, there were 500,000,000 shares of Class B common stock authorized. At January 31, 2021 and January 31, 2022, there
were 27,271,435 and 29,729,822 shares of Class B common stock issued and outstanding, respectively.
96
Domo, Inc.
Notes to Consolidated Financial Statements (Continued)
13. Stockholders' Deficit (Continued)
Class B Common Stock Warrants
In connection with the credit facility and a line of credit signed in July 2016, the Company issued warrants to purchase shares of Class B common stock. As of
January 31, 2022, there were 3,333 shares of Class B common stock subject to issuance under outstanding warrants, which are exercisable at $34.35 per share.
14. Equity Incentive Plans
In April 2011, the Company established the 2011 Equity Incentive Plan (2011 Plan), which was amended in September 2011 to provide for the issuance of stock
options and other stock-based awards. In June 2018, the Company adopted the 2018 Equity Incentive Plan (2018 Plan). The 2018 Plan provides for the grant of
incentive and nonstatutory stock options, restricted stock, RSUs, stock appreciation rights, performance units, and performance shares to employees, consultants, and
members of the Company's board of directors.
The number of shares available for issuance under the 2018 Plan includes an annual increase on the first day of each fiscal year equal to the least of:
(1) 3,500,000 shares; (2) 5% of the outstanding shares of Class A and Class B common stock as of the last day of the immediately preceding fiscal year; and (3) such
other amount as the Company's board of directors may determine no later than the last day of the immediately preceding year. During the year ended January 31, 2022,
the number of shares available for grant under the 2018 Plan was increased by 1,526,754 shares. As of January 31, 2022, there were 3,370,915 shares available for grant
under the 2018 Plan.
In connection with the IPO, the 2011 Plan was terminated. With the establishment of the 2018 Plan, the Company no longer grants equity-based awards under the
2011 Plan and any shares that expire, terminate, are forfeited or repurchased by the Company, or are withheld by the Company to cover tax withholding obligations,
under the 2011 Plan, will become available for future grant under the 2018 Plan.
The Company recognized stock-based compensation expense related to its equity incentive plans as follows (in thousands):
Cost of revenue:
Subscription
Professional services and other
Sales and marketing
Research and development
General and administrative
Interest expense
Total
Stock Options
Year Ended January 31,
2020
2021
2022
$
$
$
507
404
10,770
6,339
5,637
190
23,847 $
$
1,213
843
10,936
9,095
11,218
444
33,749 $
2,819
1,753
21,241
15,853
18,155
705
60,526
Stock options typically vest over a four-year period and have a term of ten years from the date of grant. There were 25,000 stock options granted during the year
ended January 31, 2020 and no stock options granted during the years ended January 31, 2021 and 2022. The weighted-average grant-date fair value of stock options
granted was $14.95 per share for the year ended January 31, 2020. The grant-date fair value of stock options was estimated using the Black-Scholes option
97
Domo, Inc.
Notes to Consolidated Financial Statements (Continued)
14. Equity Incentive Plans (Continued)
pricing model with the following weighted-average assumptions:
Expected stock price volatility
Expected life of options
Risk-free interest rate
Expected dividend yield
Fair value of common stock
2020
47%
6 years
2.47%
—
$31.20
Year Ended January 31,
2021
—
—
—
—
—
2022
—
—
—
—
—
The following table sets forth the outstanding common stock options and related activity for the years ended January 31, 2020, 2021 and 2022:
Shares
Subject to Outstanding
Options
Weighted- Average
Exercise
Price per Share
Weighted-Average
Remaining Contractual
Term (years)
Aggregate Intrinsic Value
(in thousands)
Outstanding as of January 31, 2019
Granted
Exercised
Forfeited
Expired
Outstanding as of January 31, 2020
Exercised
Forfeited
Expired
Outstanding as of January 31, 2021
Exercised
Forfeited
Expired
Outstanding as of January 31, 2022
Vested and exercisable at January 31, 2022
1,856,339 $
25,000
(94,603)
(11,010)
(30,311)
1,745,415
(374,049)
(2,112)
(72,751)
1,296,503
(332,137)
(1,009)
(69)
963,288
$
955,996
$
23.64
31.20
16.99
28.24
33.64
23.91
21.64
27.96
37.53
23.79
16.92
28.20
40.02
26.16
26.12
5.6 $
8,443
4.6
3.7
2.9 $
2.8 $
5,152
51,339
20,166
20,051
The aggregate intrinsic value of options exercised was $1.6 million, $10.8 million and $17.3 million for the years ended January 31, 2020, 2021 and 2022,
respectively. The intrinsic value represents the excess of the estimated market closing price of the Company's common stock on the date of exercise over the exercise
price of each option. The intrinsic value of options as of January 31, 2022 is based on the market closing price of the Company's Class B common stock on that date.
As of January 31, 2022, there was $0.1 million of unrecognized stock-based compensation expense related to outstanding stock options which is expected to be
recognized over a weighted-average period of 0.6 years.
Restricted Stock Units
Restricted stock units (RSUs) granted under the Plan vest and settle upon the satisfaction of a service-based condition. The service-based condition for these awards
is generally satisfied over three or four years with a cliff vesting period of one or two years and quarterly vesting thereafter.
98
Domo, Inc.
Notes to Consolidated Financial Statements (Continued)
14. Equity Incentive Plans (Continued)
The following table sets forth the outstanding RSUs and related activity for the years ended January 31, 2020, 2021 and 2022:
Number of Shares
Weighted- Average Grant Date
Fair Value
Outstanding as of January 31, 2019
Granted
Vested
Canceled
Outstanding as of January 31, 2020
Granted
Vested
Canceled
Outstanding as of January 31, 2021
Granted
Vested
Canceled
Outstanding as of January 31, 2022
2,328,122 $
1,113,913
(982,591)
(282,639)
2,176,805
3,209,165
(1,028,734)
(499,075)
3,858,161
2,540,946
(1,681,544)
(378,944)
4,338,619
$
19.77
28.82
21.76
20.52
23.40
25.94
21.71
23.22
25.97
77.98
25.37
40.42
55.40
As of January 31, 2022, there was $208.5 million of unrecognized stock-based compensation expense related to outstanding RSUs which is expected to be
recognized over a weighted-average period of 3.1 years.
Employee Stock Purchase Plan
In June 2018, the Company's board of directors adopted the ESPP. The number of shares of Class B common stock available for issuance under the ESPP increases
on the first day of each fiscal year equal to the least of: (1) 1,050,000 shares of Class B common stock, (2) 1.5% of the outstanding shares of Class A and Class B
common stock of the Company on the last day of the immediately preceding fiscal year, and (3) such other amount as the administrator of the ESPP may determine on
or before the last day of the immediately preceding year. The administrator elected to forgo an increase in the number of shares available under the ESPP and no shares
were added during the year ended January 31, 2022. As of January 31, 2022, there were 299 shares available under the ESPP.
The ESPP generally provides for consecutive overlapping 24-month offering periods comprising four six-month purchase periods; provided, however, that the first
purchase period in the first offering period will have a duration of approximately nine months. The offering periods are scheduled to start on the first trading day on or
after April 1 and October 1 of each year. The ESPP is intended to qualify as a tax-qualified plan under Section 423 of the Internal Revenue Code and permits
participants to elect to purchase shares of Class B common stock through payroll deductions of up to 15% of their eligible compensation. A participant may purchase a
maximum of 2,000 shares during each purchase period.
In September 2020, the ESPP was amended for all offering periods beginning on or after September 18, 2020. The amended ESPP provides for consecutive
overlapping 12-month offering periods comprising two six-month purchase periods. The offering periods are scheduled to start on the first trading day on or after April
1 and October 1 of each year. The amended ESPP is intended to qualify as a tax-qualified plan under Section 423 of the Internal Revenue Code and permits participants
to elect to purchase shares of Class B common stock through payroll deductions of up to 25% of their eligible compensation. Under the amended ESPP, a participant
may purchase a maximum of 300 shares during each purchase period.
Amounts deducted and accumulated by the participant will be used to purchase shares of Class B common stock at the end of each purchase period. The purchase
price of the shares will be 85% of the lower of the fair market value of Class B common stock on the first trading day of each offering period or the fair market value of
Class B common stock on the applicable exercise date. If the fair market value of a share of Class B common stock on the exercise date of an offering period is less than
it was on the first trading day of that offering period, participants automatically will be withdrawn from
99
Domo, Inc.
Notes to Consolidated Financial Statements (Continued)
14. Equity Incentive Plans (Continued)
that offering period following their purchase of shares on the exercise date and will be re-enrolled in a new offering period. Participants may end their participation at
any time during an offering period and will be paid their accrued contributions that have not yet been used to purchase shares of Class B common stock. Participation
ends automatically upon termination of employment.
As of January 31, 2022, a total of approximately 165,266 shares were issuable to employees based on anticipated shares available and contribution elections made
under the ESPP. As of January 31, 2022, total unrecognized stock-based compensation related to the ESPP was $1.6 million, which is expected to be recognized over a
weighted-average period of 0.2 years.
The fair value of the purchase rights for the ESPP are estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:
Expected stock price volatility
Expected term
Risk-free interest rate
Expected dividend yield
2020
43% - 52%
0.5 - 2.0 years
1.56% - 2.46%
–
Year Ended January 31,
2021
49% - 83%
0.5 - 2.0 years
0.11% - 0.23%
–
2022
41% - 82%
0.5 - 1.0 year
.04% - .09%
–
100
Domo, Inc.
Notes to Consolidated Financial Statements (Continued)
15. Income Taxes
The components of the income tax provision were as follows (in thousands):
Current income provision:
State
Foreign
Deferred income tax provision:
Foreign
Provision for (benefit from) income taxes
Year Ended January 31,
2020
2021
2022
27
739
766
(12)
754
$
32
361
393
16
409
$
5
80
85
(546)
(461)
$
Total income tax expense differed from the amounts computed by applying the U.S. federal income tax rate to income before income tax expense as a result of the
following (in thousands):
Tax benefit at U.S. federal statutory rate (1)
State income taxes, net of federal tax benefit
Non-deductible expenses
Foreign taxes
Stock-based compensation
Research and development credits
Change in valuation allowance
Other
Provision for (benefit from) income taxes
Year Ended January 31,
2020
2021
2022
$
$
(26,229) $
(5,377)
1,101
113
895
(2,529)
32,708
72
754 $
(17,687) $
(4,689)
85
351
(4,263)
(2,561)
29,160
13
409 $
(21,540)
(4,896)
157
(752)
(15,045)
(2,579)
44,287
(93)
(461)
(1) The statutory tax rate used in this analysis was 21% for the years ended January 31, 2020, 2021 and 2022.
101
Domo, Inc.
Notes to Consolidated Financial Statements (Continued)
15. Income Taxes (Continued)
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities were as follows (in thousands):
Deferred tax assets:
Net operating loss carryforwards
Stock based compensation
Accruals and other reserves
Research and development credit carryforwards
163(j) interest limitation
Foreign acquisition costs
Lease liability
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Contract acquisition costs
Capitalized software
Right-of-use assets
Basis difference in intangible assets
Total deferred tax liabilities
Net deferred tax liabilities
As of January 31,
2021
2022
$
278,118 $
9,557
3,408
17,818
7,533
—
1,478
1,983
319,895
(308,547)
11,348
(7,653)
(3,268)
(1,044)
(234)
(12,199)
$
(851) $
316,381
11,641
3,880
20,397
10,578
35
4,964
1,624
369,500
(352,834)
16,666
(8,924)
(3,645)
(4,010)
(313)
(16,892)
(226)
In assessing whether deferred tax assets should be recognized, the Company considered whether it is more-likely-than-not that some portion or all of the deferred
tax assets would be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those
temporary differences become deductible. The Company considered the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning
strategies in making this assessment. The Company determined it was more-likely-than-not that its domestic deferred tax assets would not be realized as of January 31,
2021 and 2022 and, accordingly, recorded a full valuation allowance. Net deferred tax liabilities are included in other liabilities, noncurrent on the consolidated balance
sheets.
As of January 31, 2022, the Company had federal and state NOLs available to offset future taxable income, if any, of $1,181.4 million and $1,334.9 million,
respectively. The federal NOLs will begin to expire in 2028. The state NOLs will expire depending upon the various rules in the states in which the Company operates.
Full realization of the NOLs is dependent on generating sufficient taxable income prior to their expiration. The ability to realize the NOLs and other deferred tax assets
could also be limited by previous or future changes in ownership in accordance with rules in Internal Revenue Code Sections 382 and 383.
As of January 31, 2022, the Company also had unused federal and state research and development tax credits of $20.6 million and $8.3 million, respectively. A
small portion of the federal and state credits will expire depending upon the various rules in the states in which the Company operates. As of January 31, 2022, the
Company also had foreign tax credits of $0.4 million which begin to expire in 2024.
102
Domo, Inc.
Notes to Consolidated Financial Statements (Continued)
15. Income Taxes (Continued)
During the fiscal years ended years ended January 31, 2020, 2021 and 2022, the aggregate changes in the total gross amount of unrecognized tax benefits were as
follows (in thousands):
Beginning balance
Increase in unrecognized tax benefits taken in prior years
Decrease in unrecognized tax benefits related to current year
Year Ended January 31,
2020
2021
2022
$
$
4,558 $
906
(34)
5,430 $
5,430 $
939
(36)
6,333 $
6,333
914
(11)
7,236
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is zero due to the valuation allowance. The Company does not
expect a significant change in its unrecognized tax benefits over the next twelve months.
The Company files U.S. federal, U.S. state, and foreign tax returns and is subject to examination by various taxing authorities for all open tax years. The Company
is not currently under audit by the Internal Revenue Service or any other tax authority.
The Company paid income taxes of $0.4 million, $0.8 million and $0.6 million during the years ended January 31, 2020, 2021 and 2022, respectively.
16. Net Loss Per Share
The Company computes net loss per share using the two-class method required for multiple classes of common stock and participating securities. The rights,
including the liquidation and dividend rights, of the Class A common stock and Class B common stock are substantially identical, other than voting rights. Accordingly,
the Class A common stock and Class B common stock share equally in the Company’s net losses.
The following table sets forth the calculation of basic and diluted net loss per share during the periods presented (in thousands, except per share amounts):
Numerator:
Net loss
Denominator:
Weighted-average number of shares used in
computing net loss per share, basic and diluted
Net loss per share, basic and diluted
$
$
2020
Year Ended January 31,
2021
2022
Class A
Class B
Class A
Class B
Class A
Class B
(14,903) $
(110,753) $
(9,426) $
(75,208) $
(10,408) $
(91,703)
3,264
(4.57) $
24,256
(4.57) $
3,264
(2.89) $
26,044
(2.89) $
3,264
(3.19) $
28,757
(3.19)
Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods as the inclusion of
all potential common shares outstanding would have been anti-dilutive. The
103
Domo, Inc.
Notes to Consolidated Financial Statements (Continued)
16. Net Loss Per Share (Continued)
weighted-average impact of potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive was as follows
(in thousands):
Options to purchase common stock
Restricted stock units
Employee stock purchase program
Common stock warrants
17. Employee Benefit Plan
Year Ended January 31,
2020
2021
2022
297
1,096
192
42
1,627
498
1,830
1,037
85
3,450
751
2,193
353
45
3,342
The Company has a defined contribution retirement savings plan qualified under Section 401(k) of the Internal Revenue Code (IRC), which is a pretax savings plan
covering substantially all employees. Under the plan, employees may contribute up to 50% of their pretax salary, subject to certain IRC limitations. Employees are
eligible to participate beginning on the first day of the month following their first 30 days of employment. The Company recorded expenses for contributions to its
retirement savings plan of $3.2 million, $1.6 million and $3.9 million during the years ended January 31, 2020, 2021 and 2022, respectively.
18. Subsequent Events
On March 1, 2022, Joshua G. James stepped down as the Company’s chairman and chief executive officer. Mr. James provided advisory transition services to the
Company from the date of his resignation until March 21, 2022. In connection with Mr. James’ resignation, the Company and Mr. James entered into a cooperation
agreement, a separation and transition agreement and a registration rights agreement. As part of the cooperation agreement, Mr. James agreed to not replace or remove
directors or to add directors to the Company's board of directors for a period of approximately twelve months.
On March 15, 2022, the Company's board of directors approved paying out certain executive bonuses in the form of restricted stock units (RSUs) instead of cash.
These RSUs vested on March 21, 2022, resulting in the issuance of approximately 90,000 shares of the Company's Class B common stock.
104
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), as of the end of the period
covered by this Annual Report on Form 10-K. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of such
date, our disclosure controls and procedures were effective at a reasonable assurance level.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined under Rule 13a-15(f) and
15d-15(f) under the Exchange Act. We conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal
Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on our evaluation, our
management concluded that our internal control over financial reporting was effective as of January 31, 2022.
The effectiveness of our internal controls over financial reporting as of January 31, 2022 has been audited by Ernst and Young LLP, an independent registered
public accounting firm, as stated in their report which is included in Item 8 of this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the
period covered by this Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.
Inherent Limitations on Effectiveness of Disclosure Controls and Procedures
Our management, including our principal executive officer and principal financial officer, do not expect that our disclosure controls and procedures or our internal
control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-
making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future
conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Due
to inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
105
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information required by this item is incorporated by reference to our Proxy Statement relating to our 2022 Annual Meeting of Stockholders. The Proxy
Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended January 31, 2022.
Our board of directors has adopted a Code of Business Conduct and Ethics, or the Code of Conduct, that applies to all officers, directors and employees, which is
available on our website at www.domo.com/ir under "Governance". The nominating and corporate governance committee of our board of directors is responsible for
overseeing the Code of Conduct and must approve any waivers of the Code of Conduct for employees, executive officers and directors. We expect that any amendments
to the Code of Conduct, or any waivers of its requirements, will be disclosed on our website, as required by applicable law or the Nasdaq listing standards.
Item 11. Executive Compensation
The information required by this item is incorporated by reference to our Proxy Statement relating to our 2022 Annual Meeting of Stockholders. The Proxy
Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended January 31, 2022.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated by reference to our Proxy Statement relating to our 2022 Annual Meeting of Stockholders. The Proxy
Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended January 31, 2022.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference to our Proxy Statement relating to our 2022 Annual Meeting of Stockholders. The Proxy
Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended January 31, 2022.
Item 14. Principal Accountant Fees and Services
The information required by this item is incorporated by reference to our Proxy Statement relating to our 2022 Annual Meeting of Stockholders. The Proxy
Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended January 31, 2022.
106
Item 15. Exhibits, Financial Statement Schedules
The following documents are filed as a part of this Annual Report on Form 10-K:
(a) Financial Statements
PART IV
The information concerning our financial statements, including the Report of Independent Registered Public Accounting Firm required by this item is incorporated
by reference herein to the section of this Annual Report on Form 10-K in Item 8, entitled “Consolidated Financial Statements and Supplementary Data.”
(b) Financial Statement Schedules
All schedules have been omitted because the required information is not present or not present in amounts sufficient to require submission of the schedules, or
because the information required is included in Item 8, entitled “Consolidated Financial Statements and Supplementary Data.”
(c) Exhibits
See the Exhibit Index immediately following the signature page of this Annual Report on Form 10-K.
Item 16. Form 10-K Summary
None.
107
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
SIGNATURES
thereunto duly authorized.
Date: March 22, 2022
Date: March 22, 2022
DOMO, INC.
By:
By:
/s/ John Mellor
John Mellor
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Bruce Felt
Bruce Felt
Chief Financial Officer
(Principal Financial and Accounting Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints John Mellor and Bruce Felt, and each
of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or
her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file, any and all documents in
connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing, ratifying and confirming all that said attorney-in-fact and agents or any of them or their and his or her substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
Signature
/s/ John Mellor
John Mellor
/s/ Bruce Felt
Bruce Felt
/s/ Joy Driscoll Durling
Joy Driscoll Durling
/s/ Carine S. Clark
Carine S. Clark
/s/ Dana Evan
Dana Evan
/s/ Laurence Brown
Laurence Brown
/s/ Mark Gorenberg
Mark Gorenberg
/s/ Daniel Daniel
Daniel Daniel
/s/ Jeff Kearl
Jeff Kearl
/s/ John Pestana
John Pestana
Title
Chief Executive Officer and Director
(Principal Executive Officer)
Chief Financial Officer
(Principal Accounting and Financial Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Date
March 22, 2022
March 22, 2022
March 22, 2022
March 22, 2022
March 22, 2022
March 22, 2022
March 22, 2022
March 22, 2022
March 22, 2022
March 22, 2022
Filed
Herewith
X
EXHIBIT INDEX
Incorporated by Reference
Exhibit
Number
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
10.1+
10.2+
10.3+
10.4+
10.5+
10.6+
10.7
10.8
10.9
10.10
10.11+
10.12
10.13+
10.14+
10.15+
Description
Amended and Restated Certificate of Incorporation
Amended and Restated Bylaws
Specimen Common Stock Certificate of the registrant
Amended and Restated Investors’ Rights Agreement, dated April 13, 2017,
by and among the registrant and the investors and founders named therein
Warrant to purchase 50,000 shares of Class B common stock, issued to
Silicon Valley Bank on July 18, 2016
Form of Amended and Restated Warrant to Purchase Stock, dated as of
January 4, 2019
Form of Warrant to Purchase Stock, dated as of August 7, 2020
Description of the registrant's Class B common stock
Form of Director and Executive Officer Indemnification Agreement
2011 Equity Incentive Plan, as amended
Form of Notice of Stock Option Grant and Stock Option Agreement under
the 2011 Equity Incentive Plan and Form of RSU Agreement under the
2011 Equity Incentive Plan
2018 Equity Incentive Plan and forms of agreements thereunder
2018 Employee Stock Purchase Plan
Executive Incentive Compensation Plan
Loan and Security Agreement, dated as of December 5, 2017, between the
registrant, Wilmington Trust National Association and Obsidian Agency
Services, Inc.
First Amendment to Loan and Security Agreement and Pledge Agreement
dated as of April 17, 2018, between the registrant, Wilmington Trust
National Association and Obsidian Agency Services, Inc.
Third Amendment to Loan and Security Agreement, dated as of January 4,
2019, by and among Domo, Inc., a Delaware corporation, Domo, Inc., a
Utah corporation, the lenders from time to time party thereto, and
Obsidian Agency Services Inc.
Fourth Amendment to Loan and Security Agreement, dated as of August 7,
2020, by and among Domo, Inc., a Delaware corporation, Domo, Inc., a
Utah corporation, the lenders that are party thereto from time to time
(collectively, the “Lenders”), Obsidian Agency Services Inc., as collateral
agent for the Lenders and Wilmington Trust, National Association, as
administrative agent for the Lenders
Form of Change in Control and Severance Agreement
Outside Director Compensation Policy
Aircraft Dry Lease Agreement, dated October 15, 2015 between the
registrant and JJ Spud LLC
Corrected Confirmatory Employment Letter, dated June 17, 2018, between
the registrant and Joshua James
Corrected Confirmatory Employment Letter, dated June 15, 2018, between
the registrant and Bruce Felt
Form
10-K
10-K
S-1
S-1
S-1
8-K
8-K
S-1
S-1
S-1
S-1
S-1
S-1
S-1
S-1
File No.
001-38553
001-38553
333-225348
333-225348
333-225348
001-38553
001-38553
333-225348
333-225348
333-225348
333-225348
333-225348
333-225348
333-225348
333-225348
8-K
001-38553
Exhibit
3.1
3.2
4.1
4.2
4.4
4.1
4.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.1
Date
April 15, 2019
April 15, 2019
June 18, 2018
June 1, 2018
June 1, 2018
January 7, 2019
August 7, 2020
June 18, 2018
June 1, 2018
June 1, 2018
June 18, 2018
June 18, 2018
June 18, 2018
June 1, 2018
June 1, 2018
January 7, 2019
8-K
001-38553
10.1
August 7, 2020
S-1
S-1
S-1
8-K
8-K
333-225348
333-225348
333-225348
001-38553
001-38553
10.9
10.10
10.11
10.1
10.2
June 18, 2018
June 18, 2018
June 1, 2018
May 8, 2019
May 8, 2019
S-1
8-K
8-K
8-K
S-1
333-225348
10.14
June 18, 2018
001-38553
001-38553
001-38553
333-225348
10.1
10.2
10.3
21.1
March 1, 2022
March 1, 2022
March 1, 2022
June 1, 2018
10.16+
10.17+
10.18+
10.19+
21.1
23.1
24.1
31.1
31.2
32.1*
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
Confirmatory Employment Letter, dated June 16, 2018, between the
registrant and Catherine Wong
Letter Agreement, dated as of March 1, 2022, by and among the Company,
Joshua James, Cocolalla, LLC and Cinnamon Birch, LLC
Separation and Transition Agreement, dated as of March 1, 2022, by and
between the Company and Joshua James
Registration Rights Agreement, dated as of March 1, 2022, by and between
the Company and Joshua James
Subsidiaries of the registrant
Consent of Independent Registered Public Accounting Firm
Powers of Attorney (contained on signature page)
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a)
and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a)
and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Executive Officer and Principal Financial Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
Inline XBRL Instance Document
Inline XBRL Taxonomy Extension Schema Linkbase Document
Inline XBRL Taxonomy Extension Calculation Linkbase Document
Inline XBRL Taxonomy Extension Definition Linkbase Document
Inline XBRL Taxonomy Extension Label Linkbase Document
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File (formatted as Inline XBRL and contained
in Exhibit 101)
X
X
X
X
X
X
X
X
X
X
X
X
________________
+ Indicates a management contract or compensatory plan.
* The certifications attached as Exhibit 32.1 that accompany this Annual Report on Form 10-K are not deemed filed with the Securities and Exchange Commission and are not to be
incorporated by reference into any filing of Domo, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or
after the date of this Form 10-K, irrespective of any general incorporation language contained in such filing.
Exhibit 4.6
DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934
As of January 31, 2022, we have one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended – our Class B common stock,
par value $0.001 per share. These securities are listed on the Nasdaq Global Market under the symbol “DOMO.”
The following description of our Class B common stock is a summary and does not purport to be complete. It is qualified in its entirety by, and should be read in
conjunction with, our amended and restated certificate of incorporation, amended and restated bylaws, and applicable Delaware law.
Authorized Capital Stock
Our authorized capital stock consists of 513,263,659 shares, of which:
•
•
•
3,263,659 shares are designated as Class A common stock, $0.001 par value per share;
500,000,000 shares are designated as Class B common stock, $0.001 par value per share; and
10,000,000 shares are designated as preferred stock, $0.001 par value per share.
Common Stock
Voting Rights
We currently have two classes of authorized common stock, Class A common stock and Class B common stock. Each share of Class A common stock is entitled to
40 votes per share. Each share of Class B common stock is entitled to one vote per share. Holders of Class A common stock and Class B common stock will vote
together as a single class on all matters (including the election of directors) submitted to a vote of stockholders, unless otherwise required by law or our certificate of
incorporation.
Delaware law could require holders of Class A common stock or Class B common stock to vote separately as a single class in the following circumstances:
•
if we were to seek to amend our certificate of incorporation to increase or decrease the par value of a class of our capital stock, then that class would be
required to vote separately to approve the proposed amendment; and
•
if we were to seek to amend our certificate of incorporation in a manner that alters or changes the powers, preferences or special rights of a class of our
capital stock in a manner that affected its holders adversely, then that class would be required to vote separately to approve the proposed amendment.
Our certificate of incorporation and bylaws provide that from and after when the outstanding shares of Class A common stock represent less than a majority of the
total combined voting power of our Class A common stock and Class B common stock, or the voting threshold date, we will have a classified board of directors
consisting of three classes of approximately equal size, each serving staggered three-year terms. Only the directors in one class will be subject to election by a plurality
of the votes cast at each annual meeting of stockholders, with the directors in the other classes continuing for the remainder of their respective three-year terms. Until
the voting threshold date, our directors will be elected annually for one-year terms. Stockholders do not have the ability to cumulate votes for the election of directors.
Holders of our Class A common stock and Class B common stock are not entitled to cumulative voting in the election of directors, which means that the holders of
a majority of the voting power of our Class A common stock and Class B common stock, voting together as a single voting class, will be entitled to elect all of the
directors standing for election, if they so choose.
Exhibit 4.6
Because of our dual class structure, we anticipate that, for the foreseeable future, Mr. James will continue to be able to control all matters submitted to our
stockholders for approval, including the election and removal of directors.
Our certificate of incorporation provides that the number of authorized shares of common stock or any class of common stock may be increased or decreased (but
not below the number of shares of common stock then outstanding and, in the case of the Class B common stock, issuable upon conversion of the outstanding Class A
common stock) by the affirmative vote of the holders of a majority of the Class A common stock and Class B common stock, voting together as a single class. Until the
final conversion of all outstanding shares of Class A common stock pursuant to the terms of the certificate of incorporation, or the final conversion date, any increase in
the authorized shares of Class A common stock requires the approval of the holders of a majority of the outstanding shares of Class A common stock.
Conversion
Each share of Class A common stock will automatically convert into one share of Class B common stock on the final conversion date. Each share of Class A
common stock is also convertible at any time at the option of the holder into one share of Class B common stock. In addition, each share of Class A common stock will
convert automatically into one share of Class B common stock upon any transfer, whether or not for value, except for certain transfers described in our certificate of
incorporation, including, without limitation, transfers for tax and estate planning purposes, so long as the transferring holder of Class A common stock continues to hold
exclusive voting and dispositive power with respect to the shares transferred. In addition, each outstanding share of Class A common stock held by a stockholder who is
a natural person, or held by the permitted entities and permitted transferees of such natural person (as described in our certificate of incorporation), will convert
automatically into one share of Class B common stock upon the death or disability of such natural person nine months following such death or disability, unless
otherwise extended in accordance with our certificate of incorporation.
Once converted into a share of Class B common stock, a converted share of Class A common stock will not be reissued. Following the conversion of all
outstanding shares of Class A common stock, no further shares of Class A common stock will be issued.
Dividends
Subject to preferences that may be applicable to any then-outstanding preferred stock, holders of our Class A common stock and Class B common stock are entitled
to receive dividends, if any, as may be declared from time to time by our board of directors out of legally available funds. If a dividend is paid in the form of Class A
common stock or Class B common stock, then holders of Class A common stock shall receive Class A common stock and holders of Class B common stock shall
receive Class B common stock.
Liquidation
In the event of our liquidation, dissolution or winding up, holders of our Class A common stock and Class B common stock will be entitled to share ratably in the
net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference
granted to the holders of any then-outstanding shares of preferred stock.
Rights and Preferences
Except as described above, holders of Class A common stock and Class B common stock have no preemptive, conversion, subscription or other rights, and there
are no redemption or sinking fund provisions applicable to Class A common stock or Class B common stock. The rights, preferences and privileges of the holders of
Class A common stock and Class B common stock are subject to and may be adversely affected by, the rights of the holders of shares of any series of preferred stock
that we may designate in the future.
Exhibit 4.6
Fully Paid and Nonassessable
All of our outstanding shares of common stock are fully paid and nonassessable.
Preferred Stock
Our board of directors has the authority, without further action by the stockholders, to issue up to 10,000,000 shares of preferred stock in one or more series and to
fix the rights, preferences, privileges and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights,
redemption rights, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may
be greater than the rights of Class A common stock or Class B common stock. The issuance of preferred stock could adversely affect the voting power of holders of
Class A common stock and Class B common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation. In addition, the
issuance of preferred stock could have the effect of delaying, deferring or preventing change in our control or other corporate action.
Registration Rights
Certain holders of our Class A common stock and Class B common stock, or their transferees, have the right to require us to register the offer and sale of their
shares, which we refer to as registration rights.
Demand Registration Rights
BlackRock Advisors, LLC or any of its affiliates or the holders of at least a majority of the shares having demand registration rights have the right to demand that
we use best efforts to file a registration statement for the registration of the offer and sale of at least such number of shares with anticipated offering proceeds in excess
of $20.0 million. We are only obligated to file up to two registration statements in connection with the exercise of demand registration rights. These registration rights
are subject to specified conditions and limitations, including the right of the underwriters to limit the number of shares included in any such registration under certain
circumstances and our ability to defer the filing of a registration statement with respect to an exercise of such demand registration rights for up to 90 days under certain
circumstances.
Form S-3 Registration Rights
At any time after we are qualified to file a registration statement on Form S-3, a stockholder with registration rights shall have the right to demand that we file a
registration statement on Form S-3 so long as the aggregate number of shares to be offered and sold under such registration statement on Form S-3 is at least $5.0
million. These investor registration rights are subject to specified conditions and limitations, including our ability to defer the filing of a registration statement with
respect to an exercise of such Form S-3 registration rights for up to 90 days under certain circumstances.
Piggyback Registration Rights
If we propose to register the offer and sale of any of our securities under the Securities Act either for our own account or for the account of other stockholders, a
stockholder with registration rights will have the right, subject to certain exceptions, to include their shares of common stock in the registration statement. These
registration rights are subject to specified conditions and limitations, including the right of the underwriters to limit the number of shares included in any such
registration statement under certain circumstances, but not below 25% of the total number of shares covered by the registration statement.
Expenses of Registration
We will pay all expenses relating to any demand registrations, Form S-3 registrations and piggyback registrations, other than underwriting discounts and selling
commissions.
Exhibit 4.6
Termination
The registration rights terminate upon the earlier of (1) the date that is three years after the closing of our initial public offering and (2) as to a given holder of
registration rights, when such holder of registration rights can sell all of such holder’s registrable securities in a three month-period pursuant to Rule 144 promulgated
under the Securities Act.
Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws
Delaware Law
We are subject to Section 203 of the Delaware General Corporation Law. Section 203 generally prohibits a publicly held Delaware corporation from engaging in a
“business combination” with any “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested
stockholder,
unless:
prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in
•
the stockholder becoming an interested stockholder;
•
•
upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of
shares outstanding (1) shares owned by persons who are directors and also officers and (2) shares owned by employee stock plans in which employee
participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or
on or subsequent to the date of the transaction, the business combination is approved by the board and authorized at an annual or special meeting of
stockholders, or by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested
stockholder.
Section 203 defines a business combination to include:
•
•
•
•
•
any merger or consolidation involving the corporation and the interested stockholder;
any sale, transfer, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the corporation;
subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested
stockholder;
any transaction involving the corporation that has the effect of increasing the proportionate share of the stock or any class or series of the corporation
beneficially owned by the interested stockholder; and
the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through
the corporation.
In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or controlled by the entity or person.
Certificate of Incorporation and Bylaws
Our certificate of incorporation and our bylaws include a number of provisions that could deter hostile takeovers or delay or prevent changes in control of our
board of directors or management team, including the
Exhibit 4.6
following:
•
•
•
•
•
•
•
Dual-Class Stock. As described above in “—Common Stock—Voting Rights,” our certificate of incorporation provides for a dual-class common
stock structure, which provides Joshua James, our founder, former chief executive officer and former chairman, and his affiliates, with significant
influence over matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or
other sale of our company or its assets.
Classified Board of Directors. Our certificate of incorporation and bylaws provide that, from and after the time that the Class A common stock no
longer represents a majority of the combined voting power of our Class A common stock and Class B common stock, or the voting threshold date,
our board of directors will be classified into three classes of directors. A third party may be discouraged from making a tender offer or otherwise
attempting to obtain control of us as it is more difficult and time consuming for stockholders to replace a majority of the directors on a classified
board of directors.
Stockholder Action; Special Meeting of Stockholders. Our certificate of incorporation provides that, until the voting threshold date, our
stockholders will be able to take action by written consent for any matter. Our bylaws further provide that special meetings of our stockholders
may be called only by a majority of our board of directors, the chairman of our board of directors, our chief executive officer or, until the voting
threshold date, holders of at least 50% of the combined voting power of our Class A common stock and Class B common stock, thus limiting the
ability of a stockholder to call a special meeting. These provisions might delay the ability of our stockholders to force consideration of a proposal
or for stockholders controlling a majority of our capital stock to take any action, including the removal of directors.
Advance Notice Requirements for Stockholder Proposals and Director Nominations. Our bylaws provide advance notice procedures for
stockholders seeking to bring business before our annual meeting of stockholders or to nominate candidates for election as directors at our annual
meeting of stockholders. Our bylaws also specify certain requirements regarding the form and content of a stockholder’s notice. These provisions
might preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors at our
annual meeting of stockholders if the proper procedures are not followed. We expect that these provisions may also discourage or deter a potential
acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our
company.
No Cumulative Voting. The Delaware General Corporation Law provides that stockholders are not entitled to cumulate votes in the election of
directors unless a corporation’s certificate of incorporation provides otherwise. Our certificate of incorporation does not provide for cumulative
voting.
Amendment of Charter and Bylaws Provisions. Prior to the voting threshold date, any amendment of our certificate of incorporation will require
approval by holders of at least a majority of the voting power of our then outstanding capital stock. From and after the voting threshold date,
certain amendments to our certificate of incorporation will require the approval of two-thirds of the outstanding voting power of our common
stock. Our bylaws provide that, following the voting threshold date, approval of stockholders holding two-thirds of our outstanding voting power
voting as a single class is required for stockholders to amend or adopt any provision of our bylaws.
Issuance of Undesignated Preferred Stock. Our board of directors has the authority, without further action by our stockholders, to issue up to
10,000,000 shares of undesignated preferred stock with rights and preferences, including voting rights, designated from time to time by our board
of directors. The existence of authorized but unissued shares of preferred stock would enable our board of directors to render more difficult or to
discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest, or other means.
Exhibit 4.6
Exclusive Forum
Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (1) any derivative action or
proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our
stockholders, (3) any action arising pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation or bylaws, or (4) any other
action asserting a claim that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not
have jurisdiction, the federal district court for the District of Delaware), in all cases subject to the court having jurisdiction over indispensable parties named as
defendants. Any person or entity purchasing or otherwise acquiring any interest in our securities shall be deemed to have notice of and consented to this provision.
Although we believe these provisions benefit us by providing increased consistency in the application of Delaware law for the specified types of actions and
proceedings, the provisions may have the effect of discouraging lawsuits against us or our directors and officers. Our bylaws also provide that the federal district courts
of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company, LLC. The transfer agent and registrar’s address is 6201 15th
Avenue, Brooklyn, New York 11219.
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
1. Registration Statement on Form S-8 (No. 333-225978) pertaining to the 2018 Equity Incentive Plan, 2018 Employee Stock Purchase Plan and
2011 Equity Incentive Plan of Domo, Inc.,
2. Registration Statement on Form S-8 (No. 333-230861) pertaining to the 2018 Equity Incentive Plan and 2018 Employee Stock Purchase Plan of
Domo, Inc.,
3. Registration Statement on Form S-8 (No. 333-237647) pertaining to the 2018 Equity Incentive Plan and 2018 Employee Stock Purchase Plan of
Domo, Inc.; and
4. Registration Statement on Form S-8 (No. 333-254944) pertaining to the 2018 Equity incentive Plan of Domo, Inc.;
of our reports dated March 22, 2022, with respect to the consolidated financial statements of Domo, Inc. and the effectiveness of internal control over
financial reporting of Domo, Inc. included in this Annual Report (Form 10-K) of Domo, Inc. for the year ended January 31, 2022.
/s/ Ernst & Young LLP
Salt Lake City, Utah
March 22, 2022
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, John Mellor, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Domo, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: March 22, 2022
/s/ John Mellor
John Mellor
Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
I, Bruce Felt, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Domo, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: March 22, 2022
/s/ Bruce Felt
Bruce Felt
Chief Financial Officer
(Principal Accounting and Financial Officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing of the Annual Report on Form 10-K for the fiscal year ended January 31, 2022, as filed with the Securities and Exchange Commission on
the date hereof (the "Report") by Domo, Inc. (the "Company"), John Mellor, as the Chief Executive Officer of the Company, and Bruce Felt, as the Chief Financial
Officer of the Company, each hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the
best of his knowledge:
1.
the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and
2.
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: March 22, 2022
/s/ John Mellor
John Mellor
Chief Executive Officer (Principal Executive Officer)
/s/ Bruce Felt
Bruce Felt
Chief Financial Officer (Principal Accounting and Financial Officer)
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained
by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
This certification accompanies the Report to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated
by reference into any filing of Domo, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or
after the date of the Report), irrespective of any general incorporation language contained in such filing.
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