Company: DOMO
Filing Date: 2025-04-04
Form Type: 10-K
Source: 0001505952-25-000045
Chunk: 117

Company: DOMO, INC.
Filing Date: 2025-04-04
Form: 10-K
Item: Item 7
Chunk 117
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 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 recent decline in our annual billings is primarily due to a decrease in our gross retention and ARR net retention rates. Our ARR net retention has increased sequentially for two consecutive quarters, and we expect this trend to continue as average contract length increases, customers with consumption-based agreements become a larger percentage of our renewal base, and our partner ecosystem expands.

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 derive our revenue primarily from subscription revenue, which consists of consumption-based agreements and subscription-based agreements for our cloud-based platform. We also sell professional services.

Consumption-based agreements utilize a tiered pricing structure for an annual purchase commitment based upon an estimated volume of usage. Revenue from the annual purchase commitment in consumption-based agreements is recognized ratably over the related contractual term of the contract. Amounts for the annual purchase commitments do not carry over 

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beyond each annual commitment period. Revenue from subscription-based agreements is a function of customers, platform tier, number of users, price per user, and transaction and data volumes. Revenue is recognized ratably over the related contractual term beginning on the date that the platform is made available to a customer. We recognize revenue ratably because the customer receives and consumes the benefits of the platform throughout the contract 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