Courtesy of Domo

Utah tech company Domo goes public amid skepticism

By Liesl Nielsen, KSL.com | Posted - Jun 29th, 2018 @ 6:01pm



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NEW YORK — Utah tech unicorn Domo went public Friday and is trading relatively well on an IPO that has been met with skepticism since its initial filing.

Domo raised $193 million by offering 9.2 million shares of Class B common stock at $21 per share, becoming the second Utah tech venture to go public in recent months. Tech education company Pluralsight went public in mid-May with an offering over $350 million, nearly double Domo’s.

Domo is currently trading on Nasdaq under the ticker “DOMO” and, as of Friday afternoon, had traded at a high of nearly $29.

The American Fork-based business data software company has weathered criticism since it filed for an IPO in early June when it became apparent that Domo’s financials were far from what they were expected to be.

Domo was founded in 2010 by former Omniture CEO Josh James when he realized that what he really wanted was real-time data about his company right on his phone. What he didn’t understand, however, was what it would take to get there, he said.

The company invested heavily in research and development and has a 95 percent customer retention rate, according to James, but wasn’t going to market as efficiently as he’d hoped.

Going public was the most appropriate and efficient way to raise enough money — about $200 million — to reach a cash flow break-even point, James said.

“It's a fully-funded business now, and we're in a position where all we need to do is go out and sell some more product,” he said. “So we get to go really focus on that, and kind of grow up and say, ‘OK, we're ready to be adults because we know exactly what we're doing now.’”

James believes the market for what Domo’s doing is bigger than anything he’s ever seen and says the company just needs time to fully grow up.

“We’ve got to go out and show that we can increase sales and gross sales,” he said. “And as (people) see that transition to a high-growth company, then I think they will get really excited.”

Before filing for an IPO, Domo was valued at over $2 billion after raising about $700 million — in part thanks to the excitement that surrounded some big-name backers. With the money the company raised in its IPO, however, Domo is now probably more accurately valued around half a billion — just a quarter of its previous valuation.

Domo came under fire from several national business publications, including Forbes, CNBC and investment analysis news organization Seeking Alpha, as everyone from KSL.com to Bloomberg analyzed the company’s now-public financials.

In the company’s initial filing, Domo reported revenue of $108.5 million in 2017, up 46 percent from the year before, but with a loss of $176.6 million. Last year’s numbers were better than 2016, however, when Domo lost $183.1 million on a revenue of $74.5 million.

By the end of April, Domo had just $72 million in cash which, if the company continued spending at its normal rate, represented just a few months of its operating power, according to the company’s S-1. Domo had also accumulated an $803.3-million deficit and $96 million in long-term debt by the end of April.

"If other equity or debt financing is not available by August 2018, management will then begin to implement plans to significantly reduce operating expenses," Domo said in its S-1 under risk factors.

James said the company never really expected that to become necessary but included it in the company’s documents because the language of an S-1 generally has to be fairly conservative, he said.

“The articles that were written out there were kind of all over the place and way far off the mark,” he said. “I mean (our risk factors) were just kind of like, ‘Here's the most extreme things that can happen.”

Bloomberg, however, called Domo the “poster child for Silicon Valley excess,” and the company is known for its extravagant spending. While Domo is certainly not the only company to spend its cash fast, not many go public when their financials are less than savory.

James said some even criticized the company for what many considered expensive employee perks, like catered lunch and dinner.

“When we went out on the road and talked to investors, never once did they talk about any of the things that were written in the media,” he said. “Investors pay attention to what's the value delivered to the customers.”

However, Domo’s IPO seemed like a desperate money bid to many, and the company slashed its offering price after its initial filing, most likely in an attempt to generate interest in the IPO.

“It's a little unique to go public in our situation where we're losing money and not growing as fast as we want to grow but the market’s so big and we built a defensible product that the investors were like, ‘We should get out there. We should get moving!’”

James says the company’s goals now are to perform as well domestically as it is internationally and sell more to the current customer base.

“When you go out and try to really innovate you're going to get some naysayers,” he said. Now we've got to go out and build it. We've got to go out and get those customers, and, as we do that, then the value is reflected in the stock. … What's important is to just keep staying focused on the customers.”

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