Domo Inc.

06/15/2026 | Press release | Distributed by Public on 06/15/2026 14:10

Quarterly Report for Quarter Ending April 30, 2026 (Form 10-Q)

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 potential impact on our business transitioning to a consumption-based pricing model;
•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, including changes in regulations and customs, tariffs and trade barriers, on our business and on our customers;
•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 II, 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 update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Overview
We founded Domo in 2010 with the vision of digitally connecting everyone within the enterprise with real-time, rich, relevant data and then enabling 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 AI and data products 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 build data products that generate measurable value for the business.
Business leaders, department heads and managers are typically initial subscribers to our platform, deploying Domo to solve a business problem or enable departmental access. Over time, as customers recognize the value of our platform, we engage with CIOs and other executives to facilitate broader adoption.
We primarily offer our platform, which customers can adopt in whole or in part, as a consumption-based service, which includes consumption-based agreements and enterprise-wide agreements (ELAs) with unlimited users and a data cap. Customers with consumption-based agreements have an annual purchase commitment based on estimated usage, utilizing a tiered pricing structure, which is paid upfront. Historically, we also offered subscription-based agreements, under which subscription fees are based upon the chosen Domo package which includes tier-based platform capabilities or usage. As of the end of our most recent fiscal quarter, 89% of our annual recurring revenue (ARR) was utilizing the platform as a consumption-based service, and we expect this percentage to increase in future periods.
As of April 30, 2026, 76% of our customers were under multi-year contracts on a dollar-weighted basis, consistent with 76% of customers as of January 31, 2026. The high percentage revenue from multi-year contracts, among both new and existing customers, has enhanced the predictability of our subscription revenue, which includes both subscription-based and consumption-based agreements. We typically invoice our customers annually in advance for subscriptions to our platform.
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 April 30, 2025 and 2026, total RPO was $427.5 million and $437.3 million, respectively. The amount of RPO expected to be recognized as revenue in the next twelve months was $241.0 million and $239.6 million as of April 30, 2025 and 2026, respectively.
We had total revenue of $80.1 million and $79.4 million for the three months ended April 30, 2025 and 2026, respectively. For the three months ended April 30, 2025 and 2026, 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 80% and 79% of our total revenue for the three months ended April 30, 2025 and 2026, respectively.
We have incurred significant net losses since our inception, including net losses of $18.1 million and $14.2 million for the three months ended April 30, 2025 and 2026, respectively, and had an accumulated deficit of $1,561.1 million at April 30, 2026. We expect to incur losses for the foreseeable future and may not be able to achieve or sustain profitability.
Impact of Macroeconomic Conditions
Prevailing macroeconomic conditions have elongated the software sales cycle, increased deal scrutiny and made renewal discussions more challenging. These conditions may continue to impact our business and those of our customers in a manner that we may not be able to quantify or isolate from other drivers of our performance, and may negatively impact our revenue growth in the near term. Ongoing concerns about the health of the U.S. and global economies may cause certain of our current and potential customers to reduce or delay technology spending or seek payment or other concessions from us. These conditions, along with the ongoing uncertainty in the SaaS sector, may materially and negatively impact our operating results, financial condition and prospects. In response to these dynamics, we have taken and intend to continue to take steps to better align our sales team and focus on controlling costs, which we expect will result in improved margins and efficient growth in the long term. However, as described below under "Liquidity and Capital Resources," conditions exist that raise substantial
doubt about our ability to continue as a going concern, and there can be no assurance that these steps will result in sustained positive cash flow.
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 April 30, 2026, we had over 2,400 customers. Enterprise customers accounted for 45% and 44% of our revenue for the three months ended April 30, 2025 and 2026, respectively. To drive growth among both our enterprise and corporate customers, 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 are still in the early stages of expanding within many of our customers. Under consumption-based pricing, our customers have access to all features offered on our platform, which allows for increased discoverability across the entire customer organization. We believe that as customers continue to deploy greater volumes and sources of data for multiple use cases under our consumption-based pricing model, the unique features of our platform can address the needs of everyone within their organization.
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.
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, our partner ecosystem has 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 trailing twelve month gross retention rate was 85% and 86% as of April 30, 2025 and 2026, respectively. Our gross retention has been affected in part due to macroeconomic conditions and challenging renewals from customers with COVID-19 use cases of our platform. As we continue to expand our partner ecosystem and develop methods to encourage wider and more strategic adoptions, we expect that customer retention will increase over the long term.
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 and retain 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.
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 taken steps to better align our sales and marketing spending and headcount to efficiently grow and attract new customers.
Sales and marketing expense as a percentage of total revenue was 50% for the three months ended April 30, 2025 compared to 47% for the three months ended April 30, 2026.
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 data applications. The amount of new investments as a percentage of revenue required to achieve our plans is expected to increase slightly in the near term then remain consistent in the long term.
Research and development expense as a percentage of total revenue was 25% for the three months ended April 30, 2025 compared to 23% for the three months ended April 30, 2026.
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 three months ended April 30, 2025 and 2026:
Three Months Ended April 30,
2025 2026
Billings (in thousands) $ 63,903 $ 60,430
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 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; 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.
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.
Total Other Expense, Net
Total other expense, net consists of remeasurement of warrant liability and 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 interest income. The transactional impacts of foreign currency are recorded as foreign currency losses (gains) in the consolidated statements of operations.
Income Taxes
Income taxes consist 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.
Results of Operations
The following tables set forth selected condensed consolidated statements of operations data and such data as a percentage of total revenue for each of the periods indicated:
Three Months Ended April 30,
2025 2026
Revenue: (in thousands)
Subscription $ 71,389 $ 69,777
Professional services and other 8,722 9,626
Total revenue 80,111 79,403
Cost of revenue:
Subscription(1)
13,787 13,725
Professional services and other(1)
6,881 7,135
Total cost of revenue 20,668 20,860
Gross profit 59,443 58,543
Operating expenses:
Sales and marketing(1)(3)
39,661 37,583
Research and development(1)
19,961 18,648
General and administrative(1)(2)
14,167 13,277
Total operating expenses 73,789 69,508
Loss from operations (14,346) (10,965)
Other expense, net:
Remeasurement of warrant liability 1,158 2,083
Other expense, net(1)
(4,673) (4,930)
Total other expense, net (3,515) (2,847)
Loss before income taxes (17,861) (13,812)
Provision for income taxes 191 358
Net loss $ (18,052) $ (14,170)
________________
(1)Includes stock-based compensation expense as follows:
Three Months Ended April 30,
2025 2026
Cost of revenue: (in thousands)
Subscription $ 670 $ 816
Professional services and other 278 424
Sales and marketing
4,401 6,047
Research and development
4,902 3,146
General and administrative
4,986 4,331
Other expense, net 218 -
Total $ 15,455 $ 14,764
(2)Includes amortization of certain intangible assets of $0.1 million for each of the three months ended April 30, 2025 and 2026.
(3)Includes executive officer severance as follows:
Three Months Ended April 30,
2025 2026
(in thousands)
Sales and marketing $ - $ 488
Total executive officer severance $ - $ 488
Three Months Ended April 30,
2025 2026
Revenue:
Subscription 89 % 88 %
Professional services and other 11 12
Total revenue 100 100
Cost of revenue:
Subscription 17 17
Professional services and other 9 9
Total cost of revenue 26 26
Gross margin 74 74
Operating expenses:
Sales and marketing 50 47
Research and development 25 23
General and administrative 17 18
Total operating expenses 92 88
Loss from operations (18) (14)
Other expense:
Remeasurement of warrant liability 1 3
Other expense, net (5) (6)
Total other expense (4) (3)
Loss before income taxes (22) (17)
Provision for income taxes - -
Net loss (22) % (17) %
Discussion of the Three Months Ended April 30, 2025 and 2026
Revenue
Three Months Ended April 30,
2025 2026 $ Change % Change
(in thousands)
Revenue:
Subscription $ 71,389 $ 69,777 $ (1,612) (2) %
Professional services and other 8,722 9,626 904 10
Total revenue $ 80,111 $ 79,403 $ (708) (1)
Percentage of revenue:
Subscription 89 % 88 %
Professional services and other 11 12
Total 100 % 100 %
The decrease in subscription revenue was primarily due to a $2.6 million increase from new customers, partially offset by a $4.2 million net decrease from existing customers. Our total customer count decreased 6% from April 30, 2025 to April 30, 2026. For the purposes of this comparison, new customers are defined as those added since the end of the prior year quarter, and revenue from existing customers is presented net of churn. The increase in professional services and other revenue was primarily due to a $0.7 million increase in event sponsorships and minor increases in other revenue.
Cost of Revenue, Gross Profit and Gross Margin
Three Months Ended April 30,
2025 2026 $ Change % Change
(in thousands)
Cost of revenue:
Subscription $ 13,787 $ 13,725 $ (62) - %
Professional services and other 6,881 7,135 254 4
Total cost of revenue $ 20,668 $ 20,860 $ 192 1
Gross profit $ 59,443 $ 58,543 $ (900) (2)
Gross margin:
Subscription 81 % 80 %
Professional services and other 21 26
Total gross margin 74 74
The increase in cost of professional services and other revenue is primarily due to a $1.1 million increase in employee-related costs, partially offset by a $0.8 million decrease in outsourced services.
Subscription gross margin decreased slightly primarily due to a decrease in subscription revenue. As we continue to shift more of our customer base to consumption-based pricing, we expect subscription gross margin to remain relatively stable in the near term and increase in the long term.
Services gross margin increased primarily due to a favorable mix of higher margin projects delivered during the current period and a decrease in outsourced services. We expect the gross margin for professional services to fluctuate from period to period due to changes in the proportion of services provided by third-party consultants, seasonality, and timing of projects with differing margins.
Operating Expenses
Three Months Ended April 30,
2025 2026 $ Change % Change
(in thousands)
Operating expenses:
Sales and marketing $ 39,661 $ 37,583 $ (2,078) (5) %
Research and development 19,961 18,648 (1,313) (7)
General and administrative 14,167 13,277 (890) (6)
Total operating expenses $ 73,789 $ 69,508 $ (4,281) (6)
Percentage of revenue:
Sales and marketing 50 % 47 %
Research and development 25 23
General and administrative 17 18
The decrease in sales and marketing expenses was primarily due to a $5.2 million decrease in commission expense, partially offset by a $3.5 million increase in employee-related costs. These offsets are partially driven by certain fiscal 2026 commissions paid out the form of fully vested restricted stock units (RSUs) instead of cash. Sales and marketing expense as a percentage of total revenue decreased from 50% in the three months ended April 30, 2025 to 47% in the three months ended April 30, 2026. We expect sales and marketing expense as a percentage of revenue to be relatively stable in the near term and decrease in the long term.
Research and development expenses decreased primarily due to a $2.0 million decrease in employee-related costs, driven by stock-based compensation. This was partially offset by a $0.7 million decrease in capitalized software, which increases expense. Research and development expense as a percentage of revenue decreased from 25% in the three months ended April 30, 2025 to 23% in the three months ended April 30, 2026. We expect research and development expense as a percentage of revenue to decrease in the long term.
General and administrative expenses decreased due in part to an $0.4 million decrease in travel expense and a $0.3 million decrease in income tax expense. General and administrative expenses as a percent of revenue changed from 17% in the three months ended April 30, 2025 to 18% in the three months ended April 30, 2026. We expect general and administrative expense as a percentage of revenue to decrease in the long term.
Total Other Expense, Net
Three Months Ended April 30,
2025 2026 $ Change % Change
(in thousands)
Other expense, net:
Remeasurement of warrant liability $ 1,158 $ 2,083 $ 925 80
Other expense, net (4,673) (4,930) (257) (5)
Total other expense, net $ (3,515) $ (2,847) $ 668 19
Remeasurement of warrant liability resulted in a $2.1 million gain during the three months ended April 30, 2026, a favorable change of $0.9 million.
Other expense, net increased primarily due to minor increases in interest expense and expense related to changes in foreign exchange rates and higher balances of cash denominated in currencies other than the functional currency and minor decreases to interest income.
We expect interest expense to increase modestly in the near term due to an increasing principal balance. We expect foreign currency gains and losses could become more pronounced due to current market volatility.
Income Taxes
Three Months Ended April 30,
2025 2026 $ Change % Change
(in thousands)
Provision for income taxes $ 191 $ 358 $ 167 87 %
Income taxes increased primarily due to higher taxable income from our international subsidiaries during the three months ended April 30, 2026.
Liquidity and Capital Resources
As of April 30, 2026, we had $39.1 million of cash and cash equivalents, which were held for working capital purposes. Our cash and cash equivalents consist primarily of cash and money market funds. We have a $125.3 million credit facility, all of which had been drawn as of April 30, 2026.
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.
As of April 30, 2026, we were not in compliance with the minimum annualized recurring revenue covenant under our credit facility. As a result, the lenders have the right to accelerate repayment of the $136.6 million of principal and related fees, and we have classified the related term loan and fees as a current liability as of April 30, 2026. Our cash and cash equivalents of $39.1 million as of April 30, 2026 would not be sufficient to repay the term loan upon any such acceleration. As a result, substantial doubt exists about our ability to continue as a going concern.
In connection with the covenant noncompliance described above, the Company entered into a forbearance agreement with its lenders, under which the lenders agreed to forbear from exercising their rights and remedies with respect to the noncompliance and certain other specified and anticipated defaults during a limited forbearance period, subject to certain conditions. The forbearance does not waive the underlying default and does not change the classification of the term loan, which remains a current liability, and upon its expiration the lenders may exercise their rights and remedies, including acceleration. See Note 11, "Debt," for further details.
The forbearance period is contingent on the Company's pursuit and completion of a potential transaction, including the Company's entry into a definitive purchase agreement by July 31, 2026 and the completion of a transaction no later than November 30, 2026. The Company is in advanced negotiations regarding a potential transaction. While substantial progress has been made, no definitive agreement has been executed and there can be no assurance that any transaction will result from these discussions. If negotiations continue to progress successfully, the Company anticipates that a potential transaction could be announced in the near term. Management's plans to mitigate the conditions described above are focused on completing this potential transaction. The Company also has access to an at-the-market equity offering program under which it may sell up to $150.0 million of its Class B common stock. The completion of a potential transaction, and the Company's ability to raise capital under the at-the-market program depend on factors outside the Company's control, including the actions of the Company's lenders, potential counterparties, and investors, as well as market conditions, and there can be no assurance that any of these plans will be entered into or completed on acceptable terms, or at all. Accordingly, management has concluded that these plans do not alleviate the substantial doubt about the Company's ability to continue as a going concern. See Note 1, "Liquidity and Going Concern," to our condensed consolidated financial statements. If we are unable to obtain sufficient liquidity, the lenders could accelerate our indebtedness and foreclose on our assets, and our business, financial condition and ability to continue operations would be materially and adversely affected.
On September 6, 2024, we entered into a Controlled Equity OfferingSM Sales Agreement (Sales Agreement) with Cantor Fitzgerald & Co. (Cantor). Pursuant to the Sales Agreement, we may sell, from time to time up to an aggregate of $150.0 million of our Class B common stock through an "at-the-market" offering defined in Rule 415 under the Securities Act. We will pay Cantor a commission equal to 3.0% of the gross proceeds from the sale of shares of our Class B common stock under the Sales Agreement. The $150.0 million of Class B common stock that may be offered, issued and sold under the Sales Agreement is included in the $300.0 million of securities that may be offered, issued and sold by us under our registration statement on Form S-3 that was effective on September 20, 2024. No shares have been sold pursuant to the Sales Agreement to date.
Credit Facility
We have a credit facility that permits up to $125.3 million in term loan borrowings, all of which had been drawn as of April 30, 2026. The credit facility is secured by substantially all of our assets.
In February 2024, we entered into an amendment to the credit facility which extended the maturity date for the outstanding loan from April 1, 2025 to April 1, 2026 and made certain modifications to the financial covenants. In conjunction with this amendment, we issued 189,036 fully-vested warrants to purchase shares of our Class B common stock.
In August 2024, we entered into an amendment to the credit facility which refinanced the existing term loans, extended the maturity date from April 1, 2026 to August 19, 2028, revised interest amounts payable in cash and payable in kind, and made certain modifications to the financial covenants. Furthermore, certain lenders participating in the credit facility were paid in full for their portion of the principal, PIK interest, and amendment fee and were replaced by new lenders who refinanced those amounts. We paid and subsequently refinanced the $7.0 million closing fee associated with the credit facility, resulting in no net impact to our cash balance. Additionally, the $5.0 million amendment fee from the August 2020 amendment plus $2.3 million of accrued PIK interest, totaling $7.3 million, was refinanced as the Second PIK Amendment Fee per the August 2024 amendment. The Second PIK Amendment Fee accrues interest at a rate of 9.5% per year and is due upon maturity, along with the related capitalized interest. Also in conjunction with this amendment, we issued 1,022,918 fully-vested warrants to purchase shares of our Class B common stock. These warrants have an exercise price of $0.01 per share and expire on August 19, 2028.
The credit facility requires interest-only payments on a portion of the accrued interest until the maturity date. This payable portion of the interest that accrues on the outstanding principal of the term loan is due in cash on a monthly basis, which, as of April 30, 2026, accrued at a floating rate equal to the greater of (1) 8.0% and (2) Adjusted Term SOFR. Adjusted Term SOFR is defined as the greater of (a) 2.5% and (b) Term SOFR. In the event that SOFR is unavailable, interest will accrue at a floating rate equal to the greater of (1) 7.0% and (2) the Alternate Base Rate plus 2.75% per year. The Alternate Base Rate is defined as the greatest of (a) the Prime Rate (b) Federal Funds Effective Rate plus 0.5% and (c) Adjusted Term SOFR plus 1.0%. The Federal Funds Effective rate is defined as the rate published by the Federal Reserve System as the overnight rate, or, if such rate is not so published, the average of the quotations for the day for such transaction received by Administrative Agent from three Federal funds brokers. As of April 30, 2026, the cash interest rate was approximately 6.7%. In addition to the 6.7% cash interest rate, a fixed rate equal to 5.0% per year accrues on the outstanding principal of the term loan. This capitalized portion of the interest is added to the principal amount of the outstanding term loan on a monthly basis and is due upon maturity.
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 the business, merge with or acquire other entities, incur indebtedness or encumbrances, make distributions to holders of our capital stock, make certain investments or enter into transactions with affiliates. In addition, we are required to comply with a minimum annualized recurring revenue covenant (as defined by the credit facility), tested quarterly. The credit facility defines 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. We are also required to comply with a minimum trailing 12-month consolidated EBITDA covenant (as defined by the credit facility), which is tested quarterly, and adhere to a monthly minimum liquidity covenant (as defined by the credit facility) that requires unrestricted cash on a consolidated basis of $25.0 million deposited in pledged accounts located in the United States. Noncompliance with these covenants, or the occurrence of certain other events specified in the credit facility, constitutes an event of default under the loan agreement, upon which the lenders may declare any outstanding principal, interest and fees immediately due and payable. We were in compliance with the covenant terms of the credit facility on January 31, 2026. As of April 30, 2026, we were not in compliance with the minimum annualized recurring revenue covenant and we have not obtained a waiver. As a result, we have classified the outstanding term loan as a current liability as of April 30, 2026. See Note 1, "Liquidity and Going Concern," and Note 11, "Debt," to our condensed consolidated financial statements.
Historical Cash Flow Trends
Three Months Ended April 30,
2025 2026
(in thousands)
Net cash provided by operating activities $ 3,951 $ 5,170
Net cash used in investing activities (2,927) (1,855)
Net cash used in financing activities (595) (6,951)
Operating Activities
Our operating activities consisted primarily of payments received from our customers, 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.
Net cash provided by operating activities during the three months ended April 30, 2025 consisted of cash collected from customers of $93.2 million exceeding the cash outflows of $89.2 million. Significant components of cash outflows included $47.9 million for personnel costs and $22.0 million for marketing programs and events, third-party costs to provide our platform, outsourced professional services, and other operating expenditures.
Net cash provided by operating activities during the three months ended April 30, 2026 consisted of cash collected from customers of $96.9 million exceeding $91.9 million of cash outflows. Significant components of cash outflows included $46.5 million for personnel costs and $23.4 million for marketing programs and events, third-party costs to provide our platform and outsourced professional services, and other operating expenditures.
Investing Activities
Our investing activities consisted primarily of property and equipment purchases, which included capitalized development costs related to internal-use software.
Net cash used in investing activities during the three months ended April 30, 2025 consisted primarily of $2.5 million of capitalized development costs related to internal-use software and $0.4 million of purchased property and equipment.
Net cash used in investing activities during the three months ended April 30, 2026 consisted primarily of $1.8 million of capitalized development costs related to internal-use software.
Financing Activities
Our financing activities consisted primarily of proceeds received from our employee stock purchase plan, net change in short-term payable financing, and to a lesser extent, stock option exercises and outflows used to repurchase shares for tax withholdings on vesting of restricted stock.
Net cash used in financing activities for the three months ended April 30, 2025 consisted primarily of $3.7 million of payments on short-term payable financing, $0.5 million used to repurchase shares for tax withholdings on vesting of restricted stock, $0.2 million for debt issuance costs, $0.2 million of payments of deferred offering costs for a registration statement, partially offset by $3.3 million of proceeds from short-term payable financing and $0.7 million of proceeds from shares issued in connection with our employee stock purchase plan.
Net cash used in financing activities for the three months ended April 30, 2026 consisted primarily of $3.8 million of payments on short-term payable financing and $3.4 million used to repurchase shares for tax withholdings on vesting of restricted stock. These were partially offset by $0.3 million of proceeds from shares issued in connection with our employee stock purchase plan.
Contractual Obligations and Commitments
Our principal commitments consist of long-term debt, obligations under operating leases for office space, and non-cancelable contracts for cloud infrastructure services. There have been no material changes in our contractual obligations and commitments, as disclosed in our Annual Report on Form 10-K.
Critical Accounting Policies and Estimates
We prepare our condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of these condensed 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.
There have been no material changes to our critical accounting policies and estimates as previously disclosed in our Annual Report on Form 10-K. See "Note 2-Summary of Significant Accounting Policies" of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information regarding our significant accounting policies.
Recent Accounting Pronouncements
See "Note 2-Summary of Significant Accounting Policies" of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information regarding recent accounting pronouncements.
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