Josh James: A lot of it was incremental spend that we were — that we had originally forecast. And so we just take the incremental spend out. You don’t hire a bunch of new folks. You’re really careful with your spend on outside consultants. And I think that’s where the — cost savings that we needed. And we found some efficiencies. I mean really since we got here, we’ve been finding efficiencies. And with those efficiencies that we’ve already found, we feel really good about our ability to hit the margin number.
Derrick Wood: Okay, alright. Thank you.
David Jolley: Thank you.
Operator: Your next question comes from the line of Patrick Walravens with JMP Securities. Your line is open.
Patrick Walravens: Oh, great. Thank you. So I guess, first of all, with respect to the large renewals in H2, have some of those large renewals already informed you of their intention not to renew?
Josh James: No, we’ve got — I mean, there’s certainly a couple of them that we know about, and that’s why the guide is where the guide is. And then there’s others that we just — we’re seeing a low renewal rate with the vendor consolidation. So as we get further into conversations, just trying to figure out what’s the right percentage to apply to that as we’re doing our forecast. And that’s where we came up with — what we came up with.
Patrick Walravens: Okay. And then I mean, if you look at those large renewals and take them as a whole, I mean, just rough ballpark, what percentage of the business are we talking about? 1%, 5%, 10%?
Josh James: If you go look at our top 50 customers, there’s only a handful. It’s only five, six customers that you’re worried about, and you have great relationships with the rest of them. And we have great relationships with the four or five that we’re worried about, but the four or five that we’re worried about — we know there’s other vendors in there. We know that they’re talking about vendor consolidation. We know that they’re beating us up on price, that they’re negotiating. And so again, just trying to hedge the right amount and make sure that we’re being conservative enough. So it doesn’t feel like — it definitely doesn’t feel like a holistic, we got to be worried about the enterprise business at all. In fact, I’d say it’s just — there’s a handful of deals.
There’s still one deal in there that’s COVID related that we’re definitely worried about. And that’s on the list. That’s one of the four or five. So it doesn’t feel like it’s some kind of systemic problem that we have. It’s just a handful of deals that are dealing with their IT consolidation and these big enterprises. The CIO — there’s one CIO we talked to, and he said to me that he had a several billion dollar IT spend and that when the CEO called him, he said, hey, you have several billion dollars of IT spend. I want $1 billion out. So those are the marching orders. And that’s the only conversation we’ve had thus far, but we know that, that means, hey, we got to be really careful here about forecasting that renewal.
David Jolley: And I think just from a — just one thing I might add to that from a defensive standpoint, when we’re sitting in 300 or 400 seats in that account, and we know that our competitors are virtually enterprise-wide, it just really drives home the point that we need to be in a similar position defensively. And as we move to a consumption model, that allows us to be in that same position where we’ve got seats across the entire enterprise. So that really kind of pushes us to accelerate the move to consumption and try to get all of our accounts over there.
Patrick Walravens: Okay. Great. And so Josh, I always ask you under what circumstances this business might be sold, and the way the shares work in Domo, it’s basically your decision. So does this consolidation trend impact how you think about that?
Josh James: I mean I think about that the same way always. It just depends on if anybody ever brought us an offer and then we would take a look at it and evaluate that relative to the opportunity we have in the marketplace and relative to what we think the long-term value of the shares should be. And right now, I’d say, despite some of the short-term headwinds that I think most people are dealing with, there’s certainly a few exceptions as you read everybody’s earnings calls. But most people are dealing with a lot of these similar things. Despite that, like we tried to indicate on the call, we’re actually pretty excited about the future. We’re really excited about the people that we have here. And we’re really excited about the opportunity where we’re sitting.
We talked a lot about AI. I mean when ChatGPT starts getting exciting and everyone is talking about it and you want to have prompts to enable instead of using Beast Mode or using SQL, you can do it in ChatGPT. That’s cool. It’s really interesting. It’s exciting, and we’re definitely excited about that. But the fact that you can take any BI — any AI model that’s out there and you can automate the whole process inside Domo, you can apply any particular model that’s sitting out there in Hugging Face, and you want to get a bunch of data that you have in your business and you want to apply those models to that dataset, how do you do that? Well, we happen to have the first mile done. And then we can allow you to do the second — to take that model and apply that AI power to your business right now.
And then we have the last mile. You want to move the benefit out of that and distribute that out to people in your organization. You want to have that continue to automatically work inside your organization with updated data as it comes through. We’re one of the few places you can do that. So we’re really excited about that as well.
Patrick Walravens: Okay. Last one, I’m sorry, it goes along. So what steps do you think you guys can take to help build back shareholder value until we get through this tough macro and until we get through this consumption shift?
Josh James: Yes. I mean I think the consumption shift is not — there’s nothing negative about that in our business. So I don’t think that’s any — in fact, that’s just positive. It’s positive as we go through it. It’s positive every step of the way. We don’t have to wait for the benefit. We’re getting the benefit — every time we incrementally improve that, we’re getting a benefit. And I think the other thing that’s really important in this kind of an environment is that you make sure that you’re not burning cash, you make sure that you have a positive operating margin. And I think we’re being really judicious about that. We have a lot of levers that we can still pull that we don’t need to pull yet, and hopefully, we don’t have to. And so I think you just continue to hang around the hoop, keep the capacity there and keep building great products, and we feel really good about our prospects on that front.
Patrick Walravens: Okay, thank you.
Josh James: Yes. You bet. Thanks, Patrick.
Operator: Your next question comes from the line of Sanjit Singh with Morgan Stanley. Your line is open.
Sanjit Singh: Yes, thanks for taking the questions. Going back to the topic of consumption. I was wondering, with the 10% of the base that has moved on to consumption, has there been — is there any sort of accounting rev rec headwind that’s associated with it? So if you’re bringing a customer on via subscription versus consumption, is there any sort of rev rec differences that we should be aware of that could also be a headwind to revenue? I know you said deal sizes are bigger with consumption. So does it sounds like on a TCV basis that there’s any impact there? But just wanted to kind of check if there was any headwinds as customers move from — come on board via consumption versus subscription.
