Zuora (ZUO) 27 May 212022 Q1 Earnings call transcript

Good afternoon, and welcome to Zuora's First Quarter of Fiscal 2022 Earnings Conference Call. [Operator Instructions] With that, I would like to turn the call over to Luana Wolk, Head of Investor Relations, for introductory remarks.

Thank you. Good afternoon. And welcome to Zuora's first quarter fiscal 2022 earnings conference call.

Tien McElhatton, Founder Zuora’s are Officer; Chief today Todd and Chief me Tzuo, and Zuora's Executive Joining Finance Officer.

have Session second fiscal of provide our also joining quarter first quarter us and will Robbie outlook well Chief our our We as as Revenue to the review Q&A call for today. XXXX today's purpose financial year. results The is for Traube, Officer the upcoming

actual as results and discussion today include a responses a reminder, so of our differ Some factors. of our result could forward-looking will as materially statements, several

reconciliations earnings You we most included are regarding can SEC. be measures find those earnings to information our with in and several filings today factors And our related in in GAAP to the we will financial referring release measures and lastly, release. the issued non-GAAP recent today,

copy filings, SEC over that, learn our For And at to earnings or a to about investor.zuora.com. replay our Investor Zuora, a links to the today's call please me visit turn call website more release, our Tien. of Relations let of with

our new operating on gross year. And another subscription margin, a Luana. today and joining also strong of us income, we call we first to non-GAAP XXXX. quarter everyone posted metrics, quarter earnings start including the for total you, free thank for exceeded get our you We fiscal flow. Thank guidance revenue, Zuora’s across Overall, fiscal cash revenue, non-GAAP operating positive

improving. also is execution Our

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Now our XXXX I of many know recent Day you Investor last attended just month.

my keep I'll brief. So, today comments

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processed to And central customers automating our workflow their our platform business all were the invoices customers subscription time platform. it experience As offers last business is a And customers this we sticky are Over making for workflows. provides with approximately Day, this. half subscriber central we of and million simplifying on eight installed the across tasks believe and our quarter, plus from we on half becomes we experiences. revenue the with quarter, over We executed, saving day, that us is a customers. platform, our at meaningful we in. our Live billion our money. Central and am alone processes it help I in And importance and said us our cloud billing also anchor adoption acquisition accelerate in IT Zuora our processes to it said Investor continue this supports super, a of super and about The are the roadmap. QX plus grow, that in intellectual our will end-to-end automates is and central a required this opportunistic It ARR scalability as acquisitions succeed Day, subscription transform agility laser-focused of to customers’ to more insights. and It accelerate platform where Day to we property as and At about roadmap. based $XXX end-to-end Objects, economy. it a million will subscription come manages and our Platform. excited processes even that looking tuck-in talked company our Investor technology peak two-product be platform assets capturing tool this opportunity opportunity is helping At complete innovation Investor the

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new one licensing but gives multichannel with audio quarter-over-quarter, would visual platform audio a was from great Investor and scale in We to highlight $X we the and only deal working for the to explained translated partner-driven our our customers involved businesses. multi-product years we SIs our also In blueprints its for at And successful Subscribed Zuora’s usership. a saw for examples central consultants, and all CPG their revamp of work, quarter overall company. more our unique Zuora, the us billion including this company's chose you not a enable completely company pipeline illustration gave at partner's just offering, partners a the short, building one Group increase of subscription on which helps We companies four give in A global the expertise was Strategy with This year-over-year to our what accelerate in that to company technology our business. industry-leading accelerate Zuora-certified digit growth. growth big technology, use a global you things integrator with we also Not we call coming considerable partnered of path commitment to to turn journey strategy billing, is us we systems triple solutions. biggest subscriptions. XX the our Day, will finally, collect also In Investor to during our why try And its QX blueprint let on me to are global experience three QX. subscription from Day. But subscriber of some others experience. our

finally, And the top manufacturers. on had a we educate recurring of consumer revenue eight on company to with executives also financial SSG XX partnering their metrics. We with implications of work automobile the robotics their

that ever And teams One for of the agile leaning launch first into optimize Europe. new the faster that on help they are based Zuora platform on now offerings before. them to to enterprise success, our build telematics of our them knowledge modern architectures, a that expertise can business actually in market than

engaged XX this publish Consulting based firms Group like Boston our original QX, During also that research the with Subscribed data. Strategy on over group companies, with partnering

And delivering so at summary, out year. strategy results. month's is we The solid in Investor the had start Day to laid a last we

sales see We multiproduct to continue our motion.

strategy differentiate to expertise our deliver, Our us to to unique With customers. economy. this are subscription clear capturing continues partnership and the focus, SI of opportunity we length the of and positioned well continue our our with continues

the financials. Todd to turn I'll call to over Todd? Now, our review

the Tien, thanks joining Thanks, for call. and

demonstrated Our great quarter, year, across team foundation progress key see financial It's exceeded long-term made executed first as we the QX. expectations our results, well in for during the incremental we financial the laid by growth. metrics. our to having Last

to cash this continue top-line margin of a rule that of by As growth Investor on we XX and framework year outlined focus we flow of ARR we fiscal net ahead, free improving meeting growth target a XX% applying look retention, Day. on and will dollar managing

our SI review with key me deals highlighted multiproduct partners. our was from contribution metrics. solid first Let by and QX success

retention it XX-month last dollar higher Net meaningful XXXX. The weigh we experienced to customers $XXX,XXX XXX% net lagging our dollar target with on in in net close turn one In to was metric five group business. ended a ACV, XXX%, just made significant retention Looking in the deals with QX, towards we next improvement quarter. in progress in the QX XXX We this this a we XX% quarter. at retention at above $X.X lap dollar levels year fiscal for of ago. over compared our track will customer million until metric set ACV This we and quarter or from is year customers. or prior a basis. a continues We trailing same a on represent in

volume transaction gains to helpful Turning is business as how systems Process transaction customer's processed representing through track as linearly in billion but the growth $XX XX% volume, running quarterly efficiencies our revenue they with not of scale. is our our and quarter, customer platform, understanding does year-over-year. our much

QX our represented review me to financial results. let XX% grew Subscription and Now, revenue. of total million XX% revenue $XX.X year-over-year

expected, recognition, approximately flat which daily the fewer on impacted Due to by subscription revenue days QX, has $X.X As essentially million. versus the QX revenue three subscription prior quarter. was revenue our our

a As included nonrecurring revenue XX% recall, revenue to $XX.X you may Professional decreased services million. of our year-over-year subscription benefit $X.X XXXX million. QX FY one-time

Again, towards $XX improve direct partners previously, overall we discussed professional enhances services growth This strategy a our strategy line the only mark as the is eclipsed our continues view was not mix services subscription benefits in reduce by mix more with integrator X% towards our revenue This to overall year-over-year. system to the trend. go-to-market we've our QX our and service to in overall our traction revenue and of grew opportunity, also and gain revenue. declined positive Total impacted but revenue our million partners. our SI to our margin. As recurring strategy shifting

As more overall SIs, professional gross services margins we our to improved. drive

as reflecting improvement consistent Non-GAAP reached resulted result a $X.X what driven from was improvement shared of margin year. reflecting our operating basis SI with gross breakeven, calls. at from XX.X% year, compared breakeven last This margin operating Non-GAAP past year. services was QX efficiencies. X.X%, of negative and a non-GAAP quarter, prior a services more of to $X.X QX year. line We'll subscription you XX.X% prior in basis with of XX%, growth million dramatic prior was minus margin As non-GAAP margin the our top blended from the a partners. gross to engage improvement Non-GAAP XXX was scale gross gross with continue XX.X% success, the This run meaningful in on loss for improving points margins. million in we by an QX on the of we in

go-to-market you absorb which margins call, weren't fiscal with last as the year product. we in incurred shared and operating in year be will last earning this accelerated and I flat As expenses, investments

cash the end quarter, turn ARR compared XX% growth Now ARR flow. year. was the represents year-over-year. ARR all of let's to ARR annualized contracts and at the QX, value free of the In to subscription given in a growth prior

We ARR driven flow Free fiscal by cash growth target collections continue of $X.X to year focused our XX% XXXX. million, be on record during the quarter. for was cash of

For QX, flow and $X.X plan. the the through purchase we stock million. CapEx slightly to billings the for expect be quarter of cash negative employee QX seasonality was

growth our prudently Investor as managing outlined we while we're Looking during top ahead, bottom-line. accelerating Day, line the on focused

is is free by Free framework, total revenue. free typical seasonality this flow be by of managed and margin defined As plus of such, due exceed as rule end flow. fiscal to year a free this during cash by and cash of our or rule our subscription QX the fiscal the objective Based to this sum flow. significant we introduced annual XX plus flow XXXX. to XX collections revenue calculated XX% cash higher cash the on cash divided framework objective of XX% as of We

to Turning from an cash increase and strong sheet. driven quarter ended with collections. cash $XXX.X We million cash million balance $XX.X equivalent, the of primarily the year, prior by in the

to healthy spending the to we've our continue and cash be We position maintained with prudent business. levels a manage

with well partners. the XXX.X shares approximately million quarter share maintain diluted We executed drove In stock treasury discipline investments, at and was of larger targeting count method. using working we the the improved our end our and fully in performance. QX, SI Our prospects

to outlook. financial turn let's Now our

run while FY in During were accelerate our development year. costs rate that investments XXXX, go-to-market we'll last and product absorbing and initiatives not

expect full free cash flow continue year. the for We to positive

of QX, operating to of of approximately expect million to $X.X minus $XX.X of minus currently outstanding a million. XXX.X share to we million weighted revenue shares $X.XX revenue For $XX.X loss net total to average million. Non-GAAP Non-GAAP $XX.X assuming of minus $XX.X $X million. million. Subscription loss per $X.XX,

the outlook of million. million are million growth. year and assuming a $X.XX of loss to loss a minus Non-GAAP As revenue foundation our minus million. XXXX, of expect $X of outstanding we look ahead Subscription operating to of Zuora's minus million our fiscal to pleased closing, $XXX raising we're net we $XX until $XXX of in to Non-GAAP we In per $XXX share weighted-average million. solid shares revenue full to minus million. with total XXX.X long-term QX approximately $X.XX, execution laid we've $XXX for

Next, for we'll open question. call your the

for open our the and Tien, call me As Revenue the I Officer for up the be Chief session. earlier, indicated joining Traube, Robbie one please Operator, Q&A questions. will

[Operator from Instructions] with is of line Vafi Your first question Joe the Canaccord.

little there's the accelerating more Todd, Hey of here coming bit a I thinking a start your QX, afternoon, some we'd out here and of and you and know in to in I the nice steadily install well. next see Zuora big guys, quarter, good and headwind thought good net this Tien quarter. kind out term about really results lapping remarks a talked know growth base retention that I mentioned as of short

but now, retention setup have you're pretty I'll know follow-up. like a is not providing would be next that bump then there Sounds any good up net And in quarter. quick guidance appreciated. I the for a color

Todd. ahead, Go

Joe. Hi,

So most we're that quarter. had recent the with three improvement really pleased we point this

dollar for have over point, XXX% Look, on this we is feel we retention I And plus year. think time. net steadily are to expect absolutely shows performance that the hit we it improving our track working. to the strategy at

a great. color. good That's That's

that thought mean, and maybe may be, product the we I – when think be early? Objects and that about here I assume talk how for acquisition when it's an customers potentially on little to a and I called And know that bit, Live really sounds great. the your it you Secondly, suite, integrating I might would timeline added purchase would it's see what you be although add

There's ahead products. what we're excited that and that. something we go to fill Day, would have you Investor four really of about. Sure. said I core back point in kind we I'll

You'll built the the applications, as in platform. revenue, of each these we platform think it three central of collect also building which call on

help laid platform central wanted so out graph, to some a And stronger those us central in that the those inside platform things subscriber platform process do we the areas. technology we a some of the capabilities with of orchestration is vision engine. tuck-in will in for that central core itself the to celebrate capabilities, and the This make

that monetization and that way of central ability And roadmap the make we back but deliver we monetize stickier to – so way making product product the Day. we of it, in our growth the to think the getting Investor even will our same that. still on the going platform, celebrate That's this be stronger, is the showed think to the

sales maybe Thanks, I'll it the Robbie the more just from the and And great. starting is That's Okay. on then throw integrators that one partners? color more partners systems was more. from Tien. uptake relative commentary provide I embrace know how platform is or like are effort the your sounds you to if really line. instance. Thanks of Zuora the kind lot, some a to I wondering shifting morphing could on guys.

that. Yes. Thank you for

progress I'm So was very, there. first with very when very progress. by, little it Overall know joined our we overall, pleased I

we’re consultants, the were we by certified that growth customers or three also is in massive seen covered their we've around the investing terms that in all So lives digital influenced already of sourced by what transformation. have and covered ground SIs, we've though quarters of

think penetrate and grow traction partners, really look we to term, the all opportunity GSI broad those. And our to we’ve got with as new I across our business overall. longer So of

Your is the next Berenberg. DeGasperi from line of Andrew question with

I taking net churn I rate, the in over? be terms first for Joe Thanks that a if QX to ready say question. exclude you one from know already ask retention my of year, to wanted the at it last XXX%, XXX% on would and it. fair But the guess I of asked you're

giving exit like over expect plus the guidance consistent we're the as we to confident quarters be that. the go to we XXX% I on we're And year. we'll said, as very any But year. we improvement have Andrew, not at specific that that fiscal should

And you ACV closed mentioned the I'm that on the on penetration above. Investor the in with you pipeline collect customers meaningfully is deals it. XXX,XXX are that state that customers, of then curious, is – Got revenue what Day? seeing your central platform the just you higher now, then highlighted right your the secondly, overall were and you in currently on –

I Tien. – ahead, Andrew think So go

don't don't your the the suite. right? have I've are All absolutely is strategy Day, our Yes. sell in on love path. motion really liked could [indiscernible] the the to your products got about We to I And Investor we you're about at and right. product multi-product whole have growth and off makes platform bite part a once, whole me. for sense is they that take thing And

and might and and billing the as and is revenue. I'm that doing company being every a back collect revenue different exactly long to there upsell upfront. highlighted want we this, now do come another customers then on what the internally the we once think in self-billing customers I be Other call as I what other upfront. together – to But I going are say just So billing one says, situation want that highlight

customers really motion. they the can we where so the really, are really are. products all But in And meet

past, and being weighting cross-sell better And might this is number. with probably heavier are very the Andrew, a the multi-product quarter balance had sold upsell I add volume products we seeing we've saw and of much other on we really in color a the strategy. nice that other that

Zuora help us that's to happy and the dollar make shows, really going retention. I'm more so I believe platform because are embracing really and as net the And stickier it in customers platform entire about future that

surprising you pipeline? manufacturing for of terms others, in end lastly, mentioned Thanks the strength, and that. several terms was of maybe market there And anything in

No.

it's outlined only, as it the No weeks to of fastest our verticals. we the Those subscription with Day, XX ago subscription models, about are ago. – change days, only We starting our verticals. And it We in the business industries being IOT. what think there. continue verticals. these it's technology, monitor. but see there's media, driven see economy, fastest I just by it's work our manufacturing we other – having just ourselves six that to on three in in six right? are to believe then three move, But no Investor continue adoption growing change was gosh, core data based merchant verticals really call we XX, focus, We'll that said, weeks

Thank Great. you.

from Your line Chris next Sachs. with Merwin question Goldman is the of

helpful bit, but it How the Hey, you've very largest just customers. huge do plus would question. wanted you mentioned little like XXX each like much cross-sell just too? taking of which directional for anything stronger thanks momentum, share else to of ask mean, those expectations slowed of I K we customers. and be the for plus increase about trends you. about Thank $X.X a year-on-year, motion, you of metrics metrics large those kind about my can think million evidence for so seems are I the down got think again, I in obviously, the

that. that. Hi, think seasonality But little of use maybe QX go Chris, or a look, can do anyone we bit to always if lot wipe and wants QX tends end in, will out else pipeline. and And we ahead Todd, out of I the take weigh to I in a

We quarter the base. absolutely And and We're really with deals I we is And and quite about think pleased $X.X that. upsell about talked shows five the the install you're We're million. really and really that the huge up we we see that. also market there, we in in working pleased plan really that strategy there's I other say net the would so pipeline over I saw significantly right, again, were were QX. saw up thing only I seeing in excellent guess moving the Day, nice it maybe enterprise traction Investor Robbie, and think improved. our on that retention we points. the about dollar the And if we and three pipeline bit of anything you want to growth we that of don't opportunity in I is, had that and growth know on comment a a for

Yes.

pipeline I think, good. growing on on the to the area And Again, it's all feel overall working. the really as to that expected. pipeline account-based overall, terms in ongoing of continues is focus the is verticals definitely, the on process enterprise, focus of marketing,

that All alliances, continue in really right. deal flow. source They and kicking provide is of also to influence that that

So overall, there. really think, pipeline is pleased with pod working really direction I well,

support the I us that is really all market. vertical the going focus to think of up helping

improvement about say or more maybe sales, directional it's I imagine. would is story from as seems COVID growth cross would products, and magnitude customers, with And as more you metric know are anything year. it the I be I I follow-up potential. like that improving disclose last trajectory it, Perfect. a of yes, trend one well. but is I engine bigger on mean, selling and don't you can the two-part you but know trough the And bigger It get a growth improving you think of probably it, seems like

just may in of but you uncertainty of I Robbie because year the audio off. could we've has about be But success the Investor in QX. Day say that in talked past, in focus because in Robbie those paid last would definitely give COVID, Yes, has color, two pod was I it months really, some in put jump by about we the in the customer talked structure that really that will

that churn, you engaged, keep also products, on, additional additional continue NPS, so, seeing and ability but so to to our are our our And not then to in some upsell and customers just ability so forth. strengthen modules, improving manage

flow you the through that are So, of numbers. I the it's customer ultimately, think seeing success focus really

Tien year-over-year Hey here on add of improved where was average basis. been little churn just a we color historical The maybe for I’ll below a and bit Chris. actually our has level

good really absolutely we're So, making paying. progress investments are those and

much. Thanks so Great.

to emphasize better. basis, amount on percentage just said, the even looks dollar Todd and it what a And raw so that's

of from next line Your question Stan is with Stanley. Zlotsky the Morgan

Perfect. question just us net second. you with guys. Chris' actually that? XXX,XXX new increased want ACV of I for if the that your Thank deals one walk signed you just dynamics the that's five to does through that get mean so much account just new back greater or and calculated, to customer the by in kind improve churn than there's way some is metric dynamics XXX,XXX there that that is of one, obscuring Maybe

The would sells a as it the said, low a down about I concern Stan, any customers into we that. I didn't answer we actually some that focus We had and drop upsells. had have much lower. as this customers, were did they following. don't few that And quarter we dollar out higher as had churns. churn customers but But they on have moved

names. Day we that we be the pipeline with. And have As have opportunity continue in at we and I talked look our install grow a base forward to the the to Investor large about also quarters, new adding we topline to drive expect to continue fact, really next in really and to healthy

Got it.

were those but those more deals collaborative all existing some were that I XXX,XXX us. of upsell customers count, Not than from forget the exact actually new purchased deals,

a bit and of so, seasonality, something ebb the big flow just complicated quarter-to-quarter, concerned that And and little The is, business we're number to that picture think, a not thing. I it's it's with.

it is them Got say if upsold it. wouldn't And $XXX,XXX just mechanically push above included isn't in somebody threshold? that the upsell

$XXX,XXX already were than value of was think, more than a the more Yes, dollar there but, upsell I then and $XXX,XXX. the

customer So, already a over ACV an it a plus $XXX,XXX. deal to was that $XXX,XXX existing was

guidance? a bit within dig than year The staying profitability is full it. why a the up in So, bit great. in on Got little remember quarter, I And which you moving you don't guide, little the so just, the it? are more the – investments outlined parameters some guys in marketing QX, you announced, walk acquisition there's kind the where of into you us just of going? through the going it just R&D incremental it that Is the maybe beat

where of investments year feel the we we're in, couple knows, as a about But and bottom from is didn't got I incremental incremental we've was be line. go-to-market. we We're was So, going everyone about funny investing seeing doing there acquisition, last cost products, into to this what the that in have expenses Objects have Stan, cost year Live expenses, as And a that then our on some basis. we we good we'll talked absorb we had should the and year. land are

Perfect. guys. it. Thank so much, Got you

next is Jefferies. line from Brent Your Thill with the question of

replacing Hi, great by Luv up competitive you asking, the wins it move traction further quarter. you seeing space, Congrats markets into on front, there? I guess, or the space on and Sodha anyone guys a of out for the the terms solutions you mentioned Wanted existing are that large in as are this you're Thill. to guess enterprise start I that greenfield, is in more getting. Brent deal is you on

behind ERP are to us. that shift exist might that mission are systems, to they we right. those up Yes, definitely this, these not in we can as there systems to say replace I’d market in start existing over I'd collide the say systems experiences, see take continue replace right. continue to of us CRM might But parts go system are over going We're critical right and functionalities or with that to to place, looking subscriber systems

that to is first in business, see it billion $XX go existing different replacement both systems, offering. so one and to business strategic, subscription a large a subscriptions it be $XX many into Or a their experience. be are us greenfield billion, Now it's sometimes subscriber their $XX essentially a already often launching going company, become could opportunity right, have they're so can that you billion, as that of you going consolidate differentiated into product deliver

out the this we And but about guess. more know Todd, I are that said it. follow-up a I quick think how you or year, out you periods, something flow I pre-cash towards? Got profitability? headed guess, you're for break positive say, into is do so for Maybe

really about, getting Rule we Day, So, us in you we XX where I Luv back to would where talked out to of the refer framework saw the to Investor XXXX.

that see right tell what how profitability seeing. that's of for build up a a expect evolve. see We'll would guidance we've I to but consistent the that's there to we're kind we you, there, given So,

it. you. Got Thank

Yes.

recent that acquisition too. Given tuck-in no how deviation that. definitely, guidance there's is And was, small there's this a from

So, going from it. not of you're out acquisition any see the to deviation

have from the Scott we last question of Needham. one Berg for And line time with

question thanks the on Todd Hi, good here. quarter. And first for congrats me guidance. on in is guess I a sliding

maybe about guidance Your last guess levels. on that by around it's maybe drops that little magnitude of the second But acceleration about. consider billings but shows little rate your given to two or looking improved a quarter surprised to numbers? subscription still back not the second at something after be that that a quarters, expected those growth there’s going with numbers, sales is big. be when year half for I'm we the bit else – the which five those revenues conservative, in subscription going be half should the that perspective points, seems dual something Not to we is there which that bit Should I implies a

a few things, Scott. So,

does, guidance. a at refer XX% at quarter, we I we this growth. at at we of are year growth, the we last said XX%. pumped And you end up to XX% be ARR exited the expect year First to We

hit on So, and that. that. will we're happy we We're track that with confidence

quarter, I thing is revenue. and rate non-recurring second half, some And last that would our and the other you XXX you had remind the in to The QX if fourth the what both that impact impacts third in basis we the in impacted in – XXX that points that, probably QX will about about look growth looks it's points basis at year like.

to and continue look back improvements I we'll any again, see So through the there isn't consistent deceleration. to ARR, year the

at are maybe be, quite maybe versus guess, better year ago, from more That's you really the for seems but healthy, which purchase buying not upsell helpful. seeing customers I the you. right pandemic? opportunity necessarily and then you initial the before at more Tien, or good a that a deal Robbie look today follow-up composition be Thank today, a as And I to perspective, or are guess

Robbie, go that. ahead with

expand land very Yes, working that and thanks us. Tien. mean this we’re version seeing I is really for well

that billing. well. in at and then we're added looking for in, very not And when of upsells what products but composition much revenue, overall, products much of actually seeing coming I'm the the a in people we’re we’re So I but seeing that so in, even so doing terms it necessarily think as initial coming is getting that seeing is follows that not I'm example, supporting, are

Great. Thanks taking That's questions. for helpful. my

further back over there to questions. any for are management remarks. like closing to I'd no turn And it

want I call. for joining to everybody our thank

in Just really to you opportunity, the what Investor a good really, days. start shortly of XX of to I – summarize the really and to the year. the magnitude about kind good we doing we solid in Thank our feel feel We're Day. you. recently said hope QX business, see about was

you conclude does for Thank today's participating. that And conference.

You may now disconnect. Have a great day.