Zuora (ZUO) 26 Aug 212022 Q2 Earnings call transcript

Good afternoon. And welcome to Zuora Second Quarter Fiscal 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. turn over to Ms. your like would the to conference host, I Wolk, for Relations of remarks. Luana Investor introductory Head

Thank you. XXXX earnings Good quarter conference second afternoon. call. And welcome to Zuora’s fiscal

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

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

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

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

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

revenue based year-over-year quarter, a as rate across me innovations more pleased this X representing operating XXXX we last once X and to Thank second our that product delivering fiscal for quarter. four non-GAAP start, uptick our that total from result, a you strong a results value from earnings deliver and able XXX% point of to delivered subscription of across this And customers. again lines with loss guidance quarter very that increase say point let provided call. metrics, the joining $X were we thank created and the quarter retention I’m have show we our our are QX a To We operations. Zuora’s The all you, Luana, results. revenue, exceeding quarter, including

exceed that to at early. is the XXX% this rate Day the of our goal year year happy quarters start that the strategy dollar exceeded end fiscal set of to our laid report working. retention by we the Investor at believe we year am a out earlier Now goal We we two base I and

best incumbents are and businesses platform. Zuora and Billing, to our grow technology, Zuora year. that is the fiscal as disruptors motion, to momentum with and long-term Revenue continues the goals their built to to second, a strategy Zuora expand strategic both enable subscription emphasizes believe with happy organization relationships that of against are execute Central at In continue Collect, we go-to-market truly and alike, I with our the a but what continue beginning world. Zuora strategy on the overall executed, lean coming First, expertise unique all our announced I ecosystem. short, the And they companies am we the in multi-product Zuora This for and

subscription model the are into me dive turning power recurring growing navigate from up of to out. guidance increasingly and investing fast the subscription at both on highlights looking are revenue ahead companies their continuing seeing large journey we’re disruptors are waking to companies Let for how the play to Market we of start In and enterprises and these models. cases, Zuora. in both and they’re business to identified the trends Companies quarter. year the the

from this large they just and quarter, ago marketing a we share of take a our years Zoom story recurring this months. growth leader in reported Well, last two over earlier of their we powered Investor year, over Day enterprise that’s the are now XX they went At the enable in Zuora Let’s annual SaaS level disruptor. XXX% how them We’ve them the corporate increase our system sophistication. Billing. through across been new and complex company to with since all and of billion that implement monetization working $X with models launch revenue more a than come to subscribers that offerings, before evolve more it’s invoicing multi-product XXX,XXX revenue public

at subscription look let’s economy. who’s incumbent side, other to the an pivoting the On

This the over rolling who subscription-based IoT with XXX-year $XX their company, to investments new is signed robotics billion quarter, we revenue, into streams. old revenue turn marketplace a in out

realizing they chose across strategy countries existing were help operate systems Now, for they in. plus to execute this model, their XXX that the not new built the Zuora them

other not companies could We’re deliver. Zuora also solutions that seeing selecting after to come initially simply

stuck ending to vendor. Zuora. This themselves originally a brought space, until with in disruptor they a from IT on we who Then cycle CRM never implementation the security quarter, solution a in found signed switched competitive they

with platform, the have multiple subscription easily and entire and rollout be to they monetization up process pricing to able will agility and new they offers our to across products Now manage acquisition need sign new customers channels. they the

of few but the just and the Now, here spot a scaling we believe enterprise focus results the QX. we examples, to strategy and economy is delivered these subscription up are our sweet these that incumbents make driving business fast disruptors in

we Now to land the start multiple announced product, growth. year, the and turning give expand paths multi-product at us strategy a of to designed to

land years a beachhead. few was side, only ago, the our solution On Billing Zuora our

Now forward today. to fast

of We product Revenue. the multiple are Zuora course, now including seeing Zuora beachheads,

up they And the that seeing accounting past that of their the to help year. become ensure is smart For tremendous a and machines, with scale for latest come. to example, Revenue makes are cutting preparation help there recognition set revenue for growth in in IPO, to turn over rules were years automate Zuora QX, to the complexities a digital to they compliant for who company them

more the per to quarterly XX of in closed up this represents $XXX,XXX quarter continue reached with and customer ACV we the This the simultaneously cohort, a our or during customers quarter high. group XXX at and over within of ACV And grow customer sequentially. business new QX, number XX% so

a breaking On side, the expense record we’re numbers. seeing upsell

iterate iRobot to back For quickly XXXX turned to and different a service for initially in models test example, Select. iRobot subscription Billing new Zuora

expanded, progressed pilots base involuntary reduce payments. failed invested subscriber these the an Zuora to as in company credit then the and in from Collect effort card churn Now

company leader application they management, their performance Zuora now to a usage-based public a customer, As another model. revenue a to Billing complexity in recognition. recently tremendous moved completely example, added This longtime

so create to Revenue a added complete in Zuora And they’ve solution. to order QX, revenue now

Now tremendous what’s multi-product Investor we these to enabling at in upsell and between and that approach. go-to-market our is strategy And approach motions cross-sell tight, continued highlighted interlock Day demonstrate progress. tight our QX, this the

live. sales to to take successfully our In churn, field organization addition lowering base quarters our customers year early, to dollar allowing hit and two full retention continues rates us expanding these

highest own continue ACV go our with results including second as a go-to-market the Xerox. lives, driving and we deliver traction in And by also accelerating show strategy and Monster our Worldwide HERE is Technologies, and scale growth to saw During quarterly operations our cultivating strategy network quarter, in this global about and QX. of system we said, integrators

are an our SI new partner. to our First, SI influenced business quarters were growth. our In partners contributing by QX logos three over of

successful these our are Zuora. we saw in the a higher selling select with coming Thales Now to Thanks like also with new Daihatsu, average deals Rev.com, customers collaboration and partners. price, as

our our partners take live. Second, our ability scaling to are customers SI

of saw customer to are And the according a that commitment continues future increasing strategy year demonstrating seeing finally which growth. we of at investment in go-live certified their expectations. double-digit third, the partners This is story making number our increase consultants QX. the we’re us quarter-over-quarter partners quarter QX In sets of high the our investing XX% and actually growth deliver laid Zuora. to they’re basis, up a integrator of over on the Zuora, and we system of start involved out to partner. closing, for that In the This

incumbents us. both seeing We’re turn scaling and fast disruptors to enterprise

take land/expand are seeing year to dollar target journey guide the helped over two is unique Todd we’re and their With deployment our rates to them ahead addition succeed order our to in full with expertise to our us financial companies that, our that, us Our help the made performance. to our our finally, to partners review reach technology, us subscription for planning. in align to base economy. the turn call to helping And continue of on our turn accelerate I’ll our customers in go-to-market strategy and multi-product in SI retention live growth scale in Investments we quarters successfully market why to and capabilities.

today. Thank us you, joining of thanks an results and I’ll everyone providing and for be QX full Tien, financial our the third outlook for our overview and discussing quarter year.

method financial our discussion non-GAAP quarter, updated today’s to non-GAAP measures software. internal certain measures. reminder, use for we a As calculating Beginning financial this includes related

measures and to financial in includes to You release, press both year can reflect GAAP of find today’s current table that a selected results. reconciliation details prior non-GAAP adjustments made the the our which

cash both loss and financial built key metrics. towards highlighted revenue, Our strong in progress long-term QX brought flow. partners. goals. QX performance revenue, operating great exceeded strong SI and growth our our disruptors incremental strong free subscription a QX non-GAAP and total was multi-product by foundation across We’ve in deals execution contribution with from We go-to-market expectations for was incumbents, and our

on growth, base flow. dollar free Looking ahead, ARR we’ll continue to and cash focus retention

was our So quarter. on of year, base rate the the year, experienced with focus in last we the In that XXX%, retention we of a our left improvement let in higher me and this QX, levels significant prior upsell. churn take you XX% dollar as from key retention some metrics through QX along

a or over $XXX,XXX in with This we the XXX close group business. represents deals $XXX,XXX and ended two at Looking customers. number above, as We XX% ACV, at customers of of our of our with customers same ago. year ACV

ACV new As quarterly reach record during per we for Tien noted, customer. QX

processed quarter, Turning in of growth representing to systems year-over-year. volume transaction XX% volume, our billion the $XX

does in customer is While revenue our running understanding efficiencies business process transaction as not gains volume they quarterly on customers of track helpful as scale. much linearly platform. how our It is with

upfront, included which not services in $XX.X million, not one-time review financial we to QX This grew the million. Note, total in XX% our primarily XX% were was represented Professional was million me our revenue revenue. revenue to Subscription quarter. recurring year-over-year benefits QX recognize subscription $X.X and totaling which revenue to decreased $XX Let year-over-year QX anticipated non some reflected guidance. related XX% revenue of prior results.

trend. million XX% we our we view system Tien this ship decline $XX.X and revenue positive in revenue services our integrator a as close to and continue on at mentioned, As year-over-year. partners make to strategy grew more QX progress service Total continue to

As previously partners. enhances impacted only professional towards SI was our reduce opportunity, This overall go-to-market overall strategy to but by mentioned, benefits margin. services the our mix our our of direct gross growth our our not revenue also

our the was approximately of Non-GAAP subscription year. XX margin prior QX driving as more basis margin gross the prior gross SI in to an over blended a XX%, As in was same the professional non-GAAP year. success our result partners, improvement services points XX%,

data expenses our more service, of to out offer occur move the us as enable accelerate the a will to us to decision cloud-hosted we center efficiently long-term. to operate will In over additional the made hosting we we scale this and short-term make transition. capacity QX, During which the additional

During goods partners and sold incur of the expense X%, additional one-time employee we services of related by expense benefits. quarter Non-GAAP during fiscal the margin of recognized $X.X driven million $X.X investment this in was in year. and million expect half gross cost negative our to our second second training

R&D. goal investments services the the the near adjusted operating to from our we changes QX year. compared in million Non-GAAP the non-GAAP million $X.X margin additional breakeven at $X.X for resulted Our by last for to in X.X%, in as This This mentioned non-GAAP is a future, with negative was and continue in decreased near run accounting loss in SI was year further to quarter, prior sales, partners. operating of marketing earlier. of driven breakeven engaged or

last which accelerate with year call, were our As you absorb earnings weren’t operating roughly included last this we investments. year I shared expenses, flat in on fiscal margins as and

was introduced This earlier target we growth that upsell looking our XX% well driven at our new business. investors was the new help to year. in track KPIs fiscal a ARR of QX cash I’m to progress, grew and as as including by flow, happy XX% ahead performance, ARR Now free for This growth. this year-over-year. strong report of ARR ARR year,

focus Total by XX% to XX%. $X.X to objective for Free to stock purchase continue our million, seasonality timing growth We was driven on billion. reach of mid-term our business employee cash our plan. flow and ARR was CapEx the the of $X.X of quarter the negative

$X.X Turning million the ended quarter and the in prior with a cash million $XXX to the balance over we equivalents, sheet, cash increase quarter.

with be the spend We continue a to and healthy to are cash business. maintaining prudent manage position

execution Our treasury fully at improved XXX.X drove count using QX, end was the the shares stock diluted In share the our million method. performance. approximately of quarter

We and and on with continue SI focusing investments, to be disciplined targeting working enterprise motion in land partners. customers, our expand the

last shared absorbing to center last you to turn includes go-to-market run development, the is in and that in outlook, migration call, year. for were The let’s costs our mentioned our expenses Now a the product second in as not half plan the guidance this that in with investments a I financial accelerate we earlier. year we while data rate the updated

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

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

million, $X.XX total expect revenue to minus minus share $XXX the revenue continuing objectives $XXX year, and a minus revenue XXX.X operating net are with Zuora’s a are performance of In cadence I’m loss of million to loss our to average of subscription in We’ve shares our long-term $XXX $XX of of non-GAAP million, laid weighted million minus strong currently foundation We assuming per very we execution. to our For full non-GAAP achieve million, of million $XX $X.XX, $XXX to approximately raising outlook. million. QX. closing, outstanding pleased

Operator, questions. Next, we open call questions. please for your will take the

Your of Instructions] you. first the from Thank line from [Operator Jefferies. Brent comes question Thill

is open. Your line

you Tien, a Sodha One a This mentioned Thill. know, little you’re that, it? on rates forward? some bigger improving a greenfield you more rates questions. we guys. from winning your Brent I quarter. nice the maybe Congrats it as you us against Is bit win give improving is win for Could Hi, within on competitors to spoke about Luv you there going coming about I and that is competitors Jefferies as from was, context had against the as space. -- think some opportunity see or couple

expect our Well, when tried brand both have other will business look from from, work you say, that Luv, certainly I from where at it’s coming from coming I it’s new coming in new different a world realizing, would Instagram. new coming service. say to that this a It’s right? really of are year, They subscriber this, last not something right, the They service. billing different their a great situations. is companies it’s question, Look, and different. this like that expect paying especially solutions ways is world customers a very commodity, areas, doesn’t in expect it want after experience also companies completely for They

that and space, say vendor advantage. focused we’re money from the or area, a you save that vendor and solution technology to realizing that experience would on you’re not given the in what this is really not to from really gain buy way they competitive just company that a Robbie, a that’s companies focused to on So all that’s seeing? what And and now need are provider, you a this XXX% a Instacart used and

just Thank you, very boy. It’s Tien. interesting Yeah.

become one sophisticated. on as look, same the also the more hand customers So,

capabilities out do want What do come why and just these also seeing do referred to we’re expectations. They lifetime companies right? management want I Zuora we’re words, to and looking of speaking customers’ meet box, they’re not that in solutions Now other their is the of that they Zuora. the a want seeing they customizations it. not of to at the their Tien senior not company was

Tien, was a the much some upsell of if cross-sells? to retention versus year the levels was improving quick Todd and improvement, ago how rate how may, A Thank net context as for and you. much it. could it of churn versus Got us you attributed up give it follow I or on

we So really year-over-year, more made investor job. did XX% about actual talked customer the fact great and churn success, investments that We we’ve balanced, a a down XX% year-over-year. than significant -- little was

quarters, it’s a XX of quarters. that ARR, about XX As again the percent of we’ve one levels in best seen

you reliant really customers. with that if a done multi-product were is we out, on and But volume. again, ago, more again, So, had customers. a continuing new coming retaining be quarter more on went months to Typically, much it we’ve strategy that’s, XX the months, much very back resonating products on upsells record XX were balanced, we you Today see nice then balanced. the absolutely job

balanced really about from across retention feel a coming retention and So based good being upsells and being upsells performance that dollar both the portfolio. the

Thank through. you. it Great. I will pass

of Vafi Thank Joseph you. question And line the comes Canaccord. your from next from

open. is line Your

see to tempo up and Good the business in afternoon guys. cadence continued quarter. here in the Hey, great the

congrats So that. on

more on… So just one

Thank you.

had was on year? this of follow upsell you about or know quarter for … looks record we from said, a kind on here retention, retention how And how have net great quarter. pipeline upsell, wondering And quick the the a I of think then maybe which I rest you net just that should up.

of we about talked first within Day Joe, all, So, remember, $XXX base. million we have install our opportunity of I think, about an at you Analyst that

runway there’s lot out. lot interest products a left a as saw So still we in of are new have customers on usage feel you today of a are We see the coming platform. that strong

really upsell. we future the So looks about for feel what good like

So good. standpoint, from XXX% feel plus. we hit We that

going that progress. in next don’t that to quarter From going the standpoint, at and falling we range as be prudent we keep guidance see are update certainly plus backwards. that. are to ourselves we we’ll and But We you I’m

on, the their disruptors. Sure. classify a Thanks the And you’re becoming actually, think, you you moving I coming some SI incumbents that’s newer relative see, your incumbents just both, of I Thank, you them from way are and they And than to is the Fair mean, channel with bringing that customers SI, then themselves? I would Todd. of I -- on be curious transformations enough. just or signing as lot, SI bringing perhaps, guys. them more disruptors are digital as imagine also the you, they’re are

lot Yeah. look it’s fast say $XXX coming I at both, well, ton when $XXX some especially inflection ready need that are got public that’s of And They’re intersect color XXX fast the million, you growing of and that us the world up, a out you them. there’s really really reaching challenges, you growing, right? know and for $XX you ASC would reach markets. are as the you primed a challenges add? disruptor, as billing surely Ewise, where the you’ve million You’ve point million, to attract guys you’ve any want we them disruptors. got of and that Deloitte a the to companies compliance challenges, PwC, Robbie, with help, when got and that of you the do

Yeah.

transformation I think, pipeline. and size, there, mean, sort pipeline as finding know both you of in the I you source, seen, a we’re seeing space. much they’re say, That digital right? it’s balance so influence there’s from our have you

So the lot lot from where people else, public transformation. they’re there’s of having digital at SIs. same offerings towards a those towards an helping awful whatever or as help And they’re time, more that go

both So much, the we’re incumbents. and in the in very disruptors a seeing

very guys. much, Thanks

Thank you.

Your next question comes DeGasperi from the line Berenberg. of from Andrew

Your open. line is

taking Thanks for my question.

sales it take well? as type was as of can do it the the customers there any new beyond manufactures what among you those find other just interesting a of maybe if maybe Was well the products have motion they with you you First, day, taking some was -- logos that required. strategic billing? they kind elaborate I to of wondering and at products two elaborate were like as was customer

Yeah.

bullish seeing XX sector It’s product revolution you found media. because sector, physical you reversal the at decline. of on mean, people in, that past I’m And software all years, world. physical is you it’s XX the pull Software-as-a-Service, same I’m -- entertainment major if You look XX very even that and say, happening sense that of software when And became the years, right, manufacturing is to from internet, really in years, and connected have huge the IoT. the to we’re a conversations, a probably starting I products in really every know same sector. single manufacturing a Andrew, back, where the revolution the found

the infrastructure, imagination we last all an could is so And common years their IoT spent internet with their four with. The manufacturing that years, the new get. six just is investing connecting work and now in the they revenue threat years, bursting companies products to they streams five

going from some streams that comes the work out new seeing of actually, them to the revenue there. we’re for help are could areas of really, Philips, brand in some time. that’s in they’ve there we’ve mean, the are well. internet for caterpillar would as those company say, initial some one done. the stories, Last story their days driven they’re then IoT year, example, to It’s mind right, these really they’re fastest example And and launch these even, XX a on less launches down parts that had or of are and mind, doubling a them there. their an be service grow able service that And really business, the to of growing I a like and come

helpful. your your partner derivative you… metric the to strategic that looks just on pretty impressive. as then That’s And in Would should we partnerships? I growth count a cut or a your of wondering, as as growth use certified

that. No. I do I don’t would think

Okay. you. Thank

Andrew. Thanks,

your And you. Needham. Scott of last question Berg the Thank from comes from line

open, Your sir. line is

with the towards beachheads, nice and seeing questions but two the sales in for taking probably as we on the Tien, questions equation, the pipeline? how quarter thanks for lot the traction side guess you those everyone. and on are Robbie, think kind net Hi, in churn, other deals Are modules about at probably which still new mentioned the today? my on Tien questions. look those and Congrats with customer I highly upsell nice or all well? As initial its suspect that deals lands you the billing of or of can of that three skewed land the I numbers you the a you

Yeah. Yeah.

definitely with highlight in we’re the the modules we’re was new Zuora happy. one the pretty so we lands of examples to other call and tried the I And is, Revenue that gave. seeing overall, what So

happy pretty the with We’re new land motion.

with happy the new pretty We’re business.

it, of you a on deal right, the to this positive at same really the per customers bigger as up are number quarter-over-quarter. ACV is getting look at continues well, deal, sign. tick And the If time, which customer sizes

part to so business, new to continues of the and for really And blended two these customers end business additional coming the value and sure with aspect translating our are we to day, in. the of with work And a within well. that path And accounts just we’re continue businesses. right? make want that into At that the These growing footprint happy we continue those have to of the that do and revenue. aren’t fantastic

once to And we assume maybe that, I a partners work an Got firewall move moving here understand our of from the -- to either basis general and the growth the it. mix certainly out little just higher that services probably Todd, highlighted once quarters where on last progression a you’ve Helpful. from bit national percentage relation or there? and as in is should that absolute perspective, we the a of revenue think of a done fall I there, services then couple the company. way then But

right up It for things would thought around I happy for another. when or be They’re Day, talked on we a they’re channel we XX%. at more customers. I way So we think bounce of us see that it the that take to partners do great a one SI couple training coming people. But the points than lots think in, them We’ll and said, make sure may we our for Analyst business. we we’re

good have. again. on all quarter That’s Congrats Okay. the I

Thanks Hey. again, Scott.

Scott. Thanks,

further no Tien remarks. I Sir? you. to the like CEO, time. to conference showing -- would Mr. Thank our I’m additional back additional any turn for at this question Tzuo

Thank you. wanted are. execution. we who it are contribution and us their Well, to before our makes what all continued their ZUOs, I I close out, These thank their innovations, Thank you. really Great. just

retention and our accomplished is proud QX. strategy makes is dollar I’m and incredibly in an expand from It land are place of Our what that we working. enterprise base people clear what incredible our together performance,

with resonating customers. our are products Our

lot strong remains to room ARR Thank this Our and a us feel well good about position you for growth the for joining on we have overall future feel about momentum and where economy of our continues today. upside. we quarter positive subscription We based a and are.

Ladies gentlemen, all this Thank presenters. and concludes conference today’s joining. call. you for Thank you,

You may now disconnect. all