Zuora (ZUO) 31 Aug 182019 Q2 Earnings call transcript

Company Profile

Participants

Joon Huh	VP, IR
Tien Tzuo	CEO
Tyler Sloat	CFO
Jesse Hulsing	Goldman Sachs
Richard Davis	Canaccord
John DiFucci	Jefferies
Stan Zlotsky	Morgan Stanley

Call transcript

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Operator

Good afternoon. My name is Jay and I will be your conference operator today. At this time, I would like to welcome everyone to the Zuora Fiscal Q2 2019 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. VP Relations, Huh, may Joon instructions] of you Investor begin. [Operator

Joon Huh

to Good quarter afternoon Jay. Zuora’s and call. Thanks, conference welcome second earnings fiscal XXXX

and are Chief Financial today Tzuo, Tyler Officer; Officer. me Chief Sloat, Joining Zuora’s Tien Executive Zuora’s

see some to call format language. of it. before the today more that, to like our we you legal that get we hopefully let You’ll a But conversational have and me cover

quarter to in call As some July the you our know, quarter. today’s us we purpose the is on second for provide finished color of and

We’re quarter also fiscal going the to provide financial and year. outlook for third full for the

Some of statements. responses will include our forward-looking discussion and today

as So of our variety factors. differ could materially results as a result a reminder, a of actual

filed with SEC. information the can our factors You find XX-Q regarding those Form in most recent

be financial release. Finally, to included referring and reconciliations measures non-GAAP related earnings in our to today several the measures GAAP are we will

more replay it our filings, For call now, Tien or a our investor.zuora.com. turn at ado, to copy without learn Tyler. and SEC to Zuora, links And of further earnings let today's of Relations release, website about me check over a today's to Investor out

Tien Tzuo

everyone. you, and Tien. Thank Joon is This afternoon, good

Tyler Sloat

Tyler well. Yeah. as here is

Tien Tzuo

QX this Tyler, already call earnings joining you believe months can since that five been Thank for a public you IPO. and is our earnings second that’s our call. as company the roadshow

Tyler Sloat

feels It I it. I just like yesterday. know, believe can’t Tien.

in. city to thank the I I know up. still goodness, what [ph] enough [ph], I’m made I had and stay grapefruits mornings, fun Some wake keep and me, I up everyone energy wondering healthy of but call

Tien Tzuo

pleasure the new quite that big meet and the Zuora, in had the to the public in touch the became show, who for the of in And Hey, memories. in brand for a journey being chance call all a all, investors the back and show our keeping big I of all call brings the of we Welcome It welcome Yes. folks our folks for grapefruits. of for [ph] family. know to road you thank from been building is a world. Zuora, around there few economy. the it’s you a those road you part a subscription Zers to on to Ah, speaking

for these to a earnings of We're different. something many listeners know going very to to try calls try make going there of today, through know So different. we calls, dry, a out we're just more we’re We just often boring. bit bit sit going so something ton have can of And it little these a to very be a you dialog.

For the business, the going I’m forward. going What first we're do a of and about him to the half the numbers about to Tyler our tables think, guidance what to call, going you and the marketplace state and me in questions our ask the few of Tyler? seeing QX I’m then is turn interview going

Tyler Sloat

ready, am I Tien.

this. do Let’s

talk why So kick again? going Are potties [ph] you off? you about to it porta don’t

Tien Tzuo

call potties for sadly. porta this No

So, Wisconsin. to Wauwatosa, may we trip a take

Tyler Sloat

I can't wait.

it. do Let’s

you basically show, think out down Zuora it boiled months laid and road really things. So ago, three at Tien, vision you if our five our back for to

that happening it’s and economy and industries global all shift subscription all geographies. a First, the is across trend to

a finally, transform the unique focused great XXX% the we portfolio Second, companies to sizes into the as we entire management and have across long-term only and Zuora sustainable result, complete And has a play subscription result all subscription are of business. launch, a a opportunity build built deliver economy. solution scale of growth subscription on that, And a as helping business.

the would same be a saying doing show today, you question road the So we're things? is, exact if presentation

Tien Tzuo

diverse we know, quarter the you another subscription continue I IPO, this the but see we’ll I to numbers world. macro conviction more It’s grow that and our would about our has the industries of number results. business And clear continues later, that only deliver the since increased. us new can quarters Tyler, say strong find opportunities to talk that across of trend Well, around to all two after really economy helped

Tyler Sloat

Yeah. over results, you some definitely economy? I'm can in of give before but Props, that, going us go to examples subscription growth the the the

Tien Tzuo

example. is Well, the a book great

Tyler Sloat

to book. That’s right. talk I know you love the about

don't and Subscribed. listeners book model Why for Tien that Now the a future do called be it. your about the what background, the subscription wrote to have company's

Tien Tzuo

we’ve That’s a about year right. it and June. finally on for been book Well, in this we working launched

our book. is first this Now,

know, it turns you big does these quickly on hope all became it that one You never but hit. star it ratings out you of nightmares have but well, Amazon, a

the As soon and well LA list Today. bestseller they national USA made Times Amazon, [ph], on as

Tyler Sloat

That's the and walk really really, by in New store No. was ago awesome window, it’s in front a actually cool. like and see. a really nice York to that's month I which

a you to points subscription how of But congrats. Tien, think the So success to explain the growing economy. me, book

Tien Tzuo

the how you if at ways, outside the really In Well, beyond the we has done, for many rest book book wrote Valley. the of it’s Silicon reaching look world.

and it’s of lays the manufacturing of HubSpot. congrats is we stories of we waiting wasn’t SaaS public of [indiscernible] a we've always North can business Now, around later go out growth model customers. subscription software. Many Japan, to said Europe, the SaaS the tremendous year. a set are them you They course, here in really I really whole But what how joining public the guys few any like Big, there business year. Pivotal all industries America. world, success in Right? quite from related as customers media And examples to Australia this work with transforming know bunch went all to wings our just that and saw to seeing to from big and diverse have our we more time from this of know, long is a retail Boston book

Tyler Sloat

now? like which we the I highlight of those companies. all those about in you'd things right one there Is loved that particular Husqvarna about it, examples, Fender, was book read I When one story like to the talked Yeah. from to of

Tien Tzuo

this it’s around the mean, quarter, saw mowers. book, story. but really interesting in I a another lawn not Well, story It’s we

Tyler Sloat

Lawn should good. mower subscription. be This one

Tien Tzuo

this story where takes to That’s Wisconsin. our And right. is us Wauwatosa,

Stratton probably of manufacturers has in this other products, heavily producer Wauwatosa company, is & called we mower are before, it’s in sensors and other -- industrial largest engines. in Stratton a case, a with the this mowers few lawn older work spent heard years of connectivity. Briggs lawn you’ve last with, founded of lot & outbidding investing world's that in lot Briggs Now, and a They they were XXXX. Like the

mowers. might it & out commercial Well, landscapers, you what. fleets well, these that of a ask, so lot Now, of large Briggs turns Stratton lawn sells [indiscernible]

did so And them launch called just is new Turf. platforms. we helped It’s IoT InfoHub for what we Commercial

usage teams And so their time. helps InfoHub equipment commercial in now real these track for these landscapers,

new reduce these slight these costs Now, turf their and and things do increase visualize all services like issues, maximize profitability. companies data help productivity, potential maintenance

to embrace model. talk & delivering outcomes going and talked Briggs and we we're emerging Stratton customers them new about they today, for transform business beyond helping and this when So their just products,

Tyler Sloat

customer That's models. Yeah. right, business we've about, centric been what talking

Stratton are to this nearly going be, So to smart I think can reaching mower And be subscribe can lawn Tien. the others, how kids, to able the in and I anything. us, far through Briggs we store and future, see our

Tien Tzuo

we the book write didn’t companies in subscription, wrote right. for the the many just That's And Spotify, the Netflix, that Strattons and already Salesforce. ways, of for We are book Briggs world.

Tyler Sloat

it to be Yeah. working. seems And

Tien Tzuo

to really uptake huge maybe business points model. the the the Look, in it interest of of book, Absolutely. market in the this new amount

CEO the its Digital company recommended a know you of the book consumer goods and Chief who read fact, In it giant immediately to Officer.

that your subscribe product, Spanish customers a duties The internal of that can but at the of the companies this being book really model to is growing the that, service, actually being not delivering of Japanese, meetings. future We’re Viennese translated Fortune German, service success Chinese, top by management asked is and even about Korean, XX of and simply business On book Turkish. a acceptance present their shows into is to. your selling

Tyler Sloat

Tien, lot I some crazy. know spoke languages. That’s didn’t of a you of these must be languages. you

Tien Tzuo

Tyler. Australia. the The for could book even has English translated and Commonwealth it, into You UK try been

Tyler Sloat

Wait.

So all became all assets. the Zs,

Tien Tzuo

except me. Zuora, By look call the they hey, Z the to Subscribed, Zuora anybody book, for alone. if and right. email on the way, Well, wants That’s to read

send he’ll that you. said the Amazon I might a Tyler link but page, to able you Now, to sneak be

Tyler Sloat

No.

going to send are links. We definitely out Amazon

Tien Tzuo

is of behind what’s our numbers back taking this So see some economy, a I do to the of that growing in it quarter. think you the subscription signs

Tyler Sloat

Okay.

You can explain that.

mean? you do what So

Tien Tzuo

talking the Well, about numbers. I’m growth

in subscription this later, behind I is the talk but you’re little what’s a Now, going as I subscription year-over-year the know about XX% growth our economy, bit see results growth of the revenues. to

Tyler Sloat

Tien. had solid, know in in say need we unique some future agree, repeat I you to not was growth I quarter really the The factors quarters. that that may but

Tien Tzuo

customers I us know, course, our And I the And later. in growth XX% in subscription just invoice grew also Because volume year-over-year that it’s dig revenue spending annually. also know. this behind customers $XXX,XXX into that, XX% total you the favorite one that over see system, of over billing in right, through is billion processed our metrics, the to growth $X.X your for I are year volume, of the know, transaction year putting XX% this or is economy not growth over we’ll our with quarter. can Zuora of

growth remarkable a these Now, economy. of really a subscription steady to numbers all point

Tyler Sloat

Yeah.

I and companies to of to like models just right systems as you've CEO, is in centric So, mind we’d marketplace, the every known anymore. time. also get at broad you them, out Oracle CIO feel, shift be from know business exactly that the new CFO work I right that they happening and seem legacy or this like customer the world, been hitting on But and don't Tien, actually say secular the SAP, call there. we're to models Subscription

Tien Tzuo

by A know. all industry software I but know, provider and and that that models. quoted bit know, that successfully manage to is saw subscription as why mean, they transform for And in be is this controversial, business. I enables accretive what selling ERP to business products I saying opportunity and a mean we launch, I into any to shipping company the any ERP dead. building an were been I systems, I is have of

Tyler Sloat

us don’t Okay. Well, why an example you there? give

Tien Tzuo

product. flagship just one we help billing We Well, when and retro. Zuora it actually to two, comes Zuora don't have we companies, have how

example So why don’t billing. an with start around I

drive growth, automating flagship and invoice processes. powers strategy pricing a product packaging ordering recurring collections Our company’s billing and the that

today, story for Fidelity. this tell asset me we’re of and a talking to let Now, since call, so investors mainly managers on

Now, all you the asset of the in largest world. guys one them managers know as

a Pennsylvania owned It’s a to this Investments. advisor. have XX,XXX billing financial e-money They of takes country. you where the in story a management, wealth little that’s to Now, solutions background and quarter, crazy. advisors financial enabled And around this company at Fidelity and us suite BXB with Radnor, Zuora like deployed top they the serves customers we e-money by here, planning give growing are

because the ability metrics system. limited contracts a to they and do, given change, cancellation customers these time and and invoicing changes their Now, and their contracts. aren’t problems. errors, one-time they delay, amendments it’s they This existing in grow, really the constantly every of they significant causing are it sales. your customer contract of bad what are these record I computing, accretion contracts contract of billing is where to as encounter mean, a long scale. These these changing limitations And needed ultimately term new

invoicing, subscription digital management billing, this So something services growth. in our their big you changing. pricing, needs, today, associate financial Zuora with all that’s enabling generally Direct is rating, billings, but firms, handling all services, truly we’re their

Tyler Sloat

Yeah.

what through I need go exemplifies customers, really which billing, Zuora think all That seeing changes, changing. our that as these we're story a is right to is a of and great. they ton business from leads transformation for it

example What’s that’s billing, there? Zuora Zuora retro. what So of on about going

Tien Tzuo

talk asked, you come to we from services hardware don’t and Hitachi why Fayette since back area financial move and to the about let’s Well, let’s Vantara.

where in. them, go lot to services. IoT, Now, These Hitachi revenue diversify is solutions. Vantara solutions, is really just a revenue was data billing, And a moving as provide revenue with hardware done All big big lot same software trying center lot recognition their these this digital in manually, comes companies, transformation of models, many towards complexities Hitachi through around digital like and And a around around of resources. guys data this was reps these way the they're and and challenges. case, was facing consumption offline, of based this of the recognition. sales it too it work being But thinking business they

and keep to world, In accountants contract XX Vantara amendments. XX all fact, changes over these just had revenue up around to with the

Now, it too XXX, you regulations, IFRS statutory throw in compliance, different just XX, international ASC much. was

scale Vantara knowledge a that they proven provider returned lines. hit retro both Zuora aggressive and their their the can track And a realized business, to with were we record because them only letting while time technology with Hitachi the so, and that all

Tyler Sloat

Got it.

So business model have new think of that management kind now And a of and automation products to we why a across happening as cash that's I these is guess, complexity synergistic. subscription for we variety systems and as complexity need a this two well they're why verticals. quote leads a revenue really so to wide systems

it's you Vantara. are find about & different. They're a so explain to these and curious sense Briggs since might Tien, Stratton, we So so customers investors sales our little. how know, Hitachi broad, I make model for It e-money, like

Tien Tzuo

folks starting these show, through of I you clients partners back are we where us a starting what transformations. see have into are to we going remember of Tyler. growing point, days, sales bring classic you more on model. relationships we’re SaaS company, early see, road most sell direct SaaS all as these a digital it’s to these also but the mean But days, when still company It’s another primarily I are model, the think we’re that mean, best the deals. good

let from time travel this, back for example give fact, this And me a quarter. let’s to good This to Pennsylvania. Philadelphia. In you

and entire billion spun and for Thomson provide So protection. on they to all they Clarivate and academic of Analytics out from innovation BXB IP services intellectual Division. plan trusted things scientific lifecycle insights and $X analytics ranging They is focused to research property and company the Science Reuters’ recently

thought, all is Reuters, opportunity here And out looked whole they key greenfield the they of their were that this make at spinning to ourselves with fresh business. part with Now, we to especially would because set hardcore is unique to Clarivate since tie dollars work, why SAP of Thomson subscription a we architectures, Reuters. Thomson ERP Clarivate gave start customizations as Why new of systems business, this of stuck a we of millions well, systems. the would same at spend a we're needed not

of they of and to leader to their, we ERP in partner four as Deloitte a so And case, Because systems, this an when Digital specifically included billing these Salesforce.com alternative in Clarivate as new came and the that’s based XXX% like architecture, also businesses General cloud had the included for it which platform, a designed and the things provided subscription Deloitte based Zuora as turned in. cloud as part Electric. transformation premise

world cloud Now, a the models gives we business SAP, is is think chance modern to new driving this of to enables going get and traps. that out that a architecture to their dynamic Oracle where three them companies

Tyler Sloat

partners of great GSI well Tien. positive there's our And story, the That’s Thank a around know energy you. a partnerships lot I as smaller we as have. that

are. many of is they What is all hopefully, stories more come. these start diverse opportunities about how the like I this So to

Tien Tzuo

for right. initiatives. companies, diverse That’s of Well, a lot

Tyler Sloat

and porta quarter more consumer OEMs, I even right last in mean, book. diverse how economy base the energy stories utilities, you the services we customers subscription financial mean, universal equipment underscore even the and business customer I if I They at this is. quarter, broad really all how mean, talked whole based about potties, is, our there's companies, that have services, and hardware look companies, I and

Tien Tzuo

to customers. business half point like you our that know I coming from is non-technology Well, out that

Tyler Sloat

our very I line it’s half we mean, see long strong, sight for business business book that time. right. are but to us, trend grow non-tech That's continuing continues customers for of a the of our and and really strong a sector tech of

we Tien, billing, we talked talk about RevPro. So about

little bit. a Let’s switch gears

of and different should really cross you customers. We form part as volume is key with growth between stayed would earnings and range naturally our we at will settle to Right? This Tien, that that’s think business on in couple remember dollar transaction still retention, think said XXX% a we our QX, this and helping. where we reflected is we for products first base but through is given a which in land which the this the end call expand how of the I do add-on know. flat Now, business of expansion but year folks up our closer XXX% in we where sells ’XX. in our end up year, XXX% of remind our last ways, now the half term, the QX, trending primarily sells fiscal we of in long may to are higher the and right range

volumes and transaction than the So improve upsell what's QX, more to half represented strong from we In especially had driving continued revenue? rates who all activity, upsell retention of this?

Tien Tzuo

I aspect of our growth volume love transaction the business. No.

new Now, I to on have a some think what time spend I want books we describing is. just that may the little call.

Tyler Sloat

Yeah.

good think a idea. I that’s

of fee. Zuora volume purchase billing that processed invoice posted is top as So by of Zuora And volume volume our through annual run billing. transaction on our transaction customers customers platform blocks a technically a the measured

customers. the extent an their So grow, that totals with because run to as this transaction another and said we earlier, continue XX% metric for quarter. really it in year quarter that It’s us And shows the indicator customers are to think the core year we volume using billion to had over us. if growth a will X.X is we businesses of our of solid grow usage you

larger Now unit eventually to so small product initiatives, core customer this our a divisions division to critical and allows prove footprint. other there clients, business we of we on once a upsell, and success our with because in may or can is some expand strategic demonstrate value for their strategic start a but into mission we us

you time hold. model shifts, frame they’re we with going work to for ended open our We these for patient, understand as are years to is to customers, that know, also The companies business completely take take as of these some want decades. really

Tien Tzuo

think Very this. a example of When Continuum it, about true. actually true, think this great quarter, I is very I last

Continuum us is home first with a focus company. the on [indiscernible]. managed they’re with years in RXSoft, Zuora revenues not working They They run of This just the the couple Now, of security providers. service backup based system. a grown billing billing and continuing Boston, to was of their home represented revenues. time, And solutions in X% one and think of rest through Continuum’s of continue which I divisions, at ago started

company, they’ve is Now, a couldn’t and it their this rate. recently, as out that grown annual system, just home handle they Continuum, realized been when this here XX% growth

for so, running few had business, all And us Zuora next to part convince their the revenues that’s over to team we they Zuora was through the already a of it help them scale small putting expected growth the of significant their upto management years.

So Zuora, business which company XXX% up to within its to run allows is the us set of in grow that. today,

Tyler Sloat

grow I we our It with epitomizes story. think actually great one how and that’s a paths have can for expansion, this customers we multiple totally highlights them. then of

if Tien, the I up pause here, sum So quarter? how you right would

Tien Tzuo

play is subscription our is new new companies investors, we Zuora economy. enabled. in here, the the these like I’ve earlier, to I entire believe say looking ones we are the said we threat see XX QX, is opportunities this what stories we sitting And for truly across across continue to all is why And that obviously, business would here a for last portfolio the Well, across industries and growth days, and back just these geographies this finding models. common shared, that

Now let’s you ask a roles on bit. results. financial QX questions our And about let switch that, me some

Tyler Sloat

Tien. seat. in for All I’ll get the right. it, hot Well, Go

Tien Tzuo

this based key say our you to dollar already Now, was with start me we our want All start with right. about Why retention. – don’t quarter. Anything we net It that. else XXX% metrics? on touched let

Tyler Sloat

No.

that number just nothing I up for to except range about We’re pleased that to course it’s that want folks XXX that trending how add, to the there's we really remind good XXX with to end and high the feel really may year. end else we of of and

Tien Tzuo

$XXX,XXX Okay. over And second volume. contract or customers talk our spending metric, how you about about Can key ACV that? annual

Tyler Sloat

Yeah.

long think metric customer term we XX% so majority we base proxy growth. of since a business. represents it this our a represents customers that good is And told course, for Of of this ACV, our our over

segment, year and is with a you as earlier, we we rate for customers saw we us. Tien, year think growth So, for a growth ended XXX this in XX% over the QX, really quarter mentioned which healthy

Tien Tzuo

Okay.

metrics. alliance over year-over-year, year sure about we year Why retention, talked the Subscription I'm start interested was year. we last XX% the revenue? color How revenue folks was growth digging more are strong quarter last in customers, of earlier. in growth the into So that? good also financial story about with XX% on don’t But core

Tyler Sloat

Yeah.

Subscription and But at from that sequential trend the of are a we're well. growth So revenue impacted few in subscription obviously year-over-year some QX, which you there shall is explain. a that as lagging revenue. growth should subscription revenue indicator numbers the ARR the to happy for are we are when I we mentioned I things there that very growth, happy with overall about with QX talk factors non-recurring look

first, more So, than QX had fiscal QX. days our three

up pick look over makes which revenue, compare we quarter So the stronger. quarter additional

was For to subscription due example, have same, those shown about if quarter-to-quarter the we growth days. X% would extra exactly revenue

Tien Tzuo

days Three a a was big and difference surprise. that extra that makes

Tyler Sloat

it’s right. makes difference. that I It know. But

as a QX have and both QX same QX. number days of Now,

repeat not will the this throughout So year.

the Second, just about days. so I talked

last may closed of Second, year. Leeyo remember, acquisition you we our

benefited the This RevPro. from revenue increased quarter, recognition related to of we deferred

QX year we’ll thing, and impacting continue so for growth to next over the see deals. in fact, has this eliminated This And part been timing of these few quarters. to as M&A third building As year the then most in start customers. of of our third, had impact accounting, back revenue transaction and positive a we deferred at close was up RevPro build a

on often QX, get earlier business people holidays. see in leave tends before summer we done to in As the

as a saw other earlier quarters. in deals few close quarter to we So the more compared

contributed quarter. deals slightly So, our to normal QX revenue a more than in

Tien Tzuo

Got it.

our strong a had with unique factors quarter, revenue. strong we contributing operationally, subscription to albeit So some

Tyler Sloat

right. That’s

Tien Tzuo

Okay.

I year services. XX% from that saw professional over revenue year. it about talk grew Let’s

over good. in Now, QX was year growth year But XXX%. that’s over the pretty

what’s going there? on So

Tyler Sloat

back that professional goes jump. the this of Part our Sure. to revenues Leeyo acquisition again, because acquisition, services Yeah. with

numbers, the come hit for year seen see the growth one the But compare. because in the the so number the prior in big anniversary going Leeyo back of services year line. year that professional And last as over was we four not to acquisition, we've we're quarters, year

pretty In addition, a having and to we've that us move much been to done remained starting dissipate. professional grow customers call, with revenue are start is upgrading flat new last to said our that’s quarterly really of services on and lot through relating that XXX year. now. XXX. early This next and ASC customers on year that That's ASC from services unrelated bringing professional existing These we relatively customers to to as helping – again we’re why, revenue this

Tien Tzuo

Okay.

the transition, did expense talk side. about let’s on how side. So we The revenue that’s the

Tyler Sloat

Thanks. Sure. Yeah.

So obviously continuing really business. It's to in important. we're invest the

We have company economy. a huge opportunity ahead of shifts us a as subscription to

also growth. At we goal long to term one staying disciplined a company position same to more on become continue we will the the and time, focus constant moving with number for Our profitability. towards said and more efficient is be

Tien Tzuo

is key road messages the This on That’s our of right. one show.

Tyler Sloat

important And QX reflect and Yeah. numbers it's really our this. really

on stock of also impact acquisition, everyone let touch such, highlights and the the I amortization last Leeyo expense financial software XXXX on me impact commentary May of reminder of Leeyo year. non-GAAP which two amortization exclude the few let do focus of final on take internal important. XX, and financials intangible we acquired But remind me that closed of that, months included of only used as that, I and were QX based to in capitalization the before compensation, and do transaction on the a most are before Tien, a the of I will So think minute numbers,

Tien Tzuo

That’s a of reminder. lot

Tyler Sloat

I make know got but that it’s reminders, out. I wanted to a lot of sure I

go So let on. me

going planned something highlights. general, that’s of that including as shift to and Internal implementations. the last, the shipped expenses year we systems Here have some systems back back over half spend we exception are to had came half, the the in did we was a that spent that’s and with few the implementations. into the In

margins slightly So expected, XX% center improved subscription in higher non-GAAP in and revenue our gross by as spend. data had driven efficiencies QX, we subscription ongoing to

in the in for we're of Now, think but end regard subscription where margin the year subscription first with full line really year. we half average with up to this, I the is for gross happy the margin, will more

our gross in year non-GAAP margins of And services, then, line non-GAAP on our that for is run first points. overall percentage and breakeven, the more how we our which half the improved operating were business. less or For X by we margin, with plan on professional expectation

Tien Tzuo

for and investing becoming again, efficient. growth So more

Tyler Sloat

right. exactly That’s

you let another Now, me give example, Tien.

over to look you If growth at it in comparing our we as QX, efficiency measured call as and from X.X know, continued by in you improve which we our sales is reduced marketing year ratio, improvement. this down efficiency index, to X.X QX. This lower this in better. business non-GAAP ongoing our revenue. ratio, XX marketing the We ourselves hold year increase expense manage months and metric trailing for the subscription efficiency trailing and the sales The XX through versus the months accountable

Tien Tzuo

That is really good.

the improved quarter. Our cash what So saw, to flow, about free I cash? prior compared

see you the coming do for quarters? what Now,

Tyler Sloat

negative for Free by million versus X improved X.X with million flow over cash QX Yeah. QX.

driven They’re and the about. of stronger to collections. we in that year of flow XX just you invest there's ’XX will improvement I by million. a sheet. So be a to expenses, talked balance and continue hard expect year cash second then that the for of cash in there. which accrued are our as We the through free is and lot liabilities, year the are some delays all But timing going this get to some of to out disbursements half did great some fiscal employee was There in team pushed we mentioned, the our of around really of negative the remainder job worked number

Tien Tzuo

don’t billings This billings? lot billing is seems want talk you about on sometimes another get the number number. quarterly is of controversial. Why was we The to mean, focus and I XX I talk know this still of I think month thinking. that how we a trailing metric attention. to we investors to

Tyler Sloat

You lot first, But number. of up. quarterly back me put let the a

say, historically, calculated billings billings pretty and track First, I should actual closely.

Now, deferred revenue. computed the as plus period revenue a change calculated billings in in

time. comes standard So, because will to the it believe billings. When on the it’s everyone trending is that We focus investors months to of business a how a give billings, XX can fluctuate, trailing example. quarterly better over sense we of number taught

So professional as revenue, in closely, was implies XX XX% if lines growth. XXX.X calculated for services year growth QX, month this calculated of a services billings actually trailing up year. million, or And use million XX subscription billings pretty is proxy XXX.X XX% you billings, over months professional trailing which

growth that year know year. starting year by QX the impacted do of RevPro, of in last So, numbers inclusion are the on

Tien Tzuo

Okay.

billing? So focused on our trailing XX-month

Tyler Sloat

That's right.

Tien Tzuo

given then year-over-year a to acquisition of growth about want say expectations? of impact billings anything go you forward the And Leeyo and on the

Tyler Sloat

Sure. Yeah.

going the acquisition So it's some about I impact, to important planning think we're to not regularly but color. provide talk through expectations, given the

subscription XX%. So kind general, calculated months XX for rates with settle low in term ’XX, the of trailing fiscal percentile. over to time billings expect And XXs months year, for growth align billing and in we long to the of XX% think will this trailing we XX grow our

Tien Tzuo

Good.

summarize looking Now, Why do year? started touching of you numbers. we What for rest the we some the on don’t think? our forward guidance

Tyler Sloat

Yeah.

Let’s do it.

into quarters are and executed we two So we've the year well.

how but do see, looks. all the the being we pushed rest As we year second year, the have into the are that expenses half on earlier, here's of information of I the based mentioned some

projections. As up taking Yeah. our we're

So QX. with start let’s

assumes of XX.X million revenue we're million $X.XX expecting net XX.X XXX QX, loss to non-GAAP subscription $X.XX XX.X revenue of that million million non-GAAP and total to weighted of loss currently approximately to to per million, share XX.X shares of operating outstanding and million. XX.X XX For of million,

Tien Tzuo

with this mean, Now, forget too. out sure you Tyler, I there. am these you on out putting really are you Are here limb I projections? don’t with the

Tyler Sloat

certainly You’re on overall on on see seeing we worse feel based we employees are limb. get this limb, and everything like, are the start can economy good what limb. can But I’m is really our the anything and the but the happen, today. and we on

whole the in to for Now obviously, going how QX Well, year. is change about year. through the ripple the

non-GAAP million per we're XXX that million to Subscription and approximately of for XXX million million. loss fiscal and outstanding the of to year, total to assumes million weighted whole revenue non-GAAP XX XXX.X of XX.X $X.XX So XXX million. $X.XX XX of loss currently expecting shares share revenue ’XX, of net operating to million,

So got through it. guidance, of through most got I

to Now, a lot I question switch you Tien, I’m going our it and a from we question, investors. to this as back get have

Tien Tzuo

Fire right. All it.

Tyler Sloat

do you when you we Zuora’s Tien, and growth is the long are market you or stuff this your you it, thoughts digest rate sustainable year what about are think the and this playing, business term? more probably So, beyond and think and sustainable build we growth that all what think about that for on

Tien Tzuo

the that company. sustainable said reason the bought the beginning, We really business. is I subscription term as in And the Right. we see for play economy. long the that have Well, we [indiscernible] entire not are portfolio we on

are we over innings we the It’s So still transformation. is companies few industries really believe years, the to play over but not digital few of in in next the just company. But subscription decades. what early next around a that the going involve out the succeed very world, the

our So, market we to as grows. term growth the expect long grow

XX% XX% is period see market to annual so time. growth And a growing at of we long over the

Tyler Sloat

Tien. Thanks, Great.

think the might now? that phone pretty ask others do should so think that up. questions wraps lines much I Joon, open it you we up

Joon Huh

so. I think

right. Let’s do think we’re it. Jay, ready for questions. All I

Operator

Your with [Operator Instructions] question Goldman first Sachs. Hulsing from comes Jesse

Jesse Hulsing

have Thank guys. actually Yeah. I don't anything you.

every in questions. You answering did a really good job

you’re thing meant of that corporates subscriptions. help large take one I’m businesses either have you replacing or SaaS companies SaaS to of to companies off, their if larger model companies divisions thing curious subscription consumer newer that solutions? with conversations I’m interesting a non-tech your curious, smaller or they’re Netflix -- starting a one like Tien, companies lot billing or that’s or license perpetual whether larger subscription cable about someone So homegrown is company, transitioning or you about or

Tien Tzuo

sometimes, of environment [indiscernible] homegrown a launch a billing or these really are these in whole Yeah. solutions, where sometimes, call Absolutely. are environments, solutions. in right, both it’s play have manual we’re a bunch a you’ll they also processes. maybe playing And telco greenfield legacy new We of product what

replacing that’s activities. for quarter, to both the in company a of to Continuum the to system X% we opportunity. look where started I new mix story, If the will, off story, homegrown interesting and healthy talk it about had and place the there's and then the back been it of parent really back you time with was you if that we group. think was small, go was an existing one a back obviously, Again, the in long But of greenfield one. in the in revenues, And when more

Jesse Hulsing

subscriptions subscriptions anniversarying half? help you inorganic help the Leeyo, much Thank out roughly, how on you. did And think the out how and will it from contribution much do that in second

Tyler Sloat

Jesse, and revenue right away anniversarying, up. builds the been it deferred we've and up, you that so know back goes as building back On the

haven't couple much compares we'll that's of getting it get the going We and through in, the we're exactly quarters. but out how add over called next to through

Operator

next question with Davis Canaccord. Richard comes Your from

Richard Davis

e-mail sort a I of XXX, because was on working guys. you California I bills from get system, an I think mind you guys reading some have up literally inbound question as e-mail

So is little Thanks. It are of Anyways, that know, a on subscription people now, mean, can out, probably headwind to the but kind don't would that it you super but wall epic. bit be is I topic is if least? eyes could economy? it anyway, that's -- the want you I seriously, can you at a those spooky, I helpful? to around. flush moving know. but it a guess like

Tien Tzuo

Yeah.

have option. like Month but there were customers, dedicated these ago, paying. right, this, XX say, at about XX, not Book actually customers is of mean, subscription But cancel But it’s of legislation California lazy got we you new forever. Club, interface. Columbia subscriptions, if the you years it, it on their people a of book right so as, exactly CDs in So been along right, yes, has relying an lot seems are the think we’re least called true. XX the a I about Look, online House, whole negative section to

subscription it’s it XXX ASC Right. subscription ripple that our through, through think of business accounting is capabilities, making just that’s seeing, whether new of right, that regulations, fabric the I things economy We’re business it. that’s what new changing is about. as new new really, freedom, society, economy of rules they the before. power really getting policies, built California, moderate The new whether models hard you’re subscription do couldn’t And ways not doing will rules, new for is that moderate these you’re it’s do to see economy new the XXX customers And new cancel. them what new to ripple etiquettes, that going to

model. on this so, that anyway. these And we always really doing Then, of first. the were models that companies the of we business the this new think sign a business as things focus the saw are just positive And the new customers is importance

Operator

with Our next Needham question Company. comes from Scott & Berg

Unidentified Analyst

the would sort the demand great? user core the Scott observations conference of is June, and -- RevPro, of This call you you for Ryan have be what billing in of coming Loved some Hi. beyond of on the provide Thanks. can additional the of started Berg. I the if out some But that format I here. guess, are modules see new had and for any to guess color you main

Tien Tzuo

revenue increases four have products. most into about, right, in we excited but you RevPro, part I add-on and the if I if the you at of lines the most volume it’s have and we’re our have roadshow upsells we broken add-on nascent product. look that’s will, mean, would Yeah. as probably of say the up, billing, said core we we

we much in got have there's and saying all express greenfield of so the subscription lot our people But, in lot our a is economy. products so interest connect a the marketplace, of new we there in right. apps that And collect focus really opportunity

why And make obviously to know, our motivating, and doing. up the was, it out Let’s continue and and by new there opportunity to as we always is customers. continue pretty new we logos show we’re because just metric, to business incredibly represented a sure over that's to we’re is customer with there the so we're growth base big on pumped energized the that incredibly sure But I they're customers our going key there. the experience that right XXXK, make in about focus need things conference user big,

Unidentified Analyst

Got about it's mix some And maybe as you’re just you more and helped SIs. XX-XX working know business accelerate of up, then those I this right of a quick more Do I non-core tech guess, think I some it’s great it. the follow well, now. with verticals know one in

Tien Tzuo

Yeah.

point a that company So, as you to dollar long guys that’s successful multibillion know, hard size. to right, it’s software as

do client right. see the out this We're strategic. early replace, to do I And days, server like we a SaaS this and incredibly it's so put not in. and as version rip take version think like

that So, little has of there's There's bit a of happen. bit vandalism. to a education

business so, really, Digital information eventually, kind of one to and to model strong, point areas transformation, takes time these centric be as the can transformation right. of customer And stack business embedded models, in stack digital when new new leads models, to place. drive new go are we with really share We that we these really in a wanted big where do whole to realized And that really, the that into the partners. collaboration to be be the a recommend they of the lead to to and needs was, to to they opportunity exciting. has have Deloitte storage the that if that solution that's that business these place

Operator

with comes question next John Jefferies. The from DiFucci

John DiFucci

Thank you. I got question. a

And context best future. maybe it my a a and in lot in Tyler, current that traction talk longer you both and about probably with for it's bit it and opportunity. of RevPro. little with because talk to about even pipeline catalysts is more your regards that, the in the that, this conversations think I the for up something understand comes RevPro we had ASC a has Can Tien do XXX, you Listen, about term the to of Tyler. talked but

Tyler Sloat

No, take I down, definitely Yeah. can John.

call. XXX, I is we One, we is XX what to customers seeing of upgrade. some of chose companies and for to IFRS talk a driver last they kind kind compliant XXX ASC them a think of seeing and process manual Band-Aid XXX and what But we're get timeline, had year two do lot a through we're that about good had that, things. and

but know going for they're So, need got those iteration, through to it's they their going not solution now, and sustainable revenue guys automation we're seeing XXX their forward. they've first

about there. top out But the still we're not your automation that, quote acquisition both seeing we of about it's that solution that's model it and what are complexity XXX, to all revenue processes was this and and your customers was really those while on the Tien right well now, hits as as they've business reason So did they and of tens some about they've touched to manually just doing manual on, got tens and outsourced that's all complexity that's the the all place all not they bodies and sustainable. realize and customer Hitachi example revenue up other of up, that wakes cash wake

RevPro. the so long be of that's like for tailwinds success, think that are kind where for I to And going

Tien Tzuo

it mean, which is Yeah. how the cover doing I revenue forecast, ask rules, I And saying, going department. necessary how visualize, them I I'm is surprised with I to, only the you'd about it’s in is to mean, you not really be to on you think get you worse that story, to companies revenue I is bodies Vantara right XX, to their point the asking, being would encouraging necessary big guys is point XX just Hitachi track to talk revenue, and CFOs, worse spreadsheets. it’s books, back better. would when these around if the, manually done thinking to back new order world, the the getting close and

Tyler Sloat

these John, And in layering transaction that the through did of we all the comes reason we subscription all layering sets. models, see

this and about is put the to the as and product. continuous know reason to you impact really, have I we the that have just you really have the because of look it order it One together talked we've hard stuff makes one biggest at and and that’s revenue to downstream all

John DiFucci

all NetSuite, of helpful I that does But and this, be What and are this haven’t I because well, business there a across guys? lot of and question? other to to at myself supposed point you SAP caveats, done. on point, that that's guess, is anything just felt, you always come standard that's, ERP one just about And a mean, and seeing they including competitive and to are must could a the if be think have all do front ASC XXX ERP geographies others, the know now I and lot models but curious because that’s at I from across people, Oracle I trying geez, doing they this traditional but

Tien Tzuo

Yeah.

not listen was stories I reemphasize think what and to really just But And contracts, about what, There if both maybe, are stories and definitely a Cancelling not contracts. a to it’s and billing scenario, Tyler said, dynamic recreating it’s RevPro. debooking XXX contract the was XXX. business you about catalyst. really It’s the models. contracts on cancellation. a

these cost And high unchanged, inbound, high unchanged term right systems weren’t the long for so contracts. built ERP

on try change contracts you and ones the simple. XXX, of current to signaling, just these it are. so going at the implications away [indiscernible] And with the contract, discrete and now I’m these with not to the five four look contract canceled it look, is revenue that can well, ones to And try by that but get

are. And sometimes, what the implications building

tack on these business they it the but more experienced continue model in experience new they how work. businesses. right. is can on recognition, And new more these band-aids, downstream model people more the All SAP you top in you custom were downstream models the inability more to but to patches, can’t And so, code, the revenue the just billing, of built, core not of fundamentally work,

Tyler Sloat

SAP now ironically, is out modules, or of but that led is have the XXX manual the one Oracle out, they to like since came or that’s Yeah. and allocation. but models, right. revenue inefficient pretty reality have models what’s revenue have out processes allow And seeing. insufficient who what which standard caused those John, come these to you’re been right, it’s requires we’re in They system,

come billing, that's where would come and who customers revenue current their from done that even data we and that to data models, see on SAP models they to the us fed and a already they system the be already order creating system with as quote those is for to have captures have needs they So cash right, install, data which have and revenue need to but solution, the to can't. Oracle use that's us it

itself time. to over So off it's going feed of

John DiFucci

beyond validating to all much if this And so That's legs fact you bit that's I'm one now a pipeline, XXX? RevPro, more, the helpful. for can a with little it sorry, because that about which in that pretty is I'm really just what going year, has you're saying, had ask you've talk

Tien Tzuo

what actually one any And point we we you'll fact have we products. has like other. in of time, All But the know the right. is surge see flagship given Well, two product ahead in that right, it legs.

right, growth, put And it's growth and processes bets XXX, forth, having the skillsets, us to catalyst so but sometimes, in right more sometimes, training a on the and really two right marketplace like breakpoints, right debt internal so allows they're and areas.

acquired mix we’ve And so, on, got two to going horses got sales year RevPro opportunity I we've need right, we next don't ride horses the mean, to on before is but predict yet. that add be, territories. while RevPro, new the into entirely the people. Leeyo, focused enter a was US. few we haven’t International can we to them exploited look what we can And at if even We you

that flagship the economy. the excited maintain to with, that like two products both we add have rate we we're with the continue growth logos businesses. options that land subscription the new so And to about allows enter can is we What can in us market most two really really, to fact and we

Operator

Morgan comes question Stanley. next from Your Stan Zlotsky with

Stan Zlotsky

A end. questions my couple from of

the growth new that in the between whether a higher up on revenue added to of moving it skew. number. was of modules that priced be volume one, customers us retention XXX% just sense for a base upsell customer First functionality, you your versus platform or give Can breakdown

Tyler Sloat

Yeah.

Tyler. it’s Stan, So

but we I still really that numbers out retention, our strong growth. a it. is good mix about is it So, good It’s with of gross break really, also don't we we’re really all not it the can't But breaking volume us. feel retention strong coupled say down. transaction right, which really for

Stan Zlotsky

are as now, back of just on the the back John’s how as, year? momentum half into within RevPro thinking you taking and far this get just question as of then just about And Leeyo, kind we

Tien Tzuo

company Again, as when we we a company is good. feel around. here an independent vent grown a raised mean, look and this, that’s I they so significantly never at

limited business. And ability invest been to invest so to that have in and able we've

see, when look, companies And back it’s has would or out the and I bet we that the for are, really so, And guys that company which tech limitations you most they're RevPro for recognition. XXX scores all this mean, experience. and there done, chances cover, they’ve revenue using pulled team, dozens of you XXX I

And so more distribution especially we can apply expertise when that capability is against product. that an asset,

Stan Zlotsky

Thank for still it If quick you. on this Zuora about just upselling customers one, I question, you ask, as selling up, last it into me. a brand your existing may how just thinking and logos it that’s as versus RevPro on are follow far new into that

Tien Tzuo

Right. as great XX% question. opportunity, than kind back we of do a I Yeah, take flagship said, right. That it’s land see we no, have both a new customers groups our have cross both Less logos. sell to And it of being products big, to, actually big products.

one bringing have side timing is, we board needs will we're Our aiming capability from happen on new sales a the side. on they already companies philosophy distribution cross rate and and be other should perspective, to our catalyst on as, right to the talking companies

Operator

Goldman line Kevin open. your Mr. with Sachs. comes question from Kumar next Kumar, is Your

Joon Huh

Jay. All right,

must I connection. think it be a bad

Operator

are there questions this And time, further at no apologies. My sir.

Joon Huh

us Great. joining Thank you very today. much for

please call or questions, other see next any have free you Thank you to feel and time. we'll If you. email

Tien Tzuo

you. Thank

Operator

This concludes today's conference.

may You disconnect. now

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