ZUO - Earnings call transcript Q3 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Zuora Third Quarter Fiscal 2020 Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Joon Huh, Vice President of Investor Relations. Please go ahead.

Joon Huh

Thanks Josh. to quarter welcome earnings fiscal and call. conference afternoon Zuora's of third XXXX Good

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

provide results as as today's for call fourth The for financial well on of quarter purpose quarter us and provide of remainder to third our some outlook is our our color year. the

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

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

the in with factors release those regarding information find most filed can today issued XX-Q our the earnings and You we recent SEC.

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

or For our Zuora, our release, about filings, Relations to please a visit to our call at links learn earnings of investor.zuora.com. Investor more a copy SEC website today's replay of

over And Tien. with to turn let me that, it

Tien Tzuo

XXXX. Joon, welcome for Thanks welcome, and fiscal our third call earnings quarter to

that continued we by quarter. the I'm see technology solid leadership industry pleased one another key say strong recognized to our were and analysts, add representing in we we top in to revenues to for world, had across ahead of resulted we in businesses of from the our interest continue industries. as This $XX of income the QX, companies multiple In we year-over-year quarter-over-quarter in subscription best XX% million, improved operating growth subscription non-GAAP expectations. customers,

overall, call, growth. to cover financial was some lay the long-term for later but solid it foundation sustained will quarter Tyler of specific we the the a on as continue details

we provide areas previously updates about. call, on to a that For today's key I talked plan few

Revenue specifically transition, sales Chief our leadership of hiring our First, Officer. new

with the are between and products, integration Billing RevPro. flagship seeing And platform. adoption, third, Second, emerging progress on the we our our

central are across of first out market our to traditional In let broad in is are enable see that be shift systems to early trends. models that we overall terms to business this multiple positioned what playing proving in signs this me continue supporting that ERP be solutions saw unlike companies an thesis industries. there but subscription to to So uniquely our QX, to we And economy. inflexible, new quarter succeed continues about too talk

vertical core for have at hardware, to market technology we leadership our scale. any software, continue company In

example, company. a at we quarter For this deployment the kicked Asana, management off work software

Asana started their over But it switched with system. became simple needs the more their off the better with to complex years ago business. Zuora more successful billing And the scale became. a they to

isn't a But exciting just of course, what's subscription technology story. about is it economy the

on outside noted our half As vertical. are calls, prior I've customers Hi-Tech now of approximately of the

In manufacturing, see connected the growth devices. we or strong continue Internet-of-Things from coming to

as but Platform innovate not quickly manufacturers platform them iterate Central a importantly, and new from it launching the marketplace. gives fast-path learn more Zuora offers connected to to Our only a services, also they

In Decker. with QX, and had go we Johnson lives Controls Stanley Black and

feel ago to Now to launches of from handful with initial Cat's a go-live couple of based similar data services that dealers. these U.S. began simple a years

Cat burn critical subscription mission fuel and that dealers Zuora customer has over solution to value. unlock maintenance who GPS companies engine management globally and analysis, Cat new machine use per launching expand iterate bundled as and utilization, shining Today increase location, is growth example services on-boarded XXX a monitoring a the a includes about machine. overall offerings,

toward access auto not including ownership. to we see manufacturers transportation, In continue shift a

Zuora turning Fiat go-lives services, revenue unlock as like the vehicle quarter biggest amazing as with new connect have with to The drivers Kia, in are Chrysler Harley-Davidson to brands manufacturers world the their digital launch to This and excited we're in well opportunities. motorcycles.

consumption Gobain, issue largest help smart such of water saw solutions. service our move we vertical static and continue away us of materials business heating utility releases product towards building a energy launch the it yet, and a world's call blown In with for to of services ready flexible press into from buildings offerings one QX companies the as we not Saint are we see them while you to And full based manufacturers move models. as as the subscription

company, rolled As very well as we an Origin as helping Sanan, plants. which utility for world, AXA such energy around and industry major and we've Centrica. emerging new amaysim, already other But offerings are through It's an meet Australian utility flexible still the players growth much us. Energy, and with

studies wrapped we and people tour Schneider speakers Siemens, Electric, with key Ubisoft in November, X,XXX cities highlighted up subscribed from we all over world and events In our these have registered for RICOH, SoftBank, And XXXX XX others. worldwide. many

us to our for I'm put, were because a that a in leader the pleased turning in the report. time third to And companies these quarter, say Wave we is Forrester technology. of While row, simply this named

best in a Now, if look business report having the SaaS for the agent sleeper you titled technology the presence billing and for the offering will at see largest both Forrester technology, recognizes us you marketplace. agility,

around This why customers report's I us. with is couldn't the core are coming the world thesis. more to agree And our

with depend technology, the customer from trust everything up agile customer quality to the on on the line. keep market company's your changes is to billing to in ability accounting account of Your experience the will

record where fit and looking customer our for good to aggressive, for of note on recurring strategy a roles. Forrester that play CRM supporting new it's system firms ERP product for relationships their are a goes and that is each

a untapped mentioning especially these the market. customer by we our They developers also for new This are those that of yet our spoke validation also platform is powered a Zuora references for potential validation platform functionality capabilities. it's with new called out and

tools fundamental systems. require ERP solutions a digital the absolutely focused different and completely set the the are recognizes community transformation, subscription analyst state of to but models of with customer they Today based

continues Our central thesis play to out.

making earnings talked this we're business our I've strengthen gears, calls, on capture the about previous underlying to Switching changes opportunity. to

providing few So let me spend minutes a there. updates

First let's leadership. about sales talk

time And could field be not for of considerable the spent with our you happier the search. amount right results to our Officer a Revenue searching As I all organization. of Chief we elevate know,

excited industry. from some CRO, He's for in software digital is within He world and We're scale businesses. build with the of building understands of and Robbie new companies how a enterprise our brings have track proven the Traube it. enterprise the record biggest teams worked on to transformation, a to leader on-board. Adobe subscription Robbie he recognized sales world-class

We've by also a to significant At James as James go-to-market our these previously to of previous Alliances, talked to changed their successfully about system with from hired lead that few handled Global we James companies, partners, part part I'm integrators incredibly Head Huang children efforts. growth. working the pleased partners our of now importance SaaS internal And new deployments a to Robbie's a team, relationships. deepen and implementation is model of future

are almost Niblock, group of Zuora, Richard who of Operations a provide joining leaders Terry-Lloyd, James Kevin leadership course, Of John American including Sales Robbie to sales tenured amazing had decade. go-to-market been who group North in at Europe. continues our outstanding sales our of for Phillips the and and bedrock and SVP Expert;

solutions. We broad to building infrastructure the and see subscription continue are groundwork marketplace the laying for the the to demand in capture we

team, gel new Of time course, number the for groups of and us effective. take to some give folks in it on the will becomes people really a

a in best in large my journey, leadership they revenue. digital in new we ready the So, are is, driving sales the automating opinion, transformation wherever sales have billing subscription team bias now service, launching their system, for industry, recognition our to the what of modernizing scale, customers meet

restarted and is on Second, that complete the our deliver me all the and the let RevPro our an technology are We've call on update the last I implementations integration steady of with making targeting customers' Billing. today timelines. provide integration progress mentioned implementations. paused on customer to we're

an of is next LivePerson be customers as handle to and Modernizing live the automated their couple exciting are and completed cash In to quote to of billing technical from Siemens, expected operationally solutions have we've a the number revenue RevPro needs to them, months. phase using automation. fact, Billing with all of to subscription integration and Medicine in end customers three end our This to now

product and we really start selling get Zuora live customer year. but these into the base. working hard this operationally solution, operationally an our using time, take next But can our will integrated once by cross are Billing customers customers product to RevPro live some integrated We're on these

momentum of our importance let finally, call. update Central provide and me the a last strategy the an the our platform of on offering. on Third platform about We lot talked

That's have so what of We makes an the of growing. opportunity number spread to across a incredibly customers diverse and of the group keeps industry subscriptions excited. shifting industries different number

digital features we the that But it's and the whether a right they provide really company as to an provider. go or manufacturer customize customers for media customers. can result customers of building diversity, time important Zuora of our towards that save coding on businesses to are their into their solution tools software minute we extend or Every allow a new end developer our industrial cost can this

our months we've efficiencies. These processes manual of companies adopt receive launch customers quantifiable are the Since platform results XXX in tools platform in capabilities. seen automate six orchestrate using terms nearly and to events our ago, immediate operational

a tools Media, they're automate example, to groups and time customer media reconciliation in payment saving Scandinavia, For using our they're money. gateway Schibsted both of in to workflow one the largest

by Zuora Central expensive save serves credit sports collections a that upsell using a source to over truth And of automating is Trend thousands world to the out hundreds their and for of Zuora processes. using Platform company card of move them middleware group the hours Hudl, around is the analysis of logic month teams giving software a Central single Motor retry processes. XXX

is their helping integrating and our In smarter our the by extending short, work into of customers core platform Zuora data the system model business. and

an and remain and the headed. headlines, I see day the technology every models business early eventually would pioneered that and in SaaS, the media and analyst we're we about validation closing, We of our spread most made year industry reports in to importantly where every by this we incredibly In customer building base. are companies business bid in what subscription excited

manufacturer or huge have services. from the that utility. centric for our right is to to meet now and early Zuora and of the shift we're after the unique we're a we're an the all market to demands, on any businesses going strategy solutions we products and energy a customer We team, motorcycle extend technology are whether business right stages transformational innovating Today, record platform their allows making that they company new customize of system have

let turn the Tyler Now over you financial take details. it to through me to

Tyler Sloat

Tien. Thanks

and As you our deliver continuing improve on can goals execution. to operational our we're financial see

financial do, quarter As for and process I'll I'll over move transaction finish remainder Then today reviewing year. ACV, dollar-based typically outlook parts. and I fourth start customers toward the our metrics $XXX,XXX fiscal by of key with operating comments results retention my and our the

revenue. [Technical they customers, Difficulty] of XX% with our recurring represent Starting still annual

our on in we're we all execution. new Revenue effective our brought We're recently become we together, sales team sales that Tien, from Chief Officer, for team excited land customers some heard to it improve the know you about As really closing deals. that's working and consistently operational but time will hard take Robbie, and Robbie to also the coming

expand to how of pressure compares dollar-based of we our additional slightly our Looking the near-term customer will increase so the and down platform run with that integration and prior live. as our our metric this to is operations due we we for We sell work develop get RevPro finance features. we as success quarter. and also at result cross the efforts the prior long This through But execution. this at our stronger ended will work customers, the upsell believe customers' from past activity, across partially our metric see retention improve strengthen in and XXX%, periods

which our systems as volume represents processed to continued quarter, This naturally year-over-year. as biggest $XX.X businesses Zuora transaction our volume customers XX% of billion transaction driver Lastly, efforts in with of be grow. our the grows upsell growth the

with our over because reminder, revenue volume of typically linearly time. at growth allows As track our in participate us to customers efficiencies our a realized transaction customers But does pricing this this scale. growth not the

customer which billing Because this different there can basis, this quarter. transaction on often dynamic, be fluctuations of in growth. It's or helpful impacts that seasonality in larger seen also that given in at XX-month any go-lives metric point volume caused to it's as to policies results XX% look out by a quarterly important trailing

QX about operating to results. Now our let's through metrics talk how these flow financial

in revenue grew noted $XX one-time This a in million QX $X.X earlier, guidance to quarter. not that recurring our includes a will which Tien to contract of subscription be related included benefit we previous XX% As in quarters. future the million calculations,

revenue the time services realized $XX.X on of side. services $XX.X in growth changes decreased year-over-year. million our Professional revenue This resulted X% as go-to-market total will XX% to million to be take or

the maintained Total margins the prior quarters slightly X% services XX%, lower and were We utilization. margins. XX% gross healthy negative non-GAAP subscription non-GAAP improved to two professional compared consistent quarter. to to with Turning due sequentially gross non-GAAP margin margins gross to last on down

benefit improved due Including one to four quarter. and utilized XX% operating lower points our expectations. percentage in ahead of one-time quarter-over-quarter and negative improvement item expenses revenue non-GAAP was we both margin the higher to This

expenses we business. marketing base, our investing programs but manner operating growth quarters. or lower creates scalable actively long-term delayed the had that was that managing cost the in of future Most provider some driven savings and and durable, We're also service cost into for long by leverage

through indicator, a Growth our slight at QX, the increase GEI sales efficiency Looking quarter. was it Index, X.X versus prior or Efficiency

to expense dividing year-over-year million by trailing reduce want in months, XX our the of but marketing incremental this increase this go-to-market XX As a in million. non-GAAP in develop and in our long subscription metric sales we of increase term field. lines the We it as organization, as signifies is trailing operational respect activities the $XX.X the each acquire dollars work to reminder, calculated sales subscription the last may number over near changes the term, in $XX.X months many revenue, by this of the metric until through revenue we

mix free to saw renewals turn tailwind XX% increased were Billings cash early percentage rate and Calculated higher of a a points. in growth for in year-over-year. let's subscription billings few and $XX.X Now representing million, flow. QX We resulting annual

about a can fluctuate included talked a to also billings can headwind before, future due benefit quarters. result for and a QX. quarterly - benefit include factors we've they But in these As in

look longer billings period These was a over factors time, at of XX%. tend so to over past normalize the growth XX subscription months,

is growth expect Going billings expect in slightly growth XX%. 'XX forward, full-year with to Longer-term, subscription year fiscal be subscription revenue the billings line we we above calculated subscription growth.

free compared in million Turning efficiency our to was negative year. timing $XX.X was model flow last of improvement our driven million, partially payments. cash $X.X increased in QX cash flow, QX negative operating and to This favorable and by

million One those item to quarters. of on spend, CapEx was CapEx QX than prior facilities for higher call out $X.X

new flow, negative of million free in net in cost HQ, amount includes CapEx received to $X.X by facilities in in As tech the are quarter. a $X.X recorded this flow our reimbursements our this operating expenses which million was related we building out cash cash resulting for million offset related impact improvements, $X.X

of Looking improvement lower $X a more quarter. free cash sequential on driven basis, improved the flow the expenses primarily was than million purchases and versus timing The in by ESPP QX.

As flow and in and improvement second a each each contributed QX. plan first towards and of a detriment year. ESPP quarters approximately The cash timing $X.X reminder, a year that quarters ESPP related we third the in fourth the benefit to timing of have million the versus

from free expect we our negative improvement expectations the QX million the cash be $X year to flow a compared full call. million, $XX now For to earnings

expect million quarter facilities cash be million in million equivalents and our We negative plan. related year. for remain against with to spend operating and $X our we flow the HQ move, current ended to $XX $XXX.X free fully cash the of the Excluding funded cash

stock our fully using quarter treasury was as count share million approximately the XXXX of the Lastly, XX, diluted of the method. end October $XXX

leadership new we excited As including about team, brought really sales Tien a we're mentioned our earlier, on-board.

lot though. a of work 'XX year complete fiscal planning have We to

hold next off our earnings we'll our outlook So on on call. for until QX year commentary providing

with $XX total seasonal operating million are revenue we $XX includes numbers Subscription base currently impact reflects revenue million, the million taxes. our and that additional of to million loss move. $XX.X loss see QX to $XX of of to merit for expense quarter non-GAAP the and we In Now This to for a 'XX. QX, also $XX in fiscal higher of associated guidance fourth expecting million. HQ rent increases $XXX,XXX due $XX payroll This our expense million.

$X.XX of expect $X.XX XXX.X we share, of average per outstanding loss shares million. net non-GAAP to Our approximately weighted

full loss are and million to net million. operating $XXX non-GAAP million, fiscal outstanding shares average we to of weighted And $XXX.X of of share assuming 'XX, $XX.X million currently million, of XXX.X approximately subscription loss total For year of $XX.X million share million. per to to expecting revenue non-GAAP $XXX $X.XX the $XXX.X revenue $X.XX

questions. With to that, happy we're take Operator? your

Operator

Davis ahead. first comes go Please Your Instructions] [Operator question from Canaccord. with Richard

Your is line open.

Richard Davis

in about why but So once the of RevPro all change integrated in think pricing thought get have this there the is that more. so module a into or kind that pay to if like, counts, any would you of the how like in and do I've to will platform Is pricing change much. have go I the on CRO Thanks have be talked there mean, lined model I obviously, would, market regard. all and stuff you can - I that, thoughts your that terms in and should before. a at about I you

Tien Tzuo

is Yes, have so pricing right products. changing we plans we and the sell of no way the now way our we products current our sell

it know we operating You to believe intend of given sustainable it's what models, obviously point, in keep to pricing we long-term that, looking at but this the we way at, do is. power the something we're build do always

Tyler Sloat

Yes. meaningful. and we so iterate learn always our try to customer it price, RevPro base. isn't is With We product, is at Richard, look of it this add-on we one from our right, Tyler. is that flagship

and pursue And think on is iterate based constantly of going value meaningful. a having we given. what what to from so constantly the also bit it we we But at price now look off are customers

Operator

from question Stanley. go Morgan Please Zlotsky next Your with Stan comes ahead.

ahead, go your with Your Stan Morgan is line line Please open. open. Stanley, is Zlotsky

Unidentified Analyst

quarter, and ago number customers in usual this out you for is growing year did of rightsizing We're Stan commitments large a a similar to dynamic transaction signing Did of see retention? resizing kind called of the than quarter Sarah last and period. the you net quarter on this volumes their into play downtick Zlotsky. net after retention This a in that higher

Tyler Sloat

down we answer. some out this tough of heads gave anything a quarter. forward, number of out a called the also did of kind so we the that call over wasn't last We thing now, just could kind there on a quarter, we same that one up couple That’s this this we to dramatic that see quarter. said No, sales going said pressure we

Just some normal tough business. kind and of year-over-year comparisons that comp then just course of are

Operator

Brent comes ahead. question Please from with Thill next go Your Jefferies.

Your line is open.

Luv Sodha

Luv Hi, Brent again this Thill. you question. for is Sodha for Thank on taking my

implement. Just one a of implementing questions, the is he I terms side, these is previous now given is initiatives those was - on, couple in you what sales he he know initiatives of giving on and guys outlined of same leeway cannot hired the is more that being he you calls some can sort of or Robbie, in

And second Tien one then as for was the or well. Tyler

Now building to Thank and and deployment that Huang longer pipeline, over the is you times the out term, will help process? he you've faster will you. will, recruited out ease James GSI lead deployment that that if

Tien Tzuo

the projects at a that We this go also thinking. on he we've the pleased companies that would of been one, range and can certainly But in Yes, would absolutely. of to over of is I'm projects world an I from big our are transformation into doing. our largest ended I part that very Adobe, off Robbie, right, we the the found first like a part the to comes I aligned digital say in I'll growth. say incredibly where hand is mean of environment that coming selling process together the interviewing, of as as we some imagine Robbie professional the give on to you

to how growth success scale seeing And type And so process complex level. of he’s is our more new is that of we've about that Company. necessarily certain sales on a entirely it expect sale done, what bring drive I them the think and he to taking to an

making but we longer. much we add wouldn't it that did, And expect say and expect would so I say would to extremely I I - these undue should that everything to

Tyler Sloat

second I addition around was our the part of kind new I the happen alliances guess what head there. which talk last, and to expect can to James question, we Well, the of the of of

do point think to a specifically in expect shorter. we asked, get I you time

build. as part great size, take first of to have the are lot we that deal new kind traction of of The a the in of excited Robbie organization mentioned use more, past, thing partnerships and but really relatively then with to we're these we seeing, time

might sound GSI's because the some in actually them cases, be is the point It intuitive, will might taking bigger - get but over. but at counter

an not a seeing wanting our on is P&L. mean, I necessarily that to some now piece where stock architecture. either The into be that, digital we're reason So entire large transformation of just build is that our GSI's

this, we when be always and and GSI's expert get but at we possible. look say And as maybe evolved, how as we services - so can many

and are get working utilizing just On technologies working as customers the as as to that time we're also on on so flip possible, the case, trying we actively fast to deployment side, that launching our reduce well. the we're to in and line

Operator

question comes next Goldman Please ahead. Chris Merwin go from Your Sachs. with

open. Your line is

Chris Merwin

curious Hi, thanks are there. potential product, know you back, any I should ask trending months much I just we'll these for about about Thank can adoption very highlight meeting Zuora like cases, see questions. customers wanted we that to any the platform. think few how you. using my a used far, but get so group to taking

Tien Tzuo

I'm Yes, the about. excited thanks examples a try that for But asking highlight from about call. excited. area the really an is to we're platform. obviously We This few

media processes, And really a look so, you if a into the system. collections will that there is company of one lot to move about

bunch customers, using if say in is I we will. up this the launched this highlighted of of we would Trend that automated whole bunch processes similar beta a capacity. X highlighted analysis Hudl works We platform from XXX sale when are in you actively Group It different Motor company sports about really customers, then or and was and handful June really that a software of a

mean progress whole to see can metering, of purpose yes, customers And to pleased the allow really to as is completing what seeing customization with seeing and utility customizing - the the raising acquirers capability system so and we're of so really exploding. is track starting seeing big in. we're track the we're with do company last-mile through we're companies diversity but and platform expects numbers the I so you the pleased

It's kind of tied to question the before.

We from do actually customizations. us being And work this part that has able lot also do step believe the to size done with that big that in customization is GSI work. is last-mile a to simply help right there a be more of of that that's where the and

Tyler Sloat

follow to just Chris, And, up.

super with seeing We customers. we're the are excited what

charging You are can but strategy it we evolve actually the learning well how we're don't our to will yet optimize the and are but we we're and are in time. We're as looking from not - customers over to early I what about journey we're want that learning that on. say, monetization customers, because forward, using

still last that's calls from been that constant. of and couple about And so limited we've

Chris Merwin

certain if just this new addressed optimistic more you're getting you'd couple or more we're verticals maybe starting any new out? industries of see between And just businesses And one about before, apologize calls. new follow-up traction where was within that a industries that to on more projects you're call and jumping

Tien Tzuo

Yes.

see we a industries. a So, buys lot of of lot

XX, The that that any one customers we're is some and something see model. from financial couple are service there we of more utilities more more a were announce those services into right that you'll for we of certainly health that pricing right, are monitoring. of quarter would these to I dynamic energy like moving industries see you now, industries, care XX, but models fixed traction so seem XX have been some away isolated we're years is say seeing And one-offs more user of utilities

- if right we one utility seeing two our Centrica, other our keeping utilities of on emerging really France so eye two and and releases with vertical AXA this joins we're press become announced Australia. that companies, And we one that does two us. bunch a like and had And so Origin, and in an companies for is quarter

Operator

questions I'll [Operator turn call for Instructions] time. no at telephone We have management currently to further back the closing remarks. this

Tien Tzuo

from quarter. much Please to and you us hearing talk and so let joining today if for us you any have you you. forward we'll to Thank questions next look we know

Operator

for call. concludes you This today's joining conference us. Thank

You may now disconnect.

Zuora (ZUO) 5 Dec 192020 Q3 Earnings call transcript