Zuora Inc

Good afternoon and welcome to Zora's 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. If anyone should require assistance during the conference, please press star zero on your touchdown telephone. As a reminder, this conference call is being recorded. I would like to turn the conference over to your host, Ms. Luana Woke, Head of Investor Relations for Introductory Remarks.

Thank you. Good afternoon and welcome to Zora's second quarter fiscal 2022 earnings conference call. Joining me today are Tim Doe, Zora's founder and chief executive officer, and Todd McElhatton, Zora's chief financial officer. We'll also have Robbie Trauber, our chief revenue officer, joining us for the Q&A session. The purpose of today's call is for us to review our second quarter results and provide a financial outlook for the upcoming third quarter and fiscal 2022. Some of our discussion and responses today will include forward-looking statements. So as a reminder, our actual results could differ materially due to a variety of factors. You can find information regarding those risk factors in the earnings release we issued today and our most recent filings with the SEC. And finally, we will be referring to several non-GAAP financial measures today, and reconciliations to related GAAP measures are included in our earnings release. For a copy of our earnings release, links to our SEC filings, a replay of today's call, or to learn more about Zuora, please visit our investor relations website at investor.zuora.com. And with that, I'll turn it over to teams.

Thank you, Luana, and thank you all for joining Zora's second quarter fiscal 2022 earnings call. To start, let me say that I'm very pleased with our Q2 results. We once again delivered a strong quarter, exceeding the guidance we provided across our operating metrics, including total revenue, subscription revenue, and non-GAAP loss from operations. The results of this quarter show that the innovations that we have created across our four product lines are delivering more value to our customers. And as a result, this quarter, we were able to deliver a dollar-based retention rate of 108%, representing a nine-point increase year-over-year and a five-point uptick from last quarter. Now, we set a goal at the start of the year to exceed 105% dollar-based retention rate by the end of our fiscal year, and I am happy to report that we exceeded that goal two quarters early. We believe the strategy we laid out earlier this year at our investor day is working. First, Both disruptors and incumbents alike continue to grow their subscription businesses, and they are coming to Zora for our technology, expertise, and ecosystem. And second, our multi-product strategy with Zora Billing, Zora Revenue, and Zora Collect, all built on the Zora Central platform. This strategy continues to enable a land and expand motion executed for what I believe is a truly unique go-to-market organization that emphasizes long-term strategic relationships with the best companies in the world. In short, I am happy with our overall momentum as we continue to execute against the fiscal goals that we announced at the beginning of the year. Let me dive into the highlights from the quarter. Market trends we identified at the start of the year are continuing to play out. Companies are increasingly waking up to the power of the subscription model. And we're seeing both fast-growing disruptors and large enterprise incumbents investing in recurring revenue business models. In both cases, these companies are looking for guidance on how to navigate their subscription journey ahead, and they're turning to Zora. Let's take a disruptor. At our investor day earlier this year, we shared the story of Zoom, of how we powered their torrid growth over the last 18 months. Well, this quarter, a large enterprise marketing SaaS leader reported over 200% increase in annual recurring revenue from just two years ago. And now they are invoicing more than a billion dollars in revenue across 125,000 subscribers all through Zora Billings. We've been working with them since before they went public, and it's our system that's enabled them to launch new offerings, evolve to a multi-product company, and implement the more complex monetization models that come with that level of sophistication. On the other side, let's look at an incumbent who's pivoting to the subscription economy. This quarter, we signed a 100-year-old robotics company with over $20 billion in revenue. who is rolling out a subscription based marketplace to turn their IOT investments into new revenue streams. Now realizing their existing systems were not built for this new model, they chose Zuora to help them execute the strategy across the 100 plus countries that they operate in. We're also seeing companies come to Zuora after initially selecting other solutions that simply could not deliver. This quarter, we brought on a disruptor in the IT security space who originally signed with a competitive solution from a CRM vendor. Then they found themselves stuck in a never-ending implementation cycle, and so they switched to Zorro. Now, with our platform, they will be able to manage the entire subscription monetization process, and they have the agility they need to roll out new products and pricing offers and to easily sign up new customers across multiple acquisition channels. Now, these are just a few examples, but we believe the fast-scaling disruptors and enterprise incumbents make up the sweet spot of the subscription economy, and our strategy to focus here is driving the business results that we delivered in Q2. Now, turning to product, at the start of the year, we announced a multi-product land and expand strategy designed to give us multiple paths to growth. On the land side, a few years ago, our Zora billing solution was our only key beachhead. Now, fast forward to today, we are now seeing multiple Zora product beachheads, including, of course, Zora revenue. For example... In Q2, there's a company that makes smart cutting machines who have seen tremendous growth over the past year. And in preparation for their IPO, they turn to Zora Revenue to automate the complexities of revenue recognition to help them become compliant with the latest accounting rules and to help ensure that they were set up for additional scale for years to come. And so in Q2, the number of customers with ACV over $100,000 or more continued to grow, and we closed the quarter at 694 within this cohort, up 17 sequentially. This customer group represents 93% of our business. And simultaneously during the quarter, ACV per customer reached a new quarterly high. On the expand side, we're seeing a record-breaking upsell numbers. For example, iRobot initially turned to Zor Billing back in 2020 to iterate quickly and test different subscription models for a new service, iRobot Select. Now, as these pilots progressed and the subscriber base expanded, the company then invested in Zora Collect in an effort to reduce involuntary churn from failed credit card payments. As another example, recently a leader in application performance management, a public company, and a longtime Zora billing customer. they moved completely to a usage-based model. This added tremendous complexity to their revenue recognition. And so in Q2, they've now added Zora Revenue to create a complete order-to-revenue solution. Now, what's enabling these upsell and cross-sell motions is the tight, tight interlock between our multi-product strategy and our go-to-market approach. And in Q2, this approach that we highlighted at Investor Day continued to demonstrate tremendous progress. In addition to lowering churn, expanding sales, and allowing us to hit our full-year dollar-based retention rates two quarters early, our field organization continues to successfully take these customers live. During the quarter, we saw our second-highest quarterly ACV go live, including with HERE Technologies, Monster Worldwide, and Xerox. And as we said, our go-to-market strategy is also about driving scale in our own operations and accelerating growth by cultivating a network of global system integrators. And this strategy continues to show traction and deliver results in Q2. First, our SI partners are contributing to our growth. In Q2, over three-quarters of our new business logos were influenced by an SI partner. Now, these deals are also coming in with a higher average selling price, as we saw new customers like Daihatsu, Talus, and Rev.com select Zora thanks to the successful collaboration with our partners. Second, our SI partners are scaling our ability to take our customers live. This quarter, over 40% of customer go-live actually involved a system integrator partner. And third and finally, we're seeing our partners increase the investment they are making in Zora. In Q2, we saw high double-digit growth of the number of certified consultants on a quarter-over-quarter basis, demonstrating that our partners are investing and increasing their commitment to Zora, which sets us up for future growth. In closing, The strategy that we laid out at the start of the year continues to deliver according to our expectations. This is the story of Q2. We're seeing both fast-scaling disruptors and enterprise incumbents turn to us. Our multi-product and land-expand strategy helped us reach our full-year target for dollar-based retention rates, two quarters ahead of plan. Investments we made in our go-to-market are helping us successfully take our customers live into a line with our SI partners in order to accelerate growth and scale our deployment capabilities. And finally, we're seeing that in addition to our technology, our unique expertise in the market is why companies continue to turn to us to help guide them on their journey to succeed in the subscription economy. With that, I'll turn the call over to Todd to review our financial performance.