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spk01: Good afternoon, and welcome to Zwara's third quarter of fiscal 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, please press star, followed by the number one on your telephone keypad. To withdraw your question, again, press star one. Thank you. With that, I would like to turn the call over to Luana Wolk, head of investor relations, for introductory remarks.
spk03: Thank you. Good afternoon and welcome to Zoar's third quarter fiscal year 2022 earnings conference call. Joining me today are Tin Zhou, Zoar's founder and chief executive officer, and Todd McElhatton, Zoar's chief financial officer. Robbie Trauber, our chief revenue officer, will also be joining us for the Q&A session. The purpose of today's call is for us to review our third quarter results and provide our financial outlook for the upcoming fourth quarter and full year fiscal 2022. We will also provide a preliminary outlook into fiscal year 2023. Some of our discussions and responses today will include forward-looking statements. So as a reminder, our actual results could differ materially due to several 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'll be referring to several non-GAAP financial metrics and reconciliations to related GAAP measures are included in our earnings release. For a copy of our earnings release, links to the SEC filings, a replay of today's call, or to learn more about Zora, please visit our investor relations website at investor.zora.com. Now, I'd like to turn the call over to Tim.
spk08: Thank you, Luana, and thank you, everyone, for joining us. Welcome to Zora's third quarter fiscal 2022 earnings call. The headline is we delivered yet another strong quarter. We exceeded guidance across our key financial metrics, including total revenue, subscription revenue, and non-GAAP loss from operations. This quarter, we delivered a dollar-based retention rate of 110%. That's up from 108% last quarter and 99% last year. And this is the highest level that dollar-based retention rate has been over the last 10 quarters. This quarter, our ARR growth rate continued to rise, closing the quarter at 19%, up from 12% growth this time last year. This quarter, we continue to innovate. Our new product introductions continue to generate strong customer interest, powering the highest upsell quarter in Zora's history. This quarter, we continued to deliver on the goals that we set out at the beginning of the year that we shared with you at Investor Day back in April. I'd like to do a shout out to all the CEOs around the world. I am incredibly proud of our team and our continued focus and execution. Now, let me add some more color to the quarter in three specific areas. First, the continued evolution and growth that we are seeing in our market. Next, this quarter's exciting new developments in our product portfolio. And finally, an update on the progress that we're making with our go-to-market strategy. Let's start with the market. You've heard me say this, but it's worth repeating. Last year, companies woke up to the power of the subscription economy. Businesses across more and more sectors recognize the need to shift to digital service models. We continue to believe that this shift is what is powering our momentum today. So work continues to be the go-to subscription management solution for both innovative disruptors and large enterprise incumbents alike. These companies are coming to us for the breadth of our capabilities, the scale of our platform, and the expertise that only we are able to bring to help guide them on their journey into the future let's look at disruptors you've heard us talk about hyper growth companies like the zone vivint or clear who are managing millions of subscribers on our platform this quarter we continue to bring on new fast scaling disruptors for example we brought on an online education platform that helps people learn from world famous experts with over 2 million subscribers this disruptor came to zora for a billing and revenue recognition platform that they are confident will support their continued scale for years to come. Our existing disruptors, of course, are also continuing to scale. In fact, this quarter, a leading business communications platform used by millions of developers around the world expanded its work with Zora to power an additional business unit after a recent acquisition. As they continue to grow, Zora Billing and Collect will enable this new volume and scale. On the incumbent side, You've heard us talk about dominant brands like Honeywell and Caterpillar who come to Zora to gain the agility they need to innovate and compete in the new digital economy. This quarter, we added another Fortune 500 world leader in agriculture and construction products to that list. Today, this company has seen incredible growth as they are no longer just manufacturing and selling products. Today, they also sell a subscription-based service that enables their customers to manage their equipment portfolios more effectively. By modernizing their billing with Zora, they're better positioned to implement new modernization strategies to power this new, exciting area of growth. Now, some of these, of course, are long-term bets. But we continue to sow the seeds that will power our growth for years to come. As an example, automotive, you've heard us say that we power eight of the top 10 auto companies, including companies like General Motors, Ford, and Toyota. And in recent months, you've heard many of them announce a growth target for these new digital services. In fact, these digital services are forecasted to generate $86 billion by 2025 from in-vehicle payments. Disruptors, incumbents, today's leaders, and tomorrows we focus on the best companies in the subscription economy we power the growth of their new customer-centric business models and you can see that growth in the continued increase of our transaction volume that flows through our system in q3 alone we handled 19 billion dollars in usage volume representing a year-over-year growth rate of 28 percent shifting the product The last few years have been an exciting time for Zora's technology team. We've transformed our core technology stack into a modern microservices platform. Just last month, we shifted 100% into the cloud and plan to shut down our 14-year-old data center in Q4 and expect this to increase our uptime, our scalability, and our long-term gross margin expansion. Under our Chief Product and Technology Officer, Sri Sreenivasan, We've also increased our engineering capacity by 40% since the start of the fiscal year. Now, all of this is propelling our innovation, many of which we announced this quarter. This quarter, we announced an entirely revamped set of APIs and SDKs that enable our customers to launch with Zora up to five times faster and reduce their coding hours by up to 80%. We launched unified monetization, and all new set of capabilities let out companies to manage subscriptions as well as product offerings on our platform. More and more, you're going to hear a new mantra from us. Subscription first, but not subscription only. This quarter, we launched CPQX, a new version of our CPQ solution that lets sales teams work up to 35% faster. For this quarter, I really want to talk about Zora Revenue, our product that helps companies automate the complexities of their revenue recognition process in real time. We have now had three quarters of triple digit top line growth for Zora Revenue, and its average ACV has nearly doubled in size from just one year ago. In fact, this past quarter, Braze, a customer engagement platform for multi-channel marketing, successfully went live on Zora Revenue. This launch was a key milestone in their IPO journey as they continue to simplify and maintain their revenue reporting. And today, finally, I have some other news to share. This is a particularly exciting announcement for me because I was part of this organization in the very early days. This quarter, I'm pleased to say that the biggest SaaS company in the world, none other than Salesforce.com has signed a multi-year renewal with us to automate all of their global revenue recognition with Zuora Revenue. Finally, let's take a look at go-to-market. Now, two years ago, we set out to transform the way we sell to the biggest enterprises in the world. We made a deliberate decision to move upmarket. And in Q3, what you saw is that that effort continues to pay off. In addition to Salesforce.com, we continue to sign fantastic new and upsell deals such as Hitachi and Toshiba. Our number of customers with ACV at or above $100,000 increased by 26 last quarter. This customer cohort now constitutes 94% of our business. This is also leading to larger deal sizes and greater customer lifetime value. This past quarter, we signed 10 deals with ACB at or over $500,000, including two deals over $1 million. In short, our strategy to focus and grow within the enterprise segment of the market is working. Finally, the investments we've made in our broader ecosystem of system integrators and strategic partners continue to show results. Let me give you a few examples. We now have over 200 globally certified consultants within our SI partners versus just 52 a year ago. Over 40% of customer goal lives in the quarter involved a system integration partner. Finally, on a dollar basis, bookings from SI-influenced deals in Q3 grew by over 130% year over year. Beyond our SI partners, We're also starting to expand our ecosystem of strategic technology partners. Now you may have seen early in Q3, we announced an exciting collaboration with Microsoft. We'll be working to integrate our products into Microsoft Dynamics, so users of that product can also use Zora. We'll also be taking advantage of Microsoft's Azure platform, as well as Power BI to drive more innovation and value within our own products, for our customers. Over time, we expect this will open up the opportunity to connect further into the Microsoft ecosystem as potentially a new distribution channel. It's still early days, but we are very excited about the potential of this collaboration. To wrap it up, I want to thank again our CEOs for another very strong quarter. The focus and the alignment that I am seeing across Zora is truly remarkable. Our market continues to expand, and companies are turning to us to guide their transformation. Our innovation engine is accelerating, creating further separation between us and legacy ERP vendors. And our upmarket strategy and go-to-market operations that we put in place two years ago continue to deliver results. Now I'll turn the call over to Todd to review our financials. Todd.
spk09: Thank you, team, and thanks, everyone, for joining today's call. I want to start by acknowledging the exceptional work that our employees have done since I joined Zora 18 months ago. I have seen tremendous focus on our product and go-to-market strategy and continuous execution. We've rallied together to overcome the pandemic challenges, and I have great pride in being a CEO. Now let's review the results for Q3, our guidance for Q4, and our preliminary outlook for fiscal 2023. Our discussion includes non-GAAP financial measures. You can find the details in today's press release, which includes a reconciliation table of selected GAAP to non-GAAP measures that reflects the adjustments made to both our current and prior year results. Q3 was another strong quarter across our key financial metrics. We again exceeded expectations and subscription revenue, total revenue, and non-GAAP operating laws. Q3 is another proof point that the strategy we laid out at Investor Day back in April is working. This past quarter, we closed several multi-product deals, had solid growth in the enterprise space with both strong go-to-market execution and great contribution from our SI partners. Let's dive into our top-line performance. Total revenue was $89.2 million in the third quarter, up 16% year-over-year. Subscription revenue was $73.8 million, up 19% year-over-year, driven by overall improvement in our go-to-market execution. Subscription revenue represented 83% of total revenue. Professional services was $15.5 million, flat year-over-year as we continue to shift services to our system integrator partners. As a result in our success of driving professional services to our SI partners, non-GAAP blended gross margin was 66%, an improvement of over 300 basis points year over year. Non-GAAP subscription margin was 79%, 199 basis point improvement over the prior year. As a reminder, this includes the additional cost associated with our move to the public cloud. Non-GAAP professional services gross margin was negative 1%, driven by investments in training our partners. Our objective is to run services at or near break-even. Non-GAAP operating loss was negative $1.2 million in the quarter, compared to an operating income of $0.2 million in the prior year. This was driven by our planned investments in sales, marketing, and R&D. This resulted in a non-GAAP operating margin of negative 1%, a decrease from breakeven in Q3 of last year. Our fully diluted share count at the end of the quarter was approximately 144 million shares using the treasury stock method. Now, let me take you through some of the key metrics for the quarter. In Q3, expansion across our customer base drove our dollar-based retention rate to 110%. an impressive 11-point year-over-year improvement. Customer spending at or over $100,000 in ACV closed the quarter at 720, an increase of 26 sequentially. This represents 94% of our business. We continue to have success in moving off-market. We've closed 10 deals with ACV of a half a million dollars or above versus six a year ago. Two of those deals had ACV greater than $1 million, including the transaction with Salesforce.com that Tien mentioned earlier. This was also evident in our total remaining performance obligations, or RPO, growing 31% year-over-year and our non-current RPO, which grew 50% year-over-year. This is a testament to our strong go-to-market motion and success with our system integrator partners. As T noted, we've now surpassed 200 globally certified consultants, which has doubled since investor day. Turning to transaction volume, our systems process $19 billion of volume in the quarter, representing 28% growth year over year. As you recall, while process transaction volume is helpful in understanding how much of our customer's business is running on our platform, It does not track linearly with quarterly revenue as customers gain efficiencies as they scale. Now, looking at ARR and free cash flow. In Q3, our ARR grew 19% year over year, two points ahead of our 17% ARR objective for this fiscal year. This was partially driven by our best upsell quarter ever. We continue to focus on our objective to reach ARR growth of 25 to 30% by fiscal 2025. Free cash flow was negative $1.7 million, which includes our accelerated investments to move into the public cloud. We continue to expect to be free cash flow positive for both Q4 and this fiscal year. Total capex for the quarter was $2.3 million. Turning to the balance sheet, we ended the quarter with $203 million in cash and cash equivalents, a $2.4 million increase over the prior quarter. We feel good about the progress we've made over the past year and look forward to Q4 and fiscal 23. So let's turn to our financial outlook. As noted on prior calls, we continue to accelerate our investments in go-to-market and product development initiatives while absorbing costs that were not in our run rate last year. For the full year, we're raising our outlook. We currently expect total revenue of $345 to $346 million, subscription revenue of $285.5 to $286.5 million, non-GAAP operating loss of $10 to $9 million, non-GAAP net loss per share of 11 cents to 10 cents per share assuming a weighted shares outstanding of approximately 124.3 million. For Q4, we currently expect total revenue of 90 to $91 million, subscription revenue of 75 to $76 million, non-GAAP operating loss of 2.5 to $1.5 million, Non-GAAP net loss per share of 3 cents to 2 cents per share, assuming the weighted average shares outstanding of approximately 127.4 million. Looking ahead, while we've not finalized our fiscal 2023 planning cycle, we'd like to provide a preliminary outlook for next year. We remain confident in our execution, Zora's strong product portfolio, and our leadership position. As always, We'll update you on our regular cadence as we move through the year. For fiscal 2023, we currently expect total revenue of $401 to $405 million, subscription revenue of $337 to $339 million, non-GAAP operating loss of negative $2 million to break even. For the year, we also expect a dollar-based retention rate of 112% or better, and ARR growth of 21% or better. To close off, I'm very pleased with our performance in Q3. We continue to deliver strong execution upon the foundation we laid out and are making progress towards Zora's long-term objective. With that, team, Robbie and I are happy to take your questions and we'll turn it over to the operator.
spk01: As a reminder, if you would like to ask a question at this time, please press star followed by the number one on your telephone keypad. Your first question comes from Chad Bennett with Craig Hallam. Please go ahead.
spk02: Great. Thanks for taking my questions, guys. Nice job on the quarter. So just, and I'm not sure who this is for, Todd or Robbie or Teen, I don't know, but just in terms of where we are evolution-wise on the whole kind of upsell versus kind of downsell and kind of working through the downsells. And I assume we're, you know, we're at the tail end of those. And, you know, it was great to see the fiscal year 23 outlook. Didn't expect that, but it's great to see the acceleration, you know, on net expansion and ARR. So just can you give me an update on kind of where we are on kind of the headwind there from the down cells and, you know, if that's behind us?
spk09: Hey, Chad, thanks a lot for the question. Todd here. So, look, the DVRR of 110%, that really puts us in an entirely different neighborhood, and we're really pleased with that. We're past the down cells. Last year, we talked, you know, Q2. We've now lapped that for a full year. And so we feel that we are in the area of, you know, being able to accelerate our DVRR. We had talked our long-term range was to be 112 to 115. And as I shared today, you know, our expectation is we'll be 112 plus next year. So, again, we feel really good about our ability to continue to upsell. Got it.
spk02: And then I think you indicated, Todd, and maybe, Teen, that this quarter was – I think your strongest upsell quarter, and I think you've had a few of them in the last year, to be honest with you. So it seems like the momentum is going your way. In terms of, you know, if you rank order, I guess, if you want to look at it like that, what is really driving the upsells? You know, you've introduced a lot of product innovation over the last year. whether it's the revenues module or it's CPQ? I know unified monetization is new, so it's probably more pipeline than bookings driven. What's really driving it from kind of the upsell standpoint?
spk08: Yeah, sure. I'll go ahead and feel that. It's really across the board. I think I'll give you sort of three core reasons. One certainly is The restructuring of the sales organization that we talked about, even going back to last year, right, when it's more customer-centric focus, the ones that focus on long-term relationships, right? It's the entire go-to-market model that Robbie has put in, and Q3 is just yet another quarter of demonstration that that strategy is working. The second really is the innovation, and so, you know, I would say there's been a pent-up potential in our innovation that we build, all the things that we built. And when you marry that with a resurgent sales organization that's focused on long-term customer success, that's what you're really seeing. And the third thing I'd say is sometimes there's a misunderstanding of us as a replacement of legacy ERP. We're really attacking an entirely new business model that ERP systems don't really handle. And so I see this as an enormous amount of white space that we can go attack from an innovation standpoint. And, you know, whether that's revenue, whether that's collect, whether that's the platform capabilities, that's what we're really excited about, right? That the subscription economy is growing. There's a new set of tools. It sets up the white space, and we're really the clear leader building the innovation and the solutions that are needed in this space. Got it. Thanks.
spk09: It's really balanced on the upsell. As Dean said, the new products coming in the central sandbox, revenue, premium support, all those are really helping. Volume upsells as well. Yeah, and we continue to get the usage that comes through. So it's really nice and balanced where if you went back, you know, five or six quarters ago, we were heavily reliant on volume. So again, the innovation engine that's firing up, we're seeing nice take from the customers on that.
spk02: Got it. Thanks much. Nice job again.
spk01: Your next question comes from Joshua Riley with Needham. Please go ahead.
spk00: Hey guys, thanks for taking my questions. Nice job on the quarter here. So maybe digging in a little bit more on the ARR growth and what was driving that. How much of the improvement would you say here is from the improving macro economy and demand environment versus the internal changes that you've made to the sales organization and product over the last year?
spk08: I would say it's both, but I probably On a short-term basis, I would credit the execution and the changes that we're doing. On a long-term basis, I would credit the macro economy. You know, there was really a significant change last year in terms of companies' appreciation of the subscription-based business model. But I would say that, you know, the translation of that intent and that direction into demand for us does take time. It's not, you know, like they're just taking compute power and shifting it to the cloud overnight. This requires companies to... to build new innovations, launch new capabilities, which they're doing on us. And so I think the short-term improvements that you're seeing is really on our execution, but the long-term macro trends are also in our favor as well.
spk00: Okay, great. That's super helpful. And then the net 26 customers added with ATV over 100K, that's a really strong number on both a seasonal and absolute basis. If you look at the profile of these customers, though, How should we think about the mix of, is it net new larger customers that are being added, or is it existing customers that you're expanding to additional products? Is there balance there, or how should we think about that mix?
spk08: You're going to see a balance, and Robbie, feel free to chime in here, but we talk about disruptors and we talk about incumbents. A lot of times we do still grab disruptors and bring them on board when they're smaller companies, right? You talk about how we power Zoom, but we started working with them when they were $30 million. We started working with Fox. Congrats to Aaron over there having a great day yesterday. But we started working with them when they were $3 million. So those deals tend to start small and are going to grow as those companies have success. But if you look at incumbents, you know, $100,000 is a small deal to many of these companies. And oftentimes we'll start at a higher point too. And so you're really going to see both effects in that 26 number.
spk00: Okay. Can I sneak one more in there? Oh, sorry, did I cut you off there? I don't know if there was.
spk05: I was just going to say, I mean, again, the mix was right. It's what we've expected. It's what we've seen going forward as well. So I think Dean responded to it. But it's as we expected, as we've seen going forward.
spk00: Okay, great. And then maybe just sneak one last quick one in there. On ERP migrations, I know you said that that's not necessarily key to what you're doing, but how much of a tailwind has that been here in the second half? And how much more do you think that can accelerate into the next fiscal year?
spk08: Yeah, ERP is definitely one of the key replacement engines. But the subtlety is we're not replacing the existing financial system with another financial system. We're really powering new business models that ERP systems were never built to power. So a company like Caterpillar will keep their ERP systems for their core business, which is selling tractors and excavators, but they're fast-growing digital businesses, subscription businesses, Cat Connect. That's the business that they're putting on us. Same with GM. We're not touching the car sales specifically, but we're powering the billions of dollars of connected car sales that they have today and they expect to grow in the coming years.
spk05: I've seen as well. I'd say it's part of the digital transformation. We're seeing that a lot also with our system integrators. This is a really, really good direction that we're seeing. I think many are seeing in that market, but we are part of that piece to it as well. So just to catch the label team is saying.
spk12: Awesome. Thanks, guys.
spk01: Thank you.
spk12: Thanks, Josh.
spk01: Your next question comes from Brent Thill with Jefferies. Please go ahead.
spk11: Hey, guys. This is Love Suda on for Brent Thill. Congrats on a great quarter. Great to see the momentum that you guys are seeing. Maybe the first question I had was a follow-up to Josh's question before on the net new ads that you saw in this quarter over 100K. I guess, Tina, are you seeing more adoption outside of the core verticals that Zora has historically been strong in? Are you seeing new verticals adopting the Zora solution, if you will?
spk08: I'd say our three core verticals are still our core verticals. Those verticals are high-tech, manufacturing, and media. But you're absolutely right. We continue to see strong interest in new verticals. We've talked about financial services in the past. We continue to be really, really excited about it. It sure feels like the retail sector, if you read some of the news, is starting to get their act together and realize that the future is not about stores versus e-commerce. It's about customers first, meeting customers where they are, both online and in-store. And so, but I would say right now, our three core verticals still remain what they are, but we have a healthy, healthy interest outside of those three verticals as well. And the big picture, Love, you know this, right? You know that we believe that really every industry, every company in the industry will be shifting to this discretion economy. It's just a matter of time, and we need to make sure we're in a position to help them with that transformation.
spk11: Got it. Maybe one quick one for Todd. The guide for next year is very encouraging. For subscription revenue, I'm guessing it implies 18%. But at the same time, you're guiding to ARR growth of 21% or more. So how should we think of ARR growth and how that would trend towards subscription growth over the long term?
spk08: So I think it would be the opposite, Love. You know subscription revenue certainly lags ARR, which is why we've been reporting off of that. And so you would expect subscription revenue to catch up to ARR. But, Todd, I'll let you add some more color on that.
spk09: Yeah, Love, we feel really good about the guidance that we're giving for next year. And what I would say to you is, just as Tina said, we gave the metric of the ARR growth and We've done, I think, really well with that. We started off last year, ended at 12% growth. Today, we reported at 19%. We said we'll be at 21%. That is the leading metric. Revenue is lagging. It lags by several quarters. And so I feel like at this time, we've given you some really good guidance. It's early. I want to be prudent. And like we've always said, we'll continue to update you on a quarter-by-quarter basis.
spk08: The best description business is run off of ARR, so that's why we would point you at that number, obviously, and you know that.
spk11: Yep, got it.
spk12: Thank you, guys. Congrats. Thanks, love.
spk01: Your next question comes from Andrew De Gasperi with Birnberg. Please go ahead.
spk10: Hi, everyone. Just had one question maybe on the Microsoft announcement that you had a few weeks ago. Just wondering, besides the integration, I think you mentioned that you're looking forward to expanding the relationship. Should we think about that as maybe expanding the business relationship on the go-to-market side? Can you just elaborate on that?
spk08: Well, I think the big picture here is that we got to where we are today really by figuring out a brand-new market and, in many ways, going it alone in that marketplace. And what you heard from us over the last 18 months, maybe 24 months, is a big change in tones. where we do believe that to get to where we can in this marketplace, you know, a billion dollars or more, part of that is really building and focusing on a healthy ecosystem. We started with the GSIs, right? So you hear us talking about our system integration partnerships, Accenture, Deloitte, PwC, EY, IBM, right, quarter over quarter progress on that. What we really added to that really is a secondary focus or a parallel focus on technology vendors. And we've chosen to really start with Microsoft as a place to start. Now that, being a technology vendor, does require stronger integration. And so what you're seeing is the first phase of that partnership focused on technology integration. If we do our part, we do believe that should open up the Microsoft install base and potentially their distribution channel. But I would say it's early days, and right now we're focusing on step one, which is the technology integration.
spk11: That's helpful.
spk10: And then maybe, Tien, it's encouraging that you renewed Salesforce for revenue. That sounds good. Yeah, I was wondering, you know, what was the dynamic around that, if you can maybe elaborate a little bit? I know that they have a competing solution on billing. I'm just curious to know maybe some background on that.
spk08: Well, look, Salesforce got to where it is because it's – It certainly, you know, the history of this company is, you know, I used to run the billing system at Salesforce. And so Salesforce really got to where it could be from really having no constraints on their ability to innovate on their business models. And so when you look at the size, the scale, the global nature of what they have, I would say that this was a competitive process. I would say that they did look at the marketplace and did a full scan of possible solutions with close advisors outside the organization as well. And they came to the conclusion that our product was really the only one that can handle their size scale and needs. And so I'm pretty happy with the results. And it's great to be able to say that we power really the biggest company in the world.
spk09: The other thing I would say, Andrew, is we feel really good. Deals like that are things that are helping the RPO grow. We talked about it in the comments. 31% year-over-year, non-current growing 50%. So these larger deals, longer durations are really helping us on the RPO.
spk12: That's helpful. Thank you.
spk01: As a reminder, if you would like to ask a question at this time, please press star followed by the number one on your telephone keypad. And your next question comes from Joseph Fafi with Canaccord. Please go ahead.
spk07: Hey, guys. Good afternoon. Great results. Good to see the continued increasing momentum in the business. Maybe just kind of following up on that last comment and, Todd, what you were saying on RPO versus billing versus ARR. It may be a little bit early days, but just kind of thinking about the size of deals that you're seeing and just kind of maybe frame visibility you have in the business now versus a year ago. because it looks like that RPO is really moving forward here.
spk09: Yeah, I mean, look, I still think the one thing that we want to push everybody to is that ARR growth. It is the best leading indicator of how the business is going to do. And so I'd like to keep people focused on that. That being said, as we've moved to these larger deals, if I look at my top 10 deals, they were all, you know, the vast majority of them were almost three-year deals. And those larger deals, longer duration contracts are really helping us build up the RPO. And that's something that we've been focused on. That was one of the things that Robbie and I worked on making sure we aligned with the sales teams on, and we feel good about the progress that we've made there. And that's an area that we'll continue to focus on is, you know, how do we, you know, build with these longer term, longer duration, higher value agreements with customers.
spk08: And I'll just add one thing, Joe. I would say this really shows that these subscription businesses, and you know this, they're no longer little side experiments that people are doing with 12-month contracts, right? But these are mission-critical systems. These are long-term decisions. The Salesforce decision for using Zora revenue is certainly a long-term decision, and that naturally is going to lead to longer-term deals, right? They obviously want to lock into longer-term contracts.
spk07: Sure. And then just one more follow-up on the Salesforce thing. deal. I mean, they clearly have a big ecosystem of their own of other software vendors. And just like, you know, Microsoft Dynamics is, I know, team you mentioned, I just wondering with, you know, with this expanded, you know, deal there, is that is that an opportunity on selling into the into the Salesforce ecosystem, and software vendors that are integrated there?
spk08: Well, Salesforce has been a partner since the early days. We have a deep integration to the Salesforce product as well. We have a CPQ system that's built natively on force.com. And so I would say that that's always existed and that's always been an important part of our business. I'd say that we're expanding to other ecosystems as well. We're pretty excited about the Microsoft ecosystem. But I think the Salesforce deal really, to me, is a proof point that we have the best product in the marketplace for running subscription businesses. And that's something that I'm the most proud of.
spk07: Sure, yeah, I mean, that's great validation. And then if we just, you know, if we look at that unified monetization platform and what it means to the business, I mean, clearly most software companies are not just selling a subscription. There's others to their revenue line. And, I mean, it would just be helpful to kind of, kind of frame you know what the value proposition was before and where you might have been boxed out and what it means now just to understand how holistically some of those customers could embrace your platform because there's no constraint around what you're billing for that's a great question joe i appreciate you asking it i think if you look at the roots of our company we started with pure subscription businesses right sas companies
spk08: that were 100% subscriptions, streaming companies that were 100% subscription businesses. But as we get into larger companies, Caterpillar, General Motors and the like, those obviously are companies with mixed business models, with many, many types of business models. So it was important for us with unified modernization to reach a point where we can say that, yes, we want to be subscription first because we believe the future is a subscription economy, but we don't want to be subscription only. So whether you're a pure subscription business has evolved to the point where you know, you're Zoom and you're starting to sell hardware. You're a streaming company, you're starting to sell pay-per-view in addition to that, you know, $10, $12 a month. Or, you know, you're a hardware company that's looking to sell subscription services, but you're looking to create bundles across the two things. We need to be able to do that. And so the unified monetization announcement actually is a really, really important announcement for us. It's a great milestone. And it means that, you know, going forward, we can really support on all types of business models as companies embrace this digital future.
spk07: Sure, that's great. And then just maybe one at a high level strategically, it really sounds like the software suite has come together really nicely here at this point. Now, kind of what's next? You've I mean, it sounds like the APIs, a new set of APIs, all the products seem to be being embraced in the market. Is M&A back on the table at this point? What are you thinking about in expanding the opportunity? Because clearly it's moving very fast.
spk09: So, Joe, we think we've got a lot of opportunity still left in our three beachheads and then platform. That being said, our plan is not incumbent upon doing any M&A. But, of course, we are always looking out at the market. If there's areas where we can use that to accelerate our product development or areas where we can help companies in the subscription experience, we're open to that and we look at things constantly. But at this time, no change from what we've talked about in the past.
spk12: Great. Thanks so much, guys. Thanks, Joe.
spk01: Your next question comes from Stan Vlotsky with Morgan Stanley. Please go ahead. Your line is open.
spk06: Perfect. Thank you so much, guys, and congratulations on very strong results. Two questions from my end, and my apologies, I'm running, I'm jumping back and forth between earnings, so if this was already asked, but the strong results that you're seeing this year, how much of that, if at all, is driven by a resurgence of ERP migration migrations to the cloud. And also, maybe if that's a factor that you're thinking through as you gave your fiscal 23 guidance as well, and then have a quick follow-up.
spk08: Yeah, Stan, I would say I'd rather you think of two parallel trends that are going on. One of them certainly is we want to move financial systems and ERP systems into the cloud. So much other software has moved into SaaS models into the cloud, and you're seeing ERP systems do the same thing. We're probably more of a parallel effort, right? Which is more, I've got these new business models that ERP systems simply cannot handle. And so, so, you know, I want to move away from a traditional ERP centric system that's built for selling products to something that's more about monetizing digital services, right? That's really where we sit. And when I look at it that way, that trend or that demand never really slowed down in, in, in 2020. There might have been, you know, a short-term pause in March or April of 2020, but companies realize that digital subscriptions, right, these new business models of the future, and that's really what's causing our demand. And that's really what's causing what you see, the results. And, you know, as a good example, the dollar-based retention rate that we've talked about in the past, you know, really puts us in a whole new neighborhood.
spk12: Got it. Okay, that makes sense. And actually, I just wanted to –
spk06: jump back to the dollar-based net retention rate. The 1.12 inflection for next year is certainly a very nice continuation versus the trend we've been seeing through this year. As far as what the drivers are of that continued improvement through next year, is it selling more product into the existing customer base? Is the customer base moving up price skews? Is it just more volume flowing through? If you guys walk us through the puts and takes.
spk09: So, Stan, the one thing I felt really good that we've kind of continued this year and we continue seeing on to next year is really a balance on what's driving that net dollar retention. First off is we're seeing new products coming out. We're seeing great take on that. The innovation engine is really taking off, and customers are buying those products. Secondly, as you said, we continue to see usage move forward, and that's being a driver of the volume going through the platform this quarter up 28%. And then last but not least, we've talked about revenue and we're really seeing revenue on fire. That product has grown triple digits for three quarters in a row. And again, this quarter was another driver of that net dollar retention. So we continue to see a balanced performance against the upsells as we move into fiscal 23.
spk08: Yeah, internally, we've called that our multi-vector land and expand strategy. And I would say that we're really pleased about that's come together And we believe that gives us a sustainable growth strategy in the quarters to come.
spk12: Perfect. Thank you, guys.
spk01: There are no further questions at this time. I'll turn the call back to Tianzhou for any closing remarks.
spk08: Thank you. Well, I would like to say thank you again to everyone on the call and a big, big thank you to all our ZEOs. It's our people that make Zora an incredible place to be, and I'm proud of what we've accomplished together in this quarter. The subscription economy continues to have a lot of room for upside, and it's clear from our dollar-based retention performance and our ARR growth that our land and expand enterprise strategy is working. With that, we look forward to Q4 and FY 2023. Thank you for joining us today.
spk01: This concludes today's conference call. Thank you for your participation. You may now disconnect.
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