Zuora Inc

Good afternoon and welcome to Zuora's second quarter of fiscal 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. And after the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. And if you'd like to withdraw that question, again, press star one. Thank you. And with that, I would now like to turn the call over to Luana Wolk, Head of Investor Relations, for introductory remarks. Please go ahead.

Thank you. Good afternoon and welcome to Zora's second quarter fiscal 2025 earnings conference call. On the call, we have Team Zoe, Zora's Founder and Chief Executive Officer, and Todd McElhatton, Zora's Chief Financial Officer. Robbie Trauber, our President and Chief Revenue Officer, will be joining us for the Q&A session. During today's call, we'll make statements that represent our expectations and beliefs concerning future events that may be considered forward-looking under federal securities law. These statements reflect our views only as of today and should not be relied upon as representative of our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. These statements are subject to several risks and uncertainties that could cause actual results to differ materially from expectations. For further discussion of the material risks and other important factors that could affect our financial results, please refer to a filing with the FTC. And finally, unless otherwise noted, all numbers except revenue mentioned today are non-GAAP. You can find a reconciliation from GAAP to non-GAAP results for both the current and the prior year periods in today's press release. A press release and a replay of today's call can be found on Zora's investor relations website at investor.zora.com. Now, I'll turn the call over to you, team.

Thank you, Gawana, and thank you, everyone, for joining Zora's second quarter fiscal 2025 earnings call. Looking back on the quarter, I would say that this quarter was a solid follow-up to our Q1. We continue to execute our land and expand strategy while navigating the current macro environment. Let's start with the numbers. In Q2, description revenue was $104 million, up 9% year over year. We again exceeded our guidance for non-GAAP operating income, coming in at $25.6 million, which equates to a 22% operating margin. another quarterly record. We generated adjusted free cash flow of $12.2 million during the quarter. And finally, against the rule of 40 framework, which combines growth and profitability, we closed the quarter at 31. This is ahead of our goal for the full fiscal year. Looking beyond the numbers, I would say that we continue to benefit from our customer base of some of the biggest and best companies in the world. And this shows in two areas. First, this is the segment where the depth and breadth of our portfolio truly matters. And second, this install base continues to represent strong expansion opportunities for us that we can fuel through both ongoing organic innovations as well as targeted acquisitions. On the first point, let me give you an example from the quarter. I am proud to welcome Canva as a new customer. Canva is the leading online design and visual communications platform. They have over 190 million monthly users that have created over 25 billion designs. Canva came to Zora as part of preparing for their next phase of growth across both their B2C and enterprise offerings. What made the difference to Canva was our ability to combine billing and revenue to address their needs across the entire quote-to-revenue process and give them new speed and flexibility to drive their current and future pricing strategies. And Canva is not the exception. In fact, in Q2, half of our logos bought both Zora Billing and Zora Revenue to power quote-to-revenue. On the second point, once companies like Canva become customers, their growth and ever-evolving needs represent strong expansion opportunities. Here are some examples of customers who expanded with us in Q2. For instance, Zillow Group, which includes the Zillow, Trulia, and other brands that provide solutions to consumers and real estate professionals for buying, selling, financing, and renting homes. They began to use Zora billing a few years back, and in Q2, they added Zora Revenue to automate their revenue recognition and additional Zora payment modules provide customers with more flexible payment options. Another great example is a long-time customer, Aura, a great example of a fast-growing customer who has sold over 2.5 million smart rings that track fitness levels, sleep, and more. They renewed and grew with us as their subscriber base continues to grow. We've also been working with a world leader in transportation, e-commerce, and business services that generates over $80 billion in annual revenue. This customer is adopting usage-based billing models, showing that this is not just a trend for technology companies. And so in Q2, they added advanced consumption modules to turn their raw data into revenue with metering, rating, and billing. How big are these expansion opportunities? Well, if you look at the two deals, over $1 million or more in ACV that we had in Q2. Both came from within our install base. Proof that our land and expand strategy is working. And finally, of course, our enterprise customers also enhance our partnerships with leading system integrators. In fact, in Q2, more than half of our deals that were $500,000 or more in ACV were with an SI partner. Now, What's fueling our land and expand strategy is, of course, our technology and our product portfolio. Last quarter, I talked about how our vision is to build a complete monetization stack that helps our customers win with a strategy that we call total monetization. Now, what does total monetization mean? Well, there was a time, a simpler time, when a more traditional static subscription model was enough. The times, they are changing. And so now we're seeing the best companies in the world introduce a wide range of monetization strategies, such as maybe they allow customers to consume by the drip, so-called usage or consumption models that we talked about with this transportation company. Or maybe they're unbundling and re-bundling off their offerings to craft the perfect offering for each of their customers. Maybe they offer one-time transactions, such as pay-per-view or single purchases before a customer is ready to commit to something long-term. Maybe they offer prepaid models like the Starbucks card that many of us are familiar with that I use to buy my empty coffees. Or maybe they deploy hybrid models that mix and match all of the above. Over time, we believe that companies will need to be able to monetize with any business model, and this is what we mean by total monetization. And we're seeing this concept really resonate. Those of you who joined us at Subscribe Live in the Bay Area in June, So these conversations are happening with our customers and prospects. Companies are coming to us and saying, you captured the essence of what we're trying to do. And so this vision is fueling our innovation. Three quick examples from the quarter. First, our advanced consumption billing vision. In Q2, advanced consumption billing was one of our fastest growing products, in part driven by the rollout and monetization of AI features that you are seeing from almost all the technology vendors. And in Q2, advanced consumption billing is now totally enhanced with Togai. The acquisition we announced in Q1 and closing Q2, giving us some of the most advanced metering and rating technology in the marketplace today. Second, in Q2, we also announced the acquisition of SubX. to add new AI capabilities that will strengthen our Zephyr product, offering media companies an advanced AI-powered paywall solution. Through reinforcement learning, SubEx helps media companies put the right offer in front of the right customer, maximizing subscriber acquisition and conversion, all without manual testing and experimentation. And since SubEx is already a Zora partner with an integrated solution, customers can immediately take advantage of these new capabilities. And in fact, we already had joint customers like the Financial Times doing this today. And third, on the organic innovation side, in Q2, we went deeper into Zora Payments, enhancing our smart retry capabilities. If a company is trying to collect a payment and that payment fails, our smart retry in Zora Payments analyzes over 15 transaction characteristics, such as the account monthly recurring revenue, the currency, the payment gateway, to automatically retry the failed payment at the most optimal time. We're continuing to make the AI technology that powers smart retry more and more advanced. And in Q2 alone, we helped our customers recover over $120 million in lost revenue with this smart retry capability. That's an increase of over 40% year over year. And finally, this total monetization strategy. This message is resonating with the analyst community too. Earlier this month, Gartner, one of the world's most respected and trusted industry analyst firms, recognized Zora as a leader in the magic quadrant for recurring billing applications for the Zora modernization suite, placing us the furthest in completeness of vision. And that's not all. Back in June, we were named a leader by ISG Research And some of you might know of formerly as Ventana Research in all four of their subscription management buyer guides, B2B subscription management, B2C subscription management, description management platform, and then all around description management offering. ISG classified Zora as exemplary. Out of 24 software vendors, we received the highest rating in each of the four buying guides. And that's not all. Just last week, Zora Revenue also ranked number one in product and strategy in MGI's 360 Ratings and Buyer's Guide in Automated Revenue Management, or ARM. And now the last news from the quarter. We released this quarter our latest global impact report, showcasing the progress that we have made in our ESG goals and initiatives. We continue to be a carbon neutral company, And in this year's report, we took the next step. We committed to the science-based targets initiative and are working on setting both near-term and long-term greenhouse gas reduction goals, including reaching net zero. So to recap the quarter, we continue to create new opportunities for our install base to land and expand with Zora as we build out our monetization stack. This stack is helping the biggest and best companies in the world win with a total monetization strategy. Our modular solutions, both organic innovation and strategic acquisitions over the last few years, give us what's needed to capture this opportunity. And of course, we continue to focus on delivering balanced growth and improved profitability. With that, I'll turn the call over to Todd to review the finances for the quarter. Todd.