Zuora(US:ZUO)2022-08-25 03:21Financial Data and Key Metrics Changes - Subscription revenue reached $83.8 million, growing 19% year-over-year in constant currency and 17% as reported, exceeding guidance [32] - Total revenue was $98.8 million, up 17% in constant currency and 14% as reported year-over-year, also above guidance [32] - Non-GAAP subscription gross margin improved to 80%, an increase of over 100 basis points year-over-year [33] - Non-GAAP operating loss was $0.2 million, compared to a loss of $3.9 million in the prior year, reflecting improved top line growth [34] - ARR was $337.6 million, growing 20% as reported, with about 1 percentage point headwind due to foreign exchange [39] Business Line Data and Key Metrics Changes - Professional services revenue was $15 million, flat year-over-year, with a target mix of 15% of total revenue achieved ahead of plan [32] - The number of customers with annual contract value (ACV) of $500,000 or more grew over 25% year-over-year, with 7 deals closed at this level, up from 2 a year ago [35] - The average contract term was the longest since the IPO, contributing to a total remaining performance obligation growth of $32 million from the prior quarter [37] Market Data and Key Metrics Changes - The company processed $21 billion in transaction volume, representing 18% growth in constant currency and 16% growth as reported year-over-year [38] - The dollar-based retention rate increased to 111%, up from 110% in Q1 and 108% from Q2 of last year [15][35] Company Strategy and Development Direction - The company is focusing on large enterprises in the subscription economy, targeting companies with over $1 billion in revenue and fast-growing companies [11] - An acquisition of Zephr was announced, expected to close in early September, aimed at enhancing the company's offerings in the media and digital publishing sectors [21][22] - The multiproduct land-and-expand strategy is emphasized, with a focus on delivering more value to existing customers [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current macroeconomic climate, citing the resilience of the subscription model [8][28] - The company is cautious about the second half of the year due to macroeconomic uncertainties and foreign exchange impacts [43][71] - Management noted that demand for their solutions remains strong, with a mixed picture regarding deal timelines [74] Other Important Information - The acquisition of Zephr is valued at $44 million in cash, with a potential earnout of $6 million based on ARR growth objectives [42] - Free cash flow was negative $7.6 million for the quarter, with expectations of fluctuations due to timing of cash collections [39][49] Q&A Session Summary Question: Clarification on FX impact on revenue guidance - Management indicated that the majority of the revenue guidance de-risking was due to foreign exchange impacts, with minimal business risk [60][72] Question: New logo deal count and SI influence - Management noted that while the focus has shifted to larger customers, the transition is natural, and the number of larger customers is increasing [61][63] Question: Insights on Zephr's business growth - Zephr has grown to approximately $5 million in ARR, with a healthy growth rate of over 60% annually [68] Question: Demand in Europe and pricing strategies - Management reported good demand in Europe, with a significant portion of contracts priced in local currencies to meet customer expectations [92][95] Question: Free cash flow and delayed payments - Management clarified that the delays in payments are not indicative of collectibility issues, but rather timing with some larger customers [97][99]