Zuora(US:ZUO)2022-05-26 01:04Financial Data and Key Metrics Changes - In Q1, subscription revenue reached $78.5 million, growing 21% year-over-year, exceeding guidance [33] - Total revenue was $93.2 million, up 16% year-over-year, also above guidance [35] - Non-GAAP operating loss improved to $0.2 million from a loss of $2.4 million in the prior year, resulting in a non-GAAP operating margin of negative 0.2% [37] - Dollar-based retention rate was 110%, up from 103% year-over-year [10][38] - Annual Recurring Revenue (ARR) was $326.3 million, growing 20% year-over-year [42] Business Line Data and Key Metrics Changes - Professional services revenue declined 3% year-over-year to $14.7 million, aligning with the strategy to shift implementation work to system integrator partners [34] - Non-GAAP subscription gross margin improved to 79%, a 90 basis points increase year-over-year [35] - Non-GAAP blended gross margin increased by 330 basis points year-over-year to 67% [36] Market Data and Key Metrics Changes - The company processed $21 billion in billing transaction volume, representing 21% growth year-over-year [41] - The average selling price (ASP) for new logos more than doubled year-over-year, indicating strong demand in the enterprise segment [39] Company Strategy and Development Direction - The company continues to focus on the enterprise segment, which provides stability and opportunities for larger deals [14][22] - Zuora aims to maintain a dollar-based retention rate of 112% or better and ARR growth of 21% or better for the full year [51] - The company is committed to its ESG initiatives, having achieved carbon neutrality and promoting diversity within its workforce [27][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the subscription business model, even in potential downturns, citing past performance during economic uncertainty [55][56] - The company is monitoring macroeconomic factors, including the ongoing war in Europe, but has not seen a significant impact on demand [45][63] - The outlook for Q2 includes total revenue expectations of $96.5 million to $98.5 million and subscription revenue of $82 million to $83 million [48] Other Important Information - The company ended the quarter with $453 million in cash and cash equivalents, an increase driven by a recent investment from Silver Lake [44] - The company is actively pursuing M&A opportunities but remains cautious about valuations in the current market [80][81] Q&A Session Summary Question: Resilience of the business model in a potential downturn - Management highlighted the resilience of subscription models, noting that recurring revenue provides stability and customer loyalty [55][56] Question: Impact of international revenue and Ukraine situation - Management confirmed no revenue exposure in Russia or Ukraine and stated that demand signals remain strong [63] Question: Sales force productivity and partner contributions - Management reported strong growth in partner contributions, with over 450 certified consultants influencing a significant portion of bookings [67] Question: Pipeline and macro environment impact - Management indicated that they have not seen a decline in the pipeline and demand remains strong across various sectors [72] Question: Capital allocation priorities and M&A focus - Management confirmed an active M&A program but emphasized the importance of being strategic and cautious in the current environment [74][75] Question: Hiring challenges and implementation consultants - Management noted that while hiring challenges exist, they are focusing on leveraging partners for implementation work [85]