Be more Zoom! COVID's 'wake-up call' to business will fuel Subscription Economy growth, says Zuora CEO Tien Tzuo

Zuora has handed in a solid set of full year numbers, after a year in which overall Subscription Economy growth rates took a COVID hit, but the firm saw a healthy uptick in larger enterprise deals. 

For fiscal 2021, revenue rose 11% year-on-year to $305.4 million with a GAAP net loss of $73.2 million, down from a loss of $83.4 million in fiscal 2020. Q4 revenue was $79.3 million, up 13%, with a net loss of $18.8 million, down from $23.8 million for the comparable year-before period. 

Other stats of note: 

• Full year subscription revenue rose 17% to $242.3 million.
• $17.0 billion in transaction volume through the billing platform in Q4, up 30% year-on-year.
• 40 customers went live in Q4. 
• 8 news deals with annualized contract value of $500,000.
• 23 new customers with an annual contract value of more than $100,000 added during Q4.
• 676 customers with annual contract value of at least $100,000, up 8% from a year earlier and now accounting for 90% of total business.

Customer size

On those bigger account deal increases, CEO Tien Tzuo says there is a shift among larger companies towards subscription models that favors Zuora: 

A new survey from The Harris Poll found that 78% of international adults currently have subscription services, up from 71% just two years ago. This is forcing big brands to think how they continue to drive growth in their revenues and turn their customers into subscribers…We continue to see our messaging resonate with larger brands. I've been having meaningful conversations with C-level executives at some of the biggest companies in the world. They are coming to us for our expertise and staying with us for our technology.

He cited the examples of the likes of Bridgestone Tires and Radio Canada as large enterprises that have gone live on Zuora, as well as an unnamed financial institution, “one fo the world’s largest and oldest banks”:

If you read the press, you may think that this is an industry under attack and being picked apart by high flying fintech start-ups. But the fact is veteran financial services institutions have the customers, the brand, and they have enormous resources at their disposal; what they need is agility…We’ve given them the ability to launch new products and services in weeks instead of months or even years. Zuora has given them the digital agility and insights of a start-up. 

Another exemplar cited was Grundfos, the world’s largest water pump manufacturer: 

This is a 75 year old company, shifting from selling water pumps in boxes to delivering water-as-a-service. They're using Zuora to monetize the usage data coming from the sensors on the pumps. With new as-a-service offerings, companies like Grundfos are doubling down on a recurring subscription approach to cater to their customer demands for access over ownership.

Zuora is also seeing traction behind customers tapping into both Billing and Revenue offerings, such as cyber-security provider Sophos, he added, which is using Zuora tech for quote-to-cash transformation: 

By selecting the combined power of Zuora Billing and Zuora Revenue, Sophos can go-to-market faster with new pricing models and improve their operational efficiency…We definitely saw strength in the Zuora Billing and Zuora Revenue combination and a lot of those are going to be new deals, new companies coming on board, saying ‘I want both products at once’. I see the combined strength of the products really being a big advantage.

Where next?

Having navigated the COVID crisis, and seen growth slow somewhat despite the accelerated digital transformation efforts that have been widely reported among end users as a result of pandemic pressures, the question facing Zuora in calendar 2021 is what happens when the Subscription Economy meets the new Vaccine Economy? Tzuo expects to see a return to pre-COVID growth rates, which were running at about 25%-30%:


When we look at the Subscription Economy, you can certainly pick sectors that are on fire.

The events of the past 12 months have been a learning experience for many, he argues: 


Twenty-twenty was a wake up call to say, if I have a business model that relied on selling product through physical distribution channels to get to my customer, I'm incredibly vulnerable. The flip side of it is, if I have a business model that is depending on usage, consumption, direct-to-consumer relationships and digital relationships, I'm actually doing really, really well. Inside of these incumbent companies, where they have a mix - they have a traditional product-centric business model and they have a new digital subscription based business model - they’re seeing where the growth rates are. 

He adds:

That is the story of Caterpillar. That is the story of Fender. In many ways, that's also the story of Zoom. [Other companies are] seeing companies like Zoom just go on fire and they're saying, ‘This is where the future is lying’…I'm having conversations directly to the CEO level, with CEOs around the world of multi-billion dollar companies. They're really just waking up to the power of this business model and they're leaning in.

My take

A solid performance against the backdrop of an abnormal year. The COVID crisis may have resulted in some growth pressures on the wider Subscription Economy's expansion, but there was still growth and every reason to expect a return to - and beyond - pre-pandemic norms in the vaccinated months to come.