Over half of Zuora’s customers are now outside the technology sector, validating CEO Tien Tzuo’s long-standing mantra that every industry is moving to a Subscription Economy model:
We made an early bid that the subscription business models pioneered by SaaS, media and technology companies would eventually spread to every industry and we see validation of this every day in the business headlines, in the analyst reports and most importantly in our customer base.
Zuora turned in Q320 numbers yesterday with total revenue running at $71.8 million, an increase of 17% year-on-year, while subscription revenue was $54.0 million, an increase of 25% year-on-year. GAAP net loss was $18.2 million, compared to a net loss of $17.2 million last year, while non-GAAP net loss fell from $9.5 million to $6.5 million.
Picking up on the multiple industry theme, Tzuo pointed to successes in manufacturing, citing recent go-lives with Johnson Controls and Stanley Black and Decker. These have a sense of déjà vu, he suggests:
These launches feel similar to [Caterpillar's] initial go-live from a couple of years ago that began with simple data services to a handful of US-based dealers. Today Cat has on-boarded over a 180 dealers globally launching new bundled services that includes GPS location, machine utilization, fuel burn analysis, engine monitoring and overall maintenance management per machine. Cat is a shining example about companies who use Zuora as a mission critical solution to iterate and expand the subscription offerings, unlock growth and increase customer value.
In transportation, including auto manufacturers we continue to see a shift toward access not ownership. This quarter we're excited to have go-lives with amazing brands like Kia, Fiat Chrysler as well as Harley-Davidson in motorcycles. The biggest vehicle manufacturers in the world are turning to Zuora to launch digital services, connect with their drivers and unlock new revenue opportunities.
While not ready to be classed as a “full blown vertical” as yet, Tzuo reckons he can also see promise in another market:
We continue to see utility companies move away from static product offerings towards flexible energy as a service models.
He cites several examples:
Saint Gobain, one of the world's largest manufacturers of building materials - we help them move into the business of smart buildings and launch consumption based services such as the subscription heating and water solutions. As well as amaysim, an Australian utility company, which we are helping grow through new offerings and flexible energy plants. It's still very much an emerging industry for us. But we've already met and rolled with other major utility players around the world, such as Origin Energy, Sanan, A2A and Centrica.
From a product point of view, Zuora’s integration of RevPro with its Billing offering is now complete, says Tzuo, and customer implementations are now underway:
We’ve completed the technical integration phase with a number of customers and three of them, Siemens, LivePerson and Modernizing Medicine are expected to be operationally live using RevPro and Billing in the next couple of months…We're working hard to get these customers operationally live on an integrated product by really next year. But this will take some time, but once these customers are operationally live and using the integrated solution, we can start cross selling our RevPro product into our Zuora Billing customer base.
There’s also been some solid traction around adoption of the Zuora Central platform, he adds:
Since our platform launch six months ago, we've seen nearly 100 customers adopt the platform capabilities. These companies are using our tools to orchestrate events in automate manual processes and receive immediate quantifiable results in terms of operational efficiencies.
For example, Schibsted Media, they're one of the largest media groups in Scandinavia, they're using our workflow tools to automate reconciliation to a customer payment gateway saving in both time and money. Hudl, a sports analysis software company that serves hundreds of thousands of teams around the world, is using the Zuora Central Platform to save over 100 hours a month by automating the upsell processes.
And Motor Trend group is using Zuora Central to move credit card retry logic out of expensive middleware and giving them a single source of truth for their collections processes. In short, the Zuora platform is helping our customers work smarter by extending and integrating our system and data model into the core of their business.
The platform is an important growth driver as Zuora’s customer footprint expands across industry divides, he explains:
We have an incredibly diverse group of customers spread across a number of different industries and the number of industry shifting to subscriptions keeps growing. That's what makes the opportunity so excited. But as a result of this diversity, it's really important that we provide the right tools to allow our customers to customize and extend the Zuora solution into their businesses, whether they are digital media company or an industrial manufacturer or a software provider. Every minute of developer time that we can save our customers on cost coding can go towards building new features for their end customers.
It’s probably fair to say that Zuora has had some growing pains this year. Back in May, the firm ran into some sales headwinds, with Tzuo admitting to a need for improvements in execution as the company pitched into new sectors and attracted bigger enterprises:
We continue to be excited by the healthy demand for subscription business models, but we are making changes to our sales approach to scale the business to the next level, which tempers our expectations for the remainder of the year.
That will inevitably remain a work-in-progress, but there have been some positive developments. A new Chief Revenue Officer is now in place in the shape of Robbie Traube, a 25 year veteran in the enterprise software business. And with Zuora’s increasingly large enterprise customer demographic, James Huang, previously with SAP, Workday and WorkForce, has come on board as Head of Global Alliances, to foster partnerships with the global SIs. Those are both savvy appointments that should pay off in 2020.
As we noted back in May:
Every enfant terrible hits puberty at some point and as we all know, puberty’s seldom fun.
As 2020 looms, Zuora will be hoping that it’s put ‘that awkward phase’ behind it.