Zuora CEO Tien Tzuo - it's not just bigger enterprises that can get underway with monetization tech

Zuora cut its GAAP net loss in its latest quarter, down to $22.6 million from $29.9 million for the comparable year ago period, on revenues up nine percent year-on-year to $108 million. Other stats of note: 

• Subscription revenue was $95.5 million, an increase of 14% year-on-year.
• Customers with Annual Contract Value (ACV) equal to or greater than $250,000 numbered 444, up from 407 in the previous year. 
• One deal that closed in Q2 was valued at $1 million ACV. 
• Another six had ACV equal to or greater than $500,000. 
• Zuora closed over 35% more new logos compared to Q2 of last year.
• New customers and go-lives included DISH Wireless, The Atlantic and Guesty.

CEO Tien Tzuo pointed to “a durable business model that is riding a wave that will last decades, not years”, saying: 

The core thesis of the company is to be the leading beneficiary of a broad, long-term secular shift in business models. Our mission is to offer differentiated hard-to-replicate technology that helps companies thrive with these new business models. Our technology goes into the guts of a company's operations. When we go in, we're very sticky. And so our strategy is to sign up the biggest and best companies in the world, turn them into customers for life and tie our growth to the growth of their recurring revenue business in two ways. First, with a consumption-based pricing model and second, through a consistent pace of organic and inorganic innovations that we can sell.

He pointed to some of the new logos won during the quarter:

The DISH Wireless, a subsidiary of DISH Network and a 5G network provider that reaches more than 240 million Americans. They purchased Zuora Revenue in Q2. Zuora has the unparalleled functionality DISH needs to automate their revenue recognition as they grow their subscriber base.

The Atlantic, a great proof point of the success of our Zephr acquisition last year, which further strengthened our position in the media and publishing vertical. In previous quarters, we've talked about our work with the New York Times and Gannett. In Q2, we were proud to welcome The Atlantic, a leading magazine and multi-platform publisher with over 925,000 subscribers, which signed out with Zuora Billing and Zephr together to power their paywall and billing solutions. Zuora will give them new flexibility to experiment and enhance the reader experience while freeing up engineering resources to innovate. Again, the technologies we offer continue to be relevant in this marketplace.

Macro-pressures

That said, the macro-economic climate does mean that certain markets are tougher than others, he added: 

There's more scrutiny on spend currently out there. It depends on industries, right? So you've seen the media industry continue to invest in subscriptions because they know that, that's where their revenue growth is coming from. But look, overall, at a macro-generalized level, there's scrutiny on spend. But when you look at our specific space, companies are still saying, ‘Look, the future is going to be recurring revenue. The future is going to be monetizing these new digital services. So, this is something that we simply have to do’. And so the projects that are in companies that are saying, ‘Look, regardless of what's going on in the macro, we have to invest in this space now’, those are the bigger deals that we're seeing. 

Outside of those larger enterprises, there are still ways to get underway, said Tzuo: 

With other companies, we can say, ‘Look, you know you want to get started, you know it's important to you. If you have downward pressure on spend right now, why don't we get started in this part of the portfolio and you can continue to grow with us over time…People have this impression that because we sell an ERP-like system that we can only do large deals and large implementations. Actually, our architecture allows us to go in with one product, not the entire suite….We can just land with Billing, we could just land with Revenue. We could just land with Zephr. Our ability to tackle the market in this agile way, it does allow us to do smaller, faster deals, and we're seeing the positive impact of that.

As for the inevitable AI element of enterprise tech analyst calls in 2023, Tzuo said that there are a “a lot of conversations” being had within Zuora about this subject: 

We announced a lot of AI capabilities with the four product announcements that we had just a month ago around Zuora Warehouse, around Zuora Command Center. But if you look sort of step back and say, does AI have a big, big opportunity to really transform financial systems and allow our products to be much, much more valuable?  Absolutely! It’s in the area of insights. It's the area of being able to improve subscriber experiences for our customers and, obviously, to be much, much more efficient in their financial operations. We think AI can have a big capability in all three areas, and it's something that is really driving right now internally.

My take

A solid quarter with progress on a number of fronts. Zuora continues (correctly) to play a long game.