Zuora Inc Fireside Chat Hosted By Canaccord Genuity Group Inc Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : Great. So maybe we'll just start off at a high level and go through the product suite at a high level, just for the benefit of the group. There's a few -- I think the -- clearly the main flagship product is your billing product, but we're hearing more about your platform products. So I'd like to just drill down into platform and what it's providing and penetration rate and the value and the differentiation that platform is providing. And then there's obviously some other products that you've been working on, including revenue and some other so, you're kind of at a high level, we'll start off with the product suite.

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : Okay. Great. I know on your Q3 call, guys, you mentioned that your platform product, which I think is your underlying, opening up the product for a little more customization in real time. So there's -- that's about 2/3 penetrated into the installed base now. We didn't hear as much about progress on revenue in Q3, and just kind of want to try to frame the revenue opportunity and how that unfolds in terms of the product suite.

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : Okay. That's helpful. And we'll get to some metrics on the business later, but just drilling down one more on revenue. Because it doesn't feel like it's not penetrated yet, but there could be a good opportunity. What, if you looked out past this year and what's going on, is it -- what could revenue do to net dollar retention, do you think? I mean is it -- can it move the needle materially just on its own in an installed base? Or how should we think about just that one product as it starts to kind of gain more traction?

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : Okay, great. It just feels like, if you move into the enterprise into some businesses and verticals that aren't -- haven't traditionally done a lot of subscription stuff, the whole 606 becomes a different thing for them, that they haven't really dealt with either. And so I'm just curious on that. So I guess the next question is, is on the road map overall on the product suite. We've got a nice suite now. It feels like there's a lot of opportunity just to upsell and cross-sell some of the newer rollouts into the base and into new customers, is -- can you provide some insight on the road map from here? Are you happy with the product suite? Or are there some opportunities continuing to add here? And how that may fit into kind of the broader strategy if you look out over the next few years?

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : We'll switch gears a little bit now and kind of get into some of the operations and other things relative to the cadence of the business now. On your Q3 call, I think you mentioned that your churn had kind of come back down to normal levels or kind of pre-COVID levels. Just kind of curious, if we look at the composition of the customer base now versus pre-COVID and kind of perhaps the resilience of that customer base versus before composition, start -- I mean it hasn't been that long yet, but moving to perhaps larger enterprises versus smaller companies in the customer base,

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : Okay. Great. Maybe we'll just follow up on that comment here real quick, Todd, on those upsells, which sounded like a pretty good metric. Can you characterize anything going on in those upsells more broadly? Was it just increased volume on their own platforms and in amount billed, adding new functionality, new pieces of the suite to the solution, expanding to perhaps different divisions inside of an organization? Is there any kind of read-through that's emerging on upsell to kind of paint a picture of how it evolves from here?

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : And then we do have one question that's kind of come in from the group that's related to the churn discussion we were talking about. Can you provide some color on perhaps internally data analytics, other things that you have available to you relative to the customer base? And data around subscriptions to help you analyze churn, to mitigate churn, to proactively address it? Not just as a customer still, it's still in business or not, just to kind of help on the churn side.

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : Okay. Great. Maybe we'll drill down a little bit more on those enterprise customers a bit more. I know you mentioned that you've signed your, I think, your largest customer in your history in Q3. Congrats on that. And I think you said it was a large consumer electronics company. Maybe we'd just kind of use that as an example. What kind of sales cycle was there, there? Kind of theoretically, you'd expect the larger the enterprise, the larger the sale, the longer the sales cycle would be. Is that indeed what you're seeing with large enterprise customers? And then how do they uptake the product? At once? Are they just -- are they starting just with billing? Or are they taking on more of the product suite initially?

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : That's great. And then just a follow-up, how did Zuora integrate into their current computing infrastructure, their current finance systems? What was the kind of learning there in terms of getting -- it may not be integrated actually, already. Maybe the deal just got signed. But how do you see the integration of your software into their current environment client?

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : It seems like things are starting to go that way. So just staying on the enterprise a little bit more, Tien, you've got a product set. You've got -- you're kind of -- you're still a small company with a good product set. But you have all these huge enterprises that have never done business with you. They're all thinking about subscription products. Everyone's got to be, right? You can only touch so many of them. If you think of your net out there relative to the enterprise, all these big enterprises that are somewhat hard to penetrate, how well do you think you're aware of deals or opportunities across the broader enterprise space that you can touch, versus opportunities where you're just -- you just -- you can't see it, they can't see you, and they go with some homegrown thing or they just continue to muddle along or go with another solution?

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : Sure. And then maybe just following up on that, I know you mentioned on your call again. I think, did you say 1/3 of ...

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : of new business came in through the SI channel?

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : 1/3 of the go lives. Okay, fair enough. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 17, 2020 / 5:00PM, CF.TO - Zuora Inc Fireside Chat Hosted By Canaccord Genuity Group Inc

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : Yes, right. Right. But I mean that's still -- that's a pretty decent metric. And so it kind of feels maybe a little bit that, that SI channel is maturing and...

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : Sure. And from what you've seen, do you think that...

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : Were you going to say something, Todd? Go ahead.

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : Okay. And then I guess the follow-up then is, do you expect that whatever it is, if it's go-lives or new deals or whatever, do you expect that SI channel to continue to be a larger and larger percentage of the driver of go-lives or new deals? Or is it like the third number where you think it kind of stays for a while? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 17, 2020 / 5:00PM, CF.TO - Zuora Inc Fireside Chat Hosted By Canaccord Genuity Group Inc

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : I mean they'll do the work, right? But just all those SIs have relationships across all the big verticals and all the big enterprises, right? And so it's a function of generating your awareness inside of them, right? And where do you think you are on that journey at this point?

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : Okay. And we'll kind of stay on the kind of business development sales front. I know you kind of, you also mentioned on your call that you've tweaked your sales strategy from a hunter farmer strategy to kind of a more dedicated team client strategy. Can you comment on what the thought there was and why you changed? And how the new -- frame the new approach and how that changes the cadence of billings or revenue over time?

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : Great. That's helpful, Tien. Maybe we kind of keep on the kind of the sales and the sales model. What about contracts structures and how you structure contracts? Based on perhaps percent -- expected volume in billings going through the product, versus just if that was just kind of a straight subscription revenue kind of, I guess, kind of fixed fee on the subscription revenue versus volume-based pricing. Is that something you see pushback on from clients? Or do you think you have the right pricing model in your contracts?

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : Okay. Maybe we just kind of stay on some of the operational metrics a little bit and net dollar retention. I think it's a quite key metric that we're all focused on over the next few quarters. Related to churn, which we kind of talked about coming down, is there any way to frame that dollar retention metric x the Q2 churn, either kind of apples to apples outside of that bucket of churn off? Or maybe even kind of annualizing a sequential net dollar retention Q2 to Q3, something like that? Any kind of color, I think people would find that useful here.

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : Great. I wanted to kind of circle back to, I know we've kind of talked about the auto industry a little bit here. It's kind of gotten mentioned a few times. And I think Tien, you had said that 2020 was a big year in terms of rollout in the auto industry, with you kind of powering some of their stuff on the back end. Is there anything to note there, that all of a sudden, there was big uptake across multiple OEMs? Or how did you kind of penetrate everything kind of a lot in one year within the auto industry?

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : Okay. No. Just to remind everyone, we're going to wrap it up here in a little bit. So if you do have a question, lob it in now into the queue. How about the competitive landscape? Any changes, any movement there? There's -- a lot of my coverage is, is more on the fintech side, and I think you partner with some of the payment gateways and things like that. But just kind of wondering from homegrown to kind of peer companies that are like you, to even some of the payment gateways, thinking they could vertically integrate more towards what you're doing. How do you see the competitive landscape now?

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : Okay. One final question from the queue on the sales force and size of the sales force now, where you think -- and growth in sales force. Do you see sales force needing to grow in line with expected revenue growth? Or is there leverage in your current sales force? And what to expect around head count there as we move through next year?

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : Okay. And then maybe I'll just lob one final one in, kind of related to that. As you focus more on the enterprise, there's still a big middle market out there in terms of subscription opportunity in billing. Do you think the company does both kind of fully? Or is it should we really think that companies sales, business development resources are on the enterprise, and the mid-market is somewhat deemphasized now? And do you see it, or do you see the company capable of exploiting both markets at the same time?

Question: Joseph Anthony Vafi - Canaccord Genuity Corp., Research Division - Analyst : Great. Well, guys, thanks very much for joining our fireside chat today. Think 2021, best of luck in 2021. It should be -- it looks like the company is set up for some accelerating success, at least in my opinion. So thanks, everyone, for joining today. If you have any follow-up questions, please lob them in to me or your salesperson at Canaccord, and we'll try to get all those answers for you. So thanks, everyone. Have a great day.