Zuora Inc (NYSE:ZUO) Q3 2018 Earnings Conference Call - Final Transcript

Nov 29, 2018 • 05:00 pm ET

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Zuora Inc (NYSE:ZUO) Q3 2018 Earnings Conference Call - Final Transcript

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Presentation
Executive
Tien Tzuo

But before I continue, Tyler, why don't we open with the high-level results for the quarter.

Executive
Tyler Sloat

Sure, Tien. As you mentioned, when we look at Q3 we had another really good quarter. Later in the call, I'll go deeper into our key metrics and our operational and financial details. I'll also provide some financial outlook and guidance for the future, but now though, let me provide the highlights.

In Q3, we grew subscription revenue by 43% year-over-year to $44.5 million. We grew total revenue by 33% to $61.6 million. As a quick reminder, which we highlighted previously, the reason that total revenue grew slower than subscription revenue is that we had a big one-time uptick in professional services revenue last year related to our RevPro business. We'll have this year-over-year anomaly in Q4 as well, but we believe it should normalize in Q1.

We were able to accomplish this revenue growth, while bringing our non-GAAP operating loss down to $10.6 million, an improvement of $1.7 million versus the prior quarter. As we scale, we continue to gain more leverage in our business model. All this led to outperformance on non-GAAP EPS, resulting in negative $0.10. We delivered results above our guidance range across all of these metrics.

Executive
Tien Tzuo

Thanks, Tyler. Really, really proud of our quarter.

Now, let me give you some color on what we're seeing in the quarter, which continues to give us confidence that we can sustain this level of growth over an extended period of time, years, if not decades. The fundamental bet that this Company is built on is the continued widespread of the subscription economy that we're all seeing will lead to continued strong demand for the unique technology solutions that only we have delivered. The strategy behind this bet is what we call our land and expand strategy. Now, where other SaaS companies talk about landing and expanding within a single company, we focus our land and expand on entire industries.

Let's look at the technology sector, namely software and hardware, which is our first core vertical. It still represents about half of our business. The shift to subscriptions here is well-known. It's led by the adoption of SaaS, cloud, and the preferences companies now have for these pay-as-you-go models. Today, we're behind both the SaaS companies, so Zendesk, New Relic, DocuSign, Avalara, Salesforce, as well as the more established players, like Symantec, PTC, and NetApp. Now, you all know how fast these guys are growing. But the key here is, now that we are behind these leading companies in this sector, as the entire industry continues to shift to subscriptions, this is automatically powering our growth.

Now, the same thing has played out with the media industry, starting with newspapers. Now, after going through years of hurt, newspapers today are finding growth again through the digital subscriptions. Now, we saw the shift early and began to focus on this industry years ago. We started working first with News Corp UK in 2011, and