25 -Feb -2020 Zuora, Inc. · 2/25/2020 · billion, $20 billion $50 billion and they are doing the digital transformation project and this part of their project they're realizing

Corrected Transcript

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25-Feb-2020

Zuora, Inc. (ZUO)

JMP Securities Technology Conference

Zuora, Inc. (ZUO) JMP Securities Technology Conference

Corrected Transcript 25-Feb-2020


2 Copyright © 2001-2020 FactSet CallStreet, LLC

CORPORATE PARTICIPANTS

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc.

.....................................................................................................................................................................................................................................................................

MANAGEMENT DISCUSSION SECTION

[Abrupt Start] .....................................................................................................................................................................................................................................................................

Unverified Participant

...team from Zuora back at JMP. Second year in a row, I think, right? .....................................................................................................................................................................................................................................................................


Second year in a row, yeah. .....................................................................................................................................................................................................................................................................


[indiscernible] (00:00:13) thank you. And then the early days, you used to come too when we you were private. .....................................................................................................................................................................................................................................................................


Yeah. You had a lot. .....................................................................................................................................................................................................................................................................


How are you? .....................................................................................................................................................................................................................................................................


Good, good, very good. .....................................................................................................................................................................................................................................................................






So, all this [indiscernible] (00:00:23) – I have not done this [indiscernible] (00:00:25). I usually I slowly

[indiscernible] (00:00:27). .....................................................................................................................................................................................................................................................................


[indiscernible] (00:00:28) .....................................................................................................................................................................................................................................................................

QUESTION AND ANSWER SECTION

Q

How is business – how are things at Zuora? .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A Things are going well. Things are going well, the broader shift to subscriptions, and [indiscernible] (00:00:39) little

bit about us. Software-as-a-service company and we're focused on providing an alternative platform to ERP

systems for companies that have subscription based business models. And we help companies launch, build and

grow subscription businesses anything from software-as-a-service companies to media companies, news,

streaming media all the way to a lot of the manufacturing companies that we work with are all launching

subscription services tied to their physical connected products, cars, appliances, wearables whatever happens to

be. And so, we've been doing this for 10, 12 years and in the broader shift to subscriptions continues to go strong

and it continues to drive our business. .....................................................................................................................................................................................................................................................................

Q

Yeah. It seems like it would be the most obvious problem to start the software company to solve. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A Yeah. .....................................................................................................................................................................................................................................................................

Q

Right. And yet it's been there are some challenges right. What are the biggest challenges in subscription bill? .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A It's a really tough space, I think. .....................................................................................................................................................................................................................................................................

Q





Yeah. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A I think certainly if you ran one of these businesses before and you've had a lot of frustrations of not being able to

do what you want because you're running on Oracle, you're running on NetSuite, you're running on a home grown

system, then and you know those are obviously your best customers, right, because they start the next thing, they

wanted to be a subscription business and say look I need something very, very different. But for the rest of the

folks, right, subscription businesses in the grand scheme of things are relatively new. And so, the experience of

understanding it's really, really hard to scale these businesses. It's something that we have to do a lot of

evangelism, education on. And I would say the first – for the first few years even the cost of our subscriptions was

not necessarily there, right. So, we [indiscernible] (00:02:16), we say look the world's going subscription, you are

not going to buy anything anymore, you simply going to subscribe the services and some controversy, but most

people nod and say, okay, I could see that. But 10 years ago that was not the case, right, there was no Uber,

Netflix was selling out DVDs. And so, I think you know we call this market early. .....................................................................................................................................................................................................................................................................

Q

Yeah. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A It is a tough set of products to build, the closest comparable thing that you're going to see out there is going to be

the telecom billing systems, right. These are gigantic expensive complex systems, but because we called it early,

we've had a head start on it. I think we've got sort of differentiated technologies that whether you talk to Forrester,

Gartner, IDC, people recognize that we've got the best platform in the marketplace. .....................................................................................................................................................................................................................................................................

Q

And in terms of when you're like actually getting a customer live on Zuora, what's the biggest challenge? .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A I think that's one of the biggest accomplishments that we've made. If you think about ERP systems of the 1990s,

the biggest knock was half of these deployments never went live, right. And so, so really understanding how to

take this complex piece of technology, and putting it inside of the company. .....................................................................................................................................................................................................................................................................

Q

[indiscernible] (00:03:19). .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A Oh, yeah. Yeah. ERP systems.





[indiscernible] (00:03:21) .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A ...ERP systems, you got to remember those stats. .....................................................................................................................................................................................................................................................................

Q

Did you – what you do before Salesforce? .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A I was at Oracle. That's the cross worlds in between. .....................................................................................................................................................................................................................................................................

Q

Yeah. Okay. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A Yeah. And so, we have a really successful formula of bringing customers live, that I think really drove the growth

of the company. And so, you have a space where the technology takes time to build. It's a complex piece of

technology, and you've got to know how to deploy it within our customers. And if you know little bit about us, the

last few quarters we've been talking a lot about system integrator partners. .....................................................................................................................................................................................................................................................................

Q

Yeah. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A So the next step really is to take our formula for success and to be able to scale it through partner alliances

community primarily the big GSIs, right, Accenture, Deloitte, UI, PwC... .....................................................................................................................................................................................................................................................................

Q

And where are we on those – which one of those is doing the best? .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A I would say they all have their own different vertical focus... .....................................................................................................................................................................................................................................................................





Q

Yeah. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A And so, we see a lot of IBM in the automotive sector, the manufacturing sector, all right. We see Deloitte with

business services, we see a lot of PwC in the UIs, especially with the SaaS companies and so within the Europe

we see a lot of Capgemini, and so you're going to see – we work with them across the board. .....................................................................................................................................................................................................................................................................

Q

Who's got the most people trained up, do they have like – is there a Zuora practice? .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A There are various [ph] phases (00:04:35) of Zuora practice. I think you really have to count how many projects

that they have done, and I'd say it's still fairly early stages. But if you look at our customer base, our deployments,

the biggest deployments invariably have a system integrator because a lot of these things are big, big digital

transformation projects. .....................................................................................................................................................................................................................................................................

Q

Yeah. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A I see a lot of our companies are – 50% of companies – our customers are technology all right. So, [indiscernible]

(00:05:00), right. This is kind of what we are known for because this is where we started, increasingly we are

seeing the hardware companies in there too, right, so the Cisco's and so and so forth. But the other 50% are non-

tech, are non-hardware, non-software and some of these are 50, 60, 100, 200 year old companies you know $10

billion, $20 billion $50 billion and they are doing the digital transformation project and this part of their project

they're realizing you know this isn't about digital transformation to be more efficient without fundamentally

changing our business model, and getting closer to the customer, right, and the best way to get to close of the

customer is to have a subscription-based business model, and so cars... .....................................................................................................................................................................................................................................................................

Q

Yeah, non-tech example. Yeah. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A





...the car companies are recognizing if you look at the stats and this is true whether its cars, whether its game

consoles, physical products, number of car sales year-over-year is declining around the world, and its declining

also in China, in India before this whole virus thing took... .....................................................................................................................................................................................................................................................................

Q

We'll get to that. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A ...and so – but miles driven continues to go up, right. If you just look at these stats, so if your business model is

based on car sales, it's hard, it's hard to grow your revenues, you're sort of stuck in your – you got headwinds, the

most you can do is increase prices and things like that. But if your business model is based on miles driven, right,

Uber, Lyft and others... .....................................................................................................................................................................................................................................................................

Q

Is it because of the ride sharing, is that what... .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A So we're finding all source of ways, where technology is finding all source of ways to get more out of the products

that we have, right. And so – but it's the same with video games, game console sales are going down... .....................................................................................................................................................................................................................................................................

Q

So, [indiscernible] (00:06:35) with parts, right. .....................................................................................................................................................................................................................................................................


Q

So, do you have – are you – who are you working with [indiscernible] (00:06:39). .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A So every car is now coming off the assembly line with an Internet connection, there the dealers pushing you to

sign up for service. We're working with seven of the top 10 auto manufacturers. So, imagine you buy a Fiat

Chrysler now and the rollouts [indiscernible] (00:06:55), and there's ways to monetize our relationship. So you're

driving and all of a sudden you get a pop up on your dashboard that says would you like to sign up for SiriusXM.

Would you like to order something from McDonald's right 5 miles down the street, right, down the highway and it's

time for you to get gas, right. They're talking about, well, how do we turn the car actually into a payment method





like the phone, right. What if you pull up to a gas station, why not use the car to authenticate NFC just like your

iPhone does? So, why [indiscernible] (00:07:24)... .....................................................................................................................................................................................................................................................................

Q

That's a great idea. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A ... iPhone, just fill up the gas and go. And by the way, the car is much more secure because it's a lot harder to

steal a car than to steal a phone. And so, Harley Davidson launched their electric bike, same thing there's an app

that you pay for that allows you to do things like find the bike, start the bike, right, but now they can build a whole

community, now they can actually see how their riders are using the bike, do they bike every day, do they bike

every weekends, is it the commuting, is it a hobbyist thing and they're just getting to know the customers much

better, and then eager to launch services. .....................................................................................................................................................................................................................................................................

Q

Yeah. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A So, we're the monetization platform, we're the billing, commerce, payments, and [indiscernible] (00:08:01) .....................................................................................................................................................................................................................................................................

Q

All right. So, I guess this is my point on the stock, which is, I mean that's such a great example, right. And it's

seen – and enabling Harley Davidson to do that is so critical for them. How is it the stock hasn't done better?

What sets us back? .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A So, yeah. So, we sell lot of...

[indiscernible] (00:08:20) .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A I would expect nothing [indiscernible] (00:08:26) .....................................................................................................................................................................................................................................................................

Q

Okay. .....................................................................................................................................................................................................................................................................





Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A You know it well. So, the markets, we feel really, really good about the markets, right... .....................................................................................................................................................................................................................................................................

Q

Yeah. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A But last year, we did say we had to make some structural changes in our organization, and so we took our targets

down, right at the start of the last year, and it was really tied to rebuild of the sales organization under a new sales

leader. And so, it's something that we announced in May of last year, and we announced – so we had a new CRO

join in October-ish – November-ish, right, in October, early November. And so, that person now have been in

place for 90 days. .....................................................................................................................................................................................................................................................................

Q

Yeah. Well, let's talk about that, that's, Robbie, right. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A That's Robbie... .....................................................................................................................................................................................................................................................................

Q

Who came from Adobe... .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A Robbie Traube. .....................................................................................................................................................................................................................................................................

Q

Okay. So, how did you find Robbie? .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A Well, we looked at a lot...

[indiscernible] (00:09:12) .....................................................................................................................................................................................................................................................................





Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A We had a headhunter, yeah, [indiscernible] (00:09:12) he personally helped us out with this. It turns out there was

a lot of CRO searches for SaaS companies at the time if you're tracking. And so, but you know, I don't know,

gosh, there's a lot of dinners, a lot of conversations... .....................................................................................................................................................................................................................................................................

Q

A lot of SaaS companies are looking for CROs, because they're all growing fast and they need to figure out...

[indiscernible] (00:09:34) .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A Yeah. There's something about stages and skills, right. And so, you get to know who's really, really good at the

stage, they don't always translate and that's really was the case for us. I think it was also a recognition that we

were – our marketplace is much more upmarket. And so, every Fortune 500 Global 2000 company is going to

face this issue, right. If you see Caterpillar, Ford, right, these companies face these issues, you can just see it's

extrapolating, medical devices, printing companies, they are all shipping products, coffeemakers, washing

machines, they're all connecting the Internet now and these companies also are trying to figure out what to do

with it. And so, we needed an upmarket sales organization. And in Robbie's background, one he ran strategic

accounts in Adobe, took – he went into Adobe [indiscernible] (00:10:18) $30 million. .....................................................................................................................................................................................................................................................................

Q

I didn't realize that. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A Yeah, yeah, $30 million, $50 million to about something like $2 billion, right, give or take. So, he has seen that

skill and experience, working with large companies and Adobe's message, they sell the CMO and we sell the

CFO. .....................................................................................................................................................................................................................................................................

Q

Yeah. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A So we're in different places. The core of it is actually digital transformation. And so, the familiarity with our sales

process and what we're trying to do was very strong. .....................................................................................................................................................................................................................................................................

Q





You sell to the CFO? .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A We sell the CFO, CIO primarily... .....................................................................................................................................................................................................................................................................

Q

Yeah. Okay. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A Yeah, yeah. And the launch will sometimes sell to the Chief Digital Officer. .....................................................................................................................................................................................................................................................................

Q

Yeah. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A But once we go in because we're money, right, we touch money it ultimately [indiscernible] (00:10:57) the CFO. .....................................................................................................................................................................................................................................................................

Q

Yeah. So, you had a lot of dinners with a lot of different sales candidates and you had a dinner with Robbie and

what's different about this one? .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A Well, when you're hiring, you're always looking for, right, you're looking for obviously experience set, you're

looking for a strong D&A fit, but you're also looking for somebody who is saying this is the next challenge that we

have, that I want right. And so, we're big believers in sort of making its way through Silicon Valley, [indiscernible]

(00:11:24) you write up a scorecard, you look for the outcomes that you want. And so, either two pager that are

pulled out and I think Robbie saw himself in that description and so, the fit was really, really strong. .....................................................................................................................................................................................................................................................................

Q

And quite understanding. So, what was... .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A Well, the who – yeah, yeah, [indiscernible] (00:11:43) this, but it's a book, so who the key part... .....................................................................................................................................................................................................................................................................





Q

Does anyone know the who? .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A ...is writing a scorecard. Yeah, we talk to Silicon Valley company, they're asking like what system do you use for

recruiting, and so it starts with a scorecard, all right. It starts with the outcomes that you're really looking for this

person to drive, right, versus dropping straight into the competencies experiences. .....................................................................................................................................................................................................................................................................

Q

Yeah. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A And so it's very descriptive and it gives you a visualization of a specific person and what are they doing on a day-

to-day basis, right. .....................................................................................................................................................................................................................................................................

Q

So here's the outcomes that we want you to drive and [indiscernible] (00:12:16) with that. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A Yeah, yeah, yeah. .....................................................................................................................................................................................................................................................................

Q

Yeah. And so what were the outcomes you wanted them to drive? .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A Well I think, here is what I would say, right. I would say that which you look for in these large enterprise software

companies, and you need a great product and you need a great market to get going. But ultimately, it's the sales

force, right, it's the sales organization that winds up being your true distribution channel, right, and then enterprise

software to sales organization. And so if you look at the greats over the years, right, IBM, Oracle, SAP,

Salesforce, they took something that's going on in the marketplace, right. Computers, client server, ERP, cloud,

and they said we are going to help the best companies in the world to navigate that transition, right, and the best

of the companies will turn to them and there's a chance to build a large sales organization that's differentiated.

And because these big trends, computers, client server, ERP, cloud are – take place over at a multi-decade

timeframe, you have a chance, you have a runway to build a differentiated sales organization at the best

companies in the world to work with, right. And so that was essentially sales versus strategy. And so we think we





have a chance to do that, right. We think that this wrestling with business models and transforming your business

is one of the most important topics that companies will be facing right now and through the next 10, 15, 20 years.

And so we need to build that sales organization that could translate all the insights and the intelligence because

we have all these customers, we have 10 years history, and we can publish benchmark of what success looks

like. If you do usage-based pricing, you're going to grow faster. If you let your customers change your

subscriptions, you can change faster and you can grow faster. These are all data that we have. How do we

translate that into a consultative sales model? And so that was embedded into description, Robbie is like, look,

I've spent my career doing this, and I want to do this as the top guy, as the CRO. .....................................................................................................................................................................................................................................................................

Q

I like it. All right. So IBM computers, Oracle databases, Salesforce, what would you say, it's CRM software? .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A Cloud. .....................................................................................................................................................................................................................................................................

Q

Cloud, really, okay. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A Not CRM. CRM was... .....................................................................................................................................................................................................................................................................

Q

Salesforce is cloud, and at Zuora, the business model changes. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A It's a subscription-based business. .....................................................................................................................................................................................................................................................................

Q

Yeah, cool, I like that. All right. I like that. All right. So [indiscernible] (00:14:34) when he landed, and I guess if he

is here we could ask him, but [indiscernible] (00:14:38) what was his impression when he landed? Pleasant

surprises, unpleasant surprises. .....................................................................................................................................................................................................................................................................






Look, I think it's always like somebody is pushed [indiscernible] (00:14:47) so like everything we said in the

interview process is all there, right, [indiscernible] (00:14:51) he's understanding okay, the raw material, the

people, the market the customer base, the insights, the positioning, .....................................................................................................................................................................................................................................................................

Q

[indiscernible] (00:14:59) positives or negatives, where are the positives? .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A So we just came up a whole set of another round of what we call, [indiscernible] (00:15:05) Forrester, IDC, they

looked at all the market, all the products of the technology, and we're clearly the biggest bubble for this up, the

first the right. .....................................................................................................................................................................................................................................................................

Q

Yeah. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A And so the technology is solid, the people are great. We've a really, really good culture in the organization, called

the ZEO culture, [indiscernible] (00:15:24) and the customer base is good. And so now he's got to go and put the

– we also where it stands still. And so we did a lot of work in Q2, Q3, putting the forecasting foundation so on and

so forth. So we're just taking hold of the machinery and fine-tuning it, right. And so... .....................................................................................................................................................................................................................................................................

Q

Yeah. What are the things that you think he needs to improve? .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A And so I think what he is now bringing in is that up market thinking and so I think we will be talking more about

this in the coming weeks and months, but – and there are more tweaks than anything else. But if you're going up

market, what are the implications and so if you're saying, look, the market, the system integrators are there, they

need to be important partners. We just kicked off our fiscal year, right, Feb 1. It's a good chance we do comp

plans, right. SO how do I make sure I tweak the comp plans at this moment in time to align to strategic goals. So if

there's any conflict between us and the partners, right, embedded in the comp plan, let's get rid of those things,

right. And so in the longer term

[indiscernible] (00:16:30) .....................................................................................................................................................................................................................................................................

Q

...already hopefully? .....................................................................................................................................................................................................................................................................





Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A We did a lot of stuff. .....................................................................................................................................................................................................................................................................

Q

Okay. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A He is pretty busy at work. .....................................................................................................................................................................................................................................................................

Q

All right, so comp plans, up market... .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A Comp plans, countersign...

[indiscernible] (00:16:42) .....................................................................................................................................................................................................................................................................

Q

...selling to the right people or does he feel like he needs to go bring in people have done more complex sales

and bigger enterprises sort of thing? .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A No, we are already a market, right, so I think as we talk about we close, it's not like we don't know how to go up

market. .....................................................................................................................................................................................................................................................................

Q

Okay. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A But I would say, there were still some systems and processes that were embedded in starting from like seven,

eight years ago, when our focus primarily was selling to Fox when they're $2 million, right, to Zoom when we they

are like $20 million and so we still do that business, right, but that doesn't necessarily translate to expectations of

a Caterpillar or an S&P Global where, look, I want a team of six people on site every single day. .....................................................................................................................................................................................................................................................................





Q

Yeah. Okay, awesome. Before I get into the coronavirus, let's pause and see if we have any questions from our

audience. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A I see one in the back. .....................................................................................................................................................................................................................................................................

Q

Yeah. Any update on the cash flow breakeven [indiscernible] (00:17:45)? .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A No, we're still committed to what we said three years after IPO, which is coming up. .....................................................................................................................................................................................................................................................................

Q

All right. Tien, so what's your perspective on the coronavirus? Is it impacting anything in terms of sales cycles or

leads that you have seen so far? And then, I guess, the other end of it is sort of events and marketing. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A Yeah. Well, first of all, you got to look at it first and foremost from a, obviously, human perspective. We have a

whole team in Beijing and so we monitor the situation fairly closely. .....................................................................................................................................................................................................................................................................

Q

Okay. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A And it's giving me a window into what's going on over there. .....................................................................................................................................................................................................................................................................

Q

Okay. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A And they're all working from home right now. .....................................................................................................................................................................................................................................................................





Q

Yeah. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A And so... .....................................................................................................................................................................................................................................................................

Q

How big is your team in Beijing? .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A It's not small, it's about 100, give or take. .....................................................................................................................................................................................................................................................................

Q

Oh, wow. Okay. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A Yeah. And so you're tracing who comes from the Wuhan City or the Hubei Province. But working at home for

engineers with technology today it works okay. .....................................................................................................................................................................................................................................................................

Q

Yeah. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A And so we're not necessarily seeing a productivity decline, they're getting reacquainted with their family, their

kids, they're all cooking – because a lot of their cooks and nannies can't come back to the cities and so you see a

lot of – it's pretty fascinating.

From a business perspective, we don't have a lot of cross-border, there's something about subscription business

models that tend to be more localized, right, if you look at Uber as an example, right, or even Amazon, a lot of

these things are localized within the country and you see different versions of Amazon local versions, local

versions of Uber around the world. So a lot of these services, it's not manufacturing, but we're building a product

and shipping it to another country and taking advantage of a cheap manufacturing base.

And so we don't see a lot of cross-border activity, and we don't have – we don't sell into China. We might have

one or two customers offhand, but it's not a good focus of ours. So we're not really directly impacted certainly –





some of our customers, especially manufacturing customers might be affect us, might be an indirect effect. But

we tend to be in the part of their business that's services future oriented, right, and so we'll see. .....................................................................................................................................................................................................................................................................

Q

So your customer base is not particularly exposed, in other words, that's the point about the subscriptions... .....................................................................................................................................................................................................................................................................


Q

...being localized. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A Yeah. I mean, I'm sure that's a micro event [indiscernible] (00:20:13). .....................................................................................................................................................................................................................................................................

Q

So when did I mention this earlier about the DocuSign CEO... .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A No. .....................................................................................................................................................................................................................................................................

Q

So Dan was sitting there and I asked the same question and he goes – he was supposed to go to Japan, and

they all – and we had the event there. I'm still looking to go. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A Yeah. [indiscernible] (00:20:34), right. I mean, when you look at the stats, right, the probability are so small, but

the [indiscernible] (00:20:42), if you go there and come back and Japan, I think, is okay. You just got to avoid, I

can't stay at home for 14 days. So that's what we're trying to manage around. .....................................................................................................................................................................................................................................................................

Q

All right. Any other questions from our audience?

All right. So let's talk about, you made an acquisition and then there were some challenges in the integration. .....................................................................................................................................................................................................................................................................






Q

And tell us where we are now? Give us the background, first of all, and where we are now? .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A Yeah so, if you look at the financial processes... .....................................................................................................................................................................................................................................................................

Q

Yeah. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A ...the two big places that subscription business models really break is around billing and revenue recognition. And

you could say why did they break? Well, traditionally, in a product oriented model, you think of the shopping cart,

right, [indiscernible] (00:21:34) shopping cart, that's your order, that's your quote. If you're a sales person, you

book it, and you ship it and it's [indiscernible] (00:21:40) invoice read and you recognize it, right, you shipped it.

In a subscription-based business, these customers ask, they want two more seats and the state and it's really,

really complex. And so there's huge implications around billing and revenue. And so manual processing of these

orders and translating that to an invoice stream, revenue stream it just doesn't work, right, it's error prone, it's

costly, it pushes up the time it takes to close books, so automation is key.

And then you can't manually process telco invoices as an example, right. And so you need a billing system that

automates all the stuff. And so we took care of the billing side and many customers came to us and said, well,

more and more I want you to take care of the revenue side. And they used to be a little simpler because revenue

recognition could be off the invoice, right, you bill for it and while it's 12 months or sliced into 12 pieces and

recognize it over time. But with these new world ASC 606 that goes out the door. And so ASC 606 says, look, I

don't care about the bill. I want to look at the original contract. .....................................................................................................................................................................................................................................................................

Q

Yeah. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A And you need a whole rules-based system. And so gosh, you did this contract, but they had a little condition on it,

well, that screws up revenue, right. You can't just make it simple. I'm built for it and that will be recognized over

the time periods that I built for it, right. So the complexity just went up a factor of 10. .....................................................................................................................................................................................................................................................................





Q

That's really interesting. Okay. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A And so we were on track saying, gosh, we had a light revenue, billings-based revenue recognition module, and

we weren't going to be able to hit all the dates, that ASC 606 needed. And so we have the set of great partners.

We talked to all the partners and this company, Leeyo, clearly had the best technology and so we absorbed them

in.

First year, we left them alone because the companies, our customers, really need to hit the ASC 606 deadline.

But after that, okay, look, obviously, we brought you – to merge these two products together, but again, the

complexities of all these rules and mapping, what happens in building the revenue, it was harder than we thought,

but once we figured it out, it was pretty straight forward to do, but we took a long turn and that's what we talked

about last year, right, so we had sold a set of customers on making sure the integration works and turned out

hindsight to be about a six-month delay there and so we're deploying all the customers we sold now and so the

last couple of earnings calls we did an update the set of customers I think like LivePerson and other companies

that are deploying live on the system, so we feel good. .....................................................................................................................................................................................................................................................................

Q

Yeah. All right, great. So the takeaway on that that I didn't realize before is the difference, the real change was

doing something [indiscernible] (00:24:19) do it off the invoicing, taking a look at the actual contract. .....................................................................................................................................................................................................................................................................


Q

That's the – that increased the complexity terrifically. .....................................................................................................................................................................................................................................................................

Tien Tzuo Founder, Chief Executive Officer & Director, Zuora, Inc. A Yeah. Because... .....................................................................................................................................................................................................................................................................

Q

And everyone's got to deal with that. .....................................................................................................................................................................................................................................................................






[indiscernible] (00:24:29) comes in and says, give me five more seats for sales force, it sounds easy, right, and

the product model you shipped it, you invoiced it, you recognize it and this model is like okay, it's in the context of

a contract that has like seven amendments before it and one of them had a little condition, right, that affects

revenue recognition or another one has a little condition that says okay, well, you have subscription revenue and

professional services revenue, but the way you're doing it, I want you to bundle that together and reallocate. And

so it's super, super complex, awesome .....................................................................................................................................................................................................................................................................


All right, Tien. Thank you so much. It's great having you here. I really appreciate it. .....................................................................................................................................................................................................................................................................


Yeah. Absolutely.

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25 -Feb -2020 Zuora, Inc. · 2/25/2020 · billion, $20 billion $50 billion and they are doing the digital transformation project and this part of their project they're realizing