Q3 2022 Zuora Inc Earnings Call

Good afternoon, and welcome to <unk> third quarter of fiscal 2022 earnings Conference call.

Speaker 1: Good afternoon, and welcome to Zawahra's third quarter of fiscal 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session.

Speaker 1: If you would like to ask a question during this time, please press star followed by the number one on your telephone keypad. To withdraw your question, again, press star one. Thank you. With that, I would like to turn the call over to Luana Wolk, Head of Investor Relations, for introductory remarks.

If you would like to ask a question. During this time. Please press star followed by the number one on your telephone keypad.

Withdraw you question again press Star one thank you.

With that I would like to turn the call over to we want to walk head of Investor relations for introductory remarks.

Thank you good afternoon, and welcome to the worst third quarter fiscal year 2022 earnings conference call.

Speaker 2: Thank you. Good afternoon and welcome to Zora's 3rd Quarter Fiscal Year 2022 Earnings Conference Call. Joining me today are Tin Zou, Zora's Founder and Chief Executive Officer, and Todd McElhatton, Zora's Chief Financial Officer. Robbie Trauber, our Chief Revenue Officer, will also be joining us for the Q&A session.

Joining me today are teens, though doors, founder and Chief Executive Officer, and Todd Mcelhatton, North Chief Financial Officer.

Ravi <unk>, our Chief revenue Officer will also be joining us for the Q&A session.

The purpose of today's call is for US to review, our third quarter results and provide our financial outlook for the upcoming fourth quarter and full year fiscal 2022.

Speaker 2: The purpose of today's call is for us to review our third quarter results and provide our financial outlook for the upcoming fourth quarter and full year fiscal 2022.

Speaker 2: We will also provide a preliminary outlook into fiscal year 2023.

We will also provide a preliminary outlook into fiscal year 2023.

Some of our discussions and responses today will include forward looking statements. So as a reminder, our actual results could differ materially due to several factors.

Speaker 2: Some of our discussions and responses today will include forward-looking statements. So as a reminder, our actual results could differ materially due to several factors.

You can find information regarding those risk factors in the earnings release, we issued today and our most recent filings with the SEC and finally, we'll be referring to several non-GAAP financial metrics and reconciliations to related GAAP measures are included in our earnings release.

Speaker 2: You can find information regarding those risk factors in the earnings release we issued today and our most recent filings with the SEC. And finally, we'll be referring to several non-GAAP financial metrics and reconciliations to related GAAP measures are included in our earnings release.

For a copy of our earnings release links to the SEC filings a replay of today's call or to learn more about Dora. Please visit our investor Relations website at Investor <unk> War Dot Com now I'd like to trying to call over to team.

Thank you Walter and thank you everyone for joining US welcome to <unk> third quarter fiscal 2022 earnings call.

Speaker 3: Thank you, Luana, and thank you, everyone, for joining us. Welcome to Zora's third quarter fiscal 2022 earnings call.

The headline is we delivered yet another strong quarter, we exceeded guidance across our key financial metrics, including total revenue subscription revenue and non-GAAP loss from operations. This quarter, we delivered a dollar based retention rate of 110% that's up.

Speaker 3: The headline is, we delivered yet another strong quarter. We exceeded guidance across our key financial metrics, including total revenue, subscription revenue, and non-GAAP loss from operation.

Speaker 3: This quarter, we delivered a dollar-based retention rate of 110 percent. That's up from 108 percent last quarter and 99 percent last year.

From 108% last quarter and 99% last year.

Speaker 3: And this is the highest level that dollar-based retention rate has been over the last 10 quarters.

This is the highest level the dollar based retention rate has been over the last 10 quarters.

This quarter our <unk>.

Speaker 3: This quarter, our ARR growth rate continued to rise, closing the quarter at 19%, up from 12% growth this time last year.

Our growth rate continued to rise closing the quarter at 19% up from 12% growth. This time last year.

This quarter, we continued to innovate our new product introductions continue to generate strong customer interest powering the highest upsell quarter in <unk> history.

Speaker 3: This quarter, we continue to innovate. Our new product introductions continue to generate strong customer interest, powering the highest upsell quarter in Zorus history.

This quarter, we continued to deliver on the goals that we set out at the beginning of the year that we shared with you at Investor Day back in April.

Speaker 3: This quarter, we continued to deliver on the goals that we set out at the beginning of the year that we shared with you at Investor Day back in April . I'd like to do a shout out to all the CEOs around the world. I am incredibly proud of our team and our continued focus and execution.

I'd like to do a shout out to all the Ceos around the world I am incredibly proud of our team and our continued focus and execution.

Speaker 3: Now, let me add some more color to the quarter in three specific areas.

Let me add some more color to the quarter in three specific areas.

First the continued evolution and growth that we are seeing in our market.

Speaker 3: First, the continued evolution and growth that we are seeing in our market. Next, this quarter's exciting new developments in our product portfolio. And finally, an update on the progress that we're making with our go-to-market strategy.

This quarter's exciting new developments in our product portfolio and finally, an update on the progress that we're making with our go to market strategy.

Let's start with the market.

You've heard me say this but it's worth repeating last year companies woke up to the power of the subscription economy.

Speaker 3: You've heard me say this, but it's worth repeating. Last year, companies woke up to the power of the subscription economy.

Initiatives across more and more sectors recognize the need to shift to digital service models.

Speaker 3: Businesses across more and more sectors recognize the need to shift to digital service models.

We continue to believe that this shift is what is powering our momentum today, So where continues to be the go to subscription management solution for both innovative disruptors and large enterprise incumbents like these.

Speaker 3: We continue to believe that this shift is what is powering our momentum today. So it continues to be the go-to subscription management solution for both innovative disruptors and large enterprise incumbents alike.

These companies are coming to us for the breadth of our capabilities the scale of our platform and the expertise that only we are able to bring to help guide them on their journey into the future.

Speaker 3: These companies are coming to us for the breadth of our capabilities, the scale of our platform, and the expertise that only we are able to bring to help guide them on their journey into the future.

Let's look at Disruptors, you've heard us talk about hyper growth companies.

Speaker 3: Let's look at disruptors. You've heard us talk about hyper-growth companies.

<unk> zone vintage were clear.

Speaker 3: like The Zone, Vivint, or Clear. We're managing millions of subscribers on our platform.

We're managing millions of subscribers on our platform.

This quarter, we continued to bring on new fast scaling disruptors.

Speaker 3: This quarter, we continue to bring on new, fast-scaling disruptions.

Speaker 3: For example, we brought on an online education platform that helps people learn from world-famous experts. With over 2 million subscribers, this disruptor came to Zora for a billing and revenue recognition platform that they are confident will support their continued scale for years to come.

For example, we brought on an online education platform that helps people learn from world famous experts with over 2 million subscribers. This disruptor came to Saar for a billing and revenue recognition platform that they are confident will support the continued scale for years to come.

Our existing Disruptors of course are also continuing to scale in fact in this quarter, a leading business communications platform used by millions of developers around the world expanded its work with sort of power and additional business unit. After a recent acquisition as they continue to grow Saar of billing and collect will enable this new volume and scale.

Speaker 3: Our existing disruptors, of course, are also continuing to scale. In fact, this quarter, a leading business communications platform used by millions of developers around the world, expanded its work with Zora to power an additional business unit after a recent acquisition. As they continue to grow, Zora billing and collect will enable this new volume and scale.

On the incumbent side, you've heard us talk about dominant brands like Honeywell, and caterpillar, who come to us or the gain the agility they need to innovate and compete in the new digital economy.

Speaker 3: On the incumbent side, you've heard us talk about dominant brands like Honeywell and Caterpillar who come to Zora to gain the agility they need to innovate and compete in the new digital economy.

Speaker 3: This quarter, we added another Fortune 500 world leader in agriculture and construction products to that list. Today, this company has seen incredible growth as they are no longer just manufacturing and selling products. Today, they also sell a subscription-based service that enables their customers to manage their equipment portfolios more effectively.

This quarter, we added another fortune 500 world leader in agriculture, and construction products to that list. Today. This company has seen incredible growth as there are no longer just manufacturing and selling products today. They also sell a subscription based service that enables their customers to manage their equipment portfolios.

More effectively.

Speaker 3: By modernizing their billing with Zora, they're better positioned to implement new modernization strategies to power this new, exciting area of growth.

Modernizing their billing with Zara, they're better positioned to implement new monetization strategies to power this new exciting area of growth.

Now some of these of course are long term bets.

Speaker 3: But we continue to sow the seeds that will power our growth for years to come.

We continue to sow the seeds that will power our growth for years to come.

As an example, automotive you've heard us say that we power eight of the top 10 auto companies, including companies like General Motors Ford and Toyota.

Speaker 3: As an example, automotive. You've heard of SAFE, that we power eight of the top ten auto companies, including companies like General Motors, Ford, and Toyota.

And in recent months, you've heard many of them announced growth target for these new digital services in.

Speaker 3: And in recent months, you've heard many of them announce a growth target for these new digital services.

Speaker 3: In fact, these digital services are forecasted to generate $86 billion by 2025 from in-vehicle payments.

In fact, these digital services are forecasted to generate $86 billion by 2025 from in vehicle payments.

Disruptors incumbents todays leaders and tomorrows, we focus on the best companies in the subscription economy, we power the growth of their new customer centric business models and you can see that growth and the continued increase of our transaction volume that flows through our system in Q3 alone we handled 19.

Speaker 3: Disruptors, incumbents, today's leaders, and tomorrows. We focus on the best companies in the subscription economy. We power the growth of their new customer-centric business models. And you can see that growth in the continued increase of our transaction volume that flows through our system. In Q3 alone, we handled $19 billion in usage volume, representing a year-over-year growth rate of 28%.

<unk> billion dollars and usage volume, representing a year over year growth rate of 28%.

Shifting our product.

Speaker 3: Shifting to product, the last few years have been an exciting time for Zora's technology team. We've transformed our core technology stack into a modern microservices platform.

The last few years have been an exciting time for <unk> technology team, we've transformed our core technology stack into a modern micro services platform.

Just last month, we shifted 100% into the cloud and play to shutdown, our 14 year old data center in Q4 and expect this to increase our uptime, our scalability and our long term gross margin expansion.

Speaker 3: Just last month, we shifted 100% into the cloud and plan to shut down our 14-year-old data center in Q4 and expect this to increase our uptime, our scalability, and our long-term gross margin expansion.

Speaker 3: Under our Chief Product and Technology Officer, Sree Srinivasan, we've also increased our engineering capacity by 40% since the start of the fiscal year.

Under our chief product and Technology Officer, Sri Srinivasan, We've also increased our engineering capacity by 40% since the start of the fiscal year.

All of this is propelling our innovation many of which we announced this quarter. This.

Speaker 3: Now, all of this is propelling our innovation, many of which we announced this quarter. This quarter we announced an entirely revamped set of APIs and SDKs that enable our customers to launch with Zora up to five times faster and reduce their coding hours by up to 80%.

This quarter, we announced entirely revamped set of Apis and Sdk's enable our customers to launch with <unk> up to five times faster and reduce their coding hours by up to 80%.

Speaker 3: We launched unified monetization and all new set of capabilities let our companies to manage subscriptions as well as product offerings on our platform. More and more, you're going to hear a new mantra from us. Subscription first.

We launched unified monetization, an all new set of capabilities, let all companies to manage subscriptions as well as product offerings on our platform more and more you're going to hear a new mantra from us subscription first.

But not subscription only.

This quarter, we launched <unk> X a new version of our <unk> solution that lets sales teams work up to 35% faster.

Speaker 3: This quarter, we launched CPQx, a new version of our CPQ solution that lets sales teams work up to 35% faster.

But this quarter I really want to talk about zero revenue or product that helps companies automate the complexities of their revenue recognition process in real time.

Speaker 3: But this quarter, I really want to talk about Zora Revenue, our product that helps companies automate the complexities of their revenue recognition process in real time.

Speaker 3: We have now had three quarters of triple-digit top-line growth for Zora Revenue and its average ACV has nearly doubled in size from just one year ago. In fact, this past quarter, Braze, a customer engagement platform for multi-channel marketing, successfully went live on Zora Revenue.

We have now had three quarters of triple digit topline growth preserve revenue and its average ACB has nearly doubled in size from just one year ago.

In fact, this past quarter braze, the customer engagement platform multichannel marketing successfully went live on zero revenue.

This launch was a key milestone in the IPO journey as they continue to simplify and maintain the revenue reporting.

Speaker 3: This launch was a key milestone in their IPO journey as they continue to simplify and maintain their revenue reporting.

Speaker 3: And today, finally, I have some other news to share. This is a particularly exciting announcement for me because I was part of this organization in the very early days. This quarter, I'm pleased to say that the biggest SaaS company in the world, none other than salesforce.com has signed a multi-year renewal with us to automate all of their global revenue recognition with Zora Revenue.

And today finally.

Some other news to share.

This is a particularly exciting announcement for me because I was part of this organization and the very early days.

This quarter I'm pleased to say that the biggest SaaS company in the world.

None other than Salesforce Dot Com has signed a multi year renewal with us to automate all of their global revenue recognition with zero revenue.

Finally, let's take a look at go to market now.

Speaker 3: Finally, let's take a look at go-to-market. Now, two years ago, we set out to transform the way we sell to the biggest enterprises in the world. We made a deliberate decision to move upmarket.

Now two years ago, we set out to transform the way we sell to the biggest enterprises in the world. We made a deliberate decision to move upmarket.

And in Q3, which you saw is that that effort continues to pay off in addition to Salesforce Dot com, we continue to sign fantastic, new and upsell deals such as Hitachi and Toshiba.

Speaker 3: Our number of customers with ACV at or above $100,000 increased by 26 last quarter. This customer cohort now constitutes 94% of our business.

Our number of customers with ACB at or above $100000 increased by 26 last quarter. This customer cohort now constitutes 94% of our business.

Speaker 3: This is also leading to larger deal sizes and greater customer lifetime value.

<unk> is also leading to larger deal sizes and greater customer lifetime value.

This past quarter, we signed 10 deals with ACB at or over $500000, including two deals over $1 million.

Speaker 3: This past quarter, we signed 10 deals with ACB at or over $500,000, including two deals over $1 million.

Sure.

Our strategy to focus on growth within the enterprise segment of the market is working.

Speaker 3: Our strategy to focus and grow within the enterprise segment of the market is working.

Finally.

The investments we've made in our broader ecosystem of system integrators and strategic partners continue to show results. Let me give you a few examples we now have over 200 globally certified consultants within our Si partners versus just 52 a year ago.

Speaker 3: The investments we've made in our broader ecosystem of system integrators and strategic partners continue to show results. Let me give you a few examples. We now have over 200 globally certified consultants within our SI partners versus just 52 a year ago.

Over 40% of customer go lives in the quarter and bought a system integration partner.

Speaker 3: Over 40% of customer go-lives in the quarter involve a system integration partner.

Finally on a dollar basis bookings from ESI influence deals in Q3 grew by over 130% year over year.

Speaker 3: Finally, on a dollar basis, bookings from SI-influenced deals in Q3 grew by over 130% year over year.

Beyond our Si partners. We're also starting to expand our ecosystem of strategic technology partners. Now you may have seen early in Q3, we announced an exciting collaboration with Microsoft will.

Speaker 3: Beyond our SI partners, we're also starting to expand our ecosystem of strategic technology partners.

Speaker 3: Now you may have seen early in Q3, we announced an exciting collaboration with Microsoft.

We will be working to integrate our products into Microsoft dynamics. So users of that product can also use zora.

Speaker 3: We'll be working to integrate our products into Microsoft Dynamics so users of that product can also use Zora. We'll also be taking advantage of Microsoft's Azure platform as well as Power BI to drive more innovation and value within our own products for our customers.

We will also be taken advantage of Microsoft's Azure platform as well as power bi to drive more innovation and value within our own products for our customers.

Over time, we expect this will open up the opportunity to conduct further into the Microsoft ecosystem.

Speaker 3: Over time, we expect this will open up the opportunity to connect further into the Microsoft ecosystem as potentially a new distribution channel.

Potentially a new distribution channel is.

Speaker 3: It's still early days, but we are very excited about the potential of this collaboration.

Still early days, but we are very excited about the potential of this collaboration.

To wrap it up I want to thank again, our Ceos for another very strong quarter, the focus and the alignment that I am seeing across Zara is truly remarkable.

Speaker 3: To wrap it up, I want to thank again our ZEOs for another very strong quarter. The focus and the alignment that I am seeing across Zora is truly remarkable.

Speaker 3: our market continues to expand and companies are turning to us to guide their transformation. Our innovation engine is accelerating, creating further separation between us and legacy ERP vendors. And our upmarket strategy and go-to-market operations that we put in place two years ago continue to deliver results.

Our market continues to expand and companies are turning to us to guide their transformation. Our innovation engine is accelerating creating further separation between us and legacy ERP vendors and our up market strategy and go to market operation that we put in place two years ago continue to deliver results.

<unk>.

Now I'll turn the call over to Todd to review our financials.

Speaker 3: Now I'll turn the call over to Todd to review our financials.

Todd.

Thank you Jane and thanks, everyone for joining today's call.

Speaker 4: Thank you, Jane, and thanks, everyone, for joining today's call. I want to start by acknowledging the exceptional work that our employees have done since I joined Zora 18 months ago.

I want to start by acknowledging the exceptional work that our employees have done since I joined <unk> 18 months ago.

Speaker 4: I've seen tremendous focus on our product and go-to-market strategy and continuous execution. We've rallied together to overcome the pandemic challenges, and I have great pride in being a CEO .

I have seen tremendous focus on our product and go to market strategy and continuous execution, we've rallied together to overcome the pandemic challenges and I have great pride in being a CEO.

Now, let's review the results for Q3, our guidance for Q4, and our preliminary outlook for fiscal 2023.

Speaker 4: Now let's review the results for Q3, our guidance for Q4, and our preliminary outlook for fiscal 2023.

Speaker 4: Our discussion includes non-GAAP financial measures.

Our discussion includes non-GAAP financial measures.

You can find the details in today's press release, which includes a reconciliation table of selected GAAP to non-GAAP measures that reflects the adjustments made to both our current and prior year results.

Q3 was another strong quarter across our key financial metrics, we again exceeded expectations in subscription revenue total revenue and non-GAAP operating loss.

Speaker 4: Q3 was another strong quarter across our key financial metrics.

Speaker 4: we again exceeded expectations of subscription revenue, total revenue, and non-GAAP operating loss.

Speaker 4: Q3 is another proof point that the strategy we laid out at Investor Day back in April is working.

Q3 is another proof point that the strategy, we laid out at Investor day back in April is working.

Speaker 4: This past quarter, we closed several multi-product deals, had solid growth in the enterprise space with both strong go-to-market execution and great contribution from our SI partners.

This past quarter, we closed several multi product deals had solid growth in the enterprise space with both strong go to market execution and great contribution from our Si partners.

Let's dive into our top line performance.

Total revenue was $89 2 million in the third quarter up 16% year over year subscription revenue was $73 $8 million up 19% year over year, driven by overall improvement in our go to market execution.

Speaker 4: Total revenue was $89.2 million in the third quarter, up 16% year over year. Subscription revenue was $73.8 million, up 19% year over year, driven by overall improvement in our go-to-market execution.

Subscription revenue represented 83% of total revenue.

Speaker 4: Subscription revenue represented 83% of total revenue.

Speaker 4: professional services was $15.5 million, flat year over year as we continue to shift services to our system integrator partners.

Professional services was $15 $5 million flat year over year as we continue to ship services to our system integrator partners.

As a result, and our success of driving professional services to our Si partners non-GAAP blended gross margin was 66% an improvement of over 300 basis points year over year.

Speaker 4: As a result in our success of driving professional services to our SI partners, non-GAAP blended gross margin was 66%, an improvement of over 300 basis points year over year. non-GAAP subscription margin was 79%, 199 basis point improvement over the prior year. As a reminder, this includes the additional costs associated with our move to the public cloud.

Non-GAAP subscription margin was 79% 199 basis point improvement over the prior year. As a reminder, this includes the additional cost associated with our move to the public cloud.

Non-GAAP professional services gross margin was negative 1% driven by investments in training our partners. Our objective is to run services at or near breakeven.

Speaker 4: non-GAAP professional services gross margin was negative 1%, driven by investments in training our partners. Our objective is to run services at or near breakeven.

Non-GAAP operating loss was negative $1 $2 million in the quarter compared to an operating income of $1 2 million in the prior year. This was driven by our planned investments in sales.

Speaker 4: non-GAAP operating loss was negative $1.2 million in the quarter compared to an operating income of $0.2 million in the prior year. This was driven by our planned investments in sales, marketing, and R&D. This resulted in a non-GAAP operating margin of negative 1%, a decrease from breakeven in Q3 of last year.

<unk> in R&D. This resulted in a non-GAAP operating margin of negative 1% a decrease from breakeven in Q3 of last year.

Our fully diluted share count at the end of the quarter was approximately 144 million shares using the treasury stock method.

Speaker 4: Our fully diluted share count at the end of the quarter was approximately 144 million shares using the treasury stock method.

Now let me take you through some of the key metrics for the quarter.

Speaker 4: Now, let me take you through some of the key metrics for the quarter.

In Q3 expansion across our customer base drove our dollar based retention rate to 110% an impressive 11 point year over year improvement.

Speaker 4: In Q3, expansion across our customer base drove our dollar-based retention rate to 110%, an impressive 11-point year-over-year improvement.

Speaker 4: customers spending at or over $100,000 in ACV, close the quarter at 720, an increase of 26 sequentially. This represents 94% of our business.

Customer spending at or over $100000 ACB closed the quarter at 720, an increase of 26 sequentially. This represents 94% of our business we.

We continue to have success in moving upmarket, we've closed 10 deals with ACB of a half a million dollars or above versus six a year ago. Two of those deals had HCV greater than $1 million, including the transaction with Salesforce Dot com that Tim mentioned earlier.

Speaker 4: We continue to have success in moving up market. We've closed 10 deals with ACV of a half a million dollars or above versus six a year ago. Two of those deals had ACV greater than one million dollars, including the transaction with Salesforce.com that Tien mentioned earlier.

This was also evidenced in our total remaining performance obligations or <unk> grew.

Speaker 4: This is also evident in our Total Remaining Performance Obligations, or RPO, growing 31% year-over-year, and our non-current RPO, which grew 50% year-over-year.

<unk> growing 31% year over year, and our non current RPI, which grew 50% year over year.

Speaker 4: This is a testament to our strong go-to-market motion and success with our system integrator partners. As Tim noted, we've now surpassed 200 globally certified consultants, which has doubled since investor day.

This is a testament to our strong go to market motion and success with our system integrator partners. As gene noted we have now surpassed 200 globally certified consultants, which has doubled since investor day.

Turning to transaction volume our systems process at $19 billion of volume in the quarter, representing 28% growth year over year as.

Speaker 4: Turning to transaction volume, our systems process $19 billion of volume in the quarter, representing 28% growth year over year. As you recall, while process transaction volume is helpful in understanding how much of our customers' business is running on our platform, it does not track linearly with quarterly revenue as customers gain efficiencies as they scale. Now, looking

As you'll recall wide process transaction volume is helpful. In understanding how much of our customers' business is running on our platform. It does not track linearly with quarterly revenue as customers gain efficiencies as they scale.

Now looking at <unk> and free cash flow.

In Q3, <unk> grew 19% year over year.

Speaker 4: In Q3, our ARR grew 19% year over year, two points ahead of our 17% ARR objective for this fiscal year. This was partially driven by our best upsell quarter ever. We continue to focus on our objective to reach ARR growth of 25 to 30% by fiscal 2025.

Two points ahead of our 17% our objective for this fiscal year. This was partially driven by our best upsell quarter ever we continue to focus on our objective to reach a growth of 25% to 30% by fiscal 2025 free.

Free cash flow was negative $1 $7 million, which.

Speaker 4: Free cash flow was negative $1.7 million, which includes our accelerated investments to move into the public cloud. We continue to expect to be free cash flow positive for both Q4 and this fiscal year.

<unk>, our accelerated investments to move into the public cloud, we continue to expect to be free cash flow positive for both Q4 and this fiscal year.

Speaker 4: Total capex for the quarter was $2.3 million.

Total capex for the quarter was $2 3 million.

Turning to the balance sheet, we ended the quarter with $203 million in cash and cash equivalents, a $2 $4 million increase over the prior quarter.

Speaker 4: Turning to the balance sheet, we ended the quarter with $203 million in cash and cash equivalents, a $2.4 million increase over the prior quarter.

We feel good about the progress we've made over the past year and look forward to Q4 and fiscal 'twenty three so let's turn to our financial outlook.

Speaker 4: We feel good about the progress we've made over the past year and look forward to Q4 and fiscal 23. So let's turn to our financial outlook.

As noted on prior calls we continue to accelerate our investments in go to market and product development initiatives, while absorbing costs that were not in our run rate last year.

Speaker 4: As noted on prior calls, we continue to accelerate our investments in go-to-market and product development initiatives while absorbing costs that were not in our run rate last year. For the full year, we're

For the full year, we're raising our outlook. We currently expect total revenue of $345 million to $346 million subscription revenue of $285 five to $286 $5 million non-GAAP operating loss of 10 to 9 million.

Speaker 4: We currently expect total revenue of $345 to $346 million.

Speaker 4: Subscription revenue of $285.5 to $286.5 million.

Speaker 4: non-gap operating loss of $10 to $9 million.

Non-GAAP net loss per share of 11.

Speaker 4: non-GAAP net loss per share of $0.11 to $0.10 per share, assuming a weighted shares outstanding of approximately $124.3 million.

210 per share assuming a weighted shares outstanding of approximately $124 3 million.

For Q4, we currently expect total.

Speaker 4: Total revenue of $90 to $91 million. Subscription revenue of $75 to $76 million. non-GAAP operating loss of $2.5 to $1.5 million. non-GAAP net loss per share of $0.03 to $0.02 per share, assuming the weighted average share is outstanding, of approximately $127.4 million.

Total revenue of $90 million to $91 million.

Subscription revenue of $75 million to $76 million non-GAAP operating loss of $2 five to $1 $5 million non-GAAP net loss per share of <unk> to <unk> <unk> per share assuming a weighted average shares outstanding of approximately 127.

$4 million.

Looking ahead, while we have not finalized our fiscal 2023 planning cycle, we'd like to provide a preliminary outlook for next year, we remain confident in our execution Saar, a strong product portfolio and our leadership position.

Speaker 4: Looking ahead, while we've not finalized our fiscal 2023 planning cycle, we'd like to provide a preliminary outlook for next year. We remain confident in our execution, Zora's strong product portfolio, and our leadership position.

As always we'll update you on a regular cadence as we move through the year for fiscal 2023, we currently expect.

Total revenue of $401 million to $405 million.

Speaker 4: Total revenue of $401 to $405 million.

Speaker 4: Subscription revenue of $337 to $339 million. non-GAAP operating loss of negative $2 million to break even. For the year, we also expect a dollar-based retention rate of 112% or better, and ARR growth of 21%.

Subscription revenue of $337 million to $339 million non-GAAP operating loss of negative $2 million to breakeven for the year. We also expect our dollar based retention rate of 112% or better.

<unk> growth of 21% or better.

To close off I am very pleased with our performance in Q3, we continued to deliver strong execution. Upon the foundation, we laid out and are making progress towards <unk> long term objective.

Speaker 4: To close off, I'm very pleased with our performance in Q3. We continue to deliver strong execution upon the foundation we laid out, and are making progress towards Zora's long-term objective.

With that teen Robby and I are happy to take your questions and we'll turn it over to the operator.

Speaker 4: With that, team, Robbie and I are happy to take your questions, and we'll turn it over to the operator.

As a reminder, if you'd like to ask a question at this time. Please press star followed by the number one on your telephone keypad.

Speaker 1: As a reminder, if you would like to ask a question at this time, please press star followed by the number one on your telephone keypad. Your first question comes from Chad Bennett with Craig Hallam. Please go ahead.

Your first question comes from Chad Bennett with Craig Hallum. Please go ahead.

Great. Thanks for taking my questions guys.

Speaker 5: Great. Thanks for taking my questions, guys. Nice job on the quarter.

Nice job on the quarter.

So just and I'm not sure who this is for Tyler Rob Your teen I don't know, but just in terms of where we are evolution wise.

Speaker 5: So just, and I'm not sure who this is for, Todd or Robbie or Teen, I don't know, but just in terms of where we are evolution-wise on the whole kind of up-cell versus kind of down-cell and kind of working through the down-cells, and I assume we're...

On the whole.

Kind of upsell versus versus kind of down sell and kind of working through the down sells and I assume we're you know we're at the tail end of those in.

Speaker 5: You know, we're at the tail end of those and, you know, it was great to see the fiscal year 23 outlook. I didn't expect that, but it's great to see the acceleration, you know, on net expansion and ARR. So, just can you give me an update on kind of...

It was great to see the fiscal year 'twenty three outlook didn't expect that but it's great to see the Alex acceleration.

Net expansion and a IRR. So just can you give me an update on kind of where we are on on kind of the headwind there from the down sales in FY <unk>.

Speaker 5: where we are and i'm i'm kind of the head when they're from the down cells and in

That's behind Us.

Speaker 4: Hey, Chad, thanks a lot for the question. Todd here. So look.

Hey, Chad Thanks, a lot for the question Todd here, so long that DVR or a 110% that really puts us in an entirely different neighborhood and we're really pleased with that.

Speaker 4: The DBRR of 110%, that really puts us in an entirely different neighborhood, and we're really pleased with that. We're past the down cells. Last year we talked Q2, we've now lapped that for a full year, and so we feel that we are in the area of being able to accelerate our DBRR.

We're past the down cells last year, we talked in our Q2, we've now lapped that for a full year and so we feel that we are in the area.

Being able to accelerate our DVR or we had talked a long to our long term range is to be $1 12 to $1 15, and as I shared today.

Speaker 4: We had talked our long-term range was to be 112 to 115. And as I shared today, you know, our expectation is we'll be 112 plus next year. So again, we feel really good about our ability to continue to upsell.

Expectation is will be 112, plus next year. So again, we feel really good about our ability to continue to.

To upsell.

Speaker 5: about it and then uh... i think you indicated tied in and maybe team that that the this quarter was

Got it and then I think you indicated Todd and maybe team that that the this quarter was I think youre strongest upsell quarter in and I think you've had.

Speaker 5: your strongest upsell quarter and I think you've had a few of them in the last year to be honest with you. So it seems like the momentum is going away. In terms of...

A few of them in the last year to be honest with you.

So it seems like the momentum is going away.

In terms of.

Speaker 5: You know, if you rank order, I guess, if you want to look at it like that, what is really driving the upsells? You know, you've introduced a lot of product innovation over the last year, you know, whether it's the revenues module or it's CPQ. I mean, I know unified monetization is new, so it's probably more pipeline than bookings driven. What's really driving it from from, you know, kind of the upsell standpoint?

Can you rank order I guess, if you wanted to look at it like that what is really driving the Upsells you know you've introduced a lot of product innovation over the last year.

Whether it's the revenues module or its CP Q I mean, I know unified monetization is new so it's probably more pipeline and bookings driven what's really driving it.

From kind of the up sell standpoint.

Yes, sure I'll go ahead and feel that it's really across the board I think.

Speaker 3: Yeah, sure. I'll go ahead and feel that it's really across the board. I think

Speaker 3: I'll give you sort of three core reasons. One certainly is.

I'll give you sort of three core reasons, one certainly is the.

The restructuring of the sales organization that we talked about even going back to last year right. When it's more customer centric focus are the ones that we focus on long term relationships right and so the entire go to market model that Ravi has put in in Q3 is just yet another quarter of demonstration of that strategy is working the second really is the <unk>.

Speaker 3: the restructuring of the sales organization that we talked about, even going back to last year, right, when it's more customer-centric focus, the ones that focus on long-term relationships, right, it's the entire go-to-market model.

Speaker 3: that Robby has put in and Q3 is just yet another quarter of demonstration that that strategy is working. The second really is the innovation and so I would say there's been a pent up.

Innovation and so I would say there has been a pent up.

Speaker 3: potential in our innovation that we built, all the things that we built, and when you marry that with a resurgent sales organization that's focused on long-term customer success.

Potential in our innovation that we build all the things that we built and when you marry that with a resurgent sales organization is focused on long term customer success, that's what you're really seeing in the third thing I'd say is sometimes there is a misunderstanding of us as a replacement of legacy ERP, we're really attacking.

Speaker 6: That's what you're really seeing. And the third thing I'd say is, you know, sometimes there's a misunderstanding of us as, as a replacement of legacy ERP, we're really attacking an entirely new business model, right? That ERP systems don't really handle. And so I see this as an enormous amount of white space that we can go attack from an innovation standpoint. And, you know, whether that's revenue, whether that's collect, whether that's the platform capabilities.

An entirely new business model right that ERP systems don't really handle and so I see this as an enormous amount of white space that we can go attack from an innovation standpoint.

And whether that's revenue whether that's collect whether that's the platform capabilities. That's what we're really excited about right that the subscription economy is growing there's a new set of tools setup, the white space and we're really the clear leader billing the innovation and the solutions that are needed in this space.

Speaker 6: That's what we're really excited about, right? That the subscription economy is growing, there's a new set of tools, it sets up the white space, and we're really the clear leader building the innovation and the solutions that are needed in this space.

Got it alright, thanks, Marty I'd add Chad, it's really balanced on the upsell as <unk> said, the new products coming in our central sandbox revenue.

Speaker 4: It's really balanced on the upsell, as Steve said, the new products coming in with central sandbox, revenue, premium support, all those are really helping. Volume upsells as well. Yeah, and we continue to get the usage that comes through, so it's really nice and balanced where if you went back five or six quarters ago, we were heavily reliant on volume. So again, the innovation engine that's firing up, we're seeing nice take from the customers on that. Got it. Thank you.

Premium support all of those are really helping a volume of cells.

And we continue to get the usage that comes through so it's really nice and balanced where if you went back.

Five or six quarters ago, we were heavily reliant on volume. So again the innovation engine that is firing up and we're seeing nice take from our customers on that.

Got it thanks, so much nice job again.

Your next question comes from Joshua Reilly with Needham. Please go ahead.

Speaker 1: Your next question comes from Joshua Riley with Needham. Please go ahead.

Hey, guys. Thanks for taking my questions nice job on the quarter here.

Speaker 7: Hey, guys, thanks for taking my questions. Nice job on the quarter here. So maybe digging in a little bit more on the on the AR growth and what was driving that.

Maybe digging in a little bit more on the on the AOR growth and what was driving that.

How much of the improvement would you say here is from the improving macro economy and demand demand environment versus the internal changes that you've made to the sales organization and product over the last year.

Speaker 7: How much of the improvement would you say here is from the improving macroeconomy and demand environments versus the internal changes that you've made to the sales organization and product over the last year?

I would say, it's both but I probably.

Speaker 6: I would say it's both, but I probably, on a short-term basis, I would credit the execution and the changes that we're doing. On a long-term basis, I would credit the macroeconomy.

The short term basis, I would credit the execution and the changes that we're doing in a long term basis I would credit the macro economy.

Uh huh.

There was really a significant change last year in terms of company's appreciation of the subscription based business model, but I would say that the translation of that intend to net direction into demand for US does take time, it's not like like Theyre, just taking compute power and shifting it to the cloud overnight. This requires.

Speaker 6: You know, there was really a significant change last year in terms of companies appreciation of the subscription based business model.

Speaker 6: But I would say that, you know, the translation of that intent and that direction into demand for us does take time.

Speaker 6: It's not like they're just taking compute power and shifting it to the cloud overnight. This requires companies to build new innovations, launch new capabilities, which they're doing on us.

<unk> two two to build new innovations launched new capabilities, which youre doing on us.

Speaker 6: And so I think the short-term improvement that you're seeing is really on our execution, but the long-term macro trends are also in our favor as well.

So I think the short term improvements that youre seeing is really on execution, but the long term macro trends are also in our favor as well.

Okay, Great. That's Super helpful. And then the net 26 customers added with ACD over 100 K.

Speaker 7: Okay, great, that's super helpful. And then the net 26 customers added with ATV over 100K, that's a really strong number on both a seasonal and absolute basis. If you look at the profile of these customers though, how should we think about the mix of, is it net new larger customers that are being added, or is it existing customers that you're expanding to additional products? Is there balance there, or how should we think about that?

Really strong number.

And both our seasonal and absolute basis. If you look at the profile of these customers, though how should we think about the mix or is it net new larger customers that are being added or is it existing customers that you are expanding to additional products as their balance there how should we think about that mix.

Youre going to see a balance.

Speaker 6: You're going to see a balance and Robbie, feel free to chime in here. But but, you know, we talk about disruptors and we talk about incumbents. A lot of times we do still grab disruptors and bring them on board when they're smaller companies. Right. You talk about how we power Zoom, but we started working with them when there were 30 million dollars. We started working with Fox.

Rob Please feel free to chime in here, but we talked about Disruptors and we talk about incumbents.

Lot of times, we do still grab the disruptors and bring them onboard with smaller companies, where you talk about how we power zoom, but we started working with them. When there were $30 million, we started working with box Ah Congrats the iron over they're having a great data yesterday, but we started working with them when they were $3 million ratio those deals tend to start small and they're not going to grow as those.

Speaker 6: Congrats to Aaron over there having a great day yesterday, but we started working with them when they were $3 million, right? So those deals tend to start small and are gonna grow as those companies have success. But if you look at incumbents, $100,000 is a small deal to many of these companies and oftentimes will start at a higher point too. And so you're really gonna see both effects in that 26 number.

Companies have success, but if you look at incumbents.

$100000 of the small deal too many of these companies and oftentimes will start at a higher point too and so you're really going to see both effects in that 26 number.

Okay, maybe I can I sneak sneak one more in there.

Speaker 8: Okay, maybe, can I sneak one more in there? Oh, sorry, did I cut you off there? I don't know if there's... I was just gonna say, I mean, again, the mix was the right, it's what we've expected, it's what we've sort of seen going forward as well. So, and I think Dean responded to it, but it's as we expected, as we've seen going forward.

Sorry did I cut you off there at Arthur.

Again, the mix was the right is what we've expected and that's what we've seen going forward as well so not maintaining seamless monitor but it's as we expected as we're seeing going forward.

Okay, Great and then maybe just sneak one last quick one in there on ERP migrations I know you said that that's not necessarily what you're doing but how much of a tailwind has that been here in the second half and how much more do you think that can accelerate into the next fiscal year.

Speaker 7: OK, great. And then maybe just sneak one last quick one in there. On ERP migrations, I know you said that that's not necessarily key to what you're doing, but how much of a tailwind has that been here in the second half? And how much more do you think that can accelerate into the next fiscal year?

Speaker 6: Yeah, ERP is definitely one of the key replacement engines, but the subtlety is, we're not replacing the existing financial system with another financial system. We're really powering new business models that ERP systems were never built to power. So a company like Caterpillar will keep their ERP systems for their core business, which is selling tractors and excavators, but they're fast-growing digital businesses, subscription businesses, CatConnect.

Yes.

ERP is definitely one of the key.

Replacement edges, but the subtlety is.

We're not like I say, we're not replacing the existing financial system with another financial system, We're really powering new business models that ERP systems whenever it built to power. So a company like caterpillar will keep their ERP systems for their core business, which is.

Youre selling tractors and excavators for their fast growing digital businesses subscription business is cat connect that's the business that they're putting on US same with GM right. We're not touching the car sales specifically, but we're powering.

Speaker 6: That's the business that they're putting on us. Same with GM, right? We're not touching the car sales specifically, but we're powering the billions of dollars of connected car sales that they have today and they expect to grow in the coming years.

The billions of dollars of connected car sales that they have today and they expect to grow in the coming years.

Alright, Zain as well I mean, it's part of our play as part of the digital transformation.

Speaker 8: I've seen as well, I mean, it's part of the, I'd say it's part of the digital transformation. You know, we're seeing that a lot also with our system integrators. This is a really, really good direction that we're seeing. I think many are seeing that market, but we're part of that piece to it as well. So just to encapsulate what Tim was saying.

We're saying that a lot also with our system integrators. This is a really really good direction that we're seeing I think many are seeing in our market, but we are part of that piece of it as well.

Mr <unk> Zhang.

Awesome. Thanks, guys.

Speaker 9: Awesome, thanks guys. Thank you. Thanks, Josh.

Thanks, Josh.

Your next question comes from Brent Thill with Jefferies. Please go ahead.

Speaker 1: Your next question comes from Brent Thill with Jeff Rees. Please go ahead.

Hey, guys.

Speaker 10: Hey guys, this is Love Suda on for Brent Hill. Congrats on a great quarter. Great to see the momentum that you guys are seeing. Maybe the first question I had was, you know, follow up to Josh's question before on the, you know, the net new ads that you saw in this quarter, over 100K. I guess, you know, Tien, are you seeing more adoption outside of the four verticals that?

On for Brent Thill.

Congrats on a great quarter.

Great. Thanks momentum that you guys are seeing.

Maybe the first question I had was a follow up on Jonathan's question before.

On the net new adds that you saw in this quarter over 100 K.

Are you seeing more adoption outside of the core verticals that <unk>.

Laura.

Speaker 10: you know, Zora has historically been strong in. Are you seeing new verticals kind of adopting the Zora solution, if you will?

They've been strong and are you seeing new verticals.

Adopting <unk>.

I'd say, our three core verticals there is still a core verticals those verticals are high tech right Manny.

Speaker 6: I'd say our three core verticals are still our core verticals. Those verticals are high-tech, manufacturing, and media. But you're absolutely right. We continue to see strong interest in new verticals. We've talked about financial services in the past. We continue to be really, really excited about it.

Manufacturing in media.

But you're absolutely right. We continue to see strong interest in new verticals, we've talked about financial services in the past we continue to be really really excited about it this year. It feels like the retail sector. If you read some of the news is starting to get their act together and realize that the future is not about stores versus e-commerce, but it's about customers first meeting customers, where they are both online.

Speaker 6: It sure feels like the retail sector, if you read some of the news, is starting to get their act together and realize that the future is not about stores versus e-commerce, but it's about customers first.

Speaker 6: meeting customers where they are both online and in store.

And in store.

Speaker 6: But I would say right now, our three core verticals still remain what they are, but we have a healthy, healthy interest in outside of those three verticals as well. And the big picture, love, you know this, right? You know that we believe that really every industry, every company and industry will be shifting to this subscription economy. It's just a matter of time, and we need to make sure we're in a position to help them with that transformation.

And so so but I would say right now.

Our three core vertical still remember what they are but we have a healthy healthy interest in outside of those three verticals as well and the Big picture Love You know this way you know we we believe that really every industry every company in the industry, we will be shifting to the subscription economy. It's just a matter of time and we need to make sure. We're in a position to help them with that transformation.

Got it and maybe one quick one for Todd.

Speaker 10: Got it. Maybe one quick one for Todd. The guide for next year is very encouraging. For subscription revenue, I'm guessing it implies 18%. At the same time, you're guiding to ARR growth of 21% or more. How should we think of ARR growth and how that would trend towards subscription growth over the long term?

For next year is very encouraging.

For subscription revenue.

Implies 18%.

But at the same time, you're guiding to.

A growth of 21% or more so how should we think of.

Our growth and how that would trend towards subscription growth over the long term.

So I think.

Speaker 4: I think it would be the opposite, Love. You know, subscription revenue certainly lags ARR, which is why we've been reporting off of that. And so, you would expect subscription revenue to catch up to ARR, but Todd, I'll let you add some more color on that. Yeah, Love, we feel really good about the guidance that we're giving for next year. And what I would say to you is, just as Tien said,

Subscription revenue certainly lagged IRR, which is why we've been reporting off of that and so you.

You would expect subscription revenue to catch up to <unk>, but Todd I'll, let you add some more color on that yes love week are really good about the guidance that we're giving for next year and what I would say to you is that just as teams that way.

Speaker 4: We gave the metric of the ARR growth, and we've done, I think, really well with that. We started off last year, ended at 12% growth. Today, we reported at 19%. We said we'll be at 21%. That is the leading metric. Revenue is lagging. It lags by several quarters. And so, I feel like at this time.

We gave the metric of the AAR growth.

We've done I think really well with that we started off last year ended at 12% growth today. We reported at 19, we said we'll be at 21% that is the leading metric revenue is lagging lagged by several quarters and so I feel like at this time.

We've given you some really good guidance, it's early I want to be prudent and Mike. We've always said, we will continue to update you on a quarter by quarter basis.

Speaker 4: We've given you some really good guidance. It's early, I wanna be prudent. And like we've always said, we'll continue to update you on a quarter by quarter basis.

Speaker 11: The best subscription business is run off of ARR, so that's why we would point you at that number, obviously. And you know that. Yep, got it. Thank you, guys.

The best description business runoff of IRR. So that's why we were pointed at that number obviously.

Yeah got it thank you guys congrats.

Thanks, Rob.

Your next question comes from Andrew de Gasperi with Thornburg. Please go ahead.

Speaker 1: Your next question comes from Andrew DeGasperi with Bernenberg. Please go ahead.

Hi, everyone.

Speaker 10: Hi, everyone. This had one question maybe on the Microsoft announcement that you had a few weeks ago. Just wondering, besides the integration, I think you mentioned that you're looking forward to expanding the relationship. Should we think about that as maybe expanding like the business relationship on the go to market side? Can you just elaborate on that?

Had one question maybe on the Microsoft announcement.

The announcement that you had a few weeks ago, just wondering besides integration I think you've mentioned that you are looking forward to expanding our relationships should we think about that as maybe expanding the business relationship on the go to market side.

Can you just elaborate on that.

Well I think the big picture here is that we got to where we are today really figuring out a brand new market and in many ways going it alone in that marketplace and what you heard from us over the last 18 months is maybe 24 months is a big change in tone.

Speaker 6: Well, I think the big picture here is that, you know, we got to where we are today, really by figuring out a brand new market and in many ways, going it alone in that marketplace.

Speaker 6: And what you heard from us over the last 18 months is, maybe 24 months, is a big change in tone where we do believe that to get to where we can in this marketplace, you know, a billion dollars or more, part of that is really building and focusing on a healthy ecosystem. We started with the GSIs, right, since you hear us talking about our system integration partnerships, Accenture, Deloitte, PwC, EY, IBM, right, quarter over quarter progress on that.

We do believe that that to get to where we can in this marketplace $1 billion or more.

As part of that is really building and focusing on a healthy ecosystem. We started with the gsi's greater <unk> is talking about our system integration partnerships Accenture Deloitte Pwc y.

The IBM rate quarter over quarter progress on that and what we've really added to that it really is a secondary focus or a parallel focus on technology vendors and we've chosen to really start with Microsoft as as a place to start now that the in the technology vendor does require stronger integration and so what you are.

Speaker 6: What we really added to that really is a secondary focus or a parallel focus on technology vendors. And we've chosen to really start with.

Speaker 6: as a place to start. Now that, being a technology vendor, does require stronger integration.

Speaker 6: And so what you're seeing is the first phase of that partnership focus on technology integration. If we do our part, we do believe that should open up.

<unk> seen as the first phase of that partnership focused on technology integration. If we do our part we do believe that should open up.

Speaker 6: the Microsoft install base and potentially their distribution channel but I would say it's early days and right now we're focusing on step one which is the technology integration.

The Microsoft installed base and potentially their distribution channel, but I would say, it's early days and right now we're focusing on step one which is the technology integration.

That's helpful and then maybe TN.

Speaker 12: That's helpful. And then maybe, Tiana...

It's encouraging that you signed that renewed at Salesforce for revenue.

Speaker 12: It's encouraging that you signed the renewed sales force for revenue. That felt good. Yeah, I was wondering, you know, how was what was the dynamic around that if you can maybe elaborate a little bit? I know that they have a competing solution on billing and just curious to know, maybe some background on that.

That felt good under it.

Yes, I was wondering.

What was the dynamic around that if you can maybe elaborate a little bit I know that they have a competing solution on billing and just curious to know.

Maybe some background on that.

Well look at Salesforce dot to where it is because it's it certainly.

Speaker 3: Well look, Salesforce got to where it is because it's certainly, you know, the history of this company is, you know, I used to run the billing system at Salesforce, and so Salesforce really got to where it could be from

Yeah.

The history of this company is.

Used to run the billing system at Salesforce, and so salesforce really got to where it can be from really having no constraints on their ability to innovate on their business models and so when you look at the size the scale the global nature of what they have I would say that this was a competitive process.

Speaker 6: really having no constraints on their ability to innovate on their business model.

Speaker 6: And so when you look at the size, the scale, the global nature of what they have.

Speaker 6: I would say that this was a competitive process. I would say that they did look at the marketplace and did a full scan of possible solutions with close advisors outside the organization as well. And they came to the conclusion that our product was really the only one that can handle their size, scale, and needs. And so I'm pretty happy with the results. And it's great to be able to say that we power, really, the biggest company in the world.

I would say that they did look at the marketplace and did a full scan of possible solutions with close advisors outside the organization as well and they came to conclusion that our product was really the only one that can handle their size scale and needs and so I'm pretty happy with the results.

And it's great to be able to say that we power really the biggest company in the world.

Speaker 4: The other thing I would say, Andrew, is we feel really good. Deals like that are things that are helping the RPO grow. You know, we talked about it in the comments, 31% year over year, non-current growing 50%. So these larger deals, longer durations, are really helping us on the RPO.

I would say Andrew is we feel really good deals like that are things that are helping the RPI grow we talked about it in the comments, 31% year over year non current growing 50%. So these larger deals longer durations are really helping us on the IPO.

That's helpful. Thank you.

As a reminder, if you would like to ask a question at this time. Please press star followed by the number one on your telephone keypad.

Speaker 1: As a reminder, if you would like to ask a question at this time, please press star followed by the number one on your telephone key.

Speaker 1: When your next question comes from Joseph Zafi with Canaccord, please go ahead.

And your next question comes from Joseph <unk> with Canaccord. Please go ahead.

Hey, guys. Good afternoon, great results good to see the continued increasing momentum in the business, maybe just just kind of following up on that last comment.

Speaker 13: Hey, guys. Good afternoon. Great results. Good to see the continued increasing momentum in the business. Maybe just kind of following up on that last comment and, Todd, what you were saying on RPO versus billing versus ARR. Is there maybe a little bit early days, but just kind of thinking about

Todd what you were saying.

Our Po versus billing versus <unk> is there maybe a little bit early days.

But just kind of thinking about it.

Speaker 13: the size of deals that you're seeing and just kind of maybe frame visibility you have in the business now versus a year ago, because it looks like that RPO is really moving forward here.

The size of deals that youre seeing and just kind of maybe frame visibility you have in the business now versus a year ago is that.

Because it looks like that RPM is really.

Moving forward here.

Yes, I mean look I still think the one thing that we want to push everybody to us that our growth. It is the best leading indicator of how the business is going to do and so I'd like to keep people focused on that that being said as we move to these larger deals if I look at my top 10 deals they were all.

Speaker 4: Yeah, I mean, look, I still think the one thing that we want to push everybody to is that ARR growth. It is the best leading indicator of how the business is going to do. And so I'd like to keep people focused on that. That being said, as we've moved to these larger deals, if I look at my top 10 deals, they were all...

You know the vast majority of them were almost three year deals and those larger deals longer duration contracts are really helping us to build up the RPI and that's something that we've been focused on that was one of the things that Robbie and I worked on making sure we align with the sales teams on and we feel good about the progress that we've made there and that's an area that we'll continue to.

Speaker 4: you know, the vast majority of them were almost three year deals and those larger deals.

Speaker 4: Longer duration contracts are really helping us build up the RPO, and that's something that we've been focused on. That was one of the things that Robby and I worked on, making sure we aligned with the sales teams on, and we feel good about the progress that we've made there, and that's an area that we'll continue to focus on, is how do we build with these longer term, longer duration, higher value agreements with customers.

<unk> is how do we build with these longer term longer duration higher value agreements with customers.

Speaker 3: And I'll just add one thing, Joe. I would say this really shows that these subscription businesses, and you know this, they're no longer little side experiments that people are doing with 12-month contracts, right? But these are mission-critical systems. These are long-term decisions.

I'll just add one thing Joe I would say this really shows that the subscription businesses and you know there's there's no longer a little side experiments that people are doing with 12 month contracts right. But these are mission critical systems. These are long term decisions. The salesforce decision for using zero revenue is certainly a long term decision.

Speaker 6: The Salesforce decision for using Zora Revenue was certainly a long-term decision, and that naturally is going to lead to longer-term deals, right? They obviously want to lock into longer-term contracts.

And that's naturally is going to lead to longer term deals, where they obviously want to lock into longer term contracts.

Sure and then just one more follow up on the sales force.

Speaker 13: Sure. And then just one more follow-up on the Salesforce deal. I mean, they clearly have a big ecosystem of their own of other software vendors, just like Microsoft Dynamics is a team you mentioned. I'm just wondering with this expanded deal there, is that an opportunity on...

They clearly have a big ecosystem of their own of other software vendors.

Like Microsoft dynamics.

<unk> you mentioned I'm, just wondering with with this expansion.

<unk> D.

There is that is that an opportunity on.

Selling into.

Speaker 13: selling into the Salesforce ecosystem and software vendors that are integrated there.

Into the Salesforce ecosystem.

<unk> software vendors that are integrated there.

Speaker 6: Well, Salesforce has been a partner since the early days. We have a deep integration to the Salesforce product as well. We have a CPQ system that's built natively on force.com. And so I would say that that's always existed and that's always been an important part of our business. I'd say that we're expanding to other ecosystems as well. We're pretty excited about the Microsoft ecosystem. But I think the Salesforce deal really, to me, is a proof point that we have the best product in the marketplace for running subscription businesses. And that's something that I'm the most proud of.

Salesforce has been a partnership is the early days, we have a deep integration to the salesforce product as well we have a CPU system that is built natively on.

On <unk> com and so I would say that that has always existed and that's always been an important part of our business I would say that we're expanding to two other ecosystems as well we're pretty excited about the Microsoft ecosystem and I think the Salesforce deal really to me is a proof point that we have the best product in the marketplace regarding subscription businesses and that's something that I'm. The most.

<unk>.

Sure.

Speaker 13: That's great validation. If we look at that unified monetization platform and what it means to the business.

That's great validation and then if.

If we just.

If we look at that unified monetization platform and what it means to the business.

I mean clearly.

Most software companies are not just selling a subscription there.

Speaker 13: Most software companies are not just selling a subscription, there's others to their revenue line. I mean, it would just be helpful to kind of...

So their revenue line.

I mean, it would just be it would be helpful to kind of.

Kind of frame, what the value proposition was before and where you might've been boxed out and what it means now just to understand how holistically some of those customers could embrace your platform because there's no constraint around what youre billing.

Speaker 13: kind of frame what the value proposition was before and where you might have been boxed out and what it means now just to understand how holistically some of those customers could embrace your platform because there's no constraint around what you're billing for.

Sure.

That's a great question, Joe I appreciate you asking it I think if you look at the roots of our company, we started with pure subscription businesses right SaaS companies now we're 100% subscriptions.

Speaker 3: That's a great question, Joe. I appreciate you asking it. I think if you look at the roots of our company, we started with pure subscription businesses, right? SaaS companies that were 100% subscriptions, streaming companies that were 100% subscription businesses. But as we get into larger companies, Caterpillar, General Motors and the like, those obviously are companies with mixed business models, with many, many types of business models.

Streaming companies over 100% subscription businesses, but as we get into larger companies Caterpillar General Motors and alike. Those obviously are companies with mixed business models with many many types of business models. So it was important for us with unified monetization monetization to reach a point, where we can say that yes, we want to be subscription first because we believe the future.

Speaker 6: So it was important for us with unified monetization to reach a point where we can say that, yes, we want to be subscription first because we believe the future is a subscription economy, but we don't want to be subscription only. So whether you're a pure subscription business that's evolved to the point where, you know, you're Zoom and you're starting to sell hardware, you're a streaming company, you're starting to sell pay-per-view in addition to that, you know, $10, $12 a month.

<unk> is the subscription economy, but we don't want to be subscription only so whether you're a pure subscription business has evolved to the point, where now youre zoom and you are starting to sell hardware Youre streaming company Youre starting to sell paper view. In addition to that $10 $12, a month or Youre, a hardware company, that's looking to sell subscription services, but youre looking at.

Speaker 6: Or you're a hardware company that's looking to sell subscription services, but you're looking to create bundles across the two things. We need to be able to do that. And so the unified monetization announcement actually is a really, really important announcement for us. It's a great milestone.

<unk> bundles across the two things, we need to be able to do that and so the unified monetization announcement actually is a really really important announcement for us it's a great milestone.

Speaker 6: And it means that, you know, going forward, we can really support.

And it means that going forward, we can really support on all types of business models as companies embrace this digital future.

Speaker 6: on all types of business models as companies embrace this digital future.

Sure that's great and then just maybe one at a high level strategically it really sounds like the.

Speaker 13: That's great. And then just maybe one at a high level strategically, it really sounds like the software suite has come together really nicely here at this point. What's next?

The software suite has come together really nicely here at this point or kind of what's next.

Yes.

Speaker 13: I mean, it sounds like the APIs, a new set of APIs, all the products seem to be being embraced in the market. Is M&A...

It sounds like the API is are you a new set of API as all of the products seem to be being embraced in the market is it.

Is M&A.

Speaker 13: back on the table at this point, what are you thinking about in expanding the opportunity? Because clearly it's moving very fast.

Back on the table at this point what are you thinking about expanding the opportunity because clearly it's moving very fast.

So Joe we think we've got a lot of opportunity still left in our three beachheads and then platform that being said our plan is not incumbent upon doing any M&A, but of course, we are always looking out at the market. If there is areas, where we can use that to accelerate our product development are areas, where we can help companies in the subscription.

Speaker 4: So Joe, we think we've got a lot of opportunity still left in our three beachheads and then platform. That being said, our plan is not incumbent upon doing any M&A, but of course we are always looking out at the market if there's areas where we can use that to accelerate our product development or areas where we can help companies in the subscription experience. We're open to that and we look at things constantly, but at this time, no change from what we've talked about in the past. Thank you.

We're open to that and we look at things constantly but at this time.

No change from what we've talked about in the past.

Great. Thanks, so much guys.

Thanks, Joe.

Your next question comes from Stan <unk> with Morgan Stanley. Please go ahead. Your line is open.

Speaker 1: Your next question comes from Stan Zlotsky with Morgan Stanley . Please go ahead, your line is open.

Okay.

Perfect. Thank you so much guys and congratulations on very strong results.

Speaker 14: Perfect. Thank you so much, guys, and congratulations on very strong results.

Two questions from my end and my apologies I am running im jumping back and forth between earnings. So if this was already asked but.

Speaker 14: Two questions for Mayan, and my apologies, I'm running, I'm jumping back and forth between earnings, so if this was already asked, but the strong results that you're seeing this year, how much of that, if at all, is driven by a resurgence of ERP migration, migrations to the cloud? And also maybe if that's a factor that you're thinking through as you gave your fiscal 23 guidance as well, and then I have a quick followup.

<unk>.

The strong results that youre seeing this year, how much of that if at all is driven by.

A resurgence of ERP migration migrations to the cloud.

And then also maybe if you have if that's a factor.

We're thinking through.

You gave your fiscal 'twenty three guidance as well and then I have a quick follow up.

Yes, Dan I would say.

Speaker 6: Yeah, Stan, I would say, I'd rather you think of two parallel trends that are going on. One of them certainly is we want to move financial systems and ERP systems into the cloud. So much other software has moved into SaaS models into the cloud.

I'd, rather you think of two parallel trends that are going on one of them. Certainly is we want to move financial systems and ERP systems into the cloud. So much other software has moved into SaaS models into the cloud and <unk>.

Speaker 6: You know, you're seeing ERP systems do the same thing. We're probably more of a parallel effort, right? Which is more, I've got these new business models that ERP systems simply cannot handle.

You're seeing ERP systems do the same thing will probably more of a parallel effort right, which is more I've got these new business models that ERP system simply cannot handle and so so I want to move away from a traditional ERP centric system thats built for selling products to something thats more about monetizing digital services.

Speaker 6: And so, you know, I want to move away from a traditional ERP-centric system that's built for selling products.

Speaker 6: to something that's more about monetizing digital services.

Right, that's really where we sit and when I look at it that way that trend or that demand never really slowed down in 2020, and there might have been a short term pause in March or April of 2020, but companies realize that digital subscriptions right. These new business models of the future and.

Speaker 6: right, that's really where we sit and when I look at it that way.

Speaker 6: that trend or that demand never really slowed down in 2020. It might've been a short-term pause in March or April of 2020, but companies realize that digital subscriptions, right, these new business models of the future.

Speaker 6: And that's really what's causing our demand. And that's really what's causing what you see the results. And, you know, as a good example, the dollar base retention rate that we've talked about in the past, you know, really puts us in a whole new.

And that's really what's causing our demand and that's really what's causing what you see the results.

As a good example, the dollar based retention rate that we've talked about in the past you know really puts us in a whole new neighborhood.

Got it okay that makes sense and actually I just wanted to.

Yeah.

Come back to that dollar based net retention rate the one.

112 inflection for next year, certainly very nice continuation versus the trend we've been seeing through this year.

Far as me on what the drivers are of that continued improvement through next year is it selling more and more products into the existing customer base or the customer base moving up price Skus is it just more volume flowing through again, we kind of if you guys just walk us through the puts and takes.

Since Dan one thing I felt really good.

Speaker 4: Stan, the one thing I felt really good that we kind of continued this year and we continue seeing on to next year is really a balance on what's driving that net dollar retention.

Kind of continued this year and we continue seeing onto next year is really a balance on what's driving that net dollar retention first off as we're seeing new products coming out we're seeing great take on that innovation engine is really taking off and customers are buying those products. Secondly, as you said, we continue to see usage move forward.

Speaker 4: First off is we're seeing new products coming out. We're seeing great take on that. The innovation engine is really taking off and customers are buying those products.

Speaker 4: Secondly, as you said, we continue to see usage move forward, and that's being a driver of the volume going through the platform this quarter up 28%.

And thats being a driver of the volume going through the platform. This quarter up 28% and then last but not least we've talked about revenue and we're really seeing revenue on fire that product is growing triple digits for three quarters in a row and again this quarter was another driver of that net dollar retention. So we can we continue to see.

Speaker 4: And then last but not least, we've talked about revenue, and we're really seeing revenue on fire. That product has grown triple digits for three quarters.

Speaker 4: in a row, and again, this quarter was another driver of that net dollar retention. So we continue to see a balance.

Our balanced.

Speaker 4: performance against the upsells as we move into fiscal 23.

Performance against the Upsells as we move into fiscal 'twenty, three and internally, we call that our multi vector land and expand strategy and I would say that we're really pleased with how that's come together and we believe that gives us a sustainable growth strategy in the quarters to come.

Speaker 6: Yeah, internally we've called that our multi-vector land and expand strategy, and I would say that we're really pleased with how that's come together.

Speaker 6: and we believe that gives us a sustainable growth strategy in the quarters to come.

Perfect. Thank you guys.

Okay.

There are no further questions at this time I will turn the call back that can sell for any closing remarks.

Speaker 1: There are no further questions at this time. I'll turn the call back to Tien-Phil for any closing remarks.

Thank you.

Like to say, thank you again to everyone on the call and a big Thank you to all our Zeos, it's our people that make Saar, an incredible place to be and I'm proud of what we've accomplished together in this quarter. The subscription economy continues to have a lot of room for upside and it's clear from our dollar based retention performance and our AUR growth.

Speaker 6: Well, I would like to say thank you again to everyone on the call, and a big, big thank you to all our ZEOs. It's our people that make Zora an incredible place to be, and I'm proud of what we've accomplished together in this quarter. The subscription economy continues to have a lot of room for upside, and it's clear from our dollar-based retention performance and our ARR growth that our land and expand enterprise strategy is working.

But our land and expand enterprise strategy is working with that we look forward to Q4 and FY 2023. Thank you for joining us today.

Speaker 6: With that, we look forward to Q4 and FY 2023. Thank you for joining us today.

This concludes today's conference call. Thank you for your participation you may now disconnect.

Speaker 1: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Okay.

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