Zuora IPO: What you need to know about the subscription management company
The latest in a string of tech IPOs, cloud-based subscription management company Zuora went public on the New York Stock Exchange Thursday under the ticker symbol ZUO. So far, the San Mateo, California-based company is trading nearly 48 percent above its initial public offering price, and is well on its way to surpassing its IPO-implied valuation of just over $1.4 billion.
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In the most basic of terms, Zuora is a business that's set up to help other businesses manage their online subscription models.
Since its founding in 2007, Zuora has been a self-described champion of the subscription-based business model, hinging its success on the idea that recurring revenue streams would become standard practice in modern day businesses. The company even claims to have coined the term "subscription economy" many years back.
Zuora's core product is a relationship business management platform that allows companies to manage the entire lifecycle of a subscriber, including customer acquisition, recurring billing and payments, revenue recognition, and subscription metrics.
Diving into its IPO prospectus filed with the Security and Exchange Commission, here are a few more facts to know about Zuora:
The company will operate with a dual-class stock. Zuora will follow the IPO trend and offer its shares in a two-class structure. Class B shareholders will have no voting rights at the company, whereas Class A shareholders will have 10 votes per share.
Revenue is increasing, but so are its losses. Zuora says it had $168 million in revenue for its fiscal year ending in January. That's up 49 percent from the previous year. Meanwhile, Zuora's losses grew to $1.78 per share in its latest fiscal year, compared to a loss of $1.68 per share in the year-ago period. The company had cash and cash equivalents of $48.2 million as of January 31.
"In order to increase our revenue and achieve and sustain profitability, we must increase the size of our direct sales force, both in the United States and internationally, to generate additional revenue from new and existing customers," the company wrote in its filing.
Zuora has a strong customer base but a lot of competition. Zuora said it currently has 950 customers across 30 countries, including several well known enterprises such as HBO, TripAdvisor, Box, Zillow, Ford and Nvidia. The company identifies Oracle and SAP AG as its primary competition when it comes to traditional ERP providers, but also cites competitive threats in the CPQ space and among telecommunications billing systems providers.
In its last fiscal year, Zuora said it managed 95 million subscriptions, sent out 172 million invoices, and processed 142 million payment transactions on behalf of its customers.
Most of its management team is new to the public market. Zuora said that a majority of its leadership has little to no experience running a publicly traded company, interacting with shareholders or complying with the increasingly complex laws pertaining to public companies. Zuora said it has a total of 933 employees, including 346 outside of the US. Peter Fenton of Benchmark Capital is a majority shareholder along with Zuora CEO Tien Tzuo.
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