Zuora: What’s happening with digital transformation plays really well into our wheelhouse

Companies’ desire to consume products on a subscription basis, a per-usage basis, or any number of different ways, is the way of the future, says CFO McElhatton.
Written by Tiernan Ray, Senior Contributing Writer

"I think we're in a fantastic space," Todd McElhatton, chief financial officer of Zuora, the software maker for billing, said in an interview following the company's fiscal third-quarter report Thursday evening, which topped expectations. 

"If you look at what's happening with subscriptions, with digital transformation, those play really well into our wheelhouse," said McElhatton.

Zuora reported an 8% jump in revenue in the three months ended in October, and, just as important, the company forecast revenue two percent higher this quarter than the Street has been expecting, much better than forecasts of the last two years.

Asked if the company was at a turning point, McElhatton said, "I think we're making good progress."

The company can serve any number of complex billing situations, not just annual subscriptions for software, McElhatton said. "That's one of the beauties of the Zuora platform, we give companies the ability to decide, how do they want to change their product, and the ability to do that in real time."

The world is becoming more diverse, not less, in terms of how things are billed and paid for, McElhatton said.

He gave the example of Amazon AWS. "You can consume Amazon on a consumption basis, as you decide you want to use it, or else you can consume it as a reserved instance, where you make a commitment for a certain service or a certain amount of time that you're going to have compute. Companies have different needs at different times."

McElhatton also likes to compare what's happening today to some of the complex billing practices of the telecom industry. 

"Think of some of the telco billing of the day, you had phone usage charged for peak and off-peak," he said. "Same thing for electric vehicle charging today."

"So, I think there's a tremendous amount of complexity to be able to do that in a very agile way and to be able to get that billing to your customers in a way that they want."

With a forecast for revenue this year of $301 million to $303 million in revenue this fiscal year, sales are expected to rises much as 10%, year over year. It's still a big drop from last year's seventeen percent, but things may be picking up. 

"I think we have an opportunity to really accelerate our revenue growth over the next couple of quarters," said McElhatton. 

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