Zuora CFO Roundtable - Vancouver | Dec 9

CFO
Roundtable
Vancouver
December 9th,
2015
@tylersloat#CFOsummit

Topics for Today
• Current Market Trends and Multiples
• Sales Modeling and Efficiency
• Business Intelligence & Analytics --- tools,
team, best practices
• Budget Process
• Headcount – churn and hiring

Top of News
Day's Range: 11.90 - 12.24
52wk Range: 9.00 - 14.78
Volume: 1,075,743
Avg Vol (3m): 6,912,410
Market Cap: 3.87B
P/E (ttm): N/A
EPS (ttm): -1.13
Div & Yield: N/A (N/A)

Lower
development,
support and
maintenance
costs
Predictability
allows longer-
term thinking
No quarter-end
pricing games
Oh yeah,
investors give
you a higher
valuation
Downside: longer
ramp to scale
from lack of up
front license fee
At scale,
subscription models
are superior in every
aspect
“Ultimate Software
will never make
money.”
- Competitor CEO in 2002 … just as ULTI stock price
was on the cusp of a 12 year, 14-fold advance
#CFOsummit

3/31/05 6/30/05 9/30/05 12/30/05 3/31/06 6/30/06 9/30/06 12/30/06 3/31/07 6/30/07 9/30/07 12/30/07 3/31/08 6/30/08 9/30/08 12/30/08 3/31/09 6/30/09 9/30/09 12/31/09 3/31/10 6/30/10 9/30/10 12/31/10 3/31/11 6/30/11 9/30/11 12/31/11 3/31/12 6/30/12 9/30/12 12/31/12 3/31/13 6/30/13 9/30/13 12/31/13 3/31/14 6/30/14 9/30/14 12/31/14 3/31/15 6/30/15
Entering ARR 45,411 47,679 50,520 53,307 56,372 60,377 64,418 68,326 74,695 81,734 86,938 93,791 100,546 102,018 104,774 112,069 120,165 127,421 133,891 140,227 151,795 162,393 171,914 180,978 193,536 204,722 214,457 242,629 249,513 252,523 265,430 284,206 304,862 318,741 333,792 353,240 378,370 400,928 421,042 441,419 465,086 488,794
Growth 5,096 5,171 5,423 5,698 6,213 6,941 6,425 6,836 7,582 7,520 7,889 8,871 9,776 9,676 10,440 9,912 12,047 11,137 11,273 11,294 13,397 12,938 12,897 12,464 15,326 13,811 13,268 15,700 16,963 15,700 15,332 16,709 19,814 19,487 19,129 21,824 24,032 24,525 23,089 24,620 32,980 28,444
Non-Growth 9,627 10,442 14,876 10,838 11,347 11,690 12,543 13,015 15,101 14,713 15,307 16,265 17,861 19,235 21,405 19,547 21,464 22,122 22,796 23,329 25,307 26,367 26,802 27,284 30,596 31,990 33,126 38,924 38,766 38,924 37,353 39,301 43,344 43,963 45,641 47,990 52,747 54,991 58,976 60,844 62,978 66,942
Growth %ARR 45% 43% 43% 43% 44% 46% 40% 40% 41% 37% 36% 38% 39% 38% 40% 35% 40% 35% 34% 32% 35% 32% 30% 28% 32% 27% 25% 26% 27% 25% 23% 24% 26% 24% 23% 25% 25% 24% 22% 22% 28% 23%
Non-Growth %ARR 85% 88% 118% 81% 81% 77% 78% 76% 81% 72% 70% 69% 71% 75% 82% 70% 71% 69% 68% 67% 67% 65% 62% 60% 63% 63% 62% 64% 62% 62% 56% 55% 57% 55% 55% 54% 56% 55% 56% 55% 54% 55%
%ARRGrowth 5% 6% 6% 6% 7% 7% 6% 9% 9% 6% 8% 7% 1% 3% 7% 7% 6% 5% 5% 8% 7% 6% 5% 7% 6% 5% 13% 3% 1% 5% 7% 7% 5% 5% 6% 7% 6% 5% 5% 5% 5% 5%
GEIonACV 1.34 1.16 1.21 1.17 1.05 1.14 1.06 0.79 0.79 0.94 0.81 0.89 2.01 1.56 0.96 0.83 1.07 1.03 1.04 0.69 0.85 0.86 0.87 0.67 0.87 0.83 0.37 1.04 1.48 0.73 0.55 0.55 0.82 0.76 0.69 0.64 0.75 0.81 0.75 0.71 0.93 0.73
GrossProfit Margin% 59% 61% 60% 58% 54% 61% 58% 55% 56% 58% 58% 58% 58% 57% 52% 51% 56% 56% 55% 54% 56% 56% 57% 57% 55% 57% 56% 57% 54% 57% 57% 58% 57% 58% 59% 61% 59% 59% 59% 61% 61% 61%
Recurring Profit Margin% 19% 17% -12% 23% 25% 27% 27% 30% 26% 32% 35% 35% 30% 27% 24% 35% 33% 34% 35% 39% 38% 39% 41% 44% 40% 40% 45% 38% 39% 41% 47% 48% 46% 47% 48% 49% 47% 48% 47% 48% 48% 48%
-50%
0%
50%
100%
150%
200%
250%
-
100,000
200,000
300,000
400,000
500,000
600,000

INTROSubscription goes mainstream…
• 30-50 subscription software IPO’s over
the next two years seems reasonable.
• Hottest areas:
• Vertical SaaS
• Security/Systems Software
• Analytics
• Next Generation Marketing
• Caution:
• High valuations allow features to
think they’re companies.
0
10
20
30
40
50
60
2005 2010 Today
Number of Public Saas Companies

• Bookings / New ARR
• Gross Customer Churn
• Mix of S&M spend that is growth oriented
• New ARR = forward year increase in subscription
revenue + gross dollars churned in current year
• Assume all S&M spend is driving new ARR
• S&M Efficiency = $ S&M Spend / $ New ARR
• Range of Public SaaS Companies: $0.67 - $2.30
DATA WE DON’T GET HOW WE THINK ABOUT IT
SLIDE HEADERS&M Efficiency: a challenge for public investors
Conclusion: the trend line is up
2012 2013 2014 2015E 2016E
Average S&M / $ARR $0.99 $1.02 $1.18 $1.27 $1.40
Based on Canaccord Genuity analysis of the 30 largest SaaS companies; leverages SEC filings, Capital IQ estimates, and Canaccord Genuity estimates

• Bookings / New ARR
• Gross Customer Churn
• Mix of S&M spend that is growth oriented
• New ARR = forward year increase in subscription
revenue + gross dollars churned in current year
• Assume all S&M spend is driving new ARR
• S&M Efficiency = $ S&M Spend / $ New ARR
• Range of Public SaaS Companies: $0.67 - $2.30
DATA WE DON’T GET HOW WE THINK ABOUT IT
SLIDE HEADERS&M Efficiency: CAC Data points
Conclusion: the trend line is up
2012 2013 2014 2015E 2016E
Average S&M / $ARR $0.99 $1.02 $1.18 $1.27 $1.40
Based on Canaccord Genuity analysis of the 30 largest SaaS companies; leverages SEC filings, Capital IQ estimates, and Canaccord Genuity estimates

S&M
Efficiency
Best in Class 2015E
Veeva $0.67
Descartes $0.76
Q2 Holdings $0.80
Ultimate Software $0.94
Constant Contact $0.95
Analysis based on SEC filings, Capital IQ estimates, and Canaccord Genuity estimates
Best in class

The level to which operating
margins asymptotically approach if
you were to cull all growth spend
2014A 2015E 2016E
Subscription Services Revenue $5,014 $6,055 $7,295
Growth 31% 21% 20%
Subscription Gross Margin 83.4% 83.7% 84.5%
Subscription Gross Proft $4,182 $5,068 $6,164
R&D Expense (672) (819) (997)
G&A Expense (577) (672) (780)
Recurring Gross Profit $2,933 $3,577 $4,388
Recurring Profit Margin 58.5% 59.1% 60.1%
* Based on Canaccord Genuity projections
Salesforce.com: Top of the Pack and Improving
C2015E
Sub Rev
Recurring
Profit Margin
1 CRM 6,055 3,577 59.1%
2 N 599 347 57.9%
3 PAYC 201 113 56.2%
4 CSOD 306 165 54.1%
5 NOW 830 428 51.5%
6 VEEV 308 158 51.2%
7 LOCK 560 279 49.8%
8 SPSC 142 69 48.3%
9 MKTO 182 87 48.1%
10 OPWR 133 64 48.0%
11 CVT 173 83 47.7%
12 ULTI 515 242 47.0%
13 CTCT 374 169 45.3%
14 HUBS 155 70 45.2%
15 SQI 102 45 43.8%
Recurring Proft Margin
Analysis based on SEC filings, Capital IQ consensus,
and Canaccord Genuity estimates
Recurring Profit Margin

Starts with Gross
Margin
Analysis based on SEC filings, Capital IQ estimates, and Canaccord Genuity estimates
Best in class

INTRORetention: most powerful lever to LTV
Today, Salesforce.com’s gross churn is about 10%... What if it improved to 7%?
Salesforce.com
Annual Gross Churn Rate: 10% Implied Customer Life (years): 10.0
2012A 2013A 2014A 2015E 2016E
Subscription Services Revenue $2,869 $3,825 $5,014 $6,055 $7,295
Growth 35% 33% 31% 21% 20%
Subscription Gross Margin 85.5% 84.2% 83.4% 83.7% 84.5%
Subscription Gross Proft $2,453 $3,220 $4,182 $5,068 $6,164
R&D Expense (353) (516) (672) (819) (997)
G&A Expense (364) (505) (577) (672) (780)
Recurring Gross Profit $1,736 $2,199 $2,933 $3,577 $4,388
Recurring Profit Margin 60.5% 57.5% 58.5% 59.1% 60.1%
New ARR Approximation $1,243 $1,572 $1,543 $1,846 $2,189
S&M Expense (1,404) (1,872) (2,406) (2,858) (3,475)
Cost / $ARR (CAC) $1.13 $1.19 $1.56 $1.55 $1.59
LTV / $ARR $6.05 $5.75 $5.85 $5.91 $6.01
LTV / CAC 5.4x 4.8x 3.8x 3.8x 3.8x
Salesforce.com
Annual Gross Churn Rate: 7% Implied Customer Life (years): 14.3
2012A 2013A 2014A 2015E 2016E
Subscription Services Revenue $2,869 $3,825 $5,014 $6,205 $7,481
Growth 35% 33% 31% 24% 21%
Subscription Gross Margin 85.5% 84.2% 83.4% 83.7% 84.5%
Subscription Gross Proft $2,453 $3,220 $4,182 $5,194 $6,322
R&D Expense (353) (516) (672) (819) (997)
G&A Expense (364) (505) (577) (672) (780)
Recurring Gross Profit $1,736 $2,199 $2,933 $3,703 $4,545
Recurring Profit Margin 60.5% 57.5% 58.5% 59.7% 60.8%
New ARR Approximation $1,157 $1,457 $1,543 $1,710 $2,021
S&M Expense (1,404) (1,872) (2,406) (2,858) (3,475)
Cost / $ARR (CAC) $1.21 $1.29 $1.56 $1.67 $1.72
LTV / $ARR $8.64 $8.21 $8.36 $8.53 $8.68
LTV / CAC 7.1x 6.4x 5.4x 5.1x 5.0x
Note: we estimate that a 3% improvement in retention could drive a ~16% increase in
C2015 operating profit – an incremental $150M at subscription GMs
Analysis based on SEC filings, Capital IQ consensus, and Canaccord Genuity estimates

It’s no wonder that investors
value net dollar retention.
• Most public companies don’t provide gross
customer retention
• Instead, they give net dollar retention, which is
inclusive of upsell
Ticker
Dollar-Based
Retention
1 VEEV 138%
2 BOX 126%
3 NOW 125%
4 HDP 125%
5 QTWO 122%
6 ZEN 120%
7 NEWR 120%
8 ULTI 110%
9 PAYC 110%
10 MKTO 109%
VEEV
BOX
NOWHDP
QTWO
ZEN NEWR
ULTI PAYC
MKTO
WK
CSLT
AMBR DWRE
OPWR
ECOM
FIVN
RNG
CVTMRIN
SQI
BNFT
CSOD SPSC HUBS
IL
CRM
LOCK
CARB
LOGM
CTCT
70%
80%
90%
100%
110%
120%
130%
140%
1.0x 3.0x 5.0x 7.0x 9.0x 11.0x
DollarBasedRetention
EV/C2015E Revenues
DBR is based on most recently available
publicly stated information
Valuation based on Capital IQ consensus and Canaccord Genuity estimates

Value of Customer Success

• In March 2014, investors transitioned
from GAAP to GARP
– That means from “Growth at any Price” to
“Growth at a Reasonable Price”
• A quick trick we like to use: Revenue
Growth + FCF Margin
– Gold, Silver, Bronze: 50%, 40%, 30%
– Change in G+M is an important indicator as
well
 Many trending down as growth rates decelerate
faster than margins ramp
An Easy Screen:
growth +
margin

Acquire
• How do you model
• How do you compensate
• How do you drive efficiency in
your sales org
• Accelerate, digest or pull back

77%of respondents sell
primarily through a
direct sales approach 52%use a self
service model
65%offer their prospects a
free trial period
20%However, only 47% said less than
20% convert from free trial to
customer
Acquire: Selling Approach

Acquire: Marketing Vs. Sales Costs
Industry
Verticals31%
Customer
Rev26%
#
Employees21%

Acquire: Bookings growth
29% < 20%
29% 20 – 60%
17% 60 – 100%
25% > 100%

Acquire: Revenue growth
29% 20 – 60%
17% 60 – 100%
25% > 100%

Acquire: Revenue growth by size of Company
29% 20 – 60%
17% 60 – 100%
25% > 100%

Acquire: Revenue growth by GTM Strategy
29% 20 – 60%
17% 60 – 100%
25% > 100%

Acquire
What percentage of your total sales opportunities close?
1-2% 3-5% 6-10% >10%
5%
37%
21%
36%

Acquire: How to model ramp?
30 days 60 days 90 days > 4 mos
21%
24%
41%
14%

Acquire: How to model sales cycle
10 days4%
30 days16%
60 days32%
120
days
29%
19%

Acquire: How to model quota attainment
> 40 %
12% 10%
40 – 60%
39%
60 – 80%
31%
80 – 100%
7%
> 100%

Acquire: What’s your over-assign
100M
in quota on the
street
35% >$90MEXPECT
36% $80-90MEXPECT
25% $70-80MEXPECT
2% $50-70MEXPECT
2% < $50MEXPECT

ACQUIRE: What is OTE to quota?
16% < 150k
26% < 200k
35% < 250k
13% < 300k
10% > 300k
$1
M

Acquire: What’s your quota based on?
19%
18%
48%
15%
MRR
TCV
ACV
Other

Acquire: What are your commission rates?
9% 5%
35% 6- 10%
37% 11 - 15%
12% 20%
CHEAPSKATES
THE NORM
THE NORM
BREAKING THE BANK

42%
51%
7%
Who Manages Upsells?
Customer
Success Team
Sales Reps
Other
35%
65%
Do you pay for results?
no
yes
Expand

Expand: Upsells as a % of ACV

Expand: Top Growers Rely on Upsell

Zuora CFO Roundtable - Vancouver | Dec 9

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Was ist angesagt?

Was ist angesagt? (19)

Andere mochten auch

Andere mochten auch (6)

Ähnlich wie Zuora CFO Roundtable - Vancouver | Dec 9

Ähnlich wie Zuora CFO Roundtable - Vancouver | Dec 9 (20)

Mehr von Zuora, Inc.

Mehr von Zuora, Inc. (20)

Kürzlich hochgeladen

Kürzlich hochgeladen (20)

Zuora CFO Roundtable - Vancouver | Dec 9

Hinweis der Redaktion