In its first financial reporting since becoming a public company, Zuora posted some impressive numbers including,
The subscription billing company’s year-over-year subscription revenues grew 39 percent and total revenue grew an amazing 60 percent.
Customers with greater than $100,000 annual contract value (ACV) grew to 441.
Total quarterly revenue was $51.7 million, giving it a run rate that should exceed $200 million in its first year as a public company.
Also, non-GAAP loss from operations was $18.6 million which is a lot of money as a percentage of revenues.
Reading further you discover the company has over $200 million in the bank, mostly from the IPO. Net/net this young company is growing well and it has cash on hand to lift it to profitability. Spending on operations if it includes selling and marketing would seem tolerable since it’s going into growth and the results indicate the strategy is working.
If you’re an optimist and you own the stock it’s likely that you bought on the promise of the As-A-Service economy aka the “Subscription Economy” that the company touts. If memory serves, Salesforce went public with similar numbers and word is that they’re doing okay, so there’s a case for being optimistic.
The key question is whether the company in question represents a new category with great growth prospects or if it’s a me-too. Today a me-too might be an analytics company or a new CRM company, we already have too many of them. But subscription billing, while still a crowded market, has a lot of potential. More traditional companies are launching products as services and finding they need help with the books.
What these numbers might also show, in my opinion, is how difficult it is to launch a company into the financial space. It’s rather conservative after all as shown by the slower growth of cloud ERP companies compared to cloud front office companies.
So from my seat it looks like Zuora is growing nicely, they’ve got cash and if they ensure their spending drives activities that drive further growth, it’s all good.
Next week, Zuora hosts its customers at its annual Subscribed conference. I will be reporting from the scene and it will be interesting to see what they have to say.
Oracle’s race to the cloud has offered multiple successes to its investors and some disappointment as well. No transition of this magnitude can be expected to run like clockwork but the difference between revenues for Oracle’s SaaS apps for last quarter, $1.1 billion, and those for its cloud infrastructure, IaaS, at $396 million, should at least get you thinking.
There’s a good explanation for this and it’s surprising that the company hasn’t done more to provide guidance to its financial analysts but then again, the purpose of reporting your finances is just that. There’s no room for anything that can look like an excuse. That’s too bad because it can lead people to wrong conclusions.
I spent a day at Oracle last week receiving a briefing on the company’s roadmap for the year ahead. While some of the information was presented under nondisclosure, I can say that the briefing ran the gamut and went into areas that I am not expert at such as serverless apps, bare metal servers, and the new autonomous database. But I am coming up to speed as fast as I can.
The company’s cloud architecture and IaaS offering gave me one surprise. Oracle intends to roll out 13 distinct regions for IaaS connected by a very high-speed backbone. Each region is highly modularized with triple redundancy and can easily scale as demand increases. All of this is very important because, I believe, this is not simply about cloud computing but about another disruptive innovation we will all face in the next few years.
The disruption is the formation of an information utility and it’s all but certain that no single corporate entity will own all of it. As big as Oracle’s plans are, Salesforce has similar ideas and while we’re at it so do Microsoft, IBM, SAP, Amazon, and a number of hosting services too numerous to mention. Yes, there will be consolidation and those too numerous vendors will likely be scooped up first.
But back to Oracle—$396 million is a lot of money but small change compared to its SaaS number and small compared with the company’s aspirations. The logical conclusion that many finance people drew from that number is that Oracle has a “problem” or that it’s not executing well in PaaS and IaaS, but really? Not exactly.
According to Oracle President of Product Development, Thomas Kurian, who led off the analyst briefing, only 3 of the 13 regions have been deployed so far. More will hit their markets this year but the rollout takes time and we’ll still be talking about it next year.
Not having the regions up and running means that in some strategic places, the company doesn’t have IaaS to sell. So the $396 million is a look into a still very much expanding world. Just for fun you could say that 3 of 13 is just under a quarter of the deployment. If the other regions were running as well as the three in place the IaaS and PaaS numbers might easily be four times the reported revenue number. It’s unclear if that’s good or not since we don’t know a lot such as capacity and utilization of the existing regions, but still…
So for now, the revenue picture remains lumpy but now we have more explanation and color for the results. Hopefully this also gives financial analysts something to consider as they try to figure out what the numbers mean to investors. The rest of the market seems to expect a bright future for Oracle as its stock continues to do well despite the lumpy earnings.
There’s also discussion about renewed competition in the database market circulating after a story in The Information suggested that companies like Amazon and Salesforce were building competitive database products and would depart Oracle in the near future. I don’t agree. If for nothing else, building a database is a big effort and one that detracts mightily from a company’s primary business interests. It is dilutive of effort and cannibalistic of resources. For these reasons it should only be taken on as a last resort. That’s the way any business should look at any effort to self-source rather than go to the marketplace for needed resources.
On top of that I spoke with Parker Harris CTO and co-founder of Salesforce recently and when asked about the story he said, “We have a good relationship with Oracle and we use a ton of it. We are not getting rid of the Oracle database. We are working on technologies that add capabilities around the edges, like sandboxes. We will have SQL Server and Oracle for a long time.”
No surprises there. It’s been true for a long time that in these big markets sometimes we compete and sometimes we cooperate. In the era of the Information Utility I expect a lot more co-opetition.
Happy New Year to all of you reading this and, as Steve Gillmor might say, all of you who are not.
2018 is poised to be a busy year. I am off to San Francisco this week and next. Salesforce’s annual analyst kick-off, a day of briefings and 1:1 discussions designed to inform folks like me as well as to solicit advice happens on Thursday. Past Salesforce events like this have been eye-openers because they expose the theory and motivations for new product introductions and provide focus for several years out. The crew at Salesforce is exceptionally well versed in how to carry this kind of thing off. For starters, they bring out technologists and executives we don’t often hear from or about. Second, they open the kimono a fair bit so what I learn might stay under NDA for a while. So safe to say that even if the temperature in Boston hadn’t been flirting with absolute zero for the last couple of weeks, I’d still be looking forward to the event.
Just to show how competitive it is in CRM and cloud computing these days, Oracle is not wasting time either. I will attend their analyst kick-off the following week. It will be a very different but still illuminating event because they have a lot to say about positioning their IaaS, PaaS, and SaaS solutions in the modern marketplace. Oracle’s recent earnings jumps show the company is once again a powerful competitor at the leading edge of a new part of the industry. Oracle’s big question/issue will be how they intend to encourage their installed base to begin the Herculean effort of moving to the cloud. Hint: favorable pricing won’t get the job done. So as much as I want to hear more about the autonomous database, self-patching, advanced security and all the rest of the technology, I’ll also be interested in understanding their perceived path to market. Two things you can be sure of is that Oracle has some of the brightest minds in the business and they don’t like failure.
We’ll talk. Watch this space or email me.
I swear I was getting through this and trying to move on. She wasn’t my favorite candidate but when you consider the alternative she looked like George Washington in a pantsuit. Like many people I had moved on from denial and anger to Elizabeth Kubler-Ross’ next stage in the grief pyramid called bargaining. He can’t be that bad…they can tame him…I’m going back to work, he can’t chase me there…I’ll be okay.
But noooo! A brief story in the New York Times today says Donald Trump, incipient POTUS is planning to hold a technology conference next week. It’s right here under this headline, “Trump Plans Technology Conference With Silicon Valley Executives.” The article by David Streitfeld, Maggie Haberman, and Michael D. Shear covers a lot of ground what with Trump also seeming to have cancelled the next generation of Air Force One today, which is also in the piece.
Says the article, “The list of those being invited was not immediately clear, but they could include Mark Zuckerberg of Facebook, Timothy D. Cook of Apple and Sundar Pichai of Google.” Sure, that’s right, Silicon Valley CEOs have nothing scheduled that far out so of course they’ll all trudge over to Trump Tower. Whatever it is, when a president asks for your time, he’s doing it in the name of all the American people so you more or less have to attend.
The one saving grace in all this might be (and we really don’t know all the details yet) the fact that these are all consumer technology mavens so far. Maybe Trump has a punch list of social media enhancements to go over or maybe he intends to build a wall between our electrons and the rest of the world. Or maybe Trump just wanted to call a fly-in for rich guys to compare private aircraft. His is bigger, you know.
Regardless, I’ll withhold judgment on Trump’s tech chops until I know if this is just show and tell for social media or if he really wants the skinny on what to expect in areas like machine learning, AI, the IoT, and a half dozen other techno-wizbangs that will rock his world soon. I’ll begin to worry when Ellison, Benioff, and Gates get summoned.
I am not one to buy a product as soon as it is introduced, not one to wait in line over night to be one of the first in my time zone, etc. But this time was different. I needed a new iPad. The iPad2 that I bought almost 5 years ago was running very slowly despite fixes like turning off a bunch of CPU hogging things that I didn’t need. I write using every device I have, sometimes I even dictate to the device. But writing on the iPad2 with its screen or virtual keypad had lost its glamour and I was intrigued about having a detachable keypad and, because I also draw and paint avidly, the pencil held a certain artistic allure.
So off I went to the mall, to my nearest Apple store on Saturday to fetch the newest iPad which I hoped would alleviate some of the discomfort I’d grown accustomed to with “the 2”.
My first observation of the mall in general was that the place looked like a ghost town. Normally full with shoppers, this time it was easy to navigate through the halls to find the store, and since I’d entered through a different portal than usual, I only got lost once.
Once at the store, all was as it should be, except the crowd inside was also miniscule. Perhaps the horde would descend after lunch but I saw no evidence of one queuing up in the food court. Was everyone avoiding malls and suddenly eating healthy?
So with minimal drama I got the device I wanted with Lele’s help, but with a surprising exception. The keyboards and pencils are on back order for an estimated 4-5 weeks and all I could buy was the thing itself, which I did in space grey. Set up is remarkably easy thanks to the backup from “the 2” that is automatically stored for me in iCloud. I did it in the store and left with a more or less fully functional device sans keyboard and pencil. Final installation of my apps happened once I was home via my own WiFi and that was achieved without drama.
The device is fine. It’s a lot bigger than “the 2” but I don’t plan to travel with it and will mostly read from it so the larger form factor is all positive for me. Due the larger screen everything is bigger. The default font is readable without glasses and the virtual keyboard is bigger, with more keys, and better, though I still lust for the new keyboard-stand combo.
I was able to order the keyboard and pencil on-line (free shipping) and that’s where I learned of the 4-5 week wait time. They will be delivered before the holidays (barely). I suspect on-line everything is what’s accounting for the small crowds at the malls and if it’s true, then the old arguments from the 1990s about brick and mortar demolition thanks to the Internet might finally be too obvious to ignore. But I digress.
The iPad Pro is a worthy successor to the first iPad, in my humble judgment. It is pretty, has huge numbers of pixels and robust sound thanks to 4 speakers and I suspect it takes great pictures and even movies which I will try as soon as the cats wake up. I saw no reason, given my limited use to spring for a cellular plan or for 128 GB—the 32 GB WiFi only model will suffice just fine. Overall I am happy but would be more so if Apple had managed to get the accessories out at the same time. The delay seems to me very un-Apple like.
Since I read books and news on the iPad, I wonder how much longer it will take for book publishers to follow the lead of the likes of the New York Times to embed video into books. Some books contain still photos and they are reproduced along with maps in eBooks. But it seems to me that if for no other reason than keeping prices up, book writers and sellers need to become more forward thinking about the multi-media aspects of this market. It would give devices like the iPad Pro something to do, something to better justify its existence, much like the spreadsheet did for the PC.