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Zuora CFO Roundtable - Vancouver | Dec 9

This document summarizes key topics from a CFO roundtable event held in Vancouver on December 9th, 2015. The topics discussed include current market trends and valuation multiples, sales modeling and efficiency, business intelligence and analytics tools/best practices, and headcount trends related to churn and hiring. A section on subscription business models notes their advantages over traditional licensing models, including lower costs, longer-term planning ability, and higher valuations from investors. Retention is highlighted as the most powerful lever for improving customer lifetime value.

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CFO Roundtable Vancouver December 9th, 2015 @tylersloat#CFOsummit
Topics for Today @tylersloat#CFOsummit • 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 @tylersloat#CFOsummit 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
@tylersloat#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 @tylersloat#CFOsummit
• 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 @tylersloat#CFOsummit
• 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 @tylersloat#CFOsummit
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 @tylersloat#CFOsummit
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 @tylersloat#CFOsummit
Starts with Gross Margin Analysis based on SEC filings, Capital IQ estimates, and Canaccord Genuity estimates Best in class @tylersloat#CFOsummit
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 @tylersloat#CFOsummit
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 @tylersloat#CFOsummit
Value of Customer Success @tylersloat#CFOsummit
• 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 @tylersloat#CFOsummit
@tylersloat#CFOsummit
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 @tylersloat#CFOsummit
Acquire: Marketing Vs. Sales Costs Industry Verticals31% Customer Rev26% # Employees21% @tylersloat#CFOsummit
Acquire: Bookings growth 29% < 20% 29% 20 – 60% 17% 60 – 100% 25% > 100% @tylersloat#CFOsummit
Acquire: Revenue growth 29% 20 – 60% 17% 60 – 100% 25% > 100% @tylersloat#CFOsummit
Acquire: Revenue growth by size of Company 29% 20 – 60% 17% 60 – 100% 25% > 100% @tylersloat#CFOsummit
Acquire: Revenue growth by GTM Strategy 29% 20 – 60% 17% 60 – 100% 25% > 100% @tylersloat#CFOsummit
Acquire What percentage of your total sales opportunities close? 1-2% 3-5% 6-10% >10% 5% 37% 21% 36% @tylersloat#CFOsummit
Acquire: How to model ramp? 30 days 60 days 90 days > 4 mos 21% 24% 41% 14% @tylersloat#CFOsummit
Acquire: How to model sales cycle 10 days4% 30 days16% 60 days32% 120 days 29% 19% @tylersloat#CFOsummit
Acquire: How to model quota attainment > 40 % 12% 10% 40 – 60% 39% 60 – 80% 31% 80 – 100% 7% > 100% @tylersloat#CFOsummit
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 @tylersloat#CFOsummit
ACQUIRE: What is OTE to quota? 16% < 150k 26% < 200k 35% < 250k 13% < 300k 10% > 300k $1 M @tylersloat#CFOsummit
Acquire: What’s your quota based on? 19% 18% 48% 15% MRR TCV ACV Other @tylersloat#CFOsummit
Acquire: What are your commission rates? 9% 5% 35% 6- 10% 37% 11 - 15% 12% 20% CHEAPSKATES THE NORM THE NORM BREAKING THE BANK @tylersloat#CFOsummit
42% 51% 7% Who Manages Upsells? Customer Success Team Sales Reps Other 35% 65% Do you pay for results? no yes Expand @tylersloat#CFOsummit
Expand: Upsells as a % of ACV @tylersloat#CFOsummit
Expand: Top Growers Rely on Upsell @tylersloat#CFOsummit
Thank you.

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Zuora CFO Roundtable - Vancouver | Dec 9

  • 1.
  • 2.
    Topics for Today @tylersloat#CFOsummit •Current Market Trends and Multiples • Sales Modeling and Efficiency • Business Intelligence & Analytics --- tools, team, best practices • Budget Process • Headcount – churn and hiring
  • 3.
    Top of News @tylersloat#CFOsummit Day'sRange: 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)
  • 4.
    Lower development, support and maintenance costs Predictability allows longer- termthinking 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
  • 5.
    @tylersloat#CFOsummit 3/31/05 6/30/05 9/30/0512/30/05 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
  • 6.
    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 @tylersloat#CFOsummit
  • 7.
    • 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 @tylersloat#CFOsummit
  • 8.
    • 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 @tylersloat#CFOsummit
  • 9.
    S&M Efficiency Best in Class2015E 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 @tylersloat#CFOsummit
  • 10.
    The level towhich 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 @tylersloat#CFOsummit
  • 11.
    Starts with Gross Margin Analysisbased on SEC filings, Capital IQ estimates, and Canaccord Genuity estimates Best in class @tylersloat#CFOsummit
  • 12.
    INTRORetention: most powerfullever 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 @tylersloat#CFOsummit
  • 13.
    It’s no wonderthat 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 @tylersloat#CFOsummit
  • 14.
    Value of CustomerSuccess @tylersloat#CFOsummit
  • 15.
    • In March2014, 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 @tylersloat#CFOsummit
  • 16.
  • 17.
    Acquire • How doyou model • How do you compensate • How do you drive efficiency in your sales org • Accelerate, digest or pull back
  • 18.
    77%of respondents sell primarilythrough 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 @tylersloat#CFOsummit
  • 19.
    Acquire: Marketing Vs.Sales Costs Industry Verticals31% Customer Rev26% # Employees21% @tylersloat#CFOsummit
  • 20.
    Acquire: Bookings growth 29%< 20% 29% 20 – 60% 17% 60 – 100% 25% > 100% @tylersloat#CFOsummit
  • 21.
    Acquire: Revenue growth 29%20 – 60% 17% 60 – 100% 25% > 100% @tylersloat#CFOsummit
  • 22.
    Acquire: Revenue growthby size of Company 29% 20 – 60% 17% 60 – 100% 25% > 100% @tylersloat#CFOsummit
  • 23.
    Acquire: Revenue growthby GTM Strategy 29% 20 – 60% 17% 60 – 100% 25% > 100% @tylersloat#CFOsummit
  • 24.
    Acquire What percentage ofyour total sales opportunities close? 1-2% 3-5% 6-10% >10% 5% 37% 21% 36% @tylersloat#CFOsummit
  • 25.
    Acquire: How tomodel ramp? 30 days 60 days 90 days > 4 mos 21% 24% 41% 14% @tylersloat#CFOsummit
  • 26.
    Acquire: How tomodel sales cycle 10 days4% 30 days16% 60 days32% 120 days 29% 19% @tylersloat#CFOsummit
  • 27.
    Acquire: How tomodel quota attainment > 40 % 12% 10% 40 – 60% 39% 60 – 80% 31% 80 – 100% 7% > 100% @tylersloat#CFOsummit
  • 28.
    Acquire: What’s yourover-assign 100M in quota on the street 35% >$90MEXPECT 36% $80-90MEXPECT 25% $70-80MEXPECT 2% $50-70MEXPECT 2% < $50MEXPECT @tylersloat#CFOsummit
  • 29.
    ACQUIRE: What isOTE to quota? 16% < 150k 26% < 200k 35% < 250k 13% < 300k 10% > 300k $1 M @tylersloat#CFOsummit
  • 30.
    Acquire: What’s yourquota based on? 19% 18% 48% 15% MRR TCV ACV Other @tylersloat#CFOsummit
  • 31.
    Acquire: What areyour commission rates? 9% 5% 35% 6- 10% 37% 11 - 15% 12% 20% CHEAPSKATES THE NORM THE NORM BREAKING THE BANK @tylersloat#CFOsummit
  • 32.
    42% 51% 7% Who Manages Upsells? Customer SuccessTeam Sales Reps Other 35% 65% Do you pay for results? no yes Expand @tylersloat#CFOsummit
  • 33.
    Expand: Upsells asa % of ACV @tylersloat#CFOsummit
  • 34.
    Expand: Top GrowersRely on Upsell @tylersloat#CFOsummit
  • 35.

Editor's Notes