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Zuora Inc (NYSE:ZUO)
Q2 2020 Earnings Call
Aug 28, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon. My name is Chris, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Zuora Second Quarter and Fiscal 2020 Earnings Conference Call. [Operator Instructions]

I'll now turn the call over to Joon Huh, VP of Investor Relations. You may begin the conference.

Joon Huh -- Vice President of Investor Relations

Thanks, Chris. Good afternoon, and welcome to Zuora second quarter fiscal 2020 earnings conference call. Joining me today are Tien Tzuo, Zuora's Chief Executive Officer; and Tyler Sloat, Zuora's Chief Financial Officer. The purpose of today's call is for us to provide some color on our second quarter results, as well as provide our financial outlook for our third quarter and the remainder of the year.

Some of our discussion and responses today will include forward-looking statements. So as a reminder, our actual results could differ materially as a result of a variety of factors. You can find information regarding those factors in the earnings release we issued today and our most recent 10-Q filed with the SEC.

Finally, we'll be referring to several non-GAAP financial measures today. And reconciliations to the related GAAP measures are included in our earnings release. For a copy of our earnings release, links to our SEC filings, a replay of today's call or to learn more about Zuora, please visit our Investor Relations website at investor.zuora.com.

And with that, let me turn it over to Tien.

Tien Tzuo -- Founder and Chief Executive Officer

Thank you, Joon, and welcome to our second quarter earnings call for fiscal 2020. The headline is that we had a solid quarter. Our second quarter financial results came in largely better than expectations, while we continue to focus on improving our operational metrics. Subscription revenue grew 24%, while professional services increased 12%, resulting in total revenues was $69.7 million, representing a 21% year-over-year growth. And we outperformed on operating income as we saw some savings in the quarter. Tyler will cover financials in greater detail later in the call.

In Q2, we continue to see signs that support our central thesis. That our core market remains strong, and that we are in the early stages of a broad shift to subscription business models, a shift that we believe will ripple through every industry. And that the needs of the companies in this new world cannot be met by traditional product centric ERP systems that are not designed for customer-centric, subscription-based business models.

In Q2, we continue to sign on customers, and of course, our technology vertical, such as Seiko Epson, Omni Tracks and virtual stream, but we also continue to see strong demand outside of the technology vertical. For example, this quarter we signed one of the largest electronic manufacturers in Japan. We signed a major manufacturer of ball bearings in Europe. Yet another automotive services provider, one of the largest global consulting firms and one of the top three educational publishers in the United States. So the shift to subscriptions remains strong.

We also saw susceptible life deployments for key customers, including Airbus, Diamond Inc, Hudl, Penske Media and Poly. The merger between Polycom and Plantronics. In Q2, we also shared some great stories, like our StackPath, a platform for secure edge services, is taking advantage of our new central platform to build and automate key workflows, which we'll talk about later.

Or how we help the company in Europe called Omoove. Let's focus on the car sharing space to managing support complex, the usage based pricing models and how we're powering CreativeBug. It's a division of retailer Jovian Fabrics to scale and on demand video content offerings that enables them to better engage with their customers and increase retail sales.

We also focused relentlessly on operational execution. We overhauled our go-to-market methodology. We completed the first version of the technical integration work between Billing and RevPro, and we brought a new senior talent to help build a foundation for the next level of growth. So for today's call, I'd like to cover the following.

First, I'll give you an update on our sales operations in our go-to-market execution. Next, I'll provide a progress report on the product integration between Billing and RevPro. Then I'll highlight key highlights. I'll review key highlights and product innovations from the quarter. And I'll close with some early thoughts of the platform strategy that we recently announced at Subscribed conference in June.

Let's start by talking about our plans to adjusted sales execution challenges we discussed in the last call. We have worked on four specific initiatives over the quarter. First, as we mentioned on our last earnings call, we reorganized the sales team in order to better leverage our experienced leaders. Since then, we've also promoted some of our first line managers, so they're in a better position to coach a wider group of folks. We're starting to see this pay off in terms of more momentum in our newer reps as we engage with our perspective customers.

Second, we updated our sales formula. Our old model involve a lot of educating and evangelizing. Now the good news here is that the market has matured. Companies now understand the importance of subscriptions and less education is needed. But there's also still a wide range in where companies are in this subscription maturity curve. Some companies, for example, are looking to launch their very first offering. They want something quick, but they also want an experienced partner to guide them through potential pitfalls.

Others may be outgrowing the homegrown system, but perhaps a first put in when they launched years ago, that it's now holding them back. Many of our bigger enterprises are working with SIs [Phonetic] global systems integrators on a entire quote to cash transformation. These companies are coming to us at different points in their subscription journey, and that's why we updated our sales formulas so that our reps can intersect with our customers where they are in their range of maturity.

Third, we overhauled our entire sales enablement and training process. We just finished boot camps in North America, in a couple of weeks we're headed to Europe to roll it out there. As part of this we've also tightened the definitions of each of our sales stages, leading to a cleaner instrumentation of our sales process so that we can be a more analytics driven sales organization.

And finally, we've talked on previous calls about the importance of our global system integration partners. And so we realigned this team to focus more on our key partners, such as Deloitte, Accenture, EMY [Phonetic] and PWC. In regards to our search for our new head of sales. Now I've met a lot of candidates over the last few months and the quality of people out there is truly really high. We've narrowed down to a few high caliber candidates and I'm very excited about, of course, we're going to take the time to find the right person. But this is one of my top priorities. I mean, we look forward to having an announcement soon. So overall, we're making tangible progress on the sales front. But we know these type of organizational changes can't take time to take hold. We expect to make continued incremental improvements each quarter and we'll continue to keep you updated.

Now, turning to integration of our RevPro product with Billing. I am pleased to say that our engineering team has completed and delivered the integration technology between our two flagship products, Billing and RevPro. I'm incredibly proud of our entire technology organization for their dedication, commitment and hard work.

And so now, we're actively working with the backlog of our Billing customers who had purchased our RevPro solution to help bring them live. In fact, we've restarted with a number of previously paused implementations, including Light Person, Carbonite, and view the space with the expectation that these customers will go live in the coming quarters. And once we completed these implementations, we plan to resume our cross-sell motions of selling RevPro to our other billing customers.

Over the past quarter, I've been truly inspired by the focus and dedication of our ZEOs as we work to improve our operational execution. Our sales team that had over 49 logos this quarter. And our global services team helps over 50 customers go live on Zuora. We continue to tag great talent to our team across the board in sales, product, engineering as we build the team for the next leg of our journey.

We appointed Tom Krackeler, our previous SVP of product to a new Chief Customer Officer role. This is a strategic position to ensure that our customers are consistently successful in growing as a result of adopting Zuora products. And to lead the product organization going forward, we hired a new Chief Product Officer, Chris Battles, who comes to us with a wealth of enterprise, software experience will help us scale our platform and products to the next level of growth.

Our product team also made meaningful enhancements to our billing and payment suites, including the collect add on product. Now the collect product as a reminder is one of our newer products and really, really important for a high volume B2C customers. We're managing payments in account receivables are critical. And we now integrate with over 37 payment gateways worldwide. We believe this beat -- we believe this to be the most of any other cloud vendor. This help our customers improve revenue collection and reduce churn. And as a result, we've almost doubled our collect customer base and nearly 90 customers in the past two quarters.

And in June, our product and marketing teams organized our largest subscribed conference ever in San Francisco. We're gearing up to take subscribe to Europe and APAC in the fall. Now speaking the subscribe, this is where we made an announcement about our central platform that I'm really excited about. Then let me take a couple of minutes to explain why. As you know, over the last decade, we have built the leading product that enables the best companies to compete and win in a subscription economy. And we focused that product on the industries that are leading the shift to subscriptions. Technology, media, increasingly manufacturing in a few emerging verticals like utilities.

Now, when we meet with investors, would you tell us as our customers are echoing that we have the best product on the market. But they also say that it doesn't do everything and it's been pretty hard to customize a solve that last mile of functionality. And unlike other product areas for billing and revenue recognition, that last mile of functionality can be pretty important especially if you're using us to compete and win in the market. And that's why our real competition remains homegrown and Do it yourself or DIY systems. This is where our Zuora Central platform comes in.

A platform strategy is ultimately what enables our customers to customize and extend their Zuora Billing or RevPro implementations to solve those last mile needs. And we're already seeing signs, really signs that this is working. So for example, let's take the customer StackPath, a fast growing technology company with a market leading edge computing platform aimed at powering the $200 billion [Phonetic] hardware-as-a-service market. We've been a customer since 2016, but this year, they were able to use the workflow capabilities in the platform and the central platform to quickly build custom provisioning close integrations with other systems like Salesforce and Automate [Technical Issues] prior to the central platform would have been too difficult or time consuming to do.

This area is going to be a big, big focus for us. You're going to hear a lot more about it in the coming quarters as we continue to add more platform capabilities to show the impact it's having on our business in terms of faster deployments, increased win rates against DIY decisions, or being able to cover a greater footprint with our -- within our customers in terms of number of processes handled.

So in conclusion, I continue to be incredibly optimistic of our future. Early on, we intentionally decided to tackle a really hard problem. We learned from our early experience at the SAT -- at the early SaaS leaders about the importance of billing and scaling this new business model. And we wanted to build a solution that will would allow the best companies in the world to compete and win in this new subscription economy. And we wanted to be there when the [Technical Issues] start to drive their industry shift to subscriptions.

And so today, we have a solution that not only works for technology companies, but also works for streaming media companies and industrial manufacturers, retailers and telecom companies, publishers and car makers. And this is what we believe is foundational to building a company for durable long-term growth. We've been doing this for a decade now. We plan on doing it for many decades to come.

Now, let me turn it over to Tyler.

Tyler Sloat -- Chief Financial Officer

Thanks, Tien. This past quarter we made a lot of progress to improve our operational execution, which is reflected in our Q2 financial results. Let me start my comments today by reviewing our key operating metrics and cover our financial results and finish with our outlook for the third quarter and the remainder of the fiscal year.

Beginning with our customers, we ended the quarter with 566 customers over $100,000 ACV, which reflects a net add of 20 customers over the quarter and 19% year-over-year growth. As Tien mentioned, we've made changes to our go-to-market methodology and updated our sales approach. We're optimistic about these changes, but it will take time to realize the benefits in terms of landing new logos and expanding with existing customers. The good news is that we continue to see a steady trend of increasing average ACV within this customer base, which means our customers are growing on our platform and placing more value on our products. Customers over $100,000 ACV now represents 88% of our annual recurring revenue in Q2.

Our second key operating metric dollar-based retention ended 107% down from the prior quarter. Keep in mind, this metric is measured on a trailing 12 month basis. So RevPro product integration challenges over the past two quarters have limited the cross-sell motion into our Zuora's [Phonetic] customer base and impact expansion opportunities.

Additionally, we saw a slight increase in churn percentage driven mostly by down sales, with some customers renewed with lower transaction volume in the quarter. We've historically talked about a range of 108% to 112% for dollar-based retention, but this metric may see fluctuations for the next couple of quarters. Given the strong comparison last year and as we continue working to improve our overall sales motion.

Longer term, and as we talked about during our investor session in June, we expect dollar-based retention trend higher as our platform innovations help make our products more mission critical and stickier for our customers.

Turning to transaction volume. We processed over $10.1 billion in transaction volume through our billing platform last quarter, which represents 35% year-over-year growth. Transaction volume continues to be the largest contributor to our upsell motion. As I mentioned on prior calls, there can be quarterly movements in this metric due to their customer billing practices or large customer go live as specific quarter. Given these movements is often helpful to look at transaction volume on a trailing 12 month basis when you did that results in 40% growth.

Now let's talk about how all these operating metrics translate to our financial results. Starting with revenue. Subscription revenue grew 24% to $50.6 million in the quarter. Professional services revenue grew 12% compared to last year to $19.1 million. Sequentially, professional services revenue represented a 14% increase from the prior quarter as services revenue benefited from seasonality in our business, including three additional days compared to Q1. This led to total revenue growth of 21% year-over-year to $69.7 million and ahead of our guidance expectations.

Looking at our margins, we saw improvements in our gross margin and operating efficiency metrics over the past quarter. Non-GAAP subscription gross margins remained at 78%. As we continue to maintain healthy rates. We saw a good improvement on non-GAAP professional services gross margin compared to Q1 reaching breakeven levels for the quarter. This is sequential improvement was a result of some seasonal benefits combined with improved management oversight of the services business in Q2.

Our non-GAAP operating margin was negative 14% for Q2, coming in well ahead of expectations. In addition to revenue our performance, we realized meaningful cost savings in the quarter, while we had some expense shift to the second half of the year. Most of the savings in a quarter came from improved productivity efficiency. We said all along, it's important for us to invest for future growth, but we want to do in our prudent and scalable manner in growing the business.

Turning to our sales efficiency, we measure this through our GEI or Growth Efficiency Index is calculated by dividing our trailing 12 months non-GAAP sales and marketing expense of $93.2 million by the year-over-year increase in trailing 12 month subscription revenue $43.6 million. A lower number means we're spending less to acquire each incremental dollars of subscription revenue. We maintained our GEI 2.1 for Q2 similar to Q1.

Our long-term expectations are to maintain or improve the GEI as our business grows. But as I mentioned before, this efficiency metric may see movements as we work through our sales execution changes.

Let me now turn to our billings in free cash flow. As you know, quarterly billings can fluctuate due to a number of factors. And we saw this play out over the last couple of quarters. We noted on the Q1 call that we saw a higher rate of early renewal activity. We need to a benefit in Q1 billings with a possible detriment to Q2 billings. As we expected, Q2 billings was impacted by these early renewals in Q1 resulting in calculate subscription billings growth of 14% year-over-year to $48.5 million and calculated total billings of $67.6 million.

Additionally, we saw our lower mix percentage for annual billings terms compared to the historical average, which further impacted the growth rate. In order to normalize for these quarter-to-quarter factors, we generally look at billings growth over a longer period of time. To looking on a trailing six month basis, calculate subscription billings grew 22%. We know that there will be continued quarterly billings fluctuations. So looking over the full year, we estimate our fiscal 20 subscription billings growth to be slightly lower than our subscription revenue growth rate for the year. Beyond that and longer term, we expect 12 month trailing subscription billings attract similarly with our longer term revenue growth rates.

Moving to cash flow. Q2 free cash flow is negative $11.5 million compared to negative $7.3 million for the same quarter a year ago. Most of the difference resulted from our ESPP plan that reduced free cash flow by approximately $2.6 million in the quarter and had a similar impact in Q4 of last year.

As we move forward, we can expect to see a negative free cash flow impact in Q2 and Q4 and a positive impact in Q1 and Q3 each year resulting from stock issuances from the plan. For the full year, we expect free cash flow to be modestly better than the negative $40 million we targeted on the Q1 call. Excluding the $9 million of facility spend expected to follow H2 [Phonetic] move, free cash flow for the year would be better than negative $31 million, reflecting an improvement of more than $6 million compared to last year. We expect the majority of the facility spend to happen this quarter. So Q4 free cash flow should be better than Q3.

Lastly, we ended the quarter with $174.6 million in cash and cash equivalents remain fully funded against our current operating plan. Another item to note for your models are fully diluted share count as of July 31 was $126 million using the treasury stock method.

Before we move to our forward-looking guidance, a couple of quick comments. As you can see, we're making meaningful changes to improve our execution have been working hard to put the issues we described in our Q1 call behind us. I hope you can see that we're making good progress, but as we have said, it will take some time for our changes to take hold.

Second, we are confident in our operating model and our ability to invest prudently, and create leverage as we grow the business. We know that managing the -- the balance between operating margin improvement and sustainable growth is how we deliver the long-term value to our shareholders and we're focused on doing just that.

Now let me close out with our guidance numbers. For Q3, we are currently expecting total revenue of $69 million to $71 million. Subscription revenue of $51.5 million to $52.5 million. Non-GAAP operating loss of $10.5 million to $9.5 million. And non-GAAP net loss per share of $0.10 to $0.09 assuming weighted average shares outstanding approximately $111.8 million.

For the full year fiscal '20, we are currently expecting total revenue of $273.5 million to $278 million. Subscription revenue to $202.5 million to $206 million. Non-GAAP operating loss of $44 million to $42 million. This includes $1.3 million of additional temporary rent expense associated with H2 move expected in the second half of this year. And non-GAAP net loss per share $0.40 to $0.38 assuming weighted-average shares outstanding of approximately $111.1 million.

With that, we're happy to take your questions. Operator?

Questions and Answers:

Operator

[Operator Instructions] And your first question is from John DiFucci with Jefferies. Your line is open.

Ross -- Jefferies -- Analyst

Hi. This is Ross [Phonetic] on for John DiFucci. Thank you for taking my questions. I just had two quick questions. One was on the net dollar retention. You mentioned that fell to 107%. Could you provide some additional color, because transaction volume seem to have increased impressively this quarter. So was there any change in like renewal rates or anything else?

Tyler Sloat -- Chief Financial Officer

Yeah, I can take. Hey, Ross. This is Tyler. So we said there was really two things that impacted in net dollar retention. The cross-sell motion between Billings and RevPro, we kind of -- we've talked about that after Q1 call that we kind of pause that until we can get a bunch of our backlog customers successful. And because of that slows down your upsell motion. Right? And we talked about the transaction volume as a reminder. The purchases of transaction volume precedes the actual volume that flows through our system. So as we report each quarter, right, that's probably reflective of something that's already been purchased. And what we mentioned in the call just now that sometimes as customers get to the end of their contract terms, they renew for something less than what they would have had. So we did see some down sell, which pushes down your dollar net retention a little bit.

Tien Tzuo -- Founder and Chief Executive Officer

Yeah, just to add some color to that, right, just visualize some customers will sign a three year contract with expectations of -- perhaps even something they launched being generated a certain amount of revenue, some percent of those customers are going to way exceed their launch expectations, right. And that results and upsells, but this quarter we did see a few of the renewals where they did not hit their launch expectations and resulted in a reduction of the transaction volume. And so we're going to see some quarter-to-quarter fluctuations depending on the mix of that specific quarter.

Tyler Sloat -- Chief Financial Officer

But as a reminder, the transaction volume we process is not really a correlation for upsells in that quarter.

Ross -- Jefferies -- Analyst

Got it. Thank you for that. And just one quick follow up, if I may. So thank you for the comments on the sales. The changes that you've made to the sales execution, I just had -- so you mentioned an updated sales formula. Just wanted to ask a little bit further on that. Has the go-to-market motion changed dramatically or how has the conversations that you have with customers changed?

Tien Tzuo -- Founder and Chief Executive Officer

Yeah, I wouldn't say it's changed dramatically. I think, what I was trying to highlight was -- if you think four years ago, certainly some of the company mixes are little bit different. We see a lot of manufacturing companies, we see utility companies. But the bigger change, I think is four years ago we had to do a lot more work convincing people that billing was important. And now these companies are coming to us. And like I mentioned, the good news is they're looking for a billing solution. Right? We don't have to do as much work, but there's still a mix of maturity. And so some companies, we have four motions if you want to simplify it down. Companies might be coming to us saying, we want to launch something. Companies might be coming to us saying, look, we put in a commercial billing system where both are homegrown billing systems years ago and it's no longer working. It might be coming to us saying, we're doing more and more revenue recognition spreadsheets, because of all these new business models and that's killing us or the SIs might be saying, look, as part of your digital transformation, you've got to do a complete pull-to-cash transformation. And so, so honing down on these four types and updating our sales formula to -- to more match our customers are buying today was part of what we're doing. But the conversations are still the same conversations.

Ross -- Jefferies -- Analyst

Perfect. Thank you, again.

Tien Tzuo -- Founder and Chief Executive Officer

You bet.

Operator

Your next question comes from the Scott Berg with Needham. Your line is open.

Tien Tzuo -- Founder and Chief Executive Officer

Hi, Scott.

Scott Berg -- Needham & Co -- Analyst

Hi, Tien, hi, Tyler. Thanks for take my questions. I guess, Tien would start off with the sales changes in the quarter, and then roll that forward to comments on your overall pipeline with the changes that you made in the quarter. How did sales trend relative to your expectations when you started the journey around these changes in the sales arc?

Tien Tzuo -- Founder and Chief Executive Officer

The results haven't changed significantly. One of the things that we don't -- we didn't touch on, because the work was really done early was -- we did have a much tighter forecasting, much more disciplined forecasting process as well. And what we're seeing really is the learning of the new reps, right? Now that the -- the change in the structure that we've done right, allowing our newer reps to roll into more experienced reps, giving them a more specific sales formula, a recipe that matches our customers want to buy, right. These are the things are just general focus on an operational execution. And we're definitely seeing early signs of this when I talk to the reps, right, when I joint deals and I see how they're -- how they're doing. But we just want a dose of caution that typically these things do take several quarters to play out and really crystallize inside, right, organizational change does take time.

Scott Berg -- Needham & Co -- Analyst

Okay. Fair enough. And then, how would you characterize the sales pipeline today relative to a year ago?

Tien Tzuo -- Founder and Chief Executive Officer

We still see strong demand. You can feel it, you can feel it when you look at all these news reports. Companies are continue to move aggressively into launching subscription services or finding that their subscription services are doing really, really well and looking to scale these subscription services. And so, I don't think there's any change in the market. This is really our own execution.

Scott Berg -- Needham & Co -- Analyst

Got it. And then a quick follow up for Tyler. Tyler, on the professional services did break -- in a breakeven level in the quarter, as you mentioned. How should we feel the -- how should we view the margins on that business going forward? Is this kind of a new level that you can sustain? Or will this may be kind of fallback in that low burn rate that you've seen over the last couple of years? Thank you.

Tyler Sloat -- Chief Financial Officer

Yeah, I do think there's going to be some quarter-to-quarter fluctuation there, Scott, we -- and I think we could shift to some low burn. Our goal is to run that business on a non-GAAP breakeven basis. We experience some really positive things on the services side this quarter in terms of utilization rates and things like that, compared to Q1, we benefited from a couple of extra days. But I could see us, we could see some fluctuations, especially as we kick and hiring and you have people ramping and things like that as well. So I wouldn't expect it to just be breakeven -- because it fluctuates slightly. But again, the goal is to breakeven from an non-GAAP perspective.

Tien Tzuo -- Founder and Chief Executive Officer

I'm really happy with the operational discipline we have in that part of the business. So, of course, there's always going to be some quarter-to-quarter fluctuations, but the discipline the rigor and how we manage our businesses is fairly solid.

Scott Berg -- Needham & Co -- Analyst

That's all I have. Thanks for taking my questions.

Tien Tzuo -- Founder and Chief Executive Officer

Thanks, Scott.

Operator

Your next question is from Chris Merwin with Goldman Sachs. Your line is open.

Christopher Merwin -- Goldman Sachs -- Analyst

Hi, thanks for taking my questions. Hi, Tien. I just wanted to pause real quick on net retention. As I understand it, just in terms the way it works, you get the customers you pay, kind of the platform fee and the volume blocks. And to the extent that they bought bigger box than they've thought initially, that's just a function of overestimating kind of the pace of their growth. Just wondering, if I could better understand just those things down so that you saw in the quarter that's something that should probably correct in time. And then I had a follow up. Thank you.

Tien Tzuo -- Founder and Chief Executive Officer

Yeah, that's right. And it really speaks to just the range of customers we have, right. So if you're talking to a company that's they're well on their way, their subscription journey, perhaps a 100% of businesses subscriptions, maybe they're $100 million company, maybe they're a $1 billion company. You're obviously not going to see that bigger range. Right? Because they can estimate. But we do sell a lot of situations to a launch or an early stage subscription offering where you just going to see a lot of variation, right. They're committed to the offering, they might sign a two or three year contract with a set of expected volume that does not necessarily materialize.

The other factors we sometimes see is some of our customers will get acquired into a bigger company and you see both the facts you'll see the bigger companies able to accelerate that division's revenue. You also see not a surprise rate, you guys to see those other companies where the bigger company actually slows down the acquired companies revenues. And so, you're going to see some level of variation. Just given -- it is I mean, what we believe is, as we get bigger as the industry matures, rate as we could continue to get bigger and bigger levels of scale, that variation will reduce over time. But for now, you are going to see some quarter-to-quarter fluctuations on that.

Christopher Merwin -- Goldman Sachs -- Analyst

Okay. Great. And then Tien, maybe one more for you. Just on that platform and then just guess there is any feedback that you've got from customers for -- are there any initial deployments out there? I'm just curious, like what type of customers are taking this product, what they're using it for and kind of how we think about this folding into the model and in time given net retention or those other APIs. Thanks.

Tien Tzuo -- Founder and Chief Executive Officer

We just announced this platform in June. Certainly it's been in a more of a limited availability before that. And so, this is a fairly new product. And the early signs are that the early signs are, well, call these last mile customizations. A lot of it is around things like orchestrating the customer experiences, right, where you see a lot of variation in terms of how companies want to operate from one company. Every company has a very specific experience. They're trying to create for their customers, whether it's changing account profile or signing on a new customer. The new customer change or out on products. And in the platform, specifically the workflow tool, really allows them to do those last mile customizations without a lot of work. And so previously, they would have to build a lot of these things with custom code. Find a place to host it. Right? Do a whole bunch of calls back to our APIs. Now they could do it in platform, if you will. And so the early signs are that the amount of work it takes to do any specific sales flow is being cut down by 70%, 80% or 90%.

All right. Again, this is early signs of the customers that are using it. So you're seeing them be able to customize our overall billing system. Write down that last mile because customization to their specific needs. I flagged in couple of metrics on an earlier conversation. Well, how does that translate, so that should translate into faster deployments right. That should translate into easier last mile customizations and that should translate into a wider footprint that we have if you measure that, say, by the number of processes that we cover inside the application itself. That ultimately, hopefully translates [Speech Overlap] stick your product and faster growth.

Christopher Merwin -- Goldman Sachs -- Analyst

Perfect. Thank you.

Tien Tzuo -- Founder and Chief Executive Officer

Thanks, Chris.

Operator

[Operator Instructions] Your next question is from the Stan Zlotsky with Morgan Stanley. Your line is open.

Mark Randy -- Morgan Stanley -- Analyst

Hey, guys. Mark Randy [Phonetic] on for Stan Zlotsky here. Thanks for taking my question. So there's a press release out. You actually note on your script from Omoove, an Italian car sharing company. So about that, I mean, have you guys seen any traction outside of Western Europe where you've been seeing a lot of traction, like maybe APAC or I'm just kind of more on that international opportunity.

Tien Tzuo -- Founder and Chief Executive Officer

Yeah, what we do see in the subscription economy certainly is not limited to any specific countries. And we continue to see 30% of our business is coming from an international regions. Just this past quarter, for example, our Nordic region is really starting to come on strong. The ball bearings company that we talked about is in that part of the world. And so international becomes -- this is still remains really, really important. We still think there's a lot of growth opportunity in the countries that we're already in. Right? So this is being the Western Europe. This may be Japan. This may be Australia, New Zealand. And so right now, I wouldn't say that we're focused on expanding beyond the countries that we're already in.

Mark Randy -- Morgan Stanley -- Analyst

Awesome, thank you. And then maybe one quick follow up. I think customers over a $100,000 in ACV. It grew 19% year-over-year this quarter. I think that's like compared to 28% a year ago and 24% last quarter. Anything in particular for this any like large deals kind of slip in or out of the quarter. And how should we think about this moving forward? That's it for me. Thanks, guys.

Tien Tzuo -- Founder and Chief Executive Officer

No, let me just remember we continue to obviously the closed companies that are $700,000 [Phonetic], we see this as the start-up tech community and our goal is, if you close 10 companies, there are two of them will become the next Zendesk, right the next Box, next Foresight. And we certainly see that happening. We also flagged in the last in our Investor Day back in June that if we're -- at a $1 billion four times [Phonetic] growth, we wouldn't expect for four times growth in our customer base. And so we would expect that our footprint within our existing customers continues to grow as well. And so and you're going to continue to see that effect. But I wouldn't say there's anything to call out with that.

Mark Randy -- Morgan Stanley -- Analyst

Got it. Thank you.

Operator

And your next question is from Scott Berg with Needham. Your line is open.

Scott Berg -- Needham & Co -- Analyst

Hi, Tien, just a quick follow-up. I forgot to ask about this Nike deal that you guys look like you may be signed in the quarter or the prior quarter. Can you help us understand maybe how nike is using your -software?

Tien Tzuo -- Founder and Chief Executive Officer

I think you're talking about a commentary that we did on Nike's announcement, and so we are working with a number of fitness companies. I would say, all right, but we don't have any specific announcement of a specific company. We're just seeing that the fitness sector, if you will is very much in motion. And we took Nike's announcement of their offering as a chance to comment on that broader trend that we see. We're really excited about fitness. I mean, that the bigger picture is, if you're a consumer and you have called it $20, $50 to spend every month, where do you spend it? Right. You spend it on a gym membership. Do you spend it on peloton? Right. Do you spend it on one of these fitness applications? Do you spend it on these boot camp places right. And we're seeing this all really come to a head and there's a lot of disruption and innovation happening in the entire sector.

Scott Berg -- Needham & Co -- Analyst

Got it. Helpful. Thank you.

Operator

[Operator Closing Remarks]

Duration: 38 minutes

Call participants:

Joon Huh -- Vice President of Investor Relations

Tien Tzuo -- Founder and Chief Executive Officer

Tyler Sloat -- Chief Financial Officer

Ross -- Jefferies -- Analyst

Scott Berg -- Needham & Co -- Analyst

Christopher Merwin -- Goldman Sachs -- Analyst

Mark Randy -- Morgan Stanley -- Analyst

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