Consumers and businesses are signing up for more subscription services—covering everything from streaming video to software. Customers often prefer the product experience over actual ownership., provider of a cloud-based subscription management software platform, is a play on the continued strong growth of the subscription economy.
In fiscal 2019 , Zuora’s total revenue rose 40% to $235.2 million. Transaction volume processed on the platform last year advanced 45% , signaling solid progress for the subscription economy in general. At the post-IPO high of $37.78 reached last June, the valuation had gotten too far ahead of the fundamentals. The stock then dropped sharply into the end of last year, hitting a new post-IPO low of $15.56 in late December. Two months later, the shares had rebounded 58%.
So far, Zuora is having the most success selling its platform into the technology and media verticals, which makes sense given the two industries have fully embraced subscription offerings. The tech vertical alone accounts for fully half of Zuora’s business. That’s good and bad because tech is obviously a healthy and growing industry, but 50% concentration in any one vertical elevates the risk.
Up-sells represent half of Zuora’s bookings. Within up-sells, transaction-volume additions last year accounted for 80% of the business, leaving product up-sells at just 20%. Zuora needs to step up the focus on selling additional products into the customer base. Investors tend to award higher valuations to software vendors with robust platforms made up of multiple products.
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