Zuora, Inc. · Zuora, Inc. (Exact name of Registrant as specified in its charter) Delaware 7372...

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Table of Contents As filed with the Securities and Exchange Commission on March 16, 2018 Registration No. 333- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Zuora, Inc. (Exact name of Registrant as specified in its charter) Delaware 7372 20-5530976 (State or other jurisdiction of incorporation or organization) (Primary Standard Industrial Classification Code Number) (I.R.S. Employer Identification Number) 3050 South Delaware Street, Suite 301 San Mateo, California 94403 (800) 425-1281 (Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices) Tien Tzuo Chairman of the Board of Directors and Chief Executive Officer Zuora, Inc. 3050 South Delaware Street, Suite 301 San Mateo, California 94403 (800) 425-1281 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: Gordon K. Davidson, Esq. Jeffrey R. Vetter, Esq. Faisal Rashid, Esq. Ran D. Ben-Tzur, Esq. Fenwick & West LLP 801 California Street Mountain View, California 94041 (650) 988-8500 Jennifer Pileggi, Esq. Senior Vice President, General Counsel, and Secretary Zuora, Inc. 3050 South Delaware Street, Suite 301 San Mateo, California 94403 (800) 425-1281 Steven E. Bochner, Esq. Robert G. Day, Esq. Andrew D. Hoffman, Esq. Wilson Sonsini Goodrich & Rosati, P.C. 650 Page Mill Road Palo Alto, California 94304 (650) 493-9300 Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, or Securities Act, check the following box. ☐ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐ If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934, as amended. (Check one): Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ (Do not check if a smaller reporting company) Smaller reporting company ☐ Emerging growth company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐ CALCULATION OF REGISTRATION FEE Title of Each Class of Securities to be Registered Proposed Maximum Aggregate Offering Price (1)(2) Amount of Registration Fee Class A common stock, par value $0.0001 per share $100,000,000 $12,450 (1) Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act. (2) Includes the aggregate offering price of additional shares that the underwriters have the option to purchase. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

Transcript of Zuora, Inc. · Zuora, Inc. (Exact name of Registrant as specified in its charter) Delaware 7372...

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    As filed with the Securities and Exchange Commission on March 16, 2018Registration No. 333-

    UNITED STATES

    SECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549

    FORM S-1

    REGISTRATION STATEMENTUNDER

    THE SECURITIES ACT OF 1933

    Zuora, Inc.(Exact name of Registrant as specified in its charter)

    Delaware 7372 20-5530976

    (State or other jurisdiction ofincorporation or organization)

    (Primary Standard IndustrialClassification Code Number)

    (I.R.S. EmployerIdentification Number)

    3050 South Delaware Street, Suite 301San Mateo, California 94403

    (800) 425-1281(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

    Tien Tzuo

    Chairman of the Board of Directors and Chief Executive OfficerZuora, Inc.

    3050 South Delaware Street, Suite 301San Mateo, California 94403

    (800) 425-1281(Name, address, including zip code, and telephone number, including area code, of agent for service)

    Copies to:

    Gordon K. Davidson, Esq.Jeffrey R. Vetter, Esq.

    Faisal Rashid, Esq.Ran D. Ben-Tzur, Esq.Fenwick & West LLP801 California Street

    Mountain View, California 94041(650) 988-8500

    Jennifer Pileggi, Esq.Senior Vice President, General Counsel, and

    SecretaryZuora, Inc.

    3050 South Delaware Street, Suite 301San Mateo, California 94403

    (800) 425-1281

    Steven E. Bochner, Esq.Robert G. Day, Esq.

    Andrew D. Hoffman, Esq.Wilson Sonsini Goodrich & Rosati, P.C.

    650 Page Mill RoadPalo Alto, California 94304

    (650) 493-9300

    Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, or

    Securities Act, check the following box. ☐If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration

    statement number of the earlier effective registration statement for the same offering. ☐If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement

    number of the earlier effective registration statement for the same offering. ☐If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement

    number of the earlier effective registration statement for the same offering. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth

    company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of1934, as amended. (Check one):Large accelerated filer ☐ Accelerated filer ☐Non-accelerated filer ☒ (Do not check if a smaller reporting company) Smaller reporting company ☐

    Emerging growth company ☒If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accountingstandards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

    CALCULATION OF REGISTRATION FEE

    Title of Each Class of Securities to be Registered

    Proposed Maximum Aggregate

    Offering Price (1)(2) Amount of

    Registration FeeClass A common stock, par value $0.0001 per share $100,000,000 $12,450(1) Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act.(2) Includes the aggregate offering price of additional shares that the underwriters have the option to purchase.

    The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a

    further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or untilthe Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

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    The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and ExchangeCommission is effective. This prospectus is not an offer to sell these securities, and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is notpermitted.

    Subject to Completion. Dated March 16, 2018.

    Shares

    Class A Common Stock

    This is the initial public offering of shares of Class A common stock of Zuora, Inc.

    We are offering shares of our Class A common stock.

    We have two classes of authorized common stock, Class A common stock and Class B common stock. The rights of the holders of Class A common stock andClass B common stock are identical, except with respect to voting and conversion rights. Each share of Class A common stock is entitled to one vote per share. Eachshare of Class B common stock is entitled to ten votes per share and is convertible into one share of Class A common stock. Outstanding shares of Class B commonstock will represent approximately % of the voting power of our outstanding capital stock immediately following the completion of this offering, with ourdirectors, executive officers, and 5% stockholders, and their respective affiliates, holding approximately %, assuming in each case no exercise of theunderwriters’ option to purchase additional shares.

    Prior to this offering, there has been no public market for our Class A common stock. It is currently estimated that the initial public offering price per share will bebetween $ and $ . We intend to apply to list our Class A common stock on the New York Stock Exchange under the symbol “ZUO.”

    We are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012 and, as such, have elected to comply withcertain reduced public company reporting requirements.

    Seethesectiontitled“RiskFactors”beginningonpage13toreadaboutfactorsyoushouldconsiderbeforebuyingsharesofourClassAcommonstock.

    Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon theaccuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

    Per Share Total Initial public offering price $ $ Underwriting discounts (1) $ $ Proceeds, before expenses, to Zuora $ $ (1) See the section titled “Underwriting” for a description of the compensation payable to the underwriters.

    To the extent that the underwriters sell more than shares of Class A common stock, the underwriters have the option to purchase up to an additional shares from us at the initial public offering price, less the underwriting discounts and commissions.

    The underwriters expect to deliver the shares against payment in New York, New York on , 2018.

    Goldman Sachs & Co. LLC Morgan Stanley Allen & Company LLC Jefferies

    Canaccord Genuity Needham & Company

    Prospectus dated , 2018.

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    WELCOME TO THE SUBSCRIPTION ECONOMY zuora

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    THIS IS THE 21ST CENTURY. WE’RE ALL IN THE RELATIONSHIP BUSINESS. zuora

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    TABLE OF CONTENTS Page Prospectus Summary 1 Risk Factors 13 Letter From Zuora CEO and Co-Founder Tien Tzuo 51 Special Note Regarding Forward-Looking Statements 54 Industry and Market Data 56 Use of Proceeds 58 Dividend Policy 58 Capitalization 59 Dilution 62 Selected Consolidated Financial Data 65 Management’s Discussion and Analysis of Financial Condition and Results of Operations 67 Business 98 Management 120 Executive Compensation 130 Certain Relationships and Related Party Transactions 141 Principal Stockholders 142 Description of Capital Stock 145 Shares Eligible for Future Sale 153 Material U.S. Federal Tax Consequences to Non-U.S. Holders 156 Underwriting 161 Legal Matters 169 Experts 169 Where You Can Find Additional Information 169 Index to Consolidated Financial Statements F-1

    Through and including , 2018 (the 25th day after the date of this prospectus), all dealers effecting transactions in thesesecurities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation todeliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

    Neither we nor the underwriters have authorized anyone to provide any information or to make any representations other than those contained in thisprospectus or in any free writing prospectuses we have prepared. We and the underwriters take no responsibility for, and can provide no assurance as tothe reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only undercircumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is accurate only as of the date of this prospectus,regardless of the time of delivery of this prospectus or of any sale of the Class A common stock.

    For investors outside of the United States: Neither we nor the underwriters have done anything that would permit this offering or possession ordistribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselfabout, and to observe any restrictions relating to, this offering and the distribution of this prospectus outside of the United States.

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    PROSPECTUS SUMMARY

    Thissummaryhighlightsinformationcontainedelsewhereinthisprospectusanddoesnotcontainalloftheinformationyoushouldconsiderinmakingyourinvestmentdecision.BeforedecidingtoinvestinsharesofourClassAcommonstock,youshouldreadthissummarytogetherwiththemoredetailedinformation,includingthesectionstitled“RiskFactors,”“Management’sDiscussionandAnalysisofFinancialConditionandResultsofOperations,”and“SpecialNoteRegardingForward-LookingStatements,”andourconsolidatedfinancialstatementsandtheaccompanyingnotes,providedelsewhereinthisprospectus.Unlessthecontextindicatesotherwise,theterms“Zuora,”“theCompany,”“we,”“us,”and“our”refertoZuora,Inc.,togetherwithitsconsolidatedsubsidiaries,unlessotherwisenoted.Seethesectionstitled“RiskFactors”and“SpecialNoteRegardingForward-LookingStatements.”OurfiscalyearendisJanuary31,andourfiscalquartersendonApril30,July31,October31,andJanuary31.OurfiscalyearsendedJanuary31,2016,2017,and2018arereferredtohereinasfiscal2016,fiscal2017,andfiscal2018,respectively.

    ZUORA, INC.

    Zuora’s Vision and Mission

    We provide cloud-based software on a subscription basis that enables any company in any industry to successfully launch, manage, andtransform into a subscription business.

    Our vision is simple. We call it “The World Subscribed,” and it’s the idea that one day every company will be a part of the SubscriptionEconomy.

    Our mission is to enable all companies to be successful in the Subscription Economy.

    Overview

    For at least the last hundred years, companies have operated primarily under a product-centric business model, where the goal was to make,ship, and sell more units—more cars, more clothes, more computers.

    Today, consumers and businesses are realizing that they no longer have to always buy products. Why buy a DVD, CD, movie, or song whenyou can subscribe to streaming video and music services? Why buy software or hardware when you can subscribe to software-as-a-service or cloudcomputing services? Why buy a car when you can subscribe to ride-sharing services?

    Ten years ago, we coined the term “Subscription Economy” to describe this new world. We foresaw a new business landscape in whichtraditional product or service companies shift toward subscription business models. Our vision redefines subscriptions in a broader context than asimple monthly fee. Our vision reflects the wide range of business models in the Subscription Economy, where products and services can be pricedbased on usage, consumption, and outcomes, and the value of a company’s relationships with its customers is critical. Forrester Research has definedthis as “The Age of the Customer,” a 20-year business cycle in which the most successful enterprises will reinvent themselves to systematicallyunderstand and serve increasingly powerful customers. This shift started with software, but it is spreading to many other industries that affect our lives,including media and entertainment, transportation, publishing, industrial goods, and retail.

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    This shift in business models is creating a unique opportunity to disrupt the current enterprise software landscape. Traditional enterpriseresource planning, or ERP, systems were built in the 1970s for product-based businesses, and these product-centric architectures do not adequatelysupport the new requirements that companies face in the Subscription Economy. This new Subscription Economy requires different systems formanaging the dynamic nature of ongoing relationships with subscribers.

    We believe we are well-positioned to capitalize on this shift in business models and have spent the last ten years building and selling a leadingand differentiated solution, and enhancing our proprietary deployment methodology and business model.

    Architected specifically for dynamic, recurring subscription business models, our solution functions as an intelligent subscription managementhub that automates and orchestrates the entire subscription order-to-cash process, including billing and revenue recognition. Our cloud-based softwaresolution is the new system of record for subscription businesses.

    We currently serve more than 950 customers in over 30 different countries across most industries, including 15 of the Fortune 100 as ofJanuary 31, 2018. Unsurprisingly, customers pay for our platform under a subscription-based model, and this model allows us to grow as theSubscription Economy grows. For fiscal 2016, fiscal 2017, and fiscal 2018, our total revenue was $92.2 million, $113.0 million, and $167.9 million,respectively. We have made significant investments to grow our business, including in sales and marketing, infrastructure, operations, and headcount.As a result, we incurred net losses for fiscal 2016, fiscal 2017, and fiscal 2018 of $48.2 million, $39.1 million, and $47.2 million, respectively.

    Industry Background

    Digital Technologies Have Changed the Consumption Preferences of Both Consumers and Businesses

    Today, consumers and businesses function in a digital world, a world of cloud and mobile technologies, internet-enabled commerce, big data,and connected devices comprising the “Internet of Things,” or IoT. This new world has irreversibly changed consumer expectations. They wantfreedom: freedom to access products and services on their own terms—where, when, and how they want. They increasingly value access overownership and care more about outcomes and experiences as opposed to simply product specifications or features.

    Businesses are Realizing the Benefits of Subscription Business Models

    These expectations and the proliferation of new digital services and markets are leading to increased demand in “as-a-service,” or subscription,business models. Businesses can benefit from the many strategic advantages in adopting subscription business models, including:

    • New revenue streams and new growth opportunities;

    • Better data-driven decisions;

    • Improved revenue predictability; and

    • Increased customer lifetime value.

    This New Subscription Economy is Transforming Major Industries

    In industry after industry, new disruptors are using subscription business models to upend traditional industry dynamics. Established businessesare realizing they need to innovate or risk being

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    disrupted. As incumbents discover new ways of generating revenue from their existing assets and customers, it is becoming increasingly clear thatmuch of their future growth can come from subscriptions.

    The Subscription Economy Index, or SEI, our study of long-term Zuora customers, indicates that total amounts invoiced for subscription-basedproducts and services by customers that were invoicing through our platform for at least ten quarters grew at an average annual rate of 17.6% for theperiod from January 1, 2012 to September 30, 2017. The SEI includes customers that have been invoicing through our ZuoraCentralPlatformfor atleast ten quarters, except customers that are in the process of importing data from another billing system or migrating off of our platform. As of October1, 2017, 304 customers had been invoicing through our ZuoraCentralPlatformfor at least ten quarters and were not in the process of importing datafrom another billing system or migrating off of our platform, and 300 of those customers were included in the November 2017 SEI. We excluded fourcustomers that were otherwise eligible for inclusion in the SEI for various reasons including non-standard implementations or due to unusual billing orusage patterns. The SEI does not include ZuoraRevProcustomers. For a discussion of the methodology used in preparing the SEI, see the sectiontitled “Industry and Market Data.”

    The Subscription Economy Represents a Once-in-a-Century Shift in How Businesses Operate

    We believe we are still in the early stages of the Subscription Economy, with an inevitable multi-industry and multi-decade global shift towardsubscription business models.

    To be successful in the Subscription Economy, businesses need to change their mindsets from one-time product sales to earning andmaintaining long-term customer relationships. To deliver on the promise of the Subscription Economy, businesses need freedom from old technologiesand business models of the product-centric era.

    New Requirements and the Limitations of Traditional Approaches

    Requirements for Success in the Subscription Economy

    Orienting businesses around the subscriber and maintaining an ongoing relationship with subscribers are prerequisites for success withsubscription business models. To succeed in this new environment, businesses must:

    • Offer recurring or consumption-based pricing models;

    • Offer seamless customer experiences;

    • Quickly adapt operations;

    • Track subscriber lifecycles; and

    • Access and react to subscription metrics.

    Limitations of Traditional ERP Systems and In-House Custom Built Systems

    Traditional ERP systems were not specifically designed to meet the needs of successful subscription business models in the digital era. Theywere built for the product era and designed to support linear, order-based, sequential, and one-time transactions that focus on selling and shippingproducts to customers and accounting for those transactions.

    To meet the needs of the Subscription Economy, ERP systems would need to be completely re-architected. Simply adding customizations toERP systems does not adequately solve for the growing complexities of the Subscription Economy.

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    Similarly, in-house custom built systems usually require a significant amount of engineering and IT resources to build and maintain andfrequently prove to be inadequate as companies seek to expand their offerings and operations.

    Market Opportunity

    We believe the global, multi-decade shift across industries toward the Subscription Economy is creating a significant opportunity for subscriptionmanagement systems.

    The market size for our current core cloud-based billing and revenue recognition products was nearly $2.0 billion in 2017 and is expected to be$9.1 billion by 2022, growing at a 35% CAGR, according to MGI Research. Additionally, Gartner estimates that spending on ERP software is expectedto reach $40.6 billion by 2021. As ERP systems cannot fully address the needs of companies in the Subscription Economy, we believe we are well-positioned to take a share of this spend as the Subscription Economy continues to grow.

    Solution

    Our solution functions as an intelligent subscription management hub that automates and orchestrates the entire subscriptionorder-to-cash process. Our cloud-based software solution is the new system of record for subscription businesses. Zuora offers businesses the abilityto meet the constantly-evolving needs of their subscribers, capitalize on new revenue opportunities, and accelerate business growth.

    We have developed a deployment methodology designed to ensure that our customers can successfully acquire and nurture their subscribersby offering a flexible pricing model and automated billing, streamlined collection, and efficient accounting features.

    Benefits

    • Reduce Time to Market. Our solution significantly reduces the time required to go-to-market with new subscription offerings and to iterate

    on the pricing and packaging of existing offerings, enabling businesses to quickly react without having to re-code or re-engineer back officesystems.

    • Increase Operational Efficiencies. In the Subscription Economy, customers regularly make changes to their subscriptions. Zuoraautomates these processes and reduces the impact of such changes on businesses.

    • Free Up IT and Engineering Resources. Our cloud-based solution reduces both system complexity and costs. With Zuora, engineering

    and IT departments no longer need to build in-house custom systems or customizations for their ERP systems to keep up with marketchanges, ongoing customer demands, and new order-to-cash processes.

    • Establish a Single System of Record. Zuora captures financial and operational data, enabling subscription businesses to have a singlesystem of record rather than having to reconcile data from multiple systems.

    • Make Customer Data-Driven Decisions. Because our solution serves as a single source of data and information for subscribers,

    companies use Zuora to gain insights into customer behavior. This helps them understand their subscribers better, predict upsellopportunities, and increase customer retention.

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    • Access Growing Ecosystem of Order-to-Cash Partners. Our solution has over 50 pre-built connectors to various

    order-to-cash partners, including payment gateways, tax vendors, general ledgers, and customer relationship management, or CRM,systems.

    • Support Rapid International Expansion. With over 26 pre-built payment gateways, over 150 supported currencies, and over 20supported payment methods, our solution enables companies to quickly expand internationally.

    Competitive Strengths

    We believe the following competitive advantages enable us to maintain and extend our leadership as the system of record for companies in theSubscription Economy:

    • Proven track record with more than 950 customers as of January 31, 2018 and 99.95% average annual uptime, which includes scheduleddowntime, over the last several years;

    • Comprehensive solution built specifically to handle the complexities of subscription business models;

    • Flexible technology with a broad range of customers and use cases;

    • Mission-critical system that is difficult to replace;

    • Accelerated pace of innovation with ten years of development experience;

    • Deep domain expertise across a broad range of subscription business models;

    • Proprietary deployment methodology; and

    • Growing subscription economy ecosystem with more than 80 applications and a broad network of partners and integrators.

    Growth Strategies

    Key elements of our growth strategies include:

    • New Customer Acquisition. As the Subscription Economy evolves, we intend to capitalize on our leadership and acquire new customersin current and future markets.

    • Expand Relationships with Existing Customers. Once we acquire a customer, we intend to expand our footprint and drive sustainablegrowth in multiple ways, such as increasing transaction volume and upsells and cross-sells with additional products.

    • Enter New Vertical Markets. We currently have a strong position in four key markets—technology, media and telecommunications,manufacturing, and industrial and consumer IoT—and intend to expand to additional vertical markets.

    • Expand our Global Footprint. As adoption of the Subscription Economy evolves throughout the world, we intend to expand into newgeographies where we see future expansion opportunities.

    • Leverage Global Systems Integrators to Accelerate our Growth. We intend to work with large global systems integrators, or GSIs, andleverage their role in advocating for transformation to subscription business models.

    • Launch New Products and Extend our Technology Lead. As we grow and evolve with our customers, we intend to continue to developadditional products and enhance our current offerings.

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    • Optimize Pricing and Packaging. We intend to optimize and enhance pricing and packaging to align the value customers realize fromour products with the revenue we receive.

    Selected Risks Associated with Our Business

    Our business is subject to numerous risks and uncertainties, including those highlighted in “Risk Factors” immediately following this prospectussummary. Some of these risks include:

    • We have a history of net losses and may not achieve or sustain profitability;

    • If the shift by companies to subscription business models develops slower than we expect, our growth may slow or stall, and our operatingresults could be adversely affected;

    • We have experienced rapid growth in recent periods and we may not be able to sustain or manage any future growth effectively;

    • If our security measures are breached or if our products are perceived as not being secure, customers may reduce the use of or stop usingour products, and we may incur significant liabilities;

    • Our success depends in large part on a limited number of products, and our business will suffer if these products fail to gain, or lose, marketacceptance;

    • If we are unable to attract new customers and expand sales to existing customers, our revenue growth could be slower than we expect andour business may be adversely affected;

    • Our operating results may fluctuate from quarter to quarter, which makes our future results difficult to predict;

    • A customer’s failure to deploy our solution after it enters into a subscription agreement with us, or the incorrect or improper deployment or

    use of our solution, could result in customer dissatisfaction and negatively affect our business, operating results, financial condition, andgrowth prospects;

    • If we are not able to develop and release new products and services, our business could be adversely affected;

    • Our business depends largely on our ability to attract and retain talented employees, including senior management;

    • The market in which we participate is competitive, and if we do not compete effectively our operating results could be harmed; and

    • The dual class structure of our common stock will have the effect of concentrating voting control with those stockholders who held our capitalstock prior to the completion of this offering, including our directors, executive officers, and 5% stockholders.

    Corporate Information

    We were incorporated in the State of Delaware in September 2006. Our principal executive offices are located at 3050 South Delaware Street,Suite 301, San Mateo, California 94403 and our telephone number is (800) 425-1281. Our website address is www.zuora.com. The informationcontained on, or that can be accessed through, our website is not incorporated by reference into, and is not a part of, this prospectus. Investors shouldnot rely on any such information in deciding whether to purchase our Class A common stock.

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    Zuora, the Zuora logo, Subscription Economy, The World Subscribed, ZuoraCentralPlatform, ZuoraBilling, ZuoraRevPro, ZuoraCPQ,ZuoraInsights, ZuoraCollect, ZuoraConnectMarketplace, and other registered or common law trade names, trademarks, or service marks of Zuoraappearing in this prospectus are the property of Zuora. This prospectus contains additional trade names, trademarks, and service marks of othercompanies that are the property of their respective owners. We do not intend our use or display of other companies’ trade names, trademarks, orservice marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies. Solely for convenience, our trademarks andtradenames referred to in this prospectus appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that wewill not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor, to these trademarks and tradenames.

    Implications of Being an Emerging Growth Company

    As a company with less than $1.07 billion in revenue during our most recently completed fiscal year, we qualify as an “emerging growthcompany” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our BusinessStartups Act of 2012, or the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and otherrequirements that are otherwise applicable, in general, to public companies that are not emerging growth companies. These provisions include:

    • an exemption from compliance with the auditor attestation requirement on the effectiveness of our internal control over financial reportingpursuant to the Sarbanes-Oxley Act of 2002;

    • an exemption from compliance with any requirement that the Public Company Accounting Oversight Board, or PCAOB, may adopt regarding

    mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financialstatements;

    • reduced disclosure about our executive compensation arrangements;

    • exemptions from the requirements to obtain a non-binding advisory vote on executive compensation or a stockholder approval of any goldenparachute arrangements; and

    • extended transition periods for complying with new or revised accounting standards.

    We will remain an emerging growth company until the earliest to occur of: (i) the last day of the fiscal year in which we have more than$1.07 billion in annual revenue; (ii) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates;(iii) the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; and (iv) the last day of thefiscal year ending after the fifth anniversary of the completion of this offering.

    We may take advantage of these exemptions until such time that we are no longer an emerging growth company. Accordingly, the informationcontained herein may be different than the information you receive from other public companies in which you hold stock. Further, pursuant to Section107 of the JOBS Act, as an emerging growth company, we have elected to take advantage of the extended transition period for complying with new orrevised accounting standards until those standards would otherwise apply to private companies. As a result, our operating results and financialstatements may not be comparable to the operating results and financial statements of other companies who have adopted the new or revisedaccounting standards. It is possible that some investors will find our Class A common stock less attractive as a result, which may result in a less activetrading market for our common stock and higher volatility in our stock price.

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    The Offering Class A common stock offered sharesOption to purchase additional shares of Class A common stock offered

    sharesClass A common stock to be outstanding after this offering

    shares ( shares if the option to purchase additionalshares is exercised in full)

    Class B common stock to be outstanding after this offering shares

    Total Class A and Class B common stock to be outstanding after this offering

    shares ( shares if the option to purchase additionalshares is exercised in full)

    Use of proceeds

    We intend to use the net proceeds that we receive from this offering forworking capital and other general corporate purposes. We also mayuse a portion of the net proceeds from this offering to make strategicacquisitions or investments.See the section titled “Use of Proceeds” for additional information.

    Voting rights

    Shares of Class A common stock are entitled to one vote per share.Shares of Class B common stock are entitled to ten votes per share.Holders of our Class A common stock and Class B common stock willgenerally vote together as a single class, unless otherwise required bylaw or our restated certificate of incorporation. Following thecompletion of this offering, each share of our Class B common stockwill be convertible into one share of our Class A common stock at anytime and will convert automatically upon certain transfers and upon theearlier of (i) the date specified by a vote of the holders of 66 2/3% ofthe outstanding shares of Class B common stock, (ii) ten years fromthe closing of this offering, and (iii) the date the shares of Class Bcommon stock cease to represent at least 5% of all outstanding sharesof our common stock.

    The holders of our outstanding Class B common stock will hold %of the voting power of our outstanding capital stock following thisoffering, with our directors, executive officers, and 5% stockholdersand their respective affiliates holding % in the aggregate. Theseholders will have the ability to control the outcome of matters submittedto our stockholders for approval, including the election of our directorsand the approval of any change of control

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    transaction. See the sections titled “Principal Stockholders” and“Description of Capital Stock” for additional information.

    Proposed New York Stock Exchange symbol “ZUO”

    The number of shares of our Class A and Class B common stock to be outstanding after this offering is based upon no shares of our Class Acommon stock outstanding and 185,016,846 shares of our Class B common stock outstanding, in each case, as of January 31, 2018, and does notinclude:

    • 30,802,965 shares of our Class B common stock issuable upon the exercise of options to purchase shares of our Class B common stockoutstanding as of January 31, 2018, with a weighted-average exercise price of $1.78 per share;

    • 1,668,203 shares of our Class B common stock issuable upon the vesting of restricted stock units, or RSUs, outstanding as of January 31,2018;

    • 7,099,533 shares of our Class B common stock issuable upon the exercise of options to purchase shares of our Class B common stockgranted after January 31, 2018, with an exercise price of $3.97 per share; and

    • 15,221,242 shares of our common stock reserved for future issuance under our equity compensation plans, consisting of (i) 121,242 sharesof our Class B common stock reserved for future issuance under our 2015 Equity Incentive Plan, or the 2015 Plan, as of January 31, 2018(which number of shares is prior to the options to purchase shares of our Class B common stock granted after January 31, 2018 and anincrease of 13,900,000 shares of our Class B common stock reserved for future issuance under our 2015 Plan after January 31, 2018), (ii)10,300,000 shares of our Class A common stock reserved for future issuance under our 2018 Equity Incentive Plan, or the 2018 Plan, whichwill become effective on the date immediately prior to the date of this prospectus, and (iii) 4,800,000 shares of our Class A common stockreserved for issuance under our 2018 Employee Stock Purchase Plan, or the 2018 ESPP, which will become effective on the date of thisprospectus.

    On the date immediately prior to the date of this prospectus, any remaining shares available for issuance under our 2015 Plan will be added tothe shares of our Class A common stock reserved for issuance under our 2018 Plan, and we will cease granting awards under the 2015 Plan. Our 2018Plan and 2018 ESPP also provide for automatic annual increases in the number of shares reserved thereunder. See the section titled “ExecutiveCompensation—Employee Benefit Plans” for additional information.

    Except as otherwise indicated, all information in this prospectus assumes:

    • the amendment to our restated certificate of incorporation to redesignate our outstanding common stock as Class B common stock andcreate a new class of Class A common stock to be offered and sold in this offering;

    • the automatic conversion and reclassification of all outstanding shares of our convertible preferred stock as of January 31, 2018 into123,968,054 shares of our Class B common stock in connection with the completion of this offering;

    • a -to-1 reverse stock split of our outstanding capital stock, that was effected in 2018;

    • the filing and effectiveness of our restated certificate of incorporation and the effectiveness of our restated bylaws, each of which will occurimmediately prior to the completion of this offering;

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    • no exercise of outstanding stock options or settlement of outstanding RSUs after January 31, 2018; and

    • no exercise by the underwriters of their option to purchase up to an additional shares of our Class A common stock in thisoffering.

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    Summary Consolidated Financial Data

    The following tables summarize our consolidated financial data. We derived our summary consolidated statements of comprehensive loss forfiscal 2016, fiscal 2017, and fiscal 2018 and our summary consolidated balance sheet data as of January 31, 2018 from our audited consolidatedfinancial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected in thefuture. You should read the following summary consolidated financial data in conjunction with the sections titled “Selected Consolidated Financial Data”and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, theaccompanying notes, and other financial information included elsewhere in this prospectus. Our fiscal year end is January 31, and our fiscal quartersend on April 30, July 31, October 31, and January 31. Our fiscal years ended January 31, 2016, 2017, and 2018 are referred to herein as fiscal 2016,fiscal 2017, and fiscal 2018, respectively.

    Fiscal Year Ended January 31,

    2016 2017 2018

    (in thousands, except per

    share data) Consolidated Statements of Comprehensive Loss: Revenue:

    Subscription $ 68,228 $ 89,836 $120,373 Professional services 23,956 23,172 47,553

    Total revenue 92,184 113,008 167,926

    Cost of revenue: Subscription (1) 17,820 22,840 31,077 Professional services (1) 25,540 25,322 48,829

    Total cost of revenue 43,360 48,162 79,906

    Gross profit 48,824 64,846 88,020

    Operating expenses: Research and development (1) 20,485 26,355 38,639 Sales and marketing (1) 64,508 62,384 73,087 General and administrative (1) 11,979 15,140 22,572

    Total operating expenses 96,972 103,879 134,298

    Loss from operations (48,148) (39,033) (46,278) Interest and other (expense) income, net (528) 219 252

    Loss before income taxes (48,676) (38,814) (46,026) Income tax benefit (provision) 469 (284) (1,129)

    Net loss (48,207) (39,098) (47,155)

    Comprehensive loss: Foreign currency translation adjustment (191) (470) 960

    Comprehensive loss $ (48,398) $ (39,568) $ (46,195)

    Net loss per share attributable to common stockholders, basic and diluted (2) $ (1.07) $ (0.82) $ (0.89)

    Weighted-average shares outstanding used to compute net loss per share attributable to commonstockholders, basic and diluted (2) 44,853 47,686 53,099

    Pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited) (2) $ (0.27)

    Pro forma weighted-average shares outstanding used in calculating pro forma net loss per share, basicand diluted (unaudited) (2) 177,067

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    (1) Includes stock-based compensation expense as follows:

    Fiscal Year Ended January 31,

    2016 2017 2018 (in thousands) Cost of revenue:

    Subscription $ 235 $ 326 $ 747 Professional services 566 583 2,121

    Research and development 827 1,126 2,292 Sales and marketing 1,536 1,577 2,717 General and administrative 497 771 1,113

    Total $3,661 $4,383 $8,990

    (2) See notes 1 and 14 of the notes to our consolidated financial statements included elsewhere in this prospectus for an explanation of the calculations of our net loss pershare attributable to common stockholders, basic and diluted, and pro forma net loss per share attributable to common stockholders, basic and diluted.

    As of January 31, 2018

    Actual Pro Forma (1) Pro Forma

    As Adjusted (2) (in thousands) Consolidated Balance Sheet Data: Cash and cash equivalents $ 48,208 $ 48,208 $ Working capital (deficit) (7,536) (7,536) Total assets 155,366 155,366 Deferred revenue, current portion 66,058 66,058 Total debt 14,969 14,969 Convertible preferred stock 12 — Total stockholders’ equity 26,666 26,666 (1) The pro forma column reflects the automatic conversion of all outstanding shares of our convertible preferred stock as of January 31, 2018 into 123,968,054 shares of our

    Class B common stock in connection with this offering.(2) The pro forma as adjusted column reflects the items described in footnote (1) and the sale by us of shares of our Class A common stock in this offering at an

    assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting theestimated underwriting discounts and commissions and estimated offering expenses. The pro forma as adjusted information discussed above is illustrative only and willbe adjusted based on the actual public offering price and other terms of this offering determined at pricing. Each $1.00 increase (decrease) in the assumed initial publicoffering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) cash and cashequivalents, working capital (deficit), total assets, and total stockholders’ equity by $ million, assuming that the number of shares offered, as set forth on the cover ofthis prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions. Similarly, each increase (decrease) of one million sharesin the number of shares offered by us would increase (decrease) cash and cash equivalents, working capital (deficit), total assets, and total stockholders’ equity byapproximately $ million, assuming the assumed initial public offering price, which is the midpoint of the price range set forth on the cover page of this prospectus,remains the same and after deducting the estimated underwriting discounts and commissions.

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    RISK FACTORS

    InvestinginourClassAcommonstockinvolvesahighdegreeofrisk.Youshouldconsidercarefullytherisksanduncertaintiesdescribedbelow,togetherwithalloftheotherinformationinthisprospectus,includingthesectiontitled“Management’sDiscussionandAnalysisofFinancialConditionandResultsofOperations”andourconsolidatedfinancialstatementsandtheaccompanyingnotesincludedelsewhereinthisprospectusbeforedecidingwhethertoinvestinsharesofourClassAcommonstock.Therisksanduncertaintiesdescribedbelowarenottheonlyonesweface.Additionalrisksanduncertaintiesthatweareunawareoforthatwedeemimmaterialmayalsobecomeimportantfactorsthatadverselyaffectourbusiness.Ifanyofthefollowingrisksoccur,ourbusiness,financialcondition,operatingresults,andfutureprospectscouldbemateriallyandadverselyaffected.Inthatevent,themarketpriceofourClassAcommonstockcoulddecline,andyoucouldlosepartorallofyourinvestment.

    Risks Related to Our Business and Industry

    We have a history of net losses, anticipate increasing our operating expenses in the future, and may not achieve or sustain profitability.

    We have incurred net losses in each fiscal year since inception, including net losses of $48.2 million, $39.1 million, and $47.2 million in fiscal 2016,fiscal 2017, and fiscal 2018, respectively, and we expect to incur net losses for the foreseeable future. As of January 31, 2018, we had an accumulateddeficit of $258.7 million. We expect to make significant future expenditures related to the development and expansion of our business, including increasingour overall customer base, expanding relationships with existing customers, entering new vertical markets, expanding our global footprint, leveraging GSIsto accelerate our growth, optimizing pricing and packaging, and expanding our operations and infrastructure, both domestically and internationally, and inconnection with legal, accounting, and other administrative expenses related to operating as a public company. These efforts may prove more expensivethan we currently anticipate, and we may not succeed in increasing our revenue sufficiently, or at all, to offset these higher expenses. While our revenue hasgrown in recent years, if our revenue declines or fails to grow at a rate faster than these increases in our operating expenses, we will not be able to achieveand maintain profitability in future periods. As a result, we may continue to generate losses. We cannot assure you that we will achieve profitability in thefuture or that, if we do become profitable, we will be able to sustain profitability.

    If the shift by companies to subscription business models, including consumer adoption of products and services that are provided throughsuch models, and, in particular, the market for subscription management software, develops slower than we expect, our growth may slow orstall, and our operating results could be adversely affected.

    Our success depends on companies shifting to subscription business models and consumers choosing to consume products and services throughsuch models. Many companies may be unwilling or unable to offer their solutions using a subscription business model, especially if they do not believe thatthe consumers of their products and services would be receptive to such offerings. Our success will also depend, to a large extent, on the willingness ofmedium and large businesses that have adopted subscription business models utilizing cloud-based products and services to manage billings and financialaccounting relating to their subscriptions. The adoption of these models is still relatively new, and enterprises may not choose to shift their business modelor, if they do, they may decide that they do not need a solution that offers the range of functionalities that we offer. Many companies have investedsubstantial effort and financial resources to develop custom-built applications or integrate traditional enterprise software into their businesses as they shift tosubscription or subscription business models and may be reluctant or unwilling to switch to different applications. Accordingly, it is

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    difficult to predict customer adoption rates and demand for our solution, the future growth rate and size of the market for subscription management software,or the entry of competitive solutions. Factors that may affect market acceptance of our solution include:

    • the number of companies shifting to subscription business models;

    • the number of consumers and businesses adopting new, flexible ways to consume products and services;

    • the security capabilities, reliability, and availability of cloud-based services;

    • customer concerns with entrusting a third party to store and manage their data, especially transaction-critical, confidential, or sensitive data;

    • our ability to minimize the time and resources required to deploy our solution;

    • our ability to maintain high levels of customer satisfaction;

    • our ability to deploy upgrades and other changes to our solution without disruption to our customers;

    • the level of customization or configuration we offer; and

    • the price, performance, and availability of competing products and services.

    The markets for subscription products and services and for subscription management software may not develop further or may develop slower thanwe expect. If companies do not shift to subscription business models and subscription management software does not achieve widespread adoption, or ifthere is a reduction in demand for subscription products and services or subscription management software caused by technological challenges, weakeningeconomic conditions, security or privacy concerns, decreases in corporate spending, a lack of customer acceptance, or otherwise, our business could bematerially and adversely affected. In addition, our subscription agreements with our customers generally provide for a minimum subscription platform feeand usage-based fees, which depend on the total dollar amount that is invoiced or managed on our solution. Because a portion of our revenue depends onthe volume of transactions that our customers process through our solution, if our customers do not adopt our solution throughout their business, if theirbusinesses decline or fail, or if they are unable to successfully shift to subscription business models, our revenue could decline and our operation resultscould be adversely impacted.

    We have experienced rapid growth and expect to invest in our growth for the foreseeable future. If we fail to manage our growth effectively, thenour business, operating results, and financial condition could be adversely affected.

    We have experienced rapid growth in recent periods. For example, the number of our employees has grown from 583 as of January 31, 2017 to 933as of January 31, 2018. In May 2017, we acquired Leeyo Software, Inc., or Leeyo, which had significant operations in the United States and India. Thegrowth and expansion of our business has placed and continues to place a significant strain on our management, operations, financial infrastructure, andcorporate culture. In the event of further growth of our operations or in the number of our third-party relationships, our information technology systems andour internal controls and procedures may not be adequate to support our operations.

    To manage growth in our operations and personnel, we will need to continue to improve our operational, financial, and management controls and ourreporting systems and procedures. Failure to manage growth effectively could result in difficulty or delays in deploying customers, declines in quality orcustomer satisfaction, increases in costs, difficulties in introducing new products and services or enhancing existing products and services, loss ofcustomers, or other operational difficulties, any of which could adversely affect our business performance and operating results.

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    If our security measures are breached, if unauthorized access to customer data, our data, or our solution is otherwise obtained, or if our solutionis perceived as not being secure, customers may reduce the use of or stop using our solution, and we may incur significant liabilities.

    Security breaches and other security incidents could result in the loss of information, litigation, indemnity obligations, penalties, and other liability. Ifour security measures or those of our service providers are breached, or are perceived to have been breached, as a result of third-party action, includingcyber-attacks or other intentional misconduct by computer hackers, employee error, malfeasance, or otherwise, and someone obtains unauthorized accessto our data or other data we or our service providers maintain, including sensitive customer data, personal information, intellectual property, and otherconfidential business information, we could face loss of business, regulatory investigations, or orders, and our reputation could be severely damaged. Wecould be required to expend significant capital and other resources to alleviate the problem, as well as incur significant costs and liabilities, including due tolitigation, indemnity obligations, damages for contract breach, penalties for violation of applicable laws or regulations, and costs for remediation and otherincentives offered to customers or other business partners in an effort to maintain business relationships after a breach or other incident. Moreover, if oursolution is perceived as not being secure, regardless of whether our security measures are actually breached, we could suffer harm to our reputation, andour operating results could be negatively impacted.

    We cannot assure you that any limitations of liability provisions in our contracts would be enforceable or adequate or would otherwise protect us fromany liabilities or damages with respect to any particular claim relating to a security breach or other security-related matters. We also cannot be sure that ourexisting insurance coverage will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claimsrelated to a security incident or breach, or that the insurer will not deny coverage as to any future claim. The successful assertion of one or more largeclaims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or theimposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition,operating results, and reputation.

    Cyber-attacks and other malicious Internet-based activities continue to increase generally. Because the techniques used to obtain unauthorizedaccess to or sabotage systems change frequently and generally are not identified until they are launched against a target, we and our service providers maybe unable to anticipate these techniques or to implement adequate preventative measures. In addition, third parties may attempt to fraudulently induceemployees, contractors, or users to disclose information to gain access to our data or our customers’ data. We could suffer significant damage to our brandand reputation if a cyber-attack or other security incident were to allow unauthorized access to or modification of our customers’ data, other external data, orour own data or our IT systems or if the services we provide to our customers were disrupted, or if our solution is perceived as having security vulnerabilities.Customers could lose confidence in the security and reliability of our solution and perceive them to be not secure. This could lead to fewer customers usingour products and services and result in reduced revenue and earnings. The costs we would incur to address and respond to these security incidents, and toprevent them thereafter, would increase our expenses. These types of security incidents could also lead to lawsuits, regulatory investigations and claims,and increased legal liability, including in some cases costs related to notification of the incident and fraud monitoring.

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    Our success depends in large part on a limited number of products. If these products fail to gain or lose market acceptance, our business willsuffer.

    We derive substantially all of our revenue and cash flows from sales of subscriptions and associated deployment of our ZuoraCentralPlatformandour ZuoraBillingand ZuoraRevProproducts. As such, the continued growth in market demand for these products is critical to our success. Demand for oursolution is affected by a number of factors, many of which are beyond our control, including the growth or contraction of the Subscription Economy,continued market acceptance of our solution by customers for existing and new use cases, the timing of development and release of new products andservices, features, and functionality introduced by our competitors, changes in accounting standards, policies, guidelines, interpretations, or principles thatwould impact the functionality and use of our solution, and technological change. We expect that an increasing transition to disaggregated solutions thatfocus on addressing specific customer use cases would continue to disrupt the enterprise software space, enabling new competitors to emerge. We cannotassure you that our solutions and future enhancements to our solution will be able to address future advances in technology or the requirements ofenterprise customers. If we are unable to meet customer demands in creating a flexible solution designed to address all these needs or otherwise achievemore widespread market acceptance of our solution, our business, operating results, financial condition, and growth prospects would be adversely affected.

    If we are unable to attract new customers and expand sales to existing customers our revenue growth could be slower than we expect, and ourbusiness may be adversely affected.

    Our ability to achieve significant growth in revenue in the future will depend, in large part, upon our ability to attract new customers. This may beparticularly challenging where an organization has already invested substantial personnel and financial resources to integrate billings and other businessand financial management tools, including custom-built solutions, into its business, as such an organization may be reluctant or unwilling to invest in newproducts and services. If we fail to attract new customers and fail to maintain and expand new customer relationships, our revenue may grow more slowlythan we expect and our business may be adversely affected.

    Our future revenue growth also depends upon expanding sales and renewals of subscriptions to our solution with existing customers. If our existingcustomers do not expand their use of our solution over time or do not renew their subscriptions, our revenue may grow more slowly than expected, may notgrow at all, or may decline. Additionally, increasing incremental sales to our current customer base requires increasingly sophisticated and costly salesefforts that are targeted at senior management. During fiscal 2016, fiscal 2017, and fiscal 2018, sales and marketing expenses represented approximately70%, 55%, and 43% of our total revenue, respectively. We plan to continue expanding our sales efforts, both domestically and internationally, but we may beunable to hire qualified sales personnel, may be unable to successfully train those sales personnel that we are able to hire, and sales personnel may notbecome fully productive on the timelines that we have projected or at all. Additionally, although we dedicate significant resources to sales and marketingprograms, including our Subscribedevents, these sales and marketing programs may not have the desired effect and may not expand sales. We cannotassure you that our efforts would result in increased sales to existing customers, and additional revenue. If our efforts to expand sales and renewals toexisting customers are not successful, our business and operating results could be adversely affected.

    Our customers generally enter into subscription agreements with one- to three-year subscription terms and have no obligation to renew theirsubscriptions after the expiration of their initial subscription period. Moreover, our customers that do renew their subscriptions may renew for lowersubscription or usage amounts or for shorter subscription periods. In addition, in the first year of a subscription, customers often purchase a higher level ofprofessional services (such as training and deployment

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    services) than they do in renewal years. Costs associated with maintaining a professional services department are relatively fixed in the short-term, whileprofessional services revenue is dependent on the amount of billable work actually performed for customers in a period, the combination of which may resultin variability in, and have a negative impact on, our gross profit. Customer renewals may decline or fluctuate as a result of a number of factors, including thebreadth of early deployment, reductions in our customers’ spending levels, higher volumes of usage purchased upfront relative to actual usage during thesubscription term, changes in customers’ business models and use cases, our customers’ satisfaction or dissatisfaction with our solution, our pricing orpricing structure, the pricing or capabilities of products or services offered by our competitors, or the effects of economic conditions. If our customers do notrenew their agreements with us, or renew on terms less favorable to us, our revenue may decline.

    Our operating results may fluctuate from quarter to quarter, which makes our future results difficult to predict.

    Our quarterly operating results have fluctuated in the past and may fluctuate in the future. Additionally, we have a limited operating history with thecurrent scale of our business, which makes it difficult to forecast our future results and subjects us to a number of uncertainties, including our ability to planfor and anticipate future growth. As a result, you should not rely upon our past quarterly operating results as indicators of future performance. We haveencountered, and will continue to encounter, risks and uncertainties frequently experienced by growing companies in rapidly evolving markets, such as therisks and uncertainties described herein. Our operating results in any given quarter can be influenced by numerous factors, many of which are unpredictableor are outside of our control, including:

    • our ability to maintain and grow our customer base;

    • our ability to retain and increase revenue from existing customers;

    • our ability to introduce new products and services and enhance existing products and services;

    • the transaction volume that our customers processes through our system;

    • our ability to respond to competitive developments, including pricing changes and the introduction of new products and services by ourcompetitors;

    • the productivity of our sales force;

    • changes in the mix of products and services that our customers use;

    • the length and complexity of our sales cycles;

    • cost to develop and upgrade our solution to incorporate new technologies;

    • seasonal purchasing patterns of our customers;

    • impact of outages of our solution and reputational harm;

    • costs related to the acquisition of businesses, talent, technologies, or intellectual property, including potentially significant amortization costs andpossible write-downs;

    • failures or breaches of security or privacy, and the costs associated with responding to and addressing any such failures or breaches;

    • foreign exchange fluctuations;

    • changes to financial accounting standards and the interpretation of those standards that may affect the way we recognize and report our financialresults, including changes in accounting rules governing recognition of revenue;

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    • the impact of changes to financial accounting standards, such as ASU No. 2014-09, RevenuefromContractswithCustomers(Topic606), or

    ASC 606, and the interpretation of those standards on customer adoption and use of our products and services and our ability to service ourcustomers’ needs, including through ZuoraRevPro;

    • general economic and political conditions and government regulations in the countries where we currently operate or plan to expand;

    • decisions by us to incur additional expenses, such as increases in sales and marketing or research and development;

    • the timing of stock-based compensation expense; and

    • potential costs to attract, onboard, retain, and motivate qualified personnel.

    The impact of one or more of the foregoing and other factors may cause our operating results to vary significantly. As such, we believethat quarter-to-quarter comparisons of our operating results may not be meaningful and should not be relied upon as an indication of future performance. Ifwe fail to meet or exceed the expectations of investors or securities analysts, then the trading price of our Class A common stock could fall substantially, andwe could face costly lawsuits, including securities class action suits.

    A customer’s failure to deploy our solution after it enters into a subscription agreement with us, or the incorrect or improper deployment or useof our solution could result in customer dissatisfaction and negatively affect our business, operating results, financial condition, and growthprospects.

    Our solution is deployed in a wide variety of technology environments and into a broad range of complex workflows. We believe our future successwill depend in part on our ability to increase both the speed and success of our deployments, by improving our deployment methodology, hiring and trainingqualified professionals, deepening relationships with deployment partners, and increasing our ability to integrate into large-scale, complex technologyenvironments. We often assist our customers in deploying our solution. In other cases, customers rely on third-party partners to complete the deployment. Insome cases, customers initially engage us to deploy our solution, but, for a variety of potential reasons, including strategic decisions not to utilizesubscription business models, fail to ultimately deploy our solution. If we or our third-party partners are unable to deploy our solution successfully, or unableto do so in a timely manner and, as a result, customers do not utilize our solution, we would not be able to generate future revenue from such customersbased on transaction or revenue volume and the upsell of additional products and services, and our future operating results could be adversely impacted. Inaddition, customers may also seek refunds of their initial subscription fee. Moreover, customer perceptions of our solution may be impaired, our reputationand brand may suffer, and customers may choose not to renew or expand their use of our solution.

    If we are not able to develop and release new products and services, or successful enhancements, new features, and modifications to ourexisting products and services, our business could be adversely affected.

    The market for our solution is characterized by rapid technological change, frequent new product and service introductions and enhancements,changing customer demands, and evolving industry standards. The introduction of products and services embodying new technologies can quickly makeexisting products and services obsolete and unmarketable. Additionally, because we provide billing and finance solutions to help our customers withcompliance and financial reporting, changes in law, regulations, and accounting standards could impact the usefulness of our products and services andcould necessitate changes or modifications to our products and services to accommodate such changes. Subscription management products and servicesare inherently complex, and it can take a

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    services depends on several factors, including timely completion, competitive pricing, adequate quality testing, integration with new and existingtechnologies and our solution, and overall market acceptance. We cannot be sure that we will succeed in developing, marketing, and delivering on a timelyand cost-effective basis enhancements or improvements to our platform or any new products and services that respond to continued changes in subscriptionmanagement practices or new customer requirements, nor can we be sure that any enhancements or improvements to our platform or any new productsand services will achieve market acceptance. Since developing our solution is complex, the timetable for the release of new products and enhancements toexisting products is difficult to predict, and we may not offer new products and updates as rapidly as our customers require or expect. Any new products orservices that we develop may not be introduced in a timely or cost-effective manner, may contain errors or defects, or may not achieve the broad marketacceptance necessary to generate sufficient revenue. Moreover, even if we introduce new products and services, we may experience a decline in revenueof our existing products and services that is not offset by revenue from the new products or services. For example, customers may delay making purchasesof new products and services to permit them to make a more thorough evaluation of these products and services or until industry and marketplace reviewsbecome widely available. Some customers may hesitate to migrate to a new product or service due to concerns regarding the complexity of migration orperformance of the new product or service. In addition, we may lose existing customers who choose a competitor’s products and services or choose toutilize internally developed applications instead of our products and services. This could result in a temporary or permanent revenue shortfall and adverselyaffect our business.

    In addition, because our products and services are designed to interoperate with a variety of other business systems applications, we will need tocontinuously modify and enhance our products and services to keep pace with changes in application programming interfaces, or APIs, and other softwareand database technologies. We may not be successful in either developing these new products and services, modifications, and enhancements or inbringing them to market in a timely fashion. Furthermore, modifications to existing platforms or technologies, including any APIs with which we interoperate,will increase our research and development expenses. Any failure of our products and services to operate effectively with future network platforms andtechnologies could reduce the demand for our products and services, result in customer dissatisfaction, and adversely affect our business.

    Our business depends largely on our ability to attract and retain talented employees, including senior management. If we lose the services ofTien Tzuo, our founder, Chairman, and Chief Executive Officer, or other members of our senior management team, we may not be able to executeon our business strategy.

    Our future success depends on our continuing ability to attract, train, assimilate, and retain highly skilled personnel, including software engineers,sales personnel, and professional services personnel. We face intense competition for qualified individuals from numerous software and other technologycompanies. In addition, competition for qualified personnel, particularly software engineers, is particularly intense in the San Francisco Bay Area, where ourheadquarters are located. We may not be able to retain our current key employees or attract, train, assimilate, or retain other highly skilled personnel in thefuture. We may incur significant costs to attract and retain highly skilled personnel, and we may lose new employees to our competitors or other technologycompanies before we realize the benefit of our investment in recruiting and training them. As we move into new geographies, we will need to attract andrecruit skilled personnel in those areas. If we are unable to attract and retain suitably qualified individuals who are capable of meeting our growing technical,operational, and managerial requirements, on a timely basis or at all, our business may be adversely affected.

    Our future success also depends in large part on the continued services of senior management and other key personnel. In particular, we are highlydependent on the services of Tien Tzuo, our

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    founder, Chairman and Chief Executive Officer, who is critical to the development of our technology, platform, future vision, and strategic direction. We relyon our leadership team in the areas of operations, security, marketing, sales, support, and general and administrative functions, and on individualcontributors on our research and development team. Our senior management and other key personnel are all employed on an at-will basis, which meansthat they could terminate their employment with us at any time, for any reason, and without notice. We do not currently maintain key-person life insurancepolicies on any of our officers or employees. If we lose the services of senior management or other key personnel, or if we are unable to attract, train,assimilate, and retain the highly skilled personnel we need, our business, operating results, and financial condition could be adversely affected.

    Volatility or lack of appreciation in our stock price may also affect our ability to attract and retain our key employees. Many of our senior personneland other key employees have become, or will soon become, vested in a substantial amount of stock or stock options. Employees may be more likely toleave us if the shares they own or the shares underlying their vested options have significantly appreciated in value relative to the original purchase price ofthe shares or the exercise price of the options, or conversely, if the exercise price of the options that they hold are significantly above the market price of ourcommon stock. If we are unable to retain our employees, or if we need to increase our compensation expenses to retain our employees, our business,results of operations, financial condition, and cash flows could be adversely affected.

    The market in which we participate is competitive, and if we do not compete effectively our operating results could be harmed.

    The market for subscription management products and services is highly competitive, rapidly evolving, and fragmented, and subject to changingtechnology, shifting customer needs, and frequent introductions of new products and services. Our main competitors fall into the following categories:

    • providers of traditional ERP software, such as Oracle Corporation and SAP AG;

    • traditional order-to-cash solutions that address individual elements of the subscription order-to-cash process such as traditional Configure PriceQuote, or CPQ, management, billing, collections, revenue recognition, or e-commerce software;

    • telecommunications billing systems and other niche systems, such as Amdocs Limited; and

    • in-house custom systems.

    Many of our current and potential competitors have longer operating histories, significantly greater financial, technical, marketing, distribution orprofessional services experience, or other resources or greater name recognition than we do. In addition, many of our current and potential competitorssupply a wide variety of products to, and have strong and well-established relationships with, current and potential customers. As a result, our current andpotential competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, orcustomer requirements or devote greater resources than we can to the development, promotion, and sale of their products and services. In addition, somecurrent and potential competitors may offer products or services that address one or a limited number of functions at lower prices or with greater depth thanour solution, or integrate or bundle such products and services with their other product offerings. Potential customers may prefer to purchase from theirexisting suppliers rather than from a new supplier. Our current and potential competitors may develop and market new technologies with comparablefunctionality to our solution. In addition, because our products and services are integral to our customers’ ability to accurately maintain books and recordsand prepare financial statements, our potential customers may prefer to purchase applications that are critical to their business from one of our larger, moreestablished competitors, or leverage the software that they have

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    already purchased from our competitors for their billing and accounting needs, or control such infrastructure internally. We may experience fewer customerorders, reduced gross margins, longer sales cycles, and loss of market share. This could lead us to decrease prices, implement alternative pricingstructures, or introduce products and services available for free or a nominal price in order to remain competitive. We may not be able to competesuccessfully against current and future competitors, and our business, operating results, and financial condition will be adversely impacted if we fail to meetthese competitive pressures.

    Our ability to compete successfully in our market depends on a number of factors, both within and outside of our control. Some of these factorsinclude: ease of use; subscription-based product features and functionality; ability to support the specific needs of companies with subscription businessmodels; ability to integrate with other technology infrastructures and third-party applications; enterprise-grade performance and features such as systemscalability, security, performance, and resiliency; vision for the market and product innovation; relationships with GSIs, management consulting firms, andresellers; total cost of ownership; strength of sales and marketing efforts; brand awareness and reputation; and customer experience, including support andprofessional services. Any failure by us to compete successfully in any one of these or other areas may reduce the demand for our solution, as well asadversely affect our business, operating results, and financial condition.

    Moreover, current and future competitors may also make strategic acquisitions or establish cooperative relationships among themselves or withothers, including our current or future technology partners. By doing so, these competitors may increase their ability to meet the needs of our customers orpotential customers. These developments could limit our ability to obtain revenue from existing and new customers. If we are unable to competesuccessfully against current and future competitors, our business, operating results, and financial condition could be adversely impacted.

    Because we recognize subscription revenue over the term of the applicable agreement, a lack of subscription renewals or new subscriptionagreements may not be reflected immediately in our operating results and may be difficult to discern.

    We generally recognize subscription revenue from customers ratably over the terms of their contracts, which typically vary between one and threeyears. As a result, most of the subscription revenue we report in each quarter is derived from the recognition of unearned revenue relating to subscriptionsentered into during previous quarters. Consequently, a decline in new or renewed subscriptions in any particular quarter would likely have a minor impact onour revenue results for that quarter, but would negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales andmarket acceptance of our solution, and potential changes in our pricing policies or rate of renewals, may not be fully reflected in our operating results untilfuture periods. Moreover, our subscription model makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenuefrom new customers must be recognized over the applicable subscription term.

    As a substantial portion of our sales efforts are increasingly targeted at large enterprise customers, our sales cycle may become increasinglylengthy and more expensive, we may encounter still greater pricing pressure and deployment and customization challenges, and we may have todelay revenue recognition for more complicated transactions, all of which could adversely impact our business and operating results.

    As a substantial portion of our sales efforts are increasingly targeted at large enterprise customers, we face greater costs, longer sales cycles, andless predictability in the completion of some of our sales. In this market segment, the customer’s decision to use our solution may be an enterprise-widedecision, in which case these types of sales frequently require approvals by multiple departments and executive-level personnel and require us to providegreater levels of customer education regarding

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    the uses and benefits of our solution, as well as education regarding security, privacy, and scalability of our solution, especially for those large “business toconsumer” customers or those with extensive international operations. These large enterprise transactions might also be part of a customer’s broaderbusiness model or business systems transformation project, which are frequently subject to budget constraints, multiple approvals, and unplannedadministrative, processing, security review, and other delays that could further lengthen the sales cycle. Larger enterprises typically have longer decision-making and deployment cycles, may have greater resources to develop and maintain customized tools and applications, demand more customization,require greater functionality and scalability, expect a broader range of services, demand that vendors take on a larger share of risks, demand higher levels ofcustomer service and support, require acceptance provisions that can lead to a delay in revenue recognition, and expect greater payment flexibility fromvendors. We are often required to spend time and resources to better familiarize potential customers with the value proposition of our solution. Additionally,while we currently offer and sell our solution in the cloud, large enterprise customers could require us to provide our solution on-premises to give them morecontrol over data security and software infrastructure. Deploying our solution on-premises would cause us to incur significant additional research anddevelopment expense, and, even if we were to make these investments, we may be unsuccessful in implementing a competitive on-premises offering. As aresult of these factors, sales opportunities with large enterprises may require us to devote greater sales and administrative support and professional servicesresources to individual customers, which could increase our costs, lengthen our sales cycle, and divert our own sales and professional services resources toa smaller number of larger customers. We may spend substantial time, effort, and money in our sales efforts without being successful in producing anysales. All these factors can add further risk to business conducted with these customers. In addition, if sales expected from a large customer for a particularquarter are not realized in that quarter or at all, our business, operating results, and financial condition could be materially and adversely affected.

    The market for our revenue recognition automation software product, Zuora RevPro, is rapidly evolving as a result of the effectiveness of ASC606, which makes it difficult to forecast adoption rates and demand for this product, and could have a material adverse effect on our businessand operating results.

    We began selling ZuoraRevProfollowing our acquisition of Leeyo in May 2017. We have less experience marketing, determining pricing for, andselling ZuoraRevPro, and we are still determining how to best market, price, and support adoption of this offering. We have directed, and intend to continueto direct, a significant portion of our financial and operating resources to develop and grow ZuoraRevPro. The market for ZuoraRevProis rapidly evolvingas a result of the effectiveness of ASC 606, the revenue recognition accounting standard that will take effect for most public companies in January 2018.While we have seen a significant number of ZuoraRevProdeployments, particularly in the second half of fiscal 2018, associated with the effectiveness ofASC 606, it is uncertain whether ZuoraRevProwill achieve and sustain high levels of demand and market acceptance. Accordingly, our future successdepends in part upon growth in this market and the ability of our ZuoraRevProproduct to meet the demand for revenue recognition automation solutions.We have limited experience with respect to determining the optimal prices for this solution. Companies may choose to purchase our ZuoraRevProproductto comply with ASC 606 in the short-term but may develop proprietary solutions in-house or migrate toward other solutions developed by our competitors inthe future. Customers may purchase ZuoraRevProas a standalone product and not purchase other core Zuora products. The rapidly evolving nature of thismarket, as well as other factors that are beyond our control, reduces our ability to accurately evaluate our long-term outlook and forecast annualperformance. A reduction or slowdown in demand for revenue recognition automation software, caused by shifts in the marketplace, regulatoryrequirements, accounting standards, lack of acceptance, technological challenges, and competing solutions, could have a material adverse effect on ourbusiness, future growth, operating results, and financial condition.

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    Our revenue growth and ability to achieve and sustain profitability will depend, in part on being able to expand our direct sales force andincrease the productivity of our sales force.

    To date, most of our revenue has been attributable to the efforts of our direct sales force. In order to increase our revenue and achieve and sustainprofitability, we must increase the size of our direct sales force, both in the United States and internationally, to generate additional revenue from new andexisting customers.

    We believe that there is significant competition for sales personnel with the skills and technical knowledge that we require. Because our solution is


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