One interesting thing to note, this is the first time, I think, in four or five quarters that we actually saw a sequential uptick on the volume. The other thing I would say is, keep in mind, Q2 was a really tough compare for us from last year. So as I take a look at what the pipeline looks like, and what we can see with our customer base and what their needs are for growth and the different products that we’ve most recently reduced — or excuse me, released, I’m confident that the 107% is definitely the bottom end of it, and we’ll be in that 107% to 109% range as we exit the year, as we said at the beginning of the year.
Chad Bennett: Great. Thanks for the color. Great job on the quarter, guys.
Todd McElhatton: Thanks, Chad.
Operator: Your next question comes from the line of Rob Oliver of Baird. Your line is open.
Rob Oliver: Great. Thanks guys. Good afternoon. Good to be on the call. Tien, I had one for you and then, Todd, a follow-up for you. So Tien, you called out Pete Hirsch and the enthusiasm over is hire. I was wondering if you could just talk a little bit about what made him a good fit? And what are some of the priorities that you had or he has coming in to the role.
Tien Tzuo: Yeah. So I think he’s been in the job for, I think, six to eight weeks right now. So I want to give him a little bit of time. But the first thing I would say is — we don’t have any major changes, right, that we were looking for Pete to come in and do. Things were going well. The innovation machine was going well. The adoption of our capabilities is people are incredibly enthusiastic of — and so we’re not looking to make any short-term changes with Pete, brings in really is a deep understanding of financial systems. He’s obviously built a point of view of working with CFOs and Chief Accounting Officers in the past four years where he’s been at and obviously one of the big areas that he’s really excited about too is going to be not a surprise here, but AI and so there’s a lot of conversations that he’s really starting to drive about what is our future around AI.
There’s a lot of good ideas that we have. We’ve obviously been using AI quite a bit. We use it in our payments and collection capability to get retry rates, right, payment completion rates from somewhere, call it, high 80s to 99% or better. We announced a lot of AI capabilities with the four product announcements that we had just a month ago around Zuora Warehouse, around Zuora Command Center. But if you look sort of step back and say, does AI have a big, big opportunity to really transform financial systems and allow our products to be much, much more valuable, absolutely. It’s in the area of insights. It’s the area of being able to improve subscriber experiences for our customers and obviously, to be much, much more efficient in their financial operations, we think AI can have a big capability in all three areas, and it’s something that is really driving right now internally.
Rob Oliver: Great. That’s really helpful. Appreciate that. And then, Todd, one for you. With the partners taking on some of the smaller deals and the impact on the PS revenue makes sense — it strikes me as a bit of an encouraging sign, too. I’d be curious to hear your take. Is this something you expect to kind of revert back? I know you said it’s — you expect it to continue as long as there’s pressure on large digital transformation deals. But is it something you expect to revert back when those do return? And given that these large professional service partners know your complete portfolio, what does this potentially do in terms of pipeline creation on the back end for you guys with the smaller lands? Thanks.
Todd McElhatton: Hey. Thanks a lot, Rob. So we’re absolutely focused on the subscription revenue side of the business. That grew 16% in constant currency this last quarter. You saw the gross margin increased to 81%, and that’s where we make our money. And the services at the ancillary business to us, you know that we run that at a breakeven to a slight loss. And so the design of — or by design, we said we continue to want to bring down the services mix in our business. And so it might be happening a little bit faster now. That’s been something we’ve been talking about now for quite some time. It’s something that we’re very comfortable with. And we’re happy to have our partners take that over and work that, we work well with them.
It also helps drive additional pipe for us over time. So from my perspective, we’re kind of at the range where I think will remain over the next time over the next several quarters and we feel good about that because subscription is being very healthy, provides us a great margin, and that’s where we’ll get focused on.
Robbie Traube: And so I mean, if I can as well, again, we want to win the best companies in the world. Right? It’s about growing subscription business for that long term. We are partner first, and that is our strategy, right? So as we are, they are adjusting to the current macro — and so we’re going to continue our commitments to them, and they’re doing the same with us. And I was, for example, in two of our top global SIs, — two of the people who’ve been there sponsoring and their commitment, they’ve become partners because of the work that they’ve done with Zuora. So absolutely, we will continue that relationship and that strategy in a partner-first strategy.
Rob Oliver: Thank you.
Operator: Your next question comes from the line of Andrew DeGasperi of Berenberg. Your line is open.
Andrew DeGasperi: Thanks for taking my question. Well, I guess, first, congrats, Luana. But second, I just wanted to touch on the releases you made in June. The assumption billing in particular. I was wondering in terms of the reception you got from customers, have you seen a ramp up of kind of activity there, maybe not necessarily deals to call out, but have you seen kind of incremental interest since that event?
Tien Tzuo: Absolutely. Look, I mean, you could tell them I was excited about the capabilities when we launched in June. It was something that we have worked closely with our customers. We have this thing called the Zuora Advisory Group, the ZAG that our key customers are involved with, and these ideas are really incubated out of that. And on the call, I tried to highlight some of the successes — and so the consumption billing capabilities already drove — the deal with probably just shy of seven digits, I think we call it a high six-digit deal and that deal wouldn’t have happened without this Zuora consumption capabilities. I highlighted Zephr right? It’s — when we did the acquisition, obviously, you can see it has a big impact already in our media space with The Atlantic.
But the big, big bet was, can we take it outside of media into all the other industries that we have — and so announcing a 24-hour fitness and existing customers are saying, look, we like that Zephr Vision. We want the Zephr vision, we need Zephr vision, and they became the first nonmedia customer of Zephr and that was really, really exciting as well. And again, we’re sitting here in August and the subscribed live was in June. And so you’re seeing that the impact of these innovations are happening fairly quickly.
Andrew DeGasperi: Thanks for that. And then, Todd, I had what sort of a two-part question. First, on the — I know you don’t normally call this out, but the billings growth was really strong in Q2. I’m just wondering if there’s anything there. And then secondly, just as a follow-up to Rob’s question earlier on the services, I mean, clearly, the numbers are coming off a bit faster than we’ve modeled. Just wondering in terms of the steady-state level that you foresee beyond maybe even this year, do we continue to see that number coming down slightly, maybe not at this sort of range, but at a lower level. Would you see that at some point, we would see that flattening out if the macro improves? Or if there’s some kind of other element that we’re not aware of?
