Zuora (ZUO) Earnings Top Estimates in Q3, Revenues Up Y/Y

Zuora ZUO reported third-quarter fiscal 2022 non-GAAP loss of 2 cents per share, which was narrower than the the Zacks Consensus Estimate by 33.33%, but wider than a loss of 1 cent reported in the year-ago quarter.

Revenues of $89.2 million beat the consensus mark by 3.16% and increased 15.5% year over year.

This solid outperformance can be attributed to the robust adoption of Zuora solutions. Transaction volumes through Zuora’s billing platform were $18.8 billion, up 28% year over year.

Quarter Details

Zuora’s subscription revenues contributed 82.7% to total revenues. The figure was $73.8 million, up 19% year over year.

Zuora, Inc. Price, Consensus and EPS Surprise

Zuora, Inc. Price, Consensus and EPS Surprise

Zuora, Inc. price-consensus-eps-surprise-chart | Zuora, Inc. Quote

Professional Services revenues accounted for 17.3% of total revenues. The figure was $15.5 million, up 1.5% year over year.

In the fiscal third quarter, the number of customers with annual contract value equal to or greater than $100K was 720, increasing 10% year over year.

The dollar-based retention rate was 110% compared with 99% as of Oct 31, 2020.

Zuora launched a new Unified Monetization solution during the reported quarter. The service will help customers monetize subscription and non-subscription offers.

Non-GAAP gross margin expanded 310 basis points (bps) year over year to 60%, driven by a shift from services work to a higher-margin, subscription-based model.

Non-GAAP subscription gross margin was 79% compared with 77% in the year-ago quarter.

Research & development expenses, as a percentage of revenues, declined 10 bps on a year-over-year basis to 15%. General & administrative expenses, as a percentage of revenues, were 25.7%, up 150 bps year over year. Sales & marketing expenses increased 370 bps to 31.4%.

Total operating expenses, as a percentage of revenues, were 84.2%, up 650 bps from the year-ago quarter’s levels.

Loss from operations was $7.6 million in the reported quarter compared with $6.8 million in the year-ago quarter.

Balance Sheet & Cash Flow

As of Oct 31, 2021, Zuora had cash, cash equivalents and short-term investments of $203.3 million compared with $200 million as of Jul 31, 2021.

Free cash outflow was $1.7 million in the reported quarter.

Guidance

For fourth-quarter fiscal 2022, Zuora expects subscription revenues in the range of $75-$76 million. Total revenues are expected between $90 million and $91 million.

Non-GAAP loss from operations is expected to be between $2.5 million and $1.5 million. Non-GAAP loss is expected to be between 3 cents and 2 cents per share.

For fiscal 2023, Zuora expects subscription revenues in the range of $337-$339 million. Total revenues are expected between $401 million and $405 million.

Zacks Rank & Stocks to Consider

Zuora currently has a Zacks Rank #3 (Hold).

Zuora shares are up 32.4% against the Zacks Internet Software industry’s decline of 17.8% and Computer & Technology sector’s return of 22.7% year to date.

Some of the better-ranked stocks in the Computer & Technology sector are Nova Measuring Instruments NVMI, Advanced Micro Devices AMD and Pinterest PINS

Nova Measuring sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. The long-term earnings growth rate stands at 32.2%.

Nova Measuring’s shares have returned 83% year to date compared with the Zacks Electronics-Semiconductors industry’s growth of 36.7% and the Computer & Technology sector’s return of 22.7%.

The long-term earnings growth rate for AMD, a Zacks Rank #2 (Buy) stock, is currently pegged at 46.2%.

The AMD stock has returned 62.6% year to date compared with the Electronics-Semiconductors industry’s growth of 36.7% and the Computer & Technology sector’s return of 22.7%.

Pinterest, holding a Zacks Rank #2, has a long-term earnings growth rate of 52.7%.

PINS shares are down 43.4% compared with the Zacks Internet Software industry’s decline of 17.8% and Computer & Technology sector’s return of 22.7% year to date.

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