Zuora (ZUO) Incurs Loss in Q1, Subscription Revenues Up Y/Y

Zuora ZUO reported first-quarter fiscal 2022 loss of 2 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 4 cents. Notably, the company had reported a loss of 6 cents in the year-ago quarter.

Moreover, revenues of $80.3 million beat the consensus mark by 1.7%. The top line also improved 8.7% year over year.

The solid performance was led by strength in Zuora’s billing platform. Customer usage of Zuora’s solutions grew, with $17 billion in transaction volume, reflecting an increase of 38% year over year.

Moreover, this Zacks Rank #3 (Hold) company benefited from a resilient subscription-based business model similar to its Zacks Internet Software industry peer Workday WDAY.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Notably, Workday reported first-quarter fiscal 2022 subscription revenues (87.2% of total revenues) of $1.03 billion, up 17% year over year.

Markedly, Zuora’s subscription revenues accounted for 81.1% of total revenues. The figure improved 14.5% year over year to $65.1.

Zuora, Inc. Price, Consensus and EPS Surprise

Zuora, Inc. Price, Consensus and EPS Surprise

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

Quarter Details

Professional Services Revenues (18.9% of total revenues) declined 10.7% year over year to $15.2 million.

In the fiscal first quarter, the number of customers with annual contract value — equal to or greater than $100K — was 677, up 5% year over year.

The dollar-based retention rate improved 3 basis points (bps) sequentially at 103%. Zuora enhanced relations with customers including F5 Network FFIV, GoPro GPRO and The Mainichi newspapers. Zuora also announced a research partnership with Boston Consulting Group and Zuora’s Think Tank.

Meanwhile, non-GAAP gross margin expanded 410 bps year over year to 64.5%. Non-GAAP subscription gross margin was 79%, which remained unchanged year -over -year.

Research & development expenses, as a percentage of revenues, decreased 190 bps on a year-over-year basis to 19%. Moreover, general & administrative (G&A) expenses, as a percentage of revenues, contracted 130 bps year over year to14.1%.

However, sales & marketing expenses expanded 10 bps to 34.6%.

Total non-GAAP operating expenses, as a percentage of revenues, were 67.7%, down 320 bps from the year-ago quarter.

Balance Sheet & Cash Flow

As of April 30, 2021, Zuora had cash, cash equivalents and short-term investments of $197.4 million compared with $186.6 million as of Jan 31, 2021.

Free cash flow was $8.6 million compared with free cash flow of $2.1 million in the previous quarter.

Guidance

For the second quarter of fiscal 2022, Zuora expects subscription revenues in the range of $67.5 million to $69.5 million. Revenues are expected between $82.5 million and $84.5 million. The Zacks Consensus Estimate for revenues is currently pegged at $80 million, indicating growth of 6.8% year over year.

Non-GAAP loss from operations is expected between $4.5 million and $5 million.

Non-GAAP loss is anticipated between 3 cents per share and 4 cents per share. The consensus mark for the same stands at 2 cents per share.

For fiscal 2022, Zuora expects subscription revenues to be $274-$278 million. Revenues are expected between $337 million and $339 million. The Zacks Consensus Estimate for revenues is currently pegged at $336 million, indicating growth of 10% year over year.

Non-GAAP loss from operations is expected between $8 million and $12 million.

Non-GAAP loss is expected between 6 cents per share and 10 cents per share. The consensus mark for the same is pegged at 8 cents per share.

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