Zuora Inc (ZUO) Posts Improved Margins and Revenue Growth in Q3 Fiscal 2024
Subscription revenue increased by 13% year-over-year to $98.0 million.
GAAP operating margin improved by 26 percentage points; Non-GAAP operating margin by 14 percentage points compared to the same quarter last year.
Non-GAAP net income reached $12.3 million, a notable rise from a net loss of $2.9 million in Q3 fiscal 2023.
On November 29, 2023, Zuora Inc (NYSE:ZUO) released its 8-K filing, disclosing the financial results for its fiscal third quarter ended October 31, 2023. The company reported a significant improvement in operating margins and a healthy increase in subscription revenue, reflecting the success of its strategic initiatives and the strength of its recurring business model.
Financial Performance Overview
Zuora Inc (NYSE:ZUO) achieved a 13% year-over-year growth in subscription revenue, reaching $98.0 million, and a total revenue increase of 9% to $109.8 million. The company's GAAP loss from operations narrowed significantly to $8.8 million from a loss of $33.9 million in the prior year's quarter. Non-GAAP income from operations was $16.0 million, a substantial improvement from $0.6 million in Q3 fiscal 2023.
GAAP net loss was reduced to $5.5 million, or 5% of revenue, down from a net loss of $37.0 million, or 37% of revenue, in the same quarter of the previous fiscal year. Non-GAAP net income per share was $0.09, compared to a non-GAAP net loss per share of $0.02 in the third quarter of fiscal 2023.
Balance Sheet and Cash Flow Highlights
The company's balance sheet showed cash and cash equivalents and short-term investments totaling $493.7 million as of October 31, 2023. Net cash used in operating activities was $55.7 million, which included a significant payment of $68.3 million to settle shareholder litigation. Adjusted free cash flow was positive at $12.7 million, compared to negative $7.2 million in the same quarter of the previous year.
Operational and Business Highlights
Zuora Inc (NYSE:ZUO) reported key operational metrics, including an increase in customers with an annual contract value (ACV) of $250,000 or more to 453, up from 420 the previous year. The dollar-based retention rate (DBRR) was 108%, and the annual recurring revenue (ARR) grew by 13% to $396.0 million.
The company also highlighted several business achievements, such as hosting international Subscribed Connect events, announcing new product enhancements, and expanding its services with Google Fiber. New customer acquisitions included notable names like LinkedIn, FreshBooks, and Dark Matter Technologies.
Future Outlook
For the fourth quarter and full fiscal year 2024, Zuora Inc (NYSE:ZUO) provided guidance that anticipates continued growth in subscription revenue and non-GAAP income from operations. The company expects subscription revenue to be between $99.3 million and $100.3 million for the fourth quarter and anticipates a non-GAAP income from operations of $12.0 million to $13.0 million. The projected ARR growth is around 12%, with an adjusted free cash flow of $37 million or more for the fiscal year.
Zuora Inc (NYSE:ZUO) remains focused on executing its strategy and building upon the momentum of its recurring revenue model. The company's improved financial metrics and operational achievements underscore its potential for sustainable growth and profitability.
Investors and interested parties can access more details on the company's performance by joining the webcast and conference call or by reviewing the full financial statements and non-GAAP reconciliations provided in the earnings release.
Explore the complete 8-K earnings release (here) from Zuora Inc for further details.
This article first appeared on GuruFocus.
