Zuora (ZUO) Q2 Earnings Beat Estimates, Revenues Increase Y/Y
Zuora ZUO reported second-quarter fiscal 2024 non-GAAP earnings of 7 cents per share, which comfortably beat the Zacks Consensus Estimate of 3 cents. The company reported a loss of 3 cents per share in the year-ago quarter.
Revenues of $98.8 million beat the consensus mark by 1.52% and increased 14.2% year over year.
Zuora continues to benefit from an expanding clientele with the addition of DISH Wireless, The Atlantic and Guesty. DISH Wireless bought Zuora Revenue solution in the reported quarter, while The Atlantic selected Zuora Billing and Zephr together to support its paywall and billing solutions.
In the reported quarter, Zuora added more than 35% new logos on a year-over-year basis and its average sales cycles improved by more than 30% year over year.
Zuora, Inc. Price, Consensus and EPS Surprise
Zuora, Inc. price-consensus-eps-surprise-chart | Zuora, Inc. Quote
Zuora is benefiting from expanding adoption of Zephr in different industries including SaaS, gaming, fitness, hospitality and other markets, apart from media and publishing.
Zuora shares declined 2.58% in after-hours trading. The company’s shares have gained 52.2% compared with the Zacks Computer & Technology sector’s growth of 34.6% and the Zacks Internet Software industry’s return of 42.8%, year to date.
Quarter Details
Zuora’s subscription revenues accounted for 88.4% of total revenues. The figure was $95.5 million, up 13.9% year over year.
Professional Services revenues accounted for 11.6% of total revenues. The figure was $12.6 million, down 16% year over year.
In the fiscal second quarter, the number of customers with an annual contract value (ACV) equal to or greater than $250K was 444, up from the 407 reported in the year-ago quarter. Seven of the deals that closed in the reported quarter had ACV equal to or greater than $500K, one of which had ACV greater than $1 million.
The dollar-based retention rate was 107% compared with 111% as of Jul 31, 2022.
In the reported quarter, Annual Recurring Revenues increased 14% year over year to $384.2 million.
The non-GAAP gross margin was 70.8% compared with 67.3% in the year-ago quarter. Subscription gross margin expanded 90 basis points (bps) while professional services contracted 190 bps.
Research & development expenses, as a percentage of revenues, decreased 240 bps on a year-over-year basis to 24.3%. Sales & marketing expenses, as a percentage of revenues, decreased 610 bps to 39.6%.
General & administrative expenses, as a percentage of revenues, were 18%, down 100 bps year over year.
Total operating expenses, as a percentage of revenues, were 81.9% compared with 91.4% reported in the year-ago quarter.
Non-GAAP operating income was $9.6 million in the reported quarter against an operating loss of $0.2 million in the year-ago quarter.
Balance Sheet & Cash Flow
As of Jul 31, 2023, Zuora had cash, cash equivalents and short-term investments of $406.2 million compared with $396.9 million as of Apr 30, 2023.
The free cash flow was $4 million in the reported quarter compared with the free cash flow of $13 million reported in the previous quarter.
Guidance
For the third quarter of fiscal 2024, Zuora expects subscription revenues in the range of $96.5-$97.5 million. Professional services revenues are expected between $11 million and $12 million.
Total revenues are expected between $107.5 million and $109.5 million.
The non-GAAP income from operations is expected between $10 million and $11 million. The non-GAAP earnings are expected between 5 cents and 6 cents per share.
For fiscal 2024, Zuora expects subscription revenues in the range of $380-$384 million. Total revenues are expected between $428 million and $433 million.
The non-GAAP income from operations is expected to be between $34 million and $36 million. The non-GAAP earnings are expected between 21 cents and 23 cents per share.
For fiscal 2024, ARR growth is expected between 12% and 15%. The dollar-based retention rate is expected in the 107-109% range.
Adjusted free cash flow is expected to be more than $28 million.
Zacks Rank & Other Stocks to Consider
Zuora currently has a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the same industry are Model N MODN, Paylocity Holdings PCTY and Workday WDAY, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Workday and Paylocity have gained 38.6% and 2.9%, respectively, on a year-to-date basis. Model N shares have declined 31.7% over the same time frame.
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