Zuora (ZUO) Q3 Earnings Beat Estimates, Revenues Increase Y/Y
Zuora ZUO reported third-quarter fiscal 2024 non-GAAP earnings of 9 cents per share, which comfortably beat the Zacks Consensus Estimate by 50%. The company reported a loss of 2 cents per share in the year-ago quarter.
Revenues of $109.8 million beat the consensus mark by 1.24% and increased 8.7% year over year.
Zuora continues to benefit from an expanding clientele. The company is supporting Google Fiber’s full order-to-revenue process. Google Fiber is Alphabet's high-speed broadband Internet service that spans 15 states and is in the stage of further expansion. Moreover, Zuora added LinkedIn to its clientele.
Zuora shares were up 5.15% in after-hours trading. The company’s shares have gained 31.3%, underperforming the Zacks Computer & Technology sector’s growth of 46%.
Quarter Details
Zuora’s subscription revenues accounted for 89.3% of total revenues. The figure was $98 million, up 13.3% year over year.
Zuora, Inc. Price, Consensus and EPS Surprise
Zuora, Inc. price-consensus-eps-surprise-chart | Zuora, Inc. Quote
Professional Services revenues accounted for 10.7% of total revenues. The figure was $11.8 million, down 18.6% year over year.
In the fiscal third quarter, the number of customers with an annual contract value (ACV) equal to or greater than $250K was 453, up from the 420 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 108% compared with 109% as of Oct 31, 2022.
In the reported quarter, Annual Recurring Revenues increased 13% year over year to $396 million.
The non-GAAP gross margin was 73.7% compared with 67.1% in the year-ago quarter. Subscription gross margin expanded 410 basis points (bps).
Research & development expenses, as a percentage of revenues, decreased 310 bps on a year-over-year basis to 25%. Sales & marketing expenses, as a percentage of revenues, decreased to 36.6% from 46.5% reported in the year-ago quarter.
General & administrative expenses, as a percentage of revenues, were 14.5%, down 470 bps year over year.
Total operating expenses, as a percentage of revenues, were 76.1% compared with 93.7% reported in the year-ago quarter.
Non-GAAP operating income was $16 million in the reported quarter compared with an operating income of $0.6 million in the year-ago quarter.
Balance Sheet & Cash Flow
As of Oct 31, 2023, Zuora had cash, cash equivalents and short-term investments of $493.7 million compared with $406.2 million as of Jul 31, 2023.
The free cash flow was $12.7 million in the reported quarter compared with the free cash flow of $4 million reported in the previous quarter.
Guidance
For the fourth quarter of fiscal 2024, Zuora expects subscription revenues in the range of $99.3-$100.3 million. Professional services revenues are expected between $10.5 million and $11.5 million.
Total revenues are expected between $109.8 million and $111.8 million. The Zacks Consensus Estimate for revenues is pegged at $110.9 million, indicating 7.63% year-over-year growth.
In the near term, Zuora expects its subscription gross margins between 81% and 82%.
The non-GAAP income from operations is expected between $12 million and $13 million.
The non-GAAP earnings are expected between 4 cents and 5 cents per share. The consensus mark for earnings is pegged at 5 cents per share, unchanged over the past 30 days.
For fiscal 2024, Zuora expects subscription revenues in the range of $382.5-$383.5 million. Professional services revenues are expected between $48.3 million and $49.3 million.
Total revenues are expected between $430.8 million and $432.8 million. The Zacks Consensus Estimate for revenues is pegged at $430.5 million, indicating 8.69% year-over-year growth.
The non-GAAP income from operations is expected to be between $43.6 million and $44.6 million.
The non-GAAP earnings are expected between 25 cents and 26 cents per share. The consensus mark for earnings is pegged at 21 cents per share, unchanged over the past 30 days.
For fiscal 2023, ARR growth is expected to be 12%. The dollar-based retention rate is expected to be in the 107-108% range.
Adjusted free cash flow is expected to be more than $37 million.
Zacks Rank & Stocks to Consider
Zuora currently has a Zacks Rank #3 (Hold).
BlackLine BL, Ceridian HCM CDAY, and Everbridge EVBG are some better-ranked stocks that investors can consider in the broader sector, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
BlackLine shares have lost 13.2% year to date. The long-term earnings growth rate is pegged at 50.56%.
Ceridian HCM shares have gained 7.8% year to date. The long-term earnings growth rate is pegged at 44.15%.
Everbridge shares have declined 30.2% year to date. The long-term earnings growth rate is pegged at 47.04%.
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