Zuora (ZUO) Q3 Earnings Flat Y/Y, Revenues Beat Estimates

·4 min read

Zuora ZUO reported third-quarter fiscal 2023 non-GAAP loss of 2 cents per share, narrower than the Zacks Consensus Estimate of a loss of 6 cents and flat year over year.

Revenues of $101.1 million beat the consensus mark by 1.58% and increased 17% in constant currency and 13% year over year. The third quarter performance reflects strong uptake of its business platform and the resilience of its cloud subscription-based business model.

Quarter Details

Zuora’s subscription revenues accounted for 85.6% of total revenues. The figure was $86.6 million, up 20% in constant currency and 17% year over year. Zuora’s subscription revenues experienced forex headwinds based on the strength of the U.S. dollar.

Professional Services revenues accounted for 14.4% of total revenues. The figure was $14.5 million, down 6% year over year.

In the fiscal third quarter, the number of customers with an annual contract value equal to or greater than $100K was 770, up from the 720 reported in the year-ago quarter.

Zuora, Inc. Price, Consensus and EPS Surprise

Zuora, Inc. Price, Consensus and EPS Surprise
Zuora, Inc. Price, Consensus and EPS Surprise

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

The dollar-based retention rate was 109% compared with 110% as of Oct 31, 2021.

In the reported quarter, ARR growth was at 19%, flat year over year.

The non-GAAP gross margin was 67%, which improved 157 basis points (bps).

Research & development expenses, as a percentage of revenues, jumped 230 bps on a year-over-year basis to 20.1%. Sales & marketing expenses decreased 40 bps to 34%.

General & administrative expenses, as a percentage of revenues, were 12.3%, down 230 bps year over year.

Non-GAAP operating income was $0.6 million in the reported quarter against a loss of $1.2 million in the year-ago quarter.

Balance Sheet & Cash Flow

As of Oct 31, 2022, Zuora had cash, cash equivalents and short-term investments of $401 million compared with $448.6 million as of Jul 31, 2022.

The free cash outflow was $7.2 million in the reported quarter compared with the free cash outflow of $7.6 million reported in the year-ago quarter.

Guidance

For the fourth quarter of fiscal 2023, Zuora expects subscription revenues in the range of $87.5-$88.5 million. Professional services revenues are expected to be between $56 million and $57 million.

Total revenues are expected to be between $99.5 million and $101.5 million.

The non-GAAP loss from operations is expected between $2.5 million and $1.5 million. The non-GAAP loss is expected between 6 cents and 5 cents per share.

For fiscal 2023, Zuora expects subscription revenues in the range of $337-$341 million. Total revenues are expected to be between $394 million and $400 million.

The non-GAAP income from operations is expected between $1 million. The non-GAAP loss is expected between 7 cents and 6 cents per share.

For fiscal 2023, ARR growth is projected to be 21% or higher. The dollar-based retention rate is expected at 112% or higher.

Free cash outflow is expected between $36.5 million and $33.5 million.

Zacks Rank & Other Stocks to Consider

Zuora currently has a Zacks Rank #2 (Buy).

The stock has plunged 61.4% compared with the Zacks Computer & Technology sector’s decline of 31.5% year to date.

Here are some other top-ranked stocks to consider in the broader tech sector:

Arista Networks ANET carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ANET’s shares have increased 2.9% in the year-to-date period compared with the Zacks Communication - Components industry’s decline of 12%.

Airbnb ABNB is also a Zacks Rank #2 stock.

ABNB shares have lost 50% in the year-to-date period compared with the Zacks Internet - Content industry’s decline of 40%.

Bumble BMBL carries a Zacks Rank #2.

BMBL’s shares have slumped 39.3% in the year-to-date period compared with the Zacks Internet Software industry’s decline of 63.9%.

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