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Zuora (ZUO) to Report Q3 Earnings: What's in the Cards?

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Zacks Equity Research
·4 min read
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Zuora ZUO is set to release third-quarter fiscal 2021 results on Dec 3.

For the quarter, the company expects total revenues between $73 million and $75 million. On a non-GAAP basis, loss is expected in the 4-5 cents-per-share range.

The Zacks Consensus Estimate for revenues is pegged at $73.6 million, suggesting growth of 2.5% from the figure reported in the year-ago quarter.

The consensus mark for loss stayed at 5 cents per share over the past 30 days. Zuora had reported a loss of 6 cents in the year-ago quarter.

Notably, the company beat the Zacks Consensus Estimate in the past four quarters, delivering an earnings surprise of 45.8%, on average.
 

Zuora, Inc. Price and EPS Surprise

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

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

 

Let’s see how things have shaped up for this announcement.

Factors to Watch

Zuora’s third-quarter results are expected to have benefited from a resilient subscription-based business model amid the coronavirus pandemic.

Much similar to its Zacks Internet Software industry peers, Anaplan PLAN, Model N MODN and HubSpot HUBS, Zuora expects subscription revenues to grow in the to-be-reported quarter. The company expects revenues between $59 and $60 million which at the midpoint indicates 10.2% year-over-year growth.

Markedly, Anaplan, Model N and HubSpot reported subscription-revenue growth of 31.4%, 8% and 32%, respectively, in their recently-concluded quarterly results.

Notably, in August, Zuora and GoCardless partnered to introduce a joint solution, which enables businesses to efficiently process their international recurring payments, reduce payment-related costs and decrease customer churn rate. The new solution is anticipated to have boosted this Zacks Rank #3 (Hold) company’s presence in international markets. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Further, the company launched Zuora Analytics, an addition to its Order to Revenue suite, which provides customers with subscription data and trend analysis using an automated, self-service dashboard. Moreover, growing traction of the new application is likely to have driven customer base expansion in the quarter under review.

Additionally, the company introduced new enhancements to the Zuora Billing application, such as advanced usage-based pricing capabilities and an adaptive performance engine, which are expected to have fueled growth of its robust product portfolio.

Notably, Zuora helped 41 customers, which included Analog Devices, Brother International Corporation, McGraw Hill and SiriusXM, to go live in the previous quarter. Moreover, strong adoption of its platform is likely to have continued in the to-be-reported quarter.

Further, the shift of revenue mix to high-margin subscription revenues is expected to have driven margin expansion and aided top-line growth. Subscription revenues contributed 77.8% to total revenues in the second quarter.

However, the dollar-based retention rate, which declined to 99% due to increased customer churn rate led by bankruptcies, mergers and acquisitions, and product fit, is expected to have continued its downslide in third-quarter fiscal 2021. Additionally, cash flow is expected to have declined due to business seasonality and delays in capital spending.

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