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Zuora (ZUO) Q1 Earnings Miss Estimates, Revenues Increase Y/Y

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Zuora (ZUO - Free Report) reported a first-quarter fiscal 2023 non-GAAP loss of 3 cents per share, which missed the Zacks Consensus Estimate by 50% but was narrower than the loss of 2 cents reported in the year-ago quarter.

Revenues of $93.2 million beat the consensus mark by 1.30% and increased by 16% year over year.

This solid outperformance was led by the robust adoption of Zuora solutions. Transaction volumes through Zuora’s billing platform were $20.6 billion, up 21% year over year.

Quarter Details   

Zuora’s subscription revenues accounted for 84.3% of total revenues. The figure was $78.5 million, up 20.5% year over year. ZUO benefited from an expanding customer base, which includes the likes of Bloomberg, GoPro (GPRO - Free Report) and Zoom (ZM - Free Report) . These companies are benefiting from the expanded usage of Zuora solutions.

For instance, GoPro’s subscription and service revenues surged 72.2% year over year to $18.6 million in the first quarter of 2023. Meanwhile, Zoom’s revenues of $1.07 billion increased 12.3% year over year.

Zuora, Inc. Price, Consensus and EPS Surprise

Zuora, Inc. Price, Consensus and EPS Surprise

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

Professional Services revenues accounted for 15.7% of total revenues. The figure was $14.7 million, down 3.4% year over year.

In the fiscal first quarter, the number of customers with an annual contract value equal to or greater than $100K was 746, up from 677 reported in the year-ago quarter.

The dollar-based retention rate was 110% compared with 103% as of Apr 30, 2021.

In the reported quarter, ARR growth came in at 20%, up from 14% in the year-ago quarter.

The non-GAAP gross margin expanded by 330 basis points (bps) year over year to 66.9%, driven by a shift from services work to a higher-margin, subscription-based model.

The non-GAAP subscription gross margin was 79% compared with 77% in the year-ago quarter.

Research & development expenses, as a percentage of revenues, increased 20 bps on a year-over-year basis to 18.1%. Sales & marketing expenses increased 80 bps to 35.4%.

General & administrative expenses, as a percentage of revenues, were 13.5%, down 50 bps year over year.

Total operating expenses, as a percentage of revenues, were 67.1%, up 50 bps on a year-over-year basis.

The loss from operations was $0.2 million in the reported quarter compared with $2.4 million in the year-ago quarter.

Balance Sheet & Cash Flow

As of Apr 30, 2022, Zuora had cash, cash equivalents and short-term investments of $452.6 million compared with $215.4 million as of Jan 31, 2022.

Free cash flow was $3.7 million in the reported quarter compared with $8.63 million reported in the year-ago quarter.

Guidance

For the second quarter of fiscal 2023, Zuora expects subscription revenues in the range of $82-$83 million. Total revenues are expected between $339 million and $341 million.

The non-GAAP loss from operations is expected between $2 million and $1 million. The non-GAAP loss per share is expected between 6 cents and 5 cents.

For fiscal 2023, Zuora expects subscription revenues in the range of $339-$341 million. Total revenues are expected between $402 million and $406 million.

The non-GAAP loss from operations is expected between $2 million and $0 million. The non-GAAP loss per share is expected between 19 cents and 15 cents.

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

Free cash flow is expected between $6 million and $9 million.

Zacks Rank & Stock to Consider

Zuora currently has a Zacks Rank #4 (Sell).

ZUO shares have dropped 48.9% compared with the Zacks Computer & Technology sector’s decline of 17.9% year to date (YTD).

A better-ranked stock in the Computer & Technology sector is Samsara (IOT - Free Report) , which has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Samsara is scheduled to release first-quarter fiscal 2023 results on Jun 2. IOT shares have been down 61.8% YTD.


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