Zuora (ZUO) Q4 Loss Narrower Than Estimates, Revenues Up Y/Y

Zuora, Inc. (NYSE:ZUO) reported fourth-quarter fiscal 2020 loss of 9 cents per share, which was narrower than the Zacks Consensus Estimate by 10% and flat year over year.

Revenues of $70.4 million missed the consensus mark by 2% but increased 11% on a year-over-year basis.

The year-over-year growth was driven by robust adoption of Zuora’s platform as more companies are moving to a subscription-based economy.

Zuora, Inc. Price, Consensus and EPS Surprise

Quarter Details

Subscription Revenues (77.5% of total revenues) amounted to $54.6 million, up 21% from the year-ago quarter’s figure.

Professional Services Revenues (22.5% of total revenues) declined 14% year over year to $15.8 million. The downside was caused due to Zuora’s focus on shifting services to its Global Systems Integrator (GSI) partners and a milestone-based contract where key milestones were pushed into upcoming quarters.

In the fourth quarter, customers with annual contract value (ACV) equal to or greater than $100K was 624, up 19% year over year. Dollar-based retention rate was 104% during the quarter.

Transaction volume through Zuora’s billing platform during the fourth quarter was $13.1 billion, up 21% year over year.

Notable go-lives during the quarter include Derco, Cinépolis, Softbank Robotics, Siemens and Topcon Agriculture, among others. Moreover, client wins during the quarter include Poly, Vertalo, Radiuz, Monet Technologies and Briggs & Stratton.

Operating Details

Non-GAAP gross margin expanded 250 basis points (bps) year over year to 58%.

Sales and marketing expenses increased 13.6% year over year to $27.4 million, driven by investments for the development of the sales team.

Research and development expenses were $20.7 million, up 40.6% year over year. General and administrative expenses increased 7.2% year over year to $12.5 million.

Non-GAAP operating loss for the quarter was $10.5 million compared with $9.9 million in the year-ago quarter.

Balance Sheet & Cash Flow

As of Jan 31, 2020, the company had cash, cash equivalents and short-term investments of $171.9 million compared with $ 170.4 million as Oct 31, 2019.

Net cash flow from operating activities was $4 million as of Jan 31, 2020 compared with $3.5 million as of Oct 31, 2019.

Free cash outflow during the quarter was $4.5 million.

Guidance

First-Quarter Fiscal 2021

The company expects revenues in the range of $70.5-$73 million. The Zacks Consensus Estimate for revenues is pegged at $72.7 million, which indicates year-over-year growth of 13.4%.

Non-GAAP loss is expected between 10 cents and 11 cents per share. The consensus mark for earnings is pegged at 8 cents, which suggests a decline from 11 cents reported in the year-ago quarter.

Fiscal Year 2021

The company expects revenues in the range of $300-$307 million. The Zacks Consensus Estimate for revenues is pegged at $332 million, which indicates year-over-year growth of 19.6%.

Non-GAAP loss is expected between 25 cents and 29 cents per share. The consensus mark for earnings is pegged at 26 cents, which suggests an improvement from 36 cents reported in the year-ago quarter.

Zacks Rank & Stocks to Consider

Currently, Zuora carries a Zacks Rank #3 (Hold).

Applied Materials, Inc. (NASDAQ:AMAT) , Garmin Ltd. (NASDAQ:GRMN) and Microsoft Corporation (NASDAQ:MSFT) are some better-ranked stocks in the same industry. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Applied Materials, Garmin and Microsoft is currently pegged at 9.9%, 7.4% and 13.2%, respectively.

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