Le Lézard
Classified in: Science and technology, Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

Zuora Reports First Quarter Fiscal 2023 Results


Zuora, Inc. (NYSE: ZUO), the leading cloud-based subscription management platform provider, today announced financial results for its fiscal first quarter ended April 30, 2022.

"Our first quarter continued to demonstrate the resilience of the recurring revenue model, and our unique ability to provide a complete quote to cash and revenue recognition process at scale. We exceeded guidance for total revenue and subscription revenue. Long-term trends continue to support the broadening Subscription Economy and we delivered another quarter of consistent execution," said Tien Tzuo, founder and CEO of Zuora.

First Quarter Fiscal 2023 Financial Results:

A description of non-GAAP financial measures is contained in the section titled "Explanation of Non-GAAP Financial Measures" below and a reconciliation of GAAP and non-GAAP financial measures is contained in the tables below.

Key Metrics and Business Highlights:

Financial Outlook:

As of May 25, 2022, we are providing guidance for the second quarter and full year fiscal 2023, as well as an additional view of our expected fiscal year 2023 results, based on current market conditions and expectations. We emphasize that the guidance is subject to various important cautionary factors referenced in the section entitled "Forward-Looking Statements" below.

For the second quarter and full fiscal year 2023, Zuora currently expects the following results, which reflects the impact of the Silver Lake investment:

 

Second Quarter

 

Fiscal 2023

Subscription revenue

$82.0M - $83.0M

 

$339.0M - $341.0M

Total revenue

$96.5M - $98.5M

 

$402.0M - $406.0M

Non-GAAP loss from operations

($2.0M) - ($1.0M)

 

($2.0M) - $0.0M

Non-GAAP net loss per share¹

($0.06) - ($0.05)

 

($0.19) - ($0.15)

Zuora is providing the following preliminary view of our expected results for fiscal year 2023:

 

Fiscal 2023

ARR Growth

21% or higher

Dollar-based Retention Rate

112% or higher

Free Cash Flow2

$6.0M - $9.0M

(1) Non-GAAP net loss per share was computed assuming 130.2 million and 131.8 million weighted-average shares outstanding for the second quarter and full year fiscal 2023, respectively. The Silver Lake investment resulted in an increase to Non-GAAP net loss of $13.3 million.

(2) The Silver Lake investment resulted in a decrease to expected free cash flow of $8.0 million.

These statements are forward-looking and actual results may differ materially. Refer to the "Forward-Looking Statements" safe harbor section below for information on the factors that could cause our actual results to differ materially from these forward-looking statements.

Zuora has not reconciled its guidance for non-GAAP loss from operations to GAAP loss from operations or non-GAAP net loss per share to GAAP net loss per share because stock-based compensation expense cannot be reasonably calculated or predicted at this time. Additionally, free cash flow has not been reconciled to operating cash flows as it cannot be reasonably calculated or predicted at this time. Accordingly, a reconciliation of these non-GAAP measures is not available without unreasonable effort.

Webcast and Conference Call Information:

Zuora will host a conference call for investors on May 25, 2022 at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time to discuss the company's financial results and business highlights. Investors are invited to listen to a live webcast of the conference call by visiting https://investor.zuora.com. A replay of the webcast will be available through May 25, 2023. The call can also be accessed live via phone by the toll-free dial-in number: 1-888-440-5655 or toll dial-in number: 1-646-960-0338 with conference ID 8022374. An audio replay will be available shortly after the call and can be accessed by dialing 1-800-770-2030 or 1-647-362-9199 with conference ID 8022374 available from May 25, 2022 at 4:00 p.m. PT to June 1, 2022 at 11:59 p.m. PT.

Explanation of Non-GAAP Financial Measures:

In addition to financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), this press release and the accompanying tables contain non-GAAP financial measures, including non-GAAP cost of subscription revenue, non-GAAP cost of professional services revenue, non-GAAP gross profit, non-GAAP total gross margin, non-GAAP subscription gross margin, non-GAAP professional services gross margin, non-GAAP research and development expense, non-GAAP sales and marketing expense, non-GAAP general and administrative expense, non-GAAP operating margin, non-GAAP loss from operations, non-GAAP net loss, non-GAAP net loss per share, and free cash flow. The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP.

We use non-GAAP financial measures in conjunction with GAAP measures as part of our overall assessment of our performance, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies and to communicate with our Board of Directors concerning our financial performance. We believe these non-GAAP measures provide investors consistency and comparability with our past financial performance and facilitate period-to-period comparisons of our operating results. We also believe these non-GAAP measures are useful in evaluating our operating performance compared to that of other companies in our industry, as they generally eliminate the effects of certain items that may vary for different companies for reasons unrelated to overall operating performance.

We exclude the following items from one or more of our non-GAAP financial measures:

Additionally, Zuora's management believes that the free cash flow non-GAAP measure is meaningful to investors because management reviews cash flows generated from operations after taking into consideration capital expenditures, net of insurance recoveries, as these net expenditures are considered to be a necessary component of ongoing operations. Insurance recoveries include amounts paid to us for property and equipment that were damaged in January 2020 at our corporate headquarters.

Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. The non-GAAP measures we use may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes. We compensate for these limitations by providing specific information regarding the GAAP items excluded from these non-GAAP financial measures.

Operating Metrics:

Annual Contract Value (ACV). We define ACV as the subscription revenue we would contractually expect to recognize from a customer over the next twelve months, assuming no increases or reductions in their subscriptions.

Dollar-based Retention Rate. We calculate our dollar-based retention rate as of a period end by starting with the sum of the ACV from all customers as of twelve months prior to such period end, or prior period ACV. We then calculate the sum of the ACV from these same customers as of the current period end, or current period ACV. Current period ACV includes any upsells and also reflects contraction or attrition over the trailing twelve months but excludes revenue from new customers added in the current period. We then divide the current period ACV by the prior period ACV to arrive at our dollar-based retention rate.

Annual Recurring Revenue (ARR) and ARR Growth. ARR represents the annualized recurring value at the time of booking or contract modification for all active subscription contracts at the end of a reporting period. ARR excludes the value of non-recurring revenue such as professional services revenue as well as contracts with new customers with a term of less than one year. We calculate the growth in ARR (ARR Growth) by dividing ARR as of a period end by ARR for the corresponding period end of the prior fiscal year. ARR and ARR Growth are performance metrics and should be viewed independently of revenue and deferred revenue, and are not intended to be a substitute for, or combined with, any of these items.

Forward-Looking Statements:

Zuora's Financial Outlook and other statements in this release that refer to future plans and expectations are forward-looking statements that involve a number of risks and uncertainties. Words such as "believes," "may," "will," "estimates," "potential," "continues," "anticipates," "intends," "expects," "could," "would," "projects," "plans," "targets," and variations of such words and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on management's expectations as of the date of this filing and are subject to a number of risks, uncertainties and assumptions, many of which involve factors or circumstances that are beyond our control. Our actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, risks detailed in our Form 10-K filed with the Securities and Exchange Commission on March 28, 2022 as well as other documents that may be filed by us from time to time with the Securities and Exchange Commission. In particular, the following factors, among others, could cause results to differ materially from those expressed or implied by such forward-looking statements: adverse changes in general economic or market conditions, including the impact that inflation or a slowdown in the economy or market conditions may have on our business and our customers; we may be unable to attract new customers and expand sales to existing customers; we may not be able to manage our future growth effectively; the shift by companies to subscription business models may develop slower than we expect; the risk of loss of key employees; future responses to and effects of the ongoing COVID-19 pandemic, including the pandemic's impact on the economy, our customers and our businesses; we have a history of net losses and may not achieve or sustain profitability; we face intense competition in our markets and may not be able to compete effectively; our products may fail to gain market acceptance or our product development efforts may be unsuccessful; our products may fail to gain, or lose, market acceptance; customers may fail to successfully deploy our solution after entering into a subscription agreement with us; we may not be able to develop and release new products and services, or successful enhancements, new features and modifications to our existing products and services; our sales and product initiatives may not be successful or the expected benefits of such initiatives may not be achieved in a timely manner; challenges related to growing our relationships with strategic partners such as systems integrators and their effectiveness in selling our products; our security measures may be breached or our products may be perceived as not being secure; we may be unable to adequately protect our intellectual property; we may experience interruptions or performance problems, including a service outage, associated with our technology; current and future litigation including our current shareholder litigation could have a material adverse impact on our financial condition; general political or destabilizing events, including war, conflict or acts of terrorism, such as the ongoing conflict in Ukraine; other business effects, including those related to industry, market, economic, political, regulatory and global health conditions, changes in foreign exchange rates; weakened global economic conditions may adversely affect our industry; and other risks and uncertainties. The forward-looking statements included in this press release represent our views as of the date of this press release. We anticipate that subsequent events and developments will cause our views to change. We undertake no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.

About Zuora, Inc.

Zuora provides the leading cloud-based subscription management platform that functions as a system of record for subscription businesses across all industries. Powering the Subscription Economy®, the Zuora platform was architected specifically for dynamic, recurring subscription business models, and acts as an intelligent subscription management hub that automates and orchestrates the entire quote to cash and revenue recognition process. Zuora serves more than 1,000 companies around the world, including Box, Ford, Penske Media Corporation, Schneider Electric, Siemens, Xplornet, and Zoom. Headquartered in Silicon Valley, Zuora also operates offices around the world in the U.S., EMEA and APAC. To learn more about the Zuora platform, please visit www.zuora.com.

© 2022 Zuora, Inc. All Rights Reserved. Zuora, Subscribed, Subscription Economy, Powering the Subscription Economy, and Subscription Economy Index are trademarks or registered trademarks of Zuora, Inc. Third party trademarks mentioned above are owned by their respective companies. Nothing in this press release should be construed to the contrary, or as an approval, endorsement or sponsorship by any third parties of Zuora, Inc. or any aspect of this press release.

SOURCE: Zuora Financial

ZUORA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands, except per share data)

(unaudited)

 

 

Three Months Ended
April 30,

 

 

2022

 

 

 

2021

 

Revenue:

 

 

 

Subscription

$

78,500

 

 

$

65,142

 

Professional services

 

14,699

 

 

 

15,187

 

Total revenue

 

93,199

 

 

 

80,329

 

Cost of revenue:

 

 

 

Subscription

 

18,725

 

 

 

15,643

 

Professional services

 

17,510

 

 

 

17,078

 

Total cost of revenue

 

36,235

 

 

 

32,721

 

Gross profit

 

56,964

 

 

 

47,608

 

Operating expenses:

 

 

 

Research and development

 

22,872

 

 

 

18,967

 

Sales and marketing

 

40,457

 

 

 

31,865

 

General and administrative

 

17,290

 

 

 

14,185

 

Total operating expenses

 

80,619

 

 

 

65,017

 

Loss from operations

 

(23,655

)

 

 

(17,409

)

Interest and other income, net

 

795

 

 

 

121

 

Loss before income taxes

 

(22,860

)

 

 

(17,288

)

Income tax provision

 

308

 

 

 

373

 

Net loss

 

(23,168

)

 

 

(17,661

)

Comprehensive loss:

 

 

 

Foreign currency translation adjustment

 

(359

)

 

 

(85

)

Unrealized loss on available-for-sale securities

 

(398

)

 

 

(34

)

Comprehensive loss

$

(23,925

)

 

$

(17,780

)

Net loss per share, basic and diluted

$

(0.18

)

 

$

(0.15

)

Weighted-average shares outstanding used in calculating net loss per share, basic and diluted

 

128,457

 

 

 

121,354

 

 

ZUORA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

 

 

April 30, 2022

 

January 31, 2022

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

350,626

 

 

$

113,507

 

Short-term investments

 

101,926

 

 

 

101,882

 

Accounts receivable, net

 

74,307

 

 

 

82,263

 

Deferred commissions, current portion

 

15,254

 

 

 

15,080

 

Prepaid expenses and other current assets

 

16,260

 

 

 

15,603

 

Total current assets

 

558,373

 

 

 

328,335

 

Property and equipment, net

 

28,629

 

 

 

27,676

 

Operating lease right-of-use assets

 

30,482

 

 

 

32,643

 

Purchased intangibles, net

 

2,898

 

 

 

3,452

 

Deferred commissions, net of current portion

 

26,856

 

 

 

26,727

 

Goodwill

 

17,632

 

 

 

17,632

 

Other assets

 

4,449

 

 

 

4,787

 

Total assets

$

669,319

 

 

$

441,252

 

Liabilities and stockholders' equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

7,155

 

 

$

6,785

 

Accrued expenses and other current liabilities

 

24,195

 

 

 

14,225

 

Accrued employee liabilities

 

26,861

 

 

 

32,425

 

Debt, current portion

 

571

 

 

 

1,660

 

Deferred revenue, current portion

 

157,135

 

 

 

152,740

 

Operating lease liabilities, current portion

 

10,907

 

 

 

11,462

 

Total current liabilities

 

226,824

 

 

 

219,297

 

Debt, net of current portion

 

204,500

 

 

 

?

 

Deferred revenue, net of current portion

 

1,098

 

 

 

771

 

Operating lease liabilities, net of current portion

 

43,149

 

 

 

45,633

 

Deferred tax liabilities

 

3,243

 

 

 

3,243

 

Other long-term liabilities

 

1,649

 

 

 

1,701

 

Total liabilities

 

480,463

 

 

 

270,645

 

Stockholders' equity:

 

 

 

Class A common stock

 

12

 

 

 

12

 

Class B common stock

 

1

 

 

 

1

 

Additional paid-in capital

 

776,323

 

 

 

734,149

 

Accumulated other comprehensive loss

 

(865

)

 

 

(108

)

Accumulated deficit

 

(586,615

)

 

 

(563,447

)

Total stockholders' equity

 

188,856

 

 

 

170,607

 

Total liabilities and stockholders' equity

$

669,319

 

 

$

441,252

 

 

ZUORA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

Three Months Ended April 30,

 

 

2022

 

 

 

2021

 

Cash flows from operating activities:

 

 

 

Net loss

$

(23,168

)

 

$

(17,661

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

Depreciation, amortization and accretion

 

4,202

 

 

 

4,147

 

Stock-based compensation

 

22,825

 

 

 

13,797

 

Provision for credit losses

 

499

 

 

 

1,153

 

Amortization of deferred commissions

 

4,563

 

 

 

3,874

 

Reduction in carrying amount of right-of-use assets

 

2,161

 

 

 

2,342

 

Change in fair value of warrant liability

 

(4,373

)

 

 

?

 

Other

 

216

 

 

 

156

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

 

7,457

 

 

 

18,223

 

Prepaid expenses and other assets

 

(206

)

 

 

(1,169

)

Deferred commissions

 

(4,984

)

 

 

(4,200

)

Accounts payable

 

101

 

 

 

(1,342

)

Accrued expenses and other liabilities

 

2,205

 

 

 

(1,522

)

Accrued employee liabilities

 

(5,564

)

 

 

(3,056

)

Deferred revenue

 

4,722

 

 

 

(1,109

)

Operating lease liabilities

 

(3,673

)

 

 

(3,382

)

Net cash provided by operating activities

 

6,983

 

 

 

10,251

 

Cash flows from investing activities:

 

 

 

Purchases of property and equipment

 

(3,263

)

 

 

(1,965

)

Insurance proceeds for damaged property and equipment

 

?

 

 

 

344

 

Purchases of short-term investments

 

(30,887

)

 

 

(26,687

)

Maturities of short-term investments

 

30,263

 

 

 

22,692

 

Net cash used in investing activities

 

(3,887

)

 

 

(5,616

)

Cash flows from financing activities:

 

 

 

Proceeds from issuance of convertible senior notes, net of issuance costs

 

234,586

 

 

 

?

 

Proceeds from issuance of common stock upon exercise of stock options

 

907

 

 

 

3,567

 

Principal payments on long-term debt

 

(1,111

)

 

 

(1,111

)

Net cash provided by financing activities

 

234,382

 

 

 

2,456

 

Effect of exchange rates on cash and cash equivalents

 

(359

)

 

 

(85

)

Net increase in cash and cash equivalents

 

237,119

 

 

 

7,006

 

Cash and cash equivalents, beginning of period

 

113,507

 

 

 

94,110

 

Cash and cash equivalents, end of period

$

350,626

 

 

$

101,116

 

 

ZUORA, INC.

RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES

(in thousands, except percentages and per share data)

(unaudited)

 

 

Three Months Ended April 30, 2022

 

GAAP

 

Stock-based
Compensation

 

Amortization of
Acquired
Intangibles

 

Certain
Litigation

 

Change in
Fair Value
of Warrant
Liability

 

Non-GAAP

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

Cost of subscription revenue

$

18,725

 

 

$

(1,799

)

 

$

(554

)

 

$

?

 

 

$

?

 

 

$

16,372

 

Cost of professional services revenue

 

17,510

 

 

 

(3,017

)

 

 

?

 

 

 

?

 

 

 

?

 

 

 

14,493

 

Gross profit

 

56,964

 

 

 

4,816

 

 

 

554

 

 

 

?

 

 

 

?

 

 

 

62,334

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

22,872

 

 

 

(5,966

)

 

 

?

 

 

 

?

 

 

 

?

 

 

 

16,906

 

Sales and marketing

 

40,457

 

 

 

(7,456

)

 

 

?

 

 

 

?

 

 

 

?

 

 

 

33,001

 

General and administrative

 

17,290

 

 

 

(4,587

)

 

 

?

 

 

 

(120

)

 

 

?

 

 

 

12,583

 

Loss from operations

 

(23,655

)

 

 

22,825

 

 

 

554

 

 

 

120

 

 

 

?

 

 

 

(156

)

Net loss

$

(23,168

)

 

$

22,825

 

 

$

554

 

 

$

120

 

 

$

(4,373

)

 

$

(4,042

)

Net loss per share, basic and diluted2

$

(0.18

)

 

 

 

 

 

 

 

 

 

$

(0.03

)

Gross margin

 

61

%

 

 

 

 

 

 

 

 

 

 

67

%

Subscription gross margin

 

76

%

 

 

 

 

 

 

 

 

 

 

79

%

Professional services gross margin

 

(19

)%

 

 

 

 

 

 

 

 

 

 

1

%

Operating margin

 

(25

)%

 

 

 

 

 

 

 

 

 

 

?

%

 

Three Months Ended April 30, 20211

 

GAAP

 

Stock-based
Compensation

 

Amortization of
Acquired
Intangibles

 

Certain
Litigation

 

Non-GAAP

Cost of revenue:

 

 

 

 

 

 

 

 

 

Cost of subscription revenue

$

15,643

 

 

$

(1,043

)

 

$

(423

)

 

 

?

 

 

$

14,177

 

Cost of professional services revenue

 

17,078

 

 

 

(2,001

)

 

 

?

 

 

 

?

 

 

 

15,077

 

Gross profit

 

47,608

 

 

 

3,044

 

 

 

423

 

 

 

?

 

 

 

51,075

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

18,967

 

 

 

(4,529

)

 

 

?

 

 

 

?

 

 

 

14,438

 

Sales and marketing

 

31,865

 

 

 

(4,080

)

 

 

?

 

 

 

?

 

 

 

27,785

 

General and administrative

 

14,185

 

 

 

(2,144

)

 

 

?

 

 

 

(809

)

 

 

11,232

 

Loss from operations

 

(17,409

)

 

 

13,797

 

 

 

423

 

 

 

809

 

 

 

(2,380

)

Net loss

$

(17,661

)

 

$

13,797

 

 

$

423

 

 

$

809

 

 

$

(2,632

)

Net loss per share, basic and diluted2

$

(0.15

)

 

 

 

 

 

 

 

$

(0.02

)

Gross margin

 

59

%

 

 

 

 

 

 

 

 

64

%

Subscription gross margin

 

76

%

 

 

 

 

 

 

 

 

78

%

Professional services gross margin

 

(12

)%

 

 

 

 

 

 

 

 

1

%

Operating margin

 

(22

)%

 

 

 

 

 

 

 

 

(3

)%

(1) Beginning with the second quarter ended July 31, 2021, we no longer exclude non-cash adjustments for capitalization and amortization of internal-use software from our non-GAAP financial measures. We believe that this change more closely aligns our reported financial measures with current industry practice. Our non-GAAP financial measures for the three months ended April 30, 2021 were recast to conform to the updated methodology for comparison purposes.

(2) GAAP and Non-GAAP net loss per share are calculated based upon 128.5 million and 121.4 million basic and diluted weighted-average shares of common stock for the three months ended April 30, 2022 and 2021, respectively.

ZUORA, INC.

RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED)

(in thousands)

(unaudited)

Free Cash Flow

 

Three Months Ended April 30,

 

 

2022

 

 

 

2021

 

Net cash provided by operating activities

$

6,983

 

 

$

10,251

 

Less:

 

 

 

Purchases of property and equipment, net of insurance recoveries

 

(3,263

)

 

 

(1,621

)

Free cash flow

$

3,720

 

 

$

8,630

 

 


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News published on 25 may 2022 at 16:05 and distributed by: