Zuora (NYSE:ZUO) Q2 Sales Beat Estimates, Stock Soars

Kayode Omotosho /
2021/08/25 4:26 pm EDT

Subscription management platform Zuora (NYSE:ZUO) reported Q2 FY2022 results that beat analyst expectations, with revenue up 15.3% year on year to $86.4 million. Zuora made a GAAP loss of $23.6 million, down on its loss of $20.1 million, in the same quarter last year.

Is now the time to buy Zuora? Access our full analysis of the earnings results here, it's free.

Zuora (ZUO) Q2 FY2022 Highlights:

  • Revenue: $86.4 million vs analyst estimates of $83.4 million (3.69% beat)
  • EPS (non-GAAP): -$0.04 vs analyst estimates of -$0.04
  • Revenue guidance for Q3 2022 is $86.5 million at the midpoint, above analyst estimates of $85.4 million
  • The company reconfirmed revenue guidance for the full year, at $341 million at the midpoint
  • Free cash flow was negative -$4.36 million, down from positive free cash flow of $8.63 million in previous quarter
  • Net Revenue Retention Rate: 108%, up from 103% previous quarter
  • Customers: 694 customers paying more than $100,000 annually
  • Gross Margin (GAAP): 58.3%, down from 59.2% previous quarter

“I'm very pleased with our Q2 results. We once again delivered a strong quarter exceeding our guidance for operating metrics including total revenue, subscription revenue and non-GAAP loss from operations. The improvement in our dollar-based retention rate is a clear indicator that our multi-product, land-and-expand strategy is working. We feel well-positioned and positive about the future based on the overall momentum and execution we have seen this quarter,” said Tien Tzuo, founder and CEO of Zuora.

Founded in 2007, Zuora (NYSE:ZUO) offers software as a service platform that allows companies to bill and accept payments for recurring subscription products.

The subscription revenue model benefits both customers and the companies, making products available for low upfront investment and generating predictable revenue stream. Subscription products are on the rise, and so is the demand for billing and payment platforms to manage them.

Sales Growth

As you can see below, Zuora's revenue growth has been solid over the last year, growing from quarterly revenue of $74.9 million, to $86.4 million.

Zuora Total Revenue

This quarter, Zuora's quarterly revenue was once again up 15.3% year on year. We can see that the company increased revenue by $6.15 million quarter on quarter. That's a solid improvement on the $1.04 million increase in Q1 2022, so shareholders should appreciate the acceleration of growth.

Analysts covering the company are expecting the revenues to grow 10.3% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

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Large Customers Growth

You can see below that at the end of the quarter Zuora reported 694 enterprise customers paying more than $100,000 annually, an increase of 17 on last quarter. That is quite a bit more contract wins than last quarter, suggesting that the company may be reinvigorating growth.

Zuora customers paying more than $100,000 annually

Key Takeaways from Zuora's Q2 Results

With a market capitalization of $2 billion Zuora is among smaller companies, but its more than $200.9 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

We were very impressed how strongly Zuora accelerated the rate of new contract wins this quarter. And we were also glad to see the improvement in net revenue retention rate. On the other hand, revenue growth is overall a bit slower these days and gross margin deteriorated a little. Overall, we think this was still a really good quarter, that should leave shareholders feeling very positive. The company is up 8.12% on the results and currently trades at $17.7 per share.

Should you invest in Zuora right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.