Subscription management platform Zuora (NYSE:ZUO) reported results in line with analyst expectations in Q4 FY2022 quarter, with revenue up 14.3% year on year to $90.6 million. Guidance for the full year also exceeded estimates, however the guidance for the next quarter was less impressive, coming in at $92 million, 0.45% below analyst estimates. Zuora made a GAAP loss of $35.1 million, down on its loss of $18.7 million, in the same quarter last year.
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Zuora (ZUO) Q4 FY2022 Highlights:
- Revenue: $90.6 million vs analyst estimates of $90.3 million (small beat)
- EPS (non-GAAP): -$0.01 vs analyst estimates of -$0.02
- Revenue guidance for Q1 2023 is $92 million at the midpoint, below analyst estimates of $92.4 million
- Management's revenue guidance for upcoming financial year 2023 is $404 million at the midpoint, in line with analyst expectations and predicting 16.5% growth (vs 13.4% in FY2022)
- Free cash flow of $7.63 million, up from negative free cash flow of $1.65 million in previous quarter
- Net Revenue Retention Rate: 110%, in line with previous quarter
- Customers: 747 customers paying more than $100,000 annually
- Gross Margin (GAAP): 60.6%, up from 59.4% same quarter last year
"After a transformational year at Zuora, we closed out Fiscal 2022 meeting or exceeding expectations across our operating results," 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.
Consumers want the ability to make payments whenever and wherever they prefer – and to do so without having to worry about fraud or other security threats. However, building payments infrastructure from scratch is extremely resource-intensive for engineering teams. That drives demand for payments platforms that are easy to integrate into consumer applications and websites.
Sales Growth
As you can see below, Zuora's revenue growth has been mediocre over the last year, growing from quarterly revenue of $79.2 million, to $90.6 million.
This quarter, Zuora's quarterly revenue was once again up 14.3% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $1.46 million in Q4, compared to $2.74 million in Q3 2022. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.
Guidance for the next quarter indicates Zuora is expecting revenue to grow 14.5% year on year to $92 million, improving on the 8.7% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $404 million at the midpoint, growing 16.5% compared to 13.4% increase in FY2022.
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Large Customers Growth
You can see below that at the end of the quarter Zuora reported 747 enterprise customers paying more than $100,000 annually, an increase of 27 on last quarter. That's in line with the number of contracts wins in the last quarter and quite a bit again above what we have typically seen over the last year, confirming the company is sustaining a good pace of sales.
Key Takeaways from Zuora's Q4 Results
With a market capitalization of $1.92 billion Zuora is among smaller companies, but its more than $215.3 million in cash and positive free cash flow over the last twelve months give us confidence that Zuora has the resources it needs to pursue a high growth business strategy.
We were impressed that Zuora guided for revenue growth to accelerate next year. And we were also glad to see the improvement in gross margin. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. The company is up 3.89% on the results and currently trades at $15.99 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.