Subscription management platform Zuora (NYSE:ZUO) reported results in line with analyst expectations in Q1 FY2024 quarter, with revenue up 10.6% year on year to $103.1 million. Guidance for next quarter's revenue was $108.8 million at the midpoint, which is 1.91% above the analyst consensus. Zuora made a GAAP loss of $19.3 million, improving on its loss of $23.2 million, in the same quarter last year.
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Zuora (ZUO) Q1 FY2024 Highlights:
- Revenue: $103.1 million vs analyst estimates of $102.1 million (0.98% beat)
- EPS (non-GAAP): $0.05 vs analyst estimates of $0 ($0.05 beat)
- Revenue guidance for Q2 2024 is $108.8 million at the midpoint, above analyst estimates of $106.7 million
- The company reconfirmed revenue guidance for the full year, at $435.5 million at the midpoint
- Free cash flow of $13 million, up from negative free cash flow of $20.1 million in previous quarter
- Net Revenue Retention Rate: 110%, in line with previous quarter
- Customers: 782 customers paying more than $100,000 annually
- Gross Margin (GAAP): 63.8%, up from 61.1% same quarter last year
“We started the year with solid execution in the first quarter, coming in ahead of guidance on both the top and bottom-line, while progressing toward profitability and balanced growth,” said Tien Tzuo, Founder and CEO at 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.
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Sales Growth
As you can see below, Zuora's revenue growth has been mediocre over the last two years, growing from quarterly revenue of $80.3 million in Q1 FY2022, to $103.1 million.
This quarter, Zuora's quarterly revenue was once again up 10.6% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $54 thousand in Q1, compared to $1.97 million in Q4 2023. 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 10.1% year on year to $108.8 million, slowing down from the 14.2% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 9.57% over the next twelve months.
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Large Customers Growth
You can see below that at the end of the quarter Zuora reported 782 enterprise customers paying more than $100,000 annually, an increase of 9 on last quarter. That is quite a bit more contract wins than last quarter but also quite a bit below what we have typically seen over the last year, suggesting that the company may be reinvigorating growth.
Key Takeaways from Zuora's Q1 Results
Since it has still been burning cash over the last twelve months it is worth keeping an eye on Zuora’s balance sheet, but we note that with a market capitalization of $1.16 billion and more than $396.9 million in cash, the company has the capacity to continue to prioritise growth over profitability.
This was a nice beat and raise quarter for Zuora. We were very impressed how strongly Zuora accelerated the rate of new contract wins this quarter in addition to beating revenue expectations slightly. And we were also glad that the revenue guidance for the next quarter exceeded analysts' expectations. Full year guidance for revenue, adjusted operating profit, and adjusted EPS were raised from previous quarter's outlook, and these metrics are above current Consensus. Overall, we think this was still a really good quarter, that should leave shareholders feeling very positive. The company is up 6.17% on the results and currently trades at $9.04 per share.
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The author has no position in any of the stocks mentioned.