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Zuora Reports Fourth Quarter and Full Year Fiscal 2023 Results

  • Full year subscription revenue grew 18% year-over-year, 20% on a constant currency basis.
  • Full year total revenue grew 14% year-over-year, 17% on a constant currency basis.

Zuora, Inc. (NYSE: ZUO), a leading monetization platform provider for recurring revenue businesses, today announced financial results for its fiscal fourth quarter and full year ended January 31, 2023.

“Q4 was another solid quarter where we came in ahead of guidance across our operating metrics, including revenue, free cash flow, net dollar retention and non-GAAP operating income,” said Tien Tzuo, founder and CEO at Zuora. “We continue to successfully execute our land and expand strategy based on the clear demand for billing, revenue and subscription management solutions. Looking ahead, we’re committed to balancing growth and profitability in the upcoming fiscal year.”

Fourth Quarter Fiscal 2023 Financial Results:

  • Revenue: Total revenue was $103.0 million, an increase of 14% year-over-year and 17% on a constant currency basis. Subscription revenue was $89.5 million, an increase of 16% year-over-year and 20% on a constant currency basis.
  • GAAP Loss from Operations: GAAP loss from operations was $23.7 million, compared to a loss from operations of $34.2 million in the fourth quarter of fiscal 2022.
  • Non-GAAP Income (Loss) from Operations: Non-GAAP income from operations was $2.2 million, compared to a non-GAAP loss from operations of $0.6 million in the fourth quarter of fiscal 2022.
  • GAAP Net Loss: GAAP net loss was $31.9 million, or 31% of revenue, compared to a net loss of $35.2 million, or 39% of revenue, in the fourth quarter of fiscal 2022. GAAP net loss per share was $0.24 based on 134.3 million weighted-average shares outstanding, compared to a net loss per share of $0.28 based on 127.1 million weighted-average shares outstanding in the fourth quarter of fiscal 2022.
  • Non-GAAP Net Loss: Non-GAAP net loss was $5.8 million, compared to a non-GAAP net loss of $1.5 million in the fourth quarter of fiscal 2022. Non-GAAP net loss per share was $0.04 based on 134.3 million weighted-average shares outstanding, compared to a non-GAAP net loss per share of $0.01 based on 127.1 million weighted-average shares outstanding in the fourth quarter of fiscal 2022.
  • Cash Flow: Net cash used in operating activities was $18.0 million, compared to net cash provided by operating activities of $10.4 million in the fourth quarter of fiscal 2022.
  • Free Cash Flow: Free cash flow was negative $20.1 million compared to $7.6 million in the fourth quarter of fiscal 2022.
  • Cash and Investments: Cash and cash equivalents and short-term investments were $386.2 million as of January 31, 2023.

Full Year Fiscal 2023 Financial Results:

  • Revenue: Total revenue was $396.1 million, an increase of 14% year-over-year and 17% on a constant currency basis. Subscription revenue was $338.4 million, an increase of 18% year-over-year and 20% on a constant currency basis.
  • GAAP Loss from Operations: GAAP loss from operations was $111.5 million, compared to a GAAP loss from operations of $96.2 million in fiscal 2022.
  • Non-GAAP Income (Loss) from Operations: Non-GAAP income from operations was $2.5 million, compared to a non-GAAP loss from operations of $8.1 million in fiscal 2022. Fiscal year 2023 was the first full year that we generated positive non-GAAP income from operations.
  • GAAP Net Loss: GAAP net loss was $122.0 million, or 31% of revenue, compared to a GAAP net loss of $99.4 million, or 29% of revenue, in fiscal 2022. GAAP net loss per share was $0.93 based on 131.4 million weighted-average shares outstanding, compared to a net loss per share of $0.80 based on 124.2 million weighted-average shares outstanding in fiscal 2022.
  • Non-GAAP Net Loss: Non-GAAP net loss was $17.2 million, compared to a non-GAAP net loss of $11.3 million in fiscal 2022. Non-GAAP net loss per share was $0.13 based on 131.4 million weighted-average shares outstanding, compared to a non-GAAP net loss per share of $0.09 based on 124.2 million weighted-average shares outstanding in fiscal 2022.
  • Cash Flow: Net cash used in operating activities was $20.6 million, compared to net cash provided by operating activities of $18.7 million in fiscal 2022.
  • Free Cash Flow: Free cash flow was negative $31.3 million compared to $10.3 million in fiscal 2022.

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.

Fourth Quarter Key Metrics and Business Highlights:

  • Customers with ACV equal to or greater than $100,000 were 773, up from 747 as of January 31, 2022.
  • Dollar-based Retention Rate was 108%, compared to 110% as of January 31, 2022.
  • Our ARR was $365.0 million compared to $313.9 million as of January 31, 2022, representing ARR growth of 16%, compared to 20% as of January 31, 2022.
  • Customer usage of Zuora solutions grew, with $23.8 billion in transaction volume through Zuora’s billing platform during our fourth quarter, an increase of 12% year-over-year and 13% on a constant currency basis.
  • Launched purpose-built, end-to-end billing and revenue recognition for consumption-based pricing, giving companies a comprehensive solution to quickly iterate across quote-to-cash and revenue accounting.
  • New customer logos and go-lives included AVEVA, Donnelley Financial Solutions (DFIN), Microsoft, Scout24, SimpliSafe and Stellantis.
  • Announced the departure of Chief Product and Engineering Officer Sri Srinivasan, who will leave Zuora at the end of March. Zuora is conducting a search for his replacement, and internal leaders are managing the product and engineering organizations until the replacement is hired.

Financial Outlook:

As of March 1, 2023, we are providing guidance for the first quarter and full fiscal year 2024 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 first quarter and full fiscal year 2024, Zuora currently expects the following results:

 

First Quarter

 

Fiscal 2024

Subscription revenue

$88.0M - $89.5M

 

$374.0M - $384.0M

Professional services revenue

$13.0M - $13.5M

 

$54.0M - $56.0M

Total revenue

$101.0M - $103.0M

 

$428.0M - $440.0M

Non-GAAP income from operations

$4.0M - $5.0M

 

$26.0M - $31.0M

Non-GAAP net income per share1

$0.00 - $0.01

 

$0.07 - $0.11

ARR growth2

 

 

12% - 15%

Dollar-based Retention Rate2

 

 

107% - 109%

Free Cash Flow3

 

 

$24.0M+

(1) Non-GAAP net loss per share was computed assuming 136.2 million and 140.0 million weighted-average shares outstanding for the first quarter and full fiscal year 2024, respectively.
 
(2) Refer to the "Operating Metrics" section below for how we define ARR and Dollar-based Retention Rate. ARR growth is calculated by dividing the annual recurring revenue (ARR) as of a period end by the ARR for the corresponding period end of the prior fiscal year.
 
(3) Free cash flow includes the expected impacts of the following: tax-related and acquisition-related expenses associated with our acquisition of Zephr Inc Limited (Zephr), costs associated with the workforce reduction we approved in November 2022, and lower billings related to the macroeconomic environment including extended deal cycles.

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 income from operations to GAAP loss from operations or non-GAAP net income 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 March 1, 2023 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 March 1, 2024. 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 March 1, 2023 at 4:00 p.m. PT to March 8, 2023 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: subscription revenue and total revenue that exclude the impact of foreign currency exchange rate fluctuations (constant currency basis); 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 income (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:

  • Stock-based compensation expense. We exclude stock-based compensation expense, which is a non-cash expense, because we believe that excluding this item provides meaningful supplemental information regarding operational performance. In particular, stock-based compensation expense is not comparable across companies given it is calculated using a variety of valuation methodologies and subjective assumptions.
  • Amortization of acquired intangible assets. We exclude amortization of acquired intangible assets, which is a non-cash expense, because we do not believe it has a direct correlation to the operation of our business.
  • Charitable contributions. We exclude expenses associated with charitable donations of our common stock. We believe that excluding these non-cash expenses allows investors to make more meaningful comparisons between our operating results and those of other companies.
  • Certain litigation. We exclude non-recurring charges and benefits, net of insurance recoveries, including litigation expenses and settlements, related to litigation matters that are outside of the ordinary course of our business. We believe these charges and benefits do not have a direct correlation to the operations of our business and may vary in size depending on the timing and results of such litigation and related settlements.
  • Asset impairment. We exclude non-cash charges for impairment of assets, including impairments related to internal-use software and office leases. Impairment charges can vary significantly in terms of amount and timing and we do not consider these charges indicative of our current or past operating performance. Moreover, we believe that excluding the effects of these charges allows investors to make more meaningful comparisons between our operating results and those of other companies.
  • Change in fair value of warrant liabilities. We exclude the change in fair value of warrant liabilities, which is a non-cash gain or loss, as it can fluctuate significantly with changes in Zuora's stock price and market volatility, and does not reflect the underlying cash flows or operational results of the business.
  • Acquisition-related transactions. We exclude acquisition-related transactions (including integration-related charges) that are not related to our ongoing operations, including expenses we incurred and gains or losses recognized on contingent consideration related to our acquisition of Zephr. We do not consider these transactions reflective of our core business or ongoing operating performance.
  • Workforce reduction. We exclude charges related to the workforce reduction plan we approved in November 2022, including severance, health care and related expenses. We believe these charges are not indicative of our continuing operations.

Additionally, we believe 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.

Zuora also provides subscription revenue and total revenue, including year-over-year growth rates, adjusted to remove the impact of foreign currency rate fluctuations, which we refer to as constant currency. We believe providing revenue on a constant currency basis helps our investors to better understand our underlying performance. We calculate constant currency in a given period by applying the average currency exchange rates in the comparable period of the prior year to the local currency revenue in the current period.

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). ARR represents the annualized recurring value at the time of initial 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. ARR should be viewed independently of revenue and deferred revenue, and is 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-Q filed with the Securities and Exchange Commission on December 8, 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 currency exchange rate fluctuations; we may not achieve the benefits of the workforce reduction we approved in November 2022 and there may be possible changes in the size and timing of charges related to such reduction; the risk of loss of key employees; the anticipated impact of the acquisition of Zephr on Zuora's business and future financial and operating results, the ability of Zuora to successfully integrate Zephr's operations and technology, and the expected amount and timing of synergies and benefits from the acquisition; 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, 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 a leading monetization platform for recurring revenue businesses across all industries, enabling companies to unlock customer-centric business models. After starting with Zuora Billing in 2007, Zuora’s award-winning multi-product portfolio now also includes Zuora Revenue, Zuora Collect, and Zephr, all powered by the Zuora Platform. Zuora serves as an intelligent hub that monetizes and orchestrates the complete quote to cash and revenue recognition process at scale. Through its industry leading technology and expertise, Zuora helps more than 1,000 companies around the world, including BMC Software, Box, Caterpillar, General Motors, Penske Media Corporation, Schneider Electric, Siemens and Zoom nurture and monetize direct, digital customer relationships. Headquartered in Silicon Valley, Zuora operates offices around the world in the U.S., EMEA and APAC. To learn more about the Zuora monetization platform, please visit www.zuora.com.

© 2023 Zuora, Inc. All Rights Reserved. Zuora, Subscribed, Subscription Economy, Powering the Subscription Economy, Subscription Economy Index, Zephr, and Subscription Experience Platform 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)

 

 

Three Months Ended

January 31,

 

Fiscal Year Ended

January 31,

 

2023

 

2022

 

2023

 

2022

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

 

Revenue:

 

 

 

 

 

 

 

Subscription

$

89,513

 

 

$

77,332

 

 

$

338,391

 

 

$

287,747

 

Professional services

 

13,528

 

 

 

13,360

 

 

 

57,696

 

 

 

58,991

 

Total revenue

 

103,041

 

 

 

90,692

 

 

 

396,087

 

 

 

346,738

 

Cost of revenue:

 

 

 

 

 

 

 

Subscription

 

21,070

 

 

 

18,095

 

 

 

81,094

 

 

 

68,285

 

Professional services

 

16,995

 

 

 

17,603

 

 

 

72,135

 

 

 

71,821

 

Total cost of revenue

 

38,065

 

 

 

35,698

 

 

 

153,229

 

 

 

140,106

 

Gross profit

 

64,976

 

 

 

54,994

 

 

 

242,858

 

 

 

206,632

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

24,925

 

 

 

21,654

 

 

 

102,564

 

 

 

83,219

 

Sales and marketing

 

41,295

 

 

 

38,236

 

 

 

173,871

 

 

 

143,366

 

General and administrative

 

22,445

 

 

 

29,292

 

 

 

77,878

 

 

 

76,223

 

Total operating expenses

 

88,665

 

 

 

89,182

 

 

 

354,313

 

 

 

302,808

 

Loss from operations

 

(23,689

)

 

 

(34,188

)

 

 

(111,455

)

 

 

(96,176

)

Change in fair value of warrant liability

 

(134

)

 

 

 

 

 

9,214

 

 

 

 

Interest expense

 

(4,486

)

 

 

(40

)

 

 

(15,133

)

 

 

(152

)

Interest and other income (expense), net

 

5,888

 

 

 

(748

)

 

 

5,986

 

 

 

(1,670

)

Loss before income taxes

 

(22,421

)

 

 

(34,976

)

 

 

(111,388

)

 

 

(97,998

)

Income tax provision

 

9,437

 

 

 

206

 

 

 

10,582

 

 

 

1,427

 

Net loss

 

(31,858

)

 

$

(35,182

)

 

 

(121,970

)

 

 

(99,425

)

Comprehensive loss:

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

1,187

 

 

 

(287

)

 

 

(461

)

 

 

(673

)

Unrealized gain (loss) on available-for-sale securities

 

663

 

 

 

(170

)

 

 

(350

)

 

 

(231

)

Comprehensive loss

$

(30,008

)

 

$

(35,639

)

 

$

(122,781

)

 

$

(100,329

)

Net loss per share, basic and diluted

$

(0.24

)

 

$

(0.28

)

 

$

(0.93

)

 

$

(0.80

)

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

 

134,349

 

 

 

127,102

 

 

 

131,441

 

 

 

124,206

 

ZUORA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

January 31, 2023

 

January 31, 2022

 

(unaudited)

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

203,239

 

 

$

113,507

 

Short-term investments

 

183,006

 

 

 

101,882

 

Accounts receivable, net of allowance for credit losses of $4,001 and $3,188 as of January 31, 2023 and January 31, 2022, respectively

 

91,740

 

 

 

82,263

 

Deferred commissions, current portion

 

16,282

 

 

 

15,080

 

Prepaid expenses and other current assets

 

24,285

 

 

 

15,603

 

Total current assets

 

518,552

 

 

 

328,335

 

Property and equipment, net

 

27,159

 

 

 

27,676

 

Operating lease right-of-use assets

 

22,768

 

 

 

32,643

 

Purchased intangibles, net

 

13,201

 

 

 

3,452

 

Deferred commissions, net of current portion

 

28,250

 

 

 

26,727

 

Goodwill

 

53,991

 

 

 

17,632

 

Other assets

 

4,677

 

 

 

4,787

 

Total assets

$

668,598

 

 

$

441,252

 

Liabilities and stockholders’ equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

1,073

 

 

$

6,785

 

Accrued expenses and other current liabilities

 

27,678

 

 

 

14,225

 

Accrued employee liabilities

 

30,483

 

 

 

32,425

 

Debt, current portion

 

 

 

 

1,660

 

Deferred revenue, current portion

 

167,145

 

 

 

152,740

 

Operating lease liabilities, current portion

 

9,240

 

 

 

11,462

 

Total current liabilities

 

235,619

 

 

 

219,297

 

Debt, net of current portion

 

210,403

 

 

 

 

Deferred revenue, net of current portion

 

442

 

 

 

771

 

Operating lease liabilities, net of current portion

 

37,924

 

 

 

45,633

 

Deferred tax liabilities

 

3,717

 

 

 

3,243

 

Other long-term liabilities

 

7,333

 

 

 

1,701

 

Total liabilities

 

495,438

 

 

 

270,645

 

Stockholders’ equity:

 

 

 

Class A common stock

 

13

 

 

 

12

 

Class B common stock

 

1

 

 

 

1

 

Additional paid-in capital

 

859,482

 

 

 

734,149

 

Accumulated other comprehensive loss

 

(919

)

 

 

(108

)

Accumulated deficit

 

(685,417

)

 

 

(563,447

)

Total stockholders’ equity

 

173,160

 

 

 

170,607

 

Total liabilities and stockholders’ equity

$

668,598

 

 

$

441,252

 

ZUORA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

Fiscal Year Ended January 31,

 

2023

 

2022

 

(unaudited)

 

 

Cash flows from operating activities:

 

 

 

Net loss

$

(121,970

)

 

$

(99,425

)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

 

 

 

Depreciation, amortization and accretion

 

18,738

 

 

 

16,760

 

Stock-based compensation

 

96,401

 

 

 

72,070

 

Provision for credit losses

 

2,245

 

 

 

2,919

 

Donation of common stock to charitable foundation

 

1,000

 

 

 

1,000

 

Amortization of deferred commissions

 

19,291

 

 

 

16,330

 

Reduction in carrying amount of right-of-use assets

 

7,363

 

 

 

9,717

 

Asset impairment

 

4,537

 

 

 

12,783

 

Change in fair value of warrant liability

 

(9,213

)

 

 

 

Change in fair value of contingent consideration

 

(380

)

 

 

 

Other

 

(391

)

 

 

802

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

 

(11,081

)

 

 

(6,322

)

Prepaid expenses and other assets

 

(7,379

)

 

 

(1,179

)

Deferred commissions

 

(22,802

)

 

 

(24,127

)

Accounts payable

 

(6,084

)

 

 

4,457

 

Accrued expenses and other liabilities

 

12,353

 

 

 

1,424

 

Accrued employee liabilities

 

(2,161

)

 

 

1,165

 

Deferred revenue

 

12,020

 

 

 

24,281

 

Operating lease liabilities

 

(13,131

)

 

 

(13,969

)

Net cash (used in) provided by operating activities

 

(20,644

)

 

 

18,686

 

Cash flows from investing activities:

 

 

 

Purchases of property and equipment

 

(10,634

)

 

 

(8,776

)

Insurance proceeds for damaged property and equipment

 

 

 

 

344

 

Purchase of intangible assets

 

 

 

 

(1,349

)

Purchases of short-term investments

 

(234,246

)

 

 

(109,510

)

Maturities of short-term investments

 

154,806

 

 

 

99,192

 

Cash paid for acquisition, net of cash acquired

 

(41,000

)

 

 

 

Net cash used in investing activities

 

(131,074

)

 

 

(20,099

)

Cash flows from financing activities:

 

 

 

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

 

233,901

 

 

 

 

Proceeds from issuance of common stock upon exercise of stock options

 

2,471

 

 

 

18,499

 

Proceeds from issuance of common stock under employee stock purchase plan

 

7,019

 

 

 

7,428

 

Principal payments on long-term debt

 

(1,480

)

 

 

(4,444

)

Net cash provided by financing activities

 

241,911

 

 

 

21,483

 

Effect of exchange rates on cash and cash equivalents

 

(461

)

 

 

(673

)

Net increase in cash and cash equivalents

 

89,732

 

 

 

19,397

 

Cash and cash equivalents, beginning of year

 

113,507

 

 

 

94,110

 

Cash and cash equivalents, end of year

$

203,239

 

 

$

113,507

 

ZUORA, INC.

RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES

(in thousands, except percentages and per share data)

(unaudited)

 

 

Three Months Ended January 31, 2023

 

GAAP

 

Stock-based

Compensation

 

Amortization

of Acquired

Intangibles

 

Certain

Litigation

 

Asset

Impairment

 

Change in

Fair Value of

Warrant

Liability

 

Acquisition-

related

Transactions

 

Workforce

Reduction

 

Non-

GAAP

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of subscription revenue

$

21,070

 

 

$

(1,624

)

 

$

(724

)

 

$

 

 

$

 

 

$

 

$

 

 

$

(400

)

 

$

18,322

 

Cost of professional services revenue

 

16,995

 

 

 

(2,111

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(247

)

 

 

14,637

 

Gross profit

 

64,976

 

 

 

3,735

 

 

 

724

 

 

 

 

 

 

 

 

 

 

 

 

 

 

647

 

 

 

70,082

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

24,925

 

 

 

(4,852

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(459

)

 

 

19,614

 

Sales and marketing

 

41,295

 

 

 

(5,472

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,107

)

 

 

34,716

 

General and administrative

 

22,445

 

 

 

(2,297

)

 

 

 

 

 

(22

)

 

 

(4,537

)

 

 

 

 

(1,541

)

 

 

(496

)

 

 

13,552

 

(Loss) income from operations

 

(23,689

)

 

 

16,356

 

 

 

724

 

 

 

22

 

 

 

4,537

 

 

 

 

 

1,541

 

 

 

2,709

 

 

 

2,200

 

Net loss

$

(31,858

)

 

$

16,356

 

 

$

724

 

 

$

22

 

 

$

4,537

 

 

$

134

 

$

1,541

 

 

$

2,709

 

 

$

(5,835

)

Net loss per share, basic and diluted1

$

(0.24

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(0.04

)

Gross margin

 

63

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

68

%

Subscription gross margin

 

76

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

80

%

Professional services gross margin

 

(26

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8

)%

Operating margin

 

(23

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

%

 

Three Months Ended January 31, 2022

 

GAAP

 

Stock-based

Compensation

 

Amortization

of Acquired

Intangibles

 

Certain

Litigation

 

Asset

Impairment

 

Non-

GAAP

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

Cost of subscription revenue

$

18,095

 

 

$

(1,718

)

 

$

(554

)

 

$

 

 

$

 

 

$

15,823

 

Cost of professional services revenue

 

17,603

 

 

 

(2,787

)

 

 

 

 

 

 

 

 

 

 

 

14,816

 

Gross profit

 

54,994

 

 

 

4,505

 

 

 

554

 

 

 

 

 

 

 

 

 

60,053

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

21,654

 

 

 

(5,526

)

 

 

 

 

 

 

 

 

 

 

 

16,128

 

Sales and marketing

 

38,236

 

 

 

(6,491

)

 

 

 

 

 

 

 

 

 

 

 

31,745

 

General and administrative

 

29,292

 

 

 

(3,770

)

 

 

 

 

 

(7

)

 

 

(12,783

)

 

 

12,732

 

Loss from operations

 

(34,188

)

 

 

20,292

 

 

 

554

 

 

 

7

 

 

 

12,783

 

 

 

(552

)

Net loss

$

(35,182

)

 

$

20,292

 

 

$

554

 

 

$

7

 

 

$

12,783

 

 

$

(1,546

)

Net loss per share, basic and diluted1

$

(0.28

)

 

 

 

 

 

 

 

 

 

$

(0.01

)

Gross margin

 

61

%

 

 

 

 

 

 

 

 

 

 

66

%

Subscription gross margin

 

77

%

 

 

 

 

 

 

 

 

 

 

80

%

Professional services gross margin

 

(32

)%

 

 

 

 

 

 

 

 

 

 

(11

)%

Operating margin

 

(38

)%

 

 

 

 

 

 

 

 

 

 

(1

)%

(1) GAAP and Non-GAAP net loss per share are calculated based upon 134.3 million and 127.1 million basic and diluted weighted-average shares of common stock for the three months ended January 31, 2023 and 2022, respectively.

ZUORA, INC.

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

(in thousands, except percentages and per share data)

(unaudited)

 

 

Fiscal Year Ended January 31, 2023

 

GAAP

 

Stock-based

Compensation

 

Amortization

of Acquired

Intangibles

 

Charitable

Contribution

 

Certain

Litigation

 

Asset

Impairment

 

Change in

Fair Value

of Warrant

Liability

 

Acquisition-

related

Transactions

 

Workforce

Reduction

 

Non-

GAAP

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of subscription revenue

$

81,094

 

 

$

(8,141

)

 

$

(2,236

)

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

(547

)

 

$

70,170

 

Cost of professional services revenue

 

72,135

 

 

 

(12,297

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(646

)

 

 

59,192

 

Gross profit

 

242,858

 

 

 

20,438

 

 

 

2,236

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,193

 

 

 

266,725

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

102,564

 

 

 

(25,819

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(971

)

 

 

75,774

 

Sales and marketing

 

173,871

 

 

 

(33,075

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,497

)

 

 

137,299

 

General and administrative

 

77,878

 

 

 

(17,069

)

 

 

 

 

 

(1,000

)

 

 

(268

)

 

 

(4,537

)

 

 

 

 

 

(3,153

)

 

 

(708

)

 

 

51,143

 

(Loss) income from operations

 

(111,455

)

 

 

96,401

 

 

 

2,236

 

 

 

1,000

 

 

 

268

 

 

 

4,537

 

 

 

 

 

 

3,153

 

 

 

6,369

 

 

 

2,509

 

Net loss

$

(121,970

)

 

$

96,401

 

 

$

2,236

 

 

$

1,000

 

 

$

268

 

 

$

4,537

 

 

$

(9,214

)

 

$

3,153

 

 

$

6,369

 

 

$

(17,220

)

Net loss per share, basic and diluted2

$

(0.93

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(0.13

)

Gross margin

 

61

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

67

%

Subscription gross margin

 

76

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

79

%

Professional services gross margin

 

(25

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3

)%

Operating margin

 

(28

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

%

 

Fiscal Year Ended January 31, 20221

 

GAAP

 

Stock-based

Compensation

 

Amortization

of Acquired

Intangibles

 

Charitable

Contribution

 

Certain

Litigation

 

Asset

Impairment

 

Non-

GAAP

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of subscription revenue

$

68,285

 

 

$

(5,875

)

 

$

(2,050

)

 

$

 

 

$

 

 

$

 

 

$

60,360

 

Cost of professional services revenue

 

71,821

 

 

 

(10,274

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

61,547

 

Gross profit

 

206,632

 

 

 

16,149

 

 

 

2,050

 

 

 

 

 

 

 

 

 

 

 

 

224,831

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

83,219

 

 

 

(21,072

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

62,147

 

Sales and marketing

 

143,366

 

 

 

(22,484

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

120,882

 

General and administrative

 

76,223

 

 

 

(12,365

)

 

 

 

 

 

(1,000

)

 

 

(176

)

 

 

(12,783

)

 

 

49,899

 

Loss from operations

 

(96,176

)

 

 

72,070

 

 

 

2,050

 

 

 

1,000

 

 

 

176

 

 

 

12,783

 

 

 

(8,097

)

Net loss

$

(99,425

)

 

$

72,070

 

 

$

2,050

 

 

$

1,000

 

 

$

176

 

 

$

12,783

 

 

$

(11,346

)

Net loss per share, basic and diluted2

$

(0.80

)

 

 

 

 

 

 

 

 

 

 

 

$

(0.09

)

Gross margin

 

60

%

 

 

 

 

 

 

 

 

 

 

 

 

65

%

Subscription gross margin

 

76

%

 

 

 

 

 

 

 

 

 

 

 

 

79

%

Professional services gross margin

 

(22

)%

 

 

 

 

 

 

 

 

 

 

 

 

(4

)%

Operating margin

 

(28

)%

 

 

 

 

 

 

 

 

 

 

 

 

(2

)%

(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 fiscal year ended January 31, 2022 were recast to conform to the updated methodology for comparison purposes.

(2) GAAP and Non-GAAP net loss per share are calculated based upon 131.4 million and 124.2 million basic and diluted weighted-average shares of common stock for the fiscal year ended January 31, 2023 and 2022, respectively.

Free Cash Flow

 

Three Months Ended

January 31,

 

Fiscal Year Ended

January 31,

 

2023

 

2022

 

2023

 

2022

Net cash (used in) provided by operating activities

$

(17,965

)

 

$

10,366

 

 

$

(20,644

)

 

$

18,686

 

Less: Purchases of property and equipment, net of insurance recoveries

 

(2,163

)

 

 

(2,732

)

 

 

(10,634

)

 

 

(8,432

)

Free cash flow

$

(20,128

)

 

$

7,634

 

 

$

(31,278

)

 

$

10,254

 

Net cash provided by (used in) investing activities

$

34,848

 

 

$

(18,256

)

 

$

(131,074

)

 

$

(20,099

)

Net cash provided by financing activities

$

2,908

 

 

$

5,119

 

 

$

241,911

 

 

$

21,483

 

Constant Currency Revenue

 

Three Months Ended

January 31,

 

 

 

Fiscal Year Ended

January 31,

 

 

 

2023

 

2022

 

% Change

 

2023

 

2022

 

% Change

Subscription revenue (GAAP)

$

89,513

 

$

77,332

 

16

%

 

$

338,391

 

$

287,747

 

18

%

Effects of foreign currency rate fluctuations

 

3,105

 

 

 

 

 

 

 

7,237

 

 

 

 

 

Subscription revenue on a constant currency basis (Non-GAAP)

$

92,618

 

 

 

 

20

%

 

$

345,628

 

 

 

 

20

%

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue (GAAP)

$

103,041

 

 

$

90,692

 

 

14

%

 

$

396,087

 

 

$

346,738

 

 

14

%

Effects of foreign currency rate fluctuations

 

3,413

 

 

 

 

 

 

 

9,263

 

 

 

 

 

Total revenue on a constant currency basis (Non-GAAP)

$

106,454

 

 

 

 

17

%

 

$

405,350

 

 

 

 

17

%

 

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