Zuora stock surges after earnings top expectations

Zuora stock surges after earnings top expectations

CEO says more businesses are looking to incorporate subscription offerings

Shares of Zuora Inc. headed higher in after-hours trading Thursday after the software company that helps businesses create subscription models reported better-than-expected results for its latest quarter and issued an upbeat revenue outlook.

The company posted a fiscal third-quarter net loss of $16.8 million, or 14 cents a share, compared with a loss of $18.2 million, or 16 cents a share, a year earlier. After adjustments, Zuora ZUO, +1.72% lost a penny per share, an improvement from its 9-cent per-share loss a year earlier. Analysts tracked by FactSet were modeling a 5-cent adjusted loss per share.

Zuora’s sales for the fiscal third quarter rose to $77.2 million from $71.8 million, while analysts were expecting $73.9 million.

The stock was up more than 7% in after-hours trading.

Chief Executive Tien Tzou told MarketWatch that the company is noticing a warmer reception to subscription-based business models both from companies whose businesses have been negatively impacted by the pandemic and those who’ve seen positive effects. “The resilience of a recurring revenue model” is helping companies “weather the storm of the current situation,” he said.

Zuora’s churn rate was a source of concern coming out of the company’s last earnings report, but Chief Financial Officer Todd McElhatton said that the company has moved past some those headwinds. “We had a good quarter in terms of turning things around on churn,” he told MarketWatch.

Though Zuora’s net dollar retention rate stayed constant at 99% compared with what the company disclosed in its prior report, McElhatton said that the figure is a trailing four-quarter metric, meaning it will take time for Zuora to lap the weaker parts of the pandemic.

For the fiscal fourth quarter, Zuora expects revenue of $75 million to $77 million and an adjusted loss per share of 5 cents to 6 cents. Analysts tracked by FactSet were modeling $74.3 million in revenue and an adjusted loss per share of 5 cents.

Zuora shares have declined 18% so far this year as the S&P 500 SPX, -0.06% has risen 13%.

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