On December 9, 2024, Zuora Inc (ZUO, Financial) released its 8-K filing detailing the financial results for its fiscal third quarter ended October 31, 2024. Zuora Inc, a provider of cloud-based subscription management software, reported a total revenue of $116.9 million, surpassing the analyst estimate of $116.02 million. However, the company faced a GAAP net loss of $32.2 million, significantly higher than the $5.5 million loss reported in the same quarter last year.
Company Overview
Zuora Inc offers a comprehensive suite of cloud-based software solutions that enable businesses to manage subscription-based services. The company's flagship product, Zuora Central, automates the subscription order-to-cash process, including billing, collections, and revenue recognition. Zuora derives most of its revenue from the United States, serving a diverse range of industries.
Financial Performance and Challenges
Zuora Inc's subscription revenue grew by 7% year-over-year to $105.3 million, contributing to a total revenue increase of 6%. Despite this growth, the company's GAAP loss from operations widened to $11.7 million from $8.8 million in the previous year. The increased losses were attributed to costs associated with a proposed acquisition, including a $20.2 million debt redemption liability and $9.8 million in transaction-related expenses.
Key Financial Achievements
Zuora Inc reported a non-GAAP income from operations of $25.1 million, up from $16.0 million in the prior year. This improvement highlights the company's ability to generate operational efficiency despite the challenges faced. The non-GAAP net income also rose to $24.8 million, compared to $12.3 million in the same quarter last year, indicating a positive trend in the company's core business operations.
Income Statement Highlights
| Metric | Q3 2025 | Q3 2024 |
|---|---|---|
| Total Revenue | $116.9 million | $109.8 million |
| GAAP Net Loss | $32.2 million | $5.5 million |
| Non-GAAP Net Income | $24.8 million | $12.3 million |
Balance Sheet and Cash Flow
Zuora Inc's balance sheet remains robust with cash and cash equivalents, and short-term investments totaling $558.5 million as of October 31, 2024. The company generated $22.4 million in net cash from operating activities, a significant turnaround from the $55.7 million used in the same quarter last year. Adjusted free cash flow also improved to $25.5 million from $12.7 million.
Operational Metrics
The company reported a slight decrease in customers with an annual contract value of $250,000 or more, from 453 to 451. The dollar-based retention rate dropped to 103% from 108%, indicating challenges in maintaining customer retention levels. However, annual recurring revenue grew by 6% to $419.9 million, reflecting the company's ongoing efforts to expand its subscription base.
Analysis and Conclusion
Zuora Inc's Q3 fiscal 2025 results demonstrate a mixed performance with revenue growth exceeding expectations but accompanied by increased losses due to acquisition-related costs. The company's ability to improve non-GAAP income and cash flow metrics suggests operational resilience. However, the decline in customer retention and increased operational losses highlight areas that require strategic focus. As Zuora transitions to a privately held company following its acquisition, stakeholders will be keenly observing how these dynamics evolve.
Explore the complete 8-K earnings release (here) from Zuora Inc for further details.
