Zuora Earnings 2019-10-31

ZUO 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

Comparables ($MM TTM)
Ticker	M Cap	Assets	Liab	Rev	G Profit	Net Inc	EBITDA	EV	G Margin	EV/EBITDA	ROA
EPAY	1,928	669	290	422	239	10	30	1,830	57%	60.1	1%
LPSN	1,841	496	319	267	198	-56	-37	1,616	74%	-44.0	-11%
PRGS	1,838	830	515	397	329	53	133	2,011	83%	15.1	6%
VRNS	1,824	304	204	271	239	-48	-44	1,755	88%	-39.8	-16%
BAND	1,776	313	44	213	98	7	8	1,635	46%	214.6	2%
SAIL	1,764	559	184	190	209	-2	12	1,665	110%	138.6	-0%
ZUO	1,736	314	141	260	132	-80	-69	1,693	51%	-24.4	-25%
SEND	1,722	245	48	105	79	-4	5	1,540	75%	333.4	-2%
CISN	1,644	2,215	1,730	740	469	-13	214	2,891	63%	13.5	-1%
SHOP	1,603	244	48	0	0	0	0	1,493			0%

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

_____________________________

FORM 10-Q

_____________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2019


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-38451

_____________________________

Zuora, Inc.

(Exact name of registrant as specified in its charter)

_____________________________


Delaware						20-5530976
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)


3050 South Delaware Street, Suite 301, San Mateo, California						94403
(Address of principal executive offices)						(Zip Code)

(800) 425-1281

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

_____________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name on each exchange on which registered
Class A common stock, $0.0001 par value per share	ZUO	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 30, 2019, the Registrant had approximately 93.7 million shares of Class A common stock and 19.5 million shares of Class B common stock outstanding.


		Page
PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements (unaudited)	2
	Condensed Consolidated Balance Sheets as of October 31, 2019 and January 31, 2019	2
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended October 31, 2019 and 2018	3
	Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended October 31, 2019 and 2018	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 31, 2019 and 2018	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	41

PART II.	OTHER INFORMATION	43
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	74
Item 6.	Exhibits	75
Signatures			76

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q (Form 10-Q) to “Zuora,” “Company,” “our,” “us,” and “we” refer to Zuora, Inc. and, where appropriate, its consolidated subsidiaries.

This Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. All statements contained in this Form 10-Q, other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, market growth, and our objectives for future operations, are forward-looking statements. 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 contained in this Form 10-Q include, but are not limited to, statements about our expectations regarding:

•trends in revenue, cost of revenue, and gross margin;

•our investments in our platform and the cost of third-party hosting fees;

•trends in operating expenses, including research and development expense, sales and marketing expense, and general and administrative expense, and expectations regarding these expenses as a percentage of revenue;

•our existing cash and cash equivalents, investment balances, funds available under our loan and security agreement, and cash provided by subscriptions to our platform and related professional services being sufficient to meet our working capital and capital expenditure needs for at least the next 12 months; and

•other statements regarding our future operations, financial condition, and prospects and business strategies.

Such forward-looking statements are based on our expectations as of the date of this filing and are subject to a number of risks, uncertainties and assumptions, including but not limited to, risks detailed in the “Risk Factors” section of this Form 10-Q. Readers are urged to carefully review and consider the various disclosures made in this Form 10-Q and in other documents we file from time to time with the Securities and Exchange Commission (SEC) that disclose risks and uncertainties that may affect our business. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and circumstances discussed in this Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance or achievements. In addition, the forward-looking statements in this Form 10-Q are made as of the date of this filing, and we do not undertake, and expressly disclaim any duty, to update such statements for any reason after the date of this Form 10-Q or to conform statements to actual results or revised expectations, except as required by law.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

ZUORA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)


	October 31, 2019		January 31, 2019
			As Adjusted¹
Assets
Current assets:
Cash and cash equivalents	$	64,621	$	67,940
Short-term investments	105,777		107,908
Accounts receivable, net of allowance for doubtful accounts of $2,622 and $2,522 as of October 31, 2019 and January 31, 2019, respectively	60,073		58,258
Restricted cash, current portion	—		400
Deferred commissions, current portion	8,981		8,616
Prepaid expenses and other current assets	16,157		14,632
Total current assets	255,609		257,754
Property and equipment, net	28,392		19,625
Restricted cash, net of current portion	—		1,684
Purchased intangibles, net	6,043		7,396
Deferred commissions, net of current portion	18,044		18,664
Goodwill	17,632		17,632
Other assets	5,569		3,292
Total assets	$	331,289	$	326,047
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,719	$	1,512
Accrued expenses and other current liabilities	17,158		14,210
Accrued employee liabilities	27,227		22,603
Debt, current portion	4,447		2,963
Deferred revenue, current portion	94,010		86,784
Total current liabilities	144,561		128,072
Debt, net of current portion	7,187		10,494
Deferred revenue, net of current portion	209		112
Deferred tax liabilities	1,877		1,877
Other long-term liabilities	9,712		3,678
Total liabilities	163,546		144,233
Commitments and contingencies (note 16)
Stockholders’ equity:
Class A common stock	8		8
Class B common stock	3		3
Additional paid-in capital	534,642		488,776
Accumulated other comprehensive income	186		481
Accumulated deficit	(367,096)		(307,454)
Total stockholders’ equity	167,743		181,814
Total liabilities and stockholders’ equity	$	331,289	$	326,047

(1) See Note 2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements for a summary of adjustments related to the adoption of Topic 606.

See notes to unaudited condensed consolidated financial statements.

ZUORA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands, except per share data)

(unaudited)


	Three Months Ended October 31,						Nine Months Ended October 31,
	2019		2018		2019		2018
			As Adjusted¹				As Adjusted¹
Revenue:
Subscription	$	54,038	$	43,083	$	151,996	$	119,849
Professional services	17,784		18,273		53,668		51,802
Total revenue	71,822		61,356		205,664		171,651
Cost of revenue:
Subscription	13,858		10,987		38,589		31,273
Professional services	20,443		19,190		61,445		53,569
Total cost of revenue	34,301		30,177		100,034		84,842
Gross profit	37,521		31,179		105,630		86,809
Operating expenses:
Research and development	17,903		14,282		53,662		39,667
Sales and marketing	28,027		24,849		80,818		71,008
General and administrative	10,597		9,579		32,366		27,553
Total operating expenses	56,527		48,710		166,846		138,228
Loss from operations	(19,006)		(17,531)		(61,216)		(51,419)
Interest and other income (expense), net	1,190		633		2,294		(1,218)
Loss before income taxes	(17,816)		(16,898)		(58,922)		(52,637)
Income tax provision	(421)		(326)		(720)		(921)
Net loss	(18,237)		(17,224)		(59,642)		(53,558)
Comprehensive loss:
Foreign currency translation adjustment	(141)		(679)		(416)		(341)
Unrealized gain (loss) on available-for-sale securities	75		(32)		121		(32)
Comprehensive loss	$	(18,303)	$	(17,935)	$	(59,937)	$	(53,931)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.16)	$	(0.16)	$	(0.54)	$	(0.62)
Weighted-average shares outstanding used in calculating net loss per share attributable to common stockholders, basic and diluted	111,835		106,049		110,436		85,820

(1) See Note 2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements for a summary of adjustments related to the adoption of Topic 606.

See notes to unaudited condensed consolidated financial statements.

ZUORA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands)

(unaudited)


	Nine Months Ended October 31, 2019
													Accumulated			Total
	Class A				Class B						Additional		Other		Accumulated	Stockholders'
	Common Stock				Common Stock						Paid-in		Comprehensive		Deficit	Equity
	Shares	Amount		Shares	Amount		Capital		Income		As Adjusted¹		As Adjusted¹
Balance, January 31, 2019	77,119	$	8	32,575	$	3	$	488,776	$	481	$	(307,454)	$	181,814
Conversion of Class B common stock to Class A common stock	15,477	—		(15,477)	—		—		—		—		—
Issuance of common stock upon exercise of stock options, net of repurchases	(15)	—		2,217	—		8,981		—		—		8,981
Lapse of restrictions on common stock related to early exercise of stock options	—	—		—	—		365		—		—		365
Purchases of common stock under the ESPP	422	—		—	—		5,069		—		—		5,069
RSU releases	595	—		147	—		—		—		—		—
Stock-based compensation	—	—		—	—		31,413		—		—		31,413
Deferred offering costs	—	—		—	—		38		—		—		38
Other comprehensive loss	—	—		—	—		—		(295)		—		(295)
Net loss	—	—		—	—		—		—		(59,642)		(59,642)
Balance, October 31, 2019	93,598	$	8	19,462	$	3	$	534,642	$	186	$	(367,096)	$	167,743

	Three Months Ended October 31, 2019
									Accumulated
	Class A				Class B						Additional		Other			Total
	Common Stock				Common Stock						Paid-in		Comprehensive		Accumulated	Stockholders'
	Shares	Amount		Shares	Amount		Capital		Income		Deficit		Equity
Balance, July 31, 2019	87,875	$	8	24,422	$	3	$	520,812	$	252	$	(348,859)	$	172,216
Conversion of Class B common stock to Class A common stock	5,413	—		(5,413)	—		—		—		—		—
Issuance of common stock upon exercise of stock options, net of repurchases	(7)	—		406	—		1,933		—		—		1,933
Lapse of restrictions on common stock related to early exercise of stock options	—	—		—	—		59		—		—		59
RSU releases	317	—		47	—		—		—		—		—
Stock-based compensation	—	—		—	—		11,838		—		—		11,838
Other comprehensive loss	—	—		—	—		—		(66)		—		(66)
Net loss	—	—		—	—		—		—		(18,237)		(18,237)
Balance, October 31, 2019	93,598	$	8	19,462	$	3	$	534,642	$	186	$	(367,096)	$	167,743

(1) See Note 2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements for a summary of adjustments related to the adoption of Topic 606.

See notes to unaudited condensed consolidated financial statements.

ZUORA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)

(in thousands)

(unaudited)


	Nine Months Ended October 31, 2018
														Accumulated				Total
	Convertible				Class A					Class B						Additional		Related		Other	Accumulated	Stockholders'
	Preferred Stock				Common Stock					Common Stock						Paid-in		Party		Comprehensive	Deficit	Equity
	Shares	Amount		Shares	Amount		Shares	Amount		Capital		Receivable		Income		As Adjusted¹		As Adjusted¹
Balance, January 31, 2018	61,984	$	6	—	$	—	30,524	$	3	$	286,152	$	(1,281)	$	471	$	(234,713)	$	50,638
Conversion of convertible preferred stock to common stock in connection with initial public offering	(61,984)	(6)		—	—		61,984	6		—		—		—		—		—
Issuance of common stock in connection with initial public offering, net of underwriting discounts and issuance costs	—	—		12,650	1		—	—		159,999		—		—		—		160,000
Conversion of Class B common stock to Class A common stock	—	—		59,478	6		(59,478)	(6)		—		—		—		—		—
Issuance of common stock upon exercise of stock options, net of repurchases	—	—		369	—		2,543	1		7,012		—		—		—		7,013
RSU releases	—	—		106	—		212	—		—		—		—		—		—
Lapse of restrictions on common stock related to early exercise of stock options	—	—		—	—		—	—		1,751		—		—		—		1,751
Deferred offering costs	—	—		—	—		—	—		(543)		—		—		—		(543)
Stock-based compensation	—	—		—	—		—	—		17,722		—		—		—		17,722
Related party notes receivable	—	—		—	—		—	—		—		1,281		—		—		1,281
Other comprehensive loss	—	—		—	—		—	—		—		—		(373)		—		(373)
Net loss	—	—		—	—		—	—		—		—		—		(53,558)		(53,558)
Balance, October 31, 2018	—	$	—	72,603	$	7	35,785	$	4	$	472,093	$	—	$	98	$	(288,271)	$	183,931

	Three Months Ended October 31, 2018
														Accumulated				Total
	Convertible				Class A					Class B						Additional		Related		Other	Accumulated	Stockholders'
	Preferred Stock				Common Stock					Common Stock						Paid-in		Party		Comprehensive	Deficit	Equity
	Shares	Amount		Shares	Amount		Shares	Amount		Capital		Receivable		Income		As Adjusted¹		As Adjusted¹
Balance, July 31, 2018	—	$	—	44,970	$	4	62,680	$	6	$	461,804	$	(5,657)	$	809	$	(271,047)	$	185,919
Conversion of Class B common stock to Class A common stock	—	—		27,239	3		(27,239)	(2)		—		—		—		—		1
Issuance of common stock upon exercise of stock options	—	—		369	—		297	—		2,264		—		—		—		2,264
RSU releases	—	—		25	—		47	—		—		—		—		—		—
Lapse of restrictions on common stock related to early exercise of stock options	—	—		—	—		—	—		614		—		—		—		614
Deferred offering costs	—	—		—	—		—	—		(10)		—		—		—		(10)
Stock-based compensation	—

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$0.00	111	$1,736

10-Q	2019-12-16	Quarter: 2019-10-31
10-Q	2019-09-16	Quarter: 2019-07-31
10-Q	2019-06-11	Quarter: 2019-04-30
10-K	2019-04-18	Annual: 2019-01-31
10-Q	2018-12-13	Quarter: 2018-10-31
10-Q	2018-09-12	Quarter: 2018-07-31
10-Q	2018-06-13	Quarter: 2018-04-30
S-1	2018-03-16	Public Filing

8-K	2019-12-05	Earnings, Exhibits
8-K	2019-09-26	Other Events
8-K	2019-08-28	Earnings, Exhibits
8-K	2019-06-18	Shareholder Vote
8-K	2019-05-30	Earnings, Exhibits
8-K	2019-05-29	Officers
8-K	2019-03-21	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2019-03-21	Earnings, Exhibits
8-K	2019-02-28	Officers
8-K	2018-11-29	Earnings, Exhibits
8-K	2018-08-30	Earnings, Exhibits
8-K	2018-08-15	Other Events
8-K	2018-07-10	Other Events
8-K	2018-05-31	Earnings, Exhibits

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