Zuora Reports 6% Revenue Growth to $116.9 Million, Net Loss Increases to $32.2 Million

Zuora, Inc. reported its financial results for the third quarter of fiscal 2025, revealing a total revenue of $116.9 million, a 6% increase from $109.8 million in the same period last year. Subscription revenue, which constitutes the majority of the company's income, rose by 7% to $105.3 million, driven by higher transaction volumes and additional product sales to existing customers. However, the company recorded a net loss of $32.2 million, compared to a loss of $5.5 million in the prior year, reflecting increased operating expenses and significant changes in the fair value of debt derivative liabilities.

The company's operating expenses increased to $90.3 million from $83.6 million year-over-year, with notable rises in general and administrative costs, which surged by 69% to $26.9 million, largely due to expenses related to the proposed merger and other consulting fees. Research and development expenses decreased slightly, while sales and marketing costs fell by 9% as a result of workforce reductions implemented earlier in the year. The gross profit margin for the quarter was 67%, down from 68% in the previous year, primarily due to rising costs associated with data center operations.

Zuora's customer metrics showed a slight decline, with the number of customers with an annual contract value (ACV) of $250,000 or more decreasing to 451 from 453 a year earlier. The dollar-based retention rate also fell to 103% from 108%, indicating challenges in retaining and expanding revenue from existing customers. The annual recurring revenue (ARR) grew by 6% year-over-year to $419.9 million, reflecting the company's ongoing efforts to enhance its subscription offerings.

Strategically, Zuora has been active in expanding its capabilities through acquisitions, including the recent purchases of Togai and Sub(x), aimed at enhancing its metering and AI solutions for digital publishing. The company also announced a proposed merger with Zodiac Purchaser, L.L.C., which is expected to close in the first quarter of 2025, subject to regulatory approvals. Under the terms of the merger, shareholders will receive $10.00 per share in cash, which will result in the delisting of Zuora's common stock.

Looking ahead, Zuora anticipates continued growth in subscription revenue, although it acknowledges potential macroeconomic headwinds. The company maintains a strong liquidity position with cash and cash equivalents totaling $277.6 million as of October 31, 2024, alongside short-term investments of $280.9 million. This financial stability is expected to support its operational needs and strategic initiatives, including the integration of recent acquisitions and the proposed merger.