REDWOOD CITY, Calif., December 09, 2024--(BUSINESS WIRE)--Zuora, Inc. (NYSE: ZUO), a leading monetization suite for modern business, today announced financial results for its fiscal third quarter ended October 31, 2024.

Third Quarter Fiscal 2025 Financial Results:

Revenue: Subscription revenue was $105.3 million, an increase of 7% year-over-year. Total revenue was $116.9 million, an increase of 6% year-over-year. GAAP Loss from Operations: GAAP loss from operations was $11.7 million, compared to a loss from operations of $8.8 million in the third quarter of fiscal 2024. Non-GAAP Income from Operations: Non-GAAP income from operations was $25.1 million, compared to non-GAAP income from operations of $16.0 million in the third quarter of fiscal 2024. GAAP Net Loss: GAAP net loss was $32.2 million, or 28% of revenue, compared to a net loss of $5.5 million, or 5% of revenue, in the third quarter of fiscal 2024. GAAP net loss per share was $0.21 based on 152.3 million weighted-average shares outstanding, compared to a net loss per share of $0.04 based on 141.5 million weighted-average shares outstanding in the third quarter of fiscal 2024. The GAAP net loss reflects increased costs associated with our proposed acquisition, including a debt redemption liability of $20.2 million as of October 31, 2024 associated with our obligation to repurchase a portion of our 2029 Notes pursuant to our proposed acquisition, and $9.8 million of legal, consulting, and other transaction related costs. Refer below for further information on the proposed acquisition. Non-GAAP Net Income: Non-GAAP net income was $24.8 million, compared to non-GAAP net income of $12.3 million in the third quarter of fiscal 2024. Non-GAAP net income per share was $0.16 based on 152.3 million weighted-average shares outstanding, compared to non-GAAP net income per share of $0.09 based on 141.5 million weighted-average shares outstanding in the third quarter of fiscal 2024. Cash Flow: Net cash provided by operating activities was $22.4 million, compared to net cash used in operating activities of $55.7 million in the third quarter of fiscal 2024. Adjusted Free Cash Flow: Adjusted free cash flow was $25.5 million compared to $12.7 million in the third quarter of fiscal 2024. Cash and Investments: Cash and cash equivalents and short-term investments were $558.5 million as of October 31, 2024.

Descriptions of our non-GAAP financial measures are contained in the section titled "Explanation of Non-GAAP Financial Measures" below and reconciliations of GAAP and non-GAAP financial measures are contained in the tables below.

Story Continues

Proposed Acquisition; Conference Call and Guidance

On October 17, 2024, we announced that Zuora entered into a definitive agreement to be acquired by Silver Lake, the global leader in technology investing, in partnership with an affiliate of GIC Pte. Ltd. ("GIC"). The transaction is valued at $1.7 billion, with Silver Lake and GIC to acquire all outstanding shares of Zuora common stock for $10.00 per share in cash. The acquisition is expected to close in the first calendar quarter of 2024, subject to customary closing conditions and approvals, including the receipt of the required regulatory approvals. Upon completion of the transaction, Zuora will become a privately held company.

Given the proposed acquisition of Zuora, we will not be holding a conference call or live webcast to discuss Zuora's third quarter of fiscal 2025 financial results, we will not be providing any forward looking guidance, and we are withdrawing all previously provided goals, outlook, and guidance.

Key Operational and Financial Metrics:

Customers with annual contract value (ACV) equal to or greater than $250,000 were 451, compared to 453 as of October 31, 2023. Dollar-based retention rate (DBRR) was 103%, compared to 108% as of October 31, 2023. Annual recurring revenue (ARR) was $419.9 million compared to $396.0 million as of October 31, 2023, representing ARR growth of 6%.

Explanation of Key Operational and Financial 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. We define the number of customers at the end of any particular period as the number of parties or organizations that have entered into a distinct subscription contract with us and for which the term has not ended. Each party with whom we have entered into a distinct subscription contract is considered a unique customer, and in some cases, there may be more than one customer within a single organization.

Dollar-based Retention Rate (DBRR). We calculate DBRR 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. ARR growth is calculated by dividing the ARR as of a period end by the ARR for the corresponding period end of the prior fiscal year.

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: non-GAAP cost of subscription revenue; non-GAAP subscription gross margin; non-GAAP cost of professional services revenue; non-GAAP professional services gross margin; non-GAAP gross profit; non-GAAP gross margin; non-GAAP income from operations; non-GAAP operating margin; non-GAAP net income; non-GAAP net income per share; and adjusted 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. Shareholder matters. We exclude non-recurring charges and benefits, net of insurance recoveries, including litigation expenses, settlements and other legal, consulting and advisory fees, related to shareholder matters that are outside of the ordinary course of our business, including expenses related to a cooperation agreement. 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, results and resolution of such litigation, settlements, agreements or other shareholder matters. Asset impairment. We exclude non-cash charges for impairment of assets, including impairments related to internal-use software, office leases, and acquired intangible assets. 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 debt derivative and warrant liabilities. We exclude fair value adjustments related to the debt derivative and warrant liabilities, which are non-cash gains or losses, as they can fluctuate significantly with changes in Zuora's stock price and market volatility, and do not reflect the underlying cash flows or operational results of the business. Acquisition-related expenses. We exclude acquisition-related expenses (including integration-related charges) that are not related to our ongoing operations. These expenses include gains or losses recognized on contingent consideration related to acquisitions, including costs associated with our proposed acquisition. We do not consider these transaction expenses as reflective of our core business or ongoing operating performance. Workforce reductions. We exclude charges related to workforce reduction plans, including severance, health care and related expenses. We believe these charges are not indicative of our continuing operations.

Additionally, we disclose "adjusted free cash flow", which is a non-GAAP measure that includes adjustments to operating cash flows for cash impacts related to Shareholder matters and Acquisition-related expenses described above, and net purchases of property and equipment. We include the impact of net purchases of property and equipment in our adjusted free cash flow calculation because we consider these capital expenditures to be a necessary component of our ongoing operations. We believe this measure is meaningful to investors because management reviews cash flows generated from operations excluding such expenditures that are not related to our ongoing operations.

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.

Forward-Looking Statements:

This press release contains forward-looking statements that involve a number of risks and uncertainties. Words such as "believes," "may," "will," "determine," "estimates," "potential," "continues," "anticipates," "intends," "expects," "could," "would," "projects," "plans," "targets," "strategy," "likely," and variations of such words and similar expressions are intended to identify forward-looking statements. Forward-looking statements in this release include statements regarding the proposed acquisition of Zuora, including the expected timing of the closing of the acquisition, and expectations for Zuora following the completion of the acquisition. 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 August 29, 2024 as well as other documents that may be filed by us from time to time with the Securities and Exchange Commission, including in our Quarterly Report on Form 10-Q for the quarter ended October 31, 2024. In particular, the following factors, among others, could cause results to differ materially from those expressed or implied by such forward-looking statements: the possibility that the closing conditions to the proposed acquisition are not satisfied (or waived), including the risk that required approvals from Zuora’s stockholders for the proposed acquisition or required regulatory approvals to consummate the acquisition are not obtained in a timely manner (or at all); the outcome of the current complaint and any potential litigation relating to the proposed acquisition; uncertainties as to the timing of the consummation of the proposed acquisition; the ability of each party to consummate the proposed acquisition; our ability to attract new customers and retain and expand sales to existing customers; our ability to manage our future revenue and profitability plans effectively; adoption of monetization platform software and related solutions, as well as consumer adoption of products and services that are provided through such solutions; our ability to develop and release new products and services, or successful enhancements, new features and modifications; challenges related to growing our relationships with strategic partners; loss of key employees; our ability to compete in our markets; adverse impacts on our business and financial condition due to macroeconomic or market conditions; the impact of actions to improve operational efficiencies and operating costs; our history of net losses and ability to achieve or sustain profitability; market acceptance of our products; the success of our product development efforts; risks associated with currency exchange rate fluctuations; risks associated with our debt obligations; successful deployment of our solutions by customers after entering into a subscription agreement with us; the success of our sales and product initiatives; our security measures; our ability to adequately protect our intellectual property; interruptions or performance problems; litigation and other shareholder related costs; the anticipated benefits of acquisitions and ability to integrate operations and technology of any acquired company; geopolitical conflicts or destabilizing events; 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.

Important Information and Where to Find It

In connection with the proposed acquisition, Zuora has filed with the Securities and Exchange Commission (the "SEC") a proxy statement in preliminary form on November 25, 2024, a definitive version of which will be mailed or otherwise provided to its stockholders. The Company and affiliates of the Company have jointly filed a transaction statement on Schedule 13E-3 (the Schedule 13E-3). Zuora may also file other documents with the SEC regarding the potential transaction. BEFORE MAKING ANY VOTING DECISION, ZUORA’S STOCKHOLDERS ARE URGED TO CAREFULLY READ THE PROXY STATEMENT AND THE SCHEDULE 13E-3 IN THEIR ENTIRETY AND ANY OTHER DOCUMENTS FILED WITH THE SEC AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS THERETO IN CONNECTION WITH THE PROPOSED TRANSACTION OR INCORPORATED BY REFERENCE THEREIN BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND THE PARTIES TO THE PROPOSED TRANSACTION AND RELATED MATTERS. Investors and security holders may obtain free copies of the proxy statement, the Schedule 13E-3 and other documents that Zuora files with the SEC from the SEC’s website at www.sec.gov and Zuora’s website at investor.zuora.com. In addition, the proxy statement, the Schedule 13E-3 and other documents filed by Zuora with the SEC (when available) may be obtained from Zuora free of charge by directing a request to Zuora’s Investor Relations at [email protected].

Participants in the Solicitation

Zuora and certain of its directors, executive officers and employees may be deemed to be participants in the solicitation of proxies from Zuora’s stockholders in connection with the proposed transaction. Information regarding the persons who may, under the rules of the SEC, be deemed to be participants in the solicitation of the stockholders of Zuora in connection with the proposed transaction, including a description of their respective direct or indirect interests, by security holdings or otherwise will be set forth in the proxy statement and Schedule 13E-3 and other materials to be filed with the SEC. You may also find additional information about Zuora’s directors and executive officers in Zuora’s proxy statement for its 2024 Annual Meeting of Stockholders, which was filed with the SEC on May 16, 2024 (the "Annual Meeting Proxy Statement"). To the extent holdings of securities by potential participants (or the identity of such participants) have changed since the information printed in the Annual Meeting Proxy Statement, such information has been or will be reflected in Zuora’s Statements of Change in Ownership on Forms 3 and 4 filed with the SEC. You can obtain free copies of these documents from Zuora using the contact information above.

About Zuora,Inc.

Zuora provides a leading monetization suite to build, run and grow a modern business through a dynamic mix of usage-based models, subscription bundles and everything in between. From pricing and packaging, to billing, payments and revenue accounting, Zuora’s flexible, modular software platform is designed to help companies evolve monetization strategies with customer demand. More than 1,000 customers around the world, including BMC Software, Box, Caterpillar, General Motors, The New York Times, Schneider Electric and Zoom use Zuora’s leading combination of technology and expertise to turn recurring relationships and recurring revenue into recurring growth. Zuora is headquartered in Silicon Valley with offices in the Americas, EMEA and APAC. To learn more, please visit zuora.com.

© 2024 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, INC.

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, 2024    2023    2024    2023  Revenue:  Subscription $ 105,253   $ 98,048   $ 308,263   $ 283,232  Professional services  11,676    11,801    33,831    37,760  Total revenue  116,929    109,849    342,094    320,992  Cost of revenue:  Subscription1  23,954    20,378    67,207    62,304  Professional services1  14,383    14,650    43,483    47,851  Total cost of revenue  38,337    35,028    110,690    110,155  Gross profit  78,592    74,821    231,404    210,837  Operating expenses:  Research and development1  26,833    27,504    76,853    79,428  Sales and marketing1  36,597    40,245    108,579    124,488  General and administrative1  26,880    15,893    71,351    54,160  Total operating expenses  90,310    83,642    256,783    258,076  Loss from operations  (11,718 )   (8,821 )   (25,379 )   (47,239 ) Change in fair value of debt derivative and warrant liabilities  (20,174 )   6,997    (29,115 )   2,241  Interest expense  (7,045 )   (5,610 )   (20,781 )   (14,604 ) Interest and other income (expense), net  6,505    2,272    19,988    13,639  Loss before income taxes  (32,432 )   (5,162 )   (55,287 )   (45,963 ) Income tax (benefit) provision  (226 )   340    (2,152 )   1,396  Net loss  (32,206 )   (5,502 )   (53,135 )   (47,359 ) Comprehensive loss:  Foreign currency translation adjustment  462    (696 )   386    (1,383 ) Unrealized gain (loss) on available-for-sale securities  248    (18 )   63    494  Comprehensive loss $ (31,496 )  $ (6,216 )  $ (52,686 )  $ (48,248 ) Net loss per share, basic and diluted $ (0.21 )  $ (0.04 )  $ (0.36 )  $ (0.34 ) Weighted-average shares outstanding used in calculating net loss per share, basic and diluted  152,263    141,488    149,457    138,789

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(1) Stock-based compensation expense was recorded in the following cost and expense categories:

Three Months Ended

October 31,   Nine Months Ended

October 31,  2024    2023    2024    2023  Cost of subscription revenue $ 2,331   $ 2,350   $ 6,291   $ 6,889  Cost of professional services revenue  2,598    2,747    7,359    8,997  Research and development  7,697    7,165    21,680    20,661  Sales and marketing  7,613    8,191    20,609    24,857  General and administrative  4,694    5,648    13,163    16,569  Total stock-based compensation expense $ 24,933   $ 26,101   $ 69,102   $ 77,973

ZUORA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)  October 31, 2024  January 31, 2024 Assets  Current assets:  Cash and cash equivalents $ 277,615   $ 256,065  Short-term investments  280,909    258,120  Accounts receivable, net  82,414    124,602  Deferred commissions, current portion  15,995    15,870  Prepaid expenses and other current assets  25,183    23,261  Total current assets  682,116    677,918  Property and equipment, net  27,403    25,961  Operating lease right-of-use assets  20,591    22,462  Purchased intangibles, net  23,146    10,082  Deferred commissions, net of current portion  24,941    27,250  Goodwill  73,903    56,657  Other assets  4,972    3,506  Total assets $ 857,072   $ 823,836  Liabilities and stockholders’ equity  Current liabilities:  Accounts payable $ 761   $ 3,161  Accrued expenses and other current liabilities  45,167    32,157  Accrued employee liabilities  29,860    37,722  Deferred revenue, current portion  177,436    199,615  Operating lease liabilities, current portion  7,030    6,760  Total current liabilities  260,254    279,415  Long-term debt  368,348    359,525  Deferred revenue, net of current portion  860    2,802  Operating lease liabilities, net of current portion  32,573    37,100  Deferred tax liabilities  4,066    3,725  Other long-term liabilities  6,781    7,582  Total liabilities  672,882    690,149  Stockholders’ equity:  Class A common stock  15    14  Class B common stock  1    1  Additional paid-in capital  1,067,329    964,141  Accumulated other comprehensive loss  (410 )   (859 ) Accumulated deficit  (882,745 )   (829,610 ) Total stockholders’ equity  184,190    133,687  Total liabilities and stockholders’ equity $ 857,072   $ 823,836

ZUORA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)  Nine Months Ended 
October 31, 2024    2023  Cash flows from operating activities:  Net loss $ (53,135 )  $ (47,359 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities:  Depreciation, amortization and accretion  14,715    13,684  Stock-based compensation  69,102    77,973  Provision for credit losses  2,117    457  Amortization of deferred commissions  13,946    14,415  Reduction in carrying amount of right-of-use assets  3,470    4,876  Change in fair value of debt derivative and warrant liabilities  29,115    (2,241 ) Other  (2,418 )   2,630  Changes in operating assets and liabilities:  Accounts receivable  40,149    12,476  Prepaid expenses and other assets  (2,657 )   878  Deferred commissions  (12,107 )   (12,013 ) Accounts payable  (2,529 )   (634 ) Accrued expenses and other liabilities  6,843    (82,904 ) Accrued employee liabilities  (7,986 )   509  Deferred revenue  (24,439 )   (7,461 ) Operating lease liabilities  (7,476 )   (10,962 ) Net cash provided by (used in) operating activities  66,710    (35,676 ) Cash flows from investing activities:  Purchases of property and equipment  (9,252 )   (6,913 ) Purchases of short-term investments  (240,093 )   (66,665 ) Maturities of short-term investments  222,279    175,128  Cash paid for acquisition, net of cash acquired  (24,786 )   (4,524 ) Net cash (used in) provided by investing activities  (51,852 )   97,026  Cash flows from financing activities:  Proceeds from issuance of common stock upon exercise of stock options  3,372    1,000  Proceeds from issuance of common stock under employee stock purchase plan  4,481    4,765  Payment for taxes related to net share settlement of stock options  (1,547 )   —  Proceeds from issuance of convertible senior notes, net of issuance costs  —    145,861  Net cash provided by financing activities  6,306    151,626  Effect of exchange rates on cash and cash equivalents  386    (1,383 ) Net increase in cash and cash equivalents  21,550    211,593  Cash and cash equivalents, beginning of period  256,065    203,239  Cash and cash equivalents, end of period $ 277,615   $ 414,832

ZUORA, INC. RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (in thousands, except percentages) (unaudited)  Subscription Gross Margin  Three Months Ended 
October 31,  Nine Months Ended 
October 31, 2024    2023    2024    2023  Reconciliation of cost of subscription revenue:  GAAP cost of subscription revenue $ 23,954   $ 20,378   $ 67,207   $ 62,304  Less:  Stock-based compensation  (2,331 )   (2,350 )   (6,291 )   (6,889 ) Amortization of acquired intangibles  (1,164 )   (607 )   (2,706 )   (2,083 ) Workforce reductions  (228 )   —    (796 )   (38 ) Acquisition-related expenses  (12 )   —    (103 )   —  Asset impairment  —    (439 )   —    (439 ) Shareholder matters  —    —    (20 )   —  Non-GAAP cost of subscription revenue $ 20,219   $ 16,982   $ 57,291   $ 52,855  GAAP subscription gross margin  77 %   79 %   78 %   78 % Non-GAAP subscription gross margin  81 %   83 %   81 %   81 %

Professional Services Gross Margin   Three Months Ended 
October 31,  Nine Months Ended 
October 31, 2024    2023    2024    2023  Reconciliation of cost of professional services revenue:  GAAP cost of professional services revenue $ 14,383   $ 14,650   $ 43,483   $ 47,851  Less:  Stock-based compensation  (2,598 )   (2,747 )   (7,359 )   (8,997 ) Acquisition-related expenses  (22 )   —    (22 )   —  Shareholder matters  —    —    (28 )   —  Workforce reductions  —    —    (5 )   (46 ) Non-GAAP cost of professional services revenue $ 11,763   $ 11,903   $ 36,069   $ 38,808  GAAP professional services gross margin  (23 )%   (24 )%   (29 )%   (27 )% Non-GAAP professional services gross margin  (1 )%   (1 )%   (7 )%   (3 )%

ZUORA, INC. RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED) (in thousands, except percentages) (unaudited)  Total Gross Margin  Three Months Ended 
October 31,  Nine Months Ended 
October 31, 2024    2023    2024    2023  Reconciliation of gross profit:  GAAP gross profit $ 78,592   $ 74,821   $ 231,404   $ 210,837  Add:  Stock-based compensation  4,929    5,097    13,650    15,886  Amortization of acquired intangibles  1,164    607    2,706    2,083  Workforce reductions  228    —    801    84  Acquisition-related expenses  34    —    125    —  Asset impairment  —    439    —    439  Shareholder matters  —    —    48    —  Non-GAAP gross profit $ 84,947   $ 80,964   $ 248,734   $ 229,329  GAAP gross margin  67 %   68 %   68 %   66 % Non-GAAP gross margin  73 %   74 %   73 %   71 %

Operating (Loss) Income and Operating Margin  Three Months Ended 
October 31,  Nine Months Ended 
October 31, 2024    2023    2024    2023  Reconciliation of (loss) income from operations:  GAAP loss from operations $ (11,718 )  $ (8,821 )  $ (25,379 )  $ (47,239 ) Add:  Stock-based compensation  24,933    26,101    69,102    77,973  Acquisition-related expenses  10,299    19    17,100    211  Amortization of acquired intangibles  1,164    607    2,706    2,083  Workforce reductions  241    —    1,518    265  Shareholder matters  181    (3,508 )   4,240    (3,265 ) Asset impairment  —    1,592    —    1,592  Non-GAAP income from operations $ 25,100   $ 15,990   $ 69,287   $ 31,620  GAAP operating margin  (10 )%   (8 )%   (7 )%   (15 )% Non-GAAP operating margin  21 %   15 %   20 %   10 %

ZUORA, INC. RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED) (in thousands, except per share data) (unaudited)  Net (Loss) Income and Net (Loss) Income Per Share  Three Months Ended 
October 31,  Nine Months Ended 
October 31, 2024    2023    2024    2023  Reconciliation of net (loss) income:  GAAP net loss $ (32,206 )  $ (5,502 )  $ (53,135 )  $ (47,359 ) Add:  Stock-based compensation  24,933    26,101    69,102    77,973  Change in fair value of debt derivative and warrant liabilities  20,174    (6,997 )   29,115    (2,241 ) Acquisition-related expenses  10,299    19    17,100    211  Amortization of acquired intangibles  1,164    607    2,706    2,083  Workforce reductions  241    —    1,518    265  Shareholder matters  181    (3,508 )   4,240    (3,265 ) Asset impairment  —    1,592    —    1,592  Non-GAAP net income $ 24,786   $ 12,312   $ 70,646   $ 29,259  GAAP net loss per share, basic and diluted1 $ (0.21 )  $ (0.04 )  $ (0.36 )  $ (0.34 ) Non-GAAP net income per share, basic and diluted1 $ 0.16   $ 0.09   $ 0.47   $ 0.21

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(1) For the three months ended October 31, 2024 and 2023, GAAP and Non-GAAP net (loss) income per share are calculated based upon 152.3 million and 141.5 million basic and diluted weighted-average shares of common stock, respectively. For the nine months ended October 31, 2024 and 2023, GAAP and Non-GAAP net (loss) income per share are calculated based upon 149.5 million and 138.8 million basic and diluted weighted-average shares of common stock, respectively.

Adjusted Free Cash Flow   Three Months Ended 
October 31,  Nine Months Ended 
October 31, 2024    2023    2024    2023  Reconciliation of adjusted free cash flow:  Net cash provided by (used in) operating activities (GAAP) $ 22,408   $ (55,657 )  $ 66,710   $ (35,676 ) Add:  Acquisition-related expenses  5,587    28    7,300    135  Shareholder matters  824    71,377    4,379    72,130  Less:  Purchases of property and equipment  (3,330 )   (3,075 )   (9,252 )   (6,913 ) Adjusted free cash flow (non-GAAP) $ 25,489   $ 12,673   $ 69,137   $ 29,676  Net cash provided by (used in) investing activities (GAAP) $ 18,999   $ 2,005   $ (51,852 )  $ 97,026  Net cash (used in) provided by financing activities (GAAP) $ (1,295 )  $ 145,899   $ 6,306   $ 151,626

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Contacts

Investor Relations Contact: 
Luana Wolk
[email protected] 
650-419-1377

Media Relations Contact: 
Margaret Juhnke
[email protected] 
619-609-3919

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