Zuora (ZUO) has surged to new highs after reporting its first quarterly report as a public traded company yesterday afternoon.
Zuora beat first quarter (April) estimates and guided for a smaller than expected net loss on higher than expected revenue for the second quarter and fiscal 2019 -- check all the boxes for a cloud stock Wall Street debut.
ZUO provides cloud-based software on a subscription basis that enables companies to launch, manage, and transform into a subscription business. When the company was founded, it coined the phrase "subscription economy" as it foresaw a new business environment in which traditional product or service companies shift toward subscription business models.
The subscription business model is all the rage for cloud software companies, so Zurora's end market is red hot.
Zuora raised $162 million in April selling 11 million shares in an IPO at $14/share. The deal priced above the $11-13 range, which was raised from $9-11.
First quarter results were strong. Revenue grew 60% to $51.7 million, 5% above estimates, but that growth should slow as it benefited from the acquisition of Leeyo/RevPro in May of last year. Subscription revenue grew 39%.
- Zuora ended the quarter with 441 customers with ACV equal to or greater than $100,000, representing 6% quarter-over-quarter growth in such customers, and a net add of 26 of such customers.
- Dollar-based retention rate increased quarter-over-quarter to 112%, primarily driven by strong volume upsell activity.
- Customer usage of Zuora solutions grew, with $7.2 billion in transaction volume through Zuora's billing platform, an increase of 46% year-over-year.
Revenue guidance for the second quarter and full year was ~4% above Wall Street expectations.
Zuroa has established itself as one of the newest hot cloud stocks. It's not hard to see a long runway for growth.
With a $2.8 billion valuation, the stock is already quite expensive at nearly 12x this year's sales estimates or ~9x next year's sales. The tiny ~12 million share float (supply) is exacerbating today's move as shares are in demand and technology stocks breakout.