Shares of cloud-based subscription management platform provider Zuora, Inc. (ZUO) have surged 35.4% over the past year. It recently reported better-than-expected third-quarter performance on both its top-line as well as bottom-line fronts.
Q3 revenue increased 15.5% year-over-year to $89.2 million, beating analysts’ expectations by $2.7 million. Net loss per share at $0.02 came in narrower than estimates by $0.01. Meanwhile, Subscription revenue during this period rose 19% over the prior year.
Significantly, the company’s billing platform saw a transaction volume of $18.8 billion in Q3, registering a year-over-year increase of 28%. With these developments in mind, let us take a look at the changes in Zuora’s key risk factors that investors should know.
Risk Factors
According to the TipRanks Risk Factors tool, Zuora’s top risk category is Finance & Corporate, contributing 39% to the total 56 risks identified. In its recent quarterly report, the company has changed three key risk factors.
The first two of these risks fall under the Finance & Corporate risk category. Zuora highlighted that its lenders have a first-priority lien against substantially all of Zuora’s non-intellectual property assets. Its debt agreement also includes financial covenants and other restrictions on its actions. This may limit the company’s flexibility of operations and also negatively affect its financial position.
Similarly, amid the COVID-19 pandemic, Zuora lowered its overall rate of hiring in fiscal 2021 as a cost-saving measure. During the nine months ended October 31, it has increased hiring and other operational investments. If the company is not able to increase its headcount in a reasonable timeframe, then its growth and expansion plans may see an adverse impact.
Meanwhile, under the Tech & Innovation risk category, Zuora noted that if its cloud providers face disruptions, then the company’s ability to provide services could be impaired.
Compared to a sector average of 16%, Zuora’s Tech & Innovation risk factor is at 18%.
Hedge Fund Activity
According to TipRanks data, the best hedge funds on Wall Street have decreased holdings in Zuora by 25.3 thousand shares in the last quarter, indicating a negative hedge fund confidence signal in the stock based on the activities of 2 hedge funds in the recent quarter.
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