As the revenue season begins to wane, there are still some fast-growing tech stocks worth looking into when their reports come into effect later this month. Zuora (NYSE: ZUO) and Workday (NASDAQ: WDAY) for example, are two companies with cloud-based platforms that are seeing strong business growth. Zuora's subscription management platform and Workday's business applications for finance, human resources, planning and analytics help the two companies win new customers and increase revenue at fast rates.
Ahead of their two-week earnings reports, here's a preview of some key elements to look at.
Benefits from strong demand for subscription business models. , Zuora's turnover increased by 22% year on year in the last quarter (first quarter of fiscal 2020), to $ 64.1 million. The company's subscription revenues increased 32% year-on-year to $ 47.3 million, and professional services revenue rose 1% to $ 16.8 million.
Investors would like to keep an eye on Zuora's growth in clients with annual contract values equal to or greater than $ 100,000. Although the company's growth of 24% year over year with these customers during the second quarter is impressive in itself, there is a significant decline from the 27% growth Zuora saw with these customers in the fourth quarter of fiscal year 2019.
Another metric worth checking out is Zuora's dollar-based retention rate, or a measure of the change in spending for existing customers during the 12 months leading up to the end of the quarter. The key metric dropped from 112% in the fourth quarter of fiscal year 2019 to 110% in fiscal 2020. While the lump in this growth rate is normal, several quarters in a row of deceleration for this calculation may indicate that the company is having trouble selling existing customers . Investors should therefore look for a dollar-based maintenance rate of around 110% – but hopefully it is even better.
Zuora reports on the fiscal results for the second quarter after the end of the market on 28 August.
Workday's top line has grown even faster than Zuoras. The company had a first quarter financial income of 33.4% from the previous year to $ 825 million. Revenue during the period was driven by a 34.3% year over year subscription revenue increase, placing subscription revenue in the period at $ 701 million.
"We added many new customers worldwide – and increased our footprint worldwide Fortune 50 and 500 – and saw more existing customers expand investment in Workday," Workday CEO Aneel Bhusri said in a quarterly press release .
Investors may want to be aware of the working day's reported revenue growth in finance in the second quarter. The company's top line growth of 33.4% in fiscal first quarter was down from 35.4% growth in the previous quarter. Will this retardation continue?
For the full year for the fiscal year 2020, management said they expect revenue to grow 28% year over year. This implies a significant deceleration in the second half of the year. While this may simply reflect conservatism on the part of management, investors should still look for how meaningful the working day's turnover growth is.
Workday reports results for the second quarter after the market closed on August 29.