- Company Name
- Zuora, Inc.
- Stock Symbol
- Class Period
- April 12, 2018 to May 30, 2019
- Motion Deadline
- August 13, 2019
- Northern District of California
The complaint charges Zuora and certain of its officers with violations of the Securities Exchange Act of 1934. Zuora is a cloud-based subscription management platform. Its flagship products are Zuora RevPro, a revenue recognition automation solution that, among other things, helps companies comply with new accounting standards (ASC 606 and IFRS 15) being implemented in January 2018, and Zuora Billing, which is designed for subscription billing. Zuora acquired RevPro in May 2017, when it acquired Leeyo Software Inc.
The complaint alleges that throughout the Class Period, defendants made materially false and misleading statements and/or failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, defendants failed to disclose that: (1) the Company would focus on implementing RevPro for new customers ahead of the deadline to comply with accounting standard ASC 606; (2) as a result, the Company lacked adequate resources to integrate RevPro with its core business; (3) the Company would focus on RevPro integration a year after the acquisition closed; (4) delays in integrating RevPro would materially impact the Company’s business; (5) the market for RevPro was limited to customers seeking to implement new accounting standards such as ASC 606; and (6) after the deadline for ASC 606 compliance passed, demand for RevPro was reasonably likely to decline. As a result of this information being withheld from the market, Zuora securities traded at artificially inflated prices during the Class Period, with its stock price reaching a high of more than $36 per share.
Then on May 30, 2019, the Company announced its first quarter 2020 financial results, disclosing that it was lowering its fiscal 2020 revenue guidance to a range of $268 million to $278 million from its prior guidance of $289 million to $293.5 million. According to the Company, the product integration for Billing and RevPro “is taking longer than expected” and the “technical work to complete the integration is taking time as these are complex mission-critical systems.” As a result of this product integration delay, the Company had slowed down RevPro implementations. The Company also reported certain sales execution problems that had slowed down its ability to cross sell its products, which “resulted in lower professional services and subscription revenue in the quarter.” On this news, the price of the Company’s shares fell $5.91 per share, or nearly 30%, to close at $13.99 per share on May 31, 2019.