Zscaler Reports Fourth Quarter and Fiscal 2024 Financial Results
Zscaler (NASDAQ: ZS) reported robust financial results for Q4 and fiscal year 2024. Revenue grew by 30% YoY to $592.9 million in Q4, while calculated billings rose 27% YoY to $910.8 million. Deferred revenue increased 32% YoY to $1,895.0 million. The company posted a GAAP net loss of $14.9 million, a significant improvement from the $30.7 million loss a year ago, and a non-GAAP net income of $140.6 million, up from $100.9 million.
For fiscal year 2024, revenue grew by 34% YoY to $2,167.8 million. GAAP net loss narrowed to $57.7 million from $202.3 million, while non-GAAP net income surged to $508.1 million from $277.0 million. Cash provided by operations was $779.8 million, up 36% of revenue, with free cash flow rising to $585.0 million.
Looking ahead, Zscaler forecasts Q1 fiscal 2025 revenue of $604-$606 million and full-year revenue of $2.60-$2.62 billion. The company highlighted reaching over half a trillion daily transactions on its cloud platform.
Zscaler (NASDAQ: ZS) ha riportato risultati finanziari robusti per il Q4 e l'anno fiscale 2024. I ricavi sono aumentati del 30% su base annua, raggiungendo $592,9 milioni nel Q4, mentre le fatturazioni calcolate sono cresciute del 27% su base annua, raggiungendo $910,8 milioni. I ricavi differiti sono aumentati del 32% su base annua, raggiungendo $1.895,0 milioni. L'azienda ha registrato una perdita netta GAAP di $14,9 milioni, un miglioramento significativo rispetto alla perdita di $30,7 milioni dello scorso anno, e un reddito netto non GAAP di $140,6 milioni, in aumento rispetto ai $100,9 milioni.
Per l'anno fiscale 2024, i ricavi sono cresciuti del 34% su base annua, raggiungendo $2.167,8 milioni. La perdita netta GAAP si è ridotta a $57,7 milioni da $202,3 milioni, mentre il reddito netto non GAAP è salito a $508,1 milioni da $277,0 milioni. I flussi di cassa forniti dalle operazioni sono stati di $779,8 milioni, pari al 36% dei ricavi, con un flusso di cassa libero che è salito a $585,0 milioni.
Guardando avanti, Zscaler prevede per il primo trimestre dell'anno fiscale 2025 ricavi tra $604 e $606 milioni e ricavi annuali complessivi di $2,60-$2,62 miliardi. L'azienda ha evidenziato di aver raggiunto oltre mezzo trilione di transazioni giornaliere sulla sua piattaforma cloud.
Zscaler (NASDAQ: ZS) reportó sólidos resultados financieros para el Q4 y el año fiscal 2024. Los ingresos crecieron un 30% interanual, alcanzando $592.9 millones en el Q4, mientras que las facturaciones calculadas aumentaron un 27% interanual a $910.8 millones. Los ingresos diferidos aumentaron un 32% interanual a $1,895.0 millones. La compañía tuvo una pérdida neta GAAP de $14.9 millones, una mejora significativa con respecto a la pérdida de $30.7 millones del año anterior, y un ingreso neto no GAAP de $140.6 millones, en comparación con $100.9 millones.
Para el año fiscal 2024, los ingresos crecieron un 34% interanual, alcanzando $2,167.8 millones. La pérdida neta GAAP se redujo a $57.7 millones desde $202.3 millones, mientras que el ingreso neto no GAAP se disparó a $508.1 millones desde $277.0 millones. El efectivo proporcionado por operaciones fue de $779.8 millones, representando el 36% de los ingresos, con el flujo de efectivo libre aumentando a $585.0 millones.
Mirando hacia el futuro, Zscaler pronostica ingresos para el primer trimestre del año fiscal 2025 de $604 a $606 millones y un ingreso anual total de $2.60 a $2.62 mil millones. La compañía destacó que ha alcanzado más de medio billón de transacciones diarias en su plataforma en la nube.
Zscaler (NASDAQ: ZS)는 2024 회계연도 4분기 및 전체 회계연도에 대한 강력한 재무 실적을 보고했습니다. 4분기 매출은 전년 대비 30% 증가한 5억 9,290만 달러에 달했으며, 계산된 청구액은 전년 대비 27% 증가한 9억 1,080만 달러에 달했습니다. 이연 수익은 전년 대비 32% 증가하여 18억 9,500만 달러에 이르렀습니다. 회사는 GAAP 기준으로 1,490만 달러의 순손실을 기록했으며, 이는 작년 같은 기간의 3,070만 달러 손실보다 상당히 개선된 수치입니다. 비-GAAP 기준으로는 1억 4,060만 달러의 순이익을 기록해 1억 9,090만 달러에서 증가했습니다.
2024 회계연도 동안 매출은 전년 대비 34% 증가한 21억 6,780만 달러에 도달했습니다. GAAP 기준의 순손실이 5,770만 달러로 축소되었고, 비-GAAP 기준의 순이익은 2억 5,810만 달러에서 5억 8,100만 달러로 급증했습니다. 운영을 통해 제공된 현금은 7억 7,980만 달러로, 수익의 36%에 해당하며, 자유현금흐름은 5억 8,500만 달러로 증가했습니다.
앞으로 Zscaler는 2025 회계연도 1분기 동안 6억 40만 달러에서 6억 60만 달러의 매출과 연간 매출이 26억 달러에서 26억 2,000만 달러에 이를 것으로 예상하고 있습니다. 이 회사는 클라우드 플랫폼에서 하루에 5조 개 이상의 거래를 처리했다고 강조했습니다.
Zscaler (NASDAQ: ZS) a annoncé des résultats financiers solides pour le 4e trimestre et l'année fiscale 2024. Le chiffre d'affaires a augmenté de 30 % d'une année sur l'autre, atteignant 592,9 millions de dollars au 4e trimestre, tandis que les factures calculées ont progressé de 27 % par rapport à l'année précédente pour atteindre 910,8 millions de dollars. Les revenus reportés ont augmenté de 32 % d'une année sur l'autre, atteignant 1,895.0 millions de dollars. L'entreprise a affiché une perte nette GAAP de 14,9 millions de dollars, une amélioration significative par rapport à la perte de 30,7 millions de dollars de l'année dernière, et un revenu net non GAAP de 140,6 millions de dollars, en hausse par rapport à 100,9 millions de dollars.
Pour l'année fiscale 2024, le chiffre d'affaires a progressé de 34 % d'une année sur l'autre, atteignant 2,167.8 millions de dollars. La perte nette GAAP s'est réduite à 57,7 millions de dollars contre 202,3 millions de dollars, tandis que le revenu net non GAAP a bondi à 508,1 millions de dollars contre 277,0 millions de dollars. Les liquidités générées par les opérations se sont élevées à 779,8 millions de dollars, soit 36 % du chiffre d'affaires, avec un flux de trésorerie disponible augmentant à 585,0 millions de dollars.
Pour l'avenir, Zscaler prévoit un chiffre d'affaires de 604 à 606 millions de dollars pour le premier trimestre de l'année fiscale 2025 et un chiffre d'affaires annuel total de 2,60 à 2,62 milliards de dollars. L'entreprise a souligné avoir atteint plus de 500 milliards de transactions quotidiennes sur sa plate-forme cloud.
Zscaler (NASDAQ: ZS) hat starke Geschäftsergebnisse für das 4. Quartal und das Geschäftsjahr 2024 gemeldet. Der Umsatz stieg im Jahresvergleich um 30% auf 592,9 Millionen Dollar im 4. Quartal, während die berechneten Rechnungen um 27% im Vergleich zum Vorjahr auf 910,8 Millionen Dollar zunahmen. Die aufgeschobenen Einnahmen stiegen im Jahresvergleich um 32% auf 1,895.0 Millionen Dollar. Das Unternehmen verzeichnete einen GAAP-Nettoverlust von 14,9 Millionen Dollar, was eine deutliche Verbesserung gegenüber dem Verlust von 30,7 Millionen Dollar im Vorjahr darstellt, und einen Non-GAAP-Nettoertrag von 140,6 Millionen Dollar, im Vergleich zu 100,9 Millionen Dollar.
Im Geschäftsjahr 2024 stieg der Umsatz um 34% im Jahresvergleich auf 2.167,8 Millionen Dollar. Der GAAP-Nettoverlust verringerte sich auf 57,7 Millionen Dollar von 202,3 Millionen Dollar, während der Non-GAAP-Nettoertrag auf 508,1 Millionen Dollar von 277,0 Millionen Dollar anstieg. Der Cashflow aus der Betriebstätigkeit betrug 779,8 Millionen Dollar, was 36% der Einnahmen ausmacht, und der freie Cashflow stieg auf 585,0 Millionen Dollar.
Für die Zukunft prognostiziert Zscaler für das 1. Quartal des Geschäftsjahres 2025 einen Umsatz von 604 bis 606 Millionen Dollar sowie einen Gesamterlös von 2,60 bis 2,62 Milliarden Dollar. Das Unternehmen hebt hervor, dass es täglich über eine halbe Billion Transaktionen auf seiner Cloud-Plattform erreicht hat.
- Q4 revenue increased by 30% YoY to $592.9 million.
- Non-GAAP net income for Q4 rose to $140.6 million from $100.9 million YoY.
- Full-year revenue grew by 34% YoY to $2,167.8 million.
- Non-GAAP net income for fiscal year 2024 surged to $508.1 million from $277.0 million YoY.
- Cash provided by operations increased to $779.8 million, representing 36% of revenue.
- Deferred revenue grew 32% YoY to $1,895.0 million.
- GAAP net loss for fiscal year 2024 was $57.7 million.
Insights
Zscaler's Q4 FY2024 results showcase robust growth and improving profitability. Revenue grew
Key financial metrics improved significantly:
- Non-GAAP operating margin expanded from
19% to22% - Cash flow from operations increased to
34% of revenue - Free cash flow margin rose to
23%
The full-year results are equally impressive, with revenue growing
Zscaler's achievement of processing over half a trillion daily transactions is a significant milestone, solidifying its position in the Zero Trust cloud security market. This scale demonstrates the platform's robustness and widespread adoption.
The collaboration with Google Chrome Enterprise to integrate Zscaler Private Access (ZPA) is a strategic move. It expands Zscaler's reach to millions of enterprise users, potentially driving further growth. The launch of AI-powered URL categorization and enhanced AI Data Protection capabilities showcases Zscaler's commitment to innovation in cybersecurity.
The partnership with NVIDIA to accelerate AI-powered security copilot services is forward-thinking, positioning Zscaler at the forefront of AI integration in cybersecurity. These technological advancements and partnerships should help Zscaler maintain its competitive edge and drive future growth in the rapidly evolving cybersecurity landscape.
Zscaler's ThreatLabz 2024 Ransomware Report reveals concerning trends in the cybersecurity landscape. The
The company's strong financial performance, coupled with these market dynamics, positions Zscaler favorably. The shift towards zero-trust architectures and cloud-based security solutions aligns well with Zscaler's offerings. As organizations continue to prioritize cybersecurity in response to evolving threats, Zscaler's market opportunity is likely to expand further.
Investors should monitor Zscaler's ability to capitalize on these trends and maintain its technological edge in a competitive and fast-evolving market.
Fourth Quarter Highlights
- Revenue grows
30% year-over-year to$592.9 million - Calculated billings grows
27% year-over-year to$910.8 million - Deferred revenue grows
32% year-over-year to$1,895.0 million - GAAP net loss of
$14.9 million compared to GAAP net loss of$30.7 million on a year-over-year basis - Non-GAAP net income of
$140.6 million compared to non-GAAP net income of$100.9 million on a year-over-year basis
SAN JOSE, Calif., Sept. 03, 2024 (GLOBE NEWSWIRE) -- Zscaler, Inc. (Nasdaq: ZS), the leader in cloud security, today announced financial results for its fiscal fourth quarter and fiscal year ended July 31, 2024.
“We ended a successful Fiscal 2024 with Q4 results exceeding the high end of our guidance across all metrics,” said Jay Chaudhry, Chairman and CEO of Zscaler. “Customers adoption of our Zero Trust Exchange platform is stronger than ever, and I’m thrilled to share that we have achieved a major milestone with our cloud platform surpassing over half a Trillion transactions daily. I'm excited about the year ahead, as we enter Fiscal 2025 with a strong go-to-market machine and a high pace of innovation.”
Fourth Quarter Fiscal 2024 Financial Highlights
- Revenue:
$592.9 million , an increase of30% year-over-year. - Income (loss) from operations: GAAP loss from operations was
$27.0 million , or5% of revenue, compared to$44.6 million , or10% of revenue, in the fourth quarter of fiscal 2023. Non-GAAP income from operations was$127.5 million , or22% of revenue, compared to$86.0 million , or19% of revenue, in the fourth quarter of fiscal 2023. - Net income (loss): GAAP net loss was
$14.9 million , compared to$30.7 million in the fourth quarter of fiscal 2023. Non-GAAP net income was$140.6 million , compared to$100.9 million in the fourth quarter of fiscal 2023. - Net income (loss) per share, diluted: GAAP net loss per share, diluted, was
$0.10 , compared to$0.21 in the fourth quarter of fiscal 2023. Non-GAAP net income per share was$0.88 , compared to$0.64 in the fourth quarter of fiscal 2023. - Cash flows: Cash provided by operations was
$203.6 million , or34% of revenue, compared to$135.9 million , or30% of revenue, in the fourth quarter of fiscal 2023. Free cash flow was$136.3 million , or23% of revenue, compared to$101.3 million , or22% of revenue, in the fourth quarter of fiscal 2023. - Deferred revenue:
$1,895.0 million as of July 31, 2024, an increase of32% year-over-year. - Cash, cash equivalents and short-term investments:
$2,409.7 million as of July 31, 2024, an increase of$309.4 million from July 31, 2023.
Full Year Fiscal 2024 Financial Highlights
- Revenue:
$2,167.8 million , an increase of34% year-over-year. - Income (loss) from operations: GAAP loss from operations was
$121.5 million , or6% of revenue, compared to$234.6 million , or15% of revenue, in fiscal 2023. Non-GAAP income from operations was$442.2 million , or20% of revenue, compared to$240.8 million , or15% of revenue, in fiscal 2023. - Net income (loss): GAAP net loss was
$57.7 million , compared to$202.3 million in fiscal 2023. Non-GAAP net income was$508.1 million , compared to$277.0 million in fiscal 2023. - Net income (loss) per share, diluted: GAAP net loss per share, diluted, was
$0.39 , compared to$1.40 in fiscal 2023. Non-GAAP net income per share was$3.19 , compared to$1.79 in fiscal 2023. - Cash flows: Cash provided by operations was
$779.8 million , or36% of revenue, compared to$462.3 million , or29% of revenue, in fiscal 2023. Free cash flow was$585.0 million , or27% of revenue, compared to$333.6 million , or21% of revenue, in fiscal 2023.
Recent Business Highlights
- Surpassed half a trillion daily transactions, further demonstrating Zscaler’s position as a leader in the Zero Trust cloud security market.
- Published the Zscaler ThreatLabz 2024 Ransomware Report, which analyzed the ransomware threat landscape from April 2023 through April 2024. Findings in the report uncovered an
18% overall increase in ransomware attacks year-over-year, as well as a record-breaking ransom payment of US$75 million – nearly double the highest publicly known ransomware payout – to the Dark Angels ransomware group.
- Collaborated with Google Chrome Enterprise to bring the power of Zscaler Private Access™ (ZPA™) zero trust secure access and advanced threat and data protection to private applications. The integration with Chrome Enterprise will provide hundreds of millions of enterprise users with advanced threat and data protection without the need for legacy VPNs or requiring additional browsers.
- Launched multiple innovations to its AI Data Protection capabilities. These innovations make Zscaler’s AI Data Protection a leading comprehensive data protection solution to protect structured and unstructured data in-motion, at-rest, and in-use, data across inline channels including Web, SaaS, Email, BYOD, and private applications in data centers and public cloud.
- Launched Zscaler AI/ML-powered URL categorization that classifies web URLs and assigns them specific categories by using AI and ML to analyze text and visuals.
- Announced the appointment of James Beer to its Board of Directors and also to the audit committee of the Board of Directors.
- Announced a collaboration with NVIDIA to accelerate AI-powered security-centric copilot services for the enterprise.
Change in Non-GAAP Measures Presentation
Effective August 1, 2024, the beginning of Zscaler’s fiscal year ending July 31, 2025, we are using a long-term projected non-GAAP tax rate of
Financial Outlook
For the first quarter of fiscal 2025, we expect:
- Revenue of
$604 million to$606 million - Non-GAAP income from operations of
$114 million to$116 million - Non-GAAP net income per share of approximately
$0.62 t o$0.63 , assuming approximately 164 million fully diluted shares outstanding and a non-GAAP tax rate of23%
For the full year fiscal 2025, we expect:
- Revenue of approximately
$2.60 billion to$2.62 billion - Calculated billings of
$3.11 0 billion to$3.13 5 billion - Non-GAAP income from operations of
$530 million to$540 million - Non-GAAP net income per share of
$2.81 t o$2.87 , assuming approximately 164 million fully diluted shares outstanding and a non-GAAP tax rate of23%
These statements are forward-looking and actual results may differ materially. Refer to the Forward-Looking Statements safe harbor below for information on the factors that could cause our actual results to differ materially from these forward-looking statements.
In August 2023, we completed an assessment of the useful lives of our servers and networking equipment, which resulted in an extension of their useful lives from four to five years. This change was effective beginning in fiscal year 2024. Based on the carrying amount of these assets as of July 31, 2023, the impact was approximately a 60 basis point benefit to our gross margin for the fourth quarter of fiscal 2024 and full year fiscal 2024.
Guidance for non-GAAP income from operations excludes stock-based compensation expense and related employer payroll taxes, amortization of debt issuance costs, and amortization expense of acquired intangible assets. We have not reconciled our expectations of non-GAAP income from operations and non-GAAP net income per share to their most directly comparable GAAP measures because certain items are out of our control or cannot be reasonably predicted. For those reasons, we are also unable to address the probable significance of the unavailable information, the variability of which may have a significant impact on future results. Accordingly, a reconciliation for the guidance for non-GAAP income from operations and non-GAAP net income per share is not available without unreasonable effort.
For further information regarding why we believe that these non-GAAP measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to the "Explanation of Non-GAAP Financial Measures" section of this press release.
Conference Call and Webcast Information
Zscaler will host a conference call for analysts and investors to discuss its fourth quarter of fiscal 2024 and outlook for its first quarter of fiscal 2025 and full year fiscal 2025 today at 1:30 p.m. Pacific time (4:30 p.m. Eastern time).
| Date: | Tuesday, September 3, 2024 |
| Time: | 1:30 p.m. PT |
| Webcast: | https://ir.zscaler.com |
| Dial-in: | To join by phone, register at the following link: (https://register.vevent.com/register/BIfba5c76db32d45fa97aa1227ae1a06d3). After registering, you will be provided with a dial-in number and a personal PIN that you will need to join the call. |
Upcoming Conferences
First quarter of fiscal 2025 investor conference participation schedule:
- Citi Global TMT Conference in New York City
Thursday, September 5, 2024
- Goldman Sachs Communacopia + Technology Conference in San Francisco
Wednesday, September 11, 2024
- Wolfe Research TMT Conference in San Francisco
Wednesday, September 11, 2024
Sessions which offer a webcast will be available on the Investor Relations section of the Zscaler website at https://ir.zscaler.com/
Forward-Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties, including, but not limited to, statements regarding our future financial and operating performance, including our financial outlook for the first quarter of fiscal 2025 and full year fiscal 2025. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including but not limited to: macroeconomic influences and instability, geopolitical events, operations and financial results and the economy in general; risks related to the use of AI in our platform; our limited operating history; our ability to identify and effectively implement the necessary changes to address execution challenges; risks associated with managing our rapid growth, including fluctuations from period to period; our limited experience with new products and subscriptions and support introductions and the risks associated with new products and subscription and support offerings, including the discovery of software bugs; our ability to attract and retain new customers; the failure to timely develop and achieve market acceptance of new products and subscriptions as well as existing products and subscription and support; rapidly evolving technological developments in the market for network security products and subscription and support offerings and our ability to remain competitive; length of sales cycles; useful lives of our assets and other estimates; and general market, political, economic and business conditions.
Additional risks and uncertainties that could affect our financial results are included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth from time to time in our filings and reports with the Securities and Exchange Commission (SEC), including our Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2024, filed on June 7, 2024, as well as future filings and reports by us, copies of which are available on our website at ir.zscaler.com and on the SEC’s website at www.sec.gov. You should not rely on these forward-looking statements, as actual outcomes and results may differ materially from those contemplated by these forward-looking statements as a result of such risks and uncertainties. Additional information will also be set forth in other filings that we make with the SEC from time to time. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we do not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.
Use of Non-GAAP Financial Information
We believe that the presentation of non-GAAP financial information provides important supplemental information to management and investors regarding financial and business trends relating to our financial condition and results of operations. For further information regarding why we believe that these non-GAAP measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to the “Explanation of Non-GAAP Financial Measures” section of this press release.
About Zscaler
Zscaler (Nasdaq: ZS) accelerates digital transformation so customers can be more agile, efficient, resilient, and secure. The Zscaler Zero Trust Exchange™ platform protects thousands of customers from cyberattacks and data loss by securely connecting users, devices, and applications in any location. Distributed across more than 160 data centers globally, the SSE-based Zero Trust Exchange is the world’s largest in-line cloud security platform.
Zscaler™ and the other trademarks listed at https://www.zscaler.com/legal/trademarks are either (i) registered trademarks or service marks or (ii) trademarks or service marks of Zscaler, Inc. in the United States and/or other countries. Any other trademarks are the properties of their respective owners.
Investor Relations Contacts
Ashwin Kesireddy
VP, Investor Relations and Strategic Finance
(415) 798-1475
ir@zscaler.com
Natalia Wodecki
Media Relations Contact
press@zscaler.com
| ZSCALER, INC. | |||||||||||||||
| Condensed Consolidated Statements of Operations | |||||||||||||||
| (in thousands, except per share amounts) | |||||||||||||||
| (unaudited) | |||||||||||||||
| Three Months Ended | Year Ended | ||||||||||||||
| July 31, | July 31, | ||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Revenue | $ | 592,868 | $ | 455,006 | $ | 2,167,771 | $ | 1,616,952 | |||||||
| Cost of revenue (1) (2) | 130,205 | 102,682 | 477,129 | 362,832 | |||||||||||
| Gross profit | 462,663 | 352,324 | 1,690,642 | 1,254,120 | |||||||||||
| Operating expenses: | |||||||||||||||
| Sales and marketing (1) (2) | 294,200 | 252,810 | 1,100,239 | 953,864 | |||||||||||
| Research and development (1) (2) | 139,150 | 96,387 | 499,828 | 349,735 | |||||||||||
| General and administrative (1) | 56,263 | 46,380 | 212,052 | 177,544 | |||||||||||
| Restructuring and other charges (1) | — | 1,299 | — | 7,600 | |||||||||||
| Total operating expenses | 489,613 | 396,876 | 1,812,119 | 1,488,743 | |||||||||||
| Loss from operations | (26,950 | ) | (44,552 | ) | (121,477 | ) | (234,623 | ) | |||||||
| Interest income | 27,233 | 21,351 | 109,130 | 60,462 | |||||||||||
| Interest expense (3) | (3,604 | ) | (2,494 | ) | (13,132 | ) | (6,541 | ) | |||||||
| Other expense, net | (1,783 | ) | (331 | ) | (3,750 | ) | (1,862 | ) | |||||||
| Loss before income taxes | (5,104 | ) | (26,026 | ) | (29,229 | ) | (182,564 | ) | |||||||
| Provision for income taxes (4) | 9,774 | 4,648 | 28,477 | 19,771 | |||||||||||
| Net loss | $ | (14,878 | ) | $ | (30,674 | ) | $ | (57,706 | ) | $ | (202,335 | ) | |||
| Net loss per share, basic and diluted | $ | (0.10 | ) | $ | (0.21 | ) | $ | (0.39 | ) | $ | (1.40 | ) | |||
| Weighted-average shares used in computing net loss per share, basic and diluted | 151,497 | 146,424 | 149,586 | 144,942 | |||||||||||
(1) Includes stock-based compensation expense and related payroll taxes as follows:
| Cost of revenue | $ | 13,890 | $ | 12,016 | $ | 52,766 | $ | 40,297 | |||||||
| Sales and marketing | 60,584 | 60,181 | 230,597 | 222,280 | |||||||||||
| Research and development | 54,598 | 34,742 | 186,107 | 121,151 | |||||||||||
| General and administrative | 20,298 | 19,336 | 79,630 | 73,051 | |||||||||||
| Restructuring and other charges | — | — | — | 1,036 | |||||||||||
| Total | $ | 149,370 | $ | 126,275 | $ | 549,100 | $ | 457,815 |
(2) Includes amortization expense of acquired intangible assets as follows:
| Cost of revenue | $ | 4,483 | $ | 2,765 | $ | 12,879 | $ | 9,574 | |||||||
| Sales and marketing | 501 | 217 | 1,232 | 773 | |||||||||||
| Research and development | 140 | — | 513 | 713 | |||||||||||
| Total | $ | 5,124 | $ | 2,982 | $ | 14,624 | $ | 11,060 |
| (3) Includes amortization of debt issuance costs | $ | 980 | $ | 975 | $ | 3,914 | $ | 3,894 |
| (4) Includes tax benefit associated with business acquisitions | $ | — | $ | — | $ | (1,864 | ) | $ | — | ||||||
| ZSCALER, INC. | |||||||
| Condensed Consolidated Balance Sheets | |||||||
| (in thousands) | |||||||
| (unaudited) | |||||||
| July 31, | July 31, | ||||||
| 2024 | 2023 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 1,423,080 | $ | 1,262,206 | |||
| Short-term investments | 986,574 | 838,026 | |||||
| Accounts receivable, net | 736,529 | 582,636 | |||||
| Deferred contract acquisition costs | 148,873 | 115,827 | |||||
| Prepaid expenses and other current assets | 101,561 | 91,619 | |||||
| Total current assets | 3,396,617 | 2,890,314 | |||||
| Property and equipment, net | 383,121 | 242,355 | |||||
| Operating lease right-of-use assets | 89,758 | 70,671 | |||||
| Deferred contract acquisition costs, noncurrent | 296,525 | 259,407 | |||||
| Acquired intangible assets, net | 63,835 | 25,859 | |||||
| Goodwill | 417,029 | 89,192 | |||||
| Other noncurrent assets | 58,083 | 30,519 | |||||
| Total assets | $ | 4,704,968 | $ | 3,608,317 | |||
| Liabilities and Stockholders’ Equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 23,309 | $ | 18,481 | |||
| Accrued expenses and other current liabilities | 91,708 | 64,975 | |||||
| Accrued compensation | 160,810 | 136,800 | |||||
| Deferred revenue | 1,643,919 | 1,281,143 | |||||
| Convertible senior notes | 1,142,275 | — | |||||
| Operating lease liabilities | 50,866 | 34,469 | |||||
| Total current liabilities | 3,112,887 | 1,535,868 | |||||
| Convertible senior notes, noncurrent | — | 1,134,159 | |||||
| Deferred revenue, noncurrent | 251,055 | 158,533 | |||||
| Operating lease liabilities, noncurrent | 44,824 | 41,917 | |||||
| Other noncurrent liabilities | 22,100 | 12,728 | |||||
| Total liabilities | 3,430,866 | 2,883,205 | |||||
| Stockholders’ Equity | |||||||
| Common stock | 152 | 147 | |||||
| Additional paid-in capital | 2,426,819 | 1,816,915 | |||||
| Accumulated other comprehensive loss | (4,789 | ) | (1,576 | ) | |||
| Accumulated deficit | (1,148,080 | ) | (1,090,374 | ) | |||
| Total stockholders’ equity | 1,274,102 | 725,112 | |||||
| Total liabilities and stockholders’ equity | $ | 4,704,968 | $ | 3,608,317 | |||
| ZSCALER, INC. | |||||||
| Condensed Consolidated Statements of Cash Flows | |||||||
| (in thousands) | |||||||
| (unaudited) | |||||||
| July 31, | |||||||
| 2024 | 2023 | ||||||
| Cash Flows from Operating Activities | |||||||
| Net loss | $ | (57,706 | ) | $ | (202,335 | ) | |
| Adjustments to reconcile net loss to cash provided by operating activities: | |||||||
| Depreciation and amortization expense | 66,308 | 55,756 | |||||
| Amortization expense of acquired intangible assets | 14,624 | 11,060 | |||||
| Amortization of deferred contract acquisition costs | 130,139 | 98,718 | |||||
| Amortization of debt issuance costs | 3,914 | 3,894 | |||||
| Non-cash operating lease costs | 49,445 | 32,212 | |||||
| Stock-based compensation expense | 527,676 | 444,834 | |||||
| Accretion of investments purchased at a discount | (19,062 | ) | (6,582 | ) | |||
| Unrealized (gains) losses on hedging transactions | 753 | (3,319 | ) | ||||
| Deferred income taxes | (5,633 | ) | 352 | ||||
| Other | 3,320 | (820 | ) | ||||
| Changes in operating assets and liabilities, net of effects of business acquisitions: | |||||||
| Accounts receivable | (152,960 | ) | (183,858 | ) | |||
| Deferred contract acquisition costs | (200,303 | ) | (176,950 | ) | |||
| Prepaid expenses, other current and noncurrent assets | (39,971 | ) | (39,922 | ) | |||
| Accounts payable | 4,164 | (8,416 | ) | ||||
| Accrued expenses, other current and noncurrent liabilities | 43,556 | 26,814 | |||||
| Accrued compensation | 10,507 | 24,538 | |||||
| Deferred revenue | 450,314 | 418,564 | |||||
| Operating lease liabilities | (49,239 | ) | (32,197 | ) | |||
| Net cash provided by operating activities | 779,846 | 462,343 | |||||
| Cash Flows from Investing Activities | |||||||
| Purchases of property, equipment and other assets | (144,588 | ) | (97,197 | ) | |||
| Capitalized internal-use software | (50,308 | ) | (31,527 | ) | |||
| Payments for business acquisitions, net of cash acquired | (374,702 | ) | (15,643 | ) | |||
| Purchase of strategic investments | (2,000 | ) | (3,206 | ) | |||
| Purchases of short-term investments | (1,291,015 | ) | (1,064,143 | ) | |||
| Proceeds from maturities of short-term investments | 1,132,268 | 901,849 | |||||
| Proceeds from sale of short-term investments | 47,165 | 50,530 | |||||
| Net cash used in investing activities | (683,180 | ) | (259,337 | ) | |||
| Cash Flows from Financing Activities | |||||||
| Proceeds from issuance of common stock upon exercise of stock options | 12,249 | 3,944 | |||||
| Proceeds from issuance of common stock under the employee stock purchase plan | 51,998 | 42,263 | |||||
| Payment of deferred consideration related to business acquisitions | — | (215 | ) | ||||
| Other | (39 | ) | (2 | ) | |||
| Net cash provided by financing activities | 64,208 | 45,990 | |||||
| Net increase in cash and cash equivalents | 160,874 | 248,996 | |||||
| Cash and cash equivalents at beginning of period | 1,262,206 | 1,013,210 | |||||
| Cash and cash equivalents at end of period | $ | 1,423,080 | $ | 1,262,206 | |||
| ZSCALER, INC. | |||||||||||||||
| Reconciliation of GAAP to Non-GAAP Financial Measures | |||||||||||||||
| (in thousands, except percentages) | |||||||||||||||
| (unaudited) | |||||||||||||||
| Three Months Ended | Year Ended | ||||||||||||||
| July 31, | July 31, | ||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Revenue | $ | 592,868 | $ | 455,006 | $ | 2,167,771 | $ | 1,616,952 | |||||||
| Non-GAAP Gross Profit and Non-GAAP Gross Margin | |||||||||||||||
| GAAP gross profit | $ | 462,663 | $ | 352,324 | $ | 1,690,642 | $ | 1,254,120 | |||||||
| Add: Stock-based compensation expense and related payroll taxes | 13,890 | 12,016 | 52,766 | 40,297 | |||||||||||
| Add: Amortization expense of acquired intangible assets | 4,483 | 2,765 | 12,879 | 9,574 | |||||||||||
| Non-GAAP gross profit | $ | 481,036 | $ | 367,105 | $ | 1,756,287 | $ | 1,303,991 | |||||||
| GAAP gross margin | 78 | % | 77 | % | 78 | % | 78 | % | |||||||
| Non-GAAP gross margin | 81 | % | 81 | % | 81 | % | 81 | % | |||||||
| Non-GAAP Income from Operations and Non-GAAP Operating Margin | |||||||||||||||
| GAAP loss from operations | $ | (26,950 | ) | $ | (44,552 | ) | $ | (121,477 | ) | $ | (234,623 | ) | |||
| Add: Stock-based compensation expense and related payroll taxes | 149,370 | 126,275 | 549,100 | 457,815 | |||||||||||
| Add: Amortization expense of acquired intangible assets | 5,124 | 2,982 | 14,624 | 11,060 | |||||||||||
| Add: Restructuring and other charges, excluding stock-based compensation expense(1) | — | 1,299 | — | 6,564 | |||||||||||
| Non-GAAP income from operations | $ | 127,544 | $ | 86,004 | $ | 442,247 | $ | 240,816 | |||||||
| GAAP operating margin | (5 | )% | (10 | )% | (6 | )% | (15 | )% | |||||||
| Non-GAAP operating margin | 22 | % | 19 | % | 20 | % | 15 | % | |||||||
(1) In connection with a restructuring plan announced in March 2023, we incurred stock-based compensation expense of approximately
| ZSCALER, INC. | |||||||||||||||
| Reconciliation of GAAP to Non-GAAP Financial Measures | |||||||||||||||
| (in thousands, except per share amounts) | |||||||||||||||
| (unaudited) | |||||||||||||||
| Three Months Ended | Year Ended | ||||||||||||||
| July 31, | July 31, | ||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Non-GAAP Net Income per Share, Diluted | |||||||||||||||
| GAAP net loss | $ | (14,878 | ) | $ | (30,674 | ) | $ | (57,706 | ) | $ | (202,335 | ) | |||
| Stock-based compensation expense and related payroll taxes | 149,370 | 126,275 | 549,100 | 457,815 | |||||||||||
| Amortization expense of acquired intangible assets | 5,124 | 2,982 | 14,624 | 11,060 | |||||||||||
| Restructuring and other charges, excluding stock-based compensation expense(1) | — | 1,299 | — | 6,564 | |||||||||||
| Amortization of debt issuance costs | 980 | 975 | 3,914 | 3,894 | |||||||||||
| Benefit for income taxes(2) | — | — | (1,864 | ) | — | ||||||||||
| Non-GAAP net income | $ | 140,596 | $ | 100,857 | $ | 508,068 | $ | 276,998 | |||||||
| Add: Non-GAAP interest expense related to the convertible senior notes | 359 | 359 | 1,436 | 1,437 | |||||||||||
| Numerator used in computing non-GAAP net income per share, diluted | $ | 140,955 | $ | 101,216 | $ | 509,504 | $ | 278,435 | |||||||
| GAAP net loss per share, diluted | $ | (0.10 | ) | $ | (0.21 | ) | $ | (0.39 | ) | $ | (1.40 | ) | |||
| Stock-based compensation expense and related payroll taxes | 0.93 | 0.80 | 3.44 | 2.94 | |||||||||||
| Amortization expense of acquired intangible assets | 0.03 | 0.02 | 0.09 | 0.07 | |||||||||||
| Restructuring and other charges, excluding stock-based compensation expense(1) | — | 0.01 | — | 0.04 | |||||||||||
| Amortization of debt issuance costs | 0.01 | 0.01 | 0.02 | 0.03 | |||||||||||
| Benefit for income taxes(2) | — | — | (0.01 | ) | — | ||||||||||
| Non-GAAP interest expense related to the convertible senior notes | — | — | 0.01 | 0.01 | |||||||||||
| Adjustment to total fully diluted earnings per share(3) | 0.01 | 0.01 | 0.03 | 0.10 | |||||||||||
| Non-GAAP net income per share, diluted | $ | 0.88 | $ | 0.64 | $ | 3.19 | $ | 1.79 | |||||||
| Weighted-average shares used in computing GAAP net loss per share, diluted | 151,497 | 146,424 | 149,586 | 144,942 | |||||||||||
| Add: Outstanding potentially dilutive equity incentive awards | 2,699 | 3,265 | 4,091 | 3,174 | |||||||||||
| Add: Convertible senior notes | 7,626 | 7,626 | 7,626 | 7,626 | |||||||||||
| Less: Antidilutive impact of capped call transactions(4) | (1,325 | ) | — | (1,486 | ) | — | |||||||||
| Weighted-average shares used in computing non-GAAP net income per share, diluted | 160,497 | 157,315 | 159,817 | 155,742 | |||||||||||
___________
(1) In connection with a restructuring plan announced in March 2023, we incurred stock-based compensation expense of approximately
(2) We use our GAAP provision for income taxes for purposes of determining our non-GAAP income tax expense. The difference between our GAAP and non-GAAP provision for income taxes represents primarily the effects of stock-based compensation expense and income tax effects associated with business acquisitions. The income tax benefit related to stock-based compensation expense included in the GAAP provision for income taxes was not material for all periods presented. In the fiscal quarter ended October 31, 2023, we recognized a tax expense of
(3) The sum of the fully diluted earnings per share impact of individual reconciling items may not total to fully diluted non-GAAP net income per share due to the weighted-average shares used in computing the GAAP net loss per share differs from the weighted-average shares used in computing the non-GAAP net income per share, and due to rounding of the individual reconciling items. The GAAP net loss per share calculation uses a lower share count as it excludes potentially dilutive shares, which are included in calculating the non-GAAP net income per share.
(4) We exclude the in-the-money portion of the convertible senior notes for non-GAAP weighted-average diluted shares as they are covered by our capped call transactions. Our outstanding capped call transactions are antidilutive under GAAP but are expected to mitigate the dilutive effect of the convertible senior notes, and therefore are included in the calculation of non-GAAP diluted shares outstanding. The capped calls have an antidilutive impact when the average stock price of our common stock in a given period is higher than their exercise price.
| ZSCALER, INC. | |||||||||||||||
| Reconciliation of GAAP to Non-GAAP Financial Measures | |||||||||||||||
| (in thousands, except percentages) | |||||||||||||||
| (unaudited) | |||||||||||||||
| Three Months Ended | Year Ended | ||||||||||||||
| July 31, | July 31, | ||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Calculated billings | |||||||||||||||
| Revenue | $ | 592,868 | $ | 455,006 | $ | 2,167,771 | $ | 1,616,952 | |||||||
| Add: Total deferred revenue, end of period | 1,894,974 | 1,439,676 | 1,894,974 | 1,439,676 | |||||||||||
| Less: Total deferred revenue, beginning of period | (1,577,014 | ) | (1,175,373 | ) | (1,439,676 | ) | (1,021,123 | ) | |||||||
| Calculated billings | $ | 910,828 | $ | 719,309 | $ | 2,623,069 | $ | 2,035,505 | |||||||
| Free cash flow | |||||||||||||||
| Net cash provided by operating activities | $ | 203,557 | $ | 135,936 | $ | 779,846 | $ | 462,343 | |||||||
| Less: Purchases of property, equipment and other assets | (49,384 | ) | (27,070 | ) | (144,588 | ) | (97,197 | ) | |||||||
| Less: Capitalized internal-use software | (17,855 | ) | (7,565 | ) | (50,308 | ) | (31,527 | ) | |||||||
| Free cash flow | $ | 136,318 | $ | 101,301 | $ | 584,950 | $ | 333,619 | |||||||
| Free cash flow margin | |||||||||||||||
| Net cash provided by operating activities, as a percentage of revenue | 34 | % | 30 | % | 36 | % | 29 | % | |||||||
| Less: Purchases of property, equipment and other assets, as a percentage of revenue | (8 | )% | (6 | )% | (7 | )% | (6 | )% | |||||||
| Less: Capitalized internal-use software, as a percentage of revenue | (3 | )% | (2 | )% | (2 | )% | (2 | )% | |||||||
| Free cash flow margin | 23 | % | 22 | % | 27 | % | 21 | % | |||||||
| ZSCALER, INC. | |||||||||||||||
| Change in Non-GAAP Measures Presentation | |||||||||||||||
| Establishment of Projected Non-GAAP Tax Rate of | |||||||||||||||
| (in thousands, except per share amounts) | |||||||||||||||
| (unaudited) | |||||||||||||||
| Effective August 1, 2024, the beginning of Zscaler’s fiscal year ending July 31, 2025, we are using a long-term projected non-GAAP tax rate of | |||||||||||||||
| The table below illustrates the impact of this change to our non-GAAP net income and non-GAAP net income per share to all periods presented: | |||||||||||||||
| Three Months Ended | Year Ended | ||||||||||||||
| July 31, | July 31, | ||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Non-GAAP net income, as reported | $ | 140,596 | $ | 100,857 | $ | 508,068 | $ | 276,998 | |||||||
| Add: Non-GAAP provision for income taxes, as reported | 9,774 | 4,648 | 30,341 | 19,771 | |||||||||||
| Non-GAAP income before income taxes, as reported | 150,370 | 105,505 | 538,409 | 296,769 | |||||||||||
| Less: Non-GAAP provision for income taxes based on non-GAAP tax rate of | (34,585 | ) | (24,266 | ) | (123,834 | ) | (68,257 | ) | |||||||
| Non-GAAP net income based on non-GAAP tax rate of | $ | 115,785 | $ | 81,239 | $ | 414,575 | $ | 228,512 | |||||||
| Non-GAAP net income per share, diluted, as reported | $ | 0.88 | $ | 0.64 | $ | 3.19 | $ | 1.79 | |||||||
| Non-GAAP net income per share, diluted, based on non-GAAP tax rate of | $ | 0.72 | $ | 0.52 | $ | 2.60 | $ | 1.48 | |||||||
| ZSCALER, INC. |
| Explanation of Non-GAAP Financial Measures |
In addition to our results determined in accordance with generally accepted accounting principles in the United States of America (GAAP), we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the following non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only, as it has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In particular, free cash flow is not a substitute for cash provided by operating activities. Additionally, the utility of free cash flow as a measure of our liquidity is further limited as it does not represent the total increase or decrease in our cash balance for a given period. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation of our historical non-GAAP financial measures to their most directly comparable financial measures stated in accordance with GAAP has been included in this press release. Investors are cautioned that there are a number of limitations associated with the use of non-GAAP financial measures and key metrics as analytical tools. Investors are encouraged to review these reconciliations, and not to rely on any single financial measure to evaluate our business.
Expenses Excluded from Non-GAAP Measures
Stock-based compensation expense is excluded primarily because it is a non-cash expense that management believes is not reflective of our ongoing operational performance. Employer payroll taxes related to stock-based compensation, which is a cash expense, are excluded because these are tied to the timing and size of the exercise or vesting of the underlying equity incentive awards and the price of our common stock at the time of vesting or exercise, which may vary from period to period independent of the operating performance of our business. Amortization expense of acquired intangible assets and non-recurring income tax expense or benefit associated with business acquisitions are excluded because these are considered by management to be outside of our core business operating performance. Restructuring and other charges includes severance and termination benefits in connection with a restructuring plan to streamline operations and to align people, roles and projects to our strategic priorities. These expenses are excluded because they fluctuate in amount and frequency and are not reflective of our core business operating performance. Amortization of debt issuance costs from the convertible senior notes are excluded because these are non-cash expenses and are not reflective of our ongoing operational performance. We estimate the tax effect of these items on our non-GAAP results and may adjust our GAAP provision for income taxes, if such effects have a material impact to our non-GAAP results.
Effective August 1, 2024, the beginning of Zscaler’s fiscal year ending July 31, 2025, we are using a long-term projected non-GAAP tax rate of
Non-GAAP Financial Measures
Non-GAAP Gross Profit and Non-GAAP Gross Margin. We define non-GAAP gross profit as GAAP gross profit excluding stock-based compensation expense and related employer payroll taxes and amortization expense of acquired intangible assets. We define non-GAAP gross margin as non-GAAP gross profit as a percentage of revenue.
Non-GAAP Income from Operations and Non-GAAP Operating Margin. We define non-GAAP income from operations as GAAP loss from operations excluding stock-based compensation expense and related employer payroll taxes, amortization expense of acquired intangible assets, and restructuring and other charges. We define non-GAAP operating margin as non-GAAP income from operations as a percentage of revenue.
Non-GAAP Net Income per Share, Diluted. We define non-GAAP net income as GAAP net loss excluding stock-based compensation expense and related employer payroll taxes, amortization expense of acquired intangible assets, restructuring and other charges, amortization of debt issuance costs, and the tax effects of these items on our non-GAAP net income, if such effects have a material impact to our non-GAAP results. We define non-GAAP net income per share, diluted, as non-GAAP net income plus the non-GAAP interest expense divided by the weighted-average diluted shares outstanding, which includes the effect of potentially diluted common stock equivalents outstanding during the period and the anti-dilutive impact of the capped call transactions entered into in connection with the convertible senior notes.
Calculated Billings. We define calculated billings as revenue plus the change in deferred revenue in a period. Calculated billings in any particular period aims to reflect amounts invoiced for subscriptions to access our cloud platform, together with related support services for our new and existing customers. We typically invoice our customers annually in advance, and to a lesser extent quarterly in advance, monthly in advance or multi-year in advance.
Free Cash Flow and Free Cash Flow Margin. We define free cash flow as net cash provided by operating activities less purchases of property, equipment and other assets and capitalized internal-use software. We define free cash flow margin as free cash flow divided by revenue. We believe that free cash flow and free cash flow margin are useful indicators of liquidity that provide information to management and investors about the amount of cash generated from our operations that, after the investments in property, equipment and other assets and capitalized internal-use software, can be used for strategic initiatives.
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