Zscaler Reports Second Quarter Fiscal 2025 Financial Results
Zscaler (ZS) reported strong Q2 FY2025 financial results with revenue reaching $647.9 million, up 23% year-over-year. The company's calculated billings grew 18% to $742.7 million, while deferred revenue increased 25% to $1,878.5 million.
The company reduced its GAAP net loss to $7.7 million from $28.5 million year-over-year, while non-GAAP net income rose to $127.1 million. Operating cash flow was $179.4 million (27% of revenue), and free cash flow reached $143.4 million (22% of revenue).
For Q3 FY2025, Zscaler expects revenue between $665-667 million and non-GAAP net income per share of $0.75-0.76. The full-year FY2025 guidance projects revenue of $2.640-2.654 billion and calculated billings of $3.153-3.168 billion.
Zscaler (ZS) ha riportato risultati finanziari solidi per il secondo trimestre dell'anno fiscale 2025, con ricavi che hanno raggiunto 647,9 milioni di dollari, in aumento del 23% rispetto all'anno precedente. Le fatturazioni calcolate dell'azienda sono cresciute del 18%, arrivando a 742,7 milioni di dollari, mentre i ricavi differiti sono aumentati del 25%, raggiungendo 1.878,5 milioni di dollari.
L'azienda ha ridotto la sua perdita netta GAAP a 7,7 milioni di dollari rispetto ai 28,5 milioni di dollari dell'anno precedente, mentre il reddito netto non GAAP è salito a 127,1 milioni di dollari. Il flusso di cassa operativo è stato di 179,4 milioni di dollari (27% dei ricavi), e il flusso di cassa libero ha raggiunto 143,4 milioni di dollari (22% dei ricavi).
Per il terzo trimestre dell'anno fiscale 2025, Zscaler prevede ricavi compresi tra 665 e 667 milioni di dollari e un reddito netto non GAAP per azione di 0,75-0,76 dollari. Le previsioni per l'intero anno fiscale 2025 stimano ricavi tra 2,640 e 2,654 miliardi di dollari e fatturazioni calcolate tra 3,153 e 3,168 miliardi di dollari.
Zscaler (ZS) reportó resultados financieros sólidos para el segundo trimestre del año fiscal 2025, con ingresos alcanzando 647.9 millones de dólares, un aumento del 23% en comparación con el año anterior. Las facturaciones calculadas de la compañía crecieron un 18% hasta 742.7 millones de dólares, mientras que los ingresos diferidos aumentaron un 25% hasta 1,878.5 millones de dólares.
La compañía redujo su pérdida neta GAAP a 7.7 millones de dólares desde 28.5 millones de dólares en el año anterior, mientras que el ingreso neto no GAAP aumentó a 127.1 millones de dólares. El flujo de caja operativo fue de 179.4 millones de dólares (27% de los ingresos), y el flujo de caja libre alcanzó los 143.4 millones de dólares (22% de los ingresos).
Para el tercer trimestre del año fiscal 2025, Zscaler espera ingresos entre 665 y 667 millones de dólares y un ingreso neto no GAAP por acción de 0.75-0.76 dólares. La guía para el año fiscal 2025 proyecta ingresos de 2.640-2.654 mil millones de dólares y facturaciones calculadas de 3.153-3.168 mil millones de dólares.
Zscaler (ZS)는 2025 회계연도 2분기 재무 결과가 강력하다고 보고하며, 수익이 6억 4,790만 달러에 도달하여 전년 대비 23% 증가했다고 발표했습니다. 회사의 계산된 청구액은 18% 증가하여 7억 4,270만 달러에 이르렀고, 이연 수익은 25% 증가하여 18억 7,850만 달러에 도달했습니다.
회사는 GAAP 기준 순손실을 전년의 2,850만 달러에서 770만 달러로 줄였으며, 비GAAP 기준 순이익은 1억 2,710만 달러로 증가했습니다. 운영 현금 흐름은 1억 7,940만 달러(수익의 27%)였고, 자유 현금 흐름은 1억 4,340만 달러(수익의 22%)에 도달했습니다.
2025 회계연도 3분기 동안 Zscaler는 수익이 6억 6,500만에서 6억 6,700만 달러 사이가 될 것으로 예상하고 있으며, 비GAAP 기준 주당 순이익은 0.75-0.76 달러로 예상하고 있습니다. 2025 회계연도 전체 가이드는 수익이 2,640억에서 2,654억 달러, 계산된 청구액이 3,153억에서 3,168억 달러에 이를 것으로 예상하고 있습니다.
Zscaler (ZS) a annoncé de solides résultats financiers pour le deuxième trimestre de l'exercice 2025, avec des revenus atteignant 647,9 millions de dollars, en hausse de 23 % par rapport à l'année précédente. Les facturations calculées de l'entreprise ont augmenté de 18 % pour atteindre 742,7 millions de dollars, tandis que les revenus différés ont augmenté de 25 % pour atteindre 1,878.5 millions de dollars.
L'entreprise a réduit sa perte nette GAAP à 7,7 millions de dollars contre 28,5 millions de dollars l'année précédente, tandis que le revenu net non GAAP a augmenté à 127,1 millions de dollars. Le flux de trésorerie d'exploitation était de 179,4 millions de dollars (27 % des revenus), et le flux de trésorerie libre a atteint 143,4 millions de dollars (22 % des revenus).
Pour le troisième trimestre de l'exercice 2025, Zscaler s'attend à des revenus compris entre 665 et 667 millions de dollars et un revenu net non GAAP par action de 0,75-0,76 dollar. Les prévisions pour l'ensemble de l'exercice 2025 projettent des revenus de 2,640-2,654 milliards de dollars et des facturations calculées de 3,153-3,168 milliards de dollars.
Zscaler (ZS) berichtete über starke Finanzzahlen für das zweite Quartal des Geschäftsjahres 2025, mit Einnahmen von 647,9 Millionen Dollar, was einem Anstieg von 23% im Vergleich zum Vorjahr entspricht. Die berechneten Rechnungen des Unternehmens wuchsen um 18% auf 742,7 Millionen Dollar, während die aufgeschobenen Einnahmen um 25% auf 1.878,5 Millionen Dollar zunahmen.
Das Unternehmen reduzierte seinen GAAP-Nettoverlust auf 7,7 Millionen Dollar von 28,5 Millionen Dollar im Vorjahr, während das Nicht-GAAP-Nettoeinkommen auf 127,1 Millionen Dollar anstieg. Der operative Cashflow betrug 179,4 Millionen Dollar (27% der Einnahmen), und der freie Cashflow erreichte 143,4 Millionen Dollar (22% der Einnahmen).
Für das dritte Quartal des Geschäftsjahres 2025 erwartet Zscaler Einnahmen zwischen 665 und 667 Millionen Dollar und ein Nicht-GAAP-Nettoeinkommen pro Aktie von 0,75-0,76 Dollar. Die Prognose für das gesamte Geschäftsjahr 2025 rechnet mit Einnahmen von 2,640-2,654 Milliarden Dollar und berechneten Rechnungen von 3,153-3,168 Milliarden Dollar.
- Revenue growth of 23% YoY to $647.9M
- Non-GAAP net income increased to $127.1M from $99.4M YoY
- Deferred revenue up 25% YoY to $1.88B
- Strong cash position of $2.88B, up $470.6M from July 2024
- Operating cash flow at 27% of revenue
- GAAP net loss improved to $7.7M from $28.5M YoY
- Calculated billings growth slowed to 18% YoY
- GAAP operating loss of $40.1M (6% of revenue)
- GAAP net loss continues at $7.7M
Insights
Zscaler delivered strong Q2 FY2025 results that exceeded guidance across both revenue and profitability metrics. The company reported
The profitability story stands out prominently in these results. Non-GAAP operating income reached
Cash flow metrics reveal exceptional financial health, with operating cash flow at
Forward guidance signals management's confidence, projecting Q3 revenue of
Zscaler's focus on Zero Trust and AI-driven innovations is creating multiple growth vectors, with the introduction of Zero Trust Segmentation solution and integration with SAP positioning the company to capture additional market share while helping customers reduce infrastructure costs.
Zscaler's Q2 results validate its strategic pivot toward integrating AI with Zero Trust security architecture. The company has effectively positioned its platform at the intersection of two powerful tailwinds: the ongoing migration to Zero Trust models and the proliferation of AI applications across enterprises.
The newly introduced Zero Trust Segmentation solution represents a technical breakthrough by enabling microsegmentation across both branch offices and cloud environments without legacy firewall dependencies. This approach directly addresses the critical challenge of lateral movement prevention in ransomware attacks while simultaneously reducing infrastructure costs—delivering both security benefits and ROI.
The ZTNA integration with RISE with SAP demonstrates Zscaler's strategic market positioning. By embedding their technology directly within SAP's cloud migration pathway, Zscaler has created a friction-free adoption channel for their services among large enterprises undertaking complex ERP transformations. This significantly widens their addressable market without proportional sales effort.
The appointment of Phil Tee signals Zscaler's commitment to deepening their AI capabilities. Tee's background in AI-driven monitoring solutions for DevOps and ITOps suggests Zscaler is preparing to expand its observability and automation capabilities—likely pursuing integration between security posture and operational intelligence.
Nokia's adoption of Zscaler's Zero Trust Exchange as a replacement for traditional firewalls represents the exact customer transition pattern the company's business model is designed to capture. This high-profile migration serves as both validation and reference architecture for similar enterprise transformations.
Second Quarter Highlights
- Revenue grows
23% year-over-year to$647.9 million - Calculated billings grows
18% year-over-year to$742.7 million - Deferred revenue grows
25% year-over-year to$1,878.5 million - GAAP net loss of
$7.7 million compared to GAAP net loss of$28.5 million on a year-over-year basis - Non-GAAP net income of
$127.1 million compared to non-GAAP net income of$99.4 million on a year-over-year basis
SAN JOSE, Calif., March 05, 2025 (GLOBE NEWSWIRE) -- Zscaler, Inc. (Nasdaq: ZS), the leader in cloud security, today announced financial results for its second quarter of fiscal year 2025, ended January 31, 2025.
“Growing adoption of Zero Trust and AI is driving strong demand for our platform, resulting in yet another strong quarter that exceeded our guidance on both top and bottom line. We are leading the industry towards Zero Trust Everywhere by transforming security from legacy appliance-based to a Zero Trust architecture,” said Jay Chaudhry, Chairman and CEO of Zscaler. “By combining AI with Zero Trust, we are delivering several key innovations to secure our customers’ use of AI applications, creating new avenues of growth.”
Second Quarter Fiscal 2025 Financial Highlights
- Revenue:
$647.9 million , an increase of23% year-over-year. - Income (loss) from operations: GAAP loss from operations was
$40.1 million , or6% of revenue, compared to$45.5 million , or9% of revenue, in the second quarter of fiscal 2024. Non-GAAP income from operations was$140.5 million , or22% of revenue, compared to$103.2 million , or20% of revenue, in the second quarter of fiscal 2024. - Net income (loss): GAAP net loss was
$7.7 million , compared to$28.5 million in the second quarter of fiscal 2024. Non-GAAP net income was$127.1 million , compared to$99.4 million in the second quarter of fiscal 2024. - Net income (loss) per share, diluted: GAAP net loss per share was
$0.05 , compared to$0.19 in the second quarter of fiscal 2024. Non-GAAP net income per share was$0.78 , compared to$0.63 in the second quarter of fiscal 2024. - Cash flows: Cash provided by operations was
$179.4 million , or27% of revenue, compared to$142.1 million , or27% of revenue, in the second quarter of fiscal 2024. Free cash flow was$143.4 million , or22% of revenue, compared to$100.8 million , or19% of revenue, in the second quarter of fiscal 2024. - Deferred revenue:
$1,878.5 million as of January 31, 2025, an increase of25% year-over-year. - Cash, cash equivalents and short-term investments:
$2,880.2 million as of January 31, 2025, an increase of$470.6 million from July 31, 2024.
Recent Business Highlights
- Introduced the industry’s first Zero Trust Segmentation solution for branches and cloud environments. The new solution improves customers’ security posture by preventing lateral movement from ransomware attacks, while cutting firewall and infrastructure spend in half.
- Started offering the Zero Trust Network Access (ZTNA) service natively integrated within RISE with SAP. Zscaler Private Access™ (ZPA™) for SAP helps enable SAP customers with on-premises ERP workloads to simplify and de-risk their cloud migration, without the complexity and risk associated with traditional VPNs.
- Appointed Phil Tee as EVP of AI Innovations. Tee previously co-founded an enterprise AI-driven provider of intelligent monitoring solutions for DevOps and ITOps.
- Achieved FedRAMP authorization for Zscaler Zero Trust Browser. The authorization assures agencies of compliance with rigorous security standards, facilitating cloud adoption and streamlining the procurement process.
- Announced that Nokia, a multinational technology leader, is migrating from its traditional firewall-based security model to the Zscaler Zero Trust Exchange to enhance its security, improve operational efficiency, and strengthen cloud capabilities.
Change in Non-GAAP Measures Presentation
Effective August 1, 2024, the beginning of our fiscal year ending July 31, 2025, we are using a long-term projected non-GAAP tax rate of
Financial Outlook
For the third quarter of fiscal 2025, we expect:
- Revenue of
$665 million to$667 million - Non-GAAP income from operations of
$140 million to$142 million - Non-GAAP net income per share of approximately
$0.75 t o$0.76 , assuming approximately 163 million fully diluted shares outstanding and a non-GAAP tax rate of23%
For the full year of fiscal 2025, we expect:
- Revenue of approximately
$2.64 0 billion to$2.65 4 billion - Calculated billings of
$3.15 3 billion to$3.16 8 billion - Non-GAAP income from operations of
$562 million to$572 million - Non-GAAP net income per share of
$3.04 t o$3.09 , assuming approximately 163.5 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.
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 second quarter of fiscal 2025 and outlook for its third quarter of fiscal 2025 and full year fiscal 2025 today at 1:30 p.m. Pacific time (4:30 p.m. Eastern time).
| Date: | Wednesday, March 5, 2025 |
| 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/BI81201a44d72f48cab018ea30aa79b03b). 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
Third quarter of fiscal 2025 investor conference participation schedule:
- Morgan Stanley Technology, Media and Telecom Conference in San Francisco
Thursday, March 6, 2025
- Susquehanna Travel, Tech + Gambling Forum (Virtual)
Friday, March 7, 2025
- Loop Capital Markets 2025 Investor Conference (Virtual)
Monday, March 10, 2025
- Stifel Technology 2025 Technology One-on-One Conference in New York City
Tuesday, March 11, 2025
- Cantor Global Technology Conference in New York City
Wednesday, March 12, 2025
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 third 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 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 October 31, 2024 filed on December 5, 2024 and our Annual Report on Form 10-K for the fiscal year ended July 31, 2024 filed on September 12, 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 SASE-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 | Six Months Ended | ||||||||||||||
| January 31, | January 31, | ||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Revenue | $ | 647,900 | $ | 524,999 | $ | 1,275,855 | $ | 1,021,702 | |||||||
| Cost of revenue(1) (2) | 148,498 | 117,199 | 289,960 | 228,593 | |||||||||||
| Gross profit | 499,402 | 407,800 | 985,895 | 793,109 | |||||||||||
| Operating expenses: | |||||||||||||||
| Sales and marketing(1) (2) | 307,872 | 276,481 | 613,959 | 543,592 | |||||||||||
| Research and development(1) (2) | 170,860 | 122,181 | 325,114 | 235,720 | |||||||||||
| General and administrative(1) | 60,810 | 54,595 | 117,629 | 105,311 | |||||||||||
| Total operating expenses | 539,542 | 453,257 | 1,056,702 | 884,623 | |||||||||||
| Loss from operations | (40,140 | ) | (45,457 | ) | (70,807 | ) | (91,514 | ) | |||||||
| Interest income | 30,878 | 28,385 | 60,926 | 54,327 | |||||||||||
| Interest expense(3) | (2,339 | ) | (3,605 | ) | (5,482 | ) | (6,764 | ) | |||||||
| Other income (expense), net | (4,936 | ) | 172 | (5,588 | ) | (1,040 | ) | ||||||||
| Loss before income taxes | (16,537 | ) | (20,505 | ) | (20,951 | ) | (44,991 | ) | |||||||
| Provision for (benefit from) for income taxes(4) | (8,813 | ) | 7,964 | (1,176 | ) | 16,961 | |||||||||
| Net loss | $ | (7,724 | ) | $ | (28,469 | ) | $ | (19,775 | ) | $ | (61,952 | ) | |||
| Net loss per share, basic and diluted | $ | (0.05 | ) | $ | (0.19 | ) | $ | (0.13 | ) | $ | (0.42 | ) | |||
| Weighted-average shares used in computing net loss per share, basic and diluted | 153,672 | 148,951 | 153,114 | 148,287 | |||||||||||
| (1) Includes stock-based compensation expense and related payroll taxes as follows: | |||||||||||||||
| Cost of revenue | $ | 17,619 | $ | 13,434 | $ | 33,412 | $ | 26,389 | |||||||
| Sales and marketing | 69,979 | 65,855 | 134,845 | 124,523 | |||||||||||
| Research and development | 65,896 | 44,120 | 124,761 | 85,163 | |||||||||||
| General and administrative | 22,862 | 22,127 | 43,912 | 42,190 | |||||||||||
| Total | $ | 176,356 | $ | 145,536 | $ | 336,930 | $ | 278,265 | |||||||
| (2) Includes amortization expense of acquired intangible assets as follows: | |||||||||||||||
| Cost of revenue | $ | 3,815 | $ | 2,717 | $ | 7,490 | $ | 5,434 | |||||||
| Sales and marketing | 425 | 226 | 850 | 452 | |||||||||||
| Research and development | 5 | 140 | 145 | 233 | |||||||||||
| Total | $ | 4,245 | $ | 3,083 | $ | 8,485 | $ | 6,119 | |||||||
| (3) Includes amortization of debt issuance costs | $ | 982 | $ | 978 | $ | 1,963 | $ | 1,955 |
| (4) Benefit from a release of valuation allowance (*) | $ | 17,188 | $ | — | $ | 17,188 | $ | — | |||||||
(*) During the three months ended January 31, 2025, we recognized a tax benefit of
| ZSCALER, INC. | |||||||
| Condensed Consolidated Balance Sheets | |||||||
| (in thousands) | |||||||
| (unaudited) | |||||||
| January 31, | July 31, | ||||||
| 2025 | 2024 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 1,758,506 | $ | 1,423,080 | |||
| Short-term investments | 1,121,734 | 986,574 | |||||
| Accounts receivable, net | 514,314 | 736,529 | |||||
| Deferred contract acquisition costs | 156,079 | 148,873 | |||||
| Prepaid expenses and other current assets | 114,573 | 101,561 | |||||
| Total current assets | 3,665,206 | 3,396,617 | |||||
| Property and equipment, net | 422,315 | 383,121 | |||||
| Operating lease right-of-use assets | 83,703 | 89,758 | |||||
| Deferred contract acquisition costs, noncurrent | 284,286 | 296,525 | |||||
| Acquired intangible assets, net | 55,658 | 63,835 | |||||
| Goodwill | 417,730 | 417,029 | |||||
| Other noncurrent assets | 77,070 | 58,083 | |||||
| Total assets | $ | 5,005,968 | $ | 4,704,968 | |||
| Liabilities and Stockholders’ Equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 24,600 | $ | 23,309 | |||
| Accrued expenses and other current liabilities | 90,626 | 91,708 | |||||
| Accrued compensation | 140,430 | 160,810 | |||||
| Deferred revenue | 1,595,780 | 1,643,919 | |||||
| Convertible senior notes | 1,147,513 | 1,142,275 | |||||
| Operating lease liabilities | 49,917 | 50,866 | |||||
| Total current liabilities | 3,048,866 | 3,112,887 | |||||
| Deferred revenue, noncurrent | 282,725 | 251,055 | |||||
| Operating lease liabilities, noncurrent | 40,912 | 44,824 | |||||
| Other noncurrent liabilities | 26,119 | 22,100 | |||||
| Total liabilities | 3,398,622 | 3,430,866 | |||||
| Stockholders’ Equity | |||||||
| Common stock | 155 | 152 | |||||
| Additional paid-in capital | 2,797,350 | 2,426,819 | |||||
| Accumulated other comprehensive loss | (22,304 | ) | (4,789 | ) | |||
| Accumulated deficit | (1,167,855 | ) | (1,148,080 | ) | |||
| Total stockholders’ equity | 1,607,346 | 1,274,102 | |||||
| Total liabilities and stockholders’ equity | $ | 5,005,968 | $ | 4,704,968 | |||
| ZSCALER, INC. | |||||||
| Condensed Consolidated Statements of Cash Flows | |||||||
| (in thousands) | |||||||
| (unaudited) | |||||||
| Six Months Ended | |||||||
| January 31, | |||||||
| 2025 | 2024 | ||||||
| Cash Flows from Operating Activities | |||||||
| Net loss | $ | (19,775 | ) | $ | (61,952 | ) | |
| Adjustments to reconcile net loss to cash provided by operating activities: | |||||||
| Depreciation and amortization expense | 45,911 | 29,361 | |||||
| Amortization expense of acquired intangible assets | 8,485 | 6,119 | |||||
| Amortization of deferred contract acquisition costs | 79,191 | 61,504 | |||||
| Amortization of debt issuance costs | 1,963 | 1,955 | |||||
| Non-cash operating lease costs | 31,565 | 21,633 | |||||
| Stock-based compensation expense | 329,295 | 269,570 | |||||
| Accretion of investments purchased at a discount | (10,110 | ) | (9,582 | ) | |||
| Unrealized losses on hedging transactions | 3,036 | 2,841 | |||||
| Deferred income taxes | (17,359 | ) | (1,437 | ) | |||
| Other | 1,303 | 1,403 | |||||
| Changes in operating assets and liabilities, net of effects of business acquisitions: | |||||||
| Accounts receivable | 222,043 | 102,374 | |||||
| Deferred contract acquisition costs | (74,158 | ) | (67,744 | ) | |||
| Prepaid expenses, other current and noncurrent assets | (12,144 | ) | 2,660 | ||||
| Accounts payable | 98 | (2,412 | ) | ||||
| Accrued expenses, other current and noncurrent liabilities | (11,481 | ) | 6,020 | ||||
| Accrued compensation | (20,380 | ) | 562 | ||||
| Deferred revenue | (16,469 | ) | 62,477 | ||||
| Operating lease liabilities | (30,246 | ) | (22,477 | ) | |||
| Net cash provided by operating activities | 510,768 | 402,875 | |||||
| Cash Flows from Investing Activities | |||||||
| Purchases of property, equipment and other assets | (32,043 | ) | (59,553 | ) | |||
| Capitalized internal-use software | (43,416 | ) | (17,816 | ) | |||
| Payments for business acquisitions, net of cash acquired | (834 | ) | (4,377 | ) | |||
| Purchase of strategic investments | (786 | ) | (2,000 | ) | |||
| Purchases of short-term investments | (729,066 | ) | (761,796 | ) | |||
| Proceeds from maturities of short-term investments | 605,003 | 594,687 | |||||
| Proceeds from sale of short-term investments | — | 2,105 | |||||
| Net cash used in investing activities | (201,142 | ) | (248,750 | ) | |||
| Cash Flows from Financing Activities | |||||||
| Proceeds from issuance of common stock upon exercise of stock options | 3,456 | 3,848 | |||||
| Proceeds from issuance of common stock under the employee stock purchase plan | 22,344 | 18,407 | |||||
| Net cash provided by financing activities | 25,800 | 22,255 | |||||
| Net increase in cash and cash equivalents | 335,426 | 176,380 | |||||
| Cash and cash equivalents at beginning of period | 1,423,080 | 1,262,206 | |||||
| Cash and cash equivalents at end of period | $ | 1,758,506 | $ | 1,438,586 | |||
| ZSCALER, INC. | |||||||||||||||
| Reconciliation of GAAP to Non-GAAP Financial Measures | |||||||||||||||
| (in thousands, except percentages) | |||||||||||||||
| (unaudited) | |||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||
| January 31, | January 31, | ||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Revenue | $ | 647,900 | $ | 524,999 | $ | 1,275,855 | $ | 1,021,702 | |||||||
| Non-GAAP Gross Profit and Non-GAAP Gross Margin | |||||||||||||||
| GAAP gross profit | $ | 499,402 | $ | 407,800 | $ | 985,895 | $ | 793,109 | |||||||
| Add: Stock-based compensation expense and related payroll taxes | 17,619 | 13,434 | 33,412 | 26,389 | |||||||||||
| Add: Amortization expense of acquired intangible assets | 3,815 | 2,717 | 7,490 | 5,434 | |||||||||||
| Non-GAAP gross profit | $ | 520,836 | $ | 423,951 | $ | 1,026,797 | $ | 824,932 | |||||||
| GAAP gross margin | 77 | % | 78 | % | 77 | % | 78 | % | |||||||
| Non-GAAP gross margin | 80 | % | 81 | % | 80 | % | 81 | % | |||||||
| Non-GAAP Income from Operations and Non-GAAP Operating Margin | |||||||||||||||
| GAAP loss from operations | $ | (40,140 | ) | $ | (45,457 | ) | $ | (70,807 | ) | $ | (91,514 | ) | |||
| Add: Stock-based compensation expense and related payroll taxes | 176,356 | 145,536 | 336,930 | 278,265 | |||||||||||
| Add: Amortization expense of acquired intangible assets | 4,245 | 3,083 | 8,485 | 6,119 | |||||||||||
| Non-GAAP income from operations | $ | 140,461 | $ | 103,162 | $ | 274,608 | $ | 192,870 | |||||||
| GAAP operating margin | (6 | )% | (9 | )% | (6 | )% | (9 | )% | |||||||
| Non-GAAP operating margin | 22 | % | 20 | % | 22 | % | 19 | % | |||||||
| ZSCALER, INC. | |||||||||||||||
| Reconciliation of GAAP to Non-GAAP Financial Measures | |||||||||||||||
| (in thousands, except per share amounts) | |||||||||||||||
| (unaudited) | |||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||
| January 31, | January 31, | ||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Non-GAAP Net Income per Share, Diluted | |||||||||||||||
| GAAP net loss | $ | (7,724 | ) | $ | (28,469 | ) | $ | (19,775 | ) | $ | (61,952 | ) | |||
| Add: GAAP provision for (benefit from) income taxes | (8,813 | ) | 7,964 | (1,176 | ) | 16,961 | |||||||||
| GAAP loss before income taxes | (16,537 | ) | (20,505 | ) | (20,951 | ) | (44,991 | ) | |||||||
| Add: | |||||||||||||||
| Stock-based compensation expense and related payroll taxes | 176,356 | 145,536 | 336,930 | 278,265 | |||||||||||
| Amortization expense of acquired intangible assets | 4,245 | 3,083 | 8,485 | 6,119 | |||||||||||
| Amortization of debt issuance costs | 982 | 978 | 1,963 | 1,955 | |||||||||||
| Non-GAAP net income before income taxes | 165,046 | 129,092 | 326,427 | 241,348 | |||||||||||
| Non-GAAP provision for income taxes(1) | 37,965 | 29,691 | 75,083 | 55,510 | |||||||||||
| Non-GAAP net income | $ | 127,081 | $ | 99,401 | $ | 251,344 | $ | 185,838 | |||||||
| GAAP provision for (benefit from) income taxes | $ | (8,813 | ) | $ | 7,964 | $ | (1,176 | ) | $ | 16,961 | |||||
| Add: Income tax and other tax adjustments(2) | 46,778 | 21,727 | 76,259 | 38,549 | |||||||||||
| Non-GAAP provision for income taxes(1) | $ | 37,965 | $ | 29,691 | $ | 75,083 | $ | 55,510 | |||||||
| Non-GAAP effective tax rate(1) | 23 | % | 23 | % | 23 | % | 23 | % | |||||||
| Non-GAAP net income | 127,081 | 99,401 | 251,344 | 185,838 | |||||||||||
| Add: Non-GAAP interest expense, net of tax related to the convertible senior notes | 276 | 276 | 552 | 552 | |||||||||||
| Numerator used in computing non-GAAP net income per share, diluted | $ | 127,357 | $ | 99,677 | $ | 251,896 | $ | 186,390 | |||||||
| GAAP net loss per share, diluted | $ | (0.05 | ) | $ | (0.19 | ) | $ | (0.13 | ) | $ | (0.42 | ) | |||
| Stock-based compensation expense and related payroll taxes | 1.09 | 0.91 | 2.08 | 1.75 | |||||||||||
| Amortization expense of acquired intangible assets | 0.03 | 0.02 | 0.05 | 0.04 | |||||||||||
| Amortization of debt issuance costs | 0.01 | 0.01 | 0.01 | 0.01 | |||||||||||
| Income tax and other tax adjustments(2) | (0.29 | ) | (0.14 | ) | (0.47 | ) | (0.24 | ) | |||||||
| Non-GAAP interest expense related to the convertible senior notes | — | — | — | — | |||||||||||
| Adjustment to total fully diluted earnings per share(3) | (0.01 | ) | 0.02 | 0.01 | 0.03 | ||||||||||
| Non-GAAP net income per share, diluted | $ | 0.78 | $ | 0.63 | $ | 1.55 | $ | 1.17 | |||||||
| Weighted-average shares used in computing GAAP net loss per share, diluted | 153,672 | 148,951 | 153,114 | 148,287 | |||||||||||
| Add: Outstanding potentially dilutive equity incentive awards | 2,988 | 4,670 | 2,848 | 4,226 | |||||||||||
| Add: Convertible senior notes | 7,626 | 7,626 | 7,626 | 7,626 | |||||||||||
| Less: Antidilutive impact of capped call transactions(4) | (1,769 | ) | (2,093 | ) | (1,505 | ) | (1,254 | ) | |||||||
| Weighted-average shares used in computing non-GAAP net income per share, diluted | 162,517 | 159,154 | 162,083 | 158,885 | |||||||||||
___________
(1) Effective August 1, 2024, the beginning of our fiscal year ending July 31, 2025, we are using a long-term projected non-GAAP tax rate of
(2) Consists of income tax adjustments related to our long-term non-GAAP effective tax rate 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 | Six Months Ended | ||||||||||||||
| January 31, | January 31, | ||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Calculated Billings | |||||||||||||||
| Revenue | $ | 647,900 | $ | 524,999 | $ | 1,275,855 | $ | 1,021,702 | |||||||
| Add: Total deferred revenue, end of period | 1,878,505 | 1,502,175 | 1,878,505 | 1,502,175 | |||||||||||
| Less: Total deferred revenue, beginning of period | (1,783,720 | ) | (1,399,544 | ) | (1,894,974 | ) | (1,439,676 | ) | |||||||
| Calculated billings | $ | 742,685 | $ | 627,630 | $ | 1,259,386 | $ | 1,084,201 | |||||||
| Free Cash Flow | |||||||||||||||
| Net cash provided by operating activities | $ | 179,433 | $ | 142,069 | $ | 510,768 | $ | 402,875 | |||||||
| Less: Purchases of property, equipment and other assets | (15,018 | ) | (30,894 | ) | (32,043 | ) | (59,553 | ) | |||||||
| Less: Capitalized internal-use software | (20,987 | ) | (10,387 | ) | (43,416 | ) | (17,816 | ) | |||||||
| Free cash flow | $ | 143,428 | $ | 100,788 | $ | 435,309 | $ | 325,506 | |||||||
| Free Cash Flow Margin | |||||||||||||||
| Net cash provided by operating activities, as a percentage of revenue | 27 | % | 27 | % | 40 | % | 39 | % | |||||||
| Less: Purchases of property, equipment and other assets, as a percentage of revenue | (2 | )% | (6 | )% | (3 | )% | (6 | )% | |||||||
| Less: Capitalized internal-use software, as a percentage of revenue | (3 | )% | (2 | )% | (3 | )% | (2 | )% | |||||||
| Free cash flow margin | 22 | % | 19 | % | 34 | % | 32 | % | |||||||
| 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 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.
Effective August 1, 2024, the beginning of our 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 and amortization expense of acquired intangible assets. 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, amortization of debt issuance costs, and the non-GAAP provision for income taxes adjustment. We define non-GAAP net income per share, diluted, as non-GAAP net income plus the non-GAAP interest expense related to the convertible senior notes 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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