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 of 30% year-over-year.
Income (loss) from operations: GAAP loss from operations was $27.0 million, or 5% of revenue, compared to $44.6 million, or 10% of revenue, in the fourth quarter of fiscal 2023. Non-GAAP income from operations was $127.5 million, or 22% of revenue, compared to $86.0 million, or 19% 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, or 34% of revenue, compared to $135.9 million, or 30% of revenue, in the fourth quarter of fiscal 2023. Free cash flow was $136.3 million, or 23% of revenue, compared to $101.3 million, or 22% of revenue, in the fourth quarter of fiscal 2023.
Deferred revenue: $1,895.0 million as of July 31, 2024, an increase of 32% 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 of 34% year-over-year.
Income (loss) from operations: GAAP loss from operations was $121.5 million, or 6% of revenue, compared to $234.6 million, or 15% of revenue, in fiscal 2023. Non-GAAP income from operations was $442.2 million, or 20% of revenue, compared to $240.8 million, or 15% 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, or 36% of revenue, compared to $462.3 million, or 29% of revenue, in fiscal 2023. Free cash flow was $585.0 million, or 27% of revenue, compared to $333.6 million, or 21% 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 23% for the purpose of determining our non-GAAP net income and non-GAAP net income per share to provide better consistency across interim reporting periods in fiscal 2025 and beyond. Given the significant growth of our business and non-GAAP operating income, we believe this change is necessary to better reflect the performance of our business. We have included a table in this earnings release illustrating the impact of this change to these non-GAAP financial measures to all periods presented. We will continue to assess the appropriate non-GAAP tax rate on a regular basis, which could be subject to change for a variety of reasons, including the rapidly evolving global tax environment, significant changes in our geographic earnings mix, or other changes to our strategy or business operations.
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 to $0.63, assuming approximately 164 million fully diluted shares outstanding and a non-GAAP tax rate of 23%
For the full year fiscal 2025, we expect:
Revenue of approximately $2.60 billion to $2.62 billion
Calculated billings of $3.110 billion to $3.135 billion
Non-GAAP income from operations of $530 million to $540 million
Non-GAAP net income per share of $2.81 to $2.87, assuming approximately 164 million fully diluted shares outstanding and a non-GAAP tax rate of 23%
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 CityThursday, September 5, 2024
Goldman Sachs Communacopia + Technology Conference in San FranciscoWednesday, September 11, 2024
Wolfe Research TMT Conference in San FranciscoWednesday, 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)
Natalia WodeckiMedia Relations
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
