Zscaler, Inc. (Nasdaq: ZS), the leader in cloud security, today announced financial results for its first quarter of fiscal year 2022, ended October 31, 2021.
“CISOs and CIOs are looking to phase out legacy network security in favor of zero trust architecture, due to increasing cyber and ransomware risks and accelerating digital transformation. This architecture shift continues to drive strong demand for our Zero Trust Exchange platform,” said Jay Chaudhry, Chairman and CEO of Zscaler. “We delivered outstanding results for the first quarter, with year-over-year revenue growth accelerating to 62%. We recently achieved a significant milestone of surpassing $1 billion in annual recurring revenue (ARR), and are now focusing on achieving $5 billion in ARR.”
First Quarter Fiscal 2022 Financial Highlights
- Revenue: $230.5 million, an increase of 62% year-over-year.
- Income (loss) from operations: GAAP loss from operations was $74.4 million, or 32% of total revenue, compared to $42.7 million, or 30% of total revenue, in the first quarter of fiscal 2021. Non-GAAP income from operations was $23.9 million, or 10% of total revenue, compared to $19.7 million, or 14% of total revenue, in the first quarter of fiscal 2021.
- Net income (loss): GAAP net loss was $90.8 million, compared to $55.0 million in the first quarter of fiscal 2021. Non-GAAP net income was $21.0 million, compared to $20.0 million in the first quarter of fiscal 2021.
- Net income (loss) per share: GAAP net loss per share was $0.65, compared to $0.41 in the first quarter of fiscal 2021. Non-GAAP net income per share was $0.14, compared to $0.14 in the first quarter of fiscal 2021.
- Cash flow: Cash provided by operations was $93.3 million, or 40% of revenue, compared to $53.5 million, or 38% of revenue, in the first quarter of fiscal 2021. Free cash flow was $83.4 million, or 36% of revenue, compared to $42.2 million, or 30% of revenue, in the first quarter of fiscal 2021.
- Deferred revenue: $647.8 million as of October 31, 2021, an increase of 74% year-over-year.
- Cash, cash equivalents and short-term investments: $1,584.6 million as of October 31, 2021, an increase of $82.1 million from July 31, 2021.
Recent Business Highlights
- Announced major enhancements to Zscaler Digital Experience (ZDX), with new Unified Communications as a Service (UCaaS) application monitoring, visibility into Zero Trust secured private apps, and digital workflow service integrations to automatically pinpoint and quickly remediate performance issues for improved employee collaboration and productivity. Delivered as an integrated service on Zscaler’s cloud-native Zero Trust Exchange, ZDX addresses the three biggest challenges that prevent seamless collaboration for the hybrid workforce: siloed user data, limited legacy monitoring tools, and a lack of analytics and workflows that can optimize and improve the productivity and digital experience for employees no matter where they reside.
- Announced U.S. Department of Defense (DoD) has granted Zscaler ZPA a Provisional Authorization to Operate at Impact Level 5 (PATO/IL5), making it the first, and currently the only, Zero Trust Network Access solution that meets the DoD’s IL5 cloud security requirements. DoD agencies can now leverage this provisional authorization as the foundation to procure and implement ZPA for securing their applications and user base by issuing agency-specific Authorization to Operate (ATO).
- Extended a partnership with Siemens to enable customers to securely access Operational Technology (OT) systems and applications in the production network from the office or from remote working environments. The combination of Zscaler’s cloud delivered Zero Trust Network Access service with Siemens’s SCALANCE LPE local processing engine provides highly secure Zero Trust access to industrial automation environments.
- Announced expanded integrations with CrowdStrike to allow Zscaler ZIA service to leverage CrowdStrike Falcon ZTA (Zero Trust Assessment) device scores for access policy configuration. Joint Zscaler and CrowdStrike customers can leverage these integrations for both internal and external applications.
- The Zscaler ThreatLabZ team released its annual State of Encrypted Attacks Report by leveraging insights from the Zero Trust Exchange which analyzes more than 200 billion daily transactions. The ThreatLabZ team tracked and analyzed more than 20 billion threats blocked over HTTPS, which increased more than 314% year-over-year, underscoring the need for a Zero Trust security model.
Financial Outlook
For the second quarter of fiscal 2022, we expect:
- Total revenue of $240 million to $242 million
- Non-GAAP income from operations of $20 million to $21 million
- Non-GAAP net income per share of approximately $0.11, assuming approximately 150 million common shares outstanding
For the full year fiscal 2022, we expect:
- Total revenue of $1.00 billion to $1.01 billion
- Calculated billings of $1.300 billion to $1.305 billion
- Non-GAAP income from operations of $90 million to $93 million
- Non-GAAP net income per share of $0.50 to $0.52, assuming approximately 150 million to 151 million common shares outstanding
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 expense of acquired intangible assets, asset impairment related to facility exit, certain litigation-related expenses, amortization of debt discount and issuance costs and income tax effects generated by intangible assets acquired in business acquisitions. Guidance for non-GAAP net income per share includes the anti-dilutive impact of the capped call transactions entered into in connection with our convertible senior notes. We have not reconciled our expectations to 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. 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.