Zscaler, Inc. (NASDAQ: ZS), the leader in cloud security, today
announced certain preliminary unaudited financial results for the
third quarter of fiscal year 2023, ended April 30, 2023. All
figures in this release are approximate due to the preliminary
nature of the announcement.
“I am pleased to announce that our preliminary
third quarter results exceeded the high end of our guidance range.
We had a strong finish to the quarter as the high ROI of adopting
the Zscaler Zero Trust ExchangeTM platform continues to resonate
with customers and prospects in this challenging macro
environment,” said Jay Chaudhry, Chairman and CEO of Zscaler. “Our
customer engagements are strong, and our platform continues to
expand with innovations that solve our customers' real time IT
challenges. We look forward to sharing more details on our upcoming
earnings conference call.”
Based on our preliminary review, we expect to
report the following results for the third quarter ended April 30,
2023:
|
Preliminary Results |
Prior Guidance |
|
|
|
Revenue |
$415 million to $419 million |
$396 million to $398 million |
|
|
|
GAAP loss from operations |
$59 million to $55 million |
Not provided |
|
|
|
Non-GAAP income from operations |
$60 million to $64 million |
$55 million to $56 million |
|
|
|
Based on our preliminary review, we also expect
to report calculated billings of approximately $478 million to $482
million, an increase of approximately 38% to 39%
year-over-year.
We expect full year fiscal 2023 results to
exceed prior guidance:
|
Updated Guidance |
Prior Guidance |
|
|
|
Revenue |
$1,587 million to $1,591 million |
$1,558 million to $1,563 million |
|
|
|
Calculated billings |
$1,970 million to $1,974 million |
$1,935 million to $1,945 million |
|
|
|
Non-GAAP income from operations (*) |
$220 million to $224 million |
$213 million to $215 million |
|
|
|
(*) Guidance for non-GAAP income from operations
excludes stock-based compensation expense and related employer
payroll taxes, amortization expense of acquired intangible assets
and restructuring and other charges. We have not reconciled our
expectations for non-GAAP income from operations to its 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 is not
available without unreasonable effort.
|
ZSCALER,
INC. |
Reconciliation of Preliminary GAAP to Preliminary Non-GAAP
Financial Measures |
(in millions) |
(unaudited) |
|
|
Three Months Ended |
|
April 30,
2023 |
|
Range of Preliminary Results |
|
|
|
|
|
|
|
|
Revenue |
$ |
415 |
|
|
$ |
419 |
|
|
|
|
|
|
|
|
|
Non-GAAP Income from Operations: |
|
|
|
|
|
|
|
GAAP loss from operations |
$ |
(59 |
) |
|
$ |
(55 |
) |
Adjustments (1) |
|
119 |
|
|
|
119 |
|
Non-GAAP income from operations |
$ |
60 |
|
|
$ |
64 |
|
|
|
|
|
|
|
|
|
Calculated Billings: |
|
|
|
|
|
|
|
Revenue |
$ |
415 |
|
|
$ |
419 |
|
Add: Total deferred revenue, end of period |
|
1,175 |
|
|
|
1,175 |
|
Less: Total deferred revenue, beginning of period |
|
(1,112 |
) |
|
|
(1,112 |
) |
Calculated billings |
$ |
478 |
|
|
$ |
482 |
|
|
|
|
|
|
|
|
|
(1) Reflects the
mid-point of the range of estimate of adjustments for stock-based
compensation expense and related employer payroll taxes of
approximately $111 million, amortization expense of acquired
intangible assets of approximately $3 million, and restructuring
and other charges of approximately $5 million.
Our preliminary results and guidance for
non-GAAP income from operations excludes stock-based compensation
expense and related employer payroll taxes, amortization expense of
acquired intangible assets and restructuring and other charges.
In the third quarter of fiscal 2023, we updated
our definition of non-GAAP income from operations to include
restructuring and other charges.
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.
Preliminary Results
We are currently in the process of finalizing
our full financial results for the quarter ended April 30, 2023 and
applying our normal closing procedures and, therefore, the
estimated revenues, non-GAAP operating income, and calculated
billings presented above reflect various assumptions and estimates
based only upon information available to us as of the date hereof.
As a result, while we consider the preliminary amounts to be a
reasonable estimate, it remains subject to change and actual
results may differ due to developments or other information that
may arise between now and the time the full financial results for
the third quarter ended April 30, 2023 are finalized.
Earnings Conference Call and Webcast
Information
Zscaler will release third quarter fiscal year
2023 earnings after the market close on Thursday, June 1, 2023. We
will host an investor conference call that day at 1:30 p.m. Pacific
time (4:30 p.m. Eastern time) to discuss the results.
|
Date: |
Thursday, June 1, 2023 |
|
Time: |
1:30 p.m.
PT |
|
Webcast: |
https://ir.zscaler.com |
|
Dial-in: |
To join
by phone, register at the following link: Click Here. After
registering, you will be provided with a dial-in number and a
personal PIN that you will need to join the call. |
Please dial in at least 10 minutes prior to the
1:30 p.m. PT start time. A live webcast of the conference call will
be accessible from the Zscaler website at ir.zscaler.com. Listeners
may log on to the call under the “Events & Presentations”
section and select “Q3 2023 Zscaler Earnings Conference Call” to
participate.
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 updated financial outlook for the third
quarter of fiscal 2023 and full year fiscal 2023. 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, including the ongoing effects of inflation,
geopolitical events and the COVID-19 pandemic on our business,
operations and financial results and the economy in general; the
uncertainty about the raising of the US federal government debt
limit and the impact of a government default or shut-down; 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
product and subscription 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; 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 January 31, 2023 filed on March 8, 2023 and our
Annual Report on Form 10-K for the fiscal year ended July 31, 2022
filed on September 15, 2022, 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 protects
thousands of customers from cyberattacks and data loss by securely
connecting users, devices, and applications in any location.
Distributed across more than 150 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.
Media Relations Contact Natalia
Wodecki press@zscaler.com
Investor Relations Contact Bill
Choi, CFA ir@zscaler.com
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, 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 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 preliminary 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 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 intangible assets acquired in business
acquisitions and related income tax effects, if applicable, are
excluded because these are considered by management to be outside
of our core business operating performance. Restructuring and other
charges related to severance and termination benefits in connection
with a restructuring plan to streamline operations and to align
people, roles and projects to our strategic priorities are excluded
because these fluctuate in amounts and frequency and are not
reflective of our core business operating performance.
Non-GAAP Financial Measures
Non-GAAP Income from
Operations. 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. In
the third quarter of fiscal 2023, we updated the definition of
non-GAAP income from operations to include restructuring and other
charges as defined in the preceding paragraph.
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.
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