Zscaler, Inc., the leader in cloud security, announced financial results for its first quarter of fiscal year 2024, ended October 31, 2023.
“We had a strong start to our fiscal year with all key metrics coming above our guidance. We are enabling enterprises to move forward with their key transformative initiatives – Zero Trust and AI – which is driving demand for our Zero Trust Exchange,” said Jay Chaudhry, Chairman and CEO of Zscaler. “In order to meet this growing need, we are scaling our go-to-market and R&D organizations, strengthening our foundation for the long-term growth of our business.”
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First Quarter Fiscal 2024 Financial Highlights
- Revenue: $496.7 million, an increase of 40% year-over-year.
- Income (loss) from operations: GAAP loss from operations was $46.1 million, or 9% of revenue, compared to $69.1 million, or 19% of revenue, in the first quarter of fiscal 2023. Non-GAAP income from operations was $89.7 million, or 18% of revenue, compared to $42.1 million, or 12% of revenue, in the first quarter of fiscal 2023.
- Net income (loss): GAAP net loss was $33.5 million, compared to $68.2 million in the first quarter of fiscal 2023. Non-GAAP net income was $106.5 million, compared to $44.0 million in the first quarter of fiscal 2023.
- Net income (loss) per share: GAAP net loss per share was $0.23, compared to $0.48 in the first quarter of fiscal 2023. Non-GAAP net income per share was $0.67, compared to $0.29 in the first quarter of fiscal 2023.
- Cash flows: Cash provided by operations was $260.8 million, or 53% of revenue, compared to $128.5 million, or 36% of revenue, in the first quarter of fiscal 2023. Free cash flow was $224.7 million, or 45% of revenue, compared to $95.6 million, or 27% of revenue, in the first quarter of fiscal 2023.
- Deferred revenue: $1,399.5 million as of October 31, 2023, an increase of 39% year-over-year.
- Cash, cash equivalents and short-term investments: $2,324.4 million as of October 31, 2023, an increase of $224.2 million from July 31, 2023.
Recent Business Highlights
- Appointed two go-to-market leaders to scale Zscaler’s cloud security business to $5 billion in ARR and beyond. Mike Rich was appointed as Zscaler’s Chief Revenue Officer (CRO) and President of Global Sales, with worldwide responsibility for all aspects related to revenue growth and sales strategy. Joyce Kim has joined as the Chief Marketing Officer (CMO) and is responsible for scaling global marketing execution to accelerate Zscaler’s next phase of growth.
- Announced a joint solution with technology partners CrowdStrike and Imprivata to deliver a purpose-built zero trust security solution for healthcare organizations. The integration will provide visibility, threat protection and traceability for end-to-end, multi-user, shared device access control that are required for healthcare organizations to meet regulatory compliance requirements, such as HIPAA and HITECH.
- Named as one of Fortune’s Best Workplaces in Technology for 2023, a ranking that is based on over 162,000 responses from employees at companies across the technology industry.
- Released the findings of the ThreatLabZ 2023 Enterprise IoT and OT Threat Report, which provides an in-depth analysis of malware activity over a six-month period. This report found a 400% increase in IoT malware attacks year-over-year with the manufacturing industry being the top targeted sector for IoT and OT malware attacks.
- Announced the appointments of Claudionor Coelho Jr. as Chief AI Officer and Mohamed Shabar as EVP, Data & AI Platforms, reinforcing Zscaler’s continued investment and focus on driving rapid innovation in the areas of advanced Artificial Intelligence (AI) and Machine Learning (ML) to define the future of cloud-based security technologies.
- Introduced a series of industry-first, zero trust innovations to the Zscaler Workloads Communications solution designed to radically simplify and improve cloud workload security through native integration with AWS user-defined tags. The advancements are designed to deliver granular zero trust VPC segmentation for cloud-based VDI and enable customers to connect and protect workloads across the full spectrum of cloud environments – including Government Cloud.
- Published the 2023 Impact and ESG Report, which provides a progress report and update on Zscaler’s ESG initiatives, reaffirming Zscaler’s commitment to operating its business in a responsible and sustainable manner.
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Financial Outlook
For the second quarter of fiscal 2024, we expect:
- Revenue of $505 million to $507 million
- Non-GAAP income from operations of $84 million to $86 million
- Non-GAAP net income per share of approximately $0.57 to $0.58, assuming approximately 160 million fully diluted shares outstanding
For the full year fiscal 2024, we expect:
- Revenue of approximately $2.09 billion to $2.10 billion
- Calculated billings of $2.52 billion to $2.56 billion
- Non-GAAP income from operations of $360 million to $365 million
- Non-GAAP net income per share of $2.45 to $2.48, assuming approximately 161 million fully diluted 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.
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 for the three months ended October 31, 2023 was approximately a 60 basis point benefit to our gross margin.
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.
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