Zscaler(ZS) - 2025 Q1 - Quarterly Results

Q1 FY2025 Financial Highlights Zscaler reported strong financial results for the first quarter of fiscal 2025, with revenue growing 26% year-over-year to $628.0 million, alongside significant improvements in profitability and robust cash flow Q1 FY2025 Key Financial Metrics (Year-over-Year) | Metric | Q1 FY2025 | Q1 FY2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | $628.0M | $496.7M | +26% | | Calculated Billings | $516.7M | $456.6M | +13% | | Deferred Revenue | $1,783.7M | $1,399.5M | +27% | | GAAP Net Loss | ($12.1M) | ($33.5M) | +63.8% | | Non-GAAP Net Income | $124.3M | $86.4M | +43.9% | | GAAP Net Loss Per Share | ($0.08) | ($0.23) | +65.2% | | Non-GAAP Net Income Per Share | $0.77 | $0.55 | +40.0% | | Cash from Operations | $331.3M | $260.8M | +27.0% | | Free Cash Flow | $291.9M | $224.7M | +29.9% | - CEO Jay Chaudhry attributed the solid Q1 results to strong sales execution and growing customer engagements, highlighting the opportunities created by the combination of Zero Trust and AI[4] Recent Business Highlights Zscaler achieved a significant platform milestone, processing over half a trillion daily transactions, while strengthening leadership and expanding its ecosystem through enhanced integrations to advance Zero Trust security - The Zscaler cloud security platform surpassed a new scalability milestone of over half a trillion daily transactions, nearly 60 times the daily volume of Google searches[7] - Adam Geller was appointed as Chief Product Officer to accelerate innovation, particularly in the AI-driven security operations platform[8] - Announced new AI and Zero Trust integrations with the CrowdStrike Falcon® platform and four new integrations with Okta to enhance threat detection, response, and context-aware security for joint customers[8][10] - The 2024 ThreatLabz report revealed that the Zscaler cloud blocked 45% more IoT malware transactions compared to the previous year, indicating a proliferation of botnets across IoT devices[11] Financial Outlook Zscaler provided a positive outlook for both the upcoming quarter and the full fiscal year 2025, projecting Q2 revenue between $633 million and $635 million and full-year revenue between $2.623 billion and $2.643 billion Q2 Fiscal 2025 Outlook | Metric | Guidance | | :--- | :--- | | Revenue | $633M - $635M | | Non-GAAP Income from Operations | $126M - $128M | | Non-GAAP Net Income per Share | $0.68 - $0.69 | Full Year Fiscal 2025 Outlook | Metric | Guidance | | :--- | :--- | | Revenue | $2.623B - $2.643B | | Calculated Billings | $3.124B - $3.149B | | Non-GAAP Income from Operations | $549M - $559M | | Non-GAAP Net Income per Share | $2.94 - $2.99 | Financial Statements The consolidated financial statements detail Zscaler's performance in Q1 FY2025, showing strong revenue growth, narrowing net loss, a solid cash position, and robust cash generation from operations Consolidated Statements of Operations (Income Statement) For the first quarter ended October 31, 2024, revenue increased by 26% year-over-year to $628.0 million, with gross profit growing to $486.5 million, and GAAP net loss narrowing significantly to $12.1 million Q1 Statement of Operations (in thousands) | Metric | Q1 FY2025 | Q1 FY2024 | | :--- | :--- | :--- | | Revenue | $627,955 | $496,703 | | Gross Profit | $486,493 | $385,309 | | Loss from Operations | ($30,667) | ($46,057) | | Net Loss | ($12,051) | ($33,483) | Consolidated Balance Sheets As of October 31, 2024, Zscaler's balance sheet remains strong with total assets of $4.71 billion, cash and short-term investments totaling $2.71 billion, and total deferred revenue at $1.78 billion Key Balance Sheet Items (in thousands) | Metric | Oct 31, 2024 | Jul 31, 2024 | | :--- | :--- | :--- | | Cash & Short-Term Investments | $2,707,897 | $2,409,654 | | Total Assets | $4,709,002 | $4,704,968 | | Total Deferred Revenue | $1,783,720 | $1,894,974 | | Total Liabilities | $3,280,457 | $3,430,866 | | Total Stockholders' Equity | $1,428,545 | $1,274,102 | Consolidated Statements of Cash Flows In the first quarter, Zscaler generated $331.3 million in cash from operating activities, a 27% increase year-over-year, resulting in a strong free cash flow of $291.9 million with a 46% margin Q1 Cash Flow Summary (in thousands) | Metric | Q1 FY2025 | Q1 FY2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $331,335 | $260,806 | | Net Cash used in Investing Activities | ($201,660) | ($162,545) | | Net Increase in Cash | $130,565 | $99,517 | Free Cash Flow Calculation (in thousands) | Metric | Q1 FY2025 | Q1 FY2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $331,335 | $260,806 | | Less: Purchases of property, etc. | ($17,025) | ($28,659) | | Less: Capitalized internal-use software | ($22,429) | ($7,429) | | Free Cash Flow | $291,881 | $224,718 | Non-GAAP Financial Measures Zscaler utilizes non-GAAP metrics to provide supplemental insight into its operational performance, with key adjustments including the exclusion of stock-based compensation and a new projected 23% non-GAAP tax rate for fiscal 2025 Change in Non-GAAP Measures Presentation Effective August 1, 2024, Zscaler adopted a long-term projected non-GAAP tax rate of 23% for calculating non-GAAP net income and EPS to better reflect business performance and ensure consistency across reporting periods - Starting in fiscal 2025, the company is using a long-term projected non-GAAP tax rate of 23% to determine non-GAAP net income and EPS for better consistency across reporting periods[12][39][50] Reconciliation of GAAP to Non-GAAP Measures The reconciliation tables illustrate the adjustments made to arrive at non-GAAP figures, converting a GAAP operating loss of $30.7 million to a non-GAAP operating income of $134.1 million and a GAAP net loss of $12.1 million to a non-GAAP net income of $124.3 million for Q1 FY2025 Reconciliation of GAAP Loss to Non-GAAP Income from Operations (Q1 FY2025, in thousands) | Metric | Amount | | :--- | :--- | | GAAP loss from operations | ($30,667) | | Add: Stock-based compensation | $160,574 | | Add: Amortization of intangibles | $4,240 | | Non-GAAP income from operations | $134,147 | Reconciliation of GAAP Net Loss to Non-GAAP Net Income (Q1 FY2025, in thousands) | Metric | Amount | | :--- | :--- | | GAAP net loss | ($12,051) | | Add: Stock-based compensation | $160,574 | | Add: Amortization of intangibles & debt costs | $5,221 | | Add: Tax adjustments | $29,481 | | Non-GAAP net income | $124,263 | Explanation of Non-GAAP Measures Zscaler defines its key non-GAAP metrics, including Calculated Billings and Free Cash Flow, and explains the exclusion of non-cash expenses like stock-based compensation and amortization to provide a clearer view of ongoing operational performance - Calculated Billings is defined as revenue plus the change in deferred revenue in a period, reflecting amounts invoiced for subscriptions[51] - Free Cash Flow is defined as net cash provided by operating activities less purchases of property, equipment, and capitalized internal-use software[51] - The primary expenses excluded from non-GAAP measures are stock-based compensation (and related payroll taxes) and amortization of acquired intangible assets and debt issuance costs[50]