01—Abstract
Summary
Summary of the 10-Q filed December 5, 2024. Cited figures are marked; the original filing is the authoritative source.
Zscaler, Inc. reported revenue of $627.96 milliona for the three months ended October 31, 2024, up from $496.70 million a year earlier, with the filing stating revenue increased $131.3 million, or 26%.
Net loss narrowed to $12.05 millionb from $33.48 million, and GAAP loss from operations improved to $30.67 million from $46.06 million. Non-GAAP income from operations was $134.15 million, a 21% non-GAAP operating margin, compared with $89.71 million and 18% a year earlier. Net cash provided by operating activities was $331.34 million and free cash flow was $291.88 million, a 46% free cash flow margin.
The balance sheet shows cash, cash equivalents and short-term investments of $2.71 billionc as of October 31, 2024. Deferred revenue totaled $1.78 billion, of which $1.53 billion is current, and remaining performance obligations were $4.41 billion, with 49% expected to be recognized over the next 12 months. The 0.125% convertible senior notes due July 1, 2025 carry a principal amount of $1.15 billion and are a key liquidity item.
The company states that existing cash is sufficient for at least the next 12 months. The filing also highlights a dollar-based net retention rate of 114% for the trailing 12 months ended October 31, 2024, down from 120% a year earlier, and a subsequent event in November 2024: a non-cancelable agreement with a public cloud provider with a total minimum purchase commitment of $300.0 milliond over five years.
02—Key points
Key Highlights
- Revenue of $627.96 million, up 26% from $496.70 million in the prior-year quarter, driven by increased users and additional subscriptions to existing customers.
- Net loss of $12.05 million, or $(0.08) per share, compared with a net loss of $33.48 million, or $(0.23) per share, a year earlier.
- Non-GAAP income from operations of $134.15 million (21% non-GAAP operating margin) versus $89.71 million (18%) in the prior-year quarter.
- Free cash flow of $291.88 million (46% free cash flow margin) versus $224.72 million (45%) a year earlier.
- Dollar-based net retention rate of 114% for the trailing 12 months ended October 31, 2024, down from 120% a year earlier.
- Remaining performance obligations of $4.41 billion, with 49% expected to be recognized over the next 12 months.
- Convertible senior notes of $1.15 billion principal amount mature July 1, 2025; the filing states the conversion conditions were not met during the quarter.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q1 FY2025, Zscaler lost $0.02.
- Revenue$628.0M100.0%
- Cost of revenue−$141.5M22.5%
- Gross profit$486.5M77.5%
- Operating costs−$517.2M82.4%
- Operating income−$30.7M4.9%
- Interest, other & tax$18.6M3.0%
- Net income−$12.1M1.9%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2025filed December 5, 2024Financial Statements
Q1 FY2025 against Q1 FY2024
| Line item | Q1 FY2025Q1 FY2024 | Change |
|---|---|---|
| Revenue | $627.96M$496.70M | +26.4% |
| Cost of Revenue | $141.46M$111.39M | +27.0% |
| Gross Profit | $486.49M$385.31M | +26.3% |
| R&D Expenses | $154.25M$113.54M | +35.9% |
| Operating Expenses | $517.16M$431.37M | +19.9% |
| Operating Income | -$30.67M-$46.06M | +33.4% |
| Interest Expense | $1.34M$1.34M | +0.3% |
| Net Income | -$12.05M-$33.48M | +64.0% |
| EPS (Basic) | $-0.08$-0.23 | +65.2% |
| EPS (Diluted) | $-0.08$-0.23 | +65.2% |
| Shares Outstanding (Basic) | 152.56M147.63M | +3.3% |
| Shares Outstanding (Diluted) | 152.56M147.63M | +3.3% |
05—Questions
Frequently Asked Questions
How did Zscaler's revenue and profitability change in the quarter ended October 31, 2024?
Revenue rose 26% to $627.96 million from $496.70 million. GAAP net loss narrowed to $12.05 million from $33.48 million, and GAAP loss from operations narrowed to $30.67 million from $46.06 million. The filing attributes the revenue increase primarily to more users and additional subscriptions sold to existing customers, which contributed $94.7 million, with the remainder from new customers.
How much liquidity does Zscaler have, and does it cover its debt?
Cash, cash equivalents and short-term investments totaled $2.71 billion as of October 31, 2024. The company states this is sufficient to fund working capital, capital expenditures and convertible senior notes repayment requirements for at least the next 12 months. The $1.15 billion principal of 0.125% convertible senior notes matures July 1, 2025.
What is driving the change in Zscaler's customer retention metrics?
The dollar-based net retention rate was 114% for the trailing 12 months ended October 31, 2024, compared with 120% a year earlier. The filing lists factors that can affect this metric, including the performance of the cloud platform, selling bigger deals, the rate of ARR expansion of existing customers and potential changes in renewal rates, but it does not attribute the decline to a single cause.
What significant commitments did Zscaler disclose after the quarter ended?
In November 2024, Zscaler entered into a non-cancelable agreement with a public cloud provider for a total minimum purchase commitment of $300.0 million over a five-year term. Earlier, in September 2024, it had entered a $100.0 million five-year commitment with a public cloud provider.
06—Continue