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Why Is Zscaler (ZS) Up 7.6% Since Last Earnings Report?
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A month has gone by since the last earnings report for Zscaler (ZS - Free Report) . Shares have added about 7.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Zscaler due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Zscaler's Q1 Earnings and Revenues Top Estimates, Up Y/Y
Zscaler reported first-quarter fiscal 2021 adjusted earnings of 14 cents per share that beat the Zacks Consensus Estimate by a whopping 133.3%. Moreover, quarterly earnings soared more than three-fold from the year-ago quarter’s earnings of 4 cents per share.
Revenues of $142.6 million surged 52% year over year on rise in adoption of the company’s cloud platform security solutions by global enterprises. The figure surpassed the consensus mark by 7.7%.
Americas accounted for 51% of revenues, while EMEA contributed 39%. The remaining came in from the Asia Pacific and Japan.
Calculated billings jumped 64% year over year to $144.7 million in the reported quarter.
Zscaler’s quarterly results benefited from continued solid demand for its products, given the healthy environment of the global security market.
Also, a huge global workforce is working remotely in an effort to contain the spread of coronavirus. However, an increasing number of people logging into employers' networks has been prompting a greater need for security. This trend spurred demand for Zscaler’s products during the fiscal first quarter.
Customer Details
Zscaler continued to win customers and its net dollar retention rate was strong at 120% compared with the 120% recorded in the previous quarter as well in the year-ago quarter.
Remaining Performance Obligations (RPO), which represent Zscaler’s committed non-cancelable future revenues, were $864 million as of Oct 31, up 56% year over year.
Operating Details
In the reported quarter, non-GAAP gross margin remained flat year over year at 81%. Sequentially, non-GAAP gross margin witnessed an expansion of 200 basis points (bps), mainly driven by better timing of expenses and migration of most of its ZPA infrastructure to its data centers.
Non-GAAP research & development (R&D), sales & marketing (S&M) and general & administrative (G&A) expenses flared up 42%, 31% and 29% to $20.9 million, $64.2 million and $10.9 million, respectively.
Non-GAAP operating income was $19.7 million in the fiscal first quarter compared with the year-ago quarter’s $3.7 million.
Balance Sheet & Cash Flow
As of Oct 31, Zscaler had $1.42 billion in cash, cash equivalents and short-term investments compared with the previous quarter’s $1.37 billion. Notably, the company had issued convertible senior notes worth $1.15 billion in June 2020.
In the reported quarter, cash provided by operations was $53.5 million. Free cash flow was $42.2 million.
Deferred revenues surged 51% year on year to $371.9 million.
Guidance
For second-quarter fiscal 2021, Zscaler expects revenues between $146 million and $148 million. Non-GAAP income from operations is expected between $11 million and $12 million. Non-GAAP earnings are projected between 7 cent and 8 cents per share.
For fiscal 2021, Zscaler raised the revenue guidance range to $608-$612 million from the $580-$590 million projected earlier. Non-GAAP income from operations is now expected to be $55-$57 million, up from the previous forecast of $44-$46 million. Non-GAAP earnings estimate has been revised upward to 37-38 cents per share from 28-30 cents per share.
The company’s fiscal 2021 calculated billings are estimated now between $755 million and $765 million, up from the earlier guided range of $710-$720 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
Currently, Zscaler has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Zscaler has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Zscaler (ZS) Up 7.6% Since Last Earnings Report?
A month has gone by since the last earnings report for Zscaler (ZS - Free Report) . Shares have added about 7.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Zscaler due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Zscaler's Q1 Earnings and Revenues Top Estimates, Up Y/Y
Zscaler reported first-quarter fiscal 2021 adjusted earnings of 14 cents per share that beat the Zacks Consensus Estimate by a whopping 133.3%. Moreover, quarterly earnings soared more than three-fold from the year-ago quarter’s earnings of 4 cents per share.
Revenues of $142.6 million surged 52% year over year on rise in adoption of the company’s cloud platform security solutions by global enterprises. The figure surpassed the consensus mark by 7.7%.
Americas accounted for 51% of revenues, while EMEA contributed 39%. The remaining came in from the Asia Pacific and Japan.
Calculated billings jumped 64% year over year to $144.7 million in the reported quarter.
Zscaler’s quarterly results benefited from continued solid demand for its products, given the healthy environment of the global security market.
Also, a huge global workforce is working remotely in an effort to contain the spread of coronavirus. However, an increasing number of people logging into employers' networks has been prompting a greater need for security. This trend spurred demand for Zscaler’s products during the fiscal first quarter.
Customer Details
Zscaler continued to win customers and its net dollar retention rate was strong at 120% compared with the 120% recorded in the previous quarter as well in the year-ago quarter.
Remaining Performance Obligations (RPO), which represent Zscaler’s committed non-cancelable future revenues, were $864 million as of Oct 31, up 56% year over year.
Operating Details
In the reported quarter, non-GAAP gross margin remained flat year over year at 81%. Sequentially, non-GAAP gross margin witnessed an expansion of 200 basis points (bps), mainly driven by better timing of expenses and migration of most of its ZPA infrastructure to its data centers.
Non-GAAP research & development (R&D), sales & marketing (S&M) and general & administrative (G&A) expenses flared up 42%, 31% and 29% to $20.9 million, $64.2 million and $10.9 million, respectively.
Non-GAAP operating income was $19.7 million in the fiscal first quarter compared with the year-ago quarter’s $3.7 million.
Balance Sheet & Cash Flow
As of Oct 31, Zscaler had $1.42 billion in cash, cash equivalents and short-term investments compared with the previous quarter’s $1.37 billion. Notably, the company had issued convertible senior notes worth $1.15 billion in June 2020.
In the reported quarter, cash provided by operations was $53.5 million. Free cash flow was $42.2 million.
Deferred revenues surged 51% year on year to $371.9 million.
Guidance
For second-quarter fiscal 2021, Zscaler expects revenues between $146 million and $148 million. Non-GAAP income from operations is expected between $11 million and $12 million. Non-GAAP earnings are projected between 7 cent and 8 cents per share.
For fiscal 2021, Zscaler raised the revenue guidance range to $608-$612 million from the $580-$590 million projected earlier. Non-GAAP income from operations is now expected to be $55-$57 million, up from the previous forecast of $44-$46 million. Non-GAAP earnings estimate has been revised upward to 37-38 cents per share from 28-30 cents per share.
The company’s fiscal 2021 calculated billings are estimated now between $755 million and $765 million, up from the earlier guided range of $710-$720 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
Currently, Zscaler has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Zscaler has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.