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Why Is Zscaler (ZS) Up 1.6% 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 1.6% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.
Zscaler Earnings & Revenues Surpass Estimates in Q1
Zscaler reported non-GAAP earnings of 14 cents per share, which beat the Zacks Consensus Estimate of 12 cents per share. The bottom line remained flat year over year.
The fiscal first-quarter revenues were $230.5 million surpassing the Zacks Consensus Estimate of $212.3 million. The top line rose 62% from the prior-year reported figure.
Top-Line Details
During the first quarter of fiscal 2022, calculated billings jumped 71% year over year to $247.7 million.
Geographically, the Americas accounted for 51% of revenues, while the EMEA contributed 35%. The Asia Pacific and Japan made up the remaining 14%.
Zscaler’s quarterly results benefited from sustained demand for its products given the healthy environment of the global security market. Increased cyber and ransom ware risks, coupled with accelerating digital transformation contributed significantly to growth. Its Zero Trust Exchange platform acted as a key catalyst.
Customer Details
In the first quarter, Zscaler continued to win multiple customers in each of its three market segments: financial services, enterprise market and federal. Its net dollar-based retention rate was at 125% compared with the previous quarter’s 128%.
Remaining Performance Obligations (RPO) representing Zscaler’s committed non-cancellable future revenues were $1.71 billion as of Oct 31, significantly up 97% year over year.
During the first quarter, Zscaler had 224 customers with $1 million or higher annualized recurring revenue (“ARR”). The figure, which is the highest so far, improved 86.7% year over year.
The company had 1,616 customers with $100,000 or higher ARR. The figure reflected year-over-year growth of 52.9%.
Operating Details
In the first quarter, non-GAAP gross margin remained flat year over year at 81%. Sequentially, non-GAAP gross margin expanded 100 basis points (bps).
Non-GAAP research & development (16% of revenues), sales & marketing (48% of revenues), and general & administrative (7% of total revenues) expenses flared up 75.6%, 71.7% and 37% to $36.6 million, $110.2 million and $15.0 million, respectively.
Total non-GAAP operating expenses, accounting for 71% of total revenues, climbed 68.6% to $161.8 million. Operating expenses as a percentage of revenues surged 300 bps primarily due to increased hiring, higher compensation expenses and investments related to the acquisition of Trustdome and SmokeScreen.
Non-GAAP operating margin contracted 400 bps year over year to 10%. Non-GAAP operating income was $23.9 million compared with the year-ago quarter’s $19.7 million.
Balance Sheet & Cash Flow
As of Oct 31, 2021, Zscaler had $1.58 billion in cash, cash equivalents and short-term investments compared with the previous quarter’s $1.50 billion.
Cash flow generated through operating activities was $93.3 million, while it generated free cash flow of $83.4 million in the first quarter of fiscal 2022.
Free cash flow margin expanded 600 bps to 36% during the reported quarter. Deferred revenues were $647.8 million, up 74% year over year.
Guidance
For the second quarter of fiscal 2022, Zscaler projects revenues between $240 million and $242 million. Non-GAAP earnings are projected to be approximately 11 cents per share.
Non-GAAP income from operations is estimated to be $20-$21 million.
Zscaler updated its fiscal 2022 guidance. It anticipates revenues of $1.00-$1.01 billion, up from the previous guidance of $940-$950 million.
Calculated billings are anticipated in the range of $1.300 billion and $1.305 billion, up from the previously guided range of $1.23-$1.25 billion.
Non-GAAP earnings for fiscal 2022 are expected to be 50-52 cents per share, down from previous forecast 52-56 cents.
Non-GAAP operating income is estimated to be $90-$93 million, up from previous guidance of $85-$90 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -15.91% due to these changes.
VGM Scores
Currently, Zscaler has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. It's no surprise Zscaler has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Why Is Zscaler (ZS) Up 1.6% Since Last Earnings Report?
A month has gone by since the last earnings report for Zscaler (ZS - Free Report) . Shares have added about 1.6% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.
Zscaler Earnings & Revenues Surpass Estimates in Q1
Zscaler delivered better-than-anticipated first-quarter fiscal 2022 performance.
Zscaler reported non-GAAP earnings of 14 cents per share, which beat the Zacks Consensus Estimate of 12 cents per share. The bottom line remained flat year over year.
The fiscal first-quarter revenues were $230.5 million surpassing the Zacks Consensus Estimate of $212.3 million. The top line rose 62% from the prior-year reported figure.
Top-Line Details
During the first quarter of fiscal 2022, calculated billings jumped 71% year over year to $247.7 million.
Geographically, the Americas accounted for 51% of revenues, while the EMEA contributed 35%. The Asia Pacific and Japan made up the remaining 14%.
Zscaler’s quarterly results benefited from sustained demand for its products given the healthy environment of the global security market. Increased cyber and ransom ware risks, coupled with accelerating digital transformation contributed significantly to growth. Its Zero Trust Exchange platform acted as a key catalyst.
Customer Details
In the first quarter, Zscaler continued to win multiple customers in each of its three market segments: financial services, enterprise market and federal. Its net dollar-based retention rate was at 125% compared with the previous quarter’s 128%.
Remaining Performance Obligations (RPO) representing Zscaler’s committed non-cancellable future revenues were $1.71 billion as of Oct 31, significantly up 97% year over year.
During the first quarter, Zscaler had 224 customers with $1 million or higher annualized recurring revenue (“ARR”). The figure, which is the highest so far, improved 86.7% year over year.
The company had 1,616 customers with $100,000 or higher ARR. The figure reflected year-over-year growth of 52.9%.
Operating Details
In the first quarter, non-GAAP gross margin remained flat year over year at 81%. Sequentially, non-GAAP gross margin expanded 100 basis points (bps).
Non-GAAP research & development (16% of revenues), sales & marketing (48% of revenues), and general & administrative (7% of total revenues) expenses flared up 75.6%, 71.7% and 37% to $36.6 million, $110.2 million and $15.0 million, respectively.
Total non-GAAP operating expenses, accounting for 71% of total revenues, climbed 68.6% to $161.8 million. Operating expenses as a percentage of revenues surged 300 bps primarily due to increased hiring, higher compensation expenses and investments related to the acquisition of Trustdome and SmokeScreen.
Non-GAAP operating margin contracted 400 bps year over year to 10%. Non-GAAP operating income was $23.9 million compared with the year-ago quarter’s $19.7 million.
Balance Sheet & Cash Flow
As of Oct 31, 2021, Zscaler had $1.58 billion in cash, cash equivalents and short-term investments compared with the previous quarter’s $1.50 billion.
Cash flow generated through operating activities was $93.3 million, while it generated free cash flow of $83.4 million in the first quarter of fiscal 2022.
Free cash flow margin expanded 600 bps to 36% during the reported quarter. Deferred revenues were $647.8 million, up 74% year over year.
Guidance
For the second quarter of fiscal 2022, Zscaler projects revenues between $240 million and $242 million. Non-GAAP earnings are projected to be approximately 11 cents per share.
Non-GAAP income from operations is estimated to be $20-$21 million.
Zscaler updated its fiscal 2022 guidance. It anticipates revenues of $1.00-$1.01 billion, up from the previous guidance of $940-$950 million.
Calculated billings are anticipated in the range of $1.300 billion and $1.305 billion, up from the previously guided range of $1.23-$1.25 billion.
Non-GAAP earnings for fiscal 2022 are expected to be 50-52 cents per share, down from previous forecast 52-56 cents.
Non-GAAP operating income is estimated to be $90-$93 million, up from previous guidance of $85-$90 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -15.91% due to these changes.
VGM Scores
Currently, Zscaler has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. It's no surprise Zscaler has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.