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Zscaler (ZS) Down 2% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Zscaler (ZS - Free Report) . Shares have lost about 2% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Zscaler due for a breakout? 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 Q4 Earnings and Revenues Beat Estimates, Rise Y/Y
Zscaler reported fourth-quarter 2023 non-GAAP earnings of 64 cents per share, which beat the Zacks Consensus Estimate by 30.61%. The company reported earnings of 25 cents per share in the year-ago quarter.
Zscaler’s fourth-quarter fiscal 2023 revenues were $455 million, which surpassed the Zacks Consensus Estimate by 5.71% and surged 43.1% year over year.
Top-Line Details
During the fiscal fourth quarter, Zscaler’s calculated billings increased 38.2% year over year to $719.3 million.
Region-wise, the Americas accounted for 53% of revenues, while the EMEA contributed 32%. The Asia Pacific and Japan made up the remaining 15%.
Zscaler strengthened the capabilities of its Zero Trust Exchange cloud security platform through the launch of Risk360 and Zero Trust Branch Connectivity in the reported quarter.
In the fiscal fourth 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 121% in the reported quarter.
Remaining Performance Obligations (RPO), representing Zscaler’s committed non-cancelable future revenues, were $3.51 billion as of Jul 31, up 35% year over year. The current RPO is approximately 49% of the total RPO.
At the end of the quarter, the company had 449 customers with $1 million or higher annualized recurring revenues, up 37.3% year over year.
ZS added 177 customers during the quarter who pay $100,000 annually. The total count of such customers reached 2,609 at the end of the fiscal fourth quarter.
Operating Details
The non-GAAP gross profit increased 41.5% year over year to $367.1 million. However, the non-GAAP gross margin contracted 90 basis points (bps) on a year-over-year basis to 80.7%.
Total non-GAAP operating expenses, accounting for 62% of revenues, increased 27% year over year to $281.1 million. Sales and marketing, research and development, and general and administrative expenses increased 22.9%, 38.6% and 33.4%, on a year-to-date basis, respectively.
The non-GAAP operating income was $86 million compared with the year-ago quarter’s $38.1 million. The non-GAAP operating margin expanded 690 bps year over year to 18.9%.
Balance Sheet & Cash Flow
As of Jul 31, 2023, Zscaler had $2.1 billion in cash, cash equivalents and short-term investments compared with $1.97 billion as of Apr 30.
The company generated operating and free cash flows of $136 million and $101.3 million, respectively. Zscaler generated operating and free cash flows of $108.5 million and $73.9 million, respectively, in the previous quarter.
Guidance
Zscaler expects fiscal 2024 revenues between $2.050 billion and $2.065 billion. The company expects emerging products contribution to increase to more than 20% in the fiscal year.
Calculated billings are expected in the range of $2.52-$2.56 billion.
The non-GAAP operating income is estimated in the band of $330-$340 million. Non-GAAP earnings for fiscal 2024 are expected in the band of $2.20-$2.25 per share.
For the first quarter of fiscal 2024, Zscaler projects revenues between $472 million and $474 million. Gross margin is expected to be 80%. The non-GAAP income from operations is estimated in the band of $70-$72 million. Non-GAAP earnings are projected between 48 and 49 cents per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -13.87% due to these changes.
VGM Scores
At this time, Zscaler has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest 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 downward for the stock, and the magnitude of these revisions looks promising. Notably, Zscaler has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Zscaler (ZS) Down 2% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Zscaler (ZS - Free Report) . Shares have lost about 2% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Zscaler due for a breakout? 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 Q4 Earnings and Revenues Beat Estimates, Rise Y/Y
Zscaler reported fourth-quarter 2023 non-GAAP earnings of 64 cents per share, which beat the Zacks Consensus Estimate by 30.61%. The company reported earnings of 25 cents per share in the year-ago quarter.
Zscaler’s fourth-quarter fiscal 2023 revenues were $455 million, which surpassed the Zacks Consensus Estimate by 5.71% and surged 43.1% year over year.
Top-Line Details
During the fiscal fourth quarter, Zscaler’s calculated billings increased 38.2% year over year to $719.3 million.
Region-wise, the Americas accounted for 53% of revenues, while the EMEA contributed 32%. The Asia Pacific and Japan made up the remaining 15%.
Zscaler strengthened the capabilities of its Zero Trust Exchange cloud security platform through the launch of Risk360 and Zero Trust Branch Connectivity in the reported quarter.
In the fiscal fourth 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 121% in the reported quarter.
Remaining Performance Obligations (RPO), representing Zscaler’s committed non-cancelable future revenues, were $3.51 billion as of Jul 31, up 35% year over year. The current RPO is approximately 49% of the total RPO.
At the end of the quarter, the company had 449 customers with $1 million or higher annualized recurring revenues, up 37.3% year over year.
ZS added 177 customers during the quarter who pay $100,000 annually. The total count of such customers reached 2,609 at the end of the fiscal fourth quarter.
Operating Details
The non-GAAP gross profit increased 41.5% year over year to $367.1 million. However, the non-GAAP gross margin contracted 90 basis points (bps) on a year-over-year basis to 80.7%.
Total non-GAAP operating expenses, accounting for 62% of revenues, increased 27% year over year to $281.1 million. Sales and marketing, research and development, and general and administrative expenses increased 22.9%, 38.6% and 33.4%, on a year-to-date basis, respectively.
The non-GAAP operating income was $86 million compared with the year-ago quarter’s $38.1 million. The non-GAAP operating margin expanded 690 bps year over year to 18.9%.
Balance Sheet & Cash Flow
As of Jul 31, 2023, Zscaler had $2.1 billion in cash, cash equivalents and short-term investments compared with $1.97 billion as of Apr 30.
The company generated operating and free cash flows of $136 million and $101.3 million, respectively. Zscaler generated operating and free cash flows of $108.5 million and $73.9 million, respectively, in the previous quarter.
Guidance
Zscaler expects fiscal 2024 revenues between $2.050 billion and $2.065 billion. The company expects emerging products contribution to increase to more than 20% in the fiscal year.
Calculated billings are expected in the range of $2.52-$2.56 billion.
The non-GAAP operating income is estimated in the band of $330-$340 million. Non-GAAP earnings for fiscal 2024 are expected in the band of $2.20-$2.25 per share.
For the first quarter of fiscal 2024, Zscaler projects revenues between $472 million and $474 million. Gross margin is expected to be 80%. The non-GAAP income from operations is estimated in the band of $70-$72 million. Non-GAAP earnings are projected between 48 and 49 cents per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -13.87% due to these changes.
VGM Scores
At this time, Zscaler has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest 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 downward for the stock, and the magnitude of these revisions looks promising. Notably, Zscaler has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.