Yahoo Finance Zscaler (ZS) Beats on Q3 Earnings and Revenue Estimates
Zscaler ZS delivered a better-than-anticipated third-quarter fiscal 2023 performance. The company reported non-GAAP earnings of 48 cents per share, which beat the Zacks Consensus Estimate of 42 cents and surged more than threefold from the year-ago quarter’s earnings of 17 cents.
Zscaler’s third-quarter fiscal 2023 revenues were $418.8 million, surpassing the Zacks Consensus Estimate of $417.4 million. The top line improved 46% from the prior-year reported figure.
Top-Line Details
During the fiscal third quarter, Zscaler’s calculated billings increased 40% year over year to $482 million.
Region-wise, the Americas accounted for 54% of revenues, while the EMEA contributed 31%. The Asia Pacific and Japan made up the remaining 15%.
ZS' Zero Trust Exchange platform acted as a key catalyst in the fiscal third quarter. The company benefited from the sustained demand for its products, given the healthy environment of the global security market. Increased cyber and ransomware risks, coupled with accelerated digital transformation, contributed significantly to the growth.
Zscaler, Inc. Price, Consensus and EPS Surprise
Zscaler, Inc. price-consensus-eps-surprise-chart | Zscaler, Inc. Quote
Customer Details
In the fiscal third 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 more than 125%.
Remaining Performance Obligations, representing Zscaler’s committed non-cancelable future revenues, were $3.02 billion as of Apr 30, significantly up 36% year over year.
At the end of the quarter, the company had 400 customers with $1 million or higher annualized recurring revenues. The figure, which is the highest so far, surged 39% year over year.
ZS added 95 customers during the quarter who pay $100,000 annually. The total count of such customers reached 2,432 at the end of the fiscal third quarter.
Operating Details
The non-GAAP gross profit increased 45.1% year over year to $335.7 million. However, the non-GAAP gross margin contracted 100 basis points (bps) to 80% from 81% in the year-ago quarter.
Total non-GAAP operating expenses, accounting for 65% of revenues, climbed 33.2% to $271.8 million.
The non-GAAP operating income was $63.9 million compared with the previous quarter’s $48.8 million and the year-ago quarter’s $27.2 million. The non-GAAP operating margin expanded 600 bps year over year to 15%. Sequentially, the margin grew 200 bps.
Balance Sheet & Cash Flow
As of Apr 30, 2023, Zscaler had $1.97 billion in cash, cash equivalents and short-term investments compared with the previous quarter’s $1.91 billion.
The company generated operating and free cash flows of $108.5 million and $73.9 million, respectively.
Guidance
Zscaler raised its guidance for fiscal 2023. For the full fiscal, the company now anticipates revenues between $1.591 billion and $1.593 billion, up from the earlier forecast in the band of $1.558-$1.563 billion.
Calculated billings are still expected in the range of $1.935-$1.945 billion.
The non-GAAP operating income is estimated in the band of $224-$225 million instead of the earlier projection in the range of $213-$215 million. Non-GAAP earnings for fiscal 2023 are now expected in the band of $1.63-$1.64 per share, up from the $1.52-$1.53 per share range forecast previously.
For the fourth quarter of fiscal 2023, Zscaler projects revenues between $429 million and $431 million. The non-GAAP income from operations is estimated in the band of $69-$70 million. Non-GAAP earnings are projected to be approximately 49 cents per share.
Zacks Rank & Stocks to Consider
Zscaler currently carries a Zacks Rank #3 (Hold). Shares of ZS have rallied 52.1% year to date (YTD).
Some better-ranked stocks from the broader technology sector are Meta Platforms META, Manhattan Associates MANH and Blackbaud BLKB. While Meta and Manhattan Associates each sport a Zacks Rank #1 (Strong Buy), Blackbaud carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Meta's second-quarter 2023 earnings has been revised 8 cents northward to $2.87 per share in the past 30 days. For 2023, earnings estimates have been revised 2.4% upward to $12.04 per share in the past 30 days.
Meta’s earnings beat the Zacks Consensus Estimate twice in the preceding four quarters while missing the same on two occasions, the average surprise being 15.5%. Shares of META have surged 120% YTD.
The Zacks Consensus Estimate for Manhattan Associates' second-quarter 2023 earnings has been revised upward by a couple of cents to 72 cents per share for the past 60 days. For 2023, earnings estimates have moved upward by 17 cents to $2.87 per share in the past 60 days.
Manhattan Associates' earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 33.6%. Shares of MANH have soared 49.5% YTD.
The Zacks Consensus Estimate for Blackbaud’s second-quarter 2023 earnings has been revised 10 cents northward to 93 cents per share in the past 30 days. For 2023, earnings estimates have increased to $3.75 per share from $3.43 30 days ago.
Blackbaud's earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 10.4%. Shares of BLKB have rallied 24.7% YTD.
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