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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 8-K
___________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
 
Date of Report (date of earliest event reported)
December 2, 2024
___________________________________
Zscaler, Inc.
(Exact name of registrant as specified in its charter)
___________________________________
Delaware
(State or other jurisdiction of incorporation or organization)
001-38413
(Commission File Number)
26-1173892
(I.R.S. Employer Identification Number)
120 Holger Way
San Jose, California 95134
(Address of principal executive offices and zip code)
(408) 553-0288
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
___________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange of which registered
Common Stock, $0.001 Par ValueZSThe Nasdaq Stock Market LLC

 Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company ☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 


Item 2.02 Results of Operations and Financial Condition.
On December 2, 2024, Zscaler, Inc. issued a press release announcing its financial results for the first fiscal quarter ended October 31, 2024. A copy of the press release is furnished herewith as Exhibit 99.1 and incorporated herein by reference.
The information contained in this Item 2.02 and Item 9.01 in this Current Report on Form 8-K, including the accompanying Exhibit 99.1 hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filings, unless expressly incorporated by specific reference in such filing.    
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No.Description of Exhibit
99.1
104Cover page interactive data file (embedded within the Inline XBRL document)
 
 


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Zscaler, Inc.
December 2, 2024/s/Remo Canessa
Remo Canessa
Chief Financial Officer




Exhibit 99.1

Zscaler Reports First Quarter Fiscal 2025 Financial Results
First Quarter Highlights
•Revenue grows 26% year-over-year to $628.0 million
•Calculated billings grows 13% year-over-year to $516.7 million
•Deferred revenue grows 27% year-over-year to $1,783.7 million
•GAAP net loss of $12.1 million compared to GAAP net loss of $33.5 million on a year-over-year basis
•Non-GAAP net income of $124.3 million compared to non-GAAP net income of $86.4 million on a year-over-year basis
SAN JOSE, California - December 2, 2024 - Zscaler, Inc. (Nasdaq: ZS), the leader in cloud security, today announced financial results for its first quarter of fiscal year 2025, ended October 31, 2024.

“Growing customer engagements and strong sales execution drove a solid Q1 with all metrics exceeding our guidance. The combination of Zero Trust and AI is creating exciting new opportunities, which we are well positioned to capture with our large and expanding platform,” said Jay Chaudhry, Chairman and CEO of Zscaler. “With our customer obsession, the world’s largest cybersecurity cloud, and an upleveled go-to-market machine, we are driving strong growth.”

First Quarter Fiscal 2025 Financial Highlights
•Revenue: $628.0 million, an increase of 26% year-over-year.
•Income (loss) from operations: GAAP loss from operations was $30.7 million, or 5% of revenue, compared to $46.1 million, or 9% of revenue, in the first quarter of fiscal 2024. Non-GAAP income from operations was $134.1 million, or 21% of revenue, compared to $89.7 million, or 18% of revenue, in the first quarter of fiscal 2024.
•Net income (loss): GAAP net loss was $12.1 million, compared to $33.5 million in the first quarter of fiscal 2024. Non-GAAP net income was $124.3 million, compared to $86.4 million in the first quarter of fiscal 2024.
•Net income (loss) per share, diluted: GAAP net loss per share was $0.08, compared to $0.23 in the first quarter of fiscal 2024. Non-GAAP net income per share was $0.77, compared to $0.55 in the first quarter of fiscal 2024.
•Cash flows: Cash provided by operations was $331.3 million, or 53% of revenue, compared to $260.8 million, or 53% of revenue, in the first quarter of fiscal 2024. Free cash flow was $291.9 million, or 46% of revenue, compared to $224.7 million, or 45% of revenue, in the first quarter of fiscal 2024.
•Deferred revenue: $1,783.7 million as of October 31, 2024, an increase of 27% year-over-year.
•Cash, cash equivalents and short-term investments: $2,707.9 million as of October 31, 2024, an increase of $298.2 million from July 31, 2024.

Recent Business Highlights
•Zscaler’s cloud security platform reached a new scalability milestone, surpassing half a trillion daily transactions, which is nearly 60 times greater than the total number of Google searches per day. This milestone underscores the unparalleled scalability, resilience, and trust customers have placed in the Zscaler platform, which enables organizations to secure users, applications, and devices, while simplifying operations and consolidating costs.

•Appointed Adam Geller as Chief Product Officer to accelerate Zscaler’s next phase of innovation and growth. Geller’s proven security product and engineering experience will be invaluable to the development of Zscaler’s AI-driven security operations platform.

•Announced a set of AI and Zero Trust integrations with the CrowdStrike Falcon® cybersecurity platform to advance security operations by providing advanced threat detection, response, and risk management.
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•Announced four new integrations with Okta designed to accelerate joint customers' Zero Trust transformation by delivering end-to-end, context-aware security. Together, Okta and Zscaler are helping customers reduce risk, improve the user experience, and enable cross-domain response through shared telemetry and threat intelligence.

•Published the Zscaler ThreatLabz 2024 Mobile, IoT, and OT Threat Report, which provides detailed insights covering mobile and IoT/OT cyber threat landscape from June 2023 through May 2024. ThreatLabz found that the Zscaler cloud blocked 45% more IoT malware transactions than last year–indicating botnets continue to proliferate across IoT devices.

Change in Non-GAAP Measures Presentation
Effective August 1, 2024, the beginning of our fiscal year ending July 31, 2025, we are using a long-term projected non-GAAP tax rate of 23% for the purpose of determining our non-GAAP net income and non-GAAP net income per share to provide better consistency across interim reporting periods in fiscal 2025 and beyond. Given the significant growth of our business and non-GAAP operating income, we believe this change is necessary to better reflect the performance of our business. We will continue to assess the appropriate non-GAAP tax rate on a regular basis, which could be subject to changes for a variety of reasons, including the rapidly evolving global tax environment, significant changes in our geographic earnings mix, or other changes to our strategy or business operations. Prior period amounts have been recast to reflect this change.
Financial Outlook
For the second quarter of fiscal 2025, we expect:
•Revenue of $633 million to $635 million
•Non-GAAP income from operations of $126 million to $128 million
•Non-GAAP net income per share of approximately $0.68 to $0.69, assuming approximately 163 million fully diluted shares outstanding and a non-GAAP tax rate of 23%
For the full year of fiscal 2025, we expect:
•Revenue of approximately $2.623 billion to $2.643 billion
•Calculated billings of $3.124 billion to $3.149 billion
•Non-GAAP income from operations of $549 million to $559 million
•Non-GAAP net income per share of $2.94 to $2.99, assuming approximately 164 million fully diluted shares outstanding and a non-GAAP tax rate of 23%
These statements are forward-looking and actual results may differ materially. Refer to the Forward-Looking Statements safe harbor below for information on the factors that could cause our actual results to differ materially from these forward-looking statements.

Guidance for non-GAAP income from operations excludes stock-based compensation expense and related employer payroll taxes, amortization of debt issuance costs, and amortization expense of acquired intangible assets. We have not reconciled our expectations of non-GAAP income from operations and non-GAAP net income per share to their most directly comparable GAAP measures because certain items are out of our control or cannot be reasonably predicted. For those reasons, we are also unable to address the probable significance of the unavailable information, the variability of which may have a significant impact on future results. Accordingly, a reconciliation for the guidance for non-GAAP income from operations and non-GAAP net income per share is not available without unreasonable effort.

For further information regarding why we believe that these non-GAAP measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to the "Explanation of Non-GAAP Financial Measures" section of this press release.
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Conference Call and Webcast Information
Zscaler will host a conference call for analysts and investors to discuss its first quarter of fiscal 2025 and outlook for its second quarter of fiscal 2025 and full year fiscal 2025 today at 1:30 p.m. Pacific time (4:30 p.m. Eastern time).
Date:Monday, December 2, 2024
Time:1:30 p.m. PT
Webcast:
https://ir.zscaler.com
Dial-in:To join by phone, register at the following link: (https://register.vevent.com/register/BIe2c2c82d1e694dd3a00b3debc6f30548). After registering, you will be provided with a dial-in number and a personal PIN that you will need to join the call.
Upcoming Conferences
Second quarter of fiscal 2025 investor conference participation schedule:

•UBS Global Technology and AI Conference in Scottsdale
Wednesday, December 4, 2024

•BTIG Virtual Software Forum
Monday, December 9, 2024

•Scotiabank Annual Global Technology Conference in San Francisco
Tuesday, December 10, 2024

•Barclays Annual Global Technology Conference in San Francisco
Wednesday, December 11, 2024

•Needham Growth Conference
Thursday, January 9, 2025 and Friday, January 10, 2025

Sessions which offer a webcast will be available on the Investor Relations section of the Zscaler website at https://ir.zscaler.com/

Forward-Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties, including, but not limited to, statements regarding our future financial and operating performance, including our financial outlook for the second quarter of fiscal 2025 and full year fiscal 2025. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including but not limited to: macroeconomic influences and instability, geopolitical events, operations and financial results and the economy in general; risks related to the use of AI in our platform; our limited operating history; our ability to identify and effectively implement the necessary changes to address execution challenges; risks associated with managing our rapid growth, including fluctuations from period to period; our limited experience with new products and subscriptions and support introductions and the risks associated with new products and subscription and support offerings, including the discovery of software bugs; our ability to attract and retain new customers; the failure to timely develop and achieve market acceptance of new products and subscriptions as well as existing products and subscription and support; rapidly evolving technological developments in the market for network security products and subscription and support offerings and our ability to remain competitive; length of sales cycles; useful lives of our assets and other estimates; and general market, political, economic and business conditions.
Additional risks and uncertainties that could affect our financial results are included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth from time to time in our filings and reports with the Securities and Exchange Commission ("SEC"), including our Annual Report on Form 10-K for the fiscal year ended July 31, 2024, filed on September 12, 2024, as well as future filings and reports by us, copies of which are available on our website at ir.zscaler.com and on the SEC’s website at www.sec.gov. You should not rely on these forward-looking statements, as actual outcomes and results may differ materially from those contemplated by these forward-looking statements as a result of such risks and uncertainties. Additional information will also be set forth in other filings that we make with the SEC from time to time. All forward-looking statements in this press release are based on information available to us as
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of the date hereof, and we do not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

Use of Non-GAAP Financial Information
We believe that the presentation of non-GAAP financial information provides important supplemental information to management and investors regarding financial and business trends relating to our financial condition and results of operations. For further information regarding why we believe that these non-GAAP measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to the “Explanation of Non-GAAP Financial Measures” section of this press release.

About Zscaler
Zscaler (Nasdaq: ZS) accelerates digital transformation so customers can be more agile, efficient, resilient, and secure. The Zscaler Zero Trust Exchange™ platform protects thousands of customers from cyberattacks and data loss by securely connecting users, devices, and applications in any location. Distributed across more than 160 data centers globally, the SSE-based Zero Trust Exchange is the world’s largest in-line cloud security platform.
Zscaler™ and the other trademarks listed at https://www.zscaler.com/legal/trademarks are either (i) registered trademarks or service marks or (ii) trademarks or service marks of Zscaler, Inc. in the United States and/or other countries. Any other trademarks are the properties of their respective owners.

Investor Relations Contacts
Ashwin Kesireddy
VP, Investor Relations and Strategic Finance
(415) 798-1475
ir@zscaler.com

Natalia Wodecki
Media Relations Contact
press@zscaler.com

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ZSCALER, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
October 31,
20242023
Revenue$627,955 $496,703 
Cost of revenue (1) (2)
141,462 111,394 
Gross profit486,493 385,309 
Operating expenses:
Sales and marketing (1) (2)
306,087 267,111 
Research and development (1) (2)
154,254 113,539 
General and administrative (1)
56,819 50,716 
Total operating expenses517,160 431,366 
Loss from operations(30,667)(46,057)
Interest income30,048 25,942 
Interest expense (3)
(3,143)(3,159)
Other expense, net(652)(1,212)
Loss before income taxes(4,414)(24,486)
Provision for income taxes
7,637 8,997 
Net loss$(12,051)$(33,483)
Net loss per share, basic and diluted$(0.08)$(0.23)
Weighted-average shares used in computing net loss per share, basic and diluted152,557 147,625 
(1) Includes stock-based compensation expense and related payroll taxes as follows:
Cost of revenue$15,793 $12,955 
Sales and marketing64,866 58,668 
Research and development58,865 41,043 
General and administrative21,050 20,063 
Total$160,574 $132,729 
(2) Includes amortization expense of acquired intangible assets as follows:
Cost of revenue$3,675 $2,717 
Sales and marketing
425 226 
Research and development140 93 
Total$4,240 $3,036 
(3) Includes amortization of debt issuance costs
$981 $977 

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ZSCALER, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
October 31,July 31,
20242024
Assets
Current assets:
Cash and cash equivalents$1,553,645 $1,423,080 
Short-term investments1,154,252 986,574 
Accounts receivable, net424,573 736,529 
Deferred contract acquisition costs152,475 148,873 
Prepaid expenses and other current assets108,835 101,561 
Total current assets3,393,780 3,396,617 
Property and equipment, net409,005 383,121 
Operating lease right-of-use assets84,091 89,758 
Deferred contract acquisition costs, noncurrent286,656 296,525 
Acquired intangible assets, net59,595 63,835 
Goodwill417,029 417,029 
Other noncurrent assets58,846 58,083 
Total assets$4,709,002 $4,704,968 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$25,368 $23,309 
Accrued expenses and other current liabilities83,384 91,708 
Accrued compensation126,379 160,810 
Deferred revenue1,533,080 1,643,919 
Convertible senior notes1,145,799 1,142,275 
Operating lease liabilities49,600 50,866 
Total current liabilities2,963,610 3,112,887 
Deferred revenue, noncurrent250,640 251,055 
Operating lease liabilities, noncurrent41,938 44,824 
Other noncurrent liabilities24,269 22,100 
Total liabilities3,280,457 3,430,866 
Stockholders’ Equity
Common stock153 152 
Additional paid-in capital2,593,010 2,426,819 
Accumulated other comprehensive loss(4,487)(4,789)
Accumulated deficit(1,160,131)(1,148,080)
Total stockholders’ equity1,428,545 1,274,102 
Total liabilities and stockholders’ equity$4,709,002 $4,704,968 

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ZSCALER, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended
October 31,
20242023
Cash Flows from Operating Activities
Net loss$(12,051)$(33,483)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization expense21,423 13,962 
Amortization expense of acquired intangible assets4,240 3,036 
Amortization of deferred contract acquisition costs39,068 30,111 
Amortization of debt issuance costs981 977 
Non-cash operating lease costs15,657 9,903 
Stock-based compensation expense157,178 129,138 
Accretion of investments purchased at a discount(5,003)(3,199)
Unrealized losses on hedging transactions3,689 1,564 
Deferred income taxes186 (43)
Other644 1,031 
Changes in operating assets and liabilities, net of effects of business acquisitions:
Accounts receivable311,975 215,082 
Deferred contract acquisition costs(32,801)(27,680)
Prepaid expenses, other current and noncurrent assets(8,767)1,349 
Accounts payable1,043 4,596 
Accrued expenses, other current and noncurrent liabilities(6,240)4,859 
Accrued compensation(34,431)(39,232)
Deferred revenue(111,254)(40,154)
Operating lease liabilities(14,202)(11,011)
Net cash provided by operating activities331,335 260,806 
Cash Flows from Investing Activities
Purchases of property, equipment and other assets(17,025)(28,659)
Capitalized internal-use software(22,429)(7,429)
Payments for business acquisitions, net of cash acquired— (4,377)
Purchase of strategic investments(561)— 
Purchases of short-term investments(430,296)(375,929)
Proceeds from maturities of short-term investments268,651 253,849 
Net cash used in investing activities(201,660)(162,545)
Cash Flows from Financing Activities
Proceeds from issuance of common stock upon exercise of stock options890 1,256 
Net cash provided by financing activities890 1,256 
Net increase in cash and cash equivalents130,565 99,517 
Cash and cash equivalents at beginning of period1,423,080 1,262,206 
Cash and cash equivalents at end of period$1,553,645 $1,361,723 

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ZSCALER, INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands, except percentages)
(unaudited)
Three Months Ended
October 31,
20242023
Revenue$627,955 $496,703 
Non-GAAP Gross Profit and Non-GAAP Gross Margin
GAAP gross profit$486,493 $385,309 
Add: Stock-based compensation expense and related payroll taxes15,793 12,955 
Add: Amortization expense of acquired intangible assets3,675 2,717 
Non-GAAP gross profit$505,961 $400,981 
GAAP gross margin77%78%
Non-GAAP gross margin81%81%
Non-GAAP Income from Operations and Non-GAAP Operating Margin
GAAP loss from operations$(30,667)$(46,057)
Add: Stock-based compensation expense and related payroll taxes160,574 132,729 
Add: Amortization expense of acquired intangible assets4,240 3,036 
Non-GAAP income from operations$134,147 $89,708 
GAAP operating margin(5)%(9)%
Non-GAAP operating margin21%18%

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ZSCALER, INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
October 31,
20242023
Non-GAAP Net Income per Share, Diluted
GAAP net loss$(12,051)$(33,483)
Add: GAAP provision for income taxes7,637 8,997 
GAAP loss before income taxes(4,414)(24,486)
Add:
Stock-based compensation expense and related payroll taxes 160,574 132,729 
Amortization expense of acquired intangible assets 4,240 3,036 
Amortization of debt issuance costs981 977 
Non-GAAP net income before income taxes
161,381 112,256 
Non-GAAP provision for income taxes (1)
37,118 25,819 
Non-GAAP net income$124,263 $86,437 
Add: Non-GAAP interest expense related to the convertible senior notes359 359 
Numerator used in computing non-GAAP net income per share, diluted$124,622 $86,796 
GAAP net loss per share, diluted$(0.08)$(0.23)
Stock-based compensation expense and related payroll taxes 1.00 0.84 
Amortization expense of acquired intangible assets0.03 0.02 
Amortization of debt issuance costs 0.01 0.01 
Non-GAAP provision for income taxes adjustment (2)
(0.18)(0.11)
Non-GAAP interest expense related to the convertible senior notes— — 
Adjustment to total fully diluted earnings per share (3)
(0.01)0.02 
Non-GAAP net income per share, diluted$0.77 $0.55 
Weighted-average shares used in computing GAAP net loss per share, diluted152,557 147,625 
Add: Outstanding potentially dilutive equity incentive awards 2,348 3,431 
Add: Convertible senior notes 7,626 7,626 
Less: Antidilutive impact of capped call transactions (4)
(1,235)(177)
Weighted-average shares used in computing non-GAAP net income per share, diluted161,296 158,505 
___________

(1) Effective August 1, 2024, the beginning of our fiscal year ending July 31, 2025, we are using a long-term projected non-GAAP tax rate of 23% for the purpose of determining our non-GAAP net income and non-GAAP net income per share to provide better consistency across interim reporting periods in fiscal 2025 and beyond. Given the significant growth of our business and non-GAAP operating income, we believe this change is necessary to better reflect the performance of our business. We will continue to assess the appropriate non-GAAP tax rate on a regular basis, which could be subject to changes for a variety of reasons, including the rapidly evolving global tax environment, significant changes in our geographic earnings mix, or other changes to our strategy or business operations. Prior period amounts have been recast to reflect this change.

(2) Adjustment related to the difference between the GAAP provision for income taxes and Non-GAAP provision for income taxes.

(3) The sum of the fully diluted earnings per share impact of individual reconciling items may not total to fully diluted non-GAAP net income per share due to the weighted-average shares used in computing the GAAP net loss per share differs from the weighted-average shares used in computing the non-GAAP net income per share, and due to rounding of the individual reconciling items. The GAAP net loss per share calculation uses a lower share count as it excludes potentially dilutive shares, which are included in calculating the non-GAAP net income per share.

(4) We exclude the in-the-money portion of the convertible senior notes for non-GAAP weighted-average diluted shares as they are covered by our capped call transactions. Our outstanding capped call transactions are antidilutive under GAAP but are expected to mitigate the dilutive effect of the convertible senior notes, and therefore are included in the calculation of non-GAAP diluted shares outstanding. The capped calls have an antidilutive impact when the average stock price of our common stock in a given period is higher than their exercise price.


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ZSCALER, INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands, except percentages)
(unaudited)
Three Months Ended
October 31,
20242023
Calculated Billings
Revenue$627,955 $496,703 
Add: Total deferred revenue, end of period1,783,720 1,399,544 
Less: Total deferred revenue, beginning of period(1,894,974)(1,439,676)
Calculated billings$516,701 $456,571 
Free Cash Flow
Net cash provided by operating activities$331,335 $260,806 
Less: Purchases of property, equipment and other assets
(17,025)(28,659)
Less: Capitalized internal-use software
(22,429)(7,429)
Free cash flow$291,881 $224,718 
Free Cash Flow Margin
Net cash provided by operating activities, as a percentage of revenue53%53%
Less: Purchases of property, equipment and other assets, as a percentage of revenue
(3)%(6)%
Less: Capitalized internal-use software, as a percentage of revenue
(4)%(2)%
Free cash flow margin46%45%


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ZSCALER, INC.
Explanation of Non-GAAP Financial Measures
In addition to our results determined in accordance with generally accepted accounting principles in the United States of America ("GAAP"), we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the following non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only, as it has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In particular, free cash flow is not a substitute for cash provided by operating activities. Additionally, the utility of free cash flow as a measure of our liquidity is further limited as it does not represent the total increase or decrease in our cash balance for a given period. In addition, other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation of our historical non-GAAP financial measures to their most directly comparable financial measures stated in accordance with GAAP has been included in this press release. Investors are cautioned that there are a number of limitations associated with the use of non-GAAP financial measures and key metrics as analytical tools. Investors are encouraged to review these reconciliations, and not to rely on any single financial measure to evaluate our business.
Expenses Excluded from Non-GAAP Measures
Stock-based compensation expense is excluded primarily because it is a non-cash expense that management believes is not reflective of our ongoing operational performance. Employer payroll taxes related to stock-based compensation, which is a cash expense, are excluded because these are tied to the timing and size of the exercise or vesting of the underlying equity incentive awards and the price of our common stock at the time of vesting or exercise, which may vary from period to period independent of the operating performance of our business. Amortization expense of acquired intangible assets and amortization of debt issuance costs from the convertible senior notes are excluded because these are non-cash expenses and are not reflective of our ongoing operational performance.
Effective August 1, 2024, the beginning of our fiscal year ending July 31, 2025, we are using a long-term projected non-GAAP tax rate of 23% for the purpose of determining our non-GAAP net income and non-GAAP net income per share to provide better consistency across interim reporting periods. Given the significant growth of our business and non-GAAP operating income, we believe this change is necessary to better reflect the performance of our business. We will continue to assess the appropriate non-GAAP tax rate on a regular basis, which could be subject to changes for a variety of reasons, including the rapidly evolving global tax environment, significant changes in our geographic earnings mix, or other changes to our strategy or business operations. Prior period amounts have been recast to reflect this change.
Non-GAAP Financial Measures
Non-GAAP Gross Profit and Non-GAAP Gross Margin. We define non-GAAP gross profit as GAAP gross profit excluding stock-based compensation expense and related employer payroll taxes and amortization expense of acquired intangible assets. We define non-GAAP gross margin as non-GAAP gross profit as a percentage of revenue.
Non-GAAP Income from Operations and Non-GAAP Operating Margin. We define non-GAAP income from operations as GAAP loss from operations excluding stock-based compensation expense and related employer payroll taxes and amortization expense of acquired intangible assets. We define non-GAAP operating margin as non-GAAP income from operations as a percentage of revenue.
Non-GAAP Net Income per Share, Diluted. We define non-GAAP net income as GAAP net loss excluding stock-based compensation expense and related employer payroll taxes, amortization expense of acquired intangible assets, amortization of debt issuance costs, and the non-GAAP provision for income taxes adjustment. We define non-GAAP net income per share, diluted, as non-GAAP net income plus the non-GAAP interest expense related to the convertible senior notes divided by the weighted-average diluted shares outstanding, which includes the effect of potentially diluted common stock equivalents outstanding during the period and the anti-dilutive impact of the capped call transactions entered into in connection with the convertible senior notes.
Calculated Billings. We define calculated billings as revenue plus the change in deferred revenue in a period. Calculated billings in any particular period aims to reflect amounts invoiced for subscriptions to access our cloud platform, together with related support services for our new and existing customers. We typically invoice our customers annually in advance, and to a lesser extent quarterly in advance, monthly in advance or multi-year in advance.
Free Cash Flow and Free Cash Flow Margin. We define free cash flow as net cash provided by operating activities less purchases of property, equipment and other assets and capitalized internal-use software. We define free cash flow margin as free cash flow divided by revenue. We believe that free cash flow and free cash flow margin are useful indicators of liquidity
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that provide information to management and investors about the amount of cash generated from our operations that, after the investments in property, equipment and other assets and capitalized internal-use software, can be used for strategic initiatives.
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v3.24.3
Cover Page
Nov. 27, 2024
Cover [Abstract]  
Document Type 8-K
Document Period End Date Dec. 02, 2024
Entity Registrant Name Zscaler, Inc.
Entity Incorporation, State or Country Code DE
Entity File Number 001-38413
Entity Tax Identification Number 26-1173892
Entity Address, Address Line One 120 Holger Way
Entity Address, City or Town San Jose
Entity Address, State or Province CA
Entity Address, Postal Zip Code 95134
City Area Code 408
Local Phone Number 553-0288
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common Stock, $0.001 Par Value
Trading Symbol ZS
Security Exchange Name NASDAQ
Entity Emerging Growth Company false
Amendment Flag false
Entity Central Index Key 0001713683
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