Zscaler (NASDAQ: ZS) reported Q1 EPS of $0.03, $0.02 better than the analyst estimate of $0.01. Revenue for the quarter came in at $93.6 million versus the consensus estimate of $89.79 million.

First Quarter Fiscal 2020 Financial Highlights

• Revenue: $93.6 million, an increase of 48% year-over-year.
• Income (loss) from operations: GAAP loss from operations was $18.3 million, or 20% of total revenue, compared to $8.7 million, or 14% of total revenue, in the first quarter of fiscal 2019. Non-GAAP income from operations was $2.9 million, or 3% of total revenue, compared to $1.2 million, or 2% of total revenue, in the first quarter of fiscal 2019.
• Net income (loss): GAAP net loss was $17.1 million, compared to $7.6 million in the first quarter of fiscal 2019. Non-GAAP net income was $4.1 million, compared to $2.3 million in the first quarter of fiscal 2019.
• Net income (loss) per share: GAAP net loss per share was $0.13, compared to $0.06 in the first quarter of fiscal 2019. Non-GAAP net income per share was $0.03, compared to $0.02 in the first quarter of fiscal 2019.
• Cash flow: Cash provided by operations was $21.4 million, or 23% of revenue, compared to $11.0 million, or 17% of revenue, in the first quarter of fiscal 2019. Free cash flow was $9.4 million, or 10% of revenue, compared to $5.2 million, or 8% of revenue, in the first quarter of fiscal 2019.
• Deferred revenue: $245.9 million as of October 31, 2019, an increase of 49% year-over-year.
• Cash, cash equivalents and short-term investments: $377.6 million as of October 31, 2019, an increase of $13.0 million from July 31, 2019.

Recent Business Highlights

• Announced Zscaler B2B, a new solution that reduces the attack surface introduced by customer-facing applications. Built within a zero trust network access (ZTNA) architecture, Zscaler B2B enables enterprises to provide secure application access to their business customers and partners without exposing the applications to the internet.
• Microsoft named Zscaler the first and only cloud security provider to be a certified partner in the Microsoft Networking Partner Program (NPP) for Office 365, which has stringent requirements for user performance. Microsoft only recommends NPP partners for Office 365 connectivity. The program is designed to offer Office 365 customers a set of partners whose deployment practices and guidance provide users a fast and secure user experience by aligning with Microsoft’s networking recommendations.
• Partnered with Crowdstrike to provide joint customers with seamless protection across the cloud and the endpoint. Crowdstrike’s AI-powered Threat Graph will integrate with Zscaler’s cloud security platform to provide customers with real-time threat detection and automated policy enforcement.
• Zscaler was named a Leader in the Gartner Magic Quadrant for Secure Web Gateways for the ninth year in a row. The report positioned Zscaler furthest in completeness of vision and highest in ability to execute.
• Zscaler achieved significant milestones in the U.S. Federal business. Zscaler Private Access (ZPA), a ZTNA service, earned Federal Risk and Authorization Management Program (FedRAMP) Ready status at the High Impact level. Zscaler was also added to the Department of Homeland Security Continuous Diagnostics and Mitigation Program Approved Products List.
• Hosted Zenith Live Zscaler Cloud Summits in Las Vegas and Lisbon, Portugal.

"We delivered strong revenue growth and non-GAAP profitability in Q1 while significantly investing in our business to pursue our large market opportunity. We are committed to scaling all elements of our go-to-market strategy, as we see enterprises increasingly transforming their network and security to realize the benefits of the cloud," said Jay Chaudhry, Chairman and CEO of Zscaler. "I am confident that our new sales leadership, coupled with our cloud-native security platform, is strengthening our foundation for the long-term growth of our business."

GUIDANCE:

Zscaler sees Q2 2020 EPS of $0.03, versus the consensus of $0.04. Zscaler sees Q2 2020 revenue of $97-100 million, versus the consensus of $97.37 million.

Zscaler sees FY2020 EPS of $0.13-$0.15, versus the consensus of $0.15. Zscaler sees FY2020 revenue of $405-413 million, versus the consensus of $402.89 million.

Financial Outlook

For the second quarter of fiscal 2020, we expect:

• Total revenue of $97 million to $100 million
• Non-GAAP income from operations of $3 million to $4 million
• Non-GAAP earnings per share of approximately $0.03, assuming approximately 138 million common shares outstanding

For the full year fiscal 2020, we expect:

• Total revenue of $405 million to $413 million
• Calculated billings of $500 million to $510 million
• Non-GAAP income from operations of $15 million to $18 million
• Non-GAAP earnings per share of $0.13 to $0.15, assuming approximately 139 million common shares outstanding

For earnings history and earnings-related data on Zscaler (ZS) click here.