Summary
Zscaler ended fiscal 2021 with strong top-line momentum, but the bottom line stayed deeply negative. Fourth-quarter revenue was $197.1 million, up 56.5% from $125.9 million in the prior-year quarter. Full-year revenue reached $673.1 million, up 56.1% from $431.3 million. Gross profit for the quarter was $151.6 million, up 60.4% year over year, and full-year gross profit was $522.8 million, up 55.8%. The quarterly gross margin was 76.9%, up 1.8 percentage points from 75.1%. For the full year, gross margin was 77.7%, down 0.1 percentage point from 77.8%.
The operating loss widened. Fourth-quarter operating loss was $67.4 million compared with $44.9 million in the prior-year quarter, and the full-year operating loss was $207.8 million compared with $114.0 million. Operating margin for the quarter was negative 34.2%, up 1.5 percentage points from negative 35.7%. For the full year, operating margin was negative 30.9%, down 4.5 percentage points from negative 26.4%. Net loss for the quarter was $81.0 million compared with $49.5 million, and full-year net loss was $262.0 million compared with $115.1 million. Diluted EPS for the full year was negative $1.93 compared with negative $0.89.
Cash generation improved. Fourth-quarter operating cash flow was $44.7 million, up 41.4% from $31.6 million. Full-year operating cash flow was $202.0 million, up 154.7% from $79.3 million. Capital expenditures were $13.9 million in the quarter, down 23.7% from $18.3 million, and $48.2 million for the full year, up 11.8% from $43.1 million. Free cash flow, a non-GAAP measure, was $27.7 million in the quarter, compared with $10.9 million, and $143.7 million for the full year, compared with $27.5 million.
Deferred revenue was $630.6 million at July 31, 2021, up 70.5% from $369.8 million at July 31, 2020. Remaining performance obligations were $1.55 billion, up 98.5% from $782.8 million. Calculated billings, a non-GAAP measure, grew 70% to $332.2 million in the quarter. Zscaler reported more than 5,600 customers as of July 31, 2021, including more than 500 of the Forbes Global 2000. Its dollar-based net retention rate for the trailing 12 months ended July 31, 2021 was 128%, up from 120% at the end of fiscal 2020 and 118% at the end of fiscal 2019. The company's cash, cash equivalents and short-term investments totaled $1,502.6 million as of July 31, 2021, an increase of $132.0 million from July 31, 2020.
Guidance points to continued growth. For the first quarter of fiscal 2022, Zscaler expects revenue of $210 million to $212 million, non-GAAP income from operations of $18 million to $19 million, and non-GAAP net income per share of approximately $0.12 on roughly 148 million shares. For full-year fiscal 2022, the company expects revenue of $940 million to $950 million, calculated billings of $1,230 million to $1,250 million, non-GAAP income from operations of $85 million to $90 million, and non-GAAP net income per share of $0.52 to $0.56 on roughly 149 million to 150 million shares.
Risks remain. Zscaler has incurred net losses since inception and expects to continue incurring them as it invests in sales and marketing, research and development, and public-company compliance. The COVID-19 pandemic adds uncertainty around customer demand, sales cycles, and operations. The company also faces risks tied to rapid growth, competition, new product introductions, software bugs, and legal matters. Its convertible senior notes issued in June 2020 increase interest expense, and the company maintains a full valuation allowance against its U.S. federal, state, and U.K. deferred tax assets because it is more likely than not that some or all of those assets may not be realized. Management also disclosed that it may seek additional equity or debt financing if existing cash, cash equivalents, and short-term investments are not sufficient to fund operating and capital needs.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2021 | Q3 FY2021 | QoQ | Q4 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $197.1M | $176.4M | +11.7% | $125.9M | +56.5% |
| Gross profit | $151.6M | $137.4M | +10.3% | $94.5M | +60.4% |
| Gross margin | 76.9% | 77.9% | -1.0 pp | 75.1% | +1.8 pp |
| Research & development | $56.2M | $41.0M | +37.2% | $32.8M | +71.4% |
| Sales & marketing | $136.4M | $115.7M | +17.8% | $89.2M | +52.9% |
| General & administrative | $26.4M | $24.6M | +7.5% | $17.4M | +51.8% |
| Total operating expenses | $219.0M | $181.3M | +20.8% | $139.4M | +57.1% |
| Operating income (loss) | -$67.4M | -$43.9M | -53.7% | -$44.9M | -50.1% |
| Operating margin | -34.2% | -24.9% | -9.3 pp | -35.7% | +1.5 pp |
| Net income (loss) | -$81.0M | -$58.5M | -38.6% | -$49.5M | -63.5% |
| Net margin | -41.1% | -33.1% | -8.0 pp | -39.4% | -1.8 pp |
| Diluted EPS | -$0.60 | — | — | — | — |
| Customers | 5,600 | 4,500 | +24.4% | 4,500 | +24.4% |
| Net retention rate | 128.0% | 126.0% | +2.0 pp | 120.0% | +8.0 pp |
Risks
Zscaler has incurred net losses in all periods since inception and expects to continue incurring net losses. Net loss widened to $262.0 million in fiscal 2021 from $115.1 million in fiscal 2020, and operating loss widened to $207.8 million, as the company continues to invest significantly in sales and marketing, research and development, and general and administrative functions.
The market for network security is intensely competitive, and Zscaler faces established appliance vendors and larger networking and security vendors that can bundle products, offer concessions, or sell at zero or negative margins. Named competitors include Check Point, Fortinet, Palo Alto Networks, Broadcom, Cisco, Juniper, FireEye, Forcepoint, Netskope, and Pulse Secure.
The conditional conversion feature of the Notes was triggered during the three months ended July 31, 2021, so holders may convert their Notes from August 1, 2021 through October 31, 2021, and cash settlement could adversely affect liquidity or require reclassifying principal as a current liability. Interest expense increased $48.3 million, or 962%, in fiscal 2021 compared to fiscal 2020 due to the Notes.
As a security provider, actual or perceived failure of Zscaler's cloud platform to block malware or prevent a security breach could harm its reputation and cause customers to lose trust. If a high-profile breach occurs at another cloud services provider, customers and potential customers may lose trust in cloud security generally.
Risk Factors say the ongoing COVID-19 pandemic is highly uncertain and may materially adversely impact the business, particularly in India and other regions where Zscaler has significant operations and personnel. MD&A notes the pandemic may extend sales cycles and affect sales execution and marketing, though no significant disruption to operations or financial performance has occurred to date.
Most revenue is derived through channel partners, and sales through the top five channel partners and their affiliates represented 34% of revenue for fiscal 2021, down from 40% for fiscal 2020 and 42% for fiscal 2019. If partners do not effectively market the platform, promote competitors, or fail to meet customer needs, growth could be harmed.
Sales cycles are long and unpredictable, particularly with large enterprises and government entities that require significant evaluation, budget approvals, and qualified personnel. The COVID-19 pandemic may further extend sales cycles for some products and services.
Zscaler hosts its cloud platform from over 150 data centers, many operated by third parties, and relies on public cloud infrastructure when capacity is strained. In fiscal 2020, gross margin declined because increased ZPA traffic from work-from-home required more expensive public cloud infrastructure, and future increases in public cloud use could negatively impact results.
Growth depends on key technical, sales, and management personnel, and competition for sales personnel with advanced skills is significant. Sales and marketing headcount increased 59% from July 31, 2020 to July 31, 2021, and a large percentage of the sales and marketing team is new to the company, requiring significant training before reaching full productivity.
Zscaler may face patent, commercial, product liability, employment, class action, and regulatory litigation. MD&A says general and administrative legal expenses decreased $18.0 million in fiscal 2021, primarily due to a $15.0 million Broadcom litigation settlement payment in fiscal 2020, and future significant claims may cause material fluctuations in expenses.
SaaS KPIs
All quarters →Free Cash Flow Margin
Free Cash Flow
Non-GAAP Operating Margin
Calculated Billings
Non-GAAP Gross Margin
Total Customers
Customer Base Growth (YoY)
Forbes Global 2000 customers
Summary, forecast, risks and KPIs are extracted from Zscaler, Inc.'s SEC filings for Q4 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.