Cloud security provider Zscaler (NASDAQ:ZS) reported its fiscal fourth-quarter results after the market closed on Sept. 10. Revenue surged and the bottom line improved, but the software-as-a-service company's guidance called for a much lower growth rate in the year ahead. Here's what investors need to know.

Zscaler results: The raw numbers


Q4 2019

Q4 2018



$86.1 million

$56.2 million


Net income (loss)

($5.3 million)

($7.0 million)


Non-GAAP (adjusted) earnings per share




Data source: Zscaler.  .

What happened with Zscaler this quarter?

  • Calculated billings increased by 32% year over year to $125.8 million. This growth rate was much slower than the 55% rate reported for the third quarter.
  • Deferred revenue grew by 53% year over year to $251.2 million; the growth rate was 69% in the third quarter.
  • Cash, cash equivalents, and short-term investments totaled $364.6 million, up slightly from the third quarter.
  • Zscaler's dollar-based net retention rate was 118%, flat from the third quarter, and the customer churn rate declined compared to the previous quarter and the prior-year period.
  • The Americas accounted for 51% of total revenue; Europe, the Middle East, and Africa accounted for 41%; and the Asia-Pacific region accounted for 8%.
  • Zscaler ended the quarter with more than 3,900 customers, including 100 Fortune 500 companies.
A lock.

Image source: Getty Images.

What management had to say

Zscaler CFO Remo Canessa explained during the earnings call that billings growth seems stronger if an adjustment is made: "As a reminder, our contract terms are typically one year to three years, and we primarily invoice our customers one year in advance. Excluding upfront greater-than-one-year billings in both periods, billings would have grown over 50%."

CEO Jay Chaudhry doesn't seem to be worried about competition: "Yeah, if I may add, I mean as we compete out there, we almost win every deal, very low situations where we don't win. So very comfortable with our differentiated technology, very comfortable with our sales process."

Looking forward

Zscaler grew revenue by 59% in fiscal 2019. Fiscal 2020 won't be quite as impressive. The company expects:

  • Revenue between $395 million and $405 million, up 32% at the midpoint.
  • Calculated billings between $490 million and $500 million, up 27% at the midpoint.
  • Non-GAAP earnings per share between $0.12 and $0.15, down from $0.22.

Zscaler also provided guidance for the fiscal first quarter:

  • Revenue between $89 million and $90 million, up 41.4% year over year.
  • Non-GAAP earnings per share between breakeven and $0.01, compared to $0.01 in the prior-year period.

While management isn't worried about competition, the company's guidance calls for substantially slower growth over the next year. With the stock still trading for more than 20 times trailing sales, even after a steep decline, slowing growth is the last thing investors wanted to see.