Looks like a solid quarter & beat and raise to me.
This quarter is in-line and slightly better QoQ than the past two Q2 reports. The guidance was solid. With a similar beat (low end of their beats), next quarter’s QoQ will come in at 12.4% or annualized at 59.59%. ZS will remain a low 60% YoY grower (almost 63%).
Customer growth numbers remained around where they were last quarter.
Highlights
Second Quarter Highlights
• Revenue grows 63% year-over-year to $255.6 million
• Calculated billings grows 59% year-over-year to $367.7 million
• Deferred revenue grows 70% year-over-year to $759.9 million
• GAAP net loss of $100.4 million compared to GAAP net loss of $67.5 million on a year-over-year basis
• Non-GAAP net income of $19.2 million compared to non-GAAP net income of $14.0 million on a year-over-year basis
Financial Outlook
For the third quarter of fiscal 2022, we expect:
• Total revenue of $270 million to $272 million
• Non-GAAP income from operations of $19 million to $20 million
• Non-GAAP net income per share of approximately $0.10 to $0.11, assuming approximately 149 million to 150 million
common shares outstanding
For the full year fiscal 2022, we expect:
• Total revenue of $1.045 billion to $1.05 billion
• Calculated billings of $1.365 billion to $1.37 billion
• Non-GAAP income from operations of $95 million to $98 million
• Non-GAAP net income p
At risk of being a bit of a naysayer vs the general enthusiasm, imo there was stuff to like, and stuff to dislike.
Stuff to like:
Revenue growth was reasonably strong. I was looking for $264m, but overlooked some Q2 seasonality trends, so $255m was good.
Sales people ramping up suggests funnel strong.
Federal still in the wings, could be a significant boost in the future (hope?)
Larger initial deal sizes “…which are increasing due to our success with large enterprises who are buying more of our expanding platform”. See DBNRR “dislike”.
Stuff to dislike
Billings growth was weak.
Implied billings guidance was weak. They’re guiding $1.37b for full year, which means they have $755m to go, or $377m per quarter vs $367 this quarter.
Ramp for large numbers of new people? 1 in 4 employees are new in the last 6 months.
Large amounts of SBC, over 40% of revenue. I’m not keen on these levels (vs DDOG at 17%, CRWD at 23% etc).
DBNRR ~ 125% which is a little weaker than previous quarters (see larger deal sizes “like”)
My recalibrated revenue expectations for next quarter are around $290m given Q3 is generally strong. Seems like a big beat however!
cheers
Greg
Long ZS since forever. Still percolating implications…
Note (mostly for me) that billings is revenue + change in deferred revenue.
I agree there was some stuff not to like… the weak billings growth is probably the main reason why the stock is down AH. Although the 20% drop seems quite excessive. But that is the standard for any metric being off in a high growth/SaaS report this earnings season.
FY21 Q2 billings growth were up 71% YoY so there was a pretty tough comp for this Quarter’s billings. Still the billings growth acts like a magnet for future revenue growth. Will need to keep an eye on it and maybe talked about in the CC? (have not listened yet).
They seem to have hired alot of new employees (1000, over the last 6 months and was previously 3,000). So I am ok with the temporary high SBC if management is expecting continued high levels of growth.
I think the drop is overdone, like every downside earnings reaction this Q. I added to my medium sized position at $217.5 in AH. Network security/Zero-trust tailwinds will continue to be strong. May we see better days soon
As per the CFO; billing were down in Q2 mainly due to the underperformance of the federal business (“low single digit”), explained by budget constraints. However, they are confident it will play a substantial portion in future revenue given the FedRAMP certification and strong relationships.
The RPO growth, however, is still strong at 14% QoQ and 90% YoY.
Total customer growth appears to be slowing down, although the much important >1M ARR cohort growth stays intact.
Metrics to keep an eye on, but no major red flags - in my opinion - to an otherwise solid quarter.