Zscaler, Inc. reports 80.6% CAPEX growth in 2020 and 42.4% Revenue growth
09/09/2020 • About Zscaler, Inc. (
$ZS) • By InTwits
Zscaler, Inc. reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Zscaler, Inc. is a fast growth stock: FY2020 revenue growth was 42.4%, 5 year revenue CAGR was 51.7% at FY2020 ROIC -13.4%
- The company operates at negative EBITDA Margin: -18.4%
- Zscaler, Inc. motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for FY2016-FY2020 was 2.2% while average EBITDA Margin was -15.9% for the sames years
- Zscaler, Inc. has medium CAPEX intensity: 5 year average CAPEX/Revenue was 8.7%. At the same time it's a lot of higher than industry average of 3.2%.
- CAPEX is quite volatile: $52m in FY2020, $29m in FY2019, $15m in FY2018, $8m in FY2017, $6m in FY2016
- The company has unprofitable business model: ROIC is -13.4%
- It operates with medium-size leverage: Net Debt/EBITDA is 2.9x while industry average is -1.0x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue surged on 42.4%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin dropped on 14.3 pp from 54.7% to 40.4% in FY2020. During FY2016-FY2020 EBITDA Margin topped in FY2019 at -7.9%.
Gross Margin decreased on 2.5 pp from 80.3% to 77.8% in FY2020. During FY2016-FY2020 Gross Margin topped in FY2019 at 80.3%. SG&A as a % of Revenue jumped on 10.0 pp from 71.5% to 81.5% in FY2020. During the last 5 years SG&A as a % of Revenue bottomed in FY2019 at 71.5%.
Net Income margin dropped on 17.2 pp from -9.5% to -26.7% in FY2020. During the last 5 years Net Income margin topped in FY2019 at -9.5%.
Investments (CAPEX, working capital and M&A)
Zscaler, Inc.'s CAPEX/Revenue was 12.0% in FY2020. The company showed CAPEX/Revenue growth of 5.5 pp from 6.5% in FY2017 to 12.0% in FY2020. It's average CAPEX/Revenue for the last three years was 9.8%. During the last 5 years CAPEX as a % of Revenue bottomed in FY2017 at 6.5% and was growing since that time.
Return on investment
The company operates at negative ROIC (-13.4%) and ROE (-29.0%). ROIC decreased slightly on 0.55 pp from -12.9% to -13.4% in FY2020. ROE dropped on 18.6 pp from -10.4% to -29.0% in FY2020.
Leverage (Debt)
Company's Net Debt / EBITDA is 2.9x and Debt / EBITDA is . Net Debt / EBITDA didn't change in FY2020. Debt jumped while cash jumped on 80.7%.
Zscaler, Inc. has no short term refinancing risk: cash is higher than short term debt (909.3%).
Financial and operational results
FY ended 07/31/2020
Zscaler, Inc. ($ZS) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 80.3 | 125.7 | 190.2 | 302.8 | 431.3 | 42.4% |
| Gross Profit | 60.2 | 98.2 | 152.3 | 243.2 | 335.5 | 38.0% |
| SG&A | 66.1 | 99.8 | 147.5 | 216.5 | 351.6 | 62.4% |
| EBITDA | -22.0 | -28.2 | -26.6 | -24.0 | -79.4 | |
| EBIT | -26.8 | -35.1 | -34.6 | | | |
| Tax | 0.5 | 0.9 | 1.3 | | | |
| Net Income | -27.4 | -35.5 | -33.6 | -28.7 | -115.1 | |
| Stock Based Compensation | 3.6 | 9.9 | 11.2 | | | |
Balance Sheet
|
|---|
| Cash | 92.8 | 88.0 | 135.6 | 78.5 | 141.9 | 80.7% |
| Accounts Receivable | 24.5 | 39.1 | 61.6 | | | |
| Accounts Payable | 1.4 | 3.8 | 4.9 | | | |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 15.6 | |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 889.6 | |
Cash flow
|
|---|
| Capex | 6.2 | 8.2 | 15.2 | 28.7 | 51.8 | 80.6% |
Ratios
|
|---|
| Revenue growth | 49.6% | 56.5% | 51.3% | 59.2% | 42.4% | |
| EBITDA growth | 129.7% | 28.5% | -5.7% | -9.9% | 230.6% | |
|
|---|
| Gross Margin | 74.9% | 78.1% | 80.1% | 80.3% | 77.8% | -2.5% |
| EBITDA Margin | -27.4% | -22.5% | -14.0% | -7.9% | -18.4% | -10.5% |
| EBIT Margin | -33.4% | -27.9% | -18.2% | | |
| SG&A, % of revenue | 82.3% | 79.4% | 77.6% | 71.5% | 81.5% | 10.0% |
| SBC, % of revenue | 4.5% | 7.9% | 5.9% | | |
| Net Income Margin | -34.2% | -28.2% | -17.7% | -9.5% | -26.7% | -17.2% |
| CAPEX, % of revenue | 7.8% | 6.5% | 8.0% | 9.5% | 12.0% | 2.5% |
|
|---|
| ROIC | | -60.2% | -23.9% | -12.9% | -13.4% | -0.5% |
| ROE | | | | -10.4% | -29.0% | -18.6% |
People
|
|---|
| Insider ownership | 25.0% | 25.0% | 25.0% | | | |
| Employees | | | 1,050 | | | |
| Revenue/Employee, th. $ | | | 181 | | | |
Zscaler, Inc. ($ZS) key quoterly financial indicators
| mln. $ | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 94 | 101 | 111 | 126 | | - | - | - | - |
| EBITDA | -11 | -22 | -12 | -34 | | - | - | - | - |
| Net Income | -17 | -29 | -19 | -50 | | - | - | - | - |
Balance Sheet
|
|---|
| Cash | 69 | 77 | 125 | 142 | | - | - | - | - |
| Short Term Debt | 9 | 11 | 13 | 16 | | - | - | - | - |
| Long Term Debt | 25 | 23 | 28 | 890 | | - | - | - | - |
Ratios
|
|---|
| Gross Margin | 79.1% | 80.0% | 77.8% | 75.1% | | - | - | - | - |
| EBITDA Margin | -11.7% | -22.2% | -10.6% | -27.2% | | - | - | - | - |
| Net Income Margin | -18.2% | -28.8% | -17.5% | -39.4% | | - | - | - | - |
Peers in Systems Software
Below you can find Zscaler, Inc. benchmarking vs. other companies in Systems Software industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| ServiceNow, Inc. ($NOW) | - | 38.0% | 36.0% | 32.6% | 30.6% |
| SailPoint Technologies Holdings, Inc. ($SAIL) | - | 40.5% | 33.8% | 15.9% | 26.6% |
| Rapid7, Inc. ($RPD) | - | 27.6% | 21.5% | 33.9% | 25.9% |
| Tenable Holdings, Inc. ($TENB) | - | 50.9% | 42.4% | 32.6% | 24.2% |
| Allot Communications Ltd. ($ALLT) | - | -9.3% | 16.9% | 14.9% | 23.5% |
| |
|---|
| Median (23 companies) | 12.9% | 14.0% | 19.0% | 15.9% | 12.9% |
|---|
| Zscaler, Inc. ($ZS) | - | 56.5% | 51.3% | 59.2% | 42.4% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 88.5% | 88.6% | 89.6% | 89.5% | 89.4% |
| Progress Software Corporation ($PRGS) | 83.8% | 82.6% | 83.1% | 81.8% | 86.0% |
| Varonis Systems, Inc. ($VRNS) | 90.5% | 90.4% | 89.8% | 86.2% | 84.9% |
| Vmware, Inc. ($VMW) | 85.2% | - | 85.5% | 83.9% | 83.4% |
| Tenable Holdings, Inc. ($TENB) | 88.6% | 86.4% | 83.9% | 82.8% | 82.4% |
| |
|---|
| Median (23 companies) | 73.1% | 73.9% | 73.5% | 75.4% | 76.5% |
|---|
| Zscaler, Inc. ($ZS) | 74.9% | 78.1% | 80.1% | 80.3% | 77.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 49.8% | 50.7% | 48.8% | 46.0% | 45.1% |
| Qualys, Inc. ($QLYS) | 23.8% | 25.1% | 28.4% | 36.5% | 40.3% |
| SolarWinds Corporation ($SWI) | -8.0% | 44.0% | 44.8% | 44.7% | 39.8% |
| Progress Software Corporation ($PRGS) | 2.4% | 28.6% | 32.9% | 23.4% | 34.4% |
| Fortinet, Inc. ($FTNT) | 7.2% | 11.1% | 15.9% | 19.8% | 23.9% |
| |
|---|
| Median (23 companies) | -8.0% | -3.6% | -3.9% | 0.2% | 3.0% |
|---|
| Zscaler, Inc. ($ZS) | -27.4% | -22.5% | -14.0% | -7.9% | -18.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| ServiceNow, Inc. ($NOW) | 7.6% | 7.8% | 8.6% | 7.7% | 9.3% |
| Qualys, Inc. ($QLYS) | 11.7% | 16.4% | 8.2% | 8.6% | 8.3% |
| Zuora, Inc. ($ZUO) | 3.4% | 3.3% | 2.8% | 5.7% | 7.8% |
| Proofpoint, Inc. ($PFPT) | 9.2% | 9.0% | 4.1% | 4.0% | 6.9% |
| Allot Communications Ltd. ($ALLT) | 1.8% | 3.5% | 3.6% | 3.4% | 5.6% |
| |
|---|
| Median (23 companies) | 2.0% | 2.2% | 2.5% | 3.4% | 2.8% |
|---|
| Zscaler, Inc. ($ZS) | 7.8% | 6.5% | 8.0% | 9.5% | 12.0% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Fortinet, Inc. ($FTNT) | 5.3% | 15.0% | 28.0% | 29.0% | 46.3% |
| Check Point Software Technologies Ltd. ($CHKP) | 24.7% | 26.8% | 25.5% | 24.2% | 25.6% |
| Qualys, Inc. ($QLYS) | 13.7% | 12.3% | 14.3% | 18.7% | 22.0% |
| Vmware, Inc. ($VMW) | 15.9% | - | - | 18.1% | 19.6% |
| Progress Software Corporation ($PRGS) | -4.9% | 13.5% | 18.5% | 7.6% | 16.0% |
| |
|---|
| Median (23 companies) | -2.1% | -2.7% | -0.9% | -6.3% | -6.4% |
|---|
| Zscaler, Inc. ($ZS) | - | -60.2% | -23.9% | -12.9% | -13.4% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| SolarWinds Corporation ($SWI) | - | 6.2x | 4.1x | 4.4x | 4.1x |
| Proofpoint, Inc. ($PFPT) | - | - | - | -27.4x | 2.5x |
| Progress Software Corporation ($PRGS) | -7.5x | -0.1x | 0.1x | 1.5x | 2.1x |
| Vmware, Inc. ($VMW) | -0.7x | - | -0.8x | 0.3x | 1.5x |
| CyberArk Software Ltd. ($CYBR) | -4.1x | -5.7x | -4.5x | -3.6x | 0.9x |
| |
|---|
| Median (12 companies) | -1.2x | -0.6x | -0.4x | -0.3x | 0.4x |
|---|
