Shares of Zscaler Inc. fell in extended trading on Thursday after the cybersecurity company said a longer sales cycle and other headwinds contributed to its cautious guidance, slightly higher than consensus. Wall Street’s agreement.
Zscaler
ZS,
shares fell 10% in hours, after gaining 8.3% in the regular trading session, to close at $144.50.
Zscaler said it expects adjusted earnings of 29 cents to 30 cents a share on revenue of $364 million to $366 million for the fiscal second quarter. Analysts surveyed by FactSet estimated 26 cents a share on revenue of $325.1 million and bills of $355.3 million for the quarter.
The company also forecasts adjusted earnings of $1.23 billion to $1.25 a share on revenue of about $1.53 billion for the year and bills of $1.93 billion to $1.94 billion. dollars, while analysts had forecast earnings of $1.18 a share on revenue of $1.5 billion and a bill of $1.93 billion for the year.
But last quarter’s earnings were a tough move to track, as Zscaler Exceeded Wall Street expectations across the boardand the stock recorded its best one-day performance since the company went public in 2018.
Admittedly, it is difficult for cloud software providers to win deals in a cost-effective environment with an economic downturn looming. Over the past few years, native cloud companies — and legacy companies that have moved to the cloud — have introduced their version of the “platform,” or essentially an ecosystem. By adding new services or modules to the platform, customers are then further sold, incentivized to add more modules or functions to their custom platform.
Remo Canessa, Zscaler’s chief financial officer, told analysts on a conference call on Thursday that the company’s payback period is above average, 14 months compared with the 10-month average. That should lead to bill growth of about 5 percentage points.
“While good for our business, larger transactions take longer to complete because of more checks and reviews by customers,” Canessa said. “In this environment, we think it is prudent to expect our customers to continue to have a higher level of review and monitoring.”
Additionally, reorganizing the company’s sales force to better serve customers was welcomed by analysts on the call as an operational cost headwind worth questioning, but Jay Chaudhry , president and chief executive officer of Zscaler, downplayed the sales reorganization and gave the bigger picture. Grab bigger deals from bigger clients.
“They’re not huge changes, but they’re beyond what we normally do,” Chaudhry said. “But none of these transactions disappeared. We have a good location. We’re winning some already. We are working on more.
The company reported a financial loss for the first quarter of $68.2 million, or 48 cents a share, compared with a loss of $90.8 million, or 65 cents a share, for the period. period one year ago. Adjusted net income, excluding compensation based on stocks and other items, was 29 cents a share, compared with 14 cents a share for the year-ago period.
Revenue rose to $355.5 million from $230.5 million in the previous quarter, the company said. Calculated invoices, or revenue plus deferred revenue earned for the quarter, increased 37% to $340.1 million year over year.
Analysts surveyed by FactSet had forecast earnings of 26 cents a share on revenue of $340.7 million and bills of $333.1 million.
As of Thursday, the stock is down 55% year-to-date, compared with a 15% drop for the S&P 500 index.
SPX,
down 27% by the tech-heavy Nasdaq Composite Index
COMPUTER,
and a 23% drop of the ETFMG Prime Cyber Security ETF
CHEAT,
Zscaler’s earnings report is similar to that of CrowdStrike Holdings Inc.
CRWD,
on Tuesday, when the cybersecurity company said Subscriber growth is slowing down due to longer buying cycles from customers. CrowdStrike shares fell 15% the next day, their second worst day.
Salesforce Inc.
CRM,
Stocks hit after the customer relationship management software giant offered a Forecast not as expected Wednesday and revealed that co-CEO Bret Taylor will be leaving the company. Meanwhile, Snowflake Inc.
SNOW,
results have been welcomed with mixed reviews on Wall Street.
Even Palo Alto Inc. Network.
PANW,
successfully kicked off its cybersecurity earnings season, said it needs to be more active with customers to close deals sooner.
On the other hand, Okta Inc.
OKTA,
surprise investors surprise profit forecast for fourth quarter and sustain profit until next year, and Workday Inc.
DAY,
shares jumped 17% on Wednesday after the cloud-based HR software company raised its prospects and launched a stock buyback program.
