I/O Fund is keeping tabs on cloud security company Zscaler because of its surging sales and strong growth over multiple quarters. Zscaler's success is evident in the most recent earnings results.
Sales History
Zscaler's growth is impressive, because sales have grown over 50%+ for five consecutive quarters.
In fact, as you can see in the chart below, Zscaler has grown 40%+ or more in every quarter, except one, as a public company.
Growth Factors
Zscaler's notably high growth is due to a few secular tailwinds propelling the company forward:
- Rise of the cloud environment
- Obsolescence of firewalls used to secure networks in the cloud
- Network effects, as Zscaler collects massive amounts of data, over 300 trillion signals everyday
Upward Trending Sales and Persistent Demand
Market demand for Zscaler's products and solutions is demonstrated in customers' willingness to pay for multi-year contracts upfront, allowing for a constant stream of revenue and capital to go back into Zscaler's operations.
Current cashflow trends are indicative of Zscaler's ability to deliver high quality results.
We can see upfront cash payments by looking at deferred revenue, which increased 74% YoY. It is also worth pointing out that long-term deferred revenue (DR) increased 99% YoY to $63 million. Deferred revenue turns into sales in the future and an outsized growth in DR highlights that there is ample balance sheet support for future sales.
