Reconciliation of GAAP to Non-GAAP Financial Measures(in thousands, except per share amounts)(unaudited) Three Months Ended October 31, 2024 2023 Non-GAAP Net Income per Share, Diluted GAAP net loss$(12,051) $(33,483)Add: GAAP provision for income taxes 7,637 8,997 GAAP loss before income taxes (4,414) (24,486)Add: Stock-based compensation expense and related payroll taxes 160,574 132,729 Amortization expense of acquired intangible assets 4,240 3,036 Amortization of debt issuance costs 981 977 Non-GAAP net income before income taxes 161,381 112,256 Non-GAAP provision for income taxes (1) 37,118 25,819 Non-GAAP net income$124,263 $86,437 Add: Non-GAAP interest expense related to the convertible senior notes 359 359 Numerator used in computing non-GAAP net income per share, diluted$124,622 $86,796 GAAP net loss per share, diluted$(0.08) $(0.23)Stock-based compensation expense and related payroll taxes 1.00 0.84 Amortization expense of acquired intangible assets 0.03 0.02 Amortization of debt issuance costs 0.01 0.01 Non-GAAP provision for income taxes adjustment (2) (0.18) (0.11)Non-GAAP interest expense related to the convertible senior notes — — Adjustment to total fully diluted earnings per share (3) (0.01) 0.02 Non-GAAP net income per share, diluted$0.77 $0.55 Weighted-average shares used in computing GAAP net loss per share, diluted 152,557 147,625 Add: Outstanding potentially dilutive equity incentive awards 2,348 3,431 Add: Convertible senior notes 7,626 7,626 Less: Antidilutive impact of capped call transactions (4) (1,235) (177)Weighted-average shares used in computing non-GAAP net income per share, diluted 161,296 158,505 ___________________ (1) Effective August 1, 2024, the beginning of our fiscal year ending July 31, 2025, we are using a long-term projected non-GAAP tax rate of 23% for the purpose of determining our non-GAAP net income and non-GAAP net income per share to provide better consistency across interim reporting periods in fiscal 2025 and beyond.
Condensed Consolidated Statements of Cash Flows(in thousands)(unaudited) Three Months Ended October 31, 2024 2023 Cash Flows from Operating Activities Net loss$(12,051) $(33,483)Adjustments to reconcile net loss to cash provided by operating activities: Depreciation and amortization expense 21,423 13,962 Amortization expense of acquired intangible assets 4,240 3,036 Amortization of deferred contract acquisition costs 39,068 30,111 Amortization of debt issuance costs 981 977 Non-cash operating lease costs 15,657 9,903 Stock-based compensation expense 157,178 129,138 Accretion of investments purchased at a discount (5,003) (3,199)Unrealized losses on hedging transactions 3,689 1,564 Deferred income taxes 186 (43)Other 644 1,031 Changes in operating assets and liabilities, net of effects of business acquisitions: Accounts receivable 311,975 215,082 Deferred contract acquisition costs (32,801) (27,680)Prepaid expenses, other current and noncurrent assets (8,767) 1,349 Accounts payable 1,043 4,596 Accrued expenses, other current and noncurrent liabilities (6,240) 4,859 Accrued compensation (34,431) (39,232)Deferred revenue (111,254) (40,154)Operating lease liabilities (14,202) (11,011)Net cash provided by operating activities 331,335 260,806 Cash Flows from Investing Activities Purchases of property, equipment and other assets (17,025) (28,659)Capitalized internal-use software (22,429) (7,429)Payments for business acquisitions, net of cash acquired — (4,377)Purchase of strategic investments (561) — Purchases of short-term investments (430,296) (375,929)Proceeds from maturities of short-term investments 268,651 253,849 Net cash used in investing activities (201,660) (162,545)Cash Flows from Financing Activities Proceeds from issuance of common stock upon exercise of stock options 890 1,256 Net cash provided by financing activities 890 1,256 Net increase in cash and cash equivalents 130,565 99,517 Cash and cash equivalents at beginning of period 1,423,080 1,262,206 Cash and cash equivalents at end of period$1,553,645 $1,361,723 ZSCALER, INC.
Condensed Consolidated Statements of Operations(in thousands, except per share amounts)(unaudited) Three Months Ended October 31, 2024 2023 Revenue$627,955 $496,703 Cost of revenue (1) (2) 141,462 111,394 Gross profit 486,493 385,309 Operating expenses: Sales and marketing (1) (2) 306,087 267,111 Research and development (1) (2) 154,254 113,539 General and administrative (1) 56,819 50,716 Total operating expenses 517,160 431,366 Loss from operations (30,667) (46,057)Interest income 30,048 25,942 Interest expense (3) (3,143) (3,159)Other expense, net (652) (1,212)Loss before income taxes (4,414) (24,486)Provision for income taxes 7,637 8,997 Net loss$(12,051) $(33,483)Net loss per share, basic and diluted$(0.08) $(0.23)Weighted-average shares used in computing net loss per share, basic and diluted 152,557 147,625 (1) Includes stock-based compensation expense and related payroll taxes as follows: Cost of revenue$15,793 $12,955 Sales and marketing 64,866 58,668 Research and development 58,865 41,043 General and administrative 21,050 20,063 Total$160,574 $132,729 (2) Includes amortization expense of acquired intangible assets as follows: Cost of revenue$3,675 $2,717 Sales and marketing 425 226 Research and development 140 93 Total$4,240 $3,036 (3) Includes amortization of debt issuance costs$981 $977 ZSCALER, INC.
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