initial public offerings (IPOs) trading on American exchanges

Saturday, March 17, 2018

Zscaler (ZS) started trading on the Nasdaq on 16 March 2018

  • 12.0 million (originally 10.0 million) shares priced at $16, above the upwardly revised range of $13-$15 (originally $10-$12). 
  • The deal raised $192 million in gross proceeds, which is $82 million, or, 75% more than anticipated. 

OverviewZS is the developer of a security cloud platform which is distributed to more than 100 data centers helping them to accelerate their IT migration to the cloud. This includes the migration of applications from a corporate data center to the cloud, and from a legacy "hub-and-spoke" system (WANs) to an updated direct-to-cloud network. ZS' platform allows traffic to be routed locally and securely to the internet via broadband and cellular connections.

The company's two core services are:
  • ZScaler Internet Access (ZIA): This solution securely connects users to externally managed apps, including SaaS applications, and internet destinations, regardless of device, location, or network. It is designed to ensure malware does not reach the user and valuable corporate data remains safe.
  • ZScaler Private Access (ZPA): This service offers authorized users secure and reliable access to internally managed applications hosted in enterprise data centers or the cloud. The ZPA product connects a specific user to specific applications, without bringing the user on the network. This results in better security and is different from traditional remote access solutions like VPNs.
ZS has over 2,800 customers across all major geographies and its customer base spans every major industry. It implements a joint sales approach in which its sales force develops relationships directly with customers. It bolsters its sales presence by levering its network of telecom service providers, system integrators, and re-seller partners.
Looking at the financials, for FY17, revenue jumped by 56% to $156.4 million. The growth in revenue was driven by a 14% increase to its customer base, as well as sales of additional subscriptions to existing customers. This is reflected by its very healthy dollar-based retention rate of 115%.

Meanwhile, gross margin increased to 78% from 75%, due to better efficiency of its technology, infrastructure, and data centers, enabling technological improvements.

But, despite the strong revenue growth and rise in gross margin, its loss from operations widened to ($35.1) million from ($26.8) million in FY16. The cause is tied to a a 60% spike in Research & Development costs, due to increased headcount, and a 118% surge in General & Administrative costs. 

110 Baytech Dr Ste 100
SAN JOSE, CA 95134-2302
United States - Map
+1-408-5330288 (Phone)
+1-302-6365454 (Fax)

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