“earnings per share of $0.08 to $0.09, assuming approximately 146 million fully diluted shares.”

In context

“Remo Canessa (CFO): Thank you, Jay. As Jay mentioned, we are pleased with the results for the third quarter of 2021. Revenue for the quarter was $176.4 million, up 12% sequentially and 60% year-over-year. ZPA product revenue was 16% of total revenue. From a geographic perspective, we had broad strength across our three major regions: Americas represented 51% of revenue, EMEA was 38% and APJ was 11%. Turning to calculated billings, which we define as the change in deferred revenue for the quarter plus total revenue recognized in that quarter. Billings grew 71% year-over-year to $225 million, with billing duration towards the upper-end of our 10 to 14 months range. We had several customers choosing to pay upfront for their multi-year contracts. As a reminder, our contract terms are typically one to three years and we do not offer any special incentives for upfront payments. With that in mind, we are also pleased that short-term billings, which are calculated based on the change in short-term deferred revenue plus reported revenue for the period, grew 61% over the prior year. Remaining performance obligations, or RPO, which represent our total committed non-cancelable future revenue, were $1.2 billion as of April 30th. RPO grew 85% from one year ago. The current RPO is 51% of the total RPO. Our strong customer retention and ability to upsell the broader platform have resulted in a consistently high dollar-based net retention rate, which was 126% compared to 127% last quarter and 119% a year ago. As we have highlighted, this metric will vary quarter-to-quarter. While good for our business, our increased success selling bigger bundles and selling multiple-pillars from the start and faster upsells within a year can reduce our dollar-based net retention rate in the future. Considering these factors, we feel that 126% is outstanding. Total gross margin of 81% was flat quarter-over-quarter and improved by 1 percentage point year over year. As a reminder, gross margins in the second half of last fiscal year were pressured by the augmented use of public cloud to meet the 10x surge in ZPA traffic as pandemic lockdowns began. Turning to operating expenses. Our total operating expenses increased 6% sequentially and 53% year-over-year to $119.7 million. Operating expenses as a percentage of revenue declined by 3 percentage points from 71% a year ago to 68% in the quarter primarily due to lower T&E, which was partially offset by increased hiring and M&A expenses. Sales and marketing expense increased 6% sequentially and 56% year-over-year to $80.9 million. The year-over-year increase was due to higher compensation expenses and investments in building our teams and go-to-market initiatives. R&D expenses increased 8% sequentially and 55% year-over-year to $25.9 million. The increase is primarily due to continued investments in our engineering teams. G&A expenses increased 4% sequentially and 33% year-over-year to $12.9 million. The growth in G&A includes investments in building our teams, compensation-related expenses and professional fees. Our third quarter operating margin was 13% compared to 9% in the same quarter last year, and T&E spending had a positive 270 basis point benefit. Operating margin was better than our guidance range due to stronger than expected performance in the business and due to the timing of certain sales and marketing spend. Net income in the quarter was $21.4 million or a non-GAAP earnings per share of $0.15. We ended the quarter with over $1.4 billion in cash, cash equivalents, and short-term investments. Free cash flow was positive $56 million in the quarter, which compares to $9 million during the same quarter last year. The increase was driven by our strong billings growth, receivables collection and operating performance. Now, moving to guidance. As a reminder, these numbers are all non-GAAP which excludes stock-based compensation expenses and related payroll taxes, amortization of debt discount, amortization of intangible assets and any associated tax effects. For the fourth quarter of fiscal 2021, we expect revenue in the range of $185 million to $187 million, reflecting a year-over-year growth of 47% to 49%; gross margins of 79%. I would like to remind investors that a number of our emerging products, including ZDX, Workload Segmentation and CSPM, will initially have lower gross margins than our core products. We are currently managing the emerging products for time-to-market and growth, not optimizing them for gross margins. With this in mind, we believe 79% to 80% is a good range for us in the near-term; operating profit in the range of $13.5 million to $14.5 million; other income of $300,000, net of interest payments on the senior convertible notes; income taxes of $1.7 million; earnings per share of $0.08 to $0.09, assuming approximately 146 million fully diluted shares. For the full-year fiscal 2021 we now expect revenue in the range of $660 million to $664 million or year-over-year growth of 53% to 54%; calculated billings in the range of $878 million to $880 million or year-over-year growth of approximately 60%; operating profit in the range of $71 million to $72 million; earnings per share of $0.47 assuming approximately 145 million fully diluted shares. The acquisitions of Trustdome and Smokescreen are expected to have an immaterial impact on revenue in Q4 and in fiscal 2022, as they are early stage companies. Our plan is to further develop these products and incorporate their technologies into our platform. We expect to incur $2.5 million to $3.0 million in additional operating expenses in Q4 related to the acquisitions, including a new R&D center of excellence in Israel. This is incorporated into our Q4 guidance. For your modeling purposes, we expect to incur approximately $13 million to $15 million in operating expenses related to the acquisitions in fiscal 2022. With a huge market opportunity, we remain committed to investing aggressively in our company behind the growth in our business. We have a highly efficient business model and are making investments across the organization today in order to capitalize on the large opportunity ahead of us. While we will balance growth and profitability, growth will continue to take priority considering our strong business momentum.”