SEC Filing | Zscaler, Inc.

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zs-20220430

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________________________________

FORM 10-Q

_____________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _to_

Commission File Number: 001-38413

_____________________________________

ZSCALER, INC.

(Exact Name of Registrant as Specified in its Charter)

_____________________________________

Delaware

(State or other jurisdiction of

incorporation or organization)

26-1173892

(I.R.S. Employer

Identification Number)

120 Holger Way

San Jose, California 95134

(Address of principal executive offices)

Registrant’s telephone number, including area code: (408) 533-0288

___________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, $0.001 Par Value

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) Yes ý No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

As of May 31, 2022, the number of shares of registrant’s common stock outstanding was 141,862,695.

ZSCALER, INC.

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		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets as of April 3 0 , 2022 and July 31, 2021	3
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended A pril 3 0 , 2022 and 2021	4
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended April 3 0 , 2022 and 2021	5
	Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended April 3 0 , 2022 and 2021	6
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended Ap ril 3 0 , 2022 and 2021	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	49
Item 4.	Controls and Procedures	50
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	89
Item 6.	Exhibits	89
	Signatures	90

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our financial outlook and market positioning. These forward-looking statements are made as of the date they were first issued and were based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. The words "believe," "may," "will," "potentially," "estimate," "continue," "anticipate," "intend," "could," "would," "project," "plan," "expect," and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements.

These forward-looking statements include, but are not limited to, statements concerning the following:

•the potential impact on our business of the ongoing COVID-19 pandemic;

•our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit or gross margin, operating expenses (including changes in sales and marketing, research and development and general and administrative expenses), and our ability to achieve, and maintain, future profitability;

•market acceptance of our cloud platform;

•the effects of increased competition in our markets and our ability to compete effectively;

•our ability to maintain the security and availability of our cloud platform;

•our ability to maintain and expand our customer base, including by attracting new customers;

•our ability to develop new solutions, or enhancements to our existing solutions, and bring them to market in a timely manner;

•market acceptance of any new solutions or enhancements to our existing solutions;

•anticipated trends, growth rates and challenges in our business and in the markets in which we operate;

•our business plan and our ability to effectively manage our growth and associated investments;

•beliefs about and objectives for future operations;

•beliefs about and objectives for future acquisitions, strategic investments, partnerships and alliances and our ability to successfully integrate completed acquisitions;

•our relationships with third parties, including channel partners;

•our ability to maintain, protect and enhance our intellectual property rights;

•our ability to successfully defend litigation brought against us;

•our ability to successfully expand in our existing markets and into new markets;

•sufficiency of cash to meet cash needs for at least the next 12 months and service our outstanding debt;

•our need and ability to raise additional capital in future debt or equity financings;

•our expectations regarding settlement of our Notes (defined in Note 9);

•our ability to comply with laws and regulations that currently apply or become applicable to our business both in the United States and internationally;

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•beliefs about the impacts of legal and geopolitical developments upon our business;

•the attraction and retention of qualified employees and key personnel; and

•the future trading prices of our common stock.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in "Risk Factors" elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements and you should not place undue reliance on our forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.

You should read this Quarterly Report on Form 10-Q in conjunction with the audited consolidated financial statements and related notes in our Annual Report on Form 10-K for the fiscal year ended July 31, 2021 filed with the Securities and Exchange Commission, or the SEC, on September 16, 2021.

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PART I. FINANCIAL INFORMATION

Item. 1 Financial Statements

ZSCALER, INC.

Condensed Consolidated Balance Sheets

(in thousands, except per share amounts)

(unaudited)



	April 30, 2022		July 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	594,893	$	275,898
Short-term investments	1,062,981		1,226,654
Accounts receivable, net	272,092		257,109
Deferred contract acquisition costs	75,897		57,373
Prepaid expenses and other current assets	41,182		31,269
Total current assets	2,047,045		1,848,303
Property and equipment, net	141,692		108,576
Operating lease right-of-use assets	45,185		44,339
Deferred contract acquisition costs, noncurrent	181,402		149,657
Acquired intangible assets, net	27,034		32,129
Goodwill	59,823		58,977
Other noncurrent assets	22,363		15,650
Total assets	$	2,524,544	$	2,257,631
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	15,234	$	12,547
Accrued expenses and other current liabilities	43,160		22,908
Accrued compensation	102,678		93,622
Deferred revenue	731,904		571,286
Operating lease liabilities	19,600		19,842
Total current liabilities	912,576		720,205
Convertible senior notes, net	954,578		913,538
Deferred revenue, noncurrent	86,839		59,315
Operating lease liabilities, noncurrent	31,028		31,225
Other noncurrent liabilities	7,946		4,453
Total liabilities	1,992,967		1,728,736
Commitments and contingencies (Note 10)
Stockholders’ Equity

Common stock; $0.001 par value; 1,000,000 shares authorized as of April 30, 2022 and July 31, 2021; 141,847 and 138,662 shares issued and outstanding as of April 30, 2022 and July 31, 2021, respectively	142		139
Additional paid-in capital	1,450,139		1,131,006

Accumulated other comprehensive loss	(24,478)		(650)
Accumulated deficit	(894,226)		(601,600)
Total stockholders’ equity	531,577		528,895
Total liabilities and stockholders’ equity	$	2,524,544	$	2,257,631

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ZSCALER, INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)



	Three Months Ended April 30,				Nine Months Ended April 30,
	2022		2021		2022		2021
Revenue	$	286,807	$	176,404	$	772,887	$	476,026
Cost of revenue	64,022		38,977		173,974		104,839
Gross profit	222,785		137,427		598,913		371,187
Operating expenses:
Sales and marketing	192,132		115,730		520,991		323,022
Research and development	76,578		40,952		210,989		118,473
General and administrative	40,672		24,595		111,833		70,107
Total operating expenses	309,382		181,277		843,813		511,602
Loss from operations	(86,597)		(43,850)		(244,900)		(140,415)
Interest income	949		593		1,979		2,288
Interest expense	(14,246)		(13,436)		(42,121)		(39,730)
Other income (expense), net	(2,001)		71		(3,434)		857
Loss before income taxes	(101,895)		(56,622)		(288,476)		(177,000)
Provision (benefit) for income taxes	(490)		1,837		4,150		4,006
Net loss	$	(101,405)	$	(58,459)	$	(292,626)	$	(181,006)


Net loss per share, basic and diluted	$	(0.72)	$	(0.43)	$	(2.08)	$	(1.34)
Weighted-average shares used in computing net loss per share, basic and diluted	141,422		136,385		140,403		134,938

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ZSCALER, INC.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(unaudited)



	Three Months Ended April 30,				Nine Months Ended April 30,
	2022		2021		2022		2021
Net loss	$	(101,405)	$	(58,459)	$	(292,626)	$	(181,006)
Available-for-sale securities:
Change in net unrealized losses on available-for-sale securities	(7,121)		(316)		(12,532)		(658)

Cash flow hedging instruments:
Change in net unrealized gains (losses)	(9,304)		572		(13,773)		994
Net realized losses (gains) reclassified into net loss	1,246		(69)		2,477		(140)
Net change on cash flow hedges	(8,058)		503		(11,296)		854
Other comprehensive loss	(15,179)		187		(23,828)		196
Comprehensive loss	$	(116,584)	$	(58,272)	$	(316,454)	$	(180,810)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ZSCALER, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

(unaudited)

Stockholders' equity activity for the three months ended April 30, 2022:


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance as of January 31, 2022	141,063	$	141	$	1,341,346	$	(9,299)	$	(792,821)	$	539,367
Issuance of common stock upon exercise of stock options	150	—		1,319		—		—		1,319

Vesting of restricted stock units and other stock issuances	634	1		(1)		—		—		—


Stock-based compensation	—	—		107,475		—		—		107,475
Other comprehensive loss	—	—		—		(15,179)		—		(15,179)
Net loss	—	—		—		—		(101,405)		(101,405)
Balance as of April 30, 2022	141,847	$	142	$	1,450,139	$	(24,478)	$	(894,226)	$	531,577

Stockholders' equity activity for the three months ended April 30, 2021:


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance as of January 31, 2021	135,858	$	136	$	964,214	$	472	$	(462,118)	$	502,704


Issuance of common stock upon exercise of stock options	392	—		2,665		—		—		2,665


Vesting of restricted stock units and other stock issuances	645	1		(1)		—		—		—






Stock-based compensation	—	—		61,010		—		—		61,010

Other comprehensive income	—	—		—		187		—		187
Net loss	—	—		—		—		(58,459)		(58,459)
Balance as of April 30, 2021	136,895	$	137	$	1,027,888	$	659	$	(520,577)	$	508,107

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ZSCALER, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

(unaudited)

Stockholders' equity activity for the nine months ended April 30, 2022:


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance as of July 31, 2021	138,662	$	139	$	1,131,006	$	(650)	$	(601,600)	$	528,895
Issuance of common stock upon exercise of stock options	814	—		6,190		—		—		6,190
Issuance of common stock under the employee stock purchase plan	109	—		11,509		—		—		11,509
Vesting of restricted stock units and other stock issuances	2,262	3		1,700		—		—		1,703


Stock-based compensation	—	—		299,734		—		—		299,734
Other comprehensive loss	—	—		—		(23,828)		—		(23,828)
Net loss	—	—		—		—		(292,626)		(292,626)
Balance as of April 30, 2022	141,847	$	142	$	1,450,139	$	(24,478)	$	(894,226)	$	531,577

Stockholders' equity activity for the nine months ended April 30, 2021:


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance as of July 31, 2020	132,817	$	133	$	823,804	$	463	$	(339,571)	$	484,829


Issuance of common stock upon exercise of stock options	1,891	2		13,908		—		—		13,910

Issuance of common stock under the employee stock purchase plan	131	—		8,563		—		—		8,563
Vesting of restricted stock units and other stock issuances	2,056	2		(2)		—		—		—



Vesting of early exercised common stock options	—	—		93		—		—		93


Stock-based compensation	—	—		181,522		—		—		181,522
Other comprehensive income	—	—		—		196		—		196

Net loss	—	—		—		—		(181,006)		(181,006)
Balance as of April 30, 2021	136,895	$	137	$	1,027,888	$	659	$	(520,577)	$	508,107

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ZSCALER, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Nine Months Ended April 30,
	2022		2021
Cash Flows From Operating Activities
Net loss	$	(292,626)	$	(181,006)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization expense	29,437		21,401
Amortization expense of acquired intangible assets	6,695		4,729
Amortization of deferred contract acquisition costs	48,793		28,577
Amortization of debt discount and issuance costs	41,043		38,648
Non-cash operating lease costs	18,988		15,156
Stock-based compensation expense	294,745		178,538
Amortization of investment premiums, net of accretion of purchase discounts	5,942		8,600
Deferred income taxes	(521)		(1,502)
Impairment of assets	—		416
Other	649		3
Changes in operating assets and liabilities, net of effects of business acquisitions
Accounts receivable	(15,449)		(20,128)
Deferred contract acquisition costs	(99,062)		(71,130)
Prepaid expenses, other current and noncurrent assets	(10,354)		1,797
Accounts payable	2,966		6,421
Accrued expenses, other current and noncurrent liabilities	10,150		3,008
Accrued compensation	9,056		11,583
Deferred revenue	188,595		128,414
Operating lease liabilities	(20,273)		(16,221)
Net cash provided by operating activities	218,774		157,304
Cash Flows From Investing Activities
Purchases of property, equipment and other assets	(48,046)		(34,215)
Capitalized internal-use software	(14,167)		(7,047)


Payments for business acquisitions, net of cash acquired	(380)		(29,420)
Strategic investments	—		(2,877)
Purchases of short-term investments	(810,111)		(724,472)
Proceeds from maturities of short-term investments	955,279		562,744
Proceeds from sale of short-term investments	—		22,499
Net cash provided by (used in) investing activities	82,575		(212,788)
Cash Flows From Financing Activities

Proceeds from issuance of common stock upon exercise of stock options	6,190		13,910

Proceeds from issuance of common stock under the employee stock purchase plan	11,509		8,563
Payment of deferred consideration related to business acquisitions	(50)		(2,250)
Other	(3)		—

Net cash provided by financing activities	17,646		20,223
Net increase (decrease) in cash and cash equivalents (1)	318,995		(35,261)
Cash and cash equivalents at beginning of period (1)	275,898		141,851
Cash and cash equivalents at end of period (1)	$	594,893	$	106,590
Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes, net of tax refunds	$	3,917	$	3,580
Cash paid for interest expense	$	719	$	743
Non-Cash Activities
Operating lease right-of-use assets obtained in exchange for operating lease obligations, net of terminations	$	18,624	$	27,622
Net change in purchased equipment included in accounts payable and accrued expenses	$	(404)	$	8,720

(1) We did not hold restricted cash for any periods presented.

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ZSCALER, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1. Business and Summary of Significant Accounting Policies

Description of the Business

Zscaler, Inc. ("Zscaler," the "Company," "we," "us," or "our") is a cloud security company that developed a platform incorporating core security functionalities needed to enable fast and secure access to cloud resources based on identity, context and organization’s policies. Our solution is a purpose-built, multi-tenant, distributed cloud platform that secures user-to-app, app-to-app, and machine-to-machine communications over any network and any location. We deliver our solutions using a software-as-a-service ("SaaS") business model and sell subscriptions to customers to access our cloud platform, together with related support services. We were incorporated in Delaware in September 2007 and conduct business worldwide, with presence in North America, Europe and Asia. Our headquarters are in San Jose, California.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States ("GAAP") and applicable regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting, and include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the applicable required disclosures and regulations of the SEC. Therefore, these unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company's audited consolidated financial statements and related notes in its Annual Report on Form 10-K for the fiscal year ended July 31, 2021 (the "Fiscal 2021 Form 10-K"), as filed with the SEC on September 16, 2021.

Interim Unaudited Condensed Consolidated Financial Statements

The accompanying condensed consolidated balance sheet as of July 31, 2021 was derived from the audited consolidated financial statements as of that date. The accompanying interim condensed consolidated financial statements, including the condensed consolidated balance sheet as of April 30, 2022, the condensed consolidated statements of operations for the three and nine months ended April 30, 2022 and 2021, the condensed consolidated statements of comprehensive loss for the three and nine months ended April 30, 2022 and 2021, the condensed consolidated statements of stockholders’ equity for the three and nine months ended April 30, 2022 and 2021 and the condensed consolidated statements of cash flows for the nine months ended April 30, 2022 and 2021 are unaudited. The related financial data and the other financial information disclosed in the accompanying notes to these condensed consolidated financial statements are also unaudited. These interim unaudited condensed consolidated financial statements have been prepared on a basis consistent with our annual consolidated financial statements and, in our opinion, include all normal recurring adjustments necessary to state fairly our quarterly results. The results of operations for the three and nine months ended April 30, 2022 are not necessarily indicative of the results to be expected for our fiscal year ending July 31, 2022 or for any other future fiscal year or interim period.

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Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the financial statements and accompanying notes. Such estimates include, but are not limited to, the determination of revenue recognition, deferred revenue, deferred contract acquisition costs, valuation of acquired intangible assets, period of benefit generated from our deferred contract acquisition costs, allowance for doubtful accounts, valuation of common stock options and stock-based awards, useful lives of property and equipment, useful lives of acquired intangible assets, recoverability of goodwill, valuation of deferred tax assets and liabilities, loss contingencies related to litigation, fair value and effective interest rate of convertible senior notes, valuation of strategic investments and the discount rate used for operating leases. Management determines these estimates and assumptions based on historical experience and on various other assumptions that are believed to be reasonable. Actual results could differ significantly from these estimates, and such differences may be material to the condensed consolidated financial statements.

Due to the COVID-19 pandemic, there is ongoing uncertainty and significant disruption in the global economy and financial markets. We are not aware of any specific event or circumstances that would require an update to our estimates, judgments or assumptions or a revision to the carrying value of our assets or liabilities as of the date of issuance of these condensed consolidated financial statements. These estimates, judgments and assumptions may change in the future, as new events occur or additional information is obtained.

Fiscal Year

Our fiscal year ends on July 31. References to fiscal 2022, for example, refer to our fiscal year ending July 31, 2022.

Significant Accounting Policies

Our significant accounting policies are described in the Fiscal 2021 Form 10-K. There have been no significant changes to these policies that have had a material impact on the condensed consolidated financial statements and related notes for the three and nine months ended April 30, 2022.

Recently Adopted Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board ("FASB") issued ASU No. 2021-08, Business Combinations (Topic 805) on Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This standard requires contract assets and contract liabilities from contracts with customers that are acquired in a business combination to be recognized and measured as if the acquirer had originated the original contract. Previously, acquired contract assets and liabilities were measured at fair value. This standard is effective for us in the first quarter of fiscal 2024, though early adoption is permitted. We early adopted this standard in the first quarter of fiscal 2022 and it did not have a material impact to the condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2020, the FASB issued ASU No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40). This standard eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted earnings per share computation. This standard is effective for us in the first quarter of fiscal 2023, using the fully retrospective or modified retrospective method, though early adoption is permitted. We are currently evaluating the potential impact of this standard on the condensed consolidated financial statements.

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Note 2. Revenue Recognition

Disaggregation of Revenue

Subscription and support revenue is recognized over time and accounted for approximately 97% of our revenue for all periods presented.

The following table summarizes the revenue by region based on the shipping address of customers who have contracted to use our cloud platform:


	Three Months Ended April 30,								Nine Months Ended April 30,
	2022				2021				2022				2021
	Amount		% Revenue		Amount		% Revenue		Amount		% Revenue		Amount		% Revenue

	(in thousands, except per percentage data)
United States	$	141,109	49	%	$	85,678	49	%	$	379,940	49	%	$	233,379	49	%
Europe, Middle East and Africa	95,933		33	%	66,461		38	%	264,656		34	%	181,108		38	%
Asia Pacific	42,003		15	%	20,523		11	%	109,083		14	%	51,500		11	%
Other	7,762		3	%	3,742		2	%	19,208		3	%	10,039		2	%
Total	$	286,807	100	%	$	176,404	100	%	$	772,887	100	%	$	476,026	100	%

The following table summarizes the revenue from contracts by type of customer:


	Three Months Ended April 30,								Nine Months Ended April 30,
	2022				2021				2022				2021
	Amount		% Revenue		Amount		% Revenue		Amount		% Revenue		Amount		% Revenue

	(in thousands, except per percentage data)
Channel partners	$	266,258	93	%	$	165,969	94	%	$	720,809	93	%	$	446,750	94	%
Direct customers	20,549		7	%	10,435		6	%	52,078		7	%	29,276		6	%
Total	$	286,807	100	%	$	176,404	100	%	$	772,887	100	%	$	476,026	100	%

Significant Customers

No single customer accounted for 10% or more of the total revenue during the periods presented. The following table summarizes customers that accounted for 10% or more of the total balance of accounts receivable, net:


	April 30, 2022	July 31, 2021
Channel partner A	10%	*

(*) Represents less than 10%.

Contract Balances

Contract liabilities consist of deferred revenue and include payments received in advance of performance under the contract. Such amounts are recognized as revenue over the contractual period. Deferred revenue, including current and noncurrent balances as of April 30, 2022 and July 31, 2021 was $818.7 million and $630.6 million, respectively. In the nine months ended April 30, 2022 and 2021, we recognized revenue of $502.1 million and $298.5 million, respectively, that was included in the corresponding contract liability balance at the beginning of these periods.

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Remaining Performance Obligations

The typical subscription and support term is one to three years. Most of our subscription and support contracts are non-cancelable over the contractual term. However, customers typically have the right to terminate their contracts for cause, if we fail to perform. As of April 30, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $2,215.8 million. We expect to recognize 49% of the transaction price over the next 12 months and 96% of the transaction price over the next three years, with the remainder recognized thereafter.

Costs to Obtain and Fulfill a Contract

We capitalize sales commission and associated payroll taxes paid to internal sales personnel that are incremental to the acquisition of channel partner and direct customer contracts. These costs are recorded as deferred contract acquisition costs in the condensed consolidated balance sheets.

The activity of the deferred contract acquisition costs consisted of the following:


	Three Months Ended April 30,				Nine Months Ended April 30,
	2022		2021		2022		2021

	(in thousands)
Beginning balance	$	234,505	$	134,946	$	207,030	$	109,915
Capitalization of contract acquisition costs	40,549		27,976		99,062		71,130
Amortization of deferred contract acquisition costs	(17,755)		(10,454)		(48,793)		(28,577)
Ending balance	$	257,299	$	152,468	$	257,299	$	152,468

The outstanding balance of the deferred contract acquisition costs consisted of the following:


	April 30, 2022		July 31, 2021

	(in thousands)
Deferred contract acquisition costs, current	$	75,897	$	57,373
Deferred contract acquisition costs, noncurrent	181,402		149,657
Total	$	257,299	$	207,030

Sales commissions accrued but not paid as of April 30, 2022 and July 31, 2021, totaled $26.2 million and $46.7 million, respectively, which are included within accrued compensation in the condensed consolidated balance sheets.

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Note 3. Cash Equivalents and Short-Term Investments

Cash equivalents and short-term investments consisted of the following as of April 30, 2022:


	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value

Cash equivalents:	(in thousands)
Money market funds	$	211,774	$	—	$	—	$	211,774

U.S. treasury securities	143,706		—		(7)		143,699
Corporate debt securities	23,785		—		—		23,785
Total	$	379,265	$	—	$	(7)	$	379,258

Short-term investments:
U.S. treasury securities	$	325,024	$	26	$	(376)	$	324,674
U.S. government agency securities	399,690		6		(7,022)		392,674
Corporate debt securities	350,700		—		(5,067)		345,633
Total	$	1,075,414	$	32	$	(12,465)	$	1,062,981

Total cash equivalents and short-term investments	$	1,454,679	$	32	$	(12,472)	$	1,442,239

Cash equivalents and short-term investments consisted of the following as of July 31, 2021:


	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value

Cash equivalents:	(in thousands)

Money market funds	$	167,337	$	—	$	—	$	167,337
U.S. government agency securities	10,999		—		—		10,999

Total	$	178,336	$	—	$	—	$	178,336

Short-term investments:
U.S. treasury securities	$	387,428	$	9	$	(17)	$	387,420
U.S. government agency securities	511,622		144		(34)		511,732
Corporate debt securities	327,512		102		(112)		327,502
Total	$	1,226,562	$	255	$	(163)	$	1,226,654

Total cash equivalents and short-term investments	$	1,404,898	$	255	$	(163)	$	1,404,990

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The amortized cost and fair value of our short-term investments based on their stated maturities consisted of the following as of April 30, 2022:


	Amortized Cost		Fair Value

	(in thousands)
Due within one year	$	786,434	$	783,735
Due between one to three years	288,980		279,246
Total	$	1,075,414	$	1,062,981

Short-term investments that were in an unrealized loss position as of April 30, 2022, consisted of the following:


	Less than 12 Months				Greater than 12 Months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses

	(in thousands)
U.S. treasury securities	$	277,139	$	(376)	$	—	$	—	$	277,139	$	(376)
U.S. government agency securities	291,236		(5,677)		45,315		(1,345)		336,551		(7,022)
Corporate debt securities	241,058		(4,447)		33,522		(620)