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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
OR
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 ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, $0.001 Par ValueZSThe 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 filerýAccelerated filer
Non-accelerated filerSmaller 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
PART II. OTHER INFORMATION



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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, 2022July 31, 2021
Assets
Current assets:
Cash and cash equivalents$594,893 $275,898 
Short-term investments1,062,981 1,226,654 
Accounts receivable, net272,092 257,109 
Deferred contract acquisition costs75,897 57,373 
Prepaid expenses and other current assets41,182 31,269 
Total current assets2,047,045 1,848,303 
Property and equipment, net141,692 108,576 
Operating lease right-of-use assets45,185 44,339 
Deferred contract acquisition costs, noncurrent181,402 149,657 
Acquired intangible assets, net27,034 32,129 
Goodwill59,823 58,977 
Other noncurrent assets22,363 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 liabilities43,160 22,908 
Accrued compensation102,678 93,622 
Deferred revenue731,904 571,286 
Operating lease liabilities19,600 19,842 
Total current liabilities912,576 720,205 
Convertible senior notes, net954,578 913,538 
Deferred revenue, noncurrent86,839 59,315 
Operating lease liabilities, noncurrent31,028 31,225 
Other noncurrent liabilities7,946 4,453 
Total liabilities1,992,967 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 capital1,450,139 1,131,006 
Accumulated other comprehensive loss(24,478)(650)
Accumulated deficit(894,226)(601,600)
Total stockholders’ equity531,577 528,895 
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,
2022202120222021
Revenue$286,807 $176,404 $772,887 $476,026 
Cost of revenue64,022 38,977 173,974 104,839 
Gross profit222,785 137,427 598,913 371,187 
Operating expenses:
Sales and marketing192,132 115,730 520,991 323,022 
Research and development76,578 40,952 210,989 118,473 
General and administrative40,672 24,595 111,833 70,107 
Total operating expenses309,382 181,277 843,813 511,602 
Loss from operations(86,597)(43,850)(244,900)(140,415)
Interest income949 593 1,979 2,288 
Interest expense(14,246)(13,436)(42,121)(39,730)
Other income (expense), net(2,001)71 (3,434)857 
Loss before income taxes(101,895)(56,622)(288,476)(177,000)
Provision (benefit) for income taxes(490)1,837 4,150 4,006 
Net loss$(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,
2022202120222021
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 loss1,246 (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 DeficitTotal
Stockholders’ Equity
SharesAmount
Balance as of January 31, 2022141,063 $141 $1,341,346 $(9,299)$(792,821)$539,367 
Issuance of common stock upon exercise of stock options150 — 1,319 — — 1,319 
Vesting of restricted stock units and other stock issuances634 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, 2022141,847 $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 IncomeAccumulated DeficitTotal
Stockholders’ Equity
Shares Amount
Balance as of January 31, 2021135,858 $136 $964,214 $472 $(462,118)$502,704 
Issuance of common stock upon exercise of stock options392 — 2,665 — — 2,665 
Vesting of restricted stock units and other stock issuances645 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, 2021136,895 $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 DeficitTotal
Stockholders’ Equity
SharesAmount
Balance as of July 31, 2021138,662 $139 $1,131,006 $(650)$(601,600)$528,895 
Issuance of common stock upon exercise of stock options814 — 6,190 — — 6,190 
Issuance of common stock under the employee stock purchase plan109 — 11,509 — — 11,509 
Vesting of restricted stock units and other stock issuances2,262 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, 2022141,847 $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 DeficitTotal
Stockholders’ Equity
SharesAmount
Balance as of July 31, 2020132,817 $133 $823,804 $463 $(339,571)$484,829 
Issuance of common stock upon exercise of stock options1,891 2 13,908 — — 13,910 
Issuance of common stock under the employee stock purchase plan131 — 8,563 — — 8,563 
Vesting of restricted stock units and other stock issuances2,056 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, 2021136,895 $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,
20222021
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 expense29,437 21,401 
Amortization expense of acquired intangible assets6,695 4,729 
Amortization of deferred contract acquisition costs48,793 28,577 
Amortization of debt discount and issuance costs41,043 38,648 
Non-cash operating lease costs18,988 15,156 
Stock-based compensation expense294,745 178,538 
Amortization of investment premiums, net of accretion of purchase discounts5,942 8,600 
Deferred income taxes(521)(1,502)
Impairment of assets 416 
Other649 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 payable2,966 6,421 
Accrued expenses, other current and noncurrent liabilities10,150 3,008 
Accrued compensation9,056 11,583 
Deferred revenue188,595 128,414 
Operating lease liabilities(20,273)(16,221)
Net cash provided by operating activities218,774 157,304 
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 investments955,279 562,744 
Proceeds from sale of short-term investments 22,499 
Net cash provided by (used in) investing activities82,575 (212,788)
Cash Flows From Financing Activities
Proceeds from issuance of common stock upon exercise of stock options6,190 13,910 
Proceeds from issuance of common stock under the employee stock purchase plan11,509 8,563 
Payment of deferred consideration related to business acquisitions(50)(2,250)
Other(3) 
Net cash provided by financing activities17,646 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,
2022202120222021
Amount% RevenueAmount% RevenueAmount% RevenueAmount% 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 Pacific42,003 15 %20,523 11 %109,083 14 %51,500 11 %
Other7,762 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,
2022202120222021
Amount% RevenueAmount% RevenueAmount% RevenueAmount% Revenue
(in thousands, except per percentage data)
Channel partners$266,258 93 %$165,969 94 %$720,809 93 %$446,750 94 %
Direct customers20,549 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, 2022July 31, 2021
Channel partner A10%*
(*) 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,
2022202120222021
(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, 2022July 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 securities143,706  (7)143,699 
Corporate debt securities23,785   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 securities399,690 6 (7,022)392,674 
Corporate debt securities350,700  (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 securities10,999   10,999 
Total$178,336 $ $ $178,336 
Short-term investments:
U.S. treasury securities$387,428 $9 $(17)$387,420 
U.S. government agency securities511,622 144 (34)511,732 
Corporate debt securities327,512 102 (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 years288,980 279,246 
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 MonthsGreater than 12 MonthsTotal
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 securities291,236 (5,677)45,315 (1,345)336,551 (7,022)
Corporate debt securities241,058 (4,447)33,522 (620)274,580 (5,067)
Total$809,433 $(10,500)$78,837 $(1,965)$888,270 $(12,465)
Short-term investments that were in an unrealized loss position consisted of the following as of July 31, 2021, consisted of the following:
Less than 12 MonthsGreater than 12 MonthsTotal
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
(in thousands)
U.S. treasury securities$306,908 $(17)$ $