Company Quick10K Filing
Zscaler
Price46.99 EPS-0
Shares128 P/E-157
MCap5,993 P/FCF114
Net Debt-69 EBIT-37
TEV5,924 TEV/EBIT-160
TTM 2019-10-31, in MM, except price, ratios
10-Q 2020-04-30 Filed 2020-06-03
10-Q 2020-01-31 Filed 2020-03-04
10-Q 2019-10-31 Filed 2019-12-06
10-K 2019-07-31 Filed 2019-09-18
10-Q 2019-04-30 Filed 2019-06-05
10-Q 2019-01-31 Filed 2019-03-06
10-Q 2018-10-31 Filed 2018-12-06
10-K 2018-07-31 Filed 2018-09-13
10-Q 2018-04-30 Filed 2018-06-07
S-1 2018-02-16 Public Filing
8-K 2020-06-22
8-K 2020-05-26
8-K 2020-02-20
8-K 2020-01-10
8-K 2019-12-03
8-K 2019-09-12
8-K 2019-09-10
8-K 2019-05-30
8-K 2019-04-30
8-K 2019-02-28
8-K 2018-12-18
8-K 2018-12-04
8-K 2018-10-05
8-K 2018-09-05
8-K 2018-06-06
8-K 2018-04-30

ZS 10Q Quarterly Report

Part I. Financial Information
Note 1. Business and Summary of Significant Accounting Policies
Note 2. Revenue Recognition
Note 3. Cash Equivalents and Short - Term Investments
Note 4. Fair Value Measurements
Note 5. Property and Equipment
Note 6. Business Combinations
Note 7. Goodwill and Acquired Intangible Assets
Note 8. Operating Leases
Note 9. Commitments and Contingencies
Note 10. Stock - Based Compensation
Note 11. Income Taxes
Note 12. Net Loss per Share Attributable To Common Stockholders
Note 13. Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 zsexhibit311q3fy2010q.htm
EX-31.2 zsexhibit312q3fy2010q.htm
EX-32.1 zsexhibit321q3fy2010q.htm

Zscaler Earnings 2020-04-30

Balance SheetIncome StatementCash Flow
0.70.60.40.30.10.02016201720182020
Assets, Equity
0.10.10.0-0.0-0.1-0.12016201720182020
Rev, G Profit, Net Income
0.10.0-0.0-0.1-0.1-0.22016201720182020
Ops, Inv, Fin

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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, 2020
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 29, 2020, the number of shares of registrant’s common stock outstanding was 130,518,247.

ZSCALER, INC.
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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;
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;
our ability to comply with laws and regulations that currently apply or become applicable to our business both in the United States and internationally;
beliefs about the impacts of legal and geopolitical developments upon our business;
the attraction and retention of qualified employees and key personnel; and
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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, 2019 filed with the Securities and Exchange Commission, or the SEC, on September 18, 2019.
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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, 2020July 31, 2019
Assets
Current assets:
Cash and cash equivalents$124,592  $78,484  
Short-term investments266,722  286,162  
Accounts receivable, net105,583  93,341  
Deferred contract acquisition costs26,316  21,219  
Prepaid expenses and other current assets28,903  16,880  
Total current assets552,116  496,086  
Property and equipment, net63,297  41,046  
Operating lease right-of-use assets35,128  —  
Deferred contract acquisition costs, noncurrent58,024  48,566  
Acquired intangible assets, net10,146  8,708  
Goodwill13,350  7,479  
Other noncurrent assets3,903  2,277  
Total assets$735,964  $604,162  
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$9,392  $6,208  
Accrued expenses and other current liabilities14,366  12,810  
Accrued compensation34,215  21,544  
Deferred revenue274,726  221,387  
Operating lease liabilities12,939  —  
Total current liabilities345,638  261,949  
Deferred revenue, noncurrent26,065  29,815  
Operating lease liabilities, noncurrent27,909  —  
Other noncurrent liabilities1,558  3,840  
Total liabilities401,170  295,604  
Commitments and contingencies (Note 9)
Stockholders’ Equity
Common stock; $0.001 par value; 1,000,000 shares authorized as of April 30, 2020 and July 31, 2019; 130,347 and 127,253 shares issued and outstanding as of April 30, 2020 and July 31, 2019, respectively
130  127  
Additional paid-in capital623,859  532,618  
Accumulated other comprehensive income827  268  
Accumulated deficit(290,022) (224,455) 
Total stockholders’ equity334,794  308,558  
Total liabilities and stockholders’ equity$735,964  $604,162  

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,
2020201920202019
Revenue$110,524  $79,128  $305,382  $216,728  
Cost of revenue24,579  14,960  64,375  42,330  
Gross profit85,945  64,168  241,007  174,398  
Operating expenses:
Sales and marketing67,727  45,295  188,759  120,596  
Research and development24,117  16,499  65,094  44,756  
General and administrative14,615  15,911  56,223  36,428  
Total operating expenses106,459  77,705  310,076  201,780  
Loss from operations(20,514) (13,537) (69,069) (27,382) 
Interest income1,528  2,081  5,405  5,595  
Other income (expense), net70  (144) 28  (82) 
Loss before income taxes(18,916) (11,600) (63,636) (21,869) 
Provision for income taxes421  636  1,931  1,510  
Net loss$(19,337) $(12,236) $(65,567) $(23,379) 
Net loss per share, basic and diluted
$(0.15) $(0.10) $(0.51) $(0.19) 
Weighted-average shares used in computing net loss per share, basic and diluted
129,682  124,672  128,538  122,644  

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,
2020201920202019
Net loss$(19,337) $(12,236) $(65,567) $(23,379) 
Other comprehensive income, net of tax:
Unrealized net gains on available-for-sale securities336  160  559  225  
Other comprehensive income 336  160  559  225  
Comprehensive loss$(19,001) $(12,076) $(65,008) $(23,154) 

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, 2020:
Common Stock Additional
Paid-In
Capital
Accumulated Other Comprehensive
Income
Accumulated DeficitTotal
Stockholders’ Equity
Shares Amount  
Balance as of January 31, 2020129,266  $129  $589,229  $491  $(270,685) $319,164  
Issuance of common stock upon exercise of stock options882  1  5,795  —  —  5,796  
Vesting of restricted stock units199  —  —  —  —    
Vesting of early exercised common stock options—  —  131  —  —  131  
Stock-based compensation—  —  28,704  —  —  28,704  
Unrealized net gains on available-for-sale-securities—  —  —  336  —  336  
Net loss—  —  —  —  (19,337) (19,337) 
Balance as of April 30, 2020130,347  $130  $623,859  $827  $(290,022) $334,794  
Stockholders' equity activity for the three months ended April 30, 2019:
Common Stock Additional
Paid-In
Capital
Accumulated Other Comprehensive
Income (Loss)
Accumulated DeficitTotal
Stockholders’ Equity
Shares Amount  
Balance as of January 31, 2019123,897  $124  $483,951  $(59) $(206,943) $277,073  
Issuance of common stock upon exercise of stock options1,642  2  8,028  —  —  8,030  
Vesting of restricted stock units13  —  —  —  —    
Vesting of early exercised common stock options—  —  277  —  —  277  
Stock-based compensation—  —  13,275  —  —  13,275  
Unrealized net gains on available-for-sale-securities, net of tax—  —  —  160  —  160  
Net loss—  —  —  —  (12,236) (12,236) 
Balance as of April 30, 2019125,552  $126  $505,531  $101  $(219,179) $286,579  

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, 2020:
Common StockAdditional
Paid-In
Capital
Notes
Receivable
From
Stockholders
Accumulated Other Comprehensive
Income
Accumulated DeficitTotal
Stockholders’ Equity
SharesAmount
Balance as of July 31, 2019127,253  $127  $532,618  $  $268  $(224,455) $308,558  
Issuance of common stock upon exercise of stock options2,102  3  12,551  —  —  —  12,554  
Issuance of common stock under the employee stock purchase plan284  —  5,334  —  —  —  5,334  
Vesting of restricted stock units708  —  —  —  —  —    
Vesting of early exercised stock options—  —  393  —  —  —  393  
Stock-based compensation—  —  72,963  —  —  —  72,963  
Unrealized net gains on available-for-sale-securities—  —  —  —  559  —  559  
Net loss—  —  —  —  —  (65,567) (65,567) 
Balance as of April 30, 2020130,347  $130  $623,859  $  $827  $(290,022) $334,794  
Stockholders' equity activity for the nine months ended April 30, 2019:
Common StockAdditional
Paid-In
Capital
Notes
Receivable
From
Stockholders
Accumulated Other Comprehensive
Income (Loss)
Accumulated DeficitTotal
Stockholders’ Equity
SharesAmount
Balance as of July 31, 2018119,764  $119  $438,392  $(2,051) $(124) $(196,100) $240,236  
Cumulative effect of accounting change—  —  (300) —  —  300    
Issuance of common stock upon exercise of stock options5,153  6  23,517  —  —  —  23,523  
Issuance of common stock under the employee stock purchase plan627  1  8,690  —  —  —  8,691  
Vesting of restricted stock units16  —  —  —  —  —    
Repurchases of unvested common stock(8) —  —  —  —  —    
Repayments of principal amount on notes receivable from stockholders—  —  —  1,905  —  —  1,905  
Accrued interest on notes receivable from stockholders, net of repayments—  —  —  146  —  —  146  
Adjustment to initial public offering costs—  —  300  —  —  —  300  
Vesting of early exercised stock options—  —  844  —  —  —  844  
Stock-based compensation—  —  34,088  —  —  —  34,088  
Unrealized net gains on available-for-sale-securities, net of tax—  —  —  —  225  —  225  
Net loss—  —  —  —  —  (23,379) (23,379) 
Balance as of April 30, 2019125,552  $126  $505,531  $  $101  $(219,179) $286,579  

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,
20202019
Cash Flows From Operating Activities
Net loss$(65,567) $(23,379) 
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization expense12,278  7,331  
Amortization expense of acquired intangible assets2,062  405  
Amortization of deferred contract acquisition costs17,673  13,505  
Noncash operating lease costs9,649  —  
Stock-based compensation expense70,012  34,088  
Accretion of purchased discounts, net of amortization of investment premiums(463) (1,702) 
Deferred income taxes(555)   
Impairment of assets746    
Other305  244  
Changes in operating assets and liabilities, net of effects of business acquisitions:
Accounts receivable(12,218) (9,540) 
Deferred contract acquisition costs(32,228) (21,700) 
Prepaid expenses, other current and noncurrent assets(13,365) (3,361) 
Accounts payable1,923  (611) 
Accrued expenses, other current and noncurrent liabilities660  (1,047) 
Accrued compensation12,671  (1,548) 
Deferred revenue49,581  47,519  
Operating lease liabilities(5,482) —  
Net cash provided by operating activities47,682  40,204  
Cash Flows From Investing Activities
Purchases of property, equipment and other assets(24,793) (16,698) 
Capitalized internal-use software(6,296) (1,713) 
Acquired intangible assets  (1,480) 
Payments for business acquisitions, net of cash acquired(8,918) (823) 
Purchases of short-term investments(202,764) (272,324) 
Proceeds from maturities of short-term investments209,225  139,361  
Proceeds from sale of short-term investments14,084    
Net cash used in investing activities(19,462) (153,677) 
Cash Flows From Financing Activities
Payments of offering costs related to initial public offering  (1,797) 
Proceeds from issuance of common stock upon exercise of stock options12,554  23,523  
Proceeds from issuance of common stock under the employee stock purchase plan5,334  8,691  
Repurchases of unvested common stock  (22) 
Repayments of notes receivable from stockholders  1,905  
Net cash provided by financing activities17,888  32,300  
Net increase (decrease) in cash, cash equivalents and restricted cash46,108  (81,173) 
Cash, cash equivalents and restricted cash at beginning of period78,484  136,147  
Cash, cash equivalents and restricted cash at end of period$124,592  $54,974  
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes, net of tax refunds$1,738  $1,500  
Noncash activities
Net change in purchased equipment included in accounts payable and accrued expenses$1,446  $1,551  
Operating lease right-of-use assets obtained in exchange for operating lease obligations, net of terminations$27,205  $—  
Vesting of early exercised common stock options$393  $844  
Net change in deferred offering costs accrued$  $(2,097) 
Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets:
Cash and cash equivalents$124,592  $54,974  
Restricted cash, current and non-current    
Total cash, cash equivalents and restricted cash$124,592  $54,974  
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 users to safely utilize authorized applications and services based on an organization’s policies. Our solution is a purpose-built, multi-tenant, distributed cloud security platform that secures access for users and devices to applications and services, regardless of 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 ("U.S. 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 U.S. 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, 2019 (the "Fiscal 2019 Form 10-K"), as filed with the SEC on September 18, 2019.
JOBS Act Extended Transition Period
As a result of the market value of our common stock held by our non-affiliates as of January 31, 2019, we ceased to be an "emerging growth company" ("EGC"), as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"), with our transition to a large accelerated filer status as of July 31, 2019. As an EGC, we elected not to avail ourselves of the extended transition periods available for complying with new or revised accounting pronouncements applicable to public companies that are not emerging growth companies. Accordingly, the transition to a large accelerated filer did not have an impact to our consolidated financial statements.
Interim Unaudited Condensed Consolidated Financial Statements
The accompanying condensed consolidated balance sheet as of July 31, 2019 was derived from the audited financial statements as of that date. The accompanying interim condensed consolidated financial statements, including the consolidated balance sheets as of April 30, 2020, the consolidated statements of operations for the three and nine months ended April 30, 2020 and 2019, the consolidated statements of comprehensive loss for the three and nine months ended April 30, 2020 and 2019, the consolidated statements of stockholders’ equity for the three and nine months ended April 30, 2020 and 2019 and the consolidated statements of cash flows for the nine months ended April 30, 2020 and 2019 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
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ended April 30, 2020 are not necessarily indicative of the results to be expected for our fiscal year ending July 31, 2020 or for any other future fiscal year or interim period.
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, the 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, loss contingencies related to litigation, valuation of deferred tax assets 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 financial statements. These estimates, judgments and assumptions may change in the future, as new events occur or additional information is obtained.