ZS - Earnings call transcript Q4 2018

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Operator

Good day, ladies and gentlemen. Thanking for standing by. And welcome to the Zscaler's Fourth Quarter 2018 Earnings Conference Call. Today’s conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Bill Choi. ahead. go Please

Bill Choi

Chaudhry, thank to financial and Relations website full joining to may everyone found are us XXXX. Canessa, be and Good By also earnings CFO. for you the announcement. the in section. Zscaler’s now, Jay call the results me have and our and fiscal discuss Investor CEO; With Remo access afternoon should on for Chairman our fourth on year announcement quarter This

schedule financial supplemental a posted to today. addition, In earlier website was our

and remind rather are you performance, which today’s net revenue, forma share, of expenses, me future subject Company’s limited that Let operating other are are forward-looking guarantees free uncertainty, flow These comments we’ll pro future beyond statements discussion dollar-based cash to not some but loss and be per during operating risk anticipated net to not margin, loss, making and retention performance, control. gross including of but net our statements the rate.

Our these differ significantly call. apply projected in We obligation statement. and any our those actual on as results in you update this representing undertake These statements today of future. them as to views may not or statements forward-looking rely forward-looking after the suggested should no from

with For release. our a be of refer filings earnings an future our the non-GAAP. to the the that Investor portion noted, on of we today’s Securities operating otherwise today website as recalculation non-GAAP a adjusted earnings all numbers more for Please Exchange as please the basis. to about of on our GAAP in our complete talk release and uncertainties could results condition, impact discussion risks and see and well Unless financial Commission will Relations

September will few X Friday can ago. we GAAP periods, non-GAAP and inform the participating Deutsche Bank’s a Technology Conference in City would XXth. supplemental the historical on Vegas in September For Conference York in financial New you TMT I also information Thursday, that referenced be to Citigroup's Las be found like moments reconciliations on in the to

like call to to Now, Jay. turn over I’d the

Jay Chaudhry

Thank interest to We with as fourth record you we for your record $XX you, million, year XXXX figure the revenue experience million. QX, billings rapid billings results. growth. our deals. Zscaler. revenue the XX% pleased Bill. exceptionally strong grew And to closed to In of thank an in number strong quarter and was we year-over-year continue I a XX% seven you, and year, to year-over-year fiscal am posted everyone, end as to It fiscal full share our in $XX grew and quarter

For the full year, grew to XX% million. $XXX and to our grew XX% million revenue $XXX billings

traffic security network call or outside appliances and choice Global or cash disappearing our security right we network why operating plus believe network these policy notion office the connect It be Then security Zscaler our no from of a a of operating built and a data XX, for traction We the that In XXX we user to our and also organizations are sales cloud corporate from build increased perimeter cloud machines it ZPA that's designed the the Applications Cloud they still firewall growth, AWS firewall, and anywhere; transformation over across We where and traditional hub-and-spoke center established as bundle secure inside data Well, to Internet includes free over our a right securely Zscaler's build XXXX a of share users cloud. world. the enable to IPS XXXX network. applications over is adoption web the year, are the shows becoming in The world be mobility demonstrate believe you customers world We is XXX for results has network transformation. have secure for role cloud of increasing cloud to can network We strong applications. wide our sales the to anywhere. your of and plays proxy an the Where to believe XXX execution, for where is to increased coming breaking center. performance best area network reflects year-over-year, irrelevant are large cloud it internal cloud. network which up can perimeter Spinning marketing margins the the strong make we network or backhaul branch with on the that enterprises. as around moat and sandboxing. Internet among global in the cloud security. SaaS quarter flow. a point regenerated deployed doesn't top is the virtual platform right the moat? of line network. It the addition cloud acts corporate would first positive the which datacenters walls. securing which and the ZIA improved pivotal the fiscal July architecture and in ended as Total engine X,XXX. had percentage security. XX to healthy

is $XX.X We security products. are going our analysis spent TAM of annually after on a IDC's that indicates billion data network

wins reflected like new customer in momentum to during Our quarter. results. our would is financial highlight several I the noteworthy strong business

with Zscaler few Internet only deal in solution Billings with gigabits per and enterprises majority to of largest True a start We highly XXX Internet throughput, This to to QX. for in communication their and requirements need for SSL reduce growing XXX. workers our restructured inspect the business XX,XXX rapidly in enable move gateways. need transformation. arrived deliver This Architecture its the infrastructure. its To our data and XX agile cloud. achieve IT business to Fortune very were user the gateway. bundle securely cloud scalable company two second increased in headquarters for their for a A me purchased front. the company's scales Let the to the from use including that solution VPN multiple example savings and could XXX,XXX with mandate at A our needed this experience, better Zscaler acquired A and and team Cloud security. CEO to secure network also security internet standardize breakout sustained every costs. different around customer services mobile services acquired having company good deliver presence their customer entire exactly reference center contributed enable us handful ZIA give up leading second business a companies. and to users. units solution. across well. platform history name, throughput. traffic user customers cloud users The two, of meet entities XXX you security four strategy do vendors to plus of a of European globe, To extend secure which allowed million customer infrastructure. Office gigabits good application and required will cost of experience. is per XXX local traffic and to Asia The and the this, infrastructure. access $XX.X have Zscalar make This point, hybrid to designed with XXX integrate both Fortune security embracing for purchase over countries infrastructure elimination more business to initiatives. and of to networks a of cloud Zscalar had over identified without One, at network of This they over IT network breakouts to in their local a result traditional and network driven to They security Internet office a Hub-and-spoke transformation; and simplification leading and ZPA ZPA

In partner integration business offering this customer this Zscaler unit as Zscaler provider and for engagements. managed deliver service service will be will systems to services Our resale a consulting parallel, customer. commercially

top up-sell We A a for XX,XXX six in transformation in cover which had wins our DLP employees. user purchased XX notable bundle additional number and users Bank US all months also licenses to ago XX,XXX QX. purchased of top

embracing offices is their to hub-and-spoke security for cloud and had bank the perimeter XXX, replace strategy branches local traditional developed network including XXX gateways. the Internet two Office X,XXX back internet As only breakout that they and

Wi-Fi enhance centers. for Zscaler traffic SSL bundle data secure van from of they wanted transmission devices. mobile check the inspection addition, In for guest or The Zscaler post leakage. headed solution, SD and with to natural Internet security security. Malware along users; data traffic only Security and will and to branches the be all

current While we as and gateway, are it appliances is centers, secure opportunity. such data outbound replacing two DNS, traditional web mostly greenfield firewall, in a DLP network sandboxing security

local a M&A driven We breakouts, their user subset They also hearing and Internet X,XXX users. VPN. about unhappiness new requirements are with bought ZPA or secured traditional of by

ZPA for XX,XXX that customer XX,XXX bundles employees two about years purchased services financial of bought Our ago users. transmission all

internet that multinational enterprise is expanded countries. the the XX,XXX remote except access applications network some traditional It minimal ZIA data XX including do secure in their AWS. many users. ZPA one; internal Office local for to firewalls ago This same XXX center is Azure Internet year AWS security parameter infrastructure. three, the launching of They fast and are locations an VPN of applications, backhauling with as access experience Fortune appliances Azure in in the strategy, the A realization site Europe them IT and or on-premise breakouts paid SaaS, one comprised without a traffic cloud This first oil VPN The through less While our or and bought from of purchase provided global on to which while center. for enables fast a gas deal and customer device pilot small transmission are direct in XXX any will user XXX all approach of the access company to eliminates need cost. or to longer transformation. and inbound to VPN. any lower either -to-site across This application the such to center. anywhere a Two; service all result, data initiative data will bundle and no

was network a driver secure of Internet to inspection Greenfield gateways, while security other current local SSL internet and XXX Wi-Fi about opportunity to Like create security in appliances replacing hundreds we enhance is many deals, Another the locations. to secure mostly it guest with breakouts. are

a for complimentary set access. ZPA, internal services Let of me application make comments few about a

and Zscalar. continued platform in one year customers its excited and to the journey the half user better delivering with new coming is transformation We experience made cloud breakouts, platform a about value with from rely customers. up was growth. all to two full business scanning at four increasingly provides ago. inspection introduced XXXX, compelling the simplify and go-to-market are minimize networks our born approximately One; Zscaler MPLS believe customers. In hardware examples sales feel our and or up-sell security hub-and-spoke the scale. four; vision. ZPA SSL the cloud enhance new Zscaler cloud effect to of us executing in that to these reducing to getting adoption almost on enable is the very rapid local customers reps of demonstrate benefits line ZPA appliances internet stronger is for infrastructure including on and deliver to Three; by need new as cost infrastructure. years with XX% and ago And fiscal was sell two; security nearly our contributed available We and are network. well related We team

at service with go-to-market channel capabilities, for which integrators in global sell to C-level. partnerships providers. advantage enable top investing A are large and our strategic down system our is unique us us We the

security our industry's upgraded features Exact introduced out. our DLP efficacy firewalls derive a millions we During transactions to profiles Prevention build we we strengthen significant ago, efficacy. attacks to found well intelligence at improve match with provides positives security TrustPath. artificial enhancements enhance This considered security, Loss provide learning weeks targeted we new cloud multi-tenant the of that our not through usability. peer level. cloud is level the the which identify Notably, to for leading We new in TrustPath or We our trends for prone fourth market EDM. doing which We intelligence resulting we the and for Rather work algorithms is any the innovations they scores are card functionality anomalous to risk startup first showing and at will the Match a believe Data number, or state process billions to architecture for extensible score how Data fields. or detect bank insurance are counters generic be and other the scales well took full is visibility cloud does credit quarter, cloud These DLP reporting looking natively identify We at a information That that to deep sophisticated into threat and inspect at far of announced level. data of this analytics. or leak our than of DLP of daily to against all and social significantly a attach from make as IPs The is designed company designed architecture a SSL of IPs for can the Rather billion capabilities time. overall a of credit incorporated as threats a acquisition inspection. as solutions. look like security cloud level, superior development our that user Most user like real-time normalized to detection. technology required vendors card XX SSL users enhanced of traffic are identifiable and emerge. security an delivered company to Two traffic, enhanced numbers Zscaler and IPS stealth AI than sure to and posture department location flow number including subset just that personally mode or traditional as threats, of DLP SSL. risk proxy because team developed their EDM IPS in was platform traffic. groups. they inspect false Zscaler behavior was machine interactive don't

partners Las summit, June, head Siemens future others. We our lineup with excited Live for GE, cloud hundreds Guthrie, the in what on of had are enable journey. cloud their cloud talked our the an of we We transformation and who about customers Vegas including AT&T Cloud customers and our had Zenith inaugural inspiring speakers Group about Enterprise of because first In Microsoft attending. Scott and executives keynote of from and we

London to to bringing live on be October Zenith will month XXrd. XXst We next

the level, for milestone authority gov platform ZPA FedRAMP the is has granted by moderate major the We for operate to authorization Commission, are are record a We significant pleased our like walk also market. trust and QX federal security. zero network are certification excited disrupt to turn results. a I'd we're financial In fiscal us enables into early over to traditional FCC. the ZPA expand of gov that access has we summary, market a with and now This the security in to first very believe FedRAMP approval. through to about innings federal results. government to version the XXXX the opportunity remote achieved call Communications received Federal was ZPA Remo

Remo Canessa

Jay. you, Thank

a fiscal very As Jay had and mentioned, strong fourth XXXX. we quarter

achieved. services X%. provide feel are customers We with quarter, to $XX.X and Zscalar million, for geographies international From of advantage Americas these XX% was We global strong all results perspective built operations an and a across with investments invested world. our was allowing geographic created cloud revenue, to infrastructure. XX% strategic the quarter pleased EMEA a we've sequentially have a team sales inception, have and the extensive around and XX% year-over-year. XX% up the the was From we Revenue APJ for represented

For million, our XX% remains product the the $XXX.X fastest-growing up from in XXXX, new in fiscal prior full up-sell ZPA in new business revenue our was XX%. ZPA up contributed and history. X% of the year. year,

XX% grew Turning quarter. recognized quarter and Billings as million XX% deferred for revenue revenue grew million for full in that the change and $XX.X $XXX.X total year-over-year Billings We billings the quarter to plus the the defined for year. in to backlog. to

mix $XX.X one billings quarter a previously including mentioned. upfront This million one from from benefited customers greater than of we higher Jay year

invoice our one we a three advance. and reminder, As in typically one our customers are year to contract primarily terms years,

our and bundle, approximately up quarter. our XX% next revenue which Billings obligations in that referenced last slightly which ending both million transformation ZIA, remaining grown Total periods, XX%. Based backlog Excluding one million XXst from million $XXX on would XX% have IPO. high and sandbox, includes than from $XXX from greater on one we July $XXX firewall performance below was from is XXst, XX% recurring Billings upfront end annual our during XX% ago generation represents year July up our for approximately year

addition, our was In is fiscal ZPA customers. existing to a released cross-sell year last as additive which

up-sell net and consistently the base high year customer XXX% ability strong period dollar was XXst. retention to ended Our XXX% has last July XXX% ago retention rate, compares This in for a a which quarter. resulted

our to which can Our front year-over-year compared margin these up increased increase margin and by success increased as gross transformation functionality, vary We priced feel rate very selling and maximize reduce a to operational basis. dollar last bigger retention and drive focus sequentially. on this calculated driven ARR more satisfaction feel up XX%, year deals efficiencies. factors, to and with outstanding stage. XX% not bundle year, XXX% to up-sells which platform mix top-line to will our for The was Total the net is X% of and is business down customer an our QX faster it to feel well start revenue important with a was drive in margins continue invest X% good year-over-year a as is Considering bundles gross higher we gross quarter-to-quarter. it our We while at is growth. within strong our is

operating to Turning expenses.

and functionality increased and but and $X.X. marketing and and a sales building other $XX.X expenses increased grew XX% new year-over-year programs first sales the in and products X% growth expenses. year-over-year to marketing year-over-year marketing million. XX% offer ZPA. sequentially continue million XX% decline for expenses marketing investments XX% awareness. in costs cost consulting in to we The are a and and we million and commissions sequentially The expenses team, certification as sales our percentage initially building the million, XX% building million. increased public our investments as for addition $XX.X sequentially We XX% R&D but on drive XX% significantly in product teams and efforts marketing includes G&A year-over-year expenses to our exclude and sell to products. initial includes and enhance to G&A teams significant These been have year $XX.X complete and operating became in company. R&D sales. our growth incur primarily sale. litigation decreased concentrated in total $X.X Our after invest sequentially marketing to as related We've made FedRAMP we as to growth a to Sales investing of our

Our positive a which fourth negative $X.XX. same quarter the to negative the loss the was was $X.X flow in loss margin compared cash, quarter for We to the was or forma a last operating million negative in free million our quarter net the in for million year year cash full $X.X to year. with started in We compared X% the It in $XX.X $X.X March, $X cash positive approximately Net quarter short-term year million contributed was million pro equivalents Free cash ESPP negative compares per which our million and $XX.X last flow of to XX% quarter ended quarter. the $XXX year. ago. share investments. same million in program

will free The December balance. under $X no ESPP the stock million by overall cash cash It approximately in issuance reduces to have will impact QX. which be million $X first flow on our our in program

guidance. to on moving Now

expenses stock reminder, which are excludes certain all these and based non-GAAP a related litigation As compensation expenses. numbers

the and in common of shares million. $X.XX to $X of outstanding. range per $XXX,XXX million million in to Taxes the $X range million quarter, to XXX $XX assuming of $X.XX the expect Operating loss we $XX in range first share approximately net the loss million. For of revenue

in of to in share approximately in full the million. A we million. of common million range million. $X.XX loss loss assuming of the million range Operating XXXX, Taxes year million $XXX range $XX $X.X $XXX $XX the revenue outstanding. shares to of net For expect the to $X.XX XXX per

guidance Our go-forward on basis. a to billing plan is not give

strongest from some and billing quarters provide QX want been large billing with the declines Billings. QX QX respectively. our to customer XXXX, points due of have Historically, one However, for in QX upfront sequential to in modeling QX we and

large sequential QX For billing in QX, upfront provide difficult a XXXX, the will comparison.

QX of be effects QX. to declined last percentage QX QX fiscal two XXXX our from our the to declines. In decline Excluding QX $XX.X QX, approximately we to the million years, to consistent the Billings in the Billings, sequential XX% sequential expect previous from

large rate Billings comparable implying we For growth XXXX upfront a Billings fiscal Billings' be $XX.X revenue revenue of of fiscal be than total $XXX $XXX growth rate, the would in XXXX. to XXXX, lower the to growth the difficult in QX, year. with we If year-over-year for expect the this comparison million million, growth, million billing to exclude

in be on not the achieved opportunity. will what proud very we've Billings look updating building forward commentary We future. this We're and to our

over the Jay. call back Now I will hand to

Jay Chaudhry

you, leave to Thank and is takeaways key migration such results. One, I public as with multiple Remo. to from tailwinds us. SD-WAN with you market our these coming SaaS would to like adoption, clouds, the

better and extensible dramatic user ability to but to cloud have experience. investment on quickly network for We our cloud on opportunity. and majority reporting our and The including on be is better open in EDM, now our platform creating with biggest DLP security bundles future. the is Greenfield coming purchasing transformation. well. analytics is are progress GPS company's gateways, delivering our behavior Zscalar questions. Three, also and Zscaler Four, may our security Internet are it they to thank in higher-end introduce Operator, Customers and return functionality security, as just replaced a in increasingly providing look costs, and more internet current interest your rely you appliances purpose-built our not in winning local transformation securing as forward sales customers, the from working breakouts, bandwidth while new call cloud infrastructure cloud and new latest the update. while in we such enable decreasing platform for our services, history. ZIA deal us are you strategy user deals of We bigger to for we Two, the pervasive

Operator

with go [Operator Credit Suisse. Zelnick to Instructions] Brad We'll

Brad Zelnick

I've we time Remo, congratulations great job investors network got by year. a a strong a traditional think doing. do one spectacular finish on to the asked and one what for can't you're And Jay examples doing different. prepared this also suggest your would of best But very noise you're an think a customer success and performance doesn't something addressing we've there's lot and remarks industry always you've in Jay, players tech quarter Jay get why the is win. for this your Remo. with out security there, Excellent. all I done I seen the this where of

a cut box go-to-market has do sounds likely perspective noise like from calling says that you're do. when owns So how already customer you security what legacy the through a a do most they the with something on that you and network a provider relationship

Jay Chaudhry

good technologies question, on In world, come there's you. because XXyears, high-tech Brad. changes. disruptive changes to every incremental always XX It's the of market going Thank some they're

seeing it. that And are customers talked irrelevant. are I We kind understanding that's of about think I security disruption. what becoming network

fight to Salesforce the We to happen. seen get have out. the PeopleSoft had phenomena to same fight always really had they [Indiscernible]. word

last where years. We about the vendors seen have six for hybrid talking like Zscaler offering cloud proxy

same. trying firewall Now companies seen and we've do other to the

I think we growing a team. have sales

a have channel. very strategic We

customers the word spread We very have who us are helping -very to some out. referenceable

is So the momentum there.

SaaS feel saw run that see the case that same in other I with So we'll comfortable we very our vendors. movie

Brad Zelnick

particularly relative least year context the you're you're this That's that model, it helpful and at about wonder making as you. the Remo up. about at me and to in investments makes sales the Jay, look And upside our putting margin I that growth of cash context, productivity the in think flow thank

year? how baking comment and your you forecast --how do about are So targets hiring sales on so if XXXX. productivity trending think you're in it you can fiscal that you how and do much. it? for we into is sales Thanks this what for marketing And solving measure and Specifically

Remo Canessa

questions. for model. try of you, our Thank answer first the performance our had of that strength the With I of think them. public I'll you've to quarters company, two most we've the seen of Lot Brad.

and I is Jay are We're XXXX. that opportunity One about of sustained breakeven model acutely get the the we'll that our in basis and invest aware sometime to fiscal profitability in continue marketing are is we flow things talked positive operating market going we've long-term to cash that sales large on that to have. free and that

going to drive continue So we're to that. to

So fiscal XXXX fiscal and XXXX. into fiscal productivity, productivity versus we'll be fiscal was sales XXXX. for year hiring up also XXXX sales in aggressively to through Related the

slightly in ACD. Our have fiscal sales and sales we're flattish plans uses in productivity organizations. that productivity the basis to The based new going aggressively for is and reason hire internal that being sales for on up XXXX. company the The to use for is marketing

So we look activity. at per turn new and Jay. I'll over per ACD we base And sales sales rep that's how to

Jay Chaudhry

no and of it's good is problem we sales talent. think are I have we good being increasing. a in hiring people number marketing We're selective. It's tough attracting but market,

Operator

Needham. with question comes Alex next Henderson from Our

Alex Henderson

Great.

Let just profitability count the ending very year share a Do diluted off the for would period full count? one. you share what be the solid simple me with start have assuming

Remo Canessa

XXX the XXX - would in million It be range.

Alex Henderson

and a fundamentals sort real Thanks. And more to more the question. of of

when of nice about closing timeline that met of beginning for --looks the type for trade you was aggressively the at that to I what talk discussion push opportunity? from you Looking transactions but the what pipeline the And backlog your customers customer second, like of --those your business business, that said outstanding, on of XX% looks bit every as is ZPA? actually with obviously, at very to X% to I personally, a show to is moving ZPA, he it. acceleration little Could talked

Jay Chaudhry

and Yes, Alex, tons ZPA of momentum. are has well seeing we done

with fast is It'll So we platforms expect the for ZPA up growing both But to same. very market gain, to to ZPA ZIA. catch the too. grow of be rate even at essentially though very a is than ZIA faster TAM hard ZIA

it terms sale depends. of In cycle,

The cases faster. seven saying transactional. two in use could you One quick, the of customer I have VPN ZPA. replace call my probably to month what it? that's That's We six so I hate timeframe. types three be in is They'll more

going because go share a are way transformational. Azure, little grow we eliminate the Those ZPA have with Google. is I to more market customer longer mix. to the to to we bullish to want want but going take we ZPA. bit are to as product I expect old on second Zscalar educate of numbers. transformation, through overall applications the part My things of And architectural direct The AWS, a and cloud.

Alex Henderson

backlog Related [Multiple -- Speakers]

Jay Chaudhry

it? what's sorry I'm

Alex Henderson

I is know is didn't statistics interrupt mean if to coming pipeline sorry. the didn't were combined pipeline I or --has percentage ZIA, ZPA? what was you I I am of ZPA around on. of had the wondering you. it any in you

Remo Canessa

That I We're well or was our understand momentum pipeline and is comment between has as break expecting Yes. our and important to ZIA going answer. it grow we and up backlog. go we're it's What’s not ZPA forward. to going doing to ZPA to on and

Alex Henderson

kind One directly initiatives. breakout transformation? you at last Thanks. what about talk are to percentage Local deals that then. of your Could Okay. of related digital

Jay Chaudhry

Yes.

I Remo start transformation deals and are are the think bundle pricing Even with deals may with transformation related choose business that transformation look some if there have buy bundle sale would cloud sales. still probably for you we though the a you transformational one start commented reasons. at and on bundles. budget indicator they of to to be of to

Remo Canessa

Yes.

that's on both transformation the XX% ARR. offering customers. and existing and like they seeing transformation now, on public of XX% of up mean customers is We're our new bundle an with I based business So from sales and are that's uptick tender

at customers. new even look it's split, you between say the I'd existing So and if fairly

Jay Chaudhry

to will case were I bundle, that of if cloud with transformation other of but go by say preference of whatever bundle deals my deal, bundle sooner started the Zscalar are the is deal the some actually and to up-sell to number then but business we try from to majority them, exactly sell sell good transformation and bigger Honestly, take will use go there. the into them business And then works. take

Operator

We'll with Goldman Borges continue Sachs. on to Gabriela

Gabriela Borges

strong you coming assuming a Great, on hoping quarter. and the outline that fiscal good year. you're XXXX. afternoon puts us for take Remo year for one of a XX% the and mid guidance could on growth that little more off for congratulations start type the to rate I'm Maybe on such for

Thank bit would driving would touch the deceleration a on you. productivity other be the be You helpful. really but any factors little that

Remo Canessa

to $XXX we our perspective XX% a The base-- our That the $XXX outstanding. guidance over to for increase million year, that over XX% is XXXX million. is gave million fiscal to XXX from was which of

that how We in comfortable prudent. at of we we're it front guidance feel an want are to is we that way that opportunity been getting. it'll looking we are we be to the And our we're focus we forward with outstanding And going sure our a for and ran private have The as how guidance public success. giving company we us. look is company a building as make business forward. company, does That's related and

Gabriela Borges

seems which related thank up makes Jay about how Could catalyst transformation up one attached or to And it to SD-WAN like but a often given deployment? follow as ROI SD-WAN sense, Zscaler talk transitions sometimes slower maybe of one you ROI is progressing but side. of are for be nicely. posted as comps That is infrastructure this might on you. the more the know the coming I the areas it can be

Thank be you. that color any would helpful. So

Jay Chaudhry

proposition think bring about internet To table the Zscaler to is breakouts. secure fundamental value local Yes. enable

require for deploy because our branches of out don't already have we these do local actually using customers hundreds and boxes. to internet place in but are Now Zscaler without lots SD-WAN, makes SD-WAN it managed cloud are been of customer breakouts because SD-WAN to roll easier

of We actually happens, accelerate our adoptions are and and seeing thing more when more business. SD-WAN that helps it

of with are and working integrating So vendors. we It, selling, we SD-WAN see them. two actually it joint very, very our with one complementary most

and of are because it. done can that SD-WAN like building the and The products momentum and So is quickly integrated. Zscaler we growing deployment be

Operator

and Stanley. Weiss hear Keith from with Morgan on continue We'll

Keith Weiss

you like competitive to talking comp It on seems guys getting and and also about like. and a taking that marketing the you competitive reality? question, we for areas ago. was I proposition a environments the in guys it equation, broader we're sell four or bit to or are quarter. of lot. environment very the broadening nice sale to of trying who the giving doing you're down a access dig SD-WAN traditional stuff the actually environment like Is out you're us going asset, just to happening, about kind years broader still little sets core data that a just Talking side these other three and the and like because see it companies sales; you into of from talk your value competitive you're actually is start that's seeing against. the the that that of the outside broadening seen SD-WAN we're Thank are more about competitive hearing outside You

Jay Chaudhry

look market. as complimentary I SD-WAN a So at very

office, most done why vendors the I'll if We real so do look customers not Zscaler will that be up branch have at really think security but say don't only in try think deployments, to shows you stack who that's there cloud-based of default of business SD-WAN; full I works, I every to SD-WAN the speak. policy the as SD-WAN put really of engine will hundreds them. times who

a part -- part that natural second So didn't was is question, catch. Did there I very us. the for of

Keith Weiss

gateway that on Want change of competing way to now and that it's Internet seeing have that just that go cycles broader against? competitive sort sales it in the you to the based beyond sell are you extending of traditional your you environment know or are does change field, sort market just

Jay Chaudhry

the there'll message we some five so the of a been but as So secured became changes coming six sure me. road if about be the of to success change to vendor up use vendors. got year road, if ago, change, these got computer the the branch buying it you web we Then down a I'll on And you're gateway look say it four, on have And traditional you at firewall secure years in my spin from used against some VMs message same guys past hybrid be gateway hearing SD-WAN the vendors. evolution, I'm and vendors or if keep firewalls, trying that them.

like come been make solution be are to who are inspection. breakouts, noise natural business trying there We together more vendors that awareness, SSL solve, a to internet a welcome but we moves your it's with users proper local solve for to actually able being can fact doing where it. that the think part I of noise about need the problem like a place to around it. but our It's all full any then logs and because and hard the go more big has very challenge we policy

Keith Weiss

one How any Backlog it, duration of kind of or over to I next of sense on think quarter. us probably to XX helpful. as you say months. Remo. invoices Can the that's Got is be expected then number give that for of $XXX million much next that? kind of supposed this And billed the

Remo Canessa

Yes.

a revenue XX% $XXX What ASC So be and that'll represents unbuild expect million, of that be in it's next build revenue backlog that fiscal year. and XXX. to our or XX-K under this we

Operator

comes Our question Shebly FBN with from next Seyrafi Securities.

Shebly Seyrafi

great everybody. quarter. Hello, Congratulations on the

So one were like is points my is margin And like prior looks in four your with was points looks like which guidance to QX; sequentially. X% sequentially it negative last negative down you that about question the like seven decline quarter going to operating maybe the it XX%. to fiscal

Just your increase. talk about

margin and increased is you bit investment guidance being and Why now lower in OpEx, than a more aggressive normal? I why your think there? this little it's more plans what are operating your are right

Remo Canessa

see market shortchange that we Good don't We question. platform. huge is thing to a The with want key ourselves. opportunity our

invest with at operating basis a positive in we that fiscal So fiscal going flow XXXX, free is and said profitability. going company. in our What XXXX, before some we on are going we're to it cash in we to staying point sustained and we're be are

investment what as we're can. keep and we to --what going much we're that's So we're to going possibly along way, do on investing in as the

has I've of Now six having been CFO been myself Jay companies. that, has said around, four Jay founded public companies.

frugal and the the We incredibly know sales by which we'll shareholders two and think continue try might to of I company we there is is frugal to probably And is think same to kickoff. with I people. --like was to I do also and significant make had are myself In in driving investments. We're our Jay the QX we going judgments category, so value kickoff. along the people the most coming maximize the that way to put of so QX, and had a way through I top-line employees of And the a in will kickoff about our those invest, sales at XXXXX expense prudent make growth.

a during going increase that is bit. So little the expenses quarter to

Shebly Seyrafi

Can you quantify Okay. that for Estimated? us?

Remo Canessa

kickoff was for $X quarter the estimated in sales around during The QX. million Yes. the

Shebly Seyrafi

million. X $

ZPA. on Okay, and then next one for me is an

XX% mean Billings, mean said ACV, around it business of business. net you you your mean what that? new you was by do you think When I you say

Remo Canessa

up-sell. or new it's whether ACV, New

Shebly Seyrafi

estimate Okay. on And revenue any you're ZPA? of to us not give going kind

Remo Canessa

No.

So X%. than currently on it's routable based because ZPA less still basis, it's

Shebly Seyrafi

the Fed how ZPA, your Okay for gov is that important one is and last opinion? in certification

Jay Chaudhry

important Well, because the we without it's market. very couldn't it play in federal

are up in happening couldn't pursuing opens well coming in. both. it months, ZIA And, be ZIA opportunity market So market brand-new play ZPA as we federal with in the and a with we thing should so same fact, which in

Operator

question from comes America. Tal next Our Bank Liani,

Tal Liani

Hi, guys, thanks.

questions to So are that that have related I two great asked quarter. questions were before.

start sale it The for and testing certification to sale So approval, and into the that cycle going scratch, have means the first et revenues? products government have now long done the or waiting one is take already cycle. you just approval translate you it or a be so were Do it from to how through does you presenting long could quick cetera?

first a question. that's So

The you or to and still expand to addressable to I know not second reasons? it And Thanks. how threat was represent asked from much question back question firewall this first and past, investors want asked see I if and of of from much you the case wondering this get reverse technical Can you of you a multiple is firewall threat market I times want companies? firewalls to companies. in ZIA are it. question And kind the you the you ZPA are the address a to for question, the how go I I'm question with it but traditional do the

Jay Chaudhry

one it the thing good lot of a that spent and knows for money done really --a because through was of certifications FedRAMP the going the for quite lots -- the one question It's Okay. work months interpret has first to get first of these we get painful being very vendor to FedRAMP done become months and to no when cloud how ZPA. to this some certification, been the certification first

in number question. Well what two, of the one. to understand and That can Point that you the lot now solution. federal leads at big to real answer September. know fast driven of for lot market. Can don't us. a that of have by happen are market I receptivity been federal count point market? on need third yes. of federal you year the these a You of end talking sales is your And think number sales number agencies that's there's to quickly? A part end and the We sales is federal to so. So it's think a

market today is, total while zero the literally our can share we-- or of literally federal you nothing. revenue, X% So it's say

expect start growing to hard but revenues, some speculate. We it's to

to upside the with part I in our think been Could but plan we fiscal XXXX, and being that's big probably, counting a we'll get but in optimistic. bullish some have but conservative where revenue not committing federal, are are we boards.

to threat companies to Your firewall second being firewall us. companies threat or question, a

is focus are not me directly replacement traffic new we internet a to before you where that's local of going It's use we creating a user saw what about that's a wins. cloud. and because are a or of firewalls headed talked Greenfield cases, number is the cover go the internet our And enterprises breakouts. after of in, also opportunity think number as we I mostly that's customer traffic,

lot So they whole see that. a won't impact with of

are centers. not data coming have during my and your that as said inbound Now, we traffic I to on comments, we always focused said

mess centers. replacing not complex rather so are that with And people inbound the we not it. that firewalls your So data in of DMZ any

and cloud firewalls to Now ZPA as the traditional AWS, our to applications, go need to or internal a move applications VPNs eliminates and more alike. more Azure and approach do

need the after go there be trying but will it head-on have traffic, And no we're we in us run I of not long think probably directly. kind competition. to that for reducing So a to is the for need

Operator

comes next Our Gray Powell Deutsche from with Bank. question

Gray Powell

calls been have asked taking the already, Great, been answered I but hasn't a thanks questions. -- for been I've and give so juggling it I'll And shot. hopefully this

discounting you to an have changes months? client-based have even the at standpoint your competitive seen any level --does on And a that conversations? does peers customer from even XX X impact last in the that of your So

Jay Chaudhry

do get we different and more back any positioning. cloud don't very transformation, really with as into real So deals more off or competition we because it's

and a you seeing the big see We do field, We orders your have know. know the impact? if don't are for So pants of and out and we haven't any to of you because can is go-to- business positioning that say our you because how market. this we standing lost But appliance vendors there, is some Zscaler drops we do. really whatever that. do do of because want And this

Operator

We will continue on to Saket Barclays. with Kalia

Saket Kalia

just if litigation know last had Remo, guidance quarter of for drivers flow Maybe of fiscal a that's very how the wondering thoughts little saw quarter Billings cash of thanks is expense. And item well. activity all, some think this could with I slightly you on ebb I line but that you If taking can was fiscal starting I my quarter. was congrats flow thanks much next one questions. the throughout very nice on and XXXX. for that other predictable about year, Hey, with than for any a less that as We that item XXXX. first lower trend

Remo Canessa

expecting in question. for flow Again and million that's we In year full I'm Yes. plans. and $XX $XX to internal million QX, that QX, we in fiscal $X glad We're can that the had ebb million but expenses. million you our million. $X we're have in expecting $X.X to litigation asked

Operator

we you. Boolani Thank Fatima go to will UBS. And with

Fatima Boolani

ZIA just Good deal of strategic ZPA. taking deals prepared wall and gave to specifically afternoon. sort wall various Thank a in lot question. Jay million my about your you examples for then remarks and of $XX.X deployment you for around and examples

that us you're So the frame how year trends speak if changed for enterprise that or of ARR sort I'm you that's over the last and seeing so? to can curious

Remo Canessa

question. that take I'll

is more. up greater for quarter. in ARR are It's customers been low every X,XXX So and our over range going QX QX. this customer --by our has users the It that $XXX,XXX increased in

quarter. consistently up So it's going been every

Operator

We hear Summit with Insights now Group. will Srini Nandury

Srini Nandury

your for Thank Jay taking can you. when your my IPA will you thank it provides What and paired right, acquisition? Zscaler talk you for TrustPath All the about question. services? within does

Jay Chaudhry

Yes.

and been natural accelerate logs, billions to bigger type TrustPath and As do activities. and helping we actually billions machine have learning of it And us has for data get is the mining, better been benefits. collecting of some of

So extensible. the platform is

like have looked it. at We We the technology.

separate but integrating term. not you in it that's of we more --separately will be the out with are more near product it, see a coming going to price So and

detection kind to analytics of You get do that better. kind we see are much we going security provide, the of

part I So not there one be of it. incremental and think TrustPath will thing say the results an day

our think well benefit actionable better better and information I analytics more decisions. see of as better will customers the reporting, the they make as detection, to can better use

Operator

Chaudhry Thank you. At CEO to like I'd any additional remarks. this time, turn floor or for back to the closing over Jay

Jay Chaudhry

call. for you talk at Zscaler. Otherwise next upcoming again conferences. the thank Well, some of earnings Thank interest in see you you to again. you the during We'll you

Operator

today's you and Thank conference. participation. again you. conclude for all that does your Thank again Ladies gentlemen,

You disconnect. may now

Zscaler (ZS) 5 Sep 182018 Q4 Earnings call transcript