ZS - Earnings call transcript Q2 2019

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Operator

Abrupt start

Bill Choi

financial results for the second quarter of fiscal 2019. With me on the call are Jay Chaudhry, Chairman and CEO; and Remo Canessa, CFO. By now, everyone should have access to our earnings announcement. This announcement may also be found on our website in the Investor Relations section.

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

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

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

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

Security in Chicago the we would the information March For historical Symposium Jaffray’s financial also found that inform periods, the non-GAAP supplemental to on participating will you be GAAP to a in in XXth. can ago. like few the Piper referenced be moments I reconciliations

over to I’ll Now, the Jay. call turn

Jay Chaudhry

with I to you on joining thank us second our for share call record am today. Thank our results. quarter you, Bill and pleased you everyone

revenue XX% grew calculated grew year-over-year. XX% and billings Our

top our achieved another to we line free flow. of cash positive profit operating growth, and addition quarter In

XX improved year-over-year to percentage margins operating Our points XX%.

profitability. growth Having ability opportunity. significant continue will market said and our leverage to our Our business in that, aggressively our and the drive QX results pursue to model invest we our in demonstrate to business

policy no deployed right to the for there right XXX maintain across of expensive a than Internet of ZIA applications positioned center policy or is longer defending internal and to clouds are security be the stacks center, cloud acts is which security. The the disappearing. is the network has with the centers cloud. on a in and inside level public that network the the applications SaaS your data capitalize no more notion therefore is hybrid anywhere be is megashifts effectively business for there cloud network or users engine the architectures a of the and secured data securely complex network walls, In no trust disappeared. user has appliances the applications the network for private network and ZPA and can the parameter Zscaler to application; connect assigned cloud matter a to and adoption data outside It We anywhere. Design can a support which of no simple wall devices as well Zscaler cloud the to in worlds, or need to network and

as Our leveraged journey. they has cloud our stages adoption cloud been by of comprehensive platform customers through security their progress various

incumbent [ph] bound offered worldwide. traffic web from offices experience on-prem piloted Asia used driven proxy security. Office in in The with appliance would appliances existing XXX. issues days Zscaler several capacity cases. to bank top This with highlight uplevel as the customer surge their and the Their XXX,XXX employees not me business hybrid bundle that diverse up the XXX vendor puts quarter an scale for security. keep in Let cloud global illustrate over internet A the

the the by in head requirements. deploying see and to often inspection, accessory They sandboxing. leveling up solution advanced As security protection the hybrid failed are we meet also customer’s market,

our year. share business And you help entry in am requirements. to our purchase is I pleased they you last addition, our DLP with meet In Solution growing that new regulatory We to Japan to well this into market. talked about

a example, IT replace is users which and functionality products services Zscaler security with purchased of For company, now XXX stack web entry the inspection for layers bundle and XXX,XXX proxies additional last level professional us. consolidating global to year SLL on-premise

for SLL web attacks bundle drivers, SLL traffic hidden passing business that is traditional and The of XXX,XXX always sandboxing This more upgraded luggage targeted XX% security their the zero quarter through against almost they of airport box not are day replacing users to visible this all cloud increased to vendor. unchecked. has our sand protection incumbence Imagine to in than the XX% security traffic traffic. traffic, and appliances. highly

has our reduce what You can’t, leading that attempt unacceptable, [Indiscernible] designed this and organizations be when happens without user because security but a impacting proxy, means is SLL Zscaler inspect customers encrypted full experience, next-gen would better traffic businesses. firewalls which natively to exactly protect users. use to can to

Zscaler to and users me customer’s infrastructure. XXX locations. retail Fortune security the purchase all purchased example, which transformation A bundle manufacturing hundreds Zscaler and where secure Cloud firewall, secure cloud and give was to network XX,XXX of Let another sandbox, includes company IPS a transformation for of

matter secure DLP breakouts. and to internet helping mobile and local will including customer further office or initiative will a upcoming [ph] from their the experience, Zscaler for protect data improve laptop in on or SD-WAN headquarter, centers become users few a purchase user as addition for XXX coverage with In premise device. breakouts. or leaking, the on a users, own sitting all DLP enhance mobile sensitive Office the The deployment, at a customer information secure user branch ineffective the local to is, no the road, on where all for

with its its In take to the M&A network Instead, our data a wide organization in full is company. new the fast, or would secure, deal customer applications, out can of this the cases. wide locations security a security reliable driving Zscaler at from and than provide year location user security lower network ZIA hub will new and access take pursued to as leveraging global operational with policy and simplicity. used and years. they a as transformation separate for separate a Zscaler is and pharma from Zscaler The building to they one for a any Another XXXXX And ownership, spinning cloud engine. centers, to rather highlights spoke division, internet ZPA any with the business A appliances, capability world, used area network its for and XXX and off bundle new its greater area, need months the two. the of often They a users cost purchase mode and applications device network, across and be which without and gateways. pre-cloud moving building parent transformation

a business the contractors for Next, and putting to users, plus customer completes six the transformation. months and corporate less that and purchase. purchase for security traffic. the In of with and Fortune ZIA users all into This Auto users the network This functionality for specific XXX purchase across VPN for customer M&A the I applications This to Company purchase expanded deal highlight integration. XXX quickly in firewall including total ZPA success network, after ZIA. to will initial able customer without provide on started cloud than specific customer access was for user’s, With them our full visibility applications XX,XXX have bundle, led quadrupling XX,XXX and replacement to XXXX ZPA latest the full August, locations this spend resulted ZPA, Zscaler.

the discussed which largest history, QX contributed billings Lastly, quarter. in deal we on the in million our to $XX.X call, Zscaler’s

This for project, billings. a in deal required Zscaler sustained period, additional cloud point, that Over deliver XXX began of hybrid Remo throughput, current quarter, cloud deals discuss handle second we throughput. a give five million reference this delivers. to allowed a a benefits XXX revenue. demonstrate gigabits in customers scalable to second per of $XX center this engine, $XX the to this million second stage security a public per highly further. the will solution. that gigabits customer secure This sector you These transformation extend this SSL policy traffic architecture our to expect data and while few deal These need the an majority can customer unmatched [ph] in us generate resulting of Fortune enterprise a inspecting year

serves cloud approach, We keep cloud. PeopleSoft version? of deployed cloud version application cloud heard extend network around It’s happened virtual message data you While to way, customer's single cloud we architecture, significant world, This you hybrid cloud corporate This technology defensive have trying the and to between of result the are on premise, which a born and the the running are legacy noise a our the to data they scaling the vendor center self-preservation risk. making cloud customer. When not security [ph] my the and was on-prem Yet office. will is the boxes, have case, in who what technology, VPN have more your our castle. the in but the we is or a maturity increasing their needs time of service increases my Zscaler’s where splitting can, the the for With moat? in cloud spend know right not based private? cloud the a a when network various competitive hence hybrid many Where designed and technology security Siebel this equates on to doing you public [Indiscernible] managing, a clouds use business where for keep office, Legacy extend view do the the the corporate logs, fundamentally and we architecture, users are Their it. a vendors full customers machines. cloud? single as last architecture the of your of corporate a platform. cloud, them. network How center who traditional data the do their and hybrid protect virtual vendors, use is, it our We or firewall the manages build what cloud. to where of hybrid road a the that’s tenant the service. my boxes, and In vendors building It's the about moat a In security disjointed in tax advantage to believe, strategy, on branch are security responsibility network solution. the by how designed the manages in will

As the world's inspecting billion largest security cloud, transactions XX each day. we are

is traffic expansion, second security of Zscaler hundred The requirement site. over of high. a and of As all gigabytes one nines latest very our that per for per fourth availability centers appearing per generation links total second your SLA. for handles internet of data cloud ongoing a provide five part Hence, capacity delivers multiple terabyte cloud

We scale. have years experience, XX operational at over of cloud our security running

As have compression said, experience. there some or no really algorithm is

As exploring highlighter seen without is with deals, our granting network trust of corporate apps zero techniques access momentum. Customers the ZPA to are to building to offer network. access some

offering a at early have pioneer we software enterprises. mature, of perimeter, in rich an As in hundreds running defined production ZPA that's

investing are designed with use can't. While for range coming applications and to fast secure web others and of multi many on using we was quarter, our out ZPA wide and and to Global us apps, that a marketing. and environment. internal in This running cases with imitators in XXXX our hybrid access cloud by and allows all capabilities on to workforce cloud protocols address that access this and approximately employees half making report to We expanded remain focused pleased XXX in solid sales the we executing go-to-market our on accounts. progress execution, vision I'm are

on are Tours. road, how We enable are IT and customer taking Zenith of Academy Cloud securely. events, regional Zscaler providing World studies Summit hands labs, series Transformation these best on events a case Cloud we the on with called our Live practices to At

market also channel results pleased XX% continued QX the large networks call significant and over contribute to strengthening security. and to which business. opportunity we are turn very strong financial the service We the walk we innings with system of summary, in growth global our to our over I are partnerships, in are like results. now our disrupt our early a Remo We providers, through to integrators In our believe, traditional revenue. of

Remo Canessa

Jay. you, Thank

public the was milestone. million well was quarter, a was sector Jay was Americas perspective project private infrastructure $X.X sequentially was had revenue from solution amount up from comprised the As our From X%. This deferred for mostly large achieve we subscription a of mentioned, of of non-recurring cloud QX. strong QX revenue, as as geographic revenue XX% Revenue QX million as in represented year-over-year. a for XX% $XX.X EMEA private we quarter a revenue by and recognition deploying and APJ XX% cloud. XX% as aided very customer the

change calculated to quarter. deferred we which total grew to in that for Turning million. in plus as the recognized revenue XX% billings, define $XXX the Billings year-over-year revenue quarter,

quarter mix $XX approximately This greater than of customer. a public from sector million upfront we the one benefited billings higher including from year

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

XXst, Excluding upfront $XXX year periods, greater obligations performance grown billings million backlog, from over XX% ago. million than both XX%. $XXX year up in which one remaining on would Total billings January have was one represents

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

selling quarter-to-quarter. start dollar a on good sales can reduce Considering bundle range it in while drive our for ARR to was business, We year-over-year. X% a the is will outstanding success that our to in a year-over-year near feel bigger to which to calculated And vary rate, X% with which and target topline sequentially feel and factors, faster our Total and continue revenue net we continues upfront, XXX% year, up the gross XX%, basis. be medium transformation increased good invest growth. to Our is it platform down deals within retention these XX% term. is important margin

worldwide XXX employees. by and QX. year-over-year decreased and XX% our of decreased expenses, QX a European to $XX.X XX% the The is headcount to and expenses percentage sequential sales decline timing X% operating Zenith in sales in kick-off decreased as Live increased Conference year-over-year but of expenses and X% Turning primarily million, increased Sales XX%. million. to User $XX.X approximately We increased marketing in operating to due total operating our to sequentially sequentially

in and have decline the mentioned events. expenses, up decline investing X% to R&D our marketing programs. million. we and to though marketing and approximately sales sales sequentially the QX, marketing teams due Even As primarily is we was of XX% and employees. by marketing year-over-year up and In sequential increased $XX.X teams XX marketing timing our building are in sales we and a sales

in to sequentially G&A includes building As to continue decreased functionality offer we The increased and teams, XX% invest fees. $X.X growth sequential and enhance became million. due we to other G&A expenses $X.X and product These expenses year-over-year decline expenses. company. in X% our that made is a public in The to new in as consulting we've year-over-year related primarily products. million G&A professional investments to litigation lower exclude

was million year. X% XX% of to Net quarter the second in negative Our positive income per a earnings margin last non-GAAP in $XX.X quarter operating was compares which same or quarter the a $X.XX. share

cash, basis compared positive the quarter, million term investments. the fully equivalents in cash million our approximately $X.X cash calculated million was to diluted $XXX ended Given the the $XX of short quarter a quarter flow in the million Free positive earnings year in quarter EPS negative XXX ago. for same shares. a We on with was and

program free by SVP balance. approximately our $X.X stock as SVP December. reduced program our flow million does in our we Our cash first initiated not The issuance overall impact cash

So now guidance. moving on to

related litigation which tax reminder, assets, all non-GAAP, compensation amortization these numbers expenses, effects. of expenses, a certain intangible As associated any excludes stock are based and

assuming revenue $X taxes million range the XX% common zero million XX%. in profit year-over-year quarter, of in range $X.XX Operating third the of per million of outstanding. to $XXX,XXX, expect XXX of $XX approximately shares billion. For a growth reflecting Income we share $XX to earnings to of the

revenue expect of $X.XX the shares growth a $XXX range or million. range the share the full growth year $X.X year-over-year in year-over-year to in to XX%. XX% the the million $XX in million $XX or million of assuming profit XX% XXX $XXX common of $XXX Billing we taxes range outstanding. in to million to per approximately million Operating XX%. million Income of to range $X.XX For million of earnings $XXX a XXXX, of and to of

to and not investments business of in our be aggressively and to the our we'll are leverage, to our marketing to maximize our profitability market forward, with significant our additional senior VP of stepping plans operating invest pursue Looking in CMO experience transformation customer but our or opportunity, coming quarters. board up generate

including billing QX multiple the This In addition, want investments QX, tough cloud achieved Also strongest increase that one and very been customer. have of than sector keep decline forward a of had a model our platform in as in sequential quarters we'll QX. had will in and XXXX and opportunity. on in infrastructure. year from and million to will in that with $XX.X QX QX you quarters that our billings building have pose we respectively. technology We're billing public be historically you what accentuated comparison the declines we year-over-year I our And, by greater upfront in million sequential QX of $XX remind mind, to billings, look large proud QX we

Now over the turn to Jay. call to like back I would

Jay Chaudhry

in Remo. may call we We is you world. the tailwinds open deployed and we’re can us. as the future. security, in gap and interest as architecture realize you, migration such user adoption, mobile-first cloud look Zscaler thank you deliver expensive public in spun a for to best multiple app to progress appliances a reporting architecture and of public We questions. and forward up On-prem, poor now believe your scale, market on clouds, coming cloud for are SaaS With the securing SD-WAN to experience. our cloud imitators Operator, fully single The Thank to the in or the believe the the allow whether machines will virtual for as leave not right matters. tenant choice benefits enterprises These

Operator

you. Thank Instructions]. [Operator

first with Our from Melissa comes Morgan question Stanley. Franchi

Melissa Franchi

Great. congrats so question, taking the Thank you my on much and for quarter.

Zscaler a ZIA, with particularly is So it but scale also transformational like ZPA. sounds obviously enabling

Just are given and you sales cycles seeing getting approach? more your sale of that correct, shortening is is becoming more this What If or in result, mainstream becoming enterprises transformational are it seeing the comfortable it does as little with a seem a mainstream. terms cycle you like that's bit perhaps of sales more are

Jay Chaudhry

you, Melissa. So thank

months. about As our larger why But hence rapidly; is we number smaller cycles for closing six have months, take is time. growing to deals six in XX pipeline do our past, of about is transformations up. deals. three the would sales said are to going say, the accounts for more the we're I some of That's

So it's we six probably side been it's probably months. end Yeah a say more months won't on talked moving or to of cut until lower the side. upper and about. would range I the still down twelve lower the say But few I

Operator

next comes Our Suisse. question Zelnick with from Brad Credit

Brad Zelnick

on platform Thank it but point. much world security But rattling is phenomenal days once sabers of hyper is a things virtualized as a you in major Jay, in analytics, seeing the you last as you've players congrats of legacy networks so also success. moats and building and to Remo Jay, plays. two and we're much data the dynamic approach relates the remarks, what battleground couple to driving your emerge orchestration next in around end the And a like seen and really which just team and and security now we've is said prepared quarter. endpoints, and legacy past again, tied Like protected so your infrastructure.

regard, data well see natural you for you becoming question Does in a a and got seem might layer, orchestration for has past, as being and you've I've So, future Zscaler up Zscaler? natural Remo. is in talked the ever participate. about And change, in endpoint would the my the if shaping up to that play? what follow for role it as players Zscaler wanted How this do advantage partners

Jay Chaudhry

sitting believe subsuming Okay, consolidation security security But slate, do good in lots building doing question. clean path and we by traffic by real all from the functionality. true a and It consolidation. an done enterprises of are is there is what there that's it’s about want network a out extensible that platform consuming I that are and vendors

said who security like. I see identity analytics from to and functionality that, believe all don't having God a point Now, the you vendor consolidated end to

to be there your of needs strengths you ecosystem natural a know So where are. Well partners.

talk You end about point.

We end for in point. core end inspections. the and technology think form at very look points Let's traffic line the competencies are different

Endpoint network tried in to You've vendors seen How the they Protection made? with sell believe years. security much for past vendors. We in pipe many progress Endpoint have have being partners

interesting this analytics security orchestration, actually an We and is Now area. in partner it area.

identity, databases vendors core form I line inspection, endpoints, need applications from do You Office believe, scaling competency who like you XXX. better job. don't machine security servers, non, traffic cloud learning personally in need that have of just large logs network it will a and

partnering vendors. with we are So those

think in to I it ZPA ZIA, seems about entire in-line have be $XX past enforcement we you together is and policy the eliminating between billion talked to Tam growing.

So a analytics? long answer, want really. in to but the Not do security or endpoint compete we

there. good have partnerships We

Operator

Our next question comes Ives Wedbush from Dan Securities. with

Daniel Ives

quarter. Hey all and a just hope phenomenal well, Yes. but is

of So the we're is my are across the terms I terms in acceleration the terms kind cycles, are seeing this vertical a in you that question of you seeing on terms of the transformation deals. is particular strategic board of or on transformation in going of in kind mean of sales

Jay Chaudhry

question. good Dan Yes,

along sooner transformation lines the lies than others. So embracing verticals cloud the of are which

before sector they and actually embraced cloud also breakouts. others needed do internal to Our local manufacturing many

must transform are meet embrace picking but vertical embrace hard legacy cloud slow got was cloud, embracing a your network companies we but it’s they bit and of up, in where were along line, your a and security. slow, are services it's that's Once there. up. I the So that say’s slower, to Siemens picking so they CIO but cloud. The a are you who Healthcare out GE you financial now don’t the world bit

CXOs, seeing architects come of together. cycle. question, we timing sales bit a sorry CIOs, CTOs, on interest, increased the little the are to So but See along transformation the the requires

and a It’s and an cool place and time. time, better is security one It is new that’s feeds kind has here So architectural not technology. lesser longer other. matter speeds It a of box. of a it does different transformation takes why take with bit it some a

Operator

Our next Andrew from with comes Piper question Jaffray. Nowinski

Andrew Nowinski

Great. congrats a quarter. Thank you, great and on

So and vendor I’d necessarily customers Office their trying deal you against an that about trying likely highlighted -- use or you specific they to XXX? XXX that that talked give proxy lot. to winning the other us Office customers assume, far scalability on-premise customers XXX support if from the we was a as tailwind that potential could not Migration issues likely were issues. face are meaning Office environment a to Web you I to that wondering are along regard deploying just similar would the your estimate of how with

Jay Chaudhry

good question. So, very

this to go are exchange of server that stay to XX% the and calendar issue your This to proxy. happens to is a customer the specific when traffic cloud You used traffic out. you this Web and that what used correct, wasn't company, your XX% move e-mail only within

the calendar to entry and go every to cloud out every e-mail, traffic, come has all Now back.

increase the So to of finding the file grows significantly. to difficulty] you total is go triple. and attachments Internet everything simply with all [Technical are amount or we traffic double once your traffic What

only for client creates outlook firewalls for and proxies, Now connections. that problems creates not to because web each it XX problems persistent XX creates

are and bandwidth of out out run equipment operate and there connections, to You you security then there costs MPLS. have the

issues. some simple quantity or There's XXX firewall. address a bandwidth just So issues. IP Office service proxies work a It in lot management doesn't through has of

handling past of with worked service and and have the deployment years, quality like. Microsoft single click the We three over

Office So we XXX. positioned are handle well to

bought, Now, in the XXX? and question probably the the the of how much probably and Office actually a majority with going haven't deployment? deal second of the like. those enterprises on is been stage early XXX piloting we part Office are What's with, bought has who of they by

X%. So Office to about about years give today colored you the that that XX% traffic traffic. through XXX is these ago, cloud a number Three goes perspective, of was

customers the catalyst goes Okay, Office going as will off transformation. XXX on headroom of the believe, the probably of customers, up, cloud, us keep I about becomes but to it there's where a our we for have XX% on drive us up. number office for plenty

Andrew Nowinski

one public in call. public vendor That's And win that of the sector that established then across you to you Do other with agencies regard the that on you great. when the Zscaler referenced the that Thanks marquee perhaps? Jay. customer choice question sector can somewhat leverage think

Jay Chaudhry

the could The requirements, does. only who interesting we really vendor were definitely when requirements. the all meet it the is, the point put So customer

I you think, have others. to the very still engage and but for position, and the well positioned go deal, in [Indiscernible] win but

Andrew Nowinski

Keep great. That’s up work, good guys. the

Jay Chaudhry

Thank you.

Operator

comes The from with Deutsche Powell Bank. next question Gray

Gray Powell

for growing do of fast on factors? And the that or gateway factors taking a you're growth I curious, think web overall think view to appliance form on within and hear I'm good market? the congratulations the results. are the broader then, your you Thanks that what versus secure Great. how do questions selling know your but much what platform, I love you that is form cloud

Jay Chaudhry

business and small a remaining probably a of enterprise of standard our X% Web has professional from the next bundle find the has an deal web from and lot level. factor. which there, firewall and proxy driven to about it's business the actually the to the that business equal a needed So proxy proxy transformation appliance controls outbound for which traffic. like. a every but point has make I stuff evolves Web a bundle is, out X% Internet. But is of sure user as said hard that, proxy, web form growth actually start replacement of for firewall. we doesn't is of don't type the including in very of our it Zscaler web placement. and factor. bandwidth is form of saw with cloud you Web sandbox functionality, been which the next of may even bundle, includes think proxy having to and proxy I'm going our because -- have But The deals in essentially I'll bundle, some number kind growth The appliance is by traffic not don't or comes advance track obviously there Are wins, something a most proxy

cloud they a transformation be business securing to solution do breakouts. breakouts Our saying, local and Internet embracing must driven I by network CIO are local is secured purposeful we the essentially driving for requires which am the which is and

Gray Powell

that's And Remo, That's if may. helpful. it. I Got for then one really

of grew sequentially quarter growth expect trends, by at to the the reason expect in out back from April? onetime item from kind be Just quarter. in looking X% if the January you X% we October XX% and I revenue, like Any should -- about sequential more revenue to

Remo Canessa

I got our Well, mean, you've guidance. let's

know we're again with the that feel comfortable you guidance. with prudent And So our given. we've guidance we

Gray Powell

you very much. Okay. Thank

Remo Canessa

Great. Thank you.

Operator

next comes Gabriela with from Goldman Our question Sachs. Borges

Dan Church

This question. certainly a you takes evening. can and of sounds at and onto that's Yes on the Borges. like puts customers Church upscale there they're and and for like my takes It the Gabriela of Good what coming like from walk been higher you just AOV. Thanks platform Dan if what know how IPO ago that to trending? when puts year opportunity AOVs relative to me a just, Maybe some look you what start. for is are me taking through

Jay Chaudhry

AOV? an is What

Dan Church

Average or Order Value. Order Value, sorry Initial

Jay Chaudhry

it. Got

and than mid-XXX,XXX you quarter-over-quarter. has been of It's gone larger up at gone Yes. greater It basis. the has are It's up price. and customers know sales the average increasing customers we the users. consistently year-over-year currently look on yes, quarter-over-quarter that a It So it in XXXX range. for

Dan Church

XXX the KL, of time it same type less at Probably is customer. the than IPO

Jay Chaudhry

XXX. correct. was IPO below At the That's time

Dan Church

changing maybe there I Right. customers there's follow to some Zscaler you. of appliance given MPLS transformative of appliance vendors our thinking have conversations and macro ROI you the takes? the talking just customers and in lower up handful switch about irrespective costs, with of willing a as customers with guess puts a And invest if how versus another and your SD-WAN think maybe, the vendors challenging about out and how been – these Thank going a are transformations environment. more to

Jay Chaudhry

for natural SD-WAN the Yes. We Good securing actually the question. the are choice SD-WAN.

don't breakouts functionality do earlier of some hard to security they local are do have secured. that level, branch of very try is so. But As and notch to transformation built top I are really consolidating they switching, in routing that said SD-WAN but those them breakouts, in Internet trying functionality, and security. it's driving and at to comments, will some the vendors need natural be

So and tailwind I stronger the it for look at becomes a SD-WAN us. way as accelerates, stronger market it,

not does needs breakcode, to sent management can Traffic router. we of play it from that's require by it be still in. can network branch makes any where local security But but money and sales Zscaler doing ZIA easier, SD-WAN Now SD-WAN. deployment save and the

them. keep us, and we So wave we all working helping were with believe SD-WAN on of the will also,

where that sent we've and fact the a comfortable single traffic with with monitoring done to can very opportunity. be done and literally console configuration be the on us click In APIs excited integration through can

Operator

Our with next Tal from America. Liani comes question of Bank

Unidentified Analyst

my Hey Thanks [ph] Tal. on for up I guys. pricing. of for follow to Bartlettson This last taking questions. one, but is Dan Kind the to focus wanted

mainly a meaning that option guys obviously can bundle of there? be a potentially and lower and you advantages, SD-WAN do differences, Zscaler the at you still [ph] architecture discussed Ford knowing so think and cost look lot when would your SD-WAN we And those have Cisco umbrella tactical competitors but

Jay Chaudhry

you couple Do devices, came you I there? Zscaler Zscaler years XX% think be Cisco will to SD-WAN traffic came was XX%. first of cost talking option of before So, lower Cisco to executive the even a in from fact a the one all, of ago, that of

and fact, I present In the market that's in smiled said, XX% would of market line with my are routers. that he oh, in share my

Okay.

customers is, all the top have us. kind is the seeing sales a network for to a we the the really from reason traffic need part driven. It of are still breakout the player. coming SD-WAN we is selects the we Zscaler not you transformation Zscaler stuff. a The the following; big these when there And security as down creates truly what is been of out securing become vendors. So network local all bought and customer natural have and

richness, just in so policy well. to large ability ability designed of very some the around, the cloud world, So these to move high the other for work functionality, come point requirements The the that they compliance. I'll all don't they becomes GDP for just of that enterprises, are back, for solution logs mention is, not security

Not things really. those do concern So us?

Unidentified Analyst

sales quick shifting well? to we Just through of through And or Make go-to-market great. trying is the as momentum breakout that the are sense. really percent if for of Okay, service or get metrics get providers? a manage where any strategy channel direct then, feel on the the in Thanks.

Jay Chaudhry

Yes.

So, and between direct to SI XX-XX legacy for and SPs is we’ve with business, VAR split under [Indiscernible] deals the channel close for new its and XX% or X%, XX% the got everything – going currently channel. pretty is

Remo Canessa

done resell VARs through XX% transformation. our before, may vendor is having -- have SI to XX%, appliance XX%, go to a XX% companies but SP from traditional like because case and percentage SI over revenue those very In boxes. business I I and they differentiation add, SPs comes because appliance good small drive and If mean, is are those don't typical

Operator

next Henderson question Alex our from And Needham. with comes

Alex Henderson

guys. Hey,

you and job. price Nice So delivered for perfection it.

Jay Chaudhry

Okay.

Alex Henderson

some just ZPA uptake in you what percentage-wise to love Can bundles housekeeping give I math the of care Again, doing right? the in am and things sequentially? What sense around us quarter? the And think was? increase staffing sales the the I'd the take I the was was mix XX%, of. what

Jay Chaudhry

XXX on increase QX, The companies transformational is increase business basis. as give we to approximately adopt on is doing increased over related also of you to What in our All and forth, to quarter Transformation that, we an we very metrics are end give certainly and at update so changes. of that employees fiscal the sales sales a also say can year when the the that. need sales had ZPA. are quarter our for ZPA strategy, those and that marketing. meaningful sales out well mix said in and and we a half is about been increasing I transformation has and We’ll were company our recognizing headcount in Related overall by increasing. the transformation

market we are we So aggressively that hiring. of opportunity have front large and we us in the see

Alex Henderson

this. got I

Remo Canessa

add very a bullish ZPA, It’s on me it. on and Alex. let But fastest growing product for us

Alex Henderson

what compared that I to account? the to sequentially XX% trying out was higher, staffing figure in the XX XX% to got increase on just base

Remo Canessa

what We haven’t the increase to out is. metrics related given those

Alex Henderson

Thanks. great. Okay,

Operator

CEO, question-and-answer conference the That over time, turn for Chaudhry concludes I back today's remarks. Jay will at this your session. closing

Jay Chaudhry

see many your of thank the we’ll Bye-bye. you for Otherwise you you at talk you all Well, Conference. Odyssey next and to at interest the quarter's Hope again. time. to earnings Thank call.

Operator

call. today's your you participation. concludes This Thank for

You disconnect. may now

Zscaler (ZS) 28 Feb 192019 Q2 Earnings call transcript