ZS - Earnings call transcript Q4 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day everyone and welcome to the Zscaler's 4Q 2019 Earnings Conference Call. Today's conference is being recorded.

And at this time, I would like to turn the conference over to Mr. Bill Choi, Vice President of Investor Relations. Please go ahead sir.

Bill Choi

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

was supplemental Investor to Relations today. section addition, a posted earlier In of financial schedule the our website

revenue, the discussion, that billings, future Let making today's flow, cash not be retention earnings gross and you performance, net operating calculated income share. net rate, during we'll operating including, me Company's limited margin, to, remind statements forward-looking but dollar income, based per taxes, anticipated free operating expenses, income,

and other These are future not which but uncertainty, beyond comments our of control. risk guarantees some are statements of rather and performance, to are subject

Our significantly may forward-looking those suggested or differ statements. projected in any actual results from

today, statements statements future. them views representing apply our as forward-looking obligation These update you no of on rely should as this call. undertake to the not in and We after these

For as Unless discussion numbers other Securities and could results talk risks our the basis. see impact earnings complete today's revenue as then of and all be about operating that condition, Commission, well filings adjusted Exchange will uncertainties with non-GAAP future and please our otherwise the noted, an in release. financial today more we a on

release of our the Relations our Investor earnings to on the measures. to GAAP reconciliation Please non-GAAP for refer a portion of financial website

to Conference that be conjunction non-GAAP Day financial information Vegas. referenced on our ago. XXth, For Analyst also I moments Las reconciliations next be supplemental inform Zenith we'll with September the the a historical can you periods, Live in our week GAAP in like found hosting to few in would

and Zenith Live and transformation cloud to keynote customer a annual cloud specific for presentations partner future. is regarding featuring breakout topic the summit our

our IR the program access the website. Day of webcasting which Zenith and keynotes be on will event you can both section We Live the Analyst

I'll to Jay. Now, over turn call the

Jay Chaudhry

you, we and fourth thank everyone for and we you In on free quarter QX, pleased joining the are announce growth revenue positive Bill with that us flow. today. cash in profit strong Thank to operating our call delivered

quarter, the our year-over-year a grew billings grew comparison. grew XX% And against full difficult very and XX% the XX% grew billings for our revenue XX%. For revenue year, and

I will start on market the our call by opportunity. commenting

Next, of our President Go-to-Market I including and hiring Chief wins with quarter. the will and deal Revenue our sales discuss of some the execution, conclude our Officer in new

empower take to to a where move them, seeing their organizations they are cloud place applications as mega scale and quickly architecture We're shift choosing data to multi-tenant cloud. the

and adoption transformation protection the and a of patterns network. change Digital build perimeter model, mode appliances fundamentally cloud organizations traditional to and a traffic hub-and-spoke where mobile break security that secure network network of and

policy Zscaler Walls, direct which to the deployed World Without of is as a a Built to full on for business data centers more application. now across a engine, security deliver acts policy the cloud enforcement and than path set XXX

for need where to customers' is perimeter access information, where appliance-based advice secure, better Responding to provide reliable Our mission a lives. is world no fast, relevant. matter it centric for cloud and less to security

the introduced recently SASE. SASE future with is or with pronounced In well SD-WAN Edge "The disruption cloud of titled, hardware security in has Service MPLS groundbreaking zero the Gartner principles. Access the paper, network research appliances of Secure a of applying this published cloud." a or they goes trust note beyond concept

providers to that interpreted, each distributed power service the SASE Number edge as points. a offer edge one, possible close I demands has key of the network, As widely endpoint. compute at following distributed as

web website. ideally of gateway, and I services main that a scale. Three, complexity with or available on browser key for isolation Zero We inspection It moving network agree Most traffic importantly, everyone secure recommends just our CASB; is recommend all findings at and DNS, router to Access, these in with Security Gartner Access cloud. security branch Network reducing vendor Cloud remote encrypted the capabilities. and delivers read one Broker security light Trust two, this by report. Number in-line

Zscaler start the spelled platform world has out. that was Gartner designed the from for

moves model, As cloud-based towards it the world are traditional after the years. vision vendors network security Zscaler's rejecting security of SASE embracing for

legacy fundamentally and They're making what more their cloud trying retrofit into and their security more we offerings. believe cloud noise flawed a to about world hybrid appliances are

on Their cloud we can’t gaps in poor so-called together branch service but messages are experience or enterprises on user believe of clouds realize expensive, when the deliver and road will users office, the boxes piece to leave not benefits my buy[ph] security use cloud. the keep a hybrid a the allow in but fully the my are scale,

of the the is virtual customer. This cloud. you Just create a strategy machines serve of our public stacking by thousands of in a you not cloud cloud, in high-performance like bunch offer a the security in a DVD up imitators, can't does Netflix needs can't service cloud of by spinning in-line, which defensive players view an

it just network add advantages Zscaler Edge firewalls zero and proxy put for that simply, architecture on. inspection, SSL can't cloud TLS access. To multi-tenancy, matters, trust has architectural or for policy four enforcement,

is content across the the experience platform inspection, centers from advantages deep up Zscaler's to user of was deployed provides elasticity, scale, ground built data that difficult and match. XXX and more than

of XX cloud scale. addition, In years we security at operational have running experience our over

we top/down transformational build compression consistent critical sales for said is for growing have if need the $X I tougher. execution sale, a as there before, seek pace on gets really sales a rapid market environment To algorithm to drive in reach a to at even which delivers no keep to we machine experience. As billion revenue,

as impact, Zscaler our taking joining see longer announce execution, and not Rajic to We're the scaling sure macroeconomic deliver is go-to-market Go-to-Market deals to started help President, and CRO. I'm having close. very an Dali if environment some large to To but us that pleased is we

leader as the role. important the an extremely execution. progressive my to finding that Dali our with sales right about is views confident this deliberate selling, drive and shares strategic value been driven I've he right on mindset a leader is I'm

He brings a and long-term and a scale experience objectives. of global ability to and cloud growth support of wealth channel a in sales SaaS proven

On the platforms to are or service more backhauling through any ZIA and the front, a customers that any access the deal which from buying on transformation anywhere ZPA traffic direct data I'm enables together, device without excited true with center. application

internal is data our you XX% cloud, years two started know already of ZIA contributing that applications business, part platform and and ZPA selling for business. a some an is about important our the or new for we of your as newer of center Internet in in SaaS now ago and ZPA

We with from ZPA with are approximately of seeing rapid half coming ZIA growth customers. existing business the

new network infrastructure. that bodes a information and a ZPA services highlighting center by start along global me with ZIA spun data off company the units together, business customer and its legacy one Let of

With an Internet to to as network, opportunity their and cloud slate, transformation as the they wide-area a strategy center, the the data clean start cloud new adopted platform. with with enforcement a full as pursue to a policy Zscaler

a leveraging network investments cost bundle integrator all employees access provide is for our mobile The data operational a leverage, Without plus device a ownership all of project driving and are with users XX,XXX system creating transmission from in gateways with firewall new global any of ZPA the SI scores partners. who customer XX,XXX overall Zscaler security key and ZIA is and for fast cloud we at lower to greater secure, simplicity, customer users. new purchased with played for example all and locations loss building prevention the business role a Zscaler channel sale, partner a an in on implementing of reliable our

Fortune you gas customer XX,XXX that multinational oil ZPA. purchased for bought with an of give bundle year ZIA XX,XXX ZIA example me customer employees, headquarters in an and users. ZPA adding over our Let transmission existing last with XXX A Europe

this customer's replace towards a ZPA represents next cloud legacy After strategy. and XXX its VPN the for transmission fast ZPA locations, Internet bought customer step a to lot adopting turning local a breakouts to IT more. in

the a all will including increasing thousands to applications a and and public policy-based they're Azure. access Network level ZPA across security to of of unified its cloud, data environments moving in Zero the ZPA the while AWS approach. the that in provide apps creates Access access center Trust with

integrate by two-thirds. Zscaler also XXX company deployments internet we from This to large expects with primary total deals, continue Office the as our ZIA benefit to acquisitions. latest potential large purchase ZPA This In spent driver. increased and local customer breakouts see to securing a

fund headquarters scalable growth over Europe in a keep year. with business users, in a XXX,XXX Cloud that purchased acquired industrial a as Sandbox XX% global for with pace they can for and A traffic solution Internet XXX company

all locations users the XX branch on SSL sand-boxing and XXX, In office were for cloud countries needed road. better of for inspection traffic whether addition and security Office the all plus at headquarters or to across

consumer several XXX,XXX purchased goods that In for business to data upgraded another all deal company Fortune of bundle prevention years bundle employees. transformation loss plus ago, XXX

XXX drive have to nearly instead, With longer local one XXX growth will better to SD-WAN centers breakouts and Office implementing SharePoint. they they're Internet deploying customer for user XXX locations Office the last experience. overwhelmed After traffic was for for with of year, four deliver no the Zscaler, to backhaul data

matter sensitive To and out purchased keep Firewall, information where to secure users and malware all Sandbox from in a user all leaking customer is. for the DLP local no breakouts, Cloud coming from

creating security and we believe and platform the to we're is cloud needs. security that rapidly adding imitators. significant network evolving For customers cloud platform functionality and market multi-tenant transformation, their from who native, are cloud The want the only meets a distance more we

our Live more week. Zenith about at You Summit hear will next innovations our Cloud

a environment rates XXX%. Overall we've net win with of rate high dollar favorable and remains strong the retention competitive coupled

year-over-year. churn year customers. We as global customers, over over And quarter-over-quarter fiscal In rate a XXX our to XXX Fortune from XXX X,XXX with declined of fact, over X,XXX of customers our companies have Total increased July over XX, and the up as XXX XXXX we customer ago. ended

XX% strengthening are channel revenue. contribute integrators global We our and partnerships who providers large over of our system service with

to invest our to in business our We opportunity. aggressively will market pursue continue significant

walk-through to over to I'd like the Now, Remo, turn results. to financial our call

Remo Canessa

the you, XX% X% Revenue million, Thank and $XX.X quarter for year-over-year. was Jay. up sequentially

ago a deployed QX year nonrecurring as our that XXXX customer revenue large sector recall $X.X aided comparison million public platform cloud. the private from was For revenue in by

APJ. and EMEA XX% Americas From represented a geographic quarter perspective revenue, the of XX% was for

ZPA For million, XX%. revenue the up new history. year in was product the fastest-growing our full remains $XXX

contributed of billings, total up calculate upsell change ZPA Billings the year. new fiscal in for plus XX% from in Trying XX% deferred the $XXX recognized quarter. quarter our revenue and revenue prior that in XXXX, which year-over-year to the grew million. defined we to XX% business in

both our periods, year upfront invoice our The terms primarily reminder, As we and greater would one years, to in excluding grown billings are year customers than one three advance. contract a typically have billings one XX%. over in

Performance $XXX or was on Obligations XX, million RPO XX% up July year $XXX ago. Remaining one from [ph]

a the reminder, public-sector million added to a large RPO year deal As ago. $XX

ending XX, is up next our XX% on for generation a ZIA, approximately our last from approximately high-end annual which recurring revenue XX% includes Based transformation year. July and sandbox, bundle, firewall from

resulted to high net and ended XXX% XX. is year retention ability retention customer upsell strong A last July basement, ago have XXX% which the quarter rate, This in of compares and a under quarter. consistently for dollar XXX% to

success bigger within basis. is reduce bundle good deals it rate, can year-over-year a upsells retention while with a and upfront which increase Our which transformation our ARR for selling net on faster calculate business start year,

and was to factors good it growth. important outstanding in to medium XX%, feel XXX% that margin target X% drive gross invest near we year-over-year. platform topline to range our to revenue up vary and continue We be is to continues quarter-to-quarter. sequentially a is these Considering down feel the in as X% will XX% term, Total

expenses to and XX%. are operative as in increased Turning million, to marketing operating increase expenses; X% is in spend $XX.X due percent expenses R&D. sales a Sequential of and increased operating year-over-year primarily sequentially XX% to total decreased increased revenue

and the to sequentially We million. increased due year-over-year end $XX expenses to our programs. employees year Sales X% and in compensation is and over XXX increased over increase higher The headcount of employees. marketing by and QX XX% marketing of XXXX

sequentially invest enhance functionality and up we $XX.X R&D innovate to and and as products. continue was XX% up X% million year-over-year our product new

publicly over increase company. building year may year sequentially related coming G&A the at increased in XX% in X% and year-over-year other includes investments expenses X You to teams growth and our traded million dollars,

These expenses exclude million $X expense. litigation-related

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

$XX.X in $XXX investments. flow $X.X quarter billion ended and million to for million a We quarter and in cash ago. with cash compared equivalents Free the positive year positive quarter the was cash short-term same

$X in cash not cash Our a approximately in ESPP year had balance. program decreased $X quarter. ESPP positive quarter our impact. the we impact overall program by ago million does the Whereas million her free flow

to Now guidance. on moving

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

For Europe million reflecting range negative the the revenue sales kickoff. and loss $XX million XX%, Zenith to note a of Americas, market Please major three XX% million year-over-year range to for QX of breakeven. to growth including of expect in expenses our quarter we in first $X $XX Live the million Zenith Live will in operating include events $X

to XXX common Income of taxes range of earnings outstanding. per $XXX,XXX $X.XX; assuming $X.XX share in in the million shares

of year-over-year expect we to revenue the For million fiscal range in growth to or the $XXX full-year XX%. of [ph] million $XXX XX% XXXX,

$XXX XX% to of range million profit of the $XX assuming XXX taxes income operating to million, of $XX million million $XXX XX%, $X.XX earnings in the the per million, share range growth billings Calculated common outstanding. to year-over-year to $X.XX of $X.X shares million of in or range in approximately

reflects sales and aggressively opportunity. our With expect business in we investment in guidance quarters. invest significant to CRO to up market Our marketing on step to the our pursue our board, plans coming our

investments increase we'll cloud technology addition In in platform, our infrastructure.

model that sequential our have strongest QX respectively. you QX I you historically and billings to QX been billing remind with declines and quarters QX in quarters As want

our fiscal fully to half last mix Reason Over to CRO to for the ramping. we full expect billings be half have he business In range. years billing. five and on of our three represented, related new average XX% this in first XXXX to familiar the XX% the year to with primarily is XX% XX% and first our is

sector in keep will tough from $XX as which of large please public a our platform QX a customer in cloud, a million mind, pose large in deploying Also we XXXX upfront year-over-year have comparison private billing QX. a of

guidance XX% growth. our billings Excluding the for implies full year this deal, to XX%

move of In related our on have that flow, Jose cash improvement payments expenses for San note existing tenant cash January, buildings the well lease in we'll as ongoing related in terms litigation headquarters spending our please free for semantic ongoing to additional as outlays to lawsuit.

free fiscal points two we to than move, term one million million flow cash these expect expect profit to budget margins we modest free be would cash $X to non-GAAP With of our operating headquarters a expect cash Longer Including our tenant for in $X improvements. to our XXXX payments, operating compared flow we or margins. margins. margins are higher lower be

it hand to over to like I'd Jay. Now, back

Jay Chaudhry

Remo. opportunity software design Thank transformation opportunity disrupt are enable legacy developed has of just security. and innings multi-tenant we in early a cloud native, native believe Workday significant you, summary to cloud disrupt the to salesforce network a large market we In as multi-tenant vendors, platforms a Zscaler similar cloud architecture, like to

coming the as such to tailwinds market multiple XXX believe migration With is we clouds, SD-WAN adoption, us. Office to and public SaaS app

we're With organization sales can that execution. the addition a building of deliver Dali world-class Rajic

our you Summit thank Cloud of to showcase Vegas product. Analyst Las for Zenith to on look forward Zscaler and your We some our Day will look in future. Live where seeing and interest you in the forward we upcoming in our progress at our reporting We new

may Operator, open questions. now the for you call

Operator

our with [Operator Zelnick we'll ahead. take Suisse. go Credit question Please from first Instructions] Brad you. Thank And

Brad Zelnick

guys you hear Can much. so you Thank Great. me?

Jay Chaudhry

Yes.

Brad Zelnick

Hello. a fantastic and excellent. it's Excellent. year excellent, Congrats on

comment fantastic What it's about your deals taking above about sustained year and longer you I proper if we to So, to make you what selling? you close. may congrats ask gives XX% in this on change growth be wanted large confidence perhaps Jay, a adjustments. to see the great versus a are that execution macro to you're dynamic isn't points And what to this your due the the issues? for deterioration the that competitive proof suggest

Jay Chaudhry

Yes.

a with large we deals. deal of So, number

been that can which Our tell competition, The any firewall deals really made I see longer. or of guys pipeline versus other did, the you analyze guys. growing. Top comment deals that some we has Talking our macro competition real was we from XX we larger about competitive, took if we

very, very competitive remains strong. our rate So,

macro we CRO number sophisticated a a have about do through macro they the On keep we haven't it. level. methodologies, execution but we indications macro far, any say remains in believe kind all us any talk role clear No as new have competitive are the level, the of a of need about are the reps to on doing so we framework help We that significant to sales the that done playing kind been we’ve large hired, sales bit being is like, to things everyone next who of really before that can scaling on seen the go successful further scale we not work and seen the worried more excited be them, that so as though does can pressures. to so

Brad Zelnick

this it hire that baked would there the up duration entire discussing it for well same the to this that from just on Jay you’re been Is your what year? it more on quarter. the you. at well? Congrats as assuming might what it seem follow Is year? as and bit Thank average topic a fiscal full XXXX be the there Remo. look is last guidance exiting What’s deferreds, is seeing If or long-term throughout due had dynamics or we with on shrinking the to you factors other what of saw consider into are

Remo Canessa

basically duration. Yes. entire is we’ve Thank on My what the guidance through Brad. seen you, year based

public that perspective anything different sector I transfers a XX%, deferred my from guidance we it revenue we’ve deferred short-term. a grew from what to wouldn’t duration in XXXX. fiscal and XX%, revenue, for related total If deal in look long-term have at short-term got over grew think you deferred revenue, take long-term which

Brad Zelnick

much. so thanks Great,

you see week. will We next

Remo Canessa

you. Thank

Bill Choi

you. Thank

Operator

question We with will take Alex our & Needham go Company. next from Please Henderson ahead.

Roger Boyd

on thanks. expect portion RPO you XX Roger months. you to Alex. for is what This recognize can I'm of another way, say Hi, the next Boyd wondering over

Jay Chaudhry

Well, is so XX I'm be million, that it’s XX% next the $XXX months. the CRPO – is sorry, will about over the CRPO --

Roger Boyd

and Got way some deployments? channel then education it. provide offer terms help do to I And out for in on you wondering could execution, partners in you was what the just enablement training detail of on sales of their you your if smooth them what

Jay Chaudhry

Yes.

we have doing is, typical our about And of to Remember, So, not sales appliance are that channel and question all along said technical two you people. our questions we sale partners? our is hundreds here, one to train enable the deployment. is of what type and security second sell go a they where

enabling transformations, down is are to top so CIO, at C cloud CSO. level, We fundamental driven sales CTO, the

integrators new wins are the indicated when a you best I heavy So when and touch, doing lifting a great sale, you’re service one we of partners as are though heavy high -- up amount world, and fair transformational end the to doing job. I is disrupting doing a our but channel driving natural, our old highlighted, of lifting system SI because providers, partners in have drive you’re the

Regarding channel Zscaler deploy. deployment, do actually our is relatively train easier to We partners.

also with channel that work deployment our We own teams have partners.

customers can Our very well, retention pretty fast, fairly happen our our see which net churn pretty as and been has low. rate happy overall rate, also deployments from you are and

Roger Boyd

Great, thank much. you very

Jay Chaudhry

Thank you.

Operator

America. with we’ll Please Moving of go Tal ahead. Liani go to Bank next,

Tal Liani

from day Number and one of Last wondering the company. is a network wondering not you address solution for question down was went right issue on the the directly. stock the run is competitors you an said two if firewall I Jay. of proxies have guys, right the there high-level offer this. services can that am and the that I analyst the if same in one questions. are was this long I’m this more Hi – to solution week,

because that you noted. slower planning second the Thanks. outside The anything you to of environment of doing you’re thing plan the anything on you what is there doing sales is discuss, address on growth there

Jay Chaudhry

Yeah.

first So, about of proxy. all

proxy out XX% expert what law agree asked you think gives I threats, I people to think of on there technology. if inspection smart capability any better inspect security you a it's technology

have making I think competition that truly statements sense. a So, like may zero

you In large fact, of alright. lot a for work banks,

about You security. are clear

zero. proxy look of I lots you world the believe you'll banks top how If replaced technology of of have many at firewall, them the and in a them many them. How find for traffic, next-gen ten outbound large it

upon at tens In spent large of or proxy-based deployed without even like a I to has over, servers one technology millions a traffic this sitting threats. Two, thing, meaningful doing dollars vendor firewall little of proxy technology, of know next-gen is look to It’s inspect very for in them and and depending proxy control. have who they is a piece. bank Akamais that bank clear have on you fact, any if the because all of you front world, any all of still no

was Lastly, SSL the is designed good cases before were device a traffic, world SSL the firewall SSL. was the needed a traffic, technologies never in Today, cases to percent for pass-through firewalls inspect it’s which encrypted. not traffic SSL XX thing plus proxy when most of of TLS

don’t really good an post luggage your traffic, inspect through That’s it a inspected. you is inspection like not airport If passing without thing. check the

are and to give So the meaningless. industry. security disservice sense statements false of I think security do They mislead a them customers. these They

that things deliberate our perspective a half, without Jay’s been we for done, on to CRO we've a up that part and growth a a part, From make sure we've year was about feel person, have we hire we We want found that to right wrong absolute not gun the the person so organization. our to and person. sales did right the run the jump

and the – our this Having Sales board we of market opportunity. see this right hires of invest and increase sales we’re fiscal into we to over gives general market the Federal, the on the large person confidence of and XXXX. VP going to us in maximize efforts organization VP a our last to CRO more opportunity VP made several as four marketing and a sales to marketing EMEA, Enablement, the East, of manager months. new hired the six VP, we’ve Also,

Jay Chaudhry

situations mean may we little we out there deal, If we win. – as compete every almost win don't very I add Yeah. where I

with process refined We can differentiator So, we very to set numbers. targets comfortable sales comfortable on as [ph]. make scaling keep with bigger our sure and very our we need technology, for the it, bigger just

Tal Liani

comments does the it your margin it of as to going improvement? changes just longer the given it’s you mentioned, targets So trajectory take get to margin mean you to

Remo Canessa

No. XX% I mean no we’ve is him billings. at all model our half there’s get we’ve get from that. total billion The change give perspective what to related XX% that we operating XX% our some XX%, historically of some the he’s room profitability. we're guidance. said in board, understand one down landscape, to to where first change coming Dali is The versus that along been to $XXX operating that our to XX%, billing to time we ramped take Once going [ph], we in to so related down that reason guidance the for our to the want up on brought with

Tal Liani

you. Thank

Operator

Nowinski from Please question Piper Our Jaffray. will Andrew ahead. next come with go

Andrew Nowinski

growth significant left order, if quarter. just wondering could in nice Alright, XXXX you any just start about Thanks. about XXX you’ve Zscaler. fiscal the how talked and we can fiscal thanks the fiscal in rank impacting XXXX should in could top your terms that we head as I’m your also and of as guidance? congrats -- on think parameters give into drivers on what’s if Office know Maybe you I just if past tailwind us you with,

Jay Chaudhry

almost generated and do XXX Office Office amount that’s XXX big breakout that Yes. driver, by has far other local because because XXX you Office than SaaS of far, is requires applications bigger all a traffic combined. been the

aren't. largest that’s number to have happen the about means is Zscaler bought lagging that breakouts, deployment comes XXXX local XXX, are so Office the So customers deployment XX% help cost-effectively Most number can do Zscaler point customers better with XX% today the one. of response of companies but time. two, Point about Global behind in

significant Office XXX opportunity of ahead for So us. we see

linked We are not Office the sale of the XXX. to

Office needed are deployment for the We XXX. of

evolving. SD-WAN Actually, also a is is because big by for us and SD-WAN of is type SD-WAN. part, driven local second XXX driver of The requirements. Office big breakout technology

secure a all the the at that’s as big to are opportunity Zscaler choice happening so large often is in look enterprises, you deployments If SD-WAN, SD-WAN those well.

So to with than among are say drivers and SSL Office a drivers used provide happening the would security, two SD-WAN to scale there especially at with ability out XXX along top it much I traffic be. larger

Andrew Nowinski

thanks great, Jay. It’s

Operator

from Saket Kalia come ahead. will question with Please go Barclays. next Our

Saket Kalia

for Hey my taking for apologies the questions noise. and guys, thanks background

you been were maybe about major of I major days the the that’s happened we of appliance Jay, has for hands. competition First, changing vendors talking course guess from XX firewall in the changes one players, the last

and and about curious that’s your curious since of I’m all changed talking So, course I’m Broadcom at Symantec. I’m been if with how customers have conversations announced.

Jay Chaudhry

Yes.

Coat. there's the besides So with, first if that’s are Symantec all solution we of outbound largely dealing large Blue they one enterprises deployed Zscaler for traffic. is It

and enterprises displacing vendors, start in On proxy other large our has been success from proxies by other the the those lower seeing you different appliances. end,

met customers over in make they have felt There because more uncertainty I the need went which to that, urgency is and out do, change they’ll of as where time. often yes, in the the customers, space. past but So I change, a

change. So we beneficiary be that this the believe will we of do

Saket Kalia

It's makes you it. Got That sense. Remo. for my follow-up

bit billings about sounds you large guide guys? QX, for what next in It how of big little thought As sort deals the longer year, took about your a large here XXXX about we fiscal maybe assumed close, like some do think to deal in deals you the environment. have

Remo Canessa

are XXXX. in news there’s of mean similar of levels, they Yeah on trajectory the hiring I they lot go to going they're board, get a back and that fiscal things it’s were say forth. as to guidance. I the into so would I mean

similar. pretty it’s be to going Let’s say

Saket Kalia

thanks helpful, Very guys.

Operator

Wedbush We'll go next Please go to with Dan Securities. ahead. Ives

Dan Ives

you and would maybe even about talk just fiscal plans XXXX in the international? maybe that Yeah, thanks. of how hiring some versus U.S. be Can

Remo Canessa

number had about else. number in that that. hiring that and R&D, one; for XXX [ph] hires to hiring the The of support had marketing, in My employees. concentration is we’ll planning hires total people we expectation basically net is then three, going sales The than operations Yes. we XXXX everything two; cloud and be more fiscal and number hire our for

and a are has and look of at in third take ticking the geographically, look if world. few employees a a the two bit the When here we in one at in last distribution one I take over have our third third offices, in quarters. of Zscaler got are little you San the about the a a Jose, up in India, We’ve Bangalore. a at Chandigarh India headquarters been rest

will probably rest my in is versus be of on currently. similar but we pretty similar, the bit So more percentages the expectation percentages the pretty India have little based world, a what maybe

Dan Ives

deals, Got seven-figure I deals you if deals it’s deals in about most in you're Maybe Zscaler now of that, any dynamics. large about it. pipeline, change do talk Thanks. then of being just think those in asked from talk noncompetitive, think terms there's and questions in the competitive were seeing a them just a the high-level about only what there maybe there talk And those cycles? or just and about about is right sales

Jay Chaudhry

Yes.

with deals when often And that is quite network RFP standard exciting up end exciting, before typical multiple transformation and part make that's an down. very all providers company a two when expect providers as enterprise we those do do -- process, it. vendors providers hands would or well. one that So to they I change, you being local would practice, a standard they and because most never -- enterprises find this We four. providers large I very We large service as the what get as goes being be other a a enterprise when what's in a may large expect and you but which go expect. SPs look for it sometimes seen proxy five time bid being win the of And by five is Zscaler of breakout for

And So that's worried lot guys, hear There's a noise the okay. the why we makes we aren't competition. about it of sense. no firewall about

doing every very they two alluded they're In I to, as fact, very customer talking what well. I And a week, in know and and all about they're talked sure last million deals. users someone about. wasn't Zscaler with over happy Zscaler displacing

a Fortune we any. at they displacement customer not and XXX Zscaler personally to, retail every XX Regarding I did know Zscaler, customer lose Fortune alluded

So, compete we claims expect to I've they analyzed this see We their Top further legacy in vendors cloud win tout who They are Zscaler, fireball security future displacement wins. desperate, we the appliances. claim away in vendors trying cloud were trying people, think look behavior. security try cloud gateway gave security legacy they I as to information. with it from to the see deals and there. When XX secure and They and get the firewall falsely leading upgrade of misleading web rarely the when they do a for saw Zscaler. same to vendor were

strong, sure strong, need we sales keep numbers execution technology, Our bigger differentiation our just methodology a well as our sales bigger. can on make getting stay to stay our we scale and

Dan Ives

Thanks.

Operator

Our next Please Joshua Tilton Berenberg question come ahead. will go Markets. from with Capital

Unidentified Analyst

deal possibly This pricing But speak market. improving? the Hi. been Joshua. fears? on [ph] size could one And around focuses it has average region macro slowdowns signs developed? how We Thank on trending? EMEA, to and to on you would understand you. macro the any seeing Brett were win, been more then to these of winning be How commentary Has for have is due you you're Any trying the helpful. that follow-up that seen in has

Remo Canessa

a and greater quarter our pressure, it ARR, is up pricing up for on Average in I'll of to deal X,XXX based any than are few size Yes. them. for lower. QX, try customers quarter QX to every upsell go is discounting QX. gone a new business has to and did users quarter, answer year-over-year Related

pricing we're let about the that. no, more pressure. I'll not So to EMEA Jay Related seeing talk

Jay Chaudhry

a talk fair of amount on Brexit. there's EMEA, Yes.

on. We haven't the see news sure of I wonder I out pulse it uncertainty watching a about it. carefully. without put tangible newspaper do hardly the I'm the not on we some but We it, about Can the on talking customers big seen do there. can see my You effect can about put business. effect. I'm

to probably more and do to have we need hiring do we work -- some scaling think the I business. to

important last I in ramping it large the teams need to great quarter. job, remind or go. in brought to are and international of about remain At He's and internationally. comes the come for of kind stage that that focused We share. unusually our guys a up very us want on there you and from XX% we'll from company the market business to of we really where leader XX% EMEA that new investing to a in It's EMEA keep EMEA. sales doing we scaling market

Unidentified Analyst

Thank you.

Operator

Gray go Deutsche ahead. question from next will Bank. come Please with Our Powell

Gray Powell

And appreciate for Thanks couple of greatly questions. it. Great. just maybe me, and a working I

in guide revenue $XXX guidance the at look revenue and total absolute In added I less add revenue fiscal over than I million. a little growth if XXXX and a one, a a the fiscal you at dollar implies million $XXX that look new bit XXXX So a just basis little terms. in for you

that absolute go the particularly sales reason marketing any dollar given you down should and the that growth there made? is investments So

Jay Chaudhry

and We guidance like is to we prudent. guidance our be our feel prudent with

Gray Powell

one this displace your Good made of firewall product feel you side cloud Fair enough. on the Okay. how kind about office to what do then, potential branch answer. improvements Maybe the you and firewalls? on have functionality

Jay Chaudhry

So, tons potential done had and and firewalls, to displace we them. tons branch of tons office

firewall what customers all they So same with center policy this that who branch I should center. someone are they're in your and say. data carrying me times you They the a new up is talked first in mixed Zscaler firewall here, is to about if say, it cloud talking telling firewall. have They that functionality. guys lacking is Many data firewall, maybe of the firewalls,

in data How more. say, firewall? I center X,XXX. me okay, you your I many do rules tell say have

What's or a sit as when shop? netting a In your center time to difference said, They office branch I sit are your – evolved data fact nothing. to office coffee you far those in as rules. everything. in what they protect complex, you branch say between is I trying employees. said, in in course, the of I you over two airport manage say, and bought products a firewall

a So, office? branch are That's with silly. home firewall rules your putting every X,XXX or at you really

are office traffic branch for outbound a in firewalls So very straightforward.

In fact because listening that's it. from no have done. the zero, your most somebody when really when of like anything the port, surface cases in you they're security reason they be The you tack [ph] needed and should coming aren't even that's they best you have needed is outside needed. don't becomes aren't have what should They're have feels

Our any said, We never lose case very your you someone where firewall branch situation. rich. firewall is We have never a is right know. not

creating is on firewall. focus lots of really our rules now Now branch

on bring you network. can people working that on really SASE network a of type zero focus where about don't Gartner Our approach even the approach talks trust

trying switchboard new things control worry an middle you user security the don't a where a we're don't it. the way to So in you're connect the summary, in to do you simply with network you network, and of securely application

going Live. significant very technology see the are new we'll areas And some you're to next we that expansion increasing. of comfortable at be So lead and week big announcing Zenith

Gray Powell

you great. much. That's Thank very

Jay Chaudhry

you. Thank

Operator

question come & Please next Nick will Yako Our Cowen Company. from ahead. go with

Nick Yako

Thanks great. and customers more guys. ZPA of seeing which Jay, adopt the gate, you both mentioned ZIA out is

So guess, sale if on cycles? an the impact I wondering I'm having outside just that's

Jay Chaudhry

not cycle, if complex. I cycle; is top talk longer really deals our the deal combined the is So sale won't think a yes, about the typically It's general ZPA, bigger bigger has transformation your becoming to that buy to the mostly want sale mix or cell say I but you the the products longer in that you general, are ZIA, mix all be down. --

of about head You really good same team do it of end selling it with all can keeps have the so a people job on up security, our methodology. I and of sales type some securing to along it doing we'll with the support in exciting think we growing. we grow creation had head selling thing architecture, but of effectively not of of that need network, Dali, sure value well, very I the great to head to mindset of architects some make large sales and he make sure who of number so are be most a found scaling we the top-down and numbers with just

Nick Yako

And Great. then Thank follow-up. the you.

or new platform to separate product first continue you component this how you've As really the do you functionality that over layering functionality new Thank pricing that a stack into components and in with expand the done transformational time, address you. bundle security ZPA? like of as the weigh more

Jay Chaudhry

Yes.

things take other I market, you time. to you the pay your willing bundles you kind option change think on you at and rate, those market then of over look the at look are

years. changes And us some the of change there'll couple of You has some I bundles think seen past over be time. the more over

evolution we security of are the of being large some are rather think announced typical see I to we're be with about, beyond that imitators think you'll between cloud technology significant traditional further you'll doing distance and addition But talking I us. the the platforms kind pleased significant the create

Operator

Keith with take ahead. next we'll Stanley. go And Please question our from Weiss Morgan

Jay Chaudhry

are Keith, you there?

Keith Weiss

you about the for question. mute. Sorry on that. I was Thank taking

years? about So Dali has should also sort in going later product we new you're get-go fiscal who or I Salesforce come up your should vision prior much you significant year kind portfolio, kind as should just selling think you CRO much versus the but into of broader needs as we expect come the asking, we bigger the kind once a change ramp that of How there up a going next was that have enter to is plan. the to of we're have customer. kind in with we Is ramp the up, degree of into of year year, time of it kind expect to and restructuring a the time from game of

Jay Chaudhry

to training, kind consistently. been is sure a are consistently think we have significant to needs the a our sales sales of to team. done framework mean enablement, you $XXX I need that sales have stage know methodology, able know million, the all to We million $XXX when exactly what our stuff. a certain have make go of to to be you $XXX million, it's expect need change I to and sales the a Those to zero our across. need of refinement set is. good one overall to we where metrics focus don't which in while. for discussing the in a gotten We do quite Dali the be significant We teams. do, deliver it really be message change We expect

to phase next lot things are to place. big for of And you billion kind kind $X these a of of things As the in those targets, the level. type go of next you the make a

And for all Remos refining all forecast on those by XXXX. and sorry built scaling. honing into are factors are the We way factors -- those

Bill Choi

take we'll any, question one If please. last

Operator

ahead. go we'll with Please Certainly, BMO. Bachman to go next Keith

Keith Bachman

Hi. you. to question. Thank segue past wanted It's bit. just push from I the little a Jay, a back good

of requires, XX% to have the largest still sale. many is you enterprise in It that this change. evangelical cases mentioned yet and an architectural You penetrate an

need keep more dependency who rates I'm and rates significant have. penetration much frankly wouldn't the that less lean community model you to growth fulfillment salesforce think the a So just in I logos about on new and on growing why to revenue more SI order wondering on you is fulfilling given

wondering a you So growth market just $XXX was just that why I'm but what just was at I for of the me? to pretty and million, one CRPO those could you. attributes. what high I'm clarification to sales us it to that's rate the Thank wanted just well see, in clarify as growing rate you need just told keep and And given sneak wouldn't expense going

Remo Canessa

XX% rate I'll year-over-year. [ph] growth the answer Yes. that's

Jay Chaudhry

lifting the So, I think of regarding I at looked heavy said said high - you what I early part the channel partners actually transformation on sales sales. we question, tons but do if touch yes first are of help, do

our and sales marketing. we investing in So significantly are

our In marketing brought didn't to I fact, keeping it, revenue down another do if year-over-year if need good more then plan, we you of impression sales in gas which as I that's putting message would some haven't on a that percentage and a XXXX and we look at job. left mind we keep typically on and

facilitating with Channel is is are us, us. and helping sales own our actually channel driving sales organizations We

much know of you We much getting should commoditize do channel role. so when happens more transformation mature only all become aren't channel leverage, technology plays bigger of can channel but when and

invest prudently people so pretty sales but year adding of last and year only There's headcount investing, are number is right? we much a or significant. terms total you So this we're sales can in marketing

you message other said. otherwise If clear. with any it aligned wasn't said fully I So

Operator

over call the any conclude today's remarks. And will closing turn with this question-and-answer now does for I additional to back session. Jay Chaudhry

Jay Chaudhry

forward our a Thank thank seeing you for on quarter. to next us will talk call, as Zenith and we Live We state of at you for number Conference to otherwise you. we well analysts you as look joining this

Operator

call. today's participation. for Thank concludes this again, your you once And

disconnect. now may You

Zscaler (ZS) 10 Sep 192019 Q4 Earnings call transcript