ZS - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Zscaler Fiscal Fourth Quarter and Full Year 2020 Earnings Conference Call. At this time, all participants’ lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to Mr. President Relations. Vice Senior Choi, of Investor Bill Thank you. go sir. ahead, Please

Bill Choi

and Good earnings Zscaler’s welcome fiscal everyone, conference fourth XXXX the year to afternoon, full quarter call. and

non-GAAP CEO; are the noted, we that all Unless about to our basis. a talk Chaudhry, On our me and posted Canessa, today today numbers release on financial with Chairman Please we call have an and will otherwise supplemental and earnings note Investor Remo CFO. website. adjusted Jay be schedule Relations

the find to non-GAAP will GAAP You reconciliation release. the financial of earnings our measures in

For historical related financial compensation reconciliations in will periods, information. the be supplemental stock-based non-GAAP excluding payroll GAAP taxes we to the 'XX, be can the from Starting our fiscal in results. found non-GAAP

performance, separate expenses, per data in performance, guarantees share. respective We obligation update statements with this rate, and not limited but calculated rely income on future our earnings customers, remaining after I'd table the views schedule to representing and apply gross call. retention and beyond discussion impact but of of should undertake economy revenue, that to quarters. on our some comments eight our rather are partners. including you taxes Company's them a vendors COVID-XX for other limited as margin, performance global net uncertainty, net are the operating last to no of are contain operating and income, subject the and statements These anticipated supplemental future. duration today, to business, historical control, These remind like which cash these not you forward-looking not the dollar-based operating of billings, of risk and will to as including obligations, and today's in but the businesses have our We statements, flow, free not the forward-looking income, statements provided future the

inform filings Global our following please would XXth. as be you management as the conferences: upcoming Conference attending with complete Management release. September that well be these risks Technology Conference on events discussion Presentations on to see For and Behind tomorrow; in of Investor a September and be Morningstar for today's Moat like the will more available the I uncertainties, industrial earnings Bank the SEC links virtual also Conference Relations will Citi XXth; our webcast on website. will Technology Deutsche the

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

Jay Chaudhry

network We the challenges. the to independent connected you and the business. native like borderless a in customers ongoing digital full with securely your on We of results scale staying any anywhere applications for XX% economy offer all to which Zero the accelerate Thank the both, hyper customer to of call users reflecting Zscaler of increased are can QX, pleased I to upsell joining fiscal to would momentum the operate and are ensure our and corporate report world. cloud in applications any Exchange, and work irrelevant. or to security macroeconomic we customers businesses users connecting outside are you growth revenue, you, the partners of in cloud our for anywhere in In that the year the transformation, pandemic, families where customer fourth become I tireless acknowledge of thank digital are strong committed network. growth and business applications and With traditional XXXX who with device, in new as and success. safe. have I'm XX% applications despite the In network our and moving from Bill platform, delivered and we and exceptional the users quarter network, world a at team efforts hope billings, us. our healthy our Trust new in

reduces risk businesses move which are Trust Zero customers Security, security helping from makes our network agile and legacy and to business We competitive.

I As year I front culminating we view tremendous ‘XX we in in reflect fiscal incredible on for strong us stronger. performance, in well never number growth. of progress Zscaler which strategic I have QX long-term pivotal as to us. past XX a the made of months, on been our a an position believe has opportunity fronts And

it platform Gartner's users with significant platform Let and cloud, our offer scale But a better firewalls Zenith having magnitude retrofit set was up AI of an faster to imitators. blocking day Scalability. Traditional XXX goal from our cloud cloud. threats security difficult. architecture the Our and in Secure ground of framework. can’t is in-line promise daunting a a the XX% SASE cloud renewable security a world. our countries. more architecture the of to platform; This name, Netflix Zero Deployed high-performance you across deliver centers, and simply, Edge, DVD platform stands you we’re appliances public vision for years. large of legacy trying and vendors for To threat cloud availability a after largest bunch protection, on go-to-market. They're our by heights. creates our Exchange rejecting me for more happens energy use XX%. today And strategy: it with security this XXX XXX pillars detection our of over than more more feeds Trust cloud was in world. to by per of platform, can't of than a Zero cloud in and our True cloud processing superior across continues of into of All learning Access than three full XXX security highlight And an order Building data new uses Zscaler’s engines in-line Exchange application traffic bottlenecks. put to Trust thousands distributed that and security products; built data machine To stacking native transactions our resolution Zscaler a co-opt running massive latency anomalies, platform create cloud a native to user billion performance five-nines million just start challenge. barrier from a like minimal with to virtual for right players the network entry the of or cloud are Service spinning up to the a in-line the with to fully trying is our

and Fortune large the meets native XXX over X,XXX their X,XXX of For companies. with believe, global XXX ‘XX security modernization, are customers, we ended platform and We including over cloud the network over that want multi-tenant fiscal who we only enterprises and XXX of the needs.

XXX annual over over recurring have that in We billion customers $X generate ARR revenue. or

XX, or the higher, Zscaler’s NPS is While is average X.X SaaS times company NPS average score, an proof of is XX, Zscaler a of the which net value delivers. promoter that

been for significantly teams innovation. our product platform, engineering an expanding innovation product through has on available increased further highly of technology exceptionally and on products the substantial and our This productive and internal we where integration acquisitions number have our internal year Next targeted lead. already

we X During to the X. expanded the of solutions number from year,

expanded expanded data products, with our advanced Cloud two solution together Isolation, ZIA our CASB, flagship DLP, new protection. and our in-line and CASB which out-of-band market First, with addressable Browser for

deployment including has market has global scale wide non-web the doubles market the trust support which applications. most web With a customers, trust XXX solution, with with at leader and deep zero mature become for become for solution over opportunity, our XXXX ZPA massive our functionality, Second, and zero ZPA security.

performance to Third, between a helping or user resolve measuring score, customers performance Zscaler the our our experience ZDX Experience, market. digital and solution, Zscaler pinpoint computes with platform, Digital issues, of every application, uniquely expanding addressable the sitting further application, user and the and

applications public clouds. With can Lastly, or to protection. identify our our next our of remediate data workloads, Zero and on data CSPM providing expand product, private opportunity Exchange and to misconfigurations is superior cloud Trust protect we

for the architecture Our sets platform to who What on maybe implements many a workload where apart machines. far having or for claim app without approach the communication to apps is service network-based app containers running segmentation segmentation vendors us is a following. do have app to segmentation. zero from This virtual superior trust

targeted platform cloud a security vendors by of is work. platform for History a products. bunch shown It Legacy be third-party built companies. integrate purpose with to Our designed as together as with acquired cloud. create this does that can network has acquisitions, is to not cobbling our the extensible well approach

value pillar, the We believe visibility can revenue. into in We to heavily we refined to pipeline. driven, a process, that on our and compelling which enterprises, deals, a go-to-market. invested third growing metric sales us machine demonstrate this sales execution sales deliver further giving drive Moving a strong and and repeatable annual our $X billion consistent our beyond take larger deep to Zscaler build is to business, year

XX% significant of carrying year, cloud-focused we for Program, The leverage. our our We exceeding another leadership accomplishments. expectations. We go-to-market extra a further me field our our productivity reps. sales out our Summit Even in we build a few recruited by increase Since the growth, sales with our channel of in had quarter expanded Let Partner sales our exceeded quota management. adding year-over-year complete. largely was depth leadership drive up of sales and year-end highlight target significantly filing our additional partners launched regional record to is

this how are with sales and proud deal we year. extremely We I'm and of pleased size our team increasing Partners. our wins Summit our see strategy to larger go-to-market executed

quarter. provide Now, business for fourth the let some me highlights

due accelerating When our homes, to access and on internet is and anywhere. their a major employees from customers’ business focus need risk ZIA. the SaaS from allowed ZIA are becomes applications Our directly to work they security

cloud XX% sandbox. coming our At recurring adoption increased revenue to includes of the annual see the last bundle, transformation from our XX% bundle, to continue 'XX, and high-end is the firewall year. ZIA compared which transformation We end of of fiscal

With for two A They in with accelerated SD-WAN their customer Microsoft employees DLP CSPM architecture our customer share CASB a services XXX. sensitive purchased the a as from for the me engaged pandemic. to major the of new security quarter securing us was proxy the including to This offices. Let entire financial secure a considered. only homes financial in was and Office XXX ZIA momentum the data customers. SD-WAN at requirement, focus XX,XXX result deals that shifted ZIA risk, advanced initially and portfolio show

that on-site engineers and a Our CASB a required Product three itself annual Point seven-figure CASB integrated by replaced spent. offering

the of DLP their a that only security than ZIA our three and considered Like the customer consolidated XX,XXX services a They architecture. at another In and both upsell, operations peer been financial business vendors, streamlining protect with example, superior this a all their costs. since and proxy on plus XXXX, to standardized reducing platform doubled purchase the employees. company merged bundle Our prior a CIO with a and has CFO. attractive customer resonated ROI the more very

Microsoft Our product important integration with and was an consideration. CrowdStrike

like highlight to I'd Next, ZPA.

work access zero our upsell with contributed a ZPA X,XXX from the than to ZPA of all private not benefiting We employees have pandemic, continue quarter, a compared is significant customer. level while VPN. Zscaler, strong its ZPA COVID, and ZPA to cloud. of access a in a the policy to new transformation selected was network. purchased shift a objective anywhere users the and purchasing 'XX, battled migrating largest for is with for proof with to replacement. eliminate and ZIA for a more multi-cloud the already XX% ZPA our you over architectural conglomerate maturity trust in was the to adoption XX% deployed environment. spread prior It applications ZPA for this With from accelerated immediate in scalability. ZIA VPN X.X XXX employees. the business legacy we and point and to secure million just specific zero weeks to COVID to portfolio by world which for has of ZPA, application the is they to an closed success couple is establishing global security unique In applications the connect as deal deal another resounding longtime applications by in ZPA This of year. providing fiscal entire apps, the globally in trust implement where lf trust journey

in of surface one in using applications company ZPA facing purchased as Asia, an for cloud. headquarters VPN they viewed world's Next, XXX,XXX the firewall IT internet which This customer firewalls the all They eliminate. wanted attack the public VPNs virtual and that or to employees. to largest each was services protect

four direct ZPA tried the customer vendors hundreds customers of business requirement ZIA and to for rollout, internet over ZPA access which to together, share transformation, to their weeks, the any meet handful surface. to but for the failed exposure enables delighted true down risk. attack zero any I'm network. the less With that sell than to applications are a reducing buying reduced cloud-based greatly more application in VPN, Legacy

all our plus professional comprehensive and handling of could ZPA involves DLP for incumbent not traffic, company inspection a cloud including and tried for The was users. sensitive business information. transformation vendor The purchased global offering, needed but data example, to inspection based its as for firewall Hence users DLP SSL SSL services they requirements. For they meet protection. the XX,XXX bundle XX,XXX sell disqualified customer

user the XX,XXX VPN with ZPA on technology, and help Our trust bundle cloud zero integrate agency pandemic and the could in a experience. the scale lastly, growth ZIA poor civilian deal, business legacy a users. strategy future will purchased approach this logo which in company. to core for not federal When started, also relied firewall customer agency for M&A, quickly plus DLP resulted another new And

immediate the cloud our this security VPN together date, its transform and deal largest authorized federal replacement, in the to federal considerable was ZPA notably This acquired win they're U.S. with use market. agency building FedRAMP momentum network case to and While our was ZIA platform. and

proud With we ZPA well involves our times. positioned are rigorous and levels these this large market in trying which help a work ZIA are customers critical process, the of their very both, in the and certifications government of highest FedRAMP do our we to

Let products to new me a are deal touch wins. couple on starting that contribute to of

starting I company. products early become highlights. out-of-band to pharmaceutical helping increase a size, CASB us success also including Our the our indicated see and and deal U.S.-based with consumer in with deal point company CASB European very comprehensive, We're wins ZDX, has as displace a parts

While significant currently products very create new growth small, we believe our a opportunity.

to are As in we their to we fortunate start be a the highest customers position transformation, help new priority. year, IT our pursue able fiscal digital

I've a CIO part us. openness seen costs. customer mindset with of transformation, awareness increase and bigger have The projects transformation becoming products, And in level With consolidate a change inbound complexity, greatly increased. save remove the requests to key to partner and the and engagement an we're point and

about excited mission users. the and for our for enjoyable make are We business to cloud safe

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

Remo Canessa

Jay. you, Thank

quarter. the quarter, we perspective, the XX% total and the fourth XX% full XX%. a $XXX.X geographic results for for and revenue in mentioned, XXXX. APJ with the pleased XX% year-over-year. revenue, the was quarter year million, were XX% and EMEA quarter XX% of ZPA sequentially As of up was Revenue represented the From was was revenue for Americas

million, For year, the full XX% revenue was $XXX.X up year-over-year.

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

was Remaining As obligations typically our in three which invoice to our committed year one RPO, future total represents one terms a our contract We years. customers are non-cancelable advance. million performance reminder, revenue, $XXX the XX% primarily of year. of prior up compared XXst, The fiscal total XX% RPO. ago. XX% RPO the is one new July in 'XX upsell on to was in ZPA business from year XX% current and total or

and see between higher number per of customers. existing the of deal. ZPA, mix a new seats a rate deals of seeing number of ZPA both We and the opportunities tax good We’re

XXX We of only purchased have a ZPA. large as XX% global customers XXXX upsell opportunity our have

customer and strong have quarter. which retention dollar resulted quarter a ago, consistently retention XXX% and ability a upsell XXX% XXX% based to Our to for year compared is last net the in high rate,

metric vary will this highlighted, have we As quarter-to-quarter.

selling AWS outstanding. we traffic centers since feel centers. Considering X than primarily the future. surge of costs in points of XXX% sequentially our data migrating to due growing The within the guidance the While to better higher progress during both business, made February. down which XXx decline from year our in the margin start margin our percentage more The success year-over-year. our dollar-based reduce we transformation to and is faster gross rate augmented selling run ZIA XX%, demand, is good use on ZPA can gross X ZPA traffic ZPA over The Total solid quarter. was as our of and increased XX% Azure the bigger compared significantly data these for our and XX% points to meet to a at the bundles, and net upsells was that retention factors,

ZIA As the of to are products,, XX% our we mentioned core half XXXX. previously, expected our second combined and return of fiscal margins in gross to ZPA,

of segmentation, products, most include However, workload data ZDX, and into emerging which future. in our new until will be the we running centers CSPM scale public in own cloud them the our

products. margins our products these gross cloud, lower core public the than While will have

As corporate XXXX. a total to result, in XX% gross expect be margins we XX%, fiscal

Turning operating to expenses.

and professional our R&D of the successful $XX.X increased X% headcount to compensation includes fees, continued growth to million. year-over-year XX% XX% in building expenses a was $X.X to XX% goal The investments the related to building increased was $XX.X was at for by year-over-year and up our as of in full in expenses the and XX%. due hiring marketing including total with acquisition XX% Sales We and percentage on-boarding was sequentially in revenue in in acquisitions. year-over-year includes to XX% our rep lower million investments year-over-year field operating due of XX% our sequentially, G&A million. sequentially remotely. million. team. Our $XX.X flat Cloudneeti Edgewise year-over-year The offset The to and and sequentially by approximately associated We've primarily teams XX% and million, compensation expenses increased expenses related year. $XX.X been exceeded higher increasing increase investments expenses. XX% G&A increase very QX expenses teams, and and and Operating up initiatives, year-over-year our T&E. go-to-market

including short-term quarter cash, for for quarter $X.XX. positive raised same last share Our over X% non-GAAP senior margin of per quarter. ended in approximately compares in cash which equivalents due cash million was the in with $X quarter investments, Net operating the net fourth year. was earnings We XXXX. for the quarter and was income offering $X.X the to in billion of convertible cash the $XX million June Free $X flow billion notes in X%,

moving guidance. to Now, on

debt amortization numbers associated effects. all which reminder, any As stock-based expenses, intangible facility non-GAAP, of discount, a tax assets, compensation are and costs these of exclude exit amortization

As also our related fiscal taxes stock-based to results. we non-GAAP be XXXX, starting excluding Bill will from payroll earlier, indicated in compensation

profit XX% range interest quarter growth million first the other in $X.XX reflecting we on taxes For expect earnings senior the $X XX%; and income income revenue to XXX of the operating to fiscal net $XXX of range of a convertible shares the $XXX,XXX share $XX $X.XX, $XXX payments of common $X.XX of notes; million, per to XXXX, assuming year-over-year of million; million outstanding. of in million; to approximately

full expect of billings 'XX, the $XXX to the a XX%. XX% For year growth range we million to year-over-year in million $XXX the XX%; XX% to $XXX fiscal or in of million growth of calculated range to year-over-year revenue million $XXX of

five in We XX% million Over million, the billings years, $X of approximately profit range income and last XXXX. million million fiscal full year taxes earnings outstanding. of $X.XX a in distribution to average first on assuming $X.XX income Operating would shares have XXX $X of to the million, XX% of represented to in half expect $XX common of similar the other $XX range share per billings.

and increased market we to we the have our Zscaler digital the business, the We is our to see momentum us. investments transformation, COVID-XX reflects which serve. in coming was accelerating two created market driven based performance, by major on developments, feel guidance one, is Our

Our to in Jay with opportunities new sales plans pursuit of that marketing invest and additional reviewed our the products market our our Two, continue business. in growth behind are earlier. aggressively to

on million and $XX are approximately a the have ’XX, indicated, in while operating I've material million As Edgewise impact expected fiscal $XX revenue in to to of expenses. adding Cloudneeti acquisitions

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

investments accelerated long-term like our this to model. Given update an we'd financial year, to provide our

for We in expect to achieve the operating fiscal to year XX% margin XX% ‘XX. full

opportunity. priority, our growth growth will significant market considering take and we While balance profitability, will

target years. of our We model are reaching confident next within the operating four

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

Jay Chaudhry

to and opportunity platforms market Remo. Workday, of from such just as are disrupt similar multiples resonating us. value The believe app adoption, work we secure is public to the legacy a cloud disrupt and has customers. significant to platform to our Zscaler network early with anywhere you, a software security. migration multi-tenant large proposition the digital innings market of clouds, is to native Thank transformation, zero We opportunity develop believe SaaS vendors. coming like we in tailwinds, trust With Salesforce

the experience. next opportunity into digital Our as well cloud, is expand big monitoring to securing in communication app-to-app end-to-end as

As may in long-term world interest look are we quarters, believe reporting positioned for thank are execution, you to we the in for and you growth. open your delivering and We our the Operator, we recent demonstrated class in future. for we sales progress Zscaler forward questions. call now

Operator

from with Walter [Operator Pritchard Instructions] Our first question Citi. comes

line is open. Your now

Walter Pritchard

sales, increase you some Hi. capacity and juxtapose how takes the productivity think think is with this Thanks. you next for forth. so you we Obviously, I'm you together? guidance reps wondering, I around I that. those should the year, around billings growth two if in XX% the which had in could things double puts suppose year, there's think had But, script. said and about And productive about

make the or Just wanted together any that drives things sure disparity? thinking to about those we're

Remo Canessa

to by increase our guidance, to prudent. for we're have us. in down. primarily initially the Related XX%, for the sales to the to think team in that sales half, fiscal fiscal we be field I to, related to higher how we speaks as reps as organization, we volumes productivity go-to-market in we sales when the think me And as second will and that productivity the market you our be Related Yes, I us quota the 'XX 'XX, well coming able call, be long time. do fine. to sales Walter, mentioned for you've on like a consider known planned Jay

the key market things, just coming we’re fiscal into coming new see remember market the all that bringing us go we we're that meetings, basically to going to board, looking that is As sizes, we to employees on on, some consolidation the 'XX, growth, is growth. customer thing everything basically the clarity, to points us. forward and the points growth, deal just pipeline new at from Everything customer

invest doing is we're SaaS this going And a step market our slow So, in sales we're coming in investments operating and to the you gas, things and on what growth because sales said the board of across the quicker. margin model’s got easy gas. seeing profitability perspective, on operating of continued operations the and our particular, years to coming it market to an to to increase the two the and basically we're and Company. and us, Jay and to going delivery the start, All possibility I the down, we of our also do is to contribution from we're get in if R&D, us, see From marketing, to significantly stepping is -- platform. we're going Company, and the we're cloud marketing three. in

Operator

comes Our Markets. RBC Hedberg Matt with question Capital next from

Matt Hedberg

to transformations fact wondering, is In guys. sort to digital I'm is first? you Congrats clearly what that quarter. is exiting talk words, a of other question, security leading the are thinking lot are as Jay, taking my to the a in for transformation? I COVID. that accelerating on though, Thanks year? also Hi. record executives, post them And to of transformations -- digital pipelines are have precursor And what's happen assume that

Jay Chaudhry

Matt. That's you. Thank correct,

maybe And on wherever, secure. branch application so must economy, with starts you new alike. your in people transformation be you because if access end it, application up of from office network think the since this applications, to collaborations can to need has wherever, you digital you three modernization, be So, business it sitting everything working or and transformation, anywhere pieces

enabler this important becomes transformation security So, an journey. of

because that say cloud accelerating That's any things people not in to why fact, business. network or slow the event, COVID, a of CEOs the I CIOs, are without we before seeing in, actually seeing are to SD-WAN would business, can’t of down? in proper In onetime because because trend. when of we say, I it That's More comes done. be are but and our acceleration say why are our going no, transformation security, gee, talking after us. acceleration comes first security more centric

not and just business The other transformation is, our thing would driven come along by Zscaler then CIO that. Number of is one -- sponsor number one with CTO buyer of I mention and or CSO is Zscaler CSOs.

Operator

Henderson next with Alex Our question comes Needham. from

Alex Henderson

Just a Can really a with processing? does domain, you to them? Thanks. pace tie continue about you technology to app players, capacity in commentary domain Jenkins then, penetrate the more Can one app environments with conflict talk protection, you a in partner expand your piece to to the to environments. you that whether application about Kubernetes talk CI/CD some by you orchestration of faster around question little one bit you expect how into put on the and And CDN 'XX in the are or side. second sales then at modern I’m guidance? than front. your technical and fascinated sales And on technology your

Remo Canessa

I'll first take is the answer question, yes. The Alex.

the -- year in will 'XX Related sales coming sales on trying 'XX. capacity we're bet. in the took positive capacity trying fiscal -- have sales increasing and the in capacity sales of about our basically fiscal increase we're 'XX, was are capacity into that half to Much to load half capacity and increases. to good our sales we end sales capacity going capacity fiscal going second We significantly that a fiscal fiscal the front increased basically, impact second us of The puts it And a increase last position into increasing 'XX. in right increasing bet sales 'XX.

mentioned, all we I As to it's what we be be go in our The how I monitor -- will But, where year It we speaks sales are just productivity, sales mentioned as prior indicators forward, go very, going. we as the we exceeded very place. we'd thought just before, above the business is activity, below. positive. that put

as key the now because knew when wasn't of basically as basically world. fast the think hitting external you Zscaler, future; are in you're that It's a us about us, to was we coming today, our there, things, built a which market about but factors coming think that One would. about to thought it talking of company platform the the we for a

got, a sales So, the best -- feel, is we've the piece, We in sales our and the the we not leadership machine, go-to-market. sales if with there basically world's machines into missing the in 'XX. that have in one and fiscal we’ve organizations foundation just was world's of fiscal that to Having fiscal and 'XX will basically that, That in is investments make that filled place. 'XX. go-to-market in best the foundation in the said continue made

add as we'll to monitor expand. we're we’ll to see open things going it, we're to, to it. we Now, continue If

Jay Chaudhry

this Jay. is Alex, And

and Second protection question public dynamic a your ways. seeing security approach Different vendors being lots to this to We��re vendors part legacy lots take of launched at workloads in it to Legacy is try try public be and look cloud. to has different of done. application cloud; it.

let security. guys no come gee, and try the can CDN this say, like. create from thing network such a to segmentation. the new CDN world, it fact trying firewall I’m around example, We will that there's as [ph] guys to say, are in me For build vendor, WAN I traditional

application. We exchange, to the are right switchboard. right connect we’re user the We

ZPA application to company to the our that's the process we right called with acquisition Networks. extending process. using of securely right And concept we same will connect combined Edgewise a of to right We’re core right application, say, technology the did

a and the had technologies. ZPA disruption can thing we public market. new that a same it's So, a It's of cloud type think, opportunity. ZIA done in We nascent for do we

Operator

you. Thank

with from comes D.A. question Andrew next Davidson. Our Nowinski

line Your open. is now

Andrew Nowinski

related recently, ZDX. a gentlemen, believe on a much, similar and network great is ask I more -- I Thank want technology aimed which you a to more to quarter. providing competition acquired at company I question. ThousandEyes of just congrats the Cisco and called visibility, very

more So, from trust then the any market. competition And Palo seeing provide on win rates if I'm versus Alto? wondering in any could Thanks. also, your you're feedback Cisco zero also you

Jay Chaudhry

Yes.

that the We It private question the monitor they start true We doing that new typically me are this, the network. lots about is network network vendors that is do network with don't Let wide your visibility And that first network. believe network, any of area the that. was of vendors. internet monitoring.

not are we itself. network on So, focused

market is of application on the market, after user a about focused much a piece have number trust. performance. It’s and device from the zero new performance to one. because A is piece of do We’re piece -- really old user market. even this monitoring of is two, from in end-to-end it, of to market of we’re may old though This one doesn't application. network network The is performance be relatively work is a a going end and is with app user it. anywhere. it, That's performance Number

seeing we larger from on of are can things be done competition was, trust trust question by Zero top other security. zero vendors? Your cobbling network

network. Because If be that you're doing the on to because security, network basically zero you not trusted -- zero trust trust, network. don’t the assuming can't securing means do you be

So, second that's the part.

I third think form you firewall of think. The part I company, is, Yes. mentioned competition

them putting us. to So, application an on we network. or think about securely -- we security companies, trust, they’re say zero including transport network it is we connect Network firewalls, for merely the you trying another entity without secure network. use All think look, to an to the entity if

other totally is architecture architecture. opposite to Our

we to the even few trust, inspection. SSL as architecture out requirement including whilst in They at they security, on savvy. proxy ruled it architecture. and understand to -- my understand customer highlighted in they’re them And generally security, a if upfront, are see understand they my some enterprises, firewalls some of of wins, zero comes the because they there a are do go So, very to I prepared of when accounts, proxy becomes in lower trying remarks the proper large

Operator

you. Thank

comes Suisse. Zelnick Credit Brad with next from Our question

is line now open. Your

Brad Zelnick

it's the to in Great. finish provided And you that see. I drill year. on to the Remo, real Congratulations wanted update great strong a on long-term guys, unbelievable to real, model.

the maybe over way? of at business ‘XX, high the in we it growing assume how out revenue I think in that time the think XX% deceleration the So, you XX% be try you And expansion at operating at time, hit margins as think way I'm the over fair And would somewhere back natural And model now IPO, you've and would not well, if Company that teens the about, envelope, point, to you told margin is us, we on million when timeline $X years the be put you it you'd of to to, I that thought to had out. that the Do around I would that the XX% four about want recall the be should XXs? $XXX to if go just at about of that low that goal. slope and in or to XX%? a time back time mistaken, that the billion to you to

Remo Canessa

I several key Brad, an The basically, two you seeing that built that from in is It transformation. talked for. acceleration, the we're in as world that a world lot questions. got the And which we're things the accelerating great the questions. changed what's one time I seeing very apparent, basically we before. COVID-XX. is The is acceleration mean, thing happened, our went about And is basically changed, we're markets public. business, the of that it's

on. thing So, going that's one that's

if next and We thing said right and shareholders year basically mean, It the is absolutely also significant down with emerging the The also a that and like refine we're saying products, this second this do get what know is to slow you TAM 'XX target, know can model. segmentation. profit year, you and that there not. we dollar that the model, want amount, have? our opportunity the additional our What user thing, -- I which the fiscal the market we full the that And Is have for decided XX% SaaS for in basically, product we to. XX% provided experience is we to versus thing we've workload before. we've to with

there’s long took for and company because met therefore, meaningful significant ago, took before, very job and build I, I than in to and changed. trying I to have this this. job build and and So on the a so -- same of opportunity, Jay, have we're not that the Jay respect great page. We're because are world. page. four this on my more years company. the because and a changes discussions we about Jay same basically now I the we feel we had much We that’s

things but growth our for we're where We -- putting profitability, zones, where end to market can 'XX. What matter get there projections we're there. play full for We of how tell can goalpost we can't How you. and for 'XX you the we're you. rates? tell no I are growth basically is can't be is going ahead now can I put the get goes. this the at out? fiscal What to going I will right year fiscal tell

to that we product platform pretty that we the been we it's take the we've at And that started you ZIA, expanded With the in ZPA look significant. have, out ZPA. growth with had, a then

you're I’ve Now, significant adding market, we which user the has experience, think ZDX, as mentioned.

foreclosed putting [ph] isolation, you like then, You're ability have And on other board to segmentation. products the the out-of-band, CASB, BXB, CSPM. browser bring the

order ability We the have we’ve to products. deliver products because built the to these these platform in deliver

cannot is tell -- to I So, tell what the am I'm to place, operating on potential, to What I that good. we're based I the have very am. you. feel very on we based on for be? growth we're you profitability market in team get going I our can I But that the based seeing, going confident years?

Operator

question next Our Keith comes BMO. with from Bachman

Keith Bachman

to the I you COVID it much the to a on on just would world's more you little ZPA growth be you what solution talk -- about bit mentioned a And a seem to about getting welcome is drivers. economy, just ask up pick is reception. that what And change. wanted in pick

to you growth. growth So, only your ZPA really, it, 'XX, seems thinking a for been speaking about asking a for being opening ZIA, the us if what accounts, you of us it rate selling base up context? on And new that of base opening just distribution. is, a the little you as a to growth new is we about now thinking catalyst in give purchase. of And it of ZPA 'XX? could that you on the give color is doors that mentioned as well installed standalone? gave help I'm any Thank how When you you so about into just terms fact the isn't should you the color But, But, guidance XX% it's of like installed within And think be in as in how speak. you. are

Remo Canessa

up showing buying We going forward closer had have our you Pipeline be ZPA We're XX-XX. XX% It ZPA XX% QX, comparable. it's mean, If platform for for pretty ZDX the I XX% I'll and depends segmentation, XX% that new I've look pretty historical by about. thing was lot going the or QX, about, to call is take new. Yes, That the fall to much XX%, look products ZIA? and Question existing record let is on of when I we came that ZPA customers we talked off traction it it ZIA to And that at it would a is indicated rates the ZIA ZPA, and COVID. came that going as I answer your your of other at Jay that platform. total said we percentages workload and business think, I the it QX. Zscaler QX. ZPA, but in QX. our -- contribution is ZPA of is driven pipeline was ZPA on upsell, question to on has last talk. year quarter talked what It build. I of XX% a and new our basically. key the healthy. was The were yes. is were cliff? of crack, last XX%, at the what's that's up And is XX% ZIA upsell then, that call record to take think, amount quarter. it's a dollar draw business, more I new. for a was to want with close that in though, around Well, mean, The ZIA attention in a a related of rates, was,

century. of better. tell so lives the XXst understand customers companies to to Zscaler we in can their the have, Zscaler out they for As have a center their go there what need need companies XXst what is century. and was built related a right the these networks we go We lot that for be securing need. forward,

really think going as applications in you forward, to think relatively about to -- about properly us quickly, going Zscaler user well when add additional secure both to in the our environment, environment. as So, customers, them, as play, service a workload platform ability a the

Jay Chaudhry

ZPA, ZIA say, would both. for ZPA. many is and I times Remo. anywhere means combined, big from COVID people No, of great, work there both That’s think potential Yes. means and

Operator

Thank you.

comes Daniel Bartus Bank of next Our question of America. from

Your line open. now is

Daniel Bartus

ZBXB. ask to ZDX specifically and and about wanted new products I

can Thanks. to first, you at And ‘XX then, products talk compared So, these maybe through or Remo, what in fiscal time, this assumptions the you early general? customer years ZPA? baked curious products Jay, interest for about just have your new into just

Jay Chaudhry

Yes.

single market XXX, start issues let the are product your things filling. CEO lands in two a you So, there's me big Office with That's products figure to When slow, ZDX, new about, talked hole connects IT which we that digital are. helps the out is not Sydney, in a the where experience.

last And got product out pretty just we the So, quarter. there's high ZDX. a demand for

bit a interest building application. BXB good a we’re in interested the is pretty little a rapidly. are Chief angle, it. new and lots bit They who seeing actually We’re big, sizable the is different interesting buyers. Officer kind product products, different opportunity evolving Digital little pipeline, It's of but BXB of

board customers of best platform at see Because us become part the we've lot bought. time. both extension ZDX; and on platform. to because proper platform But breed both All areas, buy piece of than They things are good has aren’t these ZDX side in products. on a best sales BXB. the but our trying a a on of side. going help the good needed to lot customer of sales we seen of breed But cycle So, interest, on a cycle pipeline longer more shorter interest, evangelism BXB

Remo Canessa

type the the we then mid-single-digit On I products the ZPA, backed range for more we where trajectory would best for single XX%, all basically new for from say type digit that is revenue ACD, range side, similar combined, by went new ratable. and And upto business, immaterial into that probably the financial plan. type is in because the we're X% had like

Operator

Thank from And Essex with comes Goldman our you. Brian Sachs. question next

now Your line open. is

Brian Essex

what of there call seemed want color Jay, a leading to though, you those will question as seeing bit maybe to give buying, and balanced they lot off is are with just it to question. It helpful. of sounds quarter, I was had of that It don't led have but Keith’s -- last more growth real for pivot purchases larger do a to maybe have Maybe now enough talk deals panic like they terms reassess I I you, and architecture. more of their customers? now. new -- us have enterprise to customers sounds what time a Are they assess didn't the little be and you to in that about enterprise platform? Could maybe can it rate. strategically new a you're more seeing ZPA naturally lot of like you added that think network attach onto And a higher you're architecture time

Jay Chaudhry

already of they architecture. the some do that the a testing pretty both lot is people things. and Two assessment, actually cost mentioned there. true because and knew them some exposed ZPA to is, us is, It who very of are already. right fact, you driven Zscaler launched of decisions they've Yes. it, Two driven? those is quickly their the of points complexity both answer to by in familiar One are yes The

of The a ZIA and number QX. of further ZPA acceleration deals has saw together in increased. also combined combined ZIA, a deals ZPA We

this we're met. customers or bunch we talking now be So, need what know realize to is we yes, a for prospects number VDIs also transformation. I But we're zero whatever that. to VPNs a are finding go we want we're talking would to needs trust, now we or short-term But of a bought we saying or digital say of to

ZPAs not of ZIA Zscaler architectural driven for by term, short of but So, evaluation for needs, those the are some and transformation.

are is The simplification. consolidation trying cost pressures, and do second more macroeconomic more to CFOs of and how big out to trend because CIO we're every and figure that seeing

they're That So, on than buy side, other bundles ZPA has of led smaller to on an combination transformation ZIA bundles. ZIA beginning of more also bigger increase now, and but sites. platform to more together and bundle the

of think So good from the and simplification, trend more complexity benefiting competitive. we've for making as well. agile consolidation, a it's to more needs do We reduction market that business

Operator

Deutsche from Bank. comes next Patrick question Our Colville with

Patrick Colville

there, in increase we about talk the hiring? think just Can in XXXX, biggest just astute in hindsight, headcount great. guys and hiring if guess through I you one the we around, XXXX, about, to I can you awesome, probably go the metrics sales that we guess, how In that’s was very be net trending? XX% about things see be then, you the I that momentum just sales the think by decision. headcount of And Can how should saw, would

Remo Canessa

give give much to we going expect though, 'XX in as substantially. heads Yes. increased we I as of We're our organization, do we did the to not you color fiscal last increase say that time. some sales What can perspective, field to number

that I substantially proposition are ‘XX But, numeric increased 'XX fiscal quality we higher a we think related very -- that attracting awareness high that amount we're -- people. the basically to aggressive in aggressively hire. 'XX are We're will has. we there's right the is So, we going going I hiring to feel That I started. finding And us. that we to are business. is things the than the amount, value hired. be think do Zscaler some the hiring coming total the We're as what for fiscal already market that aggressive fiscal see mentioned, And to

Operator

comes Our next question from Baird. with Jonathan Ruykhaver

Jonathan Ruykhaver

if Jay, with into Summit put have more provide place initiatives the that could some I'm wondered been on you the Program. new Partner color

kind channel any you velocity? there to sales seeing, and impact Specifically, what are reception has been of just yet

Jay Chaudhry

customers question. identify cloud my cloud place was but translation. or borne in help good partners, briefly could Summit to in very Partner mentioned focused with Yes, I prepared put remarks, who

So, are it’s how actually very with sales our well aligned done.

And because -- in sale we seeing we the expect happening. the seeing 'XX these fiscal of we’re So, we leverage think partners. deal number also to are is transmission and way the from more get of size increased more growing, registrations, deal

I the So, even say, would results made fiscal very progress and we've on year. bullish expecting better this in

Operator

for session. concludes closing I gentlemen, remarks. any and turn our Chaudhry to now this like back Ladies over Jay call would the to question-and-answer

Jay Chaudhry

joining you sales Well, again. at conferences thank We we’ll of you All one seeing us. side you attending. be for forward Thank right. all the look to that

Operator

and Thank participating. today's gentlemen, for you concludes call. Ladies this conference

You disconnect. may now

Zscaler (ZS) 9 Sep 202020 Q4 Earnings call transcript