ZS - Earnings call transcript Q1 2021

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Zscaler first quarter 2021 earnings conference call. At this time. all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions]. today's being that advised be conference recorded. is Please Instructions]. [Operator hand over Mr. to I would first conference to like to now your the speaker today Bill Investor Choi, President, Strategic Senior Finance. Relations and Vice Thank you. ahead. go Please

Bill Choi

fiscal and to call. everyone XXXX afternoon Good the Zscaler earnings first welcome conference quarter

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

uncertainty, business, limited them but to share. this COVID-XX these remind of of apply businesses income taxes find of supplemental no stock-based including The should historical future and the non-GAAP and as fiscal future. duration the would performance, XXXX, views partners. net income, and vendors You the forward-looking free the in not forward-looking dollar-based economy not retention and subject compensation as which statements call. update our statements the periods will and in obligation performance in our control, including I our of obligations, but GAAP like you comments to respective information. undertake can the cash remaining are excluding the hiring are the taxes reconciliation our not customers, earnings today net These after revenue, rate, our financial presentation. based non-GAAP in financial billings, that non-GAAP some not for future measures in to are representing We contain we global Starting and will reconciliations related expenses, decisions, flow, other statements to found today's release. risk be the earnings rely operating on statements, payroll of margin, of GAAP our operating on anticipated calculated to to These guarantees per beyond are discussion and limited income, performance, you to rather impact future but company's gross operating

complete encourage to please with of Conference and UBS Conference XX, as like earnings more would Credit tomorrow, will the following the our TMT week I be Suisse Global you also well events. Conference APJ, at management Summit view X, a release. that discussion Zenith the register in be risks the next For We our for inform see virtually Global today's and Annual SEC, filings summit. will Live on presenting the to TMT Barclays as our and upcoming Technology Americas and December everyone on for EMEA Cloud held week. following uncertainties, December

We for attend links will investors a the Relations also for events website. December invite be financial will X. to Wednesday, these specifically product on and Q&A analysts The and one-hour presentations on webcast be available you session Investor our

will call over I the turn Now, to Jay.

Jay Chaudhry

you, Bill. Thank

record enabling in while accelerating pivotal Zscaler's journeys, a which our demonstrate customers' free and transformation operating believe in are cash never financial results We I and exceptionally hope all, of delivered First to and fiscal quarter. XX% our in strong of healthy our I XXXX of start results in also billings, pace generating XX% flow. role and strong before. your growth seen profits I digital are safe. am our families an first growth revenue you and proud all at

Officer. our capture efforts as organization significant customer pleased and to partners and increase and I am to like to visibility guidance. Kozup fiscal business team welcome, investing to of Chief our the for across we commitment us remains to year their is the market momentum I we the large Our our to a excited and are to team Chris are Marketing also Zscaler our Zscaler our and share opportunity. strong thank and I believe would coming success. tireless and our pleased new growing

efforts sales our team which Last in business hired also I power are Office our including enablement high One, driving with on logo deployments organization. reps acquisitions. are am Two, and all record strong building ramping We built us. is platform Exchange are which I The strong sales of optimized us metrics highlight is figure Trust investment our process, we geos. that the transformation. and pace faster now a go-to-market our an sales newly is with of Zero particular, CxOs. of the pace. pleased performance ultimately quarter. very XXX sales our three-year drove become ACV have of embracing big network and of in catalyst our we two, year scaled provide and One, pipeline. down better and a cloud closed in our driven foundation for a number percentage Three, ways. a growing despite important a These vertical, year, sales Let bearing ago, at engine across significant wins two reps. is is on majority factors a with seven in our security wins visibility commitments these strong our than And three in deals. velocity, resonating repeatable productivity increasing our financial the for services our me am and performance to doubled pleased large growing fruit enterprises, a into In application, our with contributing higher new the traction the giving the resulting

post-COVID rate. by trust protection. will to Digital I Experience user the experience be the a critical and retention SaaS, Our user increased for also private is saving, environment platform share the of net believe each which sales ZPA transformation. for current deliver platform economy, four better from vendor applications, a growing purchases segmentation initial Zscaler Zscaler record to cloud existing work applications. comprised from upsell go-to-platform of customers, customers access the An cost in challenging our of and or ZDX Internet anywhere, is XXX% coming with consolidation, new access and key to in zero and productivity to pillars ZIA protect driving for increasing workload to secure direct enabling is to element cyber

are enjoyable excited corporate enable replace and mission perimeter-based with for to users. for the our security. security increasingly trust business network their make about customers cloud the We safe as and to our We use Internet legacy zero

that's As security better. had that's us, Zscaler when and of the with materially and ended user we we told a posture CIO a experience than complex security the network network up a better have customer

the of built our which driving adoption four maximize deployment years, value look we customers' CxO few forward customer cloud the to solutions, next sales major on As From to are sophisticated for level. machine transformation. and success, together our measurable have a the sell we to value deliver outcome we and pre-sales focused broader at digital

to the our moves way. market our scale continue as increasingly organization We

to partners, across continue technology market. and total our ecosystem velocity to addressable will We expanding contributing our which build of reach are sales our channel and overall

greatly that digital are a catalyst changing events have resulting realize be customers Series, legacy can mindset work demand off we from over an transformation. current shaking a about easily Inbound increased future six implemented and through customer demonstrating rapidly. increased me that in zero IT discuss and leaders shared the secured to our Summit we temporary, are our transformation Virtual to larger hosted on helped we was the for and Additionally, an them is growing approaches. COVID value while that their Many and the architecture CxOs home of requests reduced focus Zscaler and educating in trust drew value with recent over CXO XXX part projects. At CxOs generation of of it need becoming environment, the customers thought a programs. leadership inertia, architecture number integral has and

and a to continue ZPA center with more cloud. applications seamless ZIA transformation the which enables or data applications together, We access in buying your SaaS and see true public or to direct customers

A and and XXX and had Interestingly, where for but hub users. a network this for performance XX,XXX managed network failed example, Workday. service adoption services a manufacturing Bundle initiative for XXX of their spoke manufacturing traditional slowing security meet were and as system DLP inspection. company cloud security SSL a next-gen and Zscaler. Transformation part which ZPA bid was RFP purchased For its including all CASB global were users WebEx, and their to They requirements, XX,XXX transformation. hybrid integrators facilities, tried to plus vendor offering Office sell five-year firewall deal such six and this of Drivers applications for our providers

endpoint ZIA for retail architecture. industry DLP where services Microsoft, our We from cyber This is to Security company SSL purchased and legacy XXX Bundle a am plus provider. on-prem Fortune deal purchased of provider of A their Sandbox the tech are where and legacy direct with growing accelerating. partners, cloud leveraging to good Transformation considered. customer our the adoption or ruled customers CrowdStrike security away security large I In a CASB, example deployed for increasingly with identity very appliances financial installed inspection and win, users. technologies was pursue out with overcome when became XX Office only financial with new to for security This the capacity success they data Professional architecture with and was security and major protection. to pleased customer Zscaler requirement our one DLP requirements DLP CASB gateway with data a gateway a exact ZIA replaced SSL inspection XX,XXX Firewall-based with was match. a and their web base cloud security employees issues XX,XXX advanced appliances strict seeing customer due of Bundle proxy migrate were XXX. and Fortune

are deals leakage traction three working concerned from data ZIA protection comprehensive these as customers within has anywhere. been show, As offering gaining employees about data with our

displace business customer themes are point user deal increase CASB eliminating common new IT and by most simplify products Zscaler reduce CASB this in enables The to and out-of-band us our risk, consolidating products. size. productivity, reduce increase is Our cost. platform and helping The point our wins

ZPA. to on Moving

the zero their applications. architectural shift Our customers access ZPA view foundation for trust private for to as

in customers' attack the resulting Our platform ZPA market and clear surface eliminates applications, scalability. with the risk. leader Internet is maturity business reduced proven of

of complex are hundreds supporting the large We enterprises multi-cloud in environment.

highlight in deals quarter. the me Let ZPA two

Their a with connectivity. remote their legacy and deliver team its users a cope security bank customer after needed VPN having with ZPA Europe headquarters from concern. to over in scale purchased per tickets global month to a IT over to always-on became This issues bottleneck access First, seamless for and trouble employees X,XXX experience. had VDI XXX,XXX performance with the a

was corporate our to applications, complex to Purchasing not connect ZPA take application months immediate core strategy this this at a employees policy, problem. both deal, for implement or legacy the multiple acquired more. standard high-end to is accelerate a access deployment. ZPA is replace zero separate the to the ZPA The X,XXX provides can weeks. where a companies application to elegant for offering, architecture in as to accelerate future an laptops networks deal In integration. the to customer network. solution ZPA by solution corporate growth trust across ZPA's another networks, VPN, company ZPA at to having two two XX support Integrating specific Fortune a to level objective identity to establishing still was one customer connect Without for secure ZPA two customer. use leveraging this plans M&A, purchased to After While selected with tech VPNs separate XXX division were networks. M&A year, using users

customer the a with platform all ZDX upsell ZDX. get for to and visibility an for for business review, anywhere, turn products. employees. addition on to from it We wins and new touch aligns European productivity. an and work had ZPA, products is users Bank issues accelerated emerging employees. was success close like some on towards shift my To XX,XXX which to This early end-to-end to will In performance frictionless emerging a There ZDX purchased our quarter, employee And with I customer quickly market in resolve that ZDX including our had ZIA increase number with of X,XXX troubleshoot issues.

offering, CSPM growth. giving We additional opportunities also for had us our wins for

emerging are Our our competitive products increasing differentiation. overall

in-line and who we platform are largest want their multi-tenant modernization, network security cloud only world. needs. cloud meets security we large the the the Zscaler native platform in enterprises that For believe is

harder. for seven policy Deployed data the processing incidents our are availability Edge centers, while security more cloud XXX up framework. was is Service hard order XXX the across is magnitude preventing an architecture or native of We Exchange platform Access built daily, Trust and a global billion cloud with than of Zero security and more with massive full SASE minimal Building very Xs violations. running and in-line than a Secure from five latency ground transactions billion

the why trust moves that about and build to competition a like framework asked native foundation the SASE lies supports a Well, everything. you of platform in can't have zero world cloud and is the which architecture, of like answer architecture, some As others Zscaler. the building

inspection up complex operate. like to threat applications without application SaaS Our foundation build aware firewall, platforms at XX easy solutions to an since much simple complex cloud over service competitive the demonstrating prevention strategic are It world-class compromising execution from operate and NetSuite our between the our is cloud for ERP. of and sales It decades a hard sandbox, started and an ERP develop, scale. SaaS are like a platform process Zscaler a build multi-tenant to many to While user momentum, in-line including delivers traffic are ground business DLP, important systems difference multi-dimensional ERP extremely advanced like are design, that we That's dimensional experience. architecture built you two highly and SaaS antivirus, and building With ago? harder How as are also advantages. is single versus cloud a cloud key inspection. SSL security native

rapid First, customers sales digital the of sales sales for identifies believe I model requires can This value benefits the are bottom we best transformation. process at our the and talent. we strategic realize to enables top hiring fully we to are them consultative sales team drive top the pace. a and

top talent the We globe. are around for destination a now

partners, contributing deal are to technology of our leverage adding ecosystem which our deepening to and model. wins are we sales Second,

long ongoing for a and that joint have now with solution believe built to partnership Microsoft engine engagements. partnership addition our extended we to to go-to-market growth. integrate go-to-market our CrowdStrike, generate sustainable with In their and we have strategic I will VMware SD-WAN partner term with

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

Remo Canessa

Jay. Thank you,

the Jay to APJ represented as across million, customers. As of our of guidance have activity revenue. Americas quarter strength XXXX. pleased three increasingly EMEA regions. ZIA XX% expected are total $XXX.X for From of mentioned, the XX% was of geographic due stronger first the and XX%. exceeded value our was revenue sequentially Revenue XX% we the and revenue, was Revenue broad XX% major than becoming ZPA up with a we results year-over-year. perspective, for ZPA and is proposition to deal clear was quarter XX%

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

and customers between had current October existing new three The total XX, up XX% of mix our of million As a with to advance. reminder, years. our obligations year one our upsell non-cancelable typically contract ACV. We performance future represents primarily was from RPO, RPO on is ago. We committed which invoice total RPO. customers terms a XX% revenue, the $XXX or a are healthy in new year and one over new XX% Remaining customers contributing

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

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

both of and sequentially a migrating was While bundles, to business, by bigger for ZPA basis. timing these infrastructure margin the during our gross good well we quarter, faster percentage improvement can XXX% a the Considering of centers and year-over-year was Sequential driven our dollar-based feel as our of selling comparable Total future. our within XX% rate two expenses. data the transformation points net the outstanding. ZPA increased is on as ZIA most start retention that success in increased factors, and year from upsells selling reduce

that and running the pleased own like products, would the which them a gross we I scale of future. until emerging cloud remind number the be to workload investors new will in our we While ZDX, include are CSPM our segmentation centers data margin performance, with public into in

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

for fiscal the to in margins approximately we XXXX. be year As gross expect a XX% result, full

operating Turning to expenses.

year-over-year increased year Operating XX% marketing a expenses XX% $XX a XX% percentage Our Sales improved sequentially expenses to XX increased investments lower The percentage offset from ago and XX% from by increase employees our year-over-year initiatives and compensation was with sequentially and by and the $XX.X to higher XX% in quarter. go-to-market to home. million. of expenses year-over-year building our XX% to in total working T&E million. and points teams due operating revenue as

our and increased fiscal have sequentially this million. We The in in year. G&A $XX.X hiring compensation-related to increase due in team. to marketing successful and investments G&A investments remotely million. been hiring very and primarily accelerating our growth our expenses XX% we year-over-year was sales R&D to year-over-year are onboarding X% The X% XX% increased teams, fees. sequentially and professional throughout in and continued and $XX.X building includes

receivable in quarter cash which driven prior quarter $XX quarter or million Our cash income a million in $X over and quarter and ended share non-GAAP was flow of was operating was X% to positive in the was in short-term profitability compares of last the billion underlying flow meaningful free $XX quarter, quarter. million The $X.X year Net cash, equivalents the quarter. investments. the first quarter strength XX%, from with and We margin ago $X.XX. year. same strong improvement in cash earnings Free per in which collections million better by the in the is the $XX

guidance. on to Now moving

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

assuming profit interest of payments $XXX,XXX, the XXXX, million, of XX% of net earnings full-year we of $X.XX common for income a growth $XX $X.XX, first senior revenue expected the than other in of strong shares range $XX year-over-year million approximately on expect are million XXXX performance of guidance we to to Operating per quarter to of better million For notes, $XXX $X,XXX,XXX convertible and reflecting revenue, our billings $XXX outstanding. our and million, pipeline, $XXX Due the second quarter share of to income XX%. fiscal to fiscal increasing taxes and profit.

expect million For million of XX%. the of approximately range million growth Calculated $XXX XX% $XX Operating outstanding. the $XXX we million fiscal and of in growth million share to in revenue billings $X.XX shares to of to XX%. million, to or income per assuming XX% year-over-year now year-over-year $XXX XXXX, profit of range in $XXX or of to to Other range common million of $X.XX, income $XX $X.X earnings of $XXX in $X.X the million. the range taxes million

to business. the market and coming continue We behind in in aggressively us remain our company the to see our to committed investing growth

We model the making ahead organization large to us. efficient a and of on capitalize order have across are in the highly business investments today opportunity

While to take market profitability, we growth will growth balance continue priority our will considering and significant momentum.

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

Jay Chaudhry

record a digital our The off our a market Coming the validating trust with over platform platform. customers QX, Remo. early last and reflected innings we is we We trust zero opportunity market seeing we value our secure the significant vision three for of are believe coming enable of in in are momentum you, resonating proposition to seeing transformation. quarters. Thank to and are zero us native business this the cloud

Operator, go-to-market for see Zscaler. you now you are your long you delivering We hope Thank next call may at for have term will scaled growth. We and the interest sustainable execution, in open world-class Zenith week. sales which Live we to engine questions. believe drive our

Operator

from I go of show JPMorgan. from question Auty Instructions]. line first comes Sterling Please ahead. [Operator our the

Sterling Auty

Yes. Thanks guys.

penetration are or number it mentioned of How is to say of of characterize you that you continued traction seeing services industries? are momentum big times Where maybe Jay, up revenue? catches as a So would perhaps, in the that percentage in some And financial we where you as a other industry? it the seeing. you would terms

Jay Chaudhry

embracing make delivering up. some be and is with faster cloud their work the have are Sterling, now and work, transformations XXX slow embracing security thank XXX to much they has we Microsoft To catalyst. you. are there can and XXX opening becoming Financial to in make Office user Office be sure securely services so Office have all They been cloud, experience. enabled in network done but

that's then to get one So there. that space want to from you becoming expanding our Remo, it? to anything into add application number

Remo Canessa

Yes.

that I verticals. have mean, we financial, top health. are But verticals So and are broad all manufacturing we three across

really vertical that's there's no dominant. So

of we verticals, haven't but of broad. we the percentages each are out So given those very

Sterling Auty

you. Thank it. Got

Operator

Please you. I our from question from show Thank the of Matt line Hedberg go next Markets. comes ahead. Capital RBC

Matt Hedberg

cemented the numbers, the those I conversations Zscaler. for really it change. guys. sort my in showing momentum vaccine. mean, sort Thanks to though, in the results me think I is what on like I tone conversations post-vaccine, of you am curious obviously customer? your buying strong CIOs of the I a on Congrats is taking the up lot with importance of Hi the am Jay, are the here. would a sort in do of curious, behavior feel tone question. But of of am curious, of has how really target

Jay Chaudhry

asked pre-COVID, questions of Lots being are post-COVID and Yes. whatnot.

look good you very is our we by in driven our record accelerating. acceleration at had business transformation. digital If It's growth, pre-COVID,

how accelerated they COVID cloud security was do The embrace shaking like. catalyst change for did When Now, we in transformation to has being me, important to off CIOs, for not the realize tell it for demand talk and collaboration, I mindset was to in trust. able zero inertia. a

So they did faster moving are they than before. really

old highlighted works. to legacy has this transform and momentum and our picked clearly to transformation so, business old it limitation the And need because the of has network up, and

even are think on business after So we pretty our vaccine, bullish. accelerating. will keep We

Matt Hedberg

done, guys. lot. Great. Thanks a Well

Remo Canessa

if follow-on is Jay accelerating. at that, with is pipeline take our we a our One look pipeline,

And both that's ZPA. ZIA and the pipeline. in seeing in So across acceleration we are an our board,

Operator

comes next ahead. go of Please I Kalia the line from you. our Saket show from Thank Barclays. question

Saket Kalia

how where Jay, service a perhaps That process process. many taking any competitive there Thanks guys. competitive? in versus your do have isn't you. a you are Okay. thoughts Great. on question makes for The is, a engagements my being provider really sense? for competitive of maybe Meaning, by here. question brought statistics or breakup Hi general just

Jay Chaudhry

Yes. Saket, thank you.

AirDefense are when I to to At of question appliances Your at faster, box is which CipherTrust Transformation lots their them level discussion bake-offs, cheaper. used is to reminds help and CIO box to enable by box actually of all all we have a with driven of transformation. is to them Zscaler, we me days applications used sell. with you security network, my and not It security, big starts sell together.

most the enterprise end, of the at So competition, rare. our really lower at the are but to large aren't come much competitive higher of level end, deals see at all. some you When do bake-offs we

I my channel That's in SI it. was transformation. six take In understands can remarks, partners, though because cloud and the Zscaler, I with managed win that make do SI/SP prepared fact, even highlighted won a that services bid very all them and RFP a am of we customers okay. where to proud try an boxes legacy you SPs the and there typical

something, a big, competition, some to we think architecture, Unless someone really maintain lead. we have big this got comes purpose-built lead. it when good tries I So will

Operator

Thank show comes Henderson next our you. go I from ahead. Alex Please of from Needham. line the question

Alex Henderson

more that's and talk how the cloud just we actually it? you architecture about about bit to applications Thank margin it's could expansion you as are your to talk coming out, on machine-to-machine you, more wanted doing what participate topline. that little see a a environments, or more I domain-to-domain important, I but you you numbers, that modern traffic. direct like clear little and the doing if the job. what bit, accelerated cross-domain pretty Can very Good decide much. to Kind with look and secure forward what's are the to in that of front? hard It you that in seems to not me

Jay Chaudhry

Yes. Azure app-to-app and two a or clouds, stuff. There public the West is, type is, across cloud. One machine-to-machine Azure of second East part are to question. your maybe And aspects communication within

we have company built do apps this, zero technology, needed for trust have and doing few traditional or technology. through cloud trying the can While would virtual we network zero identity the public companies using trust app-to-app to acquisition a approach have communication a security we carious where and taken Networks. are whatnot, Edgewise did firewalls doing switching ago be way, to Identity we the months we called, where

a without that, the that's app across clouds. machine-to-machine also education. we do nascent data having needs we It And some a with can said market. within young communication network segmentation. market. That's doing But and So center can achieve segmentation go that,

time of the So to well-positioned take big in there, if some will for for area grow. it early position and market get a to us. But we investments are go that's

Alex Henderson

you very much. Thank Super.

Operator

Thank you.

comes the of Citi. Pritchard Please Our line from next question Walter ahead. from go

Walter Pritchard

pretty been as the when are you a when competing of have point to? wondering, the Is or us am competitive cycles are market, market you number are the I fairly that you, buyer sales competition? Who that for the the generally market. new there you and on starting Hi. Could are the protection that a same help Jay, kind workload cloud selling market, you differentiation you understand in what And the players Thanks. is have product that of in a situation? in there? as maybe you deals buyer in seeing early it's

Jay Chaudhry

Cloud the not Yes. they a multiple and it's are Thank simple question, is pieces competing understood Walter. market. market. you. different protection fairly actually well. Good one piece, stages and fairly in we one area CSPM are where well of That's is

you cloud simply to some doesn't Azure or by AWS can it of which try workloads and these Internet, simply whatnot, which work through most can to pointing do virtual traffic Zscaler send firewall from Your Access traffic. workload do, Internet you going

that's application, about, the that. customers building what communication they We are driven security very some And One That's well of actually and for Alex worked. buyer says, start-ups actually said. I But segment often Because game. positioned market asked but by this. in must IT many in young in fast, that that two do segmentation younger kind a of are that's network third lot organization to application are area hasn't are CSO cloud young, somewhat machine-to-machine part the some said, buyer the trying of and security. and It you Then ignore doing a do I Then in so we comes competition of see whatnot, see pursue the and the who the they protection. is not is things And DevOps actually as and team. space. types selected segment. put the different, to I this. second, place. there's only is a tried you players, There app-to-app. you whole customers can generally, being where this had wait tried

up So parties, new and for deal know little that's we that party, DevOps get to bit and dealing two us to a CSOs with we already learn. with end

Walter Pritchard

Thank you.

Jay Chaudhry

you. Thank

Operator

Thank you. America. Please of Tal comes question our show of next Liani go I ahead. the Bank from line from

Tal Liani

Great more guys. higher for to My the question next trying level. year. am Hi expectations understand I quarter. is

ZPA? to build you when understand of, have newer year. get guidance next the beaten the like grow part What rate you how at the same am level years, more for driving I the solutions be How do have same comes bit ability are have gain areas. question growth the solutions look older there? older I I if solutions So am few it your customers? existing for to in in your raise have which little I qualitative new and competition The various spreadsheet are versus of and you trying markets. last are customers this your you view the you factors? then, view And a trying to newer to How rate to seen year about growth done add offering. do with in a And staying to that going we you you

Jay Chaudhry

very out question, good has you been sitting key But are at that, And of solutions just been Tal. of ZIA the a Global there. growing four in I market I market, open Think if It has our the XX%. talked workhorse. mean about. there's a penetration, we rapidly. majority XXXX under big a spite in it's about look

we market of taking and where and that's In Coat fact, there proxies is still more a and be to Blue removed legacy part of sizable are like more that.

not product. is ZIA And one-piece. of kind that's one So

up and or or and Transformation start offerings are more a they more is bundles. from ZIA with buying to know, customers business bigger you moving are several of either As professional bundles portfolio bundles like

in So business ZPA, from zero close have that's younger, at look only to have XX% And about years just leveling or about nowhere ZPA. know pretty customer ZIA. that XXXX you if thing at the of to all. old, the on base, off customer sizable about new XX% relatively our ZIA offer a Global in gone We and range. mid-XX%, somewhere so four

installed our market a So out ZIA, there. even in of there's big base

to is big product So have plenty offering meaningful pillars, of go It's time. think no then digital any in has a And new an you big ZDX, they end-to-end opportunity. as know the call portfolios we over Because too for product becoming two someone a them, these area. let room or one experience, proven new product. interesting response Internet,

new is the towards. user fourth The we data We have and from expect expect workload, ZPA growth every pretty way driving good One almost And it. area the are the day ZIA, area, we will ZDX. center. cloud that's

will that think mature. market some time I to take

either As are to think of ZIA ZIA products. the plenty areas. they always browser Remo in sell. picking leaders, part the really ZPA. with as are revenue automatically things or new, CASB in In of our ZIA they some And are new areas. to my we But shouldn't of but about to But tons you with pulling goes have said, are same attach goes all has sales said bundle. lots product new we mean, I portfolio. They type of room we now seeing isolation I of way, up, of which

sales we are what and on. organization that's our focused scale Let's

are focused well. go-to-market, doing growing which very on We is

Remo, cover? year. did next for I excited So

Remo Canessa

question. have acceleration it's their up. ZPA July. I great in and big XX% in had versus the an Yes. new at And you mean of it growth we has with quarter this is continually base look has revenue, emerging mean, customers so our gone call a indicated that of QX it in growth percentage that up customers the QX. XX%, of take last over products. gone in transformation, installed a in opportunity the I We have it was for

So are momentum. we seeing

seeing sizes bigger. deal are getting We

have really part the mentioned, of visibility. legacy architectures. that. on they But got COVID us. level others the by need the is realization What a the Jay driven broader now seeing started companies seeing understand for are what's scale, It COVID. and right the are business We as on the we for and are not CIOs who That's at is driving architectures high the transformation

In addition pipeline, productivity. interest, to that, proof points have that we

you Just momentum. feel the

it also. comes The the The to the The an and that's there. is needed What end, it scaling last people very our we is I job execution. are the people. to? way. the piece It past in And momentum feeling about it. the had done down market And there product there. to comes I we three down our comes was scale go-to-market, we is to there. feel are coming think You vision good At the down which quarters believe amazing in

Jay Chaudhry

Agreed.

Tal Liani

Got you. it. Thank

Operator

you. Thank

the from Please Fodderwala next Hamza Stanley. go Morgan from Our ahead. line question comes of

Hamza Fodderwala

a taking for Hi my Jay, guys. Thank for question you question. you.

on term any are these the security strong been You hiring competitors color space? of Are you, customers really am And are mentioned you earlier they of deals well transformation well. you that? that catalyst Zscaler a from? newer hires they from cloud Can as within COVID your space? for of give longer you in coming as a you market you guys. wondering, security coming I terms coming the for Or terms coming to from for as has environment sort of in more to cyber where mentioned some us coming coming talent to

Jay Chaudhry

Yes.

we a expected. had So even our than first faster is pace happening all, of hiring at I think

years reps. or are Remember that year say sales hiring good about we in recall we Remo, a So very you two used is ago, behind that. All actually. past. to

because RSMs. selling. SaaS security that that areas our place. sales selling, look of a sales not background, probably solution sales very question, are box even our then sales different And is multiple more wide beyond known Also if Typically think areas answer your type well are brand are in two there. reps I to there you out rep though and of coming is Majority put from of come hiring, broad specific from our getting our helping typical from deep a than at has sales background. leadership box-selling leadership

by from and software So That's they large. generally SaaS come number of one. and companies, type

that, and hired had before, for quarter, call would the before out, tons we the domain SC number I in little And are they side, longer. we in record a it XXX. the generally with about A someone was it it XXX little technical a comes quarter getting On we a the that a record quota-carrying a need rep security had which people. sales In we that from hires. background A expertise, hire side, bit But because networking quarter and progress takes QX. XXX, area. we before, pretty trying stay tracking things Of hiring quarter of very we we had and when for over But are selective our well. net much quarter are interest XXX. XXX. on net were a was that quarter QX. XX% was one hires and hire. sales On basis, in to We tons comparable marketing the of We hiring the

anticipated we accelerating hiring we our are We are than call, what had even last the seeing. what given on more

Hamza Fodderwala

Thank Got you. it. Super helpful.

Operator

you. Thank

from go Our Bank. line Deutsche next from the question of Please Colville Patrick comes ahead.

Dan Caiello

Hi a really just curious comment This I on Obviously, strong. just And how to on But have retention Congratulations for on it could Dan the seems Patrick. really prices if quarter. Caiello, rate. impressive on then guys. I guys obviously wanted environment. trended? great you ask is pricing am

much I that into is how the am organization, on makes sense? if curious versus new product adding So expanding of more that

Remo Canessa

Yes.

environment. pricing comparable a it's So

up what net drove price rate, products not Our to go Jay quarter-over-quarter. are the emerging did the user per retention Related as mentioned, significant impact.

transformation in rate. the what as ZPA, the to net of products, which more So the increase drove retention is movement well as it's existing

Dan Caiello

you. Thank Great.

Operator

Thank you.

Our of Sachs. ahead. go next from Goldman from Brian question the Please line comes Essex

Brian Essex

Great. on you maybe you question for bit great you and of a very quarter. well force wondering Jay, could seeing. on a from Thank congrats the are little and deals sales the was the much as maturity that taking result I if the me color of in give

growth the rest half Is hiring throughout accelerating? the factor playing Can that are you it think see into How sales your that sales like little growth ACV should help elevated in better year? getting looks confidence do for year a terms year. in that get was of color bit the that I know larger, over installed of you is much expansion base maturing of deals of type understand maybe maybe or of year I your are activity of noted penetration back in last the deal noted growth new that like versus the previously based to base? And on end force sounds through you it into level installed Just you you the into you But record and deals me drive the maturity in the customer seeing? of have what XX-K, the XX%. force your is number how the the this of as better maturity. back customer just seven-figure deals. of

Jay Chaudhry

That's quite a questions. few Yes.

Sales and sales sales about disciplined right. give and we make a four place. all sure we sales a maturity, us, Dali time. and process, in enablement quarters business a force leading at spent bring me putting leaders to Since that X.X of let the number systematic So understand a to piece indicators stuff joined in metrics to plus

I you about stuff. maturity it. do So, organization? the of Because asked that happy, good place of say, me the the think I what rest very the sales in having would extremely about drives

that more comfortable very and because hiring the are more field. in salespeople So we accelerating comfort, and it's of

is Next deals, new customer related customers, question to growth. customers,

or that misleading. will growth of We need we are, and start those some out segmentations. to get you number Because large segmentation holistically, look X,XXX X,XXX customers, is where small customers those if of within kind at one level whatever at of customers. I looking percentages there a think be some to proper whatever

are ARR well. actually is Our traditionally going doing customers and the done very in big has are well of enterprises the in large those having we we penetration those among of been and terms focus extremely have up in percentage in we terms deal, customers the

so will I Remo about of speak. we to finish, I then as And And expanding let those that. more the lower with pleased talk into are some numbers. also very are enterprises, We

I color. think more you give we over will time,

now we segment user XX,XXX start at getting look getting better. to the already more are you over and you there. out computing we X,XXX focused segment, segments, But well we largest got So covered can on wins user the if and growth are pretty the XX,XXX because great

Remo, So want big to you to market there and well. as add expand for come us is more. a downstream

Remo Canessa

mean, correct. is The Jay definitely per increasing. customer ARR I Yes. is absolutely

out break we on customers ways the it up. of which is just per going customer, X,XXX $XXX,XXX up is, One keeps ARR users with over than were year-over-year, greater

stated, it's range New our XX%, XX%. we within of have the historical range growth, of customer

growth have good give we company, confidence. record before, from RSM all in me perspective QX. and about been well got are and headcount mind, sales for mentioned had in significant as in Also, the seen of majority looking of strong is the that here frankly. encouraging in thing quite comment which have like put basis QX the never quarter in customer structure, place up. go-to-market, of new had increase really the I with was acceleration my the the have lot. XXXX. comment seen Also an had at for organization. a that year-over-year a time is I comparable As Those the half QX RSMs occurred as indicators to QX keep the in and that made what anything hiring productivity we Zscaler around was productivity, fiscal second I the our things to long about we our sales have in But for on our we are I a QX I that,

Brian Essex

it. Super answer. helpful appreciate I multi-part

Operator

question D.A. show Thank of the line ahead. Davidson. Please from Nowinski from our comes go Andrew I you. next

Andrew Nowinski

on Congrats about you, Thank to ask gentlemen. Great. a wanted great I partnerships. quarter. just Hi. the

with had very So with and a partnership a announced partnership Microsoft. strong you new have always you VMware

record in wondering, just partnership deals am the VMware? thinking quarter? new Microsoft if you contributed to you had I of with So how the are about the seven-figure number And

Jay Chaudhry

always has me said The some to very, good of that and SD-WAN deployments SD-WAN, complementary natural a large team we out us for have good SD-WAN start look was very VMware. you securing area let portfolio it us SD-WANs, up for been been with VMware us. actually there. have So if VMware. And for with partner at we is a

what integrations. had So done do? We we did

click. lot deployed single with more with be more that, number can exciting SD-WANs actually them a initiatives. are than working of easily those on a go-to-market we But So joint

joint doing we of are Our a number sales kind account planning have people initiatives. and of market

large we the AD revenue of VMware several with both well Azure years. because It type Access to experience, to is to for good because that's partnership late us beyond they XXX. partner know configuration want go-to their Office goes user So companies. deployments. the in the on incremental That's be have and think for that that Microsoft, this would Zscaler goes helping started single for of companies And deployment Azure XXX Sentinel those Office services, been XXX make of those particularly a expanded side And then financial it. and to even deployments partner in you deployments. Azure areas. great adopter to now sure with pushing Office endpoint Microsoft is

with be helping they where and was working sure deals deals Microsoft. deals. large is if miss Microsoft in Microsoft helping Microsoft am I are But these in helping services not did customers. to So large us of by will Remo, something? companies, financial we impacted there those or any specific I be quarter are this the close we will together

Remo Canessa

No.

it. got You

Andrew Nowinski

Yes. guys. That's Thanks great.

Operator

next our comes Please show line go ahead. of Boolani I from Fatima question from you. the UBS. Thank

Fatima Boolani

questions. in the to deployment. some ZPA wanted from for of of Good afternoon, zero I revenue to mid-teens gone commentary percentage on the I derived hit Thank back from around have your remarks now prepared we Jay the ZPA. Remo, or you gentlemen. taking mean,

your because be are to bigger just dollars more driving from of I hasn't about favor am this started ZPA the getting getting sort being have are of all I here of budgetary around from what a over earmarked the appreciating for wondering some where that there reallocated that in you adoption? and necessarily away are ZPA more are overnight course expansion am the specific that in dollars runway So some So the is for your And budget some more picture coming if extent been where working factors can wondering we ZPA. from home are demand specificity pulled year? of favor? forward, the

Jay Chaudhry

think budget view. transformation, while that's lot So point area a stuff from an generally one the easiest are for there's about point if of of entry you it, each we do

the being connect a many up being ends time. interest in entry have to trust have and year, you point. big bought past zero gone is zero architecture, ZPA But big, the for we point seen VPN said network. one In implementation. first the users trust don't I as the put And So where specific times, it's

it is any it's cloud-based as product So still an zero counted it's that's related, on-prem the and a VPN or really doesn't whether product a VPN get trust offering. VPN,

But done and center, So access data not implement are but also importantly, customers more more budget. trust the you can they it when wins to sure starts do in zero zero and more with cloud even taking want AWS the your make Azure to out the VPN to are office. in trust all having we application also are only being to sitting

And accelerating to because anywhere. are showing coming we COVID able think need see is So for deals wins actually pulled being continue. and ZPA anything trust We some from zero that acceleration we of are the the don't forward. access being this think

ZPA. pipeline are very projection reflected ZPA Remo? and in So seeing the about we confident that's for the

Remo Canessa

Yes.

a high the are was business, and low XX% QX It's That digital new customer we and the take new from of right. percentage see. occurring at up that what's XX% transformation in both you resonating. our range. ZPA, customers ZIA That's buying look For what range. That's is

that is to great solution indicates a or the mind has occurring the of transformation for top things Zscaler internally So that again, many IT we what's the best in gets, related got market are And for seeing solution that digital professionals. them.

giving that's And us so confidence.

Jay Chaudhry

trust same the security, same same level of are where ZIA office, in. say, experience, It's comes and may buying. I combination And that can anywhere, of policy If that's CIOs of what user level any and from Yes. that's user wherever. a ZPA ensures work the zero home,

Fatima Boolani

Appreciate gentlemen. helpful. Thank color. you, super That's the

Operator

Thank you. of last Please I go from our from comes the ahead. question Trebnick show line Catharine Colliers.

Catharine Trebnick

a quarter. phenomenal Congratulations on

and remarks pretty in you in But federal said it manufacturing. had You government the big well finance, seems And you three you have healthcare to like to in the that prepared greenfield what is a verticals, for to your describe done XXX, can well give moving are to prepare are also background because us Office in doing on or do Thanks. similar folks? you that, the some XXXX. they financial

Jay Chaudhry

our and Federal a Yes. Catharine, good thank business opportunity for is you. big progress is there. us making

we market, sizable team in place a have now. Our

FedRAMP and got XXXX have and We have pipeline good very we beyond. growing certifications a in some

be We our of Remo, to where you now? do part it of give expect a is color federal bigger to business. a want

Remo Canessa

forward. of the see going our digit mentioned, single Yes. Federal that federal and are in as upsell was and QX we of pleased a And mid new Jay opportunity business. very with as substantial progress our

Catharine Trebnick

you. Thank Okay.

Jay Chaudhry

right. All

the at are hope investor you questions. we and like will several Live think done with say to I you And I for your are we participating Zscaler. Goodbye. see We So to that upcoming in. Zenith interest thank conferences in

Remo Canessa

gentlemen, and for this Thank attending. Operator Great. you Thank call. concludes you. today's Ladies conference

You may disconnect.

Zscaler (ZS) 3 Dec 202021 Q1 Earnings call transcript