ZS - Earnings call transcript Q2 2021

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Operator

Good day ladies and gentlemen. And thank you for standing by. Welcome to the Zscaler Second Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder this conference call is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, to Bill Choi, Senior Vice President of Investor Relations and Strategic Finance.

Bill Choi

welcome Call. Zscaler and XXXX second everyone, Conference Earnings afternoon, to fiscal the quarter Good

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

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

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

the uncertainties, filings SEC today's in risks see earnings complete as a please release. the with as more discussion of our and For well

website you We move I Securities be that prepared the a inform segment Conference upcoming today’s Q&A Relations X; X; we Technology These when following copy Investor on website. call. our will March presentations to on the JMP on on events: be upload the the like of management will be would also Technology March March TMT Conference at our Truist links presenting Relations Stanley available Morgan to virtual remarks will Investor Securities to of webcast, and will Conference X.

turn Now I over call will Jay. the to

Jay Chaudhry

Thank you, Bill.

our of operating accelerating strong QX, and and growth Trust rapid in in showed revenue profits generating cash also growth drove free platform. and growth scale in XX% are very flow. in performance pleased growth which XX% with while at innovation We our billings, Zero We

pace a velocity, optimized strong driving engine including Our is significant new go-to-market additions. customer of

achieved milestone Global customers, we quarter, X,XXX XXX a of over XXXX. the including over During of the

smaller last increase in areas, as pursue enterprises drove our to to R&D all with the teams, yielding We and decision strategic our expansion of increased Our year begin we go-to-market employees. particularly our results. wins X,XXX segment, is enterprise strong X,XXX investments to across

incident location. securely provides Zscaler and accelerate zero has for Trust Zero users, and applications, need secure, journey, the their trust any-to-any a our for With priority. elevated recent helping Zscaler. workloads their systems, The are top SolarWinds We our true further transformation OT to like their remains Exchange, of regardless platform customers connectivity which digital IoT security

architecture. secure legacy security as are level lateral purpose-built application-level from proxy-based firewalls expanding requests segmentation We would The eliminates During Trust protection to is loss for and of threat data user communication; Zero and our ZIA, a Exchange achieve Zero Protection we Exchange: our access awareness, added lead. such segmentation network not CIO applications, and product I’m prevent different including: transformation. we There network, In and new sensitive Last compliance; segmentation. extends sophisticated of and Segmentation has to security and network ZPA to which viewed over ZDX substantial app-to-app we and pillar products increased, proud configuration protection. attacks, and an which accelerating pillars to from our called significantly workload our which ensure fourth Workload our proper app of without is network and to cloud are latest CSPM of ZCP, provide for XXX further our ZCP portfolio platform legacy and users or Zscaler Communication innovation, and have quarter, architecture secure movement. inbound enhancements. and Cloud the upgrade, Workload of launched expanding Trust four experience, speed our users engagements technology our major application, trust zero for foundation our and fundamentally cloud-to-cloud of workloads,

Browser number Zscaler platform the including Zscaler Out-of-band All have of and and deeper. ZDX. our delivered is cloud innovation Digital we or Over our platform, solutions making XX BXB through the past significantly Experience Isolation, this Zscaler wider CASB, increased months,

believe protection For highly prevention. zero-trust, and for platform only to high a have want meets proper multitenant loss proxy are and enterprises build cybersecurity network and that who their reliable failed needs. data vendors performance, tried security we modernization, we Many the required

data seven of centers, true instead SASE more than edge XXX processing across number at limited enforcing cloud preventing deployed violations. transactions, a the XXX security policy and incidents billion while a day, we Every locations. As to are up billion we of framework, policy are public

sustainability We scale are so massive in with a operating at environmental and mind. doing

the goal today energy like an exceptional renewable thank platform for XX%. would teams at XX% engineering innovation. to of our job use in and keeping forefront expanding over Zscaler uses with our to over I a platform Our

its by is transformation, shift workforce, of for is subset the a Now, and zero-trust all ZIA on XXX was built wins. Fortune that XX,XXX ZIA for chemical an their ZPA an ZDX employees. In world accelerated work for. initiative upsell to the There anywhere, customer from which Zscaler towards market using company a was accelerated win, purchasing

customer leading the now purchased and another user without license transportation firewalls traffic and ZIA, customer services in security bought from Workload Internet and network four a is ZPA four better on servers win, do a the experience, gaps purchased couldn’t out all data to XXX In purchased addition, service. traffic secure next-gen their recently to our for which east/west where They customer and ZIA can vendor, for X,XXX business announced they customer wins protection architecture, XXXX in the new pillars encrypted am they tech-industry ZCP XX,XXX to reduced platform. ZDX spite three of customer win, left at attack. is Since ZPA risk. server architecture. of In Global this leading buying our the industry This I had from ransomware Zscaler center. cloud employees standardized employees. ZDX the the of of pillars zero-trust impacting of new to to to X,XXX pillars, all high see to SSL to in inspection excited our public like plants, Communications firewall the solutions. ELA purchased inspect for user a from proxy a away In an Transformation, purpose-built Zscaler security two In VPNs, move security Workload new logo secure scale. traffic and They a logo all three in a their Segmentation and

monitoring of strategy, by and mobile issues from they the performance With CASB leaking, is. their purchased the our resolve experience of best-in-class user protect cloud no application their and to where purchased regardless real-time in ZDX sensitive score and was every pinpoint first DLP and matter information user location. to digital

We to with new and Communication. closed few strong great a for have great our is start, a pillars, a ZCP are dozen customer XXX for deals off interest to-date seeing QX Workload our customers ZCP. also ZCP ZDX. in purchased and ZDX excitement Over

on to ZPA. Moving

access without foundation the ZPA application for is private and of of active Today, XX% proven view applications. customers market Our overhead millions clear network delivering our segmentation. for customers. supporting zero-trust over global segments ZPA users scalability, architectural nearly daily ZPA to maturity unique operational with million shift the leader, and traditional XXXX is of their as

and highlight ZIA ZIA EMEA wanted for work-from-home me has zero months capacity CASB XX,XXX upsell access XXX that employees which with started partners. to the of for customer as represents transformation headquarters their for Within provides in EMEA XXX,XXX BXB for all employees in Let ZIA quarter. resources. ZPA XXXX pandemic. the consumer the products of the security several deal, unfettered a ZPA in bank to to with a journey. ZPA and third-party Global XX,XXX a bought XX,XXX the the remaining ZPA eliminate result This customer step ZPA July in their for IT purchased A XX,XXX of in deals customer, VPN, six all and trust purchase, expand been network and with next headquarters adoption company risk employees employees. In initial Global an the

they addition, partners. to enable X,XXX ZPA In BXB third-party purchased

certification concluded ZIA Let and all only me bundle position to a first An if was space. firewall Trust highlight zero-trust employees customer Zero for our on service the mandated ZIA criteria, connects ZPA win that Based Remote the cloud XX,XXX network important in our research user VPN advising disqualified. federal logo cybersecurity, with this This for various agencies new on trust. a zero ZPA after consideration providers ZPA’s with A legacy and not VPN, federal FedRAMP were with is security organization the the Transformation and that a architectures. purchased Access. evaluating and for selection as

levels serve ZPA, government. Federal highest to both for well the the are of and ZIA With very FedRAMP positioned certifications we

meeting different complex, major and new enterprises embracing I ZIA embraced for that across XXX countries our legacy their ESG with another to and a architecture customer purchased ZIA a only program. from the eliminated our employees like cloud legacy CSPM for from environmental architecture. for direct at to goals highlights Office need away they as XX Lastly, would security customer their XXX was With XXX customer’s the Zscaler onpremise gateways while point services Transformation migrating anywhere. protect work professional requirement sensitive large continued are appliances. risk, proxy consolidated success solutions and CASB, and to DLP advanced considered share win Fortune products, plus with bundle that six data different the customer A XXX,XXX customer

At creating Our strategy. laid on on we Zero Let is talent and our thoughts focused our To a and XXX serving Analyst Exchange. vision XXX our excellence. of million me our with achieve culture attracting of and that: users out and January, developing organization in conclude audacious Trust entire million Day goal workloads some on

culture to excellence help workforce deliver creates top our where global a executive can succeed. starts to our diverse commitment environment with at customers team an and the Our and

customers. our We continues to which deliver engineering are organization, scaling to new our products features world-class rapidly and

On as front, the the value we sophisticated sales measurable built at outcomes have XX demonstrated over to we months, level. a deliver go-to-market machine the have sell last and CXO

our We a will as top continue for are we destination talent. scale sales to organization,

is talent areas by organization segment to in persona Our all Marketing significant augmenting campaigns while critical opportunity. and better address our specializing

on pillars. We four adoption broader our driving are focused of

technology who our to of capture a our value-based velocity expand Analyst are on to and we serviceable our outlined the we to believe billion continue contributing channel will material ecosystem I share We on $XX sales are of partners reach. track that the partners, market Day. and expanding right

about to bringing systems, and seeing additional are IoT opens excited which also up opportunities are We pushes opportunities edge to computing further and the and trust zero for in OT Zscaler. XG,

future. our excited We about are

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

Remo Canessa

you, Jay. Thank

quarter we year-over-year. was XXXX. ZPA a of represented product for three $XXX.X mentioned, From and pleased Jay a revenue, APJ was the revenue. XX% sequentially strength up was major the revenue geographic Americas total regions: across second XX% perspective, XX% the of with was As results and EMEA for we broad quarter had Revenue are of XX% XX% XX%. million, our

billings, calculated define duration grew deferred our month quarter in we in of XX% million, that billing the range. which recognized the revenue around quarter. as revenue plus change year-over-year for to Turning $XXX.X XX-XX mid-point Billings with the total to

primarily RPO future during current we billion RPO, our of which reminder grew one one the XX. total January ago. year typically year obligations and or revenue, committed three a total represents terms the one The RPO. As $X.XXX our at exceeded is performance and to XX% quarter XX% in ended customers invoice our billion advance. RPO from $X non-cancellable Remaining are contract years, as of

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

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

upsells but and is net ZIA in selling While these bigger retention XX% margin future. factors, outstanding. Total and our good gross within success year-over-year introduced exceeded of of our feel products. expectations. the for declined driven we and one includes margins mix dollar-based our faster CSPM, quarter-over-quarter I Segmentation our year-over-year, start, newly higher both will business, ZDX, emerging primarily gross a to that The and a our than initially flat number products. which like year, selling a XXX% of ZPA products, that reduce would percentage point decline Considering transformation core by lower remind the rate increased was our was from have bundles, can Workload investors

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

operating to expenses. Turning

to onboarding throughout sequentially primarily our second million. XX% G&A Operating marketing increased the and the been is are to year. and by total fees. half expenses We've revenue The two year-over-year Our XX% operating expenses fiscal a points of successful ago in teams, to includes go-to-market continued increase a in The year-over-year XX% to accelerating and and our XX% R&D in remotely, teams. teams in sequentially $XX.X XX% due lower increased compensation-related $XXX.X to by increased expenses offset initiatives million. very $XX.X XX% percentage compensation employees we G&A investments and marketing our Sales year-over-year investments expenses XX% professional our from million. and working our quarter. as and and from of in building sequentially to $XX.X was sequentially and percentage in growth The XX% increased year-over-year to and higher XX% increase year increased T&E engineering with and due home. year-over-year investments building XX% expenses sales expenses million. hiring the hiring expense

with per margin was compared quarter $XX compares the flow ended operating billion Net was in cash, cash earnings equivalents, by in million was quarter $X strength $X.XX. We million the quarter quarter, the cash the during share a Free receivable in quarter XX% non-GAAP short-term the and investments. or $XX cash which of collections. $X.X was same X% negative same over flow The year. quarter year. income free million positive second to Our last to driven last in in strong

guidance. to on moving Now,

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

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

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

during five that been modeling, in QX billing our and was For approximately decline respectively. to over with declines QX in average would your quarters sequential and the quarters remind strongest The XX%. years quarters, we QX historically fiscal like QX third last investors billings have

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

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

and profitability, While to Operator, may will questions. open our we business for the balance take growth strong momentum. priority call will growth you continue now considering

Operator

the from Suisse. from comment question or first [Operator Instructions] of Our Brad Zelnick comes line Credit

Your line open. is

Brad Zelnick

initial you that guys is Breach you'd At impact a the wanted much. breach be you've to impacted way likely in congratulations level you the the approach phenomenal really in impact can that with And changed for you Sunburst high on prospects? down than around maybe you the Target has to your the Well, and so larger having results. if Day parse commercial on the at conversations Analyst Jay, is all your ask us industry. pipeline And XXXX. question January, was thank your I success out way the event strategic mentioned all, new if accounts, maybe the how to smaller across how, the all accounts

Jay Chaudhry

Brad. you, Thank

our increased to had was our pharma well during topic as discussed over sophisticated having and webinar Sunburst talk are with of I asked recently protecting Sunburst. Day, as related threats Directors we was This like prospects. to Analyst a As XXX the of attended. customers Board customers We week, we had conversations against and company, primary

So is has as than for CIOs bigger been. as It's bigger priority all the it a well making a this cyber priority Board.

happen? to your network. compromised, sure being implementation and with do firewalls do of is moat causing? people to a where not are pipeline, applications question if is that impact the quite sure the what on movement seeing is but how we're users So build Zero It bit connect up that priority. people bigger The a VPNs, connect I Trust simple. get you the engagements. one educated who Don't number Trust already on Don't quantify Trust doesn't are implementation ends can The I'm Zero make Zero that a making the network. answer lateral the increasing not customers to

Brad Zelnick

Jay. you Thank much, so Congrats.

Jay Chaudhry

Thank you.

Operator

you. Thank

from comes the Genuity. comment or line Walkley Canaccord Our of from next question Mike

open. line is Your

Unidentified Analyst

for Daniel evening. on my taking guys. from question. is This Mike. Thanks Hi Good

on smaller and been be to you you SMB expect sales color some where just really the are the moving motion your And the investments So I you I in enterprise some provide over past quarters, improving know area. Can working of on you've guess, making. forward?

Jay Chaudhry

add as towards I X,XXX going we defined will enterprise Yes, and Remo that employees start on. our we to in company. the expansion segment talked X,XXX and between about a

As the for end enterprises you the done know, higher last in in years. have we several extremely well large

is progress expectations. our this in ahead made the segment, we've So of

our from Well, the growth said was business. our in come smaller large segment. is faster strength Having that, did driving segment enterprise it base. of Our this a overall

to grow more segment, are things had the two And a this progress three more We specific do sales in adding coming teams. of past we sales business done doing the more reps, our one, enterprise in we'll quarters. in quarters lot and good

Secondly, adding and channel programs well. marketing our segment directing third, covered are And to the the expanding segment. support partners who we as

summary, expand well. in with opportunity we pleased the to performance. So and it's segment the We're a good are doing

Remo Canessa

a well. put together follow ago we or initiated program – as Summit doing a that quarters quick Just a and on, is few a

And revenues – high of as as VARs VARs in XX% – a percentage the XXs. of quarter. slightly revenue, so was pick where in before percentage just above the the quarter our the it was in about a quarter did up our

I as to mean – segments about, X,XXX XX,XXX. the large less majors X,XXX So, the to employees at talked the into than XX,XXX Jay that and enterprise X,XXX we sell commercial enterprise,

part the for expecting market. us positive we're program, to channel the results So of the in have lower

Unidentified Analyst

Thanks the Great. color. for

Operator

you. Thank

Our next Needham. Alex the comment from comes question line or Henderson from of

open. Your line is

Alex Henderson

that was about – networks? is per issues versus have differentiate per interesting think and your that the up what doing that I a network built some a implementation the the you is Thank from architectural off of you or basis, are user of of have you're talk traffic policy much. which I policy your to in architectures how fairly user to guys one unable argument basis. a to based one you very competitors flows per delta shows that alternative competitors user Can that between talk the on implementations on differentiator,

Jay Chaudhry

terminate not. network kind of is it a The decide a With a it network firewall over architecture, every security and connection, proxy what or inspect traditional our like where we and to is a pass trying architecture device, when to Yes. being to on to and guess particular the fundamental difference through stop application flowing connect is scan user. trying is, traffic

an policies user or are – There's So fact, that in we looks company C from have user A coming no a like each B untrusted user. company per or company by design.

SSL. While benefits. people is our in of – a better to The do us with kind allows far two high Trust architecture connect a they inspection based the don't proxy do to big you gives where network. result at high we including it are Two, traditional batch way, us Zero One scale policies. can end performance,

Zero help to if something specific Trust is of You the movement minimize connect a biggest you infected. probably gets to the application. damage thing lateral

Alex Henderson

you. Thank

Jay Chaudhry

you. Thank

Operator

you. Thank

Andrew Our next from line or question D.A. the comes of comments Nowinski Davidson. from

line Your is open.

Andrew Nowinski

congrats quarter. Great, on And thanks. a great

follow Brad's up revenue on question growth contributing So billings the sounds I is not in It yet. necessarily years. creating just wanted strongest seen that's pipeline like But earlier regarding to to two but we've more SolarWinds. over your that

your wondering what So that billings in just could comment contributing if you on are that the growth. drivers I'm inflection key to are

SolarWinds of it's Now impact had doesn't look it much really yet. winds, an like

Jay Chaudhry

all catalyst. in viewed like viewed pinpoint particular cause event as sessions, maybe This that catalyst. being these Generally, so a COVID may to is something, to the was as analysts

digital it they are said the to SolarWinds who is maybe they realizing driving before, helping have one the helping And that believe transformation, towards catalyst everyone is that we maybe the their that we But are accelerate COVID transformation. customers need As transformation. overall it. enabled

your significantly. up risk goes do you Zscaler, without like something transformation your If

So growth where has which ZIA, course. from? Yes. is our work our coming been

actually significantly over pretty already Now customers our contributing XXXX global but XX% go. our have XX% XX% sales, we of good now young which three we've about years ZPA. relatively or was generating ZPA, ago product XXXX have companies, got two is of It is more to global

I our And ZDX the that are talked billings customers bigger by And up is also my ZPA our bought is and together prepared pillars two quite are pleased bundles about then I'm customers together. new ZIA, I cloud in ZDX well. very during more of protection? these our buying that think off picking So contributors the and new the remarks. being growth. more biggest pillar our

the you from strength So seeing to to we're want comments? of board, across [indiscernible] it, across Remo, product my add side

Remo Canessa

think, I right. absolutely is No, Jay

If centric, user we're breadth a our protection of look also now protection. you take so we're at – cloud platform, workload basically the before

is So resonating our with platform customers. the breadth of the

we Analyst addition Day that user the on with in at X,XXX for quarter, in I say talked ARPUs that range. In X,XXX of side, that we're companies when had customers employees seeing we've the $XXX the expect, at that at range deals can we'd the in employee range $XXX.

is So there's need what's a happening in not is the basically architecture market. huge the that answer. Legacy

the Zscaler that created we'll And – and with really forward create so set is perfectly to continue with the into market. platform this breadth to platform of go in increasing we've

Andrew Nowinski

Great. you guys so Thank much.

Operator

Thank you.

the comes JMP Suppiger Our line comment Securities. of question or Erik next from from

Your open. line is

Erik Suppiger

of to proxy taking question. augment earlier architectures the it firewall, if were firewall is is think of because how given their kind competitors talking – Yes, solution? difficult with comment can what that thanks Say how introducing on to for saying capabilities, one you capability about your versus you about proxy I

Jay Chaudhry

compare said form Well, inspect architecture, say? would what There's reconnect, that you I bolt-on. you Imitation hard, to that you a is firewall, the purpose-built best because pass terminate, don't architecture. there's through something you Building native or flattery. something say and proxy is should stop I of anything. called Having called that,

You to let it go.

If it's great. something, you catch

enterprises done Many vendors XX for The have it's past two don't. to security, tried for proxy you and it and in the build don't, only user for vendors years hard. high-performance have they've cloud. on-prem a code blue the because If successfully failed you penetrated

by that try said, get no, no. customer finally And a So I the people surprised to think am proxy? I without no,

it. change they So

tricky. many been for companies six, seen I it. would years. who be rather them seven been I I There do market. had think have them, still delivering vendors, they in have this not the proxy seen a thing that but haven't name I've will saying

CASB, browser content and keep we still keep has proxy you advancing. your do throughput we sitting functionality to and isolation, work still. The to inspections. inspection, add to and are So DLP and on more not or more do most threat We still deliver all, on,

kind but we our the lead we that we legacy traditional vendors. welcome So performance, competition, of pleased with have very over are

Erik Suppiger

Thank good. Very you.

Operator

Thank you.

comes Sterling or next Auty Our JPMorgan. question from comment from

line is Your open.

Sterling Auty

Hi Yes. Thanks. guys.

in increasing that the and other about success overall the opportunity an are the about how you're success seeing the segment? curious, earnings you pointed networks given So commentary to the that with different enterprise. in they've big access had able each the I'm at you're running of on segments call that it's the in do the into or And out fashion prisma that think you're so space you just rates, that these both is serving grow market? in the

Jay Chaudhry

to and Find banks. you we are Zero architecture those to a see are changed, enterprises to it New Large dominate, to And any seen haven't of where of non all firewall that's firewall-based lot Trust change down security vendors have one. lot then started savvy. died comes proxy. who it it. bank proxy, haven't They large believes understand noise, making change the difference I months in for expect ago, guys close competitive And proxy we In understand don't a about whole noise in and we why landscape. security. firewall a enterprises. really couple of found using VPN. architecture not And a They seen When years not between of large why. so can but having six after that. enterprises in understand I the we field,

tricked time that that X,XXX spectrum, be can of to these And into when lower sophisticated. see think probably probably end it time. be below, to not they time, comes guys to we may the in on I users do firewall that or the vendors from time find sophisticated, something from

in I So change you'll the higher But end. we being seen the see solutions on less bought on end, competition. any lower think haven't sophisticated

Sterling Auty

you. Thank

Operator

Thank you.

lie next Our Patrick comes question of from comment Colville Bank. the from Deutsche or

Your open. line is

Patrick Colville

you Hey, for thank and congrats taking my question quarter. on impressive very a

help probably Just helping it that of a was potentially hiring. I around I quarter. in sequentially, mean, about numbers major think year-on-year how us to numbers guys be And that'd you any just looks now? fiscal XXXX. this to that adds can you growth understand about theme and count hiring the you was if headcount asking head great. And share mean, can that contribute net

Remo Canessa

I'll take that.

are. about doing and market it net a heads. quarter, about was We been that and QX. the XXX historically, the XX% as QX. comment We it's we we've product also we see in – quarter We're the around the Generally see had So we opportunity. marketing speaking, and every hiring. and see was in The And what was that's sales accelerating, pretty about well. huge hiring, headcount yes, that XXX much it case it's for was right that in accelerating, market. got We are the

we a take And it. going such putting invest we're hire to that in So a continue QX perspective, positive in profitability back try are profitability. Since be very going the comparable board talked growth quota feel going continue is be we've Again, it to with this But to sales of And a we We [ph] across had to that. big to our the mindful profitability. aggressively want to a QX invest we're public we've throughout flow, and in record our to in it. and half quarter quarter reps. and particular from of that. opportunity quarter I of free we about cash good We'll had we'll continue QX. had the very Jay hiring in been of we're company to and we mindful capture year. to and that mindful plan in advantage the of and We offering, a

Jay Chaudhry

a from Yes, with quarters and training organization, things. engine we of have past if sales our over all plan, quarter-after-quarter. openly shared I delivered you're game scaling enablement the you the of pretty to sales I And building being may results our think add, four those seen

customer sales, So, areas. and head engineering, we'll it we count, other and increasing keep are and our bullish about support on related and all and

Patrick Colville

much. you so Great. Thank

Operator

you. Thank

Boolani UBS. next question from comes Our Fatima of the line from

is Your line open.

Fatima Boolani

also were in sort multi-product. prepared Good Jay, a transactions remarks wall-to-wall questions. taking Remo for his very large afternoon, my you, number for alluded of thank you that of to question

I'm and outsized can regions? comment the us if could of maybe any that? saw you if would it give wondering that you the helpful deal large quantification really on in It in you quarter be some was particular So, if activity

Jay Chaudhry

Yes. good question. A

companies comparable but So bit the other than a was in same, same QX. I higher see year. also perspective, did invest. the the large with well. customers. our a increased to last see have platform little much in quarter, security strong we we value all I it are we faster with continue and to of the APJ, when Related implementation, ease the probably deal done than the breadth It well Zscaler. value From comment that regions significantly – the resonating The ROI. and before, made have companies geographic And activity regions, was all the the and proposition was of to of regions mean, is the pretty regions, level. all investing

And so, we're seeing that.

may we're what increases broadening it, I the – value couple so, truly by the Zscaler. ZCP a of of and it add platform. And we actually expanded adding have to of ZDX platform, the points and If

call see and our products and a a value. gone the throw spree them – of because platform add buying We these there a haven't lot it value, unintegrated customers those in on don't

to is example, hardly flowing anything literally happening. a on because it's the everything For is few minutes. It ZDX, takes already turn traffic through

is, have did mega meant we there one, deals wall-to-wall I you like quarter. all deals. no teller that call make to yes, I But in guess are what deals. second The the

artificially kind one all across deal time of distributed geos. numbers. our properly no special It that was increased there's and pillars, And Okay. various billings

Remo Canessa

As also it for for new new record a also customers. quarter was a Jay follow-on

no in quarter. So, had broad, there's the it mentioned, Jay as deals was we've mega it that and was strong,

Fatima Boolani

Thank so Thanks. much. you

Jay Chaudhry

you. Thank

Operator

you. Thank

Matt next the comment or Hedberg RBC line comes question from of Our from Markets. Capital

open. line Your is

Matt Swanson

your time maybe a expansion? back, it the six Yes, on the opportunity a base. When thank can Day, are comes steps [ph]. upsell some kind times like and of you. within This Matt. you Analyst take success realizing is you on Matt just INVPA kind aggressively about Jay, matter more opportunity of they of pursue upselling is of customer value to are see it there or that to more for as that it the going we back coming I seemed large of at those kind lot talked deals, of Swanson had the, know

Jay Chaudhry

So, customers trusting think our I are us. happy and

case, sell; point. is staffs want need machine in you to built engagement, you the that's not engagement, that sales, If the sales that's two, So proper our starting execution, a us. C-level, helping

So, we share good pretty of are getting upsell deals.

In we fact, incentive, sales we incentive, or upsell. don't have that differentiation between sales

pleased the So, with new upsell we and performance. aren't performance

I much But ACV quarter. the decide, good we upsell have how need we good every upsell, rule, Remo and between debate numbers have new seen we do total let both opportunities. internal versus growth, have We

Matt Swanson

a business also. upsell and quick fifty-fifty slightly very upsell there's some to Upsell first was new strong, for XX% QX Jay very was the numbers. below in If between was the And new half in split approximately Yes. follow-on was strong

Jay Chaudhry

new XX%. Sorry was

Remo Canessa

new slightly below was me Excuse XX%.

Jay Chaudhry

Yes.

Remo Canessa

I just In Xx, a upsell mix, point that And we reasons, good fifty-fifty. is for existing ZIA going brought mean the you and forward, to think Zscaler the ability customers, the up, for into ZPA.

And so, it is significant.

Matt Swanson

Great guys. you, quarter. Thank

Bill Choi

Thank you.

Operator

you. Thank

line comment the Goldman Essex next or Sachs. Brian from Our question of comes from

is Your line open.

Brian Essex

up a on And Hi, acceleration. Thank attract of multiple kind the question, and color count good see was and I to salesforce? Is you're brought primarily attracting is color of market? the I billings too, afternoon. rate, it terminal in of rate bit geographies maybe reached little if of of but was get or that you're within of able question. you velocity around training terms Great a for your we of your on it wondering, it that, rate in that hiring taking the the hiring, better around a platform? And talent think, maturation bit wondering, from localized previous rate some in how area the a to ever could have your you in little

Jay Chaudhry

start, will I then you on. can add

first become So, we the the top talent. top of all, have for destination

market sales While or don't engineering. problem talent, actually whether have organization good competitive, in we in that's attracting on is the

you but are team hiring, proper in concentration for please things place, a sure make view, is the the customer we where of Joe's point sales from So is. you or where with have to obviously need that, that's happening. to Related

over We Singapore, Europe, all India, big APJ, of global a presence all U.S., Japan, very with all over places. are these organization

And attracting to to from coming are the on everywhere. we solve side, know sell software, transformation solutions, from for to how need sales generally, are talent how part. talent know we first looking sell companies the who who So, who sales. That's

at The ability was second to train. part

Over proper sales interview the – with with the documented with process for even sales how past whole leaders people, we the you these built for shared quarters how we we team, enablement that proper team build four process. the

are I think very I we there. ever out seen as say I would it's optimized. as optimized

them do So enablement. and little a with make that's off a why better shared the Day, during amount productive otherwise. being you large in are able that's of time we would to made bit significantly number kind that our Analyst pretty that training add We of and better shorter impact

Remo Canessa

As us to for people to right. way could that, who just It never ability structured the from sales not Jay trained gives being who looking talked nothing the about do from as the be destination. transformation. looking career, sell sales to seen organizations, Nothing. sales scale. people as to really what in we for need we're at around, career. a it traditional, ability, with and anything here a enablement follow-on and top And like We're it's organizations, said, my The good you the sell Zscaler. the my Jay group, my are we organization quick from perspective, matches training And bottom have

We increase have hiring the see ability we to to onboard We we have do faster? do. quickly? to We our getting Do salespeople productivity the do. Do phase? are. So, ability we

it's be. good to So, a I mean, place

Brian Essex

That's it. you. helpful. Thank Got

Operator

you. Thank

Next Liani question from the America. comes Bank line Tal of of from

open. is line Your

Tal Liani

you growth that Do question the or think related second you have that the half rate My the on data have we one in know license was XXXX And about and take this of to because view year or if wondering I'm feel, with to Hi you is an might comps. do mind, of that's the COVID COVID. some way XXXX. any guys. is have the comps support data to investors’ another? case, this for an any issue if I increase

Jay Chaudhry

more Remo, comments with start general the you give me let you specific. can be hard I part. Yes, the

Remo Canessa

give I numbers. will have to

Jay Chaudhry

believe [indiscernible] limitations just momentum, to light a do mindset really catalyst and that It but also the to legacy off I network brought not had we stay, changed work Look of actually it COVID and guess, shake inertia. gave the has to security. became

they after implementing the need deal no any zero ZPA means even seeing If ZPA short seeing are going be we which on doing the office, of beyond renewal was ZPA, everything would back I'm we I trust, So, that are term ZIA to to gets top case, saying, to normal. our that. deployments not customers and saying longer back

So, changing. we think the is world

how overall. the office impacting look momentum So, going Remo? not back it be our That's the at to should of business. I

Remo Canessa

strong and is in Pipeline engagement and interest Zscaler, is is high significant.

Tal Liani

it. much Not – thanks. Got

Operator

you. Thank

Hamza from from Morgan comment line Stanley. or the question next Fodderwala comes of Our

is line open. Your

Hamza Fodderwala

really strong guys, my traction taking Hey for question. first you talked my question for about you, you with thank Jay VDX.

that ambition be with vendors. initially I you've given with you traction the had, the be it strong more think I'm it complimentary seemed is would the of product. customers launched it was sort solution, something over your on what product? that would When XXX monitoring like this perhaps that wondering,

Remo Canessa

It Okay. monitoring, with is right? application complimentary

So, not people between sitting Private Hardly your any. vendors it's you're traffic going what but tools monitoring network to at and but When branch network. the going monitoring center are your monitoring center, network home private data you away, over and can office office complimentary, vendors networks because use? data anywhere. all network are XXX, monitoring are sitting your

are monitoring see the the side are in the we we players sitting see to compliment end-to-end we give sitting middle, we side, to and vendors. point user endpoint, best on we application end the are the and So, monitoring application connecting application, you

Hamza Fodderwala

of massive expansion just traditional these over then and years. the couple are the And given a for I'm reps obviously, curious question right, of, But of period fully Salesforce have? percentage maybe the it. Remo what ramp productive, that they channel Got past follow-up the

Remo Canessa

less for still here Yes, fully year. let ramping, say just of thirds than ramping, that I answer not me been they have they're ramped. our two reps saying When so it sales are

Hamza Fodderwala

helpful. it. Got That's Thank you.

Operator

you. Thank

yourself one please reminder, question. to a As limit

or question Powell comes next from comment the line of Our BTIG. from Gray

open. Your line is

Gray Powell

Great. Thanks for working me in.

quick. be I'll yes, So

back part as up lot vendors, for continuity So do they that that incremental you VPN went of companies And of gives out come gain some just renewal? last are capacity solutions? looking opportunity as of you to an look share purchased companies those their modernize they initiatives, additional really year think a deals you from those legacy and seeing to

Jay Chaudhry

few. say discussion and I as would quite a do large I I our Yes, personally with have enterprises

find yet customer more I to do ZPA. the customers and And various of keep result be growth want run. a of exception, are most customer is embrace former the all, see stages who embracing Zscaler more all ZDX customers Zscaler but more to I embracing to of that the some and We more long journey, base often see Zero well. you a ZPA, who and Trust will ZIA ZPA. there believe them in talked I VPN a for They're has I said, would as

been platform design, ZPA over. well is over of Right? strategy well. off? and That question to up can pillars be, the four Our answered ago, all [ph], with prime, take integrated Two years has used question working

can ZCP to your Early s indications ZDX very VPN good. opportunity and is question But the back are an replacement take vendors for question us? Now, yes. off? Absolutely,

typically which bundle. starting full of is then proxy. start to protection, point user Our we expanding it the the ZIA replacing is And a

VPN with entry Zero expand you app segmentation. point to, vendor. is ZPA Our Trust And generally then a

Gray Powell

Got it.

you Thank Okay, helpful. much. that's really very

Operator

Thank you.

We have time for one last question.

will final Our from be Market. Yun Loop from Capital of question Kim the line

Your line is open.

Yun Kim

for then seeing product? target hyperscaler the And partnership and cloud VIA I platforms, the with AWS the as getting also a and you cloud know workload with already to Jay on hyperscalers, need since new early team an you your you traction such have see So, Azure begin for of AWS. addition, those you since there, already on opportunity in protection to cloud workloads lot are partner are product do workload like VTA dev-ops reside to some

Jay Chaudhry

Yes, it's question. good a

said, engaged and ZPA. providers cloud ZIA already with leading So, you as with we have

little got area, of bit virtual take a pipeline, moving trying is we’re say, going complimentary worked users workloads vendors not fit-PC and my replicate but Protection users. early. look to for at traditional like strong. We in The a it We Zscaler some is even apps. the way On way who it's a I only early And at building there's quarter the them. the security? we and the in good look the so, work think going Cloud your is like the image firewall that never going, momentum is center to mirror data you How cloud. strong, protection with look should or put initiative cloud I you the should mean, firewall think I'm at cloud to be for protected it's

workload that are So able what we Exchange, That's truly architecturally. Zero Trust in workload the B Trust very through to a Zero us Exchange. makes Internet, coming Region connect our to A Region different over

part was the stuff. your question left-shift Now, of next

their customers, a our having we us are engaging are monitoring we closely with dialogue are they As It's and new area left-shift it. they out figuring are strategy. as with

rest market the will can assured customers. serve to be you As evolves, there we our

Yun Kim

much. Thank great. so Okay, you

Operator

Officer for Executive our That for question-and-answer today. like Chaudhry, you. over concludes Jay Chief closing remarks. Mr. the back to to any turn Thank conference I'd session

Jay Chaudhry

one was for hope I Thank Great. the session you of the joining hope as before investor earnings in Thank joining. We us. you that worthwhile. our be next call see or we'll to you. events

Remo Canessa

Thank you,

Bill Choi

bye. Good

Operator

conference. for This you thank concludes participating the gentlemen, Ladies program. and today's in

You may disconnect. day. wonderful have now Everyone, a

Zscaler (ZS) 26 Feb 212021 Q2 Earnings call transcript