ZS - Earnings call transcript Q3 2021

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Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Zscaler Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions].

conference being this reminder, a call recorded. is As like the conference this time, to turn would I At over to Mr. Bill Relations Choi, and Investor Strategic Finance. Senior Vice President, Mr. Choi, you may begin.

Bill Choi

basis. be talk an today Difficulty] will [Technical adjusted about non-GAAP on

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

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

on that of at Global be Strategic prepared also upcoming you today's the Bank Services of to like Bernstein's Cybersecurity Consumer virtual events: copy the be management webcast segment inform Q&A Media which will website. website presenting and on move XX; Investor a XX; America Relations Technology X; XX. June to June Decisions tomorrow remarks call. upload available of Conference will June I June on JPMorgan May a Technology, on the when we our on Sessions to We would following Conference Mizuho on and Conference Conference will our Investor offer Summit X; Baird’s & Global Technology Relations Communications

APJ is The would XX June Cloud through encourage like EMEA which through and from zscaler.com/zenithlive be invite from our you for run XX website, Now Partner Jay. Live were XXrd. summit will we turn And the to Lastly, We call the June Customer XXth. Americas to Summit. to register and Zenith XXXX, and the attend everyone I'll over Virtual our to events our

Jay Chaudhry

Thank you, Bill.

delivered quarter, release, our revenue We broader our in in billings. saw for accelerating XX% increasing growth at scale while the with we platform. and earnings in drove growth third you As growth results outstanding adoption of XX%

for free normal. the the We which also looking believe and are in architect transformation growth to cash to secure record flow. digital work-from-anywhere operating is delivered generated strong profits Zscaler new and their Enterprises economy, we

results we and fiscal for our Our exceeded ‘XX. our are again expectations, increasing guidance

is cylinders. on Our firing business all

go-to-market optimized the noise. engine elevating us competitive is and architecture superior above Our

users, devices which Exchange different security. firewall-based Trust Zero from fundamentally castle-and-moat connects Our platform and applications, is

IT while reducing latest their and the security of data. Faced and reducing making movement ransomware lateral Furthermore, are prevents blocks applications their SSL-encrypted Internet, from dramatically threat threats cyberattacks, sophisticated risk. improve and sensitive news-making CISOs to inspect costs. other Our to our proxy the by and Zscaler prevents business CIOs legacy turning with eliminates traffic, architecture, hence platform the attack designed loss to invisible surface posture

day data the policy XXX centers vendors Built as deployed of one, built to As inevitably by their with architecture enforce architecture from are the availability. which matters. the from advocated to before, trying right multi-tenant fails. say whereas are have framework, heard five purpose many across we at nines Zscaler edge, start me existing proxy you retrofit high-performance, solutions, SASE

processing transactions incidents daily, violations. billion and more provides preventing effect billion unmatched security are XXX up We X better than This policy to security experience. user network and

Let me X factors that strong quarter. performance the highlight drove in our

X-year a large enterprises, provide security customers foundation and a our industries. our of on range building wins of commitments broad ACV First, of number strength application, deals the these for record with we network transformation. across closed are Most seven-figure to

Strong purchases the Second, retention an quarter. drove customers. our and increasing by XXX% share of our existing coming dollar-based platform from upsells new broader net in platform sales is rate

cyber Our like for increasingly are Zscaler protection. Zscaler resonating platform and depth The Zscaler wins. ZCP, Cloud customers, Protection of Experience Digital CASB, contributing or platform vendor and out-of-band our newer is believe and and solutions go-to productivity better or is our increased with cost breadth user I the savings, to ZDX consolidation,

in Third, investment all increase is yielding this consists which of segment, am year, investments momentum Enterprise X,XXX very performance in year Earlier with all geos, the products. expanded to X,XXX I segments employees. go-to-market our market results. last we and decision our all pleased organizations and strategic our with to fantastic across our

from we this quarter, saw higher of This a segment. mix business new

by working Edition their overwhelmed SaaS users as data the corporate and routing logo helping over highlight ZDX. in security identifying of starting and experience their Office performance well user for sandboxing real-time customer issues To SSL firewall, resolve ZDX This cloud XXX Internet for me wins reduce experience. pandemic, SaaS supporting and win, was Because inspection, the quarter, path like user of home risk power created their with their appliances. ZIA services Business [XX,XXX] challenges VPN DLP directly XXX company employees, Global global complain. improves as business modernization center. new to all ZIA. initiative our applications poor network plus improve in to another work-from-anywhere firewall, workplace Edition technology a applications Transformation cloud Asia the CASB, user for including purchased entire a In let productivity and key business through employees purchased from cloud company facing the employees traffic and ZDX over Now XX,XXX a the access in before

they replaced access provide center VPN private for with to XX,XXX addition, zero employees. applications their ZPA call trust In their legacy to

our pillars, of With of is this X-month X X accelerating customer reality. transformation goal the a platform X-year into purchase their a digital from

partners. our Next, environment. security zero requirement, let our as our tier ZIA is financial that services users. inspection Sandbox scale proxy at only for top two trust architecture With a for deals our ZDX investment rebuilding with bank the success work A XX,XXX with was architecture vertical the pursuing show DLP, a its me momentum Business Cloud working major hybrid share increasing modern, a significant They tech purchased growing by global security strategy in Edition and SSL considered. and plus

services isolation, segmentation example advantage the security of Our is available financial the customer multi-national platform deal, X additional Taking This tech CSPM streamlined Microsoft advanced field IT portfolio example XX-year This with reduced between and products, a another running operations Microsoft. successful our in DLP track were proxy CrowdStrike. made is deal best architectures including browser tech reliable highly record choice. embracing partner, another field great inline Their ZPA. cloud of great vendors, sales the this and of XXX, of partner In a workload consolidated another XX,XXX CASB, collaboration only firewall company CASB, cloud win, and plus us Zscaler limited this disqualified. sales our and transformation architecture a platform, and Office a the purchased including breadth of massive, deployments their customer Zscaler of started for and entire purchase the engagement for employees. ZDX case, ZIA important considered prior Like costs. this also

customer our products, data show, CASB, out-of-band isolation growing. of rate the As is attach protection CSPM including and wins these DLP, for SaaS browser new

protection. are deal let driven discuss purchased customers DLP We as Zscaler’s their existing CASB XX,XXX with XXX was that employees the on and customer platform. for Europe Now, pharma point trend seeing security. data are headquarters displaced an increasingly up-level incumbent a me we in standardizing advanced Global all An out-of-band CASB, primarily integrated to product, upsell Sandbox by

addition, seven-figure purchase eliminate This step ARR. In access doubled customer’s the applications, first private VPN. to the a which legacy latest bought to deal, X,XXX seats, ZPA ACV was they their

laptops eliminate the to As we world, which unwittingly infected lateral in bring platform office, employees of post-pandemic the to organizations trust movement. to back a look risk forward zero true threat a need

company and XXX a SD-WAN. for users. architecture this their doubled manufacturing in their Secondly, to which seeing upsell customer The added direct-to-cloud user we’re some In finally, that with Transformation to Global some the are cloud breakouts highlight with headquarters bundle And also SD-WAN quarter, hub-and-spoke subscription with last and they local a X-year secure projects firewall, now XX,XXX Zscaler. security. moving from Business Transformation the their with companies their and with SD-WAN X,XXX Cloud pharma bundle commitment network I’ll existing from delayed worldwide, an Transformation previously win to at ZPA and application castle-and-moat an accelerating XXX,XXX without locations and Sandbox year, was purchased and deployment upgraded ARR. Europe network bundle transformation SD-WAN customer’s Their to global restarting, legacy

demonstrates employees additional our zero an for Service are implementing customers employees, for to the employees, while all enable ZPA they new all cover XX,XXX They office. ZIA Private also users. quarter, adding to all ZPA returning for seats access This not This also purchased XX,XXX ZPA remote and users. their DLP purchased for Edge, to just trust

in next big Zscaler Cloud protecting our workloads addition Protection. users, protecting success ongoing In with our is to opportunity

through organic expanding We our and ZCP are targeted acquisitions. rapidly portfolio, innovation

activity. me Let M&A our recent highlight

Trustdome, data opportunity Infrastructure information correlate last CSPM cloud business hence access to enforce least solution. leading and for or CSPM a expands with This our acquired identity month, workload announced properly Entitlement Cloud can provider environments, reducing CIEM, integrated, privileged together, complement risk. market Management our for As CIEM configuration we and further security. of and

addition, a our solutions active our Smokescreen agreement which provides We deception detect us to to plan integrate enhance ZIA definitive ZPA we active Technologies, a and attacks with In acquire lateral with to Smokescreen today, and movement. threat capabilities. to technology defense announced

Cloud our these Live will hear solutions You Zenith about month. more next Summit at

transformation. the we of broader focused together four forward of our we which digital As driving years, next the to platform maximize adoption few look are success on pillars,

the never growth Our and about core ZCP, for early company. has excited stronger. And been business traction next engines ZDX the of and ZPA the ZIA we’re

highlight will I three about is very well. scaling which machine go-to-market our Now points

and to Our all continues on executing field cylinders. organization is scale

to our Moving partners.

mentioned partnerships. wins, strong technology have we and in As growing deal I our

to to and we offerings. addition continue Partner we Zscaler with our at Champion joint became go-to-market I their that zero a proud includes to XX/XX customer technology Trust Microsoft’s services add Further was relationships, quarter. security product their am incremental CrowdStrike, partnered Zero go-to-market Awards. solutions, In named partnership the our integrating and with integrations, grow also this recently identity, trust MDM Zscaler partnership IBM to initiatives. expanding SIEM with who This

our are On the VARs are program Partner building expanding transformation we channel cloud that adding practices. Summit front, and

building Our relationships integrators. provider engagements are strong and we’re joint with service system

On progress are making results to quarter we and we $XX leadership generation market. after of areas, the marketing investing for quarter. our organization, strong and a in are thought we are serviceable front, all and programs. expanding channel zero demand believe marketing delivering capture trust share summary, on material security In track sales aggressively tremendous billion across three partners, I

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

Remo Canessa

Thank Jay. you,

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

we upper-end XX Billings our with for pay in revenue We billings, for calculated towards change to months which that upfront the as multi-year contracts. duration deferred grew the XX% to the plus billing in $XXX range. customers XX to quarter quarter. their had Turning several year-over-year define to total revenue choosing recognized million, of

total pleased that do short-term and As are upfront incentives a offer any reminder, in our we are for for we that year from over as XX% XX% to deferred The revenue special revenue, short-term in the change our were RPO $X.X performance one non-cancelable is billion obligations, of grew committed represent the revenue years the With billings, mind, three payments. which RPO. April reported future typically grew XXth. year. prior of not based on Remaining also ago. current total calculated contract or one period, XX% plus RPO the terms which RPO, are

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

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

in year is While of future. and from quarter-over-quarter upsells and improved a good bundles we was increased retention year. X rate Considering can for our success gross dollar-based selling faster start Total net percentage reduce factors, outstanding. within over our business, multiple-pillars bigger feel and XXX% our flat the point these selling that XX% by margin year the

gross surge reminder, by in pandemic fiscal began. in last year margins as a XXx the half As cloud lockdowns second use of the were of the augmented meet traffic to public ZPA pressured

operating to Turning expenses.

sequentially in Our operating total increase increased $XXX.X XX% and and to due increased sequentially million. to by year X% G&A in $XX.X primarily X G&A and investments a X% to and a partially million. initiatives. fees. expenses increased and percentage and expenses teams. sequentially continued quarter was $XX.X to million. due $XX.X The includes investments marketing R&D to year-over-year lower expenses increased expense go-to-market in in due expenses to engineering increase expenses. sequentially increased revenue hiring our offset year-over-year XX% is percentage expenses declined the professional investments XX% teams, year-over-year as and higher building ago X% to X% our T&E, in XX% which XX% compensation and our XX% was year-over-year compensation-related primarily growth of M&A Sales million. Operating to teams building points from expenses and The The year-over-year by

a positive our to quarter, Free margin share positive certain due was quarter and the quarter billings was in and the quarter guidance was and in due of was earnings year, investments. short-term in point to operating driven than which to equivalents, $X.X to $XX same expected the business million Operating $X.XX. flow and compares or increase quarter basis cash, The quarter range compared cash Net of last million billion third performance. Our stronger non-GAAP collection performance margin XX% spending strong over $XX.X our marketing X% by during had year. spend. ended the better We in benefit. per the than timing and T&E receivables cash same a the XXX was $X operating last million the growth, with income in sales

to moving Now, guidance.

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

a ZDX, million of range remind margins XXXX, revenue growth gross $XXX we XX% our like I than to in to of products. For gross Segmentation initially emerging quarter have the fiscal and fourth our of of core margins expect XX%. XX%; the investors number of would CSPM, products, $XXX reflecting million, will Workload year-over-year lower including to that a

optimizing earnings of a of range in $XXX,XXX, payments in managing this other $X.X the notes; $XX.X shares. income We assuming mind, to taxes million; the for believe convertible and million; growth, $X.XX we income us to $X.XX, diluted gross fully them for for range $XX.X are products to approximately net is million senior not XX% share time-to-market margins. With the per good XXX on emerging profit operating interest of XX% currently million near-term; in of the of

the million the companies. fiscal we year-over-year million they For million acquisitions $XX have $XXX fully approximately of Smokescreen and early of of QX the of immaterial operating revenue are per expect the approximately range and to to earnings XX%; full-year diluted XX%; or to are million in impact $X.XX XXXX Trustdome XXXX, XX% $XX million to The profit range of revenue expected share stage as on assuming million; in in an or XXX $XXX year-over-year $XXX fiscal of growth now growth calculated $XXX to million billings range of in in shares.

further into to their is technologies and our plan these develop platform. products incorporate Our

to to We in is in $X.X expect operating excellence guidance. including new R&D additional QX million related $X.X incur expenses a in the acquisitions, million Israel. QX into our to incorporated of This center

the expenses acquisitions aggressively For business. opportunity, your With in expect growth $XX to related we in market approximately XXXX. modeling we huge remain to committed purposes, in to operating million our $XX behind company incur the our to in a investing fiscal million

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

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

Operator

Instructions]. [Operator

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

Alex Henderson

me year. that of you you do extent think To First results. now program? off, that successful how productivity? have the capacity And over superb let about do thank for last quarter. of see a Outstanding you its you've is the And I really additional adding question on the incredibly continuation in terms capacity maturing what been sales

Jay Chaudhry

thank Alex, you.

adding As you and sales been know, capacity. have rather accelerating we

with deliver want Remo, do we are pleased us and it? to give you accelerating to a to are performance, color it counting We on better growth.

Remo Canessa

field are Majority our ramping. sales reps Yes. still of

key of in up a organization And hiring. QX. are in quarter we good still had our in So significant aggressively We're portion a The brought is have thing expecting is QX. to of we ramp very good the hiring phase. we in a that past quarter that

plans, our in in that are is moving great earnings the that indications is position. really the about strong. market a to as So talked us. we're All Jay call, It's

aggressively to forward. So of after Zscaler really to growth the and we're going going hire continue the go

Jay Chaudhry

become may market a one it's statement. I for talent. more One, a destination add top top talent. if Zscaler And competitive for has

stronger. and So talent able our sales we're good team grow to attract

Operator

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

Matt Hedberg

utilities enterprise public success on on the or, at. are Obviously, I a obviously risk Colonial attack large guess, in federal there's upsell deals. some the Pipeline I highlighted lot you're market. question and here Jay, sector the of seeing a that had the

we next X? how for Trust be might could look Just as you the forward sector? architecture about year or an that the benefit public us And Zero can about you think accelerant talk to

Jay Chaudhry

a have that coming I hearing Zero It's more I from a This Biden XX need bigger to see based hijack the is vendors something. government many without federal on paper, see research and think that done the after is administration, way, to highlights they we it. theme. entities as like. good saying started written about braking investing of by MIJST of last It And to pass-through SolarWinds connection, but not the and of upon had through go must X type months, in FedRAMP Zero trying the firewall. the believe and a are to to for we'll have ago, do more years it's directive is of talk [EU] the advantage and Zero Trust. connecting lengthy we by entities to big very clear of Zero for say space been attacks. We XX certifications which a Trust especially federal good process now, up to Trust, it about a is Trust enterprises by some need But

well about very certified. a sales have are strong organization ago, X a in We started years growing team, and pipeline. We investing strong

great. federal education and is the part, is of And state, second actually question local sector, your which seems stuff. part So public is which non-federal the business

are well We well. doing in that part very Remo? as

Remo Canessa

No, is significantly you invested that in I key federal. Jay, the think, thing mean I it. hit we've

FedRAMP which FedRAMP us moving also, position completely the ZPA. about, FedRAMP puts we for ZIA, talked Jay different towards than As And a High certifications. in High companies. other for are

sales organization the build strongly partners that the think in we've the addition, federal. to been is organization I able very one In at strengths of and

forward. market federal the in positioned well we're feel I going So

Operator

question from from the Our Mizuho. or comment line of Greg next comes Moskowitz

Gregg Moskowitz

on Colonial to had what maybe impact a of Okay. and this discernible a the they phenomenal Pipeline last the Jay, recent breaches on SolarWinds that of pipeline. able any follow-up on quarter. to bit, Congratulations bit dating inclusive the question, have have your from little touched you're attack, but you back high-profile on sort gather, a to

we hear curious what like some again, translate the kind there's So is just to from tell? you're to I'm much able extent if anything anecdotes, you do. of able that to

Jay Chaudhry

the engagement CIO just the not Board of stepped and instances, has of all, first number from in inbound many and So up. CISOs,

dollars, are when that interest a That's engaged, they the an become those easier. making up, high with a point level less number of that Point secured. get of the few whose to dollar sure degree becomes a of of us one. companies million dealing is it's open number get C-level budgets two, hundreds When clear you're lot So deal issue. for generally there's in millions CIO, budget of

are we interest. tremendous So seeing

they discussions too and factors, guesstimating Zero do security customers need because Probably Can Trust that Our to be business SolarWinds? I'll including Yes. implementation what quantify of Colonials I of much. having and part pipeline?

I'll open quantify. to, a positive leave to hard say, So but impact, it

Operator

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

Gray Powell

much Is So mentioned to the X,XXX you in yes, a driving? this this then investment X,XXX about And X way the contribution roughly with you the ramping to contributed the or -- over segment XX mid-market of from we should how how is quantify think mid-enterprise mix next months? quarter. higher the that segment expanded to potential the employees upside segment a companies there

Remo Canessa

bars the just for the towards the are the quarter-over-quarter the we're employees fastest-growing seeing made business been very, On have. points. we is X,XXX our Enterprise shows of Yes. basically upsell basis, primarily and targeted -- has new clarification, growth. percentage segment, that growth, this with segment for primarily X,XXX we've for the towards and I in a a and growth it is segment Summit per Summit couple employees company, we mean, bars happy very so of the Program and that investments What Program good is to

we As it's enterprise, segments The have. majors, commercial. we are the mentioned, and that segment have large fastest-growing I enterprise

the So this one. largest is

this assets. So is growing large

Jay Chaudhry

the for add, from natural It's may partner into delivering for to program this is a been results. large in sales force high we adding have of the us having started end, to this part together it was pleased expand and area, in a are strong presence bit quite we see enterprises. We majors I performance. natural enterprise. and and In good If us, Yes. area

Gray Powell

environment? faster there? there cycles different in Or And Got the sales competitive it. is are anything

Jay Chaudhry

are they faster. Yes,

deal, fewer the longer the the cycle. and the sales the smaller As the stakeholders The faster bigger the you company, cycle. would typically, expect, sales

Operator

Instructions]. [Operator

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

Mike Walkley

Just on going giving all potential to about it's longer-term in modeling, this taking tougher even the wanted ZPA your And comps just further to the of the pandemic, the thinking to with dig remote. on penetration with opportunity pipeline it size though customer any within off Any comments ZPA, strong? way not sounds about on thoughts base? users,

Jay Chaudhry

they big So was first of office, so XX%, go for ZPA the XX%, all, get bought almost belief infected back their we to they worried remote was Whereby as on VPN the XX%, people that everyone pandemic back But companies we for since even bringing so through to from coming only. XXX%. buy XX%, No knew actually never do switchboard, happened, was office, architecture the ZPA our remote, of the the are was shift day the the that never saw. And our when every a implementation. the previously, ZPA Trust customers of number Trust want as when from they matter fact, in most where would designed these will to X, Zero employees corporate about network. XX% machines so companies, It access got employees. Zero they're a designed are office. And in was users are, employee to

Exchange. through Zero want they to our Trust that, go for So

for implement to segmentations customers a further customer for opportunity fact, it built running Zero users, is giving a Trust Edge. we call actually In we for Private the great on-prem applications, looking in Imagine data service, which Service are for. center private another which what is that, your switchboard

access it's makes sure to our the ZDX as matter while So ZIA time. I have experience will users have customers actual and a And be allows well. easily work Because and ZIA, and every ZDX can ZPA employee of ZPA solved. applications, they think you great of anywhere any a and issues,

Remo Canessa

a Yes. ZPA. our a perspective ZT XX% penetration customers, have from little over for And

-- So a into significant us to existing to opportunity little of for customers, over XX% clarify. sorry upsell ZIA customers our

Jay Chaudhry

That is correct.

Operator

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

Andrew Nowinski

win. on the CrowdStrike So had question a

given more may provide lot color I'm hear and they those whether stop both technology stopping is deploy deploying Zscaler You a wondering prides EDR and they're could why and CrowdStrike any their Zscaler using think necessary follow they're attack. -- security you on if Pipeline how how that Zscaler? any on the endpoint and about other need So on breaches, themselves enterprises you maybe together? breaches lead specifically Colonial and what And like CrowdStrike would to

Jay Chaudhry

We doesn't to are believe serves as enterprise serves serious come and do. second but a cloud That's yet clear as important thing security layer who most large I approach, across in layer. an common the endpoint a

and the most notion, what's do able So it's for to for from product we when -- and you other customers which from each that level, customers to integration work can API-based endpoint benefit that is bind for and we cloud together help it's XX going on integration the where past what the CrowdStrike do, security and with customers XX And natural to is say, months X this keeps customers exciting over Zscaler. be the to it. done to of proper integration, CrowdStrike had and get Zscaler next

sales on working engagements both partnership for field, because your Did I of together are integration So each joint great our and and complement by we product where question? teams our of other, wanted us, driven a then both answer customers win-win our that CrowdStrike -- it's us.

Andrew Nowinski

Yes, Jay. it did. Thanks,

Operator

from of question of come Bank Keith next line comes Montreal. the Our Bachman from

Keith Bachman

much Jay, contributing? give unfolding is, we those the see attach And are? see Any that How how over next color, could much so sense if And around more the ZCP today? or both some color on wins XX you contribute get rates? color more assets, are question about really any I Where a comments to the wanted how months? rather new you solutions and ZDX. could

Jay Chaudhry

you. and Thank side of point the the Remo add start I'll at strategic can it. Yes. on with positioning,

and a As area of by opportunity availability areas the like, done there. couple which you a the and workloads connecting lateral one because VPN communication cloud is protecting of risks various zones big One know, for massive school a big creates are There moment. with network, is way traditionally workloads, is whole wide which protection site-to-site ZCP, workloads. among has

segmentation, zero customers, direct we of workload just like it's security network-based which with start large is. that's the for will offering. implemented posture CSPM security, on is disrupt is us with where strong give one And cloud early type easy obviously, combined security and of architecture that's to This and have second ZPA. our a with workload a offering is it. base, part of ZIA users That's trust with legacy So own for And and some us and traction Trustdome stuff. side posture a where customer management, acquisition then

about We are market, to The part ZPA it's the any user is ZCP nascent, ZIA and interesting. rapidly. issues. growing resolve which is and complementing This bullish very is identify performance ZDX but

is the And to with this here ZPA we ZIA have and which only. more any employees start. and customers ZPA Normally sales. we ZIA with and Then now ZIA, color deals ZPA together, a enable work experience. bundle and Remo and more our ZIA at add natural great seeing and for are to natural ZDX on... makes their more More we to started sell selling together on deals So to ZPA used together. and ZIA are a

Remo Canessa

mid-single-digits ZCP still be we the and upsell Yes. from and numbers expect perspective, to this I contribution for year. mean, just new for a ZDX

feel think this mentioned, both in good mid-single-digit we products that year the and new been the and high, upsell reception those products But forward. for contribution Jay As range. has about of going about

Operator

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

Patrick Colville

So just to you of ever. not if highest which this giving of rose guys math, be disclosure have since kind kind the XX% the at rate looking been CRPO seems quarter, RPO and billings, the on I'm mistaken, growth CRPO

this importantly, are seeing the they are And forward of acceleration impressive. quarter, what confidence and kind have as of of this hugely So of to how guys 'XX are real we What sustainable into the factors? I 'XX? kind and guess rest kind you look calendar

Remo Canessa

I'll Yes. first color. give some have, take part the Jay, and

we then, with customers. Infrastructure that ZPA, last is their Since you brought going hit, networks year work. That discussions is are billings order You're not they XX% companies And RPO applications to are When for the which is basically shows order to yesterday's mean having accelerant business. their and is last with business. that. that we've to networks basically, that very is new which change, right, upsell That big occurring, things employees that work. light, connected in absolutely Patrick, the ZDX place with just our year aren't we've -- is basically in our company, just to our which that, XX% going related is to XX%, the Those growth what been not to recognizing a is we do it's companies of a really We going about seen. the for with growth outstanding about well was is couple talking I What's talked is been infrastructure in platform. and to basically, growth onto of basically going results. the us. recognized We've additional infrastructure and it the that With and workload as or changing to get features done forward. outstanding. broadened CRPO that, XX%, protection what broadened current the we've our increase platform. optimal that need our saw basically had COVID We with product.

and of has partnership. frankly, the XX testament larger, the centers, of of basically broadening data we just becoming your that of more through traffic platform platform -- now almost our a our with a you being to zero, deal the quite the credibility with basically SLAs traffic X-plus the the years expansion the of thing with again, on XXX also, on Zscaler. it to And strong we've at a to related that the type over communications strategic this they've margins ago. networks have Zscaler, really of a sizes transforming with So team. to movement is type led a balance the the we've I built put basis, quarterly Zscaler world got take of gross if was And Jay? was amount world. playing is public for And what's to think got customers. over for this that's across strength company strong through And for built the sheet, and was years key a The look

Jay Chaudhry

all, you all and are one; I four and force sales great and three; X; brand sales. think accelerating but portfolio customer expanded digital our being said [acquisitions], it accelerating our being being large, platform transformation

Operator

Next question Catherine the comes from Colliers. from of Trebnick line

Catharine Trebnick

the bit through give channel little versus opportunities? how a explosion your the us Program you're provider idea in a unpack really seeing you to service Summit well Can sales and doing your where better there you're

Jay Chaudhry

Yes.

early evolved channel provider service on. fairly Our

want customers our As transformation strong us channel. a to and SPs CIOs channel. growing a with to happen. work told make that It's It's

that. Summit of at years, part cloud our becoming not part pivoting sales The they seeing good VAR are for as have they For VARs, what are favors. more. that, built, they last more took a of They're rate. we our The the contribution embrace going more to pivoting result participation a are -- to in programs. services, the we're couple of so growing and forever, actually growth and who time us That's to box are one transformation program realized Program. was And business faster of the of past the

Remo Canessa

combined VARs low From SPs The as SIs been a mid-single-digits. rate range. and SIs is in a numbers low is also, perspective, XX%. significant percentage growth and SPs direct revenue our the in year-over-year And also. the in has XX% of

So SIs year-over-year a on significant basis. in growth we've SPs, had

Operator

Our next question comes of Barclays. Saket line the Kalia from from

Saket Kalia

question little bit think felt And SASE well. you maybe to do them on that for it just area you service like a that plays as to Jay. channel. start little quarter, worked those on of Maybe as vendors other vendors how see provider this some off maybe specifically? years, you, piggyback as other that and with is, with more work been service future maybe sort I security are with starting start for conversations in security has a noted, one the last to bit Actually, your channel dealers these out channel of strategic you're as an guess providers? work that The to the well with how question a

Jay Chaudhry

Yes.

quite that's especially Remo other stuff, said, in first for this type firewall of terms our of MSSP of firewalls, SIs been for vendors, providers SP, Think have is the well. and business, year-over-year growing as So years selling all, years. not servers new have Service news.

a actually a hear you new that probably we engage happened None has and the SD-WAN not stuff lower But area area. to transformation. adding drive then changed. to the on about. is of Yes, partner new and firewalls with talk together of end. those the When larger has they most enterprises, us So of that

but combination lower the combined SI firewalls, end, channel of VAR some about this as the the channel. as SD-WAN probably SP channel, bullish we are well On with

channel more us investments because so. in significantly leverage, growing giving to our and are and continue fact, we will more that's In do

Operator

comes question Liani of of America. next Tal Our the from line from Bank

Tal Liani

the When ask why are I you you, same. is answer successful? The always

the do competitive -- competitive bids the landscape long for I ask that see the to before? is anything wondering going changed? you But with today versus the ask again. seen successful in you're the not I'm you space. what you've what landscape? about share a you want What's So between competitors? the do you the can new of see we I'm time, and how fact you So And on competitive And gap condition. such to so players us how and period in

Jay Chaudhry

Frankly, the every to We ask lot not quarter. is the has competitive ourselves on We changed whole it times. landscape. truth many, this many a analyze question

like. seen noise larger the segment, haven't all. change much vendors so talked we firewall and customers Have we larger seen hearing change? about We’re at always the from that On any much

our And few of couple during We cases. remarks. I a prepared a have mentioned seen them

thing, come we engaging of we see to some a so users, the our the We X,XXX this them altogether. announcing but because yes, got scalable, where have more would reliable they that we said a and we are larger architecture. now, under a saying, savvy pretty say, some in some are say segment, it's handsomely. we very spectrum, a space thing Having of as end lower architecture. in less is upon that disqualified we proxy once and Enterprise the But proxy are of you to do have security have we one engage, go depend Vendors when firewall Well, But compete is trying down of winning building do could enterprise kind with But customers. don't vendors them. of different that, more them.

on on comfortable the simplification. every and because segment very So for customers are front looking consolidation and competitive more more actually

So low make end to are from speak, so it product expand, to don't players that point and trying really well. coming

said, you of That's architecture. because story, vendors, bigger our we better a Some are much trust truly a trust And I oxymoron. can Trust a kind of Zero the convert zero our the firewall Exchange architecture. legacy does zero old ones, platform into as

Tal Liani

to Or execution and time do to And your between to the make is try it. more two? the you need current feel order Got acquisitions marketing focus within your just and on you it and TAM? TAM, try market share? get in more to focus that is grow to Where -- sales

Jay Chaudhry

look open potential to Having It's in won't I expand said markets. strengthen kind It's any looking sales of grow to and pretty faster see a a for to for us, at the not that sense. not? momentum or opportunity And good question. market is Both. makes opportunity right that to. say as small our pace. adjacent so on Why We're areas be TAM. need the investing. acquisition we with business would into We've We're fill investing looking right for that We acquisitions We'll on a why technology. at moving that, are keep few everything we heavily. good, for acquisitions done a marketing, so

our kind be In fact, versus lots so of I a have can't Remo us spending both debates, internal happen such We sailors. top-line hey, like of growth say, and be to is drunken bottom-line. of we priority, that top-line

good. bottom-line see being pretty You'll our also

Operator

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

Erik Suppiger

your Are that the best that SD-WAN with fit space, Or SD-WAN at who do look point? are you? there this space? Just how at different for architectures partners in you well

Jay Chaudhry

SD-WAN.

architecture, who natural enterprise-class pretty is compete work large vendors because are who on with to want them. higher customers end have simple. the they with our Starting So answer the us

from choice. may customers the other open. security do some and have but with when have SD-WAN It's partner the almost I As do working comes their from enterprise kind the But VMware, relationships. vendors to they see high of the any some customers? lower lot have can frequently stronger I firewall our up go it of have end. to with SD-WAN and customers X market. decided end of and there, coming we're three best we take side large we the HP business end, customers they deployments less we is of we it, large on of before have on but Most it integrate who said cloud a that often. And traffic of for everyone. see of were is Cisco. we it's vendor enterprises. our We them the one them vendors, ends VMware deployed being SD-WAN low Then Aruba, of but Yes,

Operator

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

Hamza Fodderwala

Jay, just a question maybe high level you. for market

have time, and touched at and X, at you've we're on a clearly of lifts in Trust it right? at firewall you're the tide competitors been. Not are of what about math that adoption I think vendor. a seems same been many to point I any particular the in approaches. be and you go of this But of all of do of short-term, stuff of big for think are SASE about you day a aligned earlier, to the kind like mentioned winnows towards this boats, to down But necessarily the similar talking that, earlier about? the clearly from rising your architected beneficiary And and some trend that least trends in talk of that of but that's as look obviously, you a Zero some solution a seeing for truly terms you kind lot -- talked perspective, people right, such FUD, you've network think one critical access,

Jay Chaudhry

before. We've movie Yes. this seen

winning, on were more are and of there's market, the rising with the when network-centric threats. with [indiscernible] data-centric mean doing They're a is XX%, of architecture, XX% architecture a architecture, it to sales vendors more why firewalls, and type stop type don't SolarWinds to the and small some network, way If and whose take recall, kind of Zero us. I with think We for powerful still guys guys doing they Trust, only we pass-through right? dealing architecture? you people some that are Colonial be deployed it the comes put But on to that's proxy new you I young. It time will -- aren't where are have the Jay, losing? buying still will customers other you the What threats thing. you have don't keep truly

things I I now. big And think what you'll right pretty the that's see changing. think. Overall, market is

are who impacted really We or of well. competitors doing by inhibited aren't those any

example, I changes. think for still -- keep and our some Zero share architecture Take, spinning a Trust. really make doesn't the for anyone until VPN It's going will them in time VPN. the cloud

Our You customers change over course, can't. Trust? they Zero deploying that make it? into time? VPN are, Of are course, buying will. alright? you and Will Of it Can

Operator

from from the Owens question or Piper Rob of line comes Our Sandler. next comment

Rob Owens

would reopening, transformation expect relative conversations of work we to the network change? and think right the sense how And Great. about customer transformation urgency? of are where around now to Jay, potentially return digital therefore, and you pace

Jay Chaudhry

that just like of from corporate office. need the that, have home branch the said to to important cloud, sure having learned traffic work the in a So going employee’s They without from office doesn't plans was to But beginning employees Many up. opened go customers very are the to when to data role. they back make and during branch and make crisis work the went COVID are the office, centers. from directly play What the the directly it they network anywhere. them partially come could from

ZPA. actually local that's a is, sure they opportunity breakout. so that's product the they But bigger architecture helping can restarting issue SD-WAN bigger want employees to the or do the Trust is us, some projects do that the make with So Zero helping still in office like us of

companies a security us. Overall, office the the in helping them we are get and Trust, return security, office well. for machines so like to SolarWinds movement in they get So an Or better the trouble. seeing are to where as don't back trouble. asset fully the have And opportunity threats can them implement infected we issue Zero coming full good of good lateral interest positive

Operator

time one have final question. We for

the comes question Essex from of last Brian line Sachs. Our from Goldman

Brian Essex

on congrats really of was in appreciate I it bit maybe, on the terms results. drivers Back right. you bus. of some -- I little All the a wondering, here headwinds. got if on the and expand you've macro could Jay,

sales productivity. got You've

experiencing customer those the then relate You've grade most shift the growth? Expansion to to way the of does quantify got that of any kind meaningful customer transformational growth growth cloud. trajectory tailwinds of there How in platform. now? to your to regard which you're are terms and that with Is

Jay Chaudhry

customer you of a or are When telling customers revenue growth, number said you growth?

Brian Essex

growth of in looking platform some I'm Yes. initiatives productivity to I sales play? have and guess that relative logo currently the of expansion you for kind

Jay Chaudhry

Right.

to which It's upsell. we well logo to should do new We mix pay of opportunity And areas, because for the the good there's are doing from coming new we company in an new logo be both new -- bearing upsell. not, more okay? a decided so falls not an growth sell The well as platform, much under business logo, or as upsell. interesting in and have logo

more security organization. the the you have phenomenal focus So the opportunities, Sales helping, is us. sales force, job done they environment macro is in helping a on said, as

area. more seeing marketing And strengthened our opportunity speed. platform team, on coming and CMO. Very lot very focus really are our good a marketing results the Summit is bullish channel, we machine got new partners. from Now good we've product We in early a the going on Marketing, expanded very investments forward. and at a

Remo Canessa

From Yes. XX% our base we by about perspective, total year-over-year. customer grew customer a

Operator

conference time. any concludes Jay like for Chaudhry this you. over at Q&A our session to Mr. to Thank I'd That remarks. turn the closing

Jay Chaudhry

I'd you Summit Annual Thank Live our continued for Cloud us join at to your thank all Zenith Please like in again. mid-June. you support.

Remo Canessa

Thank you.

Operator

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

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

Zscaler (ZS) 26 May 212021 Q3 Earnings call transcript