Earnings call transcript Q4 2023

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Operator

Thank you for standing by, and welcome to Zscaler Earnings Announcement Fiscal Year 2023 Fourth Quarter Conference Call. At this time, all participants are in listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's call is being recorded.

I would now like to turn the conference over to your host, Mr. President Relations Vice Strategic Senior Choi, of and Investor Finance. Bill ahead. go Please

Bill Choi

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

and me Jay call CFO. today the Remo Canessa, with Chaudhry, On Chairman CEO, and are

have relations adjusted Please investor today release and to Unless will talk non-GAAP about otherwise noted, be our a note posted earnings an financial basis. supplemental that schedule we on we website. our all numbers

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

I'd remind forward-looking that company's income our our response obligations, our discussion statements, hiring cash billings, operating today's including, revenue, per free earnings and objectives dollar-based the and our taxes, outlook, income, margin, operating flow, future future like decisions, to, expenses, net you remaining to net rate, to customer share, will products operating performance, gross performance but contain not anticipated income, calculated limited retention performance guarantees statements future. of not views are beyond them end of uncertainty, on other some control. future call. which and market opportunity. you and the today, after our to as and as rely subject statements We forward-looking These update of in statements undertake market obligation our no to this share representing These risk are but apply are comments should these not rather

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

September inform Piper you Wolfe Conference September. Growth Xth, like Xth, will on I in Technology on Goldman September Conference following on Sandler TMT to would and events Conference and Research XXth. Frontiers attending Communacopia also that be the Sachs upcoming September

to over call the turn Jay. I'll Now

Jay Chaudhry

we customer year. revenue strong our and fiscal delivered and verticals, geographies. billings all balanced growth had close We XX% segments, a In Bill. with you, growth XX% Thank across growth to QX,

XX% billings For $X billion the to XX% our grew revenue to year, and full over grew $X.X billion.

We other added achieving attained QX proud $X trust of platform. and our the are records record also humbled million in billings record across the generated highest by ARR a measures. I'm we in profit set In for addition achievements placing customers quarter, customers, our number team's operating record to several pipeline and the new our of margin.

environment priority, we as executives forward cybersecurity with are macro well. trust the our are executing remains a While business. challenging, IT With zero initiatives driving high moving

CXOs As I compelling CFO-ready with mentioned ROI cases earlier payback we with business to before, periods. partnering are and clear create

high-touch the sales As deals our helping across line. process get our finish results demonstrate, large refining is

faster number blueprint key of upsells, a closed initial over across months QX, a have ACV $X broad We in We based for strength driven often immediate which drives industry verticals. by our within value, purchase. XX record delivering of deals million

growth, In margin record achieved are our reflect we than generating gross operating XX% addition best to doubled discipline, These results class we more the our XX% industry-leading economics Due outstanding spending unit a a our with record margins. we business in income our operating of on strong to top-line basis. profitability. as year-over-year

average to for Promoter customer retention companies contributed XX% gross is two the SaaS XX, which than drove and innovation Our more high Net Score and times our obsession to our exceed rate.

and only We pleased secure $X SaaS very over quarters. X,XXX billion annual to in am $X from of I billion a reaching announce have achieved. doubled recurring of companies that large we capturing revenue of to XX zero trust milestone seven select our over a of over a With world in to early believe customers $XX billion stages in we looking today's mobility, AI, and every adopt market customer share are the users. architecture protect our million opportunity. cloud, we handful

billion our achieving sights next our in goal $X have of ARR. We on set

business platform for agility a users, and and become savings, increased workloads to take OT and the consolidation, on systems We and cyber mission trust everywhere better data go-to protection. are cost to zero vendor

fully trust increasingly are protection. protection, complete for buying the for Zscaler which platform, user To users, zero business our data customers ZDX, our solution and value by includes realize enabled ZIA, ZPA,

workload and purchases gaining drove the In customers, than ZPA the powered same traction broader addition, XXX growth with core nearly platform $X customers exceeding ZIA in These protection ARR. with technology. XX% customers XX with by in million. million quarter including We we ended are greater year-over-year such $X

where data customer global Let A headquarter also for offshore security system open in and protection development technology for and deal They faster and all also purchased me one customer strategy. pillars. a our They large XXX,XXX and in to from They the users XXX,XXX Asia seeing much anywhere enable platform protection for purchased integrator XX% ZPA ZDX deception their and onboard This their and purchased hybrid highlight advanced customer partner environment. new offices securely. centers application workload a product users. now more adopted to the to are work employees. improve became time ZIA, can

data with them XX% everywhere, consideration was highly protection distributed for deal a data for the major accounted As organization value. and of a

approaching Data in for of pillar a protection us, an ARR. year. important and billion is growing $X.XX growth new XX% per

and solution in to deepest workloads the protection taking We opportunity data we the of data rapid billion enterprises DLP $XX incumbent representing at protection beyond and replacing the the innovation, in our us. are to widest is we are plus Due with now data largest market, targeted for and devices. protection a believe increasingly legacy and investments users

became new this users with this encrypted a of large logo for and Let is telecom their for that nine data win based which TLS traffic. purchased Data by by within customer increasingly internet With data a multiple protection gaps struggles with operator led their comprises a for protection protection. Zscaler win uncomfortable and point Zscaler, driver traffic XX,XXX over payback VPN A employees. was key left purchase for as products highlight months. customer consolidating the me security, XX% on firewall expects the

to XXXX. in increased continued for and emerging adoption Workloads and our business of Zscaler XX% see Our products, fiscal contributed ZDX new including

to In ACV company figure I'd over fiscal are ‘XX. from upsell to our XXX,XXX value We purchased that deal, in ZDX XX% a contribution to seven expect realizing increase products for XX Advanced two initial their a insurance Fortune highlight like after emerging ZIA all users deals driven deployment. by emerging products.

ZDX expands earn our deployed share the of With in platform and security. troubleshooting and productivity. quickly, reduces trust impact their customer beyond Zscaler spending of improves already revenue gets platform place, exchange to customer's directly the time the field exemplifies agents' agent and our ability benefits commissions. zero ZDX We

users employees. Zscaler this With their as figure making from Zscaler workload move after as traffic of most accelerating customer one the just workload all upsell In win, X,XXX Fortune plans for cloud well ACV their seven for is XX XXX,XXX workloads Workloads to over protection, the company purchase quarter of purchased protect locations. for healthcare another a on-prem to initial

of level Lastly, see vertical. starting agencies and customers, are XX awards let me larger to cabinet the in our we from highlight XX the federal our success are agencies. these

me deal. wide highlight Let agency such one

of architecture a firewall with These ZPA. We only products this mid have cloud at security over and multiyear than task user certification. will because from this value an Against order level of two federal The with and for native meeting This for opportunity market. security security order a the figure users. the in on better cloud key field delivers remain and we us agency are while service were highest the FedRAMP FedRAMP executive zero a XXX,XXX experience, We ACV units. ZIA over more awarded vendors driving the deployment award, realized time received chose to contract all trust contract certifications Zscaler our seven the customer based for requirements. be significant

by a enterprises architecture. attacks security up Next, of virtual cyber exploited to within from our a network and let built attackers by be Risk VPNs Zscaler the are of risk. and reported spinning a and number According they to of fundamental fell to transform public cyber third ransomware, security vulnerability, some Cybersecurity latest including were me ThreatLabZ trust year. IT security cyber the right one VPN reducing zero trends. having legacy cloud. architecture nearly targeted key Growing to VPN can't security remains to past bunch victim trust IT in is discuss a zero leaders True Report, threats, who industry half the enterprises priority driving firewalls ransomware

Our any products whose not know vendor you us have gives compromised? differentiation long VPN architectural been Do advantage. term

pressure As and increasing regulators you on improve may to cyber are security. companies seen, have investors

trust With exchange security corporate Board which the platform days, fast executive to zero SEC for comprehensive business in on reporting, report have must requirement new a security of four material delivers increased there visibility governance be now Zscaler each is cybersecurity. a meeting focus and requirements. for controls level incident will and

in The depth with functionality level the industry risk that comes at In good scale. transformational messaging. is this in mimic Good no and Both vendors. offerings immature to unproven newcomers of is cannot projects legacy tried performance from our have vendors a our enough. of providing environment, close never enough critical and cybersecurity customers mission security vendor and reality to

investors. Next, productivity let tremendous potential problems. employee customers and AI which top and insights, mind complex Generative me of unlock for AI, improve has discuss to is solve

this of sovereignty To models. concerns, risk data data the into potential of that capabilities and address new the appropriated we delivered sensitive However, these public through loss data are prompts already prevent AI technology. protection of limiting leakage data the and of issue training

not type only enterprises. any employees sensitive isolation employees enables to a browser but for our do use let This information example, into also For session so or prompts. manner secure would in AI, GenAI not paste

teams that's data new applications AI advanced premium classification trust such access. have Our price zero our in auto and innovated auto on rapidly available data engineering segmentation as functionality of unstructured for of for protection driven bundles.

provide security executive on boards fashion. We and we implement recently can risk timely and based customers. and understand will RiskXXX, in AI a with products up-to-date status launched corrective the have actions better which posture new upsell of significant organizations their they enables our provides visibility will with opportunities unparalleled to that teams Second,

And and our exchange transactions captures protection largest Trust provide customers. every that that the of AI doubling anomalies, threat day superior effect user private These daily our cloud, more for AI models to Zero customers. inspecting the can and than communication potential resulting network experts Zscaler Exchange logs a over Using signals has switchboard sophisticated XXX plus with to detection our inline proxy all unique domain. AI of data anonymized have security like traffic driven XX positive be we logs. will Based data security believe add AI, dataset train other able use tremendous prevention our cyber models and for ransomware on LLM has believe private we prevent also most we to monetize insights and opportunity. customize predict scientists that on valuable, today's attacks customer application to and months. architecture, we transactions for value. and in XXX a of a trillion I better the per feed our billion and

We first All investing within have for be the fiscal in enhancements, invest we go-to-market guidance AI will investments our AI been and and solutions envelope margin market. AI made cloud rapid AI Remo our will in acquisition to ‘XX to that XXXX, innovations, for a of discuss. including while will the take quite to continue in

In closing, we are excited the opportunities ahead. about

protection our building have record of of future growing innovations contribute data our we will Trust and Zero and a products these Workloads, increasingly track new new AI. to We and now turning attention to believe We growth. like are ZDX,

trust this message customers broader Zscaler to platform journey. other customers adopting provider resonating consolidate than in securing zero challenging multiple any business our and value the are is macro more point We trust products. environment, more believe for Our

We nearly mobility. employees hyper X,XXX and our connected secure of with a team the mission global to AI cloud to have grown world

want and strong we to and success. I'm the profitability their ‘XX. our customer extremely for thank and employees tireless our growth I in efforts delivered our to of proud partners fiscal commitment

excellence. We to our to ahead capture continuing of will opportunity the us operational and customers invest large while aggressively delight deliver

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

Remo Canessa

Jay. you, Thank

XX%. with up up We sequentially. as break execution, From grew and QX X% pillars. will geographic product we XX% with are ongoing solution deals, that million, of XX% in involve EMEA This we're multiple revenue revenue Revenue quarter XX% scrutiny solid and out last bundles $XXX pleased product that was revenue, year-over-year. ZPA ZPA the strong represented customer Americas large be increasingly and our was performance year-over-year separately selling was APJ even XX% perspective, a of

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

benefited from to total a basis, grew quarter-over-quarter. million year-over-year XX% sequential multiyear upfront deal. total calculated $XXX QX in XX% million. Our billings $XX grew a on billings On Total billings a billing

three As are one one reminder, contract a invoice our advance. our primarily terms typically year in years. to customers We

strong saw and XX% grew calculated perspective, across growth vertical Our a XX% quarter-over-quarter. year-over-year billings From our current we verticals. key

$X XX% remaining ended obligations current RPO approximately with $X from The XX% We of total greater the role in to billion. play performance digital with metric or in transformation initiatives. the ago ARR, ARR than strength customers grew XX customer customer's customers Our large continued million is million $X.XX year XXX a RPO. year RPO this the adding we record quarter. a the of in speaks to The strategic our

the greater a $XXX,XXX We than quarter ARR. X,XXX also customers ended with with in

rate trailing in net XX-month retention was dollar based XXX% Our QX.

financial the to Turning of for performance. drove change public in margin. in in products usage Higher to the XX.X% of emerging rest quarter quarter. gross year-over-year the and gross XX.X% cloud our Total prior compares margin year ago XX.X% the

to compared new in Jay and are As in mentioned, products of contributed XXXX. our emerging fiscal business of as ACV new XXXX a XX% fiscal XX% percentage growing

increased Due significant XX% of X% on year, discipline we year-over-year. our in focus basis leverage approximately operating and operating our XXX margin spending increase Moving reaching operating XX%, sequentially $XXX on, expenses to to total points model, with generated million. an year-over-year this our

Our of free revenue. cash XX%, flow approximately data including margin center X% CapEx was of

year, was XX%. was margin the full free cash our flow operating XX% For and margin

our and lives the quarter equipment. life In four XXXX, equipment for we're in August, billion useful in cloud for advances network investments. equivalents operate depreciable cash, five with technology our infrastructure assets fiscal of in cash We in extending we to of and in how server these efficiencies we years. the useful assessment starting network completed ended short-term and and With an our $X servers over the

impact for change this margin We approximately to expect to be basis benefit our the point fully XX a year. gross of the

macro and the customers remains guidance. Next, large observations about some to global let environment deals. framework From me continue our and share macro environment perspective, uncertain, scrutinize for our the

first larger ramp will to billings level into grow strategic these but In deals enable year commitments. in Typically, ramp second the run instances, customers rate our into continue a select addition, in to new we annual will year. subscription reduce higher

growth. for example, percentage was ramp QX, X of approximately the deals net billings headwind to impact In of a point

ramps execution business improved in we're confidence fiscal with the our outlook for We XXXX. balancing net billings expect will optimism impact of uncertainties. ongoing In ‘XX, and neutral be in our fiscal to our macroeconomic

with QX strong. pipeline, entering record and remain are customer We a our engagements

However, period large aggressively we the for environment, in broader will and any remains challenging. opportunity, close and long term With customers we a XX are invest day us to predicting and that profitability. rates adopting mindful growth this market ramps in position increasingly platform,

With year me that in guidance our mind, let XXXX. provide fiscal for full QX and

a all As are reminder, these non-GAAP. numbers

quarter, $XXX equipment. for first XX%. we in revenue a range approximately server the $XXX including of the For life the Gross in margins growth useful XX%, year-over-year of of to expect accounting change million of reflecting million,

growth, our initially emerging optimizing gross also not margins. like Zscaler than core products. would products, like and the products investors emerging margins I currently Workloads of for time-to-market products a newer remind our including that We're ZDX to number and for will lower for managing gross have them

to addition, million range and to income net in a of earnings $X.XX profit million, diluted with $X.XX, our infrastructure of continue invest to million of shares. the demand. assuming to of XXX the $XX AI scale income in the $XX range per million, taxes we'll $XX Operating $X growing In million, cloud fully share in other

billion $X.XXX approximately in the billion to billings fiscal billion year of in For of to expect range we the XX%. to Calculated or growth $X.XX of XX% year-over-year $X.XX range to XX% billion of growth $X.XX revenue full XX%. or XXXX, year-over-year the

on to a billings grow basis. approximately We expect year-over-year XX% QX

our which range margin approximately million of reflects to XXX profit of Income first diluted in share $X.XX earnings the guide. XXX points XXX to approximately points mix billings of full million, basis to XX% improvement of half taxes $XXX to We expect of $XXX basis to our also range Operating the approximately $XX compared million, be year. last operating million per shares. in fully assuming $X.XX, year

be cash slightly free our XX%. margin to flow expect We above

data Finally, expect digit of single for revenue percentage the our year. be to center high we full CapEx

may now questions. you the for Operator, open call

Operator

Bank. Instructions] Zelnick from [Operator line comes the Deutsche Our question of Brad of first

open. Your line is

Brad Zelnick

in of you've much what quick one growth of for for a maybe where And upside wasn't XX% just and risk us beyond already downside in. seem Remo. finish told Single-Vendor most a because doesn't billings slowing Remo versus that's a guiding you're impressive. if at And on peers address congrats we be so inputs recent year. off you've in clearly year included delivered degrees Gartner's mindful and Zscaler historically? outperforming it of you quite all to Thanks. down SASE? Great. you should your Thanks What to why terms is what Quadrant of Jay, can the such and strong certainly be Magic

Jay Chaudhry

Right.

us So, SSE, we a few SASE years MQ every have. Brad, of we've this products an down integration [indiscernible]. FD that started is And the at is ago, Gartner a out not it matters broad there. vendor was with all. When it slowing integration done and genetic gateway SD-WAN

time MQ started SD-WAN it. SASE was So that but offering this single in vendor for that got with

We have do But offering offer zero (ph). trust [in SD-WAN zero We often trust space] SASE. said that offer we SD-WAN is SASE. don't

we're So [indiscernible].

about so. very really the world, not in the and world, we propagating are are We doing successful old changing

Remo Canessa

And the is our related record to are, pipeline. guidance, Brad, positives pipeline know, you

we supported optimism that very what to macro in was guidance seeing potential XX%, environment. Our us 'XX. environment see to business which out, similar we related we which our as a seeing situation. in strong we're the have, our downside is also we we're QX, XX% fiscal feel global The called gives by is confidence. XXXX, taken that view, for you very macro at guidance, as From We've into account. in good the execution The did that global our

Brad Zelnick

much very guys. you Thank

Operator

moment One please. you. Thank

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

Your open. line is

Matt Hedberg

the Congrats my I more comments be in was Jay, questions kicking taking even year. on quarter. here on guys. success. for Thanks Seems to year emerging so next product this particularly and impressed, really Great.

ZIA some think protection. curious Maybe to the Now TAM workload seems of of much more a doing, a partner if kind up on to I they're It these opens because why conversations details little resonating, bit ZPA? lot products on was on add that's larger I just call. core it be than of certainly that you continue do resonating what mentioned on and

Jay Chaudhry

extend need applications. So when other started A user we who communicate trust each started talk to to workflows with securely workflows ZPA in to ZIA, zero because we users. ZPA, for for natural workflows, It's can ZIA fashion.

understand opportunity customers upsell appreciate our it. as customer expand So a it our ARPU great as, and with It's us for us. well to spend

Internet. number So it the only stages, we But trust when various we are area is this success. because size offering in among comes The deal various we're workloads that's actually the provider smaller have because of seeing no to workloads good workloads competition through still customers. communication or literally zero

upbeat are for it ‘XX about fiscal We well. as

Matt Hedberg

Congrats. Jay. Thanks,

Jay Chaudhry

Thank you.

Operator

you. Thank please. One moment

Our Boyd UBS. line next the Again, Roger of Roger of question comes from UBS. of Boyd

Your open. line is

Roger Boyd

Hey, lot Very a this made not about for and security nice great. pretty Jay, into entry a but market. taking Microsoft’s on Microsoft high has SASE level, and SSE edge the Thanks quarter. space the congrats is question space. been targeting specifically

do further that a relative Just you follow-up SASE? SSE legitimizing to approach Thanks. distinction single as Brad's to maybe vendor the maybe question, see

Jay Chaudhry

Thank you.

for was getting for is SSE the essentially market and the and we high security destinations. bar, owned But it's down natural of be a This slowing and a great and market in new SSE and know, that totally high for inline no them. large, has But a today. it widely area area of accepted. ZPA From the larger, security, SSE then security performance, and traditionally range Microsoft, supporting operating the time to rebuilt. is have pioneered So appreciates combination understood directory they endpoint Windows system. identity It's as active very is ZIA

being like the [indiscernible]. it's fact, In

GCP We applications connect thousand and applications SaaS and to on have are that and out to Microsoft AWS there. a

and like of They'll take us Zscaler And applications on Zscaler because there don't enterprises. validation, we that's any not new tied the the of to itself. large like positioning large entrant. customers it'll time the be So lower further provider has of positioning entries trust earned for impact the believe Microsoft of some a impact end a enterprise may but market. market Yes,

Operator

please. Thank moment, you. One

and line next comes the Our of Kidron from question of Ittai Company. Oppenheimer

Your line open. is

Ittai Kidron

clearly great Thanks, I the are landscape for and was more of Fortinet competitors could traditional Palo of finish I Maybe here. seeing trying year. about is what guess, what Congrats, guys, different to here? more Alto I and talk recently a talk want acquisition a hi, and it near more big you guess [referring year -- competitive the ago? and] recently, firewall than the well efforts what mean, what make about today your competitive I (ph) to Check it kind term And you environment. way gentlemen. Point as the from are

Jay Chaudhry

Thank you.

of comes on branch to market. When in gets it on Zscaler If say On we really change, position of I the the extremely trust we the there's I would no solidified, haven't do office. we somewhat end further has the are market, architecture, -- any replacing with even there's and we branches. change. where firewalls for deployed easier high seen art firewall market, When it any well, zero has the room a say, gotten firewall end would the the higher

the and But center of and slowing the are data there. center customers as and breakout out Now data data for because impact center are firewalls demand for east-west there firewalls to is the is traffic inside every in traffic bound the the from which traffic light down, going of sales don't doing still through the local play we amount alike. location,

and it'll been that firewalls believe trust VPN from is shift we we So continue. zero the about have talking traditional away to and happening truly do

Ittai Kidron

it. Thank Appreciate you.

Jay Chaudhry

you. Thank

Operator

One moment, please. you. Thank

comes question Wells from the Fargo. of Nowinski Andrew line next of Our

is open. line Your

Andrew Nowinski

mean, the it $XX even great if pull that on out you. Thank a looks billings. solidly on Congrats exceeded you like deal Great. you quarter, million that particularly I upfront.

data the you protection out. products I ask wanted to about that So call

a on about the data and of it like on just slide components based there's spent looks info deck, it protection. a lot that of beyond lot talking your on the call, to time You

So there? it perspective? maybe, seeing I you two you the And from there just relative for replaced of you some could competing is talk two just you're their and to like think expand a on you the that against markets ZPA? can customer, ZIA one of different vendors maybe you're how about what vendors. Thanks. Maybe said -- competitive competitive

Jay Chaudhry

Yeah.

So through data traffic becomes us starts protection a for flowing natural thing Zscaler. when

So, literally, vendor hard the sitting data Zscaler traffic is any it's have to protection other when in path. actually

some are success of what line. done in First the here? pieces prevention, of So traffic of essentially which that's all, the DLP, loss is data on

there replacing are number is We replacing Symantec deployed. one the which we're widely vendor, is XX,

So first, the piece. we Symantec, secondary DLP boxes, Blue deployed Coat no, the and is

CASB big area the we're got sold point as module. vendors. early The of product is as replacing on CASB a third a some

it's a us, feature. For

pure replaced SaaS by essentially who our customer has any deployed kind platform. of play data be So protection gets

two So the now of those big newer are areas. coming But we areas addition, seeing in up. some are

is as recently we supply launched, there, getting tremendous endpoint Through protection. email DLP the we data have sorry, Canonic, acquisition wonderful which we chain via out attraction added SaaS, added ecosystem, the the our DLP, well. is module example, For of

ARR. most So we to kind all line. great, in billion is out year-over-year. of and close growth That's sitting And are called the we it this because comprehensive has made $X.XX over XX% platform, why Zscaler the traffic it's

Andrew Nowinski

Thanks, great. up Keep That's work. good the Jay.

Jay Chaudhry

you. Thank

Operator

Thank moment you. please. One

Our the JP of line Essex Brian from next question Morgan. comes of

Your line is open.

Brian Essex

dynamics work and as it how in quarter. it in future and the deals more the that pipeline see give a or of ramping? you the you of periods? and terms pricing, us more were amounts Or what visibility the what results. of over that ramp ramp flexibility the Remo the wondering taking Thanks. terms of Jay, question I Is percentage typically, you in this does do deals And deals on of terms coverage of Hi. give well, there around quarters the commitments, bit even give thank maybe you way the little you does and more congrats flexibility? a quantify in how those prior around for to versus saw was you color does Good if afternoon,

Remo Canessa

of larger as and for maybe start is doing, about we Four contribute talked our headwind the to products ramp customers customers we with ZPA, basically us. that we're also. customers seeing suite with we're was platform ZIA, X% about ramp we their seeing into protection. existing full ZDX past, also Ramp platform is upfront. and I'll expanding use that our buy We're What of a the have. mean, data could I that we're Jay more deals seeing in

So up their our off products But, full in products, use at XXXX point. into get billings expect buying of then vehicle the as the same follow with use. our into and to billings in when that fiscal pricing. level start they'll give of they're a basically, that been It's periods. into future our customers ‘XX. to it ramp we very we suite ramps ramp ramps The this do vehicle kind us just of a allow it I ramps of expect visibility we better to basically and is lower fiscal type billings effective. I'd because would

to And Jay? we'll continue And, so it. use

Jay Chaudhry

the in bigger or part factor bad pieces a compared have so years pick business, sell, we likely more doing macro in manage two, thing. the a way. just not to there's We may it as it's the right that of more platform did to We of need as past ago. Yeah, bigger two up environment year to provide and you be The if because some ramp Number done. the deals add. tighter the scrutiny. I Ramp to

Brian Essex

very you Thank Great. much.

Operator

you. Thank moment please. One

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

Your line is open.

Gray Powell

the on the and, good Okay. results. question Thanks for Gray congrats from Great. BTIG. Yeah, taking Powell

the Does billings. brand about give Can I'm deals So, trying this of talk side. just on of growth stage last help your today late a does guess higher relative the on better to today, the to percentage couple that outlook? you related I And in my year? questions confidence you visibility get have time on pipeline you visibility

Jay Chaudhry

visibility good. is Our

talked had, in So, our and a execution also we've record pipeline as about, QX. we

Certainly the guidance. us give billings, would us a too. say, is also good good our So visibility with supports I the ramps, for visibility and

takes our pipeline, and So, I I have very a to XX% energy our us. out sales to were We it we're excitement a Vegas visibility We record couple guidance, The is about is Actually, the our kickoff about and momentum of lot was seeing good and add, the our in there. because we And have talked also, talked may ago. deals the adding our record the into room weeks business. team channel very pipeline, and We XX% felt. feel, confidence. if doing account a record factors. in guidance, be pretty good on could momentum of good all the sales new

we our feel good fiscal ‘XX So very about business.

Gray Powell

Thank you very much. perfect. That's

Operator

Thank you. moment, please. One

next question Cantor. of the Jonathan of Our line Ruykhaver comes from

is Your line open.

Jonathan Ruykhaver

you. Yes, thank

So emerging a on the question have product portfolio. I

AI of but it new bar going you plus the to comments to just from like you talked those highlighted You me fiscal to plus represented that expect cloud, seems get XX% ZDX, in it is that business to including, be, like seems about could fiscal XX%. plus 'XX, data XX% products. a that I'm in benefit sure not 'XX. just what that and low given some security, on tailwind how your It

the demand dynamics and you can strongest understand takes see where help expect you portfolio, puts the just specific within of So us to products demand? that

Jay Chaudhry

If may all start, I of only. out coming Yes. it is XXX%

point That's most important is the when Okay. pretty growth overall the strong.

very even grows hard pretty the to significant. product, if has even X% to a That's ACV. from percent work new or new total take year, it the it for X% XX% XX%, away And Okay.

think good faster than but of growth they're growth new products into they are called these We out of and the the new is the overall So fairly business. business. became you're combination ACV, small workload are it much data much a growing of I growing ZDX as protection the too, at and And both here seeing rate. significant our of a part protection faster

think much portfolio, are I trying the to we rest share the the but is So is make which math I actually the it on the with overall base. steal impressive. small, rate, the but growth why looks happy a was market bigger pretty they are point away of trying That's to has

Jonathan Ruykhaver

you. Yeah. point, understood. Jay. Thank Thank Good you.

Operator

please. One you. Thank moment,

Tilton Wolfe Joshua of comes Research. question from next of Our line the

open. Your is line

Joshua Tilton

Hey, quarter. billings to the bit at a two my than guidance, taking want back guys. kind new little would question. of I Thanks congrats question more you aggressive, the my the on good say, a if years. looks go first I for And, I the of kind last to and implied echo like look

some outperform So please? level for take or set it for the would set laid takes kind us, maybe of next what puts the us months out kind what guys to you XX around just, for for and expectations guardrails you on or of

Jay Chaudhry

add big Let to it. your me you color Remo, picture start can to you give and a

we guidance our first the a of have product and the pipeline So starting all, in record And of have sell. to is momentum with we plenty business.

business growing drivers. a opportunity have and many market We

are lot market zero Lots covered. not of customers better a who that's We of have security. new for really buying trust

of are products some increasingly doing XX% strong. flagship customers We still And happening in out are further the still about of really, by are of deals. coming market strong. that's our buying the sector in deals of we're ZPA, saw CI public market. federal global that to coming And seeing leading are mandates these And XXXX of strong, some that are there. you platform bigger more kind announced, pushed

It are products which for every into growth complements. actually are have Emerging needs We contributing go data nicely, protection, and Zscaler,customer. factored contributing. on to good they

we factor you our guidance. when that's this, what into to Remo? you So give all took look at

Remo Canessa

is guidance. our this Yeah. very with macro solid basically We feel our business guidance I company, the our see optimism that we in market, also mean, balances environment. with this

Joshua Tilton

you. Super Thank helpful.

Operator

One moment please. you. Thank

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

Your line is open.

Saket Kalia

guys, far. my result. congrats Great up a it Remo, to that the free talk little Because see puts takes flow Thanks. in question great. margin I free flow margin echo for switch flow maybe maybe about cash of next just maybe year, free XX% it's cash expansion margin great on the for thanks are to think about can guide I expanding my way? on you, the for margin isn't like influencing want just same or how expand. thinking to Why bit. number? the CapEx Maybe taking duration here. Okay, the cash or anything some with plus things thus forward, you and to Hey you looking that's operating see billings

Remo Canessa

to do we question. so as The higher duration, 'XX, a billing be a similar had type in we that's Saket, duration billing CapEx Yeah, I expect would assume fiscal great percentage. CapEx, change. the no

in a last CapEx take of has you our years, If been revenue. the range at two look X% our the

again, CapEx to expect -- our type business. in range. making our We're reason. it's We digit be We're be to main investments in high expansion the that's the single cloud. seeing the going And of

Saket Kalia

Thanks. helpful. Very

Operator

please. moment One you. Thank

the of Gregg question next Moskowitz of comes Our from Mizuho. line

is line open. Your

Gregg Moskowitz

taking new interesting multimodal and so my data that's right. if then been echo video offering getting you me. risk, of customer question audio All uptake for and back any on in around you had your combines visualizing congrats. And the formats, Thank Curious secondly, Thank that etcetera? feature. protection, Jay, has the early RiskXXX terms what DLP to just your to I'll early that you. feedback

Jay Chaudhry

is in in customers out a is high not market. interest it's the with there's bunch and shipping, nothing but DLP like still So multimodal of there there's this development. engagement because

things one done new on actually pioneer RiskXXX, is [indiscernible] there. the don't that You hand, other no has shipping. a out

strong. take a a have I my prioritize of When say, with point of to the and my engagement the products orders. CISOs me view taken could through and holistic where risk other up what are product have bunch actually more my looks This because any than wow, are I tangible at actions and tell factors I business front single a of our wrist. think really actually has of We CISO SCXX can interest

in is there is velocity the So very and feedback growing significant as of functionality going terms product well. very, very rapidly a good on,

Gregg Moskowitz

you. Thank Perfect.

Operator

One moment, Thank please. you.

from of comes question line John next the DiFucci Guggenheim. of Our

is your open. line Your line open. Again, is DiFucci, Mr.

John DiFucci

Thank you.

third this look going it quarter, of sort the think macro should against said, when guys, to forward tick as similar quarter. good. to sort Remo, new regards on new gauged better business how And And should a a continued numbers pressure. was the you monster against nice look this we looks of mentioned Or was has what quarter forward signings. expect at, course, quarter. quarter everybody a versus and third saw it we expect down be try business what a comp we So It in is to the the a it signings, momentum I macro was like of sees But everybody like, business going backdrop? Zscaler that. But the

Remo Canessa

Yeah. I mean, our new over and upsell bookings year were year. up

I a make don't so in don't for my the John, and any QX, QX part our good want guidance. upsell say quarter. pipeline gives me we huge get to us doing was of our projections which for we market let because good that just to related I is really From upsell But it opportunity, billings that new and strong. on a mean, it's Zscaler. our So, confidence. had very strong and execution perspective,

feel that to forward, go we're do positioned and I really well So well.

come I up the backdrop. times, As really wild few mentioned, global and is a macro it's the card

And so global stay to year-over-year. similar we're the macro expecting environment

quarter what how fiscal optimism And company we so plays into a business QX we'll which that very through. gives from But we strong us how tracked, our ‘XX. had see in perspective, for going and did a

deals Zscaler engage can [risk, is the customers The and actually to added is point tight. even reduce also add business able attractions] while I'll when with (ph). macro is cost We're close reducing there since

the $X kind of QX. about number of very record We in also good deals closed felt we million

it. strength arrangements, all why major see that's and areas, feel we I across So vertical major good about

John DiFucci

what is my sense. quick bookings I follow-up, guess thanks than everybody guys up most question. you you for That And makes all said mean, better Remo, your there. just taking that year-over-year. out were are all doing But, I

at depending (ph) looking, new ACV, If billings, upon if guess I'm know trying do, [back you at to I you ARR I look but I look that way, company. current and I'm don't it into] new the

that we ACV. a still little companies, down being it up bit, most. calculate it's but new it's not. most For than year-over-year? you, Was For better And

Remo Canessa

not way but commenting bookings good a our the ACV, We're up year-over-year. Yeah. were business. think at And on look that's I new to

John DiFucci

you. Thank Okay.

Remo Canessa

Thank you.

Operator

Thank you. One moment please.

Our of of next the Stifel. line comes Adam Borg from question

open. Your line is

Adam Borg

for of housekeeping for Maybe just And so taking Awesome. much Remo, follow ups. question. related thanks a the couple

and I number I the patients in much. more after apologize And about that missed So year. quarter, but at billings was below hoping or turn Thanks it tailwind? could without just to as quarters. XXX%, to talk that of first I XXX% time next bit a was a little and a if headwind the out duration be NRR, think, did follow-up, for you I what so a

Remo Canessa

Yeah.

more seeing of feel we outstanding. is XXX%, at that NRR our upfront. is we're platform What So seeing we're customers buying more

to what still call they're our your upsell. billing you're look company out what the purchase the Also, billings, total really at buying at to at, look measure So Related really in It we impact but a future. when it customers metric is end that the from basically at are Fortune more XX that'll on my quarter. we we've look or new really since buying I comes of best QX. bought it really going upfront, whether platform in year From look basically we a saying called the been duration, is was to that impacts tailwind time that at the is only of we Zscaler. is a if So this perspective, The our Like, is the based feel NRR, the quarter on it. NRR, one offering within within billings and for public calculation

Adam Borg

much. so Thanks Great.

Operator

moment, One you. Thank please.

Our next Levine of question Evercore. line of the comes Peter from

is open. line Your

Peter Levine

Great. guys. Thanks in me for here squeezing

your to what's go same proprietary do competitive like whoever thing what is, you it know, Apollo, are in of Can normal Remo, So you point would Is a you advantage is you security contract to it into then plan your your question I same put proprietary. customer just a, data competitors your an might be that to an opportunity, when terms the of for one. you your how proprietary And just it there on mode couple but that Zscaler's Day your mean to What business. that your your kind not answer be? makes your -- base? saying Maybe just RFP second Jay final in all data the data's weeks you subscription? want you a at usage on maybe, know, call monetizing Analyst Analyst to upsell of a autopilot, think terms is as conference around is of follow-up the your the GenAI versus Day announced ago,

Remo Canessa

are inside, It short That's with, It's transaction, logs. of different on you between have non-decrypted, we they're if not your transaction all are what's A So exciting gate. What's number in use take as SSL not outside. cloud all, decrypted. you the as record’s about Firewall on, data. parties. DNS says two, if Zscaler number switchboard. one. whether let's data. they're it's logs, useful a at very after going all. are start of larger or you the logs It to your about are aren’t prem we a of firewall, designed much firewall small often DNS decryption domain Number all the If The at or the information have we lot logs fiber useful full full door. a going communication Larger that which Still says including companies has a We switchboard to? is have. with for a is information, URL. URL if a

and happens, starts, the we all logs. that's before vulnerabilities. like to was breach why collect any traffic do the reconnaissance of that able And reconnaissance Before employees, potential to officials, could can actually any it software some being client to predict things those exploit be -- of breach we It could trying and be us like.

side log on big that's part of the So it. one

product having The monetize It Zscaler we Don't AI going to bundles second of powered do include lines. only AI Today, products influence question how of our is AI our all assembly think of products? driven of some charge. premium products. driven

as actually it Products AIML Leveraging and Charge big priced other So we like of monetizing are [computing] the actually, RiskXXX, are time is clearly, bundles. (ph) a SKU. highly bundles. premium part as they

products new have they'll upsell, own Some have SKUs. they we're their will building, of the

values are there's think of seeing products plenty customers opportunities built in. So charge the because we we from to

Peter Levine

you. Thank

Operator

Thank you.

question comes next line of Our Patrick from the Colville.

One open. is line Your moment.

Patrick Colville

me putting All thank much in. so right, you for

Jay Chaudhry

Valerie, last our take Are we Patrick. can Hey, Patrick? on? you question? Hey,

Operator

One was Our last Instructions] know [Operator -- if line he disconnected. Patrick's I open. don't moment.

Jay Chaudhry

Let me try the next call.

Operator

One Thank Okay. you. moment.

comes of Research. Cleveland line Bollin, question next Our Ben from the

line open. is Your

Ben Bollin

and Any that's traditional over strategy how you into the what progress cloud XX marketplace in GSI. the of of taking broader next years? how about last have for Thanks afternoon. you you. throughout Thank interested channel, learned I'm you've the your Good couple thoughts playing your two kind question. over feel six, the tier months around

Jay Chaudhry

know, channel played has traditionally a you for role us. As limited

working We it. on have been

and more made. progress seeing We being more are

we but I take Just insist on clarify, exceptions, mean, these to channel through customers some do us. all with

So that's part. one

we areas source comes selected lot providing We and chief system providers. SI. large doing more recently of are space, of a channels, three for and after the zero channel seeing in channel, work relations deployed transformation us. In the integrators, have that He past Karl channel architecture. integration We system (ph), most yesar done quarters from he's actually year [bars] and That They means in C for and our have of service or Scalar wound to experience leverage several in work hired more Soderlund. and us. the extensive strong

our becomes embedding better. are solution into good a the it very not service then So lot because SI they advisory switches,

will do also, on leverage itself. through broad them even bar more channel counting going us. focused on program, some training They're program, we're with help the We which so more transformation enabling channel,

join kickoff we channel closer a think account together fact, that's common conduct with teams. hands and with session partners XXX had We our sales our our work planning come and In to and to bringing is more like. sales lot nearly team the

the right in please we progress, moving So and do we're we think direction.

Ben Bollin

night. great Thanks, guys. Have a

Remo Canessa

Thank you.

Bill Choi

for you. any to turn Chaudhry call back Thank remarks. over like Jay to I'd closing the

Jay Chaudhry

in again. I'm seeing Well, to your investor thank you, conferences. interest Thank of some looking at Zscaler. forward you our all for you

Operator

and you this Thank for all gentlemen, today's ladies does Thank participating. conference. conclude you,

disconnect. a Have great now day. may You

Zscaler (ZS) 5 Sep 232023 Q4 Earnings call transcript