ZS - Earnings call transcript Q4 2024

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Operator

Good day, everyone, and thank you for standing by. Welcome to Zscaler Fourth Quarter 2024 Earnings Call. [Operator Instructions] Please [indiscernible] that today's conference is being recorded.

Now I will pass the call over to the Vice President, Investor Relations and Strategic Finance, Ashwin Kesireddy. Please go ahead.

Ashwin Kesireddy

welcome Conference Zscaler Call. and Year Quarter everyone Earnings XXXX afternoon, to Fourth the Fiscal Good

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

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

see San September TMT Technology X, in and that XX, Conference as please TMT you and York also San risks Francisco For attending Goldman in to in I on the release. Conference Francisco our with be a earnings want the XX. we'll more in discussion on complete Communacopia as Sachs Research the today's September September uncertainties, Global filings on SEC City well Wolfe of Conference Citi inform conferences: following New

Jay. Now I'll over the call turn to

Jagtar Chaudhry

XX% QX Revenue delivered new and Thank XX% flow year-over-year. a you, exceeding of operating grew margin guidance. of margin XX% our strong cash Billings grew high XX%. records approximately end with free with of metrics We profitability all Ashwin. and the reached

new quarterly also business in in billion a quarter. new in achieved driven We an milestone QX, $X acceleration and upsell in by of the bookings

customer grew driven in line in and strong cash these year. to we're pleased we For the more free of the outstanding and flow execution. in our performance, the flow exceeded Exchange margin Trust innovation our year, of achieve pace free grew and the in a I'm XX new for fourth share resulting $X.X platform. milestone for revenue of ARR QX, go-to-market go-to-market consecutive XX% we cash in $X top crossed company. delivered billion customer strong year we also ARR for the very pleased recent Zero another expanded in 'XX. XX% billion bottom and XX%, full by results of we to changes demand a rule platform. I'm with of making adoption record progress of new and Despite organization, our expect The With the in or fiscal

a share me observations environment. let quarter, few the of the details further into on getting Before demand

is our business. upsell customer platform new for zero of adoption stronger record and with First, a ever setting trust QX than

across million nearly customers. Our X,XXX users XX platform secures

IoT/OT trust disjointed for users, by consolidating legacy still our users security other devices. adopting cloud zero products While vendors are to platform. struggling security deliver beyond applications, their to Customers for are comprehensive security deliver platform our we and expanded workloads

AI creating Second, avenues for the new growth increasing us. use of is of

customers we security, to access is of control these adoption prevent rising of to exposing which launched our AI their earlier new AI gain security protection To gaps policies gen Using For without security, from gen visibility, security. in posture. enforce enables the example, customers organization's gen risks, address can data AI help realize sensitive year, data leaking. our apply AI benefits data productivity the compromising and customers this gen

to data models share massive full that platform. are a is This market structured with cyber a power trillion trillion. not lake. thrilled are can't achieved innovations including leadership quantity further that as demonstrates that I'm position. proprietary in T, the unstructured proprietary Third, transactions that throughout X.X firewall our we detection. daily. major platform, have to logs generate transactions traffic URL. milestone have often That leverage that loans SSL surpassing this threat and These logs data, These our for over train data AI inspect feed our widening our of We cloud These complete vast

of with expect of continued the of Our a analytics nearly traction. contribution business we solution, for market of and in with very billion, believe the grow. With of [ and of entire the and these contribution environment addressable even QX 'XX, were the stages early attacks. continues with some to expansion AI opportunities an in ] I to year. are X part its worsen am points available pleased strong to the points firewall continue though of as AI growth we seeing solution, $XX business [indiscernible] a I and threat exploited fiscal to new only products the Analytics are 'XX VPN-based in for an fiscal of insights increasing including are limitations to X launch cybertech AI. actors contributed sophisticated RiskXXX, AI by unified volume upsell management, and [indiscernible] analytics architecture The

cloud. year, an ransomware attacks XX% the Over blocked increase Zscaler in saw by the last we

year. number adopting are Our tracking by the the of including cyber seasoned the of our customers families, threat ransomware past were sophisticated in increased uncovered XXX breaches, is team that by severe platform. zero trust more class most Driven research Zscaler many

XXX for SaaS deal. a purchased to They machinery us in logo replace a a XX their [indiscernible] firewall-based The purchased ] [ for firewall, industry chose allow ACV network win, previously in solution security. a new [ Subsequently, movement example, spend. [indiscernible]. top Fortune customer solution so-called For users, users, consolidate multiyear secure deliver not web X-figure ] to company based Zscaler gateways does and the [ ] Zscaler realized and firewall MPLS zero trust they SaaS XXX,XXX

centers makes they cloud customers' branches threat our be platform can't proxy-based Hence, Our they invisible discovered actors. can't and data purpose-built attacked. and be to

In addition platform new also our purchases, we upselling logo to are platform. landing

[ to Our upsell. $XX of successful ZPA eliminate continuous access and expand ] engagement to flywheel expand and them an bought a doubled purchase, XX,XXX customer's user creates deployment the the give and land applications After internet deal, to for securing in trust XXX access Fortune and motion and and after upsell it with a ZPA you To zero services ZIA Zscaler, private ] for quickly With X-figure customer, identify [indiscernible] SaaS ARR resolve for performance example, to and natural issues. was users. ZDX ZDX, a to to for broader million. our end-to-end [ segmentation to than nearly lateral platform. this more application financial

adopt pillars. to customers continue to our advanced protection our share happy it am of I that data Next, making the [indiscernible] of features fastest-growing one

logo in X-figure American example, including purchased protection provider our a multiyear For care XXX,XXX of ZDX in deal. platform, multiple an health a ZIA new users for TCV pillars win, data advanced and transformation,

comprehensive data, or more. SaaS, rest, e-mail, to Our and data across capabilities, was motion cloud workloads channels, critical types data all in at unstructured, whether this or protection of endpoint include due which all its data and to win including securing data pillar structured web,

emerging and for XX% and that XX% our products including Next, let delighted analytics. 'XX, to trust AI and cloud, contributed of from thoughts, emerging business fiscal in I'm 'XX. discuss ZDX, in approximately fiscal new branch me share zero upsell up

mid-XXs in grow to to expect fiscal contribution We this 'XX.

and Our zero trust solution, branch trust driving trust meaningful Trust and is wins. and SD-WAN zero including workloads, for more zero Zero cloud more segmentation for

SD-WAN the Let own two XX% [ ] making Trust win, need nearly workloads trust financial XXX dollar for existing prem X-figure another Fortune a sites, the [ protect contributed X/X Trust annual spend Zero SD-WAN this ACV which of was deal. their over deal the share the ARR XX million Trust a customer examples. In of Zero and pharmaceutical purchased manufacturing X-figure ] win applications. me purchased zero top firewalls to eliminating workloads company approximately for Starbucks. an XX of customer. In upsell like to site upsell of protect for each services our solution ACV Zero doubled upsell

further of acquisition [indiscernible] strengthened ] or new by to is sales customers. expanding products our and of opening emerging [ Avalor dose Our portfolio

security With By our edge, and also firewalls the addition branches, firewalls factories firewalls expanding relied SD-WAN, trust campuses these to Trust inside only Air Zero replace eliminate sites. inside ] and but ] [indiscernible] the of with on where Gap customers traditionally [indiscernible], control we zero provide Zscaler or combining [ West at is East network cannot [ access

system Aveda to we from daily overall customers data ] improve traction for the strong [indiscernible] vulnerability delivers seeing proprietary insights security through and our enterprise operational [indiscernible] business and also our are posture. X.X acquired real-time combining for customers' security efficiencies [ By management We actionable with trillion transactions, their data solution [indiscernible]

new with opportunities. expect that to logo broader other We emerging conversations platform products all into [indiscernible], expand start

We will expansion. in to continue platform invest our

the adoption of for U.S., Moving In opportunity their of excited a take like initiatives, a Having for with Zero to X-figure many in are large we initiatives accelerating Zscaler to cabinet With the significant landed nations opportunities sector opportunity. XXX,XXX modeling upsell XXx investments DoD, share new X,XXX a our the This level presents to I to over But large including we in Zero customer security our government Trust. Building users. cabinet-level agencies U.S. the increasing upon a go-to-market see this we XX this the vertical, Trust purchased us. of in vertical success time. cabinet-level federal the XX are landed am that agencies ACV the agency, other this users, for count similarly XX. employees, customer will deal, public our is upsell increasing federal

some Now our share updates sales let organization. me on

attrition reps improve. a First, to expect a fiscal had and plan we attrition further continue we to hiring In hiring pace lower-than-expected and strong 'XX, had quarter. strong we at

upsell than the stronger we Second, to sales than I by that continue and better sales fiscal the acceleration report driven In second pleased productivity was productivity in new 'XX, expected the first. with to to am during expect improve business. quarter, half

and that with zero trust their progress increased system plans the integrators, building platform in that showcase them investment with large integrate experienced channel, projects. driving go-to-market in GSIs customers leaders mutual enables for value to Zscaler significant their we programs to or by GSI Most global already developing in GSI enterprises. Zscaler customers, the customers' the hires Third, large GSIs delivers. Zscaler are are digital These platform hiring transformation

customer. I XXX% Zscaler deliver to deal gateways, quarter, is ever am in end sales of XX% customers. This our and GSI added of XXX,XXX we're including over to approximately revenues products, XXXX we Fortune VPNs, large top the account-centric logos as in MPLS to ] in which customer, point largest purchased the progress ROI Global consolidating ended of users multiple for the growth fiscal go-to-market which user pleased this large transforming GSIs to Global XXXX contributing This XX% companies web by more users TCV is customers. 'XX Zscaler fiscal of We than XXX for with This with to firewalls, our XX compared another of GSI fiscal our making making secure as our number GSI added balances, the in is and We 'XX [ network, double nearly services engine customers. 'XX. vertical. an companies load motion, expected X

spending quarter spending with year-over-year to ] annually. XXX by million XX% Our over customer $X million plus the customers we $X and annually [ XX base ended grew plus

large continue in expect customer to this 'XX. fiscal We momentum

of mission-critical address I reliability trivial the customers security for that entrants superior world's there's that forefront has of no is and with for resilience. service, resilience and driving has with we differentiator Operating a high such business. seamlessly no want experience. cybersecurity scaling resilience trust From have This our the interruptions. of task to built largest including do firewall outages rely cloud have the cloud cloud growth a the inception, decade, CrowdStrike. requires topic us companies platform of largest recent Microsoft surface and has due a clear experience. a When come been to room a cloud the earned for to over service on [indiscernible] is By enterprises. security the not and operating the new legacy Finally, and Zscaler years vendors, of this is

our We Zero customers enter became an As we security and continuity fiscal XXXX, with I with which obsession, uniquely confluence high their AI. to the emerging and closer events. In operations January conclusion, of adoption our business satisfaction, a strong in a move pace enables a the XX. company of With expanding an stronger a go-to-market of of we strong positioned of R&D levels that drivers, and another cloud over first security $X NPS and expect innovator customer ARR. goal are machine, to during catastrophic our 'XX large growth innovation, introduce large to market, increased leader us products billion platform of Trust addressable will benefit goal continue two market year, from secular service to in even customer

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

Remo Canessa

Thank you, Jay.

Our guidance million, our of revenue, From profitability, up X% XX% XX%. QX of EMEA up ongoing sequentially. deals. Revenue was exceeded represented and a growth results was Americas perspective, customer even geographic on and and XX% scrutiny XX% was $XXX with year-over-year APJ large

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

$XXX million. total billings Our grew in year-over-year XX% to QX sequentially XX% calculated and

paid on and upfront payments coming year-over-year. year-over-year. billings grew was unchanged customers total us relatively Our percentage such calculated the Like calculated of upfront some billings last deals, year, multiyear from current XX%

performance in the strong continued play ago with RPO remaining from role total of XX% a speaks transformation $X.XXX of RPO, RPO. over This in with billion. growth million customers or to the approximately customers' $XXX,XXX QX strategic was to ARR digital Our in we our grew and XX% obligations, XXX customers We journeys. customers year $X with ended ARR. X,XXX over large Current

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

rate While for metric in multiple dollar-based I the to a just our success our in pillars be a mentioned. upsells can on factors and year, the There variability from start future. increased faster bigger bundles, due quarterly could good selling basis this reduce retention within our business, the selling in

the Turning year benefited XX XX.X% a ago from accounting rest our life points XX.X% and year-over-year margin Total in of financial approximately On cloud QX attributed infrastructure. XX.X% basis, of prior in by to quarter. performance. our the useful in of to longer gross to gross margin change quarter a compared our the basis the

increased $XXX Moving on and XX% sequentially our to X% year-over-year expenses total operating million.

points in We operating of continue of leverage basis an significant XX%, with year-over-year. to increase margin financial model, our generate XXX approximately about

investments. margin free with and the Our We ended CapEx X% cash, over cash equivalents $X.X billion short-term of data cash was flow approximately quarter of in center revenue. XX%, including

full Before framework year to guidance, about getting details of the context billings wanted and XXXX the our fiscal additional share for QX to I guidance.

XX%. billion, or billings growth XX% year of $X.XXX to billion We fiscal of expect calculated full approximately 'XX year-over-year $X.XXX to

improve the to billings billings midpoint year guide first half We year acceleration. XX% XX.X% of in that key our to be range QX of of I'd XX% half. In expect approximately billings as year-over-year we implies the full second expect to of like driving productivity accelerating order, this continue in with of approximately XX% first be second half, no particular XX.X% the mentioned, full share factors are sales to in to half growth The This to billings guidance active One, the to billings the guide. are Jay second in the in scheduled year's three a to in billings strong with growth from and the time half three, pipeline renewal activity a first first, billings half the supports stronger contracted second stronger And growth XX% new prior giving strong strong grow contribute our from Two, second to year. half. growing half. in X% expect second us and naturally visibility than upsell acceleration. this half implies the into perspective, to growth total contracts noncanceled and we our in

million cash that approximately million. Moving XXXX, to continue on in of to to we taxes. cash a Please tax an be with estimated $XX to note expect taxpayer fiscal modest $XX

Please per and 'XX this is P&L we're calculations. in XXXX established our our release which to and making fiscal tax rate non-GAAP a tax to reporting, share Starting for are change XX%, earnings of financial forward, guidance rate. like our for I'd fiscal supplemental fiscal in attention reflected your a non-GAAP going non-GAAP XXXX. to comparisons, and non-GAAP non-GAAP to tax fiscal new refer earnings reflecting For call we 'XX

to Turning of the rest guidance.

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

the like number margins growth Branch analytics Zero also gross a and would that including products in million, and For Cloud will like XX%, of the million reflecting have ZDX, lower revenue remind products, our core than margins to I AI our to of year-over-year $XXX range quarter, investors for of products. $XXX expect gross we Trust approximately emerging XX%. initially of a first newer

managing emerging currently are growth, gross to products the We for market time and margins. them for not optimizing

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

the fiscal share in in reflecting approximately to income year-over-year diluted XXXX, Operating billion range assuming billion, XX% For range of range revenue $X.XX approximately to the to per profit $XXX the the $XXX in XXX fully million, full $X.XX $X.X of XX%. of million $X.XX to of year earnings shares. million, growth million of a $XXX taxes

our expect higher We be flow CapEx approximately to free cash XX%, year. margin to including this XX.X%

you market long-term our to aggressively may infrastructure. With profitability. expect open approximately X we in XXXX to position our will for increasingly call broader be as and now opportunity CapEx as invest growth the center to customers the us cloud With upgrades fiscal large higher for a adopting platform, data revenue a points percent we and that, We compared and operator, questions. to AI of invest

Operator

question, Kalia and of with Barclays. from it First Saket comes Instructions] line [Operator the

Saket Kalia

similar we all of question, the about I billings that A you. to guide. Zscaler? as attacking I if little SASE, views drop one and newer in think for your maybe maybe billings a approach on nice maybe get I'll the on it [indiscernible] of know quarter year's make Maybe all are Jay, pure-play bit, some next But firewall-based this of cloud with players kind how out curiosity, solutions. a

Jagtar Chaudhry

you. thank Saket,

any We change have not on seen competitive landscape. meaningful the

as for market has our better. looking important thing, for very a a broader it's platform that's approval become because gotten vendor and I if In has looking fact, resilience is the brand would the say, integrated

critical in the vendors [ they the a architecture essentially end of high about Last we or build us. other the 'XX. advantage that's to time the for we On [indiscernible] takes customers. the the a they these you We've you, of the of architecture, and experience logos. architecture. highly feel good. We market, for the to Even massive. whether year, over is a actually new trust a [indiscernible], firewall mentioned then earn doubled highly And some lack enterprises number have added if build of big the it or lack time to trust long us Architecture very seen, resilient like either multitenant ] and it vendors, proxy reliable, 'XX took these large

The we're what between So a we keep gap I position. bigger innovating. offering in feel would call on be competitors is our We so, good growing bigger. and, and

feel I other with gap very the creating are bullish comfortable and So competitors. we for platform and the

Operator

line Brad Bank. Our next Zelnick the question comes Deutsche with from of

Brad Zelnick

to as on in finish my in year. And are real cyber about place Jay, congrats within customers CrowdStrike thinking way relied available echo a way designed the July. I'll the customers by your Microsoft is strong way related Zscaler highly I that's outage appreciate a and event if and that? why I'm comments and frankly, that wondering from strategies what about you in-line their changed can any the upon Zscalers has tell, solution. But in an

Jagtar Chaudhry

focused right. the strength. are CrowdStrike a resilience, which more outage, Yes, good is our It's question. customers After on

the largest invitation customers ended briefings, what by we got of see firstly week calls. a fact, actually briefing about firstly surprise in is In importance are ended to main about we they that -- them. and delivered, mission-critical The ], doing so service and this inviting the protected? The by the after up CrowdStrike. matter or that gone know of business true of XXXX XXX we a about that [ is so, I Right outage we're incident, lots good to a that wanted to the customers, lots [indiscernible] the registered mission for the doing X,XXX to caused a our Zscaler was, or significantly So since or within deliver thing up multiple service vendor continuity how criticality first [indiscernible] was of plan Jan only has vendor has up it, question

In XX% already ] fact, have [ about ZIA. customers Zscaler's large deployed of BCP or

do them stronger security. vendor even customers they want they our consolidation but single sentiment the dependent makes [indiscernible], want single become This resilience, [indiscernible] [indiscernible]. such consolidation mid-dive has do that Microsoft while especially of also So and want not after upon it a applications for

in So think we did positioned. mission totally customers all with criticality. working And us. important job I think building it's good We are and a our I are

Operator

from comes line with the it of Boyd UBS. Royer And

Roger Boyd

general you of guide. could to just ask wanted I there. if to about And level the billings conservatism you the speak

productivity before been it quarter the than expected transition, You've out headwind sound and pretty expected year. even the better XQ of coming does clear go-to-market but was sales this this both about XQ like in

or beyond pause So environment, anything cycles giving else you broader that, anything more the around or else? your just sales tempering macro expectations

Remo Canessa

question. Great

it's So time out in we -- I versus first reps, attrition we for to account going as talked the we that get guide productivity. expected And and really higher mean Hiring full second attrition had we basically QX. reps to broke again, take in to in organization, half those than about those billings sales QX, stabilized half. the reflects account

to them expect We the second in strong half. get productivity to

of pipeline our the upsell called new you out Our called billings. the billings billings is when out And we billings, guidance. And look from are and one things also up is supports scheduled as contracts. of script contracted renewals billings on prior take year made at contracted and a we

end a half can second a that change -- XX%. What Zscaler half, reflects there's we're X% is So an basis, I in mature, seeing sell is to sales -- also of a getting very The it's we on for I basically as accounts our half, billings change increase called our this from organization my really more also what able in those leadership contracted perspective, at to seeing first value and And that. out being seeing. We're say guide organization. are business and sell that is the the to that X expected is into because almost the weighted, Zscaler. going that of feel year-over-year years, more strong the be of is we're here second deeper

are and perspective GXK key is the my puts customers. The strong the We're So Fortune for thing in from that demand in continue is expand which that going XX% ], Zscaler Trust. takes with represents [ to also Zero the XXX to around we're innovating.

So you look represented of at total in 'XX. they our emerging our fiscal products, upsell XX% and new

to expect that We up to go XX%.

focus. be selling only So products, going to but our that's also our not continued It's existing core innovating.

strong from go-to-market team. who feedback and We was there very just I our just had As momentum very, the went SKO mentioned, positive. in everybody the

we're really at. environment. said But well building think just positioned. Zscaler I what Jay, backdrop, still with that, I the [ about we're Just challenging it's we're anything? just very, spending Having go-to-market, very where ] feel feel that our platform good a our with

Jagtar Chaudhry

No, it's good.

to is I point last cost think in our CIOs ] in unique takeout. a savings, We're help environment, today's number [ position I deals. justify mentioned a ROI the that want of products cost remove closing comment do

Operator

Jefferies. the next question comes of Joseph line Gallo Our from with

Joseph Gallo

by and obviously want beyond follow that up to out and I ZIA data to AI protection you've last success. started I successfully Jay, ZPA evidenced branch mean question. very on

Does basket. how post your to we've on products? And Remo, put maybe you're just can thinking customers heard elaborate want you sell don't one this incident, your However, ability 'XX in hinder CrowdStrike then about eggs guide. billings fiscal all incremental in NRR the to their

Jagtar Chaudhry

very a question. it's So good

putting Now the products, eggs each all of CrowdStrike one one of your work an wasn't product [indiscernible] issue basket. must really of CrowdStrike well. in was

customers side, one do on want So consolidate.

products, it not going they to bring all a and that to single they a vendor got providers, vendor key you to all the sell down to do to but products. or you X go that security platform or extreme wants single want products security sell applications handful to the and a dozen If want want

and want zero in-line they X the one for to access. ], to CIOs, EDR, providers, trust most I have In of for standardizing [indiscernible] fact, for been [ one access one

a have accelerators think end still separation. a of I good because you that's couple but up [ combination you getting ],

in customers Zscaler. don't this them, we environment, our from So everything back us buy on really tell aren't because pushing

identity the provider, got an You've an that's why And markets provider, EDR of we'll choose [indiscernible]. we the and get we you've do rest carefully into.

we good and to feel where expansion So areas in. of about the want compete we and selection comfortable

Remo Canessa

perspective, MRR comes is is outstanding. we as we scale, look at time believe, top it me existing before at NRR. about is, these guiding We're business. it an I XXX%, key line is From or I our customers, really, not Joseph, for only XXX% Whether really on driving just to the The outstanding. calls, mentioned think, from customers new

Operator

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

Ittai Kidron

just quite want make understand billings. dead patterns, again on the half year-over-year Great solid I you horse to to second for in I'm finish the be I I similar in in half, have didn't the sure Remo. any on the year. sorry, were going billings. first mean, this seasonality I'm have 'XX, and right. to try unusual here they

to Is and happened dig that be the that Anything somehow lump that a macro You second X% just you expect greatly do the a half? Are can that appreciated. that on close bit out? Was comment? ago, here. years X, more is what X play back just renew into something in that's the would little and comes in half? more there sum to second out. driving deals first you pushed being things or push to expect differences it more XX% in So the Hence,

Remo Canessa

Yes.

take a year. on but the basis, first a So was it's the growth, really call and out look this -- for year-over-year half X% billings you XX% growth at and a if scheduled in of scheduled scheduled billings we billings see

question what the the X-year X-year contracts step creates we got then you and back that? So they're billings. contracts So scheduled signed to and

billings those are billings, through. scheduled coming those have we So

back Now if fiscal look were you first into and take 'XX fiscal and go 'XX first there half a challenges. half, macro

So from a environment challenging it perspective. Zscaler's was

[ sched that in half. fiscal now and with year-over-year scheduled ] lower. that fiscal creating billings coming those billings challenging those the the first X% That therefore, half 'XX rate of is are are in 'XX, first growth and So of environment, through,

having becoming the Now larger more the was before, half. made second what the made -- that that, said [indiscernible] companies business I is second comment more half. getting I becoming

So they're those those our to and billings. are reflects contracted get we and scheduled billings expect of scheduled billings that, that guidance XX%,

Operator

Our the with Essex Brian comes JPMorgan. of next question from line

Brian Essex

in Trust Jay, are to back specifically you into I may there have circle competitive certain want space, consolidate a initiatives environment I Zero certainly lot regard to seeing of we're to this the on think pricing. the certainly remarks, but with prepared on And touched the platforms. macro, in your

change is pricing, different duration, of that that How impacting lot dealing giving a dynamics, I touch if with could back away see free. layer Some platform. is an with? I you maybe you're products understand for that But to pricing on peel architectural your in your environment you times the environment? a just of understand attractive pricing the that just wanted flexible that's to there's what

Jagtar Chaudhry

In during good said enough good cyber the enough challenging is important. Also in not In is is I As areas, large at enough. time, good is remains enough. very cyber yes, my many [indiscernible]. prepared and remarks, same good enterprises, macro

import number a want two, an trust that's good, cyber number matters. real cloud-native do cyber architecture in area, That's a solution. that play one. And zero So the does very customers good role

close [indiscernible] can was closing build, Now today's actually in the once then customers, you do that, the environment pipeline next part there. your required you deal? Now with deal are comes the engaged in, you

take save out And customer bunch can you we products money release. actually for you customers. You're can and able of the to a able are show to the that

show able both. VPNs, able like, of that and products eliminate we to helps that [ [indiscernible] NAC replace of are we to firewalls, customer new products, the are to and like able a number We are it, -- number products ] whether those the us

Now we accelerated and have business a upsell new has actually.

are strength we seeing So in area.

So not firewalls. VPNs. move. bunch of those base a by firstly, wants the of Do vendors. point take today They take We to firewalls. want firewalls. remove terms protect installed is to biggest those in products? We on those firewall you The you products the showing competition. handle to I'm I'm products pricing about worried Think able a other think number of vendor of can situations

this making level, value two, we So and to owned bit. have C one. that business keep quite at sure assessment, engaged we just better a area, is process sure have create number make we at on we we the Number [indiscernible] a good getting

Operator

Matt line of with Markets. RBC is Capital next from question Our the Hedberg

Matthew Hedberg

I the on that linearity bit little the guess and you it I of we're be -- talk with but a deals a it's if back-end QX guess, in obviously, was I -- the pushed anything that little abnormal through thus more or on you quarter. about trends how would one pulled? And loaded, the September, a in comment but would bit Maybe of Could that or now but quarter, -- August August, specifically helpful. maybe could far, be assume

Remo Canessa

or have Jay loaded. unusual give August, anything talked trends speak business, or The trends I'll to QX quarters linearity quarters, that. from Nothing that about nothing prior like give in QX, comments. we it a maybe perspective. And the but QX, become specific that let more about August, amounts can was few so regarding on in similar dollar back-end few a with Jay trends The can't -- the

Jagtar Chaudhry

Yes.

about nothing August I talk making is in business progress usual. to think unusual as

on So [indiscernible] get more I probably you'll think hear as us we

Matthew Hedberg

pipeline of focus visibility, large-deal you All and understanding seems about I you consolidation kind about it in. increasingly of It the spot of to of squeeze hard talk the like those right. Can talk large of the could more predict in just the a consolidate lot playing things. Maybe a But consolidation, you on role? spirit like deal your growth feels that one timing on customer spend. guys it are could if good sort is in in to

Jagtar Chaudhry

[ There Yes. ] of no products. down consolidation on point slowing is

internal, seeing getting deals and been more They're bigger. going have upsell more. seeing our We

more So spend Y several gone -- spending deals with I X, or if up us. customers has and they're to whatnot. where shared several customers started Z X and at large

operationally give all customers and So is run looking the are protection consolidation, better? can and three, ZI, it That these don't started they bigger one manage Zscaler, is, you get one, cyber was you number of customers make area to is main which primary loud with better they sure is highlight data for [indiscernible]. protection. things consolidation started data [indiscernible] playing us handling thing Number and and role can message When for with the clear, cost savings? compromised. they're Number for do me can a I'll two, a focus that. In for cyber

a And a attacks natural that has -- data of data we with become become area exfiltrated, the has growth line to sitting traffic build where for similar and data it often protection in fastest see is a protection one item than Now are protection. the we provider, goes data more with important bigger partner natural and internet, to used be. Since us. we that to in the have

as us. We quarters expanded mentioned do has we DSPM few quite also for and [indiscernible] this a used got ] a SaaS, SSPN areas. kind the becoming DLP more that And Now also, ] in-line surpassed bit. its think of I as stuff [indiscernible] to the exceeded DLP ago, [indiscernible] billion are it a primary we e-mail now platform [indiscernible] [ for [ we

I we've So platform. positioned. With got think they're extremely I expanding savings, great think cost a well

Remo Canessa

From my just over than mean ]. are I a out ,XXX Half script per believe XX called transactions customers on ARR, ARR. X,XXX than have trillion some in ] we with greater [ customers greater I million $X numbers -- XXX,XXX [ the And XX day. Matt, perspective, customers million X also,

it's So a perspective. good

magnitude, offering, per time ] the [ day. seen. At On XX public of of transactions doing order that's billion our than more the we're anybody's

we don't position we that there else to that GSI. last perspective. as also transactions X going anybody there's able in I got one great go-to-market that a received, an we just that from in The and the XXX going we've on we focus out we're to that made with the things It's in my view capture transactions. we this That's over to help data the deeper area we've we've we receive, going basically think the of So a called that also, information XX from market. I our be are changes believe can it. sell we're billion billion to out to to do security that been the accounts, we're months, go forward. customers

platform is about really throughout is to world. And think opportunity the the we customers well really I we're I protect And positioned the think where I governments feel believe and at now. good right big.

Operator

the line from Baird. comes Kothari Shrenik question of next with Our

Shrenik Kothari

approach, of out? And for customer XX you And demand of zero top on light you elaborate kind you with help IoT. well. Jay, nature the the and beyond users for in towards logo pipeline So a win said, expanding that composition follow-up a more and called what and and for example overall platform guys of trust base application the of the of land and in billings, workloads the and with these contracts, of workloads of now applications, this the moving are right, and strong expand applications noncancelable kind you new versus does that the compensation seats terms just gave delivering Remo just broad motion securing users and and workload as

Jagtar Chaudhry

Yes.

product protecting extremely start my as We've a trying users. me Let the users are of Most with protected. that some prepared I expansion, the platform said well, mature million done vendors XX for remarks. really during to

expand natural devices the and IoT/OT it like. So is to into us workloads, for

mature products some about in you you've to points, the the areas then some flagship talk In data give we products. emerging got and newer of of growth terms

from we to products, in fiscal the 'XX, falls in, expect fiscal was go 'XX. of type fiscal Our IoT/OT XX% emerging It had in which it 'XX. stuff it in is workload protection, and XX% where mid-XXs to gone up

out growing faster. firewalls of it's bit positioned. you plans what is, IoT/OT, and communication, have to we is why lot competition some a linked that different and able that's Yes, that. The that to literally the firewall a That's different. IoT/OT, well there It's VPNs away. real the and area out done And in workloads of these just that [ all carve the exciting market It's is go is things same little to about of through like. thing and VPNs. a fashion. share lot no audience, it's are do to sale. trust zero So We all firewalls, for stuff know manufacturing do, ]

] audience, CSOs and but So you a ] common on reach do [ need role. to the CIO play [

IoT/OT, for needing device which area network without devices. one firewalls, actually With does access tons control [indiscernible], the segmentation the well needing showing customer of in It's our interest acquisition base. extremely being really without of any of that's any

In IoT/OT [indiscernible] fact, segmentation gone with based device on up number our for significantly. engagements of

entry talk about people and you us trivial to is in not So trying that's to come is between distance. Remo, the... why I feel from like the behind and to gap barrier growing want the do

Remo Canessa

upfront. contracted signed a point billing from again, the But is contracts that X-year Yes. perspective, key we

contract the getting on billing so -- That's an then is And happens And with contract scheduled afterwards. afterwards certainty billing. that that basis the good. annual

that is which with but look key, really So increasing, sell we're and deeper more our also, related X-year that positive, accounts. too. our going a going selling billings, we're buying that the And the our gives X-year We're what organization, schedule certainty size contract also product getting sales seeing to to also gives And is we're that you you but customers sell customer deeper again, into is lengths time the which for our go-to-market That's we're contract seeing seeing new billing And be mentioned of across contract to accounts. also positive. are our increasing, deal basically getting is customers to is our more. which look We as to organization, before, I the into focus. platform.

a longer it's So contracts, good thing.

Operator

question Colville the from Patrick next Scotiabank. comes of Our line with

Patrick Edwin Colville

I ZPA XX-K, guess what [ to we're products products. mean proportion lines? AI mean sustainability ] trend gen emerging a product remaining I I ramp. of upsell guess fiscal mean two the of the see I I was and but get the 'XX? And what's question those those to 'XX. in new to [ in the I PA of second impressive upsell about and and mean, 'XX. part it ZIA for do in merchant fiscal new going was I ask is, this XX% fiscal as want expect and in and then the you how TAM ] very

Jagtar Chaudhry

good very So question.

ZPA, business the literally from ] mix new between nothing if doing today, of one But let's X over between of of we look XX% with ], adder of the the ZPA. gone the you at product. that IPO, [ was kind ZIA speak. so ZPA are -- to was a So has about ZIA time XX% and to [ start and rounding products. ZPA At there the only

that's So very marketable.

enough. going In ZIA is is fact, of be too high, if goes fast wondering kind it I'll

of complete So have to I to at make Those X expect end not sales quite expect the a more, somewhat ZPA ZIA, we package, every it user get and I every grow the it for to and Zscaler could XX-XX. it products but to customer, [indiscernible], users. day, key call Zscaler ZDX. that That's which kind says single area. really because customer those Zscaler products. ] our for what our become basically goal buy is queue every for our [ these largest has key that's in for users one of

second of question? your the what Now I sorry forgot. is -- part I

Patrick Edwin Colville

that [ there's from lot guess a what we get go ZIA, of -- a -- is mature there? it's the is talk more that lines? articulated go what in a there but sustainability is ], lot guess you investors those I the to I Or question And is how about maybe just business is PA to segment?

Jagtar Chaudhry

some market second starting That there relatively seeing that GXK, XX% with much how ZIA much -- done the them -- we customers left companies companies small. But penetration starter take yes, product. nearly customers. part. -- are and sorry how [indiscernible]. is which with was are market ], is are customers reached are Obviously, have of penetration all with sorry, [indiscernible] XXX but ZPA, GXK we about Zscaler start let's -- almost a also let's we So that [ number XXX means spent XX% start

area customers [indiscernible] ZIA a a large our of about Now ZPA. end XX% of up also

go of million But for more for about [indiscernible] So $X the opportunity group GXK, us. over the existing million. have million about spend means of many us. easily XXX the to That XXX of same only $X the in good -- for of penetration. to them the $X that's in XX% us that customers, that customers could terms But done

XX% to So sell among an opportunity XX% to and ZPA. higher for to and both I'm number from there's GXK upsell, what we us ZIA saying, those -- go a

are point us. we for end market of of offer. lack the no sophisticated. we extremely Other functionality, They breadth, there's high and the market, well. the do extremely, depth I'll affiliate So Those and reliability make customers need is, on

going account counting into So driving wider program logo I new focused and gives deeper our large getting accounts our we on and you hope actually on is look. that that are is existing contest. color focused this you CRO new the

Operator

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

Adam Borg

Awesome.

talk talked investing where and R&D? a For in most but script, Jay Remo, fiscal a could 'XX more across I and sales I was the you're and bit little count know you really hoping about growth and you this about bit head in marketing

Remo Canessa

in head We fiscal expect 'XX. count increase to do Yes.

X,XXX Our what about will fiscal marketing, in the added In I from we be fiscal 'XX G&A fiscal head 'XX, and employees employees. be of went it and in less hiring We areas, fiscal 'XX. 'XX across X,XXX count was X,XXX. all to will say pace R&D, increase sales cloud. than would the

a in I of in fiscal versus think would about hiring 'XX. pace So moderate 'XX more

Operator

And comes the with of Stanley. Hamza Morgan our line last Fodderwala question from

Hamza Fodderwala

early sales that the Either you that for quarters, proof last seeing curious the Mike leadership been have confidence points on indications new heading 'XX? few what Jay of since some are early give the and in you're or fiscal Remo, into

Jagtar Chaudhry

that centric focus So key good to to of question. from companies some these of thing move That stuff. stuff out one changes. The dunes. us Remember, the set was for to we when opportunity make key we account-centric wanted early-stage was on

process. in their place, a well. making trained force you How results? You assuming seeing good start then progress upsell and this have we the the start more new you do sales see in [indiscernible] we [indiscernible] seeing are and We in logo as actually put

seeing are accounts, deals large upsell what we good expected. and that's large we So

XXX. it, gone it's fact, $X ARR In you our if overall customers, think million of to number about up

with $X XXX ]. has customers Our million gone [ more ARR

that. team key new but all for past Now is that because not quarters, we're seeing new team working started of on the the reasons attributable couple of to

is the thing second seeing The GSI a as involvement. result we're

GSIs, into embedding We special are offerings. offering actually their have on our focus who

and them and your [indiscernible] a on a accounts important offerings conform of three, part [indiscernible] to leaders indications the early larger large focus deals. with becomes that. Number background good the of it of account quality seeing sales So selling of as well. of number We're

are We of quality the seeing those people.

So I from I'm better of with is very point my very it. I'm the expected, than transition and bullish about view, it, going pleased

Remo Canessa

one from a my for of the frankly, two it got and significant From that That's a great worldwide you've I'll product yes, and comes basis. a with quick. perspective is on company a cents, And your great quite the people. you I'll down required, perspective, thing, give end need my platform really to my of day, going it At leadership across really, board strong is what in forward. will our strong It very, us that great I I've the seen believe And it's have, well leadership I up And I as go-to-market to Jay mentioned, very hire that believe is sets the on it board. we see. people. think, strong. leaders with we And the team have make

Jagtar Chaudhry

Yes.

of make to interest for and I entry of think and your we're becoming ahead again. these it's look more and We one Thanks other has at is will opportunity conferences. excited comment hard very barrier forward Zscaler. thank investor and I'll done, important what to you more is the a seeing Zscaler I with to you that, us. With do cyber

Remo Canessa

you. Thank

Operator

Thank you in all participating for today's conference.

disconnect. You now may

Zscaler (ZS) 3 Sep 242024 Q4 Earnings call transcript