Zscaler (ZS) 1 Dec 212022 Q1 Earnings call transcript

Good day and thank you for standing by, and welcome to the Zscaler First Quarter 2022 Earnings Call. At this time all participants are in a listen-only mode. After the speakers presentation there will be a question-and-answer session. Please be advised that this call is being recorded. [Operator Instructions]. to Choi, conference Strategic VP like host to Finance. now Bill today, Investor would hand over the your I Relations and Please Mr. go ahead, Choi.

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

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

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

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

we’ll the Conference, Conference, the I attending remarks the Conference. that upcoming Investor today's & of inform BMO in move when copy like events Barclays following the call. would a upload Global of segment NASDAQ Growth we prepared you IR ESG to December: to be Q&A website also will We to TMT

Jay. to the call will I over Now turn

Thank had QX Bill. growth, last start free Building year, we growth ‘XX. you, momentum delivered operating generating while In and and billings incredible profits we revenue strong from exceptionally fiscal an flow. cash XX% on record our to XX%

seeing revenue, XXXs attacks network again trust due annual and CIOs, firewalls, year-over-year revenue the I them of number milestone achieved accelerating ransomware enterprises designed main legacy all of security to coming with rapid a cyber half are why at saw eight next-gen in we increase scale. two with revenue our and a looking billion in U.S. hidden aren’t Zscaler more segments verticals, geographies, than of in A outside increasing of zero large over are my surpassing One, are architecture, dialogues legacy XXX% risks digital most will over SSL- initiatives. bypass selecting inspect solutions: of customer to recurring which would of favor from XX reasons traffic. while transformation sophisticated recent in CISOs In We encrypted threats are We and and traffic continuing encrypted phase highlight across strong out recently to growth. growth significant $X out security

not users with our year threats long a trust architecture to can’t enterprise legacy security term and users enabling Trust breach. and movement, hence principle as security. better VPNs than in This growth gives XX network core on cloud wins to a connecting lateral architecture. has us matters of only more contrast, to our be scale network, Colonial to the the billion clear proxy traffic. only provider from at Zero applications are movement. network, deliver firewalls zero the the such In designed lateral threat threat encrypted security to We eliminate attacks traffic connect SSL-encrypted architecture. This It by Two, ransomware and reducing We that advantage. cloud Pipeline built blocked is inspect architecture hidden and

two our over let $X we more $X in XX% annual drove value. growth the million of in Turning in quarter, million over discuss of in to performance: and We ending new factors me strength drove that bookings with XXX One, customers these year-over-year customers. upsell continued the exceeding per Two, ARR, total to saw fastest over contribution and is Enterprise expansion to X,XXX. to up segment, year the the pay With XX% segment, remains organizations is number increasing X,XXX customers with employees, who it from our segment. Enterprise down-market scaling than us $XXX,XXX X,XXX year-over-year of growing

customers commitment Zero to this growth Exchange that Our quarter to billings our platform. speaks Trust making XX% are the

of have is we step platform. the first adopting ZIA As noted before, often purchase to our the

A XXX and Let and agents improvement to a secure SaaS with where deals. and direct edge transformation ZIA-driven customer Fortune affiliated couple bundle share for the we cloud with DLP insurance and from response secure This ZIA purchased are Teams. data access XX% Internet sandbox Zscaler’s application working Connecting of time. a cloud peering plus hundreds Microsoft to seeing XX of wanted XXX,XXX and in firewall company CASB fast and employees anywhere. protection nearest applications, particularly have providers, to users me

Next, for plus internet integrator defense ZIA users, industry a workload leading protection XXX,XXX purchased traffic. for

these and shifting them large only reducing are the the across meeting FedRAMP that With is castle-and-moat operational show network, hub-and-spoke for enterprises whether platform DLP, firewall, platform. enforcing a the multi-tenant, the point few key cloud, network XXX Ready security. defense to the CASB of major to commitment believe our and for customers are access implement deals and transform consolidating buying XXX,XXX to banking true legacy with achieved customer requirements examples: SaaS app more private the seamless legacy recently a a cyber Fortune we needs public year a business cloud which We browser cloud, enabling several platform, multiple to ZPA costs. trust contract of signed together, and transformation direct network zero while segmentation. status implement having standard ZIA A simplifying many products, ZIA CMMC, ZPA segmentation help was units or High applications, without for meet here employees ZIA purchased cybersecurity consistent sandbox, Zscaler contractors. Our are also include will pillars policy isolation. four upgraded through and Their on-prem three They for all existing to

addition, with productivity protection. ZDX tripled our deal was annual great than purchased location. remediate In full ensure This issues to help of network or portfolio having identify end-point employee for and their customer’s adopted more experience the spend us, to and user application, user regardless

We customer. are trust this for with workloads now discussing zero security

ZPA a their cyber cloud-first customer to customer ZPA considered only a protection major proxy XX,XXX be pursue or scale of will their architecture hiding they discovered, strategy. to employees logo their rejected insurance thousands DDoS’d. firewall-based requirement, Trust eliminate all a Next, and at applications win, perform purchased architectures. as bundle attack surface, exploited hence behind and can’t new our private SSL With in Fortune XXX a inspection ZIA Exchange, for this Zero Transformation

three materially are vendor point cost. products, We operating complexity least and consolidating reducing at

with also integration consideration an CrowdStrike was and them. Our important Microsoft for

to perimeter-based users zero the newly or customer Next, European accelerate acquisition without Zscaler’s and one ROI. for networks, and to to acquired or corporate of approach An ZIA users for M&A XX,XXX two security XX,XXX of integration. corporate XX approach they which ZPA a the The complex applications expected Protection. with to XXX disrupted to provided Zscaler powerful with take integrating more, employees having applications SaaS trust connect After private weeks, months Global having bringing private accelerate Trust both requires M&A companies bundle Exchange, money. use time cases are existing legacy integration ZIA to Cloud secure post workloads our two and Zero in business, Transformation for networks. access purchased we manufacturing to with providing ZPA based to access across saving for significant is

Segmentation State workloads doing by ZCP Let without purchased their micro-segmentation existing driven me was value, ZDX for annual ZIA our Implementing a customer employees. ZPA with for for and their achieving legacy along Emerging risk highlight over by Products. and Zero network reduce a segmentation. cyber workloads, seven-figure CASB An few Trust government This contract will XX,XXX X,XXX Workload wins:

Moving offering. our Workload on Posture to

CIEM We are from in for configurations increased interest CSPM and for entitlements. seeing customers

software X,XXX a for company the for During CIEM quarter, X,XXX and CSPM workloads. over a bought tech bought enterprise workloads

Communication and wins quarter. Workload momentum is with the additional technology, powered offerings, in customer building ZPA by Our ZIA

customer For Services VPNs. for example, look at a starts a healthcare with workloads. architecture customer you When firewalls and purchased purchased and workload Financial it for true trust X,XXX opposite which communication our of wins, workloads success is the zero X,XXX these

feed purpose-built, us. big be for security VM-based network can’t centers is to in-line is single-tenant stream billion day. done Zero violations day. This day, signals legacy traffic detection competitive per transactions a Each every vendors a than more a of doubled security and XXX,XXX unique processing data months, of receives Trust highly security that provides SASE. protection largest in per and value in proud last of with built XX our than of am possible superior over public policy XXX innovation in massive Exchange preventing world, that our the I engines, from and the learning is the day more cloud better our one. running delivers trillion clouds security the are scalable only effect pace Our is cloud to of day billion on of customers. resulting which our advantage continuous architecture X This XXX-plus AI and and us threat traffic updates calling with very application per that machine XXX anomalies. This and user amount This platform Zscaler

for pillar and delivered releases delivered Let Each stats releases. me a delivered ZPA share agile new XX the agile scores XX ZIA product enhancements. few of quarter: and features

indicators Our new team delivered signatures XXX,XXX threat cloud. global over to discovered and ThreatLabz and research our security advanced

XX research new scientists and enables the cyber great our cutting-edge vulnerabilities. us platform of our protection addition, to our are research team, great research customers. combined and discovered with a of sophistication A In deliver team. to great testimonials security These scale reported zero-day

We QX. technology optical our We pace our for me replacing with files along recognition released defense our added like is technology makes data the to innovation newer manage ZDX it significant technology, for Data This of the and Match feature applications. single in and features customers loss our protection support some like CASB acquired from and more Data Exact images to The point of Smokescreen we deploy Indexed delivered with combined it and data additional previously Match SaaS buying problem a integrated We CASB customers us ZPA, with our character existing easier Let offering, ZIA ZCP for platform. making to DLP console. active pillars highlight in We recently enhanced CASB their addressing see PDFs. leading out-of-band product. accelerating.

Microsoft respond through Zoom features the customer delighting I ZDX real-time the we a with monitoring For another performance to past which our and One area, visibility quote, environment. to before can goals. We where demanded issues “We have closely customers. said, they is months, and the over may API-integration. example, delivered achieve ESG Teams, unprecedented one most now helping working faster we forecast XX and in and increasingly into become address of Microsoft have for want their ZDX added Zoom those by areas important features customers XXX and I our problem.” highlight We

Our resulting thousands associated cloud to carbon in powering of on-prem of emissions resources in future, the hundreds them. the with and and energy cooling and highly decrease significant the buy more in appliances the transporting, eliminates efficient replaces building, need

energy. a have cloud renewable As from recent our release, you press XXX% seen now platform may uses

team of I drive been this strategy. part oversight an to has never believe of effort, incredible us. and Zscaler from have a stronger, cross-functional opportunity we front As in sustainability have the we our with Board

billion. on adoption I our milestone, key platform. the our set our stage We to to to in believe sight next $X growing the our broader next is sustained have the accelerate growth of ARR

access success Trust and Zero with ZIA and foundation pillars, Exchange cloud for of users. we proven have comprehensive our major and securing application provides in implementing the for zero platform, ZPA, a mobility. world With Our four improving trust

the to technology. next by same ZIA workloads, trust bring to opportunity zero and powered Our is ZPA core immediate

ZDX growth with ZCP, vectors As and we we seeing for highlights, DU the our the are traction shared company. in newest solid

success, average measurable we at and a Xx customer customer, to value From with We per have and on opportunity CXO machine presales the we level. customers. revenue a sell increasing and deliver sales growth to upsell our outcomes sophisticated seeing current are estimate deployment

out the Over build depth several already further our the will our engine lead. years, of extending technology and breadth next platform, innovation our substantial

innings we very or the of secure some about a pursuing extend are are zero also OT technology believe to trust to Siemens. in early still In are future transformation. with opportunity We exciting operational systems, leaders manufacturing our summary, accelerate we opportunities like significant very to and digital we excited market

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

Thank you, Jay.

first From are quarter the As growth fiscal XX% XX% up sequentially for in a results by with XX% strength pleased strong $XXX total ZPA Jay was mentioned, and revenue revenue. activity. and Americas the perspective, basis, major across our revenue, the of a business three of revenue broad XXXX. million, the driven XX%. On was XX% geographic XX% we quarter of we product had year-over-year for was APJ EMEA accelerated Revenue regions. quarter year-over-year. was represented

investments in bearing revenue XXX% Our greater fruit region. APJ with in are than that growth

pay billings for calculated toXX with upfront XX We months to range. of our million, at several billings their $XXX XX% to the total contracts. multi-year high choosing grew year-over-year Our customers had duration end

incentives and payments. three to special As contract a for we offer reminder, do upfront our one not typically any are terms years

year-over-year We benefited $X.X of obligations, and from short-term in The up billings. growth total are the as year to Remaining XX% deal note billion current both XX% report revenue million in $X.XX were a is the performance of ago. from one RPO. I or also would RPO, billings XX, RPO XX% pleased October quarter. one-off that

above upsell Our higher a in platform was the ability last resulted the have quarter. XXX% and we high dollar-based XXX% rate, retention and retention strong reported customer quarter net than in to the broader which

discussed between business and before, our on We incentivizing quarter-to-quarter have manage upsell. we new metric net As we a will is differently focus metric or this without vary growing business new not towards. our

we customers’ XXX XX% enterprise prior us continued significant provides with customers, base truly paying year. strong XXX the customers our role in is factors, this strategic metric up NRR from platform. annually, our in initiatives. upsell outstanding We of to The $X us which growing had a transformation broader more opportunity these play to large we above and us. believe have for XXX% the Considering than million speaks in digital strength We

customers annually, quarter over XXX We us such paying at $XXX,XXX more than also customers. added X,XXX ending the

the of XX our and quarter-to-quarter to approximately total margin basis of rest flat Turning financial QX gross performance, was XX.X% points year-over-year. down

operating $XXX X to expenses by revenue to of ago from a hiring, and sequentially XX% primarily million. a quarter, points expenses total Our as in increased XX% due year-over-year percentage percentage increased approximately Operating higher XX% to XX% increased the year and which free second margin was benefited compensation timing expenses, investments in last return of SmokeScreen a XX%, T&E. acquired was partial the and half Trustdome from margin of businesses we flow Operating spend. of year, the and cash in XX% CapEx

full CapEx We assets primarily the other investments. the revenue includes digits implemented equivalents, balance cash our loss that U.S. to short-term minimize hedging and To our British of as continue to program percentage related note to denominated the we $XXX,XXX Euro the for strengthened. sheet. expect going in recently in such dollar change value Pound be high-single forward, impact as quarter and an We income ended $X.XX cash, Please year. over net with in for billion a

As U.S. hedging for in and expenses. in quarters program a several put reminder, international place we primarily a dollars, operating transact ago we our sales globally

primarily paid to For our expenses taxes tax represent we foreign income do jurisdictions business taxes, international in.

a countries, on APJ is made customers sales several countries. tax to For in those there withholding

As our in QX. $X.X recent business taxes has APJ quarters, withholding million grown the in significantly were

points. Now moving and modeling on to guidance

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

on the like more rather margins. range will XX% are other profit growth million, for focused optimizing XXXX, of a have gross quarter million, Workload shares. we would investors diluted $X.XX, of income XX%, of emerging a For and $XX on million including number revenue time-to-market XX%. taxes margins approximately and income the because loss of products, products, growth XXX of share core $X Segmentation $XXX in than remind second per gross fully range $XX lower $XXX CSPM, net of our than $XXX,XXX, year-over-year Operating margins of to we reflecting in gross million, million that to fiscal assuming earnings of expect ZDX, to initially to the million I our of

$X in- the year-over-year $X.XX a of or billion billion a of are we to the growth XX%, diluted decline $X.XX person assuming our XX% XXX million to before billings. shares. a count XX% approximately or XX% QX. broader $X.XXX With to customers now in XX%. half our our our of large our XX% to increasing operating adopting profit mix from full-year to million calculated now increasing debentures. fully to $X.X and that be range share full of QX of we are share year-over-year and our to investing Updating operating the platform, We Increasing of margin of of $XX For to sequentially we guidance first approximately committed in Please conferences range billion fiscal dilution return XXX increasingly expect opportunity to on convertible our improving a range to range billings note billion market includes to revenue events, earnings expect XXXX year to a growth our in million $X.XX aggressively to per million, based to to $XX company. the

We on we to for but we interest the is Operator profitability and growth best now how customers. will our questions. open of will employees our growth believe continue is balance the and call shareholders, you which business in may prioritize based growing,

Markets. Matt thank And And first our question Hedberg Instructions]. from you. [Operator comes Capital RBC from

Your line open. is now

my strong quarter. with for and I Great! congrats Thanks really start you. questions to a guys Jay, taking wanted on

call on on do goal. place there billion to to the point And here finder a have the billion X how put it and the could very you take some have, currently if in had talked wandered $X that large building ARR. you in path lot of you I products talked success recently, but blocks, ARR you from to You’ve a and about of you the about get

The me short yes. And answer expand is upon it. let

products, you upsell is amount If ZPA main opportunity have of products, flagship look a to ZIA, our which our current fair at base. current been there our

share ARR are to With We take up upsell that. we Xx. going actually could

for just the course Of upsell. norms wait

adding focused are as on We well. new customers

we’re our workloads Trust these high Zero Based penetration deploy the that of and end, technology the Zero coming market just XXXX like, posture, are two in on architecture. area. And us end Trust couple have means have early Zero out on customers other small Fortune is the for a moving IOT We XX%, is entitlement, that still solutions and decent for emerging high big there companies, Proxy XXX OT commissions and leveraging and That for to been a also architecture top Global of for stage, a XX%. into newly look were then Trust has place. that And core workloads, that in the we of security on for markets and we top and acquisitions then especially

it. growing building are it and We upon

So will have see no believe security will we significant I the be more. there, today that rapidly market on do lead disappear to We a lead, over know time old over keep and building we longer others changing. segment they

able comfortable be pretty get confident target to feel I and to So and billion beyond. to our $X ARR

Jus to add, Jay.

just Just there. bit add little a a bit little – to

which Our SAM we not investments, XG it Day, and in about BXB, Analyst BXC. does areas other I is it such as mean or areas as talked our $XX billion are OT, ITO making we include

XX the changed that a where exists is years and – over lot legacy There's opportunity. ago and really market what XX technology years it today. market interesting even this is huge it’s still ago of certainly what’s basically years was from So

is areas over in, the we’ve within things company And our investments we're we've to growth we're of significant the profitability. done, making about, that prioritize of and One operating is that in go-to-market. talked going the one

investments and go-to-market channel. hired organization got years sales, and a organization make investments past. made about the little the really got done. fruits continue CMO, outstanding. ago, we've a that see you’ve of significant marketing, last absolutely he’s year what the few recently three-pronged; to year We investments in we've you significant can been has got you've less We'll ago, doing So a it's and in significant Zscaler you Sales making

channel. throughout the company in company, getting We are to a trying build about With making get making significant investments the we also we’ve or foundation be as to the to strength and to talked work much and larger efficiencies. are that to investment going

provision addresses a opinion that unique really a XX on. market in ago in my and platform are pretty that with we much revolutionary So created was that years created this head technology a

a like hiring thanks for of throughout of a last you about a front-end That's I that had QX imagine hiring. rev think QX talk I And your and the the the dovetail the second kind into question. Can capacity adds on of you out year. quarter. bit. looks actually Obviously coming of load how fiscal balance won guys this it can mean you about lot you

We're know continue add to the going to year. throughout you aggressively,

in going rep we for going question, that after to ads like destination your marketing. to we're had in over comments before we're sales scales to made year going fiscal a so certainly rep record perspective, this do was in We're From on sales in related try and how sales to half field we hire this to this I fiscal a see quarter also in net the that of going we Our privatize to forward, are had said and filed that, versus and market. employees, going was and near QX ads grow XXX pace QX ads. those We RSM we we reps sales aggressively or we’d three do are really ’XX. about go to and quarter before, ‘XX hire were quota more field

Congrats guys!

you. Thank

to yourself gentlemen Powell And, Gray next ladies question. And we from limit and thank question that Again question. ask one comes you BTIG. from we ask our that one And yourself you. you limit to

Your now open. line is

the results. taking congratulations and for strong yeah, Thanks Great! and the on questions,

of on on ZPA more ZIA it level I a just it emerging be product portfolio? and kind of side So on the surprised the was or upside you this slide level, product was like you high quarter, most the curious the more I’d hit of know core drivers. the what

I look geo product look up at in deal well. you All still strong. did Actually was this a are deals actually coming we side. look really the products a big highlighted you in or earnings my quarter, stellar as There actually call. whether couple are or there’s segment at side side mean that you market ZIA at of the

Sometimes of that of pretty publicly people and to aren’t it slowing after be Zoom think ZIA out ZPA, ZDX past kind fast. is very it’s pretty few growing kind almost may early, we is issues slowed big seeing Zoom especially we both, but ramping integration. in And impossible in actually, and with with of ago, down, started couple months, the are that and rapidly, Microsoft did of sought products the did that based decipher that weeks and figured down we ZIA, in pace Teams of we market, kind the probably integration a API the most rapid announced help the at

product a the to board, it's wonderful, I area. kind think one pin hard across So of point

perspective, I'd APJ, also is like particular is APJ, geographic invest of a absolutely are And we've they outstanding. to your before that call about out Japan. talked from to more areas one what in, Yeah, going what in did we do is

you know across outstanding very, us. quarter. And so, board at you was was But the strong Jay our very as APJ an mentioned, look it if performance for

Got it.

helpful. Okay, there. it leave that's I'll really

thank question from And And from Needham. you. our comes Henderson Alex next

open. now is line Your

I of pretty great. with if the of be taking scenario, ZDX there user Cloud for clear come quarter. one reason application for move commentary at any I but become users is seems predominantly ZCP growth of application root to the outstanding rate or But these to in applications domain don't to about conversations Direct catch question connectivity My that points both in and much, coin, an have you CIOs, a to or world, very domain. are from those, see you CISOs. other Thank that didn't that the percentage other aggressively, the the to the CTOs, Clearly it is your guys. network. applications, under and would to revenues enterprise be going that you're simply the between the side cloud the that Thanks

in my I question enterprise you that center so into the penetrating people is Can talking about the to clouds decommissioning whether the to guess where rest was. home islands talk with management? and the in network, data And the that conversations the office is, you actually same simply vision top enterprise had start branch, have become way

real. Yes, it’s mean actually customers customers. who and so branch to can fiber have who broadband have I tell headquarters, many data, because It’s so speak; alike. happening. any network don’t I coming it office the is or you, customers talked the to many any any have I have I sense don’t all connection from

at of decommissioning enterprises most that's to I’ve where Now seen size about I company person haven't XX,XXX, everything, of from looking would in happened. or there yet decent say that kind pretty you ranging gone XX,XXX that X,XXX probably XX,XXX but XX,XXX I users.

in clearly direction. moving seeing trend are We that the

total teens, call we percent as don't other about the that. ZCP, Alex for and give And that. of upsell your last and on question breakout the we talked new ZCP we low European our CDX business of did is CDX the not and What a that related to give the

advisory free may more one about You from know talked add about to before customer that common if you board since had a enterprise. enterprise thought of datacenter today I free talk we meeting network I speak, it so the to to network, with okay. private large and want am level data now sense, of I I Firewall no us, have enterprises, free I as I meeting get well, CIOs of one a where have was no said them nine

a will applications. and its world effort is no phasing because the cloud they room Now data center, for of that. be In you more there okay, more In there see of is to needed any its center displace and the then and more while the the data there firewall. out for

Outstanding. Thank you.

Colville from Thank Patrick you. next question Deutsche from Bank. And our comes

Your line open. is now

you taking much my so for Thank questions.

guess I we’d interesting was be headcount? the a think Can like that. about would I very think better to on everyone’s it congratulations understand ask stellar correct really I commentary I just to that relatively and quarter. echo

in you So quarter. fiscal XXX net first mentioned ads

though about slightly of Just can that mean, rest path think again kind of the what of would the and be trajectory help got glide XQ, year we in number you XQ, I Thank you. different. the XQ mean, kind of to expect kind or guidance. I the basis should us you the kind of

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a good projection are XXX. to we’ll to year, of continue mentioned grow don't but add quarter we at the I want phase. I us. are was going was continue add is, it really we mean takeaway what I a for for the if net as So as growing, to give we

Okay, helpful. you that’s Thank much. so

from you. Auty Thank from JP question our comes And Sterling next Morgan.

Your open. now line is

Yeah, thanks. question, acquisition Hi trends us lines understand guys! help So costs. the of the in customer along last the

staying seen going let's last, as the you three net you look that those the actually four seeing about new cost are or acquire the logos going added what quarters. up you've you in down, over same the or when So say the customers at quarter, to

on based into marketing, relatively of because lot our on a customer are know would acquisition costs sales we we based profitability, that putting have our well say question, as same, you are investment our That’s staying great performance a organization. I and operating

or we term the I’ve is that margin talked about, again contribution have as above in basis, the two XX%. years three On short

we’re more So we're to that we're up in trying that that or new and acquire investment. still position making customers bring

now down, forward come our but right and company not matures, we that's focus. should As that the go as

Our line top focus build to growth. our is

Understood! Thank you.

Thank you.

from our Baird. And Ruykhaver next Jonathan question you. comes Thank from

now open. is line Your

and really you thank Yeah, It’s congrats guys! impressive.

So is the the commented in where obviously companies I the seem highlight you applications talking think machines. workload Jay, to capability of trying something in to But you've in of terms it its early past, only own the find most really segmentation advanced you about, so see is stage. story that their very that

in ago? out that, other curious thinking Anything So to you kind year? maybe months of that I'm about adoption see see terms what this what just relative six you were you of call what how to and

Yeah, micro is actually advanced I segmentation at done companies. look seems your I which imply question in by buckets. mean segmentation advanced three or segmentation, only to

is First do segmentation. of sorry, all to application designed zero naturally that. user-to-apps to Zscaler –

more for all a and third, say or our it, doing actually to of which the you by AWF workload good West. VPC user and East these out the actually of with level, are VPC We driving customers segmentation workload that's do is but to is ZPA. level customers in workloads, weakest for VPC to segmentation most levels level, AWF of advanced comes actually micro because that more workflow is more started at fragmentation, being link, are So kind Trust one. VP is Zero the Two, nearly and companies, sophisticated Then business. three only one our able with, do wonderful found we by done which to

Thank you.

Did I answer question? your

use case that state? just case, any steady Well, that thoughts it of change these pretty have or is you in seen use

option micro The advanced no micro segmentation, at of user-to-app Those literally think lockdown where no rate, was our growing can our areas two segmentation out, having sorry, coming is so Zscaler, do you the the easily. decent to literally I VPC-to-VPC. from are a customer interest, Great so and it had new and pushing but [ph]. options seeing app-to-app – or segment the

in will faster that So we much see growth segment.

that's context. you. Okay, helpful Thank

Thank you.

from our And comes question Kalia next from Saket Barclays.

now open. Your line is

you you just with how of you new strategies thoughts ZPA just multiple bundles my that successful past. you success great! have make and in maybe become if the changed mean and look? could those bundling been ZDX any of Okay, parts Does about with for so new all, at thanks here. know on guys, ZCP ZIA Has done I products, strategy Hey have question the you, bundling that the you've emerging as know can Jay, business. bigger taking the that for talk sense? and

It does.

CIO, three a together. for pretty easily. have broad CISO solution with know on you single want things agent, literally So and consolidation. They Then overall as looking turned also to you put and see ZIA, products products know deep get all we many a can them also platform ZPA, buy rather like than we have ZDX and

bundling and see So over time. more you will more

ZIA family, on trend this you first together. ZIA, then from to the I ZPA what seen The from based an based the timing together. in see continue you for saw coming and ZIA, on You’ve transformation business Then you we see all and in-ZIA ZDX of think learned bundling bundles ZPA Probably Then coming bundle. will be products. different may customers. different

it, Got you. thank

Thank you.

comes question Fodderwala Hamza Stanley. next our from from And Morgan you. Thank

line now is open. Your

Jay, question. my taking for question Thanks a guys! you. for Hey

on-premise and more you towards and on-premise like type know towards right, market more Network would moving security that platform, your but architecture think pretty I firewalls, broadly strong we're I chain today's supply more environment there's constraints seeing should adoption buy Access, of on Just still the firewall, Zero in obviously Trust think seeing SASE that and you that things demand a customers environment. it’s where on be you know

towards if pace occurs some around when wondering occurs or in adoption and and adoption are Access of if that that we Network can Trust I'm curve? tipping point you color that us So and maybe the where of SASE point tipping Zero give

Yeah, it's a question. good

know got there there’s appliance the of still whether the out fell time. the think of here, there. And blooper then And suddenly appliance figuring firewall kind takes very also I it figure you in and I since reminds so times question to and years lot gets grow growing the but is is the grows, numbers, on sitting know a you right? the well. there. so and shout traffic, that growing a proxy out, several Zscaler grew Why was gets our It asked saw questions through very so well You [ph] it off a hard few and You we VM Bluecore actual really it goes this. science your that selling center over I as VM upgrade hard There’s is ago. well, traffic you traffic a of can to tell me cliff. a need it data

want in firewalls any customers Our the cloud. don't

But taught solutions, Now customers they VMs firewall want are there. are some, closed out fee, as have our new today our wall. those we

It’s the we like in alone firewalls Leave phased so remove to of have trying kind mainframe over the data complexity. them out, data any being its of in for become Now center. and focus lots time. they'll zero center,

I'm away. that will not is into I sure. XXX% what but time, have I guess go appliances Now or it, can conviction VMs that firewall

Regarding only they because The and cannot would SASE, clarify. MQ said, to because further SASE I tag to SASE, can it for term, Gartner to is you SASE has become had hijacked Gartner collection the the they a in have know sink. things, to but is Service a SSE, for quadrant Edge, magic have another new kind like it now the ZPA of security. that’s guys buzzword Networking of where themselves clarify. a everyone. the functionality stock. about of It is out, I an be do it’s like But a coming for there’ll Secure acronym side, a together, kitchen separate ZIA put and networking about and

type But of that calling know security making is out that this there, growth. and different and [inaudible] are or a I and we where big There’s these There’s still over but VPN. will and we are lots driving in the now network, VPNs the helping, Trust the is know that who appliances VPN whether network customers rollout there our the have still ZPA text. They’ll the because pretty enables lateral Gartner and all want VPNs stuff the placing the market a still more is Take fire think will moment that’s growth. VPN mean eliminate most all a VPN. away progress vendor X.X buying there. that’s there out inertia the bunch buying we there unabated you years is cloud that's in I We in like. is creates by biggest and wall Its next gone Zero to there. that there it think thinks Architecture. big probably – aggressively is be for is a name of a eventually go assuming market

you. Thank

hope a helps. answer, I For long it

No, it Thank helps. you.

Brian Thank And from Goldman question comes from Sachs. you. next Essex our

line Your is open. now

customer it is. I’ve sales growth and I maybe on few wondering just and over and afternoon thank years, and Hi! you're – billing that that mean my previously. can reps growing up I you've past over the on of we've over had for I if the noticed in marketing sales that focus taking are particularly like they what Considering and follow up cross sell. looks a was Good few sell growing the investment made question. you are Jay, questions twice

how to put you're opportunity in to your whether So growth some leveraging towards sales maybe finer if – success drive upsell. / on cross force point extent sell that you yourself to investing or could particularly direct from channel a greater you're your

at our million So, had growth first -- for ARR, if customer we in over our with all look XX% year-over-year of growth, you XX% customers $X growth number. our that’s

XXX Now XX%. was if year-over-year over you that growth about at ARR, customers with K look

what I lets lower end categories. to kind low is not, the in at at, customer number, think of so misleading, there look customer up good you it's and take when some those being small numbers look end

the growth focus customers, bigger are growth overall still and is growth, just pleased alike. with or of we So ARR our bookings overall

not you've at products for do new up a actually for that new or for logo, do on selling, and go incentive other, people internally or one we cross selling me got to as for be debated special not on your Now the have sell bit, we we look motivate so portfolio, it upsell sales focus any won't when many business right. but to quite to

So and channel beginning more we to especially now enterprise play in role the more our is have essentially compensation, the segment. same

like you one more is XXXX and even us the get the add XXXX it them engage You when to of points add. actually the cover with is but to Fortune more know that's the Did they asked up channel you for? you users, to values come helping beginning big more bigger and value the or to XXX, the have channel logos, because deal XX,XXX new to I

did you Yeah was that very helpful.

thank So I very and again? much, it, congrats appreciate you

Thanks Brian.

from our you. question Mizuho. comes Gregg And next Thank from Moskowitz

open. Your now line is

robust to begun have add be environments, to a was that private Jay, I the overall uptake quarter. enterprise are and if hybrid it congrats help remarkable you just to service contributing you wondering, I'm such for that’s begin in and you, growth kind truly you Thank might see curious edge, of I’ll ZPA perhaps on that my showing.

ZPA Private Service Edge.

Private Service. yeah, Oh

you every and how would we they applications home, drive a to whether in as cloud like ZPA. growth ZDX. gives public need go time statement Okay and service and more know, to very comes sure trying are more secure at Private more all are for make a actually when is where per from users. to Service fee they say. private for fast, comes office, in the same second to experience. implement factor We they user, But users will Service but make Three Edge that let alive office or people charge sure also are does it. users money we the that’s the good, that. with since Private Azure that Service and from network what I it, be, just And them need ZPA deployed. That’s to made that Zero come yeah the use Edge and to on actually amount ZPA money user applications network, they But and are every getting at customers Edge is actually past not back the a ZIA, for subscription on ZPA of of of I it’s we this not and Private the the of they AWS, you when the have allows making in Most where are lot biggest to the really pleased through Trust That's our more reasonable and On-Prem it expect, for in. together for a look matter amount comes

works certainly And great. Jay. work that’s Thanks different hybrid environments. through Alright,

thanks. Yeah,

our Thank you. Eyal next And Cowen. from question Shaul comes from

line open. Your is now

quick talk on-going on on performance. my Federal end, on one Can Jay. the A Thank progress seeing strong you. the afternoon Congrats Good you've guys. about the front? you

Yes, than our on side, drive. It's growing we actually doing overall quite much faster Federal well. total the are

Biden EO administration to plan on, during and fiscal from the directive it’s this the expect or early came infrastructure We benefit year, helping. from that actually

two Federal out Trust we are have. Then It We that the should it of bodies architecture both FedRAMP we which speeding say the have things. projects and those that I stick are up some things; Zero actually, it there. certification aren’t of right needed needed seeing needed

are We we on only are sizeable a two and on…? color highest certification vendor the have can where security with we team. Remo, you FedRAMP give a

so total in quarter And mid-single Federal, are we the for digits business. of upsell new

significant, pretty investments As two made FedRAMP highest are the with federal significant as vendor sector. in and the The mentioned, the Jay we've certifications. Jay only we certifications mentioned, are security

got in strong we've and addition, In a team federal good partners.

In we So that engagements federal good. are pipeline our time, positioned. but well Federal increasing, we takes feel our and are is very

Thank you. it. Great Got color.

Thank you. And comes our next question Keith BMO. from Bachman from

Your now open. line is

a few competition. it to bit Jay, and in a ask you wanted different in wanted come Hi! to way break very Thank about much. parts. you out I I little

of different And are often to know especially of doing by one or iboss. NASCO, you. player And work, Thank or does into assume is Palo B, one terms same the enter cloud also particularly [inaudible] pricing field you the that negotiations architecture, but you're new mean negotiating what seeing Greenfield investors I how work. is, seeing you Is getting In much finally, think Part discussion, activities, when most different how then particularly Alto, it crowded on you new participants. – I crowded? your there's less more are or for because

question. a good It’s

will we one-on-one have first we top-down for start. replace this say, go the in really at I as driven with replace box. is box, this CIOs I’ll a of It's replacement This not transformation. all, and typically So

replacement a up view to ZPA it another secure would important the we Then starting or the web and used how will and social can end agenda gateway help ZIA we driving that So and proxy. that an became we piece. of for be show web Bluecoat point and them for from point products

ZPA customers together. ZIA buying and more and more Now are

there. out Now that's kind of a different players

the fundamentally from I changes where an all by access with all are, in it expanded portfolio, provide when go So say they guess. and to having anywhere just can ZIA, we applications, matter I ZPA, no

ZIO, about is of performance. the part because being same ZDX thing, user Now clear

So you it’s call not get to of kind it, really what it’s us type not because stuff, common bake-off into place. one-on-one for of a

the growing guys from win, why significantly. pretty time fiscal, users And see segment do on smattering our Now, we we to from firewall time, not. end lower to enterprise are once XK of what we time-to-time XK market, the from we players of a that’s engage, actually seeing

and the we cost, we Price really pricing, pricing we display issue Regarding for the is products can these the time much show least pressure, operational like. costs by important haven’t us. the seen the all becomes

Right.

lot Jay. a Thank sense makes it Okay, you. of

you. Thank

from you. from And thank or Wolfe Tilton And Research. next comes question Joshua

now Your line is open.

guys! and congrats my result. hi question for taking a Yeah, Thanks strong on

the year, very As very, quarterly to years ‘XX. expect we calculated should we prior unusual just remainder we as seasonality, changes billings strong any compared maybe of a think about the FY to continue to the lap

being You know And basically XX%. the numbers are QX in I mean and QX the first keep getting to is our thing largest quarters half the in one we mind, about and XX% talked big. billings to

that in mind So keep as to bigger, get forward really expectation. numbers your really just going

Thank you.

Thank you.

Erik JMP Suppiger from comes from Securities. question next Our

open. Your now line is

Yeah, thanks congratulations. and

the opportunity some don't On that? that you get of set aspirations I you talk kind frame, of if $X to want base can terms can within view timing, how you you give us But you context there. to installed time commitment, how bit can billion towards your little build just the a you the for see understand about in

We we're my down comes to perspective as our know give great a you frame. there. and models related tell a hard It really can as a to from time Clearly plan, range it’s really the get manner. that you to to opportunity, it’s to opportunities really long can, question. through execution, see, I responsible quickly do have related to in internal, what we I going Yeah, try and

from our revenue quarter, The that be but contribution secondary frame call. year that’s three we continue which growth, us have going we to getting Erik the we're the XX%-plus. lien for and key really continue profitability, know, forward the operating spending our You we get if customers, critical to thing are margin and XX% I that's we we growth, significant again, perspective. don't will the will to new is amount about have two on this mindful of time and to comment The that and those a first customers years in are for margins want to out. give contribution –

profitability. and We are growth in aggressively, we are driving the putting

We come will that will up, seen and myself, those you going lot the all to of make for that mindful profitability made are of our be to got good increase got a we’ve a and benefit with we value of us. for When things work our idea Jay decisions shareholders. carriers be our just we’ve but how to things decisions make in pretty things decisions, out need and

factors Yeah today I’m add, I if that external may no concerned overly I see about.

sure think we and do because largely I arrogant on to complacent our doesn't team need that become its to it's execution of and right, success. make

way we leadership right the the place in people, our that’s in continue. the done hiring So right past hiring had years, and focus two to

you. good. Very Thank

turn thank you. back Chaudhry now to call I for over like And Jay would the to closing.

the you again. Well, continued Thank and interest to support in hope for thank Zscaler. at Conference. you see your you We some Investment all of

you. Thank

participating. This you you. Thank today's conference concludes call. Thank for

now may You disconnect.