Zscaler Inc Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Saket Kalia - Barclays - Analyst : Okay, great. Hey, guys. Thanks for taking my question here. A nice quarter on the billings and on next year's billings guide. Maybe if I get to one question, Jay, maybe I'll make it for you. (technical difficulty) a little bit, I think we all know your views on firewall-based solutions. But maybe out of curiosity, how about some of the newer players in SASE that are maybe attacking this with a similar pure-play cloud approach as Zscaler? Thanks.

Question: Saket Kalia - Barclays - Analyst : Very helpful. Thanks.

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

Question: Brad Zelnick - Deutsche Bank - Analyst : Very helpful, Jay. Thank you.

Question: Roger Boyd - UBS Equities - Analyst : Great. Thank you for taking my questions. Remo, I wanted to ask you about the billings guide and if you could just speak to the general level of conservatism there. You've been pretty clear even before this quarter about the expected headwind coming out of the go-to-market transition, but it does sound like sales productivity was better than expected in both 3Q and 4Q this year. So just beyond that, anything else giving you more pause or tempering your expectations around the broader macro environment, sales cycles, or anything else? Thanks.

Question: Joseph Gallo - Jefferies - Analyst : Hey, guys. Thanks for the question. Jay, I want to follow up on that last question. I mean, you've obviously started to branch out very successfully beyond ZIA and ZPA evidenced by AI and data protection success. However, post the CrowdStrike incident, we've heard customers don't want to put all their eggs in one basket. Does this hinder your ability to sell incremental products? And then Remo, maybe you can just elaborate on how you're thinking about NRR in your fiscal '25 billings guide. Thanks.

Question: Joseph Gallo - Jefferies - Analyst : Thank you.

Question: Ittai Kidron - Oppenheimer & Co., Inc. - Analyst : Thanks, guys. Great, solid finish for the year. Remo. I'm sorry, I'm going to have to try and be the dead horse here again on the billings. I just want to make sure I understand this right. I mean, in '24, you didn't have any unusual seasonality in the first half, second half on year-over-year patterns. They were quite similar in billings. So what is it that's driving the 7% and 23% differences in the first and the second half? Are things being pushed out? You just expect deals to push out. Hence, you expect to close more or renew more in the second half? Is that a macro comment? Was there something that happened two, three years ago, a lump sum that somehow comes back into play here? Anything that you can do to dig in just a little bit more on that would be greatly appreciated.

Question: Ittai Kidron - Oppenheimer & Co., Inc. - Analyst : Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 03, 2024 / 8:30PM, ZS.OQ - Q4 2024 Zscaler Inc Earnings Call

Question: Brian Essex - JPMorgan - Analyst : Great. Thank you and good afternoon. Thank you for taking the question. Jay, I think you may have touched on this in your prepared remarks, but I want to circle back into the macro, specifically the competitive environment with regard to pricing. And there are -- certainly, in the Zero Trust space, we're seeing a lot of initiatives to consolidate on certain platforms. Some of that is flexible pricing, different duration, giving away products for free. How is that impacting the pricing environment that you're dealing with? I understand that there's a lot of times an architectural change that's attractive with your platform. But I just wanted to touch -- maybe if you could peel back a layer on the pricing dynamics just to understand what you see in your environment. Thank you.

Question: Brian Essex - JPMorgan - Analyst : Got it. Thank you.

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Great. Thanks, guys, for the questions. Maybe one on the quarter. Could you talk a little bit about -- obviously, it was a Q4 but -- and I assume it's back-end loaded. But the linearity of the quarter, anything abnormal with deals that pushed or pulled? And I guess, maybe if you could comment a little bit more specifically on trends in August thus far, that would be -- or I guess now we're in the of September, but through August, that would be helpful.

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

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Thanks, guys. Super helpful.

Question: Shrenik Kothari - Robert W. Baird & Co., Inc. - Analyst : Hey, yeah. Thanks for taking my question. So Jay, in light of what you said, right, you guys are expanding the platform beyond just securing users and now delivering zero trust for applications, workloads, and IoT. And you gave example of a new logo win with top 10 and strong customer demand for the broad approach. Just to elaborate on the nature and composition of these contracts, the noncancelable billings, the compensation of this pipeline in terms of users and seats versus workloads and applications that you called out? And does that help with the overall land and expand motion moving more towards the workload and application base. And a follow-up for Remo as well.

Question: Shrenik Kothari - Robert W. Baird & Co., Inc. - Analyst : Got it. Thanks a lot, Jay and Remo. Appreciate it.

Question: Patrick Colville - Scotiabank GBM - Analyst : Jay, thank you so much for taking my question here. I guess I want to ask about emerging products. I mean, it was 22% of new and upsell in fiscal '24. I mean, very impressive to see those emerging products ramp. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 03, 2024 / 8:30PM, ZS.OQ - Q4 2024 Zscaler Inc Earnings Call I mean we're going to get this in the 10-K, but what was ZPA and then ZIA as a proportion of new and upsell in fiscal '24? And I guess the second part of the question is, how do you expect ZPA and GenAI trend in fiscal '25? I mean, what's the sustainability and remaining TAM for those two product lines?

Question: Patrick Colville - Scotiabank GBM - Analyst : I guess it's -- the question we get from investors is how -- what is the sustainability of those business lines? And I guess, what you just articulated is that there's a lot to go in ZPA, but maybe talk about ZIA. Is there a lot to go there or is that a more mature segment?

Question: Patrick Colville - Scotiabank GBM - Analyst : Wonderful. Thank you so much.

Question: Adam Borg - Stifel Nicolaus and Company, Incorporated - Analyst : Awesome. And thanks for taking the question. For Jay and Remo, I know you talked about this a bit in the script, but I was hoping you could talk a little bit more about head count growth in fiscal '25 and where you're really investing most across sales and marketing and R&D. Thanks so much.

Question: Adam Borg - Stifel Nicolaus and Company, Incorporated - Analyst : Awesome. Thanks so much.

Question: Hamza Fodderwala - Morgan Stanley - Analyst : Good evening. Thanks for fitting me in. Either for Jay or Remo, I'm curious. Since Mike and the new sales leadership have been on in the last few quarters, what are some of the early indications that you're seeing, early proof points that give you confidence heading into fiscal '25?

Question: Hamza Fodderwala - Morgan Stanley - Analyst : Thank you.