Zscaler Inc at Goldman Sachs Communacopia + Technology Conference Transcript

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

Question: Gabriela Borges - Goldman Sachs Group, Inc., Research Division - Analyst : I wanted to start with a conversation with an architectural question because I know since the time of the IPO, we've been consistent in saying that Zscaler win deals because of its architecture. And so the question that I would ask is, help explain to us why Zscaler's architecture is the right architecture for the security problems of 2022 as well as when it was originally found in 2007, what makes the architecture durable for today?

Question: Gabriela Borges - Goldman Sachs Group, Inc., Research Division - Analyst : You mentioned clean slate and it raises the barriers to entry question, which is when you think about security companies that today building their architectures, perhaps with a clean slate based on public cloud, how do you think about the barrier to entry for some of the new entrants that are coming into the market?

Question: Gabriela Borges - Goldman Sachs Group, Inc., Research Division - Analyst : I wanted to also ask the forward-looking question, which is, I know that Zscaler employs a consultative approach with its customers and that you're very closely aligned in understanding your customers' longer-term road maps. What are your customers telling you and what are your engineers telling you is the #1 technical challenge that needs to be solved in security architectures looking forward?

Question: Gabriela Borges - Goldman Sachs Group, Inc., Research Division - Analyst : It leads into a conversation along the lines of how do you think about the catalyst path to essentially create a trigger point for customers to change the way that they think about architectures. And originally, there was a conversation around Office 365 and the move to the cloud. During COVID, 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 13, 2022 / 4:15PM, ZS.OQ - Zscaler Inc at Goldman Sachs Communacopia + Technology Conference there's been a very large conversation around distributed workforce. What do you think is the catalyst path for customers today? And how do you think about the risk that the best part of the catalyst path is behind us because we've already had Office 365 transformation, we've already had

Question: Gabriela Borges - Goldman Sachs Group, Inc., Research Division - Analyst : It leads a little bit into a question around the macro and what you're seeing over the medium term. When you think about big digital transformation projects, what are your customers telling you about their willingness to invest even as their visibility into their business may be less than it historically has been. How do you gauge the risk of perhaps some of these big digital transformation initiatives being put on hold or pushed out by 6 months to you?

Question: Gabriela Borges - Goldman Sachs Group, Inc., Research Division - Analyst : On the question on cost reduction or the topic of cost reduction. Give us some examples, order of magnitude on where you're able to realize savings. And it leads actually into a conversation around consolidation, which is there has been a narrative in security on wanting to consolidate 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 13, 2022 / 4:15PM, ZS.OQ - Zscaler Inc at Goldman Sachs Communacopia + Technology Conference point products for many years now. You already alluded to this, it tends to be a lot of inertia where you have companies that have in common positions, legacy positions. So let's bring it all together, what are some of the ways in which you consolidate specific functionality and order of magnitude? Share with us some of the ROI payback periods, et cetera.

Question: Gabriela Borges - Goldman Sachs Group, Inc., Research Division - Analyst : Jay, you commented on the willingness to invest, continue to be very strong from your customer base. Remo, I want to ask you the question as well, given your earnings call a couple of days ago. And so one of your comments on the earnings call was on the linearity of the seasonality of billings growth in your next fiscal year and first half being stronger than the second half. So tell us a little bit about what your expectations are for calendar '23, which would be your second half fiscal year. And is there a risk that -- customers have already budgeted for calendar '22, you have those forecasts, is there a risk that those budgets ultimately don't get spent for whatever macro reason or customers specifically?

Question: Gabriela Borges - Goldman Sachs Group, Inc., Research Division - Analyst : Remo, I'll ask a follow-up question on visibility, which is -- how much visibility does your existing customer base give you about their longer-term road maps? And then it leads nicely into a question about the cross-sell opportunity that you have ahead of you, to what extent are customers already telling you, hey, 2023, I'm going to expand my Zscaler appointment in X, Y, Z ways?

Question: Gabriela Borges - Goldman Sachs Group, Inc., Research Division - Analyst : It leads into a question on cross-sell. For the customers that are taking CIA perhaps the pet plants to expand into ZPA. There's now a longer-term road map as well with ZDX and cloud protection. So a little more on, I guess, 2 parts. One is how are you incentivizing and enabling your sales force on the newer levers of cross-sell. And for the customers that are engaging with you across the spectrum, how much visibility do they give you into that plan to expand with cloud protection, for example.

Question: Gabriela Borges - Goldman Sachs Group, Inc., Research Division - Analyst : As Zero Trust has become more of a paradigm shift, how is the competitive landscape changing in response? And particularly, the conversations that you have with C-level executives at your customers, are there other platform companies that perhaps are being more aggressive in wanting to be a part of that conversation as well?

Question: Gabriela Borges - Goldman Sachs Group, Inc., Research Division - Analyst : What about outside of the large enterprise? Has there been any change in competitive narrative or the way you're educating the channel outside of large enterprise?

Question: Gabriela Borges - Goldman Sachs Group, Inc., Research Division - Analyst : Remo, how does the unit economics compare when you evaluate your newer cohorts in upside of large enterprise versus your traditional presence in the large enterprise?

Question: Gabriela Borges - Goldman Sachs Group, Inc., Research Division - Analyst : I'll ask a follow-up on implications for the longer-term model. And some of the metrics you've provided rule of 80 on revenue growth plus free cash flow margin. How do you think about the durability of that combination of revenue growth and free cash flow margin? And outside of the channel mix and some of the other positive mix shift benefits in your model, what are some of the other margin levers that investors should be aware of? 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 13, 2022 / 4:15PM, ZS.OQ - Zscaler Inc at Goldman Sachs Communacopia + Technology Conference

Question: Gabriela Borges - Goldman Sachs Group, Inc., Research Division - Analyst : I'll ask one follow-up on sales and marketing. And then I do want to open it up to the audience. Specifically on leverage in the sales and marketing line, remind us what you've said about pace of hiring, mix of sales capacity between ramped and ramping sales reps for fiscal '23.

Question: Gabriela Borges - Goldman Sachs Group, Inc., Research Division - Analyst : Questions from the audience? Please? 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 13, 2022 / 4:15PM, ZS.OQ - Zscaler Inc at Goldman Sachs Communacopia + Technology Conference Unidentified Participant So just on, again, many IT companies leverage labor in India. Talk about sort of you're now thinking are 1:1. At what point you guys see that cost base in (inaudible) declining over time as the standard of living in India increases a bit more in 2030? Then that's obviously going to impact a lot of technology companies here that leverage that. And I think it's the thing that is not talked about.

Question: Gabriela Borges - Goldman Sachs Group, Inc., Research Division - Analyst : Final question. On competition, specifically in the newer emerging products and cloud products that you're offering, car protection products in market. How do you think about competition in those segments of the market specifically? It's very fragmented. And is the sales -- because it's more of a greenfield sale presumably, how do you establish an incumbency position, leveraging what you already have.

Question: Gabriela Borges - Goldman Sachs Group, Inc., Research Division - Analyst : It's a great place to end that. Thank you so much for your time, Jay, Remo. We really appreciate it.