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 Research - Analyst : Remo and Jay, I wanted to start a little bit on the medium-term outlook. And I figured I'd ask the question, to first start with, how does your planning process go this year for FY25? What was some of the debates that were top of mind for the leadership team? And then we can slide into some of the more detailed questions on guidance.

Question: Gabriela Borges - Goldman Sachs Research - Analyst : Remo, the way that you were describing the year two and year three of the contracted billings sounds very mechanical.

Question: Gabriela Borges - Goldman Sachs Research - Analyst : Where do you think the swing factors for the risk factors are when you look at the new logos piece of the business and the upsell piece of business?

Question: Gabriela Borges - Goldman Sachs Research - Analyst : So Jay and Remo, together, what you're alluding to is the secular growth drivers of the business. Remo, you also mentioned the weakness in 1H '23 that's impacting some of the unique seasonality here. How much are you still seeing a potential downdraft from contracts that were signed in the 2020, '21 time frame where our customers were expecting perhaps to increase headcount when in reality perhaps it comes to be on the pressure? Talk about how that's impacting NRR? And if that has any factor on how even our (inaudible) for renewal business.

Question: Gabriela Borges - Goldman Sachs Research - Analyst : Absolutely. The one medium-term question I want to ask here, do you want to follow up on competition and some of the other points you're making? So as analysts, most of us will run multiyear models out. We have the fiscal year '25 guidance. 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 11, 2024 / 4:30PM, ZS.OQ - Zscaler Inc at Goldman Sachs Communacopia & Technology Conference Remo, I believe you've commented that FY26 comps will be there. You've also got a go-to-market push towards cross-sell into the enterprise, which makes your business more seasonally back half weighted. So Remo, what advice would you give us as we think about the three-year profile of the company? How do we reconcile the structural element here, which is more enterprise, with some of the unique idiosyncrasies of '25?

Question: Gabriela Borges - Goldman Sachs Research - Analyst : Absolutely. Jay, let's come back to the comments on competition. And you made a comment last week on how one of the bigger disconnects between the investor community and the conversations that you have internally with customers is the level of competition. So help us understand from the outside in. What are some of the questions we should be pushing your competitors on or out? What's real? And how do you think about where there could be risk in the competitive environment over the medium term?

Question: Gabriela Borges - Goldman Sachs Research - Analyst : Jay, one of the comments you made there is competition, in your opinion, has actually gone down at the large enterprise. And I think you've continually been saying for some quarters now that your focus is on cross-sell at the large enterprise rather than competing at the low end. How do you think from a go-to-market perspective about the demarcation between large and medium and small where it makes sense for you to compete versus where it's not?

Question: Gabriela Borges - Goldman Sachs Research - Analyst : You've consistently talked in the last few minutes about the upgraded go-to-market. Tell us a little bit about the signals that you were looking at in the business that said to you, okay, now is the time to focus on [my approach] and the upgraded talent and the go-to-market. And maybe share with us some of the highlights from the sales kickoff this year as you think about priority for FY25.

Question: Gabriela Borges - Goldman Sachs Research - Analyst : I had signals on why now to upgrade the market --

Question: Gabriela Borges - Goldman Sachs Research - Analyst : There's a number of pieces to the platform that you've touched on. Remo, you just touched on cloud, DLP certainly, and the VPN replacement cycle as well. Jay, you mentioned just now having relationships at the top of the organization of your customers. And certainly, there's so much of the network transformation motion that happens with Zscaler. You have to have line top of the house. Do you feel like you need to expand the number of senior sponsors that you have with the customers in order to successfully cross-sell? And when you look at the deals that you talked about on the earnings call where you have expanded the platform, what do those customers have in common? And what does that cohort have in common such that you can move -- everyone else to look more like the customers that buy more? 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 11, 2024 / 4:30PM, ZS.OQ - Zscaler Inc at Goldman Sachs Communacopia & Technology Conference

Question: Gabriela Borges - Goldman Sachs Research - Analyst : Correct.

Question: Gabriela Borges - Goldman Sachs Research - Analyst : That makes sense. And particularly on some of the newer products like cloud and DLP, so many upgrades have come down the road map with DLP just in the last nine months. Do you still have to fight the same architectural sights that you have to fight back in the network security side with cloud and DLP? Or are those conversations getting easier because customers are already bought into process architecture and DLP superiority?

Question: Gabriela Borges - Goldman Sachs Research - Analyst : And Remo, I have a associated pricing and margin question for you. It's, how do you think about making it easy for customers to buy more, whether that's bundling, discounting, enterprise license agreements? What strategies work best with the Zscaler platform? And then the margin part of the story is -- part of the question is, what does incremental margins look like on the cross-sell?

Question: Gabriela Borges - Goldman Sachs Research - Analyst : And any comments on the packaging of new products to make it easier for customer spend?

Question: Gabriela Borges - Goldman Sachs Research - Analyst : Excellent. We'll leave it there. Please join me in thanking Jay and Remo for their time. Thank you, gentleman.