Q4 2024 Zscaler Inc Earnings Call

Unknown Executive: Good day, everyone, and thank you for standing by. A welcome to see Scaler, fourth quarter, 2024, earnings call.

Good day, everyone and thank you for standing by and welcome to see scalar fourth quarter 2024 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to participate you will need to press star one.

Unknown Executive: At this time, all participants are in a lesson on the mood. After the speaker's presentation, there will be a question-and-answer session. To participate, you will need to press Star 11 on your telephone. You will then hear a message advising your hand is raised. To withdraw your questions, simply press Star 11 again.

One on your telephone you will then hear a message of dicing. Your hand. This raced to withdraw your question simply press Star. One again, please be advised that today's conference is being recorded now I will pass the call over to the Vice President Investor Relations and strategic Finance Ashwin Kathy ready. Please go ahead.

Unknown Executive: Please be advised that today's conference is being recorded.

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

Jay Chaudhry: Good afternoon, everyone, and welcome to the Zscaler, fourth quarter fiscal year 2024, earnings conference call. On the call with me today are Jay Chaudhry, Chairman and CEO, and Remo Canessa, CFO. Please note, we have posted our earnings release and a supplement of financial schedule to our Investor Relations website. Unless otherwise noted, all numbers we talk about today will be on an adjusted non-GAAP basis. You will find the reconciliation of GAAP to the non-GAAP financial measures in our earnings release. earnings per share, our objectives and outlook, our customer response to our products, and our market share and market opportunity.

Ashwin Kathy: Good afternoon, everyone and welcome to the Zee scalar fourth quarter fiscal year 2024 earnings conference call.

Speaker Change: On the call with me today are Jay Chaudhry, Chairman and CEO and Remo <unk> CFO.

Speaker Change: Please note we have posted our earnings release and the supplemental financial schedules to our Investor Relations website.

Speaker Change: Unless otherwise noted.

Speaker Change: All numbers, we talk about today will be on an adjusted non-GAAP basis.

Speaker Change: You will find the reconciliation of GAAP to the non-GAAP financial measures in our earnings release.

Speaker Change: I'd like to remind you that today's discussion will contain forward looking statements, including but not limited to the company's anticipated future revenue calculated billings.

Speaker Change: <unk> performance gross margin.

Speaker Change: Operating expenses operating income net income free.

Speaker Change: Free cash flow.

Speaker Change: <unk> based net retention rate future hiring decisions remaining performance obligations.

Speaker Change: Income taxes.

Speaker Change: <unk> per share.

Speaker Change: Our object you send the outlook.

Speaker Change: Customer response to our products and our market share and market opportunity.

Jay Chaudhry: These statements and other comments are not guarantees of future performance, but rather are subject to risk and uncertainty, some of which are beyond our control. These forward-looking statements apply as of today, and you should not rely on them as representing our views in the future. We undertake no obligation to update these statements after this call.

Speaker Change: These statements and other comments are not guarantees of future performance, but rather are subject to risks and uncertainties some of which are beyond our control.

Speaker Change: These forward looking statements apply as of today and you should not rely on them as representing our views in the future.

We undertake no obligation to update these statements after this call.

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

Speaker Change: For a more complete discussion of the risks and uncertainties. Please see our filings with D. A C C as well as in today's earnings release.

Jay Chaudhry: I also want to inform you that we will be attending the following conferences. City Global TNT Conference in New York City on September 5th, Goldman Sachs, Communicopia and Technology Conference in San Francisco on September 11th, Wolf Research TNT Conference in San Francisco on September 11th.

Speaker Change: I also want to inform you that we'll be attending the following conferences.

Speaker Change: Citi Global TMT Conference in New York City on September 5th.

Speaker Change: Goldman Sachs commuter copier and technology conference in San Francisco on September 11th.

Speaker Change: Wolfe Research TMT conference in San Francisco on September 11th.

Jay Chaudhry: Now, I'll turn the call over to Jay. Thank you, Ashwin.

Speaker Change: Now I'll turn the call over to Jay.

Jay Chaudhry: We delivered a strong Q4 with all metrics exceeding the high end of our guidance. Revenue grew 30% year over year. Billings viewed 27%, and profitability raised new records with operating margins of approximately 22% and free cash flow margin of 23%. We also achieved a new milestone of $1 billion in quarterly bookings in Q4, driven by an acceleration in new and upset business in the quarter. For the full year, revenue grew 34%, and free cash flow grew 75%, resulting in free cash flow margin of 27%, a new record for the company. With another year of strong talk and bottom line performance, we exceeded the rule of 60 for the fourth consecutive year.

Jay Chaudhry: Thank you Ashwin, we delivered a strong Q4 with all metrics exceeding the high end of our guidance that may agree with 30% year over year Billings grew 27% and profitability reached new records with operating margin of approximately 22% and free cash flow margin of 20.

Speaker Change: 3%.

Jay Chaudhry: We also achieved a new milestone of $1 billion in quarterly bookings in Q4, driven by an acceleration in new and upsell business in the quarter.

Jay Chaudhry: For the full year revenue grew 34% and free cash flow grew 75%, resulting in free cash flow margin of 27% a new record for the company.

With another year of strong top and bottom line performance, we exceeded that rule of 60 for the fourth consecutive year.

Jay Chaudhry: Despite the recent changes in our go-to-market organization, we delivered these outstanding results driven by strong customer demand for our zero trust exchange platform. I'm very pleased with the progress we're making in go-to-market execution, the pace of innovation, and customer adoption of our expanded platform. I'm also pleased to share we crossed $2.5 billion in ARR in Q4, and we expect to achieve a new milestone of $3 billion or more in ARR in fiscal 25.

Speaker Change: It's quite a recent changes in our go to market organization. We delivered these outstanding results driven by strong customer demand for our Zero Trust X gene traction.

Speaker Change: I'm very pleased with the progress we're making in go to market execution.

Speaker Change: Pace of innovation and customer adoption of our expanded platform.

Speaker Change: I'm also pleased to share we crossed $2 $5 billion in E at all in Q4.

Speaker Change: And we expect to achieve a new milestone of $3 billion or more in Iran. In fiscal 'twenty five.

Jay Chaudhry: Before getting into further details of the quarter, let me share a few observations on the demand environment. First, customer adoption of a zero trust platform is stronger than ever, with Q4 setting a record for new and upsell business. Our platform secures 47 million users across nearly 8,700 customers. While other vendors are still struggling to deliver cloud security for users, we expanded our platform beyond users to deliver zero trust security for applications, workloads, and IoT OT devices. Customers are consolidating their disjointed legacy security products by adopting our comprehensive platform. Second, the increasing use of AI is creating new avenues of growth for us.

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

Speaker Change: First customer adoption of zero trust platforms are stronger than ever with Q4, setting a record for new and upsell business.

Ah Crap home secure was 47 million users across nearly 8700 customers.

Speaker Change: While other vendors are still struggling to deliver cloud security for users we expanded our platform beyond users to deliver zero Trust security for applications workloads and Iot Ot devices.

Speaker Change: Customers are consolidating their disjointed legacy security products by adopting our comprehensive platform.

Speaker Change: The increasing use of E. R is creating new avenues of growth for US for example, the rising adoption of Gen. AI is exposing new gaps in organizations security posture.

Jay Chaudhry: For example, the rising adoption of Gen AI is exposing new gaps in organization's security posture. To help our customers address these risks, earlier this year we launched Gen AI Security, which enables customers to realize the productivity benefits of Gen AI without compromising data security. Using our Gen AI Security, customers can gain visibility, apply access control, and enforce data protection policies to prevent their sensitive data from leaking. Third, I am thrilled to share that we have achieved a major milestone with our cloud platform, surpassing over half a trillion transactions daily; that is T as in trillion.

Speaker Change: To help our customers address these risks earlier this year, we launched Janney ice securities, which enables customers to realize the productivity benefits of journey II without compromising data secure youth.

Speaker Change: Using our Gen AI security customers can gain visibility apply access control and enforced DRAM protection policies to prevent their sensitive data from leaking.

Speaker Change: Third I'm thrilled to share that we have achieved a major milestone with our cloud platform, surpassing over half four trillion transactions daily.

Speaker Change: That is T as in Trillium.

Jay Chaudhry: This further demonstrates our widening market leadership position. These transactions generate a vast quantity of proprietary loans that feed our massive data lake. These are not firewall loans that often can't inspect SSL traffic for cyber threat detection. These are complete loans that have structured and unstructured data, including the full URL. We leverage this proprietary data to train AI models that power innovations throughout our platform. Our AI analytics solution includes a unified vulnerability management, risk free 60, business insights, or seen strong traction. AI analytics contributed nearly three points to new and upset business growth in Q4 and two points for the entire fiscal 24, even though some of these products were only available for a part of the year.

Speaker Change: This further demonstrates our widening market leadership position.

These transactions generate a vast quantity of proprietary loans that feed our massive data lake. These.

Speaker Change: These are not fire a long step often can't inspect SSL traffic for cyber threat detection. These are complete blow ups that have structured and unstructured data, including the whole U R. L.

Speaker Change: We leverage this proprietary data or to train AI models that power innovations throughout our platform.

Our E I analytic solution, including a unifying vulnerability management risk free 60 business insights are seeing strong traction.

Analytics contributed nearly three points to new and upsell business growth in Q4, and two points for the entire fiscal 'twenty before even though some of these products are only available for a part of the year.

Jay Chaudhry: I am pleased with a contribution of AI analytics in fiscal 24, and with continued expansion of the solution, I expect its contribution to continue to grow.

Speaker Change: I am pleased with the contribution of our analytics and fiscal 'twenty four.

Speaker Change: And with continued expansion of distribution I expect its contribution to continue to grow.

Jay Chaudhry: With an addressable market of 96 billion dollars, we believe we are in the very early stages of our opportunity with CR Trust and AI. The cyber threat environment continues to worsen as the limitations of firewall and VPN-based architecture are exploited by threat actors to launch an increasing volume of sophisticated attacks. Over the last year, we saw an 18% increase in ransomware attacks blocked by the Zscaler Cloud. Our season threat-class research team is tracking 391 of the most sophisticated ransomware families, including many that were uncovered by Zscaler in the past year. Driven by the increased number of cyber breaches, more customers are adopting our zero trust platform.

Speaker Change: With that addressable market of $96 billion. We believe we are in the very early stages of our opportunity, but see our cros and AI.

Speaker Change: The cyber threat environment continues to worsen as the limitations of Whitehall in VPN based architecture are exploited by threat actors to launch an increasing volume of sophisticated attacks over the last year, we saw an 18% increase in ransomware attacks blocked by the.

Speaker Change: Scalar cloud.

Speaker Change: Our season track class research team is tracking 391 of the most sophisticated ransomware families, including many that were uncovered by six <unk> in the past year.

Speaker Change: Driven by the increased number of cyber breaches more customers are adopting our zero trust platform.

Jay Chaudhry: For example, in a new logo when a top 10 Fortune 500 industry machinery company purchased Zscaler for users for 100,000 users in a multi-year 7-figure ACV deal. The customer previously purchased a firewall-based SASE solution to consolidate firewall, secure web gateways, and MPLS network strength. Subsequently, they realized the so-called SASE solution allows that growth at movement and does not deliver zero trust security. They chose Zscaler to replace their firewall-based SASE. Our purpose-built proxy-based cloud platform makes our customers' branches and data centers invisible to threat actors; hence, they can't be discovered and they can't be attacked. In addition to landing new logo platform purchases, we are also upselling our platform.

Speaker Change: And a new logo win a top 10 fortune 500 industry machinery company.

Speaker Change: Purchase Zee scalar for users for 100000 users in a multiyear seven figure ACB deal.

Speaker Change: The customer previously purchased a firewall based SaaS solution to consolidate firewall secure web gateways and mpls networks ramp.

Speaker Change: Subsequently they realized the so called sassy solution allow us backhaul Tac movement and does not deliver zero Trust security there.

Speaker Change: They chose the scalar to replace their firewall based sassy.

Speaker Change: Our purpose built proxy based cloud platform makes our customers branches and data centers invisible to chirp actors, hence they can't be discover and they can't be a capped.

Speaker Change: In addition to landing new logo platform purchases were also upselling our platform, our land and expand motion creates a flywheel of continuous engagement and upsell to.

Jay Chaudhry: Our land and expand motion creates a flywheel of continuous engagement and upsell. To give you an example, in a 7-figure upsell deal, a Fortune 200 financial services customer bought ZPA and ZDX after the successful ZIA deployment for 68,000 users. After securing internet and SASE access with Zscaler, it was natural for them to expand to our broader platform. ZPA for zero trust access to private applications and for user to application segmentation to eliminate lateral threat propagation. And ZDX to quickly identify and resolve end-to-end performance issues. With this purchase, the customer's ARR more than doubled to nearly $10 million.

Speaker Change: To give you. An example in a seven figure upsell deal a fortune 200 financial services customer bought Z P. A N C. D X. After the successful V I a deployment for 68000 users.

After securing internet and SaaS access with the scatter it was natural for them to expand to our broader platform Z P. A for zero trust access to private applications and for user to application segmentation to eliminate lateral type propagation and Z D X too quickly.

Speaker Change: Identify and it's all end to end performance issues.

Speaker Change: With this purchase our customers' ear at more than doubled to nearly $10 million.

Jay Chaudhry: Next, I am happy to share that customers continue to adopt advanced features of our data protection pillar, making it one of our fastest-growing pillars. For example, in a new logo win, an American healthcare provider purchased multiple pillars of our platform, including ZIA transformation, data protection advanced, and ZDX for 124,000 users in a multi-year 8-figure TCVD. Dada Protection Pillar was critical to this win due to its comprehensive capabilities, which includes securing all types of data, whether structured or unstructured, data in motion or data addressed, and data across all channels, including web, email, endpoint, SaaS, cloud workloads, and more.

Speaker Change: Next I am happy to share that customers continue to adopt advanced features of our data protection pillar, making it one of our fastest growing pillars. One example.

Speaker Change: And a new logo win in American healthcare provider purchased multiple pillars, Aqua platform, including Z I E transformation data protection advanced and C. D X, where 124000 users in a multi year eight figure T C B deal.

Speaker Change: Our data protection pillar was critical to this win due to its comprehensive capabilities which include securing.

All types of data, where they're structured or unstructured data in motion our data at rest and data across all channels, including web email endpoint SaaS cloud workloads and more.

Jay Chaudhry: Next, let me discuss our emerging products, including CDX, Zero Trust for Branch and Cloud, and AI Analytics. I'm delighted to share that emerging products contribute approximately 22% of new and upsell business in fiscal 24, up from 18% in fiscal 25. We expect this contribution to grow to mid 20s in fiscal 25. Our Zero Trust for Branch and Cloud solution, including Zero Trust for Workloads, Zero Trust SD-WAN, and Zero Trust segmentation, is driving more and more meaningful wins. Let me share two examples. In an upsell win, a Fortune 500 financial service customer purchased Zero Trust for Workloads to protect its own prem applications.

Speaker Change: Next let me discuss our emerging products, including CTX Zero Trust per branch in cloud and AI analytics I'm delighted to share that emerging products contributed approximately 22% of new and upsell business in fiscal 'twenty four up from 18 per.

Speaker Change: Sent in fiscal 'twenty, three we expect this country region to grow to mid Twenty's in fiscal 'twenty five.

Speaker Change: Zero Trust for branch and cloud solution, including Zero Trust for Workflows Zero Trust SD Wan and zero Ultra segmentation is driving more and more meaningful wins.

Speaker Change: We share two examples.

Speaker Change: In an upsell win a fortune 500 financial services customer purchased zero trust for workloads to protected on Prem applications.

Jay Chaudhry: Zero Trust for Workloads contributed approximately one third of this seven-figure upsell ACV deal, which doubled the annual spend of this existing million-dollar ARR customer. In another upsell win, a top 10 pharmaceutical company purchased our Zero Trust SDVAN solution to protect over 30 manufacturing sites, eliminating the need for firewalls and making each site like a Starbucks. Zero Trust SD-WAN was nearly 50% off this seven-figure ACV deal. Our expanding portfolio of emerging products, forebours strengthened by our acquisition of Avalod and Irga, is opening doors for sales to new customers. With the addition of Irga, ZSchooler is expanding to provide Zero Trust security inside branches, factories, and campuses, where customers traditionally relied on East to West firewalls and network access control on them.

Speaker Change: Zero Trust for workloads contributed approximately one third of the seven figure upsell S. C b deal, which doubles the annual spend off this existing millions dollar a are our customer.

Speaker Change: In another upsell win a top 10 pharmaceutical company purchased our zero Trust SD Wan solution to protect over 30 manufacturing sites, eliminating the need for firewalls, and making each side like a Starbucks Zero Trust SD Wan was nearly 50% off the seven figure.

C B deal.

Speaker Change: Our expanding portfolio of emerging products further strengthened by our acquisition of Avalon and he had a gap is opening doors score sales to new customers.

With the addition of yoga Zee scalar is expanding to provide zero trust security inside branches factories and campuses where customers traditionally relied on east West Firewalls and network access control on that.

Jay Chaudhry: By combining Irga with our Zero Trust SDVAN, we can not only replace firewalls at the edge, but also eliminate firewalls inside these sites. We are also seeing strong traction for the unified vulnerability management solution we acquired through Avalod. By combining our customers' enterprise security and business system data with our proprietary law of data from half a trillion daily transactions, Avalod delivers real-time actionable insights and operational efficiencies for customers to improve their overall security posture. We expect new logo conversations that start with Irga for Avalod or other emerging products to expand into broader platform opportunities.

Speaker Change: By combining ear gap with our zero Trust SD Wan, we cannot only replace firewalls at the edge, but also eliminate firewall it's inside these sites.

Speaker Change: We are also seeing strong traction for the unified formulary management solution, we acquired through <unk>.

Speaker Change: By combining our customers enterprise security and business system data with our proprietary log data from half a trillion daily transactions as large delivers real time actionable insights and operational efficiencies for our customers to improve their overall security posture.

Speaker Change: We expect new logo conversations that start with air gap or avatar or other emerging products to expand into broader platform opportunities. We will continue to invest in our platform expansion.

Jay Chaudhry: We will continue to invest in our platform expansion. Moving to the federal vertical, I am excited to share we landed a new cabinet-level agency, increasing our tongue-tock cabinet-level agencies to 13. In a server-figure ACV, Diego, this customer purchased Zscaler for users for 5,000 users. With over 100,000 employees, this customer presents a significant 20x upsell opportunity. Having landed 13 of the 15 cabinet-level agencies, including the DOD, we see large upsell opportunities in the federal vertical, with the increasing adoption of zero trust. Building upon our success in the U.S. We are accelerating our public sector go-to-market investments in other nations that are modeling the zero trust security initiatives, similarly to the U.S.

Speaker Change: Moving to the federal vertical I am excited to share we landed a new cabinet level agency, increasing account our cabinet level agencies to 13.

Speaker Change: In a seven figure ACB Diego this customer purchased Zscaler for users for 5000 users.

With over 100000 employees. This customer represents a significant 20 ex upsell opportunity.

Speaker Change: Having landed 13 of the 15 cabinet level agencies, including the D. O D. We see large upsell opportunities in the federal vertical with the increasing adoption of zero Trust building upon our success in the U S. We are accelerating our public sector. Our go to market investments in other nations.

Speaker Change: Is that a modeling zero trust security initiatives Similarly to the U S.

Jay Chaudhry: This is a large opportunity for us, but like many government initiatives, this will take time.

Speaker Change: This is a large opportunity for us, but like many government initiatives. This will take time now let me share some updates on our sales organization.

Jay Chaudhry: Now let me share some updates on our sales organization. First, we had lower than expected attrition, and we had a strong hiding court. In fiscal 25, we planned to continue hiding reps at a strong pace, and expect attrition to further improve. Second, I am pleased to report that sales productivity was better than expected during the quarter, driven by acceleration in new and upsell business. In fiscal 25, we expect sales productivity to continue to improve, with the second half stronger than the first. Third, we increased investment in the global system integrators, or GSI channel, by hiring leaders experienced in building GSI programs for large enterprises.

Speaker Change: First we had lower than expected attrition and we had a strong hiring quarter in fiscal 'twenty five we plan to continue hiring reps at a strong pace and expect attrition to further improve.

Speaker Change: Second I am pleased to report that sales productivity was a better than expected during the quarter driven by acceleration in new and upsell business in.

Speaker Change: In fiscal 'twenty, five we expect sales productivity to continue to improve with the second half stronger than the first.

Speaker Change: Third we increased investment in the global system integrators, or GSI channel by hiring leaders experienced in building GSI programs for large enterprises. These hires are driving significant progress in developing mutual go to market plans with G. S eyes that integrate.

Jay Chaudhry: These hires are driving significant progress in developing mutual go-to-market plans with GSI's that integrate the Z-skiller platform with the customer's digital transformation projects. Most large GSIs are already Z-skiller customers, and that enables them to showcase to the customers the value Z-skiller's zero trust platform delivers. This quarter, we added another large GSI end-user customer, making eight of the top 10 GSI's by-RAV news Z-skiller customers. This GSI purchased Z-skiller for users for over 300,000 users in our largest ever PCV deal in the services vertical. This GSI is consolidating multiple point products, including secure web gateways, load bounces, VPNs, firewalls, and MPS network, which is expected to deliver 200% ROI to this customer.

Speaker Change: Does the scalar platform with their customers' digital transformation projects.

Speaker Change: Most large G. S eyes are already zee scalar customers and that enables them to showcase to their customers that values. The scalar is zero trust platform delivers.

This quarter, we added another large GSI end user customer, making eight of the top 10 T. S size by revenues six pillar customers.

Speaker Change: This G S. I purchased six killer for users by over 300000 users in our largest ever P. C. B deal in the services vertical.

This GSI is consolidating multiple point products, including secure web gateways load Balancers, Vpns firewalls, and Mpls network, which is expected to deliver 200% ROI to this customer.

Jay Chaudhry: I am pleased with the progress we're making in platforming our go-to-market engine to an account-centric sales motion, which is contributing to brought off our large customers. We added nearly double the number of Global 2000 logos in fiscal 24 as compared to fiscal 23. We ended fiscal 24 with approximately 35% of Global 2000 companies and more than 40% of Fortune 500 companies as our customers. Our customer base spending $1 million plus annually grew by 26% year-over-year to 567. And we ended the quarter with over 60 customers spending $5 million plus annually. We expect this large customer momentum to continue in fiscal 25.

Speaker Change: I am pleased with the progress we're making in transforming our go to market engine to an account centric sales motion, which is contributing to growth of our large customers. We added nearly doubled the number of global 2000 logos in fiscal 'twenty four as compared to fiscal 'twenty three we.

Speaker Change: Ended fiscal 'twenty, four with approximately 35% of global 2000 companies and more than 40% of fortune 500 companies as our customers.

Speaker Change: Our customer base spending $1 million plus annually grew by 26% year over year to 567 <unk>.

Speaker Change: And we ended the quarter with over 60 customers spending $5 million plus annually. We expect this large customer momentum to continue in fiscal 'twenty five.

Jay Chaudhry: Finally, I want to address the topic of cloud resilience that has come to the forefront due to the recent cloud outages of Microsoft and CrowdStrike. When customers lie on a mission critical cyber security service, there's no room for service interruptions. From inception, Zscaler has built a cloud security platform that has been seamlessly scaling with higher reliability and resilience. The cloud will task and requires years of experience; unproven vendors, including new entrants and legacy firewall companies, do not have this experience. By operating the world's largest security cloud with superior resilience for over a decade, we have earned the trust of the largest enterprises.

Speaker Change: Finally, I want to address the topic of cloud resilience that has come to the forefront due to the recent cloud outages of Microsoft and crowd strike.

Speaker Change: When customers rely on our mission critical cyber security service, there's no room for service interruptions.

Speaker Change: From inception, Zee scalar has built a cloud security platform that has been seamlessly scaling with higher reliability and resilience.

Speaker Change: Operating such a surface is no trivial task and requires years of experience.

Speaker Change: Unproven vendors, including new entrance and legacy firewall companies do not have this experience.

Speaker Change: By operating the world's largest security clock would with superior resilience for over a decade, we have earned the trust of the largest enterprises.

Jay Chaudhry: This is a clear defaciator for us and is driving the growth of our business.

Speaker Change: This is a clear differentiator for us and is driving the growth of our business areas.

Jay Chaudhry: As an innovator and a market leader in January 2023, we became the first cloud security company to introduce a business continuity service that enables customers to continue their operations even during catastrophic events.

Hey, as an innovator and a market leader in January 2023.

Speaker Change: We became the first cloud security company to introduce a business continuity service that enables customers to continue their operations even during catastrophic events.

Jay Chaudhry: In conclusion, we're uniquely positioned to benefit from the confluence of two large, secular growth drivers: zero trust security and AI. We enter fiscal 25 with a stronger go to market machine, increased pace of on and the innovation, strong adoption of our emerging products and high levels of customer satisfaction with an NPS goal of over 70. With our customer obsession, expanding platform, and a launch addressable market, I expect another strong view which will move us closer to our goal of $5 billion in ERR.

Speaker Change: In conclusion, we are uniquely positioned to benefit from the confluence of two large secular growth drivers zero Trust security and AI.

Speaker Change: We enter fiscal 'twenty five with a stronger go to market machine increased pace of R&D innovation strong adoption of our emerging products and high levels of customer satisfaction with an NPS score of over 70.

Speaker Change: With our customer obsession expanding platform and a large addressable market I expect another strong year, which will move us closer to our goal of $5 billion in E. At all no.

Remo Canessa: No, I'd like to turn over the call to Rimo for our financial results. Thank you, Jay.

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

Remo Canessa: Our Q4 results exceeded our guidance on growth and profitability, even with ongoing customer scrutiny of large deals. Revenue was $593 million, up 30% year-over-year and up 7% sequentially. From a geographic perspective, America's represented 55% of revenue, and me was 30% in APJ with 15%. For the full year, revenue was $2.17 billion, up 34% year-over-year. Our total calculated billions in Q4 grew 27% year-over-year, and 45% sequentially to $911 million. Our calculated current billions grew 27% year-over-year. Like last year, some customers paid us upfront on multi-year deals, and the percentage of total calculated billions coming from such upfront payments was relatively unchanged year-over-year.

renewal: Thank you Jay our Q4 results exceeded our guidance on growth and profitability, even with ongoing customer scrutiny of large deals.

renewal: Revenue was $593 million up 30% year over year and up 7% sequentially.

Speaker Change: From a geographic perspective Americas represented 55% of revenue EMEA was 30% and a P. J was 15% for.

Speaker Change: For the full year revenue was $2.17 billion.

Speaker Change: Up 34% year over year.

Speaker Change: Our total calculated billings in Q4 grew 27% year over year, and 45% sequentially to $911 million.

Speaker Change: Our calculated current billings grew 27% year over year like last year, some customers paid us upfront on multiyear deals.

As a percentage of total calculated billings coming from such upfront payments was relatively unchanged year over year.

Remo Canessa: Our remaining performance obligations for our PO grew 26% from a year ago to $4.418 billion. Current RPO was approximately 48% of the total RPO. We ended Q4 with 567 customers with over $1 million in ARR and 3,100 customers with over $100,000 in ARR. This continued strong growth of large customers speaks to the strategic role we play in our customers' digital transformation journeys. Our 12-month trailing dollar-based net retention rate was 115%. While good for our business, our increased success in selling bigger bundles, selling multiple pillars from the start, and faster upsells within a year can reduce our dollar-based net retention rate in the future.

Speaker Change: Our remaining performance obligations or our P. O grew 26% from a year ago to $4.418 billion.

Speaker Change: R. P O was approximately 48% of the total our P O.

We ended Q4 with 567 customers with over $1 million in Air R and 3100 customers with over $100000 in a R. R.

Speaker Change: Continued strong growth of large customers speaks to the strategic role we play in our customers' digital transformation journeys.

Speaker Change: Our 12 month trailing dollar based net retention rate was 115%.

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

Remo Canessa: There could be variability in the future. This is the best way to improve the growth of the net retention rate in the future. This is the best way to improve the growth of the net retention rate on a quarterly basis due to the factors I just mentioned.

Remo Canessa: Turning to the rest of our Q4 financial performance, total growth margin of 81.1% compared to 81.4% in the prior quarter and 80.7% in the year-ago quarter. On a year-over-year basis, growth margin benefited by approximately 60 basis points from a change in our accounting attributed to the longer useful life of our cloud infrastructure. On our total operating expenses increased 8% sequentially and 26% year-over-year to $353 million. We continue to generate significant leverage in our financial model, with an operating margin of approximately 22%. An increase of about 260 basis points year-over-year. Our free cash flow margin was 23%, including data center cat-backs, approximately 8% of revenue.

Speaker Change: Turning to the rest of our Q4 financial performance total gross margin of 81.1% compared to 81.4% in the prior quarter and 80.7% in the year ago quarter.

Speaker Change: On a year over year basis gross margin benefited by approximately 60 basis points from a change in our accounting attributed to the lager useful life of our cloud infrastructure.

Speaker Change: Moving on our total operating expenses increased 8% sequentially and 26% year over year to $353 million.

Speaker Change: We continue to generate significant leverage in our financial model with operating margin of approximately 22%.

Speaker Change: An increase of about 260 basis points year over year.

Speaker Change: Our free cash flow margin was 23%, including datacenter capex approximately 8% of revenue.

Remo Canessa: We ended the quarter with over $2.4 billion in cash, cash equivalence, and short-term investments.

Speaker Change: We ended the quarter with over $2.4 billion in cash cash equivalents and short term investments.

Remo Canessa: Before getting to the details of Q1 and full-year fiscal 2025 guidance, I wanted to share additional context about our framework for billings guidance. We expect full-year fiscal 25 calculated billings of $3.110 billion to $3.135 billion, or year-over-year growth, approximately 19 to 20%. We expect first half billings to be in the range of 39 to 39.5% of full-year billings guide, with Q1 to be approximately 16.2% of full-year billings guide. The bit point of our guidance implies year-over-year billings growth of approximately 13% in the first half, accelerating to 23% growth in the second half.

Speaker Change: Before getting to the details of Q1 and full year fiscal 'twenty 25 guidance I wanted to share additional context about our framework for billings guidance.

Speaker Change: We expect full year fiscal twenty-five calculated billings of $3.110 billion to $3.135 billion or year over year growth approximately 19% to 20%.

Unknown Executive: Good day, everyone, and thank you for standing by.

Unknown Executive: A welcome to see Scaler, fourth quarter, 2024 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To participate, you will need to press star 1-1 on your telephone. You will then hear a message advising your hand is raised. To withdraw your questions, simply press star 1-1 again.

Speaker Change: We expect first half billings to be in the range of 39% to 39.5% of <unk>.

Speaker Change: Full year Billings guide.

Speaker Change: With Q1 to be approximately 16.2%.

Speaker Change: Our full year Billings guide.

The midpoint of our guidance implies year over year billings growth of approximately 13% in the first half accelerating to 23% growth in the second half.

Unknown Executive: Please be advised that today's conference is being recorded.

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

Remo Canessa: In no particular order, I'd like to share three key factors that are driving this acceleration. One, as Jay mentioned, we expect sales productivity to continue to improve, with a second half stronger than the first. We expect this to contribute to strong new upsell and renewal activity in the year. Two, our strong and growing pipeline supports second half acceleration, and three, from a tiny perspective, our contracted non-cancelled billings from prior years active contracts, are scheduled to grow 7% in the first half and 23% in the second half. This naturally implies a stronger second half in Billings grow, giving a strong visibility into total Billings grow in the second half.

Speaker Change: In no particular order I'd like to share three key factors that are driving this acceleration.

Jay Chaudhry: Good afternoon, everyone, and welcome to the Zscaler, fourth quarter, fiscal year, 2024, earnings conference call. On the call with me today are Jay Chaudhry, Chairman and CEO, and Remo Canessa, CFO. Please note, we have posted our earnings release and a supplement of financial schedule to our Investor Relations website. Unless otherwise noted, all numbers we talk about today will be on an adjusted non-gap basis. You will find the reconciliation of gap to the non-gap financial measures in our earnings release, earnings per share, our objectives and outlook, our customer response to our products and our market share and market opportunity.

Speaker Change: One as Jay mentioned, we expect sales productivity to continue to improve with a second half stronger than the first we expect this to contribute to strong new upsell and renewal activity in the year.

Speaker Change: Two our strong and growing pipeline supports second half acceleration and three from a tiny perspective, our contracted noncancelable billings from prior year's active contracts are scheduled to grow 7% in the first half and 23% in the second half this naturally implies a stronger second half and bill.

<unk> growth, giving us strong visibility into total billings growth in the second half.

Remo Canessa: Moving on to taxes, please note that we expect to continue to be a modest cash taxpayer in fiscal 2025, with an estimated cash tax of approximately $45 million to $50 million. For non-GAAP P&L reporting, I'd like to call your attention to a change we are making to our non-GAAP tax calculations. Starting fiscal 2025 and going forward, we're establishing a non-GAAP tax rate of 23%, which is reflected in our non-GAAP earnings per share guidance for fiscal 2025. Please refer to our earnings release in the financial supplemental for fiscal 23 and fiscal 24 comparisons. Reflecting this new non-gap tax rate.

Moving on to taxes. Please note that we expect to continue to be a modest cash taxpayer in fiscal 'twenty 25.

With an estimated cash tax of approximately 45 million to $50 million.

Speaker Change: For non-GAAP P&L reporting I'd like to call your attention to a change we're making to our non-GAAP tax calculations star.

Starting fiscal 'twenty, 'twenty, five and going forward.

Speaker Change: We're established in a non-GAAP tax rate of 23%, which is reflected in our non-GAAP earnings per share guidance for fiscal 'twenty 'twenty five.

Jay Chaudhry: These statements and other comments are not guarantees of future performance, but rather are subject to risk and uncertainty, some of which are beyond our control. These forward-looking statements apply as of today, and you should not rely on them as representing our views in the future. We undertake no obligation to update these statements after this call.

Speaker Change: Please refer to our earnings release and financial supplemental for fiscal 'twenty, three and fiscal 'twenty four comparisons, reflecting this new non-GAAP tax rate trade.

Remo Canessa: Train to the rest of guidance. As a reminder, these numbers are all non-GAAP. For the first quarter, we expect revenue in the range of $604 million to $606 million, reflecting a year-to-year growth of approximately 22%. Gross margins of 80%. I would also like to remind investors that a number of our emerging products, including newer products like ZDX, zero trust for branching cloud, and AI analytics, will initially have lower gross margins than our core products. We are currently managing the emerging products for time to market and growth, not optimizing them for gross margins. In addition, we'll continue to invest in our cloud and AI infrastructure to scale with the growing demand.

Speaker Change: Turning to the rest of guidance as a reminder, these numbers are all non-GAAP.

Speaker Change: For the first quarter, we expect revenue in the range of $604 million to $606 billion, reflecting a year over year growth of approximately 22% gross margins of 80%.

Ashwin Kesireddy: For a more complete discussion of the risks and uncertainties, please see our filings with DSCC as well as in today's earnings release. I also want to inform you that we will be attending the following conferences. City Global TNT Conference in New York City on September 5th, Goldman Sachs, Communicopia and Technology Conference in San Francisco on September 11th, Wolf Research TNT Conference in San Francisco on September 11th.

Speaker Change: I would also like to remind investors that a number of our emerging products, including newer products like Z X Zero Trust or branch in cloud and AI analytics will initially have lower gross margins than our core products. We are currently managing the emerging products for time to market and grow not.

Jay Chaudhry: Now, I'll turn the call over to Jay. Thank you, Ashwin. We delivered a strong Q4 with all metrics exceeding the high end of our guidance. Revenue grew 30% year over year. Billings viewed 27% and profitability raised new records with operating margins of approximately 22% and free cash flow margin of 23%. We also achieved a new milestone of $1 billion in quarterly bookings in Q4, driven by an acceleration in new and upset business in the quarter.

Speaker Change: Optimizing them for gross margins.

Speaker Change: In addition, we will continue to invest in our cloud and AI infrastructure to scale with the growing demand.

Speaker Change: Operating profit in the range of $114 million to $116 million.

Speaker Change: Net other income of $18 million income taxes of $31 million.

Remo Canessa: Already per share in the range of 62 cents to 63 cents, assuming $164 million fully diluted shares.

Speaker Change: Our east per share in the range of 62 to 63.

Speaker Change: Assuming a 164 million fully diluted shares.

Remo Canessa: For the full year fiscal 2025, revenue in the range of $2.6 billion to $2.62 billion, reflecting a year-to-year growth of 20 to 21%. Operating profit in the range of $530 million to $540 million, income taxes of approximately $140 million. Already per share in the range of $2.81 to $2.87, assuming approximately 164 million fully diluted shares. We expect our free cash flow margin to be approximately 23.5% to 24%, including higher catbacks this year. We expect our data center catbacks to be approximately three points higher as a percent of revenue compared to fiscal 2024, as we invest in upgrades to our cloud and AI infrastructure.

Speaker Change: For the full year fiscal 'twenty twenty-five revenue in the range of $2.6 billion to $2.62 billion, reflecting a year over year growth of 20% to 21%.

Jay Chaudhry: For the full year, revenue grew 34%, and free cash flow grew 75%, resulting in free cash flow margin of 27%, a new record for the company. With another year of strong talk and bottom line performance, we exceeded the rule of 60 for the fourth consecutive year. Despite the recent changes in our go-to market organization, we delivered these outstanding results driven by strong customer demand for our zero trust exchange platform. I'm very pleased with the progress we're making in go-to market execution, the pace of innovation and customer adoption of our expanded platform.

Speaker Change: Operating profit in the range of $530 million to $540 million.

Income taxes of approximately $140 million.

Our <unk> per share in the range of $2.81 to $2.87, assuming approximately 164 million fully diluted shares we expect our free cash flow margin to be approximately 23.5% to 24%, including higher Capex. This year.

We expect our datacenter capex to be approximately three points higher as a percent of revenue compared to fiscal 'twenty 'twenty four as we invest in upgrades to our cloud and AI infrastructure.

Jay Chaudhry: I'm also pleased to share we crossed $2.5 billion in ARR in Q4, and we expect to achieve a new milestone of $3 billion or more in ARR in fiscal 25. Before getting into further details of the quarter, let me share a few observations on the demand and why. First, customer adoption offers zero trust platforms is stronger than ever, with Q4 setting a record for new and upsell business. Our platform secures 47 million users across nearly 8,700 customers.

Remo Canessa: With a large market opportunity and customers increasingly adopting the broader platform, we will invest aggressively to position us for long-term growth and profitability.

Speaker Change: With a large market opportunity and customers increasingly adopting the broader platform.

Speaker Change: We will invest aggressively to position us for long term growth and profitability with that operator, you may now open the call for questions.

Unknown Executive: With that operator, you may now open the call for questions. Thank you, and as a reminder, to ask a question, simply press star 11 on your telephone and wait for your name to be announced. To remove yourself, press star 11 again.

Thank you and as a reminder to ask a question simply press Star one one on your telephone and wait for your name to be announced to remove yourself press star. One again, we ask that you. Please keep your questions to one please standby for your first question.

Unknown Executive: We ask that you please keep your questions to one. Please stand by for our first question.

Saket Kalia: Any comments from the line of Saket Kalia with Barclays? Please proceed. Okay, great.

Jay Chaudhry: While other vendors are still struggling to deliver cloud security for users, we expanded our platform beyond users to deliver zero trust security for applications, workloads, and IoT OT devices. Customers are consolidating the disjointed legacy security products by adopting our comprehensive platform. Second, the increasing use of AI is creating new avenues of growth for us. For example, the rising adoption of Gen AI is exposing new gaps in organization's security posture. To help our customers address these risks, earlier this year we launched Gen AI Security, which enables customers to realize the productivity benefits of Gen AI without compromising data security. Using our Gen AI Security, customers can gain visibility, apply access control, and enforce data protection policies to prevent their sensitive data from leaking.

Speaker Change: And he comes from the line of socket Calia with Barclays. Please proceed.

Saket Kalia: Hey guys, thanks for taking my question here, and a nice quarter on the Billings and all next year's Billings guide.

Sohket Calia: Okay, Great Hey, guys. Thanks for taking my question here.

Sohail Calia: And a nice quarter on the billings and all next year's Billings Guide.

Saket Kalia: Maybe if I give someone a question, Jay, maybe I'll make it for you. Drop a little bit.

Sohail Calia: Maybe if I keep it to one question Jay maybe I'll make it for you.

Sohail Calia: Kevin.

Sohail Calia: Dropped.

Jay Chaudhry: 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 kind of pure-play cloud approach as Zscaler? Thanks.

Speaker Change: A little bit.

Speaker Change: We all know your views on on firewall based solution, but but maybe out of curiosity, how about some of the newer players in the SaaS fee.

Speaker Change: Or maybe attacking this with.

A similar kind of pure play cloud approach.

As the scalar thanks.

Jay Chaudhry: Saket, thank you. We have not seen any meaningful change on the competitive landscape. In fact, if I would say, as the market is looking for a broader platform that's integrated and it's looking for a proven vendor because the resilience has become a very important thing. Our brand has gotten better on the higher end of the market. We actually feel like we're very good. We've mentioned about a number of new levels last year, the added Sassy doubles in 24-over-20 days. We've seen whether the five-row vendors or some other vendors, either they lack the proxy architecture or they lack the multi-tenant architecture.

Speaker Change: Thank you we have not seen any meaningful change on the competitive landscape in fact, if I would say as the market is looking for broader platform.

Speaker Change: And it's looking for proven vendor because <unk> has become a very important thing.

Jay Chaudhry: Third, I'm thrilled to share that we have achieved a major milestone with our cloud platform, suppressing over half of trillion transactions daily, that is T as in trillion. This further demonstrates our widening market leadership position. These transactions generate a vast quantity of proprietary loans that feed our massive data lake. These are not firewall loans that often can't inspect SSL traffic for cyber threat detection. These are complete loans that have structured and unstructured data, including the full URL.

Speaker Change: Brian has gotten better on the high end of the market, we actually feel very good that we mentioned about.

Speaker Change: Number of new logos.

Speaker Change: Last year, we added.

Speaker Change: Essentially doubled in 'twenty.

Speaker Change: Thank you.

Speaker Change: We have seen.

Speaker Change: Firewall vendors or some of the other vendors either their Mac a proxy architecture, all the lack of multi tenant architecture.

Jay Chaudhry: Architecture is critical for them, and that's a big advantage for us. Even if you build the architecture, time and experience it takes to build a highly alive and highly resilient cloud is massive. And then these large enterprises have to trust you. It took us a long time to earn the trust of these customers. So we feel we're in a good position. We keep on innovating. The gap between our offering and what I call so would be competitors is growing bigger and bigger. So IFU's very bullish and comfortable with a platform and a gap you're creating with other competitors.

Speaker Change: Actually is critical.

Speaker Change: And that's a big advantage for us even if you build the architecture.

Speaker Change: Time and experience it takes to build a highly reliable.

Jay Chaudhry: We leverage this proprietary data to train AI models that power innovations throughout our platform. Our AI analytics solution includes a unified vulnerability management, risk fee 60, business insights are seen strong traction. AI analytics contributed nearly three points to new and observed business growth in Q4 and two points for the entire fiscal 24, even though some of these products were only available for a part of the year. I am pleased with the contribution of AI Analytics in fiscal 24, and with continued expansion of the solution, I expect its contribution to continue to grow. With an addressable market of 96 billion dollars, we believe we are in the very early stages of our opportunity with CR Trust and AI.

Speaker Change: It's.

Speaker Change: And then these large enterprises have to trust aircrafts.

Speaker Change: Aircrafts, a long time to earn that trust.

Speaker Change: So we feel we're in good position, we keep on innovating.

Speaker Change: Between our offering and and.

Paul: Hey, Paul.

Paul: Would be competitors is growing bigger and bigger.

Paul: And comfortable with our platform.

Paul: Under GAAP, we are creating but other competitors.

Saket Kalia: Very helpful. Thanks.

Paul: Very helpful. Thanks.

Unknown Executive: Thank you.

Brad Zelnick: One moment for our next question. And he comes from the line of Brad Selnick with Deutsche Bank. Please proceed. Great. Thanks so much. And 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 these scalers designed in a way that's highly available and frankly relied upon by customers as an inline solution.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And it comes from the line of Brad Zelnick with Deutsche Bank. Please proceed.

Brad Zelnick: Great. Thanks, so much and I'll Echo my congrats on a real strong finish to the year Jay I. Appreciate your comments about the Microsoft and crashed strike related outage in July and why Zee scalar is designed in a way that is highly available and frankly relied upon by customers as an in line solution, but I'm wondering if that event in any way.

Jay Chaudhry: The cyber threat environment continues to worsen, as the limitations of firewall and VPN-based architecture are exploited by threat actors to launch an increasing volume of sophisticated attacks. Over the last year, we saw an 18% increase in ransomware attacks blocked by the Zscaler Cloud. Our season threat-class research team is tracking 391 of the most sophisticated ransomware families, including many that were uncovered by Zscaler in the past year. Driven by the increased number of cyber breaches, more customers are adopting our zero trust platform.

Jay Chaudhry: 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 these scalers' place within that. Thank you. Yes.

Speaker Change: From what you can tell it has changed the way customers are thinking about their cyber strategies and Zee scalar is placed within that thank you.

Jay Chaudhry: It's a good question after the CrowdStrike outage. Customers are more focused on resilience, which is our strength. In fact, I personally got lots and lots of calls. Right after the incident, they wanted to know about what we're doing about it. Now, we ended up personally inviting actually why invitation briefing to a thousand or so analogous customers. A surprise to see that, within a matter of a week or so, about 700 customers registered for the briefings. We ended up doing multiple of them. The main question was: this is mission critical service. And how are we protected?

Brian: Yes, Brian.

Jay: A good question after the crowd strike.

Customers are more focused on the series, which is our strength in fact, I personally got lots and lots of calls Brian. Thanks, Sudan. They wanted to know about what we're doing about it.

Speaker Change: Canada also lean Whiting actually widen mutation briefing to 1000 or so our largest customers.

Speaker Change: Rice to see that within a matter of week or so.

Jay Chaudhry: For example, in a new logo when a top 10 Fortune 500 industry machinery company purchased Zscaler for users for 100,000 users in a multi-year 7-figure ACV deal.

Speaker Change: 100 customers.

Speaker Change: Briefings, we ended up doing multi bought them.

<unk> question was yes.

Speaker Change: Mission critical service and how we ought to be protected the good thing is <unk> color delivered business continuity plan, our Dr Service and Jan 'twenty 'twenty.

Jay Chaudhry: The good thing is these colored delivered business continuity plan or PR service in January 2020. The first vendor to deliver the only vendor that has a true Visa. C.C.P.

Jay Chaudhry: The customer previously purchased a firewall-based SASE solution to consolidate firewall secure web gateways and MPLS network strength. Subsequently, they realized the so-called SASE solution allows that role that movement and does not deliver zero trust security. They chose Zscaler to replace their firewall-based SASE.

Speaker Change: <unk> delivered the only vendor that has a true ECP.

Jay Chaudhry: So the importance of mission criticality has gone up significantly since the outage that was caused by Kothari. In fact, about 40% of Zscaler's large customers have already deployed B.C.P. or Z.I.S. So while customers won't resend, they also do want consolidation, but they do not want considered. Solidations such that it makes an dependent on a single vendor, especially single vendor for applications and security.

Doug: So Doug.

Speaker Change: Importantly saw mission criticality has gone up significantly since.

Speaker Change: Okay that was caused by our strike in fact about 40% of these large customers have already deployed BCP VII.

Jay Chaudhry: Our purpose-built proxy-based cloud platform makes our customers branches and data centers invisible to threat actors, hence they can't be discovered and they can't be attacked. In addition to landing new logo platform purchases, we are also upselling our platform. Our land and expand motion creates a flywheel of continuous engagement and upsell. To give you an example, in a 7-figure upsell deal, a Fortune 200 financial services customer bought ZPA and CDX after the successful ZIA deployment for 68,000 users.

Speaker Change: So while our customers want it all.

Speaker Change: So.

Speaker Change: One consolidation.

Speaker Change: But the Dumont one consolidations such that it may extend dependent upon a single bank, especially spangled banner for our applications and security.

Jay Chaudhry: This sentiment has become even stronger after the mid-night desert of Microsoft issue. So I think we are opposition. We did a good job in building mission criticality. And I think it's important, and our customers are working closely with us.

Thank you Matt has become even stronger after midnight guys arent Microsoft fish.

Speaker Change: So I think we are well position, we did a good job in building mission criticality.

Speaker Change: And I think it's important and our customers are working closely with us.

Brad Zelnick: Very helpful, Jay. Thank you.

Jay Chaudhry: After securing internet and SASE access with Zscaler, it was natural for them to expand to our broader platform. ZPA for zero trust access to private applications and for user to application segmentation to eliminate lateral threat propagation. And ZDX to quickly identify and resolve end-to-end performance issues. With this purchase, the customers ARR more than doubled to nearly $10 million. Next, I am happy to share that customers continue to adopt advanced features of our data protection pillar, making it one of our fastest growing pillars.

Speaker Change: Very helpful. Jay Thank you alright.

Roger Boyd: One moment for our next question, please. And it comes from the line of Royer Boyd with UBS. Please proceed. Great. Thank you for taking my question.

One moment for our next question please.

Speaker Change: And it comes from the line of ROI are Boyd with UBS. Please proceed.

Speaker Change: Great. Thank you for taking my questions.

Roger Boyd: 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 good-of-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 given you more pause or tempering your expectations around the broader macro environment, sales cycles, or anything else. Thanks.

Speaker Change: Wanted to ask you about the billings guide and if you could just speak to the general level of conservatism conservatism, there you've been pretty clear even before this quarter about the expected headwind coming out at the go to market transition, but it does sound like sales productivity was better than expected in both <unk> and <unk>. This year, so just beyond that.

Speaker Change: I was giving you more pas are tempering your expectations around the broader macro environment sales cycles.

Jay Chaudhry: For example, in a new logo win, an American healthcare provider purchased multiple pillars of our platform, including ZIA transformation, data protection advanced, and ZDX for 124,000 users in a multi-year 8-figure TCVD. Our data protection pillar was critical to this wing due to its comprehensive capabilities, which includes securing all types of data, whether structured or unstructured, data in motion, or data addressed, and data across all channels, including web, email, endpoint, SaaS, cloud workloads, and more.

Speaker Change: Thanks.

Jay Chaudhry: Great question. So I mean, Billings guide, you know, really reflects, you know, again, we broke out the first half, first second half. And, you know, as we talked about in the sales organization, we had higher attrition than we expected in Q3; in that situation, stabilized in Q4 hiring those account reps. It's going to take time for those account reps to basically get the full productivity. We expect them to get to, you know, strong productivity in the second half. Our pipeline supports our guidance. And as we called out also, we take a look at Billings. Billings is made up of new and upsell renewals and contracted billings.

Speaker Change: Yes, great question.

Speaker Change: So I mean billings guide really reflects.

Speaker Change: Again, we broke out the first half versus second half and.

Speaker Change: As we talked about in the sales organization, we had higher attrition than we expected in Q3 and Thats nutrition stabilized in Q4 hiring those account reps.

Speaker Change: Take time for those account reps to basically get to full productivity.

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

Speaker Change: Our pipeline supports our guidance and as we called out also when you take a look at billings billings is made up of new and upsell renewals contracted billings and one of the things we called out.

Remo Canessa: And one of the things we called out on the script is contracted billings or scheduled billings from prior year contracts. So those are what we're seeing. We're seeing that because of the business is getting more second half weighted. We're seeing that this, you know, our guide reflects that. And as we called out in the first half, contracted Billings has expected to increase on a year-over-year basis, 7%, and of the second half, 23%.

Jay Chaudhry: Next, let me discuss our emerging products, including CDX, zero trust or branch and cloud, and AI analytics. I'm delighted to share that emerging products contribute approximately 22% of new and upsell business in fiscal 24, up from 18% in fiscal 25. We expect this contribution to grow to mid 20s in fiscal 25. Our zero trust for branch and cloud solution, including zero trust for workloads, zero trust SDVAN, and zero trust segmentation, is driving more and more meaningful wins.

Speaker Change: On the script is contracted billings are scheduled billings.

Speaker Change: From prior year contracts. So those are what we're seeing.

Speaker Change: We're seeing that because of the business is getting more second half weighted.

Speaker Change: Seeing that there is our guide reflects that and as we called out in the first half contracted billings.

Speaker Change: Spectra to increase on a year over year basis, 7% and in the second half 'twenty, 3%, what I can say also is that.

Jay Chaudhry: What I can't say also is that, you know, from my perspective, in the years, the scaler for, you know, almost eight years, you know, there's a change in our sales organization. You know, the change is basically, it's a more mature, very strong leadership and also an organization that I feel is going to be able to sell deeper into accounts and really sell the value of the scaler. So the puts and takes are, from my perspective, a strong demand for zero trust. We're going to continue to expand in the G2K, which represents around 35% in the Fortune 500 customer.

Speaker Change: From my perspective, being here Zee scalar for almost eight years.

Speaker Change: There is a change our sales organization.

Speaker Change: The change is basically it's a more mature.

Jay Chaudhry: Let me share two examples. In an upsell when a Fortune 500 financial service is customer purchase zero trust for workloads to protect its own prem applications. Zero trust for workloads contributed approximately one third of this seven figure upsell AC video, which double the annual spent of this existing million dollar ARR customer. In another upsell when a top 10 pharmaceutical company purchased our zero trust SDVAN solution to protect over 30 manufacturing sites.

Speaker Change: Strong leadership and also an organization that I feel is going to be able to sell deeper into accounts and really felt the value of zee scalar.

Speaker Change: So the puts and takes are for my perspective.

Speaker Change: Strong demand for zero Trust, we're going to continue to expand in the Chi to Kay which represents around 35% in the fortune 500 customers.

Jay Chaudhry: You know, the key thing with Zscaler also is that we're innovating. So you're looking at emerging products; they represent 22% of our total new and upsell in fiscal 24. We expect that to go up to 25%. So that's going to be our continued focus. It's not only selling, you know, our existing, you know, core products, but also innovating. As I mentioned, strong momentum in the go-to-market team. We just had a SKO, and the feedback from everybody. It went there. It was just very, very positive. Just really feel good about where we're at.

The key thing with Zee scalar also so we're innovating. So you look at our emerging products. They represented 22% of our total new and up sell in fiscal 'twenty. Four we expect that to go up to 25%. So that's going to be our continued focus is not only selling.

Jay Chaudhry: Eliminating the need for firewalls and making each side like a star box zero trust SDVAN was nearly 50% of this seven figure ACV deal. Our expanding portfolio of emerging products, further strengthened by our acquisition of Avalod and year gap is opening doors for sales to new customers. With the addition of year gap, these killer is expanding to provide zero trust security inside branches, factories and campuses where customers traditionally relied on East West firewalls and network access control on that.

Speaker Change: Our existing core products, but also innovating.

Speaker Change: As I mentioned strong momentum and it's been the go to market team, we just address kao and the feedback from everybody who went there was just very very positive.

Speaker Change: Just really feel good about where we're at.

Jay Chaudhry: You know, having said that the backdrop, it's still a challenge. You know, spending the environment. But I feel that, you know, Zscaler with their platform with what we're building or go-to-market. I just think we're just very, very well positioned. Okay. No, it's good. I can last comment.

Speaker Change: Having said that as a backdrop, it's still a challenging spending environment.

Speaker Change: Feel that scaling with our platform.

Speaker Change: With what we are building our go to market.

Jay Chaudhry: By combining year gap with our zero trust SDVAN, we can not only replace firewalls at the edge, but also eliminate firewalls inside these sites. We're also seeing strong traction for the unified vulnerability management solution required to have it all. By combining our customers enterprise security and business system data with our proprietary law data from half or trillion daily transactions, Avalod delivers real client actionable insights and operational efficiencies for customers to improve their overall security posture. We expect new logo conversations that start with year gap for Avalod or other emerging products to expand into broader platform opportunities.

Speaker Change: I think we're just very very well positioned.

Speaker Change: Okay Alright.

Jay Chaudhry: I mentioned is in today's environment, see I was due one auto-wide cost savings cost takeout. We're in a unique position to remove a number of one products that help justify causing our needs. Thank you.

Speaker Change: Alright, Scott I think the last comment I'll mention is in today's environment CIO is due one ottawa cost savings cost take out greater than its unique position to remove a number of products.

Speaker Change: Justify causing argues.

Speaker Change: Okay.

Unknown Executive: One moment for our next question, please.

Thank you one moment for our next question. Please.

Joseph Gallo: Any comments from the line of Joseph Gallo with Jeffries, please proceed. Hey guys, thanks for the question. Jay, I want to follow up on that last question. I mean, you've obviously started the branch out very successfully beyond ZIA and ZPA evidence 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?

Joseph <unk>: Any comes from the line of Joseph <unk> with Jefferies. Please proceed.

Joseph <unk>: Hey, guys. Thanks for the question Jay I wanted to follow up on that last question. I mean, you've obviously started to branch out very successfully beyond the CIA and DPA evidenced by AI and data protection success. However, post the crowd strike 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 maybe you can.

Jay Chaudhry: We will continue to invest in our platform expansion. Moving to the federal vertical, I am excited to share we landed a new cabinet level agency, increasing our tongue to our cabinet level agencies to 13. In a server-figure ACV Diego, this customer purchased Zscaler for users for 5,000 users. With over 100,000 employees, this customer presents a significant 20X upsell opportunity. Having landed 13 of the 15 cabinet-level agencies, including the DOD, we see large upsell opportunities in the federal vertical, with the increasing adoption of zero trust. Building upon our success in the U.S. We are accelerating our public sector go-to market investments in other nations that are modeling the zero trust security initiatives, similarly to the U.S.

Joseph Gallo: And then Rima, maybe you can just, you know, elaborate on how you're thinking about NRR and your fiscal 25 billion sky. Thanks.

Speaker Change: Just elaborate on how youre thinking about <unk> in your fiscal 'twenty five billings guide thanks.

Jay Chaudhry: So it's a very good question. Now, CrowdStrike wasn't really an issue of putting all of your eggs in one basket. How strike was one of the point products each product must work well. So, on one side, customers do one consolidation.

Speaker Change: Okay.

Speaker Change: It's a very good question.

Speaker Change: No crowd strike was not really an issue of putting all your eggs in one basket.

Speaker Change: Tri Pointe one off upon products each product must worthwhile. So on one side customers do one consolidation if you got two dozen product they wanted.

Jay Chaudhry: If you got two dozen products, they want to bring it down to a handful of key platform providers, but they do not want to go to the extreme of going the single vendor that wants to sell all security products or a single vendor that wants to sell you all the applications and security products. In fact, most of the CIOs I want to they have been standardizing in line access to three providers: one for EDR, one for identity, and one for zero trust access. I think that's a good combination because you end up getting a couple of extra layers, but you still have separation.

Speaker Change: Bring it down to a handful of key platform providers, but they do not want to go back.

Dream, all going to a single vendor that want to sell all security products or a single vendor that wants to sell you all of the applications and security products. In fact, most of the <unk> I want to add.

Speaker Change: Been standardizing in line access to three providers one for Edr.

Jay Chaudhry: This is a large opportunity for us, but like many government initiatives, this will take time.

One five inch T and one for Sundar trusts actions.

Jay Chaudhry: Now let me share some updates on our sales organization. First, we had lower than expected attrition, and we had a strong hiding court. In fiscal 25, we planned to continue hiding reps at a strong pace, and expect attrition to further improve. Second, I am pleased to report that sales productivity was better than expected during the quarter, driven by acceleration in new and upsell business. In fiscal 25, we expect sales productivity to continue to improve, with the second half stronger than the first.

Speaker Change: That's a good combination because you end up getting a couple of extra layers, but you still have separation.

Jay Chaudhry: So, in this environment, our customers aren't really pushing back on us because we tell them, don't buy every single season. You've got an EDR provider, you've an identity provider, and we'll do the rest of the kind of connectivity. And that's how we, we, we carefully choose the more cases we get into. So we feel comfortable and good about the expansion and selection, all EDRs where we want to compete in.

Speaker Change: So in this environment.

Speaker Change: Customers aren't really pushing back on us because we tell them don't buy everything at northeast Kevin.

Speaker Change: <unk> got an Edr Hawaiian.

Speaker Change: Provider and we will do that <unk>.

Speaker Change: And Thats, how we carefully choose the markets we get into <unk>.

Speaker Change: So we feel comfortable and good about the expansion inspection all.

Speaker Change: So where do we want to compete.

Remo Canessa: From an NRR perspective, Joseph, 115% I believe is outstanding. We're not guiding to NRR; the only time we really look at it is, you know, as we mentioned before on these calls. Really, the key for me is just driving top line business, you know, whether it comes to existing customers or new customers. But 115%, you know, at our scale, I think it's up.

Jay Chaudhry: Third, we increased investment in the global system integrators, or GSI channel, by hiding leaders experienced in building GSI programs for large enterprises. These hires are driving significant progress in developing mutual go-to market plans with GSI's that integrate the Z-skiller platform with the customer's digital transformation projects. Most large GSI's are already Z-skiller customers, and that enables them to showcase to the customers the value Z-skiller's zero trust platform delivers. This quarter, we added another large GSI end-user customer, making eight of the top 10 GSI's by-rav news Z-skiller customers.

Speaker Change: From an NOI perspective, Joseph 115% I believe is outstanding.

Speaker Change: Guiding to and are the only time, we really look at it is as we can.

Speaker Change: Mentioned before on these calls really the key for me is just driving topline business, whether it comes from existing customers or new customers.

Speaker Change: 15%.

Speaker Change: Scale I think is outstanding.

Unknown Executive: Thank you. Thank you. One moment for our next question, please.

Speaker Change: Thank you.

Speaker Change: Thank you one moment for our next question. Please.

Ittai Kidron: Any comments from the line of Ittai Kidron with Open Heimer, please proceed. Thanks, guys. Great talk.

Speaker Change: And he comes from the line of Epi Kids, Ron with Oppenheimer. Please proceed.

Ittai Kidron: It's finished for the year. Remo, I'm sorry, I'm going to have to try and be the dead horse here again on the buildings. Just want to make sure I understand this right. I mean, in 24, you didn't have any unusuals as an out in the first half, second half on your rear patterns. They were quite similar in buildings. So what is it that's driving the seven and 23% differences in the first and the second half? Are things being pushed out? You're just expecting deals to push out. Hence, you expect to close more, or we knew more in the second half?

Speaker Change: Thanks, guys, great solid finish for the year, Raimo, I'm, sorry, but I have to try and beat the dead horse here again on the billings just wanted to make sure I understand this right I mean in 'twenty four you didn't have any unusual seasonality in the first half second half on a year over your patterns. They are quite similar in billings.

Jay Chaudhry: This GSI purchased Z-skiller for users for over 300,000 users in our largest ever PCV deal in the services vertical. This GSI is consolidating multiple point products, including secure web gateways, load bounces, VPNs, firewalls, and MPS network, which is expected to deliver 200% ROI to this customer. I am pleased with the progress we're making in platforming our go-to market engine to an account centric sales motion, which is contributing to brought off our large customers.

Speaker Change: So what is it that's driving.

Speaker Change: The 7% and 23% differences in the first and the second half.

Speaker Change: Are things being pushed out or 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 or three years ago lump sum that somehow comes back into play here.

Remo Canessa: Is that a macro comment? Was there something that happened two or three years ago? Lumpsum, that somehow comes back into play here.

Remo Canessa: Anything that you can do to begin just a little bit more on that would be greatly appreciated. Yeah, so it's really, if you take a look at the call out of scheduled buildings and scheduled buildings growth in the first half was 7%. And scheduled buildings growth that we're going to year by year basis, we see a 23% for this year. So then the question gets that back, and what creates that. So we signed through your contracts and look for your contracts. There's scheduled buildings. So we have those scheduled buildings; those buildings are coming through. Now, if you take a look and go back into fiscal 23 first half and fiscal 24 first half, there were macro challenges.

Speaker Change: Anything that you can do to dig in just a little bit more on that would be greatly appreciate it.

Jay Chaudhry: We added nearly double the number of global 2000 logos in fiscal 24 as compared to fiscal 23. We ended fiscal 24 with approximately 35% of global 2000 companies and more than 40% of Fortune 500 companies as our customers. Our customer base spending $1 million plus annually grew by 26% year-over-year to 567. And we ended the quarter with over 60 customers spending $5 million plus annually. We expect this large customer momentum to continue in fiscal 25.

Speaker Change: So it's really if you take a look at the call out as scheduled billings and scheduled billings growth in the first half was 7% and scheduled billings growth on a year over year basis.

Speaker Change: See a 23% for this year.

Speaker Change: And the question you guys step back and what creates that so we signed three year contracts and look for your contracts Theyre scheduled billings. So when you have those scheduled billings those billings are coming through now if you take a look and go back into fiscal 'twenty, three first half and fiscal 'twenty for first half.

Speaker Change: There are macro challenges so it was a challenging environment.

Remo Canessa: So it was a challenging environment, you know, from C-skillers perspective. So therefore, would that challenge environment in the first half of fiscal 23 and fiscal 24 now those scheduled buildings are coming through and those scheduled buildings are lower? That was creating that growth rate of 7% year over year in the first half.

Jay Chaudhry: Finally, I want to address the topic of cloud resilience that has come to the forefront due to the recent cloud outages of Microsoft and CrowdStrike. When customers lie on a mission critical cyber security service, there's no room for service interruptions. From inception, Zscaler has built a cloud security platform that has been seamlessly scaling with higher reliability and resilience. As an innovator and a market leader in January, 2023, we became the first cloud security company to introduce a business continuity service that enables customers to continue their operations even during catastrophic events.

Speaker Change: From Fmc's killers perspective, so therefore with that challenged environment in the first half of fiscal 'twenty, three and fiscal 'twenty. Four now those scheduled billings are coming through and those can spill into lower fastest creating that growth rate of 7% year over year in the first half now having said.

Remo Canessa: Now having said that, what I make the comment I made before was that, you know, the business is getting more second half for between the larger companies becoming more second half. So our guidance reflects that in that scheduled buildings of 23% those were contracted buildings. They're scheduled. And, you know, we expect to get those buildings.

When I make the comment I made before was that the business is gaining more second half, we're becoming a larger company, becoming more second half sorry guidance reflects that and thats scheduled for at least a 23% those are contracted.

Speaker Change: Contracted billings.

Speaker Change: Schedule.

Speaker Change: And we.

Speaker Change: We expect to get those billings.

Unknown Executive: Thank you.

Speaker Change: Thank you.

Brian Essex: One moment for our next question. Any comments from the line of Brian SX with JP Morgan, please proceed. Great, thank you, and good afternoon. Thank you for taking the question.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And it comes from the line of Brian Essex with J P. Morgan. Please proceed.

Brian Essex: Great. Thank you and good afternoon, and thank you for taking the question Jay I think I think you may have touched on this in your prepared remarks, but I wanted to circle back into the to the macro specifically.

Jay Chaudhry: Jay, I think I think you may have touched on this in your repair remarks, but I want to circle back into the macro specifically the competitive environment with regard to pricing. And there are certainly certainly in a generic trust space. We're seeing a lot of initiatives to consolidate on, you know, certain platforms. So that is flexible pricing, different duration, giving way 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 just want to touch maybe you could pull back a layer on the pricing dynamics just to understand what you see in your environment.

Speaker Change: The competitive environment with regard to pricing and there is certainly.

Speaker Change: Certainly that zero trust space, we're seeing a lot of initiatives to consolidate.

Jay Chaudhry: In conclusion, we're uniquely positioned to benefit from the confluence of two large, secular growth drivers, zero trust security and AI. We enter fiscal 25 with a stronger go to market machine, increased pace of on and the innovation, strong adoption of our emerging products and high levels of customer satisfaction with an NPS goal of over 70.

Speaker Change: Certain platform.

Speaker Change: All of that is flexible pricing getting duration.

Speaker Change: Giving way products for free.

Speaker Change: How is that impacting the pricing environment that you're dealing with I understand that there is a lot of times in architectural.

Speaker Change: Change that's attractive with your platform, but just wanted to touch maybe peel back a layer on the pricing dynamics just to understand.

Jay Chaudhry: With our customer obsession, expanding platform and a launch addressable market, I expect another strong view which will move us closer to our goal of $5 billion in ERR.

Jay Chaudhry: Thank you. As I said during my prepare marks, yes, macro remains challenging, and there's a deal of group. Also, at the same time, cyber is very important. In many areas, good enough is good enough. In cyber and large enterprises, good enough is not good enough. So customers do want a good, a very good cyber solution at number one. And number two, in the cyber area, real zero cross architecture that's cloud-nated does play an important role that matters. Now, once you do that, your pipeline actually builds; you are engaged with customers. And the next part comes in. Can you close the deal?

Speaker Change: What you see in your environment. Thank you.

Speaker Change: Sure.

Dave: As I said during my prepared remarks, yes, macro remains challenging and as Dave.

Remo Canessa: No, I'd like to turn over the call to Rimo for our financial results. Thank you, Jay. Our Q4 results exceeded our guidance on growth and profitability, even with ongoing customer scrutiny of large deals. Revenue was $593 million, up 30% your year, and up 7% sequentially. From a geographic perspective, America's represented 55% of revenue, and me was 30% in APJ with 15%. For the full year, revenue was $2.17 billion, up 34% your year.

Speaker Change: Also at the same time side, but it's very important in many areas.

That's good enough.

Speaker Change: Taiwan and large enterprises.

Speaker Change: <unk> is not good and so customers do want.

Speaker Change: Good.

Speaker Change: Hi, good cyber solution that's number one.

Speaker Change: And number two in the cyber area.

Speaker Change: Zero Trust architecture, that's cloud native does play an important role that matters now.

Speaker Change: Once you do that your pipeline actually Bill you are engaged with customers in the next part comes in can you close the deal.

Jay Chaudhry: Now closing the deal in today's environment does require that you are able to actually show the customer that you can take a bunch of products out and you can save money for the customers. And we are able to release, we are able to replace a number of new, a number of products, whether firewalls, VPNs, NAC products, and the like. When they're able to show that we are able to eliminate those products, the customer likes it; that helps us both. Now we have a new and upset business has accelerated, actually, so we are seeing strength and area.

Bill: Closing the deal in todays environment.

Remo Canessa: Our total calculated billions in Q4 grew 27% your year, and 45% sequentially to $911 million. Our calculated current billions grew 27% your year. Like last year, some customers paid us upfront on multi-year deals, and the percentage of total calculated billions coming from such upfront payments was relatively unchanged your year. Our remaining performance obligations for our PO grew 26% from a year ago to $4.418 billion. Current RPO was approximately 48% of the total RPO.

Why are there you are.

Bill: Both actually.

Bill: Sure that customer that you can take a bunch of products.

Speaker Change: And you can save money on their customers.

And we are able to really beyond April.

Speaker Change: Replenish.

Speaker Change: Number.

Speaker Change: A number of products by their firewall VPN knack products in the line.

Speaker Change: And we are able to show that.

Speaker Change: We are able to do it.

Speaker Change: Let me now those products.

Speaker Change: Like that's helped us close no.

Speaker Change: We have new and upsell business.

Speaker Change: And actually so we are seeing strength in area. So unfortunately, I'm not worried about the competition.

Jay Chaudhry: So personally, I'm not worried about the competition. I'm able to handle pricing situations by showing the number of products you can move. So single other vendors, do you think a firewall vendor wants to remove a bunch of point products? The biggest install base in terms of products today is firewalls. They want to protect those firewalls. We take out those firewalls, we take out those VPNs. So we just have to this area, be keep on getting better, right? Is making sure we engage at the sea level. Number one, number two, make sure we create a good business value assessment.

Remo Canessa: We ended Q4 with 567 customers with over $1 million in ARR and 3,100 customers with over $100,000 in ARR. This continued strong growth of large customers, speaks to the strategic role we play in our customers' digital transformation journeys. Our 12 month trailing dollar-based net retention rate was 115%. While good for our business, our increased success in selling bigger bundles, selling multiple pillars from the start, and faster upsells within a year, can reduce our dollar-based net retention rate in the future.

Speaker Change: Well to handle pricing situations by showing a number of products you can move single other vendors do you think a firewall vendor wants to remove a bunch of point products.

Remo Canessa: There could be variability in the future.

Speaker Change: Hey, guys install base.

Speaker Change: The products today is firewall they want to protect those firewalls, we take on those firewalls VJ core those vpns. So we just have to.

Speaker Change: We keep on getting better at.

Speaker Change: Making sure we engage at the C level number one number two make sure we create a good business value assessment and we add on that.

Jay Chaudhry: And we have owned that process quite a bit.

Speaker Change: That's quite a bit.

Unknown Executive: Thank you. One moment for our next question, please.

Speaker Change: Got it thank you.

Remo Canessa: [inaudible] in the future in the future in the future in the future For non-Gap P&L reporting, I'd like to call your attention to a change we are making to our non-GAP tax calculations. Starting fiscal 2025 and going forward, we're establishing a non-GAP tax rate of 23%, which is reflected in our non-GAP earnings per share guidance for fiscal 2025. Please refer to our earnings release in financial supplemental for fiscal 23 and fiscal 24 comparisons.

Speaker Change: Thank you one moment for our next question. Please.

Matt Hartberg: Any from the line of Matt Hartberg with RBC Capital Markets, please proceed. 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 we assume it's back and loaded. But how the linearity of the quarter, you know, anything abnormal with deals that pushed or pulled. And I guess, maybe if you could comment a little bit more specifically in trend in August, thus far, that would be, I guess, now we're in the future, but through August, that would be helpful. The trends in August; I'll let Jay speak about that.

Speaker Change: And he is from the line of Matt Hedberg with RBC capital markets. Please proceed.

Great. Thanks, guys for the questions maybe one on the quarter could you talk a little bit about obviously it was a Q4, but.

Matt Hedberg: It's back end loaded, but how the linearity of the quarter and anything abnormal with deals that pushed or pulled in I guess, maybe if you could comment a little bit more specifically on trends in August thus far that would be our I guess now we're in the sort of September but through August that would be helpful.

Speaker Change #101: The trends in August.

Remo Canessa: The Q4, we talked about that the quarters have become more back and loaded. Nothing, it was similar to, you know, the prior few quarters Q4, so nothing unusual would keep working on the linearity perspective. And regarding trends in August, can't get specific trends on dollar amounts or anything like that or business, but maybe Jay gets you comments. You know, I think nothing unusual to talk about in August; business is making progress and usual. So I think you'll probably need more on us as you get better.

Speaker Change #101: I'll, let Jay speak about Q4, we talked about the quarters have become more backend loaded.

Nothing similar to the prior few quarters Q4, so nothing unusual and keep working linearity perspective.

Speaker Change #102: And regarding trends in.

Jay: August can't give specific trends on dollar amounts or anything like that or business, but maybe Jay can give few comments.

Nothing unusual to talk about in August.

Jay: Business is making progress unusual so.

Jay: I think youll, probably hear more about us as you get better.

Jay Chaudhry: All right, maybe if I could just squeeze one more, you know, it seems like, you know, in the spirit of consolidation, you know, 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 can you talk about sort of the growth in your large deal pipeline and kind of the focus on, on increasingly playing that consolidation role? Yes, there is no slowing down on consolidation of point points. We have been seeing our deals in federal getting bigger, seeing upsell going more and more.

Jay: Sure.

Jay: Alright, and maybe if I could just squeeze one more in.

It seems like in the spirit of consolidation.

Speaker Change #103: 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 it is hard to predict the timing of those things, but could you talk about sort of the growth in your large deal pipeline and kind of the focus on an increasingly playing that consolidation role.

Speaker Change #104: Yes, there is no slowing down and consolidation of <unk>.

Speaker Change #104: Pumps.

Speaker Change #105: We have been C R <unk> and journal getting bigger.

Speaker Change #106: See upsell going more and more so if we could.

Jay Chaudhry: So if the customer spend X is spending more with us, I shared several deals, several large deals where customer started at X is going up to Y or Z and whatnot. So the main thing for customers are looking for consolidation is number one, can you give me better cyber and deal with the action. Number two, get it operationally run and manage these things better. Number three, can you do cost savings? That matters a lot and clear, and they're handling all of that. In the one area highlight for consolidation, which is playing a big role for us, is data protection.

Speaker Change #107: Customer spend X they are spending more with us.

Speaker Change #107: Several do you several large deals we have customers started at X has gone up to y or Z and whatnot. So.

The main thing for customers looking for a consolidation is number one can you give me better cyber.

Speaker Change #107: <unk>.

Speaker Change #107: Number two Canada operationally run and manage these things better number.

Speaker Change #107: Number three can you do cost savings that matches loud and clear and we're handling all of that and but one area I'll highlight four consolidation which is playing.

Speaker Change #107: Playing a bigger role for us as data protection when customers started with Zee scalar.

Jay Chaudhry: When customer started the Z-skill or CI, a start of a cyber protection was a primary focus to make sure they don't get compromised. No, with a similar tax, where data is often exfiltrated, data protection has become a bigger and more important item than it used to be. Since we are sitting in line for the traffic that goes to the Internet, we are the natural provider and natural partner to do data protection. And we're seeing growth in data protection that has become one of the fastest-going areas for us. I think a few quarters ago, we mentioned that it has exceeded its surpassed core of billion dollar for us.

Speaker Change #108: Startup is cyber protection was a primary focus to make sure. They don't compromise no with ransomware attacks, where data is often exfiltrate data protection has become a bit.

Speaker Change #108: More important item than it used to be since we are sitting in line for the traffic that goes to the internet.

Actual for wider natural partner to good data protection.

Speaker Change #109: And we see.

Speaker Change #109: Growth in data protection that has become one of the fastest growing area for us.

Speaker Change #110: I think a few quarters ago, you mentioned that it has exceeded analyst surpassed $4 billion for us.

Jay Chaudhry: And also, we expanded this platform quite a bit. We used to do inline DLP as the primary thing. Now, we also got DLP for email as a big thing. SAS, SSBM, TASD kind of stuff and node, DSBM are becoming more areas. So I think we got a state expanding platform with cost savings. I think they're extremely well positioned.

Speaker Change #110: Also we expanded platform quite a bit we used to do in line DLP is the primary thing.

Remo Canessa: Reflecting this new non-GAP tax rate. Train to the rest of guidance. As a reminder, these numbers are all non-GAP. For the first quarter, we expect revenue in the range of $604 million to $606 million, reflecting a year-to-year growth of approximately 22%. Gross margins of 80%. I would also like to remind investors that a number of our emerging products, including newer products like ZDX, Zero Trust for Branching Cloud and AI Analytics, will initially have lower gross margins than our core products.

Speaker Change #110: Sure.

Speaker Change #111: Well E mail is a big thing.

Speaker Change #112: SaaS SSD casualty kind of stop and now ESPN or becoming more areas. So I think that you got to date.

Speaker Change #113: Turning to expanding platform with cost savings I think that extremely well positioned.

Jay Chaudhry: From my perspective, also, I mean, just some numbers we called out on the script. 567 customers have greater than a million ARR. 3100 customers have created than 100,000. I believe 60 over 60 customers with 5 million dollars in ARR. Half a trillion transactions per day. Just put a perspective in the order of magnitude that's more than anybody's seen. At the time of our public offering, we're doing 30 billion transactions per day. So we've gone from 30 billion transactions to 500 billion transactions. The data that we receive, the information that we receive, that we're able to basically help our customers for security perspective.

Speaker Change #114: From my perspective also I mean, just some numbers, we called out on the script 567 customers with greater than $1 million.

Speaker Change #114: 3100 customers with greater than 100000.

Remo Canessa: We are currently managing the emerging products for time to market and growth, not optimizing them for gross margins. In addition, we'll continue to invest in our Cloud and AI infrastructure to scale with the growing demand. Already per share in the range of 62 cents to 63 cents, assuming $164 million fully diluted shares. For the full year fiscal 2025, revenue in the range of $2.6 billion to $2.62 billion, reflecting a year-to-year growth of 20 to 21%.

Speaker Change #114: And I believe 60 over 60 customers with $5 million.

Speaker Change #114: <unk>.

Speaker Change #114: Half a trillion transactions every day just to put in perspective.

Speaker Change #114: The order of magnitude that's more than anybody has seen.

Speaker Change #114: At the time of our public offering we're doing 30.

Speaker Change #114: Transactions per day.

Speaker Change #114: So we've gone from 30 billion transactions too.

Speaker Change #114: By 500 billion transactions.

Speaker Change #114: So the data as we receive the information that we received.

Speaker Change #115: They were able to basically help our customers for security perspective.

Jay Chaudhry: I just don't think there's anybody else out there who can do it. It's my view that we're in a great position to capture this market. I also believe that, you know, with the go-to-market changes that we've made over the last nine months, we're going to felt deeper in the accounts. And also, you know, we've been one of the things we called out, you know, GSI. That's going to be an area that we're going to focus in on, you know, as they go forward. I think the opportunity's really big. I believe Blackboard is a form of 12th position to really protect customers and governments throughout the world.

Speaker Change #116: I just don't think there's anybody else out there who can do it.

Speaker Change #117: It's my view that we are.

Speaker Change #117: They create positioned to capture this market.

Remo Canessa: Operating profit in the range of $530 million to $540 million, income taxes of approximately $140 million. Already per share in the range of $2.81 to $2.87, assuming approximately 164 million fully diluted shares. We expect our free cash flow margin to be approximately 23.5% to 24% including higher cat-backs this year. We expect our data center cat-backs to be approximately 3 points higher as a percent of revenue compared to fiscal 2024 as we invest in upgrades to our Cloud and AI infrastructure. With a large market opportunity and customers increasingly adopting the broader platform, we will invest aggressively to position us for long-term growth and profitability.

Speaker Change #117: I believe that with the go to market changes that we've made over the last nine months.

Speaker Change #117: Can sell deeper into the accounts and also.

Speaker Change #117: One of the things we called out GSI, that's going to be an area that we're going to focus in on as we go forward I think the opportunity is really big I believe platform is well positioned to really protect customers and governments throughout the world.

Jay Chaudhry: And I think, you know, we feel good, good about where we're at right now.

Speaker Change #117: And I think.

Speaker Change #117: We feel good about where we're at right now.

Unknown Executive: Thanks. Super helpful. Thank you.

Speaker Change #118: Thanks Super helpful.

Shrenik Kothari: One moment for our next question that comes from the line of Shrenik Kothari with Beard. Please proceed. 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 cost for applications, workloads, and IoT. And you gave example of a new level way in the top 10 strong customer demand for the broad approach. Just getting elaborate on the nature and composition of these contracts, the non-cancelled buildings. The compensation of this pipeline in terms of users and seats versus workloads and applications that you called out.

Speaker Change #119: Thank you one moment for our next question.

Speaker Change #119: That comes from the line of Frank Kotare with Baird. Please proceed.

Frank Kotare: Hey, guys. Thanks for taking my question.

Frank Kotare: So Jed in light of what you said right.

Jed: We are expanding the platform beyond just securing users and now delivering zero crossfire applications workloads in Iot and you gave an example of a new level then the top 10 and strong customer demand for our broad approach.

Unknown Executive: With that operator, you may now open the call for questions. Thank you, and as I reminder, to ask a question simply press star 11 on your telephone and wait for your name to be announced. To remove yourself, press star 11 again.

Speaker Change #122: To elaborate on the nature and composition of <unk>.

Unknown Executive: We ask that you please keep your questions to one. Please stand by for our first question.

Speaker Change #123: These contracts are noncancelable billings the compensation of this pipeline.

Saket Kalia: Any comments from the line of Saket Kaliya with Barclays, please proceed. Okay, great. Hey guys, thanks for taking my question here and a nice quarter on the Billings and all next year's Billings Guide.

Speaker Change #124: In terms of users and seats versus workloads and applications that you've called out and does that help with the overall kind of land and expand motion.

Jay Chaudhry: And does that help with the overall kind of land and expand motion, moving more towards the workload and application based on that follow up for RIM as well.

Speaker Change #124: More and more towards the workloads and applications based on <unk> as well.

Jay Chaudhry: Yes, let me start with the platform expansion. As I said, during my period months, most of the vendors are trying to really mature a product for protecting users. We've done that extremely well; 47 million some users protected. So it is natural for us to expand it to workloads, IoT, OT devices in the life in terms of growth to give you some data points. We talked about emerging products from the newer areas. And then we got the mature flagship products on emerging products, which is where the workloads, protection, IoT, type of stuff falls in. It was about 22% in fiscal 24.

Jay Chaudhry: Maybe if I give someone a question, Jay, maybe I'll make it for you. Drop a little bit. I think we all know your views on firewall-based solutions, but maybe at a curiosity, how about some of the newer players in Sassy that are maybe attacking this with a similar kind of pure-play cloud approach as Zscaler? Thanks. So, Saket, thank you. We have not seen any meaningful change on the competitive level. [inaudible] DCP, so the importance of mission criticality has gone up significantly since the outage that was caused by Cochrane.

Speaker Change #124: Yes, let me start with the platform expansion as I said Julien.

Peter: Peter remarks.

Speaker Change #126: Most of the.

Speaker Change #127: Tenders are trying to really mature on our.

Speaker Change #127: Users, who had done that extremely well only $7 million from users protected.

Speaker Change #127: Natural for us to expand into.

Speaker Change #127: Workloads Iot Ot devices in the line.

Speaker Change #127: To give you some.

Speaker Change #127: Some data points.

Speaker Change #127: We talk about emerging products are some of the newer areas and then do you got.

Speaker Change #127: That mature flagship products.

Speaker Change #127: <unk> products.

Speaker Change #127: We're still <unk>.

Speaker Change #127: <unk> Iot type of stuff falls in advanced by 'twenty.

Speaker Change #127: 2% in fiscal 'twenty.

Jay Chaudhry: It had gone up from 18% in fiscal 23, and we expected to go to mid 20s in fiscal 25. So that's growing faster. That's why it's able to carve out my future out of that. The exciting thing about that area is there's literally no real competition to do these things in a zero trust fashion. Yes, some of the workloads and all is done through firewalls communication, IoT, OT. What do you do firewalls and VPNs? We all know that firewalls and VPNs have to go away, and we have well possession. It's just that it's a little bit different sale.

Speaker Change #127: Calling up from 18% in fiscal 'twenty, three and we expect it to go to mid <unk> in fiscal 'twenty, five so thats growing faster and Thats why its called.

Speaker Change #127: Our boat market share out of that.

Speaker Change #127: The exciting thing about that.

Speaker Change #127: There's literally no real competition to do these things and zero Trust fashion, yes, some of the workloads and all of it is done through firewalls communication Iot Ot, what do you do firewalls and Vpns, we all know that firewall and VPN capacity go away and we are well positioned it is just that it's a little bit.

Jay Chaudhry: It's the same audience below different IoT; a lot of stuff is linked to many facts and plans. So you need to reach out to the audience, but see source and CIO do play a common role with the acquisition of air gap, which does actually device segmentation for IoT, or teach extremely well without reading any firewalls, without reading any network access control devices. It's just one area that's being really. He's showing tons of interest in our customer base. In fact, our number of engagements with device segmentation for IoTOT based on dear gas has gone up significantly.

Sam: Different Sam it's the same audience below different Iot Ot a lot of our stuff is linked to manufacturers and brands alike.

Speaker Change #129: You need to reach out to those audience <unk> CIO do play a communal with.

Speaker Change #130: With the acquisition of <unk>, which does actually device segmentation for Iot or each extremely well without meeting any firewalls without meeting any network access control devices.

Speaker Change #130: And just one other area.

Speaker Change #130: Being.

David: Really David.

Speaker Change #132: Showing tons of interest in our customer base in fact.

Speaker Change #132: Our number of engagements device segmentation Iot based on gas has gone up significantly. So that's why I feel like the gap between us and.

Remo Canessa: So, that's why I feel like the gap between us and people trying to come from behind is growing, and a barrier to entries is not trivial in this case.

Speaker Change #132: And people trying to come from behind is growing and a barrier to entry is not trivial.

Remo Canessa: Sameal, you want to talk about that. Yeah, from a contract, it's building perspective. Again, the key point is that we signed three-year contracts up front. And so getting that certainty with that contract is good. And then the billing happens afterwards on an annual basis afterwards. That's the scheduled contract billing. So what we're seeing is that our contract lengths are increasing, which is positive. And also we're seeing our deal size increasing, which is positive too. We're also seeing customers buying more of our product across our platform. And again, getting a three-year contract with base scheduled billing, you should certainty related to the billing, but also getting that three-year contract gives you time to basically sell that customer more.

Speaker Change #132: Damian do you want to talk about that.

Damian: Contracted billings perspective.

Again, the key point is that we signed three year contracts upfront.

Damian: So getting that certainty with the contract is good.

Damian: And then the billing happens afterwards.

Damian: On an annual basis afterwards.

Damian: Scheduled contract billing so what we're seeing is our contract lengths are increasing which is positive and.

Damian: And also were senior deal size, increasing which is positive too.

Damian: We're also seeing customers buying more of our products across our platform.

Damian: And again getting a three year contract with a schedule Billy give certainty related to the billings.

Damian: Also getting that three year contract gives you time to basically sell that customer more and as I mentioned before which is really key.

Remo Canessa: And, as I mentioned before, which is really key, is that the sales organization go-to-market organization. We're selling deeper into the account. That's going to be our focus. We're going to look for new customers, but we're all going to look to sell deeper into our account. So longer contracts. It's a good thing. God, thanks a lot, Jeremy. Thank you.

Damian: The sales organization and go to market organization.

Damian: Selling deeper into the accounts that is going to be our focus when we look for new customers, but we're also going to look to sell deeper into accounts so longer contracts. That's a good thing.

Jan: Got it thanks, a lot Jan remark.

Patrick Colville: One moment for our next question that comes from the line of Patrick Colville with Scotia Bank. Please proceed. Jay, thank you so much to take my question here.

Jim: Sure Jim.

One moment for our next question comes from the line of Patrick Colville with Scotiabank. Please proceed.

Jay Chaudhry: In fact, about 40% of Zscaler's large customers have already deployed BCP for ZIA. So while customers won't resend, they also do want consolidation, but they do not want considerate. Solidations such that it makes an dependent on a single vendor, especially single vendor for applications and security. This sentiment has become even stronger after the mid-night desert of Microsoft issue.

Patrick Colville: A J. Thank you so much for taking my question here I guess.

Patrick Colville: I guess I want to ask about merging products. I mean, it was 22% of new and upsell and fiscal 24. I mean, very impressive to see those emerging products around. I mean, we're going to get this in the 10K, but what was ZPA. And then ZIA, as a promotion, a new and upsell in fiscal 24. And I guess the second bottle of questions, how do you expect that PA and ZIA to trend in fiscal 25? I mean, what's the same ability and remaining time for those two product lines?

Patrick Colville: I want to ask about margin products I mean, it was 22%.

Patrick Colville: New and upsell in fiscal 'twenty four.

Speaker Change #137: Impressive to see those emerging products ramp I mean, we're going to get into the 10-K, but what was that and then.

Speaker Change #137: As a proportion of new and upsell into fiscal 'twenty, four and I guess.

Speaker Change #138: The second part of the question is how do you expect that Ta instead ally to trend in fiscal 'twenty five.

Jay Chaudhry: So I think we are opposition. We did a good job in building mission criticality. And I think it's important and our customers are working closely with us. Very helpful, Jay. Thank you.

Unknown Executive: One moment for our next question, please.

Speaker Change #137: The ability.

Speaker Change #138: And remaining Tam for those two product lines.

Jay Chaudhry: So very good question. So let's start with ZIA ZPA. You know, at the time of IPO, there's only one product. ZIA ZPA was kind of a long thing at a sort of speed. But today, if you look at the mix between CIA and CPA, CPA has gone from literally nothing to about 40% or 40% of the new business that we're doing between the two of the products. That's very remarkable. In fact, if it goes too high, I'll be kind of wondering, is ZIA, you know, going fast enough? So I expected to grow somewhat more, but not quite.

Speaker Change #139: Sure Barry.

Speaker Change #140: Good question, so let's start with <unk> at the time of IPO, there's only one product.

Speaker Change #141: Well, it's kind of.

Royer Boyd: And it comes from the line of Royer Boyd with UBS. Please proceed. Great. Thank you for taking my question. Remile, 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 good market transition. It sounds like sales productivity was better than expected in both 3Q and 4Q this year. So just beyond that, anything else given you more pause or tempering your expectations around the broader macro environment, sales cycles or anything else. Thanks.

Speaker Change #141: And being at or so to speak.

Speaker Change #141: Today, if you look at that mix between <unk>.

Speaker Change #141: <unk> has gone from virtually nothing to about 40% over 40%.

Speaker Change #141: The new business.

Speaker Change #141: That we are doing between that throughout the process.

Speaker Change #141: Thanks.

Speaker Change #142: It's very market.

Speaker Change #142: In fact different dose to a higher quality kind of wondering.

Speaker Change #142: Fast enough. So I expect to do grow somewhat more but not quite at the end of the day.

Jay Chaudhry: At the end of the day, it could get to 50, 50. I expect every Z-score customer for every user to have CIA, CPA, and ZDX. Those key products make a complete package, and we call it C-score for users. C-score for users has become our single largest queue, basically, because that's what are saved in these. Smith, which really says that our goal is for every person who buys those key products. That's kind of one key area.

Get to 50 50.

Speaker Change #142: I expect <unk> per customer.

Remo Canessa: Great question. So I mean, Billings guide, you know, really reflects, you know, again, we broke out the first half, first second half. And, you know, as we talked about in the sales organization, we had higher attrition than we expected in Q3 and that situation stabilized in Q4. Piring those account reps is going to take time for those account reps to basically get the full productivity. We expect them to get to, you know, strong productivity in the second half.

Speaker Change #142: For every use Ci CPA and Gtx those key products.

Speaker Change #143: <unk> package and we call it sees kind of our users <unk> users has become our single largest Q basically because that's what our sales in the spring.

Speaker Change #144: <unk> said that our goal is for every customer who buy those key products. That's kind of one key area. What is the second part of your question I'm, sorry, I forgot.

Jay Chaudhry: Now what is the second part of your question? I'm sorry I forgot. I guess it's the question we get from the best is, is how, you know, what is the sustainability of those business lines? And I guess what we just articulate is that there's a lot to go in ZPA, but you know, maybe talk about yours that I if there are a lot to go there or is that a more virtual segment?

Remo Canessa: Our pipeline supports our guidance. And as we called out also, we take a look at Billings. Billings is made up of new and upsell renewals and contracted Billings. And one of the things we called out on the script is contracted Billings or scheduled Billings from prior year contracts. So those are what we're seeing. We're seeing that because of the businesses getting more second half weighted, we're seeing that this, you know, our guide reflects that.

Speaker Change #145: I guess, it's a question we get from investors is how what is the sustainability of those business lines and I guess, we just articulated is that.

Speaker Change #146: There is a lot to go in <unk>, but maybe talk about it.

Speaker Change #147: It's a lot to go there or is that more mature segments.

Jay Chaudhry: So let's also let's talk about the second part. That is how much market penetration was done, and how much market penetration we have left. A CIA was a starting product. Obviously, almost all customers started ZPA, though we are seeing some customers starting with ZPA. Is how the numbers are relatively small, but take G2K, we reached nearly 35% of G2K, which means there are about 300 companies. Sorry, yeah, they are companies that are spending. Sorry, 35% of them are Zscaler customers. Now, about Kali and an area of 60% of a large CIA customers also at ZPA, so that's good penetration.

Speaker Change #148: So let's hope so let's start with the second part of that is how much market penetration done in almost market penetration we have left.

Speaker Change #149: The CIA was Todd obviously, almost all of our customers start with us.

Remo Canessa: And as we called out in the first half contracted Billings has expected to increase on a year-over-year basis, 7% and of the second half 23%. What I can't say also is that, you know, from my perspective, in the end year it's the E-scaler for, you know, almost eight years. You know, there's a change in our sales organization. You know, the change is basically, it's a more mature, very strong leadership. And also an organization that I feel is going to be able to sell deeper into accounts and really sell the value of E-scaler.

Speaker Change #150: We have seen some cost from starting to see how that numbers relatively small but take <unk>. Okay.

Speaker Change #151: Nearly 35% of GTK, which means.

Speaker Change #152: About 300 companies, sorry, Yes, Kian company spend.

Speaker Change #152: Sorry, 35% of them are.

Speaker Change #152: Scalar.

Speaker Change #152: No.

Speaker Change #152: Charlie.

Remo Canessa: So the puts and takes are from my perspective is a strong demand for zero trust. We're going to continue to expand in the G2K, which represents around 35% in the Fortune 500 customer. You know, the key thing with Zscaler also is that we're innovating. So you're looking at emerging products, they represent a 22% of our total new and upsell in fiscal 24. We expect that to go up to 25%. So that's going to be our continued focus.

Speaker Change #152: The area of 60% of our large CIA customers offset CPA, so thats good penetration.

Jay Chaudhry: But in terms of the opportunity for us, only about 35% G2K, but 300 of them spend over a million dollars does. That means the existing customer, the 400 more, that could easily go to a million dollars for us. But many of the customers in that same group are going to 5 billion dollars. So what I'm saying is an opportunity for us to upsell, go from 35% G2K to a higher number, and among those 35% to sell more CIA and ZPA, so there's no lack of market for us. I hope that gives you a color you look.

Speaker Change #152: But in terms of.

Speaker Change #152: Entity.

Speaker Change #152: Only about <unk>.

Speaker Change #152: 35%, GGP, but 300 of them spend or $1 million does that mean.

Speaker Change #152: I'll think 15 customers 400, more that could easily go to $1 million for us.

Speaker Change #152: But many of our customers in that same broke it down to $5 million. So what I'm, saying there is an opportunity for us.

Remo Canessa: It's not only selling, you know, our existing, you know, core products, but also innovating. As I mentioned, strong momentum in the go-to-market team. We just had our SKO and the feedback from everybody. It went there was just very, very positive. Just really feel good about where we're at. You know, having said that the backdrop, it's still a challenge. You know, spending environments. But I feel that, you know, Zscaler with their platform.

<unk>.

Speaker Change #152: 35% GTK higher number and among those 35% who sell more <unk>. So theres no lack of markets for us other point I'll make is on the higher end of the market. We do extremely extremely well those customers are sophisticated they need the functionality.

Speaker Change #152: Breadth depth and reliability and resilience we offer so we are counting on this thing by counting focused program that our new CIO is driving is actually focused on going deeper and wider into.

Remo Canessa: With what we're building or you go to market. I just think we're just very, very well positioned. Okay. No, it's good. I can last comment. I mentioned is in today's environment, see, I was due one auto-wide cost savings cost takeout. We're in a unique position to remove a number of one products that help justify causing our deals. Thank you. One moment for our next question, please.

Speaker Change #152: Existing accounts and getting new large novo contest.

Speaker Change #153: I hope that gives you a color unit.

Adam Borg: Wonderful, thank you so much. Thank you.

Speaker Change #154: Wonderful. Thank you so much.

Speaker Change #154: Thank you.

Jay Chaudhry: Our next question comes from the line of Adam Borg, which diesel. Please proceed. Awesome, and thanks for taking the question. For Jay Riva, I know you talked about this a bit in the script, but I was hoping to talk a little bit more about head count growth in fiscal 25 and where you're really investing most across the market and R&D. Thanks so much. Yeah, we do expect to increase head count from Fiscal 25. Our fiscal 25 head count increase will be across all the areas R&D, sales and marketing, gene and cloud. I would say the pace of hiring in fiscal 25 will be less than what it was in fiscal 24.

Speaker Change #155: Our next question comes from the line of Adam Borg with Stifel. Please proceed.

Adam Borg: Awesome and thanks for taking the question.

Joseph Gallo: And he comes from the line of Joseph Gallo with Jeffries.

Adam Borg: Forgive me if 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 'twenty, five and where you're really investing most across sales and marketing and R&D. Thanks. So much.

Unknown Executive: Please proceed. Hey, guys. Thanks for the question. Jay, I want to follow up on that last question. I mean, you've obviously started the branch out very successfully beyond ZIA and ZPA evidence by AI and data protection success. However, post the crowd strike 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 Rima, maybe you can just elaborate on how you're thinking about NRR in your fiscal 25 billion.

Yes, we do expect to increase head count in fiscal 'twenty five.

Speaker Change #157: Our fiscal 'twenty five head count increase will be across all the areas R&D sales marketing G&A and cloud.

Speaker Change #158: I would say the pace of hiring in fiscal 'twenty five we'll be less than what it was in fiscal 2014 fiscal 'twenty four.

Remo Canessa: We added about 1,400 employees who went from 5,900 employees to 7,300. So I would think about a more moderate pace and hiring in fiscal 25 versus 24. Awesome, thanks so much.

Unknown Executive: Thanks. So it's a very good question. Now, crowd strike wasn't really an issue of putting all of your eggs in one basket. How strike was one of the point products each product must work well. So on one side, customers do one consolidation. If you got two dozen products, they want to bring it down to a handful of key platform providers, but they do not want to go to the extreme of going the single vendor that wants to sell all security products or a single vendor that wants to sell you all the applications and security products.

Speaker Change #158: Added about 1400 employees. We went from 5900 employees to 7300, <unk>. So I would think about more of a moderate pace and hiring in fiscal 'twenty five versus 24.

Speaker Change #159: Awesome. Thanks, so much.

Unknown Executive: Thank you.

Hamza Fodderwala: In our last question, one moment, please. Come from the line of Hamza Fodderwala, with Morgan Stanley, please proceed. Good evening, thanks for fitting me in.

Speaker Change #159: Thank you and our last question one moment please.

Speaker Change #159: Comes from the line of Hamzah <unk> with Morgan Stanley. Please proceed.

Hamzah: Good evening, Thanks for fitting me in.

Jay Chaudhry: Either for Jay or Remo. Curious since Mike and the new sale leadership have been on the last few quarters. Where are some of the? Early indications that you're seeing early proof points that gives you confidence heading into fiscal 25? So, good question. Remember when we set out to make some of these changes? The key thing was for us was we learned to move from early sales companies that focus on opportunity centric stuff to account centric stuff. That was one lucky dance. We have put a program in place, train the sales force, and we are actually making good progress in pursuing this process.

Unknown Executive: In fact, most of the CIOs I want to, they have been standardizing in line access to three providers, one for EDR, one for identity and one for zero trust access. I think that's a good combination because you end up getting a couple of extra layers, but you still have separation. So in this environment, our customers aren't really pushing back on us because we tell them, don't buy every single season. You've got an EDR provider, you've an identity provider, and we'll do the rest of the customer's connectivity.

Speaker Change #161: Either for Jay or remote.

Speaker Change #162: Curious since Mike and the new sales leadership have been on the last few quarters what are some of the.

Speaker Change #163: Early indications that you're seeing early proof points that gives you confidence heading into fiscal 'twenty five.

Speaker Change #163: So.

Speaker Change #164: Good question Omar when we set out to make some of these changes the key thing for US was we wanted to move on.

Speaker Change #165: Or at least stage companies that focus on opportunity centric software accounts Hendrix.

Unknown Executive: And that's how we, we, we, we carefully choose the more case we get into. So we feel comfortable and good about the expansion and selection all. ADO is what we want to compete in. From an NRR perspective, Joseph, 115% I believe is outstanding. We're not guiding to NRR, the only time we really look at it is, you know, as we mentioned before on these calls. Really the key for me is just driving top line business, you know, whether it comes to existing customers or new customers, but 115% you know, at our scale, I think is up.

Speaker Change #165: It was one of the key downs, we have put up.

Speaker Change #166: Oregon in place trained the sales force and we are actually making good progress and assuming this process. How do you see that result, you start seeing more.

Jay Chaudhry: Thank you.

Unknown Executive: Thank you, one moment for our next question, please.

Jay Chaudhry: Are you see the results? You start seeing more upsell in that own place. Plus, and then you start seeing a new logo as well. So, we are seeing good upsell, large deals, and large accounts. That's what we expected. In fact, if you think about it, overall number of $1,000,000 ARR customers. It's gone up to $567,000. Our customers, the $5,000,000 ARR, has gone to $60,000. Now, all of that is not attributable. The new team, because the new teams are working up fast couple of quarters. But we're seeing key is on for that. The second thing we're seeing as a result is the GSI involvement.

Speaker Change #166: And that one best cost and then you start seeing new logo as well. So we are seeing good up sell large deals and large accounts, that's what we expected.

Speaker Change #166: In fact, if you think about it our overall number $1 billion out of our cost.

Speaker Change #167: It's gone up to 567.

Our customers and $5 million.

Speaker Change #167: Yes.

Speaker Change #167: <unk> 2016.

Speaker Change #168: All of that is not attribute the new team because our new team started working the past couple of quarters, but we are seeing key in his answer that.

Ittai Kidron: Any comments from the line of Ittai Kidron with Open Heimer? Please proceed. Thanks, guys. Great talk.

Remo Canessa: It's finished for the year. Remo, I'm sorry. I'm going to have to try and be the dead horse here again on the buildings. Just want to make sure understand this right. I mean, in 24, you didn't have any unusual system out in the first half, second half on your rear patterns. They were quite similar in buildings. So what is it that's driving the 7 and 23 percent differences in the first and the second half?

Speaker Change #168: The second theme is seeing solid base.

Jay Chaudhry: We have a special focus on GSI's who actually are embedding the art offering into their offerings. So, it becomes part of their offerings as well. We're seeing good early indications of that. Number three, the quality of sales leaders and actually hiding a number of them come from the background with the focus and account of the focus selling. And also large accounts for large reviews. We are seeing the quality of those people. So, from my point of view, the transition is going better than expected. I'm very pleased with it, and I'm very bullish about it.

Speaker Change #168: The GSI involvement.

Speaker Change #168: Yes.

Speaker Change #168: Special focus on GSI, who actually adding offering into their offerings. So it becomes part of.

Speaker Change #169: Things asphalt.

Speaker Change #170: Any early indications on that.

Speaker Change #169: Okay.

Speaker Change #171: Our quality of sales theaters and vaccine mining.

Remo Canessa: Are things being pushed out? You're just expecting deals to push out. Hence, you expect to close more or we knew more in the second half? Is that a macro comment? Was there something that happened two, three years ago? Lumpsum? That somehow comes back into play here?

A number of them come fall the background with a focus on the account selling and on large accounts larger deals. We are seeing the quality of those people. So from my point of view.

Remo Canessa: Anything that you can do to begin just a little bit more on that would be greatly appreciated? Yeah. So it's really, if you take a look at the call out at scheduled buildings. And scheduled buildings grow in the first half was 7 percent. And scheduled buildings grow, but we're going to year-by-year we see a 23 percent for this year. So then the question gets that back and what creates that. So we signed through your contracts and looked through your contracts.

Speaker Change #172: <unk> is doing better than I expected.

Speaker Change #172: Yes.

Speaker Change #173: Very bullish spot.

Remo Canessa: Thank you.

Remo Canessa: From my perspective, yeah, from my perspective, like if you might, two cents, let's make it really quick. It's the end of the day. We've got a great company, the great platform for significant need of your product on a worldwide basis that's required, quite frankly. It comes down to one thing, and that is people. And I believe what I'm seeing with the leadership that we have, that it's going to go to marketing across the board. It is, it is great to see. And really, I think sets us up while going forward. And, as Jay mentioned, you know, strong leaders will hire strong people.

Speaker Change #174: Thank you.

Remo Canessa: There's scheduled buildings. So we have those scheduled buildings. Those buildings are coming through. Now, if you take a look and go back into fiscal 23 first half and fiscal 24 first half, there were macro challenges. So the challenging environment from C-scillars perspective. So therefore, with that challenge environment, in the first half of fiscal 23 and fiscal 24, now those scheduled buildings are coming through and those scheduled buildings are lower. That was creating that growth rate of 7 percent year-by-year in the first half.

Speaker Change #175: From my perspective, yes from my perspective, I'll give you my two cents.

Make it really quick.

At the end of the day, we've got a great company a great platform for significant need.

Speaker Change #176: Your product in a worldwide basis.

Speaker Change #177: This requires quite frankly, it comes down to one thing and that is people and.

Speaker Change #177: And I believe what I've seen with the leadership that we have.

Speaker Change #177: It's in our go to market team across the board.

Speaker Change #177: It is it is great to see.

Really I think sets us up well going forward and as Jay mentioned.

Jay: Strong leaders, who hire strong people and I believe the leadership that we have onboard is very very strong.

Jay Chaudhry: And I believe the leaderships we have on board is very, very strong. Yeah, like another comment I'll make is a barrier to entry to do what he's good at has gone. It's very hard. And Fiverr is becoming more and more important, and we are excited about the opportunity ahead of us.

Speaker Change #177: Yes.

Jay: Comment I'll make is a barrier to entry to do what she has been it has done so.

Jay: Our.

Speaker Change #178: Fiber is becoming more and more important.

Speaker Change #179: We are excited with the opportunity ahead of false.

Unknown Executive: With that, I want to thank you for your interest in Zscaler. We look forward to seeing you at one of these investor conferences. Thanks again, thank you. Thank you. Thank you all for participating in today's conference, and you may now disconnect. Thank you all for joining us today.

Speaker Change #180: With that.

Thank you for your interest and we look forward to seeing you at one of these investment volumes.

Remo Canessa: Now having said that, what I make the comment I made before was that, you know, the business is getting more second half. We're becoming a larger company becoming more second half. So our guidance reflects that. In that scheduled buildings, the 23 percent, those were contracted buildings. They're scheduled. And, you know, we expect to get those buildings.

Unknown Executive: Thank you.

Speaker Change #181: Okay. Thank you.

Speaker Change #182: By all for participating in today's conference and you may now disconnect.

Brian Essex: One moment for our next question. Any comments from the line of Brian Essex with JP Morgan? Please proceed. Great. Thank you. Any good afternoon. Thank you for taking the question.

Speaker Change #182: Okay.

Speaker Change #182: [music].

Speaker Change #182: Okay.

Speaker Change #182: Okay.

Speaker Change #182: [music].

Jay Chaudhry: Jay, I think I think you may have touched on this in your repair remarks, but I want to circle back into the macro, specifically the competitive environment with regard to pricing. And there are certainly certainly in a generic trust space. We're seeing a lot of initiatives to consolidate on, you know, certain platform. So that is flexible pricing, different duration, giving way products for free. How is that impacting the pricing environment that you're dealing with?

Speaker Change #182: Okay.

Jay Chaudhry: I understand that there's a lot of times an architectural change that's that's attracted with your platform, but just want to touch maybe you could feel back a layer on the pricing dynamics, just understand what you see in your environment. Thank you. And as I said, during my prepare marks, yes, macro remains challenging, and there's a deal for group. Also, at the same time, cyber is very important. In many areas, good enough, is good enough.

Jay Chaudhry: In cyber and large enterprises, good enough is not good enough. So customers do want a good, a very good cyber solution at number one. And number two, in the cyber area, real zero across architecture that's cloud-nated, does play an important role that matters. Now, once you do that, your pipeline actually builds, you are engaged with customers. And the next part comes in, can you close the deal? Now closing the deal in today's environment, does require that you are able to actually show the customer that you can take a bunch of products out, and you can save money for the customers.

Jay Chaudhry: And we are able to release, we are able to replace a number of new, number of products, whether firewalls, VPNs, NAC products, and the like. When they're able to show that we are able to eliminate those products, the customer likes it, that helps us both. Now, we have a new and upset business has accelerated actually, so we are seeing strength and area. So, personally, I'm not worried about the competition. I'm able to handle pricing situations by showing the number of products you can move.

Jay Chaudhry: So, single other vendors, do you think a firewall vendor wants to remove a bunch of point products? The biggest install base in terms of products today is firewalls. They want to protect those firewalls. We take those firewalls, we take those VPNs. So, we just have to, this area we keep on getting better at is making sure we engage at the sea level. Number one, number two, make sure we create a good business value assessment. And we have owned that process quite a bit. Thank you. One moment for our next question, please.

Matt Hartberg: Any from the line of Matt Hartberg with RBC capital markets, please proceed. Great. Thanks guys for the questions.

Remo Canessa: Maybe one on the quarter. Could you talk a little bit about obviously it was a Q4, but in we assume it's back and loaded, but how the linearity of the quarter, you know, anything abnormal with deals that pushed or pulled. And I guess, maybe if you could comment a little bit more specifically in trend in August, thus far, that would be, or I guess, now we're in the future, but through August, that would be helpful.

Remo Canessa: The trends in August, I'll let Jay speak about that. The Q4, we talked about that the quarters have become more back and loaded. Nothing, it was similar to, you know, the prior few quarters, Q4, so nothing unusual would keep working linearity perspective. And regarding trends in, in August, can't get specific trends on, on dollar amounts or anything like that or business, but maybe Jay gives you comments, you know, I think nothing unusual to talk about in August. Business is making progress and usual. So I think you'll probably need more of us as we get better.

Jay Chaudhry: Alright, maybe if I could just squeeze one more, you know, it seems like, you know, in the spirit of consolidation, you know, 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 sort of the growth in your large deal pipeline and kind of the focus on, on increasingly playing that consolidation role?

Jay Chaudhry: Yes, there is no slowing down on consolidation of point points. We have been seeing our deals in federal getting bigger, seeing upsell going more and more, so if the customer spend X is spending more with us, I shared several deals, several large deals where customer started at X is going up to Y or Z and whatnot. So, the main thing for customers are looking for consolidation is, number one, can you give me better cyber and deal satisfaction? Number two, get it operationally, run and manage these things better. Number three, can you do cost savings? That message is loud and clear, and they're handling all of that.

Jay Chaudhry: In the one area highlight for consolidation, which is playing a big role for us is data protection. When customer started the Z-skill or CI, a start of a cyber protection was a primary focus to make sure they don't get compromised. No, with an similar tax, where data is often exfiltrated, data protection has become a bigger and more important item than it used to be. Since we are sitting in line for the traffic that goes to the Internet, we have a natural provider, natural partner to do a data protection.

Jay Chaudhry: And we're seeing growth in data protection that has become one of the fastest in area for us. I think a few quarters ago, we mentioned that it has exceeded its surpassed core of billion dollar for us, and also we expanded this platform quite a bit. We used to do inline DLP at the primary thing. Now, we also got DLP for email as a big thing. SAS, SSBM, CASD kind of stuff, a node, DSBM are becoming more areas.

Jay Chaudhry: So, I think we better state expanding platform with cost savings. I think they're extremely well positioned. From my perspective, also, I mean, just some numbers, we called out on the script, 567 customers have created in a million ARR. 3,100 customers have created in 100,000, and I believe 60 over 60 customers with $5 million in ARR. Half a trillion transactions per day, just put a perspective in the order of magnitude that's more than anybody seeing.

Jay Chaudhry: At the time of our public offering, we're doing 30 billion transactions per day. So, we've gone from 30 billion transactions to 500 billion transactions. The data that we receive, the information that we receive, that we're able to basically help our customers for security perspective. I just don't think there's anybody else out there who can do it. It's my view that we're in a great position to capture this market. I also believe that, you know, with the go-to-market changes that we've made over the last nine months, we're going to sell deeper in the accounts.

Jay Chaudhry: And also, you know, we're going to do one of the things we called out, you know, GSI. That's going to be an area that we're going to focus in on, you know, as they go forward. I think the opportunity's really big. I believe Blackboard is a very important, well positioned to really protect customers and governments throughout the world. And I think, you know, we feel good, good about where we're at right now. Thanks. Super helpful. Thank you.

Shrenik Kothari: One moment for our next question that comes from the line of Shrenik Kothari with Baird. Please proceed. 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 cost for applications, workloads and IoT. And you gave example of a new level way in the top 10. Strong customer demand for the broad approach.

Jay Chaudhry: Just just getting elaborate on on the nature and composition of these contracts, the non-cancelled buildings. 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 kind of land and expand motion, moving more towards the workload and application based on that follow up for RIM as well.

Remo Canessa: Yes, let me start with the platform expansion, as I said, during my period months, most of the vendors are trying to really mature a product for protecting users. We've done that extremely well, 47 million some users protected. So it is natural for us to expand it to workloads, IoT, OT devices in the life in terms of growth to give you some data points. We talked about emerging products from the newer areas and then we got the mature flagship products on emerging products, which is where the workloads, protection, IoT, type of stuff falls in.

Remo Canessa: It was about 22% in fiscal 24. It had gone up from 18% in fiscal 23 and we expected to go to mid 20s in fiscal 25. So that's growing faster. That's why it's able to carve out my future out of that. The exciting thing about that area is there's literally no real competition to do these things in zero trust fashion. Yes, some of the workloads and all is done through firewalls communication, IoT, OT, what do you do, firewalls and VPNs.

Remo Canessa: We all know that firewalls and VPNs have to go away and be a well position. It's just that it's a little bit different sale. It's a same audience below different IoT, a lot of stuff is linked to many facts and plans alike. So you need to reach out to the audience, but CSOS and CIO do play a common role with the acquisition of air gap, which does actually device segmentation for IoT, OT, extremely well without needing any firewalls, without needing any network access control devices.

Remo Canessa: It's just one of area that's being really. He is showing tons of interest in our customer base. In fact, our number of engagements with device segmentation for IoTOT based on dear gas has gone up significantly. So, that's why I feel like the gap between us and people trying to come from behind is growing and a barrier to entries is not trivial in this case.

Unknown Executive: Sameal, you want to talk about that. Yeah, from a contract, it's building perspective. Again, the key point is that we signed three-year contracts up front. And so getting that certainty with that contract is good. And then the billing happens afterwards on an annual basis afterwards. That's the scheduled contract billing. So what we're seeing is that our contract lengths are increasing, which is positive. And also we're seeing our deal size increasing, which is positive too.

Unknown Executive: We're also seeing customers buying more of our product across our platform. And again, getting a three-year contract with base scheduled billing is just certainty related to the billing. But also getting that three-year contract gives you time to basically sell that customer more. And as I mentioned before, which is really key is that the sales organization go to market organization. We're selling deeper into the accounts. That's going to be our focus. We're going to look for new customers, but we're also going to look to sell deeper into our account. So longer contracts. It's a good thing. Got it. Thanks a lot, Jerry. Thank you.

Patrick Qualville: One moment for our next question that comes from the line of Patrick Qualville with Scotia Bank. Please proceed. Jay, thank you so much for taking my question here.

Jay Chaudhry: 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 around. I mean, we're going to get this in the 10k, but what was ZPA and then ZIA as a promotion and new and upsell in fiscal 24? And I guess the second bottle of questions. How do you expect ZPA and ZIA to trend in fiscal 25? I mean, what's a sustainability and remaining time for those two product lines?

Jay Chaudhry: So very good question. So let's talk about ZIA ZPA. You know, at the time of IPO, there's only one product. ZIA ZPA was kind of a rounding at her sort of speed. But today, if you look at the mix between CIA and CPA, CP has gone from literally nothing to about 40% or 40% of the new business that we're doing between the two of the products. That's very remarkable. In fact, if it goes too high, I'll be kind of wondering is ZIA, you know, going fast enough?

Jay Chaudhry: So I expected to grow somewhat more, but not quite. At the end of the day, it could get to 50, 50. I expect every Z-scaler customer for every user to have CIA, CPA, and CDX, those key products make it a complete package and we call it Z-scaler for users. Z-scaler for users has become our single largest queue basically because that's what are saved in these. Smith, which really says that our goal is for every person who buy those tea products. That's kind of one key area.

Jay Chaudhry: Now what is the second part of your question? I'm sorry I forgot. I guess it's the question we get from the best is, is how, you know, what is the sustainability of those business lines? And I guess what we start to articulate is that there's a lot to go in in ZPA, but you know, maybe talk about yours that I, if there are a lot to go there or is that a more virtual segment?

Jay Chaudhry: So let's also, let's talk about the second part. That is how much market penetration was done and how much market penetration we have left. A CIA was a starting product. Obviously, almost all customers started ZPA, though we are seeing some customers starting with ZPA is how the numbers are relatively small, but, but take G2K, we reached nearly 35% of G2K, which means there are about 300 companies, sorry, yeah, they are companies that are spending, sorry, 35% of them are Zscaler customers.

Jay Chaudhry: Now, about Kali, and the area of 60% of a large CIA customers also at ZPA, so that's good penetration, but in terms of the opportunity for us only about, of the 35% G2K, but 300 of them spend over a million dollars thus. That means, the cost of existing customers, the 400 more that could easily go to a million dollars for us. But many of the customers in that same group are going to 5 million dollars.

Jay Chaudhry: So what I'm saying is an opportunity for us to upsell, go from 35% G2K to a higher number and among those 35% to sell more CIA customers. So there's no lack of market for us. Other point I'll make is, from the height of the market, we do extremely extremely well. Those customers are sophisticated, they need the functionality, breadth, depth, and reliability, and resilience we offer. So we are counting on this thing by count focus program that our new Seattle is driving is actually focus on going deeper and wider into our existing counts.

Unknown Executive: And getting new large logo counts as I hope that gives you the color you look wonderful. Thank you so much. Thank you.

Adam Borg: Our next question comes from the line of Adam Borg, which diesel please proceed. Awesome, and thanks for taking the question. For Jay Reeve, I know you talked about this a bit in the script, but I was hoping to talk a little bit more about head count growth in fiscal 25 and where you're really investing most across the market and R&D. Thanks so much. Yeah, we do expect to increase head count from fiscal 25.

Adam Borg: Our fiscal 25 head count increase will be across all the areas R&D sales and marketing GNA and cloud. I would say the pace of hiring in fiscal 25 will be less than what it was in fiscal 24. We added about 1,400 employees, we went from 5,900 employees to 7,300. So I would think about more moderate pace and hiring in fiscal 25 versus 24. Awesome, thanks so much. Thank you.

Unknown Executive: In our last question, one moment please.

Hamza Fodderwala: Come from the line of Hamza Fodderwala, with Morgan Stanley, please proceed. Good evening, thanks for fitting me in. Either for Jay or Remo. Curious, synth, mic, and the new sale leadership have been on the last few quarters. Where are some of these? Early indications that you're seeing early proof points that gives you confidence heading into fiscal 25? So good question. Remember when we set out to make some of these changes, the key thing was for us was we learned to move from early sales companies that focus on opportunity centric stuff to account centric stuff.

Hamza Fodderwala: That was one of the key guns. We have put a program in place to train the sales force, and we are actually making good progress in pursuing this process. Are you see the results? You start seeing more upsell in that own place plus, and then you start seeing new logo as well. So we are seeing good upsell large deals and large accounts. That's what we expected. In fact, if you think about it, overall number of $1,000,000 ARR customers, it's gone up to $567,000.

Hamza Fodderwala: Our customers, the $5,000,000 ARR has gone to $60,000. Now all of that is not attribute-able to the new team because the new teams are working up fast, a couple of quarters. What we're seeing here is on for that. The second thing we're seeing as a result is the GSI involvement. We have a special focus on GSI's who actually are embedding the art offering into their offerings, so it becomes part of their offerings as well.

Hamza Fodderwala: We're seeing good early indications of that. Number three, the quality of sales leaders that are actually hiding a number of them come from the background with the focus and account of the focus selling and offering large accounts to large reviews. We are seeing the quality of those people. So from my point of view, the transition is going better than expected. I'm very pleased with it, and I'm very bullish about it. Thank you.

Jay Chaudhry: From my perspective, I'd give you my two cents. Let's make it really quick. It's the end of the day. We've got a great company, a great platform for significant need of your product in a worldwide basis that's required quite frankly. It comes down to one thing, and that is people. And I believe what I'm seeing with the leadership that we have, but it's going to go to marketing across the board. It is great to see.

Jay Chaudhry: And really, I think sets us up while going forward. And as Jay mentioned, strong leaders will hire strong people. And I believe the leaderships we have on board is very, very strong. Yeah, like another comment I'll make is a barrier to entry to do what she's good at has gone. It's very hard. And Fiverr is becoming more and more important, and we are excited about the opportunity ahead of course.

Unknown Executive: With that, I want to thank you for your interest and Zscaler. We look forward to seeing you at one of these investor conferences. Thanks again. Thank you.

Unknown Executive: Thank you all for participating in today's conference and you may now disconnect.

Unknown Executive: Thank you all very much.