Q3 2025 Zscaler Inc Earnings Call

Thank you for standing by and welcome to the scalar is a third quarter fiscal year 'twenty to 'twenty five earnings conference call. At this time all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.

To ask a question during the session you will need to press star one one on your telephone to remove yourself from the queue. You May Press Star one one again I would now like to hand, the call over to Ashwin. Your case already Vice President Investor Relations and strategic Finance. Please go ahead.

Ashwin: Good afternoon, everyone and welcome to disease Killer third quarter fiscal year 2025 earnings conference call.

Jay Chaudhry: On the call with me today are Jay Chaudhry, Chairman and CEO and remote Kennesaw CFO.

Jay Chaudhry: Please note we have posted our earnings release and the supplemental financial schedule to our Investor Relations website.

Jay Chaudhry: Unless otherwise noted all numbers, we talk about today will be on an adjusted non-GAAP basis, you will find a reconciliation of GAAP to the non-GAAP financial measures in our earnings release.

Jay Chaudhry: I'd like to remind you that today's discussion will contain forward looking statements.

Jay Chaudhry: Including but not limited to the company's anticipated future revenue annual recurring revenue calculated billings.

Jay Chaudhry: Operating performance gross margin operating expenses operating income net income free cash flow dollar based net retention rate future hiring decisions remaining performance obligations income taxes earnings per share our objectives and outlook.

Jay Chaudhry: Customer response to our products.

Jay Chaudhry: And our market share and market opportunity.

Jay Chaudhry: These statements and other comments are not guarantees of future performance.

Jay Chaudhry: But rather are subject to risk and uncertainty some of which are beyond our control.

Jay Chaudhry: These forward looking statements apply as of today.

Jay Chaudhry: And you should not rely on them as representing our views in the future.

Jay Chaudhry: 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 the SEC as.

Jay Chaudhry: As well as in today's earnings release.

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

Jay Chaudhry: Bank of America Global Technology Conference on June 5th.

Jay Chaudhry: SBN virtual technology conference on June 6th.

Jay Chaudhry: BMO virtual software conference on June nine.

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

Speaker Change: Thank you Ashwin, our strong Q3 results demonstrate growing demand for our platform and continued improvement in our sales productivity more customers are adopting these killers comprehensive solutions with platform wide deals for our zero Trust security driven.

Jay Chaudhry: By the strong demand we achieved two significant milestones first we achieved our best Q3 with <unk> bookings of over $1 billion and second our remaining performance obligations or <unk> are now nearly $5 billion new.

Jay Chaudhry: Logo ACB had strong growth of over 40% year over ear.

Jay Chaudhry: Total new HCV was up double digits year over year once again in the quarter.

Jay Chaudhry: Our annual recurring revenue or <unk> was approximately $2 $9 billion, representing the third straight quarter of 23% year over year growth, we remain on track to reach $3 billion or more in <unk> by the end of this quarter.

Jay Chaudhry: We are proud of achieving these strong topline to solve such scale, while delivering strong profitability our year to date fiscal 'twenty five revenue growth of 24% combined with our free cash flow margin of 28%, resulting in rule of law.

Jay Chaudhry: 52 performance.

Jay Chaudhry: While many SaaS companies struggled to achieve rule of 40 performance, we have exceeded this industry benchmark for each of the last 21 quarters.

Jay Chaudhry: Moving on to discussion of our platform I am very pleased to share that our platform north secures over 15 million users and other significant milestone. This milestone gives us several competitive advantages.

Jay Chaudhry: Just more users deliver powerful network effect and strengthened our market leadership.

Jay Chaudhry: <unk> Zero Trust exchange platform sits in line for Enterprise Communications every time, we secured a user from a new attack we apply that protection for all users of our platform, creating a flywheel for improving security.

Jay Chaudhry: The magnitude of this effect is staggering last year alone our exchange processed over 100 trillion transactions blocked over 60 billion threats and enforced over five trillion policies.

Jay Chaudhry: This unique network effect differentiate <unk> from other vendors trying to pursue this market segment.

Jay Chaudhry: And delivers unparalleled cyber security to our customers.

Jay Chaudhry: Hence more and more enterprises are selecting zee scalar as the partner of choice.

Jay Chaudhry: Second more users mean more high quality data for our AI solutions to millions of users workloads and Iot Ot devices on our platform result in over 500 billion transactions generating over 20 Petabytes of high fidelity data.

Jay Chaudhry: Today as you know AI is only as good as the data that powers it.

Jay Chaudhry: And I believe we have the best data.

Jay Chaudhry: There are two unique aspects to our proprietary data one.

Jay Chaudhry: Vast quantity and two it's high fidelity, both of which we utilize to train our models and deliver highly effective AI solutions.

Jay Chaudhry: Third the large volume of proprietary data I, just talked about empowers us to deliver cutting edge solutions for security operations by leveraging our data fabric technology and correlating our logs with third party data, we have introduced exposure management and track.

Jay Chaudhry: Management solutions, which deliver a new level of actionable insights for our customers security operations <unk>.

Jay Chaudhry: Leveraging our scale, we are building new security operations solutions co pilots and a gentex AI solutions that will be showcased at our upcoming zenith live conferences with our zero Trust exchange platform, we fundamentally transform cyber security from <unk>.

Jay Chaudhry: <unk> based model to a zero Trust architecture.

Jay Chaudhry: Firewall based security creates trusted and untrusted networks once a user or a threat actor gets on the trusted network. They are then blindly trusted and can move unchecked across the enterprise network that is what makes ransomware and other cyber attacks.

Jay Chaudhry: So dangerous.

Jay Chaudhry: With Zee scalar is zero Trust architecture, there's no concept of trusted networks every user every workload every Iot Ot device and every AI model is untrusted.

Jay Chaudhry: Zero Trust, we connect only the authorized party to the authorized application.

Jay Chaudhry: While legacy vendors are attempting to cobbled together disjointed point products and calling it a platform. We are constantly expanding our core zero trust exchange by integrating new functionality to solve more and more of our customers' security concerns.

Jay Chaudhry: Our industry, leading capabilities are recognized by our customers partners and leading third party analyst firms of note I'm thrilled to share that Gartner once again recognized zee scalar as a leader in the SSC magic quadrant, extending our standards as.

Jay Chaudhry: As a leader in the MQ for user security part over a decade move.

Jay Chaudhry: Moving on to the macro environment customers remain cautious about their spending due to ongoing economic uncertainty.

Jay Chaudhry: <unk> customers are still prioritizing cyber and data protection.

Jay Chaudhry: Turn on investment and the value delivered remain important to customers.

Jay Chaudhry: A couple of quarters ago, we launched our cost takeout program to help customers identify and eliminate legacy security and networking products such as firewalls vpns.

Jay Chaudhry: Is it more.

Jay Chaudhry: We are seeing great success with our program as more and more customers are embracing it to reduce cost and complexity, while improving security.

Jay Chaudhry: Additionally to help our customers unlock more cost savings, we launched a new purchasing program in Q3 called Z Flex.

Jay Chaudhry: XIAFLEX allows customers to flexibly scale adoption of our platform to meet the constantly evolving organizational demands.

Jay Chaudhry: For cyber and data protection.

Jay Chaudhry: Customers can seamlessly adopt scale and change modules based on agreed pricing, which simplifies the procurement process.

Jay Chaudhry: Since its recent launch XIAFLEX commitments contributed over $65 million in <unk> bookings.

Jay Chaudhry: To give you. An example, an existing fortune 500 technology customer made a multiyear commitment under the flex program, increasing their <unk> by over 40% to approximately $19 million as.

Jay Chaudhry: As part of the flex commitment the customer added many start hunting micro segmentation identity threat detection Janney eye protection and several data security modules.

Jay Chaudhry: This win also demonstrates our growing capabilities in the Sac and zero Trust cloud I expect the contribution from XIAFLEX to grow meaningfully in the next fiscal year.

Jay Chaudhry: Moving to products, we're seeing significant growth drivers in three categories Cedar.

Jay Chaudhry: Zero Trust everywhere.

Jay Chaudhry: Data security everywhere and a gentex operations.

Jay Chaudhry: Each of these categories is growing significantly faster than our overall <unk> and their combined <unk> is approaching $1 billion.

Jay Chaudhry: Let me cover each of these categories in more detail on our last earnings call. We introduced zero Trust everywhere, which highlights our unique ability to take zero Trust security beyond users Zero Trust for cloud workloads and zero Trust four branches.

Jay Chaudhry: In Q3, 59% of customers, who bought zero Trust branch, one new logo customers.

Jay Chaudhry: Any of these new logo customers are starting their brand journey by securing a small number of branches, which creates significant upsell opportunities for us.

Jay Chaudhry: We are enhancing our zero Trust branch functionality with several innovations for example.

Jay Chaudhry: In Q3, we launched our new unified appliance for branch that brings together a zero Trust branch connectivity and zero Trust device segmentation into a single plug and play appliance.

Jay Chaudhry: This solution dramatically simplifies branch infrastructure, eliminating the need for SD Wan firewall knack and legacy segmentation.

Jay Chaudhry: I expect zero Trust branch to be a significant growth contributor in fiscal 2006.

Jay Chaudhry: The key pillar of our SEDAR Trust everywhere strategy is zero trust cloud, which enables secure communication workload to workload and phone workload to the internet.

Jay Chaudhry: Initially our customers leverage zero trust cloud to secure a small number of workloads to get comfortable with this innovative approach that requires no Easter at firewalls, no north South firewalls, no virtual private networks no access routes and no direct connects.

Jay Chaudhry: We are seeing larger deals for zero trust cloud to secured a larger number of workloads, resulting in acceleration of zero Trust cloud <unk>.

Jay Chaudhry: To share an example.

Jay Chaudhry: And existing financial services customer made their initial purchase of cloud workload protection to secure all of their internal workload traffic. This is an impressive seven figure ACB land deal for workload protection.

Jay Chaudhry: We are seeing tremendous success as more customers are becoming zero trust everywhere enterprises by embracing zero trust per users branches and cloud <unk>.

Jay Chaudhry: Last quarter, we shared our goal to triple the number of zero Trust everywhere customers promo or 132 over 390 by the end of fiscal 2006.

Jay Chaudhry: I'm pleased to share that we ended Q3 with over 210 Zero Trust every word enterprises, which is over 60% quarter over quarter growth.

Jay Chaudhry: With this strong momentum we remain on track to achieve our target.

Jay Chaudhry: The second category driving outgrowth is data security everywhere.

Jay Chaudhry: We have the most comprehensive data security capabilities to secure all types of data, whether structured or unstructured data in motion our data at rest and data across all channels, including Jenny I apps web email endpoint SaaS DSP EM and more.

Jay Chaudhry: <unk> comprehensive data security capabilities are resonating with customers and helping us win large deals.

Jay Chaudhry: To give you. An example in a seven figure ACB deal an existing fortune 50, automotive customer added our endpoint DLP module and privileged remote access our PRA.

Jay Chaudhry: While expanding zero trust users with more vps seats.

Jay Chaudhry: This customer now has six of our eight data security modules, including inline DLP SaaS security cyber isolation data isolation classification encryption and endpoint DLP with this deal the customer's annual spend with us increased by over 50.

Jay Chaudhry: 50% to well over $10 million.

Jay Chaudhry: Historically data security was an important consideration for data heavy regulated industries, such as finance and health care with the increasing adoption of journey II and SaaS applications data securities known becoming important to all industries.

Jay Chaudhry: To give you. An example in a seven figure <unk> deal a new logo, a fortune 100, food and beverage company adopting zero trust their users and multiple data security modules.

Jay Chaudhry: Moving to a gentle operations, our third category of growth.

Jay Chaudhry: <unk> operations are expanding rapidly in two areas it ops and tech ops or.

Jay Chaudhry: For <unk>, we delivered <unk> co pilot last year as an embedded feature in our CTX advanced plus package.

Jay Chaudhry: Since the launch of <unk> copilot theoretical bookings for CTX advanced plus grew over 70% year over year to nearly $75 million.

Jay Chaudhry: <unk> co pilot helps lower the mean time to resolution of service tickets.

Jay Chaudhry: And its capabilities are becoming a key differentiator for us.

Jay Chaudhry: To give you. An example, an existing U S based large healthcare customer purchased <unk> advanced plus four 140000 users and a seven figure <unk> deal.

Jay Chaudhry: <unk> co pilot was an important consideration for the spring.

Jay Chaudhry: Moving on to the second area of a gentle operations SEC ops, where we have several modules, including risk 360 business insights unified vulnerability management identity threat detection and cyber asset attack surface management or CASM.

Jay Chaudhry: Our <unk> solution built on the data fabric technology, we acquired last year is gaining traction and it drove over 120% year over year growth in Satcom HCV.

Speaker Change: Share a customer example, and.

Jay Chaudhry: An existing U S based health care customer.

Jay Chaudhry: <unk> unified vulnerability management for 400000 assets in a seven figure <unk> deal.

Jay Chaudhry: The customer told me that UBM gave them an accurate asset inventory within two hours, which is a dramatic reduction from the six months. It would have taken them otherwise we will continue to expand our <unk> solutions the acquisition of Red Canary will allow us to expand into.

Jay Chaudhry: We saw categories of managed detection and response or MTR and threat intelligence, we expect to close this transaction in August 2025.

Jay Chaudhry: In addition to developing AI powered solutions, we are enabling customers to safely adopt AI.

Albert Chan: Albert Chan AIA data security module is enabling enterprises to securely use public journey I apps, such as Microsoft 365, co pilot deep Sea chat GPT and more in Q3, many customers, including an existing global 2000 Tech come.

Albert Chan: <unk>, a leading fleet management company and a large federal customer and more purchased our journey I data security module.

Albert Chan: In addition to securing public AIA apps, we are introducing solutions to secure customers private AIA apps, such as AI models chat bots and inference engines, we're expanding the functionality of our zero Trust exchange and.

Albert Chan: And Ellen proxy to analyze pumped query is to detect and prevent prompt injections and other malicious activities and analyze responses to prevent data leakage and enforced the right access.

Albert Chan: I believe these cutting edge innovations will position zee scalar to be a market leader in the AI security space.

Albert Chan: Customer obsession employee dedication to our mission and our customers' trust in our platform are driving us to deliver innovations that solve our customers' most critical security challenges with a strong go to market machine and strong momentum in zero Trust everywhere and AI.

Albert Chan: Security I am more excited than ever about our continued growth through $5 billion or more in <unk>.

Remo: No I like to turn over the call to Remo for our financial results.

Speaker Change: Thank you Jay our Q3 results exceeded our guidance on growth and profitability, even with ongoing customer scrutiny of large deals.

Albert Chan: Revenue was $678 million up 23% year over year and up 5% sequentially from.

Albert Chan: From a geographic perspective Americas represented 54% of revenue EMEA was 30% and a P. J was 16% our annual recurring revenue or <unk> exiting Q3 was approximately $2.9 billion or our growth was approximately 23% year over year.

Albert Chan: Remaining performance obligations or our Po grew 30% from a year ago to $4 978 billion.

Albert Chan: Current RPI was approximately 48% of the total RPM.

Albert Chan: Total calculated billings grew 25% year over year to $785 million or unscheduled billings comprised of new upsell and renewal billings grew in the high 20% year over year.

Albert Chan: Driven by increasing customer demand for our platform.

Albert Chan: Our calculated current billings grew 24% year over year.

Albert Chan: We ended Q3 with 642 customers with over $1 million in <unk> and.

Albert Chan: And 3363 customers with over $100000 in.

Albert Chan: 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 114%.

Albert Chan: While good for our business our increased success in selling bigger bundles.

Albert Chan: Selling multiple pillars from the start and faster upsells within a year can reduce our dollar based net retention rate in the future.

Albert Chan: There could be variability in this metric on a quarterly basis due to the factors I just mentioned.

Albert Chan: Turning to the rest of our Q3 financial performance total gross margin of 83% compares to 81, 4% in the year ago quarter.

Albert Chan: Our total operating expenses increased 5% sequentially and 21% year over year to $397 million.

Albert Chan: Operating margin of approximately 22% was comparable year over year.

Albert Chan: Our free cash flow margin was 18%.

Albert Chan: Including data center Capex at 11% of revenue.

Albert Chan: We ended the quarter with approximately $3 billion in cash cash equivalents and short term investments.

Albert Chan: As a reminder, our convertible debt reaches final maturity in July.

Albert Chan: We intend to settle the outstanding convertible debt and cash and equity in Q4 also.

Albert Chan: Also we will use $675 million in cash in Q1 of fiscal 26 for the acquisition of Red Canary, which we announced on May 27th.

Albert Chan: Next let me provide our guidance for Q4 and full year fiscal 2025.

Albert Chan: As a reminder, these numbers are all non-GAAP.

Albert Chan: For the fourth quarter, we expect revenue in the range of $705 million to $707 million, reflecting a year over year growth of approximately 19%.

Albert Chan: Gross margins to be approximately 80% I would like to remind investors that we are introducing new products. They are experienced strong growth in our optimized for faster go to market rather than margins.

Albert Chan: This will continue to influence our gross margins, we plan to optimize new products for margins over time as they scale.

Albert Chan: Operating profit in the range of $152 million to $154 million.

Albert Chan: Net other income of $16 million.

Albert Chan: Earnings per share in the range of 79 to 80.

Albert Chan: Assuming a 23% tax rate and 164 million fully diluted shares based on our strong Q3 performance, we're increasing our full year guidance across all metrics for the full year fiscal 2025 billings in the range of 3.184 billion.

Albert Chan: The $3.189 billion, reflecting a year over year growth of approximately 21% to 22%.

Albert Chan: Revenue in the range of $2.659 billion to $2 $661 billion, reflecting a year over year growth of approximately 23%.

Albert Chan: Operating profit in the range of $573 million to $575 million.

Albert Chan: Earnings per share in the range of $3 18 to $3 19.

Albert Chan: Assuming a 23% tax rate at approximately 163 million fully diluted shares.

Albert Chan: Free cash flow margin to be approximately 25, 5% to 26%.

Albert Chan: 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.

Jay Chaudhry: Now I'd like to turn the call back to Jay.

Jay Chaudhry: Thank you Raimo before moving on to Q&A I'm happy to share the appointment of Kevin Rubin as our new Chief Financial Officer, Raymond will remain in an advisory capacity until the end of this fiscal year to ensure a smooth transition I'm very excited too.

Jay Chaudhry: Have someone with Kevin strong background and experience joined Zee scalar Kevin has over two decades of experience as a CFO of multiple technology companies I firmly believe his recent eight year tenure as a CFO of a data analytics company it will be crucial.

Jay Chaudhry: Zee scalar in our next phase of growth, which will be driven in large part by the combination of zero Trust and AI security I'm thrilled to have Kevin on board and our leadership team and I look forward to working with him Kevin welcome to Zee scalar.

Kevin Rubin: Thank you Jay.

Kevin Rubin: I'm incredibly excited to be joining zee scalar the leader in cloud security I believe with its expanding platform Zee scalar is well positioned to benefit in an increasingly AI driven enterprise security market with my background in data analytics I am strongly aligned with <unk> vision of leveraging the high volume.

Kevin Rubin: <unk> high fidelity data of Zee scalar platform to deliver a pioneering security innovations for the age of AI I look forward to being part of our growth to $5 billion in <unk> and beyond and I look forward to working with our customers partners employees investors and the analysts Jay.

Kevin Rubin: <unk> back to you.

Kevin Rubin: Thank you Kevin Operator, you May now open the call for questions.

Speaker Change: Thank you as a reminder to ask a question you will need to press star one one on your telephone to allow everyone. The opportunity to participate in the interest of time, you will be limited to one question.

Speaker Change: Please standby, while we compile the Q&A roster.

Speaker Change: Our first question comes from the line of.

Speaker Change: <unk> Kidron of Oppenheimer and company. Please go ahead.

Kevin Rubin: Okay.

Speaker Change: Thanks, and nice results guys and rain with thank you and Kevin Good luck, great to connect with you again for the third time, so congrats and good luck to you on that.

Kevin Rubin: Jay.

Kevin Rubin: A lot of great interesting things happening so great to see a lot of good momentum here with products and customers I guess I wanted to.

Kevin Rubin: Get your perspective on sales force focus and what I mean by that is you have a portfolio that's expanding at warp speed you have a new purchasing mechanism through Z flicks.

Kevin Rubin: How do you get people how do you get customers focus how do you get salespeople focus and make sure that things.

Kevin Rubin: Stay on track and more specifically with regards to this reflects which is clearly a program that should do well for you it's done well for what many others.

Kevin Rubin: Help me think about the scope of usage of this is this going to be available to everybody what is the bottleneck.

Kevin Rubin: In making this available to everybody tomorrow.

Kevin Rubin: Alright, thank you.

Speaker Change: Great set of questions. So first of all.

Speaker Change: Expanding platform rapid pace creates interesting challenge and opportunity for our sales team we have been working on it for the last three four years as you know we started the notion of take off teams. Our newer product areas. For example data protection as a tech ops team for quite some time.

Kevin Rubin: And with the acquisition of clarity.

Kevin Rubin: Acquiring actually Steven go to market team that knows how to sell socks.

Kevin Rubin: And yes essentially.

Kevin Rubin: Yes.

Kevin Rubin: <unk> specialist team.

Kevin Rubin: Cause deep with our larger so you just kind of go to market engine. So we are using a two tier model.

Kevin Rubin: <unk>.

Kevin Rubin: Sales team covering all products and their account centric account focused and then some of the takeoff teams are more experts in some of these new product areas. So they can cover the products of <unk>.

Kevin Rubin: Tibet.

Kevin Rubin: So having done it for the last few years, we're pretty comfortable and we know how to scale it.

Kevin Rubin: Second question about <unk>.

Kevin Rubin: It evolved out of the questions on customers have been asking for.

Kevin Rubin: As the platform has gotten bigger and bigger multiple choices and many times they wanted the flexibility twice.

Kevin Rubin: <unk> modules, they werent able to swap one with so.

Kevin Rubin: So this is the kind of flexibility you are giving them.

Kevin Rubin: And there's also pre agreed upon pricing so they don't have to go through a procurement cycle every time, they want a new product.

Kevin Rubin: Additionally, relatively new program as we mentioned, we got a great star in the first quarter itself in Q3, we had $65 million plus and TCE booking for.

Kevin Rubin: This program, but we're going to start with larger customers and expand to the next level, there's nothing holding us back, but we like to be prudent test <unk> learn it and expand from there.

Kevin Rubin: Thank you our next question.

Mike Cecos: Come from the line of Mike Cecos of Needham. Please go ahead Mike.

Mike Cecos: Great. Thanks for taking the questions guys and congrats on the announcement Kevin at <unk>.

Mike Cecos: To you as well.

Speaker Change: Wanted to cycle back it really sounds like.

Mike Cecos: Macro.

Mike Cecos: You saw in April and May were.

Mike Cecos: Relative to non event versus some of the more mixed data points, you've got for companies that are on our fiscal quarter end can you just tackle that a little bit more from the macro side of the house. What are you guys seeing as far as increased scrutiny or increased visitation versus as a relative non event just given the momentum that you guys have grown.

Speaker Change: And go to market side. Thank you.

Speaker Change: I'll start and remote can add on we.

Speaker Change: We did not see a softer April this maybe because we are not in the business of selling security appliances.

Speaker Change: Overall spending environment remains challenging.

Speaker Change: Chris Joe and.

Speaker Change: And we continue to see large deals.

Speaker Change: Our budgets are tight in general.

Speaker Change: But for Ciber.

Speaker Change: It's a little easier cost fiber is priority <unk>.

Speaker Change: And even in the cyber the two areas that are high priority bar for our customers.

Speaker Change: Zero Trust architectures, one and accounting.

Speaker Change: I used to.

Speaker Change: If you project involves one of these two security offerings.

Speaker Change: And you can actually do some cost savings that deal can get done.

Speaker Change: We are able to do all these things together that's why it has been in a good quarter for us.

Speaker Change: Overall, we have been working closely with our customers to reduce their cost.

Speaker Change: And become a strategic partner and this ends up translating translating into over.

Speaker Change: Over time I can tell you this.

Speaker Change: This week alone.

Speaker Change: Customers can talk to me and they said Oh, J I'm, becoming a third time customer installation.

Speaker Change: Thats relationships, that's lumpy proud on premium.

Speaker Change: Not much to add other than to call out our sales organization.

Speaker Change: Mike Rich has been onboard now for about a year and a half and it's really built a strong sales organization really to go after the large enterprise.

Speaker Change: As you remember Mike service now, we're emulating ourselves towards service now model, where we're trying to get deeper into accounts and strategic large accounts I think thats a call out to our go to market organization as well as your sales organization.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: Comes from the line of Brad Zelnick of Deutsche Bank. Your question. Please Brad.

Brad Zelnick: Thanks, so much and I Echo my congrats all around I mean this is these are really refreshing results and congrats on everybody's new appointments and Raimo, it's been a it's been a pleasure.

Speaker Change: I wanted to circle back to Zee flex because it really speaks to the strategic platform style relationship customers want to have with you.

Speaker Change: But from your perspective remote can you walk us through how are they structured whats the typical duration any accounting of these deals in and do you maybe foresee a future where billings might no longer be the right metric to measure <unk> momentum and success. Thank you.

Speaker Change: Yes.

Speaker Change: The first part which is billions going to be the right metric, let's say.

Speaker Change: Correct.

Speaker Change: We've talked about it we're going to go to IRR in fiscal 'twenty six so you see a change from billing.

Speaker Change: <unk> <unk>.

Speaker Change: I think thats, a really big.

Speaker Change: For Zee scalar because it gives us the opportunity really to sell more deeper.

Speaker Change: And more products and really work with our customers related to when they can adopt our products. So I believe going through the <unk> metric is the right metric going forward and I think Thats Eplex program gives us a lot of flexibility.

Speaker Change: Continue to sell.

Speaker Change: Across our entire platform.

Speaker Change: Sure. So does FX program came out of our customers' desire to buy more but not having to go through.

Speaker Change: <unk> and procurement every time.

Speaker Change: For example, take data protection to eight plus modules in the single product line itself and many times the customer says hey don't see are forcing some interested in but I'm not sure I'm ready to buy all fall on.

Speaker Change: I'm not sure I can deploy all toward if I Boston right now so being able to give them flexibility to try and test and they can swap one war saga.

Speaker Change: Energy just fall ability to add some more at a pre determined pricing.

Speaker Change: Have any both the procurement cycles.

Speaker Change: The main benefits they're getting.

Speaker Change: As these things are being done there being done because the customer views us as more strategic and the duration of the contracts it's moving.

Speaker Change: To do most of the deals.

Speaker Change: We're seeing more and more deals becoming four years and five years.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of <unk>.

Kalia: <unk> Kalia of Barclays. Please go ahead second.

Kalia: Okay, Great Hey, guys. Thanks for taking my question here and Echo my congrats to Kevin and Raimo on your next steps.

Speaker Change: Jay maybe for you I was wondering if you could just dig into red Canary, a little bit more and maybe more specifically.

Speaker Change: What are you sort of view this as an extension of zero trust that accelerates that path to $5 billion.

Speaker Change: Or whether this is something that adds to that and broadens the platform.

Speaker Change: Yes.

Speaker Change: When I talk to customers often I tell them from day, one we had one north Star Zero Trust architecture, which expanded users.

Speaker Change: <unk> suppliers to workflows to branches and everything.

Speaker Change: And as we did more and more of our customers. We often talk to me and say Hey, This is wonderful and you've got the most logs.

Speaker Change: And then I have to feed these lots of third party installation pay them gain for storing them and doing some confident surety naturally expand in that space and provide me a clause feedback so things discover and your security operations solutions can be fed back sooner.

Speaker Change: Change those discussions over the past several years that took us to move in that direction.

Speaker Change: Foundational steps, we took in direct and distraction was last year, when we acquired <unk>.

Speaker Change: Avalon basically brought the notion that you no longer need to build a massive data lake and pay for it you should have data fabric.

Speaker Change: With synthesizers, the logs and creates a subset all meaningful information that as context, I can't entertain relationships. So no great.

Speaker Change: Eric brings a number of interesting things for us to move in that direction at a faster pace. So we can correct.

Speaker Change: Accelerate our vision of becoming a leading player they have highly talented and experienced detection at tech Intel engineered.

Speaker Change: Very important.

Speaker Change: Two.

Speaker Change: To my surprise they have developed a very sophisticated AI.

Speaker Change: AI technology for reasoning and workflow and this is being used today is not future using it to support a large number of questions.

Speaker Change: Can take <unk> technology compared to combine it with the <unk> data fabric.

Speaker Change: Accelerating many many months for us.

Speaker Change: So have a good sales team that can help us acting as a kickoff team for Cisco. So these two things together they accelerate.

Speaker Change: <unk>.

Speaker Change: Our overall growth, but it is expansion of the platform for US anyway, you want to add I mean, just some financial information.

Speaker Change: Transaction is valued at $675 million plus.

Speaker Change: Plus equity for employees.

Speaker Change: As Jay mentioned, we expect.

Speaker Change: To close on August of 2025.

Speaker Change: And we expect that also to be largely neutral to our FY 'twenty six consensus operating margin.

Speaker Change: A big portion of freight Canaries IRR is concentrated in certain segments that are not strategic to us. So through the post close integration process, we expect to retain approximately half of the $140 million.

Speaker Change: You may have seen.

Speaker Change: We will share more details on this on the next call and our Q4 call.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: From the line of.

Speaker Change: Sure Nick Jeffery Baird. Please go ahead <unk>.

Speaker Change: Yeah.

Speaker Change: Hey, guys. Thanks for taking my question and again congrats on great execution.

Speaker Change: Going forward to working with you Kevin.

Speaker Change: So in terms of the reflex.

Speaker Change: It definitely looks like that's helping broader adoption.

Jay Chaudhry: Multiple of deals as you said Jay.

Speaker Change: Product categories growing 5%.

Speaker Change: You also cited Jan AI as a key demand driver.

Speaker Change: Can you tell us a little bit about what kind of attach rates are you seeing there and if it's driven by flex any sense of a percentage of rents, which expertly, citing that as Johnny I related risks.

Speaker Change: <unk> casualty is the buying catalyst I appreciate it.

Speaker Change: Yes.

Speaker Change: Jenny is becoming more and more important to our customers and our solutions.

Speaker Change: In three areas first has been securing us public AI.

Speaker Change: <unk> been actually offering that solution for quite some time now and even Microsoft 365, cold water security as part of that.

Speaker Change: And this is the fast.

Speaker Change: Wondering that solution along with our advanced data protection module because the number one use of this is protect the data.

Speaker Change: Secondly, security use of private AI models and applications. Our customers are building here, we have been building an elegant proxy analyzed.

Speaker Change: And to detect any.

Speaker Change: Bad things like pump injections and the rest of the staff and can also inspect response, so that's a second here.

Speaker Change: Hey, Jen <unk> operations.

Speaker Change: Operations categories on security operations category.

Speaker Change: In this area.

Speaker Change: Building a couple of years ago, you saw office 360, <unk> unified vulnerability management that we acquired and the rent is going to help us etcetera that ADR as well and they're using a bunch of HMT AI technology, which is very helpful.

Speaker Change: We are seeing traction.

Speaker Change: If you look at numbers of growth.

Speaker Change: Starting with small numbers, but it's pretty impressive growth so far.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: Comes from the line of Roger Boyd of UBS. Your question. Please Roger.

Roger Boyd: Great. Thanks for taking the questions and congrats to you both as well.

Roger Boyd: Maybe Jay just on branch connector I think the metric that continues to impress me as that you have nearly 60% of customers adopting British connector over the past few quarters that are effectively new disease scale or what are your thoughts on what's going right. There the role of the branch characters playing in new customer wins, particularly as you continue to have success with.

Speaker Change: Some of these cost takeout ROI sales programs against maybe some legacy.

Speaker Change: Network equipment. Thanks.

Speaker Change: Yes.

Speaker Change: Our branch connectors now packaged as plug and play for us, which actually is helping customers because the plug and play into things happened and we had also embedded are integrated.

Speaker Change: Got technology to do zero trust segmentation for devices.

Speaker Change: The two together are.

Speaker Change: Doing very well or frankly degree of interest our customers have taken in this area has exceeded my expectations as you heard I mean, 59% of customers purchasing.

Speaker Change: <unk> Zero Trust branch, our new logo customers.

Speaker Change: Pretty impressive.

Speaker Change: I think it's going to get better.

Speaker Change: Just talking to a customer recently, who is testing a bunch of clients I was looking for deploying it for about 100 branches.

Speaker Change: In one step.

Speaker Change: Tim went through he said Oh I should be doing for all 1000 launches. This was pretty remarkable obviously, we need to keep on executing but it just tells you the pain customers have having a bunch of firewalls boxes, dhcp and and and they have.

Speaker Change: The lands and all of this stuff our goal is to eliminate one on desktop our branch has nothing more and two things <unk> kind of appliance on a switch and of course Wi Fi stomach. So very very excited about it.

Speaker Change: Thank you.

Tyler Army: Our next question comes from the line of Tyler Army of Bank of America. Please go ahead Todd.

Tyler Army: How are you.

Tyler Army: And they are going to learn how to pronounce my name.

Tyler Army: Yeah.

Speaker Change: The.

Speaker Change: We're entering second half of the year with scheduled billing very high.

Speaker Change: And the question, we always ask ourselves because of the new competition in SaaS is how much of the growth is because of sketches skechers billing.

Speaker Change: And how much of the growth is because of new products that are beyond the aacpa.

Speaker Change: So the question is can you can you breakdown the strength this quarter.

Speaker Change: And the reason why I'm asking it is because I see that the NR that was high about a year and a half ago declined and then slightly recovered last quarter went down again this quarter sequentially.

Speaker Change: So the question is what were the trends in <unk> versus the trends in other products sorry for the long winded question.

Speaker Change: And if you can give some kind of.

Speaker Change: Outlook, some discussion of the outlook of the new products and how you expect them to perform and contribute to revenues.

Speaker Change: That's a lot of questions.

Jay Chaudhry: With a few hopefully Jay can pick up alright, thanks, guys.

Speaker Change: Q3 unscheduled billings.

Speaker Change: 28% growth year over year. So that is outstanding scheduled billings growth in Q3 came as expected there was a low 20% range.

Speaker Change: The unscheduled billings in Q4, and the guidance that we gave is 25% growth year over year. So the business is doing very well and it's consistent to what we said at the beginning of the year when we called out scheduled versus unscheduled billings.

Speaker Change: Pretty much worked out almost exactly what we said so we're really proud.

Speaker Change: How we communicated that to the street pallet performances.

Speaker Change: Happening in the second half of the year.

Speaker Change: Related to the <unk> rate it is 114% that is outstanding.

Speaker Change: So from my perspective.

Speaker Change: We only look we've said this before we only look at it.

Speaker Change: Once every quarter right now we're talking to.

Speaker Change: Our investor call.

Speaker Change: Yeah.

Speaker Change: The key thing I think is there.

Speaker Change: If you look at what we have on the platform that we've created and the.

Speaker Change: The expansion of the emerging products.

Speaker Change: We've talked about the emerging products.

Speaker Change: <unk> is expanding so we're expecting the emerging products to be in the mid <unk> to high 20% range.

Speaker Change: For this year.

Speaker Change: The reason for that is that we're expanding products. Those are all new products that come out SPM Gen AI.

Speaker Change: And the deal DLP products, So I think Jay called out we're a technology company.

Speaker Change: Innovation company.

Speaker Change: We are at the size that we have for.

Speaker Change: For a large revenue and recurring revenue in <unk>, but.

Speaker Change: But at the heart Zee scalar is a technology company to support front to continue to really I think exploit this market has no other company can.

Speaker Change: I mean look all of our metrics are exceptionally strong.

Speaker Change: Unscheduled billings falling even.

Speaker Change: New.

Speaker Change: Our new logo area.

Speaker Change: New logos grew.

Speaker Change: 40%.

Speaker Change: So at any point of all of the areas.

Speaker Change: I can only talk about NR.

Speaker Change: Bigger platform B cell solar we sell the next thing.

Speaker Change: That's why when you kind of ignore that not all but look at other metrics.

Speaker Change: Thank you Tal.

Speaker Change: Our next question.

Speaker Change: Comes from the line of Andrew.

Speaker Change: The cast Berry BNP Powerbar. Please go ahead Andrew.

Speaker Change: Thanks.

Andrew: My question.

Speaker Change: Just on a separate line of thought.

Speaker Change: Our checks found that.

Speaker Change: Scalar could benefit greatly from the federal business and I know, it's not a big contributor of revenue today, but we've heard that it's not really being impacted by the cuts that the administration is making and in fact, there could be some ramp up there.

Speaker Change: Are you seeing the same thing or are you still optimistic about that lineup of revenue.

Speaker Change: So <unk> for us.

Speaker Change: It's in line with our expectations this quarter.

Speaker Change: And sure there's some uncertainty in the business.

Speaker Change: But.

Speaker Change: Once you cut costs.

Speaker Change: Biggest cost.

Speaker Change: In the security space, and firewall and efficacy type of vendors and.

Speaker Change: And if I can go and take a lot of cost out of it by moving all of those products and actually works in our favor.

Speaker Change: Yes, and also for our guide for Q4, we're not expecting a significant.

Speaker Change: Strength was fed.

Jay Chaudhry: As Jay mentioned, we are well positioned piece of very large contracts, which take time.

Jay Chaudhry: We're in 14 of the 15 F and agencies.

Speaker Change: But again right now.

Speaker Change: As I said, yes, as Jay mentioned, we came in as expected in Q3, and we're not expecting a significant quarter in Q4 correct.

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: Comes from the line of Andrew Nowinski of Wells Fargo. Your question. Please Andrew.

Andrew Nowinski: Thank you for taking the question and congratulations Kevin on joining Zscaler and remote.

Speaker Change: Been a pleasure working with you as well wish you well.

Speaker Change: I wanted to ask about the new growth categories that are at a higher level. Thank you for providing some of those new metrics for it I think it was over 1 billion already in <unk> across the three new.

Speaker Change: Growth categories, you called out, but it looks like.

Speaker Change: And the EPA were part of Zero Trust everywhere, So I'm wondering what's making up.

Speaker Change: The difference between the $1 billion and the new growth categories. They are you generated versus the $2 nine in total.

Speaker Change: And then whats the growth rate of those sort of non emerging products look like thank you.

Speaker Change: Okay.

Speaker Change: That's good that's kind part.

Speaker Change: Three main buckets SEDAR Trust and review.

Speaker Change: So here, we are basically making sure the customers while having.

Speaker Change: Senior Trust users sooner branches sooner plus cloud all aes together.

Speaker Change: And distribute these customers.

Bernie: Bernie and we more than doubled our went to 210 study and we plan to go to 2019.

Bernie: So thats a subset of customers.

Bernie: Number one.

Speaker Change: And we are actually seeing 60% quarter over quarter growth in that area. It's a growth factor that matters quite a bit.

Speaker Change: And it's impressive.

Speaker Change: The data security.

Speaker Change: We have been talking with Dana Securities quite some time last quarter, we shared that we crossed $350 million.

Speaker Change: In that and it's still growing faster than the total company.

Speaker Change: And thirdly is the.

Speaker Change: Relatively new issues.

Speaker Change: This is our AI solution business on our security operation. It operation. This severe somehow let's say 60 unified vulnerability management type of solutions coming.

Speaker Change: And we saw in CTX and vast plus which actually uses 76.

Speaker Change: Co product technology.

Speaker Change: 70% year over year growth.

Speaker Change: In that area and products that younger products that all in the security ops bucket.

Speaker Change: <unk> grew over 120%.

Speaker Change: All angles. These three products are doing very good managing growth and approaching $1 billion.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of.

Speaker Change: Sure.

Speaker Change: Of TD Cowen. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Congrats Jay Leno, and Kevin on all fronts.

Speaker Change: Okay.

Speaker Change: <unk> Canary there are number of MTR providers various sizes out there.

Speaker Change: What are the two reasons that attracted Q specifically to this asset over the others is the technology market tweak clients revenue scope.

Speaker Change: Just wanted to get some additional color. Thank you.

Speaker Change: Sure.

Speaker Change: This acquisition was to make sure we can accelerate our vision to become a leading.

Speaker Change: Our plan in the stock market.

Speaker Change: So what are these guys awesome.

Speaker Change: Wanted something complementary to what we had what we have in this space just a data fabric technology that you acquired from <unk> last year.

Speaker Change: Number one impact to the comp.

Speaker Change: And in June it's experienced people, who have detection in fact, Intel that's foundation.

Speaker Change: Two I mentioned earlier, we are impressed with <unk>, taking that technology for our reasoning and poor quality already built and they are using in production lots of companies talk about Egencia take AI at 20 startups, we looked at in this area all new <unk> you look at how many customers do you have what is in production R&D.

Speaker Change: This company had stopped and production and we can incubate that technology platform with expertise that brings to the table.

Speaker Change: It became very passionate and.

Speaker Change: Then of course, they also have a go to market.

Speaker Change: That can become a takeoff team our team of specialists to help us take this solution to market.

Speaker Change: Thank you.

Speaker Change: Next question.

Speaker Change: It comes from the line of micro Hedberg of RBC capital markets. Please go ahead Matthew.

Speaker Change: Hey, guys, it's Mike Richardson on for Matt. Thanks for taking the question.

Speaker Change: With the accelerating success across the broader platform here, maybe we could take a step back in and talk about how much of that success is driven from the ROI messaging resonating in this macro versus the go to market productivity that you guys were expecting and what inning are we in that go to market productivity improvement. Thanks for the question.

Speaker Change: Thanks coming from auto why Cisco Newmont was what.

Speaker Change: Sales for the current activity levels productivity, okay, great. Okay.

Speaker Change: Look.

Speaker Change: All these things.

Speaker Change: Your success generally is not a single thing that kind of makes it happen in Germany, a collection of things that work together.

Speaker Change: Have a strong go to market team that migration team had done a great job platform is expanding the two together and then being able to show cost savings, bringing these things magic happens.

Speaker Change: Trying to do one thing at a time goes only so far enabled appointed hall.

Speaker Change: <unk> go to market, great platform and cost savings. It's wonderful in fact lots of people talk about cost savings.

Speaker Change: Many companies can actually go to the customer today and say here's my security solution, that's going to save you money.

Speaker Change: Generally known that security networks saves money okay.

Speaker Change: And the C is going to we are able to show that they can actually save money by taking out a lot of not only legacy security products, but a lot on legacy networking products as well as far as the numbers from that impression.

Speaker Change: Fannie is excited about it.

Speaker Change: This thing has been working for quite some time.

Speaker Change: Getting better.

Speaker Change: And sorry, and the result of that ends up being good numbers and good productivity.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line.

Speaker Change: Gray Powell <unk>.

Speaker Change: Your question please.

Speaker Change: Okay, great. Thanks for taking the question and congratulations on the good results.

Speaker Change: I, just maybe had like.

Speaker Change: A higher level question.

Speaker Change: I understand the need for customers to rationalize.

Speaker Change: Their spend or not.

Speaker Change: Not by the same product twice.

Speaker Change: But we've also heard particularly with other security vendors.

Speaker Change: Some companies have become really aggressive pushing elas and sometimes that ends up creating shelf ware.

Speaker Change: I'd be curious like when you were talking about Zee scalar versus the competition is that something that you see in the market and if so how does that feed into your customer conversations and does it actually puts you in a.

Speaker Change: A better position.

Speaker Change: Okay.

Speaker Change: Customers.

Speaker Change: Hi.

Speaker Change: They know that elas, often become shelf here okay.

Speaker Change: So we really don't want to push you hear me.

Speaker Change: But our goal is interest can you say customers are drawing to address cyber security and lower cost and asked me going be sure then.

Speaker Change: Germany UK. His journey all you can take of these products. These products these products.

Speaker Change: And it is a cost and have better user experience and in addition business agility, often customers, saying I want to open a new branch office in <unk>.

Speaker Change: Two days rather than two months. So you can make it happen theres. So many M&A is happening out there nevertheless, or there'll be so many mergers and integration every week I see.

Speaker Change: All of them at least and they all need six <unk> solution to be able to bring things together without needing legacy network and security. So these deals are actually growing our platform. We are really not selling the law Elas, we are selling the platform they need offline talent salespeople don't really try to push.

Speaker Change: I'll figure.

Speaker Change: Our deal because they can take longer but the customer, saying Wow. If I can have more savings I can do a bigger deal. So we let that happen the way it happens, but our goal is to do what's right for the customer as a long term partnership.

Speaker Change: And honestly one of the number one thing I look at go to market point of view <unk> deployed hallmark just not deployed.

Speaker Change: Big focus on that and I can tell you <unk> got our solutions are very well deployed out there.

Speaker Change: Thank you I would now like to turn the conference back to Jay Chaudhry for closing remarks, Sir.

Jay Chaudhry: Thank you for joining us on the earnings call and look forward to seeing you at one of our many conferences. Thank.

Speaker Change: Thank you again.

Speaker Change: Goodbye. This concludes today's conference call. Thank you for participating you may now disconnect.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Are listen only mode.

Speaker Change: After the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone to remove yourself from the queue. You May Press Star one one again I would now like to hand, the call over to Ashwin. Your case already Vice President Investor Relations and strategic Finance. Please.

Speaker Change: Go ahead.

Speaker Change: Good afternoon, everyone and welcome to disease Killer third quarter fiscal year 2025 earnings conference call.

Speaker Change: On the call with me today are Jay Chaudhry, Chairman and CEO and remote can itself CFO.

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

Speaker Change: Unless otherwise noted all numbers, we talk about today will be on an adjusted non-GAAP basis, you will find a 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 annual recurring revenue calculated billings operating performance gross margin operating expenses operating income.

Speaker Change: Net income free cash flow.

Speaker Change: Base net redemption rate future hiring decisions remaining performance obligations income taxes earnings per share our objectives and outlook.

Speaker Change: Customer response to our products.

Speaker Change: Our market share and market opportunity.

Speaker Change: These statements and other comments are not guarantees of future performance.

Speaker Change: But rather are subject to risk and uncertainty some of which are beyond our control.

Speaker Change: These forward looking statements apply as of today.

Speaker Change: And you should not rely on them as representing our views in the future.

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

Speaker Change: For a more complete discussion of the risks and uncertainties. Please see our filings with the SEC as.

Speaker Change: As well as in today's earnings release.

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

Speaker Change: Bank of America Global Technology Conference on June 5th.

Speaker Change: SBN virtual technology conference on June 6th.

Speaker Change: BMO virtual software conference on June nine.

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

Speaker Change: Thank you Ashwin, our strong Q3 results demonstrate growing demand for our platform and continued improvement in our sales productivity more customers are adopting zee scalar is comprehensive solutions with platform wide deals for our zero Trust security driven.

Speaker Change: By the strong demand we achieved two significant milestones first we achieved our best Q3 with T. C V bookings of over $1 billion and second our remaining performance obligations or <unk> are now nearly $5 billion.

Speaker Change: New logo ACB had strong growth of over 40% year over ear.

Speaker Change: Total new ACB was up double digits year over year once again in the quarter.

Speaker Change: Our annual recurring revenue or <unk> was approximately $2 $9 billion, representing the third straight quarter of 22% year over year growth, we remain on track to reach $3 billion or more in a at all by the end of this quarter.

Speaker Change: We are proud of achieving these strong topline to solve that scale, while delivering strong profitability our ear to date fiscal 'twenty five revenue growth of 24% combined with our free cash flow margin of 28%, resulting in rule of law.

Speaker Change: 52 performance.

Speaker Change: While many SaaS companies struggled to achieve rule of 40 performance, we have exceeded this industry benchmark for each of the last 21 quarters.

Speaker Change: Moving on to discussion of our platform I am very pleased to share that our platform nor secures over 15 million users and other significant milestone. This milestone gives us several competitive advantages.

Speaker Change: Just more users deliver powerful network effect and strengthened our market leadership.

Speaker Change: Zee scalar is zero Trust exchange platform sits in line for Enterprise Communications every time, we secured a user from a new attack we apply that protection for all users of our platform, creating a flywheel for improving security.

Speaker Change: The magnitude of this effect is staggering last year alone our exchange processed over 100 trillion transactions blocked over 60 billion threats and enforced over five trillion policies.

Speaker Change: This unique network effect differentiate <unk> from other vendors trying to pursue this market segment.

Speaker Change: And delivers unparalleled cyber security to our customers.

Speaker Change: Hence more and more enterprises are selecting zee scalar as the partner of choice.

Speaker Change: Second more users mean more high quality data for our AI solutions, the millions of users workloads and Iot Ot devices on our platform result in over 500 billion transactions generating over 20 Petabytes of high fidelity data.

Speaker Change: Today as you know AI is only as good as the data that powers it.

Speaker Change: And I believe we have the best data.

Speaker Change: There are two unique aspects to our proprietary data one its vast quantity and two it's high fidelity bullets of which we utilize to train our models and deliver highly effective AI solutions.

Speaker Change: Third the large volume of proprietary data I, just talked about empowers us to deliver cutting edge solutions for security operations by leveraging our data fabric technology and correlating our logs with third party data, we have introduced exposure management and Ted.

Speaker Change: Management solutions, which deliver a new level of actionable insights for our customers security operations.

Speaker Change: Leveraging our scale, we are building new security operations solutions co pilots and a gentex AI solutions that will be showcased at our upcoming zenith live conferences.

Speaker Change: Our SEDAR plus exchange platform, we fundamentally transformed cyber security from five all based model to a zero Trust architecture.

Speaker Change: Firewall based security creates trusted and untrusted networks.

Speaker Change: Once a user or a threat actor gets on the trusted network. They are then blindly trusted and can move unchecked across the enterprise network that is what makes ransomware and other cyber attacks so dangerous.

Speaker Change: With Zee scalar is zero Trust architecture, there's no concept of trusted networks every user every workload every Iot Ot device and every AI model is untrusted.

Speaker Change: Wed Zero Trust, we connect only the authorized party to the authorized application.

Speaker Change: While legacy vendors are attempting to cobble together disjointed point products and calling it a platform. We are constantly expanding our core zero trust exchange by integrating new functionality to solve more and more of our customers security concerns.

Speaker Change: Our industry, leading capabilities are recognized by our customers partners and leading third party analyst firms of note I'm thrilled to share that Gartner once again recognized zscaler as a leader in the SFC magic quadrant, extending our status.

Speaker Change: As the leader in the MQ for user security bought over a decade.

Speaker Change: Moving on to the macro environment customers remain cautious about their spending due to ongoing economic uncertainty.

Speaker Change: While customers are still prioritizing cyber and data protection return on investment and the value deliver remain important to customers.

Speaker Change: A couple of quarters ago, we launched our cost takeout program to help customers identify and eliminate legacy security and networking products, such as firewalls Vpns V D eyes and more.

Speaker Change: We are seeing great success with our program as more and more customers are embracing it to reduce cost and complexity, while improving security.

Speaker Change: Additionally to help our customers unlock more cost savings, we launched a new purchasing program in Q3 called Z Flex.

Speaker Change: XIAFLEX allows customers to flexibly scale adoption of our platform to meet the constantly evolving organizational demands.

Speaker Change: For cyber and data protection.

Speaker Change: Customers can seamlessly adopt scale and change modules based on agreed pricing, which simplifies the procurement process.

Speaker Change: Since its recent launch XIAFLEX commitments contributed over $65 million in T. C V bookings.

Speaker Change: To give you. An example, an existing fortune 500 technology customer made a multiyear commitment under the flex program, increasing their E. R. R y over 40% to approximately $19 million.

Speaker Change: As part of the flex commitment the customer added many stacked hunting micro segmentation identity threat detection Janney eye protection and several data security modules.

Speaker Change: This win also demonstrates our growing capabilities in the Sac and zero Trust cloud.

Speaker Change: I expect the contribution from XIAFLEX to grow meaningfully in the next fiscal year.

Speaker Change: Moving to products, we're seeing significant growth drivers in three categories.

Speaker Change: Trust every payer data security everywhere and <unk> operations.

Speaker Change: Each of these categories is growing significantly faster than our overall <unk> and their combined <unk> is approaching $1 billion.

Speaker Change: Let me cover each of these categories in more detail on our last earnings call. We introduced zero Trust everywhere, which highlights our unique ability to take zero Trust security beyond users Zero Trust for cloud workloads and zero Trust four branches.

Speaker Change: In Q3, 59% of customers, who bought zero Trust branch, one new logo customers.

Speaker Change: Many of these new logo customers are starting their brand cherny by securing a small number of branches, which creates significant upsell opportunities for us.

Speaker Change: We are enhancing our zero Trust branch functionality with several innovations for example.

Speaker Change: In Q3, we launched our new unified appliance for branch that brings together a zero Trust branch connectivity and zero Trust device segmentation into a single plug and play appliance.

Speaker Change: This solution dramatically simplifies branch infrastructure, eliminating the need for SD Wan firewall knack and legacy segmentation.

Speaker Change: I expect zero Trust branch to be a significant growth contributor in fiscal 'twenty six.

Speaker Change: Another key pillar of our SEDAR trusts everywhere strategy is zero trust cloud, which enables secure communication point workload to workload and phone workload to the internet.

Speaker Change: Initially our customers leverage zero trust cloud to secure a small number of workloads to get comfortable with this innovative approach that requires no east threats firewalls, no north South firewalls, no virtual private networks no access routes and no direct connects.

Speaker Change: No. We are seeing larger deals for zero trust cloud to secure a larger number of workloads, resulting in acceleration of zero Trust cloud <unk>.

Speaker Change: To share an example.

Speaker Change: And existing financial services customer made their initial purchase of cloud workload protection to secure all of their internal workload traffic. This is an impressive seven figure ACB land deal put workload protection.

Speaker Change: We are seeing tremendous success as more customers are becoming zero trust everywhere enterprises by embracing zero trust per users branches and cloud <unk>.

Speaker Change: Last quarter, we shared our goal to triple the number of zero Trust every word of customers' problem.

Speaker Change: Or 132 or 390 by the end of fiscal 'twenty six.

Speaker Change: I'm pleased to share that we ended Q3 with over 210 Zero Trust every bit of enterprises, which is over 60% quarter over quarter growth.

Speaker Change: With this strong momentum we remain on track to achieve our target.

Speaker Change: The second category driving outgrowth is data security everywhere.

Speaker Change: We have the most comprehensive data security capabilities to secure all types of data, whether structured or unstructured data in motion our data at rest and data across all channels, including Jenne, a apps web E mail endpoints SaaS D. S P M and more.

Speaker Change: Our comprehensive data security capabilities are resonating with customers and helping us win large deals.

Speaker Change: To give you. An example in a seven figure ACB deal an existing fortune 50, automotive customer added endpoint DLP module and privileged remote access our PR a.

Speaker Change: While expanding zero trust users with more Z PSA it's.

Speaker Change: This customer now has six of our eight data security modules, including inline DLP SaaS security cyber isolation data isolation classification encryption and endpoint DLP with this deal the customer's annual spend with us increased by over 50.

Speaker Change: 50% to well over $10 million.

Speaker Change: Historically data security was an important consideration for data heavy regulated industries, such as finance and health care with the increasing adoption of journey II and SaaS applications data securities known becoming important to all industries.

Speaker Change: To give you. An example in a seven figure <unk> deal a new logo, a fortune 100, food and beverage company adopting zero trust their users and multiple data security modules.

Speaker Change: Moving to a gentle operations, our third category of growth.

Speaker Change: <unk> operations are expanding rapidly and two areas I T ops and SEC ops.

Speaker Change: Our I T ops, we delivered Z Dx co pilot last year as an embedded feature in our CTX advanced plus package.

Speaker Change: Since the launch of <unk> copilot theoretical bookings for CTX advanced plus grew over 70% year over year to nearly $75 million CD.

Speaker Change: <unk> co pilot helps lower the mean time to resolution of service tickets.

Speaker Change: And its capabilities are becoming a key differentiator for us.

Speaker Change: To give you. An example, an existing U S based large healthcare customer purchased <unk> advanced plus four 140000 users and a seven figure <unk> deal.

Speaker Change: <unk> co pilot was an important consideration for this brand.

Speaker Change: Moving on to the second area of a gentle operations SEC ops, where we have several modules, including risk 360 business insights unified vulnerability management identity threat detection and cyber asset attack surface management or CASM.

Speaker Change: Our <unk> solution built on the data fabric technology, we acquired last year is gaining traction and it drove over 120% year over year growth in soft comps HCV.

Speaker Change: Share a customer example, and.

Speaker Change: An existing U S based health care customer.

Speaker Change: <unk> unified vulnerability management for 400000 assets in a seven figure <unk> deal.

Speaker Change: The customer told me that UBM gave them an accurate asset inventory within two hours, which is a dramatic reduction from the six months. It would have taken them otherwise we will continue to expand our <unk> solutions the acquisition of Red Canary will allow us to expand into.

Speaker Change: We saw categories of managed detection and response or MTR and threat Intel we expect to close this transaction in August 2025.

Speaker Change: In addition to developing AI powered solutions, we are enabling customers to safely adopt AI.

Speaker Change: Albert Chan AIA data security module is enabling enterprises to securely use public journey I apps, such as Microsoft 365, co pilot deep Sea chat GPT and more in Q3, many customers, including an existing global 2000 Tech come.

Speaker Change: <unk>, a leading fleet management company and a large federal customer and more purchased our journey I data security module.

Speaker Change: In addition to securing public AI apps, we are introducing solutions to secure customers private AI apps, such as AI models chat bots and inference engines, we're expanding the functionality of our zero Trust exchange with an L. L N proxy to analog.

Speaker Change: <unk> pumped query is to detect and prevent prompt injections and other malicious activities and analyze responses to prevent data leakage and enforced the right access.

Speaker Change: I believe these cutting edge innovations will position zee scalar to be a market leader in the security space.

Speaker Change: Customer obsession employee dedication to our mission and our customers' trust in our platform are driving us to deliver innovations that solve our customers' most critical security challenges with a strong go to market machine and strong momentum in zero Trust everywhere and AI.

Speaker Change: Security I'm more excited than ever about our continued growth to $5 billion, our mod in <unk>.

Speaker Change: No I like to turn over the call to Remo for our financial results.

Speaker Change: Thank you Jay our Q3 results exceeded our guidance on growth and profitability, even with ongoing customer scrutiny of large deals.

Speaker Change: Revenue was $678 million up 23% year over year and up 5% sequentially from.

Speaker Change: From a geographic perspective Americas represented 54% of revenue EMEA was 30% and a P. J was 16% our annual recurring revenue or <unk> exiting Q3 was approximately $2.9 billion or our growth was approximately 23% year over year.

Speaker Change: Remaining performance obligations or our Po grew 30% from a year ago to $4 978 billion current RP O was approximately 48% of the total RPM.

Speaker Change: Total calculated billings grew 25% year over year to $785 million or unscheduled billings comprised of new upsell and renewal billings grew in the high 20% year over year.

Speaker Change: Driven by increasing customer demand for our platform.

Speaker Change: <unk> calculated current billings grew 24% year over year.

Speaker Change: We ended Q3 with 642 customers with over $1 million in <unk> and.

Speaker Change: And 3363 customers with over $100000 in.

Speaker Change: 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 114%.

Speaker Change: While good for our business our increased success in selling bigger bundles.

Speaker Change: 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: There could be variability in this metric on a quarterly basis due to the factors I just mentioned.

Speaker Change: Turning to the rest of our Q3 financial performance total gross margin of 83% compares to 81, 4% in the year ago quarter.

Speaker Change: Our total operating expenses increased 5% sequentially and 21% year over year to $397 million.

Speaker Change: Operating margin of approximately 22% was comparable year over year.

Speaker Change: Our free cash flow margin was 18%.

Speaker Change: Including datacenter capex at 11% of revenue.

Speaker Change: We ended the quarter with approximately $3 billion in cash cash equivalents and short term investments.

Speaker Change: As a reminder, our convertible debt reaches final maturity in July.

Speaker Change: We intend to settle the outstanding convertible debt and cash and equity in Q4 also.

Speaker Change: Also we will use $675 million in cash in Q1 of fiscal 26 for the acquisition of Red Canary, which we announced on May 27th.

Speaker Change: Next let me provide our guidance for Q4 and full year fiscal 2025.

Speaker Change: As a reminder, these numbers are all non-GAAP.

Speaker Change: For the fourth quarter, we expect revenue in the range of $705 million to $707 million, reflecting a year over year growth of approximately 19%.

Speaker Change: Gross margins to be approximately 80% I would like to remind investors that we are introducing new products. They are experienced strong growth in our optimized for faster go to market rather than margins. This will continue to influence.

Speaker Change: Influence our gross margins, we plan to optimize new products for margins over time as they scale.

Speaker Change: Operating profit in the range of $152 million to $154 million net.

Speaker Change: Net other income of $16 million.

Speaker Change: Earnings per share in the range of 79 to 80.

Speaker Change: Assuming a 23% tax rate and 164 million fully diluted shares based on our strong Q3 performance, we're increasing our full year guidance across all metrics for the full year fiscal 2025 billings in the range of $3.184 billion to.

Speaker Change: The $3.189 billion, reflecting a year over year growth of approximately 21% to 22% revenue in the range of $2.659 billion to $2 $661 billion, reflecting a year over year growth of approximately 23%.

Speaker Change: Operating profit in the range of $573 million to $575 million.

Speaker Change: Earnings per share in the range of $3 18 to $3 19.

Speaker Change: Assuming a 23% tax rate at approximately 163 million fully diluted shares.

Speaker Change: Free cash flow margin to be approximately 25, 5% to 26%.

Speaker Change: With a large market opportunity and customers increasingly adopting the broader platform will invest aggressively to position us for long term growth and profitability.

Jay Chaudhry: Now I'd like to turn the call back to Jay.

Jay Chaudhry: Thank you Raimo before moving on to Q&A I'm happy to share the appointment of Kevin Rubin as our new Chief Financial Officer, Raymond will remain in an advisory capacity until the end of this fiscal year to ensure a smooth transition I'm very excited.

Jay Chaudhry: Science to have someone with Kevin strong background and experience join Zee scalar Gavin has over two decades of experience as a CFO of multiple technology companies I firmly believe his recent eight year tenure as a CFO of a data analytics company will be key.

Jay Chaudhry: Sure two zee scalar in our next phase of growth, which will be driven in large part by the combination of zero Trust and AI security I'm thrilled to have Kevin on board and our leadership team and I look forward to working with him Kevin welcome to Zee scalar.

Kevin Rubin: Jay I'm incredibly excited to be joining zee scalar the leader in cloud security I believe with its expanding platform Zee scalar is well positioned to benefit in an increasingly AI driven enterprise security market with my background in data analytics I am strongly aligned with Jay's vision.

Kevin Rubin: Leveraging the high volume high fidelity data of Zee scalar platform to deliver pioneering security innovations for the age of AI I look forward to being part of our growth to $5 billion in <unk> and beyond and I look forward to working with our customers partners employees and investors.

Jay: Any analysts Jay back to you.

Jay: Thank you Kevin Operator, you May now open the call for questions.

Jay: Thank you as a reminder to ask a question you will need to press star one one on your telephone to allow everyone the opportunity to participate and in the interest of time, you will be limited to one question. Please standby, while we compile the Q&A roster.

Jay: Our first question.

Speaker Change: Comes from the line of Thai Kedron of Oppenheimer and company. Please go ahead.

Jay: Okay.

Speaker Change: Thanks, and nice results guys and rain with thank you and Kevin Good luck, great to connect with you again for the third time, so congrats and good luck to you on that.

Jay: Jay.

Jay: A lot of great interesting things happening.

Jay: Great to see a lot of good momentum here with products and customers I guess I wanted to.

Jay: Get your perspective on sales force focus and what I mean by that is you have a portfolio that's expanding at warp speed you have a new purchasing mechanism through flix.

Jay: How do you get people how do you get customers focus how do you get salespeople focused and make sure things.

Jay: Stay on track and more specifically with regards to this Z flex, which is a clearly a program that should do well for you that's done well for what many others.

Speaker Change: Help me think about the scope of usage of this is going to be available to everybody what is the bottleneck.

Jay: In making this available to everybody tomorrow.

Jay: Alright, thank you.

Speaker Change: Set of questions. So first of all.

Speaker Change: Expanding platform rapid pace creates interesting challenge or opportunity for our sales team we have been working on it for the last three four years as you know we started the notion uptake op teams our newer product areas.

Speaker Change: Example, data protection as a pickup team for quite some time.

Speaker Change: And with the acquisition of clarity.

Speaker Change: We are acquiring actually Steven go to market team that knows how to sell socks.

Speaker Change: And yes essentially.

Speaker Change: Yes.

Speaker Change: Sarcoma specialist team that worked closely with our larger Sis kind of go to market engine. So we are using a two tier model.

Speaker Change: Paul.

Speaker Change: Sales team covering all products and their account centric account focused and then some of the takeoff teams are more experts in some of these new product areas. So they can cover the products of <unk>.

Speaker Change: Just.

Speaker Change: So having done it for the last few years pretty comfortable and we know how to scale it.

Speaker Change: Second question Rajeev flex.

Speaker Change: It evolved out of the questions our customers have been asking for.

Speaker Change: The platform has gotten bigger and bigger multiple choices and many times. They wanted the flexibility to try some modules they werent in the small one.

Speaker Change: So this is the kind of flexibility giving them.

Speaker Change: And as also pre agreed upon pricing so they don't have to go through a procurement cycle.

Speaker Change: Anytime they want a new product.

Speaker Change: Additionally, relatively new program as we mentioned, we got a great star in the first quarter itself in Q3 being at $65 million in TCE booking.

Speaker Change: This program, but we're going to start with larger customers then expand to the next level, there's nothing holding us back, but we like to be prudent test things learn it and expand from there.

Speaker Change: Thank you our next question.

Speaker Change: Come from the line of Mike Cecos of Needham. Please go ahead Mike.

Mike Cecos: Great. Thanks for taking the questions guys and congrats on the announcement, Kevin and remote to you as well.

Speaker Change: Wanted to cycle back it really sounds like.

Mike Cecos: Macro.

Mike Cecos: You saw in April and May were.

Speaker Change: Relative to non event versus some of the more mixed data points, you've got for companies that are on our fiscal quarter end can you just tackle that a little bit more from the macro side of the house. What are you guys seeing as far as increased scrutiny or increased visitation versus as a relative non event just given the momentum that you guys have grown.

Mike Cecos: Next we go to market side. Thank you.

Speaker Change: Ill start and remote can add on we did not see a softer April this mainly because we are not in the business of selling security appliances.

Mike Cecos: All spending environment remains challenging macro is still tight and lean.

Mike Cecos: Continue to see large deals.

Mike Cecos: Our budgets are tight in general.

Mike Cecos: But for Ciber.

Mike Cecos: Hello easier cost cyber is a bigger priority.

Mike Cecos: And even in the cyber that to any of that.

Speaker Change: Hi, I'm priority bar on upon our customers' zero Trust architectures, one NFC accounting use of AI is too.

Speaker Change: If you project involves one of these two security offerings and you can actually do some cost savings that deal can get done.

Speaker Change: We are able to do all these things together that's why it has been in a good quarter for us.

Speaker Change: Overall, we have been working closely with our customers.

Speaker Change: So cost.

Speaker Change: And become a strategic partner and this ends up translating translating into overtime.

Speaker Change: Over time I can tell you.

Speaker Change: This week alone.

Speaker Change: Many customers who talk to me in this at all.

Speaker Change: Im becoming a third time cost portfolio, that's relationships, that's what would be proud to own premium.

Speaker Change: Not much to add other than to call out our sales organization.

Speaker Change: Rich has been onboard now for about a year and a half and has really built a strong sales organization really to go after the large enterprise.

Speaker Change: As you remember Mike service now emulate ourselves towards service now model, where we're trying to get deeper into accounts and strategic large accounts. So I think thats a call out to our go to market organization as well as your sales organization.

Speaker Change: Thank you.

Speaker Change: Our next question.

Brad Zelnick: Comes from the line of Brad Zelnick of Deutsche Bank. Your question. Please Brad.

Brad Zelnick: Great. Thanks, so much and I Echo my congrats all around I mean this is these are really refreshing results and congrats on everybody's new appointments and <unk>, it's been a it's been a pleasure.

Brad Zelnick: I wanted to circle back to Zee flax, because it really speaks to the strategic platform style relationship customers want to have with you.

Speaker Change: But from your perspective remote can you walk us through how are these structured whats the typical duration and the accounting of these deals.

Speaker Change: And do you, maybe foresee a future where billings might no longer be the right metric to measure <unk> momentum and success. Thank you.

Speaker Change: Yes.

Jay Chaudhry: Take the first part which is billings is going to be the right metric, let Jay answer the rest.

Jay Chaudhry: Talked about it we're going to go to <unk> in fiscal 'twenty six so here you see a change from billing.

Jay Chaudhry: Two <unk>.

Jay Chaudhry: I think thats, a really big.

Jay Chaudhry: Zee scalar because it gives us the opportunity really to sell more deeper.

Jay Chaudhry: And more products and really work with our customers related to when they can adopt our products. So I believe going to an <unk> metric is the right metric going forward and I think Thats Eplex program gives us a lot of flexibility.

Jay Chaudhry: Continue to sell.

Jay Chaudhry: Across our entire platform.

Speaker Change: Sure. So does the FX program came out of our customers' desire to buy more but not having to go through.

Jay Chaudhry: <unk> and procurement every time.

Jay Chaudhry: For example, take data protection to eight plus modules in this single product line itself.

Jay Chaudhry: And many times the customer says hey, don't see forcing some interested in but I'm not sure I'm ready to buy all four all I'm not sure I can deploy all four if I Boston right now so being able to give them flexibility to try and test and they can swap one war saga.

Jay Chaudhry: <unk> ability to add some more at a predetermined pricing.

Jay Chaudhry: Have any both the procurement cycles.

Jay Chaudhry: Some of the main benefits are getting.

Jay Chaudhry: As these deals are being done there being done because the customer views us as more strategic and the duration of the contracts, it's moving but you used to do most of the deals.

Jay Chaudhry: We're seeing more and more deals becoming four years five years.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of <unk> Kalia of Barclays. Please go ahead.

Speaker Change: Okay, Great Hey, guys. Thanks for taking my question here and Echo my congrats to Kevin and remote on your next steps.

Speaker Change: Jane maybe for you I was wondering if you could just dig into red carry a little bit more and maybe more specifically what are you sort of view. This as an extension of zero trust that accelerates that path to $5 billion and IRR or whether this is something that adds to that.

Speaker Change: And broadens the platform.

Speaker Change: Yes.

Speaker Change: When I talk to customers often I tell them from day, one we had one north Star Zero Trust architecture, which expanded users.

Speaker Change: Partners suppliers to workflows to launches and everything.

Speaker Change: And as we did more and more of our customers. We often talk to me and say Hey, This is wonderful and you got the most logs.

Speaker Change: And then I have to keep these plants with third party installation pay them gain for storing them and doing some stuff within surety naturally expand in that space and provide me a clause feedback so things discover and your security operations solutions can be fed back to six zero dosing.

Speaker Change: Change those are the discussions over the past several years that took us to move in that direction.

Speaker Change: Fast foundational steps, we took in direct and distraction was last year when you acquire Avalon.

Speaker Change: MLR basically brought the notion that you no longer need to build a massive data lake and pay for it you should have data fabric.

Speaker Change: Which synthesizes the logs and creates a subset all meaningful information that as context, I can't entertain relationships. So no. Thanks.

Speaker Change: Eric brings a number of interesting things for us to move in that direction at a faster pace. So we can kind of extraordinary.

Speaker Change: Our vision of becoming a leading okay.

Speaker Change: We have highly talented and experienced detection Intel engineered that's very important too.

Speaker Change: Some products they had developed a very sophisticated AI.

Speaker Change: Technology for reasoning and workflow and this is being used today there is no future using.

Speaker Change: A large number of questions.

Speaker Change: I can take.

Speaker Change: Technology compounded combining for the phase <unk> data fabric.

Speaker Change: Okay.

Speaker Change: Many many months for us and they also have a good sales team that can help us acting as a kickoff team.

Speaker Change: So these two things together.

Speaker Change: All right.

Speaker Change: Our overall growth, but it is expansion of the platform for US anyway, you want to add yes, I mean, just some financial information on the transaction is valued at $675 million.

Speaker Change: Plus equity for employees.

Speaker Change: As Jay mentioned, we expect it to.

Speaker Change: Closed in August of 2025.

Speaker Change: And we expect it also to be largely neutral to our FY 'twenty six consensus operating margin.

Speaker Change: A big portion for itineraries is.

Speaker Change: Is concentrated in certain segments that are not strategic to us so through the post close integration process, we expect to retain approximately half of the $140 million.

Speaker Change: You may have seen.

Speaker Change: We will share more details on this on the next call and our Q4 call.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: From the line of.

Speaker Change: Sure Nick Caffari of Baird. Please go ahead <unk>.

Nick Caffari: Hey, guys. Thanks for taking my question again, congrats on great execution.

Speaker Change: Forward to working with you Kevin.

Speaker Change: Okay in terms of the reflex.

Jay Chaudhry: Definitely it looks like that's helping broader adoption of multiple of deals as you said Jay.

Jay Chaudhry: Milligan product categories growing 5%.

Speaker Change: You also cited Jan AI as a key demand driver.

Speaker Change: Can you tell us a little bit about what kind of attach rates are you seeing there and if it's driven by flex any sense of a percentage of rents, which exquisitely, citing this janney <unk> related risks.

Speaker Change: <unk> casualty is the buying catalyst I appreciate it.

Speaker Change: Yes.

Speaker Change: Jenny is becoming more and more important to our customers and our solutions.

Speaker Change: In three areas first has been securing use of public AI, we have been actually offering that solution for quite some time now and even Microsoft C 65, co product security as part of that and.

Speaker Change: Yes. It is.

Speaker Change: We are bundling that solution along with our advanced data protection module because the number one use of this is protect the data.

Speaker Change: Secondly, securing usual private AI models and applications. Our customers are building here, we have been building in LLS proxy analyzed all queries and to detect any.

Speaker Change: That things like pump injections and the rest of the staff and it can also inspect response.

Speaker Change: So thats a second here.

Speaker Change: <unk> <unk> operations in.

Speaker Change: Operations categories on security operations Academy.

Speaker Change: This area will be started.

Speaker Change: Building a couple of years ago, you saw office 360, <unk> unified vulnerability management that would be acquired I have Paul and Rick Murray is going to help us et cetera that ADR as well and they're using a bunch of HMT AI technology, which is very helpful.

Speaker Change: We don't see traction.

Speaker Change: If you look at our numbers our growth each starting with small numbers, but it's pretty impressive growth so far.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: Comes from the line of.

Speaker Change: Roger Boyd of UBS. Your question. Please Roger.

Speaker Change: Great. Thanks for taking my questions and congrats to you both as well.

Speaker Change: Maybe Jay just on branch connector I think the metric that continues to impress me as that you have nearly 60% of customers adopting British connector over the past few quarters that are effectively new disease scale or what are your thoughts on what's going right. There the role that British characters, playing in new customer wins, particularly as you continue to have success with.

Speaker Change: Some of these cost take out ROI sales programs against maybe some legacy.

Speaker Change: Network equipment. Thanks.

Speaker Change: Yes.

Speaker Change: Our branch connectors now package that plug and play for us, which actually is helping customers because that plug and play into things happen and normally it also embedded are integrated.

Speaker Change: Technology to do SEDAR trust segmentation for devices.

Speaker Change: Together, our aren't doing very well and frankly the degree of.

Speaker Change: Interest our customers have taken in this area has exceeded my expectations as you heard I mean, 59% of customers purchasing our trust branch, our new logo customers.

Speaker Change: Pretty impressive.

Speaker Change: Yeah.

Speaker Change: I think it's going to get better.

Speaker Change: I was talking to a customer recently, who is testing our branch appliance I was looking for deploying it for about 100 branches.

Speaker Change: And one stop testing went through he said I should be doing for all 1000 launches. This was pretty remarkable obviously, we need to keep on executing but it just tells you the pain customers have having a bunch of <unk> boxes, Dfc P and and and.

Speaker Change: Yes.

Speaker Change: Re lands and all of this stuff our goal is to eliminate one on desktop our branch has nothing more and two things.

Speaker Change: <unk> kind of appliance on a switch and of course Wi Fi stomach. So.

Speaker Change: What are you excited about it.

Speaker Change: Thank you.

Tyler Army: Our next question comes from the line of Tyler Army of Bank of America. Please go ahead Sir.

Tyler Army: How are you.

Tyler Army: One day, they're going to learn how to pronounce my name.

Tyler Army: Yeah.

Speaker Change: The.

Speaker Change: We are entering second half of the year with scheduled billing very high.

Speaker Change: And the question, we always ask ourselves because of the new competition in SaaS is how much of the growth is because of scheduled scheduled billing.

Speaker Change: And how much of the growth is because of new products that are beyond the aacpa.

Speaker Change: So the question is can you can you breakdown the strength this quarter and the reason why I'm asking it is because I see that the NR.

Speaker Change: Hi, about a year and a half ago declined and then slightly recovered last quarter went down again this quarter sequentially.

Speaker Change: The question is what were the trends in <unk> versus the trends in other products sorry for the long winded question.

Speaker Change: And if you can give some kind of.

Speaker Change: Outlook, some discussion of the outlook of the new products and how you expect them to perform and contribute to revenues.

Speaker Change: That's a lot of questions. So ill try to cope with the few hopefully Jay can pick up alright I missed.

Speaker Change: Q3 unscheduled billings.

Speaker Change: 28% growth year over year. So that is outstanding scheduled billings growth in Q3 came as expected there was a low 20% range.

Speaker Change: The unscheduled billings in Q4, and the guidance that we gave is 25% growth year over year.

Speaker Change: So the business is doing very well and it's consistent to what we said at the beginning of the year when we called out scheduled versus unscheduled billings.

Speaker Change: Pretty much worked out almost exactly what we said so we're really proud.

Speaker Change: How we communicated that to the street pallet performances.

Speaker Change: Happening in the second half of the year.

Speaker Change: Related to the <unk> rate it is 114% that is outstanding.

Speaker Change: So from my perspective.

Speaker Change: We only look we've said this before we only look at it once once every quarter right right now we're talking to.

Speaker Change: Our investor call.

Speaker Change: The key thing I think is there.

Speaker Change: If you look at what we have in the platform that we've created and.

Speaker Change: The expansion of the merchant products.

Speaker Change: We've talked about the emerging products.

Speaker Change: Is expanding so we're expecting the emerging products to be in the mid <unk> to high 20% range.

Speaker Change: For this year.

Speaker Change: And the reason for that is that we're expanding products those are all new products come out.

Speaker Change: Jen AI.

Speaker Change: And the deal DLP products, So I think Jay called out where technology comes in.

Speaker Change: An innovation company.

Speaker Change: We arent that size that we have for.

Speaker Change: Very large revenue and recurring revenue and RP O.

Speaker Change: At the heart Zee scalar is a technology company that support front to continue to really I think exploit this market has no other company can.

Speaker Change: I mean look all our metrics are exceptionally strong.

Speaker Change: Unscheduled billings falling even.

Speaker Change: The new <unk>.

Speaker Change: So new logo.

Speaker Change: New logos grew.

Speaker Change: 40%.

Speaker Change: So right in front of all of Us and I can only number you talked about NR.

Speaker Change: The platform itself the sooner we settled the next thing the lower not all that's why when you kind of ignore that not all but look at other metrics.

Tal: Thank you Tal.

Speaker Change: Next question.

Speaker Change: Comes from the line of Andrew.

Speaker Change: The cast Berry BNP Powerbar. Please go ahead Andrew.

Speaker Change: Thanks for taking my question.

Speaker Change: Just on a separate line of thought.

Speaker Change: Our checks found that.

Speaker Change: Scalar could benefit greatly from the federal business and I know, it's not a big contributor of revenue today, but we've heard that it's not really being impacted by the cuts that the administration is making and in fact, there could be some ramp up there.

Speaker Change: Are you seeing the same thing or are you still optimistic about that lineup.

Speaker Change: <unk>.

Speaker Change: So <unk> for us.

Speaker Change: That's in line with our expectations this quarter.

Speaker Change: And sure there is some uncertainty in the business.

Speaker Change: But.

Speaker Change: Once you cut costs.

Speaker Change: Biggest cost.

Speaker Change: And the security space is firewall and efficacy type of vendors and.

Speaker Change: And if I can go and take a lot of cost out of it by moving all of those products and actually works in our favor.

Speaker Change: Yes, and also for our guide for Q4, we're not expecting a significant.

Speaker Change: Strength with fed.

Jay Chaudhry: As Jay mentioned, we are well positioned these are very large contracts, which take time.

Jay Chaudhry: We're in 14 of the 15 cap and agencies.

Jay Chaudhry: But again right now.

Speaker Change: As I said as Jay mentioned, we came as expected in Q3, and we're not expecting a significant quarter in Q4, perhaps.

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change #102: Comes from the line of Andrew Nowinski of Wells Fargo. Your question. Please Andrew.

Speaker Change: Thank you for taking the question and congratulations Kevin on joining Zscaler and remote.

Speaker Change: It's been a pleasure working with you as well wish you well.

Speaker Change: I wanted to ask about the new growth categories that are at a higher level. Thank you for providing some of those new metrics for it I think it was over 1 billion already in <unk> across the three new.

Speaker Change: Growth categories, you called out, but it looks like.

Speaker Change: And the EPA were part of Zero Trust everywhere, So I'm wondering what's making up.

Speaker Change: The difference between the $1 billion and the new growth categories. They are you generated versus the $2 nine in total.

Speaker Change: And then what's the growth rate of those sort of non emerging products look like thank you.

Speaker Change: Okay.

Speaker Change: That's good that's kind part.

Speaker Change: Three main buckets SEDAR Trust every day.

Speaker Change: So here, we are basically making sure the customers who are having.

Speaker Change: Sito Trust users sooner branches sooner cross cloud all Aes together.

Speaker Change: And disregard these customers.

Speaker Change: And we more than doubled our one to 210 study and we plan to go to 2019.

Speaker Change: It's a subset of customers that's number one.

Speaker Change: And we are actually seeing 60% quarter over quarter growth in that area. It's a growth factor that matters quite a bit.

Speaker Change: And it's impressive.

Speaker Change: The data security.

Speaker Change: We haven't talked Makena securities quite some time last quarter, we shared that the cost $350 million.

Speaker Change: In that and it's still growing faster than the total company.

Speaker Change: And thirdly is flattish.

Speaker Change: Relative to the new <unk>.

Speaker Change: This is our AI solution business on our security operation. It operation. This severe somehow let's say 60 unified vulnerability management type of solutions coming.

Speaker Change: And we saw in CTX, and vast plus which actually uses seminar six co product technology.

Speaker Change: 70% year over year growth in that area.

Speaker Change: And products that younger products that all in the security ops bucket and ECB view of 120%. So from all angles. These three products are doing very good managing growth and approaching $1 billion.

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of.

Speaker Change: Sure.

Speaker Change: Of TD Cowen. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Congrats Jay Remo and Kevin on all fronts.

Henri: Okay Henri.

Speaker Change: At Canary.

Henri: There are number of <unk> providers various sizes out there.

Henri: Two of the reasons that attract the queue.

Speaker Change: Secondly to this asset over the others is it technology market tweak client revenue scope.

Henri: Just wanted to get some additional color. Thank you.

Henri: Sure.

Henri: The acquisition was to make sure we can accelerate our vision to become a leading.

Speaker Change: Plant in the stock market.

Speaker Change: So what are these guys off.

Speaker Change: Wonder if something complementary to what we had what we have in this space.

Speaker Change: Fabric technology that you acquired from ethanol last year.

Speaker Change: Number one impact.

Speaker Change: The talented engineers experienced people who had detection in fact, Intel that's foundation.

Speaker Change: Two I mentioned earlier, we are impressed with <unk>, taking that technology for reasoning and were already built and they are using in production lots of companies talk about Egencia take AI at 20 startups, we looked at in this area all new <unk> you look at how many customers do you have orders and production R&D.

Speaker Change: This company had Neil stop in production and we can incubate that technology platform with expertise that brings to the table.

Speaker Change: It became very passionate and.

Speaker Change: Then of course, they also have a go to market team.

Speaker Change: That can become a takeoff team our team of specialists to help us take this solution to market.

Speaker Change: Thank you.

Speaker Change: Next question.

Speaker Change: Comes from the line of Michael Hedberg of RBC capital markets. Please go ahead Matthew.

Mike Richardson: Hey, guys, Mike Richardson on for Matt Thanks for taking the question.

Speaker Change: With the accelerating success across the broader platform here, maybe we could take a step back and talk about how much of that success is driven from the ROI messaging resonating in this macro versus the go to market productivity that you guys were expecting and what inning are we in that go to market productivity improvement. Thanks for the question.

Speaker Change: Thanks coming from automotive was go to market was what.

Speaker Change: Sales for the current activity levels.

Speaker Change: That activity, okay, great Okay.

Speaker Change: Look.

Speaker Change: All of these things.

Speaker Change: Joe success generally there's no single thing that kind of makes it happen generally a collection of things that work together.

Speaker Change: We have a strong go to market team that Mike and team have done a great job platform is expanding the two together then being able to show cost savings and bring these things Jeremy Magic happens.

Speaker Change: Going to do one thing at a time it was only so far if you're unable to pointed at all Greg.

Speaker Change: Great go to market, great platform and cost savings it's wonderful.

Speaker Change: Lots of people talk about cost saving harmony companies can actually go to the customer today and say here's my security solution that is going to save you money.

Speaker Change: Generally known that security networks saves money, but in the <unk>.

Speaker Change: He is going to able to show that they can actually save money by taking out a lot of not only legacy security products, but a lot on legacy networking products asphalt as far as the numbers are very impressive we are very excited about it.

Speaker Change: This thing has been working for quite some time, it's getting better.

Speaker Change: And sorry, and assault of that ends up being good numbers and good productivity.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line.

Speaker Change: Of Gray Powell with <unk>.

Speaker Change: Your question please.

Speaker Change: Okay, great. Thanks for taking the question and congratulations on the good results.

Speaker Change: I, just maybe have like.

Speaker Change: A higher level question.

Speaker Change: I understand the need for customers to rationalize.

Speaker Change: Spend or.

Speaker Change: Not by the same product twice.

Speaker Change: But we've also heard particularly with other security vendors.

Speaker Change: Some companies have become really aggressive.

Speaker Change: Pushing elas and sometimes that ends up creating shelf where.

Speaker Change: I'd be curious like when you were talking about Zee scalar versus the competition is that something that you see in the market and if so how does that feed into your customer conversations and does it actually puts Q&A.

Speaker Change: Better position.

Speaker Change: Customers disliked E.

Speaker Change: They know that elas, often become shelf there okay.

Speaker Change: So we really don't want to push you got me.

Speaker Change: But our goal is interest can you say customers are drawing to address cyber security and lower cost and asked me going be sure then.

Speaker Change: Germany UK. His journey all you can take of these products. These products these products and and reduce our cost and have better user experience and in addition business agility, often customers, saying I want to open a new branch office and two days rather than two months. So you can make it.

Speaker Change: Happen. There's so many M&A is happening out there nevertheless, or there'll be so many mergers and integration every week I see a couple of them at least and the only <unk> solution to be able to bring things together without needing legacy network and security. So these deals are actually.

Speaker Change: Growing our platform, we are really not selling along with selling the platform. They need offline talent salespeople don't really try to push a bigger bigger.

Speaker Change: Bigger deal because they can take longer but the customer, saying Wow. If I can have more savings I can do a bigger deal. So we let that happen the way it happens, but our goal is to do what's right for the customer as a long term partnership and honestly one of the number one thing I look at <unk>.

Speaker Change #101: Monte point of view <unk> Sis that are deployed hallmark just not deployed.

Speaker Change: Big focus on that and I can tell you <unk> got our solutions are very well deployed out there.

Speaker Change #100: Thank you I would now like to turn the conference back to Jay Chaudhry for closing remarks, Sir.

Speaker Change #100: Thank you for joining us for the earnings call and look forward to seeing you at one of the many conferences. Thank.

Speaker Change #100: Thank you again.

Speaker Change #100: Goodbye. This concludes today's conference call. Thank you for participating you may now disconnect.