Zscaler(US:ZS)2023-03-03 01:34Financial Data and Key Metrics Changes - Revenue for Q2 2023 was $388 million, representing a 52% year-over-year growth and a 9% sequential increase [32] - Total calculated billings grew 34% year-over-year to $494 million, with a sequential growth of 45% quarter-over-quarter [33] - Dollar-based net retention rate remained above 125%, indicating strong customer loyalty and expansion [34] - Operating margin increased by approximately 380 basis points year-over-year to 12.6%, reflecting improved profitability [36] Business Line Data and Key Metrics Changes - ZPA product revenue accounted for approximately 20% of total revenue, growing 74% year-over-year [32] - The number of customers with greater than $1 million in ARR increased by 51% year-over-year, reaching 378 [35] - The company saw a 51% year-over-year growth in the number of customers with greater than $1 million in ARR, indicating strong demand for its services [20] Market Data and Key Metrics Changes - The Americas represented 53% of total revenue, EMEA accounted for 32%, and APJ made up 15% [32] - EMEA showed strong growth year-over-year despite macro challenges, indicating resilience in that market [32] Company Strategy and Development Direction - The company is focused on building and innovating while increasing profitability, with a targeted cost optimization plan initiated to streamline operations [15][37] - The strategy includes expanding the business value team to help customers create CFO-ready business cases, facilitating deal approvals [17] - The company aims to achieve a $5 billion ARR goal, indicating confidence in market opportunities [30][41] Management's Comments on Operating Environment and Future Outlook - Management noted that customer cautiousness is expected to continue, with longer sales cycles and uncertain timing for large deals [13] - Cybersecurity remains a top priority for organizations, which is expected to drive demand for the company's services [14] - The company anticipates that periods of uncertainty can accelerate the adoption of its disruptive technologies [16] Other Important Information - The company plans to take a charge of $8 million to $10 million related to workforce reductions as part of its cost optimization initiative [37] - The company introduced over 150 new features in its latest cloud software release, showcasing its commitment to innovation [29] Q&A Session Summary Question: Outlook in terms of control and competitive position - Management indicated strong upsell performance and confidence in competitive positioning, noting that customers appreciate the consolidation of point products [44][46] Question: Business mix between legacy replacements and new implementations - Most business involves replacing legacy solutions, with upsell opportunities being easier due to existing customer relationships [51][52] Question: Impact of ramp deals on billings - Ramp deals are contractually obligated and are seen as strategic investments to help customers manage cash flow [55][56] Question: Sales capacity and growth acceleration - The company plans to continue investing in sales capacity while moderating hiring across other areas [61][63] Question: Pricing pressure and billings guidance - There is some pressure on pricing due to macro conditions, but the company does not see significant discounting pressure [80] Question: Adoption trends for cloud workload protection - Adoption of cloud workload protection is progressing well, with initial deals being smaller but expected to grow as customers expand [84] Question: Market opportunity and Global 2000 penetration - The company believes there is ample opportunity to increase penetration within the Global 2000, as customers prioritize best-of-breed platforms [88]