Zscaler Inc (NASDAQ:ZS) Q1 2019 Earnings Conference Call Transcript

Dec 04, 2018 • 04:30 pm ET

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Zscaler Inc (NASDAQ:ZS) Q1 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, and welcome to the Zscaler First Quarter 2019 Earnings Call. Today's conference is being recorded.

At this time, I'd like to turn the conference over to Mr. Bill Choi, VP of IR. Please go ahead, sir.

Executive
Bill Choi

Good afternoon, and thank you for joining us to discuss Zscaler's financial results for the fiscal first quarter 2019. With me on the call are Jay Chaudhry, Chairman and CEO; and Remo Canessa, CFO.

By now, everyone should have access to our earnings announcement. This announcement may also be found on our website in the IR section. In addition, a supplemental financial schedule was posted to our website earlier today.

(Forward-Looking Cautionary Statements).

I would also like to inform you that we will be participating in the Barclays Global TMT conference in San Francisco tomorrow and the Needham's Growth Conference in New York on Tuesday, January 15th.

Now, I'd like to turn the call over to Jay.

Executive
Jay Chaudhry

Thank you, Bill, and thank you everyone for your interest in Zscaler. I am pleased to share with you our solid first quarter results. We posted strong revenue and calculated billings as we continue to experience robust growth in our business.

Our revenue grew 59% year over year to $63.3 million and total billings grew 56% year over year to $64.6 million.

In addition to our top-line growth, we achieved positive operating profit and free cash flow for the quarter. Our opening margins improved approximately 20 percentage points year-over-year to 2%.

We are very pleased with reaching profitability this quarter. This demonstrates a leverage in our business model. Having said that, we will continue to aggressively invest in our business to pursue our significant market opportunity. We believe the primary driver for a market success is the change in data center and network architecture to support the adoption of cloud. Cloud and mobility are breaking the traditional perimeter, where organizations build a hub-and-spoke network to backhaul branch office traffic over private networks to the data center. Then they build a mode of security appliances to secure the network, that is why we call it network security.

In the cloud world, applications can be anywhere and devices and users can be anywhere, the notion of inside the network or outside the network is disappearing. We believe the corporate network is changing to a direct-to-internet architecture. This is commonly known as local internet breakout, which significantly improves user experience and lowers networking costs. But, when you go direct to the internet, what is the corporate network and where would you build a moat, how do you do network security in this world? Well, you can't, network security is becoming irrelevant. Design for the wall, which has no walls, Zscaler security cloud acts as a business policy enforcement engine deployed across 100 plus data centers to securely connect the right user to the right application. ZIA for internet and SaaS applications and ZPA for internal applications in your data center or the public cloud, as organizations embrace the cloud