Zscaler Inc (NASDAQ:ZS) Q4 2019 Earnings Conference Call Transcript
Sep 10, 2019 • 04:30 pm ET
Remo E. Canessa
to step up our sales and marketing investments in the coming quarters. In addition, we'll increase investments in our technology platform and cloud infrastructure. As you model billings, I want to remind you that historically, Q2 and Q4 have been our strongest billing quarters with sequential declines in Q1 and Q3 quarters respectively.
Over the last three years to five years, first half billings have represented on average 43% to 44% of full year billings. In fiscal '20, we expect our first half mix to be in the 42% to 43% range. The reason for this is primarily related to our new CRO any familiar with our business and fully ramping. Also, please keep in mind that we had a large upfront billing of $11 million in Q2 of 2019 from large public sector customer deploying our platform as a private cloud which will pose a tough year-over-year comparison in Q2.
Excluding this deal, our billings guidance for the full year implies 29% to 32% growth. In terms of free cash flow. Please note that we'll have additional spend for tenant improvements related to our headquarters move in January. As well as ongoing cash outlays for lease payments on our existing San Jose buildings in litigation expenses related to the ongoing Symantec lawsuit. With our headquarters move. We expect a modest budget of $4 million to $5 million [Phonetic] for tenant improvements. Including these cash payments, we expect our free cash flow margins in fiscal 2020 to be 1 points or 2 points lower compared to our operating profit margins. Longer term, we would expect free cash flow margins to be higher than our non-GAAP operating margins.
Now, I'd like to hand it back over to Jay.
Thank you, Remo. In summary, designed as a cloud native multi-tenant architecture, we believe we are in the early innings of a significant market opportunity to enable cloud transformation. Just like Salesforce and Workday developed cloud native multi-tenant platforms to disrupt large legacy software vendors. Zscaler has a similar opportunity to disrupt network security. With multiple tailwinds such as Office 365, SaaS adoption, SD-WAN and app migration to public clouds, we believe the market is coming to us. With the addition of Dali Rajic, we are building a sales organization that can deliver world-class execution. We look forward to seeing you at our Zenith Live Cloud Summit and our Analyst Day in Las Vegas, where we will showcase some of our upcoming new products.
We thank you for your interest in Zscaler and look forward to reporting on our progress in the future. Operator. You may now open the call for questions.