ZS at Citi tech conference

Webcast: https://kvgo.com/citi-global-technology-conference/zscaler-i…

A driver to their accelerating growth is large transformation deals. Large deals are split 50/50 between new and existing customers.

They spend a lot of time discussing hiring sales people. ZS was cagey about the numbers, just said sales headcount would continue to grow higher.

They’ve reached $1B in ARR.

With enterprise, they’re in 8 of the top 10 largest non-Chinese banks, and 7 of the largest insurance companies.

What works for companies with 2000 employees, works for companies of 300,000 employees.

Sources of budget for the ZS deals are network equipment and transmission–more and more the internet is the company’s network (because of zero trust).

Min 35:00 CEO Chaudry discussing CDN providers entering security space to find places they can grow. Akamai and NET. “Cloudflare is making noise but we’ve yet to see them in any meaningful deal in the field. They are used to sitting in front of servers, selling to content departments” Not to the CTOs/CIOs that ZS sells to.

Min 37:00 answering how long is the runway to replace/transform legacy security solutions. Chaudry talks about Blue Coat (hardware, on premise proxy). They owned 80% of Fortune 500 companies. ZS beats them because Blue Coat couldn’t come up with a good multi-tenant, cloud based solution. Chaudry still sees them in 40% of F500 companies so a lot of runway left. In this top 25 deal reviews, the majority of those transformation deals are about displacing Blue Coat.

If you don’t want to watch the whole webcast, fast forward to the end, where Citi’s Boolani asks ZS basically: you’re sandbagging, how much are you sandbagging? And the CFO Canessa answers “we’re being prudent, we’ve always been prudent, we’re not going to change.” And Boolani says “I know that’s true.” That was fun.

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Related presentation: https://ir.zscaler.com/news-events/events-presentations

Slide 10: Net promoter score 74. Also their transformation solution is faster (GE 80% less MPLS backhaul for example) and reduces cost (Siemens 70%)

Slide 11 shows where Okta, Crowdstrike, SentinelOne fit

Slide 16 their almost intentionally boring product names which they bandied about the webcast … ZIA, ZPA, ZDX

Slide 20 secular tailwinds

Slide 27/28 Servicable users and servicable workloads that yield SAM of $72B which will expand with 5G, IoT/OT, B2B. FY21 revenue at $673M, growing 50%, a lot of runway. (1% market share. Should be doing better? Are they growing even as fast as their SAM is growing? You must be sandbagging.) When I made slides like this back in the old days, these inevitable questions caused many headaches.

Slide 29 6x upsell opportunity

Slide 31 consistent, >80% GM

ZS is my 6th largest holding. Last time I added was March when market rotated away from SaaS/WFH stocks. Even though it doesn’t make a lot of news (and it has those boring product names), I don’t see any clouds at all on the horizon.

rgds,
Bill

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