“We now expect our first half mix to be approximately 43% to 44% of our full year billings.”

In context

“Remo Canessa (CFO): Thank you, Jay. As Jay mentioned, we are pleased with the results for the first quarter of fiscal 2022. Revenue for the quarter was $231 million, up 17% sequentially and 62% year-over-year. On a year-over-year basis, revenue growth accelerated in the quarter driven by strong business activity. ZPA product revenue was 16% of total revenue. From a geographic perspective, we had broad strength across our three major regions. Americas represented 51% of revenue, EMEA was 35% and APJ was 14%. Our investments in APJ are bearing fruit with greater than 100% revenue growth in that region. Our total calculated billings grew 71% year-over-year to $248 million, with billings duration at the high end of our 10 to 14 months range. We had several customers choosing to pay upfront for their multi-year contracts. As a reminder, our contract terms are typically one to three years and we do not offer any special incentives for upfront payments. We are also pleased to report 68% year-over-year growth in short-term billings. I would note that both billings and revenue benefited from a $1.5 million one-off deal in the quarter. Remaining performance obligations, or RPO, were $1.71 billion as of October 31, up 97% from one year ago. The current RPO is 50% of the total RPO. Our strong customer retention and ability to upsell the broader platform have resulted in a high dollar-based net retention rate, which was above 125% in the quarter and higher than the 128% we reported last quarter. As we have discussed before, this metric will vary quarter-to-quarter and is not a metric we manage our business towards. We focus on growing our net new business without incentivizing differently between new or upsell. We have a strong base of large and growing enterprise customers, which provides us with significant opportunity to upsell our broader platform. Considering these factors, we believe NRR above 125% is truly outstanding for us. We had 224 customers paying us more than $1 million annually, up 87% from 120 in the prior year. The continued strength in this metric speaks to the strategic role we play in our customers’ digital transformation initiatives. We also added over 550 customers paying us more than $100,000 annually, ending the quarter at 1,616 such customers. Turning to the rest of our Q1 financial performance, total gross margin of 80.6% was approximately flat quarter-to-quarter and down 50 basis points year-over-year. Our total operating expenses increased 17% sequentially and 69% year-over-year to $162 million. Operating expenses as a percentage of revenue increased by approximately 3 percentage points from 67% a year ago to 70% in the quarter, primarily due to increased hiring, higher compensation expenses, investments in SmokeScreen and Trustdome businesses we acquired in the second half of last year, and a partial return of T&E. Operating margin was 10% and free cash flow margin was 36%, which benefited from the timing of CapEx spend. We continue to expect CapEx as a percentage of revenue to be high-single digits for the full year. We ended the quarter with over $1.58 billion in cash, cash equivalents, and short-term investments. Please note that net other income includes an $800,000 loss primarily related to the change in value of our assets denominated in Euro and British Pound as the U.S. dollar strengthened. To minimize such impact going forward, we recently implemented a hedging program for our balance sheet. As a reminder, we primarily transact sales globally in U.S. dollars, and several quarters ago we put in place a hedging program for our international operating expenses. For income taxes, our tax expenses primarily represent international taxes paid to foreign jurisdictions we do business in. For several APJ countries, there is a withholding tax on sales made to customers in those countries. As our APJ business has grown significantly in recent quarters, the withholding taxes were $1.5 million in Q1. Now moving on to guidance and modeling points. As a reminder, these numbers are all non-GAAP, which excludes stock-based compensation expenses and related payroll taxes, amortization of debt discount and amortization of intangible assets. For the second quarter of fiscal 2022, we expect revenue in the range of $240 million to $242 million, reflecting a year-over-year growth of 53% to 54%, gross margins of 79%. I would like to remind investors that a number of our emerging products, including ZDX, Workload Segmentation and CSPM, will initially have lower gross margins than our core products, because we are more focused on time-to-market and growth rather than optimizing for gross margins. Operating profit in the range of $20 million to $21 million, net loss on other income of $100,000, income taxes of $4 million, earnings per share of approximately $0.11, assuming 150 million fully diluted shares. For the full-year fiscal 2022, we are increasing our revenue to a range of $1 billion to $1.01 billion or year-over-year growth of 49% to 50%, increasing calculated billings to a range of $1.3 billion to $1.305 billion or year-over-year growth of 39% to 40%. We now expect our first half mix to be approximately 43% to 44% of our full year billings. Increasing our operating profit to a range of $90 million to $93 million, based on the return of in-person conferences and events, we expect operating margin to decline sequentially in Q3 before improving in Q4. Updating our earnings per share to a range of $0.50 to $0.52 assuming approximately 150 million to 151 million fully diluted shares. Please note that our share count guidance now includes dilution from our convertible debentures. With a large market opportunity and customers increasingly adopting the broader platform, we are committed to investing aggressively in our company. We will balance growth and profitability based on how our business is growing, but we will continue to prioritize growth, which we believe is in the best interest of our shareholders, employees, and customers.”