Gray Powell: That’s perfect. Thank you very much.
Operator: Thank you. One moment, please. Our next question comes from the line of Jonathan Ruykhaver of Cantor. Your line is open.
Jonathan Ruykhaver: Yes, thank you. So I have a question on the emerging product portfolio. You highlighted how it represented 18% new business in fiscal ’23, you expect that to get to plus 20% in fiscal ’24. It just seems to me like plus 20%. I’m not sure what that plus could be, but it seems like a low bar just given your comments on data security, ZDX, and cloud, including, the tailwind that you talked about from AI that is going to benefit some of those products. So can you just help us understand demand dynamics within that portfolio, the puts and takes of specific products where you expect to see the strongest demand?
Jay Chaudhry: Yes. If I may start, it is all coming out of 100% only. Okay. That’s the most important point when the overall growth is pretty strong. Okay. And for the new product, even if it grows 70%, 80% percent a year, it has to work very hard to even take away 1% or 2% from the total new ACV. That’s pretty significant. So the growth of these new products is much faster than the growth of the overall new ACV, but they are fairly small and they’re growing into good business. We called out data protection as it became a significant part of the business. And I think here too, you’re seeing our combination of workload protection and ZDX both are growing at a much faster rate. So I think we are actually happy with the growth rate, but the point I was trying to make is they are trying to steal away the market share on the rest of the overall portfolio, which has a much bigger base. That’s why the math looks small, but it is pretty impressive.
Jonathan Ruykhaver: Yeah. understood. Good point, Jay. Thank you. Thank you.
Operator: Thank you. One moment, please. Our next question comes from the line of Joshua Tilton of Wolfe Research. Your line is open.
Joshua Tilton: Hey, guys. Thanks for taking my question and I echo my congrats on a good quarter. I kind of want to go back to the first question. And, if you look at the guidance, the implied new billings kind of looks like a little bit more aggressive, I would say, than the last two years. So maybe just, level set for us or set some guardrails or expectations around kind of the puts and takes on what it would take for you guys to kind of outperform what you laid out for the next 12 months for us, please?
Jay Chaudhry: Let me start to give you a big picture and Remo, you can add your color to it. So our guidance is starting with first of all, a record pipeline and the momentum we have in the business. And we have plenty of product to sell. We have a growing market opportunity and many business drivers. We have a lot of new customers who are really buying zero trust for better security. Lots of market that’s not covered. We are still in about 30% of global 2000 market. And we’re seeing public sector coming strong, federal market coming strong. And that’s really, further pushed by some of the mandates that are happening out there. And you saw in some of the deals that are announced, customers are increasingly buying more of these kind of platform leading to bigger deals.
CI ZPA, our flagship products are still doing strong. We have factored into good growth for data protection, which complements. It actually needs to go on every Zscaler,customer. Emerging products are contributing nicely, and they are contributing. So when you look at all this, that’s what we took into factor to give you our guidance. Remo?
Remo Canessa: Yeah. I mean, our guidance basically balances our business optimism that we see with our company, also with the macro environment. We feel in this market, this is very solid guidance.
Joshua Tilton: Super helpful. Thank you.
Operator: Thank you. One moment please. Our next question comes from the line of Saket Kalia of Barclays. Your line is open.
Saket Kalia: Okay, great. Hey guys, thanks for taking my question here. I want to echo my congrats on the result. Remo, maybe for you, just to switch it up a little bit. Great to see the free cash flow margin expansion thus far. Maybe looking forward, can you just talk about some of the puts and takes on free cash flow margin with I think the 20% plus guide for next year, how are you thinking about things like billings duration or CapEx or anything that’s maybe influencing that number? Because it’s great to see operating margin expand. Why isn’t free cash flow margin maybe expanding in the same way? Thanks.
Remo Canessa: Yeah, Saket, that’s a great question. The billing duration, I would assume the similar type billing duration as we had in fiscal ’23, so no change. CapEx, we do expect CapEx to be a higher percentage. If you take a look at the last two years, our CapEx has been in the 6% range of our revenue. We expect our CapEx to be in the high single digit type range. We’re seeing the expansion of our business. We’re going to be making investments in cloud. And again, it’s — that’s the main reason.
Saket Kalia: Very helpful. Thanks.
Operator: Thank you. One moment please. Our next question comes from the line of Gregg Moskowitz of Mizuho. Your line is open.
Gregg Moskowitz: All right. Thank you for taking the question and I’ll echo my congrats. Jay, getting back to data protection, so your multimodal DLP that combines video and audio formats, that’s interesting to me. Curious if you had any early customer feedback on that feature. And then secondly, what has been the early uptake around your new Risk360 offering just in terms of visualizing risk, etcetera? Thank you.
Jay Chaudhry: So multimodal DLP is still in development. it’s not shipping, but there’s a bunch of engagement with customers and interest is high because there’s nothing like this out there in the market. You don’t [indiscernible] pioneer new things that no one has done out there. Risk360, on the other hand, is actually a shipping. We have taken a bunch of orders. This product has more interest up front than any of the other products I can think of because our engagement with CISOs are strong. When a CISO looks at SC60 and say, wow, I have actually a single point to really tell me the holistic view of my business and actually where my risk factors are and what tangible prioritize actions I could take through my wrist. So there is a significant velocity going on, very, very good feedback and the product is growing very rapidly in terms of functionality as well.
Gregg Moskowitz: Perfect. Thank you.
Operator: Thank you. One moment, please. Our next question comes from the line of John DiFucci of Guggenheim. Your line is open. Again, Mr. DiFucci, your line is open.
John DiFucci: Thank you. So guys, it as everybody has said, the numbers look good. It was a nice quarter. But when we try to look at, like, the new business signings, it looks like it saw a tick down against a similar comp versus what I think was sort of a monster quarter, the third quarter. And Remo, you mentioned the continued macro pressure. And of course, everybody sees that. But is this quarter how we should expect Zscaler to sort of be going forward in regards to business momentum and new business signings. Or was the third quarter a better gauged on what we should expect going forward against this macro backdrop?
