Zscaler, Inc.
Q2 2021 Earnings Call Transcript

Published: 25 Feb 2021

[Operator:]

Good day ladies and gentlemen. And thank you for standing by. Welcome to the Zscaler Second Quarter 2021 Earnings Conference Call. As a reminder this conference call is being recorded. I would now like to hand the conference over to your speaker today, to Bill Choi, Senior Vice President of Investor Relations and Strategic Finance.

[Bill Choi:]

Good afternoon, everyone, and welcome to the Zscaler fiscal second quarter 2021 Earnings Conference Call. On the call with me today are Jay Chaudhry, Chairman and CEO; and Remo Canessa, CFO.

[Jay Chaudhry:]

Thank you, Bill. We are very pleased with our strong performance in Q2, which showed accelerating growth at scale and rapid innovation of our Zero Trust platform. We drove 55% growth in revenue and 71% growth in billings, while also generating growth in operating profits and free cash flow. Our optimized go-to-market engine is driving significant velocity, including a strong pace of new customer additions. During the quarter, we achieved a milestone of over 5,000 customers, including over 500 of the Global 2000. Our strategic decision last year to increase our investments across all areas, particularly the expansion of our go-to-market and R&D teams, is yielding strong results. We drove increased wins in our enterprise segment, as we begin to pursue smaller enterprises with 2,000 to 6,000 employees.

[Remo Canessa:]

Thank you, Jay. As Jay mentioned, we are pleased with the results for the second quarter of 2021. Revenue for the quarter was a $157.0 million, up 10% sequentially and 55% year-over-year. ZPA product revenue was 14% of total revenue. From a geographic perspective, we had broad strength across our three major regions

[Operator:]

Our first question or comment comes from the line of Brad Zelnick from Credit Suisse. Your line is open.

[Brad Zelnick:]

Well, thank you so much. And congratulations guys on all the success really phenomenal results. Jay, I wanted to ask you a high level question around the impact that the Sunburst Breach is having on the industry. At your Analyst Day in January, you'd mentioned that the impact is likely to be larger than the Target breach was in 2013. And if you can maybe parse out for us how the event has impacted your pipeline across your strategic accounts, maybe all the way down to smaller commercial accounts and how, if at all, you've changed the way you approach initial conversations with new prospects?

[Jay Chaudhry:]

Thank you, Brad. As we discussed during our Analyst Day, we are having increased conversations with our customers as well as prospects. We had Sunburst related webinar recently and had over 800 customers attended. This week, I was asked to talk to Board of Directors of a pharma company, and the primary topic was protecting against sophisticated threats like Sunburst. So all this is making cyber a bigger priority than it has been. It's a bigger priority for CIOs as well as the Board. So what is that causing? It is increasing engagements. I'm not sure I can quantify the impact on the pipeline, but we're seeing that the customers who are already educated on Zero Trust quite a bit are making implementation of Zero Trust a bigger priority. The number one question ends up being if people get compromised, how do make sure that the lateral movement doesn't happen? The answer is simple. Don't connect people to your network. Don't build a moat with firewalls and VPNs, do Zero Trust implementation where you connect users to applications not to the network.

[Brad Zelnick:]

Thank you so much, Jay. Congrats.

[Jay Chaudhry:]

Thank you.

[Operator:]

Thank you. Our next question or comment comes from the line of Mike Walkley from Canaccord Genuity. Your line is open.

[Unidentified Analyst:]

Hi guys. Good evening. This is Daniel on from Mike. Thanks for taking my question. So I know over the past quarters, you've been working on really improving your sales motion in the SMB and smaller enterprise area. Can you just provide some color on some of the investments you are making. And I guess, where you expect to be moving forward?

[Jay Chaudhry:]

I will start and Remo going to add on. Yes, we talked about our expansion towards the enterprise segment that we defined as between 2,000 and 6,000 employees in a company. As you know, we have done extremely well in the higher end in large enterprises for the last several years. So in this segment, the progress we've made is ahead of our expectations. Our growth was faster in this segment. Well, it did come from a smaller base. Having said that, our large enterprise segment is driving the overall strength of our business. We are doing three specific things to grow our business in this enterprise segment, one, adding more sales reps, more sales teams. And we had done a lot of good progress in the past two quarters and we'll do more in the coming quarters. Secondly, adding and expanding channel partners who covered the segment. And third, we are directing our marketing programs to support the segment as well. So in summary, it's a good opportunity to expand the segment and we are doing well. We're pleased with the performance.

[Remo Canessa:]

Just as a quick follow on, we put together a – or initiated a Summit program a few quarters ago and that is doing well. And so – as a percentage of our revenue, VARs did pick up slightly in the quarter. VARs as a percentage of our revenues in the quarter was about – just above 50% where the quarter before it was in the high 40s. So, as Jay talked about, I mean the segments that we sell into commercial less than 2,000 employees enterprise to the 6,000 – large enterprise, 6,000 to 40,000 and majors at the 40,000. So the channel program, we're expecting to have positive results for us in the lower part of the market.

[Unidentified Analyst:]

Great. Thanks for the color.

[Operator:]

Thank you. Our next question or comment comes from the line of Alex Henderson from Needham. Your line is open.

[Alex Henderson:]

Thank you very much. I was to talk to one of the architectural issues that I think is fairly interesting differentiator, which is the argument that you guys have built a network based off per user policy implementation versus architectures from some of your – one of your competitors that are unable to differentiate the traffic flows on a per user basis, or have the policy implementations on a per user basis. Can you talk about that delta between what you're doing and how that shows up in alternative competitors networks?

[Jay Chaudhry:]

Yes. The fundamental difference is being a pass through on network security architecture when traffic is flowing over the network and a traditional device, like a firewall is trying to scan what kind of application is, guess it and trying to stop it or not. With our proxy architecture, where we terminate every connection, inspect and decide to connect to a particular user. So we have policies that are per user by design. There's no – in fact, a user coming from company A or company B or company C each looks like an untrusted user. While in the traditional way, they are kind of batch based policies. The end result is – our architecture gives us two big benefits. One with proxy we can do far better inspection at a high scale high performance, including SSL. Two, it allows us to do Zero Trust where you don't connect people to a network. You connect to a specific application. Zero Trust is probably the biggest thing to help you minimize the damage of lateral movement if something gets infected.

[Alex Henderson:]

Thank you.

[Jay Chaudhry:]

Thank you.

[Operator:]

Thank you. Our next question or comments comes from the line of Andrew Nowinski from D.A. Davidson. Your line is open.

[Andrew Nowinski:]

Great, thanks. And congrats on a great quarter. So I just wanted to follow up on Brad's earlier question regarding SolarWinds. It sounds like that's creating more pipeline but not necessarily contributing to revenue yet. But your billings growth is the strongest that we've seen in over two years. So I'm wondering if you could just comment on what the key drivers are that are contributing to that inflection in your billings growth. Now SolarWinds winds, it doesn't look like it's really had much of an impact yet.

[Jay Chaudhry:]

Generally, in all these sessions, analysts like to pinpoint to particular event that may cause something, so COVID was viewed as maybe the catalyst. This is being viewed as a catalyst. As we have said before, the overall catalyst is that everyone is driving towards digital transformation, COVID maybe helping it SolarWinds maybe helping it. But customers are realizing that they believe that they need to accelerate their transformation. And we are the one who enabled the transformation. If you do your transformation without something like Zscaler, your risk goes up significantly. So where is our growth coming from? ZIA, which has been our work course. Yes. Now we've got over 25% of global 2000 companies, but we have 75% more to go. It is generating pretty good sales, ZPA, which was relatively young product two or three years ago now is actually contributing significantly about 40% of our global 2000 customers already have our ZPA. So these two are the biggest contributors of our billings growth. And then the new pillars ZDX is picking up quite well. And also is that the new pillar off cloud protection? I think I'm very pleased that our customers are buying more and more bigger bundles together. I talked about ZIA, ZPA and ZDX being bought together by our customers during our in my prepared remarks. So across the board, we're seeing strength from product side of it, across Remo, you want to add to my comments?

[Remo Canessa:]

No, I think, Jay is absolutely right. If you take a look at the breadth of our platform, before we're user centric, now basically we're also cloud protection – so workload protection. So the breadth of the platform is resonating with our customers. In addition when we talked at the Analyst Day that for companies of 5,000 employees on the user side, we'd expect, we're seeing ARPUs in that $145 range. I can say that in the quarter, we've had deals with customers at the 5,000 employee range in that range at $145. So what's happening basically is that there's a huge need in the market. Legacy architecture is not the answer. And so with Zscaler with the breadth of platform – in the increasing platform that we've created and we'll continue to create is really perfectly set to go forward into this market.

[Andrew Nowinski:]

Great. Thank you guys so much.

[Operator:]

Thank you. Our next question or comment comes from the line of Erik Suppiger from JMP Securities. Your line is open.

[Erik Suppiger:]

Yes, thanks for taking the question. Say given what you were saying earlier about proxy versus firewall, can you comment on how if – how difficult it is to augment firewall architectures with proxy capabilities, because I think one of your competitors is talking about introducing that kind of capability to their solution?

[Jay Chaudhry:]

Well, what should I say? Imitation is the best form of flattery. Having said that, I would say that there's something called native architecture, or purpose-built architecture. There's something called bolt-on. Building proxy is hard, because you terminate, you inspect and you reconnect, compare that to a pass through firewall, you don't stop anything. You let it to go. If you catch something, it's great. If you don't, you don't. Many vendors have tried and failed to build a high-performance proxy because it's hard. The only two vendors in the past 20 years have successfully penetrated enterprises for user security, blue code for on-prem and they've done it for the cloud. So I think am I surprised that people try to get by without a proxy? And finally the customer said, no, no, no. So they change it. I think delivering this thing will be tricky. I've seen many companies do it. There have been vendors, who have been saying that they had a proxy for six, seven years. I would rather not name them, but I still haven't seen them in the market. So we keep on, we are not sitting still. We keep on advancing. The most functionality you add browser isolation, to CASB, to content inspection, or DLP and all, your proxy has to do more and more work and still deliver throughput and still do threat inspections. So we welcome the competition, but we are very pleased with our performance, that kind of lead we have over traditional legacy vendors.

[Erik Suppiger:]

Very good. Thank you.

[Operator:]

Thank you. Our next question or comment comes from Sterling Auty from JPMorgan. Your line is open.

[Sterling Auty:]

Yes. Thanks. Hi guys. So how about the networks on the earnings call pointed out the success that they've had with prisma access and given the commentary about the success that you're seeing in the enterprise. I'm curious, are you running into each other in an increasing fashion in that segment? And it's just that the space is so big that you're both able to grow at these rates, or do you think you're serving different segments of the overall opportunity in the market?

[Jay Chaudhry:]

New firewall vendors started making noise a couple of years ago, a lot of noise, then it died down about six months after that. In the field, we haven't really changed, seen a whole lot of change to it. When it comes to large enterprises where we dominate, we haven't seen any change in competitive landscape. And I can understand why. Large enterprises are security savvy. They understand the difference between proxy and non proxy. They understand Zero Trust and VPN. And that's why we don't expect to see firewall-based architecture in those enterprises. And all of you guys are so close to banks. Find a large bank who believes in not having proxy, but using firewall architecture for security. I have not found one. I think when it comes to lower end of the spectrum, probably in the 5,000 users or below, we do see firewall vendors from time to time. And from time to time, these guys on that sophisticated, they can be probably tricked into find something that may not be that sophisticated. So I think you'll see less sophisticated solutions being bought on the lower end. But on the higher end, we haven't seen any change in competition.

[Sterling Auty:]

Thank you.

[Operator:]

Thank you. Our next question or comment comes from the lie of Patrick Colville from Deutsche Bank. Your line is open.

[Patrick Colville:]

Hey, thank you for taking my question and congrats on a very impressive quarter. Just asking about head count and hiring. I mean, that was a major theme of fiscal 2020. And it looks potentially in the numbers that that was probably helping to contribute to growth this quarter. I mean, can you just help us understand how you guys think about hiring now? And if you can share any numbers around net headcount adds year-on-year sequentially, that'd be great.

[Remo Canessa:]

I'll take that. So the net headcount as we had in the quarter was about 240 and it was about 260 in Q1. Generally speaking, it's around 60% sales and marketing heads. And that's what it was also – and historically, it's been pretty much every quarter, and that was the case in Q2. The comment about accelerating, hiring, yes, we are. We're accelerating, hiring. We see a huge market opportunity. We see that we are doing well. We see that we've got the right product for the market. So we're going to continue to invest across the board in the company in particular with quota sales reps. We had a record quarter hiring in Q4. We had a comparable quarter in Q1 and we had a very good quarter in Q2 and we plan to continue to hire aggressively throughout the back half of the year. Again, from our perspective, we've talked about putting growth and a profitability. We'll be mindful of profitability. Since our public offering, we've been positive profitability and free cash flow, Jay and I are very mindful of that. And we'll continue to be mindful of that. But this is such a big opportunity that we feel that we want to take advantage of it and we're going to invest in it. And we're going to try to capture it.

[Jay Chaudhry:]

Yes, if I may add, over the past four quarters we have pretty openly shared with you a game plan, of scaling our sales organization, building our sales engine from enablement to training and all of those things. And I think you're seen the results being delivered quarter-after-quarter. So, we are bullish about it and we'll keep on increasing our head count, and sales, and engineering, and customer support and all other related areas.

[Patrick Colville:]

Great. Thank you so much.

[Operator:]

Thank you. Our next question comes from the line of Fatima Boolani from UBS. Your line is open.

[Fatima Boolani:]

Good afternoon, thank you for taking my questions. Remo question for you, Jay, in his prepared remarks alluded to a number of very large sort of wall-to-wall transactions that were also multi-product. So, I'm wondering if you could comment on the large deal activity that you saw in the quarter and if it was maybe outsized in any particular regions? It would be really helpful if you can give us some quantification of that?

[Jay Chaudhry:]

Yes. A good question. So large deal activity was strong in the quarter, it was comparable to Q1. It was significantly higher than last year. From a geographic perspective, all regions did well. I mean, we are investing in all regions, pretty much the same, same level. APJ, probably a little bit faster than the other regions, but all regions have done well and we continue to invest. Related to the comment I made before, when companies see – with the breadth of the platform that we have and companies see the value of Zscaler. And the ease of implementation, the increased security and also the ROI. The value proposition is resonating with our customers. And so, we're seeing that. And so, by adding ZDX and ZCP and broadening the platform, it actually increases the value of what we're – of Zscaler. If I may add a couple of points to it, we have truly expanded the platform. We haven't gone on a buying spree and throw them in there and call it a platform because those – these unintegrated products don't add a lot of value, our customers see the value. For example, to turn on ZDX, it's literally a few minutes. It hardly takes anything because the traffic is already flowing through everything is happening. The second one, I like to make is, yes, we did have what you call wall-to-wall deals. I guess that meant all teller deals. But there are no mega deals in the quarter. Okay. And there's no one time kind of special deal that artificially increased our billings numbers. It was properly distributed various pillars, and across all geos.

[Remo Canessa:]

As a follow-on for Jay also it was a new record quarter also for new customers. So, it was broad, it was strong, and as Jay mentioned, there's no mega deals that we've had in the quarter.

[Fatima Boolani:]

Thanks. Thank you so much.

[Jay Chaudhry:]

Thank you.

[Operator:]

Thank you. Our next question or comment comes from the line of Matt Hedberg from RBC Capital Markets. Your line is open.

[Matt Swanson:]

Yes, thank you. This is Matt Swanson on for Matt. Jay, kind of going back on some of those large deals, it seemed like you had a lot of success upselling the, INVPA . I know at the Analyst Day, we talked about maybe six times upsell opportunity within your base. When it comes to kind of realizing that opportunity is it more just a matter of time and as the customer see the value they are coming back, or are there steps you can take to kind of more aggressively pursue that expansion?

[Jay Chaudhry:]

So, I think our customers are happy and trusting us. So that's a starting point. If that's not the case, you want to sell; two, you need proper sales, execution, engagement, our engagement, staffs in C-level, the sales machine that built is helping us. So, we are getting pretty good share of upsell deals. In fact, we don't have differentiation between incentive, sales incentive, or sales that we upsell. So, we aren't pleased with the upsell performance and new performance. We have internal debate between how much do we need new versus upsell, Remo and I decide, let the total ACV rule, we have both opportunities. But we have seen good growth, good upsell numbers every quarter.

[Matt Swanson:]

Yes. And there's a quick follow-on for Jay to some numbers. Upsell was very strong, new business was very strong also. If the split between new and upsell in the first half was approximately fifty-fifty upsell in Q2 was slightly below 50%

[Jay Chaudhry:]

Sorry new was 50%.

[Remo Canessa:]

Excuse me new was slightly below 50%.

[Jay Chaudhry:]

Yes.

[Remo Canessa:]

And going forward, we think a good mix, for Zscaler is fifty-fifty. In the reasons, the point that you brought up, I mean the 6x, ability to upsell into existing customers, just for ZIA and ZPA. And so, it is significant.

[Matt Swanson:]

Thank you, guys. Great quarter.

[Bill Choi:]

Thank you.

[Operator:]

Thank you. Our next question or comment comes from the line of Brian Essex from Goldman Sachs. Your line is open.

[Brian Essex:]

Hi, good afternoon. Thank you for taking the question. Great to see that billings acceleration. And on that, I was wondering, if we could get a little bit of color around your hiring rate, I think, it was brought up in a previous question, but wondering, have you ever reached some kind of a terminal velocity in terms of the rate of hiring, and the rate of training and the rate of maturation within your salesforce? And maybe a little bit of color too, around how you're attracting talent in the market? Is it primarily in localized area or is it from multiple geographies that you're able to attract better count on your platform?

[Jay Chaudhry:]

I will start, then you can add on. So, first of all, we have become the top destination for the top talent. While on the market is competitive, we actually don't have problem in attracting good talent, whether that's in sales organization or engineering. So please obviously with that, you need to make sure you have things in place, a proper team for hiring, but that's happening. Related to Joe's or where the concentration is from sales point of view, we are where the customer is. We are a very global organization with big presence all over U.S., all over Europe, APJ, Japan, India, Singapore, all of these places. So, we are attracting talent from everywhere. And generally, on the sales side, we are looking for talent coming from companies who know how to sell solutions, who need to solve software, who know how to sell transformation sales. That's the first part. The second part was at ability to train. Over the past four quarters we shared with you how we build the sales enablement team, how we built the team with sales leaders that proper – even proper process for interview for these people, with the whole documented process. I think we are very optimized. I would say it's as optimized as I ever seen out there. So that's why you are able to add significantly large number and make them pretty productive in a shorter amount of time that we would do otherwise. We shared a little bit off that during our Analyst Day, the kind of impact that's being made with better training and better enablement.

[Remo Canessa:]

As just a quick follow-on from my perspective, from being around, sales organizations, my career, really good sales organizations, nothing matches what we have here at Zscaler. Nothing. The organization top to bottom from the way it's structured and the ability to scale. And as Jay talked about the training with the sales enablement group, never seen anything like it in my career. It gives us the ability, as Jay said, we're not looking for people who sell traditional, right. We're looking for people who could sell transformation. And to do that, you need to be trained and we are a destination. So, do we have the ability to increase our hiring phase? We do. Do we have the ability to onboard quickly? We do. Do we see salespeople getting to productivity faster? We are. So, I mean, it's a good place to be.

[Brian Essex:]

Got it. That's helpful. Thank you.

[Operator:]

Thank you. Next question comes from the line of Tal Liani from Bank of America. Your line is open.

[Tal Liani:]

Hi guys. My question is about the comps for 2021. Do you feel, or do you have any data to think that some of the growth this year was related to COVID an increase in license take rate because of COVID. And if that's the case, we might have an issue second half 2021 with the comps. I know that this is on investors’ mind, and I'm wondering if you have any data to support the view one way or another?

[Jay Chaudhry:]

Yes, let me start with the general comments Remo, you can be more specific. I give you the hard part.

[Remo Canessa:]

I will have to give numbers.

[Jay Chaudhry:]

Look we do believe that work has had to stay, I guess, COVID became a catalyst to shake off inertia. It actually changed the mindset and it really not just gave momentum, but also brought to light the limitations of legacy network and security. So, we are seeing our customers saying we are implementing zero trust, which means any ZIA ZPA top on deployments even after everything gets back to normal. If that was not the case, they would be doing short term ZPA deal and saying, I'm going back to the office, I no longer need to renewal of ZPA, beyond seeing that. So, we think the world is changing. So, going back to the office should not be impacting our momentum of the business. That's how I look at it overall. Remo?

[Remo Canessa:]

Pipeline is strong and interest is high in Zscaler, and engagement is significant.

[Tal Liani:]

Got it. Not much – thanks.

[Operator:]

Thank you. Our next question or comment comes from the line of Hamza Fodderwala from Morgan Stanley. Your line is open.

[Hamza Fodderwala:]

Hey guys, thank you for taking my question. Jay my first question for you, you talked about really strong traction with VDX. I think it was over 200 customers on that product. When you initially launched the solution, it seemed like it would be something that would be perhaps more complimentary with the monitoring vendors. I'm wondering, given the strong traction that you've had, what is your sort of ambition with this product?

[Remo Canessa:]

It is complimentary with application monitoring, right? Okay. So, but it's not complimentary, but network monitoring vendors because network monitoring vendors are monitoring traffic between your branch office and the data center over your private network. Private networks are going away, people are sitting anywhere. When you're sitting at home and going to office 365, all your data center, what network monitoring tools can you use? Hardly any. So, we are sitting on the endpoint, we are connecting to user application, we are sitting in the middle, we see the application side, we see the end point side and the best players to give you end-to-end monitoring and compliment application monitoring vendors.

[Hamza Fodderwala:]

Got it. And then just maybe a follow-up question for Remo obviously, massive expansion of the Salesforce and the channel over the past couple of years. But I'm curious what percentage of, these reps are fully productive, right, given the traditional ramp period that they have?

[Remo Canessa:]

Yes, let me just answer it saying that two thirds of our sales reps are still ramping, so they're not fully ramped. When I say ramping, they have been here for less than year.

[Hamza Fodderwala:]

Got it. That's helpful. Thank you.

[Operator:]

Thank you. As a reminder, please limit yourself to one question. Our next question or comment comes from the line of Gray Powell from BTIG. Your line is open.

[Gray Powell:]

Great. Thanks for working me in. So yes, I'll be quick. So just looking back last year a lot of companies that they went out and they purchased additional VPN capacity from legacy vendors, really as part of continuity initiatives, are you seeing some of those deals come up for renewal? And do you think that gives you an incremental opportunity to gain share as those companies look to modernize their solutions?

[Jay Chaudhry:]

Yes, I would say as I have discussion with our large enterprises and I personally do quite a few. We are yet to find a customer who has I talked to who said, I want to keep VPN for the long run. They're all, in various stages of the journey, the growth you see often ZPA, a former customer base is a result of more and more Zscaler customers embracing Zero Trust and ZPA. I do believe that all there would be some exception, but most of Zscaler ZIA customers will embrace ZPA. And I see them more and more embracing ZDX as well. Our strategy of all prime, up well , design, integrated platform with four pillars is working well. Two years ago, the question used to be, can ZPA take off? Right? That question has been answered over and over. Now, the question is can ZDX and ZCP take off? Early indications are very good. But back to your question s VPN replacement vendors an opportunity for us? Absolutely, yes. Our starting point of ZIA is replacing the user protection, which typically is a proxy. And then we start expanding it to the full bundle. Our ZPA entry point is generally a VPN vendor. And then you expand to, Zero Trust with app segmentation.

[Gray Powell:]

Got it. Okay, that's really helpful. Thank you very much.

[Operator:]

Thank you. We have time for one last question. Our final question will be from the line of Yun Kim from Loop Capital Market. Your line is open.

[Yun Kim:]

So, Jay on the new cloud workload protection product since you are already getting some early traction there, are you seeing an opportunity to partner with hyperscalers, such as AWS and Azure since a lot of the cloud workloads reside on those hyperscaler platforms, and I know you already have partnership with VIA VTA for AWS. And then also in addition, do you see the need to begin to target like dev-ops team for your cloud workload product?

[Jay Chaudhry:]

Yes, it's a good question. So, as you said, we have already engaged with leading cloud providers with ZIA and ZPA. On the cloud protection area, we got some early initiative going, there's a good complimentary fit-PC with them. And I think it's a little bit early. I mean, it's only a quarter or so, but the momentum is strong, the pipeline, we’re building is strong. The way you should look at Zscaler Cloud Protection is not the way you look at traditional vendors who say, I'm going to take my firewall and put the virtual firewall in the cloud. We think that trying to replicate your data center in the cloud never worked for even moving apps. How is it going to work for security? We look at workloads like mirror image of users and should be protected like users. So that Zero Trust Exchange, we are able to connect a workload in Region A to workload Region B over the Internet, coming through our Zero Trust Exchange. That's truly what makes us very different architecturally. Now, the next part of your question was left-shift stuff. As we are engaging with our customers, they are having dialogue with us as they are figuring out their left-shift strategy. It's a new area and we are closely monitoring it. As the market evolves, you can rest assured we will be there to serve our customers.

[Yun Kim:]

Okay, great. Thank you so much.

[Operator:]

Thank you. That concludes our question-and-answer session for today. I'd like to turn the conference back over to Mr. Jay Chaudhry, Chief Executive Officer for any closing remarks.

[Jay Chaudhry:]

Great. Thank you for joining us. I hope the session was worthwhile. We hope to see you as our next earnings call or before that in one of the investor events we'll be joining. Thank you.

[Remo Canessa:]

Thank you,

[Bill Choi:]

Good bye.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.