Jay Chaudhry: I think what I commented last time, was there’s a slight reduction in scrutiny of the deal so the tone I exactly used. I think what we’re seeing though, we are saying there’s no change in macro the way we haven’t seen. So macro is not playing a role at this stage. To say the forecast needs to be assuming macros not getting any worse than it has been.
Matthew Hedberg: Thank you.
Operator: Thank you. One moment please. Our next question comes from the line of Shrenik Kothari of Baird. Your line is open.
Shrenik Kothari: Yes. Thanks for taking the question, and congress on the great Jay and Remo. It’s great to see your focus on large transformative deals in top accounts as you just highlighted, Jay. The ongoing traction with bundled offerings across your emerging new products contributing to the new business. So all of that speaks to create in-house kind of innovation model that you have talked about. Jay, how do you see the role of strategic M&A play in expansion plans as we are starting to see with some others especially around cloud and data security. And what if any potential areas to focus? And Remo, can you provide the new versus upsell split in the quarter and how it compares to the expected the 40-60 mix. Thanks.
Jay Chaudhry: Yes. Very good question. So with tighter funding and lots of security companies out there, we’re seeing lots of attractive opportunities coming our way. We are looking at a number of innovative technologies and strong development teams. It’s an option. It’s done. A number of small ones in the past some time Yes, there are some areas, interesting technologies, especially in the new world of data and AI kind of stuff. It’s an option we’re keeping. I think you will not see us trying to buy revenue through an M&A. They’re going to see us buying innovative, disruptive technologies that can help us get to market sooner, faster is important. And that integrates with our platform. I hate to see acquisition being done where you have standalone products, they don’t work together with each other. But we are actively exploring those areas. There’s no reason why we should not be. Remo?
Remo Canessa: Yes. And the new and upsell was 45% new, 55% upsell. On our year-end call, we said we expect upsell to be above 60%. That’s still our expectation for the year. But for the quarter, it was 55% or so.
Shrenik Kothari: Okay. Thanks a lot, Jay and Remo. Appreciate it.
Operator: Thank you. One moment please. Our next question comes from the line of Brian Essex of JPMorgan. Your line is open.
Brian Essex: Hi. Good afternoon, and thank you for taking the question. I guess, Remo, I wanted to dig into margins and specifically maybe gross margins, I mean, you guys are about 3x the size you were 2.5 years ago. But you’ve hovered kind of in this just below 81% gross margins, give or take, 50 basis points or so. And I appreciate the comments you had that emerging products will initially have lower gross margins. I think that’s been the case for some time. But how do we think as you continue to grow at an accelerated pace and scale, how can we expect that to impact your margins? How are you managing your infrastructure? And then maybe just an adjacent comment on sales and marketing, it seems as though that was quite a bit lower than billings. Did you hold back on sales and marketing spend ahead of the arrival of Mike and Joyce? Thank you.
Remo Canessa: Yes, a few questions. Did we hold back the sales and marketing spend? No problem. We hold back sales and marketing spend, not really. It’s just the way things worked out. Maybe a little bit on the marketing side, but that’s about it, but not really. From a gross margin perspective, our stated gross margin has been between 78% and 82% then you’re right, Brian. We’ve been in the 80% range for a long time. The beauty of Zscaler, quite frankly, is the platform technology that’s been created. When I started here, we’re doing 30 billion transactions per day. We are doing 360 billion transactions per day right now. And we still have 80% gross margin. The benefit that we have is we can make decisions really to maximize gross margin or to get applications or applications or increase the strength of our product by going through public cloud.
So we balance that. I would expect gross margins to be in the 78%, 82% long term, short term, midterm, I’d expect the 80% gross margin range. If we need to shift our focus with more increase in our margins, we will but we do manage it. We do look at it and the emerging products do carry lower gross margins. And we’ll keep on innovating. We’re not going to slow down building more products.
Brian Essex: That’s helpful. Thank you.
Operator: Thank you. And that is all the time we have for questions today. I’d like to turn the call back over to Jay Chaudhry, CEO, for any closing remarks.
Jay Chaudhry: My sincere thanks to our employees, our customers and partners for delivering a strong quarter. Thank you for your interest in Zscaler. We look forward to seeing you at some of the investor conferences. Thank you.
Remo Canessa: Thank you.
Operator: Thank you. Ladies and gentlemen, this does conclude today’s conference. Thank you all for participating. You may now disconnect. Have a great day.
