Peter Mantas of Logos LP presented his in-depth thesis on Zscaler (US: ZS) at Wide-Moat Investing Summit 2019.

Thesis summary:

Zscaler is a SaaS cybersecurity company that protects inbound and outbound gateways for enterprises that have users accessing the corporate cloud networks for applications. The bulk of revenue is divided into two platforms: Zscaler Internet Access (ZIA) and Zscaler Private Access (ZPA), with the majority of revenue generated by ZIA. The company has a unique secular growth story as enterprises transform their cloud-based architecture for mission critical workflows, meaning more enterprises will start transitioning critical tasks to the cloud over private networks. This transformation will take decades, and the company is partnering with hyperscale cloud vendors such as Microsoft and Amazon. The business has strong economics: recurring revenue, high FCF-to-sales ratio, and strong revenue growth (+61% last quarter), with strong gross margins (80+%). The company has had a strong run in 2019 but Peter believes that high returns on capital, the defensive nature of the service, and low capital requirements are likely to push the stock higher in the ongoing market cycle.

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About the instructor:

Peter Mantas serves as a general partner of Toronto-based investment firm Logos LP. Peter has an assortment of business and financial experience at global institutions. Peter’s prior experience includes senior managerial roles at large information service and enterprise technology companies in addition to legal experience within the capital markets, alternative investments and tax groups at McCarthy Tetrault LLP. Peter has also been involved in a variety of private equity transactions, ranging from retail to renewable energy, in addition to leading a proprietary trading team for a boutique desk. Prior to this, he held various economic research positions at the Export Development Bank of Canada, Statistics Canada and other various federal government departments. Peter has both an LL.B. and B.C.L. from McGill University’s Faculty of Law. Prior to studying law he obtained an Honours Baccalaureate in Commerce, Magna Cum Laude, from the University of Ottawa, Telfer School of Management, where he received several awards of excellence.