PD - Earnings call transcript Q1 2022

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Christine Cloonan

Good afternoon, and thank you for joining us to discuss PagerDuty's First Quarter Fiscal 2022. With me on today's call are Jennifer Tejada, PagerDuty's Chairperson and Chief Executive Officer; and Howard Wilson, our Chief Financial Officer. Statements made on this call include forward-looking statements, which involve known and unknown risks and uncertainties that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

Forward-looking statements represent our management's belief and assumptions only as of the date such statements are made, and we undertake no obligation to update these.

During today's call, we will discuss non-GAAP financial measures, which are in addition to and not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. of measures to equivalents. versus number these use a financial non-GAAP their are limitations the related of There closest GAAP

affect example, as to and and calculate may other the may the between our usefulness in release. of other GAAP information factors measures non-GAAP earnings reduce for For or financial comparison. our Jennifer. included differently that reconciliation and the turn with could With financial measures measures which we is available non-GAAP to could I'll in company's on use tool Further call their non-GAAP evaluate are financial Exchange measures financial of results make performance, a all these other over that, companies the filings A the Commission. Securities

Jennifer Tejada

and actively you joining hardship months more has made of of you Christine, What difference industries, you, seeing recovering and communities We're uncertainty. all thank companies a for a to and after for year today. us XX Thank than PagerDuty.

work. The coupled together. also partners, of same remote At distribution. business. only acceleration, XXX%, resilience way for the forward We was world. our with top revenue dollar-based enterprise international the was hybrid $X off is vaccine growth of along above through both for ongoing we increased quarter. of first to the and continue know time, Give was new dollar-based with PagerDuty, fiscal our Yesterday, to is around pandemic coalition XXX%. companies bottom reopening tailwind a net work, muscle manage retention business combination tailwinds many the transformation million retention transformation growth the demonstrating co-located Total and strong net the directly regions complexity the for and beat challenge the Building challenge to emerging distributed PagerDuty's close work the are Go benefiting our XX%, COVID-XX trends, line build and the the DevOps One digital of new raise collaboration a cloud decentralized pandemic. adoption, of Year-over-year geographically of and as guidance the We launched and recognize to as XXXX, effects business,

to the positioned key world, is platforms well we that few PagerDuty progress future. CTOs of in are for one CIOs as post-pandemic a and As the investing

year, becoming operations. We a digital This are We path trust, a ways testament the every our billion to now to managing operations partners on employees. our the their with of modern our a ingenuity company new $X focused to success operations, leader, are customers. deeply is on digital a our ecosystem. Today, appreciate dedication. and to had users, our In world and embrace confidence customers, a a central Digital last infrastructure business for as work. is the software PagerDuty company, complex

loyalty our of use XX%. expand to landscape users, for core the favor. customers and are more the up of the deal customer SecOps our and million As investing our deepening more investing continued macro to in $XXX,XXX customers are The the We're market a customers trust sizes developer PagerDuty is growing. and Compared number $X XX% service a and same period many up us while teams. move result, year with environment than ago, than of

and unmatched provide their and moments. enables our These empowers other investment work capabilities new real-time teams Our context visibility and incidents. to unnecessary critical and to in automation in AIOps prevent mobilize users around teams intelligently

business. as technology on and set and for of apply cases Our real-time into a challenges their fast move use growing towards diverse and becoming the response to reality. time-sensitive, teams expertise, proactive teams platform leading to orchestration teams users across incident a our beyond evolving vision of PagerDuty work mission-critical is the functions is a throughout ubiquitous

these reflects to revenue up pre-pandemic enterprise per user levels. approximately year, last in advantages returning expansion growth in XX% with average over transactions Our

capabilities resiliency. fortify organizational Our

digital top have including XX% true over IDC decision-makers as across care biotech. continued resiliency as financial see where more recent and a recently, IT automotive, This we've priority to vertical for according of health industries services, survey. momentum, Just Internet, e-commerce, is named software to this a and and year

Our continues freemium usage. to offering platform new drive

point New new saw up years. logos year in free XX%. in users and the grew by We per last strength with paid accounts logo on over and new nearly the platform XX% at particular mid-market highest three

start-ups, expand expansion and $X year-over-year leaders at million within QX, Albertsons, land credibility by the enterprise largest significant and In of to disruptive grew industry customers with continues demonstrating we including leverage fastest us deliver ensure innovators and community. added growth new with and developer thought companies to flywheel and Total customers, expand customer-facing Truist Our PagerDuty our to opportunity due quarter-over-quarter, PagerDuty with customers well. Several Lunchbox leadership both our and Pony.ai services, transactions. Jaguar expand XX% segments. KPMG, uptime relationship managing It's Canada, the as especially to We Financial; encouraging different customers, Bell including expanded now rate in this PagerDuty Land Rover, as our their our Zealand real-time for cryptocurrency ARR of and see reliability across customers became and and New existing investments Drizly, quarter LegalZoom. with work. apps, XX% functions, customers the all we customer critical over investing kinds of of

that blockchain the -- decentralized our distributed. newest all real-time platform. These and and have companies, teams the is currencies. in are the For money. UK teams Finance using viability cryptocurrency based the The They're world's the world's the US, business coordinate PagerDuty eToro, adopted urgent Malta's in uptime work based of ensures latest to largest managing world's

from growth streamline incident and operations the is their response across organization another they So, reactive PagerDuty preventative a Automotive move sector to ones. PagerDuty. turn to for emerging

app steadily on for most and the companies XXX platform. automotive this our critical reliance delivered admired Global in now car its One We the in operations is of on services digital connected the world expanding vehicle support customer-facing company.

teams, across its of geographically engineering to X,XXX a multi-million-dollar across made mobile and company a full rolled a application customer PagerDuty ensure they retail pickup As contactless new locations. Fortune parts agile channels. they digital Last and auto company a the increased out Riding wave delightful XXX introduced experience. leverage year, adopts investments diverse demand, product in development

business teams, shows company over then, annual its multiple pivoted central to across team including their PagerDuty's Since return Intelligence expanded its pilot cloud the model, Event on the incident has platform, a investment it management. As and XXX%. projected times manage to IT driving cloud with of small the company prioritize

to with of X,XXX XX,XXX new in US real-time empower One platform railways. operations miles of the PagerDuty locomotives the the in QX. is ownership. Fortune is they've digital XXX manage lines of service operations and platform their freight PagerDuty full largest logo adopted This to teams using rail the selected a

engines particular in us well EMEA. have strength multiple in our QX for International Our in footprint was expanding robust market with growth and served gaining growth share.

that our is in reach, businesses on XXX towards global a journey. Fortune of to pay our the already off, new extending journeys own XXX and XX% added PagerDuty are XX% While companies digital-first of Each focus and critical thriving continues that of Fortune as a world, undertaking we to over rely part enterprise these of their PagerDuty. over customers on

users cases companies by addition with The use is In XX% and also adopted identified reach logos, customer to our up users. number across new new our service year-over-year. we're expanding of

have delivers updates customer service OutSystems Zendesk. customer to Teams PagerDuty visibility us our our agents to allows especially customers which offering quarter, an DoorDash, the Product During Netflix Cisco Zendesk all this service all also real-time for connects as innovation which new use expanded teams proactively launched at application, features digital. exciting of hub PagerDuty. Customers, as and to we and and teams operations service directly is communicate This including soon most impacted. as expansion growth Okta, engine, integration the to the things with quarter. and our now automation within and ecosystem, is their AIOps, Zscaler adopted

are for solve customers XXX global are out enterprise their and cross-selling. to information with strong large Australia. customers, margins. our We automation including motion, into business while Fortune innovating of land faster well, automation enabling in performing PagerDuty sales international with landing able through a Rundeck utility now enterprise problems company is based new solution health improving Rundeck Rundeck our seeing integrated real-time, demand an

number PagerDuty growing ARR already of XXX% operations more see increased reducing large context online a XX% including saving ARR PagerDuty enterprise with X,XXX admin as now on resolution last malware to platform knowledge offering guard services next-generation security teams visibility build we teams Event satisfaction. month. uses automate advises against phishing, and valuable announced based and both to quarter, past the a time providing in are We team than upstream for or significantly Event expert SecOps platform incidents. the saving operators digital downstream SecOps need next update continue powerful ever-increasing different confronted for In of at strong variants while automatically first Intelligence customer steps, without One year-over-year. These and phishing year, our features improving Intelligence, education -- per on access, uptake the and dependencies, service risk to with PagerDuty updates blacklist ransomware over time. for attacks. fully on

new spent reduce and to responders service this work availability. quarter, on using spent time orchestrate incidents Our triggers, also -- resolving tasks teams, automated allow reducing actions automate that across time improving custom

change stand-alone choose domain are domain diverse These demonstrate a platform observability. and the PagerDuty to digital for integrations. extensibility customers expanded from market due operations. agnostic distinct XXX increasingly over scalability ingesting SecOps to is is sets. we key the ecosystem infrastructure us maintains data why domain events, reason a platforms of These and the broadest agnostic with new for integrations market, the Carlo for and as quarter, the JFrog During as with our According our our emerging a ecosystem. central CrowdStrike digital pipelines include and Monte Gartner, AIOps their in integrations centric for data flexibility

inclusion, company remain across our and impact, social community and diversity culture core efforts our success. and the to equity Our

Pacific quarter, money and American This Islanders. advance both we Asian for to and equality contributed time

by Array We Futures efforts the month, resource also of our Black employee group. celebrated led

with distribution, arm Core, International in International equitable credits in Our said, Next access $X invested resilient. got PagerDuty, systems alongside technical and towards places Director already Trek vaccine clear and leveraging Three eyes these Level expected social work. are support Medics, making impact Medical and life-saving expertise. grantees, and more Executive financial product million platform Medics their committing it's our us PagerDuty's of Analytics unexpected COVID-XX out Trek for both we've

health time-critical organization platform customers. type the XX we report setting IDC cited work. of delivering the recent added difference in PagerDuty's PagerDuty's platform to in industry proud These with organizations where new impact make it's exactly the we're In resilient can make. quarter, an For in a care, impact to standard. A an nonprofit grantees impact life-saving and leverage time-critical and commitment mission-driven as work our lockstep social their

will pillar We to a our make of culture. this continue

a we Sachs; host Life conversations on thought little PagerDuty. Cloud of three are Service We're of podcast of PagerDuty hosting future future forward CEO author, on Analyst where to attendees detail to XX,XXX thrilled all-digital Financial host HashiCorp; the our than will XXnd. future free off psychologists. share that, on as days, We're globe a kicks and leading Howard. global billion June the and David well we to of of ARR the $X at this Summit on of business. Salesforce; and Over business Adam the the CEO call leaders, Solomon, earlier Day Finally, this work, turn Work Clara Co-Founder more and from announcements event. welcome looking Grant, at CTO becoming Shih, the a over we'll across more XXth, We're June the roadmap the on organizational With Annual and our the to Summit, our which Dadger, expecting best-selling I'll of including Goldman as Amon year

Howard Wilson

enterprise exceeded We the the business and our our strong we gives users, expansion, quarters topline, products operating of operations the with Jane. adding million improve strong adding robust XX% started long of the can in year-over-year, end of term. you, guidance the mid-market, last continues. driven best-in-class new and momentum year solid us accelerate while execution momentum upgrading The and with that X customers plan. and particularly to margins margins results by grew Revenue maintaining Thank and gross that high our over digital confidence $XX

expansion by retail, software entertainment evidence sector, growth financial health seems media in customer We be revenue of of strong is technology, within to services, recovery, longer. International to taking showing impacted biotech. revenue. in the growth existing base. our and a XX% sciences growth A continue and The but is to grew travel and our total life year-over-year major hospitality with contributor care, telecommunications our XX% to see above-average pandemic, and negatively transportation and

a we of region this high user Our quarter. the driving plan APJ consecutive fourth successful enterprise expansion being digital the with bank predictable operations rates particularly in And for was PagerDuty with quarter. one large adoption of EMEA saw example growing

continue we we to As strong market, two trends. see move up

Firstly, customers are moving toward longer-term contracts.

shift ninth positive year years the Annual contracts continued. of versus consecutive the XX% of XX% month-to-month our annual quarter, X For ago and comprise to a revenue XX% contracts ago.

Our same period in versus grew XX% momentum multiyear a the ago remaining which deals. performance obligations, year reflect

Secondly, our increased quarters. revenue the per average customer each of X for has last

dollar-based once dollar-based enterprise net was again overall Our retention of net XXX% XXX%. retention above with

more year range months as last for ago. were XX% As dollar-based early renewals expect large reminder, billings mentioned in in fiscal year vary grew modest QX, several XXX%. $XXX at grew quarter we Quarterly a XXX% Trailing net of million a to to we a by XX% XX the XXXX, in remarks that retention executed billings prepared from due quarter. of to

said, we co-terms. the some months to As noise renewals trading of we of at previously billings XX with and timing look variable eliminate the associated

expect ago. of free, companies same XX% to billings ex months at/or XX% be the be the platform, year close and and billings number in above trailing XX a The to growth on We XX%. both QX and for QX period to XX% paid grew by between

in total increased it's conversion customer XX% is spending proof of a and $XXX,XXX stages, offering strength year Customers mid-market. a Although, rates by acquisition in point and XX% growth a $X mid and X% early over and than over enterprise expected. in our we paid from million to The spending grew better year-over-year, free customer customer larger free creating for are performance and paid solid respectively, funnel its year, markets. enterprise with another our the

Non-GAAP EPS ahead and $X.XX our non-GAAP margin was above XX%. of turn non-GAAP remained results. negative and to ahead gross operating now guide X%, consistent loss Our with consensus. XX% detailed our for target the was will I our range QX margin of quarter, to best-in-class non-GAAP of XX% financial the

operating and of were expenses $XX our Research to $XX non-GAAP development ago, compared our million due go-to-market year million to quarter, a expanding we platform or AIOps, ago. in integration million our automation, ecosystem. XX%, the same and invest investments product the to $XX expenses XX% million to expenses period and the service of year development. in in up continue For XX% a were and as of $XX R&D in workflow revenue revenue compared are our primarily areas strategy or customer

expenses investment our and marketing XX% in marketing R&D as invested Sales XX% or year, during revenue of grow to expect in prior or We in this year. XX% we $XX year-over-year million compared programs. million the were revenue, up of $XX and resources go-to-market to

the was we expect of a to of end conference, We in increase QX, QX expenses noticeable as user in year, Summit, June. this move PagerDuty which marketing held our in typically

sales $XX back And of percentage year. addition, the to in lower marketing above-the-line In the be of which costs. half year. and a increase were million anticipate XX% and or revenue, campaign, General low of expect revenue for G&A. we to launched we expenses $XX the or brand of will advertising quarter a revenue ratio million the a XX% as exiting administrative for compared prior We with year in expense-to-revenue the

quarter last of $X million year. same million the in QX Our was loss compared loss to $X operating a non-GAAP

Our negative compared operating to margin of was X% QX negative XXXX. in X%

share at $X.XX $X.XX net first quarter loss in a loss compared of of million, came $X loss last in net a year. net loss of QX net a the Our share $X to per of million, per

to first operating a equivalents the with for and marketing year we by in $X investments, shift Operating increased new our support was quarter, sheet. negative. in to and and the out campaign dip quarter flow QX expect deferral timing cash and and be cash said, expect and acquisition-related and with investments convertible cash, improvements we to the flow operating expect user balance working ago. spend investments, and cash XXXX. with FY marketing by we sales the interest our in flow increased negative than and in ended spend in positive payments prior increased increase debt free That particular, to operating XX% capital Free cash existing for in operating With the in operating brand our nearly the $XXX,XXX flow. earlier, improvements and referenced In cash in million million, free flow to cash on the QX, during offices. lower therefore, driven of in $XXX,XXX conference and to in negative sales quarter $XXX We compared an QX. of in both Turning same payments, margin loss

However, year, our in full operating year half to margin we so line the the we our guidance. back expect year of improve the with exit in

now Turning to guidance.

of quarter of million, the outstanding which, midpoint, implies a $XX.X shares revenue million. fiscal of range to XX a operating $X.XX, $X.XX loss expect share loss margin XXXX, in basic rate. second we to XX%. the growth XX% range at per Non-GAAP For represents approximately in the net to non-GAAP of This year-over-year XX% in the $XX.X range of the with million

with year million, For per of fiscal the share we XX rate. This year-over-year basic loss XX% implies to $X.XX growth $XXX of a which, non-GAAP revenue of loss margin at midpoint, represents Non-GAAP full million of net approximately expect XX%. XX% a $XXX the shares million. to operating XXXX, to outstanding $X.XX

these the doing way to like and old new tailwinds an PagerDuty's are moving redefining shifts, success. digital to turn at of platform a our critical you to transformation I that teams business; of way of plays imperatives a unique Q&A, to customers' migration, drive the Before our DevOps from things. I'd remind cloud center acceleration, workflow, role

across and that precision. multiple sustained environments, see seen customers' creates unequal robust levels growth. business work set unnecessary gives and to momentum to we've automation, are This context quarters productivity, and Our work complexity, improve orchestrates past we is in topline through the confidence continue, of outcomes. the reduce We platform well-positioned prevents the me with ensure three

in Conference As our update you week. I Q&A. for Jen able detail us that excited and were on to our up that to Day be will With open hope more mentioned, that, Summit we XXth at call join you'll at June the earlier Analyst

Operator

comes first to Instructions] raised hand Howard, joining much, Craig-Hallum. so you our Chad, us. come Thank at thank to we'll for you see Chad you. analysts The I Bennett and [Operator from

Chad Bennett

questions. taking Great. Thanks for my

to just not But elevated, right, -- impact too mentioned whether the fourth is especially current in it fourth you on to be? quarterly. had So, rate couple much on quarter or negative probably that growth focus impact, extent. that quarter billings But quarter Howard, any over what last harp would to maybe you just quarters way normalize billings do or the of much some there in that too and quantify the the billings, renewals early recall I some the and

Owen Wilson

broken So, Chad, it's -- way. we haven't down it that specifically

quarter. from can that and as You seen in had guidance within XX forward where to we growth look see quarter-to-quarter. billings we billings decided did the and falling our reason each QX, provide we those of billings did XX% see we on some create trading bring And some fluctuate also the why that in the rate months QX. why That's in at we

because a have are there's to one, falling renewals XX% arrangement some dealing growth. means of that billings; So, that's the co-term that we for our range And with, customers. with That see for represent we XX% QX, within potential we fluctuation. also it

at of view, we So will at when that the co-term. hard at above which But end being months longer-term the XX%. to XX predict we trailing exactly or QX, see look the it's

more with perspective. growth So, a the see from revenue that we up rates that lines

Chad Bennett

maybe And for then follow-up me. one

for Jennifer. Just maybe

recall logos penetration PagerDuty, cases growth the about are very talked net So within I SecOps that to mean, recall the those new just contact or and if but I are on in center user don't use they the I you're don't the seeing, you've the and base? robust. expansionary past, are numbers growth --

Howard Wilson

mute, on You're Jen.

Jennifer Tejada

for but real-time, logos, out majority and adjacency. on they In is of And other use those of all sort cases, our are most become you're start areas. service The new has vast -- work you cases, Have PagerDuty's customers a in mission-critical then customer platform case on natural it quite that mute. a unstructured, some realize expansion. can DevOps leverage in

at historically and more recall separate organic and we a Summit, year Service more may had product of for where as to adoption largely announced Customer within You viral been that for provide PagerDuty we've accounts. last around customers in started SKU kind education marketing September and that,

Chad Bennett

products. secondary that guys and behind was users Thanks. Thanks. great. did providing That you Thanks the for metrics both

Jennifer Tejada

You're welcome.

Howard Wilson

next our is has question? who who Josh, -- our

Operator

Blair. Matt Thank from see I up you, Howard. from Stotler a William hand

Matt Stotler

guys. Yes, taking questions. thank Hey, my for you

Howard Wilson

Hey Matt.

Matt Stotler

see. Good to

do level growth about installed a your as maybe answer previous helpful like base So in kind couple are and time? the today? for of there. primary of about opportunity you that including base kind One, in the one gave looks over recognize being penetration talked continue you forward, opportunity questions. And a installed some what think going that the to examples, higher penetration of you continued initiatives How of what overall to

Jennifer Tejada

something at contracts us company quarter. managing we expansion for the parts company end in think single we imagine organization. as another operations for look developers service, see this a and talk closing centers, security, out the customers includes I that cetera. that fact large uses instance, software don't large physical which us cases software we process a know use customer penetrate I that we to for workforce, that out, security in don't uses legal, across their the then ability services us using that we And engineering well of enough have There's also the company see the because customers lot sold as we us, at the of of a of about financial that's security customer different don't for et then IT, a into entire uses commercial that teams is

we inside cases more the and see expanding organization, of sort TAM customers. develop of across the as use more these So

of I becomes more challenges developer headcount other getting every to software despite a for grow. say are natural the developers, PagerDuty. more as workers the over thing last is some continues mean, company see saw we that tech hired, I those year, we and users The would company,

headcount So there's within growth. even growth

it's in expansion terms can see in of you penetration, the customers I that with largest invest or very the just over So early us. $X think near rate with And even our of our that customers. million

Matt Stotler

Right, right. That's maybe a helpful. as then And follow-up.

opportunity mentioned triggers, relatively adding continue the automated You you a great obviously is automation for which is and to new, value for your customers.

love kind value to thoughts of get remains would to opportunities in drive So your to automation on workflow of terms what continue forward? that

Jennifer Tejada

things of work at unexpected. one incident it's think I the is about that's the hard response that comes

orchestrate, It plan for unstructured. it. we're early signals us in cross-functional of the proprietary data, automation to on but in teams our And work in, which Intelligence, expertise the and helps people very and involved. tend the be investment multiyear You orchestrate be across people, XX but made themselves. tends the It within automatically The a journey, we're leveraging to events organization. certain the on we've can't correlate foundation workflows Event business consolidate and to our of coming then on years right

to with our technology the if the and of the me. auto in not of some customers what in moments of that that product to team on we in a about including of incident, take think learning next. kind apply work solve safe the are but self-healing, incidents And ask some recently tucked for that second, platform in trying what do more beginning of that of magical been helping we of from they're need direction talking And through again, is me, it features of them just Some we've sort we've when doing the assistance the you new previous orchestrate where do, what that as the should Rundeck. to similar

Matt Stotler

Got again. it. Thanks

Jennifer Tejada

up. showing for Thanks

Operator

Okay.

Weiss to we'll Next, Morgan Stanley. go Keith at

Keith Weiss

of call sort of will, But Thank the takeaway one exceeding very at it Howard. strong, billings a have on positive. you if base. your that that in initiatives sort customer follow-up not question. like And taking it this but tone It we on I'll The the bit. correct horse, of that's sounds for renewal offset dead of strategy. are of And weaker I is new very the is is a going for guess a a to a beat expectations? metrics, by side new conference well. the look you business little equation is then sort like I Is some sales beat

Howard Wilson

Yes.

mean I largest. So do would the our and comment terms at of smallest is QX I is is QX make the of our our in have typically that And we times. renewals seasonality quarter best

billings is a perspective, from base So, the available smaller.

billings. affects pull we that so And because impact. And was the also, other have the forward, that

though, about would really that's say that, look we rates important think an churn context I So business, when When our you at our billings. remained low.

terms So, base. existing above our renewal of in strong is rate is XX%, right? So our business

the at XXX%, But business at tracking net we're look clearly you are then well. retention new expanding. also additions our If really dollar-based

the strength now. are being terms business, our seeing new the us also we're give guidance, prepared confidence, but of in So, guidance we of kind gives both billings that in that doing of terms and to

Keith Weiss

And great. -- on on it. guess, then Got go-to-market. sounds it. That I Got

bit indications of to security Any terms customer operations, deals getting with little talked of cases and You a service and some really the partner the natural security strength sort use wondering, Hoyt more early guys it on Global the in How those would that pretty about big guys customer like strategy? the I head cases. some in of success Timm with a security guys, just you going partners fit good how use guys generation? a I going of fit does kind be Partners. contribute was it hire, service with Because do seems together? up Zendesk. know to align in fit deal How does new it? just those made that X

Jennifer Tejada

to partnership a anything. hub us connections central on consume, really this our we that's product. kind think to about is us There this right? that build our allowed couple ecosystem domain-agnostic where technical We of And of just about allow levels, from signal to of integration independent the ecosystem approach

So, service today, more integration see the popularity, for mentioned foundational were they the past. the partners. Salesforce offering in early CrowdStrike or that offering We strategic us And SecOps grow customer past, in cetera. et then, as those become about the some Zendesk started our partnerships in we in And of you've heard talk ecosystem.

So product the in partnerships technical momentum then, Timm that in ecosystem of look top board at to allows shared that the the the strategic cloud to some go-to-market us we've of past, have. that longer-term hyperscalers, having the on partners providers. think we move opportunity, also lean and with cloud And think we potential build I we where on And there, the cloud migrating and we much risk, helps environment, to less but -- customers go-to-market there's opportunities. have into just build an it they're evolves with into also it service faster significantly which their integrate really effectively together to not like as AWS,

having build on reach us and go-to-market Timm all in -- start the we build as it some our a really here way, to efforts of broaden market, So to their doing puts really I ourselves. position, have think, to to in opposed the that independently

Keith Weiss

you That sounds it. guys. Thank so great. much Got

Howard Wilson

Thanks, Keith.

Operator

you. Thank

Auty with Sterling Next, JPMorgan. hear from we'll

Sterling Auty

Yes. Thanks a guys. lot,

from side. Just one high-level question my

to possibility think growth? couple you do be is the a the to talk accelerating So times. you in acceleration fundamentals positioned mentioned the you business that of has changing confident about What of

Jennifer Tejada

DevOps we more combination tailwinds transformation customers investments that slow journeys, are about our trends to we've always a And there. their cloud years and signal customers our were that we've transformation, even more I very see. in people demand has for adoption as recovery, digital if the mean, long-term they've down seen making us. started pandemic are being projects early macro sort It's to expected talked and of the of take the strategic and in pulled forward multiple

as additional my work an I In your addition, complexity, remarks, prepared mentioned right? in distributed. hybrid creates of Because are now more teams layer

who's don't the moment, et know You when where, in cetera.

then is top on the the working pretty of accounts, those We is again, Fortune startup an are It's continue of removed I'm really as And perspective, metric, from for and of XXX what we're all business enterprise, a to we've From we friction customers those an of a our customer across leverage focusing XXX on, when on then are perspective. there performed really real-time area base PagerDuty sort and that to general, well a there really early. from if this new bricks-and-mortar what for executing is growing. large. time when toolkit, the the Fortune their business in well we know real-time all TAM the exceptionally route so, in And the been customers which than of to EMEA this us. quarter, more regions. XX% are I was also already inside up we've community. lastly, issues by Freemium build is that and continue start-ups adding the within And International, expansion perspective, is way, XXX. digital quarter. part DevOps get the issues, think matters, a Fortune Fortune new look time proud execution theaters at you're in matters, having last going tailwind XX% heavily and our and of you the mean, an seen XXX, segments. in of well in strong

like So you're a sort growth kind starting of we together rhythm to that see and hum in our of engines of to all see. come

Sterling Auty

Makes you. sense. Thank

Operator

with Okay. Derrick Cowen & Co. Wood

Derrick Wood

you're going up. travel at start is getting an of think I mean, the do is? could one much next lagging you improve wanted start have area sounds still to maybe. verticals nice headwind how a I Great. travel, couple really but there of that ask that talk looking Can to is Thanks. you and much on you quarters? about recovery, think I it picking like And exposure we're and that's and seeing I area how to but vaccinations, mean

Howard Wilson

-- Yes,

Jennifer Tejada

It's -- ahead, go Howard.

Howard Wilson

Yes. Yes.

the a like the that X% at transportation, like did of of pandemic, start stage, us, travel included X% to and which industries hospitality, And at at Derrick, that a time we So our quantification energy. share and affected for of revenues. was the

is travel So, a of subset that.

is travel it's improving, for not seen quarters but transportation. year We now the was level a at return have two a And ago. as it in

So, trend. we a are seeing positive

come naturally demand generate for it portion to large online, those businesses company, a standalone. amount as a that hasn't represented So, certain us start will a but of as

Jennifer Tejada

newer highly success last our base SaaS would barriers of for to in at higher. quarters providers over we're really are diversity vertical are of I some several just, customer to think financial that and opportunities, business, our when regulated the the I the industries Derrick, services, things the And the entry one, look like where I seen

and forward-thinking, that company, regulated even and wouldn't You have of in kinds they're to other to fact, demonstrate of logistics, of cetera, a et as and mentioned biotech industry. right I lines, expansions largest those railway security, a level the saw you We and in of make number of freight them resiliency in and health care highly a think be new being scale digital-first now. to accounts. one having but US' customers then transformation successful And

And et industrial software our verticals highly of cetera. regulated or well-known those more are and retail, strengths so e-commerce, additive some to in more Internet,

Derrick Wood

hear. that's Yes, great to

work But like you enterprise that strength on on that profile half? year seeing the you're the guys. premium you have approaches, is it mid-market in and guys? it Another back change sales it question towards push bigger deals, does and selling seasonality Does seasonal little of I as in business the Does cycles? more for mean, -- a within create kind for clearly, go-to-market. good enterprise. you sounds conversion top-down more Is bigger a longer

Jennifer Tejada

to you want do Howard, that? take

Howard Wilson

Yes, sure.

even within our so majority you often with you're and typically of the So, sales the quarter, the when are cycles, enterprise. still up in that longer right found with within but end the closed can -- a dealing a enterprises, deals right,

procurement to there obviously, those take cycles are much longer, the are longer. industries, regulated So, outliers, in highly tend particularly

don't a, deals particular impact does a be on see call So, a that they deployment. those What it buy terms to it is enterprise as in particular or having the an in of larger, tend So, change basis tend to we right? initiative seasonality. it, for

So, that upfront means buy their requirements. they of that

the the is a to we So, a from expansion them get it means what users purchase for the time the that would expect. longer initial the typically licenses bit or which takes deployed, to bit longer from

had model, puts the expansions. small of are to on net purchases of tend events making a like developers pressure steady which less by retention that driven you set our frequent, expansion dollar-based but bit moves be So, larger. This meant was because largely team-by-team, to add-on a be traditional

Jennifer Tejada

organizations initial like think some see -- might be in these but much focus total business I'd because and the you're land use They had past. logos the do enterprise of does are look instance. percentage in be of larger, expansion the a of our in things more we I large than to enterprise, with we more widespread it for expansions than strategic. point mix when to opportunity as one the at where But And to more the tend cases, acceleration the landing is

Derrick Wood

Thanks questions. Great. my taking for

Howard Wilson

Thanks, Derrick.

Operator

telephone, by us joining And Rob? with Okay. Baird. Oliver Rob

Rob Oliver

Thanks. me okay? Can hear you guys Great.

Jennifer Tejada

Yes.

Howard Wilson

can. We

Rob Oliver

Okay. Great. Thanks.

here. not mean, what as on seems of in Valley. probably about you your it kind Sorry question this then I'm where I strong shake balance, have finger throughout your work-from-home. to time. uncertainty issues going to I'm going more lot and fully exactly anyone. kind split -- And CEOs, if being relative there's just pent-up are pandemic a work, now guess, I and out. a I up just follow-up. seeing cadre where other just end like work-life as we for you do probably curious to Silicon when Valley Jen, about a pretty then the And are in one position we people beyond are curious, a your end thought more than had been participate hearing relating on And know really you've a I likely of demand employees appreciate make But Silicon how now And high-level company, have had around multiple decisions right to the up? not panels party importantly, you of things in talking the some leader of Where you're whether there's terms I like to teams pulse hybrid as up? to are of of

Christine Cloonan

speaker? next the have we Can

Jennifer Tejada

Go ahead, Rob, I can hear you.

Okay.

Rob Oliver

just pent-up of follow-up. a shaking how contracts? my I'm view if question. is relative That's and then with And your have -- demand or work Yes. what curious you're to out some what I your hearing around

Jennifer Tejada

on depends it company. of type I think the

model, demanding they of at to want together employees of centers look to companies et basis are the not moved to have where like come they apps, were SaaS, you the have joy able to to If digital Many pressure people to environments. of back outside they employees software, collaborate lot be significantly work where oriented get already like to teams Internet, flexibility. office, There's and at a enjoy want with regular and flexibility lakes a that digital the freedom around on they're time, used already places cetera, already business to a the and to urban of being to same sort And the work. and mountains together. want and on those

in out trying your culture. four of sort necessity, are a or are a experiments culture digital industries environment first And to back we're think a people out it with to harder only does and had a and to more office running out, some to other no, locations sense their I there verticals that are -- they going work manufacturing back number CEOs team, in much primarily historically what from make to people for co-located team that of of seeing the can of be pushing figure of in and had are is few get you days say, or require times year. and and come remote meet office we're

return summer lot as people we will of figure out I've answer few or some think I the or North like. kids statements I away think seen big the So or what sure. a sort think every look And table running. from I moved it, of is to now workplace children sort yet. they're on school about about to I And don't experiments know talking more know Flexibility for in A have regularly. of that things broad-reaching that to stake. the to that's still a making about workforce there's terms not just to want get the to policy and continuum whether of and American through the to going back, the employees concept return

in you market. of work, give the the best then the the competitive will can't for they and where employees If choice not flexibility be employees you

Second, one from have to to change down, the broken have place as of been barrier other. to great sort geographical the barriers talent move to for employees the

have when space a office, of and one to you some knowing big is When ability hold reliable. So and people this have equitable? working on you're the means easy current less; pure same do talent locations. get one and in as the become and you PagerDuty at teams What and where you've you but in experts opportunity, do for more because a your everybody can box pent-up because timely how pretty other make teams square, I of way. employee go not opportunity, remote that some big mission it's to is not orchestration. means the potentially, some got When actually of the on the tailwind and we distributed is everybody after vision conference, how and predictable the that going terms and teams cetera, it's that How distribution at reliant them, a a are in to think to everybody do you is experience the teams, compete on sure where demand That's co-working your make home, in collaboration sure happen is et basis? the see video

Rob Oliver

as had That's And one I follow-up for really then, Howard, well. helpful color. Thanks. Okay. you

much are software just guys You at success remarks able Freemium if you if of a that then been curious, different on you're you and of as just growth got But Rundeck XX,XXX-plus and the look and something you've kind user the an base? that's which that as also base in there's of nonpaying. becomes conversion the look And of yet Rundeck at developers, satisfied how Rundeck side seeing that there. when glean Obviously, prepared talked you've extended we with you Freemium to about when the cohesive. of try about talked there's industry. generally kind user also anything guys Thanks. also is your to sort larger you any -- more And to patterns

Howard Wilson

Thanks, Rob.

been platform. look that's to thing start think the how at is it's using the just I easy offering fascinating developers with become for to free our

strange a had I an we offering that called almost-free year users, barrier. a So when paying that for for created that seems five $XXX were people it the offering that, when

all through look through as list in week names be offering, each like tech. clearly You have them of read crazy of of can the of you I we some start-ups, when on looks more users companies that must free the a list start-up these tell the it the identified can the and very list, So right? companies, from a name, lot

that certainly as manifesting thing is, that they how being interesting around So had PagerDuty key itself of developers to to is the us a acknowledgment just part the see in work, it's that free.

access. And created so disruptive the of that are be we actually trend feel an part for to and they're very seeing next big companies early-stage player, we a going that of important our that moat. those that's about And sense, terms have competitive customers in already more in PagerDuty positive

Rob Oliver

again, guys. Thanks

Operator

Thank you.

at Next, hear Hedberg RBC. Matt we'll from Matt?

Matt Hedberg

there? focus I both and you you. to for European on think talked this with a an Howard. you center guys. fired And taking Hey, prepared of the new the see know Hey, data questions. Europe about Thanks my Europe. strength about drove how in Hey, up potential remarks, you guys Curious increased what in Good In strength Jen. earlier year. growth

Jennifer Tejada

We Well, do we actually not have launched data physical residency centers. in data Europe.

Matt Hedberg

I see.

Jennifer Tejada

the opportunity. also across landing well. small digital instance, ground field market. native capacity think and but because we been the to the growth performance, the European don't really important. terms distributed in us in get are really happening we've in same I think, I all food North are large like automotive, nice area for on we're a companies. of of ground in strides all access the such And time, of terms things they're player very areas particularly commercial we've leadership, places note Strong work, We opportunities America EMEA have excited been like about of One, that's distribution seen the our do that a I'm And we're of making think great at as starting, we on to that in presence mean things see some in that traction have trends happening But our grow that in of see I that lot a in now Germany. I talent, cloud software in delivery, of I of market, as but able where grow first, physical same think that sweeping to opportunity very of We the And we Germany EMEA. those thing. some humans. places an for customers, in pretty consistent like

seen also in So, team. our historically, small we've that's very again, been team. performance And APJ good a

expand multiple our and see that's when quickly, also those one and ability momentum and to So, growth you're acceleration driving about theaters, another the seeing to international invest like I and that kicking that -- time, engines very confident you that's one future of accelerate think into makes me I try said, And into us to start is the for the things at really of business. gear the business our same overall.

Matt Hedberg

see how think half business? do might And great. do Amazon And for that little just Scott's a he's year there have business guess now of obviously that the the you That's effect you through been that. for Sean a I been you he under what I of then while? a Amazon. Thanks coming and now with on bigger for impacts some from kind that guys guess rippling your

Jennifer Tejada

already the us growth, really allows to don't viral mean, areas drive we with months, to imagine. to the even cases Yes. around and because the across that teams product use He's so product mobile six about experience. but has a automation, to adopt of lot for in thinking for us thinking drives been product-led not helping been it And important that that users for organization I is great. need particularly experience Sean he's focus, experience about AIOps, us

to really multi-product time, BU think running the organization. used areas the focusing. one So, when a where the of I he's same at And ubiquity Sean about is that's play,

executing and newer our opportunity ability in to quickly so really from product well of him, also to days build a Rundeck. of time. for to support don't areas. hear he's So, take with have And have Day, we're development to executing innovate well to lot continue our for him over talent with looking talent. some you'll There's want we very product We're that at for my word a to it. an Analyst you Early bench

Matt Hedberg

little a there. teaser We Good.

Thanks that. to forward everybody. Looking

Jennifer Tejada

Thank you.

Operator

looks it And like Okay. round you group from your Kingsley, we'll with out patience. our Kingsley Crane Berenberg. thank for

Kingsley Crane

one one. I'd just like to ask quick

central system think So, of nervous also lot of of like title. enterprise, PD when about the to as themselves that that think we companies there's a as the

that? So, to be to then and continuing automation the hear on like longer for with important to for would things I that like is more Rundeck how strategy term, enterprises

Jennifer Tejada

ecosystem are independent to trying pull here, these lean And in. So, a our I'll One, moats. to from. the nibble the skate help category. to sort play in puck is et domain-agnostic couple deep of for all players mission-critical ticketing the When We essentially that think from to digital around is the systems, customers trying ops our about cloud the hockey going broadest, folks what the to where work cetera, trying Canadian one unstructured have the are edges, they're us and players, on invented we observability that heritage anywhere, we maybe and most of that game invented to really the thoughts. of order manage detect have PagerDuty's you

essentially have that have used oriented dissipate a by about don't that really gateway uptime product, seconds is very It's the they because I talking very become there, dollars has work, lead to get millions this we're to But So, distant orchestrate feel of the expertise you get we done quickly, when money. quote workflow around to earlier, quickly this like treating in right. time-sensitive integrations I workflow.

cetera. customers, enables and They're do of I our think that. ecosystem as then up nervous way do, hundreds a sort system us in services around very seeing businesses management, products their where where we're hybrid service lead players of or to I good often inside their competitive MVB, to dependencies not this another as around as the for critical the we within a us that architected service around mode around They're deploying we're center environment. both build not we're think, ownership a automation, sort and of and are very to to business. defense, digital integrated That or because or infrastructure able service other digital of and another, service have to services So open lead able that more people they're et the full-service cloud-native opportunity architected

So momentum great in I at a but we of Generally to and our that It to and think speaking, realize that then virality Kingsley, some virality team what and time comes things wanting specific Analyst there. at multiple to how in and drag services more multiple person it it ease easy from about to I the talk sort puts connect can to driving through grows would use, and value business. of with And acceleration is product drop it one ecosystem. starts is something a us of of position, say clearly the integrate our that service members, they our again, of Day Summit. one literally that PagerDuty is though, to quick

Kingsley Crane

my points, taking great for question. many thanks So

Jennifer Tejada

Thank you.

Operator

the today. rounds group Okay. for That Jennifer, you out over that's final to back comments.

Jennifer Tejada

today. Analyst our at everybody and June want to to Well, join listened XX Day. you thank just on for you I us Summit say I hope will who

thrilled are in momentum We business. with the the

our And to get want thank And especially customers As us an have a resilient and these partner to continuing us better accelerate on macro to of just see. the very you. time. difficult remained team very standard high of tailwinds for hold the our confident every long-term proud are through to I business with our with day. team I'm can you back help I we and to Thank mentioned, and to say that we us believe who that and incredibly

Operator

enjoy we everybody. today's of with call. the will you, Thank rest that, Please And conclude your day.

PagerDuty (PD) 3 Jun 212022 Q1 Earnings call transcript