- Earnings call transcript Q3 2023

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Operator

Good afternoon and thank you for joining us to discuss PagerDuty's Third Quarter Fiscal Year 2023 Results. With me today -- with me on today's call are Jennifer Tejada, PagerDuty's Chairperson and Chief Executive Officer and Howard Wilson PagerDuty's Chief Financial Officer.

Before we begin, let me remind everyone that statements made on this call include forward-looking statements based on the environment as we currently see it 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. These forward-looking statements include our growth prospects in future revenue among others and 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 as a substitute for or superior to measures of financial performance prepared in accordance with GAAP. and measures GAAP our available between release. earnings reconciliation non-GAAP is financial in A these factors and with included and the on recently filings and information Further other made our including well results make the most differ as Exchange we subsequent Commission, company's Form that to materially as filings the are XX-K SEC. in filed with Securities XX-Q, financial cause could our turn will call to the With that I Jennifer. over

Jennifer Tejada

for joining us Thanks, Tony and thanks everyone today.

of another report to marking guidance $X to high-end We We non-GAAP of a top Operations for strong Revenue growth an continued over our operating income, pleased basis with are of guidance ahead our year-over-year our of year. and the QX we milestone as quarter line last realize previous quarter schedule. of achieved in ranges guidance of profitability million above improvement execute Cloud. and high-end results our straight of million X,XXX our above profitability our points XX%. and on a Xth we both to In quarter bottom grew the quarter XX% exceeded $XX ahead QX,

see XXX% cohorts ARR two customers services. or XX% to Total continued market products. our expand segments, our in enterprise, came our was more with paid customers adopt of as quarter, In the and net more ARR and and free more grew and customer from retention products year-over-year, We focused than dollar-based users half customers our over platform to spending continued XX% in strength $XXX,XXX year. over mid grew last our on

about and a our investment plans. near-term, in see continued the growth positive opportunities trends balanced bullish macro our we remain performance headwind our for business environment both and the While likely is to underpinning remain long-term to

environment. this First, the are industries, later. in now demanded which large I multiyear transformation some traditional by to discuss adoption to leading infrastructure acceleration achieve required strong is see efficiency digital essential will transformation PagerDuty enduring incident to DevOps we macro growth digital Cloud and in response. initiatives, is wins continued

products, ahead AIOps Second, effectiveness where solutions. offering new chose of we saw of customers solid automation efficiency adoption integrated point the solution, cloud and and of operations especially our our

and makes Third, more cost attractive to return long on ownership expensive our fast solutions. customers than of time low PagerDuty investment to deployment

is new Our products. and into sales both response pipeline strong for incident heading QX

Finally, positioned environment, such challenging we growth structure well achieving to innovation. navigate profitability continue invest ourselves capacity can improving our we have the product macro to in cost by that and

strategic extended as in leverage. our product balanced we while significantly also innovation lead competitive investments we growth, QX, operating During improving

more they Our both our platform for time need results the with Automation employees resilience enterprises ever. digital effort spent to integrated value motion. strength saved PagerDuty's and experiences and aspect an translate moment this efficient team’s for managing it across a reduce their technical work when and capabilities every interrupt better customers. than of and customers money for the by our ability maturity underpins in continued quarter proposition increasingly and go-to-market our of Operations Cloud to execute operational demonstrate

onto Our across are ability the PagerDuty operations previously to consolidating entire orchestrate [tech] spending. platform which digital makes enterprise (ph) the fragmented companies

number made and revenue as well revenue we IT protect enterprise below of transactions, under validated more expansion a was of per starting average and they manage both and less, prioritize user average ARR to and This As it essential. spending customers our organizations mid-market customer. churn PagerDuty pressure come increased with do consider per have closed revenue, record X% clear

efficiency of G&A our revolutionize growth to spend. mission improving operations has been durable and grounded always while company, in Our building a go-to-market the

manage innovation our operations, help and across service flexible workflows the deepen We competitive enterprise investing moat teams AIOps, that work. customer to in through are automation, interrupt

continuing our pace cost enable lower to sustainably Lisbon Our the structure cost, operating similar efforts financial the talent new ongoing lower with company. XXs a this with demonstrable year. base, improvement of will controllables our delivered year high progress make are we volatile In over have leverage like as to early a past to controlling cost towards macro operating environment, from Rule locations the objective the we XX the

a enterprises. and Given confident to positioned we our competitive we PagerDuty essential company, workflows customer customers weather early announced profitable steps that of enables launched the will and and developer loyal use track to improved incident leading high that role we well, we a our modern roadmap, incident productivity. infrastructure, November, base record occurs. growth stronger are for In environment noise as our emerge and when capabilities cloud our innovation We this as cases automate operations performing different workflows tailor to to availability more major flexible reduce are

year human all of of of So time. and our dedicated primary time, AWS Work. the with to announced and by peoples reliable improve the at critical week best the earlier four -- we back be removing capabilities enable will increase solution automating FreedomPay, while teams is a Reinvent, tasks processes equivalent developer resiliency more saving at data-driven customers flexible can saving PagerDuty. workflows the for time. risks this practices, error manage use commerce Interrupt take making platform hours of their These engineering AW also automation AWS PagerDuty actions Overtime this non-technical customers. Earlier to

PagerDuty. and XX-months, the Fortune its in PagerDuty due with a our on The investment its teams. meantime large us. PagerDuty investment significantly realizing XXXX. Australian-based a up dollars reduced doubled translating incidents, midst its multi-year expansion contract. global it’s footprint deployment long-term tens is excess customer security operations with quarter, digital their millions improvement In QX, This of in to costs, reduce innovation while using and PagerDuty since retailer resolve spend explicitly aerospace of the customer scale to an was expanded their times home its into to company savings, return last the time initial this customer in ability of of freeing transformation with in XXX for nearly signed has footprint their In doubled on also digital a XX PagerDuty During annual its nearly a

event for for same than low. the we provide tech first This process advanced expect multinational we They XXX% scale resolve a they including to PagerDuty digital sought They had lower manage their their to enables The in increase as their them XXX quarter innovator that remediation, replacing turned multiple operations an maintenance use operations, time a but action been flexible maturity. upgraded and several return point is anticipate consolidate to to strategy diagnostics value, to their payback ultimately signing all Also in on six action. costs, Fortune productivity PagerDuty IT using automatically faster figure solution departments, a solution cases, visibility a to incidents exponentially keeping spend. to more PagerDuty in service platform less to auto integrated faster for digital detect, company can the consolidate year. and on across AIOps and digital multi-year more actions adopted technology within service the and investment platform. nearly wireless PagerDuty to a automated and advance and automation address engineering to quarter, that vendor technology central quarter, during automated intelligence and a investment. center costs Their services, PagerDuty years, expansion while of

environment. operations Our making digital is mature organizations PagerDuty's response, integrating help automation. Operations more to value and the and has value, operational today's which in tangible ROI platform We as proposition is within AIOps customers’ decision our only even resilience, becomes incident resilient and cautious. proven time deliver Cloud fast deliver critical

realize during attach third initial customers profitable The our value, innovation where opportunity than the products, and new past within as customers several easier more operating PagerDuty changes generate to have find users the several move cases. of advanced throughout and sell our outcome base. quarter much more of to expand structural an new result to leverage environment ones, current exhibited growth. use products adopt a underpenetrated the the large is recent the years implemented As the installed towards new they to In we it's

the lower to marketing high employee accelerating R&D our investments. implementation go-to-market finding locations, in have and our returns digital We environment our improving changes demand several of the including cost, responded standardizing are motions talent recent opening regions, efficiency initiatives, the by across

margins We we move expand into as continue forward our operating the to year. next fiscal

strategy award receive we this We cloud are operation recently momentum marketplace on at celebrating significant our profitability. several Reinvent fronts the balancing our and FY AWS also to were in growth expect Star our on growth year-over-year business ‘XX. AWS executing continue. that progress we support success will long-term week, with recognized Rising and the We're well for AWS in Earlier on honored to

company healthy talent, in investment an top attracting Our teams. the and a manifest our success creating workspace retaining exclusive ensuring in and of culture

Corporate for won fall multiple quarter, achievement care Responsibility health well-being special in for PagerDuty our including the workplace During social best recognized ongoing for strategy. and awards Trust commitment Social tech Radius as a we corporate to winners responsibility. This Awards Stevie and

AIOps Finally, automation. leader response, in GX incident and workload a named PagerDuty

the and demand both our well for from results ability and our reinforce emerge long-term ROI, value time to customer our in fast in near-term persistence Our confidence QX, execute the tailwinds high stronger. even and to platform

deliver our competitive scale privilege customers we the responsibility their worst know trust we that partner is as efficiently, on them. PagerDuty for our our is our it Even to fuels innovation advantage. days, and

to continue championing from product their trust to want move your quarter. thank monetizing this recognize execution customers I look we value FY for their to our our see the their Operations resilience great to for As forward global turn their and dedication for partnership expect investments our our I PagerDuty's ’XX, we customers Cloud. and With want I Howard to customers to into as [indiscernible] questions. and that, for call will and

Howard Wilson

you, day this to joining on call. afternoon's us Thank everyone good and Jen,

that our do was a them the are earnings to all are demonstrated PagerDuty's during basis programmatic forth QX to expenses as customers’ ‘XX talent and is results and in Evidence references of operating operational revenue, while PagerDuty with results release profitable GAAP on Unless stated, to reconciled to of before our retaining our combination posted the positioned our agility us to results more our in non-GAAP The cost, enabled our our to less. Cloud the last and Revenue our to challenging the preserving profitability ongoing was from call investments. international growth of the put XX% The meet as of quarter quarter that in year, was environment target quarter, total revenues, Europe. Operations contribution reducing in and third XX% protecting well up growth. XX% reach third Our commitment and well agility economic million FY earlier, call. enabling strategic $XX year-over-year. challenges efforts, the QX one reflecting compared otherwise

with expand us us Our We quarter. products. customers adding expand had new to a this continued customers and users number record with new of

and were demonstrating many transactions of their While on retention our delivered the dollar-based environment durable ago. customer We is PagerDuty did particularly reliance XXX%, enterprise business further self-service notice to to We North mid-market year even period in business. online We customers volume and PagerDuty QX the smaller of challenging in these side, on with saw growth. most our approval the testament an requirements, XXX% one increase deals. in large strength compared a our net in a the of same American in

loss by We from in net increased companies remained annual XX,XXX, QX. XX% in our demonstrating to an margins of enterprise. up be for $XXX,XXX mid-market X% QX grew approximately XX% Operating and we to platform operating improvement, profitability average Total a and Free go-to-market range outperformed note our XX% guidance year. year to ago, QX weighted Operating in an Customer spending associated for our fully to above QX the automation. within was model, compared our compared refining accelerated to or X% strength or basis revenue negative to XX%, $XXX,XXX, year quarter QX. over grew XX%. We experienced Please high-end $X margin at X% usually increasing compared use over to initiatives gross of leveraging million with million as same improvement locations to of points, million revenue revenue, recurring expect or XXX% of of ago ongoing XX,XXX, to of dollar-based the range quarter diluted QX and $XXX target paid retention the year. last the our customers income of annually our from a by income our XXX global increase paid $X the a and was scaling on last of period. sequential in X% in compared shares. count to share

Reinvent, primarily expenses is quarter QX. However, in from decline expect this as quarter our income year, of AWS we investment This well as to due marginally full hires. third operating to in the

compared cash QX last at third year. to nearly ago cash, million was flow period. positive in million, Free to was breakeven $X from $X $X.X negative cash operations year compared the in negative to Now million, quarter of $X million

positive in flow expect We quarter. the cash free fourth

cash, Turning that that period. were revenue balance Adjusting we increase we ended billings $X.X are strong $XXX to this This Last in $X.X above in year the above XX% million, call. and for a at ended approximately million provided range multi-year XX% the billings. quarter's growth Quarterly year-over-year. cash sheet, to this not the quarter of was ending result provided. and deferred million included prepaid was increase billings contracts last renewal for which of XX% equivalents includes XX% also an QX, million the the in the available with multi-year XX% investments. $XXX Total prepaid million, range calculated XX% $XXX year-over-year quarter during up had

Given volatile adjusting a QX be XX%. for we expect growth compare macro, and tougher the for to approximately billings

Given to trailing quarter-to-quarter On $XXX increase XX-months compared ago fluctuations million, XX%, above year associated provided. estimate billings. billings a in focus and culture our trailing basis, the billings XX% an and XX-months were a on practices, with of previously we

XX-months trailing to expect XX% above over fourth year. exiting be We or billings the growth last quarter at

to our guidance. now Turning

our the reflects of and Our of understanding guidance environment. uncertain the macro current consideration impacts evolving

per XX% representing fiscal rate share, fourth net the to income expect $XX growth the in $XXX to million range revenue XXXX, of diluted For PagerDuty. in approximately to X% an and XX% the range with margin quarter we of range of of shares to of million, to $X.XX outstanding $XXX operating the million. fully $X.XX This attributable Inc. implies diluted in X%. of a

million XX% fiscal we attributable million, XXXX, for expect share of $XXX to year. full of representing $X.XX to the guidance improving the net the fully per margin million. to and and shares growth For shares rate an to implies outstanding basic a range we’re diluted million Inc. revenue with breakeven outstanding in approximately for $XXX operating of X% to negative $XXX loss year This $XX of approximately PagerDuty, breakeven of

our championing. close, for like our continued partnership Before for and I teams thank their who the customers I would across to globe

Operations opportunity to continued Our us as to realize strategy, rapid revolutionize positions similar and demonstrate our We the With profitable growth, the expanding to position Cloud performance critical call of next operations. in financial transform the our for vision in work operating up leverage innovation pace of level a market improvement in that, and strong in to a achieve Q&A, our confident and our we remain QX year. I will open

Operator

it of for our have analysts questions queued And like looks several already. Okay.

to Stanley. from let's session, to with want move us start off like to Joel, will over Do you you'd Joel Sanjit Actually, kick if Q&A We Fishbein our off? at Morgan Okay. kick Sanjit, in us Truist. please.

Sanjit Singh

try. I'll me? hear you Yes. Can

Operator

you. got We've

Sanjit Singh

-- said, love in you had the achieving on the the as it, uncontrollable I Jen, of across phrase nice very XX I going quarter look kind see. team Rule growth of of pretty piece. making about progress? well we looks growth, targeting, time, script, controlling to as calendar of of, operating it software your that's versus that controllables, a think sort quarter sort type talking Awesome, a about profitability well, margin, congrats on this a it's ahead to of and it's year XXXX profitability, if like, X% ‘XX, and -- uncertain When be XX% at certainly you

year beyond? of -- going manage that plan? and And into how -- And think sort what's on making that is Rule you type you going are operating so of XX% what next XX to progress sort as of the how about framework

Jennifer Tejada

Thanks the for And proud we quarter. really question. of are the

and a growing customers I platform $XXX,XXX spending with relatively continue and executing think expansion a number we a customers of did record uncertain job their over to in demonstrate sort great ARR environment cohort, customer you like large for expansion -- transactions record and saw of of our XX%. ours demand

better come still that we especially and been to we've of marketing improve underway ROI. mean, seeing is that and delivers with go-to-market, efficiency, So, higher said strong, growth and and quarters see sales are a very improved business together we're and just to efficiency and loyalty topline drive operating process where we starting but Having customer in the platform I demand that build in the us value the to time are because drive it much within for feel several efficiency that overall the the continued now like and do to leverage. that, productivity we fast base, still our

we're laser what the XX really a position So giving continue we ourselves good for from important team see we that of of it. any for to a Rule me and I and to improve can focused goal think really And company. efficiency regardless productivity manage the for put we've not perspective, a the in macro ‘XX, guidance the is FY while we're on and happen

Sanjit Singh

accelerating Or other we opportunities of more layoffs is of it something risk something noise? at And within that's pretty engineering do or sizable going to looking with States when the still sense, we departments follow-up and solid, layoffs with as some picture the terms concerned think PagerDuty think headlines big we impact tech, a broader about we as employment see of model? how growth across these about lot United some a and layoffs big that components a the look of a companies? of drive the in to as in seen employment is be see you've tech, total to model, should terms within modest PagerDuty in at seat-based if tech the picture expansion we that just that among is be the pretty more so Makes assess overall about

Jennifer Tejada

point three business, will have one characteristics of to you are a I customer our there base. very diverse is we Well,

So and we set the verticals a tech while verticals, that quarter, high of have perform diverse do we in tech services, portion saw financial very customers represents other in of quite very, well. retail,

the customer was it certainly strength environment think during in of and So is our I pandemic. base, an like this a diversity the

Second, customer the we're our market. and at that within I customer addressable in total base, number you would base of underpenetrated you our workers when say tech look largely at look

but from dramatically, if installed attach even so much just see And headcount product headcount attach. case use compressed a more perspective, new have were huge base a within from still we new opportunity and to the we also

don't for that I XX million layoffs having look that the single-digits we are thing around developers you world The that developer of And a see TAM. we is across impact measure so as penetrating instance we the say material demand. the on when TAM last mean, I is in would community, and

be market, So just the the position, our good down an of when last we've huge customers inside is at taking your base action base. customer I puts our of see and tend still developers you kind really large. into back what comes that very the nascent TAM this do across very, I the to it situation when you really think look a early of in but go come I end broader is it's -- at heads always think to diversity said, us We a to would to the category. point employment day, the installed opportunity,

Sanjit Singh

the the I Congrats on thoughts there. quarter. appreciate

Jennifer Tejada

you. Thank

Operator

Okay.

ahead. can Hedberg from hear you Matt RBC. Next go Matt, we'll at

Matt Hedberg

go for a Thanks blue. Sure. Jen, question. the

Jennifer Tejada

anybody blue, Go seen did my [indiscernible]

Matt Hedberg

thus a And bit challenging past quarter? Howard, linearity -- about November a fun certainly kind a you Okay, to in so congrats little Novembers? good talk you, question quarter. results think I how congrats of environment. tell you on exciting really far could for versus the maybe is maybe the see, a trended more the for of a Could big, stuff fan, on maybe was that, that

Howard Wilson

Yes.

So look we in the we what pattern was of through when it QX, QX. unlike linearity not saw

that in think of referenced QX longer, of out that the the there a the call the quarter, but steady of terms the customer particularly pleasing. a the I some base, on decision-making of we some in last we in through was bit little month we our just as at factors that was played in within move processes QX saw momentum took even so quarter, least

product. the doing transactions think that was for really customers I or with adding many are thing expansion so that our me adding users it's us whether different stood out

growth, a are and really but we that quarter, purchases to make a So our to the to number continuing PagerDuty. indicated but had they record expansions with level purchases those customers grow though to for make, of we’re those continued durable they the to smaller of that and applying going tended consideration be charge

expect us trend for was to continue. sign was really that and positive a that we So

Matt Hedberg

other for Got a a and in get normalizing of in it. Just question. that? appreciate sort you billings Yes, assuming more flush? of more your thinking stay we the I the Maybe kind same assuming that about are bit a prepay. for budget January guidance perspective? just curious, guess and I guide perspective of things one the the guidance, on your multiyear are demand QX kind you December Just from case little assumptions

Howard Wilson

as interest our exactly we to are checks prepared and But certainly in is the create us. we'll write, strong help that coming QX of access of and within spend is budget reduce, our people see calendar trend really to spend increased those amount December, tends environment to do current terms to typically that is we to month prepared certain us, that seeing to mean pipeline out of with have a are a holidays be size quiet to to never able fair that for number a what I certainly customers continue on the plays them a ends spend being be is so momentum into or even year new that a there macro efficient to full. or across for also the We're they're of to see. and are how ends up the expecting vendors that that mechanism amount companies in December for able to niche companies them in gain more coming even still again of January for Yes, consolidate for activity able platform with particularly be

Matt Hedberg

guys. it. Got a lot. Thanks Congrats

Howard Wilson

Thanks, Thanks. Matt.

Jennifer Tejada

Thanks, Matt.

Operator

Okay.

hear Mr. Joel Fishbein at can from Next, we Truist.

If to go. you would like

Joel Fishbein

and congrats the operating Apologies the great on the technical difficulties margin surprise. Howard, great and results for on work. earlier

know vein, Howard, optionality macro call. How for have in out future? on and profitability that figured, there, that mean, margins that we the you guys, and point? environment mean at highlighted I thinking should for to uncertainty you more how we obviously regard are always this that be are Jennifer, Just I I about to with how balancing -- is milestone the we thinking Thank ask fact guys the throw growth about more challenging the that and you've but how that? you thinking more in there, be And just on I and directionally should I'd about this big so love out you. hear you

Jennifer Tejada

I'll in. crack that Howard then and take Well, a at you can jump

products of innovation and within quarters. we've couple base last attach is our to a us for to to a our services services. that continue quarter, First products you've out and want which early, invest to our work those people and improve of I it of been installed cost was headcount profitability incredibly allocation, not congratulate And make us lot enabled the the of to this just an slew organization from all, sweeping to changes hit We a instance. for because of incredibly now disciplined seen milestone the we are have teams, has with capital quarter new structurally lot they've in across proud that base, come available

perspective, efficiency, of are very in investment growth a right reduce a us an for and right revenue offerings relevant time, from improve productivity, risk, that So is timely. our go-to-market environment to which lot where improve place

automation, put customers. a I you ourselves what's had good -- What weeks, we a be next about as to and going our So of really the happen in In cohort the and customers feel incredibly been that large cohort future Reinvent engaged. last customer position want you or quarter while as macro time also with tell we strong team the of volumes. I've like XXX expansion was the for customers And I at given to tell $XXX,XXX or are couple is large week can of growing over customers automation, that tomorrow. see a over instance. for a where can XX% in it see learn spending lot you, we've spending I -- large in can't

but So to we a in can disciplined XX demonstrate Rule make growth, that company progress allocation still are and around absolutely capital very growth we we and being profitable, balanced we investing sure goal our durable are that long-term. can against

Howard Wilson

down. to with where margin of ensure improvement be we we've improvement and points cash becomes laid we even us I end better continue along flow is, comments, the to a rate really expect And year, points operating at for this to our the and achievement also that that foundation. good free to that, Jen's slow over to one change continuing points are if focus Like I margins have add around so that to expand what think foundation we than last laid XXX do to look would strong, of basis Yes, year, or And next year be our basis two year to an improve you points free cash margins flow our I the into point guide our expect year. this next we've and where how a from I perspective. really XXX don't for think

pattern from been we've but QX we detailed execute. can So, give how continue see more we of call, following you to the expect our course on guidance, you that to will

Joel Fishbein

Okay.

so that leverage continue you are and giving that you're the that that Just strong for been up to follow-up you've real some be delivering. growth see like, not profitable, quickly, to to just sound just makes any the fact it we can growth clear

Howard Wilson

Yes.

be sustainably guide guidance for long-term we grower. is an this the So to we that specific profitable again to for in have profitable any and for year, we not certainly the sustainable growth Jenn's provided we We a operating year. comment what control we're -- a that We but model to be providing created control. on next can know and expect

kinds that course, macro things. the is all is an environment subject to Of of

Joel Fishbein

so much. you Thank

Howard Wilson

Joel. Thanks,

Jennifer Tejada

Thanks, Joel.

Operator

Okay.

Hallum. Next from Craig with we'll hear ahead. Chad go Chad Bennett,

Chad Bennett

and all my for Yes, stuff, logos, taking profitability Thanks and around Kudos anybody, and this thinking environment great. a the challenging good environment bit about difference bit, quarter seemed that against in in be a for also think new quarters? coming the to questions. comping more in is timing net maybe your on so commentary out everything quarters spoke good should relative less just we there? relative revenue to expansion over numbers, add know but so kind is in four really growth, bullishly logo speak forth about pipeline you little was for expect from think speaking there contribution new relatively it's very it of I cross-sell your down a net -- look tougher that I from prior and and delta about to but how so obviously customer to growth to today upsell the and forth, number, and a where should we expansion we if expansion overall so is new in forth, And but next new logos? three overall Net

Howard Wilson

Yes.

So, Chad.

our business, expansion. that I if our growth primarily say you what I look would is at comes from think

the enterprise us small with we right a always grow was which growth over over we a for lands strong for lands So future. good last that is and at When and us land and kind so tend foundation have look important we this opportunity us had the so is the from really expansion are also but to mid-market perspective. of what's lands saw lands, a lays, healthy time, customers we near-term for XXX for important quarter, us

contribution logos. year always remains the the new small new So within relatively -- from first

the is that there course, and quickly, up can total add doesn't strong can to so, ease a with installed think good take lot there that we a I ownership this effort able such up in is us users running, and a fact base do cost be and products to whole a place. value that new equation For of is us, to really require and that do of to get able puts or of have get

Chad Bennett

you're being lot cautious and layoffs so a I'd Thanks. know whatnot what expansion healthy from guys any some with more color, maybe, your but how in but commentary And of horizontal a seat just a vertical customers commentary standpoint, heard and conversations are any where seeing of this calls tech specifically little it. love are kind on fairly I and just the in and customers that, pretty space, on from hearing, and Got then expansion? you're expansion seat you sector renewal on discussion renewal forth. on we've more just and

Jennifer Tejada

Well.

like You been saw talking a of lot I I've said, lately. customers to --

to X%, ARR. below continued we churn see saw starting You that

record asked So the own less. being renewals, expansions conversations to number are very of by ways more, because to go strong automate those with more to of retention customers their do looking continued well, they base new are for leadership as

approvers, those that, more of the is taking of you there the think are to super see out I I to even that things don't built essential that pipeline. there's conversations just remediation longer. see and we platform get the it's understand use like engagement We opening because I've see that recently ultimately the it's said, moment. of we probably of PagerDuty important automation deals the more a opening approvals deals core diligence flexible little and market the out, so timely were competition. more doesn't is building all We And big figure longer, additional that of into all going we to the don't with relevant had for would been with auto aid like looking deals long-term, customers, out process bit just asked going the we've you how We the it's in pandemic orchestration you saw enable day. approvals spend to tell are I the years in which out and definitely through and how had in and customers, way they -- from out two capability these associated moving it seeing find just of workflows cases, think us, show there trying What really to in this then the brakes are control is value the catalytic detection everything it's the pandemic, different feature yet terms met now, else actually cases through that people PagerDuty done. some in infrastructure. I'm at this sort What to have is good I us of, we've and what pump to one now IP flexible more And figure constrain before Like and we et over platform. trying advanced just you are be little because are me when customers around, is then lots annoying understand does go what to most truly of really at top. really the into they're more the while senior more when our done are and beginning the of workflows what up right is of that leverage you you're and for that see this win come has cetera, when types for, in they sets because never to taking proposition our may think requested sort I more use

So as that discussions well. excited the I'm having there we're about really

Chad Bennett

again kudos quarter. Got it. Well on the thanks,

Howard Wilson

Thank you, Chad.

Jennifer Tejada

you, Thank Chad.

Operator

hear we'll And Matt with next Stotler Okay. William Blair. from

Matt Stotler

the taking for you Thank questions.

that acquired Jen, right? my pretty that's is because your seems you some segue, compelling, it actually to know, Obviously, capabilities catalytic, going You good first question here be on there. a like

those integration at we're user impacting would to how seeing the in So update overall contributing capabilities are and the get this the I potentially with kind conversations to customers of timeline, you're expansion, base but point? an the progress also having love

Jennifer Tejada

app a us Well, and that the possible, in one always us using for success to simple with because or are of our usable duress stress. the moment make often users critical is very significant been engaging as of factors a

for automation, can't regulated we've drop. and a of than no mean up next to types like just tell change opportunity work. large a broadly deploy what to much that's so workflows natural to open et has drag workflows you, And automation can't flexible step very different for it And us they that code different to workflow it response and really mitigation PagerDuty's simpler for sort low types really and customers move in lot of and I what gone large, from code and felt I'm a interrupt because of highly but want specific They into that cetera. really group as It's industries, for you as have team. because healthcare And get deterministic into workflow me, well incident Midwest quarter or so us make we've learned, particularly or a industries and much advancing requirements Catalytic historically been use want maybe no I risk just where more very of code automation environment, process into our and we're a had as thrilled well. fact the with we're great Chicago this improved company, how product of they're that progressing. And technologists, thrilled a quarter with enterprise, easier

a larger being we little so were quarter I bit think bit last little taking deals And talked and automation longer. a about we

attach there. quarter we This strong saw

investments good really some take starting So inorganic hold within of the to broader business. to see those

Matt Stotler

parts something progress year of maybe then of with as seeing you today. on fiscal you're vertical broader aspiration. QX, update talked guys And specifically, ending historically that get that one billion the the helpful. kind as there, a love Obviously have $X per key kind contribution just about we'd on federal a maybe government a very That's growth to

Jennifer Tejada

regulated do Well, We view. our process, a that talked state today large education open of the XXX a investments able I to that they times if don't very think of a and PagerDuty be. doubled can deal I of company see about of loved in that my tremendous lot return XX remarks products government on my and have prepared total in ARR. more with part really investment Federal, opportunities are customers it and in will, advancement Howard, was initial you demonstrates there. and which like I is we'd a industries about aerospace add Federal underway is in and in what a realized kind horizontal certification they local SLED, and down we anything services. forward-looking I tell know, see FedRAMP how Fortune truly so And so customer our to ROI We tightly earlier more up companies because they these our more opportunity their on that's to a high are did small and -- us

Howard Wilson

you've it. think covered I No,

Matt Stotler

again. you thank Great,

Operator

Credit like from next, Thank Lee Okay. And you. we Fred would Suisse. welcome to

Fred Lee

Jennifer. Hey right, Hey, All Howard.

Howard Wilson

Hey, you? are Fred how

Jennifer Tejada

Hey, Fred.

Fred Lee

Hey, getting go and blue.

Jennifer Tejada

blue. Go

Fred Lee

the you week, If at but here we'll Phoenix you this get game, the in see Scottsdale, [indiscernible] hopefully right? in

Jennifer Tejada

Maybe, hope maybe, so. I

Fred Lee

the first and changeable? of I so I and the wondering digital nicely in if the you how of apologies Last month all. -- the if I over was actually missed was listen, quarter the through business is shape the first Hey, uptake addressed operations wondering this of in accelerated if called you business the trended part advance quarter this year already. out year quarter

Howard Wilson

so that I on Fred. comment Yes, can

skew operations operations, In digital like, for terms products. opportunities if to acquire customers digital right, of additional you of is one the

our allows particularly to intelligence other incorporate trying leverage keen them on event demand see issues. we strong the amongst to more as from add product helps event to our more customers that, which continued of the some for business plan so helps -- the capabilities, solution, that it's efficient So them quickly being our intelligence and customers respond capabilities are AIOps to to

Jen across So product script a saw multi-product is again, her our process which the attach customers attach the coming automation this we with more quarter, AIOps and XX% than is that in more strong or two of across is, piece. from and ARR products commented

Fred Lee

from acyclical environment? you. a relative tend find you Or more are AIOps a And that do the behave to versus similar response? demand Thank just in more to quick the pro-cyclicality a is it terms perspective, follow-up, of they

Howard Wilson

of in terms I'm around -- buying how behavior don't I any difference of the so Yes, discernible changes not aware that.

I the the customer. of maturity think often related it's to

predictive with a fit reactive that AIOps discuss own take companies have and event to being journey, the maturity from naturally often we we intelligence So customers products model them as being progression. seem that their to with in go through that

a the being level fits get at to were or Intelligence to point that So being in aspiring of product well. proactive, Event ready really whether they then

if you sometimes function anything of that more have So, than anything Jen, to it's add? a else.

Jennifer Tejada

and and we product are from it. into the centralized the think try maturity distributed a where production teams of Others scale a this nailed serves point integrating it operations AIOps on of organization the more the and number solutions happen idea do early context after learning opposed an some adopters much after action I happen. platform, as is centralized -- where in AIOps predictive have incidents And saver. and leverage that quarter, analyze money saw in a was of looking at some from analytics customers being the of and affect will that the they about get momentum AIOps events teams those can and means core immediately and have a high both. to incidents And inside flow events more perspective, paid way by an they you you think they analytics both mindset organized, I for It's how incidents value No, teams digital potentially as of without a and from perspective just environment. then able to huge AIOps because switching, preventing information major and you're space is time same to seeing and becoming saver storms but to and of learning to platform faster not at being data learning only which the

integrated having really lot makes of one incident automation a and response us one all the AIOps value. that So and into unique platform is drives of things

Fred Lee

very this environment. nice very quarter, and Thank especially you much in

Jennifer Tejada

Thank you.

Howard Wilson

you, Thank Fred.

Operator

next we're And with Kingsley? to Genuity. Kingsley Canaccord you. thank over Okay Crane going

Kingsley Crane

questions. seems holding taking the Thanks It my really for well. up is business like

something they record has little quarter, little on but the bit smaller. touched number a to in be everyone of a touch on to tended expansions want I bit So that

thinking expansion expansion feature a versus changed So a how from is of the few about quarters those seat the profile standpoint? expansions past over

Howard Wilson

have on them on slower uptake we has Yes, you purchase, customers so of that profile, change users purchases to the with, smaller they eager been, or ordinarily with is adopt the then that making a their there we of seats I would like customers spoke So are and comment maturity same seats what customers what being we products, if that just can the To have which that. with in about. begin incremental seen than digital with helps other side,

don't that bit little the a think drawdown allow I buy it of need you then that like of mix, sign a beauty us it's is to our model but over We've we have what they when time. a deal customers you like that to So need they large of or regardless where self-service by with when need, and seen you need taking purchases supported acquire you model are, to what approach they as the them. the you seats able company certainly you of users been customers them are, incremental we've that of to kind size need

Kingsley Crane

Makes Right. with customers sense. And more less. you do mentioned to looking Jen,

start slow a the to catalyst Could expanding in is that in customer more not as a that automation at be is So quickly? seats hiring features? looking or case

Jennifer Tejada

we both of definitely inside seen we've that and IT. And seen IT of outside that,

creates it huge Service opportunity Customer a in Operations. think I

focus advance value have think DevOps precious seen to How I opportunities with that do the my enable to we precious the reduce enable I sure, to less. can but they that can them workflows from, business, and just developer impact. on flexible for and to effectively how team are my across me conversation going with they -- coming are more help I more particularly but not toil high in on it's precious resources out, a definitely transformation you want transition create

The to don't become away, all is almost fact and much in they that it's would that incidents macro more because I go environment, for customers new harder a attract other businesses. expensive difficult even thing say in

So understand if to detect product larger, something your it experience, from takes recover customer then loss then that it new to goes you've paid into and longer the to you get it. is a much and wrong, it,

demonstrate about like infrastructure more of things, encouraging who their productive And the being might of us their expensive are things business there an for customers individuals we're to automated more encouraging that and how have this, environment very so that made across appetite think incidents using for I manually out business I automation more of doing the historically worried productivity essential all of increase an been and would a they can I so our own has of capacity. own the even appetite just by employees of that's for is our job. like team, say use that fact in right instead one our that can There's even automation to improve now much

Kingsley Crane

helpful. Right. Really you. Thank

Jennifer Tejada

you. Thank

Operator

up, from couple Andrew, It like Sherman looks a We please. hands we're Cowen. Andrew more ahead Okay. go down have to

Andrew Sherman

the [Derick] win much, aerospace (ph). impressive. Congrats thanks the was quarter on Great, so big Jen,

trend customer grow is I for somewhat think you, in a become that their industry and kinds could of those maturity? larger industries of new customers digital kind as this

Jennifer Tejada

about they automations take to a some can customer multiyear. even multiyear, historically that our most and Board member I'm and break, over momentum That particular, business it to couple on making and digital included platform who more SRE, that sort deal or one was highly as something shift do transformation talking it's are was slow of been bets through on have we stop yesterday like mean slow us. seen of a Rathi DevOps their automation traditional liked that's midway I frankly more of or digital it's a way, ago AWS and of Well, of last things I Well, total decade digital who sometimes things I adopt definitely the is on the the challenge. that going the and industries stage, has in Murthy, about Expedia's In industries big years lot the the more days kind digital become seeing of two business not of to one a regulated you coming transformation and it's PagerDuty and multi is have traditional of like is something about.

on easier going So on that. but those of expand how -- learn with of partnership the from high back it but who been made as you was terms a in and the had customer lot immediate well, that long-term very that's seen a renewal made value to we're us a discussions much it before,

Andrew Sherman

wanted there going quarter. it the U.S. are I had But Europe a others expectations? performed strong that's relative like Yes, expectations about great. your And to what forward? and sounds ask to And

Jennifer Tejada

enterprise them Americas going a very strong to bit did have Europe can big just heard deals as of we the share and XX% I as I and all not like make a customer, details, good mid said getting around deals perspective, results. The for about our going more again saw Europe, they're from said, quarter save and just to more so to quarter, engaged. pressure quarter but a market we how I a European mean continued customers are and mentioned investments get time I more diligence some fun Yes. to there, organized next about I'm done, post yesterday last It's definitely but represents I are taking revenue. earlier

some as even the places see new or that ability again business gives health So investments us grow we in being economic the making continue in Japan to around diversified, like the mix macroeconomic world. to health

Andrew Sherman

Great, thanks.

Howard Wilson

Thanks, Andrew.

Jennifer Tejada

you. Thank

Operator

round Rob please Okay, we with with go Oliver Q&A Baird. Rob, out ahead. will today's

Rob Oliver

guys me Great. Can hear you okay?

Howard Wilson

We can.

Jennifer Tejada

Yes. Hi, Rob.

Rob Oliver

Hey, Hey, for my question, Appreciate taking squeezing here. Hey, Thanks me Tony. Okay. it. Jen. in Howard.

into a little could to on I the touched wanted guys vendor that from you've out of that to which try companies seems So flush of other coverage are I mentioned that mean, if with we little where bit I you that. in, I have seeing obviously, a wanted Jenn, are be guys it of the bit. quarter to that you potentially dealing point, trend, lot think, consolidation of us tough touch you where on you environment, pressure potentially, sort in second a row -- side get all a like

be mixed that certainly Can so, just have we public a Is great? digital would you add any to that in? is -- that some do is there where AIOps what a private And guys advantage trying you and can advantage? platform have color -- a where it, brand Is Thanks. operations vendors system, more areas vendors it broadly? and you

Jennifer Tejada

lot to could and And cycle, a solutions they multiple spaces now have AIOps they right AIOps lifecycle thing, or where one because the be to a the just value in observability think running. are more our environment, understand Yes. think long SRE that's of maybe be key response have to event that value the for consolidation in broadly customers to they on solutions to is up time not and in, very lot something the ask thing perspective, duplication. to else. of us effective with to to across a opposed are with a deployment reduce get or seeing tools do to is wants they up it's from their maybe platform, help where maybe sure customers platform most in And that operations do three do point I have lot theme because long we digital bring our And of in they nobody a intelligence they've to do as popped or on them would agree some right? incident deploy, our short delivering think or very if and call in We're got easy Even thesis I same instrumentation they to and one, help got of and are contractors high for that order. your of them their because larger a that frankly ROI of I they data a of ways which kind is observability environments I leverage adding looking telemetry lifecycle they fast have we need attractive the it's benefiting and

Rob Oliver

Got it, in. me okay. for appreciate I squeezing that Thanks guys color.

Jennifer Tejada

you. to great It’s see you. Thank

Rob Oliver

to Good you. see

Tony Righetti

Okay. final comments? Jennifer, can to turn we for you

Jennifer Tejada

demonstrating because for successful resilience and customers our joined to the their again us for their durable our I trust so growth operating of our delivering Operations critical and Cloud and In and that with thank for reduce of a to results run them growth continue we today this their do our record hard profitability of your very want and to I'm margins achieving just expanding all guidance. for I we much mission revenue help are -- we proud just want in and of ahead positioned, ability lieutenants to pleased help track that call, thank our who is earnings Well, balance previous quarter challenges, and Sure. own work, you on questions, us and all PagerDuty. our customers and all rate, of PagerDuty's Thank environment, of we're our their we you have very around say for I think cost protect globe their thank well importantly, you. another with quarter

PagerDuty (PD) 2 Dec 222023 Q3 Earnings call transcript