PagerDuty (PD) 1 Jun 232024 Q1 Earnings call transcript

Good afternoon and thank you for joining us to discuss PagerDuty's First Quarter Fiscal Year 2024 Results.

With me on today's call are Jennifer Tejada, PagerDuty's Chairperson and Chief Executive Officer and Howard Wilson, 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 and 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 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

on other XX-K the are these cause information most made Securities further For and with including Commission, as financial we with our to our and filings filings Exchange the filed factors results differ well in SEC. materially Form included recently make the as company's would that subsequent

over With to turn that, call Jennifer. the I'll

on Good afternoon the for us thank and call you joining today.

growth revenue operating we ARR XX% than solid line of with range a non-GAAP delivered PagerDuty in points Year-over-year ARR. with balance account challenging mid-market more environment. record and in expanded profitability margin $XXX,XXX exhibited our as guidance X,XXX and XX% basis spending by ahead an well growth less over operating Enterprise at macro increasingly XX%. margin than X% rate increase churn of our in and resilience in stable customers contributing to

Total SMB spending we customer total mix count was improved conservative pronounced from signal pipeline quarter, positive especially new more and meaningfully ARR demand From acquisition headwinds a in perspective, and a products as a more saw the retention. during environment. up marginally year-over-year in

capacity and levels We entered first generated value quarter with several at their volume. the highest quarters. transaction pipeline ramped in strong combination This

business. on closed spending customer and size deal average and pressure sales was in-quarter conversion put created However, more especially and centralized lengthened and which cycles rates, for rigorous,

customer or than IT our only and SMB, but mid-market of with while budgets ARR represents services At optimization but primarily a for high moving solutions. churn level, behavior and customers of XX% saw high in free homegrown percentage which progress and saw to we reduced efforts. cloud higher our a customers base enterprise historical mix, stability more cost-constrained our upper new

environment and demonstrating remains incident the Operations accounts on competitive grew Platform continues PagerDuty to response. criticality Cloud stable gap and of grew nature through quarter, our by automation. platform the year-over-year. essential in The widen the the AIOps in XX% usage Free as of innovation

our to full adapting value ensuring are evolving deployments. current realization customers' by needs and We utilization from

demand Operations achieving to cross-sell while the a aren't of our means Cloud and continuing terms newest with solution, as emphasize to creation, less. automation to In AIOps more able teams

we a ship workflows innovation Cloud no-code their During the quarter, teams high-impact incident enabling our expand and platform. with incident to Operations builder to general continued for workflow released availability, for responses We added environments, Automation the enterprises. allows SaaS use process several critical We trust automation of which automation our cybersecurity in across solution, zero risk given Runbook to leverage to departments. cloud-based for features new customize teams

solution months. new AIOps our environment represent solution face is well of developer-centric teams developer-focused realized with teams, operations, cost-constrained This which existing in in more and XX professionals. Our complementing in specifically ITOps, value to specific suited infrastructure challenges needs existing not offering orchestration, complements includes our site our event flexible consumption-based centralized days, engineering pricing. address global and reliability million approximately network the central with a IT address offering customers AIOps for to global

now greater has to incident simply and AI been leveraging in market been in scalability capture it. with has enabling while flexibility Automation SKU responding invest of consumption in cases in faster moving increasingly by foundational PagerDuty disruptions. in issues our of from continue platform, and preventing value a achieved AIOps, building pricing model the we we service aligning to part and and This operations. to our this automation customer from them from incident customers a of AI financial to in mainstay gives noise, Adjusting proactively basis. major the demand in to and support PagerDuty model to becoming response, a early data business quickly. customers was every use This a offer reducing on number alongside Process

vast the The Generative a more The tremendous the natural ease software full to means creates use our software makes a number the automation's opportunity language pace a simplicity only Cloud. interface the for important Generative AI cases with potential and see Generative a Operations efficiency, and AI, through across makes of automation than customers. team for which users. elegance its for delight AI step-function and PagerDuty Operations AI will and Cloud productivity and realization of ever. Generative represents AI, a opportunity complexity improve intuitiveness brings will consumer-style DevOps more advent the With potential fundamental to unlock reality. enterprise-grade more of We of of development accelerate, Generative a engaging that increase of

critical fidelity, Today, we status for incident accuracy use experience, cases, our space of early recognize one automation. postmortems challenges level signal updates, is including process and announced work for very a the The in a three AI continue is margin expect there during high our the crisis that of actions. time-sensitive expert access We from oversight of AI-generated or automated incident in customers human of automated means tolerance positives. and paramount narrow false loop to low critical and error role. hallucination orchestration Trust play for the for is response will response

us solutions efficiency. that to customers to are our big model across learning automate over the continue productivity AI developed to we've broadly, machine to where challenges, a leverage positions More well foundational and seeking platform the data decade and

see Operations is and increasing Ultimately, ecosystem, the CASM software more software for and Generative the driving our generated the the digital greater because we TAM widening complexity operations a expanding faster, of PagerDuty's volume Cloud. AI need

the trust and operations unpredictable compelling value revolutionize Protecting and a and unexpected revenue. e-commerce customer an remains in to revenue acquisition world, by always-on customers proposition of customers almost anticipating for is entirely for increasingly digital our unchanged most or relevant remains build rely digital world. the in on heavily customer where mission Our our

includes quarter, online products, three a contract automation. AIOps brand. secured ARR During incident hospitality we Cloud first Operations a multimillion-dollar engagement premier response, multiyear and the with and process travel The

equates to executive ROI Consistent leadership. customer XXX% savings. of teams mentioned dollars a tens developers millions from earlier, multiple annual of the span in of to alignment ranging with rigor I purchasing projection Our

financial services We during enterprise strength integrated transformation. displaced continue an Operations the multiyear for win our Cloud to quarter, where midst platform cloud of the in of point the solutions in a

PagerDuty customer to Standardization million. over increased ARR at $X this of

communities a of and users, diverse period. projected on serve. Our short has ecosystem the deal. reflects X-month also escalation automation equitable that XXX-plus customer's and our investment and integration incident CloudWatch, company were and closing customers the over The a XXX% were required an this integrations [Indiscernible] Among Amazon ServiceNow. means several differentiator unique the global building of for payback across business deep return integrations we Datadog and a customers

This quarter, last on social year's we impact released our FYXX Impact ESG. Report, and detailing progress

measurement value of our chain footprint now emissions science-based for targets. announcing carbon more preparation includes in Our comprehensive climate our a

social Our continued impact in this QX as well. year

at XX-XX XXXX During recognized in XXX ongoing distinction. In support the recognized women achieve to on of all quarter, of QX, a levels. our for only the PagerDuty X boards for having women companies this Russell were we gender-balanced Board,

every and long-term their technical proposition customers Our debt increasingly operations moment. struggle and perfection value demand the strategy are while to in digital CASM relevant customers our cross address as

our to incident QX workflows, by on containment proposition product AIOps. and XX,XXX event accounts. over expanded rise X automation cost innovations, installed across We paid as efficiency, utilization delivering significant base continuing focus during rates process Even and volume of see our and very high companies we value

their to seeking a potential enterprises platform. is the digital Operations game-changing For through Cloud innovation, optimize essential PagerDuty

innovation investments execute continue long-term in consistently structure cost scaling We to strategy, growth Sustainably our our efficiently, operating to well margins. improving our on drive in generation and environment. supports significantly and our this improving pipeline

indicative to earlier and to in opportunities for growth their ability provided our durable, referenced our customers underpin conviction profitable a I like their Operations company. as teams the for The today would trust and customer thank global deliver and emerging of mission. in opportunity our stories are resilience outlook for recognize I the the my our and long-term continued against Cloud our to dedication

to questions. With turn I call that, and to over I'll forward your look the Howard,

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

well record March version February, of non-GAAP complex both in Cloud in in also cloud-based product of in XX%. operating month journey, saw enterprise margin large with a AIOps continuing at range April, offerings for deals. which Cloud and advanced QX, embracing our the workflows automation our solid support each provides In solution with of innovation customers teams. Operations expansion guidance with line availability QX It growth Operations we process significant their with and XX% revenue ITOps releases delivered next developers ahead more large quarter flexible our centralized product, and general was at

QX to a ways continue cost term. In enterprise mid-market levels expansion than respects, remained a to high standout by strong saw our In mid-market, XX% of with where pipeline strong. customer high and new the the to proved customer we looking products. enterprise quarter, for containment, sales of some focus more multi defer or and our of contribute focus And cost usage either to an customers In reduce recurring segments making increased noted be of platform. on generated challenging we The transactions to high reflected in decisions in spend annual in near engagement we quarter volume acquisition revenue. and a

our rates cycles size the pushed, and to trends. historical deals pronounced more pressure particularly and deals quarter justification of the compared more continue This levels back under where deal came of decreased Sales to approvals. as half lengthen was conversion higher in required were has

and made rest of operational as in some operating we year. adjustments are buying posted GAAP our in revising are seeing estimates have to the behavior for call. otherwise We to our and stated, of the changes that are the reconciled as non-GAAP release to our Unless response well customer the the references on results before basis a all expenses in results was earnings

end first We from The QX year XXX% dollar-based in just same the retention was of quarter, ago. in of of million last period XX% to of XX% was XXX% delivered DBNR an total net the from year-over-year. year. XXX%. below XXX% Revenue range international revenues, XX% QX lower increase came full the one $XXX in seen up contribution in to in the year of the compared

grew a up from XX% Total over $XXX,XXX annual year in Customers customers ago. period. increased to ago the revenue XX,XXX XX,XXX spending year recurring compared paid XXX, to to

evident. slower we and New an was had on expectations, our believe impact customer and where the outsized segment, higher business acquisition line macroeconomic climate for were small our enterprise churn in with but acquisition mid-market

of utilization. of the XX% loss quarter think is revenue in of $XX to by million paid to our growth across QX our driven to and improved up basis XX% of infrastructure headcount was XX% of the approximately within indicative grew above target annual of companies customers Free income gross particular. XX% under cost in was X% are year. optimization XX% of marketing increase XX,XXX, constraint a or SMB Operating $X sales to the QX over to in or XX%, an of million margin platform We and range improvement but points compared and compared on cost free over same driven X,XXX year the scale G&A. and efficiency by negative last improved revenue additional last

or year, of free free capital expected cash cash seasonality than for is was to at or QX free strong the operating year, And a our to expect points $XX of be was performance flow flow quarter margin flow revenue. the potentially million negative, margin. billings. given our full of from operations the cash be of of quarter, $XX In the working cash lowest QX revenue, better cash we of flow for couple terms and million least XX% XX% still and the in our

with $XX balance was an the million $XXX Total XX% the increase Quarterly We up million, at quarter's of to deferred and ended in below cash, XX% quarter cash investments. last of year-over-year, were ended million, approximately XX% year-over-year. equivalents quarter $XXX call. the which calculated billings provided the during Turning sheet. guidance revenue

multiyear XX%. for growth be billings approximately would Adjusting billings, also

billings Given of basis, on a provided $XXX report approximately of XX-month quarter-to-quarter year fluctuations last an quarter's ago. which On were increase in million, trailing XX%. expectation billings, to an a XX% compared we we call,

we Catalytic. volatility In constrained QX of longer macroeconomic from period manifested renewals included 'XX our cycles and $X guidance, factored revenue smaller than a in comparable behavior, purchases. in continued and sales have updating which of the from early million As buying reminder, historical leads FY to benefit

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

of compares This fiscal of XX%. year income attributable XXXX, previously million. $XXX This million of Inc., growth the For million to in to $X.XX And to expect the of operating to implies XX% diluted now XX%. an PagerDuty we full million, to $XXX rate to to $X.XX. of representing net range $XXX revenue provided XX% the a per share range $XXX margin

to and $X.XX revised Our line compared improvement X% guidance guidance of X%, bottom to is prior an respectively. to $X.XX

providing with our line guidance, estimates. the this In following we're to updates

Given expectation the low be the this for total customer to growth continued pipeline DBNR In now our expect the above on of end pressure SMB anticipation revised paid we expectations segment, fiscal our XXX% by for conversion at rates, of revising to year. remainder we're or the year. single-digit growth of

loyalty to With to be to customers continued range months quarter second with XX%. our I QX an be the of and for XX%, what growth to be we the their billings, exiting respect trading expect economic uncertain would billings for XX% like billings to XX In environment, in thank continues partnership. to approximately growth

help Our efficiency in critical put offerings for expanding that customers and term. position high work, demonstrated Cloud a operational us the our transform rates our Operations long strong retention

effectively, manage well We the our margin improvements are poised to to continue macro. operating ongoing to quickly also to positioned this expand in year. we'll respond while volatility significantly And any

call up will for I open that, the With Q&A.

[Operator Great. Matt to going and over Instructions]. first Howard Hedberg with much, Thanks so RBC. Jen. We're

Can hear okay? me you

Yes.

macro further progressed Maybe better of lower XX here. the the mean, of macro I year. with that things question the for on then deteriorate guide wanted QX in days as I did view I of that question. kind a deteriorate to But kind ago, caused had relative terms macro, want that I to things element just maybe an to understand AIOps full start and

They did.

our best but mentioned deals the of fact, set deteriorated business. trends pipeline then seem in macro at the pipeline to year. done, get customers' the historical we at In of really last quarter And strong of beginning quarters, changes very stabilized trends but sizes where when guidance we and pressure a the the than year, ramp entered QX, in half And I several taking were we further patterns have coverage. to require them level the we our now looking higher QX. the back from probably with that in to included on that macro reps we've put a seen we're deal spending And smaller. adjusting being longer in

macro we also that gives our cushion still contemplates making or available being guidance. This should worse. an is we're So either same somewhat take the getting as we in of advantage investing are it conservative potentially us we outlook that sure in situation. the macro have staying the can innovation improve, But that capacity available,

term. some think of accretive But for of longer some customers less. on-ramp sort wondering how term. maybe potentially taking Got easier it. me, it to like impacts curious pricing AIOps then model you how customers longer Thanks the you for that model, that ultimately be spend consumption like Jen. it, it just on To feels could being the think growth more, an sort it And about

I to it's positive time on be your easier or you be for having said We demand platform consume call over license that value think the on-ramp. will that get platform, you based instead the to small high that organization a but really nailed going the charged license generate into are what going teams you're net to accepted events are an the of it think it the events high platform. because push AIOps, events when also And accordingly. you we on whole you means by

heads. this value number and better then you've license got simply, pricing be aligned, to The will of

SREs, over that think course the driven teams, from teams really, like this several of last et we bodes And feedback quarters. customers was got very centralized operations, cetera. our that the for security by I well network

thing The event at higher teams manage means their we've developer infrastructure improved a the these parts which than is global many business of across our other centralized orchestration, done a service. the and managing scale reliability can events single particular much across

with this. enhancement product goes a that So significant pretty there's along also

is foundational model. our So something data competitively we're leverages about because really excited and differentiated it

Thanks. from Truist. at Fishbein Joel, going to hear go We're Joel ahead.

mentioned hear lot you AI how right space love the impact the little front. for in how to as the call, but on would bit is there's I fundraising going of of a noise, you AI one another to Obviously, going a a lot Jennifer, now. Generative on well general. on

your a and a Just us is that? on the step PagerDuty AI to deal take back, to give the thoughts with picture positioned industry? how bigger Generative And to impact how going is

to how of model to I the AI. we're engagement be work way will or And I participate industry. people Generative of going natural benefits intuitiveness the for the transformative change the everybody language using think because think it dramatically enables of a see in consumability the

example, productivity reasonable for if things enabling to to of had faster, and so assistant being draft analyst operations less, the developers with by a to increase or I services, higher every IT build start marketers we're from iterate think as it's their And and DevOps quality an about more scratch work and worker efficiency people. and going from do cost them or engineers whether helping them versus talking use they able expertise products starting to or

quickly. step our But the as is that it ecosystem cost an more services generate distributed development particular, will technology change teams For I code difficulty think will which software to ecosystem, managing in space, just are means, know, technology build will it like And in it we I a more complexity. PagerDuty's computing, accelerant see debt an already I faster develop today. expand that in fraughtless to TAM many means into more launched and AI Generative think, efficiently leveraging already because you and is more think

level that remedying auto diagnosing and more the automation those support that, expansion PagerDuty are going of for more tailwind net a identifying and issues is and customers means those that automatically issues. need in ecosystem issues complexity, think of to we the So

been teams some And a loop see going that and for products. lot actioning we've Generative already now customers time think, I how so Generative you're help in AI maybe our to of, to right? expert that's the experimentation. that with AI, see iteration things the in human You're or platform do you're to to to me really making AI exciting to alongside of that, AI using going the lot and quite decisions, reacting, are with use but inaccurate our fast information, Generative is complement our using a one of in experimenting not And

think development cases not in an building limited there others be from just be us platform. use that I the explosive could comes on nature So to but

So that's in, super important all important and the I context fidelity, also security, reliability understand exciting that using say our to me, scalability but are to people I how platform. that think, we

So that's incredibly AI and really for we're workflows. But I net where the into transformative why how and will thoughtful for company. positive overall, apply Generative think it the be we different about industry a

Tim I say from Next, I hope right. Jausovec. we Tim, hear will go ahead. that

decreased you quarters are on the for you I visibility next macro in the to which was versus over environment? couple to will potential what more and speak to outlook the of customers are customers relative conversion your continued getting spending. provided March, post catalysts convert wondering as Could rate spending has be to the

that Thanks, Yes. for question. Tim,

expand actually, in from customer benefit some and for impetus with and pure strategic our And the talked incident us already to I about less a their start AIOps with where see large is engage prepared pressure First two we of deals. the response earlier automation. include actual the in the more with and the all, would deployment do product cost engaging pressure margin in in cases, we Operations to Cloud customers remarks, to

our And response improvement the versus as our is saw product both of an more incident for quarter. and one mix we mentioned, in pipeline the So ARR in traditional also, that area. I new

smaller may starting think seen shoot frankly, and we've are do customer a that news. tighten the anticipate of in somewhat around more that future also within quarters cost And of new their where see force every that but eventually a our sort invest I them now enabling higher budgets control is say control. a to would to our sales customers more four to manage I level in to and enable approvals purchases. more that's rigorous budget our buying green base, of more centralized, is and way that think of quarters, outside more approvals segment. headcount their trying that's settle So good certainty to may and I buying, land for is potentially across into to budgets What's adapt that even containment

we've had would view to perspective this that coverage get we we coverage for that the our it we said have to in I've marketing from free we change to with is sure needed during of also about It have every our again ratios than adapt a historically more from kind and saw And pipeline that a in access making going customers. when I in to that our of make the drives targets our support our in to made priority investments they've and things of invest migration COVID, have from got means one be do to better the move value. paid number to quarter past that segment. that the them first the take already our And to if think will the they've mid-market that one us, benefit for base. they back enterprise think that when customer environment, get customers to of and see resilience already ensuring from can know that sure because the capital them we're to that's continue And they this they deployment is we our long-term

assumes Thank more you. that bit conversion follow-up, seen guidance what this your year revenue color you Howard, provide full on could a And quarter? then type you've relative rates the of a conversion to rates little

Yes, sure, Tim.

level did full have that and QX, comparison year seen conversion and we QX had within things a the seen how we the when most had that at stabilization. we recent out at a of gave, at QX rates guidance we looking a So look played in we've looking within

long close. So deals a look we at had are taking both to how have

percentage shifts to has the lengthened. look had the pipeline at conversion look that rates like. close we've We've to days and average seen what of the So

And some would are what of year multiples a these been ago. they have of

adjusted able be accordingly to we've that so account. into And to take

as So confidence would the of we in through we expecting or the that stay worse, that same then the guide, the provided $XXX is million of conservatism into some year, our year. that we've million rest this and that get range look us things built expectation the $XXX for to gives that

Next, Chad we'll with Chad, to feel ahead. from Craig-Hallum. please hear Bennett free

kind So I a the growth, billings sales at? to guide in you didn't at or the low here press Are year. at growth year. on see comfortable in mid-teens And went cost it or the any of material call, additional we're the in revenue spend taken what level that and with you have guys rate the your, running for from that XXs release obviously, you're if a actions related pretty marketing looking effectively is to, down

Yes.

So thanks, Chad.

guide able the are think been this any a structured well, get maintain to plan. XX% We that We've tracking operating hence, the in and that improvement and the that able this looking running over XXs, working year. of deliver for took spend to scale those margin for program a we continued and and on in XX%, that's programs our year, to R&D this We're in our January see the more in to We action they you'll still last an year. will in haven't cost continuing taken mark. around G&A the retain X we of be structure, we're to incremental focus execute action apart being from years efficient

a to so that. in whilst position we to marketing of sales a from the improves, our being us that prioritize macro plan we're And that advantage as perspective, improving have still a able and quota-carrying able model, be to take reps, sees

balancing we of way expense. sure manage terms we're is can to make with with margin of top the growth because improvement both an in offset in movement operating of we So profitability, some that a improvement that we've that line how and hence, seen guiding the we to the are terms

of interesting. I being kind and Generative the you of on impact. were on a the pretty follow-up earlier cases broader use one of AI maybe out saw Then just today. AI picture very or whole your to can Generative which That put blog the But maybe less, with tailwind And you Generative AI significant means seat growth adopted. think that the general. developer you I -- is growth said, thought and in moderates do as developer productivity more

automation, that and Is deal aspect AIOps and I'm understand wondering do of but it's forth. more automation more sizes, bigger seats net-net, less forth. it just you How a maybe software out a tailwind the the a of so if, complexity, positive? net-net more But balance with so deals I kind there, or tailwind.

more and developers more on through quality the a make how of works now a tail. going more developers, up AI, definitely transition I it's you the know freed just if democratization that creativity increase, with sort when I make because the of from and interesting, that's the efficient, of developer stuff, more experience think and they we ship is to think developers the chain or more more more build a for is capacity both is compute developer compute they and part So I developers of time distributed continuous the the to and It the quantity deployment spent more value you or they is way more things. my right? right? the of amazing think tailwind a And them I've with Generative whether lot efficient, just build

an can to transformative, to their technology do now engage that their mean not a if just industry, think manufacturer they really going in is I health this every but voice, for be with and excitement the be sense for the amazing customers things that's services. because relies a change products in automotive. sort And that environment tech my change you on to care, IoT the of way for enterprise that done in I in

to and business and and their we're developers these breakthroughs and the really see genius real innovation. not leverage all their of industries capability technology, going to So to in models breadth I going own all industries, advance think own of are

that work it's the a developer security of operations work. in is management, responsible creative Its testing, It's lot not a engineering, for that right? remember And it's some cases. maintenance is

you time more ideate, Generative interesting the -- So as benefit stay working to partnership more going a AI. engineers you're phenomenal can free efficient flow, up work build in and make to for business. and prompt them to that get with things, The in amazing to to become and

a in term it's about So And I'm long of the I our really do reasons think why it's say tailwind. business. confident I'd also one many net-net the

a you what quarter, here every been haul. I've is for the value to customers all long I'm but And the talk I X driving time, we over long do think years. And my about

for We our event are which and the the consumption-based essential on things is still testing led essential infrastructure the in customers, traffic, in to increase that in see us increase the in one that of start utilization platform, we pricing. incredibly

has lead tech grow. to Our continued

macro position to to should We continue with really expansion to and base in speed the With consistent we've will improve, and ramped competitive that capacity be better never you've in cost And go that invest. prosecute a those and margins a in been our frankly puts a we can position. opportunities. position sustainable strong continue good capability we marketing the the in operating innovation and margins, seen that operating

overall as can what going own And inside do I of what each and experimenting. need for TAM for because only able platform does we're It's of need and think our AI learning our expand us like I individuals more automation. software, do be more even AI to really then more said, Generative by more not Generative to DevOps, exciting complexity,

Generative of of machines harnessing is One the AI about efficient. about LinkedIn efficiently. machines work really people the because that of the Like assistants it note today executive getting more and unique in talent how she's and do become sort posted do a to your using I can more effectively love our to that more

take on reliability, focused And about so to the security, in that's lot in. what's very fidelity, of and seriously. are time a out we figure that that, that There's and interesting we're we teams that have safety, terms

for and it for PagerDuty. very I But do our exciting, of we abandon. can think is really positive this reckless run think at and all with So customers it's I don't

like Rob with hear from you to ahead next ready. Rob, Baird. Oliver are when We'd go

with each you. I you. had for Jen, of start I'll one

I the full extra look. year, that think being month like guys sort kind extra surprise of of the on the an had quarter of part guidance, think, off I for an you here and

little of that the there So to what some a which happened on and and were to that to what guys all throughout had just things. here see dive want had the into of touch but transpired I you extent things macro, wanted bit get some they I deeper Certainly, think impacted we kind other I quarter.

and Officer, Revenue in Chief in change know David a have February. I did left You

I I negotiations? is Jeremy fear like then had secondly, prices I'd course, to sense price you you any that and And then And is guys or this. you. of which a had raised So some issue at enterprise, an created Howard, follow-up in get whether for disrupt an in any to on increases. how to I wanted [indiscernible] always sense going potentially price a your your which, know extent get is to have just transition of those for the a issue that when became

questions. was here. going a them That if see I'm to I all get lot of to Okay. can

So data the We And could were to of we ball, right? a at in looking I similar have we did And see macro April, our go. helping have our what looking terms don't the we somewhat in important is drives May, to think at and but in largely crystal that was where us guide about deteriorate data and QX. at really macro think May QX be a compared the was that did look guidance. to conservative trying in

would transition, of really and several In well, to enterprise that have course has say, and easy it's that in oh, the But And an changed. and challenge. last an has of revenue mid-market management Jeremy, exceptionally transition, be experienced of the it we the the leadership veteran over was well. in scapegoat the largest years business our not led he's meaningfully and transition gone terms parts the

I go from So continue strength strength to, think, to there. we

As make stronger those with the we behavior. in around buying when in to has convert rates with down ramp pipeline the past. have that make more But pipe I determinations a entering reps is it's secure issue longer past the mentioned, you budgets the the longer come quarter taking because are to because been conversion taking growth, than to than decisions customers bigger to see

just maybe can things, I pricing And the Rob. on jump of side Yes.

So of you're we year introduced a March, about that some in anniversary right. increases We did price the ago.

We the value haven't are the to act deliver, seen current where ROI we compelling that creates environment, in the particularly environment. carefully. very when for that pricing in of still play role terms people say price reason But I at ready enterprise, outsized an this in there's the customers Obviously, this they're decision-making. looking strong would in

have of So we're but the that is certainly, in value, to clearly customers that But still evident. value when we spend. positioning constraint they're that ready deliver terms

Great.

Thanks helpful. guys. did back result you And just you make quick outlook. may very some Chad clear it, your know apologize I most And clarify you could of then actions follow-up missed I I in you. operational were? had but just in I have I January. and That's were the a that for asked what thought new prepared you you think in of remarks guys done Howard, that if adjustments about as those lowered a that, done, cost the had Okay. said were

Yes.

with So were the a associated perspective. operational adjustments any changes not from headcount

incremental in any reduction in terms force. been hasn't there So a change of

and guidance we having our around So we January, adjustments year data the we had from us QX. this prior referring we on decisions more The look to full at one did call. was QX that new in data for were which back because on the operational made discussed I our a around based

making how in we that's into things additional us improve particularly QX, change, in the decisions direct or even to some in rates data think noticeable want a led How that are pipeline current around the capital do required? And about environment. conversion that the saw half the to investment change do can QX, we pipeline generation. what a we do the and of to We back

we're QX. from worse in for a were mainly making So in in being us perspective go-to-market than QX that adjustments those were recognition they of conditions essentially

we Next, Stotler William Blair. with have Matt

on Appreciate Alex questions. is taking for you our This Matt.

trends slowdown? So it just a big in Was Thanks, under falling pipeline macro. maybe deals or of bit on just just due the more change more? you the the more few was qualify one it to broader a a Could

Yes. And for thanks the question.

buying deals, customer we've reflected some the these deferred of became and pattern from change noticed a across that close segments across verticals being smaller longer geographies seen, were behavior constrained, buying that segments, behavior customer doing deals terms in being to In generalized across and terms of for or out. in and cases, pushed those more that again was deals taking across we

no So specific specific only segment. it -- -- to a was there was a not specifically related

just for switching Thanks gears it. that. And little bit. then a Got

IoT, opportunity? do your for cetera, new such view with as SecOps, what marketing, et customer cases compelling most as the pipeline immediate the Regarding use other support, you most market

I like for way single more an one because customer platform. in But me the is. of child X an collaborate ServiceOps most favorite seeing because Gabriel, in and engagement like right AIOps so right? tell between our biggest is developer service the can products increased and community every my customer effectively That's automated when incident, us asking appetite automation they're opportunities for the I we're are there tech and they And across of front that who the would instance. teams you, that now think intuitive, the automation an automates

AIOps. So it's very hard to kind am of about excited say, but I

that that opportunity. and us. surprise automation Automation for the of different us terms process of SaaS big opportunity applying feature parity we used cases process And is term to in I and continues automation. think use the think the of forward. I trust in our environments. enterprise like the just market understand it leverage be I it to in take will set product or zero customers Long automation, terms is time types to of a are version have for think think have that process see the a a you to step cloud-based don't can big be to I that And people that in breadth now great

funny look SMB, mid-market is customers, varying points all we at they're And the enterprise, across or curve. when the of they're whether thing in maturity our operational widely

engineers on like just getting are them literally call. of Some

the and all And the can how at some company them do only detection safe about all way. in do ours spoke an to like event that digital auto on is is secure they online entire environment way And from platform of remediation. the that of scalable really operations through looking travel their of we automate a earlier and you

of you when all of direct all one But you to really in the we're start millions And and opportunity multiyear products. it I that that's address platform, question in way not ROI, high you answer what see leverage of tens deals so And very of we're doing. because those there's is bring a some the ROI. of dollars these starting entire your power to of see together, think bigger maybe to

And we're Roade next Gabriel to going Gomez.

Congrats the on quarter.

gross the has in the Or guidance expect the we questions widen of trend how year? as to to progress the of quarters you So about to initiatives end that working the gross trend I progressed? case just expect for the any margins how have efficiency, do guys two cost margin? are you quarter the towards should quick there guys on as or So

Yes.

target be XX%. our thinking still in about XX% would Gabriel, being margin So gross to is which we range,

operating then in operating terms expenses, XX%, Okay. you're deliver because the how in of And guiding around you margin, XX% -- XX%. for

So between be was wondering expenditures how how they or capital in marketing, I will those expenses increase G&A. the will research and and sales distributed

way drive marketing. trying to G&A and and the R&D looking then XX%, R&D around we're sales And full expense for year, the improvements think about we is So XX% this we and to range. that anchor keep continued around the around

we ended level. So same look that are the the where the you would for try while plan two last and keep year, if those lines see we improvement you full the most expect at at year the to R&D

it looks to final comment, made we've a It will turn you the please. for through questions. all like Jen, we

You on Jen. might mute, be

myself. attending to and talking for your just today. interest and you Thank Josh, all thank I'm you,

earlier, I mentioned is to unchanged. As our revolutionize mission operations

ability are essential on company building durable to and customers. in remains the PagerDuty to We growth focused long-term our execute. a confident our

continues grow. to lead tech Our

have durable profitable about and investment great TAM a potential sustainable margins we presents. operating that to in are expansion Thank you and themselves growth, Generative strong the AI lend excited evening. Our and possibilities