PagerDuty, Inc.

Good afternoon. My name is Khaleed, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Page Your Duty Second Quarter 2020 Earnings Call. Our lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I will now turn the conference over to Stacey Feiderman. Please go ahead.

Good afternoon, and thank you for joining us on today's conference call to discuss PagerDuty's second quarter financial results. With me on today's call are Jennifer Tejada, PagerDuty's chairperson and chief executive officer, and Howard Wilson, the company's chief financial officer. Statements made on this call include forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results, performance or achievements, Thank you for joining us today. and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus their closest GAAP equivalents. For example, other companies may calculate non-GAAP financial measures differently or may use other measures to evaluate their performance. All of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation between GAAP and non-GAAP financial measures is available in our earnings release. Further information on these and other factors that could affect the company's financial results are included in filings we make with the Securities and Exchange Commission from time to time, including the section titled Risk Factors. and the company's most recent quarterly Form 10-Q previously filed with the SEC. Now, I'd like to turn the call over to our CEO, Jennifer Tejada. Jennifer?

Thank you, Stacey, and thank you, everyone, for joining us this afternoon for our second quarter earnings call. I'm pleased to welcome Stacey Feinerman, our new VP of Investor Relations, to the PagerDuty team. Great to have you here, Stacey. Q2 was another strong quarter, demonstrating our leadership in the rapidly growing category we pioneered, digital operations management. It was our first $40 million revenue quarter, driven by our multiple engines for growth, new customers, new users, new product adoption, and international expansion. Revenue grew 45% year-over-year, with continued broad demand across industries, verticals, and geography. We closed the quarter with 12,045 total customers, adding 365 net new customers. Q2 was also a record quarter for expansion of customers spending over $100,000, increasing by 32, totaling 274. This represents an increase of 51% year-over-year, further validating our success in enterprise and mid-market segments. We grew efficiently, sustaining best-in-class, non-gap gross margins of 86%. Our success is tied directly to the success of our users and our customers, and we appreciate and respect the trust they place in our team and in PagerDuty. During the quarter, we saw robust demand for our platform, as well as strong adoption of our new products, event intelligence, modern incident response, visibility, and analytics. Demand is driven by a number of macro trends, three of which I will focus on today. First, the amount of time a consumer will wait when a brand experience is not perfect is shrinking to less than three seconds. Second, digital transformation comes with the challenges of proliferation of technology, apps, and signals stemming from cloud computing, distributed architectures, and IT modernization. This creates hugely complex technology ecosystems that need to be managed to deliver on customers' expectations. And third, the developer-influenced modern workforce requires intuitive apps that work together seamlessly, scalably, and securely, and support employees' needs in today's dynamic, real-time environment. Traditional incident management solutions don't address the challenges that come with these trends. Many were designed prior to cloud computing in a time of sequential command and control workflows. They often require manual integration, heavy investment to deploy, and can't support today's agile work environment. PagerDuty is different. Our platform is designed for digital disruptors as well as the world's largest enterprises. It was architected for real-time, cross-functional work and delivers proven resiliency at scale. Ten years ago, we made a big bet that DevOps methodology would become mainstream. and created a cloud-native on-call management solution for DevOps teams. Our bet paid off as software engineers voted with their credit cards. Today, our on-call solution is the entry point for our platform, which is now enhanced with automation, machine learning, and intelligence, substantially separating it from other solutions. When customers add enhanced products on top of the PageDuty platform, they gain significant value by shifting from basic coordination of on-call rotations the proactive and automated orchestration, incident management, and real-time operations management. Automation is a key focus area in our new products. A public mobile payments company with a point-of-sale solution used by millions of businesses uses PageDuty's platform across all of its engineering teams. This quarter, the company added event intelligence, which combines machine and human response data using machine learning to intelligently group alerts and automatically route them to the right team. As a result, the customer has reduced incidents by 42%, saving hours of unplanned work, improving customer experience, protecting revenue, and reducing operational costs. IG Group, a global fintech leader in derivatives, also adopted event intelligence this quarter, reducing their alerts by 58% and thereby reducing the number of disturbances to employees. We estimate their projected annual savings to be over $500,000. We recently commissioned our first real-time work study, which revealed that 51% of executives and employees find out about incidents from customers themselves when they complain or tweet about a bad experience. This causes hours of unplanned, stressful work as multiple teams scramble in silos to address each incident. Our modern incident response solution addresses these problems by automatically detecting issues and intelligently orchestrating cross-functional team response helping teams to ensure a better customer experience. IHS Market is a $26 billion public global information company providing data, insight, and software principally across three major industries, energy and natural resources, financial services, and transportation. This quarter, IHS Market replaced a point solution that did not scale effectively with PagerDuty's platform. The company is deploying our platform and modern incident response across nearly 1,000 users. It's also important that companies can determine the business impact of unplanned work and customer impacting incidents on their bottom line. According to our survey, the cost of unplanned work is increasing, and 86% state that this results in less time to innovate. Teams face burnout, lost productivity, and less development time, which in turn impacts competitiveness and creates brand risk. Often companies cannot understand the real-time business impact of incidents. Our visibility products Translates the immediate impact of incidents like outages and disruptions into business outcomes. No other product on the market consolidates a real-time, holistic view of operations and correlates people, technology services, and business impact in the moments that matter. PagerDuty Analytics provides operational scorecards and customizable dashboards, so companies can apply a proactive approach to managing digital operations based on how teams have historically responded to major issues. The scorecards provide a curated approach to improve team health, technology service health, and business outcomes like total cost of incidents, response cost to the business, and predictive people metrics to detect responder fatigue. This is an industry first and a significant differentiator for PagerDuty. We are excited by the broad applicability of PagerDuty's platforms. This quarter, we discovered a number of new use cases where our customers have applied our platform. A late-stage, high-growth fintech company that facilitates digital payments for millions of businesses worldwide uses PagerDuty across many of its teams. Having started with developers, they then expanded their users to legal, security, and payment operations teams. The payment operations teams use PagerDuty to coordinate with global banking partners in real time, ensuring successful transactions. Physical security teams are on PagerDuty for real-time response to physical security issues. Legal teams manage time-sensitive requests from law enforcement, and SecOps teams are on PagerDuty to monitor security risks and ensure compliance. A global recognized leader in GPS navigation and wireless devices uses PagerDuty to monitor its emergency communication devices, where complete reliability is a life-or-death matter. The company previously used a basic monitoring service and switched to PagerDuty due to reliability concerns. After recognizing improved reliability, scale, and value PagerDuty provides, the company has now expanded its use of PagerDuty to its digital transformation initiative. Another notable new use case led by our PagerDuty.org initiative was Code for America, a nonprofit that focuses on reforming government services to make them simple, easy to use, and accessible to all Americans. They are currently using PagerDuty to support their GetCalFresh program, which improves access to the Supplemental Nutrition Assistance Program, or SNAP, more commonly known as Food Stamp. GetCalFresh has digitized and streamlined the process for applying for SNAP, reducing the application time from 82% from 45 minutes to 8 minutes and has helped over 1 million Californians gain access to Food Stamp. From a product perspective, this quarter we launched a number of new capabilities that help our customers more quickly and accurately respond to issues and opportunities that impact revenue brands and customer experience. In July, we launched Business Response, which advances traditional status page capabilities so responders can seamlessly update business stakeholders on business service impact and real-time recovery progress in an intuitive, fully automated way. This allows responders to drive faster resolution and enable stakeholders to proactively manage customers' needs. Similarly, in Q2, we enhanced our search capabilities to provide improved context for IT and DevOps teams so they can more easily navigate large organizations to find the right subject matter experts, teams, and escalation policies during an incident and respond faster in the moments that matter. The further build on our market leadership, we continue to deepen our leadership bench. During the quarter, we appointed a new CMO, Julie Herendy. Julie comes to PagerDuty having led large marketing teams at companies including Uber, Dropbox, Yahoo, and Lookout, and now leads our efforts to scale our brand and continue to build our demand generation and growth marketing. As we expand our business, we will continue to invest proactively in leadership to support our growth. In the coming quarters, we anticipate adding a Chief People Officer and a Chief Revenue Officer. Overall, we have another strong quarter, and I'm proud of what our team has accomplished to benefit our users, customers, and partners. We are encouraged by our continued strength in enterprise and rapid adoption of add-on products. We continue to see growth in expansion, geographies, new use cases, and new products aided by our self-serve and high-velocity sales motion. Finally, I'd like to highlight our fourth annual User Conference Summit, which takes place on September 23rd through the 25th, where we will be hosting over 1,000 developers and technology executives. We are excited to host industry leaders, including Jeff Lawson from Twilio, Eric Yon of Zoom, Cynthia Stoddard of Adobe, and investor Andre Iguodala, as well as breakout sessions led by leaders and practitioners innovating with the PagerDuty platforms. We look forward to an action-packed week with our community, including new product innovation and best practices we can all learn from. With that, I'd now like to turn the call over to our CFO, Howard, who will walk through the financial results. Howard?

Thanks, Jennifer. We're pleased with our second quarter fiscal 2020 results. Our revenue for the second quarter grew 45% year-over-year to $40.4 million, beating the high end of our guidance. New customer acquisition, new product adoption, and healthy growth in international geographies all contributed to our strong results. Non-GAAP growth margins remained strong at 85.7%, and we exceeded our non-GAAP EPS guidance by 2 cents, coming in at a non-GAAP net loss of 7 cents per share. We ended the quarter with 12,045 customers, up 15% year-over-year. and 274 customers with an annual recurring revenue above $100,000, up 51% year over year, demonstrating our strong growth in the enterprise segment. One such customer is a global Fortune 500 company which provides global human resources management software and services. We landed a seven-figure multi-year deal with them this quarter. They use PagerDuty across multiple teams, both a modern DevOps team, and a traditional IT and NOC team. They use PageDuty to improve communication across teams, increase developer productivity, and increase total visibility into the health of all services. Other notable wins in the quarter included companies in the highly regulated financial services sector, where scalability and reliability are both factors in deepening their relationship with us. As Jen noted, our platform was built for digital disruptors as well as the world's largest enterprises. These expansions are proof points of the strong demand for real-time operations. Our dollar-based net revenue retention for the quarter was 132%. In the past eight quarters, our net revenue retention has been above 130%, and while we expect this number to vary quarter to quarter, 132% is a strong number for both our industry and our company. Our international revenue grew 59% year-over-year and now represents 22% of our total revenue. We continue to be excited about our early expansion efforts in EMEA and APJ and our revenue growth in these regions continue to be strong. In the quarter, we hosted two developer and user conferences, London Connect and Sydney Connect. I was pleased to attend London Connect where our customers shared their stories with several hundred attendees. One of those was Monzo Bank. Monzo is a disruptor in the financial services industry and has built a mobile-only bank. Their business is 100% dependent on digital services and they use PagerDuty to support a seamless experience for their more than 2.8 million customers. Cambridge Cognition is another customer that was featured at London Connect using our platform for a new use case, ClinicalWorks. They are a digital neuroscience company developing validated software technologies to enhance research into brain health and mental well-being. In addition to using PagerDuty to monitor the health and status of its IT infrastructure, the company utilizes PagerDuty to help monitor suicidal ideation. immediately notifying clinicians and sponsors to take action to prevent self-harm in patients. The need to acknowledge the call and using escalation policies ensures that the message is actioned. With that, I will turn to the detailed financial results. I'm providing these results on a non-GAAP basis. Our GAAP financial results, along with the reconciliation between GAAP and non-GAAP results, can be found in our earnings release. In Q2, non-GAAP growth margin was 85.7% and was in line with the second quarter of last year. Our cloud-native architecture, DevOps approach to production, and programmatic approach to customer support and success drives our efficient operating model. Our strong growth margins create operating leverage and allow us to make investments in the long-term growth of our business. We have run our business on growth margins between 84% and 86%. and we expect gross margins to stay within this range for the remainder of the fiscal year. Turning now to operating expenses. While we remain focused on scaling the operation to improve our leverage, we anticipate continuing to make investments for growth. Over the long term, we anticipate that our revenue will grow at a faster rate than our total operating expenses, which will improve operating margins over time. Operating expenses this quarter reflected anticipated investments in expanding our Salesforce and go-to-market programs. Second quarter non-GAAP operating expenses were $41.7 million compared to $28.1 million a year ago. This 48% increase year-over-year was driven by investments made in line with our go-to-market strategy, continued product innovation, and Infrastructure to support being a public company. Non-GAAP research and development expenses for Q2 were $10.2 million compared to $7.4 million in the same year-ago period, representing an increase of 38% year-over-year. Innovation has been and will continue to be a top priority for us as we continue to move up the value chain in real-time operations. We expect R&D to increase for the remainder of the year, but remain roughly the same as a percentage of revenue. Non-GAAP sales and marketing expenses for Q2 were $21.5 million and grew by 49% compared to Q2 of fiscal 2019. As we discussed on our Q1 earnings call, we made early investments in the first half of the year to increase our sales capacity. We expect to expand our sales force more modestly for the remainder of the year, and over time we would expect to see improved operating leverage as our subscription revenue grows. From a marketing perspective, we will host our annual industry conference, PagerDuty Summit, in September, which is a significant investment in the quarter. We will be making additional investments in Q3 program spend to promote our brand, which includes above-the-line advertising, and this will continue into Q4. Non-GAAP general and administrative expenses for Q2 were $10.1 million for the quarter ended and increased 60% year-over-year. As I mentioned in our Q1 earnings call, the year-over-year growth in GNA was driven by investments in headcount and systems that we made in anticipation of becoming a public company. GNA expenses in Q2 were sequentially flat relative to Q1 and decreased as a percentage of revenue. We expect Our non-GAAP operating loss in the quarter was $7.1 million compared to a loss of $4.2 million in the same quarter last year. Our non-GAAP operating margin was negative 17.7% in Q2 and negative 15.2% in the same period of last year. The decrease in operating margin is largely due to the investments in G&A to support becoming a public company. Over the longer term, we expect improvements in operating margin. Non-GAAP net loss for the second quarter was $5.3 million, or a net loss of 7 cents per basic share, compared to a non-GAAP net loss of $3.8 million, or a loss of 18 cents per share in the second quarter of last year. Turning to the balance sheet, we ended the quarter with $341 million in cash, cash equivalents, and investments, up $213 million from the end of the fiscal year 2019. This was primarily driven by proceeds raised in our initial public offering, slightly offset by our year-to-date operating losses. We generated $2.2 million in operating cash flow in Q2 compared to having used $4.7 million in the prior year, primarily due to timing in working capital changes. Free cash flow was $1.3 million in Q2 compared to negative $5 million last year. Free cash flow margin was positive 3.3% compared to negative 18.1% in Q2 last year. In the second half of the year, we are planning a number of capital expenditures related to our office build-outs, and in the short term, we don't expect positive operating cash flow for positive free cash flow. While we expect to make continued progress towards sustainable free cash flow in the long term, it may not be in a linear trajectory given period-to-period fluctuations in billings and working capital and capital expenditure as we expand our U.S. and international offices. Moving on to guidance. For the third quarter of fiscal 2020 and the full fiscal year 2020, Revenue is expected to be in the range of $41.5 million to $42.5 million for the third fiscal quarter and would see our full year fiscal 2020 end in the range of $162 to $164 million. Non-GAAP net loss per share is expected to be in the range of $0.09 to $0.10 for the third fiscal quarter and in the range of $0.36 to $0.37 for the full fiscal year 2020. Bottom line forecasts include the impact of the cost of our user conference in Q3 and program spend for above the line advertising. Basic shares outstanding for Q3 and the full year fiscal 2020 are expected to be $76 million and $65 million respectively. With that, Jennifer and I are happy to take any of your questions. Operator?

And we will now open up the lines for questions. If you would like to ask a question, press star 1 on your telephone keypad. And please limit your questions to one question and one follow-up question. And we'll pause for just a moment to compile the Q&A roster. And our first question comes from Sterling Alte with JPMorgan.

Hi, guys. So, you guys, the net retention rate kind of came down. I know it does fluctuate vary to quarter, but trying to see if, you know, pricing is kind of becoming an issue with the competition and how the level of expansion deals look in the quarter versus the last couple of quarters.

Thanks. Yeah. Hi, Sterling. So, In terms of our dollar-based net retention rate, 132% is a strong number for our industry and for our company, and we do expect to see that fluctuate from quarter to quarter. A couple of points to note, though, with respect to Q2, we did see a couple of our primary competitors churn or downgrade within the quarter. I think one other characteristic is that this was a quarter for us of intense hiring. In fact, from a sales team perspective, we have our highest proportion of our sales force ramping in this quarter compared to prior years as we front-loaded our hiring in H1.

Got it. Thanks for taking the question. I appreciate it.

and our next question comes from Matt Hedborg with RBC Capital Markets.

Oh, hey, guys. Thanks for taking my questions. Jen, you know, on the topic of new product attach, you've launched a number of products over the past year. You talked about a number of them on this call with a couple examples. I'm curious, when you look at these four new products, is there one that we should be keeping an eye on more in terms of attach or just sort of overall demand from an add-on perspective?

Hi, Matt. Good to hear from you. We were really encouraged by the new product adoption that we're seeing. Event intelligence and modern incident response, in particular, are products that are sort of the natural next step for a customer that has already automated their on-call environment, is looking to move beyond simply improving their response to becoming more proactive and more predictive by leveraging machine learning and automation. And we also see that some of our products suit more senior personas, whereas other products suit sort of, you know, all of the developer and operating community. So they're sort of different horses for different courses. But the next sort of logical step, I think, for our customers as they add on products is modern incident response and event intelligence.

That's great. And then Howard, one for you. I know we've talked a lot about trailing 12-month billings as probably the best indicator, but calculated billings still, I think it accelerated sequentially. It looked like deferred revenue was pretty strong this quarter. Can you remind us again how we should think about calculated billings, given your monthly contracts and the fact that a lot of your customers co-term deals?

Well, thanks, Matt. You know, obviously we're pleased when we see some acceleration or an increase in revenue. You know, to your point, we do have a few items that do create some fluctuation in that, which includes the fact that we do have 20% of our revenue coming from monthly customers who, on a month-to-month arrangement with us. And then because of the nature in which we contract with annual customers initially who then will co-term and so end up with shorter period billings associated with those, So we do tend to look at it in terms of on a trading basis to get some sort of view because that helps balance out those fluctuations. But again, it's one of those things that does move around because of these factors that I mentioned, including the seasonality of our renewals.

Great. Thanks a lot, guys.

And our next question comes from Rob Owens with KeyBank Capital Markets.

Good afternoon. I just want to drill down a little bit again into the net renewal rate. I did hear you say churn or downgrade during the quarter of a couple of customers. We'd love a little more clarity on that. Where you are seeing success with the expansion, can you help us understand how much of that is seat-based versus maybe product-based at this point?

Hi, I'm going to take that question, Rob. It's nice to hear from you. So I just want to clarify what Howard alluded to was we had a couple of competitors that churned off of our platform. Oh, I'm sorry. Yes, which impacted. And, you know, in a business like ours, you're always seeing some customers come and go, but our churn numbers still remain best in class. And we're particularly proud of the expansion that we've seen in enterprise, where customers This quarter in particular, we added 32 customers spending over 100K with us. I think, you know, I'd also would just point out that we're seeing, we continue to see strong expansion, user expansion across teams and new use cases, and that drives the majority of our growth, but we're excited about the new product adoption that we've seen. I would just underscore What we said last quarter, which is those new products are still early. We don't guide on a revenue breakdown by those new products or share that information. But we are seeing customers very interested and excited about taking their operations maturity to the next level, starting to use machine learning and automation to their advantage to reduce the cost and time and risk associated with what we think of as modern incident response.

Great, and thanks for the clarification there on the competitor churn. Number two, with the success you're seeing internationally, can you talk about go-to-market overseas, and is there any unique localized competition or anything different from a competitive landscape? Thanks.

I think go-to-market is a lot like it is in North America. Most of the accounts we engage with are greenfields, and that's the case across our customer base. While we do see Some competition from time to time. I'd emphasize that we still really see it's a large and nascent market, and a lot of customers are really just thinking through how to improve the time it takes for them to respond to demanding customer requirements when their technology is getting more complicated. We're really proud of the growth that we're seeing with very new teams in both EMEA and APJ. Those teams have only been in market for about two years. and some of the most interesting use cases are coming out of those markets. Again, I would also just reflect that in international, very similar to North America, the adoption of our platform is very horizontal. We see it across just about every single vertical and across different kinds of teams.

Great. Thanks, Jennifer.

And again, to ask a question, press star followed by the number one on your telephone keypad. And that's star followed by the number one to ask a question. And our next question comes from Sanjit Singh with Morgan Stanley.

Yeah, I just had a higher, I guess, a strategic question, Jennifer, if you will. So we've seen a lot of call it the IT operations management space, a lot of consolidation. Splunk's made a couple of acquisitions in the performance monitoring side, application performance monitoring side. A lot of these guys are your partners, but in terms of the longer-term strategy, is the partnership strategy with the performance monitoring vendors and and other parts of the ecosystem. Is that the right way to go or do you need to start to bring in more and more and subsume more of that functionality into the PagerDuty platform as you try and pursue a platform play in the enterprise? I just want to get your sort of higher level thoughts there.

Thanks for the question, Sanjit. What I would say is that as we see consolidation in that particular part of the market, it really strengthens our position because It becomes increasingly important to our customers to have a central, independent, third-party correlating events from all the different points and monitoring environments within the ecosystem. And that's not limited to APM. It includes security, ticketing, physical environments, et cetera. And so you're correct that we do partner with the APM providers. And in fact, most of them, like Datadog, New Relic, AppD, Cisco, are our customers as well. So there's a very strong complement. And the way to think about it is as we consume those signals long term, we're not just leveraging what's happening right now in the moment. We're leveraging 10 years of data in the platform that helps us to really correlate and make sense of what's happening regardless of how complex or how distributed the environment is. The second thing that I would say, which is very different from the approach of the APM providers or traditional monitoring or log providers, is that we really focus on automating and intelligently orchestrating the people and the work itself. So every time an issue or an opportunity runs on the platform, the platform is learning from it and then providing more proactive predictive capabilities to the team the next time around. And that continues to be, I think, a really and many more. So we continue to see ourselves as being central in that ecosystem as opposed to bias towards one particular type of capability or sub-segment or another. Understood. And maybe just sticking with that, those sort of longer-term themes,

As customers kind of move more and more to these container-based, microservices-based, Kubernetes standard type application architectures, how does that impact PagerDuty from a growth and positioning standpoint in your view?

So containerization so far has been great for PagerDuty because it actually creates another layer of complexity to monitor, but it doesn't replace some of the legacy environments that our customers have to contend with on a day-in and day-out basis. And I would say even with some of our younger disruptive customers, because of the pace at which technology and architecture has changed, they all have to deal with some kind of hybrid mix of native, new, cloud-centric technology, on-prem, traditional legacy technology, and the complexity and the change that accelerates as you have people doing tens, 20, hundreds of deploys a day make it impossible for humans to manage. So containerization has actually been a good tailwind for us alongside of cloud and the broader sort of umbrella of digital transformation where you're trying to do more, you're trying to shift your investment to innovation and application development, and yet the complex technology sitting behind it isn't getting any easier to manage. There's just kind of a different set of challenges, I would say, that come with containerization and the distribution in architecture.

Great. Appreciate the thoughts, Jennifer.

And our next question comes from Bhavan Suri with William Blair.

Hey, guys. Thanks for taking my questions, and nice job there on the quarter. I guess I wanted to chat a little bit on the penetration opportunity of the core product. You know, if I think about the core on-call management product, and you think when you look at the seat count perspective with the average customers, I'd love to sort of get an idea how you think about sort of the remaining runway for additional seats within the larger customers. You've got some customers deploying more than 20,000 seats, and you think about sort of that spreading. I'd love to sort of think about how you guys think about attacking that opportunity and what the size of that opportunity within the existing base might be.

Yeah, the way we think about that is I think the traditional starting point for most of our customers is in developer ops and IT teams, and then you see this Natural expansion, organic expansion into related organizations like customer support or security operations, et cetera. We don't have a single customer that is sold out. All of our customers still have employees that have real-time responsibilities and deal with complexity in their day-to-day operations that are not on pager duty. So we think the opportunity continues to be significant within our existing base, on our core product, as well as the opportunity to acquire new customers and expand through add-on products. What I would say is we continue to work very hard at making our products simple and easy to use so that you don't have to be a developer who can script to kind of understand how it works. That includes things like removing jargon from the UI and also articulating the value and how our products can be leveraged and applied to different use cases than sort of what's typical as opposed to sort of allowing customers to have to figure it out for themselves.

Got it, got it. That was helpful. And then I know someone asked about competitors a little bit in consolidation, but I want to touch on some of the AI ops entrants, right? So you think some of the monitoring guys are coming in, so guys like Dynatrace have opened up their platforms, you know, to work with more third-party systems and data sources and addressing sort of the AI ops opportunity, I guess. Are you seeing that at customers at all? Do you see any of these new AI ops kind of entrants in that space? are you seeing monitoring entrants on deals or is that still pretty much the traditional guys or guys that have been acquired and consolidated like Victrops or whatever?

First of all, most of our deals are uncontested. There's still a lot of greenfield where we're replacing phone trees and WhatsApp channels. Second of all, I would say that we're not seeing AIOps in a competitive way at all. In fact, all those people that you mentioned use PagerDuty and are beginning to leverage PagerDuty for things like event management or event intelligence. So I don't see them coming that way and I think what's important is there's quite a technology effort to not just consume a signal but then correlate that signal. We need a very strong data set to work from in order to make sense out of a very complicated set of events that in a traditional APM environment would each look like their own separate incidents and would be pushed to a A single silo team, whereas with PagerDuty, Event Intelligence, and Modern Incident Response, as those events come together through our platform, they're consolidated into a single related event and then orchestrated to maybe a handful of people instead of hundreds of people across five or six teams working on them. So the workflow is different, and then our ability to orchestrate people, orchestrate teams, and intelligently route insights and actions direct to right teams and right subject matter experts is very differentiated. The last thing I'd mention is visibility, where we talk about helping people in the moment understand the context of what's happening in business. For instance, changes in transaction volume or changes in shopping cart abandonment. At the same time, they're experiencing a complicated technology incident. which helped responders prioritize immediately, spontaneously, the things that are the most important for the business in that moment. And that, again, is quite different relative to the AIOP part of the world.

That was super helpful. Thank you, guys, and nice job there. Thanks again for taking my questions.

And our next question comes from Richie Geluria with D.A. Davidson.

Hey, guys. Thanks for taking my questions. I wanted to start by drilling down on the 100K ads. Now we're 32 and getting to 274 in the quarter. Maybe help us understand, was that just a result of better execution in terms of sales and go-to-market or any other contributors there? And maybe directly help us understand, was that mostly existing PagerDuty customers that just expanded with both products and seats, or were some of those net new customers that weren't PagerDuty customers before?

Thank you. I'll answer your second part of your question first because it's easier to remember. The customers over 100K is a mix of existing customers and net new customers, but the majority are existing customers that are expanding within their dev teams or to new teams or new use cases. at Ormi Products within their relationship with us. And, you know, if I think about what's driving the strength in that segment, I think one of it is just market demand from enterprise and mid-market and the fact that there are not other scalable, resilient, secure platforms available to them. Some of those customers have tried point solutions or internal solutions and have not been successful. The other thing I would say is it's some of the macro trends that we're seeing, which is most of these large companies and even large disruptive mid-market players are trying to move very fast. They're investing heavily in digital transformation, which we facilitate readily. A lot of them are involved in cloud adoption or cloud migration, and those tend to be tailwinds that really support that kind of expansion. and then last I would say I think we are building credibility because we are proven in more than half the Fortune 100 and over a third of the Fortune 500 as delivering the enterprise scale and enterprise grade offering. We've also had feedback from a lot of these customers around how excited they are about the roadmap and the fact that as their operational maturity and a number of other people.

And I think that's really helpful. And then just in thinking about some of the early positive reception you've had with event intelligence, incident response and some of the other ancillary products, have you given thought to at some point in time, I know Jennifer you said not disclosing revenue breakdown or anything like that, but But maybe even something like attach rates or attach rates for even just 100K customers, be that once a year or at the analyst day or something. Just because I think what gets people really excited is when the platform part of the story really starts to take off and clearly the pieces are in place. But any kind of early signs and momentum I think would be helpful. But just wanted to get your perspective on that. Thanks.

Thanks. I appreciate your feedback there. At this point in time, we don't have an intention to share that data. Again, I think these products are early. We released Event Intelligence into the market last summer, so it's been out in the market in just a year, and the other products have all followed. And just earlier this quarter, we released Business Response, which allows customers to not just manage their technology incidents and issues and opportunities, but help business leaders drive the corporate response if they need to engage go-to-market to get ahead of challenges with their customers or legal or PR. And so it's a pretty diversified offering, and I think for where we are right now, we don't intend to share attachment data.

Okay. Got it. I understand. Thank you so much.

And there are no final questions at this time. I'll now turn the conference back over to management for the closing remarks.

Thank you, everybody, for taking the time to join our call. And thank you to the entire PagerDuty customer and user community and the team for another solid quarter. We look forward to seeing many of you at our upcoming summit later this month. Thanks very much and have a great night.

And that concludes today's conference call. You may now disconnect.