Q3 2021 PagerDuty Inc Earnings Call
Third quarter fiscal 2021 with me on today's call our agenda for Tata Pager duties Chairperson and Chief Executive Officer, and Howard Wilson, Our Chief Financial Officer statements made on this call include forward looking statements, which involve known and unknown risks and uncertainties that may cause our actual results.
The performance or achievements to be materially different from those expressed or implied by the forward looking statements forward looking statements represent our management's beliefs 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.
Our in addition to 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 make use of.
Other measures to evaluate their performance all of which could reduce the usefulness of our non-GAAP financial measures as a tool for comparison of our.
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 Companys financial results are included in filings, we make with the Securities and Exchange Commission with that I'll turn the call over to Jennifer.
Thank you Alex.
Can you hear me okay.
Thank you, we'll us and thanks to all of the who have joined US today. We are proud of our Q3 results and we were we were well above our guidance and consensus as many large enterprise seem to find the new normal for turning to strategic investments in nature to the digital operations platform.
We are confident this momentum will continue throughout Q4 Im personally grateful for the health of our customers our team and families as well as we all cases pandemic together and I extend our hope that you and your families are safe and well building.
Moving on a strong start momentum continued throughout Q3 led by strength in the enterprise the mid market segments year on year revenue was 26% and dollar based net retention grew from 116% in the previous quarter to 119%.
Our leading indicators, including pipelines web traffic and combined free and paid customer acquisition growth have trended positively our team performed well across the globe with an outperformance in North America, and EMEA and strong growth in Asia Pacific.
The third quarter since appointing new go to market leadership improved sales execution resulted in increased productivity close rates and average revenue per customer.
The reception to the new products, we launched in September exceeded our expectations, especially the response to our expanded automation and on a remediation capabilities with the acquisition of Rentech, which we closed in October.
Index, the a new and distinct land opportunity for us within the enterprise and Midmarket Dev ops, the Nike team and expands our total addressable market to include automation use cases within and beyond the management. This deepens our competitive mode.
These are you guiding value champion the customer was rewarded this quarter many of our largest customers made strategic investments to expand on our digital operation plan, which leverages the advanced product capabilities utilizing AI to deliver automation quantifiable of return on investment.
In Q3, we captured reinvigorated demand across most regions segments and verticals, including deals above $1 million in both tech and financial services with the large deal momentum in retail as well for.
For of the five largest software companies in the world expanded on page for during the quarter to accelerate their debt ops transformation to full service ownership. This included a very significant expansion deal with sales force, who is rolling out pager duties digital operations plan to over 10000 employees, including multiple teams outside of engineering.
In support of their ongoing mandate to ensure great customer experiences.
We also made excellent progress in our ship from on call automation to our digital operating platform as customers continued to embed major new the as essential infrastructure.
Our digital operation plan accounted for nearly three quarters of our net new era of striking 65% from last year.
We added industry leaders and innovators, including Bellcore Chanel credit Lego legal do and the Seattle, we saw significant ongoing expansion with customers, including discovery communication Docusign Pearson data on Yahoo, Japan and bank on to increase their use of nature.
Or duty to accelerate operations maturity in performance across their businesses.
We also thought digital acceleration increase.
Every organization is grappling with the new reality that were once structured plan unpredictable is now increasingly on structured unplanned and cross functional the shift to digital first is the one way of door consumers appreciate the safety and convenience of life online and the of little patience for a less than perfect expire.
During the.
Net the team responsible for seamless digital operations case historical increases in events, which went on managed cost more than half a million dollars per minute.
Our customers events and if the traffic was up 135% year on year debt. Our event intelligence solution is helping to prevent events from progressing into incidents even under the increase in traffic pager duty has continued to deliver resilience at scale maintaining for guidance reliability to the business for our customers.
The.
This is critical as the page you're getting platform essentially Operationalizing trust for our clients with their customers, while reducing the cost of their operation meaningfully. According to IVC patron duty customers are realized the two month payback period with an average benefit of over $3 million annually and a three day.
Year ROI of nearly 100%.
I'd see also estimate the profound shift the Digitization will account for 65% of global GDP by 2022, the strike three strategic imperatives for our customers, which are long term tailwinds for Paytv digital acceleration cloud migration and Dev ops transformation our day.
Digital operations platform empowers, new customers across verticals and geographies day tackle these imperatives.
One of the Australia's largest bank with over 600 billion and Apple is rolling out pager to the across multiple teams with the potential for thousands of users in a multi year partnership on our digital operation plan pager to the provides them with rich real time insights to proactively automate and respond to incidents where every minute of downtime.
The critical our platform Leverages AI to proactively reduce alerts and resolution time for instance, increasing the productivity of their Dev ops iseatz and the placement team, while saving of projected $1.5 million annually.
As a reminder, most of our new customer lands are greenfield the mark of the nascent market, where many companies are still early in their debt debt ops transformation and Sci is a leading provider of decision support for the global investment community undergoing an executive led debt ops transformation. They replaced their in house tool.
The with pager duty to scale up over 1000 users with our workflow automation cater to the will help and Sci reduce their projected thousands of incidents monthly improving availability, reducing user generated tickets by 50% and decreasing the number of service now tickets by 65% like men.
Any of our customers MFC I embrace pager day to reduce the reliance on manual processes and antiquated ticketing systems that cannot address the business critical customer facing issues, which require real time insights action and automation.
We also growth, we're serving new teams and use cases, particularly within customer service and second and run index run the book automation Global a language service provider that connect doctors and patients with interpreters adopted our new page of the for customer service solution as the pivoted in response to cash.
EBIT the for global was use of the Doctor's office, but saw increasing demand for telemedicine. This resulted in a spike in incidence and customer dissatisfaction with their video platform. So they turned the page or duty to drastically improve workload between customer support and engineering teams.
Additionally, the major duties of that intelligent has enabled automated escalation, allowing teams to focus on building out in the scaling new products and services, while reducing disruptions by more than 60% now flow both proactively resolve the issues, providing a great experience for doctors and patients on interrupted.
As some of the in September we unveiled new capabilities, resulting in a strong pipeline growth, including service dependency insights machine learning based recommendations and change management insights while most of our customers have accelerated their digital transformation. The reality is they have infrastructure and digital assets that span data.
Centres and multiple of private and public clouds, we are the only solution provider, enabling incident prevention by capturing and consolidating insights from across these environments simple fine complex data and intelligently Actioning and automating work this quarter, we cemented our leadership position at the center of our.
Customers hybrid cloud and on Prem ecosystems with new partnerships along.
Along with run that we achieved over 500 ecosystem integration many of which for built by partners like cloud Flair Freshworks profit and Symphony, who are helping us force multiply pager duties platform Q.
Q3 was also a record quarter for partner sell through as we expanded our presence the channel partners through joint campaigns. We welcome the top of consultancy services, one of the top global systems integrators in the world.
To our growing partner ecosystem, there developing apps to support industries beyond our core verticals selling and implementing painter duty. We also continue to expand our relationships with cloud providers, including this weeks announcement as the launch partner for Amazon Dev Ops, Subaru pager duty leverages the outputs from that.
GAAP Subaru automating the work flow and enabling customers to comprehensive met comprehensively manage their cloud hybrid an on prem environment not only has paid for did even available in the HW EPS marketplace for over the last few years. This quarter, we released new integrations to aid Ws control tower in eight of the.
The outpost to help customers on their cloud migration journey, these integrations and partnerships validate our platform and help extend our reach to new markets and channel.
During the quarter, we advanced programs to improve representation and the quality of pager duty in September we open sourced our first annual diversity report not to imply that we have all the answers rather in an effort to hold ourselves accountable and share what we have learned with other companies seeking to put sustainable programs in place.
We also enlisted as the founding partner of the Board challenge on movement to improve the representation of Black directors on corporate Eurosport.
This week, we announced the appointment of Dr., Alex gallon more to pager duties board of directors as the Robert shape last 16 of engineering at the University of Michigan. Alec has the unique view on where engineering and software are headed and we're thrilled for welcome him.
Through paid for duty that or we announced over half a million dollars in new grants to support voter engagement time critical healthcare and to match employee and giving.
Overall Q3 was a great quarter for pager duty and an important inflection point on both optimistic and confident in our growing market leadership position, where innovation has expanded our tam well beyond the alerting and on call to AI up automation and more broadly digital operations I am.
Confident in our new opportunity with our enhanced automation offerings opening up new use cases, while being additive to our leadership in the incident response.
Most importantly, I of huge trust and confidence in our incredibly committed and resilient team who continue to focus on solving important customer problems, while raising the bar deepening our leadership bench and building on the innovative diverse and inclusive culture that differentiates us.
I am grateful to our team our customers our users and energized by the bright future ahead of us However overview.
Thank you Jennifer.
We saw strong momentum in the market ending up at the security with revenue growth of 26, the thinking about the year to $54 million.
The coming in at the high end of that.
International business is strong with Thats, where the price of 30.
It's the same here over the years driven by expansion.
We also saw increasing the economies of scale as we streamline of business non.
Non-GAAP gross margin came in at any given the sales in the quarter.
Of our target range of Okay. The six the Saints non-GAAP operating margin improved markedly I think it of 12% the negative 22% in the pie yes.
And non cash EPS was the eight about guidance of negative I think the share we delivered positive operating cash flow.
Apply for the hitting the fit for that and Weve of free cash flow positive again bolt.
Beginning early in Q3, we focused on the shift back to the strategic projects improved expansion along with high run the acquisitions help lift on the other base amputation rates alter on old 619 cents.
That's good because it relates to the trading contraction of the night in Q2.
We sold the ticket that strength amongst our enterprise customers a dollar based net retention increased sequentially about the 120 percentage as.
As several large customers double down on the page 80, or it's a total initiative and Dev ops transformation.
In addition, well the savings from ticket of also approximately one third of its price cash excess.
The best.
Average deal size for during the quarter and training the contraction improved significantly for training to pre code the sales.
On new free offering has been well received and the number of companies benefiting from effect on both paid and free grew by more than 18% of.
Yes.
Outside of form of sticky because the district, it's real time mission critical way, which is why we continue to have the renewal rates above 95% the.
The mix of of business continued to shift for predictable contracts with the proportion of customers on 10 contracts basis of tomorrow.
Consistently increasing ending the quarter with any sense of revenue coming from cuts on kind of country basis, 82% a year ago.
Robust expansion growth year over yet on the building its price if you treat the phase trailing 12 months spending growth at 24 cents and remaining performance obligations of the five for things.
All strong leading indicators of the Tailwinds, we have discussed on the cost.
The large expansion some of the multi year with enterprise customers and the for the growing importance of cloud adoption. Thanks for the next generation and gave us the transformation.
Customers embracing moving 100000 altogether, we expect it to the sales and customers as the 500000 total through 40% compared to Q3 last year.
Non-GAAP operating expenses for $53 million compared to $46 million in the pie, yet the 16% increase versus the 26% you're right the growth in revenue demonstrating the leveraging our land of expand business model and sustainable operating efficiencies.
Non-GAAP research and development of the thinking the in dollars.
$7 million in the same period a year ago.
An 18% increase of the prior year.
We paid the high value on innovation and we'll continue chain based on chip product differentiation income advantage.
Non-GAAP EPS, so a lot of the expenses between the $8 million.
The what percentage of revenue compared to 59% of revenue in the prior year, we continue to balance the base can share of the topline growth and the demand signals in the markets.
Non-GAAP EPS general and administrative expenses were $12 million or 20.
23 percentage of revenue estimate between the 2% decline yet.
On a non-GAAP operating loss for the $6 million compared to the loss of $9 million in the same quarter last year.
Non-GAAP operating margin of this negative 12% in Q3. This is taking the 22% in Q3 of trade the 20.
The first thing policy to reduce annual travel and should open space.
As one of the ongoing initiatives the scale efficiently.
Non-GAAP net losses $87 million, the net losses of nine cents per share. Okay. Total non-GAAP net loss of $8 million a net loss of 10 cents per share in the third over the last year.
Turning to the balance sheet, we reported $5 million the positive operating cash flow in the third.
About the thankful for the fiscal Twentytwenty of 3 million total.
Free cash flow increased buy ahead of the phase two of $5 million in Q3 compared to $2 million in Q3 of fiscal Twentytwenty with the free cash flow of margin of eight states. One of the 5% EBIT that will for last year, which demonstrates the efficiency of our business model and improved leverage as the scale.
We ended the quarter with $556 million in cash cash equivalents and the investments.
For the full year, we expect to be operating cash flow positive for the first time and very excited about our ability to generate positive operating cash while still investing in innovation.
As Jason mentioned, we completed the acquisition of run because for the.
The integration is on track the racing to plan and we apply the by the overwhelming it's yeah. That's on our customers around the powerful combination and even more so by the value we can bring to our customers through enhanced automation and so the mediation.
With the grinding we expect the increased demand for optical and ample opportunities for new cross sell within the expanded 10 grades.
Given the momentum on the third quarter net strongest losses in the markets and our confidence in our topline and team we are raising fourth quarter fiscal Twentytwenty one guidance.
We expect revenue in the range of 57.
The $58 million, representing a growth rate between 24 and 26. The things. This is the fourth fiscal quarter of Twentytwenty.
Non-GAAP net loss per share is expected to be in the range of 11 to 12 cents basic shares outstanding of approximately $82 million.
This implies an operating margin in the range of 14 to 16 for things. This incorporates expense adjustments associated with the acquisition of client base this past quarter.
For the full fiscal year 21, we expect revenue of 211 to trend of $12 million, which at the midpoint prepared for thank the trade you said the same quite price.
Non-GAAP net loss for share is expected to be in the range of 29 to 30 cents with basic shares outstanding of approximately 18 million. This implies an operating loss margin of 11 sales.
Before I turn into Q1 day, let me reiterate chain of his comments on the tailwind that block of business.
Dave of transformation digital let's say the race and cloud migration on luck last to Heska cuts during periods that of critical to the basic sales and these tailwinds for returning to pre because its momentum.
Hey, you can do the tech won't the pay for a unique role at the same sort of be shifts reducing complexity managing unplanned critical would.
Improving productivity and ensuring topline business outcomes.
We are confident that we will continue to see these tailwinds drive out business as we accelerate our growth in the coming year.
With that I will open up the pull for acuity.
Thank you so much of Howard we're going to open up for Q in Q name from our analysts and we do have an order to go through share I'm, just going to switch over so that our participants can see the gallery view and who is with us.
Folks if you do have your webcam on our participants can see you now Oh.
And for those of you have had not yet turned on your cameras feel free to turn on your camera, while you present your question.
Looks like for going first to Joel Fishbein with the truth Joe.
Hi, Joel I'll, just need to the on mute.
Sorry, I'm on there you go. Thank you hey, congrats on the great results Jennifer on good I'll start with you.
On the you're very very upbeat.
For this quarter I can hear your voice I can share in Howard's voice as well.
What would you be coming out of coated what do you think the or your top priorities for the skill Peter duty from here.
The great question, it's nice to see you Joel on well I think when we have the continued to deliver innovation for our customers. We have I think widened the mode of.
Between other competitors that are really focused on on call of and you can see that in the adoption of our digital operations platform plan, so continuing to bring innovation of particularly around the eye off on.
Automation to sort of new use cases in the really important to us I mentioned this as sort of background around our premium plan because of such strong growth margins. It's given us room to experiment with premium and I was really excited to see that the combination of new free and paid accounts grew 18% year over year that really.
<unk> is our effort towards expanding our reach.
We need to build our brand, but it's such it's still such in the early market was over 45 million developers an IC personnel out there we've got to go find them and get them on the platform, So acquisition and marketing to build our brand and help the market understand what we do I think it is very important.
And then lastly, I will always day. This every call our customers count on us to be resilient at scale and its covance shown us nothing else has shown us that even when we saw significantly increased incidence more of the 40% growth in incidents the 135% growth in events and the traffic.
This quarter the.
Platform continue to work on operating very very well, but.
But as we continue to scale with customers, who are very important in our spending more and more time and have the more people on our platform with the continued to produce those high operational outcomes.
Just one quick follow up on it.
This cyber Monday, apparently a lot of ecommerce companies had some very difficult.
Difficult time, serving their customers and I was just curious if you've seen an uptick in in balance.
As early as late as this week you know as the result of some of these ecommerce companies struggling to keep up with some of their challenges that they had for most of our two perspective. This is precisely well quite branding is so important for us and we did have a really strong quarter in retail I think I mentioned that in my comments retail and E. Commerce will continue to be a really in.
Part of the segment for us.
I would say this I think that we're just seeing sort of scratching. The surface now that everybody is part of their businesses into the digital environment. They now have to figure out how to operate them successfully and it's early in that journey for many of our customers, which is why we believe that we're going to continue to see momentum and long term take.
On the wins, particularly as it relates to hardening of the operations behind digital acceleration supporting our customers in the cloud adoption of cloud migration, which you've seen continues to grow and then Dev ops transformation, which is still very early.
Great. Thank you so much thank you.
Thank you Joel and next we'll go to Kingsley Crane Kingsley with Berenberg.
Hi, congrats on the quarter, thanks for taking my questions.
The first one would be.
You know the excellent traction in the.
Part of your partner ecosystem integrations.
You know the number of companies called for Freshworks of equity are you seeing any particular areas.
The hit for the most structured or that's the price give us.
On some of the areas you know, we always look at current partner ecosystem to sort of see where the market is going and we've seen a lot of interest in security and customer service, which is why you see us investing in those area automation continues to be I think the big opportunity, but I think the you'll also see is that when you think about patriot any more gen.
Finally, as a platform that helps the automate the detection of real time on plan on structured work and automate those workloads of getting network to the REIT distributed team and making sure. It gets resolved for closing the loop you start to see lots of new use cases, where where partners are discovering a pay for duty integration can help them close the loop on.
On the for the analytics of they provide on the services that they are trying to the naval and so I think we'll continue to see that as the trend I'm really excited to see more and more partners building on pay TV.
That's really encouraging and then on up one quick follow up would be really encouraging to hear the strength of the large enterprises in.
In the some of it are you hearing anything new because of the when rates are improving against competitors like Opps Genie or is it really just that these customers are recognizing.
The best of class or well.
Well I'll remind you of a couple of things one most of our new lands of Greenfields are often replacing manual.
Behaviors or spread sheets et cetera, So again still early and a lot of customers are starting to accelerate their dev ops transformation because their teams are now working remotely their businesses are now of digital.
We also don't see much competition from laughing and others in enterprise and more than 80% now I think of our users our enterprise users. So thats been an area that we have talked about as the strategic focus for over the last two three years and it's nice to see that the starting to manifest itself, but I.
I really do think that the leverage of our data, which is I think the big differentiator for over a decade of data on responders workflows events and the incidence themselves with a guy on some of the solutions that we put on into the market over the last year or two has started to mature and gain traction and that's been a big part of it I would also tell you that on.
A lot of these large enterprises in that shift to digital are starting to add not just new products and services, but new team. They bring their desktop first and then maybe there is the operations teams. The often security we're increasingly seeing interest from customer service teams and that's the starting to see pager de leveraged more and more across the organization.
Okay, and I think Jamie the one thing I would just add to the kings. The is that we think of growth.
The lockerbie consistent in saying that having on enterprise and midmarket customers expand with us and we again. This is another quarter of way before Wes if the same expand with US which is always good to see the bill.
We have seen income any sort of getting back to pre co. The type activity. So the force of project spending associated with the things that Jane mentioned like on.
Many of US transformation on Cogs migrations those projects for the back on the table happening and that certainly proving to be a tailwind for.
And that's helping kind of sustain that 80% of our revenue coming from the enterprise and Midmarket sales.
Awesome.
Thanks, Jos Congrats again, thank you Thanks, Inc.
Thank you and to our analysts joining us and feel free to locate the participant list at the bottom you'll see you can raise your hand down there right you have the handrail snacks Ray Mcdonough from credit Suisse.
Great. Thanks for taking the questions on incorrect resolutions on the strong quarter.
I noticed after your summit in.
In September of the landing page of your web site. The change to include some solutions by industry.
Should we think of of those changes as more of a targeted form of marketing or the broader changes on the horizon either from a go to market perspective or from a packaging perspective, how should we think about that well I. Appreciate you noticing that I know the marketing team will be for of the here some of the actually looking and paying attention to what happens on the website.
We definitely see some strength in certain verticals that tend to be digitizing faster so to speak being more of their business moving the digital app on.
And and you know of you've talked in the past the lot about the tack on consumer Internet Commerce retail financial services, and a really strong performing category for us and I think two things are really happened one customers are becoming a more willing to talk about their stories and share what's working for them and and we really want of open source.
Some of their of earnings so that our other customers can move faster and that's the big part of the what we do from a customer marketing perspective.
But also I think there are so many different ways that you can apply the beauty, helping some of these vertical industries understand the the sort of natural place since the start where do on where do I keep on my use case makes a lot of sense.
Well, we haven't had the verticalize the product and I think this is a really important differentiator for PGT, it's very easy to use it's very easy to deploy you can be up and running in five or 10 minutes on PBT for the AD team et cetera. So it doesn't require on hakan verticalized or package for the product, but I think getting the word out on how customers are levered.
The PGT and really importantly on you heard me talk about the IVC research today like the the kinds of ROI for our customers seeing I would tell you that increasingly our customers are growing tired of having to pay huge multi year licensing fees and wait three to four years to get ROI and we.
Talk about in the enterprise a two month payback with an ROI of over 800% and I think you know if you're someone championing the new SaaS solution in your organization being able to quantify that kind of return is really helpful.
That makes a ton of sense on the I appreciate the color and maybe if I could Howard one for you just just a little bit of of house cleaning. If I could are on the acquisition could you comment on on how many of your customer ads on the quarter came from run deck and to the extent that there was significant overlap.
Could you comment on whether or not there is there are contribution in your expansion rate this quarter.
Yes, so thanks space. So on August can be placed the one day acquisition in October bye.
Its contribution to the quarter with on.
It's relatively small on one for any material in terms of the customers. The paperwork along the we did share details about the heavily weighted for the full customer base. It's an 80 companies. So it came out of a material number of ads on they certainly delivered a positive contributions to our total or arbitrary day disclosed.
Losses, if they fit.
But they have been certainly the the positive impact with that and I think the piece that I'm. Most excited about is head of such a logical combination that the when I have discussions of the customers accounts for I'm, an executive on for that they feel really all the till about how this is actually going to help them sort of post I believe from the take to remediate.
Having kind of takes the beauty and one day as part of a on one family.
Makes sense. Thanks again for taking the questions I appreciate it thank you Ray.
Great. Thank you Ray next we would like to go to the Sterling Auty from Jpmorgan Sterling.
Yes, Thanks, Hi, guys Howard maybe just to follow up and put a fine point on it and then I didn't quite catch in terms of the Rendac acquisition, what would be the revenue contribution that you would expect in the in the fourth quarter because people want to understand how it impact the guidance.
Yes, so we haven't provided a breakdown of on run deck in terms of what the specific revenue contribution would be on.
What we did say at the time of day the acquisition that we sold for being a company on an annual basis. The could have revenue within the on the high single digits on so that's kind of the stage two of which we disclosed on that and you will see that I think you can talk the heads question about the opening on deferred revenue balance of 2.7 million the Kenny.
Loss from our index.
All right I just want to make sure. So if you think about organically where the guidance is for for next quarter would you say that new guided up organically and then added runback or was.
Was there some of it was a combination it was a combination of and keeps us on this page duty and the the addition of like.
Perfect if I could sneak one last one of the Jennifer for you the comment about 80% of the customers. The enterprise I think that's very helpful. Would you say then given the increase in net dollar retention that the headwinds from SNB are now behind you and debt.
Thats going to lead to the acceleration.
I think that we the 180% of our users come from enterprise sales. It's one of the 80% of our revenue and EBITDA benefit revenue, sorry, and one thing I agree Howard the everywhere on site.
The way to the strength in enterprise expansion of our enterprise on net dollar based retention is up over 120%. So we definitely are seeing that strength and expansion.
Great. Thank you.
Okay next we have a hand up for Matt Stotler, Matt I'm, sorry, I don't have your organization. If you could let those of US the don't know the where you're calling from yeah heads and the Howard Thanks for taking the question Medstar William Blair.
Yes first the start off you guys have highlighted some of them I guess use case specific solutions recently, including a of your customer service going on operations business response on.
So the some of these are still relatively early innings, but we will look for maybe just some thoughts on early interest from customers Combi fleet this could be over time.
Well as I mentioned earlier on that thank you for the question. We have been we have been really excited about how customers are receiving some of our new products and services, but that all come from hearing from the customers. These are problems that they don't have solutions for yet so we don't build something and lots of customers are already cigna.
Selling reasonable demand and the uptake of these new solutions that we talked about in the last year that you mentioned has exceeded our expectation.
I would tell you that when you think about EPS.
Everything that's out there in the industry, it's often been.
Hard for us to explain to the market how were different because there is the kaleidoscope of monitoring and observe ability of providers their ticketing systems et cetera on I think as we start to build out. These used cases it becomes much more clear how customers can leverage up on a different way I think with covance, because everybody is working and living and learning for.
Home or the.
The concept that time really matters has also really help to create more awareness and understanding around what we do in terms of not just detecting an issue, but orchestrating and automating the work flow to get that issue to the right team at the right point in time, automating more and more of the diagnosis around that and with run that effectively starting to drive.
Some say self healing and on a remediation within those those incidents or issues and things are popping up the you don't plan for all across the business not just driven by technology problems within the debt team and that's where we're seeing some of that use case expansion.
Right right and so on that just a quick follow up you gave some commentary around the of the new pricing model, obviously sounds like the early response to the the premium of structured for positive.
Can you talk about kind of looking for any mechanisms. The you have in place to start converting those premium customers or how you think about kind of making those those for users of the parent customers yes.
Yeah. So we're lucky that we have a high of rents go to market motion. So you know for US the starts with product line growth and my teams are so sick of hearing me talk about this but the product has to be so easy to use the San works, so well and that in house customers of users discover more functionality and more features and so free.
On the M is intended to help customer sample what our platform can do but then the product should allow them.
With with Inc to expand with things like the 500 integrations or adding more teams are starting to identify new use cases and equally we have you know I think a really well performing sales organization, including our commercial teams that are focused on our midmarket customers and our enterprise.
Obviously focus on enterprise that.
Really do everything they can to not net.
No I I user who is finding the runway through the product as fine, but really support large strategic initiatives.
Net where customers are really trying to transform and one of the things we noticed in the last quarter, particularly in the even midmarket ones that customers are having more strategic conversations with us around transformative efforts, where they're really trying to change how they work where they're trying to accelerate their weight in the future of work, which is a lot more automated.
Then it has been in the past and where they really understand kind of the need to improve their operational performance to support these customer experiences that are now primarily on happening in the digital environment.
And maybe I can just add and when we look at the in its early day for us, but it's on the free play and we've seen really good kind of basing rates have fallen we haven't the and a good on displacement of that they've been better than expected EBITDA thing what we have heard the quoted in the industry.
It's looking looking for all.
Great. Thanks again.
Thank you next we'd like to hear from Sundeep Singh from Morgan Stanley since the please go ahead.
Excellent. Thank you for taking the question. This is actually Keith Weiss sitting in for percentage you [laughter].
And if you didn't know it.
No [laughter] Brent [laughter] got here, you know what I actually I dressed up as Howard Wilson, the for Halloween and.
[laughter].
Okay.
So I wanted to ask about digital operations plan.
You guys saw really good uptake of that year on year at night nice uptake in terms of the.
The amount of net new HCV coming from net plant can you talk just a little bit about what that does to the initial deal size is kind of how is that impacting your landing if you will live with these new customers.
How do you want to take that.
Yes, sure. So I think there are a couple of things of Keith on on a less on one is that often for our customers as they could still lagging in one of the of the.
Pads like of professional or no.
The plan so sometimes we do see customers land in those types of an upgrade to digital operations as part of the net migration as they mature what is the exciting though is that on fixing operations plan, Inc. Please let's say flow functionality and capabilities and that's what really sets us apart from the competition. It's a widening of the notes between us and.
Any of the other players so its companies to take advantage of features that allow them to be more predictive more proactive in terms of how they manage the environments that allows them to the average average machine learning to the able to so although less offset a recommendation engine with in that is really powerful.
But the team to help them get it for you on whats happening send the change.
And so the opinion on season the environment. All of those features are unique and special and so I think thats driving the interest and the growth of the table operating plan because there isn't anything else like it.
And then any sort of land on most of our customers to land on a relatively simple simple product opposition, it's usually still a developer that wants to manage the new service or is moving the tailored to the cloud or as part of the transformation initiative on one of the nice things about the run net acquisition is the gives us a new and the secondary Atlanta.
And you don't have to come in through the page for duty product only you can come in through run that so we're excited about that land the opportunity as well and you'll continue to see us focus on keeping the product easy to use and easy to understand even as we add new features and.
Lots of new technology to the product I think customers are starting to really appreciate the leverage on the data in the platform and how it can really should come quickly from being reactive to proactive that and the scene that in both some of the larger strategic deals. We've done this quarter, but you'll also see it and how some of our customers you'll hear us for.
Repeat the same names expanding quarter after quarter after quarter, and Thats, where we know we've really kind of customer that needs are supported the transformation.
Got it got it got it and then the drilling that specifically on the invent intelligence products How's the that uptake going are you seeing good traction with that.
Hi, Yes, I think the all that Howard Howard speak to that specifically.
Yes so.
Our customers up to take business plan, we'll finish the plan with advanced intelligence as an add on sales and that has gained the continuing to see good momentum on bed. The baking tend to the also included in on.
Digital operations plan and Thats part of the attraction day, the best intelligence on uptake is being driven largely by people wanting to be able to GAAP.
Gets you of problem pasta and be able to reduce the boys because.
Our customers will have the huge array of monitoring tools in their environments as tanquilut of kaleidoscope of monitoring applications, the rounding and size of being able to full swing on capex. They've always done on is really critical and getting the white person on to the watch problem and Thats. The best intelligence enabled for we've seen good momentum of does that flow.
Got it and then if I could just sneak one last one of the.
Any.
Update in terms of the traction outside of the core kind of IP operations use case, Oh, we talked way back when about so the potential of sort of broader use cases for base. Your duty any update on on sort of the increment for can you get the been speaking with the.
Yes, so we have I mean qualitatively we continue to see good momentum on good growth in the securities sake of type environments and in the customer sales environments, which leads whats, creating the customer to the skew if you like we haven't actually for the anything for us at the reporting on within this particular on fees and that will save it for.
On analyst day, we can get people before that I'll stick on this.
That's a good little teaser. Thank you very much guys debt [laughter] here.
Got it thanks for the fund there.
And the amount we want to go to your next Matt, Matt Hedberg with RBC capital markets.
Hi, guys. Thanks for taking my questions.
Jen.
Obviously hearing you talk about an inflection point and the competence in momentum continue its really great to hear it seems to me like it's a combination of of just perhaps better buying but also better execution and I know Dave has been there now for a while could you could you talk about the specifics on like what you can control versus the environment 'cause it on.
The skills to me like you feel better about both aspects, but even if coal the cases spike your ability to execute seems higher as well just sort of curious on daves contributions thus far share of well that's the that's absolutely right that even as Covance case, the spike in the we obviously can't predict the macro environment I think for both our customers and we are better prepared for sort of whatever.
For cons.
And you know I have to hand, it to Dave and the entire going of market team, including customer success.
New who really led with empathy and trying to understand what customers are going through the is all of our customers are experiencing this a little differently. We still have a cruise lines on airlines in our in our business. Basically also have companies that are up 300, 400% as the result of income that benefactors of when you look at the diversity of all of that it really means that our teams.
I have to be really dial in to what customers on prioritizing and what they care about and I think aim has not only hired well and up level of some of our leadership across our sales team T. supported some of our talent that was here before his front on hubs like man Jewel of tell range on who are really a of leveling our customers.
Service and he often talked about this it sounds very boring, but just being rigorous in the hygiene of managing the operations of day to day sales really important and so the forecast accuracy has improved.
And then finally I would say, Dave and the team are really prioritizing of focus on value on helping our customers really understand that quantifiable ROI, we often for customers build them a business value assessment.
And then we go back and we look at how are we delivering on that business value assessment and so when you think about on the sort of contradiction that our customers are and where they are trying to expand their digital offering and grow their revenue in this environment and at the same time reduce their cost base and become more efficient.
Those two things can can really be in conflict of one another pager to the healthy with both new and it's been important for our teams to work hard to help our customers understand that.
But I'm really pleased with how the teams going on an equally I would say.
The product organization delivered a lot of innovation summit that was really of received by our customers and in the balance of our organization I think you'd be lying if you didnt say it keep our compete by shutdowns and by not being able to go into the office and collaborate et cetera and.
Our team has really continued to grind and show a lot of credit in putting us in a better position going forward. So I am a lot more confident on our execution on.
Also like what I'm seeing and pipeline.
And just the the kinds of conversations, we're having with customers and how they're sort of settling into their own new normal and focusing on some of the strategic transformative opportunities as well.
That is debt is really really great to hear.
And then I guess the yes, you on the Q2 on your last call you know to to call. You noted you close one of your large enterprise deals ever in August.
You, maybe you addressed it in the in the prepared remarks I wasn't quite certain if you hit on that particular customer. If you did or maybe if you didn't could you could you maybe kind of little bit more light on on on that use case and I'm not the only way to scope out what what sort of magnitude of of the deal that might be the.
Certainly the temporary data point, what I would say is in all of US really excited to see customer spending of $1 million of thus grew by 33% in the quarter I think that the strong number of customers on our spending over 500 came with US grew by 40% of that particular deal on that you're referring to was a large land on with the large mortgage provider.
And on a really good example of an organization that already had a reasonably significant digital business, but is now how all in on digital and seeing in on opportunity in the market with a lot of people are moving around and changing their their lifestyle and.
Hi, How's the yard for second houses are getting out of suburban hitting in the suburban areas and out of out of urban areas and so on the.
For for that to get a customer of is all about the transforming quickly right like maybe making sure that their operations could support their digital acceleration.
The the we talk a little bit about the sales force relationships that we have which is the multiyear agreement and on US really excited to see sales force about the digital operations plan and look to continue rolling that on across their business and again similar length, right really focused on customer experience and want to ensure.
That Pedro you can can help teams across the business.
Get to issues faster.
And manage them before they become incident the impact customers in the business and not really just shift to be more proactive operationally.
Super helpful. Congrats guys.
Thank you.
Thank you we do have one more hand up so far feel free to raise your hand, if you have any other increase Hana Rudolph with D.A. Davidson Honda. Please go ahead.
Hi, all thanks for taking my question today, it's great to see the solid business momentum the quarter for.
First question, it's been a few months since your virtual on the summit I was wondering if you could talk about how pipeline conversion. Following the some of it has been and then how pipeline build following your north American some of once sure I. You know I think we are pleased with pipeline on the back of both of those some assets and in fact, because our global summit in.
September was virtually all of that and then we also had a lot of European customer that had joined the of the us on that but also came on to learn more about our new products and services. So you know we're we're excited about the interest that we're seeing across really across the product and platform set a.
Particular interest around Rendac and automation adjustments continued move to reducing total for the human in support of getting them to the purposeful mission driven work day care about of spending quite a bit of time with peppers next week clinical in Europe, Fiat via my camera and the real.
Looking forward to talking about some of some of the couple of any or that are driving transformations. One in particular.
Large telecommunications organization that has gone for a massive agile for inspiration and their CEO of actually join me to talk about how pay duties supported them their ads on transformation and that's that's the use case that we're seeing frequently where top down non technical but general like business leadership is saying we have to become more agile we have become a tech.
On the and suddenly a product like need for duty is on the rigor.
Great. That's really good to hear net on run that how much integration of their left to do in what's kind of the timeline for that now on the first thing I would say instead of their first real acquisition since Weve been on public company on not only did we get it done quickly during an environment, where we couldn't get out and you can see their office.
We closed that deal and still executed well in the quarter and the integration is actually going very well, we're trying to make sure that we get redneck enough room to continue to operate like a startup and innovate quickly and continue the build out their products I get the benefit of our distribution environment and on a lot of the folks on the finance team that has helped to prepare for earning.
This week of also really help to integrate run that can I suppose it's on its tracking very well.
Great. Thank you.
Well folks it looks like Thats all the questions that we have from our group today. However, the Jennifer I'd like to give you both an opportunity to provide any final comments to our audience today before we wrap up.
Well I just wanted the same thank you, especially to our analysts many of you have given us a lot of feedback, which we've asked for and the continued to really appreciate to try and tighten up how we help people understand our journey and where we're going in the company. So thank you so much for that and.
The all of our customers really appreciate the trust that you put on US and are going to continue to focus on earning that every day and I hope all of you continue to remain safe and well and keep your math on the till the next time, we see you. Thank you.
Well that concludes our presentation and call for today. Thank you for attending the Peter duty earnings presentation, we will be closing the session. Shortly enjoy the rest of your day.
Thanks cash.
Happy about.
Okay.