Q4 2021 PagerDuty Inc Earnings Call

And Pedro duty and ally ship in challenging bias in systemic racism and an architect in a more equitable and accessible industry M community with that I'll turn the call over to Howard.

Thank you Jane.

We are delighted with our fourth quarter results.

And confident and optimistic about the outlook for full year 'twenty 'twenty two.

We outperformed across the board in the quarter, our revenue grew 29% year over year to $59 million.

Solid beach on the high end of our guide.

Expense within the enterprise and mid market segments, where our customers expanded into new use cases added new teams and upgraded to our digital operations offering drove this revenue performance.

Our full year revenue of $214 million grew 28% versus a year ago, and our sales execution and momentum in the back half of the year delivered a strong finish to the year.

Scaling efficiencies and postal capital management, So our Q4, non-GAAP EPS improved well ahead of guidance and negative seven cents per share.

For scent beads for.

For the full year and non-GAAP EPS was negative 24 cents per share also ahead of our God.

Non-GAAP gross margin remained best in class at above 85 for the same for both the quarter and the full year. The high end of our target range consistent with where it has been for the last four quarters.

As Jay highlighted pace your duty has become essential infrastructure, enabling our customers' digital initiatives.

Consistent customer expansion proves this once again approximately one third of our enterprise customers expanding with us for the eighth consecutive quarter.

<unk> adoption of our digital operations plan is growing accounts for 70% of making our or in Q4.

Our enterprise momentum drove year over year growth of 34% in customer spending more than $500000 and 44% in customer spending more than $1 billion.

All of this re accelerates and dollar based net retention, which increased to 121%.

Taken alone Enterprise dollar based net retention accelerated to about 125 for St.

Looking ahead to fiscal year 'twenty 'twenty two we expect dollar based net retention to vary by quarter in the range of 118 to 124 for things.

We continue to penetrate the enterprise segments across multiple industries.

As of the end of the quarter, we serve over 60% of the fortune 100 and over 40% of the Fortune 500.

Within the Fortune 500, we serve 90% of media 73 per cent to technology, 33% of financial services and 52% of retail companies.

Our leadership in financial services has expanded significantly with a R. R F 150% over last year in the fortune 500, and by over 40% for financial services as a whole.

While we are seeing the strength in enterprise and mid market. We are seeing good momentum in S. B and with the continued success of our free offering grew the number of companies both paid and free by over 20% year over year.

Early renewals, including several large multiyear enterprise deals drove an uptick in Coty billings grew 41% growth year over year.

Given the fluctuations of for the billings, we focus on trailing 12 month, billings, which grew 29% year over year.

Our remaining performance obligations, which grew 59% from the same period, a year ago, reflecting momentum in multiyear deals, particularly from the enterprise.

More of our business comes from the enterprise the shift to term contracts continues with 87% of our revenue versus 83% for a year ago.

At above 95 for St. We continue to have industry, leading renewal rates.

Before turning to operating expense expenses I would like to highlight the robust growth not international markets revenue grew 34% year over year to total 24% about revenue.

Despite challenging macro conditions in Europe, or EMEA region full year revenue grew at over 40% for the third year.

We continue to invest to expand our reach internationally and today, we announced we are operating European data hosting beginning this summer to support our EMEA customers.

We have capitalized expenses in fiscal year 2021 in connection with this project and expect to begin amortizing. These expenses into the income statement in the second quarter of fiscal 'twenty 'twenty two once we are live.

I will now turn to the detailed non-GAAP financial results as a reminder, a reconciliation between GAAP and non-GAAP results is available in our earnings for leads.

For the full year operating expenses were $204 million compared to $171 million from a year ago as we continue to invest in the business for.

For the quarter operating expenses were $56 million compared to $44 million from the prior period. This is for 28% increase primarily due to investments in our go to market strategy offset by Covid related savings due to reduced travel and office related costs.

Research and development expenses were $14 million compared to $12 million in the same period, a year ago, a 14% increase this continues our investments in innovating on our platform building on our scalability reliability and security, we expect to accelerate investment into fiscal year 'twenty 'twenty two.

The specific focus on solutions for the enterprise or AI ops, and automation offerings and use case expansion.

Sales and marketing expenses were $13 million for 51% of revenue for the quarter compared to 48% of revenue in the prior year.

We've been successful redeploying the in person events budgets to virtual lead generating activities and events.

We will align our investments with growth in fiscal 'twenty 'twenty, two particularly within our partner ecosystem and expect to see continued expense to revenue ratio improvement on an annual basis.

General and administrative expenses were $12 million for the quarter or 21% of revenue in line with the prior year.

Made significant investments in infrastructure and compliance over the last few years and we are achieving economies of scale.

Our Q4 operating losses $5 million compared to a loss of $4 million in the same quarter last year.

Operating margin was negative 9% in line with Q4 of 'twenty 'twenty.

Q4, net loss came in at $6 million, a net loss of seven cents per share compared to a net loss of $3 million and net loss of three cents per share in the fourth quarter of last year.

Our full year operating loss for $19 million and our operating loss margin was 9% an improvement of eight points over last year.

While we managed our investments closely in light of the pandemic. We also benefited from savings in fiscal 2021.

As a result of moving from interest defense to virtual events, not traveling and not incurring all costs associated with our offices.

In fiscal 'twenty 'twenty, two we expect some increase in these parts of expenses, albeit not at pre COVID-19 levels.

In addition, we will continue to invest in one day integration and innovation and fiscal 'twenty 'twenty two will reflect a full year of earning this business.

Turning to the balance sheet, we ended the quarter with $560 million in cash cash equivalents and investments we improved both our operating cash flow and free cash flow for Q4, and the food yeah with $3 billion in positive operating cash flow in the fourth quarter compared to $2 million from the same.

A year ago.

Free cash flow increased by over 100% to $2 million in the fourth quarter, driven by positive operating cash flow and the deferral of investments in new and existing offices for the full year operating cash flow was $10 million and our free cash flow was $5 million.

This is a major milestone for us generating positive operating cash flow, while continuing to invest in innovation.

That said, we expect to dip in and out of positive operating cash flow during FY 'twenty, two and do not expect to be positive in the first quarter due to timing of certain cash payments. There are a number of cash payments that will occur. This fiscal year that are either new or incremental mainly a $4 million payment related to the acquisition.

A run day and a full year of interest payments of $4 million associated with our convertible debt issued in June 2021.

Beginning in Q1, we would exclude payroll taxes related to equity bonds from non-GAAP, EPS and recast prior periods to make them comparable on a non-GAAP basis all of the items have a cash flow impact only.

While we are optimistic about our early success exiting fiscal 2021 and the acceleration of secular tailwind for pay for duty. It is still early in the recovery and our guidance is balanced to reflect this I'm confident in Patriot aegis prospects for FY 'twenty two as we continue to expand our leading market share in pro.

Revenue.

As a reminder, historically our first quarter revenue is low as a percentage of revenue for the full year.

For the first quarter fiscal 'twenty, two we expect revenue in the range of 61 million to $63 million, which at the midpoint represents a 25% year over year growth rates.

Non-GAAP net loss per share in the range of nine to 10 cents with basic shares outstanding of approximately 83 million. This implies a non-GAAP operating loss margin in the range of 10% to 12%.

For the full fiscal year 'twenty 'twenty, two we expect revenue of 264 to triage from $70 million, which at the midpoint represents a 25% growth rate.

Non-GAAP net loss per share of 6% to 43 cents with basic shares outstanding of approximately 84 million. This implies a non-GAAP operating loss margin of 10 to 12 for St.

Before I turn to Q&A I'd like to remind you for the tailwind that drop out because they.

They just let acceleration cloud migration and Dev ops transformation, our imperatives critical to our customer success.

I used to do these platform plays a unique role at the Central T shirts, redefining with slow moving teams from an old way to a new way of doing things, we reduce complexity manage unplanned critical work improved productivity and ensure topline business outcomes. This gives me confidence that.

We are well positioned to see sustained robust growth.

We look forward to updating you on our longer term growth at our upcoming analyst day on June 24th our range now around our annual summit event, we will be providing more information on details in the coming weeks, but that's M. I will open up the call for Q&A.

Okay.

Thank you and as a reminder, our Animas here you can raise your hand at the bottom of the zoom interface and it looks like some of you may not have that raise hand button. So just send me a chat message and I'll make sure that your acute.

Matt Hedberg from RBC capital markets has had his hand raised early on Matt go ahead.

Hey, Thank you guys and.

Congrats on a great close to the year the acceleration really across the board was really good to see Jim.

There's a lot of things to unpack here, but you know success outside of ITE ops, we've been talking about this for a long time you noted.

The option of customer service and security, which is free to here I'm wondering is the success you're seeing there is that largely a expansion of your base for cross sell or in fact are you starting to land in some of these new cat new use cases as an initial entrance into the patronage family.

I think thanks for the question, Matt and thanks for being here, it's generally expansion within our base, although with the acquisition of run back we do see that as an opportunity to land customers through the automation use case as well.

That's great and then you know Howard.

You know you mentioned that you're optimistic on fiscal 'twenty. Two you seem to have a lot of momentum coming out of out of 'twenty. One I'm curious how do you think about your pipeline here I mean, it feels like there's building momentum.

Secondly, halfway through Q1 can you just talk about sort of the.

Your son from pipeline generation are things accelerating there as well that really supports for the guide.

Yeah, so net.

I think what we've seen particularly in the back half for this last year sales execution has improved significantly under the leadership of Dave Justice and that includes.

For more proactive efforts around pipeline generation. We've also seen how we were able to fairly seamlessly move away to new methods of generating pipeline as we move to more virtual events.

We feel very confident in the health of our pipeline and the mechanisms that we have in place to continue to manage that proactively.

Yeah, and if I could add to that Matt I would say that you know I'm confident we can get our growth into the thirties. I think we have the right strategy. We have the best product and we have a very experienced team. So I like what we're seeing in terms of trajectory. We're also seeing some early positive signs are that the impact of the pandemic is receding. So we're reasonably optimistic.

Stick, particularly given our historical strength in small business in verticals like travel hospitality and entertainment, we see those segments reopening as tailwind for the business.

Yeah, I would also say that we were seeing a lot of customers who have had to really shift their business like large coffee retailer you might know of where mobile pick up and pay has become really important that's a pandemic driven shifts, but it's here to stay in that kind of dependent on digital assets becomes another tailwind for us. So we like the philosophy that we had.

Going into the year and you know feeling good about our go to market leadership and with John coming on board and excited about product innovation as well thanks, a lot for breakfast.

Thank you.

Thank you Matt next we'd move to William Blair.

Let's see trying to locate that video bear with me just a SEC.

And we are Bhavan Suri. Please go ahead. Thanks.

My congrats to them I guess I wanted to touch a little bit I'm following up on the previous question about pipeline, you've obviously had a and I know Howard you said don't look at billings, but you got a phenomenal billings quarter.

So we won't look at it from what they are something that.

What happened did you see sort of a set of larger deals was I know you mentioned the commercial business, but just a little more color on what drove fairly material upside.

And in that and then I've got a question on the M. D. R. R.

Sure.

As I mentioned in my comments, its certainly was a good quarter for billing so that one's going to complain about 41%.

Billings growth year over year, but we you know we do note that we did do a number of large multi year deals within the quarter and we also had a few renewals that because of expansion activity were brought forward that being said across the board all of our teams executed well and so we saw a high volume of transactions.

You know a lot of smaller transactions and all of that contributed to.

For a healthy billings number.

Gotcha Gotcha, and then if we take the sort of Reacceleration in net dollar retention and we think about pricing impacts when we think about concessions you've given and then loyalty you've talked about Jennifer and Howard about customers for giving them will come back or are we starting to see that play out with this because of a large deal that we saw net dollar retention of expansions come in and help us.

<unk> closed two out is it is it are we getting past as you've seen some early green shoots but was this because of billings and expansion that drove the net dollar retention rate improvement for a combination or you can piece per piece that out for us that'd be really helpful. I think.

Sure So and Jim May have some comments on this is true I think the weighted I would characterize it is you know our strength in enterprise is well established and we continue to see large customers within the enterprise expand with us and so it's not become quite predictable like will have about a third of our customers enterprise.

As customers expand with us each quarter, we saw some spend contracting in the early days of the pandemic, but certainly today, we're seeing that more of that pre COVID-19 like demand is back right and so those customers are expanding with us and that's contributing to two for good net.

Net dollar retention rate ever.

Across all of our segments, we are seeing positive movement, it's not exclusively in the enterprise enterprises above 125%, but can be seeing healthy expansion happening in all of our segments today.

Yeah, and I'd add to that that you know the success that we're having with the digital operations platform is really driving user expansion within large customers within our base and I think our customers have learned at that Clydesdale rule applies that you know with Patriot is R. O I as you add more users that rois scale.

Exponentially likewise users recognize more users on the platform the easier their job and so we're starting to see that network effect that scale and that you know that makes a meaningful difference I also I just want to recognize our teams again, because you look at mid market setting a pretty significant record on the number of transactions their transaction growth.

Over the quarter I love it when I see that because that's the that's the nature of our hybrid go to market model at work, where you're doing high velocity transactions and at the same time still able to do large expansions in enterprise and Dave and his leadership team have done a great job there now.

No I think you're absolutely and congratulations a day and all of your teams for the nice job. Thanks Bye.

Bye bye.

Thank you next we'll go to a hungry as from a receipt of Januvia excuse me day D. A Davidson let me go ahead and enter into the spotlight.

Okay.

All right.

Hey, Jennifer Howard. Thank you so much for taking my questions great to see the Reacceleration in the business Jennifer I wanted to go to a comment you made in response to Matt's question at the very beginning which is that you're confident you can get your growth into the thirty's I'm not going to hold you to that as guidance I think that's a great aspirational goal here, but maybe if you could help us understand.

And what is it that you're seeing that's giving you confidence.

And that is a reasonable target and maybe how should we be thinking about the drivers to achieve there is that just a bounce back in macro is that relying on more growth in these non core use cases, when we're talking about security and customer support and maybe some that we're not we're not even talking about today that way.

Be talking here about a year from now or maybe it was drawn to that and then I have a follow up for Howard.

It's definitely a combination of things I think strength and even when we went public actually we talked about multiple engines for growth and I think we really delivered on sort of that mindset or new product. If you look at our digital era from digital operations management like that's doubled from that plan a regional growth up 40.

Per cent. So we're starting to see the new our new investments in EMEA and a P. J come online user growth up 40% and then we're really starting to see traction in some of the most I think sensible adjacent use cases like security and customer service that we're also seeing user expansion drive new use cases that we don't even.

Track. So you know those growth engines are working the way you know we intended them to we're executing better from a go to market perspective, and I do think the macros, improving and it's improving and improving in a way that's favorable to us because remember we don't have a bunch of pull forward revenue from COVID-19, rather what we're seeing is as customers.

Get into either recovery mood as they've gotten better at about manager from remote remote work and they've made that transition to digital they're making more strategic investments are our sales teams have given us feedback that they're just seeing many more transformative deals as opposed to tactical deal secondly, as as some of the rest of the market recovers we.

Expect to see them start to invest like they did potentially pre COVID-19 or even more than they were investing during COVID-19 because they are now more reliant on M. A digital environment and so you know I think reopening and even hybrid work is a bit of a tailwind for us because when right now and everybody is working at home. It works really well you know where everybody.

And so soon as half the companies are in offices and half the company's remote somewhere you can't find them that those teams feel even more distributed in Patria duty was built for that so I think we're going to continue to pull away from the competition like we have been the last couple of years and that that also bodes well for us, but I just I like how it's all.

All coming together is probably a really good way to put it.

As we discussed for it to hear and then Howard I wanted to drill a little bit more into the margin guidance for next year. You are talking about margins declining are pretty pretty meaningfully maybe can you tell us where are you seeing these where where do you what are the high priorities for the incremental investments and you know me.

Maybe you you did touch on this in the prepared remarks, but you you. Obviously you expect some bounce back of a COVID-19 related.

<unk> savings as travel becomes a little bit more reasonable than expectation.

Can you maybe talk about you know how how much of those costs are coming back in and what your assumptions are baked into that margin guidance or and maybe alongside that just overall you know have you turned the corner on at least being are sustainably free cash flow positive on a full year basis.

Sure. So I would probably unpack it this way we see when we look at our operating margin you have identified some of the elements correctly. There was a certain amount of savings that we we got this positive related to Covid, but then they will also some proactive measures we've put in place last year in light of the macro economic uncertainty.

When we slowed down certain parts of our activity intentionally from us.

Things like hiring because whilst we wanted to get a better understanding of what was happening in the environment. So now that we are seeing our execution operating so well our view is that we can take a far more.

Progressive view on investment into this next year, so what that means is.

One we will have run day, which will be with us for the full year and we have significant investment in one day to the next year. So that has an impact on which we spoke about at the time of the acquisition. The second is that we are planning to accelerate our investments in engineering, because we believe that from a from an innovation perspective, we've delivered a huge.

Amount of value to our customer base within this last year, but it's it's not get done we have a number of initiatives such as the the European data hosting which is another initiative that is kind of additive to what we're doing so when you add all of those together. Our view is that this is the right time for us to continue to invest in that.

<unk> continued to invest in go to market because of the demand is clearly day and that's why we framed out thinking about operating margin in that 10% to 12% range.

Operating loss and I would just add to that when you. When you look at them you know the solid performance on unit economics for the business and also you look at how early.

We are in this transition that total addressable market you know that gives us confidence to continue to invest in growth, particularly around product innovation, because that's where we're demonstrating you know a number of competitive moats that I think we can build upon.

And I would add rich you know we were the prior year, we were at negative 17 operating margin range.

Move to negative nine this year, we've demonstrated our ability to be able to make that progress. So we will continue to be prudent in how we manage those things and to comment on an operating cash flow.

Clearly, it's always been a golf for us to be sustainably cash flow positive. We have a few things that are happening this year like the payments related to the <unk> acquisition and the full interest payments from the.

The capital raise we did last year that are going to mean that some quarters, we won't be but we will continue to be working to be sustainably cash flow positive.

Really helpful. Thank you Gena for Howard.

Thank you.

Thank you so much. Our next question came in as a chat requested Derrick wood I'd like to turn to you Derek Let me bring you to the spotlight. Please.

Yeah.

Can you hear me Cowen and company go ahead Derrick. Thank you I'd add there ex great.

My longtime works for first time caller. So thanks for taking my questions first.

You guys rolled out some new pricing and packaging and recently and I want I wanted to ask for about two things first on the free tier would love to hear how that is helping build a new customer funnel and whether you've seen trade down George that's that's really just about new funnel generation and then second on.

The simple case simplification of the Skus and just would love to hear the dividends from that.

And how you expect that to impact the model, specifically net revenue retention rates heading into the new year.

Well I'll I'll kick off by talking a little bit about free and then Howard can jump in and talk about pricing and I'm free that's been a really important new offer for us to try and stimulate trial and more activity in the top of the funnel and that's going well when you look at our new accounts, both free and paid that's up 23 per <unk>.

Year over year, so we like the momentum that we're seeing there free has also given us an opportunity to invest in long term relationships with our small businesses, who really struggled this year to find op ex to invest and things. So it's helped US I think to continue to keep some of those customer relationships are engaged.

And frankly, it reduces friction for trials, so it's bringing more users onto the platform, which we have I think a good track record in converting so it's still very early days as an experiment for us, but again kind of we like what we're seeing there.

And we're seeing it it's helpful across all of our segments not just a small business a very small business and I think with Shaun Scott here, you should expect to see us try and build more functionality more discovery more capability in in the early use of our product the trial experience how our customers discover is how they discover new products et cetera.

Howard you want to talk about pricing.

And I would add to that I think the simplification like we did on our pricing structure in our plants has yielded benefits almost immediately because it's made it easier for customers to buy so the selection process of which plan. They should take they no longer are confounded buys of this plan, but this option the simplicity and that has made it.

Easier for them to progress through the tiers and I think that's part of why we've seen people make the choice of our digital operations plan, because it's very clear the value. They can get interest and we've made it easy for them for Bob.

Great. Thanks for the color if I could squeeze one more in so you guys have a new product geared for customer service specifically.

Could you could you just explain how that's different from the core M and maybe you know how you'll kind of be more strategic around trying to sell that in the new.

New year will be there'll be a dedicated sales force or how does that how do you plan to take that to market.

Sure I'll take that and we actually I have one of our executives leading a dedicated business unit around customer service, so that really starting to focus on that and if you think about at the new platforms and products that customer service agents work in a very different from the products and services that developers and I T organization views. So.

Our customer service offering really started with deep integration into our products like Salesforce service cloud and Zen desk, and we just thought a lot of uptake in when we built those integrations that will serve started there and then started to add feature sets and if you think about it case management, so customer inbound customer case management is very.

[laughter] incident management, but as businesses have become more digital.

The urgency that sort of real time operations challenge has become a lot harder for customer for our customers because they have less time before a customer will start shouting on Twitter or read it or you know getting angrier wherever they're gonna get angry they don't they don't call. It weighed on the one 800 line for you to you know patiently express what's going on and so the challenge.

For these service agents as they need to get to the developers in the organization. The I T team the security team et cetera, and historically those teams are all on different platforms, what Pedro <unk> does really well is orchestrate that effort across teams across platforms without the agent needing to leave the context of the environment that they're in so huge.

Time savings huge productivity savings and they're able to get the attention of Devin it very quickly to solve some of these problems likewise, they're able to talk to agents intelligently about what's actually going on how long it will take to resolve something et cetera, So able to give better information to service agents as well so that's.

Sort of early days there are some additional use cases that we're working on our survey, but that's kind of the starting point.

Great. Thank you congrats on a strong Q4.

Thank you nice to have you as Derek.

Thank you and next we'll be hearing from Oh Sterling.

Let's see where sterling was on.

There we go thank you sorry about that.

Sterling here, we are at with Jpmorgan go ahead.

Hi, My video is hearing from them.

Thank.

Just given some of the bread crumbs to answer part of this but I wanted to make sure I fully understand when you look at the success that you had in the enterprise segment in particular in the quarter how much of that was coming from expansion includes new customers, which we saw in the net dollar retention versus how much of that is actually bringing on new <unk>.

Enterprise customers in the quarter it might be a result of some of the improved sales execution.

So I, it's true it is a combination of but we definitely saw good expansion in the enterprise. The enterprise segment now covers more than 50% of our revenues and so we certainly saw good expansion, which shows up in the dollar based net retention rate.

Also been pleased with the customer acquisition that we've seen in the enterprise and the mid market segment. So we've been bringing on and much in a land and expand model that we've spoken about for a few years, we've been bringing on enterprises and they starting with a small in teams.

And then growing into those cohorts of the hundred K and $510 million.

And then interest me as a follow up Jennifer as you think about that why now what is it that you know these enterprises is it just we're giving up on in house solutions that maybe they were trying to use it's just that it's clear that you separated from the competition what are the major and I'm sure. There's a number of them, but what would you say for the one or two.

Things that are causing enterprises to choose you know it's definitely a couple of things. It's definitely the digitization of these business models, creating a sense of urgency to figure out how to make all the complex technology that sits underneath their brand engagement, there and consumer engagement their employee engagement right now.

Covid taught many leaders not just technical leaders, but Ceos that when that net debt.

Digital is here to stay and it's driving the majority of your business now not the minority partner for your business and so you've got to get that right. The second thing is I think we've just made it clear that we are the only and the best solution for real time off for digital ops and enterprise, there's just nobody who's come close to proving their resiliency and their scale at our level in a way that developers.

Well not only adopt but you know drive virally across the organization and then there's one other trend that I don't think we'd talk about enough, which is leadership in these large enterprises are increasingly more technical so you're seeing large traditional companies higher cloud executives from Amazon and Google et cetera, So you're finding.

Moving CTO and CIO is that you know our developers like where coders, we have carried the pager like really understand the value of not just our first use case, but automating and preventing incidents by using data and machine learning. So there's just more of an open mind toward.

Towards adopting some of our newer solutions and that's probably the thing that I've been the most excited about when you look at you know the customers spending over $1 million growing by 44%, that's because they're not like.

Crawling walking and running their they're putting together a transformative relationship with us from from the start and then the growth comes as they add users and teams and bringing them on board.

Got it thank you.

Yeah.

Okay. Thank you so much going back to some hands raised from Morgan Stanley We have sundry sing Sanchez of non interest in spotlight share.

Alright. Thank you congrats on on Q4 and really thank you for all the credit metrics. This quarter a lot of things stand out thinking about intelligence being up 150% was a particular standout and I guess my question for you Jen is weighing back for the IPO you were really clear with that.

On what you know.

The marching orders for the company was which was to move up market and.

Frankly be able to monetize your technology lead relative to customers and it's I guess, it's been a theme of this call so far but along the dimensions of.

Sales cycles.

All sizes, how often customers sort of idle with you on price where are you today versus 12 months ago. You know 18 months ago, when we were sort of really starting that.

Jeremy.

I'm really proud of the balance that we've struck there you know we always talked about our hybrid go to market model. The fact that we are land motion is e-commerce, driven and then our expand motion starts out as transactional and very short sales cycles. A lot of you know a lot of deals created and closed in the quarter, but then as we've gotten into more strategic.

Relationships, where you've got thousands or tens of thousands of users inside a fortune 100 company. They want a partner to support them. They want strategic customer success. They want professional services, they want and experienced account executives to help them in it and I think Dave and the team have done a great job of bringing that for long.

For us without damaging the velocity of the flywheel at the same the same token so likely we won't dive in deep into the funnel to get hands on something that can grow on its own. So that's one thing I'm really proud on the second thing is I think the product team has really struck the balance between getting new features to market, but also.

Continuing to add robust services are an important reliability and resiliency investments to the platform. So that we can support the largest customers in the world. The most innovative customers in the world in doing what they need to do at the pace they need to do it right and so you know one of the one of the challenges that you have it.

You grow in enterprise and I've seen this in my career is you get a lot of customer requests and then they're not always requests youre going to want to build for the rest of the market. So you've really got to strike that balance and the product teams worked really hard to be in the market listening to our largest customers, but also making sure that when we build something it's it's going to engage our entire use.

Or community not just a couple of large large customers that have a corner case. So I think that's that's been good I also think that there is a recognition around our RLI and our payback and our time to value. So it's not a three year problem to figure out whether the investment you made in paid your duty is going to pay.

It's a two month payback is at 800 per cent ROI over three years and that like we get those numbers from our customers I D. C. Audited those numbers. So when you see that it it it becomes a much easier conversation as as the quantifiable sort of value prop that comes more obvious and we've gotten better.

At at having that conversation with customers as we have grown up for sure and then the last thing that I would say is we're still being chosen by the most innovative startups on the planet. So if you look at where the developer community looks for influence where still the first choice there and you know the market has been a very concerned over competition for very long.

Time, and every quarter, we prove that that is not an issue for us and we're going to continue to prove that until it doesn't come off anymore [laughter].

It was brought up less and less so that's that's that's definitely a good sign for US as my follow up question I have a follow up question.

Wanted to ask about what's going on security because it seems like that market is evolving kind of like cloud and the Dev ops movement gave rise to observe ability and automated incident response, it seems like cloud security is.

On a similar track and seen a lot of M&A security guys requiring.

M logging Olympics vendors to do that convergence for for the Sox team and for them.

What are you thinking about how you were thinking about the security operations team and.

What your.

What your sort of wrote roadmap and the ability to serve those sets of users as they sort of weighted into the cloud at a much more accelerated pace coming out of this crisis.

We already serve Sakkaf teams very well, we don't market ourselves very well in that regard, but we already service Tech ops team is very well because if you think about it.

Responding to a security breach or a potential threat is the best version of incident response. It's the Best example of why it's mission critical why it's time sensitive how unpredictable it is and how often and structured it isn't the only way you resolve a situation like a breach of day to leak you know a potential threat et cetera is to orchestrate very detail.

Troubleshooting and work across multiple teams across the organization and Peter duty already does that the other thing that we're seeing is you know developers are largely comprised SEC ops teams. So they already have a paid your duty experience. That's been positive. It's often a developer who moved into security that brings us in et cetera, and if he and then.

The last thing I would say is when you look at event intelligence and what we've done with digital operations management. It is about really finding signal and the noise. As these events are coming through those integration investments that we've made to the security stack for threat management stack et cetera have been really important and diligent thing isn't the technology issue isn't a security issue.

Is it a day to issue et cetera. So.

And I guess, one final thing I would say is the security team and the Dev teams need to work really effective lead together and a T. S. M products do not serve the urgent nature of something that is happening right now that could be business critical where you've got to engage with developers in seconds and minutes not raise that ticket and wait for a developer to open.

Their email and find that so getting the the timeliness of getting that work done is really important. So that is an area that we will continue to invest in and I think we have to think about you know what's the right business model to do that long term et cetera, but I'm also always trying to help the team make sure we're not focusing on too many things at once and so were really following where the customers.

Headed and we do see the developer community having huge influence in this day in the SEC ops team and in the stock.

Appreciate the thoughts Victor.

Thank you.

Currently we do have two more analysts queued up Chad Bennett next to you and then Kingsley creams are coming to you after Chad let me bring you up here.

Hi, Jennifer I'll my cash.

Hey, Chad how are you great. Thank you how are you doing good. So how do you do you have the CRP one number handy for for the quarter.

Yeah for.

Our remaining for.

Families obligation member I, neither percentage I will give it to you in <unk>.

Just a minute 120 121 million.

Okay.

That was C. R P M.

That was yes that was.

That was a problem honestly not up 59%.

Okay.

<unk> was up the same amount as overall RVO.

Oh, sorry, yeah, no I haven't I don't have those numbers. Okay. Yeah. Okay. And then so just you know just kind of pushing a little bit pushing you to a little bit on the guide and I.

Jennifer maybe let the cat out of bed, 30% growth for expectations, which I love to hear and everybody who wants more just for for the growth in event intelligence the growth in the digital ops platform.

Then in the acceleration you're seeing in enterprise and in the comeback in SMB.

The net expansion range, you gave Howard or 118 to $1 21.

I guess.

Anything can happen in any quarter on that metric, but why was that metric go backwards from where we are today.

Is there something under the Hood that.

Your youre looking at.

Yes.

The mechanics for the range that we provided is 118 chatter from 24, we've seen some steady acceleration you know over the last two quarters in terms of that number.

Part of the reason for why we expect for two to fluctuate a bit is our expansion to often related to customers renewals right. So that's often at times. So there's a seasonality element to it that can change when when these things these occur sometimes we bring the renewal for it.

And so there's an early renewal.

The other aspect of this is it's very hard to always be sure exactly which customers in our cohorts are going to expand so whilst we've seen a high level of predictability, particularly in the enterprise in terms of seeing roughly a third of our customers expand every quarter, it's hard to know exactly from which cohorts, how many will expand but we.

We're feeling comfortable with our ability to forecast for it and that's why we've decided this year to give folks a view on where we think we would lag between the 118 and $1 20 for expecting that wherever we land on average enterprises to be hot.

Right and in Enterprise is now north of 50 per cent of the business from correct Yep. Okay. So if anything that number should accelerate right not putting words in your book right.

We would expect that as ex that you know, obviously enterprise being a large contributor to that number as enterprise continues to grow M. D. C that the man made from continue it would contribute positively to be followed by a day per day.

Yeah, and I'll jump in there I just add a comment I mean, I I am reasonably optimistic about the macro right now I use the words right now very intentionally I mean, who knows what's going to happen in fall and so I just want to point out that like we're still in a very volatile unpredictable macro environment and you know we're obviously, it's a good thing.

About that you know my comments around getting back into the 30 is like that's not a guy that is I'm confident this company will get back in with a three handle in front of it but I'm not telling you went in it.

And I mean, I I would just say channel last year at this time, we were having a very different for like yeah. Both are falling apart and I was trying to give guidance at that point in time, we decided not to sustained guidance. Despite the uncertainty and we've actually made sure that we've we've exceeded our guidance every week every orders. So my view is that I want to.

To make sure that what I have visibility today, and we have reasonable visibility.

That leaves us to give the guy that we do.

So it makes it a really good point that you know if you think about Pedro DD on the whole and you think about our team and kind of how how we think about our own business.

Weird durable, it's a very durable business, it's been a pretty predictable business. Our customer expansion you know a third of our enterprise customers expanding every quarter have been predictable and that's because our customers have become reliant on us and they are consistently growing through their user base and for add ons I expect that to continue so that is one of those things that gives me a lot of confidence.

For a point from both of you on the guide last year you were one of the few I won't point out.

Just one follow up real quick and I assume the expectations on new logo contribution for the year in terms of mix have not changed or.

Any any kind of different expectations on new logo contribution.

So the the way I would frame this is that the real revenue or IRR drivers for us our mid market and enterprise logos and those remain for US an area of focus obviously, we are keen to add.

M logos in the SMB space and very small business, because that's where a lot of these companies started out.

But certainly in terms of what actually contributes to our results significantly its the up the up market numbers and our expectations are that we will continue to see those grow at a at a healthy rates right.

Great. Thank you great execution on the quarter and the year.

Yes.

Okay. Thank you and we do have a henry's from Kingsley cream at Ehrenberg Kingsley, let's bring you up and.

If anybody else has any questions. Please shoot me a message if you're unable to raise your hand, but kingsley's the last time I see currently.

Okay.

King.

Uh huh.

And thanks for fitting me in a quick one on the user accounts from 700 K users up 40% is remarkable you know higher than 32% growth last year.

<unk>, new growing little bit faster than revenue so.

As we think about heading towards the 1 million user accounts should we expect user count to continue to outpace revenue.

Should we think about the drivers between customer service and you're also seeing a higher percentage of air argues drops well so.

Yeah.

Should I take the channel they want I'll take a crack at it and then you can correct me. So number one I think what we're seeing is the expansion of new teams are across the organizations that we serve particularly driven by digital operations management plan I think that's really helping us for the second thing is we launched stakeholders in business response last year.

And so we're seeing an uptick in stakeholder adoption and of those stakeholder licenses have a lower pricing than a traditional license. So that will drive additional users on the platform. The last thing would be our free product, which is going to continue to drive additional users onto the platform, which gives us a lot more trial.

At the top of the funnel. So those are some of the things that I think are going to drive that user growth up.

In ways that I think are very positive for the company long term.

Yeah, and the 700000 uses all paid users that you're referring to there. So this is representative of us becoming more ubiquitous within the organization as we are being used more broadly across the organization different use cases. So for example, if you're in a pure customer service type use case, you're not going to get its like.

Kind of plan that you would need to be a different play and hence we created a different SKU for it to someone who's in an in depth. So that that accounts for some of the variation there, but I would certainly expect that it will outpace the revenue for us.

Okay. That's helpful and then last one.

Are you on version three of the best integration, which was recently released that shows it shows the pay for software development today. So I mean, what have you learned.

Recently with this integration and how's it or how are you feeding that back into the product.

And one thing we've learned is really hard being a customer service agent like like if you think of it. If you think about like whose jobs have gotten more difficult by being remote and by being at home a lot of trouble shooting happens when you're sitting together in the same area. In your you know team managers, there and your unit managers. There etcetera, you know customer service I think have been.

<unk> by layoffs customers are using the public inter web to drive their feedback into an organization as opposed to chat and and phone calls like they have in the past an email. So I think it's tough to be a customer service agent and one of the things that we've learned is anything we can do to make the context switching to make the information consumption.

More actionable to orchestrate a response more quickly has a huge impact not just on productivity, but on the health of that customer service team and ultimately the end consumer experience and usability, which is one of the things that we're known for is really important and that use case connecting people within the platform there in sales force.

If it's cloud Zen desk et cetera, and being able to give them everything they need to know about an incident and everything they need to know about who's on it how long its taking et cetera with them without them, having to pivot into other platforms Super important and that's where our integration investments I think have.

It really made a big difference, but I think we're very very earlier.

Right, Yeah, well, that's very helpful to hear for it and congrats again on a great quarter.

Thank you.

Well that concludes the questions that we have folks Jennifer I would like to turn it back over to you to send us off with some closing remarks.

Well, firstly I just want to thank everybody who's joined the call and thank our analysts can be you all have given us a lot of feedback we've learned a lot from you in the last couple of years. Since we were first a tiny newborn public baby in the in the SaaS industry. So I really we really appreciate your partnership and your help them second of all we do have summit a cut.

Now for having somebody at the end of June this year. The last week of June which is exciting. We will also be hosting an analyst day around that timing, which Howard and the IR team will give you more information, but we look forward to seeing you there and have lots of new exciting product innovations coming and then the last thing is I just Wanna mention my support for the agent community.

Let's just taken place in Atlanta, and what we've seen over the last couple of weeks would you stand with the eastern in the black community against violence and hope for a more just and equitable universe. So thanks, everybody have a great week.

Yeah.