Q1 2022 PagerDuty Inc Earnings Call
As we progressed for a post pandemic world Patriot and he is well positioned as 1 of the few key platforms.
<unk> M C P of our investing and for the future. We are on a path to becoming a 1 billion dollar leader focused on and modern digital operations. This success is a testament to the ingenuity of our customers our users our partners and our employees, we deeply appreciate their trust and confidence and.
Asian.
And the last year the world had to embrace new ways to work today every company is a software company managing a complex digital ecosystem digital operations are now business operations with paid your duty as a central infrastructure for our customers.
As a result, our deal sizes are growing compared to the same period, a year ago. The number of customers investing more than $1 million is up 55 per cent and customers investing more than $100000 of stuff are up 32 per cent the.
And the macro environment and market landscape continued to move in our favor we're deepening the trust and loyalty of our core developer users, while many customers expand the use of Patriot duty for customer service and SEC ops teams, our investment in AI ops and automation and enables teams to prevent unnecessary work and empowers our.
Users to intelligently mobilized their teams and critical moments.
These and other new capabilities provide unmatched real time context and visibility around incidence.
Our vision to move teams beyond the incident response towards proactive orchestration of their expertise and time sensitive mission critical challenges is fast becoming a reality patriot and he is evolving into the leading ubiquitous platform for real time work as users and teams apply our technology to a diverse and grew.
And set of use cases across teams and functions for out of business.
Our growth and enterprise reflects these advantages with average revenue per user and expansion of transactions up approximately 40% over last year returning to pre pandemic levels.
Our capabilities and fortify organizational resiliency just as over 70% of it decision makers have named digital resiliency as a top priority for this year. According to a recent IDC survey. This is true of cross vertical industries, where we've continued to see momentum, including financial services software and and.
Internet automotive e-commerce, and more recently and health care and biotech.
Our freemium offering continues to drive new platform usage, new free and paid accounts on our platform grew by nearly 30%. We saw particular strength and mid market with new low was up 33% over last year and new users per level at the highest point and 3 years.
Our land and expand flywheel continues to deliver growth with both disruptive innovators and industry leaders due to our thought leadership and credibility within the developer community and Q1, we added new enterprise customers, including Albertsons Jaguar land Rover and truest financial.
Startups, Drizzly lunchbox and Pony about AI and became paid your duty customers this quarter as well, we expanded our relationship with customers, including Bell, Canada K P. M G New Zealand and legal zone.
It's especially encouraging to see our largest customers expand their investments and paid your duty at the fastest rate of all of our customer segments total air are for customers investing over $1 million with us grew by 59% year over year, and 13% quarter over quarter, demonstrating the significant expansion.
And b with existing customers as we expand across functions and managing different kinds of real time work.
Several of crypto currency companies now leverage paid your duty to ensure uptime and reliability of critical customer facing services apps and transactions for blockchain companies uptime is money the world's latest for the world's largest cryptocurrency business based on the U S E Toro based and the U K and more.
All of US finance have all adopted our platform, they're using patriot each of coordinate teams managing the urgent real time work that ensures the viability of the world's newest currencies.
These teams are decentralized and distributed so they've turned of paid your duty to streamline their incident response across the organization and moved for reactive operations to preventative 1.
Automotive is another emerging growth sector for paid your duty 1 of the most admired automotive companies of the world is steadily expanding its reliance on our digital operations platform. We now support the critical customer facing services delivered in vehicle and on App for this global 500 connected car company and the company adopt.
Full agile development across geographically diverse product and engineering teams they leverage page of your duty to ensure a delightful customer experience.
Last year of Fortune 500 auto parts company introduced contactless pickup of profit 5000 retail locations riding a wave of increased demand they rolled out of new mobile application and made multimillion dollar investments and digital channels as the company pivoted its business model. It shows Pedro vs platform.
Event intelligence to manage of small pilot with their cloud team to prioritize incident management. Since then the company has expanded multiple times across the cloud and central I T teams driving of projected annual return on investment of over 250 per cent.
1 of the largest freight rail lines and the U S adopted paid for duty and Q1. This fortune 200 logo is using a new digital platform to manage the operations of 8000 locomotives and 32000 miles of railways Patriot and he is the real time operations platform they've selected to empower their teams with full service.
Ownership.
Our multiple engines for growth have served us well and expanding our footprint and gaining market share and international growth was robust and Q1 with particular strength in EMEA, while extending our global reach and our focus on enterprise continues to pay off as we added new customers to the over 60 per cent of fortune 100 and over 40.
Per cent of fortune 5 hundreds of companies that already rely on patron duty.
Each of these businesses and are undertaking their own journey towards thriving and a digital first world and Pedro duty is of critical part of that journey.
In addition to new logos, we're also expanding our reach across companies with new use cases identified and adopted by our users. The number of customer service users is up 41 per cent year over year during the quarter. We launched new features to the paid your duty for Zen desk application, which now delivers real time updates and visibility.
<unk> directly to agents with M. Zen desk. This allows teams to proactively communicate with customers as soon as of services impacted teams at door Dash Netflix and out systems have all adopted our customer service offering and this quarter customers and putting okta, Cisco and Zee scalar also expanded their customer service teams use of Patriot.
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Product innovation and expansion is our most exciting growth engine, especially AI ops automation and our integration of the ecosystem, which connects us as on operations hub for all things digital we're seeing strong demand for our automation solution with run back now integrated into our global sales motion, enabling cross selling.
Hey, Judy render customers are able to solve problems through automation and in real time, innovating faster, while improving their margin run neck, and performing well landing new enterprise customers, including Fortune 500, Health information company and and international land with a large enterprise utility business based out of Australia.
We continue to see strong update uptake of paid your new security offering a SEC ops teams are confronted with ever increasing phishing malware and ransomware attacks, 1 SEC ops team at a large online education platform uses paid your duty to guard against more than 7000 different fishing variance per months. These 2.
And is now fully automate blacklist updates without the need for expert knowledge or admin access significantly reducing enterprise risk while saving valuable time.
And our our for our digital operations platform increased 93% over last year with Ara for event intelligence right 200 per cent year over year in the first quarter, we announced a number of features to build on the already powerful services and event intelligence, including next generation surface dependencies.
Providing context and visibility both upstream and downstream based on past incidents.
Patrons of the automatically advisors operators on resolution next steps saving time, and improving customer satisfaction, our automated triggers and also new this quarter automate tasks using custom actions that allow responders to orchestrate work across teams and reduce time spent reducing time spent on resolving incidents and improving.
Service availability.
During the quarter, we expanded our digital ecosystem.
According to Gartner the domain agnostic AI ops platform is emerging as a standalone market distinct from domain centric platforms due to the flexibility of ingesting increasingly diverse datasets paid your duty is Dow made agnostic and maintains the broadest ecosystem in the market with over 560 integration.
And these include new integrations with Jay from pipelines for change events crowd strike for circa and Monte Carlo for data Observer ability. These integrations and demonstrate our scalability and extensibility and are a key reason why our customers choose us as a central infrastructure for their digital operations.
Our social impact of inclusion and diversity and equity efforts across the company and community remains core to our culture and our success. This quarter. We contributed both time and money to advance and quality for Asian American and Pacific Islanders. We also celebrated black futures months led by the efforts of our array employee.
Resource group, our social impact of arm invested $1 million towards equitable COVID-19, vaccines vaccine access and distribution committing and financial support alongside product credit and technical expertise.
Free of these grantees International Medical Corps Trek Medics International and next week of analytics are already leveraging Pedro duties platform and their life saving work.
Check medics executive Director said, it's clear we've got eyes out for us in both expected and unexpected places with paid your duty, making our systems more resilient for an organization. We're a resilient platform can make the difference and delivering time critical care, it's exactly the type of impact we're proud to make.
In the quarter, we added 15, new impact customers, he's nonprofit and mission driven organizations work in lockstep with our time critical help grantees and leverage Patriot and these platform and they're lifesaving work of recent IDC report cited paid your duties commitment to social impact and setting and industry standard we will continue to make this a pillar.
Of our culture.
Finally, we are looking forward to our annual paid your duty summit, which kicks off a little earlier. This year on June 22nd we're expecting more than 15000 attendees from across the globe at the all digital and free of events. We're thrilled thrilled to wealth of a global thought leaders, including David Solomon The CEO of Goldman Sachs Clare of sheet and.
E. All of service cloud at Salesforce aim and Badger, the co founder and CTO of Hashi Corp, and Adam brand's best selling author host of of the work life podcast and leading organizational psychologists.
For 3 days will host conversations on the future of work the future of business and the future of paid your duty, we're hosting a financial analyst day on June 24th where we will share more detail on are some of and announcements as well as on our roadmap to becoming a 1 billion are our business with that I'll turn the call over and Howard.
Thank you Jamie.
Rethought of the year of strong with results that exceeded the high end about guidance and on momentum continues.
For the last 3 quarters of solid execution and robust business momentum gives us confidence we can accelerate the top line, while maintaining best in class gross margins and improved operating margin of over the long term.
Revenue of $64 million grew 28% year over year, driven by strong expansion, particularly in the enterprise and mid market with <unk>.
And in use and adding new products and upgrading towards digital operations play.
And we continue to see strong growth and soccer and technology financial services retail and media and entertainment and telecommunications with above average growth in healthcare and life Sciences and biotech.
The transportation sector natively impacted by the pandemic is showing evidence of recovery of travel and hospitality and seems to be taking longer.
International revenue grew 48% year over year of 2 totaled 25 to think about revenue.
And maybe to contribute to our growth is expansion of it.
And customer base on new.
The region with particular respect to basically go out and car rates of adoption of the digital operations for them this quarter and before predictable ease of expansion and a P. J with 1 example of being a large enterprise strength growing the page Judy for the fourth consecutive quarter.
And we continue to move up market, we see 2 strong trends.
Firstly customers and moving towards longer term contracts.
For the ninth consecutive quarter, the positive shift of month to month to annual contracts continued.
Annual contract comprise 87% up our revenue versus 85% of a year ago and 79 per se in 2 years ago.
Our remaining performance obligations, which group of up to 2 per cent for the same periods a year ago reflects momentum and multiyear deals.
Secondly on average revenue per customer has increased each of.
The last 9 quarters.
On enterprise dollar base net retention was once again above 125 for the same with overall dollar based net retention of 121 per se.
As a reminder for fiscal year 'twenty to 'twenty 2 weeks.
We expect all of that basically of pretension to vary by quarter and the range of 118 to 124 per se.
Trailing 12 month's billings of 257 million grew 23% on a year ago.
And your billings grew at a more modest 11% due to several large early renewals that were executed in Q4, as we mentioned in prepared remarks last quarter as well.
Previously you said.
And we look on a trailing 12 month billings to eliminate some of the noise associated with the favorable timing of renewals and coach Inc.
We expect Q2 billings growth to be between 25 and 35 per cent.
And trailing 12 months exiting Q2 to be at or above 27 per cent.
The number of companies on the platform, both paid and free group of close to 30 per cent for the same periods of the yoga.
And properly boat its and its early stages on a free offering is creating a larger funnel for customer acquisition.
And the conversion rates from free to paid of better than we expected.
Total credit customer growth and increased 7% year over year with solid performance and enterprise and mid market.
Customers spending hundreds of thousands of dollars of yeah and customer of spinning of the millions on as of yet grew by 52 per cent and 55% respectively and.
Of the proof point of about strength in enterprise and mid market.
On non-GAAP EPS loss of 8 cents and on non-GAAP operating margin was negative 9% ahead of our Q1 guide and I hit on something.
Non-GAAP gross margin remained best in class of 85 per cent per quarter concept.
Consistent with our target range of 84 to 86 per se.
I will now turn to the details of non-GAAP financial results.
For the quarter on non-GAAP operating expenses of $60 million on page $47 million, a year ago, primarily due to investments and on go to market strategy and product development.
Research and development expenses for $16 million or 24 per cent of revenue compared to $13 million and 26% of brave and you're in the same period a year ago.
R&D expenses are up 21 for things as we continue to invest and expanding our platform and the areas of AI ops automation and customer service and on integration and workflow ecosystem.
We expect to grow our investments and R&D during this year.
Sales and marketing expenses of $32 million and 51 percentage of revenue compared to 24 million of 14, 9% of revenue and the prior year up 33% of your year over year.
We invested and go to market resources and marketing programs.
We expect a noticeable increase in marketing expenses in Q2 of this year as we move our use of conference pay for duty summit, which was typically held in Q3 to the end of June.
In addition, we launched a brand campaign, which will increase above the line advertising costs.
We expect sales and marketing as a percentage of revenue to be lower in the back half of the year.
General and administrative expenses control and it involves for folks at 119% of revenue compared to $10 million and 20% of revenue in the prior year.
And we anticipate exiting the year because of low expense to revenue ratio for G&A.
Our Q1, non-GAAP operating loss was $6 million compared for the loss of $4 million and the same quarter last year.
Our operating margin was negative 9% compared to negative, 8% and Q1 of 'twenty 'twenty 1.
Q1, net loss came in at $6 million and net loss of 8 cents per share compared to a net loss of $3 million and make all sorts of 4 cents per share and the first quarter of last year.
Turning to the balance sheet, we ended the quarter with $557 million of cash cash equivalents and investments with improvements in both operating and free cash flow.
Operating cash flow was $2 million compared to negative 185 top and bottom.
And the same quarter a year ago.
Free cash flow increased by nearly 19% to negative $350000 and the first quarter driven by improvements in working capital and for the forward of investments and new and existing offices.
That said, we expect a dip in them.
Out of positive operating cash flow during FY 'twenty 2.
In particular from Q2 with increased spending in sales and marketing referenced earlier interest payments on our convertible debts and prior acquisition related payments, we expect operating and free cash flow to be negative.
And with increased sales and marketing spend to support the shift and timing for our use of confluence of brand campaign and investments, we expect an increase and our operating loss for Q2, and therefore lower operating margin and Q1. However, we picked on operating margin to improve and get back off of that yet so we exit the year in line with our full year of God.
Turning now to guidance.
For the second quarter of fiscal 'twenty 'twenty, 2 we expect revenue and the range of 64, and a half million to 66 and a half million dollars for took the midpoint represents a 29% year over year of credit cards.
Non-GAAP net loss per share and the range of 15 to 16 cents per basic shares outstanding of approximately 84 million moving.
And non-GAAP operating loss margin and the range of pecs and you're pretty cool things.
For the full fiscal year, 2020, 2 we expect revenue of trucks and $67 million to $272 million for took the midpoint represents a 26% year over year of growth rate.
Non-GAAP net loss per share of 36 to 42 cents with basic shares outstanding of approximately $84 million.
That's been 5 and non-GAAP operating loss margin of 10 to 12 for things.
Before I turn to Q&A I'd like to remind you of the tailwind for club offices.
And digital acceleration cloud migration and Dev ops transformation of all inherits is critical to our customers' success.
800 is back on pace of unique role at the Central T shirts, and redefining workflows moving teams from an old way for a new way of doing things.
Our platform prevents unnecessary works for multiple levels of automation and creates an equal context across the customer's environments and orchestrates work with precision.
We reduce complexity improve productivity and ensure of top line because of telecom.
This gives me confidence that the momentum we've seen in the past 3 quarters and seek to continue.
And we are well positioned to see sustained robust growth.
As Jane mentioned, we are excited to update you in more detail at our analyst day on June 24, and hope that you'll be able to join us on the conference earlier of bedroom.
And that I will open up the coke for Q&A.
Thank you so much Howard and thank you to our analysts for joining US and reminder, you can use zoom and control to raise your hand at the bottom of center of your screen for those of you better participating by telephone and as analysts who can use the starter mine and come in and.
And a reminder, star sixth on mute yourself, if you're on the telephone the firsthand of IC you raised and it comes from Chad Bennett at Craig Hallum, Chad will come to you.
Great. Thanks for taking my questions. So Howard maybe just on on non not to harp too much for focus too much on billings, especially quarterly.
And I do recall and you mentioned that and you had some early renewals and and <unk>.
And fourth quarter.
And probably elevated right fourth quarter billings.
And some extent, but just is there any way to quantify that impact whether you know the negative impact and the current quarter or normalizes over the last couple of quarters and and what it what the billings growth rate would be.
For Ted it's it's.
No we haven't specifically broken that down by way of you can see that on a linked to fluctuate from quarter 2 for them and and as we had seen within Q4, we did bring forward some of those and that it creates of 41% gross weights and billings and in Q4. That's the reason why we look for the trailing 12 months and also why we decided to provide some guidance.
And on where we see buildings falling and each pulled and so forth.
For Q2, we see it all of them within the range of 25 for 35% growth and that's because we are dealing with.
1 renewals kind of represent potential for billings and we have a coach and arrangements with all of our customers, but also it means that there's some fluctuation and it's hard to predict exactly which will kind of time, but when they look at the longer term view of the trailing 12 months at the end of Q2, we see that being accurate.
That's for above 27% and that lines up more with the the growth rates that we see from a revenue perspective.
And then maybe 1 follow up for me.
Maybe for Jennifer so on and on the <unk>.
Work on and the and the contact center penetration and growth that you see and read the user growth numbers are a very real boss or are those recall I don't recall and you've talked about in the past, but are those new bra.
Gross profit for duty or are are they experiencing or use cases within the base.
Yeah.
You're on mute driving all of your out of me.
In some cases those are new logos, but in most cases it is expansion and the vast majority of our customers start out on a Dev ops use case, and then I realize that they can leverage page of duties for.
Platform for unstructured real time mission critical work and other areas and customer service has become quite a natural adjacency you may recall that last year and September at summit, We announced paid your duty for customer service as a separate SKU and we started to provide even more of product marketing and more education for.
Customers around that and where historically adoption and had been largely organic and kind of viral and within accounts.
Oh, great. Thanks for providing of secondary metrics for you guys is behind the Apple users and products on screen.
Youre welcome.
Yeah.
Josh It's on next on expression. Thank you Howard I see a hand up for Matt Stotler from William Blair.
Hey, guys yeah. Thank you for taking my questions.
Good to see and maybe so maybe a couple of higher level questions..1 you talked about.
Continued penetration of your installed base as being you know kind of a primary opportunity for growth going forward and you gave some examples of doing on women and the <unk>.
Just answer there.
How do you think about what the overall penetration of it looks like and the installed base today and and what are your initiatives to kind of continue to recognize the opportunity over time.
I think this is something we don't talk enough about the fact that we don't have a single customer that sold out because you know we look at the ability to penetrate customers across an entire engineering workforce, which includes developers as well as I T. And then we see expansion into security teams and security on.
<unk> centers and customer service et cetera, and then we also see a lot of customers using us for use cases that we don't imagine in different parts of the organization and there's a large on software company that uses us for instance, and legal of large financial services company that uses that for physical security. Another software company that I know that uses.
That's for managing the process of closing out commercial contracts at the end of quarter, So as more and more of these use cases sort of develop across the organization, we see the Tam expanding inside customers. The other thing that I would say of developer of head count continues to grow despite some of the challenges we saw for the last year and every <unk>.
Company becomes a soft for a company, we see more developers more tack of workers getting hired and those are natural users for paid your do you. So theres even growth within and head count growth. So I think it's very early in terms of the penetration even with our largest customers and you can see that in just the expansion rate of our customers that invest over a million dollars and there are with us.
Right right and so.
And then maybe as a follow up and you mentioned me on automated triggers and which is relatively new and automation of obviously, a great opportunity for us.
For the customer so new would love to get your thoughts on.
And kind of what remains in terms of workflow automation opportunities to continue to drive that value forward and.
I think 1 of the things as part of an incident response is that the work comes back and unexpected you can't plan for it and it tends to be unstructured you tend to need cross functional teams and and certain expertise across the business are involved and we're very early and our automation journey, but we're leveraging the foundation of 12 years and for <unk>.
Dietary data on people on workflows.
And on events themselves the multiyear investments, we've made and event intelligence, which help us consolidate and correlates of signals coming in but then orchestrate automatically orchestrate all work to the right people within the organization. Some of the new features that we've been talking about more recently on where we take learnings in the platform from previous since.
And and apply that in the second and the moments that our customers need it when they're trying to solve and similar incidents including direction on what to do NAV and that that is you know sort of out of magic with me. If you asked me and again kind of the beginning of what we think of and say self healing not just hoping orchestrate what team should do but do we.
And some of that work for them through the assistance of some of the product technology, and you've talked and run back.
Got it and thanks again.
Thanks for showing up I appreciate it.
Okay next we'll go to Keith Weiss of Morgan family of cheap.
Thank you guys for taking the question and <unk>.
And 1 for Howard and and not to beat a dead horse and albeit on a little bit.
The tone on the conference call and it was very positive it sounds like new customer initiatives are going very well, but some of that is offset and sort of enough for you look like and boeing's buys for a week of renewal day is it a correct takeaway that sort of the new business side of the equation and it's shrunk if you will is that and that that.
It's exceeding your expectations and I have of I'll follow up on on sales strategy.
And some of the comment I would make is if we do have a seasonality in terms of our renewables based upon and Q1 is typically our smallest quarter and Q4 is our largest so from a billings perspective. The available base is smaller and so that's been fixed for things and also because we have the pull forward and they put together.
So I would say that that's an important context, when you think about billings when we look at our business.
Our churn rates remain really low and this high renewal rate of about 95 per se right.
Business is strong in terms of our existing base.
Look on dollar based net retention at 121% clearly expanding but then the new business additions also tracking really well and we're seeing strength and tens of new business and of that that gives us it gives.
As for the confidence of both.
Both of them in terms of our guidance, but also being prepared to give for kind of selling 5 and 6 week of doing that got it kind of thing that sounds great and then on on.
And go to market are you guys talking about some really good strength in terms of the customer service of use cases, and the security use cases I was just wondering how does that fit with it and then you guys just made.
On a big hire 10 point.
Head of global partners, how does that sort of aligned with the partner strategy because it seems that'd be a pretty natural kind of fit of security operations going on on some of the security Guy and customer service going on and guys like Zen desk and how did those 2 fit together and any early indications on on success and getting those partners and they contribute a little bit more on new deals and and.
And you'll generation.
We think about our partnership ecosystem and on a couple of levels right, there and our technical ecosystem, where we approach integrations with product and that's allowed us to build and then.
Made ignostic kind of central independent hub of connections and spent allow us to really consumed and signal from just about anything and so 1 of the early partnerships that were foundational for our second half operating or customer service offerings started and the integration ecosystem and then as we see those growing popularity they become Morris.
Strategic partners and you've heard us talk about and that's been part of Salesforce and the passing of gene crowd strike day et cetera. So having him on board allows us to lean in to longer term strategic and go to market partnerships. There that build on top of the technical ecosystem that we have and then we also look at the Hyperscale and cloud providers and they think of.
And the past and share some of the momentum that we have with partners like AWS on where we think theres an opportunity not just to be on product together and integrate really effectively into their cloud service environment, which help customers and are migrating to the cloud move much faster with significantly less rent, but it also you know it evolved into potential growth.
Market opportunity and so having him here and puts us in a position I think to re.
Build on some of the go to market efforts that we have on the way and really started to build broaden our reach to the market as opposed to doing it all independent and yourself.
Got it and it sounds great. Thank you so much guidance.
Thanks Keith.
Thank you next we'll hear from Sterling Auty with J P. Morgan.
Yeah. Thanks, Hi, guys, just 1 high level part of them.
And from from my side. So you mentioned acceleration on a couple of times. What do you think is changing and the business fundamentals that have your physicians the confidence to talk about the possibility of accelerating the growth.
It's a combination of the demand signal and the macro trends that we see I mean, we've always talked about digital transformation and Dev ops transformation and cloud adoption being long term tailwind for us and our customers are very early and their journeys, even if they've pulled forward.
<unk> net were expected to take multiple years as the and the pandemic has and has sort of started to slow down and people are more on recovery, we've seen our customers, making more strategic investments. There. In addition, as I mentioned in my prepared remarks hybrid work creates an additional layer of complexity right because you.
Teams are now more of distributed you don't know who's where when and the moment et cetera, and so when time really matters. When you were having around real time issues and by the way there are more real time issues in digital business and there are and bricks and mortar business of time matters.
And then we we think that is also a new tailwind for us from an execution perspective, I'm really proud of what we've seen across all of our theaters and segments. I mean, if you look at enterprise, which is an area we've been focusing heavily on and we continued to build on our customer base within the fortune 100, and the fortune 500, adding new customers. This.
Quarter on top of of what was already a pretty strong metric 60 per cent of the fortune 140 per cent of the fortune 500, and again those customers early we know the Tam inside those accounts on from an expansion perspective, as large freemium and it's working really well and the startup community. It's removed all of the friction for startups to continue to leverage Pedro Judy.
As part of their you know get up and going sort of tool kit from of Dev Ops perspective, and then lastly, we're executing well and the regions EMEA.
Performed exceptionally well this last quarter international in general is growing and so you're starting to see all of our growth engines kind of come together and sort of harm and a rhythm that you know we like to see.
Make sense. Thank you.
Okay.
Okay, Derrick wood with Cowen and co.
Great. Thanks.
Thanks.
Wanted to ask on verticals and it sounds like you're seeing nice recovery, but 1 area of it.
As travel, but still lagging and maybe can you talk about how much exposure you have there or how much of a headwind that is and you know I mean, we're we're getting back for nations and and I think travel is going to start picking up I mean do you think that's an area that could really start to improve and looking at the next couple of quarters.
I, it's all I.
I had a hard step.
And as for Derek.
Part of the pandemic because of trade like a quantification of affected industries at the time for us, which contributed to travel and hospitality transportation.
And at that stage and a G M that cause like a sense of its the same about our revenues. So travel is a subset of that we have seen a return now for 2 quarters in transportation and travel is improving but it's not at the levels of loss a year ago. So and we are seeing a bulk of the trains so as those businesses.
Spot to come on line that they can actually generate a certain amount of demand for us as a company, but it hasn't represented of a large portion of standalone.
And I would regard Eric when I look at the diversity of our customer base and the vertical opportunities you know some of the things that I think are newer to our business and 1 we're really seen over the last several quarters of success in highly regulated industries like financial services, where the barriers to entry for SAP.
Providers are higher and you have to demonstrate a level of resiliency and security et cetera, and scale to be successful and those kinds of accounts and we saw a number of new customers and expansions and health care and biotech and other highly regulated industry and then even logistics I mentioned 1 of the 1 of the U S is largest freight railway lines, you wouldn't think of them and see.
Inc. Are forward thinking digital first company, but in fact, they're having to make that transformation right now and so some of those more industrial or highly regulated verticals or attitude and too or are you now more well known and strength in software and internet and retail ecommerce and suffering.
Yeah, that's great that's great to hear.
Another question on on go to market and it sounds like you know you're seeing good strength and in mid market and in Framingham conversion and enterprise, but clearly the enterprise is a bigger push for you guys.
Is that right.
As you kind of.
Mark on bigger deals have more top down and selling approaches.
Does that create more seasonality and the business towards back half is it low longer sales cycles and does it change the seasonal profile within a year for you guys.
Howard you want to take that yeah sure for you.
And you're watching that the.
Often when dealing with the enterprises, you can end up with a longer sales cycle, but the majority of ideals of still typically found and close within a quarter.
So even within the enterprise. So obviously the alkali of particularly in the highly regulated industries and those tend to take much longer.
Procurement cycles.
Our longest so we don't see it as having a particular impact in terms of seasonality and what it does change is that those deals and the enterprise tend to be larger I'd say they tend to buy on a hold of and initiative basis or for particular deployment. So that means that they buy upfront of they were finding and stuff.
Take a bit longer for them to get for licenses of the use of deployed which means that for the time from the initial purchase for the expansion is a bit long ago from what we would typically expect so that's.
What's a bit of pressure on dollar based net retention because of traditional model, which was largely driven by developers, making small add on purchases team by team and you had the steady state of of expansion. This moves like the expansion of things ought to be less frequent and potentially larger.
Yeah.
But I do think it makes sense and we look at enterprise and are focused on enterprise 1 of the things. It does point to is acceleration and the business because you're landing logos with much more expansion opportunity then and you know as of as a percentage of the total mix and we had and the path and I like to see some of these large organizations.
Where the initial and might be larger, but the expansion and are more strategic they tend to be you know a more widespread use cases for instance.
Great. Thanks for taking my questions.
Thanks Derek.
And joining us by telephone and Rob Oliver with Baird rump.
Yeah.
Great. Thanks can you guys hear me Okay, Yes, we can.
Okay, great. Thanks, sorry to not fully participate and the BARDA here.
But I appreciate your time.
And just a high level question for you and then I had 1 follow up I mean, you've really been kind of a thought leader throughout the pandemic on our.
She was relating for work you know gene you on multiple panels talk to you about.
Work lifestyle, it's work from home and I know you have a pretty strong cadre of other silicon Valley CEO of if not beyond Silicon Valley and I'm. Just curious you know, what where and when it seems like there's a lot of uncertainty right now about how exactly things are going to shake out and I'm just curious as to what you're hearing because probably half of your kind of figure out of the bowl.
So that's probably more of that more than anyone.
Where our people in terms of where employees are gonna and up and then I guess more importantly relative to your company like for like are.
Our weighted position now where there's some pent up demand likely is we do make decisions around hybrid and teams and up being buoyed up next speaker.
Go ahead, Rob I can hear you okay.
Yeah. That's my question and I'm just curious if the you know around pent up demand and and and and you know what your view is of what you're hearing relative to you know how how worked shaking out with some of your contacts and then and then I had a follow up I think I think it depends on the type of company and if you look at our you know.
Companies that already have already were significantly oriented around of digital business model like fast like software Internet apps et cetera, 30 used to digital environments. There's not a lot of pressure on teams to get back to the office and those employees are demanding of flexibility you know.
Many of them fleets have already moved to lakes and mountains and places outside of urban centers, where they want to have the flexibility and and the freedom to work, where they want to work and at the same time, they want to be able to come together to collaborate with people I you know on a regular basis and and enjoy the sort of joy of of being together.
I think there are other industries that are pushing much harder to get people back and office out of necessity manufacturing for environment or some verticals on a culture that has historically had more of a co located culture and what we're seeing is Ceos are sort of running a number of experiments you and trying to figure out does it make sense to require Peter for people to be back of fee.
Days, and the office and only and with their team or are they going to say no where digital first and you can primarily work from remote locations and come in and meet your team 4 times of year. So I've seen just about every policy or concept on the continuum in terms of what that's going on look like and I think theres still of.
A lot to figure out through the North American summer and as children returned to school and you know kids get back whether or not and players will want to return to the to the work force.
Part of the workplace and more regularly and I don't think we know the answer to that yet and I think people and sort of moved away from making big broad reaching statements about it sort of talking about some of the experiments that they're running a few things I know for sure of flexibility is now of table stake. If you can't give employees the flexibility and the choice of where they work then.
He will not be competitive for the best employees and the market second the geographical barriers to great talent, you know had been broken down as have the sort of barrier to change for employees to move from 1 place and other so you have to compete on your mission and your vision and the opportunity, but you do have the ability to go out for talent and other location and what that means of.
In terms of pent up demand potentially is more distributed teams not less because it's actually easy when everybody is working the same way when everybody is remote and everybody is 1 square 1 box in the video conference, it's pretty predictable and reliable when you've got some teams and the office. Some teams that are co working space and some people at home et cetera, how do.
Make sure the employee experience is equitable how do you make sure of that collaboration can happen on a timely basis, that's where I think we see this as a big tailwind and a big opportunity because the pure distribution of teams and not knowing where current experts are and how to get a hold of them means you're gonna become reliant on paid for duty for that orchestration.
Okay. That's really helpful color. Thanks, and then Howard I had 1 follow up for you as well you talked about kind of the success on the freemium side and the conversion, there and and and and you guys also talked in your prepared remarks about run deck and how you've been satisfied with run deck and and also just general.
The growth of software developers, which is still something we kind of forget as an industry, but just curious if there's any patterns you're able to clean when you look at that freemium user of base, obviously, you've got a much larger extended 60000, plus user base of run deck. That's also non paying and if there's anything you guys are seeing when you.
Look of that to try to you know.
That becomes sort of more cohesive thanks.
Yeah. Thanks, Bob I think the thing that's been fascinating to look at with a free offering is just how easy it becomes for developers to start using the platform. So it seems strange that when we had and offering that I call. The almost free offering when people were paying 100 and.
And $20 for a year for 5 years and.
And that created a barrier and so when I look through the list of companies each week as we have more users on the on.
The free offering.
It looks like a list of startup companies like you can read through of unless you can tell from the day and some of the Crazy day and put these muscle would be useful.
All of us and a lot of them very clearly identified and tech.
The thing that is interesting to us is just to see that the the acknowledgment that developers have a wrong page of beauty of being.
A key part of of how they work it certainly manifesting itself and free and so we feel very positive about that trend in terms of saying that we actually have created more access and.
And for those early stage companies that are going to be and it's a mixed bag disruptive player they've already paid for duty customers and the fence and that's an important part of our competitive moats.
Thanks again guys.
Yeah.
Thank you and next we'll hear from Matt Hedberg of RBC Mt.
Oh, Hey, guys. Thanks for thanks for taking my questions, Hey, Jessica Howard.
Good to see both of you.
You know and the prepared remarks, you talked about strength in Europe, and I know you guys.
Yeah.
Fired up of new European data Center earlier this year.
Curious on on what drove the strength and how you think about the potential growth in Europe with Swift and increased focus there.
Well and we we actually launched data residency in Europe, we do not have physical data centers to your native cloud humans, we don't do the physical things, but and you know some of the things that I think are happening in EMEA and 1 at the same trends that we see sweeping across North America and in terms of the distributed work in terms of digital first of all of <unk>.
Happening and EMEA as well and we've been able to grow our capacity on the ground and I think grow our presence in that market such that we've seen a really nice distribution of landing and commercial customers you know, particularly in areas like food delivery, but also of large European software companies and really starting I think to get traction as.
A player of note in that market and strong leadership very consistent performance great access to talent all of those things have been important and at the same time, we see growth opportunities and places like Germany, and where we have very small field on the ground, but a lot of opportunity and I'm pretty excited about some of the strides that we're making and automotive for instance.
And I think that's an area of opportunity for us in places like put like Germany. So you've also seen good performance and or a P. J team and again and historically that's been a very small team so you're seeing us invest to try and expand into international and quickly and that's another 1 of those growth engines that I think.
And that's driving momentum and acceleration for the business and also you know when you start to see multiple theaters like I said really kicking into gear at the same time, that's 1 of the things that makes me very confident about our future and our ability to accelerate the business overall and that's.
That's great. Thanks for that and then I guess, you know Sean Scott's been been with you guys for it for a little under half of the year now and obviously coming from Amazon.
And I guess, what do you think some of the bigger impacts that he might have on the business now that you've been there for a while and you know how do you kind of see.
That Amazon effect rippling through your business, Yeah, I mean, Sean has been great he's not even been and but that's for 6 months, but he's already helping to drive a lot of focus and particularly in areas around automation and AI ops and thinking about product led growth really thinking about the product experience and the product experience for users of <unk>.
So important for us because it drives that viral a mobile experience that allows teams across the organization to adopt us for use cases that we don't need to imagine so when I think about the ubiquity of play that's 1 of the areas, where Sean is it's really focusing and at the same time.
You know he's used to running a multi product for your organization. So we're executing well with runback or executing well with some of our newer product development areas and new He's also really and looking for a lot of talent you know there's of talent bench that we want to build on and product to support our ability to continue to innovate very quickly over time.
Early days for him and you'll have an opportunity here from him on analyst day. So you don't just take my word for it.
There's a little teaser there and looking forward of that thanks, everybody.
Thank you.
Okay, and it looks like we will round out our group with Kingsley cream from Bahrenburg Kingsley. Thank you for your patience.
All right, we're just going to us 1 brick ones and so when we think about P. D of central nervous system of the enterprise. There's a lot of companies, but also a way to think of themselves of that title.
Longer term we.
I'd like to hear more on the strategy for continuing to beat on for enterprises and on how important and automation with things like <unk> is to that.
So a couple of thoughts and no 1 are in order for us to really help our customers manage and detect unstructured mission critical work from anywhere we have to have the broadest and most independent domain agnostic ecosystem to pull from and that is 1 of pager duties deep.
And when you think about the observer ability of players that are sort of trying to nibble around the edges, maybe their cloud player of the ticketing systems et cetera, what they're all trying to skate to where the puck is going and all of lean on our Canadian heritage here, we invented the digital off category, we essentially invented the hockey game that these folks are trying to play.
And so I really feel like we have of distant lead their that by treating integrations as product they essentially become the gateway to work flow, but we're talking about workflow oriented around very time sensitive work has to get done quickly have to orchestrate expertise very quickly because I use.
And I quote earlier uptime is money, it's it's millions of dollars that dissipate in you know in seconds. When you don't get this right. So I do think that we have a very good opportunity to lead as the center of the the sort of digital ecosystem of lead as the digital nervous system for our customers and we're seeing.
And that they are deploying us as critical infrastructure inside their businesses, where we're integrated to hundreds of services within their business and that that enables us to open up another sort of motor. Another I think very competitive defense, where we're able to build products and services around our service depending.
And CS and around more of a service management service automation and full service ownership in a way that other players are not able to do because they're not architected around both of cloud native and hybrid and service environments are often architect and Ron people or the C. M. D. B et cetera. So I think it puts us in a great position, but again you know.
And that we can talk more about at analyst day and at Summit, you know generally speaking the kingdom of what I would say is our acceleration and some of the virality of our product comes through that ecosystem. It sort of starts with 1 person and wanting to integrate paid your day to a specific service and then they were.
Realize how easy it is literally drag and drop to connect to multiple team members multiple services and it grows from there and that virality that ease of use quick time to value is clearly 1 of the things driving momentum and our business.
So many great points. Thanks for taking my question.
Thank you.
Hey, Jennifer the back over to you for final comments that rounds out the group thing.
Well I just wanted to say thank you for everybody who listened today I hope you will join US and summit on June 20 seconds and for our analyst day, and we were thrilled with the momentum in the business you know as I mentioned, we believe and are very confident that the business can accelerate on the back of these macro long term tail.
And that we see and I'm, especially proud of our team who have remained very resilient through and incredibly difficult time and I. Just wanted to say. Thank you. Thank you to our team and to our customers for continuing to partner with us and and hold us to a high standard and help us to get better with every day.
Yeah.
Yeah.
And with that we will conclude today's call. Thank you everybody.
Enjoy the rest of your day.
Yeah.
Yeah.
Yeah.