Q4 2022 PagerDuty Inc Earnings Call
People of Ukraine, and those impacted by the ongoing conflict there.
In a challenging macro environment, we continued to deliver consistent growth and strong results across the board closing a terrific Q4 on a tough comp and a fantastic full year result that exceeded our top and bottom line guidance.
We entered the new fiscal year with great momentum strong demand for our digital operations platform persists driven by long term tailwind cloud adoption Dev ops transformation digital acceleration and the increasing appetite for automation in light of rising costs and a tight talent market.
Hey, Judy. These Q4 results continue a trend of consistently strong company performance over the last several quarters with the hallmarks of growth acceleration and improved operating leverage Q4 revenue grew 32% year over year to 79 million, our third consecutive quarter of growth above 30% FY 'twenty to total <unk>.
Revenue was $281 million also growing 32% compared to 28% growth in the prior year.
For the fifth consecutive quarter, we achieved dollar based net retention above 120% our accomplishments this quarter and throughout FY 'twenty two are a testament to our leadership and to our team's anticipating the needs of our customers page.
<unk> digital operations platform is central to our customer's growth strategies, helping them advance their digital maturity.
We're efficiently capturing demand through product innovation as well as our sustained focus and execution of our customer facing teams, whose daily efforts drive loyalty and expansion within our customer base.
Exceptional results in Q4 were driven by an increase throughout the year and multi product adoption incident response user expansion and customer loyalty with gross retention rates consistently above 95% in short we are building momentum in our business by closing larger and more comprehensive deals more than half.
Half of our annual recurring revenue now comes from customers utilizing two or more Pedro duty products.
Both event intelligence and automation are each growing at 70% or more year over year as Pedro duty customers realize rapid time to value they expand their use of our platform across the enterprise beyond their Dev ops team and the upgrade to advanced functionality like AI ops and automation that deliver compounding written.
On investments.
Through consistent product innovation and go to market execution, we've built a foundation for durable efficient growth.
Everyday our per customer increased during each quarter of FY 'twenty, two and exited the fourth quarter above $20000 customers spending more than $100000 annually with paid your duty grew 39% year over year and those spending more than $1 million grew by 65%.
A continued shift towards digital first across industries creates more opportunity for increased penetration within all of our customer verticals.
As businesses navigate a hybrid work environment, our customers prioritize investment to better manage mission critical work. This work as urgent unstructured and underserved by current it service management or tradition auto traditional automation solutions.
Other platforms rely on humans to detect or identify issues and fails to account for the complex dependencies in modern digital infrastructure.
Work is no longer ticket based it's driven by events and incidents.
Your duty is purpose built to efficiently facilitate and automate the type of work that is essential to modern business success, who needs to perform it and how it will be managed.
We are investing in more flexible workflow automation that serves new use cases and augments. Our current offers offerings for Dev and it teams with our acquisition of catalytic we complement our leadership in Dev ops workflow automation with a no code offering that brings the same value to teams and business functions like sales marketing and finance.
Thrilled to welcome Sean Ravi and the entire catalytic team to Patriot duty.
And IDC survey released at the end of 2021 reinforces the need for this approach more than half of all developers surveyed reported their organizations have more than 100 services and production at any given time service proliferation is rapidly outpacing the capacity of technical workers as talent becomes more expensive and difficult to acquire them.
Hard to retain these trends underscore the need for machine learning and automation to offer productivity efficiency and innovation.
Our focused innovation has cemented Pedro duty as the market standard for both Dev ops automation and digital operations, we have expanded our reach to customer service operations.
And more broadly process automation increasingly our customers deploy two or more pages duty products relying on our platform to mature their digital operations pay duties combination of incident response, AI ops customer service ops and automation provides the time and efficiency for our users to prioritize.
Innovation and availability.
In a world of unstructured data from a wide range of sources, we now enabled more than 650 integrations converting data to high fidelity actionable signals orchestrating and automating time sensitive work across the business.
In Q4, we shipped general availability for both event orchestration and round Robin scheduling event orchestration intelligently suppresses noise. So teams can focus on the most critical signal and enabled automated incident diagnoses and remediation. This lowers the cost of the response and the risk of the incident itself round Robin scheduled.
<unk> allows centralized and decentralized teams to implement flexible automated oncall responsibilities.
We believe no other platform is more flexible and resilient that scaled and Pedro duty or provides quicker time to value with compounding return on investment over time we.
We deployed new capabilities throughout the fiscal year, extending our incident response, AI ops and process automation solutions, which are now leveraged by teams and Dev ops. It ops security operations and business operations, our fourth paid offering customer service operations continues to gain market traction with several high value deals close.
<unk> in the second half of FY 'twenty to <unk>.
This further diversifies, our product revenue by addressing a substantial market opportunity. This customer support teams the integration of catalytic into our platform accelerates our product roadmap and opens new addressable opportunities within our customer base.
Our platform serves more needs across enterprises or sorry, as our platform serves more needs across enterprises, we expect multi product adoption to continue its upward trajectory in FY 'twenty three.
With customer ops and flexible no code workflows, non technical employees citizen developers and leaders across the entire business can leverage paid your duty to anticipate and manage their most critical work.
This will enable more accessible agile and scalable workflows to operations outside of Dev ops and security we.
We increasingly see this with our customers in Q4, we significantly expanded our work with our cloud native digital marketplace customer operating in more than 460 cities across Asia with ambitions to enter additional markets in the coming years. The organization has been a patron duty customer since 2014 and including its activity in the last quarter has expanded.
Its business with us more than 70 times purchasing additional licenses upgrading to digital operations and more recently, adding our enterprise automation product.
Currently utilize over 800 integrations between Pedro duty and other services within the company's ecosystem. As a result, the company has realized an annual benefit of $3 $4 million with Patriot duty.
Looking forward to FY 'twenty three we're focused on advancing our mission to revolutionize operations and build customer trust by anticipating the unexpected in an unpredictable world.
Time has never been more fleeting or valuable and talent comes at an increasingly high price, it's more important than ever for customers to identify mission critical time sensitive opportunities and manage the complex data and systems that underpin their products and customer experiences.
The operations cloud is built on the foundation of Pedro duties digital operations platform extended by our integration ecosystem, leveraging our proprietary dataset and enabling both orchestration and automation. We believe the operations cloud will rapidly become the standard for modern enterprises, it's cloud native designed to simplify the <unk>.
<unk> built for distributed organizations easy to deploy and trusted by developers and technical leaders behind your favorite brands.
We continue to scale efficiently and improve our operating leverage and expect to be non-GAAP profitable for the full year FY 'twenty four we expect to realize this goal through continued investment in product led growth, our land and expand flywheel and activating new routes to market.
Pedro duty remains the only cloud native platform that combines real time incident response, the time critical AI ops insights and automation to help teams across leading enterprises revolutionize their operations are exceptional results and momentum over the last several quarters demonstrate durable multi engine growth.
Our vision for an equitable world guides, our strategy, our investments and our focus on our customers and our users. We will continue to develop our inclusive culture and to lead with our values delivering great products for our users and high performance for our stakeholders, while working to improve the communities around us through our social impact programs in FY <unk>.
22, 92% of Daytona and volunteered their time or made charitable charitable contributions, including several causes matched by the company.
<unk> Dot Org, we acquired new nonprofit customers focused on disaster response, addressing homelessness and child literacy I encourage you to learn more about our efforts in our upcoming annual impact report.
This week also recognizes equal pay day in the United States I'm incredibly proud of our commitment to and our success in achieving pay equity within one penny between male and female employees and within two pennies across race and ethnicity, and hope others will follow our lead.
We enter FY 'twenty three with incredible momentum a test.
It's meant to not only our leadership team, but to the incredible work of <unk> around the globe throughout FY 'twenty to our teams ran together to innovate relentlessly and service of our customers demonstrating the value of new products as they gain traction in the market and built the foundation for further growth.
I deeply appreciate the leaders who bet on us are more than 1 million users and our customer champions in an unpredictable and fast changing environment. They place their trust in Pedro duty to drive their digital transformation and maintain the integrity of their operations given.
Given long term tailwind and consistently strong execution I am very confident in our ability to continue growing efficiently and sustainability and sustainably as the operations cloud becomes the standard for modern enterprises with that I will turn to Howard and I look forward to your questions.
Thank you Jane and good day to everyone. Joining us on this afternoon's call. We are proud of our outstanding fourth quarter and full fiscal year results. The growth demonstrates our success in growing our midmarket and enterprise segments.
Spanning number of use cases for the pay TV platform and.
And collection for our new products, including event intelligence automation and customer service operations.
Revenue was $79 million for the fourth quarter up 32% year over year.
Celebration of 300 basis points over Q4 of fiscal year 2021.
International revenue grew at 32% and represents 24% of total revenues.
Our dollar based net retention rate in Q4 was 124% compared to 121% in the same period one year ago.
We have delivered.
Our above 125 consecutive quarters and expect to be at or above 120% over the next year.
We continue to gain momentum in mid market enterprise ongoing strong innovation and go to market execution.
Q4 ended with 500 logical customers with al all.
Over $100000 up 39% from a year ago.
<unk> customers.
Net income increased 43 up 65% compared to Q4 of last year.
This is a number we provide on an annual basis.
We ended Q4 with 14865 paid customers up 7% compared to yoga.
This is a multiyear acceleration sequentially.
It is worth noting that.
That Q4, NFS means the introduction of our friendship, which was first offered late in Q3 of FY 'twenty one.
In PE companies on our platform grew to over 20000, an increase of 27% year over year with screen continuing to provide a funnel for future growth.
Yes.
Our highest tier plan digital operations increased to 23% about type of L. A pump, 21% a year ago.
This metric is a conservative policy for platform adoption, but it does not entirely catch our customers using more than one product a professional and business and can be augmented with events intelligence and process automation and customer service are available on a standalone basis.
To that end.
And to provide some additional insights approximately 51% about <unk> comes from customers using two or more paid products.
This is up from 47% in FY 'twenty, one and from 32% in FY 'twenty, we will update this metric on an annual basis.
Our Q4, non-GAAP gross margin was 84% and within our target range.
Percentage is down marginally on a sequential basis due to a slight uptick in hosted and messaging fees during the quarter.
non-GAAP operating loss improved to $2 million or 3% of revenue compared to a loss of $5 million or it seems that revenue in the same quarter last year.
Primarily the result of sustainable sales and marketing.
Marketing efficiency gains.
<unk> of scale across G&A.
In terms of cash flow for the quarter cash from operations was $1 million and free cash flow was negative $1 million.
Not for the full fiscal year.
Revenue was $281 million up 32% year over year, as we accelerated growth from 28% last year.
non-GAAP gross margin was 85% bought approximately 200 basis points from 87%.
non-GAAP operating loss was $23 million or 8% of revenue.
Compared to a loss of $18 million or <unk>.
Percentage of revenue a year ago.
This year includes approximately $4 million of expenses related to a limited return to office and increasing travel compared to the prior year, which was the first deal that Debbie.
Hi.
Operating.
Okay.
Operating cash flow was negative $6 million compared to $10 million a year ago.
Cash flow was negative $13 million compared to positive $5 million in fiscal 2021, and head count increased to 950 up 21% year over year.
Turning to the balance sheet, we ended the quarter with $543 million in cash cash equivalents and investments.
Total deferred revenue ended the quarter, the headwinds $70 million up 31% year over year.
Quarterly billings were $106 million, which was an increase of 30% year over year exceeding the high end of the range. We provided during last quarter's call.
This included approximately $2 million of early renewals, we expect billings growth from Q1 to be in the range of 25% to 30%.
On a trailing 12 months basis billings were $322 million, an increase of 28% compared to a year ago and above the top of the range provided during our last call as.
As a reminder, the comparable periods Q4, FY 'twenty one included a onetime benefit of approximately $6 billion from early renewals.
We expect trailing 12 month's billings growth exiting the first quarter to be at or above 30% over last year.
Before moving onto guidance I would like to introduce a second annual metrics annual recurring revenue or <unk> given.
Given the increasing scale of page of duty and inherent fluctuation in quarterly billings, we wanted to provide additional color on the fiscal year.
We exited Q4 with $326 million in revenue, which was an increase of 32% year over year.
Turning now to our guidance, which includes top and bottom line consideration for the acquisition of penalty, which closed on March <unk>.
As well as our expectations for increases to certain line items like what's in place during the past year.
Moving to the pandemic.
For the first quarter fiscal 2023, we expect revenue in the range of any one and a half to $83 million.
Representing a growth rate of 28% to 31%.
non-GAAP net loss per share in the range of nine cents with basic shares outstanding of approximately $87 million.
This implies a non-GAAP operating margin in the range of negative eight to make that statement.
For the full fiscal year 2023, we are initiating revenue guidance for the full year $360 million to $366 million.
Representing a growth rate of 28% to 30%.
Expect non-GAAP net loss per share of 23 2017 with basic shares outstanding of approximately $88 million.
This implies a non-GAAP operating margin of negative six to negative 4%.
Before moving to Q&A I would like to provide some details to assist with modeling FY 'twenty three.
non-GAAP operating margin is expected to turn positive in the fourth quarter as merit increases payroll taxes summit, our annual user event first half accounts.
To put a final point on the trend, we expect each quarter of FY 'twenty three to be an improvement of the corresponding FY 'twenty two quarter.
We expect cash from operations and free cash flow to follow a pattern similar to last year with Q2 being below in Q4 the hub.
Seasonal factors influencing cash during the first half of bonus payouts in Q1 interest payments on our convertible debt annual merit increases at STP.
And we expect non-GAAP gross margin to be in our target range between 84 and 86%.
I want to thank our customers for their trust in us and our team for delivering an outstanding fiscal year of product innovation and full quarters of terrific go to market execution.
Innovation investments are designed to actualize, our vision to transform critical works and revolutionize operations as the operations part of the modern enterprise, while continuing to scale towards non-GAAP profitability.
I continue to remain confident in our business and performance given the market demand.
The ratio of our product innovation strong tailwind and our consistent execution.
That I will open up the call for Q&A.
Yeah.
Okay.
We ask that our analysts to ask questions for the team do raise their hand, we have.
A number of hands raised already we're going to turn first to Sanjay Singh.
Morgan Stanley .
Great.
<unk> to the team.
Exceptional year accelerated growth was really great to see.
<unk> was good too so just maybe from your end what is coming together.
Cost of product portfolio I was wondering if could address a couple of things on the execution side of the house the free to paid.
Conversion and sort of the.
Adoption of some of the add on products whether it's.
Radek.
You mentioned customer service.
Are you seeing in terms of the trend lines there on the the uptake on the auto products.
Sure well, it's great to hear from you and thanks for being here today, we are incredibly proud of the result, this year and I'm incredibly proud of our team and Super appreciative of our customers, but it's.
It's it's the story, we've been telling long term tailwind digital acceleration is not going away cloud adoption continues Dev ops transformation. Most of our customers are still early in that journey and now we're seeing macro impacts like completion, where people are trying to figure out how they're going to get more out of their current operating expenses.
And that creates I think a broader appetite for automation and we're definitely seeing that.
In particular, you know the ongoing digitization of every business.
It has meant that customer customer service ops is becoming increasingly more interesting for our customers because they can't solve problems in a brick and mortar environment. They can't wait hours for ticket to get through Qs, They actually have to resolve things.
In a very time sensitive way and their teams are distributed by design due to hybrid work and the flexibility that many employers have offered their employees and I think that will continue to be the case, because even if some people bring their folks back into the office everybody won't be in the office on the same day and people have moved out of urban locations. We also built this.
Really healthy foundation by extending our lead in incident response and that kind of creates the platform for product attach these things kind of go together like hand in glove and the consistent innovation that we've seen in a very focused way I think it's really led our customers to count on us for anything that's specific.
Perfect to what I call real time digital operation. So just a lot of the macro moving in our favor.
I would just say really strong execution on the part of our teams whether it's our customer support and customer service teams, who maintained best in class gross retention and huge customer loyalty or our sales teams, who have done a really good job of really focusing on solution, selling and selling value and improving execution across the board or the product team.
<unk> that really speeding up at all.
All of our innovation and I like what I'm seeing from a free to paid conversion perspective.
As you know free really creates an opportunity for customers to try our product get used to it to understand the value that it can create before they have to invest and I think we're getting better and better at managing that conversion process and have a lot of focus around it right now.
Appreciate all of it.
Maybe I can I can just jumping in Ed the thesis behind <unk> was really around capturing the boarder market, but our focus is really around how do we ensure that we capture the midmarket and enterprise customers because that accounts for more than 80% of our IL al and so if you just look at the numbers the number of customers that above 100, K that can be 39% above 1 billion group.
By 65% and we're seeing double digit customer growth in enterprise and mid market.
That's working as designed and planned.
And the results are showing up in those numbers, including a boarder base.
The potential there.
So as I appreciate all the color on the follow up question.
Maybe it's sort of two parts one for Gen. One for Howard just around the catalytic acquisition I was wondering if you could walk us through the rationale of why it makes sense for Patriot to move into more of these business workflows associated with finance team sales teams and marketing teams and then for Howard. If you could make is is there any comment you have that you can help us understand the contribution.
Of catalog to the to the full year guide whether it in terms of are you are in terms of revenue contribution that's assumed in the <unk>.
<unk>.
Darryl I'll cede the floor. Thank you very much.
And I'll point to our customers I mean, they're already pulling us in that direction, we have customers today that use us in legal and finance and sales marketing.
In human resources et cetera, So we could see the demand.
We also know that those customers have requirements for more intuitive more flexible workflows. The Dev ops workflow that our platform was built around is very determinant and so creating more flexible workflows and offerings that serve like I said, the citizen developer or the less technical user has it become important to our customers and they're telling us that so.
Catalytic it's all about a strategic product acquisition. It accelerates our road map. It provides a no code offering that can serve some of these new use cases. It also enabled us to acquire a great team in Chicago to expand our development capabilities I'm, a midwesterner, so I feel really good about that.
Ill, let Howard talk a little bit about how this how this works from a financial perspective.
I guess in a significant acquisition for us from a strategy perspective, it's immaterial from a financial perspective. This was a young early startup not profitable.
But certainly we see from a top line contribution less than $5 million in revenue. So.
Probably around 1% above our total revenue number for the year.
And from a bottom line perspective, the guidance that we've given.
The incremental expense that we see being in with cattle.
It just looks like yard.
Yeah.
Okay next we'll hear from Sterling Auty JP Morgan Stanley come on and join Us.
Well, thanks for letting me join you and.
Just actually going to ask one question from my side.
And it's really about the competitive landscape I think you know the earnings release timely in light of service dollars announcement.
The response from underweight stopped.
Can you give us a sense of when you look at that solution.
How does that compare and contrast, as well is it feels like some of the other traditional competition out of Atlassian and sponsors kind of faded and just wondering if there's any update around win rates more generally yes.
Yes, the competitive landscape for us continues to be favorable and it improves as we innovate and I think the focus.
And our innovation around not just incident response more broadly incident management AI ops now customer service ops, just laser much brown broader foundation for us to grow upon and if you think about the integration ecosystem that we built is also sees paid your duty being you're really essential infrastructure for our customers from a tactical perspective so.
We don't see customers, taking risks to make changes and I think other other players that are out there have much earlier less proven less resilient products and so we continue to see very good success from a competitive position near the bottom line is there isn't anybody out there that sort of can offer the breadth the depth at the SKU.
Rail and the resiliency of the Patriot EDI platform and we are seeing this real convergence of incident response, AI ops and automation coming together, where our offering is unparalleled and I you know I think there's a lot to be set for customer loyalty as well. We work every day to earn the trust of our customers and they demonstrate that in.
And their continued work with us.
Makes sense. Thank you guys.
Jim.
Yeah.
Okay. Thank you moving on our list, we're going to hear from Joel Fishbein from Trust.
Alright, Thank you and.
Congratulations on the group results as well and this is sort of a follow up to sterling's portion, which as you know.
Rhonda version Port are those coming out in the release I loved Jennifer if you could just tell us what's new in that may enhance your competitive positioning I think that would.
It would be interesting.
Well run deck. So we call this process automation now as well.
I hope that doesn't confuse people, but really proud of what the teams have accomplished in really integrating run back more closely into our framework with run neck actions are run book actions and also delivering it as a cloud solution. So it means it's really easier for our customers to trial easy for customers to buy.
And easier to apply.
What was historically known as <unk> two use cases that go beyond that often it often can be used across <unk> and across other parts of the organization. So easier use in the cloud driving direct actions integrated into paid your duty. So what you're seeing is more seamless automation of the incident response in the Pedro.
Judy incident response workflow.
And easier to try and acquire so we're one of the things I'm excited about is run deck as our land motion for us as a company great.
Great. Thank you so much and Jonathan you should come to us some of the events in June .
Publicity because you'll hear more about some of these exciting product innovation.
I will be there.
However, it is on top of it today.
Yeah.
Thank you Joe moving onto above I'm, sorry, let me bring you on.
Thank you and I'll Echo my congrats two quick questions one of them on tactical.
I know Jonathan touched on inflation, but honestly, there's probably a recession in Europe .
Certainly heard from companies think RMR customers are in cash conservation mode everything else some sense of what you're seeing deal flow was new bookings wise, because revenues revenues and as long as you guys have.
Finally, a quick call Congress, surely SMB or mid market, but sometimes on what youre seeing in Europe , given what's happening and the.
Protracted.
Central outcome there.
Yeah, well, let's talk a little bit about that I mean, the tailwind to remain the same and I think in a recessionary environment people will continue to look for ways to automate more and more of their operations to leverage the cloud to reduce their production costs etcetera. So I think we'll continue to see some of those some of those strategic efforts that are underway.
I think inflation is a potentially a tailwind for automation as well because you've got the combination of rising talent costs and then the challenge of <unk>.
Rising supply costs overall, and I'll speak to Europe , just for a second when we think about what's going on in Ukraine, and Russia that represents a very immaterial amount of our business more broadly Europe represents roughly 12, 13% of total revenue and we haven't seen a change in the buying signals. So we continue to see.
<unk> our customers, they're looking for support in maturing their digital operations and moving away from more manual process to things, where they can drive efficiencies across their business.
No that's helpful. Thank you.
And then a broader question I think a couple of people touched on it a little bit but.
But as we look at this operation is cloud.
And historically the suburb transactional operational businesses and you have analytics businesses, but as I look at the data.
Look at the inside there's a content, but moving up like sort of a marvellous Harvey of data collection is a big part, but you want to address collection, how do you think about getting to that prescriptive.
Top part of that pyramid, which is all all prescribers all predicted and is that part of the roadmap in three years five years, how should we think about Europe , we already do that today, Bob and I mean that was a big part of what event intelligence brought to our product said when we first started out with that product and now more broadly have invested in an AI ops solutions. So in the page.
<unk> D platform, we leverage machine learning across a deep more than a decade of data proprietary data set to not only predict that things are going to occur, but make recommendations on how to improve the scenario or prevent an incident from happening again, so and that's already a big part of our offering and it's <unk>.
One of the reasons why we see our.
<unk> <unk> solution and our automation solution, both growing over 70% in the last year and I think we're very very early kind of easy to use a cliche tip of the iceberg. There I think there is much more opportunity for that as teams get more comfortable as customers get more comfortable relying on our platforms like event intelligence.
<unk> and automation that provides safe self healing, where you can see the automation that's going to run its easy to roll back.
It's integrated into your overall workflow and I think they are starting to recognize the benefit of.
The platform learning and providing more value every time, an incident runs across it which is very different than any of the other offerings that have been mentioned earlier in the call.
And then on top of it will come with different nozzles pyramid.
I'm always trying to climb to the peak like that's the best part of the game no no I appreciate that thank you.
It's a pleasure.
Okay.
Excellent thanks for going to hear next from Chad Bennett at Craig Hallum.
Thanks for taking my questions.
Hum.
So so can we get an update looking at the fourth quarter and maybe the last year not that completed year in terms of.
We're stuck ops, and where customer service ops penetration kind of went from two and put all of that.
No kind of sales execution sales process progress during the year and kind of where we ended in what we think potentially you know that business or that used to do in the upcoming year from a growth standpoint.
I'll start that and Howard if you want to jump in let me now from a customer service ops perspective, that's still very early product, but what we are seeing is you know me.
More of a top down sale there so.
Some significant deals in the back half of the year, which has been great and a few of those deals have been referred by leaders from one company to another.
Problem is definitely like a senior leadership problem, it's not just a user issue and that's that's somewhat unique to the platform for us from a security perspective, what's really interesting about security is kind of a shift in the last really six months just given the.
The heightened sort.
Sort of vulnerability and threat environment, what we're seeing is a focus on security.
Resiliency. So it's not just about trying to prevent a hacker breach from happening we know what's going to happen, it's how well and how quickly can you respond and put yourself in a position that you can keep your customers and your data safe and you know that has seen a lot of adoption of Pedro duty in Dev ops teams and security ops, but we don't separate them.
As users from a regular incident response users there isn't a separate SKU. There today, we don't have a separate SKU for security operations Center and not to say, we wouldn't do something there in the future, but I think.
That continues to be part of our growth story, but it's more integrated into our traditional incident response numbers.
Yeah, and what I would add Chad like as Jim said, we've been seeing good traction in both of those areas. We have periodically shared those numbers in terms of probably have seen that growth. They have both continued to grow.
Each quarter.
But we Havent plan to give an update on the specific numbers for the school.
Okay, and then maybe a quick follow up on net expansion and net retention.
So Howard I think up until now.
And it's great to see the two plus product disclosure in that 51% of IRR, but I think up until now that the majority of net expansion has been driven by users if I'm correct I mean historically.
But we have a pretty good sign.
At 51% to plus product number.
Yes, my question would be.
Hum.
How should we think about net expansion going forward.
The user base net expansion versus cross sell up sell platform.
On a gross or net expansion.
I know I've harped on you before on it.
What would make net expansion go backwards.
So let me answer your first part of the question.
But what I would say is that.
Our growth is still driven principally by adding new users, but but what's interesting is how we've seen the shift over the last few years and it's not just one product. It's users either of our digital operations plan, which represents two products or if it's adding additional products like your bench intelligence.
More recently automation customer service up so if you had to think about it. It's still uses primarily and then adding on.
The additional products. So that's I guess, that's not unusual in terms of how that flows plywood wood.
In terms of looking forward on dollar based net expansion like we are really.
Im pleased.
Pleased with the progress I can see unions have of getting above 120, St. Five orders now and our view is that that's sustainable and we see ourselves being above that number.
Into this next year.
In terms of what could make that go backwards with high levels of customer.
Turn right.
Customers downgrading. So just in terms of pure mechanics that are what I would say is if you look at our gross retention number it's consistently been above 95%.
Yes.
The guidance I'm, giving to close is 120 or above.
For the next year, just how it would be an hour.
I appreciate it thank you Marcos job on the quarter again, thanks Ted.
Wonderful next we will hear from Derrick wood at Cowen Derek if you'd like to join us.
Yes, great to see everyone. Congrats on a great finish to the year I wanted to start on the kind of the go to market and product strategy with with catalytic will that be a separate SKU or do you plan to absorb that into.
Our core product line and end up the ladder or any any sense as to how long that'll take.
From a go to market would you ever think about having dedicated sales teams to go after a lot of business or will this be part of the bag for Corey.
Well, we're looking at that all right now I mean with run deck. We initially kept or index separate just to allow us to gain some momentum and make sure that we didn't disrupt their product road map.
They were coming into the company with catalytic we learned a lot from run neck. So there are some there is some functionality.
Analogy with catalytic today that we would like to deploy to all of our customers the flexibility and the flexible workflows or what they call smart workflows can be leveraged in a lot of different ways by Dev ops and it teams, where theres a centralized or decentralized so catalytic accelerates some of the work that we were already doing to improve the flexibility in our.
We're closing just make it easier for customers to connect to everyone connect everything and get work detected and done faster and in a more traditional incident response or Dev ops perspective, and an increasingly an operations perspective.
And at the same time like we anticipate working with catalyst links customers understand like where they're getting the most value from their business use cases, and then hope to replicate that and bring them onto the Patriot EDI platform and they have some really interesting customers like Mayo clinic, and Bosch et cetera. So we think we.
We're going to learn a lot there, but it's still very early days.
Helpful color, Thanks, and the agenda, you mentioned activating new routes to market is a key focus going forward.
So as it pertains to the channel where are you most focused on in terms of investing in the partnerships and everything.
No we should be thinking about going into the new year.
Yeah, we're looking at accelerating some of the efforts that we have a strategic partners as I mentioned in the past AWS has been a great channel to market and we're sort of doubling down with them to continue to expand our reach.
Both customers that we serve today, but also from a customer acquisition perspective, particularly within mid market and enterprise and even AWS marketplace has been a good platform for us as we look at the startups that see us as part of the five or six things they need in their startup toolkit, so strategic relationships like that will come.
To be important.
Working with partners to get to regions that were not currently in today I mean, we really have a lot of opportunity in the broader global footprint to go after and we don't need to do all of that ourselves. So looking at new regional markets, where we don't have to put feet on the street. We can work with partners will be really important as well.
Dave our sales leadership I think is doing a really good job of thinking about how we prioritize those and you can expect to hear more about that in the future.
Great Congrats.
Thank you so much I hope I'll see you at summit in June than a long time, you bet yeah.
Okay, a couple more folks well hear next from Shneur.
Oh, sorry, I hope I said that right for you got it yeah, that's right boost for Anika on for Rob a really really great quarter, a strong momentum growing by the multi product so as a follow up to some of the earlier questions I think Paul one John .
Sorry, if I might've missed it but did.
This is Brad called Dan are our four large customers. This summer on like how is that trending versus it was about 130% or so last quarter.
And then the Bartlett.
A follow up.
So it's something I think you're referring to were previously sort of broken down our dollar based net retention. If that's what your question is we haven't provided that breakdown. This quarter, we see healthy dollar based net retention across all our segments and 120 fold eventful quarter.
Yeah I think.
I'd point you to if you look at our customer cohorts that are spending $100000.
And there are $1 million now are growing 39% and 65% respectively.
Really good about those numbers and you know.
I got to give a shout out to the go to market teams because they have done a really good job of striking the balance between.
Getting large deals done large strategic deals multi product deals multi year deals done and at the same time continuing to drive the flywheel of transactional small deals, which make our revenue run rate you know more predictable.
Got it thanks, Tim Thanks, so much.
Howard So one quick follow up I know you mentioned that touched upon it a little bit.
Customer base growth picked up to.
Like at what 8% you're on your and sequentially also really good.
And in terms of the conversion I just wanted to understand that.
How much are followed what I'm seeing from home. It's all of the funnel in terms of the promotional brake France I know you touched up on a bit but just wanted to understand like the crunch so versus last quarters.
Sure. So we haven't provided specific numbers on the shrink as you know.
The model is designed is doing what we expect so part of the thesis behind this was to create a funnel that would help seed. The overall number of companies on our platform and allow us to get.
Early visibility into mid market and enterprise customers that we could then look click on things and when we look at the growth in our enterprise and Midmarket customers.
Yes.
Double digit growth.
Significantly higher than the overall growth in our paying customer base and that's exactly the result that we're looking for yeah, and I would just add to that that you know.
So pretty excited about the fact that when we look at free and paid.
Growth together, that's at 27% and we're also still seeing average revenue per customer roll up above 200 K.
Okay, sorry to 20 K added to zero.
Okay, what would be good to get would be awesome, but we're.
We're not there yet yet.
Got it got it thanks, a lot John Howard.
Thanks Flemming.
Okay.
Okay. Thank you Annabelle round things out today with Matt Hedberg coming over to you.
Okay. Thanks.
Hey, Howard.
I really like the IRR disclosure or something I think we've been asking for for a while so certainly appreciate that but is that something that youre going to update us on a quarterly basis.
I think honestly theoretically should that help smooth, our co terming and be sort of a better growth metrics in billings.
So our plan is to provide it on an annual basis, let's just because we feel that there is some of the movements by colder effectively could could be.
It could end up disclosing proprietary movement and from a company perspective, So we're thinking about this on an annual basis.
But obviously I think when people look at that triangulate that with the billings information that we'll be sharing that gonna have a much better view and will continue to provide guidance around that but.
Quarterly billings and trailing 12 month's billings to give me a bit more complete picture.
Maybe the.
I guess, how should we interpret that in terms of like you said is it does it does it does.
Sounds like Youre, not going to give a quarterly because there may be some volatility in there as opposed to kind of being more of a smoother belt metrics yes.
That is correct I mean, it's not so much volatility, but it does give you an indication of the starting point, where we are good at the.
Start of this year and it will help you then see the progression that we're making each quarter relative to billings as we provide the billings through the through the course of the year.
Got it thanks, a lot guys.
Yeah.
Thanks, Matt I'd also point out that we have I think for the first time shared our outlook on our time to profitability I mean, we are.
Confident and committed to profitability by FY 'twenty four or so in addition to sharing on annual air our number.
Very excited about not only the growth acceleration, we've seen last year the momentum that we have going into this year, particularly in mid market and enterprise and the fact that we are seeing leverage that scale and expect to continue to improve our operating leverage while we sustain these growth rates, so pretty exciting times for the company.
Okay.
Currently have no further analyst questions, Jennifer if you would like to take it home.
Right well first of all I just want to say thank you everyone for being here today in closing FY 'twenty two was an outstanding year for the company our accelerated growth and sustained performance provides an excellent foundation for durable growth in the years ahead, we are committed to non-GAAP profitability in FY 'twenty four and we remain focused on Earth.
The trust of our customers everyday thank you and be well.
Okay.
Yeah.
[noise].