PagerDuty, Inc. (NYSE:PD) Q1 2020 Earnings Conference Call June 6, 2019 5:00 PM ET
Karen Walker - Senior Vice President, Finance
Jennifer Tejada - Chief Executive Officer
Howard Wilson - Chief Financial Officer
- Sanjit Singh - 摩根士丹利
- Sterling Auty - 摩根大通
- Bhavan Suri - 威廉布莱尔
- 马特赫德伯格 - 加拿大皇家银行资本市场
- Rob Owens - KeyBanc Capital Markets
- Dylan Reider - Piper Jaffray
Sanjit Singh - Morgan Stanley
Sterling Auty - JP Morgan
Bhavan Suri - William Blair
Matt Hedberg - RBC Capital Markets
Rob Owens - KeyBanc Capital Markets
Dylan Reider - Piper Jaffray
- Sanjit Singh - 摩根士丹利
- Sterling Auty - 摩根大通
- Bhavan Suri - 威廉布莱尔
- 马特赫德伯格 - 加拿大皇家银行资本市场
- Rob Owens - KeyBanc Capital Markets
- Dylan Reider - Piper Jaffray
Good afternoon. My name is Mike and I will be your conference operator today. At this time, I would like to welcome everyone to the PagerDuty 1Q FY2020 Earnings Conference Call. [Operator Instructions] After the speakers remarks there will be a question-and-answer session. [Operator Instructions]
I will now turn the call over to Karen Walker, SVP of Finance of PagerDuty. You may begin your conference.
下午好。 我叫Mike，今天我将成为您的会议运营商。 在这个时候，我想欢迎大家参加PagerDuty 1Q FY2020盈利电话会议。 [操作员说明]在发言者发言后，会有一个问答环节。 [操作说明]
我现在将把这个电话转给PagerDuty财务高级副总裁Karen Walker。 你可以开始你的会议。
谢谢你，迈克。下午好，感谢您参加今天的电话会议，讨论PagerDuty 2020财年第一季度的财务业绩。我今天的电话会议是PagerDuty主席兼首席执行官Jennifer Tejada
Thank you, Mike. Good afternoon and thank you for joining us on today’s conference call to discuss the financial results of PagerDuty’s first quarter of fiscal 2020. With me on today’s call are Jennifer Tejada, PagerDuty’s Chairperson and Chief Executive Officer; and Howard Wilson, the company’s Chief Financial Officer. Statements made on this call include forward-looking statements.
Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results, performance, or achievements to be materially different from those expressed or implied by such statements. Forward-looking statements represent managements beliefs and assumptions only as of the date such statements are made, and we undertake no obligation to update these forward-looking statements.
In addition, during today’s call, we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. There are number of limitations related to these non-GAAP financial measures. First is their closest GAAP equivalent.
For example, other companies may calculate non-GAAP financial measures differently or may use other measures to evaluate our performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation between GAAP and non-GAAP financial measures is available in our earnings release.
Further information on these and other factors that could affect the company’s financial results are included in filings we make with the securities and exchange commission from time to time. Including the section titled risk factors in the company’s Form S1 previously filed with the SEC.
Now, I’d like to turn the call over to our CEO, Jennifer Tejada. Jennifer?
谢谢你，迈克。下午好，感谢您参加今天的电话会议，讨论PagerDuty 2020财年第一季度的财务业绩。我今天的电话会议是PagerDuty主席兼首席执行官Jennifer Tejada
Thank you, Karen. And thank you everyone for joining us today on our very first earnings call. We had a strong start to our first fiscal quarter as a public company and we’re excited to share our Q1 results with you. I’ll start with a few financial highlights then provide an overview of our business model and finally discuss our engines for growth.
Our year-over-year revenue growth continued to accelerate in Q1 to 49%, delivering a record $37.3 million in revenue and robust 85.7% non-GAAP gross margins, an improvement of 100 basis points over the same year ago period. These solid results were driven by continued demand and execution across industry verticals and customer segments, especially enterprise.
We ended the quarter with 11,680 customers, adding a record 468 net new customers complemented by consistently strong expansion within existing accounts. Overall, it was a terrific start. I’m both appreciative of our customers trust and loyalty and proud of our team and their execution.
We pioneered the digital operations management category and this quarter's results provide compelling validation of our continued leadership. The growing demand for digital operations management, the fundamental need to orchestrate real-time critical work is driven by a number of macro trends.
First, the modern consumer is experience driven and impatient. Companies must meet consumers’ increasing expectations for a perfect experience. Second, every company is becoming a software company. Digital transformation has become a top three CEO priority at not only large companies, but also at mid-size and late stage group companies.
Third, companies are migrating their digital operations to the cloud and building cloud infrastructure. This is very powerful, but it is hard, and it increases complexity and requires companies to change the way they do things. Fourth, DevOps is increasingly mainstream and proving to be a strategic enabler. We see DevOps principles being adopted across multiple business functions from security operations to business operations.
And finally, developer and associated technology headcount is growing rapidly, much faster than other occupations and we benefit from our customers organic headcount growth. These trends all present tailwinds for PagerDuty. Our cloud made a real-time operations platform, provides actionable insights across an increasingly complex far-reaching technology ecosystem, intelligently orchestrating immediate work across teams.
PagerDuty’s unique platform combines machine data with any software enabled environment or device and human behavioral data along with workflow information and business metrics to automate and orchestrate mission-critical work in seconds. This powerful combination ensures the right people and work on the right problem or opportunity at the right time.
So, businesses can keep revenues flowing, cut operational downtime, and keep their employees and customers engaged and happy. Stated to these support teams and their moments of truth. When second can make a difference between the lighting or alienating an important customer, applying agile and DevOps best practice to the challenge of detecting unforeseen issues and managing urgent critical work has been a game changer for companies a digital transformation.
By automating and orchestrating work that previously took days and cost millions of dollars to minutes with imperceptible business impact, PagerDuty has changed incident management from liner reactive response to dynamic proactive prevention. Our platform allows our customers from the most innovative disruptors to the largest industry leaders to improve their operations and immediately supported by over 350 out of the box integrations.
This API-based interoperability supports modern open work making easy for users to create workflows and integrate incident information into collaboration and service management products like Slack, Zendesk and salesforce while strengthening PagerDuty's unique position as the central nervous system for the digital ecosystem.
Let me give you a quick example of how this works. Imagine you’re online shopping for a Golden State Warriors Jersey. You do a quick search, find an online store shopping if you like, and it seemed like a straightforward transaction. It’s a slick user interface, you can do it on your phone, but when you go to check out nothing happens. You get the dreaded spinner or as my daughter prefers to it, ‘The wheel of death’.
With sitting behind here, seemingly simple transaction is an increasingly complicated set of order management, dynamic pricing, and payment application underpinned by a very complex infrastructure and usually a mix of cloud and on-premise networking technology. This is what’s happening in the background at the e-commerce company when your checkout screen freezes.
Several monitoring applications simultaneously fire alerts to different teams. [Indiscernible] send a developer team and issue with the application. [Indiscernible] sends an IT team on network. While then there is the sales force alerts the sales customer service people that ticketing volume is increasing. And at the same time, Amazon cloud [indiscernible] admin team that server capacity is an issue. These disparate often globally disperse teams then work these events and [indiscernible] unaware they are all troubleshooting components of a single related issue that’s fast becoming a customer issue with a negative top and bottom-line consequences.
Meanwhile, you, the consumer have given up and gone to a competitive [indiscernible] warrior swag and getting this right is not only mission critical, but an imperative to survive this hypercompetitive world. With PagerDuty’s platform, e-commerce company can [indiscernible] to consolidating separate events in the single incidents. Intelligently orchestrating work across the right team, [indiscernible] automating responses through machine [indiscernible] recommendations, and reviewing the [indiscernible] help of teams and services to drive continuous improvement.
PagerDuty helps companies transform the digital operations to improve the end consumer experience, protect revenue and reduce unplanned operational expense. The market opportunity for digital operations management is significant. We estimate the incident management market alone is a $25 billion [indiscernible] that we serve with our core offering. Not only is it large and growing, many of our new customers are greenfield opportunities.
As companies use the full capability of digital operations management and apply PagerDuty to an infinite number of used cases, this [indiscernible] increases substantially. With less than 1% penetration, we have just begun to scratch the surface of the enormous potential of this market. PagerDuty has multiple engines for growth, giving us confidence, we can advance our lead and further penetrate this market providing we continue to execute well.
These include one, our viral platform for real-time operations founded in DevOps. Two, PagerDuty's broad applicability and ease-of-use leading to new used cases. Three, our new product automation. Four, our land and expand for the market notion. And finally, our early efforts in regional expansion.
Let’s start with DevOps. PagerDuty's cloud native platform was designed based on DevOps best practices for time critical unplanned events in an increasing complex data overloaded world where other solutions were built before the advent of the cloud. It’s uniquely architected for resilience proven at scale and tested daily by progressive tech companies like [Elastic] and Netflix, and huge highly regulated companies like Royal Bank of Canada and the world's largest e-commerce players.
Rather than automating forms into linear workflows, which is slow, siloed and static, PagerDuty applies DevOps principles, including swarm-based collaboration, empathy, empowerment and learning, orchestrating action dynamically, and creating a leading loop with every incident. The platform and all of our products are mobile first, designed for the user with immediate time to value through industry-leading integrations, and intuitive self-service implementation.
Our newest products augment our core platform by providing operational insights for teens and benchmarking for leaders and analytics delivering real-time visibility of customer and cross-service impact during an incident offering actionable stakeholder and status communications to speed collaboration, and automating previously manual tasks with machine learning based Event Intelligence.
The platform addresses challenges presented by increasing technology complexity and segment proliferation and the need to orchestrate work and service of protecting the brand and customer experience. The broad applicability of PagerDuty's platform is another engine for growth made possible by our intuitive easy to adopt user experience. This makes it quick and simple for teams to deploy PagerDuty for problems well beyond the purview of technical teams.
I highlighted today real-time produce quality used case for many of you on the road show and if you haven't had the chance, I encourage you to read about our partnership with them in our S1. During Q1 we continue to see new applications of our real-time operations solution outside of development and IT. Following the two-week trial, one of the world's largest oil and gas companies adopted PagerDuty to supply fuel truck and terminals in most of their 14 countries.
With a throughput capacity of 5 million barrels a day resolving operational issues in minutes versus hours directly benefits the bottom line and enables a safer work environment for employees. Prior to PagerDuty, communication for maintenance and emergency support along with coordination between operations and for fuel supply terminals could take hours to resolve.
Using our platform for real-time operations, incidents such as fuel spills in operating pumps, safety issues or operational concerns are now resolved in minutes preventing potential crisis from occurring. Innovating new products on the PagerDuty platform enhancements to our existing products and increasing the number of integrations have also contributed to growth. Last year, we launched analytics visibility and Event Intelligence.
These new offerings have enabled our customers to go beyond on-call scheduling and incident management to facilitate digital transformation, proactively managing their digital services at scale and preventing issues from disrupting customers and business outcomes. Analytics, visibility, and Event Intelligence utilize machine learning and even response data to identify and resolve potential incidents mitigating both financial and reputational risk.
While it’s still early, we have seen growing production from our new products across all segments. In Q1, one of the leading hypergrowth electric scooter company has decided to replace the competitor's product because of its sale to scale reliably with them. They came to PagerDuty to support their real-time operations and immediately adopted modern incident response and began using the platform across three teams, DevOps, IT, and security.
We launched several new features and enhancements in the first quarter. For Event Intelligence, we introduced advanced event automation intelligent alert grouping enhancements, and alert grouping previews, reducing the signal to noise ratio infinite accounts, and unplanned work.
In addition to adding one touch conferencing to modern infinite response for connecting teams quickly, we introduced status communications for the intelligent enterprise to keep impacted teams informed and launch live service updates via mobile devices to allow stakeholders to receive urgent business-oriented status update. At the 2019 RSA conference in March, we announced on more than 25 integrations and integration features specifically designed for SecOps teams.
We also released enhancements to our existing integrations to support hybrid ops for medium and large companies where IT development and customer support teams need to collaborate on time sensitive responses. These included new deeper workflow integrations for Slack and ServiceNow providing fast context rich information about incidents with the bidirectional support allowing users and different teams and tooling to collaborate seamlessly and save time and resolve issues before the impact customers.
Our hybrid go-to-market model drives efficient growth. Most of our customers land through self-serve and expand over time. It’s often a signal developer team in an organization who purchases PagerDuty to improve the reliability for a service in their charge, use expands virally within the first team than to additional teams and ultimately additional departments has received the personal and team value of being on the platform.
Departmental and company-wide initiatives like DevOps and digital transformation or cloud migration often catalyze more significant expansion to customer supports, security, and business operations for both infinite management, as well as other department specific applications of our technology.
We complement self-service adoption with a high velocity sales force, primarily focused on expansion. Our inside sales teams serve the midmarket and SMB segments from metropolitan hubs, while the enterprise segment is served by an experienced high velocity field sales team.
Our high branded self-service sales assisted model reduces friction and leads to a very strong net retention rate, which has consistently been above 135 for over the last year and with 137% in Q1. In several key accounts, we saw expansion with the existing teams, as well as expansion to new departments, including Zoom, who like PagerDuty recently made their public debut.
Zoom is focused on ensuring happy customers by providing a seamless experience to their customers, which means preventing outages and interruption. Zoom’s PagerDuty engagement started with a single development team billing on a month-to-month basis, and has expanded more than six-fold with an existing and new teams across development, security, customer support, and customer success. By deploying our platform, Zoom increased the uptime for their conferencing cloud platform.
Additionally, a large public enterprise software platform company expanded their PagerDuty deployment to include their product teams and operation centers. While this company has been a customer for many years, recent reliability and availability challenges associated with scale became CEO priorities. PagerDuty helps this market leader prevent business impacting outages, and improve overall customer experience and retention while reducing SLA liability.
While most of our customers are acquired online, our sales force engages directly in enterprise accounts and periodically lands large deals. Last quarter, we were pleased to welcome a Fortune 100 global investment bank as a PagerDuty customer. We've won a seven figure multi-year contract for two different used cases.
The bank is both modernizing incident management across shared services and also using PagerDuty to improve reliability for a high-volume retail business. We’ve replaced legacy home grown to help optimize their entire digital operations management cycle, decrease system outage time, and to ultimately increase revenue and uptime.
Finally, our early effort in regional expansion delivered strong growth in international markets in Q1 with Q1 year-over-year growth exceeding our domestic growth rate. Cemex, which is one of the world's largest cement maker is based in Mexico became a new customer. Like the aforementioned oil and gas company, Cemex had opted PagerDuty to facilitate the on-demand delivery of cement a time sensitive business critical operation.
We expanded our deployment with the global recruiting services company based in Japan, a significant number of indispensable micro services are tied to their consumer facing job search engines. In just a few years, their PagerDuty user base grew by nearly 10 times, including global site reliability engineering teams. Last quarter, they implemented Event Intelligence across teams in Japan and North America to address the proliferation of inbound events and free-up their teams for innovation efforts.
Our results this quarter reinforce the breadth and depth of our community engagement. PagerDuty is loved and trusted by hundreds and thousands of users for whom we focus our design, usability, and value proposition. It is the company imperative to build an innovative, inclusive, equitable, and a socially responsible company that reflects this community.
We’ve been intentional in developing a diverse board and leadership team and inclusive collaborative and transparent culture and a talented diverse workforce. In February, we opened our sixth office in Atlanta, an important cross functional hub. We selected Atlanta to both create access and jobs for local underrepresented people seeking careers in the tech industry, and to acquire talent from richly diverse local top engineering and business goals.
In Q1, Rathi Murthy, Chief Technology Officer of the Gap and an experienced digital transformation leader joined our board bringing us close to [gender parity], which we’ve already achieved in our leadership team. We believe [clarifying] inclusivity is an important contributor to our outsized performance of a high employee engagement and retention and our trustful relationship with our users’, customers, and partners. Our IPO in April saw the funding of our 1% pledge, positioning PagerDuty.org to support a growing number of nonprofits in achieving their social impact mission.
To conclude, revenue and customer growth acceleration continued in Q1. We are all in our mission to elevate teams to the outcomes that matter and we remain encouraged by market signals and momentum. I am proud of both our results and how we’ve achieved them through inclusive leadership with relentless focus on users’ time to value and success.
With that, I’d now like to turn the call over to our CFO, Howard Wilson who will walk you through the financial results. Howard?
Thanks, Jennifer. And thanks again to everyone for joining us today. Since today's earnings conference call is our first, I’ll start by providing a brief overview of our financial model and then I’ll go through our first quarter fiscal 2020 results in detail before moving on to guidance for the second quarter and the full-year fiscal 2020.
We offer a cloud-based platform to assess model and we generate revenue primarily by setting one-year subscriptions to our top-grade platform. There are a number of levels to drive our growth, including acquiring new customers, expanding the number of users within a customer and cross-selling additional products. Our subscription fees are based on the products the customer is using and the number of users on the platform.
We target businesses of all sizes from SMB to enterprise that are in various stages of their digital revolution from innovative disruptors to large industry leaders. Customers today purchase our offerings through either self-service or direct sales. Our self-service channel allows customers to buy online. This can be customers of any size industry or location. Most of our initial customer lands come through the self-service channel.
All of our customers are able to expand a footprint online adding users of new products. We complement this with a high velocity inside sales team that is focused on landing and expanding SMB and midmarket businesses. The sales rates typically target existing customers that have the potential to expand through either upsell or cross-sell or selective new customer acquisition.
In addition, we have a field sales team that focuses on high-value relationships with enterprise customers that is companies greater than a billion dollars in revenue size. Similar to the inside sales team, the field sales [team] is typically targeting these customers that have the potential to expand further whilst also being given strategic new customer targets.
We set performance expectations around our sales reps’ ability to ramp in six months of joining the team, and we’re able to achieve these targets as a result of the significant investments we’ve made in sales enablement and strong role specific profile driven hiring practices, which allow us to match talent more effectively with our needs.
As a reminder, we offer four subscription networks to our platform. [Starter], platform team, platform business, and enterprise. Customers can then add on additional products such as modern instant response, Event Intelligence, visibility, and analytics.
Now, turning to the quarter. We are pleased with this quarter's strong results. As Jennifer noted, total revenue for the quarter was $37.3 million, representing 49% year-over-year growth. We’re excited too about the expansion into geographies outside of the United States. International revenue grew by 63% year-over-year and now represents 21% of our revenues.
We're still in the early stages of international expansion and continue to build on our operations in the UK covering EMEA, and in Australia for Asia Pacific and Japan. This quarter was also strong in terms of customer acquisition adding a record 468 new customers, ending the quarter with a total of 11,680 customers.
We continue to see growth with large enterprise customers and ended the quarter with 242 customers with an annual contract value above $100,000, up 51% compared to the same period last year. We were pleased with net revenue retention for the quarter at 137%, compared to 136% for the same quarter last year, reflecting the stickiness of our platform, as well as our existing customers continued expansion and adoption of our new offerings.
We expect to see some fluctuation in net revenue retention from quarter-to-quarter, but expected to remain above 130% through this year. Before discussing detailed financial results, I would like to point out that I will be discussing non-GAAP results. Our GAAP financial results along with a reconciliation between GAAP and non-GAAP results can be found in our earnings release.
In Q1, non-GAAP gross margin was 85.7%, up from 84.7% in the first quarter of last year. Our cloud-native architecture, DevOps approach to production, and programmatic approach to customer support and success drives our efficient operating model that has allowed us to run our business on gross margins between 84% to 86%.
Our strong gross margins allow us to making investments in the long-term growth of our business and we expect gross margins to stay within this range for the remainder of the fiscal year.
Turning now to operating expenses. We remain focused on improving the leverage in our business while balancing our investments for growth. While we expect short-term fluctuations and may make strategic investments in the business, we still anticipate that over the longer-term, our revenue will grow at a faster rate than our total operating expenses, which will expand operating margins over time.
Operating expenses this quarter reflect an acceleration in our hiring strategy and go to market programs and investments to support being a public company. Non-GAAP research and development expenses for Q1 were $10 million, compared to $7 million in the same year ago period, representing an increase of 43% year-over-year.
Innovation remains a top priority for us and we will continue to invest in R&D for the foreseeable future as evidenced by our recent introduction of our visibility and analytics product additions to the PagerDuty platform. Non-GAAP sales and marketing expenses for Q1 were $19.7 million, and grew by 58%, compared to Q1 of fiscal 2019 were expenses were $12.4 million.
This increase reflects our planned accelerated hiring strategy, and a $1.2 million impact from the shift in timing of the sales and marketing enablement event from Q4 to Q1, due to the change in fiscal year. Adjusting for this amount would have resulted in a year-on-year growth of 49%.
We continue to invest in our go-to-market operations and expect to see improving operating leverage as of our customer base grows and more of our subscription revenue comes from renewals and upsells. We continue to invest in sales enablement and sales team development to improve productivity, automation, and self-service to drive process efficiency, as well as deliver a better customer experience.
Non-GAAP general and administrative expenses for Q1 were 10.1 million for the quarter, compared to 5.6 million in the same quarter last year increasing 81% year-over-year. The growth in G&A was driven by investments in headcount and systems made in anticipation of our public offering. We expect general and administrative expenses to increase slightly over the remainder of the year, but to decrease as a percentage of revenue as we continue to scale our operations.
First quarter non-GAAP operating expenses were $39.9 million, compared to $25 million from a year ago and increased 59% year-over-year. Excluding the impact of the previously mentioned sales enablement event and an associated company event, which in total was $2 million, which shifted from Q4 to Q1 of this year, non-GAAP operating expenses would have been 37.9 million. This represents a 51% increase year-over-year, driven by the investments made in line with our go-to-market strategy and to support being a public company.
Our non-GAAP operating loss in the quarter was $7.9 million, compared to a loss of $3.8 million in the same quarter last year. This equates to a negative non-GAAP operating margin of 21.2%, compared to a negative 15.3% in the same period of last year. Excluding the aforementioned the sales event and company event, our non-GAAP operating loss would have been $5.9 million, and negative non-GAAP operating margin would have been 15.9%.
We do expect [indiscernible] operating margins over time as we scale the operations and grow both our existing and new customers. Non-GAAP net loss for the first quarter was 7.3 million or a net loss of $0.22 per basic share, compared to a non-GAAP net loss of $3.4 million or a net loss of $0.16 per share in the first quarter of last year.
Turning to the balance sheet. We ended the quarter with $338 million in cash and cash equivalents, up $210 million from the end of the fiscal year 2019. This was primarily driven by proceeds raised in our initial public offering, slightly offset by our Q1 operating losses. Free cash flow was negative 8.8 million in Q1, compared to negative 4.7 million last year.
Free cash flow margin was negative 23.5%, compared to negative 18.8% for Q1 last year. We expect to make continued progress towards sustainable free cash flow, but it may not be in a linear trajectory given period-to-period fluctuations in Billings and working capital and capital expenditure as we expand our U.S. and international offices.
Regarding guidance, for the second quarter of fiscal 2020, and the full fiscal year 2020, we expect revenue to be in the range of $38.5 million to $39.5 million for the second fiscal quarter. And with our full-year 2020 end in the range of $161 million to $163 million. Non-GAAP net loss per share is expected to be in the range of $0.09 to $0.10 for the second fiscal quarter, and in the range of $0.37 to $0.38 for the full year fiscal 2020. Basic shares outstanding for Q2 and the full year fiscal 2020 are expected to be 75 million and 65 million, respectively.
With that, Jennifer and I are happy to take any of your questions. Operator?
[Operator Instructions] Your first question comes from Sanjit Singh from Morgan Stanley.
嗨，谢谢你提出问题，并祝贺Jennifer和Howard成功上市并欢迎进入公开市场。 也许只是为了开始，因为这是第一次打电话，也许只是从高级Jennifer开始，从IPO开始，刚刚在第一季度完成，2020年财政年度的里程碑是什么，你希望实现你 为您的团队和组织设置？
Hi, thank you taking the questions, and congrats Jennifer and Howard on a successful IPO and welcome to the public market. Maybe just to start off and since it’s the first call, maybe just start from the high-level Jennifer as coming out of the IPO starting, just completed in Q1, what are the milestones for fiscal year 2020 that you are looking to achieve that you set for your team and for the organization?
嗨，谢谢你提出问题，并祝贺Jennifer和Howard成功上市并欢迎进入公开市场。 也许只是为了开始，因为这是第一次打电话，也许只是从高级Jennifer开始，从IPO开始，刚刚在第一季度完成，2020年财政年度的里程碑是什么，你希望实现你 为您的团队和组织设置？...
Well, hi Sanjiv, and thank you for the question. I appreciate you being on the call today. I think in terms of, following the IPO, which as you know is a decent undertaking for a company, we’re really focused on continuing to execute the strategy and the plan that we share with all of you on the road so effectively. Some of the milestones that we think about in that process are: One, ensuring that we have well enable productive capacity in our field to execute on the plan; Two, making sure that we are hitting our product innovation timelines effectively, and I’ve been very proud of the cadence with which the team has rolled out new products and new features, including the security effect that I referred to that we announced at MSA, our hybrid ops solutions that we announced recently as well. And we’re ramping of for our annual industry event, which happens in September, this year September 23 through the 25th.
So, they are some of the bigger milestones. We’re paying a lot of attention to new products attached, which again we feel is going well, but it’s still early and we’re also focused on continuing to ramp our effectiveness in business in new markets, particularly [EMEA and APJ], which again is going well today, but still early days for us.
That makes a lot of sense Jennifer, and if I could just unpack some of your comments on new product attach, from your perspective or maybe let me ask it this way, what’s the highest attaching product outside of management today, which were the products you think are the biggest opportunities in driving growth maybe over a multiyear timeframe?
Yes, thanks Sanjit. With regards to new products, we aren't sharing data specifically around the mix of attachment or how those products are coming together. And as I mentioned, we announced Event Intelligence visibility and analytics quite recently in the middle and late last year. We do see a lot of promise in Event Intelligence in particular, because Event Intelligence leverages the 10 years of data that we have collected across human response behaviors, signals and events, as well as workflows and metrics. And what it really enables and empowers is the shift from just responding more effectively and being reactive, which is what [core on-call] management really drives to being predictive and preventative and proactive for team.
It also reinforces our orchestration capabilities. So, not just finding signal and the noise of the events coming in, but actually orchestrating the right team, the right people on the right people and the right moment as opposed to getting a bunch of people on the role and trying to manually figure out and triage what’s happening. The combination of Event Intelligence and modern incident response [indiscernible] our customers being able to: one, recognize that certain events are storming to become a particular incident before they see the business or the customer impact. And two, to recognize issues that haven’t risen before and automated some of the resolution realty reducing the triage and the time that it takes to sort of supplement this is impacting customers.
So, we’re excited about those two products. Likewise, analytics really helps leadership look back historically at how their teams are operating and functioning together and gives them a little sense of the difference between services that are efficient and effective and operate well and teams that are efficient and operate well. And certainly. help leadership see the tenancy and the relationship between teams and the services that they are responsible for. In a digital ecosystem that is constantly changing in companies that are going through digital transformation there is very little visibility into those relationships. So that is the becoming increasingly important to our customers. And analytics also gives a leader a sense of efficiency and effectiveness of their entire environment which is important as you are trying to thing about how to allocate capital between legacy systems and underpinning architecture and infrastructure or architecture changes or new application development.
得到它了。 如果我能在离开场地之前潜入最后一个。 这有点像竞争环境，特别是当PagerDuty进入更大的企业领域时，所以当你进入你看到的大客户时 - 最常见的是你看到自定义解决方案或传统玩家，或者你开始看到[音频不可思议 世界上市营销，所以只是在你向市场推进时看到的是谁？ 这将是我的全部。 谢谢。
Got it. If I can sneak in just one last one before I leave the floor. And that is sort of on the competitive environment particularly as PagerDuty makes its journey into the larger enterprise space, so as you go into larger customers who are you seeing – most frequently are you seeing custom solutions or legacy players or you begin to see [indiscernible] world come up marketing, so just a sense of who you are seeing as you move up the market? And that will be all from me. Thank you.
得到它了。 如果我能在离开场地之前潜入最后一个。 这有点像竞争环境，特别是当PagerDuty进入更大的企业领域时，所以当你进入你看到的大客户时 - 最常见的是你看到自定义解决方案或传统玩家，或者你开始看到[音频不可思议 世界上市营销，所以只是在你向市场推进时看到的是谁？ 这将是我的全部。 谢谢。
Sure. That’s a great question Sanjit, thanks. From an enterprise perspective I’d say a couple of things. One is, it is a very early market, a lot of customers are still just pulling together automated into the management processes so the vast majority of our lands are uncontested. They are greenfield over replacing a legacy environment and that could be anything from something as simple as a 150 people in a WhatsApp channel to phone trees and email distribution to more traditional on prem solutions that just don’t serve the modern digital ecosystem, but most of those deals are uncontested. So, we don’t see a significant amount of competition in enterprise and as we moved into areas like Event Intelligence that’s even less the case.
当然。 这是一个很好的问题Sanjit，谢谢。 从企业的角度来看，我会说几件事。 一个是，这是一个非常早期的市场，许多客户仍然只是将自动化整合到管理流程中，因此绝大多数土地都是无可争议的。 它们是取代传统环境的绿色环境，可以是WhatsApp频道中的150人，电话树和电子邮件分发，以及不能为现代数字生态系统服务的更传统的现场解决方案。 这些交易是无可争议的。 因此，我们没有看到企业中存在大量竞争，因为我们进入事件智能等领域的情况更是如此。
Your next question comes from the line of Sterling Auty from JP Morgan.
Thanks. Hi, guys. You mentioned the pick-up in the new customers, look at the new customer trial, is there anything to read into either in terms of the used cases or traction on some of the marketing programs, what drove that performance in the quarter?
谢谢。 嗨，大家好。 您提到了新客户的提升情况，看看新的客户试用版，是否有任何内容可以用于使用案例或某些营销计划的牵引力，是什么推动了本季度的业绩？
Sure. Hi, Sterling. Thank you for the question. In terms of, one we’re really proud of the record outcome in terms of new customer ads. We’ve continued to see momentum and acceleration there. and it’s an important growth engine for us. What’s interesting about the new customer acquisition is we see it across all of our segments and across all verticals. We’ve recently seen some momentum for incidence in financial services enterprise which is a harder vertical to crack because of highly regulated it is and how conservative some of those IT and developer organizations are and at the same time we are really excited by the fact that while we continue to see a shift in mix to enterprise we are still landing some of the most innovative disruptive small startups. And so, there really isn’t a signal coming from how those customers look different. I do think the process of preparing for our public offering and the brand awareness that has created for us has helped to extend our brands more broadly into the market, but it often reinforce the fac that the product has an offering that applies to any company that is going through any kind of digital transformation, cloud migration, trying to step up their security stands, modernize the IT, or really invest in DevOps. So, there is this broad applicability across the market.
Great. And then one quick follow-up. This year, I think two of your customers actually acquired competitor companies or yours, are they still on your platform?
非常好。 然后快速跟进。 今年，我认为您的两个客户实际上已经收购了竞争对手公司或您的公司，他们仍然在您的平台上吗？
Well we have seen those customers try and move a number of their users off the platform and we saw a chunk of that this last quarter, but we do still have companies that have acquired competitors that remain users within our platform.
Alright, thanks. I appreciate it.
Your next question comes from Bhavan Suri from William Blair.
你的下一个问题来自William Blair的Bhavan Suri。
Hi guys, thank you taking my question and congrats on just a good quarter and a good outcome coming out of the IPO. I just wanted to touch on used cases specifically here. You currently achieved the broader set of applications for core used cases, so the on-called management developers etcetera, but the nature of the platform, the horizontal nature opens it up to – plenty about the used case on security IoT, the customer has kind of realized that broad applicability of tapping themselves whereas that we are [indiscernible] to doing sort of has to drive the initial conversations and then a quick follow-up to that is, are you seeing those used cases broaden up and sort of what are the ones you are seeing? Thanks.
嗨，大家好，谢谢你接受我的问题，并祝贺刚刚公开募股的好季度和好结果。 我只想在这里专门讨论用过的案例。 您目前为核心用例实现了更广泛的应用程序集，因此所谓的管理开发人员等，但平台的性质，横向性质打开了它 - 关于安全物联网的用例，客户有点亲切 意识到自己的广泛适用性，而我们[音频不清晰]必须推动最初的对话然后快速跟进，你是否看到那些用过的案例变得更加广泛，并且是什么类似于 你看到的？ 谢谢。
So, some of the used cases that we see are sort of naturally adjacent to IT and development. For instance, security response management where there is a security threat that that response looks a lot like a traditional technology infinite response so that’s naturally adjacent. Customer support team that come on to our platform because they’re part of an incident response. Workflow also are using PagerDuty for case revolution because that’s also, consumers are getting more and more impatient and that’s a real time work orchestration challenge, but increasingly we see teams doing things like using PagerDuty to put teams on call instead of staff teams in three shifts 24x7 to cover work that they can’t measure or predict ahead of time.
We’re seeing some really interesting used cases come out of nonprofits and some of the more industrial customers like we have as, like the example I mentioned of nearly gas customer that we talked about or Cemex in Mexico, but one of my favorite used cases is site life, which we spoke about in the IPO where they’re leveraging the PagerDuty platform to manage the entire set of workflows from identifying that cornea has become available through a donor all the way through to transiting and preserving and transplanting that cornea in a recipient. And that has nothing to do with the technology signal and we certainly didn’t have a product management organization or a sales organization driving that.
So, it speaks to the nature of one, call how infinite the number of potential problems are opportunities that are truly real time, time sensitive in nature that companies have, and two the easier the product is to use, the easier it is to apply, which makes our investment in integrations, which we advanced in more than 350 that’s called very important. And the ease of the API environment for customers to build their own integrations is important. We continue to see new cases as a great growth engine for the business.
Got it. That’s really helpful. Thanks again, and congrats.
得到它了。 这真的很有帮助。 再次感谢，并祝贺。
Your next question comes from Matt Hedberg from RBC Capital Markets.
您的下一个问题来自RBC Capital Markets的Matt Hedberg。
Hi, guys. Thanks for taking my questions. Well done on your first quarter out. Jennifer, I wanted to ask you a little bit more on SecOps, you talked a little bit on this call, but you guys announced security operations earlier to this year, could you just give us a little sense I know obviously you’ve got a huge opportunity within your core market of [indiscernible], but sort of balancing continued expansion in sort of your core IT on call management product with some of these new and emerging opportunities and SecOps, and maybe how far can you go in that category because it seems like it’s a great opportunity for you guys?
嗨，大家好。 谢谢你回答我的问题。 在你的第一季度做得很好。 Jennifer，我想问你一些关于SecOps的事情，你谈了一下这个电话，但是你们今年早些时候宣布了安全操作，你能不能给我们一点意义我知道你明白你有一个 在[音频不清晰]的核心市场中有巨大的机会，但是在你的核心IT电话管理产品中加上一些新的和新兴的机会和SecOps的平衡，并且可能会在这个类别中走多远，因为它 对你们来说这似乎是一个很好的机会？
Thank you. Thanks for the question with regard to security. Not unlike any other team in an organization, I think security teams are under increasing pressure to one: understand any given moment what’s happening not just across the technology ecosystem, but across the employee base and even fiscal security; and two, be able to quickly identify an issue or an opportunity as it arises. And historically the way that used to happen was through a human noticing by monitoring somethings manually and either raising a ticket or manually kicking off a process.
So, you can imagine how consuming machine signal correlating that signal with other signals to determine if indeed there is an issue and who needs to will be made aware of that issue and what action they should take on that issue, how automating that would become really valuable for security teams. So, what we’ve seen, which is an interesting to me is that security teams are already using the most basic product from PagerDuty for many years and just started popping on to some of our more advanced capabilities, and doing it themselves and then as IT teams and DevOps teams and DevSecOps started to emerge, you started to see more usage across multiple teams were orchestration becomes more important.
And the idea is, you don't want to distract the whole business with something as it comes up, particularly as you’re [triaging it], you just want the right people working on at the right time and getting to an answer and a resolution quickly. So, we think that is a broad opportunity among a number of other used cases that we’re excited about.
That’s great. And then maybe one for Howard. The way that the Street has modelled you guys right now, it looks like sort of hitting free cash flow in a modest free cash flow generation exiting fiscal 2021, could you talk about sort of how you think about the financial model, I mean you’ve got, obviously large opportunity, growth opportunity, but maybe offset that with kind of how you think longer-term about margin expansion?
那很棒。 霍华德也许就是一个。 街道现在模仿你们的方式，看起来有点像2021财年退出的适度自由现金流量中的自由现金流量，你能谈谈你对财务模型的看法，我的意思是你们 得到了，显然是一个巨大的机会，增长的机会，但也许可以抵消那种长期关于利润率扩张的看法？
Sure, thanks Matt. The approach that we’ve taken is really around being prudent in how we balance both the growth opportunity that’s out there, which we see as being a large opportunity and untapped market with potential time of $25 billion together with an approach around how we manage our expenses in a way that’s going to help us. One, get to the right cadence in terms of operating cash flow positive and free cash flow positive.
So, for us it’s really a case of keeping a close eye as we move through each quarter on whether the growth rates on the top line justify of continuing to invest in the expense line, and leveraging the fact that we have a really good growth margin as the basis or the platform for us to move forward.
So, we expect to, much likely that in FY 2019, we had a couple of quarters that were OCF positive and we had a couple of quarters that were either a positive from a free cash flow or very close perspective in FY 2019. We expect to see a similar pattern develop, but we will be keeping an eye on where the investment is going to make sense.
That's great. Thanks a lot, guys. Well done.
那很棒。 非常感谢，伙计们。 做得好。
Your next question comes from Rob Owens from KeyBanc Capital Markets.
您的下一个问题来自KeyBanc Capital Markets的Rob Owens。
Great and thanks for taking my question. Give us a little bit just on the pricing environment, clearly there is a strong ROI for your solution given the promise that you're solving for end customers, but it’s a bit of an evangelical sale as well. So, just some puts and takes around what you're seeing in terms of the pricing environment. And then I know it’s still a little bit early for those new modules, but what type of pricing left you typically see when you sell those and as well? Thanks.
太棒了，谢谢你提出我的问题。 给我们一点点定价环境，显然您的解决方案有很强的投资回报率，因为您承诺为最终客户提供解决方案，但这也是一个福音派销售。 因此，在定价环境方面，只需要考虑一下您所看到的内容。 然后我知道这些新模块还有点早，但是当您销售这些模块时，通常会看到什么类型的定价呢？ 谢谢。
Thanks Rob. Great questions. In terms of pricing, as Howard mentioned, we offer our products and services in four different packages, which gives customers a lot of flexibility to move at the pace that works for them, and what we find is that our customers live and very different places on a continuum of operational maturity and like I said, some of them are still using manual phone trees and some of them are using automation and machine learning every – and their business are 100% full service ownership in terms of DevOps et cetera. And so, we found that we need to have flexible offerings that allow them to move at their own pace, and in fact try and continue to ensure that we don't either add and reduce friction for them to either add new features or add new products or bring users or teams onto the platform.
So, we try and keep the barrier to entry reasonably low on our basic standard first Q, but then as they take on products and services that let to create more value for them there is a little bit of an uptick in cost. And we find that the value proposition for some of our more expanded services on the platform is highly quantifiable because you can measure it in terms of forensic and the cost associated with a minute of downtime. We’ve had retailers tell us that can be $200,000 to $500,000 a minute range. So, time is saved. People's ways to time reduced, being able to reduce outages. We saw a recent outage this weekend where large a cloud provider was down for several hours and during that we saw traffic on our platform increase over 300% every hour and still had to maintain several lines of reliability and availability through that processes and the cost to support that infrastructure, but we think we’ve found sort of a fair relationship between the value and the price that’s out in the market.
In terms of new products, they do create some price and margin expansion for us for our customers, but they are not the only driver and like I said, they are early driver. What happens in most customers is they start with a very small team that lands at a very low price point and lower expenditure. They grow from one team to the next. From one department to the next and often a top-down initiative like digital transformation or card migration will meet the bottoms up growth of the product within their company and we’ll start to see their investment grow with us. But that doesn't happen overnight, it tends to happen gradually as these teams mature and how they are digitally transforming or investing in their cloud migration or modernizing IT.
谢谢Rob。好问题。在定价方面，正如霍华德所说，我们以四种不同的方式提供我们的产品和服务，为客户提供了很大的灵活性，以适应他们的速度，我们发现我们的客户生活和非常不同的地方在运营成熟度的连续性上，就像我说的，其中一些仍在使用手动电话树，其中一些正在使用自动化和机器学习 - 他们的业务是DevOps等的100％全服务所有权。因此，我们发现我们需要灵活的产品，允许他们按照自己的进度移动，并且实际上尝试并继续确保我们不添加和减少摩擦，以便添加新功能或添加新功能产品或将用户或团队带入平台。
And your next question comes from the line of Dylan Reider for Alex Zukin from Piper Jaffray. Your line is open.
而你的下一个问题来自Piper Jaffray的Alex Zukin的Dylan Reider系列。 你的线是开放的。
Thanks for taking my question guys, and congrats on a great first quarter. Just one question from me on the international effort’s you guys discussed. Any particular geographies that you are focused on and any differences in the way that you think about going to market, and the competitive landscape abroad versus domestically? Thanks.
感谢你们提出我的问题，并祝贺第一季度表现出色。 关于国际努力，我只有一个问题是你们讨论过的。 您关注的任何特定地区以及您对上市方式的看法有何不同，以及国外与国内的竞争格局？ 谢谢。
Thank you so much Dylan. In terms of international expansion, we have seen really positive or early signs in EMEA. We kicked off our presence in that market in London, but in recent quarters we’ve seen really good traction and momentum in continental Europe, and so we continue to be excited about that. This could be markets like the Amsterdam or Germany France et cetera.
In APJ, we initially wanted to sort of start small and grow in that market. So, we really started out purely focused on Australian and New Zealand and had a strong demand signal there with a number of large ASX listed companies within our customer base, but we've recently seen quite a bit of momentum in Japan even servicing that through a Japanese speaking team out of Sydney. So, we’re excited about the momentum there as well, but trying to be pragmatic in terms of how we invest the return and then invest with the [return integral].
非常感谢迪伦。 在国际扩张方面，我们看到欧洲，中东和非洲地区出现了积极或早期的迹象。 我们开始在伦敦市场开展业务，但最近几个季度我们看到欧洲大陆的牵引力和动力非常强劲，因此我们对此持续感到兴奋。 这可能是像阿姆斯特丹或德国法国等市场。
在APJ，我们最初希望从小规模开始并在该市场中成长。 因此，我们真正开始纯粹专注于澳大利亚和新西兰，并且在我们的客户群中有一些强大的需求信号，并且在我们的客户群中有许多大型ASX上市公司，但我们最近在日本看到了相当大的动力，甚至通过 悉尼的日语团队。 所以，我们对那里的势头感到兴奋，但我们在如何投资回报然后投资[回归积分]方面努力务实。
And I think I would just add one thing to that [indiscernible] the nature of the offering being customers can acquire offering online. We actually find that we have a demand signal before we actually put teams in market. So, before we even opened up offices in Australia or in the UK, we already had hundreds of customers that was an indication that there was – could make good sense for us to put a team on the ground, and so that strategy is one that will continue to execute upon.
而且我想我只想添加一件事[音频不清晰]，客户可以在线获得产品的性质。 在我们实际将团队投入市场之前，我们实际上发现我们有一个需求信号。 因此，在我们甚至在澳大利亚或英国开设办事处之前，我们已经有数百名客户，这表明存在 - 我们可以很好地建立一个团队，因此战略是一个 将继续执行。
Got it. Thanks guys.
And that was our last question. At this time, I will now turn the call back over to management for closing remarks.
Well thank you everybody for taking the time to join our first call today. And a special thanks to the entire PagerDuty customer and user community, and the team for a solid execution during our first quarter as a public company. We look forward to seeing all of you at upcoming investor conferences and hope you have a great day. Thank you very much.
非常感谢大家今天花时间参加我们的第一次电话会议。 特别感谢整个PagerDuty客户和用户社区，以及团队在第一季度作为上市公司的可靠执行。 我们期待在即将举行的投资者会议上与大家见面，并希望您有一个美好的一天。 非常感谢你。
This concludes today's conference call. You may now disconnect.
今天的电话会议结束了。 您现在可以断开连接。如果您对美股 或者 港股也感兴趣, 或者想要了解如何开户, 可以加我wechat: xiaobei006006, 同时也可以拉您进美股交流群哦。