PagerDuty, Inc. Q2 FY2020 Earnings Call

Good afternoon. My name is Camille, and I'll be your conference operator today. At this time, I would like to welcome everyone to the PagerDuty Second Quarter 2020 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. Thank you. I will now turn the conference over to Stacey Finerman. Please go ahead.

Good afternoon, and thank you for joining us on today's conference call to discuss PagerDuty's second quarter financial results. 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 the forward-looking statements. Forward-looking statements represent our management's beliefs and assumptions only as of the date such statements are made, and we undertake no obligation to update these 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 a number of limitations related to the use of these non-GAAP financial measures versus their closest GAAP equivalents. For example, other companies may calculate non-GAAP financial measures differently or may use other measures to evaluate their 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 and the company's most recent quarterly Form 10-Q previously filed with the SEC. Now I'd like to turn the call over to our CEO, Jennifer Tejada.

Thank you, Stacey, and thank you, everyone, for joining us this afternoon for our second quarter earnings call. I'm pleased to welcome Stacey Finerman, our new VP of Investor Relations, to the PagerDuty team. Great to have you here, Stacey. Q2 was another strong quarter, demonstrating our leadership in a rapidly growing category we pioneered: digital operations management. It was our first $40 million revenue quarter driven by our multiple engines for growth: new customers, new users, new product adoption, and international expansion. Revenue grew 45% year-over-year with continued broad demand across industries, verticals, and geographies. We closed the quarter with 12,045 total customers, adding 365 net new customers. Q2 is also a record quarter for expansion of customers spending over $100,000, increasing by 32, totaling 274. This represents an increase of 51% year-over-year, further validating our success in enterprise and in market segments. We grew efficiently, sustaining best-in-class non-GAAP gross margins of 86%. Our success is tied directly to the success of our users and our customers, and we appreciate and respect the trust they place in our team and in PagerDuty. During the quarter, we saw robust demand for our platform as well as strong adoption of our new products, Event Intelligence, Modern Incident Response, Visibility, and Analytics. Demand is driven by a number of macro trends, three of which I will focus on today. First, the amount of time the consumer will wait when a brand experience is not perfect is shrinking to less than 3 seconds. Second, digital transformation comes with the challenges of proliferation in technology, apps, and signals stemming from cloud computing, distributed architectures, and IT modernization. This creates hugely complex technology ecosystems that need to be managed to deliver on customers' expectations. And third, the developer-influenced modern workforce requires intuitive apps that work together seamlessly, scalably, and securely and support employees' needs in today's dynamic real-time environment. Traditional incident management solutions don't address the challenges that come with these trends. Many were designed prior to cloud computing in a time of sequential command-and-control workloads. They often require manual integration, heavy investments to deploy and can't support today's agile work environment. PagerDuty is different. Our platform is designed for additional disruptors as well as the world's largest enterprises. It was architected for real-time, cross-functional work and delivers proven resiliency at scale. 10 years ago, we made a big bet that DevOps methodology would become mainstream and created a cloud-native On-Call Management solution for DevOps teams. Our bet paid off as software engineers voted with their credit cards. Today, our on-call solution is the entry point for our platform, which is now enhanced with automation, machine learning, and intelligence substantially separating it from other solutions. When customers add enhanced products on top of the PagerDuty platform, they gain significant value by shifting from basic coordination of on-call rotation to proactive and automated orchestration, incident management, and real-time operations management. Automation is a key focus area in our new products. A public mobile payments company with point-of-sale solutions used by millions of businesses uses the PagerDuty platform across all of its engineering teams. This quarter, the company added Event Intelligence, which combines machine and human response data using machine learning to intelligently group cohorts and automatically route them to the right teams. As a result, the customer has reduced incidents by 42%, saving hours of unplanned work, improving customer experience, protecting revenue, and reducing operational costs. IG Group, a global fintech leader in derivatives, also adapted Event Intelligence this quarter, reducing their work by 58% and thereby reducing the number of services employed. We estimate their projected annual savings to be over $500,000. We recently commissioned our first real-time work study, which revealed that 51% of executives and employees find out about incidents from customers themselves when they complain or tweet about a bad experience. This causes hours of unplanned stressful work as multiple teams scramble in silos to address each incident. Our Modern Incident Response solution addresses these problems by automatically detecting issues and intelligently orchestrating cross-functional team response, helping teams ensure a better customer experience. IHS Markit is a $26 billion public, global information company providing data, insight, and software principally across three major industries: energy and natural resources, financial services, and transportation. This quarter, IHS Markit replaced a point solution that did not scale effectively with the PagerDuty platform. The company is deploying our platform and Modern Incident Response across nearly 1,000 users. It's also important that companies can determine the business impact of unplanned work and customer-impacting incidents on their bottom line. According to our survey, the cost of unplanned work is increasing, and 86% state that this results in less time to innovate. Teams state burnout, lost productivity, and less development time which, in turn, impact competitiveness and create brand risk. Other companies cannot understand the real-time business impact of incidents. Our Visibility product translates the immediate impact of incidents like outages and disruptions into business outcomes. No other product in the market consolidates a real-time holistic view of operations and correlates people, technology, services, and business impact in the moments that matter. PagerDuty analytics provides operational scorecards and customizable dashboards so companies can apply a proactive approach to managing digital operations based on how teams have historically responded to major issues. The scorecards provide a curated approach to improve team health, technology service health, and business outcomes like total cost of incidents, response cost to the business, and predictive people metrics to detect the response of the team. This is an industry-first and a significant differentiator for PagerDuty. We are excited by the broad visibility of PagerDuty's platform. This quarter, we discovered a number of new use cases where our customers have applied our platform. A late-stage, hydro fintech company that facilitates digital payments for millions of businesses worldwide uses PagerDuty across many of its teams. Having started with developers, they then expanded their users to legal, security, and payment operations teams. The payment operations team uses PagerDuty to coordinate with global banking partners in real-time, ensuring successful transactions. Physical security teams are on PagerDuty for real-time response to physical security issues. The legal teams manage time-sensitive requests from law enforcement, and SecOps teams are on PagerDuty to monitor security risk and ensure compliance. A globally recognized leader in GPS navigation and wireless devices uses PagerDuty to monitor its emergency communication devices where complete reliability is a matter of life or death. The company previously used a basic monitoring service and switched to PagerDuty due to reliability concerns. After recognizing improved reliability, scale, and the value PagerDuty provides, the company has now expanded its use of PagerDuty to its digital transformation initiatives. Another notable new use case led by our PagerDuty.org initiative was Code for America, a nonprofit that focuses on reforming government services to make them simple, easy to use, and accessible to all Americans. They are currently using PagerDuty to support their GetCalFresh program, which improves access to the Supplemental Nutrition Assistance Program, or SNAP, more commonly known as food stamps. GetCalFresh has digitized and streamlined the process for applying for SNAP, reducing the application time by 82% from 45 minutes to 8 minutes and has helped over 1 million Californians gain access to food stamps. From a product perspective, this quarter, we launched a number of new capabilities that help our customers more quickly and accurately respond to issues and opportunities that impact revenue brands and customer experience. In July, we launched Business Response, which advances traditional status page capabilities so responders can seamlessly update business stakeholders on business service impacts and real-time recovery progress in an intuitive, fully automated way. This allows responders to drive faster evolution and enable stakeholders to proactively manage customers' needs. Similarly, in Q2, we enhanced our search capability to provide improved contacts for IT and DevOps teams so they can more easily navigate large organizations to find the right subject matter expert teams and escalation policies during incidents and respond faster in the moments that matter. To further build on our market leadership, we continue to deepen our leadership bench. During the quarter, we appointed a new CMO, Julie Herendeen. Julie comes to PagerDuty having led large marketing teams at companies including Uber, Dropbox, Yahoo!, and Lookout, and now leads our efforts to scale our brands and continue to build our demand generation and growth markets. As we expand our business, we will continue to invest proactively in leadership to support our growth. In the coming quarters, we anticipate adding a Chief People Officer and a Chief Revenue Officer. Overall, we had another strong quarter, and I'm proud of what our team has accomplished to benefit our users, customers, and partners. We are encouraged by our continued strength in enterprise and rapid adoption of add-on products. We continue to see growth in expansion, geographies, new use cases, and new products aided by our self-serve and high-velocity sales motion. Finally, I'd like to highlight our fourth annual user conference summit, which takes place on September 23 through the 25th, where we will be hosting over 1,000 developers and technology executives. We are excited to host industry leaders, including Jeff Lawson from Twilio, Eric Yuan of Zoom, Cynthia Stoddard of Adobe, and investor Andre Iguodala, as well as breakout sessions led by leaders and practitioners innovating with the PagerDuty platform. We look forward to an action-packed week with our community, including new product innovation and best practices we can all learn from. With that, I'd now like to turn the call over to our CFO, Howard, who'll walk through the financial results.

Thanks, Jennifer. We are pleased with our second quarter fiscal 2020 results. Our revenue for the second quarter grew 45% year-over-year to $40.4 million, surpassing our guidance. New customer acquisition, product adoption, and solid growth in international markets contributed to our strong performance. Our non-GAAP gross margin remained robust at 85.7%, and we exceeded our non-GAAP EPS guidance by $0.02, reporting a non-GAAP net loss of $0.07 per share. We finished the quarter with 12,045 customers, a 15% year-over-year increase, and 274 customers with an annual recurring revenue above $100,000, which is up 51% year-over-year, highlighting our strong growth in the enterprise segment. One notable customer is a global Fortune 500 company that provides human resources management software and services. We secured a seven-figure multi-year deal with them this quarter. They are utilizing PagerDuty across various teams, including both a modern DevOps team and a traditional IT and OT team, to enhance communication, boost productivity, and improve visibility into service health. Other significant wins included companies in the financial services sector, where scalability and reliability have strengthened our relationships. As mentioned, our platform is designed for both digital disruptors and the largest enterprises. These expansions are clear indicators of the high demand for real-time operations. Our dollar-based net revenue retention for the quarter was 132%. Over the past eight quarters, our net revenue retention has consistently remained above 130%. Although we anticipate some fluctuations, 132% is a strong figure for our industry and company. Our international revenue increased by 59% year-over-year, now representing 22% of our total revenue. We are excited about our early expansion efforts in EMEA and APJ, and our growth in these regions has been robust. During the quarter, we held two developer and user conferences, London Connect and Sydney Connect. I was pleased to attend London Connect where customers shared their experiences with several hundred participants. Among them was Monzo Bank, a disruptor in financial services with a mobile-only banking model. Their operations depend entirely on digital services, and they use PagerDuty to ensure a seamless experience for over 2.8 million customers. Cambridge Cognition was another featured customer at London Connect, utilizing our platform in clinical work. They are a digital neuroscience firm developing validated software for brain health research and mental well-being. They use PagerDuty to monitor their IT infrastructure and to track suicidal ideation, notifying clinicians and sponsors for timely intervention. Our approach includes ensuring messages are acknowledged and using escalation policies for action. Now, I'll discuss our detailed financial results, which I will provide on a non-GAAP basis. Our GAAP results along with reconciliations can be found in our earnings release. In Q2, the non-GAAP gross margin was 85.7%, consistent with last year's second quarter. Our cloud-native architecture and DevOps methodology drive our efficient operating model. Our strong gross margins create operating leverage, enabling investments in long-term growth. We have maintained gross margins between 84% and 86%, and we expect this range to continue for the rest of the fiscal year. Regarding operating expenses, while we focus on scaling operations for better leverage, we plan to keep investing in growth. Long-term, we expect our revenue to grow faster than our total operating expenses, which will improve operating margins over time. In this quarter, operating expenses reflected our planned investments in sales force expansion and go-to-market initiatives. Non-GAAP operating expenses were $41.7 million, up from $28.1 million a year ago, marking a 48% year-over-year increase, driven by our go-to-market strategy, ongoing product innovation, and infrastructure needs for being a public company. Non-GAAP research and development expenses for Q2 were $10.2 million, up from $7.4 million last year, a 38% increase year-over-year. Innovation remains a priority as we aim to enhance our real-time operations capabilities. We expect R&D costs to rise but remain relatively stable as a percentage of revenue for the rest of the year. Non-GAAP sales and marketing expenses for Q2 reached $21.5 million, reflecting a 49% increase compared to Q2 last year. We made early investments in the first half of the year to boost sales capacity and plan to expand modestly for the remainder of the year. Over time, we expect improved operating leverage with growing subscription revenue. From a marketing standpoint, we will host our annual industry conference, PagerDuty Summit, in September, which represents a significant investment this quarter. We plan further program spending in Q3 for brand promotion, including above-the-line advertising, continuing into Q4. Non-GAAP general and administrative expenses for Q2 were $10.1 million, a 60% year-over-year increase. This growth is attributed to investments made in headcount and systems as we prepared for becoming a public company. G&A expenses were flat sequentially compared to Q1 and decreased as a percentage of revenue. We expect G&A expenses to rise slightly throughout the year while continuing to decrease as a percentage of revenue. Our non-GAAP operating loss for the quarter was $7.1 million, compared to a loss of $4.2 million in the same quarter last year. Our non-GAAP operating margin was negative 17.7% this quarter compared to negative 15.2% last year, with the reduction mainly due to G&A investments related to our public company status. We anticipate improvements in operating margins over the long term. The non-GAAP net loss for the second quarter was $5.3 million, equivalent to a net loss of $0.07 per basic share, compared to a non-GAAP net loss of $3.8 million or $0.18 per share in the second quarter last year. Turning to the balance sheet, we ended the quarter with $341 million in cash, cash equivalents, and investments, a $213 million increase since the end of fiscal year 2019, mainly due to proceeds from our IPO, slightly offset by year-to-date operating losses. We generated $2.2 million in operating cash flow in Q2 compared to a usage of $4.7 million in the prior year, primarily due to timing in working capital changes. Free cash flow was $1.3 million in Q2, a significant improvement from negative $5 million last year. The free cash flow margin was positive 3.3%, compared to negative 18.1% in Q2 last year. In the second half of the year, we're planning several capital expenditures related to our office expansion. In the short term, we don't expect positive operating cash flow or free cash flow. While we aim for sustainable free cash flow in the long run, it may not be linear due to fluctuations in billings, working capital, and capital expenditures as we expand our offices. Moving on to our guidance for the third quarter and the full fiscal year 2020, we expect revenue to be in the range of $41.5 million to $42.5 million for the third quarter, leading to a full-year fiscal 2020 estimate of $162 million to $164 million. We anticipate a non-GAAP net loss per share in the range of $0.09 to $0.10 for the third quarter and $0.36 to $0.37 for the full fiscal year 2020. This forecast includes the cost of our user conference in Q3 and advertising program expenditures. The expected basic shares outstanding for Q3 and the full fiscal year 2020 are 76 million and 65 million, respectively. With that, Jennifer and I are happy to take any of your questions.

And our first question comes from Sterling Auty with JPMorgan.

Hi, guys. So, net retention rate kind of came down. I know it does fluctuate, vary per quarter, but trying to see if pricing is becoming an issue with the competition and how the level of expansion deals looks in the quarter versus the last couple of quarters. Thanks.

Yes. So in terms of dollar-based net retention rate, the 132 number is a strong number for our industry and for our company. And we do expect to see that fluctuate from quarter to quarter. A couple of points to note, though, with respect to Q2, we did see a couple of our primary competitors churn or downgrade within the quarter. And I think one other characteristic is that this was a quarter for us of intense hiring. In fact, from a sales team perspective, we have our highest proportion of our sales force ramping in this quarter compared to prior years as we front-loaded our hiring in H1.

Got it. Thanks for taking the question. I appreciate it.

And our next question comes from Matt Hedberg with RBC Capital Markets.

Hey, guys. Thanks for taking my question. Jen, on the top of the new product attach, you launched a number of products over the past year. You talked about another one in this call, a couple examples. I am curious, when you look at these family of products, was there one that we should be keeping an eye on more in terms of attach or just sort of overall demand from an add-on perspective?

Hi, Matt. Good to hear from you. We were really encouraged by the new product adoption that we're seeing. Event Intelligence and Modern Incident Response in particular are products that are sort of the natural next step for a customer that has already automated their on-call environment, is looking to use beyond simply improving their response to becoming more proactive and more predictive by leveraging machine learning on automation. And we also see that some of our products suit the more senior personas whereas other products suit sort of all of the developer and operating community. So there are sort of bigger horses for different courses. But the next sort of logical step, I think, for our customers as they add on products is Modern Incident Response and Event Intelligence.

That's great. And then, Howard, one for you. I know you talked – we talked a lot about trailing 12-month billings as probably the best indicator. But technically, the billings still, I think, accelerated sequentially. It looked like deferred revenue is pretty strong this quarter. Can you remind us again how we should think about calculated billings given your monthly contracts and the fact that a lot of your customers co-term deals?

Yes. Well, thanks, Matt. Obviously, we're pleased when we see some acceleration when it comes to billings. To your point, we do have a few items that create some fluctuation in that which includes the fact that we do have 20% of our revenue coming from monthly customers who are on a month-to-month arrangement with us. And then because of the nature in which we contract, those annual customers initially do then will co-term and so end up with shorter period billings associated with those. So we do tend to look at it in terms of on a trailing basis to get some sort of view because that helps balance out those fluctuations. But again, it's one of those things that does move around because of these factors that I mentioned including the seasonality of our renewals.

Great. Thanks a lot, guys.

And our next question comes from Rob Owens with KeyBanc Capital Markets.

Yeah, good afternoon. Just want to drill down a little bit again into the net renewal rates. I did hear you say churn or downgrade during the quarter with a couple of customers. Would love a little more clarity on that and where you are seeing success with the expansion. Can you help us understand how much of that is seat-based versus maybe product-based at this point?

I can take that question, Rob. It's great to hear from you. I want to clarify that, as Howard mentioned, we had a few competitors that left our platform in Q2. It's common in our business to see some customers come and go. However, our churn rate remains among the best in the industry, and we are particularly proud of the growth we've experienced in enterprise. This quarter, we added 32 customers who are spending over $100,000 with us. Additionally, we continue to see strong expansion in user adoption across various teams and use cases, which drives the majority of our growth. We are also excited about the new product adoption we are witnessing. I want to emphasize what we mentioned last quarter: these new products are still in the early stages. While we do not provide specific revenue breakdowns for these new offerings, we can confirm that customers are showing great interest and enthusiasm for advancing their operational maturity by leveraging machine learning and automation to decrease costs, time, and risks associated with modern incident response.

Great. Thanks for the clarification there on the competitor churn. Number two, with the success you're seeing internationally, can you talk about go-to-market overseas? And is there any unique localized competition or anything different from a competitive landscape?

I think go-to-market is a lot like it is in North America. Most of the accounts we engage with are greenfields, and that's the case across our customer base. While we do see some competition from time to time, I'd emphasize that we still really see it as a large and nascent market, and a lot of customers are really just phasing through how to improve the time it takes for them to respond to demanding customer requirements when their technologies are getting more complicated. We're really proud of the growth that we're seeing with very new teams in both EMEA and APJ. Those teams have only been in market for about 2 years, and some of the most interesting use cases are coming out of those markets. Again, I would also just reflect that in international, very similar to North America, the adoption of our platform is very horizontal. We see it across just about every single vertical and across different kinds of teams.

Great. Thanks, Jennifer.

Our next question comes from Sanjit Singh with Morgan Stanley.

I have a strategic question for you, Jennifer. We've observed significant consolidation in the IT operations management space, particularly around performance monitoring, where several acquisitions have taken place. Many of these companies are your partners. In terms of long-term strategy, do you believe it's best to continue with the partnership approach with performance monitoring vendors and others in the ecosystem, or should you integrate more of that functionality directly into the PagerDuty platform as part of your enterprise strategy? I would appreciate your thoughts on this.

Thanks for the question, Sanjit. What I would say is that as we see consolidation in that particular part of the market, it really strengthens our position because it becomes increasingly important to our customers to have a central, independent, third-party correlating events from all the different points and monitoring environments within the ecosystem. And that's not limited to APN. It includes security, ticketing, physical environment, et cetera. And so you're correct that we do partner with the APN providers. And in fact, most of them like Datadog, New Relic, AppD, and Cisco are our customers as well. So there's a very strong complement. And the way to think about it is as we consume those signals long-term, we're not just leveraging what's happening right now in the moment, we're leveraging 10 years of data in the platform that helps us to really correlate and make sense of what's happening regardless of how complex or how distributed the environment is. The second thing that I would say, which is very different from the approach of the APN providers or traditional monitoring and log providers, is that we're really focused on automating and intelligently orchestrating the people and the work itself. So every time an issue or an opportunity runs on the platform, the platform is learning from it and then providing more proactive, predictive capabilities to the teams the next time around. And that continues to be, I think, a really important part of our long-term strategy, the fact that our focus is actually on the people and helping them orchestrate and engage effectively even though their organizations and the ecosystem is getting more complex. So we continue to see ourselves as being central in that ecosystem as opposed to a bias towards one particular type of capability or a subsegment or an ops.

Understood. And maybe just sticking with that, those sort of longer-term themes, as customers kind of move more and more to these container-based, microservices-based, Kubernetes standard type application architectures, how does that impact PagerDuty from a growth and positioning standpoint in your view?

So containerization so far has been great for PagerDuty because it actually creates another layer of complexity to monitor, but it doesn't replace some of the legacy environments that our customers have to contend with on a day-to-day basis. And I would say even with some of our younger disruptive customers, because of the pace at which technology and architecture has changed, they all have to deal with some kind of hybrid mix of native, new cloud-centric technology, on-prem, traditional legacy technology and the complexity and the change that accelerates as you have people doing 10, 20, hundreds of deploys a day, makes it impossible for you to manage. So containerization has actually been a good tailwind for us alongside of cloud and the broader sort of umbrella of digital transformation where you're trying to do more, you're trying to shift your investment to innovation and application development, and yet the complex technology sitting behind it isn't getting any easier to manage. There's just a kind of different set of challenges, I would say, that come with this containerization and the distribution in architecture.

Great. Appreciate the thoughts, Jennifer.

And our next question will come from Bhavan Suri with William Blair.

Hey, guys. Thanks for taking my questions. And a nice job there on the quarter. I guess I wanted to chat a little bit on the penetration opportunity of the core product. If I think about the core On-Call Management product and you think when you look at the seat count perspective within average customers, I'd love to sort of get an idea how you think about sort of the remaining runway for additional seats within larger customers. You got some customers deployed more than 20,000 seats and you think about sort of that spreading. I'd love to sort of think about how you guys think about attacking that opportunity and what the size of that opportunity within the existing base might be.

Yes, the way we think about that is, I think the traditional starting point for most of our customers is in developer ops and IT teams. And then you see this natural expansion, organic expansion, into related organizations like customer support or security operations, et cetera. We don't have a single customer that is sold out. All of our customers still have employees that have real-time responsibilities that deal with complexity in their day-to-day operations that are not on PagerDuty. So we think the opportunity continues to be significant within our existing base on our core products as well as the opportunity to acquire new customers and expand through add-on products. What I would say is we continue to work very hard at making our products simple and easy to use that you don't have to be a developer who can script to kind of understand how it works. That includes things like removing jargon from our interface and also articulating the value and how our products can be leveraged and applied to different use cases than sort of what's typical as opposed to sort of allowing customers to have to figure it out for themselves.

Got it. Got it. That's helpful. And then I know someone asked about competitors, there's a little bit of consolidation. But I want to touch on some of the AI Ops entrants, right? So you think some of the monitoring guys are coming in, so guys like Dynatrace have opened up their platform to work with more third-party systems and data sources and addressing sort of the AI Ops opportunity. I guess are you seeing it in customers at all? Do you see any of these new AI Ops kind of entrants in that space? Are you seeing monitoring entrants on deals? Or is that sort of still pretty much the traditional guys or guys that have been acquired and consolidated like VictorOps or whatever.

So first of all, most of our deals are uncontested. There are still a lot of greenfields where we're replacing older solutions. Second of all, I would say that we're not seeing AI Ops as a competitive way at all. And in fact, all those people that you mentioned use PagerDuty and are beginning to leverage PagerDuty for things like event management or event intelligence. So I don't see them coming that way. And I think what's important is there's quite a technology effort to not just consume a signal but then correlate that signal. And you need a very strong data set to work from in order to make sense out of a very complicated set of events that in a traditional monitoring environment will each look like their own separate incidents and would be pushed to a single silo team whereas with PagerDuty Event Intelligence and Modern Incident Response, as those events come together through our platform, they're consolidated into a single related event and then orchestrated to maybe a handful of people instead of hundreds of people across 5 or 6 teams working on it. So the workflow is different, and then our ability to orchestrate teams and intelligently route insights and actions direct to the right teams and right subject matter experts is very differentiated. The last thing I'd mention is Visibility where we talked about helping people in the moment. We understand the context of what's happening in business, for instance, changes in transaction volume or changes with shopping cart abandonment at the same time they're experiencing a complicated technology incident, which helps responders prioritize immediately, spontaneously, the things that are the most important for the business in that moment. And that, again, is quite different relative to the AI Ops part of the world.

That was super helpful. Thank you, guys and nice job there. Thanks for taking my questions.

And our next question comes from Rishi Jaluria with D.A. Davidson.

Hey, guys. Thanks for taking my questions. I wanted to start by drilling down on the $100,000 adds, now 32 and getting to 74 in the quarter. Maybe help us understand, was that just a result of better execution in terms of sales and go-to-market or any other contributors there? And then maybe directionally help us understand, was that mostly existing PagerDuty customers that just expanded with both products and seats? Or were some of those net new customers that weren't PagerDuty customers before?

Thank you. I'll answer your second part of your question first because it's easier to remember. The customers over $100,000 is a mix of existing customers and net new customers, but the majority are existing customers that are expanding within their dev teams or to new teams or new use cases or new products within their relationship with us. And if I think about what's driving the strength in that segment, I think one of it is just market demand from enterprise and mid-market and the fact that there are not other scalable, resilient, secure platforms available to them. Some of those customers have tried point solutions or internal solutions and have not been successful. The other thing I would say is some of the macro trends that we're seeing, which is most of these large companies and even large, disruptive, mid-market players are trying to move very fast. They're investing heavily in digital transformation, which we facilitate readily. A lot of them are involved in cloud adoption or cloud migration. And those tend to be tailwinds that really support that kind of expansion. And then last, I would say I think we are building credibility because we are proven in more than half of the Fortune 100 and over a third of the Fortune 500 as delivering the enterprise scale and enterprise-grade offering. We've also had feedback from a lot of these customers around how excited they are about the roadmap and the fact that as their operational maturity advances, there is somewhere for them to go.

Got it. That's really helpful. In thinking about the early positive reception you've had with Event Intelligence, Incident Response, and some of the other ancillary products, have you considered discussing metrics like attach rates, even for customers contributing $100,000 annually? Perhaps at the Analyst Day or another opportunity, it would be great to share any early indications of how the platform's growth is progressing. People tend to get excited when the platform aspect of the story begins to take off, and while the foundational elements are clearly in place, any insights you could provide on that would be appreciated.

Thanks, I appreciate your feedback there. At this point in time, we don't have an intention to share that data. Again, I think these products are early. We've released Event Intelligence into the market last summer, so it's been out in the market for just a year, and the other products have all followed. And just earlier this quarter, we've released Business Response, which allows customers to not just manage their technology incidents and issues and opportunities but helps business leaders drive the corporate response that they need to engage go-to-market to get ahead of challenges with their customers or legal or PR. And so it's a pretty diversified offering, and I think from where we are right now, we don't intend to share attachment data.

Okay, got it. Understood. Thank you so much.

And there are no final questions at this time. I will now turn the conference back over to management for closing remarks.

Thank you, everybody, for taking the time to join our call. And thank you for the entire PagerDuty customer and user community and the team for another solid quarter. We look forward to seeing many of you at our upcoming summit later this month. Thanks very much, and have a great night.

And that concludes today's conference call. You may now disconnect.