Good day everyone and welcome. Thank you for joining in. While our attendees are piling in pretty quickly, just a quick technical announcement. We're just about to go forward and in just a moment you'll hear from Head of PagerDuty's IR, Willa McManmon.

Good afternoon and thank you for joining us to discuss PagerDuty’s Third Quarter Fiscal 2021. With me on today’s call are Jennifer Tejada, PagerDuty’s Chairperson and Chief Executive Officer; and Howard Wilson, our Chief Financial Officer. Statements made on this call include forward-looking statements which 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 belief and assumptions only as of the date such statements are made and we undertake no obligation to update these. During today’s call, we will discuss non-GAAP financial measures which 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 a tool 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. With that, I will turn the call over to Jennifer.

Thank you, Willa. Can you hear me okay? Thank you, Willa and thanks to all of you who have joined us today. We are proud of our Q3 results and we were well above our guidance and consensus as many large enterprises seem to find a new normal returning to strategic investments in PagerDuty's digital operations platform. We are confident this momentum will continue throughout Q4. I'm personally grateful for the help of our customers, our teams, and families, as we all face this pandemic together and I extend our hope that you and your families are safe and well. Building on a strong start, momentum continued throughout Q3 led by strength in the enterprise and mid-market segments. Year-on-year revenue was 26% and dollar-based net retention improved from 116% in the previous quarter to 119%. Our leading indicators including pipeline, web traffic, and combined free and paid customer acquisition growth have trended positively. Our teams performed well across the globe with an outperformance in North America and EMEA and strong growth in Asia-Pacific. In our third quarter since appointing new go-to-market leadership, improved sales execution resulted in increased productivity, close rates, and average revenue per customer. The reception to new products we launched in September exceeded our expectations, especially their response to our expanded automation and auto remediation capabilities with the acquisition of Rundeck which we closed in October. Rundeck creates a new and distinct land opportunity for us with enterprise and mid-market DevOps and IT teams and expands our total addressable market to include automation use cases within and beyond incident management. This deepens our competitive moat. PagerDuty's guiding value championing the customer was rewarded this quarter. Many of our largest customers made strategic investments to expand on our digital operations plan, which leverages advanced product capabilities utilizing AI to deliver automation and quantifiable return on investment. In Q3, we captured reinvigorated demand across most regions, segments and verticals, including deals above $1 million in both tech and financial services with large deal momentum in retail as well. Four of the five largest software companies in the world expanded on PagerDuty in the quarter to accelerate their DevOps transformation to full-service ownership. This included a very significant expansion deal with Salesforce, who is rolling out PagerDuty's digital operations plan to over 10,000 employees, including multiple teams outside of engineering in support of their ongoing mandate to ensure great customer experiences. We also made excellent progress in our shift from on-call automation to our digital operations platform as customers continued to embed PagerDuty as essential infrastructure. Our digital operations plan accounted for nearly three quarters of our net new ARR, up a striking 65% from last year. We added industry leaders and innovators including Bell Corp., Chanel, Cred, Lego, LegalZoom, and MSCI. We saw significant ongoing expansion with customers including Discovery Communications, DocuSign, Pearson, Datadog, Yahoo Japan, and Vanguard to increase their use of PagerDuty to accelerate operations, maturity, and performance across their businesses. We also saw digital acceleration increase; every organization is grappling with the new reality that what were once structured, planned, and predictable, is now increasingly unstructured, unplanned, and cross-functional. The shift to digital-first is a one-way door. Consumers appreciate the safety and convenience of life online and they have little patience for a less than perfect experience. Yet the teams responsible for seamless digital operations historically increased in events, which went unmanaged can cost more than $0.5 million per minute. Our customers' event and API traffic was up 135% year-on-year, yet our Event Intelligence solution is helping to prevent events from progressing into incidents. Even under this increase in traffic, PagerDuty has continued to deliver resilience at scale, maintaining four-nines reliability for our customers' businesses. This is critical as the PagerDuty platform essentially operationalizes trust for our clients with their customers while meaningfully reducing the cost of their operations. According to IDC, PagerDuty customers are realizing a two-month payback period, with an average benefit of over $3 million annually and a three-year ROI of nearly 800%. IDC also estimates the profound shift to digitization will account for 65% of global GDP by 2022. This drives three strategic imperatives for our customers, which are long-term tailwinds for PagerDuty: digital acceleration, cloud migration, and DevOps transformation. Our digital operations platform empowers new customers across verticals and geographies as they tackle these imperatives. One of Australia's largest banks with over $600 billion in assets is rolling out PagerDuty across multiple teams with the potential for thousands of users in a multi-year partnership on our digital operations plan. PagerDuty provides them with rich real-time insights to proactively automate and respond to incidents where every minute of downtime is critical. Our platform leverages AI to proactively reduce alerts and resolution times for incidents, increasing the productivity of their DevOps, ICS, and deployment teams while saving a projected $1.5 million annually. As a reminder, most of our new customer lands are Greenfield, the mark of a nascent market, where many companies are still early in their DevOps transformation. MSCI is a leading provider of decision support for the global investment community undergoing an executive-led DevOps transformation. They replaced their in-house tools with PagerDuty to scale up over 1,000 users with our workflow automation. PagerDuty will help MSCI reduce their projected thousands of incidents monthly, improving availability, reducing user-generated tickets by 50%, and decreasing the number of ServiceNow tickets by 65%. Like many of our customers, MSCI embraced PagerDuty to reduce their reliance on manual processes and antiquated ticketing systems that cannot address the business-critical customer-facing issues which require real-time insights, action, and automation. We also grow through serving new teams and use cases, particularly within customer service and SecOps and Rundeck's runbook automation. Globo, a language service provider that connects doctors and patients with interpreters, adopted our new PagerDuty for customer service solution as they pivoted in response to COVID. Before Globo, it was used at the doctor's office, but saw increasing demand for telemedicine. This resulted in a spike in incidents and customer dissatisfaction with their video platform. So, they turned to PagerDuty to drastically improve workflows between customer support and engineering teams. Additionally, PagerDuty's Event Intelligence has enabled automated escalation, allowing teams to focus on building out and scaling new products and services while reducing disruptions by more than 60%. Now, Globo proactively resolves issues, providing a great experience for doctors and patients uninterrupted. At our summit in September, we unveiled new capabilities resulting in strong pipeline growth, including service dependency insights, machine learning-based recommendations, and change management insights. While most of our customers have accelerated their digital transformation, the reality is they have infrastructure and digital assets that span data centers and multiple private and public clouds. We are the only solution provider enabling incident prevention by capturing and consolidating insights from across these environments, simplifying complex data, and intelligently actioning and automating work. This quarter, we cemented our leadership position at the center of our customers' hybrid, cloud, and on-prem ecosystems with new partnerships. Along with Rundeck, we achieved over 500 ecosystem integrations, many of which were built by partners like Cloudflare, Freshworks, Puppet, and Symphony who are helping us to force multiply PagerDuty's platform. Q3 was also a record quarter for partner sell-through as we expanded our presence with channel partners through joint campaigns. We welcome Tata Consultancy Services, one of the top global systems integrators in the world, to our growing partner ecosystem. They're developing apps to support industries beyond our core verticals, selling and implementing PagerDuty. We also continue to expand our relationships with cloud providers, including this week's announcement as a launch partner for Amazon DevOps Guru. PagerDuty leverages the outputs from DevOps Guru, automating the workflow, and enabling customers to comprehensively manage their cloud, hybrid, and on-prem environments. Not only has PagerDuty been available in the AWS marketplace for over the last few years, this quarter, we released new integrations to AWS Control Tower and AWS Outpost to help customers on their cloud migration journeys. These integrations and partnerships validate our platform and help extend our reach to new markets and channels. During the quarter, we advanced programs to improve representation and equality at PagerDuty. In September, we open-sourced our first annual diversity report, not to imply that we have all the answers, rather in an effort to hold ourselves accountable and share what we have learned with other companies seeking to put sustainable programs in place. We also enlisted as a founding partner of the board challenge, a movement to improve the representation of black directors on corporate U.S. boards. This week, we announced the appointment of Dr. Alec Gallimore to PagerDuty's Board of Directors. As the Robert J. Vlasic, Dean of Engineering at the University of Michigan, Alec has a unique view on where engineering and software are headed and we are thrilled to welcome him. Through PagerDuty.org, we announced over $0.5 million in new grants to support voter engagement, time-critical healthcare, and to match employee giving. Overall, Q3 was a great quarter for PagerDuty and an important inflection point. I am both optimistic and confident in our growing market leadership position where innovation has expanded our TAM well beyond alerting and on-call to AI ops, automation, and more broadly digital operations. I am confident in our new opportunity with our enhanced automation offering, opening up new use cases while being additive to our leadership and incident response. And most importantly, I have huge trust and confidence in our incredibly committed and resilient team who continue to focus on solving important customer problems while raising the bar, deepening our leadership bench, and building on the innovative, diverse, and inclusive culture that differentiates us. I am grateful to our team, our customers, our users, and energized by the bright future ahead of us. Howard, over to you.

Thank you, Jennifer. We saw strong momentum in the market and in our business in Q3 with revenue growth of 26% year-over-year to $54 million coming in above the high end of our guide. Our international business was strong with robust revenue growth of 36% year-over-year driven by expansion. We also saw increasing economies of scale as we streamlined our business. Non-GAAP gross margin came in at 87% in the quarter, above our target range of 84% to 86%. Non-GAAP operating margin improved markedly at negative 12% versus negative 22% in the prior year, and non-GAAP EPS was ahead of our guidance at negative $0.09 per share. We delivered positive operating cash flow of $5 million in the third quarter and we were free cash flow positive by $5 million. Beginning early in Q3, we saw customers shift back to strategic projects where improved expansion, along with our Rundeck acquisition helped lift our dollar-based net retention rates quarter-on-quarter to 119%. This despite the COVID-related churn and contraction we noticed in Q2, we saw particular strength amongst our enterprise customers, where dollar-based net retention increased sequentially above 120%, as several large customers doubled down with PagerDuty in support of their digital initiatives and DevOps transformation. In addition, for the seventh consecutive quarter, approximately one-third of our enterprise customers expanded with us. Average deal size during the quarter and churn and contraction improved significantly, returning to pre-COVID levels. Our new free offering has been well-received, and the number of companies benefiting from our platform, both paid and free, grew by more than 80% year-over-year. Our platform is sticky because it distributes real-time mission-critical work, which is why we continue to have a renewal rate of about 95%. The mix of our business continues to shift to more predictable contracts, but the proportion of customers on term contracts versus month-to-month is consistently increasing, ending the quarter with 87% of our revenue coming from customers on term contracts versus 82% a year ago. Robust expansion growth year-over-year, quarterly billings growth of 32%, trailing 12 months spending growth of 24%, and remaining performance obligations of 45% are all strong leading indicators of the tailwind we have discussed in the past. The large expansion including some multi-year contracts with enterprise customers supports the growing importance of cloud adoption, digital acceleration, and DevOps transformation. Customers investing more than $100,000 a year with us grew 32% and customers over $500,000 grew 40% compared to Q3 last year. Non-GAAP operating expenses were $53 million compared to $46 million in the prior year, a 16% increase versus 26% year-over-year growth in revenue, demonstrating the leverage of our landed expand business model and sustainable operating efficiencies. Non-GAAP research and development expenses were $13 million compared to $11 million in the same period a year ago, an 18% increase over the prior year. We place a high value on innovation and will continue to invest in product differentiation and competitive advantage. Non-GAAP sales and marketing expenses were $28 million or 51% of revenue compared to 59% of revenue in the prior year. We continue to balance investment here with topline growth and the demand signals in the market. Non-GAAP general and administrative expenses were $12 million for the quarter or 23% of revenue as compared to 22% in the prior year. Our non-GAAP operating loss was $6 million compared to a loss of $9 million in the same quarter last year. Our non-GAAP operating margin was negative 12% in Q3 versus negative 22% in Q3 of 2020. This was in part due to reduced spend on travel and a shift in program spend because of COVID, as well as our ongoing initiatives to scale up efficiently. Non-GAAP net loss improved to $7 million, a net loss of $0.09 per share compared to non-GAAP net loss of $8 million, a net loss of $0.10 per share in the third quarter of last year. Turning to the balance sheet, we reported $5 million in positive operating cash flow in the third quarter, about the same as the quarter of fiscal 2020 with $3 million. Free cash flow increased by 100% to $5 million in Q3 compared to $2 million in Q3 of fiscal 2020 with a free cash flow margin of 8%, well above 5% in the third quarter of last year, which demonstrates the efficiency of our business model and improved leverage as we scale. We ended the quarter with $556 million in cash, cash equivalents, and investments. For the full year, we expect to be operating cash flow positive for the first time and we're excited about our ability to generate positive operating cash flow while still investing in innovation. As Jennifer mentioned, we completed the acquisition of Rundeck this quarter, the integration is on track racing to plan and we're fired up by the overwhelming enthusiasm from our customers around this powerful combination and even more so by the value we can bring to our customers through enhanced automation and self-remediation. With Rundeck, we expect to see increased demand for our platform and ample opportunities for new cross-sell within the expanded TAM it brings. Given the momentum in the third quarter, stronger demand signals in the markets, and our confidence in our pipeline and team, we are raising fourth quarter fiscal 2021 guidance. We expect revenue in the range of $57 million to $58 million, representing a growth rate between 24% and 26% versus the fourth fiscal quarter of 2020. Non-GAAP net loss per share is expected to be in the range of $0.11 to $0.12, with basic shares outstanding of approximately 82 million. This implies an operating loss margin in the range of 14% to 16%. This incorporates expense adjustments associated with the acquisition of Rundeck this past quarter. For the full fiscal year 2021, we expect revenue of $211 million to $212 million, which at the midpoint represents a 27% growth rate. Non-GAAP net loss per share is expected to be in the range of $0.29 to $0.30 with basic shares outstanding of approximately 80 million. This implies an operating loss margin of 11%. Before I turn to Q&A, let me reiterate Jennifer's comments on the tailwinds driving our business. DevOps transformation, digital acceleration, and cloud migration are not nice to have for our customers. They're imperatives that are critical to their success and these tailwinds are returning to pre-COVID momentum. PagerDuty's platform plays a unique role at the center of the digital ecosystem, reducing complexity, managing unplanned critical work, improving productivity, and ensuring topline business outcomes. We are confident that we will continue to see these tailwinds drive our business as we accelerate our growth in the coming year. With that, I will open up the call for Q&A.

Thank you so much, Howard. We're going to open up for Q&A from our analysts and we do have an order to go through here. It looks like we're going first to Joel Fishbein with Truist. Joel?

Sorry, I'm unmute.

There you go. Thank you.

Congratulations on the impressive results. Jennifer, I'll start with you. Your report this quarter is very positive, which is evident in your voice and Howard's voice as well. Coming out of COVID, what do you see as your top priorities for scaling PagerDuty from this point forward?

That's a great question, Joel. We need to keep delivering innovation for our customers. I believe we have strengthened our competitive advantage over others that are primarily focused on on-call. You can see this in the adoption of our digital operations platform plan. Continuing to innovate, especially around AI Ops and automation to support new use cases, is crucial for us. I mentioned this in relation to our freemium plan. Our strong gross margins provide us with the opportunity to experiment with freemium. I was thrilled to see that the combination of new free and paid accounts grew 18% year-over-year, which is part of our effort to expand our reach. We need to build our brand, and it's still a nascent market with over 45 million developers and IT personnel. We need to locate them and get them onto the platform. Therefore, acquisition and branding marketing is essential to promote our brand and help the market understand our offerings. Lastly, I want to reiterate that our customers rely on us to deliver reliability at scale. The COVID experience has taught us that even with significantly increased incidents—over 40% growth in incidents and 135% growth in events and API traffic this quarter—our platform has continued to function effectively. As we scale with important customers and see more engagement on our platform, we must maintain those high operational outcomes.

Great. Just one quick follow-up. In this Cyber Monday, apparently, a lot of e-commerce companies had some very difficult time serving their customers and I was just curious if you've seen an uptick in inbounds as late as this week, as a result of some of these e-commerce companies struggling to keep up with some of their challenges that they had from an IT perspective?

This is precisely why branding is so important for us and we did have a reasonably strong quarter in retail. I think I mentioned that in my comments, retail and e-commerce will continue to be a really important segment for us. I would say this, I think that we're just starting to scratch the surface now that everybody's ported their businesses into a digital environment; they now have to figure out how to operate them successfully. And it's really a challenge in that journey for many of our customers, which is why we believe that we're going to continue to see momentum and long-term tailwinds, particularly as it relates to hardening up the operations behind digital acceleration, supporting our customers in cloud adoption and cloud migration, which you've seen continues to grow, and then DevOps transformation, which is still very early.

Great. Thank you so much.

Thank you, Joel. And next we'll go to Kingsley Crane with Berenberg.

Hi, congrats on the quarter. Thanks for taking my questions. First one would be the excellent traction with partner ecosystem integrations, a number of companies Cloudflare, Freshworks. Symphony, are you seeing any particular areas that you have the most traction or that surprised you the most?

Some of the areas, we always look at our partner ecosystem to sort of see where the market is going and we've seen a lot of interest in security and customer service, which is why you see us investing in those areas. Automation continues to be, I think, a big opportunity. But I think what you'll also see is that when you think about PagerDuty more generally as a platform that helps automate the detection of real-time unplanned unstructured work, and automate those workflows of getting that work to the right distributed team and making sure it gets resolved, so closing the loop, you start to see lots of new use cases where partners are discovering a PagerDuty integration can help them close the loop on either the analytics that they provide, or the services that they're trying to enable. And so I think we'll continue to see that as a trend. I'm really excited to see more and more partners building on PagerDuty.

That's really encouraging. And then one quick follow-up would be really encouraging to hear the strengths in the largest enterprises. In this segment, are you hearing anything new? Is it that when rates are improving against competitors, like Opsgenie? Or is it really just that these customers are recognizing the best-in-class ROI?

Well, I'll remind you of a couple of things. One, most of our new lands are Greenfield, so we're often replacing manual behaviors, or spreadsheets, et cetera. So, again, still early, and a lot of customers are starting to accelerate their DevOps transformation, because their teams are now working remotely; their businesses are now digital. We also don't see much competition from other players; over 80% now, I think, of our users are enterprise users. So, that's been an area that we have talked about as a strategic focus for over the last two or three years. And it's nice to see that starting to manifest itself. But I really do think that the leverage of our data, which is I think, a big differentiator over a decade of data on responders, workflows, events, and incidents themselves with AI and some of the solutions that we put out into the market over the last year or two has started to mature and gain traction and that's been a big part of it. I would also tell you that a lot of these large enterprises, in that shift to digital are starting to add not just new products and services, but new teams. They bring their devs on first then maybe their IT operations teams, often security; we're increasingly seeing interest from customer service teams, and that's you starting to see PagerDuty leverage more and more across the organization.

And I think Jen, the one thing I would just add to that Kingsley, is that we've been remarkably consistent in terms of having our enterprise and mid-market customers expand with us. And again, this was another quarter where we saw roughly a third of them expand with us, which is always good to see. But we have seen companies sort of getting back to pre-COVID type activity. So, the sorts of projects that were associated with the things that Jen mentioned, like DevOps transformation or cloud migration, those projects are back on the table happening. And that's certainly proving to be a tailwind for us. And that's helping to sustain that 80% of our revenue coming from the enterprise and mid-market segment.

Awesome. Thanks, guys. Congrats again.

Thank you.

Thanks Kingsley.

Thank you. Rhys McDonald from Credit Suisse is next.

Great. Thanks for taking the questions and congratulations on a strong quarter. Jen, I noticed after your summit in September, the landing page of your website changed to include some solutions by industry. Should we think of those changes as more of a targeted form of marketing? Or are there broader changes on the horizon, either from a go-to-market perspective, or from a packaging perspective? How should we think about that?

Well, I appreciate you noticing that, I know the marketing team will be thrilled to hear that someone's actually looking and paying attention to what happens on the website. We definitely see some strength in certain verticals that tend to be digitizing faster, so to speak, seeing more of their business moving to digital apps. And we've talked in the past a lot about the tech and consumer internet, e-commerce, retail, and financial services has been a really strong performing category for us. And I think two things have really happened. One, customers are becoming more willing to talk about their stories and share what's working for them and we really want to open-source some of their learnings so that our other customers can move faster and that's a big part of what we do from a customer marketing perspective. But also, I think there are so many different ways that you can apply PagerDuty helping some of these vertical industries understand the sort of natural places to start, where do I kick-off my use case makes a lot of sense. But we haven't had verticalized the product and I think this is a really important differentiator for PagerDuty. It's very easy to use, it's very easy to deploy, you can be up and running in five or 10 minutes on PagerDuty, start to add teams, et cetera. So, it doesn't require us to have to verticalize or package the product. But I think getting the word out on how customers are leveraging PagerDuty and really importantly, and you heard me talk about the IDC research today, like the kinds of ROI our customers are seeing, I will tell you that increasingly, our large customers are growing tired of having to pay huge multi-year licensing fees and wait three to four years to get ROI. And we talk about to enterprises a two-month payback with an ROI of over 800%. And I think if you're someone championing a new SaaS solution in your organization, being able to quantify that kind of return is really helpful.

It makes a ton of sense and I appreciate the color. And maybe if I could Howard, one for you just a little bit of housecleaning, if I could around the acquisition. Could you comment on how many of your customer ads in the quarter came from Rundeck? And to the extent that there was significant overlap, could you comment on whether or not there was ARR contribution in your expansion rate this quarter?

Thank you, Rhys. We completed the Rundeck acquisition in October, and its contribution to this quarter was relatively small and not significant. The customer base they brought is also small, as they are an early-stage company. Therefore, the number of new additions is not substantial. However, they did provide a positive impact on our overall ARR, although we do not disclose specific ARR figures. There has definitely been a positive effect from this acquisition. What excites me the most is that it is a logical combination, and during discussions with customer accounts where I am an executive sponsor, there is a strong sense of positivity about how this will help them connect the processes from detection to remediation by integrating PagerDuty and Rundeck into one family.

Makes sense. Thanks again for taking the questions. I appreciate it.

Thank you, Rhys.

Great, thank you, Rhys. Next we'd like to go to Sterling Auty from JPMorgan. Sterling?

Yes, thanks. Hi, guys. Howard, maybe just to follow-up and put a fine point on it, I didn't quite catch in terms of the Rundeck acquisition, what would be the revenue contribution that you would expect in the fourth quarter because people want to understand how it impacted guidance?

Yes, so we haven't provided a breakdown of Rundeck in terms of what the specific revenue contribution would be. What we did say at the time of doing the acquisition that we saw this as being a company on an annual basis that would have revenue within the high single digits, so that's kind of the extent to which we disclose on that. And you'll see when I think you can talk; we have spoken about the opening deferred revenue balance of $2.7 million that came across from Rundeck.

All right. I just want to clarify if your guidance for next quarter reflects organic growth along with the addition of Rundeck, or was it something else?

It was a combination. It was a combination of improved performance of PagerDuty and the addition of Rundeck.

All right, perfect. And if I could sneak one last one in, Jennifer for you, the comment about 80% of the customers being enterprise, I think that's very helpful. Would you say then given the increase in net dollar retention that the headwinds from SMB are now behind you? And that's going to lead to the acceleration?

I think we won 80% of our users come from enterprise, so just wanted to clarify.

80% of our revenue.

80% of our revenue, sorry, it's a good thing I bring Howard with me everywhere. But I want to point to the strength in enterprise expansion; our enterprise net dollar-based retention is up over 120%. So, we definitely are seeing that strength in expansion.

Great. Thank you.

Okay, next, we have a hand up from Matt Stotler. Matt, I'm sorry, I don't have your organization if you could let those of us that don't know; know where you're calling from?

Yeah. Hey, Jen and Howard. Thank you for taking the question. Matt Stotler, William Blair. I guess first to start-off, you guys have highlighted some, I guess, use case specific solutions recently, including your customer service, cloud operations, business response. Obviously, some of these are still relatively early innings. But we'd love to maybe get some thoughts on your early interest from customers and how meaningful you think these could be over time?

Well, as I mentioned earlier, Matt, and thank you for the question. We have been really excited about how customers are receiving some of our new products and services. But they all come from us hearing from customers, these are problems that they don't have solutions for yet. So, we don't build something unless customers are already signaling reasonable demand and the uptake of these new solutions that we've talked about in the last year that you mentioned, has exceeded our expectations. I would tell you that when you think about everything that's out there in the industry, it's often been hard for us to explain to the market how we're different because there's this kaleidoscope of monitoring and observability providers, their ticketing systems, et cetera. And I think as we start to build out these use cases, it becomes much clearer how customers can leverage us in a different way. I think with COVID, because everybody is working and living and learning from home, the concept that time really matters, has also really helped to create more awareness and understanding around what we do in terms of not just detecting an issue, but orchestrating and automating the workflow to get that issue to the right team at the right point in time, automating more and more of the diagnosis around that and with Rundeck, effectively starting to drive some safe self-healing and auto remediation within those incidents or issues and things are popping up that you don't plan for all across the business, not just driven by technology problems within the dev team and that's where we're seeing some of that use case expansion.

Right. Right, that's helpful. And then just a quick follow-up, you get some commentary around the new pricing model, obviously sounds like the early response to the freemium structure has been positive. Can you talk about kind of looking forward any mechanisms that you have in place to start converting those freemium customers or how you think about kind of making those free users into paying customers?

Yes, so we're lucky that we have a hybrid go-to-market motion. So, for us that starts with product-led growth and my teams are so sick of hearing me talk about this, but the product has to be so easy to use and work so well that it helps customers and users discover more functionality and more features. And so freemium is intended to help customers sample what our platform can do, but then the product should allow them to expand with things like the 500 integrations or adding more teams or starting to identify new use cases. And equally we have, I think, a really well-performing sales organization, including our commercial teams that are focused on our mid-market customers and our enterprise team obviously focused on enterprise that really do everything they can to not annoy a user who's finding their own way through the product just fine, but really support large strategic initiatives that where customers are really trying to transform. One of the things we noticed in the last quarter, particularly in even mid-market was that customers are having more strategic conversations with us around transformative efforts where they're really trying to change how they work, where they're trying to accelerate their way to the future of work, which is a lot more automated than it has been in the past, and where they really understand kind of the need to improve their operational performance to support these customer experiences that are now primarily happening in a digital environment.

I can add that it is still early for us with this free plan, but we have seen really good conversion rates so far. We haven't disclosed them, but they have been better than expected and better than what we have heard reported in the industry. So, it is looking strong.

Great. Thanks again.

Thank you. Next, we'd like to hear from Sanjit Singh from Morgan Stanley. Sanjit, please go ahead.

Excellent. Thank you for taking the question. This was actually Keith Weiss sitting in for Sanjit if you didn't noticed.

Not only does Sanjit look different, but Keith looks different.

You know what I actually dressed up as Howard Wilson for Halloween. So, I want to ask about digital operations plan, you guys saw really good uptake of that year-on-year nice uptake in terms of the amount of net new ACV coming from that plan? Can you talk to us a little bit about what that does to the initial deal sizes, kind of how's that impacting your landings, if you will, with these new customers?

Howard, you want to take that?

Yes, sure. So, I think there are a couple of things Keith on that one. One is that often for our customers; they could still land in one of our other plants, like our professional or in our business plan. So, sometimes we do see customers land in those plans and then upgrade to digital operations as part of a natural migration as they mature. What is exciting though is that our digital operations plan includes our most advanced functionality and capabilities and that's what really sets us apart from the competition. It widens the moat between us and any of the other players. So, it gives companies to take advantage of features that allow them to be more predictive, more proactive in terms of how they manage their environments, and it allows them to leverage machine learning to be able to solve problems much faster. Our recommendations engine within that is really powerful, ability to help them get a view on what's happening in terms of change and service dependencies in the environment. All of those features are unique and special, and so I think that's driving the interest and the growth in digital operations plan because there isn't anything else like us. Most of our customers start with a relatively straightforward product and proposal, typically involving a developer who wants to manage a new service, migrate data to the cloud, or engage in a transformation initiative. A significant advantage of the Rundeck acquisition is that it provides us with an additional way for customers to get started; they can engage with us through Rundeck rather than solely through the PagerDuty product. We are enthusiastic about this new opportunity. We will continue to prioritize making our product user-friendly and easy to comprehend, even as we introduce new features and advanced technology. Customers are increasingly recognizing the value of leveraging data on our platform, which enables them to transition from a reactive to a proactive approach. We have observed this trend in some of the substantial strategic deals we've secured this quarter, and you'll notice the same customer names expanding consistently over time. This demonstrates that we are effectively supporting customers in their transformation needs.

Got it. Got it. And then drilling down specifically on the Event Intelligence product, how's that going, are you seeing good traction with that?

Yes, I think so. I’ll let Howard speak to that specifically.

Yes, so some of our customers opt to take business plans or professional plans with Event Intelligence as an add-on, and that again, we're continuing to see good momentum. Better Event Intelligence is also included in our digital operations plan, and that's part of the attraction there. The Event Intelligence uptake has been driven largely by people wanting to be able to get to a problem faster and being able to reduce the noise, because our customers all have this huge array of monitoring tools in their environment, as Jen called it, a kaleidoscope of monitoring applications around them. And so to be able to filter in or get that noise down is really critical in getting the right person onto the right problem, and that's what Event Intelligence enables. So, we're seeing good momentum with that product.

Got it. And then if I can just sneak one last one. Any update in terms of the traction outside of the core kind of IT operations use case? We talked way back about so the potential sort of broader use cases for PagerDuty, any update on sort of the incremental fashion you guys have been seeing with it?

Yes, we continue to see strong momentum and growth in security and customer service environments, which is why we developed the customer service SKU. We don't have specific figures to report for this season, but we'll provide updates during an Analyst Day, where we can offer insights on that.

That's a good little teaser. Thank you very much, guys.

Thank you.

Thanks for the fun there. And Matt we want to go to you next Matt, Matthew Hedberg with RBC Capital Markets.

Hi guys, thanks for taking my questions. Jen, obviously, hearing you talk about an inflection point and confidence in momentum continuing is really great to hear. It seems to me like it's a combination of just perhaps better buying, but also better execution. And I know Dave has been there now for a while; could you could you talk about the specifics on like what you can control versus the environment, because it almost feels to me like you feel better about both aspects, but even if COVID cases spike, your ability to execute seems higher as well. I'm just sort of curious on Dave's contributions thus far.

Sure. Well, that's absolutely right. Even as COVID cases spike and we obviously can't predict the macro environment, I think both our customers and we are better prepared for sort of whatever comes. And I have to hand it to Dave and the entire go-to-market team, including customer success, who really led with empathy and tried to understand what customers are going through because all of our customers are experiencing this a little differently. We still have cruise lines and airlines in our business base; we also have companies that are up 300%, 400% as a result of being COVID benefactors. And when you look at the diversity of all of that, it really means that our teams have to be really dialed in to what customers are prioritizing and what they care about. And I think Dave has not only hired well, and upleveled some of our leadership across our sales teams, he supported some of our talent that was here before, he's brought in folks like new leaders who are really upleveling our customer service. And he often talks about this, it sounds very boring, but just being rigorous in the hygiene of managing the operations of day to day sales is really important and so forecast accuracy has improved. And then finally, I would say, Dave and the team are really prioritizing a focus on value on helping our customers really understand that quantifiable ROI. We often for customers, build them a business value assessment. And then we go back and we look at how we are delivering on that business value assessment. And so when you think about the sort of contradiction that our customers are in, where they're trying to expand their digital offering and grow their revenue in this environment while reducing their cost pace and becoming more efficient. Those two things can really be in conflict with one another. PagerDuty helps you with both. And it's been important for our teams to work hard to help our customers understand that. But I'm really pleased with how the teams go. I mean equally I would say, that product organization delivered a lot of innovation at summit that was really received by our customers and the balance of our organization, I think you'd be lying if you didn't say people are fatigued by shutdowns and by not being able to go into the office and collaborate, et cetera. And our teams is really continued to grind and show a lot of grit in putting us in a better position going forward. So, I am a lot more confident in our execution, but also like what I'm seeing in pipelines and just the kinds of conversations we're having with customers and how they're sort of settling into their own new normal and focusing on some of those strategic transformative opportunities as well.

That's really great to hear. In your last call, the 2Q call, did you close one of your largest enterprise deals ever in August? You may have mentioned it in the prepared remarks, but I wasn't certain if you addressed that specific customer. If you did or didn't, could you provide more details on that use case? I'm also curious about the scale of that deal, as it would certainly be a valuable data point.

I was really excited to see the number of customers spending over a million dollars with us increase by 33% this quarter, and the number of customers spending over $500,000 with us grew by 40%. The deal you're mentioning was with a large mortgage provider and serves as a great example of an organization that already had a significant digital presence but is now fully committed to digital transformation, recognizing the market opportunities as many people are relocating and changing their lifestyles, like buying houses with yards or second homes, and moving from urban to suburban areas. For that specific customer, the focus was on rapid transformation to ensure their operations could keep pace with their digital growth. We also discussed our multi-year agreement with Salesforce, and I was thrilled to see their commitment to the digital operations plan as they continue to implement it across their business. This ties into our focus on enhancing customer experience, as we aim to help teams manage issues more efficiently and prevent them from escalating into incidents that could affect our customers and their business, encouraging a more proactive operational approach.

Super helpful. Congrats, guys.

Thank you.

Thank you. We do have one more hand up so far; feel free to raise your hand if you have any other inquiries. Hannah Rudoff with D.A. Davidson. Hannah, please go ahead.

Yeah. Hi, all. Thanks for taking my questions today. It's great to see the solid business momentum this quarter. First question; it's been a few months since your Virtual EMEA Summit; I was wondering if you could talk about how pipeline conversion following the summit has been? And then how pipeline build following your North American Summit was?

We are pleased with the pipeline generated from both summits. The virtual global summit in September allowed us to engage many European customers, who also participated in the EMEA Summit, to learn more about our new products and services. We are excited about the interest across our product and platform offerings, particularly around Rundeck in automation, and the ongoing effort to reduce the workload for our teams so they can focus on meaningful, mission-driven work. Next week, I will be spending time with customers in Europe via video, and I'm eager to discuss some of the European clients that are undergoing significant transformations. One notable example is a large telecommunications company that has undergone a major agile transformation, and their CEO will join me to share how PagerDuty has assisted them in this journey. This is a common scenario we are witnessing where business leaders, although not necessarily from technical backgrounds, are emphasizing the need to become more agile and tech-focused, leading to increased attention on products like PagerDuty.

Great, it's really good to hear. And then on Rundeck, how much integration is there left to do? And what's kind of the timeline for that?

The first thing I want to mention is that this was our initial acquisition since going public. We completed the deal quickly, even though we couldn't physically visit their office, and we still performed well this quarter. The integration is progressing smoothly. We aim to provide Rundeck with enough freedom to operate like a startup, innovate swiftly, and expand their product while benefiting from our distribution network. Many members of the finance team who prepared for this week's earnings have also played a key role in integrating Rundeck, and everything is going according to plan.

Great. Thank you.

Well, folks, it looks like that's all the questions that we have from our group today. Howard, Jennifer, I'd like to give you both an opportunity to provide any final comments to our audience today before we wrap up.

I just wanted to say thank you, especially to our analysts, many of you have given us a lot of feedback, which we've asked for and continue to really appreciate to try and tighten up how we help people understand our journey and where we're going as a company. So, thank you so much for that and to all of our customers. We really appreciate the trust that you put in us and are going to continue to focus on earning that every day. And I hope all of you continue to remain safe and well and keep your masks on until the next time we see you. Thank you.

Well, that concludes our presentation and call for today. Thank you for attending the PagerDuty earnings presentation. We will be closing the session shortly. Enjoy the rest of your day.

Thanks, Josh.

Happy to help.