PagerDuty Inc at Bank of America Global Technology Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Koji Ikeda - BofA Global Research - Analyst : Yes. So let's just kick it off here. For those in the room and on the webcast that are not familiar with PagerDuty, just maybe a real quick overview. What does PagerDuty do? What is the opportunity that you're addressing? And maybe a little background on yourself. Who is Howard? What are you doing at PagerDuty? What brought you to PagerDuty?

Question: Koji Ikeda - BofA Global Research - Analyst : You've seen a lot, PagerDuty, over the years.

Question: Koji Ikeda - BofA Global Research - Analyst : So you guys just reported fiscal second quarter -- first-quarter results last Thursday. And so just maybe a recap. What are some of the key takeaways that you want to highlight? It has been about five days since you reported, four days?

Question: Koji Ikeda - BofA Global Research - Analyst : Yeah, so you've had some conversations over the -- so what has been most topical coming out? Your message, and what has been most topical amongst the investor community?

Question: Koji Ikeda - BofA Global Research - Analyst : It's been pretty interesting in the software world, I would say, over the past six weeks with lots of different companies reporting. And you guys posted pretty good results last week. And so the question is really about the macro and the demand environment. What are you seeing out there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 04, 2024 / 6:20PM, PD.N - PagerDuty Inc at Bank of America Global Technology Conference How would you categorize the demand environment for PagerDuty specifically today, I guess, as real-time as we can get, or you're comfortable disclosing today? How would you categorize that six months ago and maybe a year ago?

Question: Koji Ikeda - BofA Global Research - Analyst : I want to follow up on the pipeline. So thinking about pipeline, I guess I got a bunch of questions here. How would you categorize the pipeline today versus, let's just say, a year ago? But more so, more importantly, is how should we be thinking about pipeline conversion? What have you done to either improve or maintain the pipeline conversion, and how are you expecting pipeline conversion to be in the future? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 04, 2024 / 6:20PM, PD.N - PagerDuty Inc at Bank of America Global Technology Conference

Question: Koji Ikeda - BofA Global Research - Analyst : So to dig in a little bit more here, it sounds like the pipeline coverage ratio needs to be higher today than the past. That's correct?

Question: Koji Ikeda - BofA Global Research - Analyst : Okay. Okay.

Question: Koji Ikeda - BofA Global Research - Analyst : And so the flip side, the positive side, I take it for what it's worth on the pipeline conversion side, but on the conversion side, it sounds like you are much more comfortable and have higher visibility and more confidence and ability to close and know when to close. So does that imply that the very, very high levels of confidence in the guidance, is that kind of the, yeah.

Question: Koji Ikeda - BofA Global Research - Analyst : Got it. No, that's super helpful. Okay. So big deal activity. When we look at the transcripts over the past several quarters, I mean, you guys are landing some pretty big deals out there. And so you mentioned earlier ROI. And so it does feel like a component of ROI is helping kind of big deal activity. And so can you talk about maybe the pain points or the triggers that are really fueling this big deal activity? Is it the same today that it was before? Is ROI a key factor that is driving big deal activity?

Question: Koji Ikeda - BofA Global Research - Analyst : When you mentioned resource constraint earlier, I wanted to dig into that a little bit.

Question: Koji Ikeda - BofA Global Research - Analyst : You can think about that in two different ways, from a people perspective and a technology perspective. So when you are selling into customers and they're saying we're resource constrained, are you finding that customers are saying, hey, I got 100 people, can I deliver more value or better performance, better response with 80 people? Or are you hearing them say, got 100 people, I don't want to spend any more on this software, I'm going to spend it with you to take those 100 people and get them better? Yeah. So what are you hearing out there from them?

Question: Koji Ikeda - BofA Global Research - Analyst : I wanted to switch the conversation over to AI, everyone's favorite topic. So just thinking about AI from a very simplistic approach for the end market that PagerDuty is going after, does the end market fully understand what AI could potentially mean? Question number one. And are they still trying to figure out what does AI, specifically generative AI and LLMs mean for something like an incident response platform? Because in a very simplistic way, you could arguably think, why can't we just shove all that data into an LLM and just say, hey, LLM, what's this incident? Tell me who I need to -- tell me who needs to fix this.

Question: Koji Ikeda - BofA Global Research - Analyst : Yes. That makes sense. I'm going to ask you one more question, then I did want to open it up to the audience to see if there's any questions from the audience. SMB, SMB segment. How would you categorize the health of the SMB segment? I think it's been somewhat of a drag on the overall business. You could see it in some of the customer metrics. And so how do we think about SMB? Does it improve? When does it improve? All those types of questions.

Question: Koji Ikeda - BofA Global Research - Analyst : Yep. That makes sense. And any questions from the audience? I got questions for you.

Question: Koji Ikeda - BofA Global Research - Analyst : No, I got lots. I got a quiet crowd here. I got lots. I got lots of questions. So how do we think about the competitive landscape? We do lots of checks in DevSecOps, and we always ask them about observability tools and other IT ops tools, and then we come to incident management tools, and everyone always mentions PagerDuty's brand. So congratulations.

Question: Koji Ikeda - BofA Global Research - Analyst : You've built a very strong brand out there with PagerDuty. So yeah, I guess the question is, how do you categorize the competition or characterize the competition? I mean, there has been some consolidation in the space over the years. You do stand out from our checks. What we hear out there is a very strong brand reputation, and so who are your competitors? Like, broadly frame, what do they look and feel like? You don't have to name any names, and has that changed over the years?

Question: Koji Ikeda - BofA Global Research - Analyst : Yes. Last question for you, Howard. Thank you so much for doing this. You are the CFO, so I'm going to ask you the cash flow question.

Question: Koji Ikeda - BofA Global Research - Analyst : And you mentioned early in the conversation, look at our healthy cash generation. And so how do we think about free cash flow generation for you guys? How do we think about potential implication of cash taxes affecting free cash flow? Any sort of seasonality we should be thinking about with free cash flow? I mean, conversion from operating income, all things factored into how do we think about cash flow? Because it does look very attractive for you guys.