PagerDuty Inc Q4 2025 Earnings Call Transcript

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

Question: Andrew Sherman - TD Cowen - Analyst : Great. Thanks. Good to see you. Jen, maybe just given all the macro changes in the last six weeks or so, I would love to hear an update on what you're seeing in the market and any change to your business? I don't think you have much government business, but would love to hear any observations on that too.

Question: Andrew Sherman - TD Cowen - Analyst : Okay. Great. One more for you. We have a bunch of new sales leaders in the different regions. You're now looking for a CRO. You've migrated everyone to the same enterprise playbook, but maybe just touch on how those reps are ramping to productivity, do you need to hire more reps?

Question: Koji Ikeda - BofA Global Research - Analyst : Hey. Thanks, guys. Thanks for taking the questions. So maybe the first one there on the competitive front. We saw on the news out there that one of the legacy vendors tucked away in a large organization might be going end of life here pretty shortly. And so, from a high level, how should we be thinking about this as a potential opportunity for PagerDuty?

Question: Koji Ikeda - BofA Global Research - Analyst : And maybe a follow-up for Howard. When I look at the guide and I quickly punch in numbers in our model. I think it does imply accelerating growth in the second half just based on the commentary too with the sales capacity. Is that the right way to think about the guide? And then outside of sales capacity ramping, what else are you seeing maybe in the pipeline that's giving you the confidence to guide like that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 13, 2025 / 9:00PM, PD.N - Q4 2025 PagerDuty Inc Earnings Call

Question: Koji Ikeda - BofA Global Research - Analyst : Got it. Yeah. Thank you for that. Great growth on that 1 million plus customer on a year over year basis. So definitely see it there. Thanks guys, appreciate it.

Question: Sanjit Singh - Morgan Stanley - Analyst : Thank you for taking the question. And just talking about some of the metrics on how the business is evolving. You're now getting 30% of your ARR outside of incident management. I'm wondering if you can provide any color and detail on what offerings are leading the charge in that 30% bucket? Number one. And then, Jen, PagerDuty Advance, what is that doing to your deal sizes from an uplift perspective when they are included in your renewal or expansion opportunities?

Question: Sanjit Singh - Morgan Stanley - Analyst : And that makes a ton of sense. My one quick follow-up was, when we looked at some of your customer highlights this quarter, I saw the term multi-year agreement across the board. Is that a shift? Is this part of the upmarket shift that you guys are making? Is this something intentional? Or is this something that the customer is naturally pulling you towards? Is that a way to drive increased gross retention and stickiness in terms of the retention rates?

Question: Kingsley Crane - Canaccord Genuity - Analyst : Hey, Jen, hey, Howard. Thanks for taking the question. I hope my video isn't spotty, but I want to touch on PagerDuty Advance. When I think about the naming of agentic SRE and agentic operations analyst, and it begs the question, do you feel like these capabilities are compelling enough to demonstrate replacement of an analyst at the customer level? Just kind of curious if that's how they're being positioned and then how to think about customer ROI and how that flows into pricing?

Question: Kingsley Crane - Canaccord Genuity - Analyst : That's really interesting. And then second one, you talked last quarter about incentivizing some customers initially with some free credits to use Gen AI. You had some good response there. Just kind of curious if that initiative continued in Q4 and what kind of response you saw?

Question: Pinjalim Bora - JPMorgan - Analyst : Great. Yeah. Thank you for taking the questions. Good to see you guys. Jennifer, I want to ask you a little bit on the sales execution you had highlighted or talked about in the prepared remarks a couple of times. Could you maybe elaborate exactly what execution issues have you kind of faced? And what are you doing as you step into the new year, specifically to fix those issues? And then, Howard, maybe talk about just the bookings cadence that you have seen. And I'm trying to think about the assumptions around the guidance. And are you baking in a little bit of a caution, given what we have seen over the last two weeks on macro?

Question: Pinjalim Bora - JPMorgan - Analyst : Just to be clear, for the guidance that you provided, are you assuming a similar macro than what you have seen? Or are you using --

Question: Nick Altmann - Scotiabank - Analyst : Awesome. Thank you. I wanted to go back to Sanjit's question around 30% of ARR exiting the year being outside of incident management. When we think about the ARR framework or the color you provided, and we look at the 2025 ARR mix, I think it implies like a little bit over 60% of the net new ARR in the year was from outside of incident management. And so, when you think about this year's guide and what you're baking in for net new ARR, how should the mix look in 2026 versus this year? Maybe unpack the assumptions around incident management versus non-incident management as it pertains to net new ARR.

Question: Nick Altmann - Scotiabank - Analyst : Okay. That's super helpful. And then just a clarification question. I appreciate the color on ARR this year. If we look at the net new ARR seasonality for 2025 versus 2024 is a little bit different. Obviously, there's some of the go-to-market stuff you mentioned. Macro is still a little bit cautious. But anything else we should be keeping in mind as we look at sort of the net new ARR seasonality for 2026 and maybe call out if there's any anomalies, deal slippage, et cetera, that maybe skewed the seasonality in 2025? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 13, 2025 / 9:00PM, PD.N - Q4 2025 PagerDuty Inc Earnings Call

Question: Jeff Van Rhee - Craig-Hallum Group - Analyst : Great. Thanks for taking the questions. Hey guys, good to see you. Sorry about the light. You're catching sunset just perfectly behind me here. So be it. Just a few for you. Maybe, Howard, just on the pipeline. I think you commented last quarter that the pipeline was up 50% year-over-year. Just any update on the state of the pipeline here?

Question: Jeff Van Rhee - Craig-Hallum Group - Analyst : Yeah. Jen, is the intensified focus on all the sales change. I guess two questions. More a result of your dissatisfaction with the lead gen side or with the close rates and the way you're managing cycles as they go through. And then maybe just along the lines of that question, it's just a soft observation, but it seems last year, midyear, you were a little more satisfied with the execution in terms of how you're addressing the move to selling to procurement and the CFO type sale. And it seems now, there's less satisfaction. So maybe just kind of take those two on, if you would.

Question: Jeff Van Rhee - Craig-Hallum Group - Analyst : Yeah. Understood. And congrats on the efficiency. I mean the profitability improvements in the free cash flow for the year, real nice improvement prior year. Just one last, if I could. Howard, I guess on the SMB commercial side, just I want to make sure I heard you right. Is that viewed to be a growth engine -- not an engine, but it will grow in this fiscal year. Is that the assumption?