You could be losing customer subscribership in seconds, not minutes or hours. So, it really is, a very different application to a higher value but shorter timeline use case. I would, like, underneath that definition of that type of real-time work, you could include things like cybersecurity. The risk mitigation is certain — associated with certain regulatory compliance, Incident Management, the management of large language models and AI-based products and services, physical security. All of these things are very time sensitive and are not managed well through that sequential decision-making process or one that requires you to know where the subject matter expertise in an organization is. And so, by applying AI and automation in every point in the value chain, from detection of the events to orchestration of the work, to either people or an automated runbook to the automation of diagnostic and even safe self-healing or auto remediation of the technology ecosystem, we’re very different in our approach.
And at the same time, the market has become much more open to automation than maybe they were a year ago when they were thinking about protecting jobs. Like, most of the leaders we talk to are looking for ways to take people out of these processes and really try and improve the level of automation. One of the questions I get asked is what percentage of my infra can you help me automate, right? Which is not something you can do with a workflow solution that’s built around people, knowing who the people are, knowing who owns the approval process.
Kingsley Crane: Right. No. Very helpful. Well said. So, Howard, for you, just on the 9% to 11% growth guidance, any way to think about seat growth versus ARPU growth within that?
Howard Wilson: Yes. So, when we have a look at our model for growth with our customers through this year, we obviously have multiple levers, which is user or seat growth has been one of the primary mechanisms for us. But increasingly, we’re seeing customers adopting the Operations Cloud. So the contribution from new product, if you like, from AIOps, from automation and from customer service ops, we expect that to continue to be a large contributor. And as we mentioned in the prepared remarks, we now have Incident Management at 73% of our overall ARR. So, the contribution from the other products is increasing.
Kingsley Crane: Okay. Thank you. Very helpful.
Tony Righetti: Thank you so much. Next, we’re moving to Andrew Sherman with TD Cowen. Andrew, please go ahead.
Andrew Sherman: Great. Thanks. Hey, congrats. Howard, so ARR is going to — it’s Andrew on for Derrick, by the way.
Howard Wilson: Hi, Andrew.
Jennifer Tejada: Hi, Andrew.
Andrew Sherman: So, ARR is going to be your leading indicator here in the second half. Any color on how much you think that can accelerate as we get into the second half?
Howard Wilson: We haven’t provided any specific guidance on that, Andrew, but our view is that we will see acceleration on that in the back half of the year. And part of that is because we have so much that’s in place that we’ve already been able to demonstrate around being able to do these larger six- and seven-figure deals, get customers to take multiple products, have them commit to multi-year arrangements. And in fact, our new ARR this past quarter was the best it’s been in six quarters, and our expansion ARR was the best it had been in four quarters. And our pipeline conversion improved from the real low in Q1 of last year right through back to the typical levels in Q4. So, we believe that the changes and the adjustments that we’ve made have put us in a good place.
Now obviously, we have pipeline that goes out much further than we had historically. Instead of just the next quarter, we’re looking two, three, four quarters out now. And that means that our ability to manage that is different, improved visibility, but also the opportunity to drive incremental growth given the gestation of those deals.
Andrew Sherman: That’s great. Thanks. And Jen, you just had a big renewal quarter here. How would you characterize the behavior of that group versus your expectations going in? And is the top-down C-level approach kind of helping you drive these larger deals? And it sounds like budgets have improved, so you kind of see that continuing here in the next couple of quarters.
Jennifer Tejada: Yeah. I mean, there’s no such thing as an overnight success in software, I don’t think. But so, it’s been several quarters of working with customers. And, in fact many of our customers have trusted us for years, but just now have the budget capacity, and the confidence in managing their own business volatility to make more strategic longer-term agreements. And they see the platform opportunity as a way to consolidate some of the point solution players that are using for different things across the business. The other thing that we’re seeing customers realize is that despite spending millions of dollars on observability, they’re still learning about major incidents from their customers. In some cases, it’s 20%, in other cases, it’s a significantly higher percentage.
And so, they’re coming to us for AIOps. And just in mid-market and enterprise, we now have over 250 customers using our AIOps solution and in most cases integrating that as a part of the Operations Cloud. So, from my perspective, when I look at the promise of this change in behavior and kind of willingness to engage with us on a long-term basis, the way I think about it is it’s a huge TAM. It’s still a very early market. And you all know me, like, I’m not going to be happy with 20% growth. Like, we see ourselves as a growth company. We’re putting ourselves in a position to be durable from a profitability perspective to produce cash flow. And, I think we’ve emerged from a hard year much stronger and in a much more resilient operational position with the growth investments in place and the capacity to reaccelerate growth.
Andrew Sherman: Excellent. Thank you.
Tony Righetti: Okay. Thank you, team. Next, we’re going to hear from Jacob Roberge with William Blair. Excuse me.
Jacob Roberge: Hey, thanks for taking questions.
Howard Wilson: Hi, Jacob.
