Financial Data and Key Metrics Changes - Consolidated revenues were $1,002 million, up 6% year over year or up 7% organically [7] - Non-GAAP earnings were $0.96, up 14% year over year [24] - Consolidated gross margin was 68%, up from 67.3% [21] - Operating expenses increased 6% but declined as a percentage of revenue to 43.1% [22] Business Line Data and Key Metrics Changes - CooperVision reported revenues of $670 million, up 5% or up 7% organically [7] - CooperSurgical posted revenues of $333 million, up 8% or up 7% organically [14] - Daily silicone hydrogel lenses grew 10%, with Myopia management portfolio growing 19% [8][11] - Fertility revenues were $127 million, up 3% and up 2% organically, but lower than expected due to market softness [15] Market Data and Key Metrics Changes - The Americas grew 8%, EMEA grew 6%, and Asia Pac grew 5% for CooperVision [8] - The contact lens industry grew 4% in calendar Q1, leading to a reduction in growth expectations to 4% to 6% for the year [18][19] - Fertility market growth expectations were reduced to low single digits due to market softness, particularly in Asia Pac [19][41] Company Strategy and Development Direction - The company is focusing on operational improvements and product launches to drive growth [6] - There is a strong emphasis on increasing availability of MyDay and MiSight products in new markets [9][14] - The company is adjusting its revenue guidance to reflect solid Q2 performance and updated market assumptions [24][25] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a more complex global operating environment but emphasized strong execution and market share gains [6][20] - There is optimism about long-term growth fundamentals in fertility despite current market softness [16][41] - Management expects organic growth in Q4 to be stronger than Q3, supported by product rollouts and improved fitting activity [25][52] Other Important Information - The company repurchased approximately 537,000 shares for roughly $40.6 million, leaving $215.8 million available under the repurchase plan [24] - Tariffs are expected to have a negative impact of roughly $4 million on the cost of goods this year [26] - Currency fluctuations are anticipated to have a 0.5% headwind to revenues and a 1% headwind to earnings [26] Q&A Session Summary Question: Contact lens end market performance - Management noted that channel inventory pressures are affecting growth rates, but fitting activity remains strong [30][31] Question: Lower market growth assumption for Vision Care - The reduction in guidance is attributed to general market softness rather than specific pricing or volume issues [34][36] Question: Fertility market softness in Asia - Management indicated that the decline in fertility cycles in Asia is partly due to cultural factors and economic pressures [41][42] Question: Changes in consumer behavior regarding contact lens purchases - Management confirmed that consumers are buying shorter supply durations, impacting revenue despite strong fitting activity [46][47] Question: Guidance for Q3 and Q4 - Management expects Q3 results to be below the lower end of guidance, with Q4 anticipated to be at or above the top end [52] Question: Inventory expectations for the rest of the year - Management anticipates continued pressure on inventory levels throughout the year, affecting overall market growth [55][56] Question: Margin expectations moving forward - Management expects continued improvement in margins due to operational efficiencies and prior investment returns [70]

Financial Data and Key Metrics Changes - Revenue for the first quarter was $120 million, representing an 8% year-over-year growth, at the top of the guidance range [4][20] - Non-GAAP operating margin reached 20%, exceeding the target by 500 basis points [4] - Annual recurring revenue (ARR) increased to $496 million, reflecting a 7% growth year-over-year [5][20] - Dollar-based net retention was 104%, negatively impacted by higher customer downgrades in the enterprise segment [20] - Gross margin for Q1 was 86%, at the high end of the target range of 84% to 86% [22] - Cash from operations was $31 million, or 26% of revenue, with free cash flow at $29 million, or 24% of revenue [22] Business Line Data and Key Metrics Changes - Significant improvement in net new paid customers, with a total of 15,247 paid customers, adding 127 net new customers, the strongest quarterly acquisition in eight quarters [21] - The commercial segment saw enhancements through a new digital acquisition strategy, leading to improved customer acquisition [5][21] - The enterprise segment is transitioning to a more strategic relationship model, focusing on deeper customer engagement and AI integration [6][8] Market Data and Key Metrics Changes - International revenue increased by 11% year-over-year, contributing 28% of total revenue [20] - The company is actively pursuing FedRAMP moderate authorization to expand its public sector presence, already serving over 700 entities [10] Company Strategy and Development Direction - The company is focused on three key priorities: demonstrating product-market fit for AI offerings, enhancing enterprise engagement to drive retention and expansion, and leveraging automation and AI within operations [17] - A strategic partnership with AWS was strengthened, expanding integration capabilities [9] - The company is evolving its pricing strategy to reduce friction and increase flexibility for customers [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged execution challenges in the enterprise segment but expressed confidence in the transformation efforts and the potential for stronger execution in the second half of the year [38][40] - The macro environment remains uncertain, impacting customer decision-making, but the company is committed to helping customers realize value and efficiencies [62] - The company expects dollar-based net retention to remain between 103% and 105% throughout fiscal 2026 [20] Other Important Information - The company achieved a 90% reduction in scope one and two carbon emissions against the FY23 baseline [16] - A new Chief Customer Officer has been appointed to enhance post-sale engagement and retention strategies [8][63] Q&A Session Summary Question: What is the impact of enterprise pressure on the business? - Management indicated that execution challenges were primarily responsible for the pressure, with a focus on improving customer engagement and sales execution [36][38] Question: How does the full-year guidance reflect the current environment? - The guidance was described as prudent, taking into account organizational transitions and execution challenges faced in Q1 [41][42] Question: What adoption trends are seen in new modules like PagerDuty Advanced? - Early adoption of generative AI solutions is promising, with customers eager to experiment and integrate these offerings into their operations [46][50] Question: Can you elaborate on the enterprise churn and downgrades? - Elevated churn was noted in the SMB segment, while downgrades in the enterprise segment were attributed to mergers and macroeconomic caution [60][62] Question: What are the expectations for net retention rate moving forward? - The company expects net retention to be in the range of 103% to 105%, with opportunities for expansion among existing customers [66][68] Question: How do billings trends reflect underlying business strength? - Trailing twelve-month billings align closely with ARR, providing a clearer picture of business health compared to quarterly fluctuations [71] Question: What is the visibility from large customers regarding multiproduct deals? - Demand for multiproduct platforms remains strong, with a focus on executing transformative deals to capture this demand [107][108]

Financial Data and Key Metrics Changes - Consolidated adjusted EBITDA from continuing operations for Q4 was $176.8 million, up approximately 20% from $147.9 million in the prior year [6] - Full year adjusted EBITDA from continuing operations was $622.9 million, exceeding previous guidance of $620 million [7] Business Line Data and Key Metrics Changes - Water Solutions adjusted EBITDA for Q4 was $154.9 million, compared to $123.4 million in the prior year [7] - Physical water disposal volumes increased to 2.73 million barrels per day in Q4 from 2.39 million barrels per day in the prior year [8] - Crude Oil Logistics adjusted EBITDA decreased to $13.1 million in Q4 from $15.3 million in the prior year, primarily due to lower volumes on the Grand Mesa pipeline [10][11] - Liquids Logistics adjusted EBITDA was $17.7 million in Q4, down from $22.2 million in the prior year [12] Market Data and Key Metrics Changes - Total volumes paid for disposal increased by 11% in Q4 compared to the same quarter of the previous year [8] - Operating cost per barrel for fiscal 2025 was $0.22, down from $0.24 in fiscal 2024 [9] Company Strategy and Development Direction - The company is focusing on core assets after divesting non-core businesses, which will reduce volatility and seasonality of adjusted EBITDA [5] - Plans to continue reducing leverage and improve capital structure by addressing Class D Preferred Units [6][19] - The company aims to generate approximately 85% of adjusted EBITDA from the Water Solutions segment moving forward [16] Management's Comments on Operating Environment and Future Outlook - Management noted that despite oil price uncertainty, there has been no drop-off in customer activity in the Corita Basin [10] - The company is well-positioned with 90% of volumes committed through acreage dedications and MVCs, with 80% of total volumes from investment-grade counterparties [10] - Future growth is expected in the Water Solutions segment, with guidance for fiscal 2026 adjusted EBITDA between $615 million and $625 million [12] Other Important Information - The company completed the sale of 18 natural gas liquids terminals and other non-core assets, raising $270 million [4][16] - The biodiesel business has been fully wound down, eliminating approximately $75 million of working capital [5] Q&A Session Summary Question: Can you offer more color on your expectations by business for 2026 guidance? - Management explained that the water guidance midpoint implies about $560 million, accounting for a $20 million decline in skim oil revenues due to lower crude prices [21][22] Question: What are the conversations with customers regarding growth opportunities? - Management indicated that they are recontracting and focusing on core customers, with no slowdown in volumes currently observed [27][29] Question: How much lower could you flex capital spending down? - Management stated that capital expenditures are already low and further reductions may not be significant [35][37] Question: How do you think about your low and high range on volumes for the water business? - Management noted that fluctuations in volumes are normal, with a strong base wedge of business and no significant changes expected from customers [40][46] Question: Will there be a reinstatement of common unit distributions? - Management clarified that there are no plans for near-term distributions as the focus is on reducing Class D preferred units [52][54]

Financial Data and Key Metrics Changes - Total revenue in Q4 was $388 million, growing 16% year-over-year on an as-reported and constant currency basis [30] - Subscription revenue in Q4 totaled $362 million, also growing 16% as reported and 17% in constant currency [30] - Elastic Cloud revenue grew 23% on an as-reported and constant currency basis [30] - Non-GAAP operating margin for Q4 was 15%, with a gross margin of 77% [35][36] - Adjusted free cash flow margin improved by approximately 600 basis points to end the year at 19% [36] Business Line Data and Key Metrics Changes - The number of customers with over $1 million in annual contract value grew approximately 27%, adding about 45 net new customers [34] - Customers with over $100,000 in annual contract value grew approximately 14%, adding about 180 net new customers [34] - Subscription revenue excluding Monthly Cloud was $315 million, growing 19% in Q4 [32] Market Data and Key Metrics Changes - Strong growth was observed in the APJ region, followed by EMEA and The Americas, while some pressure was noted in the U.S. Public sector [34] - Over 2,000 Elastic Cloud customers are using Elastic for Gen AI use cases, with over 30% of these customers spending $100,000 or more annually [12] Company Strategy and Development Direction - The company is focusing on leveraging AI to automate business processes and drive innovation, positioning itself as a strategic partner for enterprises [11][18] - Elastic aims to strengthen its position as the preferred vector database, enhancing its offerings with new technologies like better binary quantization [13][19] - The company is committed to maintaining a balance between growth and profitability while continuing to innovate and expand its product offerings [40][43] Management's Comments on Operating Environment and Future Outlook - Management acknowledged potential uncertainty in the macro environment but expressed confidence in the healthy pipeline and demand signals [39] - The company expects continued growth and strong margins in FY 2026, projecting total revenue in the range of $1.655 billion to $1.670 billion [42] Other Important Information - Elastic Cloud now accounts for over 50% of subscription revenue, with strong growth in cloud adoption [18] - The company announced a strategic collaboration agreement with AWS to enhance solution integrations and accelerate AI innovation [25] Q&A Session Summary Question: Guidance and Metrics - Inquiry about the conservativeness of guidance and leading indicators of business performance [45] - Response highlighted the balance of positive demand signals with macro uncertainty, emphasizing the importance of CRPO and subscription revenue metrics [46][49] Question: Partnerships and Market Opportunities - Question regarding the impact of recent partnerships, particularly with AWS and NVIDIA, on market opportunities [53] - Management noted the growing acceptance of Elastic as a leading vector database and the importance of partnerships for driving cloud adoption [54] Question: Retrieval Augmented Generation (RAG) - Inquiry about the durability of RAG architectures and Elastic's positioning [59] - Management affirmed the critical role of retrieval in enterprise data management and the growing adoption of their vector database for RAG use cases [60][61] Question: Cloud Performance and Consumption Hesitation - Question about the sequential growth in cloud performance and the impact of the leap year [62] - Management clarified that the leap year and fewer days in Q4 affected consumption rates, but normalized growth rates remained strong [64][66] Question: Go-to-Market Strategy and Changes - Inquiry about the effectiveness of go-to-market changes made in the previous fiscal year [69] - Management confirmed that the changes have settled and are yielding positive results, with plans to continue hiring sales capacity [70][72] Question: AI Commitments and Emerging Use Cases - Question about the $1 million AI commitments and emerging use cases [93] - Management clarified that 25% of $1 million customers are using Elastic for AI workloads, with a variety of sophisticated use cases emerging across industries [94][96]

Financial Data and Key Metrics Changes - Net income for Q3 was $1.9 billion or $4.28 per diluted share, up more than 13% from $1.68 billion or $3.78 per diluted share in the same quarter last year [13] - Net sales for Q3 were $61.96 billion, an increase of 8% from $57.39 billion in the same quarter last year [15] - Membership fee income was $1.24 billion, an increase of $117 million or 10.4% year over year [18] - Gross margin rate increased by 41 basis points to 11.25% compared to 10.84% last year [21] - SG&A rate was higher by 20 basis points at 9.16% compared to 8.96% last year [25] Business Line Data and Key Metrics Changes - Fresh category comparable sales were up high single digits, led by double-digit growth in meat [29] - Non-foods also had comparable sales in the high single digits [29] - E-commerce comparable sales were up 14.8% or 15.7% adjusted for foreign exchange [16] - Gas comps were negative low double digits due to lower average price per gallon [32] Market Data and Key Metrics Changes - U.S. comparable sales were up 6.6% or 7.9% excluding gas deflation [15] - Canada comparable sales were up 2.9% or 7.8% adjusted for gas deflation and foreign exchange [15] - Other international comparable sales were up 3.2% or 8.5% adjusted [15] - Traffic increased by 5.2% worldwide and 5.5% in the U.S. [17] Company Strategy and Development Direction - The company plans to open another 10 warehouses in Q4, bringing the total to 914 worldwide [6] - Focus on maintaining competitive pricing despite macroeconomic challenges [7] - Continued investment in digital and technology to enhance member experience [10] - Strategic sourcing to mitigate tariff impacts and lower costs [9][35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to navigate challenges posed by tariffs and inflation [12] - The company remains committed to providing quality items at the lowest possible prices [35] - Management noted that in uncertain times, value resonates strongly with members [12] Other Important Information - Capital expenditure in Q3 was approximately $1.13 billion, with an estimated full-year CapEx of over $5 billion [29] - The company ended Q3 with 79.6 million paid household members, up 6.8% year over year [20] Q&A Session Summary Question: What is Costco's current pricing strategy given the market conditions? - Management indicated that they are focused on lowering prices wherever possible and have seen improvements in the competitive landscape [42][43] Question: How has the company managed inventory in light of tariffs? - Management noted proactive measures to pull forward inventory to mitigate tariff impacts and maintain pricing [49] Question: What should be expected regarding growth in non-food categories? - Management acknowledged that while growth is strong, there may be a deceleration as they cycle tougher comparisons from the previous year [60] Question: How is the company addressing member experience in high-volume warehouses? - Management is strategically opening new warehouses to alleviate congestion and improve member experience [63][64] Question: What is the outlook for LIFO charges in the upcoming quarters? - Management provided estimates for LIFO charges based on current inflation rates, indicating a potential increase in Q4 [81][84]

Financial Data and Key Metrics Changes - For the fourth quarter of fiscal year 2025, sales and other operating revenue were $702.3 million, down from $770.9 million in the same quarter of fiscal year 2024, primarily due to lower tobacco sales volumes [16] - Operating income for the quarter was $42.8 million, compared to $68.2 million for the same quarter in fiscal year 2024, also driven by lower tobacco sales volumes [16] - Net income attributable to Universal Corporation was $9.3 million or $0.37 per share, down from $40.3 million or $1.61 per share for the same quarter in fiscal year 2024 [17] - For the full year of fiscal year 2025, sales and operating revenue were $2.95 billion, up from $2.75 billion in fiscal year 2024, mainly due to higher tobacco sales prices [18] - Net income for fiscal year 2025 was $95 million or $3.78 per share, down from $119.6 million or $4.78 per share in fiscal year 2024 [19] Business Line Data and Key Metrics Changes - Segment operating income for the tobacco operations segment was $240.2 million for fiscal year 2025, up from $222.4 million in fiscal year 2024, driven mainly by higher sales prices [20] - Segment operating income for the Ingredients Operations segment was $12.3 million for fiscal year 2025, compared to $3.9 million in fiscal year 2024, primarily due to higher sales volumes [20] Market Data and Key Metrics Changes - As of March 31, 2025, the net debt was $817 million, which is $180 million lower than the previous year [21] - The estimated unsold flue-cured and burley stock was 22 million kilos as of March 31, 2025, up 11 million from December 31, 2024 [47] Company Strategy and Development Direction - The company focuses on three strategic pillars: maximizing tobacco operations, growing ingredients operations, and strengthening the organization [9] - The company aims to grow Universal Ingredients both organically and through measured acquisitions, leveraging its strong reputation for quality and service [11] - Sustainability is a core part of the business strategy, with a commitment to high standards and transparency in supply chain practices [25] Management's Comments on Operating Environment and Future Outlook - Management anticipates strong customer demand in fiscal year 2026, with global flue-cured production expected to increase by about 20% and burley production by about 30% [22] - The company is optimistic about the growth of its ingredients segment, having completed a major expansion project and focusing on organic growth [24] - Management noted that the investigation related to Mozambique has been completed and is not expected to have a material impact on financials [25] Other Important Information - The company declared its 55th annual dividend increase, with a quarterly dividend of $0.82 per share, reflecting a commitment to returning value to shareholders [8] - The company completed a pension risk transfer transaction resulting in a one-time pretax pension settlement charge of approximately $14 million [17] Q&A Session Summary Question: How should SG&A be viewed for fiscal 2026? - Management indicated that they cannot provide forward-looking guidance on SG&A but noted that fiscal year 2025 SG&A was about $305 million, down $5 million from the prior year, with various moving pieces affecting it [32] Question: Will there be ongoing legal expenses related to the Mozambique situation? - Management confirmed that the Mozambique investigation has been completed, and there will be no ongoing legal expenses related to it [35] Question: What are the expectations for tobacco margins and growth in fiscal 2026? - Management acknowledged that as the market moves from undersupply to a balanced state, it is still too early to determine the exact impact on margins and growth, but they expect strong demand to continue [38][40] Question: What is the profit outlook for the Ingredients segment? - Management reiterated their long-term target for the Ingredients segment to achieve 10% to 12% of EBITDA, emphasizing the need to leverage investments made in capabilities and sales [50] Question: What are the plans for the share repurchase program? - Management stated that while the share repurchase program is available, they are currently prioritizing other strategic investments [74] Question: What is the outlook for interest expenses in fiscal 2026? - Management indicated that they aim to bring interest expenses down due to improved working capital management and a more normalized buying season in Brazil [75]

Financial Data and Key Metrics Changes - The company reported first quarter revenue of $357 million, representing a 6% year-over-year increase, and an ARR of $1.693 billion, up 12% year-over-year [6][31] - GAAP operating loss improved to $16 million from a loss of $49 million in the prior year, while non-GAAP operating income was $70 million, reflecting a 20% margin, an improvement of 450 basis points year-over-year [7][33] - Non-GAAP adjusted free cash flow generation was $117 million, representing a 33% margin, up over 250 basis points year-over-year [33] Business Line Data and Key Metrics Changes - The launch of the agentic automation platform has driven significant customer engagement, with over 15,000 participants registered for the launch events [9] - Adoption of AgentBuilder has accelerated, with customers creating thousands of autonomous agents and generating over 250,000 agent runs to date [11] - Maestro, the orchestration solution, powered more than 11,000 process instances, indicating strong early demand [11] Market Data and Key Metrics Changes - The company ended the quarter with approximately 10,750 customers, with those generating $100,000 or more in ARR increasing to 2,365, and those with $1 million or more in ARR rising to 316 [31][32] - Dollar-based gross retention was 97%, and dollar-based net retention rate was 108% as of the first quarter [32] Company Strategy and Development Direction - The company is focused on expanding its agentic automation capabilities, which are seen as a key differentiator in the market [10][19] - A strategic partnership with Google Cloud aims to transform healthcare operations through AI-powered solutions, indicating a commitment to vertical solutions [19][84] - The company is also enhancing its partner ecosystem to drive adoption and accelerate its strategy in the market [27][28] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a variable macroeconomic environment but expressed confidence in execution and revenue guidance for the second quarter [39][34] - The company views fiscal 2026 as a foundational year for driving new revenue streams in fiscal 2027 and beyond as agentic automation scales [34] - Management remains prudent in guidance, recognizing ongoing uncertainties in the market [39][34] Other Important Information - The company repurchased 21.9 million shares of Class A common stock at an average price of $10.4, reflecting a commitment to delivering value to shareholders [33] - The company introduced a new consumption-based pricing model to drive adoption of its agentic automation solutions [12][41] Q&A Session Summary Question: What is the current macroeconomic environment and its impact on guidance? - Management noted that while the macroeconomic environment remains variable, execution in the first quarter was strong, leading to an adjustment in revenue guidance [39][40] Question: How has customer feedback been regarding the new pricing model? - Initial reactions to the new pricing model have been positive, as it is tied closer to software adoption [41] Question: How did the U.S. Federal business perform? - The U.S. Federal business is in transition, with renewals progressing well, but there is still pressure on new budgets [46][48] Question: What is the outlook for net retention rate? - Management expects stabilization and potential improvement in net retention rate as new solutions are launched [87] Question: What drove the license outperformance in the quarter? - The outperformance was attributed to a favorable mix of deals rather than any unusual contributions [91] Question: What is the strategy for the partner program moving forward? - The partner program is crucial for driving customer engagement and adoption, particularly among mid-tier customers [80]

The Gap (GAP) Q1 2026 Earnings Call May 29, 2025 05:00 PM ET Speaker0 Good afternoon, ladies and gentlemen. I would like to welcome everyone to the Gap Inc. First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. As a reminder, please limit your questions to one per participant. Speaker1 I would now like to introduce your host, Whitney Notaro, Head of Investor Relations. Good afternoon, everyone. Welcome to Gap Inc. First quarter fiscal twenty twe ...

Financial Data and Key Metrics Changes - Consolidated revenues were $1,002 million, up 6% year over year or up 7% organically [6][21] - Non-GAAP earnings were $0.96, up 14% year over year [6][23] - Consolidated gross margin improved to 68%, up from 67.3% [21] - Operating expenses increased by 6%, but declined as a percentage of revenue to 43.1% [21] Business Line Data and Key Metrics Changes - CooperVision reported revenues of $670 million, up 5% or up 7% organically [6][21] - CooperSurgical posted revenues of $333 million, up 8% or up 7% organically [6][21] - Daily silicone hydrogel lenses grew 10%, with MyDay and Clarity leading the growth [7][9] - Myopia management portfolio grew 19%, with MiSight up 35% [7][11] Market Data and Key Metrics Changes - The Americas grew 8%, EMEA grew 6%, and Asia Pacific grew 5% [7] - Fertility revenues were $127 million, up 3% and up 2% organically, but lower than expected due to market softness in Asia Pacific [14][15] - Office and Surgical sales were $206 million, up 13% or up 10% organically [15][16] Company Strategy and Development Direction - The company is focusing on expanding its product availability in new markets and channels, particularly for MyDay and MiSight [8][9] - There is a strong emphasis on operational improvements and leveraging existing investments to drive growth [21][22] - The company is optimistic about long-term growth in fertility despite current market softness [15] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a more complex global operating environment but emphasized strong execution and market share gains [5][6] - The company is adjusting its revenue guidance to reflect solid Q2 performance and updated market assumptions [17][24] - Management expects organic growth in Q4 to be stronger than Q3, driven by product rollouts and improved fitting activity [24] Other Important Information - The company repurchased approximately 537,000 shares for roughly $40.6 million, leaving $215.8 million available under its repurchase plan [23] - Tariffs are expected to have a negative impact of roughly $4 million on the cost of goods this year [25] - Currency fluctuations are anticipated to have a 0.5% headwind to revenues and a 1% headwind to earnings [25] Q&A Session Summary Question: Contact lens end market performance - Management noted that channel inventory pressures are affecting growth rates, but fitting activity remains strong [29][30] Question: Lower market growth assumption for Vision Care - The reduction in guidance is attributed to general market softness rather than specific pricing or volume issues [33][36] Question: Changes in market behavior and consumer purchasing - Management confirmed that consumers are buying shorter supply durations, impacting revenue despite strong fitting activity [45][46] Question: Fertility market softness in Asia - The decline in fertility cycles in Asia Pacific is partly attributed to cultural factors, but management remains optimistic about long-term growth [39][42] Question: Future pricing opportunities - Management believes there are opportunities for inflationary price increases, but overall pricing remains solid [100][101] Question: Impact of tariffs on guidance - Tariffs are expected to impact costs, with potential adjustments in manufacturing and pricing strategies to mitigate effects [77][104]

Financial Data and Key Metrics Changes - PagerDuty reported Q1 revenue of $120 million, reflecting an 8% year-over-year growth, at the top of the guidance range [3][20] - Non-GAAP operating margin reached 20%, exceeding the target by 500 basis points [3] - Annual recurring revenue (ARR) increased to $496 million, with a 7% year-over-year growth [4][20] - Dollar-based net retention was 104%, negatively impacted by higher customer downgrades in the enterprise segment [4][20] - Gross margin for Q1 was 86%, at the high end of the target range [22] Business Line Data and Key Metrics Changes - Significant improvement in net new paid customers, with a total of 15,247 paid customers, adding 127 net new customers, the strongest quarterly acquisition in eight quarters [21] - The company is transitioning to a more strategic approach in enterprise relationships, focusing on comprehensive customer engagement and AI integration [5][6] Market Data and Key Metrics Changes - International revenue increased by 11% year-over-year, contributing 28% of total revenue [20] - The company is actively pursuing FedRAMP moderate authorization to expand its public sector presence, already serving over 700 entities [9] Company Strategy and Development Direction - The company is focused on three key priorities: demonstrating product-market fit for AI offerings, enhancing enterprise engagement to drive retention and expansion, and leveraging automation and AI within operations [17] - PagerDuty is evolving its pricing strategy to reduce friction and increase flexibility for customers [10] - The company is committed to improving sales and marketing execution to enhance overall top-line results [4][18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in execution and customer engagement due to organizational transitions but expressed confidence in the path to GAAP profitability [19][18] - The company expects dollar-based net retention to remain between 103% and 105% throughout fiscal 2026 [20] - Management highlighted the importance of proactive customer engagement to mitigate churn and drive expansion [64] Other Important Information - The company achieved a 90% reduction in scope one and scope two carbon emissions against the FY23 baseline [16] - A new chief customer officer has been appointed to enhance post-sale enterprise engagement [6] Q&A Session Summary Question: Concerns about enterprise pressure and market hesitancy - Management indicated that execution issues were the primary concern, not market hesitancy, and noted improvements in new logo growth [34][36] Question: Guidance for revenue growth and precautions taken - Management described the guidance as prudent, reflecting organizational transitions and execution challenges in Q1 [42][44] Question: Adoption trends for new modules - Early adoption of generative AI solutions is promising, with strong customer interest and feedback [48][50] Question: Insights on enterprise churn - Elevated churn was noted in SMB, while enterprise faced downgrades due to mergers and macroeconomic caution [61][62] Question: Expectations for net retention rate - Management expects net retention to be in the range of 103% to 105%, with opportunities for expansion among existing customers [66] Question: Billings performance and indicators of business strength - Trailing twelve-month billings align closely with ARR, providing a clearer picture of business strength [71] Question: Visibility from large customers and multiproduct deals - Demand for multiproduct platforms remains strong, with confidence in executing transformative deals [103]