PagerDuty, Inc. (PD) Earnings Call Transcript & Summary

Good afternoon, and thank you for joining us to discuss PagerDuty's Second Quarter Fiscal Year 2026 results. With me on today's call are Jennifer Tejada, PagerDuty's Chairperson and Chief Executive Officer; and Howard Wilson, our Chief Financial Officer. Before we begin, let me remind everyone that statements made on this call include forward-looking statements based on the environment as we currently see it, 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. These forward-looking statements include our growth prospects, future revenue, operating margins, net income, cash balance and total addressable market, among others, and represent our management's belief and assumptions only as of the date such statements are made, and we make -- 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. A reconciliation between GAAP and non-GAAP financial measures is available in our earnings release, which can be found on our Investor Relations website. Further information on these and other factors that could cause the company's financial results to differ materially are included in filings we make with the Securities and Exchange Commission, including our most recently filed Form 10-K as well as our subsequent filings made with the SEC. With that, I will turn the call over to Jennifer.

Thank you, Tony. Good afternoon, and thanks for joining us today. In the second quarter, PagerDuty delivered revenue of $123 million, representing 6% growth year-over-year. Most notably, we achieved GAAP profitability for the first time in our company's history, while our non-GAAP operating margin reached 25%, exceeding both guidance and year-over-year expansion by 800 points. These milestones demonstrate our focus on driving profitable growth, our consistent operational discipline and the fundamental strength and durability of our business model. Annual recurring revenue increased to $499 million, representing 5% year-over-year growth. Our ARR performance and dollar-based net retention of 102% reflect elevated churn and downgrades. Despite the decline in DBNR, driven largely by customer seat optimization and cost containment initiatives, several encouraging trends are emerging that demonstrate expansion in our customer base and position us for future growth. First, new and expansion bookings increased by more than 15% sequentially. Second, similar to Q1, net new customer additions were strong, raising the first half total to 208, nearly 3x the customer adds of fiscal year '25. And third, our high-value customer base spending over $100,000 expanded to 868 customers, increasing by 20 customers sequentially and 48 year-over-year. The underlying demand for our platform continues to expand significantly with usage growing over 25% year-over-year, demonstrating the critical role the Operations Cloud plays in enterprise infrastructure. Even as revenue growth has been tempered by seat optimization initiatives across our customer base, this divergence between platform utilization and seat count validates our strategic shift towards usage-based pricing models that better align our revenue to customer value realization. Several initiatives underpinning these encouraging trends include usage-based AIOps, which is growing above 60%, flexible enterprise licensing and AI automation capabilities now integrated across all Operation Cloud plans. This comprehensive approach creates a natural expansion opportunity that helped drive cross-selling of our generative and Agentic AI offerings while ensuring customers can scale their usage in alignment with their needs. We advanced our enterprise go-to-market transformation in Q2 with marked improvement across our international theaters, demonstrating continued platform demand and improving sales execution. Our sales team continues to mature and ramp with over 60% of our enterprise reps now tenured at least 1 year. However, our Americas sales leader performance has been inconsistent, prompting us to appoint a new leader in North America sales in late July and implement organizational changes flattening our structure to increase agility and to accelerate decision-making and customer responsiveness in this critical market. Platform usage growth in both volume and use case diversity demonstrates that the work itself is mission-critical for enterprise operations. In fact, one of PagerDuty's key differentiators, our ability to orchestrate and automate the resolution of incidents is more valuable than ever in a world where complexity is increasing. We are becoming the central nervous system for the AI-native ecosystem from frontier models to code assistants and agents, the growth in the volume of code, applications, services, systems and agents along with the unpredictability of these environments requires an operations platform that anticipates complexity, mitigates risk and automates at a very different scale than we have seen historically. PagerDuty does this today. Our traction with native AI companies illustrates this point and validates our midterm growth acceleration thesis. As a segment, native AI leaders now contribute 2% of total ARR and is growing rapidly. These companies represent the entire AI value chain from infrastructure to application and agentic delivery. They are choosing PagerDuty for our proven scaled resilience and ability to anticipate the enormous technical and customer demands of this evolving market. Central to acquiring and expanding customers is product innovation. In addition to ongoing releases in automated incident management, our 4 new AI agents, Shift, Scribe, Insights and SRE will GA this quarter. Early access customers have provided encouraging feedback as we focus on customer adoption. All agents will be released with usage-based pricing models. Our ecosystem has advanced through strategic partnerships, most notably Amazon Q reached general availability as our first Agentic AI partnership. The Amazon Q integration offers over 40 data connectors, enabling customers to leverage their enterprise data and knowledge bases through PD Advance, our chat assistant and our agents. We are uniquely positioned as the incident automation platform that's integrated with Amazon Q, enabling customers with both solutions to leverage additional data as part of the operation's life cycle from diagnosis through triage to resolution. We continue to have the depth and breadth of integrations with more recent additions for Backstage, Azure SRE, ARISE and more. We've unlocked new ecosystem use cases with the recent release of our model context protocol, our MCP Server. For example, incident responders use our advanced chat assistant to correlate incidents with related GitHub deployments, Salesforce customer tickets and dependent service impacts, providing comprehensive situational awareness that accelerates resolution. We are enhancing strategic partnerships, leveraging MCP with Microsoft Azure, Amazon Cloud Smith and observability vendors to incorporate Azure resources and telemetry data into Agentic diagnostics and SRE agent remediation. Our customers continue to optimize their digital operations, improving customer experience and mitigating the escalating cost of disruption. In the rapidly evolving AI space, a specialized cloud infrastructure provider for AI and machine learning workloads selected PagerDuty with a 6-figure multiyear commitment. This customer was navigating daily high event volume while working to meet its availability commitments for compute-intensive workloads. Growing event volume made it noisy and incredibly difficult to prioritize what matters most, a problem that traditional monitoring solutions couldn't effectively handle. PagerDuty's AIOps is a game changer with automated intelligent correlation and orchestration, transforming overwhelming event volume into actionable insights and service recovery. AI augmented event correlation helped ensure reliable AI infrastructure services for the company while dramatically improving operational efficiency. This strategic relationship validates PagerDuty's central role in the emerging AI ecosystem and demonstrates the relevance of our proven resilience and effectiveness in addressing the most complex challenges facing native AI companies today. In the highly regulated telecommunications sector, a Singaporean telco leader selected PagerDuty's Operations Cloud for a transformative 6-figure 3-year IT modernization initiative. With PagerDuty, the customer is addressing critical inefficiencies that led to customer experience issues and regulatory risk, instigating funding of their first major investment in modern incident management. This comprehensive deployment of enterprise incident management, AIOps and gold services automated their incident response workflows, reducing time to resolution from 30 to 40 minutes to just 2 minutes, delivering significant annual cost savings that far exceed their platform investment. Their PagerDuty deployment not only enhances their existing ITSM investment, but also ensures regulatory compliance with evolving Singapore telco standards, positioning them for continued innovation in the competitive Southeast Asian market. This selection validates our enterprise-grade capabilities in a mission-critical infrastructure environment where reliability and rapid response are paramount. A global financial infrastructure and data provider expanded their PagerDuty relationship with a significant 6-figure agreement to modernize their operations capabilities and support their zero-risk operational objective. Given that disruptions impact global markets and create regulatory risk, this customer required enterprise-grade incident life cycle management that could seamlessly integrate with their existing technology. PagerDuty's comprehensive platform integrations and automated incident management directly address this critical requirement. This strategic expansion instantiates PagerDuty as the central nervous system for their complex multi-vendor operational environment, helping them to deliver against arduous regulations and reduce enterprise risk. The customer's decision to deepen their PagerDuty investment exemplifies our market leadership in the most sophisticated and demanding environments. On the innovation front, PagerDuty was named AIOps Platform of the Year in the 2025 AI Breakthrough Awards and was shortlisted for the 2025 SaaS Awards in multiple categories, including Best AI-powered SaaS solution and best enterprise-level SaaS product. PagerDuty.org continues to grow its customer base, now serving more than 650 nonprofit organizations globally. Reflecting these efforts, PagerDuty was honored with the 2025 TrustRadius Tech Cares Award, recognizing our meaningful contributions to communities, employees and the environment. We are pleased to announce the appointment of an exceptional enterprise-focused leader to accelerate our go-to-market transformation. Todd McNab will join our leadership team as Chief Revenue Officer later this month. Todd brings more than 25 years of experience scaling companies across diverse industries with a proven track record of driving growth within enterprise organizations. He will lead our global go-to-market organization, including sales, service, customer support and success. Todd's addition to our leadership team represents another significant step forward in our growth trajectory and reinforces our dedication to building a world-class organization serving the most important enterprises of our time. Our strengths are clear: a strong and growing customer base, an unparalleled track record of resilience at scale and industry-leading innovative platform for managing mission-critical operational risk. Our leading indicators demonstrate improved execution this past quarter, including a second quarter of strong paid account additions, growth in $100,000 accounts and international performance that exceeded our targets. Moreover, our focus on profitable growth and operational execution is driving significant expansion in margins, providing consistent cash flow and supporting our expanded capital return authorization. As we advance our enterprise transformation, the fundamental strengths of our business underscoring our progress are expanding margins, our first GAAP profitable quarter and disciplined capital allocation that mitigates dilution while positioning us for growth reacceleration. These results, coupled with the compelling demand trends we see in platform usage demonstrate our critical position in the emerging AI ecosystem and reinforce my confidence in our outlook. Thank you to our customers for your loyal partnership, our shareholders for your ongoing investment in our future and our employees for your dedication. With that, I'll turn the call over to Howard, and I look forward to your questions.

Thank you, Jen, and good day to everyone joining us on this afternoon's call. Before reviewing our second quarter financial results, I want to highlight our strong operational discipline translating to our first quarter of GAAP operating margin profitability. We expect to be at or near this level in the second half before being GAAP profitable for the full year next fiscal year. And now unless otherwise stated, all references to our expenses and operating results on this call are on a non-GAAP basis and are reconciled to our GAAP results in the earnings release that was posted on our Investor Relations website before the call. Moving to results. Revenue for the quarter was $123 million, up 6% year-over-year. International revenue increased 12% annually, contributing 29% of total revenue. Annual recurring revenue exiting Q2 grew 5% year-over-year to $499 million. In the second half of the fiscal year, we expect incremental ARR to be significantly higher than the first half. The maturing of our enterprise sales motion in conjunction with our new North America leader and a more agile structure underpins this expectation. We delivered 102% dollar-based net retention compared to 104% in Q1. DBNR was negatively impacted by lower gross retention, largely as a result of downgrades. We expect dollar-based net retention to remain at this level in the second half as our pricing and packaging becomes better aligned with customer value realization. Customers spending over $100,000 annually in annual recurring revenue increased by 20% from Q1 or up 6% year-over-year, resulting in 868 by quarter end. Total paid customers grew to 15,322 in Q2, adding 75 net new customers. Free and paid companies on our platform grew to over 33,000, an increase of approximately 13% compared to Q2 of last year. Q2 gross margin was 86% at the high end of our 84% to 86% target range, reflecting the uniquely efficient technical architecture we have developed to service our customers. Operating income was $31 million or 25% of revenue compared to $20 million or 17% of revenue in the same quarter last year. The outperformance reflected our focus on increased efficiency and operation execution with lower payroll and other personnel costs. In terms of cash flow for the quarter, cash from operations was $34 million or 28% of revenue and free cash flow was $30 million or 24% of revenue. Turning to the balance sheet. We ended the quarter with $568 million in cash, cash equivalents and investments. During the second quarter, we retired the remaining $58 million of convertible debt issued in June 2020. We are generating significant consistent cash flow, which leaves us well positioned to execute our enterprise transformation while also returning capital to shareholders. The Board has expanded our current share repurchase program to $200 million, providing us with increased flexibility to opportunistically repurchase shares in the open market, subject to market conditions and legal constraints. On a trailing 12-month basis, billings were $496 million, an increase of 6% compared to a year ago, just below our target of 7% for the quarter. With respect to Q3, we anticipate trailing 12 months billings growth to be approximately 7%. At the end of Q2, total RPO was approximately $425 million, increasing 5% year-over-year. Of this amount, approximately $295 million or 69% is expected to be recognized over the next 12 months, $100 million or 24% over months 13 to 24 and the remainder thereafter. Now turning to guidance. For the third quarter fiscal 2026, we expect revenue in the range of $124 million to $126 million, representing a growth rate of 4% to 6% and net income per diluted share attributable to PagerDuty, Inc. in the range of $0.24 to $0.25. This implies an operating margin of 21%. For the full fiscal year 2026, we now expect revenue in the range of $493 million to $497 million, representing a growth rate of 5% to 6%. This compares to the range previously provided of $493 million to $499 million. And net income per diluted share attributable to PagerDuty, Inc. in the range of $1 to $1.04. This implies an operating margin of 21% to 22%. This compares to our prior guide of $0.95 to $1 and 20% to 21%, respectively. We remain focused on the path to accelerating ARR growth, confident in continuing to expand margins and achieve GAAP profitability in FY '27 and with consistent cash flow being able to return capital to shareholders, all while delivering market-leading innovation. With that, I will open up the call for Q&A.

[Operator Instructions] Our first question will turn to -- well, we had a hand up from Sanjit Singh over at Morgan Stanley.

Can you hear me now, Jennifer?

Yes. Thank you.

Yes. Sorry about that. Apologies. My video is not working for whatever reason.

We know what you look like.

When we think about like the trend of the business, I guess the message that I'm hearing specifically with the GAAP profitability targets is that this can be a much more profitable business going forward. I totally hear you on the second half improvements in terms of ARR. When I think of like the IT operations category, which includes incident management, AIOps, obviously, the observability guys, when I look at some of the other parts of IT ops, it sounds like business is stabilizing. Some of that's due to AI native customers and their customer base is ramping like it is for you guys. Why is it -- why do you feel like in this segment of the market, growth is on an absolute basis lower and maybe quicker to, let's say, rebound versus some of your peers in adjacent markets?

Sure. Thanks for the question. I mean the things that I see that are very encouraging that give me confidence are our success during the quarter in new and expansion revenue and new logo adds. So we are starting to see that recovery and interest in the base. New and expansion was up 15% sequentially for the quarter. And as I mentioned, new customer logos were up over -- I'm going to find the number, 200, but more than 3x of what we saw in the full year last year, and we're only halfway through the year. So we are seeing the new and expansion muscle flexing again. We also saw very promising progress in our international regions. who contributed above target for the quarter. It's really been North America that we're still in progress in, I think, developing some improvements. And what I'd say is happening there where the retention pressure has been is that majority of that is seat-based optimization-driven downgrades as opposed to customers leaving the platform. So this transition that we're making to usage-based pricing is both important, but also a much better way to align value that customers realize on the platform with monetization. And one of the things that gives me confidence there is when I look at actual platform usage and the demand signals that show what our customers are actually doing on the platform. In our core product, things like event flows, automated incident workflows, we see platform usage growing more than 25% and in some cases, over 100%. And this is not new products that I'm talking about. These are new features and automation that we've delivered into the platform on the core automated incident management life cycle. So as we better align monetization or pricing mechanism to that value realization, I see that as a path to recovering and reaccelerating growth in FY '27.

That's great. And really encouraging to hear the progress on the new logo front for the first half of the year. I guess my follow-up question is congrats on the hire of the new Chief Revenue Officer. In terms of how you think about the sort of mission statement for him in the first 6 months for the balance of this fiscal year and then going into next fiscal year, can you talk about some of the initiatives and potentially the magnitude of change on the sales force and whether any potential sort of disruption is sort of embedded in the outlook?

Yes. Well, having been the interim CRO for the last quarter, I'm sure the sales teams are very excited about their new boss. But it did give me an opportunity to gain a number of valuable insights. I mean, one is we have to accelerate our transformation in enterprise and meet our customers where they are, anticipate their needs and demonstrate consistent account coverage with our economic buyers, but also continue to serve the needs of the developer community that uses our product. For Todd, I think job 1 will be to continue that enterprise transformation and drive more consistency in the performance of the team. But we have made a number of changes in the last quarter that lend themselves to a more efficient and more agile sales organization. We reduced some layers, and we've also done some work to make sure that we have more consistent alignment of our account executives and our customer success managers with our most important and our growing accounts. So I think that we've created a good kind of landing spot for Todd. And I also think Todd, with his domain expertise, having worked in the AIOps space, having worked in infrastructure in VMware in large enterprise in global strategic accounts, he really is the right CRO for the moment, and we undertook an extensive search. So I'm really excited to see him starting later this month. And as I said, I think the priorities will be leading us through that enterprise transition and really taking what we've learned and where we're seeing progress in the international markets and working with our new North American leader to ensure we can also drive that improvement in North America. The teams are working really hard there, and I think we're going to see that market start to show progress, really focused on customer love and customer retention, working closely with our Chief Customer Officer, who's now -- Allison has now been in the seat for over a quarter. So retention is the second thing. And the third thing is instantiating the adoption of our AI-led products in the market. We're going to be in the market in GA this quarter with our 4 new agents alongside of PagerDuty Advance, and that's an exciting monetization opportunity for us.

Next, we're going over to Koji Ikeda from Bank of America.

So the first question I have for you is about quality of ARR. You just hit $500 million or just about $500 million this quarter. And when I look back in the model, you were at a little over $400 million at the end of fiscal '23. And so how would you categorize the quality of the components of ARR today, which I think can help frame how NRR and other growth metrics like billings can stabilize and improve from here?

I mean I'll start and then Howard can jump in. We have made a significant shift in our business towards what I think of as large long-term profitable customers, being the largest enterprise companies in the world. And we've had to learn a lot of new things as we've made that transition in a market that has been somewhat uncertain and volatile and exciting in many ways. And at the same time, like those customers are the ones that rely heavily on us for managing their own products and services and operational environments in an ecosystem that's becoming more complex and more unpredictable. And the other thing that I would say is we're starting to see really large companies that come out of more traditional technology backgrounds moving into this market and investing in incident management for the first time. So I talked about one of those companies today, but we also have seen a large pharma organization investing for the first time with us in the last few quarters, doing a large expansion this quarter. And in the past, that was not even a vertical that was in our focus, and we've started to see larger lands in pharma and health care, for instance. So I do think the quality of ARR improves because we are landing and expanding in more of these large enterprise customers complemented by the success that we've had in the native AI segment, where now more than half of the Fortune 50 AI companies are PagerDuty customers. These are companies like Anduril, Anthropic, Scale AI, CoreWeave that are also continuing to expand as they grow with us. So that's what I would offer you. Howard, anything you want to add there?

Yes. And I would say, Koji, when I think about it over that period, we've expanded our presence in the enterprise. So when we look at our ARR today, more than 75% is coming from what we would term enterprise companies. So those are customers that have revenues over $500 million. So we've seen that shift. And so our exposure to the SMB market, which has been more volatile, we've been able to manage that to some extent while still being able to attract and bring those folks on board. The other aspect that I would say is that we've become increasingly multiproduct. So we have more than 65% of our ARR is coming from customers with 2 or more products. So we've had success in getting these other products into more of the customer base. And that bodes well in terms of being able to expand our footprint with our customers as we bring on our Agentic offerings and our other AI-based offerings. And then further, I would say that when I look at it from a product perspective, and we've shared this number previously, today, around 70% of our ARR is coming from incident management. So we have a growing portion that's coming from those other products as well. The other characteristic that I think is worth noting is that we've made a concerted effort to move more routinely, particularly for larger deals to multiyear. So we've seen a steady improvement in terms of the number of our contracts where customers are making arrangements for multiyear 2- or 3-year agreements.

And maybe the follow-up here, which I think you gave the answer to, but I just want to make sure that it's addressed is that you did kind of bring in the top end of the guide a couple of million. But Howard, when I listened to your prepared remarks, you're essentially guiding trailing 12-month billings to accelerate from the second quarter. And so I guess, is there anything more specific or anything else that you needed to call out that's giving you the confidence that trailing 12 months billings could accelerate from here?

Yes. So we expected even coming into this year that by the end -- by the back half of the year, we would have more of the building blocks in place in terms of our enterprise transition. So when I look at the incremental ARR expectations for the back half of the year, we expect those to be significantly higher than what they were in the first half of the year. So that contributes to improved billings performance. We also have Q4 as a large billings quarter for us because from a seasonality perspective, that is one of our biggest quarters for renewals. So those things contribute to our view on the trailing 12 months billings. So we expect that to be around 7%.

Next, we'll hear from Jacob Roberge with William Blair.

You all talked a lot about needing to transition to more of a usage-based model. I guess the question is, how do you see that progressing over the next few years? And then for customers that you've spoken to about that transition, what's been the feedback thus far? Is this something that they're ready and willing for? Or will there be a bit of an education period for customers?

Well, obviously, we won't be able to move all customers at the same time because customers tend to like to make these transitions in their renewal cycle. So this will be a gradual process over the next couple of years, particularly given a lot of our customers are now multiyear. I think this quarter, 45% of our revenue was multiyear. And so -- but I would tell you that customers are very open to it, and we can see that in our existing usage-based pricing, where our products that have usage-based pricing grew 60% in the quarter. So what we try and do is see a customer with a starting point and then give them the opportunity to grow their usage as they need it as opposed to it being associated with the number of people on the platform. And the reality is, as we've added more and more automation to the platform, the platform is doing some of the work of the people that customers are licensing, and they understand that, right? It's also easier for them to articulate the business case for the investment in our platform if it is tied more directly to value realization. So, so far, I would say that customer feedback has been encouraging. And we're already into that process to some extent because all of our new products over the last 18 months, 2 years, including PagerDuty Advance and our Agentic offering that is doing this quarter are usage-based along with AIOps. Plus we've been working with our large customers to deliver more flexible custom pricing, particularly as it relates to helping them leverage flexibility across products so that they're not licensed specifically one single way for everything and have to try and administer those trade-offs themselves. So as we've opened up to more flexible licensing engagements, that's also opened up the discussion for what customers are looking for, and that's really educated us in terms of what our offering needs to look like going forward.

Okay. That's helpful. And then you talked about the second half improvements in net new hire being based on the recent go-to-market changes, increasing rep tenure and then some of those net new comments. But just in terms of the larger renewals that are coming up in the back half of the year, given that transition to the usage-based model might take some period of time, is there anything that you're looking to do to help mitigate some of the seat downgrade issues that you saw this quarter as you're making your way through that transition?

Sure. And I'm frustrated by the downgrades. I think we can always do a better job of delivering consistent account management, making sure our customers are successful in the first 14 or 90 days in every day of their contract life cycle, making sure that we do a better job of monetizing growing usage and value creation for our customers is super important. But I'm also excited to see that our usage-based products are growing even within our base and that usage of the platform is growing because that lends itself, to your point, to more retention within the base. And having Allison Corley, our Chief Customer Officer, now in seat for more than a quarter. She's actually with our customers in Europe this week. She's also putting more rigor and discipline around getting ahead of these renewals and planning for them and working jointly with customers on a road map to growth. And there will always be challenges. I mean not all of our customers have businesses that are going well. Some customers are still looking for cost optimization. But what's really encouraging is the fact that at the same time, we're focused on improving retention and working through this monetization transition, we're also seeing new and expansion strengthening, right? That 15% sequential growth, the 200-plus net new logos in the first half and the fact that, that's 3x what we saw last year. For me, that gives me a lot of confidence in our path and the fact that we're able to continue to have strategic conversations with our customers even when sometimes the short-term impact is not what we'd like, the long-term relationship is growing. So overall, I'm really encouraged. And we've got a lot of work to do in the back half, but we've got the right team to do it and our go-to-market organization as well as our product innovation teams are working really hard.

And Jacob, I would just add from a pricing perspective, one of the aspects of the new pricing models that we are rolling out are about increasing flexibility for the customer. So historically, when our customers purchased, they were buying, if you like, a narrow product or a narrow plan. We've been upgrading our packaging progressively to be able to see different aspects of our platform, whether it's the incident management, the AI, AIOps, automation across multiple plans. And included in this initiative, particularly around renewals as we go into Q4 is to help customers take advantage of the flexible licensing, which would then give them access to more product, which would then also allow them to -- it would mitigate, if you like, some of the impacts of potentially less users because they'd be gaining access to more products and that would deliver greater value too.

[Operator Instructions] I remind Andrew Sherman, we're going to you with TD Cowen.

Good to see you. Congrats on the -- good to see the better execution in the quarter. Would love to dive a little deeper, Jen, into the second half drivers that you're talking about here. Is the shift to consumption going to start for some customers in the second half and that can start to help drive some better growth out of them? Or maybe that's more of a next year event. I think you made a comment that it can help accelerate growth next year. And then what signals in the pipeline or aspects about your renewal cohort in Q4 are giving you the confidence that a lot of these deals can close?