Update for anyone following this thread: We ended up hiring a TM attorney who responded to the C&D. After some back and forth, we negotiated a coexistence agreement. They agreed to stay in the B2B enterprise space, we agreed to add a tagline to differentiate in any marketing materials.
Total legal costs were around $3,800 which stung, but way better than rebranding or litigation. The key was that we had evidence our customers weren't confused — different price points, different use cases, different everything really.
Thanks everyone for the advice. Would have panicked and probably rebranded immediately without this thread.