PagerDuty (PD) came out with quarterly earnings of $0.17 per share, beating the Zacks Consensus Estimate of $0.13 per share. This compares to earnings of $0.20 per share a year ago. These figures are adjusted for nonrecurring items. This quarterly report represents an earnings surprise of 30.77%. A quarter ago, it was expected that this software developer would post earnings of $0.15 per share when it actually produced earnings of $0.17, delivering a surprise of 13.33%. Over the last four quarters, the comp ...

Part I [Business](index=7&type=section&id=Item%201.%20Business) PagerDuty provides a digital operations management platform, generating $430.7 million in FY2024 revenue through a subscription-based, land-and-expand model Fiscal Year 2024 vs 2023 Financial Highlights | Metric | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Revenue | $430.7 million | $370.8 million | | Net Loss | ($75.2 million) | ($128.4 million) | - The company's business model is centered on a **"land-and-expand" strategy**, initially attracting users through viral adoption and then expanding usage to more users, new use cases, and additional products within an organization, with a particular focus on enterprise customers[25](index=25&type=chunk) - PagerDuty's platform has an ecosystem of **over 700 direct integrations** with technologies like AWS, Datadog, Splunk, Salesforce, and Slack, enabling it to collect and correlate digital signals from a wide range of systems[24](index=24&type=chunk)[30](index=30&type=chunk) - International operations are a key growth area, generating **28% of revenue in fiscal year 2024**[38](index=38&type=chunk) [Our Platform and Key Customer Benefits](index=7&type=section&id=Our%20Platform%20and%20Key%20Customer%20Benefits) The PagerDuty Operations Cloud is a multi-product platform for real-time digital operations management, leveraging extensive data and integrations - The platform is built for real-time operations, managing complex, hybrid cloud environments to **resolve incidents in seconds or minutes**, not hours or days[27](index=27&type=chunk)[28](index=28&type=chunk) - PagerDuty has a rich repository of machine-generated and human response data from **over 15,000 paying customers**, which powers its advanced machine-learning capabilities[30](index=30&type=chunk) - The platform's products include Incident Management, AIOps for noise reduction, Process Automation for orchestrating workflows, and Customer Service Operations to manage customer-impacting issues[33](index=33&type=chunk) [Our Growth Strategies](index=9&type=section&id=Our%20Growth%20Strategies) The company's growth strategy focuses on acquiring new customers, expanding existing accounts, introducing new products, and growing its international presence - Key growth pillars include landing new customers, expanding within the existing base, introducing new products, growing internationally, and **penetrating the U.S. Public Sector**[33](index=33&type=chunk)[38](index=38&type=chunk) - **International revenue constituted 28% of total revenue** for the fiscal year ended January 31, 2024, with plans to further expand in EMEA, Asia Pacific, and Japan[38](index=38&type=chunk) - The company is targeting the U.S. Public Sector, having achieved **"In Process" status within the Federal Risk and Authorization Management Program (FedRAMP®)** in August 2023[38](index=38&type=chunk) [Competition](index=11&type=section&id=Competition) PagerDuty faces competition from established software vendors, in-house solutions, and open-source software in the digital operations management market - Direct competitors include established software providers such as **Atlassian, Splunk, Red Hat, Everbridge, and ServiceNow**[46](index=46&type=chunk) - Competition also comes from homegrown/in-house solutions and open-source software[46](index=46&type=chunk)[94](index=94&type=chunk) - Competitive factors include total cost of ownership, product functionality, breadth of offerings, security, flexibility, and performance; PagerDuty faces **pricing pressure from larger competitors** bundling services[48](index=48&type=chunk) [Human Capital](index=12&type=section&id=Human%20Capital) The company employed 1,182 people globally as of January 31, 2024, emphasizing a culture of innovation, diversity, and employee development - The company employed **1,182 people** as of January 31, 2024, with a global distribution of 59% in the U.S. and 41% in international locations[55](index=55&type=chunk) - PagerDuty's ID&E mission is to unlock the potential of every employee through systematic improvements and programmatic engagement, fostering a sense of belonging[56](index=56&type=chunk) - The company uses quarterly engagement surveys to gather employee feedback and equips leaders with coaching and training to support career development[61](index=61&type=chunk) [Global Impact and Environmental, Social and Governance Initiatives](index=14&type=section&id=Global%20Impact%20and%20Environmental%2C%20Social%20and%20Governance%20Initiatives) PagerDuty directs its social impact through PagerDuty.org and has developed climate reduction targets aligned with the Paris Agreement - PagerDuty is a member of Pledge 1%, committing **1% of equity, product, and employee time** to community impact[63](index=63&type=chunk) - In FY24, the PagerDuty.org Fund deployed approximately **$1.3 million** to organizations focused on time-critical health and climate issues[63](index=63&type=chunk) - The company has developed climate reduction targets aligned with the Paris Agreement and submitted a letter of intent to the **Science Based Targets Initiative (SBTi)**[66](index=66&type=chunk) [Risk Factors](index=15&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from economic conditions, operating losses, market competition, cybersecurity threats, and regulatory compliance [Risks Related to Our Business and Industry](index=15&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) Key business risks include a history of operating losses, high dependency on a single product, and intense market competition - The company has a history of operating losses, reporting a **net loss of $75.2 million for FY2024** and an **accumulated deficit of $552.4 million** as of January 31, 2024[74](index=74&type=chunk) - A significant majority of revenue is derived from a **single product**, the incident management offering, making the company vulnerable to declines in demand or competitive pressure for this product[88](index=88&type=chunk) - The market is highly competitive, with competition from in-house solutions, open-source software, and established providers like **ServiceNow, Atlassian, and Splunk**[89](index=89&type=chunk) [Risks Related to Technology, Security, and Operations](index=26&type=section&id=Risks%20Related%20to%20Technology%2C%20Security%2C%20and%20Operations) Operational risks stem from potential cyber-attacks, reliance on third-party cloud providers like AWS, and the need to maintain platform integrations - The business faces threats from cyber-attacks, including malware, ransomware, and phishing, which could compromise sensitive customer data and lead to significant costs and reputational damage[120](index=120&type=chunk)[121](index=121&type=chunk) - The company relies on third-party cloud providers, **primarily AWS**, for hosting its services; any interruptions or performance issues from these providers could damage customer relationships and reduce revenue[137](index=137&type=chunk) - The platform's functionality depends on its ability to integrate with a wide range of third-party applications; changes by these third parties could restrict access or functionality, negatively impacting the business[140](index=140&type=chunk) [Risks Related to Legal, Regulatory, and Compliance](index=34&type=section&id=Risks%20Related%20to%20Legal%2C%20Regulatory%2C%20and%20Compliance) The company is subject to evolving global data privacy laws, anti-corruption regulations, and increased scrutiny of AI technologies - The company is subject to numerous data privacy and security laws, including the **EU GDPR and California's CCPA/CPRA**, with non-compliance potentially leading to significant fines (up to 4% of annual global revenue under GDPR)[178](index=178&type=chunk)[180](index=180&type=chunk)[183](index=183&type=chunk) - The use of **AI and ML technologies** in products is subject to increasing regulation and scrutiny, which could lead to additional compliance costs or restrict the use of these technologies[186](index=186&type=chunk) - The business is subject to U.S. and foreign anti-corruption laws (e.g., FCPA), export controls, and economic sanctions, which can impair the ability to compete in international markets[174](index=174&type=chunk)[205](index=205&type=chunk) [Risks Related to Financial Operations and Debt](index=41&type=section&id=Risks%20Related%20to%20Financial%20Operations%20and%20Debt) Financial risks include servicing its convertible senior notes, potential repurchase obligations, and counterparty risk from capped call transactions - The company has outstanding convertible senior notes due in 2025 (**$57.5M principal**) and 2028 (**$402.5M principal**); servicing this debt depends on future performance and cash flow, which may be insufficient[210](index=210&type=chunk) - Holders of the notes can require repurchase upon a **"fundamental change,"** and the company may not have enough available cash or be able to obtain financing to meet this obligation[212](index=212&type=chunk) - In connection with the notes, the company entered into capped call transactions to reduce potential dilution and is subject to **counterparty risk** if the financial institutions involved default on their obligations[216](index=216&type=chunk)[220](index=220&type=chunk) [Risks Related to Ownership of Our Common Stock](index=45&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) Stock ownership risks include high price volatility, concentrated ownership, and the absence of dividend payments - The stock price is subject to **high volatility** due to factors like fluctuations in operating results, analyst expectations, and general market conditions[228](index=228&type=chunk) - **Ownership is significantly concentrated** among executive officers, directors, and principal stockholders, allowing them to influence all matters requiring stockholder approval[239](index=239&type=chunk) - The company has **never paid cash dividends** and does not intend to in the foreseeable future, meaning returns on investment depend solely on stock price appreciation[237](index=237&type=chunk) [Cybersecurity](index=50&type=section&id=Item%201C.%20Cybersecurity) The company's cybersecurity program is managed by senior leadership and overseen by the board's audit committee to mitigate threats - The company's cybersecurity program is managed by the **CISO, CTO, and CIO**, who are responsible for identifying, assessing, and managing threats to critical systems and data[255](index=255&type=chunk)[262](index=262&type=chunk) - The board of directors' **audit committee is responsible for overseeing** the cybersecurity risk management processes and receives periodic reports from management on significant threats and mitigation efforts[261](index=261&type=chunk)[266](index=266&type=chunk) - Mitigation strategies include incident response procedures, vulnerability management, disaster recovery plans, encryption, network security controls, and a vendor risk management program[256](index=256&type=chunk)[259](index=259&type=chunk) [Properties](index=51&type=section&id=Item%202.%20Properties) PagerDuty's corporate headquarters is in San Francisco, supplemented by several other domestic and international office locations - The corporate headquarters is in San Francisco, CA, with a lease for **42,113 sq. ft.** expiring in fiscal 2026[267](index=267&type=chunk) - PagerDuty has additional international and domestic offices in Atlanta, Toronto, Santiago, London, Sydney, Lisbon, and Tokyo[267](index=267&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=52&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) PagerDuty's common stock trades on the NYSE under the symbol "PD", and the company does not anticipate paying cash dividends - The company's common stock is listed on the NYSE under the symbol **"PD"**[271](index=271&type=chunk) - PagerDuty has **never paid cash dividends** and does not expect to in the foreseeable future, intending to retain earnings for business investment[273](index=273&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=53&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) FY2024 revenue grew 16% to $430.7 million with a 107% net retention rate, alongside an improved net loss and positive free cash flow Key Business Metrics (as of Jan 31) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Total Paying Customers | 15,039 | 15,244 | | Customers > $100k ARR | 804 | 752 | | Dollar-based Net Retention Rate | 107% | 120% | FY 2024 Financial Performance vs. FY 2023 | Metric | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Revenue | $430.7M | $370.8M | | Gross Profit | $352.9M | $300.4M | | Gross Margin | 82% | 81% | | Loss from Operations | ($96.2M) | ($129.4M) | | Net Loss | ($77.4M) | ($129.2M) | | Net Cash from Operations | $72.0M | $17.0M | | Free Cash Flow | $64.4M | $8.5M | [Results of Operations](index=60&type=section&id=Results%20of%20Operations) FY2024 revenue increased 16% to $430.7 million with an 82% gross margin, while loss from operations improved to $96.2 million - **Revenue increased by $59.9 million (16%)** in FY2024, attributed to growth from both new and existing customers through user expansion and upsells[327](index=327&type=chunk) - **Gross margin improved slightly to 82%** in FY2024 from 81% in FY2023[329](index=329&type=chunk) - General and administrative expenses increased by 13%, primarily due to an **$8.4 million real estate impairment charge** and higher personnel costs[333](index=333&type=chunk) [Liquidity and Capital Resources](index=66&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is strong with $571.2 million in cash and investments, bolstered by positive operating cash flow of $72.0 million - The company held **$571.2 million in cash, cash equivalents, and investments** as of January 31, 2024[351](index=351&type=chunk) - In October 2023, the company issued **$402.5 million in new 2028 convertible notes**, repurchased $230.0 million of its 2025 notes, and repurchased $50.0 million of common stock[353](index=353&type=chunk)[354](index=354&type=chunk) Cash Flow Summary (Fiscal Year Ended Jan 31) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $72.0 million | $17.0 million | | Net cash used in investing activities | ($30.5 million) | ($86.2 million) | | Net cash provided by (used in) financing activities | $51.6 million | ($6.4 million) | [Quantitative and Qualitative Disclosures About Market Risk](index=70&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) PagerDuty is primarily exposed to interest rate risk on its investments and foreign currency risk on its international operating expenses - The company's primary market risks are **interest rate risk and foreign currency exchange risk**[381](index=381&type=chunk)[385](index=385&type=chunk) - Interest rate risk impacts the fair value of the company's **$571.2 million in cash, cash equivalents, and investments**, as well as the fair value of its convertible notes; a hypothetical 10% change in interest rates is not expected to have a material impact[381](index=381&type=chunk)[384](index=384&type=chunk) - Foreign currency risk is mainly from operating expenses in countries like Canada, the UK, and Australia, as revenue is almost entirely denominated in U.S. dollars; a hypothetical 10% change in the U.S. dollar's value is not expected to have a material effect[386](index=386&type=chunk) [Financial Statements and Supplementary Data](index=71&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the company's audited consolidated financial statements and the independent auditor's report for fiscal year 2024 Consolidated Balance Sheet Highlights (as of Jan 31, 2024) | Category | Amount (in thousands) | | :--- | :--- | | **Assets** | | | Total Current Assets | $703,198 | | Total Assets | $925,306 | | **Liabilities & Equity** | | | Total Current Liabilities | $281,655 | | Convertible senior notes, net | $448,030 | | Total Liabilities | $746,413 | | Total Stockholders' Equity | $171,600 | Consolidated Statement of Operations (Year Ended Jan 31, 2024) | Line Item | Amount (in thousands) | | :--- | :--- | | Revenue | $430,699 | | Gross Profit | $352,867 | | Loss from Operations | ($96,246) | | Net Loss | ($77,367) | | Net Loss per Share | ($0.89) | [Notes to Consolidated Financial Statements](index=82&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, the acquisition of Jeli, Inc., terms of convertible notes, and the amortization of deferred contract costs - On November 15, 2023, the company acquired Jeli, Inc. for a purchase consideration of **$29.7 million**, resulting in **$18.5 million of goodwill** and $6.9 million of intangible assets[508](index=508&type=chunk)[510](index=510&type=chunk)[511](index=511&type=chunk) - The company defers and amortizes sales commissions over a period of four years; the balance of deferred contract costs was **$44.6 million** as of January 31, 2024[446](index=446&type=chunk)[448](index=448&type=chunk) - As of January 31, 2024, the company had **$57.5 million principal of 1.25% notes due 2025** and **$402.5 million principal of 1.50% notes due 2028** outstanding[507](index=507&type=chunk)[562](index=562&type=chunk) [Controls and Procedures](index=114&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls, procedures, and internal control over financial reporting were effective as of January 31, 2024 - Management concluded that the company's **disclosure controls and procedures were effective** as of January 31, 2024[613](index=613&type=chunk) - Management concluded that **internal control over financial reporting was effective** as of January 31, 2024; the evaluation excluded the internal controls of the recently acquired Jeli, Inc[614](index=614&type=chunk)[615](index=615&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Compensation, and Principal Accountant Fees](index=116&type=section&id=Item%2010%2C%2011%2C%2012%2C%2013%2C%2014) Information regarding directors, executive compensation, and corporate governance is incorporated by reference from the 2024 Proxy Statement - Information for Items 10, 11, 12, 13, and 14 is **incorporated by reference** from the forthcoming 2024 Proxy Statement[622](index=622&type=chunk)[623](index=623&type=chunk)[624](index=624&type=chunk)[625](index=625&type=chunk)[626](index=626&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=117&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and exhibits filed as part of the Form 10-K report - This section contains the index to the Consolidated Financial Statements and lists all exhibits filed with the Form 10-K[627](index=627&type=chunk)[629](index=629&type=chunk)

PagerDuty, Inc. (NYSE:PD) Q4 2024 Earnings Conference Call March 14, 2024 5:00 PM ET Company Participants Tony Righetti - Investor Relations Jennifer Tejada - Chairperson & Chief Executive Officer Howard Wilson - Chief Financial Officer Conference Call Participants Sanjit Singh - Morgan Stanely Joel Fishbein - Truist Rob Oliver - Baird Kingsley Crane - Canaccord Genuity Andrew Sherman - TD Cowen Jacob Roberge - William Blair Tony Righetti Good afternoon, and thank you for joining us to discuss PagerDuty's F ...

– Introduced PagerDuty AIOps to address large-scale event correlation, compression, and automation needs of ITOps, Command Centers, NOCs, and SRE teams with built-in automation and event remediation – Named a Leader in The Forrester WaveTM: Process-Centric AI For IT Operations (AIOps), Q2 2023 report – Achieved FedRAMP® "In Process" milestone bringing value to government agencies and enterprises | --- | --- | --- | --- | --- | --- | |----------------------|--------|--------|--------|--------|--------| | DBN ...

Financial Performance - Fourth quarter revenue increased 10.1% year over year to $111.1 million[1] - Total revenue for fiscal 2024 was $430.7 million, an increase of 16.2% year over year[4] - Annual recurring revenue (ARR) grew 10% year over year to $451.9 million[8] - Revenue for the three months ended January 31, 2024, was $111,117,000, representing a 10.7% increase from $100,966,000 in the same period of 2023[34] - Gross profit for the year ended January 31, 2024, was $352,867,000, up from $300,359,000 in 2023, indicating a growth of 17.5%[34] - The company achieved a GAAP gross profit of $90.8 million for the three months ended January 31, 2024, up from $82.6 million in the same period of 2023, reflecting a growth of 9.9%[40] - Non-GAAP gross profit for the same period was $94.9 million, compared to $87.0 million in 2023, indicating a year-over-year increase of 9.9%[40] Operating Loss and Income - GAAP operating loss was $33.4 million, with a GAAP operating margin of (30.1)%[4] - Non-GAAP operating income was $11.0 million, resulting in a non-GAAP operating margin of 9.9%[4] - PagerDuty reported a net loss of $30.6 million for the three months ended January 31, 2024, compared to a net loss of $24.6 million for the same period in 2023, representing a 24.5% increase in losses year-over-year[38] - GAAP operating loss for the three months ended January 31, 2024, was $33,431 thousand, compared to a loss of $26,490 thousand in the same period of 2023[42] - Non-GAAP operating income for the three months ended January 31, 2024, was $11,016 thousand, up from $6,125 thousand in the prior year, reflecting a non-GAAP operating margin of 9.9%[42] Net Income and Loss - Non-GAAP net income per diluted share for fiscal 2024 was $0.74[4] - Non-GAAP net income attributable to common stockholders for the year ended January 31, 2024, was $72,554 thousand, significantly higher than $3,694 thousand in the previous year[42] - The company reported a GAAP net loss per share, basic, of $0.89 for the year ended January 31, 2024, compared to $1.45 in 2023[42] - The company reported a non-GAAP net income per share, diluted, of $0.17 for the three months ended January 31, 2024, compared to $0.07 in the same period of 2023[42] Cash Flow and Assets - Cash and cash equivalents as of January 31, 2024, were $363,011,000, an increase from $274,019,000 in 2023, representing a growth of 32.5%[36] - Total assets as of January 31, 2024, were $925,306,000, compared to $817,873,000 in 2023, indicating a growth of 13.1%[36] - Cash flows from operating activities for the three months ended January 31, 2024, were $22.2 million, an increase from $17.6 million in the prior year, marking a 26.5% increase[38] - The company provided $22,155 thousand in net cash from operating activities for the three months ended January 31, 2024, compared to $17,572 thousand in the same period of 2023[45] Expenses - Total operating expenses for the three months ended January 31, 2024, were $124,190,000, compared to $109,112,000 in the same period of 2023, reflecting a 13.8% increase[34] - The company’s GAAP research and development expenses were $35.5 million for the three months ended January 31, 2024, compared to $34.6 million in 2023, reflecting a 2.8% increase[40] - Research and development expenses for the year ended January 31, 2024, were $139,769,000, up from $134,876,000 in 2023, indicating a 3.1% increase[34] - The company incurred acquisition-related expenses of $786 thousand for the three months ended January 31, 2024, compared to $5 thousand in the same period of 2023[42] Guidance and Projections - Total revenue guidance for Q1 fiscal 2025 is projected to be between $110.5 million and $112.5 million, representing a growth rate of 7% - 9% year over year[8] - Non-GAAP net income per diluted share guidance for Q1 fiscal 2025 is expected to be between $0.12 and $0.13[8] Acquisition - Closed on the acquisition of Jeli, Inc. on November 15, 2023, to enhance incident management solutions[8] Retention Rate - Dollar-based net retention rate was 107% as of January 31, 2024, down from 120% in the previous year[8]

[PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) Presents PagerDuty's unaudited financial statements and management's analysis for the period ended October 31, 2023 [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201%20Financial%20Statements%20%28unaudited%29) This section presents PagerDuty, Inc.'s unaudited condensed consolidated financial statements for the period ended October 31, 2023, including the balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, along with detailed notes explaining the company's business, accounting policies, and specific financial line items [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Snapshot of PagerDuty's assets, liabilities, and equity as of October 31, 2023, and January 31, 2023 | Metric | As of Oct 31, 2023 (in thousands) | As of Jan 31, 2023 (in thousands) | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Total Assets | $886,730 | $817,873 | | Total Liabilities | $712,139 | $575,787 | | Total Stockholders' Equity | $169,119 | $240,978 | - Cash and cash equivalents increased significantly from **$274,019 thousand** as of January 31, 2023, to **$380,307 thousand** as of October 31, 2023[16](index=16&type=chunk) - Convertible senior notes, net, increased substantially from **$282,908 thousand** to **$447,389 thousand**, indicating new debt issuance[16](index=16&type=chunk) [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Details PagerDuty's revenue, expenses, and net loss for the three and nine months ended October 31, 2023 | Metric (in thousands) | 3 Months Ended Oct 31, 2023 | 3 Months Ended Oct 31, 2022 | 9 Months Ended Oct 31, 2023 | 9 Months Ended Oct 31, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenue | $108,720 | $94,203 | $319,582 | $269,827 | | Gross Profit | $89,015 | $76,196 | $262,108 | $217,737 | | Loss from Operations | $(20,842) | $(32,542) | $(62,815) | $(102,887) | | Net Loss | $(13,090) | $(32,804) | $(48,550) | $(104,223) | | Net Loss per Share | $(0.16) | $(0.36) | $(0.55) | $(1.18) | - Revenue increased by **15.4%** for the three months ended October 31, 2023, and by **18.4%** for the nine months ended October 31, 2023, compared to the respective prior periods[19](index=19&type=chunk) - Net loss significantly decreased for both the three-month and nine-month periods, indicating improved operational efficiency or one-time gains[19](index=19&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Presents PagerDuty's net loss and other comprehensive income (loss) for the three and nine months ended October 31, 2023 | Metric (in thousands) | 3 Months Ended Oct 31, 2023 | 3 Months Ended Oct 31, 2022 | 9 Months Ended Oct 31, 2023 | 9 Months Ended Oct 31, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net loss | $(13,090) | $(32,804) | $(48,550) | $(104,223) | | Total comprehensive loss | $(13,014) | $(34,228) | $(48,670) | $(106,690) | - Unrealized gain on investments improved from a loss of **$(1,050) thousand** in Q3 2022 to a gain of **$227 thousand** in Q3 2023[21](index=21&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Outlines changes in PagerDuty's stockholders' equity, including stock repurchases and compensation | Metric (in thousands) | As of Jan 31, 2023 | As of Oct 31, 2023 | | :-------------------- | :----------------- | :----------------- | | Total Stockholders' Equity | $240,978 | $169,119 | | Additional Paid-in Capital | $719,816 | $745,114 | | Accumulated Deficit | $(477,246) | $(524,283) | | Treasury Stock | $0 | $(50,000) | - The company repurchased **2,331,002 shares** of common stock for **$50.0 million** during the nine months ended October 31, 2023, recorded as Treasury Stock[24](index=24&type=chunk)[115](index=115&type=chunk) - Stock-based compensation contributed **$96.0 million** to additional paid-in capital for the nine months ended October 31, 2023[24](index=24&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Details PagerDuty's cash flows from operating, investing, and financing activities for the nine months ended October 31, 2023 | Metric (in thousands) | 9 Months Ended Oct 31, 2023 | 9 Months Ended Oct 31, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | | Net cash provided by (used in) operating activities | $49,819 | $(592) | | Net cash provided by (used in) investing activities | $6,875 | $(80,272) | | Net cash provided by (used in) financing activities | $53,661 | $(6,084) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $109,904 | $(87,452) | - Operating activities generated **$49.8 million** in cash for the nine months ended October 31, 2023, a significant improvement from a cash outflow of **$(0.6) million** in the prior year[29](index=29&type=chunk)[217](index=217&type=chunk) - Financing activities provided **$53.7 million** in cash, primarily due to proceeds from the issuance of 2028 Convertible Senior Notes, partially offset by repurchases of 2025 Notes and common stock[29](index=29&type=chunk)[219](index=219&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures supporting the condensed consolidated financial statements [Note 1. Description of Business and Basis of Presentation](index=13&type=section&id=1.%20Description%20of%20Business%20and%20Basis%20of%20Presentation) Describes PagerDuty's business and the accounting principles used in financial statement preparation - PagerDuty, Inc. operates a digital operations management platform that uses machine learning to process digital signals, enabling rapid incident response and automation for mission-critical work[33](index=33&type=chunk) - The financial statements are unaudited and prepared in accordance with U.S. GAAP and SEC rules for interim reporting, consolidating wholly-owned subsidiaries and controlling interests[35](index=35&type=chunk)[36](index=36&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=14&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) Outlines key accounting policies applied in preparing the condensed consolidated financial statements - The company manages its operations as one operating segment, with the CEO as the chief operating decision maker[44](index=44&type=chunk) - No single customer accounted for more than **10%** of total accounts receivable or revenue for the periods presented, indicating diversified customer base[43](index=43&type=chunk) - Related party transactions with entities associated with Board members or executive officers amounted to **$3.8 million** for the nine months ended October 31, 2023[45](index=45&type=chunk) [Note 3. Redeemable Non-Controlling Interest](index=15&type=section&id=3.%20Redeemable%20Non-Controlling%20Interest) Details PagerDuty's joint venture in Japan and the accounting for non-controlling interest - PagerDuty established a joint venture, PagerDuty K.K., in Japan in May 2022, holding a **51%** controlling interest and consolidating its financial results[50](index=50&type=chunk)[52](index=52&type=chunk) - The redeemable non-controlling interest balance increased from **$1,108 thousand** at the beginning of the nine-month period to **$5,472 thousand** at October 31, 2023, driven by a **$1.8 million** investment and a **$4.1 million** adjustment[53](index=53&type=chunk) [Note 4. Cash, Cash Equivalents, and Investments](index=16&type=section&id=4.%20Cash,%20Cash%20Equivalents,%20and%20Investments) Breakdown of PagerDuty's cash, cash equivalents, and available-for-sale investments | Category (in thousands) | As of Oct 31, 2023 | As of Jan 31, 2023 | | :---------------------- | :----------------- | :----------------- | | Cash and cash equivalents | $380,307 | $274,019 | | Available-for-sale investments | $195,006 | $202,948 | | Total | $575,313 | $576,967 | - The company's cash and cash equivalents increased by **$106.3 million**, while available-for-sale investments decreased by **$7.9 million** from January 31, 2023, to October 31, 2023[56](index=56&type=chunk) - As of October 31, 2023, the company held **104 securities** in an unrealized loss position with an aggregate fair value of **$199.1 million**, with **$44.5 million** in a continuous unrealized loss position for over 12 months[59](index=59&type=chunk) [Note 5. Fair Value Measurements](index=17&type=section&id=5.%20Fair%20Value%20Measurements) Describes the fair value hierarchy and measurements for PagerDuty's financial assets and liabilities | Category (in thousands) | Level 1 (Oct 31, 2023) | Level 2 (Oct 31, 2023) | Total (Oct 31, 2023) | | :---------------------- | :--------------------- | :--------------------- | :------------------- | | Money market funds | $297,294 | $0 | $297,294 | | U.S. Treasury securities | $0 | $52,516 | $52,516 | | Commercial paper | $0 | $21,595 | $21,595 | | Corporate debt securities | $0 | $113,620 | $113,620 | | U.S. Government agency securities | $0 | $18,253 | $18,253 | | Total | $297,294 | $205,984 | $503,278 | - The fair value of the 2025 Convertible Senior Notes was approximately **$53.5 million** and the 2028 Convertible Senior Notes was approximately **$395.3 million** as of October 31, 2023, classified as Level 2[68](index=68&type=chunk) [Note 6. Property and Equipment, Net](index=19&type=section&id=6.%20Property%20and%20Equipment,%20Net) Presents PagerDuty's property and equipment, net of accumulated depreciation and amortization | Metric (in thousands) | As of Oct 31, 2023 | As of Jan 31, 2023 | | :-------------------- | :----------------- | :----------------- | | Gross property and equipment | $40,056 | $40,712 | | Accumulated depreciation and amortization | $(21,310) | $(22,322) | | Property and equipment, net | $18,746 | $18,390 | - Depreciation and amortization expense increased to **$6.3 million** for the nine months ended October 31, 2023, from **$5.1 million** in the prior year[70](index=70&type=chunk) - An impairment charge of **$0.4 million** was recorded for abandoned leasehold improvements in the nine months ended October 31, 2023[71](index=71&type=chunk) [Note 7. Deferred Contract Costs](index=19&type=section&id=7.%20Deferred%20Contract%20Costs) Details PagerDuty's deferred contract costs, primarily sales commissions, and their amortization - Deferred contract costs, primarily sales commissions, decreased from **$46.4 million** as of January 31, 2023, to **$43.4 million** as of October 31, 2023[72](index=72&type=chunk) - Amortization expense for deferred contract costs was **$15.3 million** for the nine months ended October 31, 2023, up from **$14.2 million** in the prior year[72](index=72&type=chunk) [Note 8. Leases](index=19&type=section&id=8.%20Leases) Provides information on PagerDuty's lease right-of-use assets and lease liabilities | Metric (in thousands) | As of Oct 31, 2023 | As of Jan 31, 2023 | | :-------------------- | :----------------- | :----------------- | | Lease right-of-use assets | $10,120 | $13,982 | | Lease liabilities, current | $6,088 | $5,904 | | Lease liabilities, non-current | $8,391 | $12,704 | - The weighted average remaining lease term was **3.3 years** with a weighted average discount rate of **3.7%** as of October 31, 2023[79](index=79&type=chunk) - An impairment charge of **$0.8 million** was recorded for a subleased office's right-of-use asset in the nine months ended October 31, 2023[84](index=84&type=chunk) [Note 9. Debt and Financing Arrangements](index=21&type=section&id=9.%20Debt%20and%20Financing%20Arrangements) Describes PagerDuty's convertible senior notes and related financing activities - In October 2023, PagerDuty issued **$402.5 million** aggregate principal amount of 1.50% Convertible Senior Notes due 2028, with net proceeds of **$390.4 million**[89](index=89&type=chunk) - The company repurchased **$230.0 million** of its 2025 Convertible Senior Notes for **$223.5 million** in October 2023, resulting in a **$4.0 million** gain on partial extinguishment[88](index=88&type=chunk) | Metric (in thousands) | 2025 Notes (Oct 31, 2023) | 2028 Notes (Oct 31, 2023) | Total (Oct 31, 2023) | | :-------------------- | :------------------------ | :------------------------ | :------------------- | | Principal | $57,500 | $402,500 | $460,000 | | Net carrying amount | $56,879 | $390,510 | $447,389 | [Note 10. Commitments and Contingencies](index=24&type=section&id=10.%20Commitments%20and%20Contingencies) Discloses PagerDuty's commitments and potential contingent liabilities - The company is not currently a party to any material legal proceedings and has not incurred material liabilities related to service-level agreements[105](index=105&type=chunk)[106](index=106&type=chunk) - PagerDuty indemnifies customers, vendors, and directors/officers, but no material claims have been made[107](index=107&type=chunk) [Note 11. Deferred Revenue and Performance Obligations](index=24&type=section&id=11.%20Deferred%20Revenue%20and%20Performance%20Obligations) Details deferred revenue and future revenue from unsatisfied performance obligations | Metric (in thousands) | 3 Months Ended Oct 31, 2023 | 3 Months Ended Oct 31, 2022 | 9 Months Ended Oct 31, 2023 | 9 Months Ended Oct 31, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Deferred revenue, beginning of period | $196,605 | $169,534 | $209,051 | $170,224 | | Billings | $108,534 | $104,384 | $306,950 | $278,462 | | Revenue recognized | $(108,720) | $(94,203) | $(319,582) | $(269,827) | | Deferred revenue, end of period | $196,419 | $179,715 | $196,419 | $179,715 | - Future estimated revenue from unsatisfied performance obligations for cloud-hosted and term-license subscriptions was approximately **$206.0 million** as of October 31, 2023, with the majority expected to be recognized over the next **24 months**[111](index=111&type=chunk) [Note 12. Common Stock and Stockholders' Equity](index=25&type=section&id=12.%20Common%20Stock%20and%20Stockholders'%20Equity) Outlines changes in common stock and stockholders' equity, including stock-based compensation and repurchases - The company repurchased **2,331,002 shares** of common stock for **$50.0 million** at an average price of **$21.45 per share** in October 2023[115](index=115&type=chunk) - Total unrecognized stock-based compensation expense related to unvested RSUs was **$234.1 million** as of October 31, 2023, to be recognized over a weighted average period of **2.4 years**[120](index=120&type=chunk) | Stock-Based Compensation Expense (in thousands) | 3 Months Ended Oct 31, 2023 | 3 Months Ended Oct 31, 2022 | 9 Months Ended Oct 31, 2023 | 9 Months Ended Oct 31, 2022 | | :---------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Cost of revenue | $1,820 | $1,937 | $5,860 | $4,948 | | Research and development | $11,128 | $10,824 | $34,002 | $30,066 | | Sales and marketing | $8,094 | $8,004 | $22,362 | $22,533 | | General and administrative | $10,786 | $10,679 | $32,686 | $28,931 | | Total | $31,828 | $31,444 | $94,910 | $86,478 | [Note 13. Net Loss per Share](index=28&type=section&id=13.%20Net%20Loss%20per%20Share) Explains the calculation of basic and diluted net loss per share for PagerDuty | Metric (in thousands, except per share data) | 3 Months Ended Oct 31, 2023 | 3 Months Ended Oct 31, 2022 | 9 Months Ended Oct 31, 2023 | 9 Months Ended Oct 31, 2022 | | :------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net loss attributable to PagerDuty, Inc. common stockholders | $(15,125) | $(32,542) | $(51,125) | $(103,861) | | Net loss per share, basic and diluted | $(0.16) | $(0.36) | $(0.55) | $(1.18) | - Basic and diluted net loss per share were the same due to the company being in a loss position, making potentially dilutive securities anti-dilutive[134](index=134&type=chunk) - As of October 31, 2023, there were no potentially dilutive shares related to the conversion of the Notes, as the conversion options were out of money[135](index=135&type=chunk) [Note 14. Income Taxes](index=29&type=section&id=14.%20Income%20Taxes) Discusses PagerDuty's income tax provisions and deferred tax assets - The company recorded an immaterial income tax benefit for the three months ended October 31, 2023, and an income tax benefit of **$0.2 million** for the nine months ended October 31, 2023[138](index=138&type=chunk) - A full valuation allowance is maintained on net federal and state deferred tax assets due to the unlikelihood of realization[137](index=137&type=chunk) [Note 15. Geographic Information](index=30&type=section&id=15.%20Geographic%20Information) Provides a breakdown of PagerDuty's revenue and long-lived assets by geographic region | Revenue (in thousands) | 3 Months Ended Oct 31, 2023 | 3 Months Ended Oct 31, 2022 | 9 Months Ended Oct 31, 2023 | 9 Months Ended Oct 31, 2022 | | :--------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | United States | $79,487 | $72,267 | $232,576 | $206,127 | | International | $29,233 | $21,936 | $87,006 | $63,700 | | Total | $108,720 | $94,203 | $319,582 | $269,827 | - International revenue grew by **33.3%** for the three months and **36.6%** for the nine months ended October 31, 2023, outpacing U.S. growth[140](index=140&type=chunk) - As of October 31, 2023, **84%** of long-lived assets were in the United States, **13%** in Canada, **2%** in Portugal, and **1%** in the United Kingdom[140](index=140&type=chunk) [Note 16. Subsequent Events](index=30&type=section&id=16.%20Subsequent%20Events) Discloses significant events that occurred after the reporting period for PagerDuty - On November 15, 2023, PagerDuty acquired Jeli, Inc. for approximately **$27 million** in cash to enhance incident learning and reduction capabilities[141](index=141&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on PagerDuty's financial condition and operational results, highlighting revenue growth driven by new and existing customers, improved profitability metrics, and strategic financial activities such as debt issuance and share repurchases. It also details key business metrics and non-GAAP financial measures [Overview](index=31&type=section&id=Overview) PagerDuty's digital operations management platform uses machine learning for rapid incident response and automation across IT, security, and customer service - PagerDuty is a digital operations management platform that uses machine learning to correlate, process, and predict issues, enabling rapid incident response and automation across IT operations, security, and customer service[143](index=143&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk) - The company generates revenue primarily from cloud-hosted subscription fees and employs a land-and-expand business model, with mid-market and enterprise customers accounting for the majority of revenue[148](index=148&type=chunk) [Macroeconomic Environment](index=31&type=section&id=Macroeconomic%20Environment) The company's business is subject to global macroeconomic conditions, including inflation, interest rate hikes, potential recession, and geopolitical conflicts - The company's business is subject to global macroeconomic conditions, including inflation, interest rate hikes, potential recession, and geopolitical conflicts, which are continuously monitored for direct and indirect impacts[149](index=149&type=chunk)[150](index=150&type=chunk) [Key Business Metrics](index=32&type=section&id=Key%20Business%20Metrics) This section presents key operational metrics, including customer counts and dollar-based net retention rates | Metric | As of Oct 31, 2023 | As of Oct 31, 2022 | | :----------------------------- | :----------------- | :----------------- | | Customers | 15,049 | 15,265 | | Customers > $100,000 in ARR | 778 | 710 | | Dollar-based net retention rate | 110% | 123% | - The number of customers with over **$100,000** in Annual Recurring Revenue (ARR) increased to **778** from **710** year-over-year, indicating strong growth in enterprise accounts[156](index=156&type=chunk) - The dollar-based net retention rate for all customers decreased from **123%** to **110%** year-over-year, reflecting a slower expansion from existing customers[160](index=160&type=chunk) [Components of Results of Operations](index=33&type=section&id=Components%20of%20Results%20of%20Operations) This section details the primary drivers of revenue and the composition of cost of revenue and operating expenses - Revenue is primarily generated from cloud-hosted and term-license software subscription fees, recognized ratably over the contractual term[161](index=161&type=chunk) - Cost of revenue includes personnel expenses, third-party cloud infrastructure, payment processing fees, and amortization of capitalized software and acquired technology[163](index=163&type=chunk) - Operating expenses are categorized into research and development, sales and marketing, and general and administrative, with personnel expenses being the most significant component[165](index=165&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including revenue, gross profit, and operating loss, for the reported periods | Metric (in thousands) | 3 Months Ended Oct 31, 2023 | 3 Months Ended Oct 31, 2022 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Revenue | $108,720 | $94,203 | $14,517 | 15% | | Cost of revenue | $19,705 | $18,007 | $1,698 | 9% | | Gross profit | $89,015 | $76,196 | $12,819 | 17% | | Loss from operations | $(20,842) | $(32,542) | $11,700 | (36)% | | Metric (in thousands) | 9 Months Ended Oct 31, 2023 | 9 Months Ended Oct 31, 2022 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Revenue | $319,582 | $269,827 | $49,755 | 18% | | Cost of revenue | $57,474 | $52,090 | $5,384 | 10% | | Gross profit | $262,108 | $217,737 | $44,371 | 20% | | Loss from operations | $(62,815) | $(102,887) | $40,072 | (39)% | - Interest income significantly increased by **227%** for the three months and **309%** for the nine months ended October 31, 2023, primarily due to higher interest rates on cash and investments[187](index=187&type=chunk)[196](index=196&type=chunk) - A **$4.0 million** gain on partial extinguishment of convertible senior notes was recorded in the three and nine months ended October 31, 2023, from the repurchase of 2025 Notes[188](index=188&type=chunk)[197](index=197&type=chunk) [Non-GAAP Financial Measures](index=40&type=section&id=Non-GAAP%20Financial%20Measures) This section presents non-GAAP financial measures, including gross profit, operating income, and net income, to provide additional insights into the company's performance | Non-GAAP Metric (in thousands) | 3 Months Ended Oct 31, 2023 | 3 Months Ended Oct 31, 2022 | 9 Months Ended Oct 31, 2023 | 9 Months Ended Oct 31, 2022 | | :----------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Non-GAAP gross profit | $92,943 | $80,120 | $274,503 | $228,078 | | Non-GAAP gross margin | 85% | 85% | 86% | 85% | | Non-GAAP operating income (loss) | $15,030 | $3,015 | $45,375 | $(2,668) | | Non-GAAP operating margin | 14% | 3% | 14% | (1)% | | Non-GAAP net income (loss) attributable to PagerDuty, Inc. common stockholders | $19,193 | $3,476 | $56,719 | $(3,596) | - Non-GAAP operating income significantly improved to **$15.0 million** for the three months and **$45.4 million** for the nine months ended October 31, 2023, compared to lower or negative figures in the prior year[203](index=203&type=chunk) - Non-GAAP net income attributable to common stockholders saw substantial growth, reaching **$19.2 million** for the three months and **$56.7 million** for the nine months ended October 31, 2023[205](index=205&type=chunk) [Free Cash Flow](index=42&type=section&id=Free%20Cash%20Flow) This section presents the company's free cash flow, a non-GAAP measure, derived from operating activities less capital expenditures | Metric (in thousands) | 3 Months Ended Oct 31, 2023 | 3 Months Ended Oct 31, 2022 | 9 Months Ended Oct 31, 2023 | 9 Months Ended Oct 31, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net cash provided by (used in) operating activities | $16,917 | $(448) | $49,819 | $(592) | | Purchases of property and equipment | $(245) | $(815) | $(1,193) | $(3,755) | | Capitalization of internal-use software costs | $(1,441) | $(988) | $(3,812) | $(2,725) | | Free cash flow | $15,231 | $(2,251) | $44,814 | $(7,072) | - Free cash flow significantly improved, turning from negative **$(2.3) million** in Q3 2022 to positive **$15.2 million** in Q3 2023, and from negative **$(7.1) million** to positive **$44.8 million** for the nine-month period[209](index=209&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's ability to meet its short-term and long-term financial obligations, including cash, cash equivalents, and investments - As of October 31, 2023, principal sources of liquidity were cash, cash equivalents, and investments totaling **$575.3 million**[213](index=213&type=chunk) - The company believes existing liquidity and cash from subscriptions will be sufficient for working capital and capital expenditures for at least the next **12 months**[213](index=213&type=chunk) - Deferred revenue was **$196.4 million** as of October 31, 2023, with **$192.9 million** expected to be recognized as revenue in the next **12 months**[214](index=214&type=chunk) [Cash Flows](index=44&type=section&id=Cash%20Flows) This section provides a detailed analysis of cash generated from or used in operating, investing, and financing activities - Net cash provided by operating activities for the nine months ended October 31, 2023, was **$49.8 million**, primarily driven by adjustments for non-cash charges and gains[217](index=217&type=chunk) - Investing activities provided **$6.9 million** in cash, mainly from proceeds from maturities of investments, partially offset by purchases of investments and capitalized software[218](index=218&type=chunk) - Financing activities provided **$53.7 million**, largely due to proceeds from the 2028 Notes issuance, offset by repurchases of 2025 Notes and common stock[219](index=219&type=chunk)[220](index=220&type=chunk) [Contractual Obligations and Commitments](index=45&type=section&id=Contractual%20Obligations%20and%20Commitments) This section outlines the company's contractual obligations and other commitments, including debt and lease obligations - No material changes to contractual obligations and other commitments were reported during the nine months ended October 31, 2023, except for the 2028 Notes[221](index=221&type=chunk) [Indemnification Agreements](index=45&type=section&id=Indemnification%20Agreements) This section describes the company's indemnification agreements with customers, vendors, and directors/officers - The company indemnifies customers, vendors, and directors/officers, but no material demands or claims have been made under these agreements[222](index=222&type=chunk) [Critical Accounting Policies and Estimates](index=45&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section discusses the accounting policies and estimates that require significant judgment and could materially affect financial results - No significant changes to critical accounting policies were reported that materially impacted the condensed consolidated financial statements[224](index=224&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section states that there have been no material changes in the company's market risk compared to the disclosures in its Annual Report - No material changes in market risk were identified compared to previous disclosures in the Annual Report[225](index=225&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, with the participation of the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures, concluding they were effective at a reasonable assurance level as of October 31, 2023. No material changes in internal control over financial reporting were identified during the quarter - Disclosure controls and procedures were evaluated and deemed effective at a reasonable assurance level as of October 31, 2023[227](index=227&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended October 31, 2023[229](index=229&type=chunk) [PART II - OTHER INFORMATION](index=47&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This part covers legal proceedings, risk factors, equity security sales, exhibits, and official signatures [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) The company is not a party to any material pending legal proceedings and is not aware of any pending or threatened litigation that could materially affect its business - PagerDuty is not involved in any material pending legal proceedings[231](index=231&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks, including potential compromises to security measures, the critical importance of service reliability, and risks associated with servicing debt and convertible notes. It emphasizes the potential adverse effects of these factors on the company's business, financial condition, and stock value - The company faces significant risks from potential compromises to its security measures or those of third-party providers, which could lead to regulatory actions, litigation, reputational harm, and financial losses[233](index=233&type=chunk)[234](index=234&type=chunk)[238](index=238&type=chunk) - Servicing the company's convertible senior notes (2025 and 2028 Notes) requires significant cash flow, and the inability to generate sufficient cash or refinance debt could adversely affect operations and lead to default[245](index=245&type=chunk)[246](index=246&type=chunk) - The conditional conversion feature of the Notes, if triggered, could require cash payments, adversely affecting liquidity and potentially diluting existing stockholders if settled with common stock[248](index=248&type=chunk)[249](index=249&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=52&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's share repurchase activities, including the repurchase of common stock and convertible senior notes during October 2023 - In October 2023, the company repurchased **2,331,002 shares** of common stock for **$50.0 million** at an average price of **$21.45 per share**[258](index=258&type=chunk)[260](index=260&type=chunk) - The company also repurchased **$230.0 million** aggregate principal amount of its 2025 Notes for **$223.5 million** in October 2023, resulting in a **$4.0 million** gain on partial extinguishment[259](index=259&type=chunk) [Item 6. Exhibits](index=52&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate documents, debt indentures, capped call confirmations, and certifications - The exhibit index includes the Amended and Restated Certificate of Incorporation and Bylaws, Indentures for the 2028 Convertible Senior Notes, and certifications from the CEO and CFO[264](index=264&type=chunk) [Signatures](index=54&type=section&id=Signatures) This section contains the signatures of the registrant's authorized officers, including the Chief Executive Officer, Chief Financial Officer, and Senior Vice President, Finance and Chief Accounting Officer, certifying the report - The report is signed by Jennifer G. Tejada (CEO), Owen Howard Wilson (CFO), and Mitra Rezvan (SVP, Finance and Chief Accounting Officer) on December 1, 2023[269](index=269&type=chunk)

Financial Data and Key Metrics Changes - PagerDuty reported Q3 revenue of $109 million, reflecting a 15% year-over-year growth, with a non-GAAP operating margin of 14%, an increase of over 1,000 basis points from the previous year [7][42][44] - Annual recurring revenue (ARR) grew 13% year-over-year to $439 million, with a dollar-based net retention rate of 110%, down from 123% a year ago [42][44] - The company ended the quarter with $575 million in cash and cash equivalents, and total deferred revenue was $196 million, up 9% year-over-year [46] Business Line Data and Key Metrics Changes - The enterprise segment was the strongest performer, with dollar-based net retention more than 500 basis points above that of SMB [13] - New customer acquisitions and expansions in enterprise and mid-market were highlighted, with a record-setting win from a long-standing enterprise software customer [11][32] - The number of customers spending over $100,000 in ARR grew to 778, a 10% increase from the previous year [42] Market Data and Key Metrics Changes - International revenue contribution increased to 27% of total revenues, up from 23% in Q3 of the previous year [42] - The total customer count declined by 1% year-over-year to 15,049, indicating uneven demand among SMB and VSB accounts [43] Company Strategy and Development Direction - The company is focused on profitable growth and plans to continue driving margin expansion while positioning for growth acceleration in the next fiscal year [29][51] - PagerDuty is enhancing its enterprise go-to-market strategy by focusing on C-suite buyers and offering flexible multiyear pricing solutions [17][16] - The acquisition of Jeli is expected to enhance the incident management capabilities and overall value proposition of the Operations Cloud [24][108] Management's Comments on Operating Environment and Future Outlook - Management noted that macro volatility continues to pressure budgets and slow customer decision-making, but engagement remains high with nearly one-third of enterprise and mid-market customers expanding [14][66] - The company sees green shoots in enterprise and mid-market stabilization, with a focus on automation and operational efficiency driving demand for the Operations Cloud [37][95] - Management expressed confidence in the long-term relationships with customers and the ability to adapt to the current economic environment [60][96] Other Important Information - PagerDuty was recognized as the AWS Marketplace Partner of the Year for North America, highlighting its innovative business model [27] - The company welcomed Eric Johnson as the new CIO, focusing on IT infrastructure and data management [28] Q&A Session Summary Question: Can you comment on the slowing in the $100,000 customers and pipeline? - Management noted a 10% growth in customers above $100,000, which is slower than previous quarters, but strong expansion growth in enterprise and mid-market is encouraging [61][66] Question: Can you elaborate on the green shoots mentioned? - Management highlighted increased engagement in strategic operations cloud discussions and stabilization in enterprise and mid-market performance [66][68] Question: How is the company adapting to headwinds in seat growth? - Management stated that they are effectively managing pricing and packaging to meet customer needs, despite headwinds in seat growth [71][72] Question: Can you discuss the acquisition of Jeli and its impact? - Management expressed excitement about the acquisition, noting it will enhance incident management capabilities and is culturally aligned with PagerDuty [106][108] Question: What are the expectations for billings growth in Q4? - Management indicated that Q4 is the largest quarter for renewals, and they expect positive contributions from larger multiyear deals [78][80]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _________________________ FORM 10-Q _________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 2023 or Delaware 27-2793871 (I.R.S. Employer Identification Number) 600 Townsend St., Suite 200 San Francisco, CA 94103 (844) 800-3889 (Address, including zip code, and telephone number, including area code, of registrant's principal ...

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PagerDuty, Inc. (NYSE:PD) Q2 2024 Earnings Conference Call August 31, 2023 5:00 PM ET Company Participants Tony Righetti - VP, IR Jennifer Tejada - Chairman & CEO Howard Wilson - CFO Conference Call Participants Robert Oliver - Baird Tony Righetti Good afternoon, and thank you for joining us to discuss PagerDuty's Second Quarter Fiscal Year 2024 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 ...