– 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 ...

PagerDuty Announces Fourth Quarter and Full Year Fiscal 2024 Financial Results Fourth quarter revenue increased 10.1% year over year to $111.1 million Fourth quarter GAAP operating loss of $33.4 million, non-GAAP operating income of $11.0 million SAN FRANCISCO – (BUSINESS WIRE) – March 14, 2024 – PagerDuty, Inc. (NYSE:PD), a leader in digital operations management, today announced financial results for the fourth quarter of fiscal 2024, ended January 31, 2024. "PagerDuty delivered year-over-year revenue gro ...

[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 ...

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q%20Filing%20Information) This section details the filing information for PagerDuty, Inc.'s Form 10-Q, including the reporting period, filer status, and outstanding common stock shares - The document is a Quarterly Report on Form 10-Q for PAGERDUTY, INC., covering the quarterly period ended April 30, 2023[1](index=1&type=chunk)[2](index=2&type=chunk) - PagerDuty, Inc. is a large accelerated filer, with its Common Stock (PD) registered on the New York Stock Exchange[3](index=3&type=chunk)[4](index=4&type=chunk) - As of May 31, 2023, the total number of common stock shares outstanding was **92,205,332**[4](index=4&type=chunk) [Special Note Regarding Forward-Looking Statements](index=3&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section highlights the inherent risks and uncertainties associated with forward-looking statements in the report, cautioning against undue reliance - This Form 10-Q contains forward-looking statements regarding future operating results, financial position, business strategy, market growth, and objectives, which involve substantial risks and uncertainties[10](index=10&type=chunk)[11](index=11&type=chunk) - Key risks include the impact of economic downturns, rising inflation, market volatility, the COVID-19 pandemic, and trends in business metrics and financial measures[12](index=12&type=chunk) - Readers are cautioned not to rely on these statements as predictions of future events, and the company disclaims any duty to update them after the filing date[13](index=13&type=chunk)[14](index=14&type=chunk) [PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This part presents PagerDuty's unaudited condensed consolidated financial statements and management's discussion and analysis for the quarter [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201%20Financial%20Statements%20(unaudited)) This section presents PagerDuty, Inc.'s unaudited condensed consolidated financial statements for the period ended April 30, 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) This table presents the company's financial position, detailing assets, liabilities, and stockholders' equity as of April 30, 2023, and January 31, 2023 | Metric | As of April 30, 2023 (in thousands) | As of January 31, 2023 (in thousands) | | :-------------------------------- | :---------------------------------- | :---------------------------------- | | Total Assets | $801,831 | $817,873 | | Total Current Assets | $590,226 | $600,336 | | Cash and cash equivalents | $300,605 | $274,019 | | Investments | $194,527 | $202,948 | | Accounts receivable, net | $61,125 | $91,345 | | Total Liabilities | $548,863 | $575,787 | | Total Current Liabilities | $245,328 | $271,077 | | Deferred revenue, current | $197,383 | $204,137 | | Total Stockholders' Equity | $252,476 | $240,978 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This table outlines the company's financial performance, including revenue, cost of revenue, gross profit, and net loss for the three months ended April 30, 2023 and 2022 | Metric | Three Months Ended April 30, 2023 (in thousands) | Three Months Ended April 30, 2022 (in thousands) | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Revenue | $103,246 | $85,371 | | Cost of revenue | $17,936 | $15,716 | | Gross profit | $85,310 | $69,655 | | Loss from operations | $(15,800) | $(32,457) | | Net loss | $(12,838) | $(32,820) | | Net loss attributable to PagerDuty, Inc. | $(12,218) | $(32,820) | | Net loss per share, basic and diluted | $(0.13) | $(0.38) | [Condensed Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) This table details the company's comprehensive loss, including net loss and other comprehensive income (loss) components for the three months ended April 30, 2023 and 2022 | Metric | Three Months Ended April 30, 2023 (in thousands) | Three Months Ended April 30, 2022 (in thousands) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Net loss | $(12,838) | $(32,820) | | Unrealized loss on investments | $380 | $(848) | | Foreign currency translation adjustments | $(66) | $— | | Total comprehensive loss | $(12,524) | $(33,668) | | Comprehensive loss attributable to PagerDuty, Inc. | $(11,908) | $(33,668) | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This table presents changes in stockholders' equity, including additional paid-in capital and accumulated deficit, as of April 30, 2023, and January 31, 2023 | Metric | As of April 30, 2023 (in thousands) | As of January 31, 2023 (in thousands) | | :-------------------------------- | :---------------------------------- | :---------------------------------- | | Total Stockholders' Equity | $252,476 | $240,978 | | Additional Paid-in Capital | $743,218 | $719,816 | | Accumulated Deficit | $(489,464) | $(477,246) | - Stock-based compensation for the three months ended April 30, 2023, was **$27.89 million**, contributing to the increase in additional paid-in capital[23](index=23&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This table summarizes cash flows from operating, investing, and financing activities for the three months ended April 30, 2023 and 2022 | Metric | Three Months Ended April 30, 2023 (in thousands) | Three Months Ended April 30, 2022 (in thousands) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Net cash provided by (used in) operating activities | $22,152 | $(2,985) | | Net cash provided by (used in) investing activities | $8,563 | $(70,357) | | Net cash used in financing activities | $(4,069) | $(2,584) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $26,586 | $(75,926) | | Cash, cash equivalents, and restricted cash at end of period | $300,605 | $273,859 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and breakdowns for the figures presented in the condensed consolidated financial statements, covering accounting policies, specific asset/liability categories, and other financial disclosures - These notes provide detailed explanations and breakdowns for the figures presented in the condensed consolidated financial statements, covering accounting policies, specific asset/liability categories, and other financial disclosures[26](index=26&type=chunk)[30](index=30&type=chunk) [Note 1. Description of Business and Basis of Presentation](index=10&type=section&id=1.%20Description%20of%20Business%20and%20Basis%20of%20Presentation) This note describes PagerDuty's digital operations management platform and the basis for preparing its financial statements - PagerDuty, Inc. is a digital operations management platform that uses machine learning to manage urgent and mission-critical work, correlating data and digital signals to resolve issues and act on opportunities rapidly[28](index=28&type=chunk) - The financial statements are prepared in accordance with U.S. GAAP and SEC rules for interim reporting, consolidating results of the company and its controlled subsidiaries[30](index=30&type=chunk)[31](index=31&type=chunk) - The company's fiscal year ends on January 31[33](index=33&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=11&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the company's key accounting policies, including those for financial instruments, credit risk, and operating segments - The company's financial instruments (cash, investments, accounts receivable) are exposed to credit risk, but cash and investments are diversified across high-credit quality institutions[37](index=37&type=chunk) - No single customer accounted for more than **10%** of total accounts receivable or revenue for the three months ended April 30, 2023 or 2022[38](index=38&type=chunk) - PagerDuty manages its operations as one operating segment, with the CEO as the chief operating decision maker[39](index=39&type=chunk) [Note 3. Redeemable Non-Controlling Interest](index=11&type=section&id=3.%20Redeemable%20Non-Controlling%20Interest) This note details the redeemable non-controlling interest arising from the PagerDuty K.K. joint venture established in May 2022 - In May 2022, PagerDuty established a joint venture, PagerDuty K.K., obtaining a **51%** controlling interest and consolidating its financial results[42](index=42&type=chunk) | Metric | Three Months Ended April 30, 2023 (in thousands) | | :------------------------------------------ | :--------------------------------------------- | | Balance at beginning of period | $1,108 | | Net loss attributable to redeemable non-controlling interest | $(620) | | Foreign currency translation adjustments | $4 | | Balance at end of period | $492 | [Note 4. Cash, Cash Equivalents, and Investments](index=12&type=section&id=4.%20Cash,%20Cash%20Equivalents,%20and%20Investments) This note provides a breakdown of the company's cash, cash equivalents, and available-for-sale investments, including their composition and maturity | Category | As of April 30, 2023 (in thousands) | As of January 31, 2023 (in thousands) | | :-------------------------- | :---------------------------------- | :---------------------------------- | | Cash and cash equivalents | $300,605 | $274,019 | | Investments (Available-for-sale) | $194,527 | $202,948 | | **Total** | **$495,132** | **$476,967** | - The company's available-for-sale investments primarily consist of U.S. Treasury securities, commercial paper, and corporate debt securities[44](index=44&type=chunk) - As of April 30, 2023, **$148.8 million** of available-for-sale investments were due within one year, and **$45.7 million** were due between one to five years[47](index=47&type=chunk) [Note 5. Fair Value Measurements](index=13&type=section&id=5.%20Fair%20Value%20Measurements) This note explains the fair value hierarchy used for financial assets and liabilities, detailing their classification and valuation - Financial assets are measured at fair value using a hierarchy (Level 1, 2, 3) based on observable inputs[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) | Category | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | Total (in thousands) | | :-------------------------- | :--------------------- | :--------------------- | :--------------------- | :------------------- | | **As of April 30, 2023** | | | | | | Money market funds | $235,444 | $— | $— | $235,444 | | U.S. Treasury securities | $— | $51,463 | $— | $51,463 | | Commercial paper | $— | $31,124 | $— | $31,124 | | Corporate debt securities | $— | $106,498 | $— | $106,498 | | U.S. Government agency securities | $— | $7,928 | $— | $7,928 | | **Total** | **$235,444** | **$197,013** | **$—** | **$432,457** | - The estimated fair value of the 1.25% Convertible Senior Notes due 2025 was approximately **$304.9 million** as of April 30, 2023, classified as Level 2[56](index=56&type=chunk) [Note 6. Property and Equipment, Net](index=15&type=section&id=6.%20Property%20and%20Equipment,%20Net) This note presents the gross and net values of property and equipment, along with associated depreciation and amortization expenses | Category | As of April 30, 2023 (in thousands) | As of January 31, 2023 (in thousands) | | :-------------------------- | :---------------------------------- | :---------------------------------- | | Gross property and equipment | $42,471 | $40,712 | | Accumulated depreciation and amortization | $(24,136) | $(22,322) | | **Property and equipment, net** | **$18,335** | **$18,390** | - Depreciation and amortization expense was **$1.8 million** for the three months ended April 30, 2023, up from **$1.6 million** in the prior year period[59](index=59&type=chunk) [Note 7. Deferred Contract Costs](index=15&type=section&id=7.%20Deferred%20Contract%20Costs) This note details the deferred contract costs and their amortization expense for the reporting periods | Metric | As of April 30, 2023 (in thousands) | As of January 31, 2023 (in thousands) | | :-------------------------- | :---------------------------------- | :---------------------------------- | | Deferred contract costs | $44,800 | $46,400 | - Amortization expense for deferred contract costs increased to **$5.0 million** for the three months ended April 30, 2023, from **$4.5 million** in the prior year period[60](index=60&type=chunk) [Note 8. Leases](index=15&type=section&id=8.%20Leases) This note outlines the company's operating lease arrangements, including right-of-use assets, lease liabilities, and lease expenses - The company has entered into various non-cancellable operating leases for its office spaces with lease periods expiring between fiscal 2024 and fiscal 2029[61](index=61&type=chunk) | Metric | As of April 30, 2023 (in thousands) | As of January 31, 2023 (in thousands) | | :-------------------------- | :---------------------------------- | :---------------------------------- | | Lease right-of-use assets | $12,806 | $13,982 | | Lease liabilities, current | $5,892 | $5,904 | | Lease liabilities, non-current | $11,226 | $12,704 | | Lease Expense Type | Three Months Ended April 30, 2023 (in thousands) | Three Months Ended April 30, 2022 (in thousands) | | :----------------------- | :--------------------------------------------- | :--------------------------------------------- | | Operating lease expense | $1,358 | $1,523 | | Short-term lease expense | $571 | $360 | | Variable lease expense | $355 | $314 | [Note 9. Debt and Financing Arrangements](index=16&type=section&id=9.%20Debt%20and%20Financing%20Arrangements) This note describes the company's 1.25% Convertible Senior Notes due 2025, including their carrying amount and related interest expense - The company issued **$287.5 million** in 1.25% Convertible Senior Notes due 2025 in June 2020, with net proceeds of **$278.2 million**[71](index=71&type=chunk) | Metric | As of April 30, 2023 (in thousands) | As of January 31, 2023 (in thousands) | | :-------------------------- | :---------------------------------- | :---------------------------------- | | Principal amount of Notes | $287,500 | $287,500 | | Less: unamortized issuance costs | $(4,137) | $(4,592) | | **Net carrying amount** | **$283,363** | **$282,908** | | Interest Expense Type | Three Months Ended April 30, 2023 (in thousands) | Three Months Ended April 30, 2022 (in thousands) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Contractual interest expense | $879 | $878 | | Amortization of debt issuance costs | $455 | $447 | | **Total interest expense related to the Notes** | **$1,334** | **$1,325** | [Note 10. Commitments and Contingencies](index=18&type=section&id=10.%20Commitments%20and%20Contingencies) This note addresses the company's legal proceedings, service-level agreements, and indemnification obligations, noting no material liabilities - The company is not currently a party to any material legal proceedings and does not anticipate any pending or threatened litigation that would materially affect its financial condition[85](index=85&type=chunk) - PagerDuty provides service-level agreements to customers but has not incurred significant liabilities related to these agreements to date[86](index=86&type=chunk) - The company indemnifies customers, vendors, and directors/officers, but no material demands have been made under these agreements[87](index=87&type=chunk) [Note 11. Deferred Revenue and Performance Obligations](index=19&type=section&id=11.%20Deferred%20Revenue%20and%20Performance%20Obligations) This note details deferred revenue balances and future estimated revenue from unsatisfied performance obligations for subscriptions | Metric | Three Months Ended April 30, 2023 (in thousands) | Three Months Ended April 30, 2022 (in thousands) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Deferred revenue, beginning of period | $209,051 | $170,224 | | Billings | $96,000 | $81,600 | | Revenue recognized | $(103,246) | $(85,371) | | **Deferred revenue, end of period** | **$201,805** | **$167,309** | - As of April 30, 2023, future estimated revenue from unsatisfied performance obligations for cloud-hosted and term-license subscriptions was approximately **$182.8 million**, with the majority expected to be satisfied over the next 24 months[89](index=89&type=chunk) [Note 12. Common Stock and Stockholders' Equity](index=19&type=section&id=12.%20Common%20Stock%20and%20Stockholders'%20Equity) This note provides information on the company's equity incentive plans, shares available for issuance, and stock-based compensation expense - The company has two equity incentive plans (2010 Stock Plan and 2019 Equity Incentive Plan), with **16,708,400 shares** available for future issuance as of April 30, 2023[90](index=90&type=chunk)[91](index=91&type=chunk) | Metric | As of April 30, 2023 | | :------------------------------------------ | :------------------- | | Outstanding stock options and unvested RSUs and PSUs | 16,268,721 | | Available for future stock option, RSU, and PSU grants | 16,708,400 | | Available for Employee Stock Purchase Plan ("ESPP") | 3,883,009 | | **Total common stock reserved** | **36,860,130** | | Stock-Based Compensation Expense | Three Months Ended April 30, 2023 (in thousands) | Three Months Ended April 30, 2022 (in thousands) | | :------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Cost of revenue | $1,876 | $1,224 | | Research and development | $10,101 | $8,675 | | Sales and marketing | $5,951 | $6,381 | | General and administrative | $9,617 | $8,629 | | **Total** | **$27,545** | **$24,909** | [Note 13. Net Loss per Share](index=22&type=section&id=13.%20Net%20Loss%20per%20Share) This note presents the calculation of net loss per share, including weighted average shares and potentially dilutive securities | Metric | Three Months Ended April 30, 2023 | Three Months Ended April 30, 2022 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net loss attributable to PagerDuty, Inc. (in thousands) | $(12,218) | $(32,820) | | Weighted average shares (in thousands) | 91,522 | 87,127 | | **Net loss per share, basic and diluted** | **$(0.13)** | **$(0.38)** | - Basic and diluted net loss per share are the same because the company was in a loss position, making potential common stock anti-dilutive[103](index=103&type=chunk) | Potentially Dilutive Securities (in thousands) | As of April 30, 2023 | As of April 30, 2022 | | :--------------------------------------------- | :------------------- | :------------------- | | Shares subject to outstanding common stock awards | 15,674 | 17,451 | | Convertible senior notes | 7,173 | 7,173 | | Restricted stock issued to acquire key personnel | 63 | 70 | | Shares issuable pursuant to the ESPP | 295 | 208 | | **Total** | **23,205** | **24,902** | [Note 14. Income Taxes](index=23&type=section&id=14.%20Income%20Taxes) This note details the income tax benefit and the company's valuation allowance on deferred tax assets | Metric | Three Months Ended April 30, 2023 (in thousands) | Three Months Ended April 30, 2022 (in thousands) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Income tax benefit | $106 | $1,204 | - The decrease in income tax benefit was primarily due to a **$1.3 million** deferred tax benefit from an acquisition in the prior year period[108](index=108&type=chunk) - The company maintains a full valuation allowance on its net federal and state deferred tax assets due to the unlikelihood of realization[107](index=107&type=chunk) [Note 15. Geographic Information](index=23&type=section&id=15.%20Geographic%20Information) This note breaks down revenue by geographic area and the location of long-lived assets | Geographic Area | Three Months Ended April 30, 2023 (in thousands) | Three Months Ended April 30, 2022 (in thousands) | | :---------------- | :--------------------------------------------- | :--------------------------------------------- | | United States | $74,834 | $64,766 | | International | $28,412 | $20,605 | | **Total Revenue** | **$103,246** | **$85,371** | - The United States accounted for the majority of revenue, and no other individual country represented **10%** or more of revenue[109](index=109&type=chunk) - As of April 30, 2023, **88%** of the company's long-lived assets were located in the United States[109](index=109&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a narrative analysis of PagerDuty's financial condition and results of operations for the three months ended April 30, 2023, compared to the prior year, covering business overview, key metrics, revenue and expense trends, non-GAAP measures, and liquidity. The company reported a significant reduction in net loss and improved operating cash flow, driven by revenue growth and expense management [Overview](index=24&type=section&id=Overview) This section describes PagerDuty's digital operations management platform, its evolution, and its revenue generation model - PagerDuty is a digital operations management platform that helps modern digital businesses manage urgent and mission-critical work, evolving from an on-call tool to a multi-product platform for digital operations[111](index=111&type=chunk)[114](index=114&type=chunk) - The platform collects data and digital signals from over **700 integrations**, leveraging machine learning for incident response, event management, and automation to resolve issues rapidly[113](index=113&type=chunk)[115](index=115&type=chunk) - Revenue is primarily generated from cloud-hosted subscription fees, with a 'land-and-expand' business model targeting small, medium, mid-market, and enterprise customers[116](index=116&type=chunk) [Macroeconomic Environment](index=24&type=section&id=Macroeconomic%20Environment) This section discusses the impact of global macroeconomic conditions on the company's business and financial performance - The company's business and financial performance are subject to global macroeconomic conditions, including inflation, rising interest rates, recession risks, the COVID-19 pandemic, foreign currency volatility, and recent bank failures[117](index=117&type=chunk) - The Russia-Ukraine conflict has not had a material impact on the business to date, but the company continues to monitor its potential effects[118](index=118&type=chunk) [Key Business Metrics](index=26&type=section&id=Key%20Business%20Metrics) This section presents key performance indicators such as customer count and dollar-based net retention rate, reflecting market penetration and customer value - Key metrics include the number of customers, particularly those with over **$100,000** in annual recurring revenue (ARR), and dollar-based net retention rate, which reflect market penetration and customer value[121](index=121&type=chunk)[124](index=124&type=chunk)[126](index=126&type=chunk) | Metric | As of April 30, 2023 | As of April 30, 2022 | | :-------------------------------- | :------------------- | :------------------- | | Customers | 15,089 | 15,040 | | Customers greater than $100,000 in ARR | 764 | 655 | | Metric | Last 12 Months Ended April 30, 2023 | Last 12 Months Ended April 30, 2022 | | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Dollar-based net retention rate for all customers | 116% | 126% | [Components of Results of Operations](index=27&type=section&id=Components%20of%20Results%20of%20Operations) This section details the primary drivers of revenue, cost of revenue, and operating expenses, including personnel and stock-based compensation - Revenue is primarily from cloud-hosted and term-license software subscriptions, recognized ratably over the contractual term, typically one year. Professional services revenue is immaterial[130](index=130&type=chunk)[131](index=131&type=chunk) - Cost of revenue includes personnel, cloud infrastructure, payment processing, and amortization of software and acquired technology. Gross margin may fluctuate due to revenue and investment timing[132](index=132&type=chunk)[133](index=133&type=chunk) - Operating expenses (R&D, S&M, G&A) are largely driven by personnel costs, including stock-based compensation and sales commissions. R&D and S&M are expected to increase in dollar value, while G&A is expected to decrease as a percentage of revenue long-term[134](index=134&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk) [Results of Operations (Comparison of Three Months Ended April 30, 2023 and 2022)](index=29&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of financial performance, highlighting revenue growth, changes in expenses, and improvements in net loss | Metric | Three Months Ended April 30, 2023 (in thousands) | Three Months Ended April 30, 2022 (in thousands) | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Revenue | $103,246 | $85,371 | | Cost of revenue | $17,936 | $15,716 | | Gross profit | $85,310 | $69,655 | | Research and development | $33,508 | $31,289 | | Sales and marketing | $43,801 | $45,552 | | General and administrative | $23,801 | $25,271 | | Loss from operations | $(15,800) | $(32,457) | | Interest income | $3,123 | $548 | | Other income (expense), net | $1,067 | $(790) | | Net loss attributable to PagerDuty, Inc. | $(12,218) | $(32,820) | - Revenue increased by **21%** year-over-year, driven by growth from both new and existing customers, including increased users and upsell of additional products and services[147](index=147&type=chunk) - Loss from operations decreased by **51%** and net loss attributable to PagerDuty, Inc. decreased by **63%** year-over-year, indicating improved operational efficiency[144](index=144&type=chunk) [Non-GAAP Financial Measures](index=32&type=section&id=Non-GAAP%20Financial%20Measures) This section presents non-GAAP financial measures used for performance evaluation, excluding certain GAAP expenses, and reconciles them to GAAP results - Non-GAAP financial measures are used to evaluate operating performance, providing consistency and comparability, but exclude significant GAAP expenses like stock-based compensation and amortization of acquired intangibles[157](index=157&type=chunk) | Metric | Three Months Ended April 30, 2023 (in thousands) | Three Months Ended April 30, 2022 (in thousands) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Non-GAAP gross profit | $89,482 | $72,095 | | Non-GAAP gross margin | 87% | 84% | | Non-GAAP operating income (loss) | $16,053 | $(2,301) | | Non-GAAP operating margin | 16% | (3)% | | Non-GAAP net income (loss) attributable to PagerDuty, Inc. | $19,298 | $(3,547) | | Free cash flow | $20,845 | $(5,835) | - Free cash flow significantly improved to **$20.8 million** for the three months ended April 30, 2023, compared to a negative **$5.8 million** in the prior year, reflecting enhanced liquidity[165](index=165&type=chunk)[167](index=167&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's principal sources of liquidity, cash flow from operations, and sufficiency of capital for future needs - The company's principal sources of liquidity are cash, cash equivalents, and investments, totaling **$495.1 million** as of April 30, 2023[171](index=171&type=chunk) - Management believes existing liquidity and cash from subscriptions will be sufficient for working capital and capital expenditures for at least the next 12 months[171](index=171&type=chunk) - Net cash provided by operating activities significantly improved to **$22.2 million** for the three months ended April 30, 2023, compared to a net cash used of **$3.0 million** in the prior year[173](index=173&type=chunk)[175](index=175&type=chunk) [Contractual Obligations and Commitments](index=36&type=section&id=Contractual%20Obligations%20and%20Commitments) This section confirms no material changes to contractual obligations and commitments since the last Annual Report - There were no material changes to contractual obligations and other commitments during the three months ended April 30, 2023, as disclosed in the Annual Report[179](index=179&type=chunk) [Critical Accounting Policies and Estimates](index=36&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights the use of estimates in financial reporting and confirms no significant changes to critical accounting policies - The preparation of financial statements requires management to make estimates and assumptions that affect reported amounts, and actual results could differ significantly[181](index=181&type=chunk) - No significant changes to critical accounting policies were identified that materially impacted the condensed consolidated financial statements[182](index=182&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=37&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 profile compared to the disclosures in its Annual Report - No material changes in market risk were reported compared to the previous Annual Report[183](index=183&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of April 30, 2023, concluding they were effective at a reasonable assurance level. The report acknowledges inherent limitations in internal control systems and states no material changes occurred in internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective at a reasonable assurance level as of April 30, 2023[184](index=184&type=chunk)[185](index=185&type=chunk) - The effectiveness of internal controls is subject to inherent limitations, and management recognizes that no system can provide absolute assurance[186](index=186&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended April 30, 2023[187](index=187&type=chunk) [PART II - OTHER INFORMATION](index=39&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This part covers other information including legal proceedings, risk factors, equity sales, exhibits, and corporate signatures [Item 1. Legal Proceedings](index=39&type=section&id=Item%201%20Legal%20Proceedings) PagerDuty is not a party to any material pending legal proceedings and does not anticipate any litigation that would have a material adverse effect on its financial condition, results of operations, or cash flows - The company is not involved in any material pending legal proceedings[189](index=189&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A%20Risk%20Factors) This section states that there have been no material changes to the risk factors previously described in the company's Annual Report. Readers are advised to consider these risks, as they could adversely affect the business and stock price - No material changes to the risk factors were reported compared to the Annual Report[191](index=191&type=chunk) [Item 2. Unregistered Sale of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202%20Unregistered%20Sale%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds during the period - No unregistered sales of equity securities or use of proceeds occurred[193](index=193&type=chunk) [Item 6. Exhibits](index=40&type=section&id=Item%206%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate documents, certifications, and XBRL interactive data files, which are incorporated by reference or filed herewith - The report includes an Exhibit Index listing various documents, such as corporate governance documents, officer certifications (31.1, 31.2, 32.1), and XBRL data files[194](index=194&type=chunk)[197](index=197&type=chunk) [Signatures](index=42&type=section&id=Signatures) The report is duly signed on behalf of PAGERDUTY, INC. by its Chief Executive Officer, Chief Financial Officer, and Senior Vice President, Finance and Chief Accounting Officer, certifying its submission - The report is signed by Jennifer G. Tejada (CEO), Owen Howard Wilson (CFO), and Mitra Rezvan (SVP, Finance and Chief Accounting Officer)[202](index=202&type=chunk)

Financial Data and Key Metrics Changes - Revenue for Q1 2024 was $103 million, reflecting a 21% year-over-year growth, in line with guidance [14][120] - Non-GAAP operating margin reached a record 16%, an increase of over 1,800 basis points compared to the previous year [14][120] - Cash from operations was $22 million, representing 21% of revenue, while free cash flow was $21 million, or 20% of revenue [21] Business Line Data and Key Metrics Changes - Free accounts on the platform grew by 65% year-over-year, indicating increased platform usage [4] - Customers spending over $100,000 in annual recurring revenue (ARR) increased by 17% to 764 [14][38] - Total paid customers rose to 15,089, a slight increase from 15,040 in the previous year [38] Market Data and Key Metrics Changes - International revenue contribution increased to 28% of total revenues, up from 24% in Q1 of the previous year [120] - The dollar-based net retention rate (DBNR) was 116%, down from 126% year-over-year [120] Company Strategy and Development Direction - The company is focusing on expanding its Operations Cloud offerings, particularly in AIOps and automation, to meet evolving customer needs [5][9] - Generative AI is seen as a transformative opportunity, expected to expand the total addressable market (TAM) and enhance operational efficiency [7][58] - The company aims to balance growth with profitability, maintaining a focus on innovation and pipeline generation [9][29] Management's Comments on Operating Environment and Future Outlook - Management noted that customer spending behavior has become more cost-constrained, leading to longer sales cycles and smaller deal sizes [15][37] - The company anticipates continued pressure on the small business segment, with expectations of low single-digit growth in total paid customer growth by year-end [27] - Management expressed confidence in the long-term strategy, emphasizing the importance of delivering value to customers [29][66] Other Important Information - The company reported a gross margin of 87%, above the target range of 84% to 86%, driven by infrastructure cost optimization [121] - Total deferred revenue increased by 21% year-over-year to $202 million [22] Q&A Session Summary Question: Can you provide insights on the impact of the AIOps consumption pricing model? - Management indicated that the new pricing model allows for scalability and flexibility, potentially leading to increased customer engagement and growth [44][56] Question: What factors contributed to the lower full-year guidance? - Management noted that macroeconomic conditions deteriorated during Q1, leading to longer deal closures and smaller deal sizes [43][53] Question: How is the transition in revenue leadership affecting the business? - Management reported a smooth transition with no significant disruptions, emphasizing the experience of the new leadership [84] Question: What is the outlook for gross margins and operating expenses? - Management expects gross margins to remain in the target range of 84% to 86% while focusing on improving operating expenses in sales and marketing [91][93]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _________________________ FORM 10-K _________________________ (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the fiscal year ended January 31, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-38856 PAGERDUTY, INC. (Exact name of registrant as specified in its charter) ...