PagerDuty(PD) - 2025 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements This section presents PagerDuty, Inc.'s unaudited condensed consolidated financial statements for the periods ended October 31, 2024, covering balance sheets, operations, comprehensive loss, equity, and cash flows Condensed Consolidated Balance Sheets As of October 31, 2024, PagerDuty's total assets decreased to $866.8 million from $925.3 million, with total liabilities slightly down and stockholders' equity declining to $111.6 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Oct 31, 2024 | Jan 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $326,440 | $363,011 | | Total current assets | $654,133 | $703,198 | | Total assets | $866,754 | $925,306 | | Liabilities & Equity | | | | Deferred revenue, current | $214,058 | $223,522 | | Total current liabilities | $332,331 | $281,655 | | Total liabilities | $738,665 | $746,413 | | Total stockholders' equity | $111,596 | $171,600 | Condensed Consolidated Statements of Operations For Q3 2024, PagerDuty's revenue increased 9.4% to $118.9 million, significantly narrowing its operating loss to $10.3 million and net loss to $6.6 million Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $118,946 | $108,720 | $346,053 | $319,582 | | Gross Profit | $98,678 | $89,015 | $286,362 | $262,108 | | Loss from Operations | $(10,293) | $(20,842) | $(48,053) | $(62,815) | | Net Loss | $(6,127) | $(13,090) | $(34,656) | $(48,550) | | Net Loss Per Share | $(0.07) | $(0.16) | $(0.47) | $(0.55) | Condensed Consolidated Statements of Comprehensive Loss For Q3 2024, total comprehensive loss improved to $5.9 million from $13.0 million year-over-year, primarily due to a reduced net loss Comprehensive Loss Summary (in thousands) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Loss | $(6,127) | $(13,090) | $(34,656) | $(48,550) | | Total Comprehensive Loss | $(5,899) | $(13,014) | $(34,425) | $(48,670) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity decreased to $111.6 million by October 31, 2024, influenced by a $34.0 million net loss, $98.2 million in stock-based compensation, and $98.6 million in common stock repurchases - For the nine months ended October 31, 2024, the company recorded $98.2 million in stock-based compensation and repurchased common stock for $98.6 million[27] - In the third quarter of 2024, the company repurchased 3,830,761 shares of common stock for $70.6 million[25] Condensed Consolidated Statements of Cash Flows For the nine months ended October 31, 2024, net cash from operations significantly increased to $86.5 million, while financing activities used $113.3 million, resulting in a $36.7 million net decrease in cash Cash Flow Summary (Nine months ended Oct 31, in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $86,489 | $49,819 | | Net cash (used in) provided by investing activities | $(9,722) | $6,875 | | Net cash (used in) provided by financing activities | $(113,323) | $53,661 | | Net change in cash, cash equivalents, and restricted cash | $(36,665) | $109,904 | Notes to Condensed Consolidated Financial Statements These notes detail PagerDuty's accounting policies and financial statement line items, covering business description, convertible notes, lease obligations, stock-based compensation, share repurchases, revenue recognition, and geographic revenue breakdown - The company provides a digital operations management platform that collects and processes digital signals using machine learning to manage urgent work (Note 1)[40] - As of October 31, 2024, the company had $57.3 million in current convertible senior notes (due 2025) and $392.7 million in non-current convertible senior notes (due 2028) (Note 9)[97] - Total remaining non-cancelable performance obligations were approximately $405 million as of October 31, 2024, with $278 million (68.6%) expected to be recognized as revenue in the next 12 months (Note 11)[108] - Under the 2024 Share Repurchase Program, the company repurchased 5,144,009 shares during the nine months ended October 31, 2024, with $1.5 million remaining available for repurchase (Note 12)[111] Revenue by Geographic Area (Nine months ended Oct 31, in thousands) | Region | 2024 | 2023 | | :--- | :--- | :--- | | United States | $250,637 | $232,576 | | International | $95,416 | $87,006 | | Total | $346,053 | $319,582 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses PagerDuty's financial performance, business model, and key metrics, highlighting Q3 2024 revenue growth, improved operating loss, positive free cash flow, and sufficient liquidity Overview and Business Model PagerDuty is a global leader in digital operations management, offering the PagerDuty Operations Cloud platform that integrates AIOps, Automation, Incident Management, and Customer Service Operations, utilizing a land-and-expand business model - PagerDuty's platform combines AIOps, Automation, Incident Management, and Customer Service Operations to manage critical work for modern enterprises[142] - The company's ecosystem includes over 700 direct integrations, allowing customers to gather digital signals from nearly any software-enabled system[146] - The business model is 'land-and-expand,' focusing on viral adoption and subsequent expansion, with a growing go-to-market focus on enterprise customers[147] Key Business Metrics PagerDuty tracks key business metrics, showing a stable total customer count of 15,050, an increase in customers with over $100k ARR to 825, and a dollar-based net retention rate of 107% as of October 31, 2024 Customer Count | Metric | As of Oct 31, 2024 | As of Oct 31, 2023 | | :--- | :--- | :--- | | Total Customers | 15,050 | 15,049 | | Customers with >$100k in ARR | 825 | 778 | - The dollar-based net retention rate for all customers for the last twelve months ended October 31, 2024, was 107%, compared to 110% for the period ended October 31, 2023[160] Results of Operations For Q3 2024, revenue increased 9.4% to $118.9 million, with operating loss narrowing to $10.3 million, and for the nine-month period, revenue grew 8.3% to $346.1 million Q3 2024 vs Q3 2023 Results (in thousands) | Metric | Q3 2024 | Q3 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $118,946 | $108,720 | $10,226 | 9.4% | | Gross Profit | $98,678 | $89,015 | - | - | | Loss from Operations | $(10,293) | $(20,842) | - | - | Nine Months 2024 vs 2023 Results (in thousands) | Metric | Nine Months 2024 | Nine Months 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $346,053 | $319,582 | $26,471 | 8.3% | | Gross Profit | $286,362 | $262,108 | - | - | | Loss from Operations | $(48,053) | $(62,815) | - | - | Non-GAAP Financial Measures PagerDuty uses non-GAAP measures, reporting Q3 2024 non-GAAP operating income of $25.0 million (21.0% margin) and nine-month free cash flow of $79.8 million, demonstrating strong cash generation Non-GAAP Operating Income Reconciliation (in thousands) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Loss from operations (GAAP) | $(10,293) | $(20,842) | $(48,053) | $(62,815) | | Non-GAAP operating income | $24,991 | $15,030 | $60,431 | $45,375 | | Non-GAAP operating margin | 21.0% | 13.8% | 17.5% | 14.2% | Free Cash Flow Reconciliation (in thousands) | Metric | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $86,489 | $49,819 | | Less: Purchases of property and equipment | $(1,646) | $(1,193) | | Less: Capitalization of internal-use software | $(5,019) | $(3,812) | | Free cash flow | $79,824 | $44,814 | Liquidity and Capital Resources As of October 31, 2024, PagerDuty's liquidity included $542.2 million in cash and investments, with deferred revenue at $216.7 million, and $113.3 million used in financing activities, primarily for share repurchases - As of October 31, 2024, principal sources of liquidity were cash, cash equivalents, and investments totaling $542.2 million[223] - A substantial source of cash is deferred revenue, which was $216.7 million as of October 31, 2024[225] - The company's Board approved a $100.0 million share repurchase program in May 2024, with $1.5 million remaining available as of October 31, 2024[228] Quantitative and Qualitative Disclosures about Market Risk There have been no material changes in the company's market risk since the Annual Report on Form 10-K/A for the fiscal year ended January 31, 2024 - There have been no material changes in market risk since the Annual Report on Form 10-K/A for the year ended January 31, 2024[240] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of October 31, 2024, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of October 31, 2024, the company's disclosure controls and procedures were effective at a reasonable assurance level[242] - No material changes to internal control over financial reporting occurred during the quarter ended October 31, 2024[245] PART II - OTHER INFORMATION Legal Proceedings The company is not currently a party to any material pending legal proceedings, though it may face claims in the ordinary course of business - PagerDuty is not currently a party to any material pending legal proceedings[247] Risk Factors There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K/A and the prior Quarterly Report for the quarter ended July 31, 2024 - There have been no material changes to the Risk Factors described in the Annual Report on Form 10-K/A and the prior 10-Q[249] Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities This section details the company's common stock repurchases during Q3 2024, totaling 3,830,761 shares at an average price of $18.42, with $1.5 million remaining available under the repurchase program Issuer Purchases of Equity Securities (Q3 2024) | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Value Remaining for Repurchase (in thousands) | | :--- | :--- | :--- | :--- | | Aug 2024 | 1,040,853 | $19.21 | $51,968 | | Sep 2024 | 1,350,809 | $17.99 | $27,671 | | Oct 2024 | 1,439,099 | $18.22 | $1,456 | | Total | 3,830,761 | - | - | - The share repurchase program was authorized in May 2024 for up to $100.0 million and is expected to continue through May 29, 2026[252] Defaults Upon Senior Securities The company reports no defaults upon senior securities - None[253] Mine Safety Disclosures This item is not applicable to the company - Not applicable[255] Other Information On September 10, 2024, a board member adopted a Rule 10b5-1 trading plan for the potential sale of up to 550,810 shares of common stock - A member of the Board of Directors, Dan Alexandru Solomon, adopted a Rule 10b5-1 trading plan on September 10, 2024, for the potential sale of up to 550,810 shares of common stock[256] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications, XBRL data files, and incorporated references to the company's Amended and Restated Certificate of Incorporation and Bylaws - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32.1) and XBRL data files (101 series)[258]