PagerDuty, Inc. — Q1 FY2024 Form 10-Q
Reporting period: Three months ended April 30, 2023; compared with the three months ended April 30, 2022. Fiscal year ends January 31. PagerDuty provides a digital operations management platform, with revenue primarily from cloud-hosted subscriptions.
Financial results
| Metric | Q1 FY2024 | Q1 FY2023 |
|---|---|---|
| Revenue | $103.2 million | $85.4 million |
| Gross profit / margin | $85.3 million / 83% | $69.7 million / 82% |
| Operating loss | $15.8 million | $32.5 million |
| Net loss attributable to PagerDuty | $12.2 million; $0.13 per share | $32.8 million; $0.38 per share |
| Operating cash flow | $22.2 million | $(3.0) million |
| Free cash flow | $20.8 million | $(5.8) million |
Cash and cash equivalents were $300.6 million and investments were $194.5 million at April 30, 2023, totaling $495.1 million. The company reported $287.5 million principal amount of 1.25% convertible senior notes due July 2025; their net carrying value was $283.4 million. Current liabilities were $245.3 million and current assets were $590.2 million. Deferred revenue totaled $201.8 million.
Changes and operating trends
- Revenue rose 21% year over year, reflecting growth from new and existing customers, including more users and additional products and services.
- Gross margin increased to 83% from 82%. Operating expenses fell slightly to $101.1 million from $102.1 million, and operating loss narrowed substantially.
- Interest income increased to $3.1 million from $0.5 million, primarily due to higher interest rates and income on cash and investments; other income also improved.
- Customer count was 15,089 versus 15,040; customers above $100,000 ARR rose to 764 from 655. Dollar-based net retention declined to 116% from 126%.
- International revenue was $28.4 million, up from $20.6 million; U.S. revenue was $74.8 million, up from $64.8 million.
Outlook, risks, and notable items
Management stated that cash, investments, and expected subscription cash flows should support working capital and capital expenditures for at least the next 12 months, and expected to meet longer-term requirements through operating cash flows and available liquidity. The filing provides no specific revenue, earnings, or margin guidance.
Management cited exposure to inflation, rising interest rates, economic downturns, foreign-exchange volatility, geopolitical conflict, the pandemic, and bank failures. It reported no material change to the risk factors in the prior annual report. No material pending legal proceedings were reported, and management concluded disclosure controls were effective at a reasonable assurance level.
Sales and marketing expense fell 4%, with management citing lower headcount following a restructuring and reduced travel and program costs. The quarter included $144,000 of restructuring costs in the non-GAAP reconciliation. Stock-based compensation was $27.5 million. A Japan joint venture, PagerDuty K.K., is consolidated and had a redeemable non-controlling interest of $0.5 million at quarter-end.
Key facts for investors to verify
- Whether the decline in dollar-based net retention continues and how it affects future subscription growth.
- Whether positive operating and free cash flow persist, considering quarter-to-quarter working-capital timing and advance customer billings.
- The scale and ongoing effects of the restructuring, including future costs and savings.
- The potential dilution, conversion terms, and repayment or refinancing implications of the 2025 convertible notes.
- How stock-based compensation and share issuance affect per-share performance and dilution.