PagerDuty, Inc. — Q1 FY2022 Form 10-Q
Reporting period: Three months ended April 30, 2021; fiscal year ends January 31. PagerDuty provides a digital operations management platform. Figures below are in U.S. dollars; financial statement amounts are in millions unless noted.
Financial performance and position
| Metric | Q1 FY2022 | Q1 FY2021 | Change |
|---|---|---|---|
| Revenue | $63.6 | $49.8 | +28% |
| Gross profit / margin | $53.2 / 84% | $42.8 / 86% | Margin down 2 percentage points |
| Operating expenses | $74.4 | $55.4 | +34% |
| Operating loss / margin | $(21.2) / (33)% | $(12.6) / (25)% | Loss widened |
| Net loss | $(22.6) | $(11.5) | Loss widened |
| Net loss per share, basic and diluted | $(0.27) | $(0.15) | |
| Operating cash flow | $1.6 | $(0.2) | Improved |
| Free cash flow | $(0.4) | $(2.9) | Improved |
Revenue growth reflected new and existing customers, including Rundeck customers; existing-customer expansion came from more users and additional products. Sales and marketing was the largest operating expense at $37.2 million, up 39%; research and development rose 37% to $20.6 million. Stock-based compensation was $13.6 million, versus $8.3 million a year earlier.
At April 30, cash and cash equivalents were $326.0 million and investments were $230.9 million, totaling $557.0 million. Current assets were $619.7 million and current liabilities were $165.3 million. The company reported $287.5 million of convertible-note principal, carried at $279.7 million net; the notes mature July 1, 2025 and bear 1.25% interest. Cash, cash equivalents, and restricted cash declined $13.1 million during the quarter to $326.0 million.
Deferred revenue was $126.1 million, including $120.1 million current. Remaining performance obligations for subscriptions with terms over one year were approximately $114.1 million; the substantial majority was expected to be recognized within 24 months.
Business trends and material changes
- Customers increased to 13,918 from 13,060 year over year; customers with more than $100,000 ARR rose to 458 from 348.
- Dollar-based net retention was 121%, unchanged year over year.
- International revenue was $15.8 million, versus $11.5 million; U.S. revenue was $47.7 million, versus $38.3 million.
- Gross margin declined as cost of revenue grew 50%, faster than revenue, reflecting increased personnel, hosting, software, telecom, and outside-service costs.
- PagerDuty early adopted ASU 2020-06 effective February 1, 2021. This changed convertible-note accounting to a single liability and increased the reported carrying amount of debt by $61.7 million at adoption; it did not affect the quarter’s operating results or cash flows.
Outlook, risks, and other notable items
The filing provides no specific revenue or earnings guidance. Management stated that cash, investments, and subscription cash flows were expected to support working capital and capital expenditure needs for at least the next 12 months.
Management said COVID-19 had not materially adversely affected the financial statements for the periods presented, but warned that customer demand, spending, contract duration, payment terms, churn, and user counts could be affected. The company had observed increased churn and fewer users it believed were associated with the pandemic, particularly citing greater demand variability among small and medium-sized businesses. Remote work and virtual sales and marketing could also affect productivity and customer acquisition.
No material pending legal proceedings, material changes to previously disclosed risk factors, or off-balance-sheet financing arrangements were reported. Uptime-related service credits had not resulted in material liabilities. Management assessed disclosure controls and procedures as effective at a reasonable-assurance level.
Important facts for investors to verify
- Whether customer retention and expansion remain strong, especially given pandemic-related churn and user-count concerns.
- Whether operating expenses continue to grow faster than revenue and how that affects margins and the path to profitability.
- Cash generation and working-capital trends, including deferred revenue, collections, and commission spending.
- The convertible notes’ conversion, dilution, and repayment exposure; the filing reports $287.5 million principal and a $371.6 million estimated fair value.
- The effect of Rundeck on revenue growth, expenses, and future results; the quarter’s revenue increase included acquired-customer contributions.