PagerDuty, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended January 31, 2023. This annual filing reports full-year results; it does not provide standalone fiscal Q4 financial results. PagerDuty (NYSE: PD) provides a digital operations management platform, with revenue primarily from cloud-hosted subscriptions.
Financial and operating performance
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $370.8 million | $281.4 million |
| Revenue growth | 32% | — |
| Gross profit / margin | $300.4 million / 81% | $233.0 million / 83% |
| Operating loss / margin | $129.4 million / (35%) | $101.7 million / (36%) |
| Net loss attributable to PagerDuty | $128.4 million | $107.5 million |
| Operating cash flow | $17.0 million | $(6.0) million |
| Free cash flow* | $8.5 million | $(12.8) million |
Growth and customer metrics: Paying customers numbered 15,244, versus 14,865 a year earlier; customers with more than $100,000 in ARR rose to 752 from 594. Dollar-based net retention was 120%, down from 124%. ARR churn was less than 5% of beginning ARR. International customers generated 24% of revenue in both years.
Liquidity and debt: At January 31, 2023, cash and cash equivalents were $274.0 million and investments were $202.9 million, totaling $477.0 million. Current assets were $600.3 million versus current liabilities of $271.1 million. The company had $287.5 million principal of 1.25% convertible senior notes due 2025, carried at $282.9 million net; contractual principal and interest payments totaled approximately $296.5 million. Deferred revenue was $209.1 million.
*Non-GAAP measure: Free cash flow is defined by the company as operating cash flow less purchases of property and equipment and capitalized internal-use software costs. Non-GAAP operating income was $3.5 million (1% margin), compared with a $23.1 million loss in FY2022; non-GAAP net income attributable to PagerDuty was $3.7 million, compared with a $27.0 million loss. These measures exclude specified expenses, notably stock-based compensation.
Material changes versus FY2022
- Revenue increased 32%, driven by new customers and expansion among existing customers, including more users and additional products.
- GAAP gross margin declined to 81% from 83%; cost of revenue increased 46%, faster than revenue, partly reflecting higher personnel, hosting and software costs, and acquisition-related intangible amortization.
- Operating expenses rose 28% to $429.7 million. Research and development rose 41%; sales and marketing rose 21%; general and administrative rose 28%. Stock-based compensation increased to $109.9 million from $70.0 million.
- GAAP net loss widened to $128.4 million from $107.5 million. Operating cash flow and free cash flow improved from negative to positive.
- Cash and investments totaled $477.0 million, down from $543.4 million. Investing cash outflow included $66.3 million paid, net of acquired cash, for Catalytic, acquired in March 2022.
Outlook, commentary, risks, and unusual items
- Outlook: The filing gives no specific revenue or earnings guidance. Management expects to keep investing in product development, sales, marketing, and customer success; it says those investments may weigh on near-term results. Management believes existing liquidity and subscription cash flows will support working capital and capital expenditures for at least 12 months.
- Restructuring: Announced January 24, 2023, the plan reduced headcount by 7% and reallocates some roles to lower-cost geographies. FY2023 charges were approximately $5.0 million, mostly expected to be paid by the end of Q1 FY2024. Most real-estate rationalization charges were expected in FY2024; their amount is not stated. Savings and execution are uncertain.
- Acquisition: Catalytic was acquired for approximately $68.8 million in cash. PagerDuty recorded $46.7 million of goodwill and $21.8 million of acquired intangible assets; Catalytic’s results were described as immaterial to consolidated results.
- Key risks: Continued operating losses; retention, renewal, and expansion of customers; reliance on incident-response offerings for a significant majority of revenue; competitive and pricing pressure; service availability and cybersecurity; evolving privacy regulation; and the ability to achieve restructuring savings. Economic weakness, inflation, higher interest rates, and bank failures could affect customers and access to funds. Management specifically noted the March 2023 Silicon Valley Bank receivership but did not quantify any company exposure.
- Other items: The company reported no litigation expected to have a material adverse effect. The financial statement audit opinion was unqualified, and management and the auditor concluded internal control over financial reporting was effective; the auditor’s assessment excluded Catalytic.
Important facts for investors to verify
- Track revenue growth, dollar-based net retention, ARR churn, and enterprise customer expansion as economic conditions evolve.
- Assess whether positive operating cash flow and free cash flow are repeatable, including the effects of deferred revenue, collections, and commission spending.
- Monitor GAAP losses, operating expenses, and the scale and dilution impact of stock-based compensation; review non-GAAP reconciliations alongside GAAP results.
- Verify delivery of restructuring savings against severance and real-estate costs, and assess any operational or retention effects.
- Review cash and investment access and credit quality, including any bank concentration not quantified in the filing, and the 2025 convertible-note repayment, conversion, and dilution scenarios.
- Check subsequent filings for updated guidance, liquidity disclosures, Catalytic integration results, and any material service, cybersecurity, regulatory, or legal developments.