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PagerDuty Announces Third Quarter Fiscal Year 2020 Financial Results

12/05/2019

Revenue increased 37% year-over-year to a record $42.8 million

Over 12,000 customers now using PagerDuty to power their digital transformations

Announced Dave Justice will join the company as CRO to drive future revenue growth

SAN FRANCISCO--(BUSINESS WIRE)-- PagerDuty, Inc. (NYSE:PD), a global leader in digital operations management, today announced financial results for the third quarter of fiscal year 2020 ended October 31, 2019.

“We are pleased to report third quarter results, demonstrating our leadership in the rapidly growing category we pioneered, Digital Operations Management," said Jennifer Tejada, Chief Executive Officer of PagerDuty. “With strong customer growth at 15% year over year and growth in accounts over $100k ARR at 49%, we are excited to bring PagerDuty to more customers than ever before. We are also seeing growth in our Digital Operations plan with it accounting for 45% of our net-new ARR.”

Third Quarter Fiscal 2020 Financial Highlights

  • Revenue: Total revenue was $42.8 million, up 37% year-over-year.
  • Gross Margin: GAAP gross marginwas 84.5%. Non-GAAP gross margin was 85.2% compared to Non-GAAP gross margin of 85.5% in the third quarter of fiscal 2019.
  • Operating Loss: GAAP operating loss was $16.7 million, or GAAP operating margin of negative 39.0% , compared to a $16.0 million loss, or GAAP operating margin of negative 51.1% , in the third quarter of fiscal 2019. Non-GAAP operating loss was $9.3 million, or non-GAAP operating margin of negative 21.9%, compared to a $5.8 million loss, or non-GAAP operating margin of negative 18.5%, in the third quarter of fiscal 2019.
  • Net Loss: GAAP net loss was $15.3 million, compared to $15.4 million in the third quarter of fiscal 2019. GAAP net loss per share was $0.20, compared to $0.71 in the third quarter of fiscal 2019. Non-GAAP net loss was $7.9 million, compared to $5.2 million in the third quarter of fiscal 2019. Non-GAAP net loss per share was $0.10, compared to $0.24 in the third quarter of fiscal 2019.
  • Cash Flow: Net cash provided by operations was $3.4 million, or 8.0% of revenue, compared to net cash provided by operations of $2.8 million, or 9.0% of revenue, in the third quarter of fiscal 2019. Free cash flow was positive $2.3 million, or 5.3% of revenue, compared to positive $0.2 million, or 0.5% of revenue, in the third quarter of fiscal 2019.
  • Cash and Cash Equivalents and Investments were $346.1 millionas of October 31, 2019.

The section titled “Non-GAAP Financial Measures” below contains a description of the non-GAAP financial measures and reconciliations between historical GAAP and non-GAAP information.

Recent Highlights

  • Customer Growth: PagerDuty had over 12,000 customers as of October 31, 2019. New and expansion customers include Gap, Carnival Cruises and Sumo Logic.
  • Product Innovation: PagerDuty announced two new capabilities: Intelligent Triage and Intelligent Dashboards. Intelligent Triage is a new feature set within PagerDuty’s Event Intelligence product, which uses machine learning to group alerts together so teams don’t receive multiple alerts coming from related issues. Intelligent Dashboards is new to PagerDuty’s Analytics product and leverages machine learning to provide teams with recommendations for how to resolve issues, as well as benchmarks against performance metrics from other teams in their organization or vertical industry so they can continually improve.
  • Platform Expansion: We announced PagerDuty for Customer Service to empower front-line customer service agents to solve issues faster and deliver better experiences to their customers. This solution consists of new partnerships and two-way integrations with both Zendesk and Salesforce Service Cloud. It allows teams to proactively share information between the applications they work in, understand and resolve technical issues and work together as a united front supporting customers.

Financial Outlook

For the fourth quarter of fiscal 2020, PagerDuty currently expects:

  • Total revenue of $44.5 million - $45.5 million, representing a growth rate of 32% - 34% year-over-year
  • Non-GAAP net loss per share of $0.06 - $0.07, assuming approximately 77 million shares

For the full fiscal year 2020, PagerDuty currently expects:

  • Total revenue of $165 million - $166 million, representing a growth rate of 40% - 41% year-over-year
  • Non-GAAP net loss per share of $0.38 - $0.39, assuming approximately 65 million shares

These statements are forward-looking and actual results may differ materially. Please refer to the Forward-Looking Statements safe harbor below for information on the factors that could cause our actual results to differ materially from these forward-looking statements.

PagerDuty has not reconciled its expectations as to non-GAAP net loss per share to GAAP net loss per share because certain items are out of its control or cannot be reasonably predicted. Accordingly, a reconciliation for forward-looking non-GAAP net loss per share is not available without unreasonable effort.

Conference Call Information:

PagerDuty will host a conference call and live webcast for analysts and investors at 2:00 p.m. Pacific Time on December 5, 2019. This news release with the financial results will be accessible from PagerDuty’s website at investor.pagerduty.com prior to the conference call. Interested parties can access the call by dialing (833) 227-5837 or (647) 689-4067 for callers outside North America, and using the conference ID 2091657.

A live webcast of the conference call will be accessible from the PagerDuty investor relations website at investor.pagerduty.com. A telephonic replay of the conference call will be available through December 19, 2019 and may be accessed by dialing (800) 585-8367 or (416) 621-4642 for callers outside North America, and using the conference ID: 2091657.

Supplemental Financial and Other Information:

Supplemental financial and other information can be accessed through PagerDuty’s investor relations website at investor.pagerduty.com. PagerDuty uses the investor relations section on its website as the means of complying with its disclosure obligations under Regulation FD. Accordingly, we recommend that investors should monitor PagerDuty’s investor relations website in addition to following PagerDuty’s press releases, SEC filings, social media, including PagerDuty’s Twitter account (twitter.com/pagerduty), the Twitter account @jenntejada and Facebook page (facebook.com/pagerduty), and public conference calls and webcasts.

Non-GAAP Financial Measures:

This press release and the accompanying tables contain the following non-GAAP financial measures: non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating loss, non-GAAP operating margin, non-GAAP net loss, non-GAAP net loss per share, and free cash flow.

PagerDuty believes that non-GAAP financial measures, when taken collectively, may be helpful to investors because they provide consistency and comparability with past financial performance and can assist in comparisons with other companies, some of which use similar non-GAAP financial measures to supplement their GAAP results. The non-GAAP financial information is presented for supplemental informational purposes only, and should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly-titled non-GAAP measures used by other companies.

The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in PagerDuty’s financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by PagerDuty’s management about which expenses and income are excluded or included in determining these non-GAAP financial measures. A reconciliation is provided below for each historical non-GAAP financial measure to the most directly comparable financial measure presented in accordance with GAAP.

PagerDuty defines non-GAAP operating loss as GAAP loss from operations excluding stock-based compensation expense and non-cash charitable contribution expense. PagerDuty defines non-GAAP net loss (which is used in calculating non-GAAP net loss per share) as GAAP net loss excluding stock-based compensation expense and non-cash charitable contribution expense. There are a number of limitations related to the use of these non-GAAP measures as compared to GAAP operating loss and net loss, including that the non-GAAP measures exclude stock-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense in PagerDuty’s business and an important part of its compensation strategy.

PagerDuty defines free cash flow as net cash provided by (used in) operating activities, less cash used for purchases of property and equipment and capitalized internal-use software. In addition to the reasons stated above, PagerDuty believes that free cash flow is useful to investors as a liquidity measure because it measures PagerDuty’s ability to generate or use cash in excess of its capital investments in property and equipment to enhance the strength of its balance sheet and further invest in its business and potential strategic initiatives. PagerDuty uses free cash flow in conjunction with traditional GAAP measures as part of its overall assessment of its liquidity, including the preparation of PagerDuty’s annual operating budget and quarterly forecasts, to evaluate the effectiveness of its business strategies, and to assess its liquidity.

There are a number of limitations related to the use of free cash flow as compared to net cash provided by (used in) operating activities, including that free cash flow includes capital expenditures, the benefits of which are realized in periods subsequent to those when expenditures are made.

PagerDuty encourages investors to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, which it includes in press releases announcing quarterly financial results, including this press release, and not to rely on any single financial measure to evaluate PagerDuty’s business.

Please see the reconciliation tables at the end of this release for the reconciliation of GAAP and non-GAAP results.

Forward-Looking Statements:

This press release contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our GAAP and non-GAAP guidance for the fourth fiscal quarter and full fiscal 2020 and financial outlook and market positioning. Words such as “expect,” “anticipate,” “should,” “believe,” “hope,” “target,” “project,” “goals,” “estimate,” “potential,” “predict,” “may,” “will,” “might,” “could,” “intend,” “shall” and variations of these terms or the negative of these terms and similar expressions are intended to identify these forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond our control. Our actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, risks detailed in our Form 10-Q filed with the Securities and Exchange Commission (SEC) on September 6, 2019. Additional information will be made available in our quarterly report on Form 10-Q for the quarter ended October 31, 2019 and other filings and reports that we may file from time to time with the SEC. In particular, the following risks and uncertainties, among others, could cause results to differ materially from those expressed or implied by such forward-looking statements: total revenue, non-GAAP net loss per share and shares outstanding for the fourth quarter and full year of fiscal 2020, our ability to achieve and maintain future profitability, our ability to attract new customers and retain and sell additional functionality and services to our existing customers, our ability to sustain and manage our growth, our dependence on revenue from a single product, our ability to compete effectively in an increasingly competitive market, and general market, political, economic, and business conditions.

Past performance is not necessarily indicative of future results. The forward-looking statements included in this press release represent our views as of the date of this press release. We anticipate that subsequent events and developments will cause our views to change. We undertake no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.

About PagerDuty

PagerDuty, Inc. (NYSE:PD) is a leader in digital operations management. In an always-on world, organizations of all sizes trust PagerDuty to help them deliver a perfect digital experience to their customers, every time. Teams use PagerDuty to identify issues and opportunities in real time and bring together the right people to fix problems faster and prevent them in the future. Notable customers including GE, Vodafone, Box, and American Eagle Outfitters. To learn more and try PagerDuty for free, visit www.pagerduty.com. Follow our blog and connect with us on Twitter, LinkedIn, YouTube and Facebook.

PagerDuty, Inc.

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share data)

(unaudited)

 

 

Three Months Ended October 31,

 

Nine Months Ended October 31,

 

2019

 

2018

 

2019

 

2018

Revenue

$

42,750

 

 

$

31,229

 

 

$

120,425

 

 

$

83,993

 

Cost of revenue(1)

6,634

 

 

4,599

 

 

18,226

 

 

12,396

 

Gross profit

36,116

 

 

26,630

 

 

102,199

 

 

71,597

 

Operating expenses:

 

 

 

 

 

 

 

Research and development(1)

12,619

 

 

14,578

 

 

35,160

 

 

30,101

 

Sales and marketing(1)

27,425

 

 

18,738

 

 

72,378

 

 

47,351

 

General and administrative(1)

12,765

 

 

9,264

 

 

38,464

 

 

30,052

 

Total operating expenses

52,809

 

 

42,580

 

 

146,002

 

 

107,504

 

Loss from operations

(16,693

)

 

(15,950

)

 

(43,803

)

 

(35,907

)

Interest income

1,427

 

 

318

 

 

4,283

 

 

596

 

Other income, net

245

 

 

372

 

 

346

 

 

1,087

 

Loss before provision for income taxes

(15,021

)

 

(15,260

)

 

(39,174

)

 

(34,224

)

Provision for income taxes

(244

)

 

(115

)

 

(725

)

 

(310

)

Net loss

$

(15,265

)

 

$

(15,375

)

 

$

(39,899

)

 

$

(34,534

)

Comprehensive loss

 

 

 

 

 

 

 

Unrealized loss on investments

(50

)

 

 

 

(50

)

 

 

Total comprehensive loss

$

(15,315

)

 

$

(15,375

)

 

$

(39,949

)

 

$

(34,534

)

Net loss per share, basic and diluted

$

(0.20

)

 

$

(0.71

)

 

$

(0.65

)

 

$

(1.63

)

Weighted-average shares used in calculating net loss per share, basic and diluted

75,992

 

 

21,598

 

 

61,628

 

 

21,226

 

(1) Includes stock-based compensation expense and non-cash charitable contribution expense as follows (in thousands, unaudited):

 

Three Months Ended October 31,

 

Nine Months Ended October 31,

 

2019

 

2018

 

2019

 

2018

Cost of revenue

$

303

 

 

$

71

 

 

$

773

 

 

$

202

 

Research and development

1,462

 

 

6,567

 

 

3,760

 

 

7,680

 

Sales and marketing

2,295

 

 

1,198

 

 

6,084

 

 

2,964

 

General and administrative

3,287

 

 

2,340

 

 

8,775

 

 

11,233

 

Total

$

7,347

 

 

$

10,176

 

 

$

19,392

 

 

$

22,079

 

PagerDuty, Inc.

 

Condensed Consolidated Balance Sheets

(in thousands)

 

 

As of October 31,

 

As of January 31,

 

2019

 

2019

 

(unaudited)

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

176,347

 

 

$

127,875

 

Accounts receivable, net of allowance for doubtful accounts of $1,024 and $2,360 as of October 31, 2019 and January 31, 2019, respectively

29,205

 

 

33,538

 

Investments, current

169,744

 

 

 

Deferred contract costs, current

8,251

 

 

6,002

 

Prepaid expenses and other current assets

9,985

 

 

5,422

 

Total current assets

393,532

 

 

172,837

 

Property and equipment, net

10,031

 

 

5,772

 

Deferred contract costs, non-current

14,667

 

 

11,470

 

Other assets

1,767

 

 

7,155

 

Total assets

$

419,997

 

 

$

197,234

 

Liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

5,254

 

 

$

7,657

 

Accrued expenses and other current liabilities

6,827

 

 

7,145

 

Accrued compensation

15,669

 

 

10,050

 

Deferred revenue, current

78,582

 

 

63,957

 

Total current liabilities

106,332

 

 

88,809

 

Deferred revenue, non-current

2,042

 

 

147

 

Other liabilities

7,132

 

 

4,185

 

Total liabilities

115,506

 

 

93,141

 

Redeemable convertible preferred stock

 

 

173,023

 

Stockholders’ equity (deficit):

 

 

 

Common stock

 

 

 

Additional paid-in-capital

473,308

 

 

59,938

 

Accumulated other comprehensive loss

(50

)

 

 

Accumulated deficit

(168,767

)

 

(128,868

)

Total stockholders’ equity (deficit)

304,491

 

 

(68,930

)

Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)

$

419,997

 

 

$

197,234

 

PagerDuty, Inc.

 

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

Nine Months Ended October 31,

 

2019

 

2018

Cash flows from operating activities

 

 

 

Net loss

(39,899

)

 

$

(34,534

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

Depreciation and amortization

1,675

 

 

1,254

 

Amortization of deferred contract costs

5,499

 

 

3,055

 

Stock-based compensation

19,392

 

 

15,862

 

Warrant issued in conjunction with charitable contribution

 

 

6,217

 

Other

(383

)

 

664

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

4,333

 

 

(6,245

)

Deferred contract costs

(10,945

)

 

(8,924

)

Prepaid expenses and other assets

(4,864

)

 

(2,448

)

Accounts payable

(1,386

)

 

319

 

Accrued expenses and other liabilities

2,464

 

 

2,127

 

Accrued compensation

5,619

 

 

2,840

 

Deferred revenue

16,520

 

 

13,577

 

Net cash used in operating activities

(1,975

)

 

(6,236

)

Cash flows from investing activities

 

 

 

Purchases of property and equipment

(3,190

)

 

(3,078

)

Capitalized internal-use software costs

 

 

(224

)

Purchases of held-to-maturity investments

(45,736

)

 

 

Proceeds from held-to-maturity of investments

8,950

 

 

 

Purchases of available-for-sale investments

(132,706

)

 

 

Net cash used in investing activities

(172,682

)

 

(3,302

)

Cash flows from financing activities

 

 

 

Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs

 

 

89,819

 

Proceeds from initial public offering, net of underwriters' discounts and commissions

220,086

 

 

 

Payments of costs related to initial public offering

(5,603

)

 

 

Proceeds from repayment of promissory note

515

 

 

 

Proceeds from issuance of common stock upon exercise of stock options

5,750

 

 

1,305

 

Proceeds from early exercised stock options, net of repurchases

 

 

2,234

 

Proceeds from issuance of common stock upon exercise of warrant

 

 

473

 

Employee payroll taxes paid related to net share settlement of restricted stock units

(14

)

 

 

Net cash provided by financing activities

220,734

 

 

93,831

 

Net increase in cash, cash equivalents and restricted cash

46,077

 

 

84,293

 

Cash, cash equivalents and restricted cash at beginning of year

130,323

 

 

46,451

 

Cash, cash equivalents and restricted cash at end of year

$

176,400

 

 

$

130,744

 

PagerDuty, Inc.

 

Reconciliation of GAAP to Non-GAAP Data

(in thousands, except percentages and per share data)

(unaudited)

 

 

Three Months Ended October 31, 2019

 

GAAP

 

Stock-based
Compensation

 

Non-GAAP

Cost of revenue

$

6,634

 

 

$

(303

)

 

$

6,331

 

Gross profit

36,116

 

 

303

 

 

36,419

 

Gross margin

84.5

%

 

0.7

%

 

85.2

%

Operating expenses:

 

 

 

 

 

Research and development

12,619

 

 

(1,462

)

 

11,157

 

Sales and marketing

27,425

 

 

(2,295

)

 

25,130

 

General and administrative

12,765

 

 

(3,287

)

 

9,478

 

Operating loss

(16,693

)

 

7,347

 

 

(9,346

)

Operating margin

(39.0

)%

 

17.2

%

 

(21.9

)%

Net loss

$

(15,265

)

 

$

7,347

 

 

$

(7,918

)

Net loss per share

$

(0.20

)

 

 

 

$

(0.10

)

 

 

Three Months Ended October 31, 2018

 

GAAP

 

Stock-based
Compensation

 

Non-GAAP

Cost of revenue

$

4,599

 

 

$

(71

)

 

$

4,528

 

Gross profit

26,630

 

 

71

 

 

26,701

 

Gross margin

85.3

%

 

0.2

%

 

85.5

%

Operating expenses:

 

 

 

 

 

Research and development

14,578

 

 

(6,567

)

 

8,011

 

Sales and marketing

18,738

 

 

(1,198

)

 

17,540

 

General and administrative

9,264

 

 

(2,340

)

 

6,924

 

Operating loss

(15,950

)

 

10,176

 

 

(5,774

)

Operating margin

(51.1

)%

 

32.6

%

 

(18.5

)%

Net loss

$

(15,375

)

 

$

10,176

 

 

$

(5,199

)

Net loss per share

$

(0.71

)

 

 

 

$

(0.24

)

PagerDuty, Inc.

 

Reconciliation of GAAP to Non-GAAP Data

(in thousands, except percentages and per share data)

(unaudited)

 

 

Nine Months Ended October 31, 2019

 

GAAP

 

Stock-based
Compensation

 

Non-GAAP

Cost of revenue

$

18,226

 

 

$

(773

)

 

$

17,453

 

Gross profit

102,199

 

 

773

 

 

102,972

 

Gross margin

84.9

%

 

0.6

%

 

85.5

%

Operating expenses:

 

 

 

 

 

Research and development

35,160

 

 

(3,760

)

 

31,400

 

Sales and marketing

72,378

 

 

(6,084

)

 

66,294

 

General and administrative

38,464

 

 

(8,775

)

 

29,689

 

Operating loss

(43,803

)

 

19,392

 

 

(24,411

)

Operating margin

(36.4

)%

 

16.1

%

 

(20.3

)%

Net loss

$

(39,899

)

 

$

19,392

 

 

$

(20,507

)

Net loss per share

$

(0.65

)

 

 

 

$

(0.33

)

 

 

Nine Months Ended October 31, 2018

 

GAAP

 

Stock-based
Compensation(1)

 

Non-GAAP

Cost of revenue

$

12,396

 

 

$

(202

)

 

$

12,194

 

Gross profit

71,597

 

 

202

 

 

71,799

 

Gross margin

85.2

%

 

0.2

%

 

85.5

%

Operating expenses:

 

 

 

 

 

Research and development

30,101

 

 

(7,680

)

 

22,421

 

Sales and marketing

47,351

 

 

(2,964

)

 

44,387

 

General and administrative

30,052

 

 

(11,233

)

 

18,819

 

Operating loss

(35,907

)

 

22,079

 

 

(13,828

)

Operating margin

(42.7

)%

 

26.3

%

 

(16.5

)%

Net loss

$

(34,534

)

 

$

22,079

 

 

$

(12,455

)

Net loss per share

$

(1.63

)

 

 

 

$

(0.59

)

(1) Stock-based compensation expense above includes $6.2 million of non-cash charitable contribution expense.
______________
Note: Certain figures in the tables above may not sum due to rounding.

PagerDuty, Inc.

 

Reconciliation of GAAP to Non-GAAP Financial Measures

(in thousands, except percentages and per share data)

(unaudited)

 

Free Cash Flow

 

 

Three Months Ended October 31,

 

Nine Months Ended October 31,

 

2019

 

2018

 

2019

 

2018

Net cash provided by (used in) operating activities

$

3,432

 

 

$

2,811

 

 

$

(1,975

)

 

$

(6,236

)

Less:

 

 

 

 

 

 

 

Purchases of property and equipment

(1,171

)

 

(2,514

)

 

(3,190

)

 

(3,078

)

Capitalization of internal-use software

 

 

(132

)

 

 

 

(224

)

Free cash flow

$

2,261

 

 

$

165

 

 

$

(5,165

)

 

$

(9,538

)

Net cash used in investing activities

(135,967

)

 

(2,646

)

 

(172,682

)

 

(3,302

)

Net cash provided by financing activities

2,566

 

 

90,999

 

 

220,734

 

 

93,831

 

Free cash flow margin

5.3

%

 

0.5

%

 

(4.3

)%

 

(11.4

)%

 

Investor Relations Contact:
Stacey Finerman
investor@pagerduty.com

Source: PagerDuty

Source: PagerDuty, Inc.

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