pd-20240430

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________________

FORM 10-Q

_________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38856

PAGERDUTY, INC.

(Exact name of registrant as specified in its charter)

_________________________


Delaware						27-2793871
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

600 Townsend St., Suite 200

San Francisco, CA 94103

(844) 800-3889

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

_________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, $0.000005 par value

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

The total number of shares of common stock outstanding as of May 29, 2024, was 95,600,016.

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PAGERDUTY, INC.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION


Item 1	Financial Statements (unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations	6
	Condensed Consolidated Statements of Comprehensive Loss	7
	Condensed Consolidated Statements of Stockholders’ Equity	8
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3	Quantitative and Qualitative Disclosures about Market Risk	39
Item 4	Controls and Procedures	40

Part II - OTHER INFORMATION


Item 1	Legal Proceedings	41
Item 1A	Risk Factors	41
Item 2	Unregistered Sale of Equity Securities and Use of Proceeds	42
Item 5	Other Information	42
Item 6	Exhibits	42
	Signatures	44

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which statements involve substantial risk and uncertainties. All statements contained in this Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, market growth and trends, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “potentially,” “likely,” “target,” and similar expressions are intended to identify forward-looking statements.

Forward-looking statements contained in this Form 10-Q include, but are not limited to, statements about our expectations regarding:

•the impact of an economic downturn or recession, rising inflation or significant market volatility in the global economy on our customers, partners, employees and business;

•trends in key business metrics, including number of customers and dollar-based net retention rate, and non-GAAP financial measures and their usefulness in evaluating our business;

•trends in revenue, cost of revenue, and gross margin;

•trends in operating expenses, including research and development, sales and marketing, and general and administrative expense, and expectations regarding these expenses as a percentage of revenue;

•our existing cash and cash equivalents and cash provided by sales of our subscriptions being sufficient to support working capital and capital expenditures for at least the next 12 months and our ability to meet longer-term expected future cash requirements and obligations, through a combination of cash flows from operating activities and available cash and short-term investment balances;

•our ability to effectively identify, acquire, and integrate complementary companies, technologies, and assets, including our ability to successfully integrate artificial intelligence and machine learning in our offerings;

•our ability to service the interest on our convertible notes and repay such notes, to the extent required;

•our efforts to maintain proper and effective internal controls;

•our ability to expand our operations and increase adoption of our platform internationally;

•our ability to stay abreast of new or modified laws and regulations that currently apply or become applicable to our business both in the United States and internationally; and

•other statements regarding our future operations, financial condition, and prospects and business strategies.

Such forward-looking statements are based on our expectations as of the date of this filing and are subject to a number of risks, uncertainties and assumptions, including, but not limited to, risks detailed in the “Risk Factors” section of this Form 10-Q and in our Annual Report on Form 10-K/A for the year ended January 31, 2024, filed with the SEC on March 18, 2024 (“Annual Report”). Readers are urged to carefully review and consider the various disclosures made in this Form 10-Q and in other documents we file from time to time with the Securities and Exchange Commission, or the SEC, that disclose risks and uncertainties that may affect our business. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Form 10-Q may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

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You should not rely on forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or may not occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. In addition, the forward-looking statements in this Form 10-Q are made as of the date of this filing, and we do not undertake, and expressly disclaim any duty, to update any of these forward-looking statements for any reason after the date of this Form 10-Q or to conform these statements to actual results or revised expectations.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

PAGERDUTY, INC.

Condensed Consolidated Balance Sheets

(in thousands) (unaudited)


	As of April 30, 2024		As of January 31, 2024
Assets
Current assets:
Cash and cash equivalents	$	382,541	$	363,011
Investments	210,242		208,178
Accounts receivable, net of allowance for credit losses of $1,142 and $1,382 as of April 30, 2024 and January 31, 2024, respectively	77,536		100,413
Deferred contract costs, current	19,612		19,502
Prepaid expenses and other current assets	17,045		12,094
Total current assets	706,976		703,198
Property and equipment, net	17,400		17,632
Deferred contract costs, non-current	24,532		25,118
Lease right-of-use assets	2,943		3,789
Goodwill	137,401		137,401
Intangible assets, net	29,467		32,616
Other assets	5,324		5,552
Total assets	$	924,043	$	925,306
Liabilities, redeemable non-controlling interest, and stockholders’ equity
Current liabilities:
Accounts payable	$	6,558	$	6,242
Accrued expenses and other current liabilities	12,893		15,472
Accrued compensation	28,609		30,239
Deferred revenue, current	219,571		223,522
Lease liabilities, current	5,498		6,180
Total current liabilities	273,129		281,655
Convertible senior notes, net	448,667		448,030
Deferred revenue, non-current	4,022		4,639
Lease liabilities, non-current	5,979		6,809
Other liabilities	4,209		5,280
Total liabilities	736,006		746,413
Commitments and contingencies (Note 10)
Redeemable non-controlling interest (Note 3)	14,004		7,293
Stockholders’ equity:
Common stock	—		—
Additional paid-in capital	794,842		774,768
Accumulated other comprehensive loss	(1,235)		(733)
Accumulated deficit	(569,574)		(552,435)
Treasury stock	(50,000)		(50,000)
Total stockholders’ equity	174,033		171,600
Total liabilities, redeemable non-controlling interest, and stockholders’ equity	$	924,043	$	925,306

See Notes to Condensed Consolidated Financial Statements

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PAGERDUTY, INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)


	Three Months Ended April 30,
	2024		2023
Revenue	$	111,172	$	103,246
Cost of revenue	19,343		17,936
Gross profit	91,829		85,310
Operating expenses:
Research and development	37,523		33,508
Sales and marketing	48,499		43,801
General and administrative	27,540		23,801
Total operating expenses	113,562		101,110
Loss from operations	(21,733)		(15,800)
Interest income	6,980		4,203
Interest expense	(2,148)		(1,334)
Other expense, net	(251)		(13)
Loss before (provision for) benefit from income taxes	(17,152)		(12,944)
(Provision for) benefit from income taxes	(193)		106
Net loss	$	(17,345)	$	(12,838)
Net loss attributable to redeemable non-controlling interest	(206)		(620)
Net loss attributable to PagerDuty, Inc.	$	(17,139)	$	(12,218)
Adjustment attributable to redeemable non-controlling interest	6,917		—
Net loss attributable to PagerDuty, Inc. common stockholders	$	(24,056)	$	(12,218)
Net loss per share, basic and diluted, attributable to PagerDuty, Inc. common stockholders	$	(0.26)	$	(0.13)
Weighted average shares used in calculating net loss per share, basic and diluted	92,876		91,522

See Notes to Condensed Consolidated Financial Statements

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PAGERDUTY, INC.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(unaudited)


	Three Months Ended April 30,
	2024		2023
Net loss	$	(17,345)	$	(12,838)
Unrealized (loss) gain on investments	(564)		380
Foreign currency translation adjustments	62		(66)
Total comprehensive loss	$	(17,847)	$	(12,524)
Less comprehensive loss attributable to redeemable non-controlling interest:
Net loss attributable to redeemable non-controlling interest	(206)		(620)
Foreign currency translation adjustments attributable to redeemable non-controlling interest	—		4
Comprehensive loss attributable to redeemable non-controlling interest	(206)		(616)
Comprehensive loss attributable to PagerDuty, Inc.	$	(17,641)	$	(11,908)

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PAGERDUTY, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

(unaudited)


	Three Months Ended April 30, 2024
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Treasury Stock			Total Stockholders’ Equity
	Shares	Amount								Shares	Amount
Balances as of January 31, 2024	95,068,187	$	—	$	774,768	$	(733)	$	(552,435)	(2,331,002)	$	(50,000)	$	171,600
Issuance of common stock upon exercise of stock options	41,875	—		291		—		—		—	—		291
Vesting of restricted stock units, net of employee payroll taxes	489,663	—		(6,552)		—		—		—	—		(6,552)
Other comprehensive loss	—	—		—		(502)		—		—	—		(502)
Stock-based compensation	—	—		33,252		—		—		—	—		33,252
Adjustment to redeemable non-controlling interest	—	—		(6,917)		—		—		—	—		(6,917)
Net loss attributable to PagerDuty, Inc.	—	—		—		—		(17,139)		—	—		(17,139)
Balances as of April 30, 2024	95,599,725	$	—	$	794,842	$	(1,235)	$	(569,574)	(2,331,002)	$	(50,000)	$	174,033


	Three Months Ended April 30, 2023
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Treasury Stock			Total Stockholders’ Equity
	Shares	Amount								Shares	Amount
Balances as of January 31, 2023	91,178,671	$	—	$	719,816	$	(1,592)	$	(477,246)	—	$	—	$	240,978
Issuance of common stock upon exercise of stock options	519,852	—		4,332		—		—		—	—		4,332
Vesting of restricted stock units, net of employee payroll taxes	396,019	—		(8,820)		—		—		—	—		(8,820)
Other comprehensive income	—	—		—		314		—		—	—		314
Stock-based compensation	—	—		27,890		—		—		—	—		27,890
Net loss attributable to PagerDuty, Inc.	—	—		—		—		(12,218)		—	—		(12,218)
Balances as of April 30, 2023	92,094,542	$	—	$	743,218	$	(1,278)	$	(489,464)	—	$	—	$	252,476

See Notes to Condensed Consolidated Financial Statements

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PAGERDUTY, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Three Months Ended April 30,
	2024		2023
Cash flows from operating activities
Net loss attributable to PagerDuty, Inc. common stockholders	$	(24,056)	$	(12,218)
Net loss and adjustment attributable to redeemable non-controlling interest (Note 3)	6,711		(620)
Net loss	(17,345)		(12,838)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	5,292		4,725
Amortization of deferred contract costs	5,279		4,990
Amortization of debt issuance costs	608		455
Stock-based compensation	32,940		27,545
Non-cash lease expense	846		1,176
Other	(1,302)		(852)
Changes in operating assets and liabilities:
Accounts receivable	22,716		30,003
Deferred contract costs	(4,805)		(3,372)
Prepaid expenses and other assets	(4,813)		(2,207)
Accounts payable	268		(1,206)
Accrued expenses and other liabilities	(3,435)		(244)
Accrued compensation	(1,667)		(17,286)
Deferred revenue	(4,423)		(7,246)
Lease liabilities	(1,512)		(1,491)
Net cash provided by operating activities	28,647		22,152
Cash flows from investing activities
Purchases of property and equipment	(457)		(235)
Capitalized internal-use software costs	(1,092)		(1,072)
Purchases of available-for-sale investments	(50,065)		(39,085)
Proceeds from maturities of available-for-sale investments	46,556		48,955
Proceeds from sales of available-for-sale investments	2,237		—
Net cash (used in) provided by investing activities	(2,821)		8,563
Cash flows from financing activities
Proceeds from issuance of common stock upon exercise of stock options	291		4,751
Employee payroll taxes paid related to net share settlement of restricted stock units	(6,552)		(8,820)
Net cash used in financing activities	(6,261)		(4,069)
Effects of foreign currency exchange rates on cash, cash equivalents, and restricted cash	(115)		(60)
Net increase in cash, cash equivalents, and restricted cash	19,450		26,586
Cash, cash equivalents, and restricted cash at beginning of period	366,667		274,019
Cash, cash equivalents, and restricted cash at end of period	$	386,117	$	300,605
Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets
Cash and cash equivalents	$	382,541	$	300,605
Restricted cash in other long-term assets	3,576		—
Total cash, cash equivalents and restricted cash	$	386,117	$	300,605

Supplemental cash flow data:
Cash paid for income taxes	$	31	$	78
Cash paid for interest	$	3,069	$	—
Non-cash investing and financing activities:
Purchase of property and equipment, accrued but not yet paid	$	320	$	199
Stock-based compensation capitalized in internal use software	$	312	$	345
Unpaid bonus capitalized in internal use software	$	56	$	69

See Notes to Condensed Consolidated Financial Statements

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PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Description of Business and Basis of Presentation

Description of Business

PagerDuty, Inc. was incorporated under the laws of the state of Delaware in May 2010.

PagerDuty is a digital operations management platform that manages urgent and mission-critical work for a modern, digital business. PagerDuty collects data and digital signals from virtually any software-enabled system or device and leverages powerful machine learning to correlate, process, and predict opportunities and issues. Using incident response, event management, and automation, the Company brings together the right people with the right information so they can resolve issues and act on opportunities in minutes or seconds from wherever they are.

As used herein, “PagerDuty”, “we”, “our”, “the Company” and similar terms include PagerDuty, Inc., unless the context indicates otherwise.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The condensed consolidated balance sheet as of January 31, 2024 was derived from the audited consolidated financial statements as of that date but does not include all of the information and notes required by GAAP for complete financial statements. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended January 31, 2024, included in the Annual Report.

The condensed consolidated financial statements include the results of the Company, its wholly-owned subsidiaries, and subsidiaries in which the Company holds a controlling interest. All intercompany balances and transactions have been eliminated in consolidation.

In the opinion of management, the information contained herein reflects all adjustments necessary for a fair statement of the Company’s financial position, results of operations and comprehensive loss, stockholders’ equity, and cash flows. The results of operations for the three months ended April 30, 2024 are not necessarily indicative of the results to be expected for the full year ending January 31, 2025 or for any other interim period, or for any future year.

The Company’s fiscal year ends on January 31. References to fiscal 2025, for example, refer to the fiscal year ending January 31, 2025.

Reclassification

Certain reclassifications of prior period amounts have been made in the Company’s condensed consolidated statements of operations to conform to the current period presentation. The Company has reclassified a portion of other income to the interest income line item on the accompanying condensed consolidated statements of operations. These reclassifications had no effect on the reported results of operations.

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PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make, on an ongoing basis, estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates. The Company’s most significant estimates and judgments involve the period of benefit for amortizing deferred contract costs, the determination of the fair value of acquired assets and assumed liabilities, stock-based compensation, redemption value of redeemable non-controlling interests, and estimates related to the Company’s revenue recognition, such as the assessment of performance obligations in the Company’s revenue arrangements and the fair value assigned to each performance obligation, among others. Management bases its estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

2. Summary of Significant Accounting Policies

Concentrations of Risk and Significant Customers

The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, available-for-sale investments, and accounts receivable. All of the Company’s cash equivalents and investments are invested in money market funds, United States (“U.S.”) Treasury securities, commercial paper, corporate debt securities, or U.S. Government agency securities that management believes to be of high credit quality. The Company’s cash, cash equivalents, and available-for-sale investments are spread across several different financial institutions.

No single customer accounted for more than 10% of the total accounts receivable balance as of April 30, 2024 or January 31, 2024. No single customer represented 10% or more of revenue for the three months ended April 30, 2024 or 2023.

Segment Information

The Company manages its operations and allocates resources as one operating segment. The Company’s chief operating decision maker (“CODM”) is its chief executive officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance, and allocating resources. Refer to Note 15, “Geographic Information” for information regarding the Company's long-lived assets and revenue by geography.

Related Party Transactions

Certain members of the Company’s Board of Directors serve as directors of, or are executive officers of, and in some cases are investors in, companies that are customers or vendors of the Company. The Company billed $4.0 million and $3.8 million to entities associated with related parties in the three months ended April 30, 2024 and 2023, respectively. The Company recognized $4.0 million and $3.2 million in accounts receivable associated with related parties as of April 30, 2024 and 2023, respectively. Other related party transactions were not material for the three months ended April 30, 2024 and 2023.

Significant Accounting Policies

There have been no significant changes to the Company’s significant accounting policies as compared to those described in the Annual Report.

SEC Form 10-Q filed by PagerDuty Inc.