PagerDuty, Inc. Q1 FY2024 earnings

PagerDuty reported first quarter fiscal 2024 revenue of $103.25 million, up 20.9% year over year. Gross profit reached $85.31 million, up 22.5%, and gross margin rose to 82.6%, up 1.0 percentage point. The bottom line improved sharply. Operating loss was $15.80 million, narrowed 51.3%. Operating margin was negative 15.3%, up 22.7 percentage points. Net loss attributable to PagerDuty was $12.22 million, narrowed 62.8% from the prior-year quarter. Diluted EPS was negative $0.13, a 65.8% improvement. On a non-GAAP basis, PagerDuty posted record operating income of $16.1 million and a 15.5% non-GAAP operating margin. Non-GAAP net income per diluted share was $0.20. Revenue growth came from a combination of new and existing customers. The increase from existing customers was driven by more users and upsell of additional products and services.

Cash generation was a bright spot. Operating cash flow was $22.15 million, up 842.1% year over year. Capital expenditures were $0.24 million, down 88.7%. Free cash flow was $20.8 million, and free cash flow margin was 20.2%. Deferred revenue was $201.80 million, up 20.6%. Remaining performance obligations were $182.80 million, up 29.3%. Those balances suggest customers continue to commit to the platform, even as billings timing can swing deferred revenue. The company also said a significant majority of customers pay in advance for subscriptions.

Customer metrics were mixed. Total paid customers rose to 15,089 from 15,040 a year earlier. Customers with annual recurring revenue over $100,000 increased to 764 from 655. However, the dollar-based net retention rate fell to 116% from 126%. That decline points to slower expansion within the existing base. PagerDuty continued to push product depth. The company introduced three generative AI-supported capabilities for the Operations Cloud, covering status updates, incident postmortems and process automation. It also announced general availability of PagerDuty AIOps and released PagerDuty Process Automation as part of the Operations Cloud. Other product moves included new Incident Workflows, which aim to remove rote tasks in incident response.

Guidance sets a more cautious tone. For the second quarter of fiscal 2024, PagerDuty expects revenue growth of 15% to 17% year over year. Non-GAAP net income per diluted share is projected at $0.10 to $0.11, assuming approximately 105 million diluted shares. For the full fiscal year 2024, the company expects revenue growth of 15% to 16% year over year, with the revenue outlook lowered from its prior range. Full-year non-GAAP net income per diluted share is expected at $0.60 to $0.65, up from $0.45 and $0.50, assuming approximately 105 million diluted shares.

Risks remain. PagerDuty cites macroeconomic conditions, global inflation, rising interest rates, recession or economic downturn, bank failures, geopolitical conflicts including the Russia-Ukraine conflict, and volatility in foreign currency exchange rates. The company also points to competition, dependence on a single product, and its ability to attract new customers and retain and expand existing customers. The 10-Q also lists risks related to achieving and maintaining future profitability, sustaining and managing growth, and competing effectively in an increasingly competitive market. Non-GAAP results exclude stock-based compensation expense, which the company describes as a significant recurring expense. The lower net retention rate and the reduced full-year revenue outlook show that growth is moderating. Management must balance continued product investment with the cost discipline that drove the non-GAAP operating income improvement.