PagerDuty, Inc. Q1 FY2025 earnings

PagerDuty's first quarter of fiscal 2025 showed steady top-line growth but a wider GAAP loss. Revenue rose 7.7% year over year to $111.2 million. Gross profit increased 7.6% to $91.8 million. Gross margin was 82.6%, flat compared with the prior-year quarter. The GAAP picture beneath that was less comfortable. Operating loss widened to $21.7 million from $15.8 million a year earlier, and operating margin fell to negative 19.5% from negative 15.3%, a decline of 4.2 percentage points. Net loss attributable to PagerDuty was $17.1 million, compared with $12.2 million in the prior-year quarter. Diluted EPS was negative $0.26, compared with negative $0.13. On a non-GAAP basis, operating income was $15.3 million with a 13.8% non-GAAP operating margin. Management said this marked the seventh consecutive quarter of non-GAAP profitability.

Cash generation improved. Operating cash flow was $28.6 million, up 29.3% from $22.2 million in the prior-year quarter. Free cash flow was $27.1 million, up from $20.8 million. Capital expenditures were $0.46 million, up 94.5% from $0.24 million. Deferred revenue was $223.6 million, up 10.8% from $201.8 million a year earlier. Remaining performance obligations reached $388.0 million, up 112.3% from $182.8 million. The company noted that beginning in the first quarter of fiscal 2025 it now includes contracts with an original term of less than 12 months in RPO, which comprised $135.0 million of the balance as of April 30, 2024. PagerDuty expects to recognize about $273.4 million, or 70%, of RPO over the next 12 months. The board authorized a share repurchase program of up to $100 million, expected to continue through May 29, 2026.

Customer metrics were mixed. Customers with annual recurring revenue over $100,000 grew 6% to 811 as of April 30, 2024, from 764 a year earlier. Total paid customers were 15,120, compared with 15,089 a year earlier. Total free and paid customers exceeded 29,000, representing approximately 18% growth year over year. The dollar-based net retention rate was 106% as of April 30, 2024, compared with 116% a year earlier. Management said annual recurring revenue growth stabilized at 10% for the second consecutive quarter. Recent product work included advanced AI and automation enhancements to speed operational issue resolution and a new enterprise offering for the Incident Management product. The company highlighted land-and-expand activity with Cisco Systems, Datadog, Equinix, Eventbrite, PriceSmart, Telefonica, Veterans Affairs VA and ZScaler.

Guidance points to continued revenue growth. For the second quarter of fiscal 2025, PagerDuty expects revenue growth of 7% to 9% year over year. It expects non-GAAP net income per diluted share of $0.16 to $0.17, assuming approximately 97 million diluted shares and a non-GAAP tax rate of 23%. For the full fiscal year 2025, the company expects revenue growth of 9% to 11% year over year. It expects non-GAAP net income per diluted share of $0.66 to $0.71, also assuming approximately 97 million diluted shares and a 23% non-GAAP tax rate. Risks include worldwide macroeconomic conditions, inflation, interest rates, recession, foreign currency volatility, and geopolitical conflicts such as the Russia-Ukraine conflict and the conflict in Israel and surrounding areas. The company also cites its ability to achieve and maintain future profitability, attract new customers and retain existing ones, sell additional functionality, manage growth, reduce dependence on a single product, and compete effectively. The declining net retention rate and wider GAAP loss are near-term pressure points.