Summary
PagerDuty's fiscal 2021 second quarter, ended July 31, 2020, showed top-line momentum and better operating leverage even as the bottom line slipped. Revenue was $50.7 million, up 25.7% year over year. For the six months ended July 31, 2020, revenue was $100.5 million, up 29.4%. Gross profit was $44.1 million in the quarter, up 28.7%, and GAAP gross margin was 86.9%, compared with 84.9% in the prior-year quarter, up 2.0 percentage points. The GAAP operating loss was $13.4 million, narrower than the $14.4 million loss in the second quarter of fiscal 2020, and GAAP operating margin was negative 26.5%, compared with negative 35.6%, up 9.1 percentage points. Net loss was $14.7 million, wider than the $12.6 million net loss a year earlier, and diluted EPS was negative $0.19. On a non-GAAP basis, operating loss was $3.5 million and net loss was $3.5 million, while non-GAAP gross margin was 87.4%. The spread between GAAP and non-GAAP results remains tied to stock-based compensation, a recurring expense.
Customer metrics point to steady expansion and a larger enterprise base, but also to pressure in smaller accounts. PagerDuty had 13,346 customers as of July 31, 2020, compared with 12,045 a year earlier. Customers with annual recurring revenue over $100,000 totaled 369, up 35% year over year from 274. Dollar-based net retention rate for all customers was 116% for the last 12 months ended July 31, 2020, down from 132% in the comparable prior-year period. Deferred revenue was $101.2 million, up 30.1% year over year, and remaining performance obligations were $81.4 million, up 35.4%. The company said about a third of enterprise and mid-market customers expanded within the quarter. New customers included The Atlantic, Dignity Health, Genentech, Lowes, Richemont, and Telenet. Existing customers that expanded included Electronic Arts, Groupon, NCS Pearson, Okta, Postmates, and SAP. PagerDuty also reported over 370 integrations and new partners such as AHEAD, CDI, Estuate, and HGC Technologies.
Cash generation was mixed. Net cash provided by operating activities was $2.0 million in the quarter, down 5.2% from $2.2 million in the prior-year quarter. For the six months ended July 31, 2020, operating cash flow was $1.9 million, up 134.4% from negative $5.4 million in the prior-year period. Free cash flow, a non-GAAP measure, was $1.4 million in the quarter, compared with $1.3 million a year earlier. Capital expenditures were $0.6 million in the quarter, down 30.2% year over year. Operating cash flow and free cash flow are different measures, and the free cash flow figure subtracts purchases of property and equipment and capitalized internal-use software costs.
Guidance points to continued growth while non-GAAP losses per share remain. For the third quarter of fiscal 2021, PagerDuty expects revenue of $52.0 million to $53.0 million, representing 22% to 24% year-over-year growth. It expects non-GAAP net loss per share of $0.11 to $0.10 on approximately 79 million shares. For the full fiscal year 2021, the company expects revenue of $206.0 million to $211.0 million, or 24% to 27% year-over-year growth, and non-GAAP net loss per share of $0.30 to $0.27 on approximately 79 million shares. The company has not reconciled forward-looking non-GAAP net loss per share to GAAP net loss per share because certain items are outside its control or cannot be reasonably predicted.
The main risks remain the COVID-19 pandemic and its effect on demand. Management said the full extent of the pandemic's impact is uncertain. The company has seen greater variability in demand from small and medium business customers, an increase in churn, and a decline in the number of users that it believes is tied to COVID-19. It may continue to see user declines if customers make workforce reductions. PagerDuty also flagged declines in customer demand, reduced customer spend or contract duration, and lengthened payment terms as possible outcomes. The shift of Summit and other events to virtual formats creates uncertainty around lead generation and customer sign-ups. Other disclosed risks include competition, dependence on a single product, the ability to attract and retain customers, the ability to sustain growth, and the ability to achieve and maintain future profitability. General market, political, economic, and business conditions also remain factors.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2021 | Q1 FY2021 | QoQ | Q2 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $50.7M | $49.8M | +1.9% | $40.4M | +25.7% |
| Gross profit | $44.1M | $42.8M | +2.9% | $34.3M | +28.7% |
| Gross margin | 86.9% | 86.0% | +0.9 pp | 84.9% | +2.0 pp |
| Research & development | $15.5M | $15.0M | +3.5% | $11.6M | +33.5% |
| Sales & marketing | $27.5M | $26.7M | +2.9% | $23.8M | +15.7% |
| General & administrative | $14.5M | $13.7M | +5.9% | $13.2M | +9.6% |
| Total operating expenses | $57.5M | $55.4M | +3.8% | $48.6M | +18.3% |
| Operating income (loss) | -$13.4M | -$12.6M | -6.7% | -$14.4M | +6.5% |
| Operating margin | -26.5% | -25.3% | -1.2 pp | -35.6% | +9.1 pp |
| Net income (loss) | -$14.7M | -$11.5M | -28.2% | -$12.6M | -16.8% |
| Net margin | -29.0% | -23.0% | -5.9 pp | -31.1% | +2.2 pp |
| Customers | 12,045 | 11,680 | +3.1% | 12,000 | +0.4% |
Risks
In June 2020 PD issued $287.5 million aggregate principal amount of 1.25% convertible senior notes due 2025. The filing states servicing this debt may require significant cash, and PD may not have sufficient cash flow or ability to raise funds to settle cash conversions or repurchase the Notes upon a fundamental change, which could lead to default.
If the conditional conversion feature of the Notes is triggered, holders may convert at their option. PD may be required to settle a portion or all of the conversion obligation in cash, which could adversely affect liquidity, and accounting rules could require reclassifying all or a portion of the Notes as a current liability, materially reducing net working capital.
MD&A states PD has experienced an increase in churn and a decline in the number of users that it believes are associated with COVID-19, with greater demand variability from small and medium business customers and risk of reduced customer spend, shorter contract duration, and lengthened payment terms.
The dollar-based net retention rate for all customers declined to 116% for the trailing 12 months ended July 31, 2020 from 132% for the trailing 12 months ended July 31, 2019, highlighting elevated churn and reduced expansion risk.
Conversion of the Notes or future sales of common stock could dilute existing stockholders and depress the market price. The Capped Calls are intended to reduce dilution but are subject to a cap and involve financial institution counterparties.
PD is exposed to unsecured credit risk on the Capped Calls with Option Counterparties. If an Option Counterparty becomes subject to insolvency proceedings, PD would be an unsecured creditor and may suffer more dilution than anticipated and adverse tax consequences.
ASC 470-20 requires separate liability and equity accounting for the Notes, resulting in non-cash interest expense from accretion of the debt discount and lower net income or higher net loss. PD has not yet evaluated ASU 2020-06, which could change the accounting and requires the if-converted method.
PD converted Summit and other events to virtual formats due to COVID-19 and cannot predict whether virtual marketing events and phone or virtual sales interactions will be as successful as in-person events, which may constrain customer sign-ups and lead generation.
SaaS KPIs
All quarters →Free Cash Flow Margin
Non-GAAP Operating Margin
Free Cash Flow
Total Customers
Summary, forecast, risks and KPIs are extracted from PagerDuty, Inc.'s SEC filings for Q2 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.