PagerDuty, Inc. Q2 FY2022 earnings

PagerDuty reported FY2022 Q2 revenue of $67.5 million, up 33.2% from the prior-year quarter. Year-to-date revenue reached $131.1 million, up 30.5% from the first six months of FY2021. Growth came from new and existing customers, including customers from the Rundeck acquisition. The company ended the quarter with 14,169 total customers, compared with 13,346 a year earlier. Customers with more than $100,000 in annual recurring revenue rose to 501 from 369. Dollar-based net retention rate was 126%, up from 116%. Nearly 18,000 companies now use PagerDuty. International revenue accounted for nearly 25% of total revenue. The platform has over 600 direct integrations. Recent customer expansions included Anheuser-Busch, Autodesk, Datadog, Nvidia, Snowflake and Ultimate Kronos Group. New customers included Alkeon Capital Management, Citigroup, EnterpriseDB Corporation, Mattress Firm, Via Varejo S.A., and Selfridges.

Profitability weakened on a GAAP basis. Gross margin was 82.3% in the quarter, down from 86.9% a year earlier. Year-to-date gross margin was 82.9%, down from 86.5%. Non-GAAP gross margin was 84.2%, compared with 87.4% in the prior-year quarter. Non-GAAP gross profit was $56.9 million, compared with $44.3 million. GAAP operating loss widened to $28.5 million from $13.4 million. GAAP operating margin was -42.1%, compared with -26.5%. GAAP net loss widened to $29.7 million from $14.7 million. GAAP net loss per share was -$0.35, compared with -$0.19. For the six months, GAAP net loss was -$52.2 million and GAAP net loss per share was -$0.63. Non-GAAP operating loss was $9.9 million, compared with $3.2 million. Non-GAAP net loss was $10.7 million, compared with $3.2 million. Non-GAAP net loss per share was -$0.13, compared with -$0.04.

Cash generation turned negative. Net cash used in operations was $11.6 million, compared with net cash provided by operating activities of $2.0 million in the prior-year quarter. For the six months, net cash used in operations was $10.0 million, compared with $1.9 million provided in the prior-year period. Free cash flow was negative $12.9 million, compared with positive $1.4 million a year earlier. Free cash flow margin was -19.1%, compared with 2.7%. Capital expenditures were $0.36 million in the quarter, down from $0.58 million. Year-to-date capital expenditures were $1.29 million, down from $3.29 million. Deferred revenue was $134.0 million, up 32.4% from the prior-year quarter. Remaining performance obligations were $118.2 million, up 45.2% from the prior-year quarter.

Guidance points to continued growth but no GAAP profitability target. For the third quarter of fiscal 2022, PagerDuty expects revenue growth of 28% to 32% year over year. The company expects non-GAAP net loss per share of $0.10 to $0.09, assuming approximately 85 million shares. For the full fiscal year 2022, management expects revenue growth of 28% to 29% year over year. Full-year non-GAAP net loss per share is expected to be $0.39 to $0.35, assuming approximately 84 million shares. PagerDuty has not reconciled these non-GAAP expectations to GAAP net loss per share. Risks include the ongoing COVID-19 pandemic, the ability to achieve and maintain profitability, the ability to attract new customers and retain and sell additional functionality to existing customers, the ability to sustain and manage growth, dependence on a single product, competition, and general market, political, economic, and business conditions. The company also notes greater variability in demand from small and medium business customers and potential impacts on sales cycles and marketing events. The company continues to operate with most employees working remotely, has travel restrictions in place, and has shifted events like Summit to virtual formats.