Summary
PagerDuty reported second quarter fiscal 2024 revenue of $107.62 million, up 19.2% year over year. The increase was attributable to a combination of growth from both new and existing customers. Gross profit was $87.78 million, up 22.1%, and gross margin expanded to 81.6%, up 1.9 percentage points. The company still recorded a GAAP operating loss of $26.17 million, but that loss narrowed 30.9% from the prior-year quarter. GAAP operating margin improved to -24.3%, up 17.7 percentage points. Net loss attributable to PagerDuty was $22.05 million, a 42.7% improvement, and diluted EPS was -$0.26, a 40.9% improvement. On a non-GAAP basis, operating income was $14.3 million and non-GAAP operating margin was 13.3%. Non-GAAP net income per diluted share was $0.19.
The quarter showed mixed customer trends. Annual recurring revenue grew 17% to $431.0 million. Customers with annual recurring revenue over $100,000 grew 12% to 773, compared with 689 in the year-ago period. Dollar-based net retention rate was 114%, down from 124% in the year-ago period. Total paid customers were 15,146, compared with 15,174 in the year-ago period. Total free and paid customers were more than 26,000, representing approximately 19% growth year over year. Deferred revenue grew 16.0% to $196.60 million. Remaining performance obligations grew 2.7% to $170.70 million. The slower RPO growth and lower net retention rate suggest some caution on expansion, even as the company added large customers. Customer wins included Banco Santander, Cisco Systems, Confluent, Docusign, Grammarly, Hubspot, and Nvidia. PagerDuty was named a Leader in the 2023 Forrester Wave for Process-Centric AI For IT Operations (AIOps), achieved FedRAMP In Process, and expanded generative AI offerings with AI-generated runbooks.
Cash generation improved. Operating cash flow was $10.75 million, up 278.4% year over year. Year-to-date operating cash flow was $32.90 million. Capital expenditures were $0.71 million, down 17.3%. Year-to-date capital expenditures were $0.95 million, down 67.8%. Free cash flow was $8.7 million. Management highlighted durable growth and continued improvement in operational efficiency, with a 1,700 basis point improvement in non-GAAP operating margin. The company continued to invest in research and development while holding sales and marketing spending in check. Interest income increased on higher rates and investment balances, which helped reduce the GAAP net loss.
Guidance points to slower near-term growth. For the third quarter of fiscal 2024, PagerDuty expects revenue of $106.5 million to $108.5 million, representing growth of 13% to 15% year over year. Non-GAAP net income per diluted share is expected to be $0.13 to $0.14, assuming approximately 105 million diluted shares. For the full fiscal year 2024, the company expects revenue of $426.0 million to $430.0 million, representing growth of 15% to 16% year over year. Non-GAAP net income per diluted share is expected to be $0.60 to $0.65, assuming approximately 105 million diluted shares. Risks include worldwide macroeconomic conditions, global inflation, rising interest rates, a recession or economic downturn, COVID-19, foreign currency volatility, and bank failures. Geopolitical conflicts, including the Russia-Ukraine conflict, could also disrupt business. The company also faces execution risks around attracting new customers, retaining existing customers, competition, and dependence on a single product. The decline in dollar-based net retention to 114% and modest RPO growth are worth watching as the company works to reaccelerate growth. The company has not reconciled its forward-looking non-GAAP net income per share to GAAP net loss per share because certain items are out of its control.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2024 | Q1 FY2024 | QoQ | Q2 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $107.6M | $103.2M | +4.2% | $90.3M | +19.2% |
| Gross profit | $87.8M | $85.3M | +2.9% | $71.9M | +22.1% |
| Gross margin | 81.6% | 82.6% | -1.1 pp | 79.7% | +1.9 pp |
| Research & development | $36.4M | $33.5M | +8.8% | $34.0M | +7.1% |
| Sales & marketing | $49.7M | $43.8M | +13.5% | $50.3M | -1.2% |
| General & administrative | $27.8M | $23.8M | +16.8% | $25.4M | +9.3% |
| Total operating expenses | $114.0M | $101.1M | +12.7% | $109.8M | +3.8% |
| Operating income (loss) | -$26.2M | -$15.8M | -65.7% | -$37.9M | +30.9% |
| Operating margin | -24.3% | -15.3% | -9.0 pp | -42.0% | +17.7 pp |
| Net income (loss) | -$22.6M | -$12.8M | -76.2% | -$38.6M | +41.4% |
| Net margin | -21.0% | -12.4% | -8.6 pp | -42.8% | +21.8 pp |
| Diluted EPS | -$0.26 | -$0.13 | -$0.13 | -$0.44 | +$0.18 |
| Customers | 15,174 | 15,040 | +0.9% | — | — |
| Net retention rate | 114.0% | 116.0% | -2.0 pp | 124.0% | -10.0 pp |
Risks
The filing states advancements in AI and ML are changing the technology landscape and that businesses slow to adopt these technologies may face a competitive disadvantage. PagerDuty must continue enhancing its digital operations platform or risk new technologies delivering competitive value at lower prices, more efficiently, more conveniently, more reliably, or more securely.
MD&A reported that dollar-based net retention rate for all customers declined to 114% for the last 12 months ended July 31, 2023 from 124% for the last 12 months ended July 31, 2022. The cash flow discussion also noted a $12.4 million decrease in deferred revenue resulting from decreased billings for subscriptions during the six months ended July 31, 2023.
PagerDuty uses AI and ML technologies in its products, and the risk factor says this development and use is subject to privacy, data protection, and information security laws, industry standards, external and internal policies, contractual requirements, and increasing regulation and scrutiny. Failure to incorporate AI/ML consistently with these factors and customer expectations may harm reputation, reduce efficiency, or create a competitive disadvantage.
MD&A says business and financial performance may be subject to worldwide macroeconomic conditions, including global inflation, rise in interest rates, recession or economic downturn, bank failures, volatility in foreign currency exchange rates, and geopolitical conflicts. It notes the ongoing Russia-Ukraine conflict could materially impact results if it continues or worsens, although customers in Russia were immaterial to net assets as of July 31, 2023 and January 31, 2023 and to consolidated revenues for the three and six months ended July 31, 2023 and 2022.
SaaS KPIs
All quarters →Free Cash Flow Margin
Non-GAAP Operating Margin
Free Cash Flow
Dollar-Based Net Retention Rate
Total Paid Customers
Non-GAAP Gross Margin
Non-GAAP Operating Income
Customers > $100K ARR
Annual Recurring Revenue
Total Free and Paid Customers
Summary, forecast, risks and KPIs are extracted from PagerDuty, Inc.'s SEC filings for Q2 FY2024 (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.