PagerDuty, Inc. Q3 FY2022 earnings

PagerDuty reported $71.8 million in revenue for its fiscal 2022 third quarter, up 33.5% from the prior-year quarter. Year-to-date revenue reached $202.9 million, up 31.5% from the first nine months of fiscal 2021. Gross profit was $59.7 million in the quarter, up 29.6% from the prior-year quarter, and $168.5 million year to date, up 26.7%. Gross margin was 83.2%, down 2.5 percentage points from the prior-year quarter. On a year-to-date basis, gross margin was 83.0%, down 3.2 percentage points from the prior-year period. The revenue increase came from growth from both new and existing customers, including customers from the Rundeck acquisition.

Profitability remains negative. The quarter's operating loss was $24.8 million, a wider loss than the prior-year quarter. Operating margin was negative 34.6%, an improvement of 6.0 percentage points. For the nine months, operating loss was $74.5 million, a wider loss than the prior-year period, and operating margin was negative 36.7%, down 5.7 percentage points. Net loss was $26.3 million in the quarter, a wider loss than the prior-year quarter. Diluted EPS was -$0.31, a wider loss per share. Year-to-date net loss was $78.6 million, a wider loss than the prior-year period, and diluted EPS was -$0.94, a wider loss per share. Non-GAAP operating loss was $5.0 million, with a non-GAAP operating margin of negative 7.0%. Non-GAAP net loss per share was $0.07. The difference between GAAP and non-GAAP results mainly reflects stock-based compensation, employer taxes related to employee stock transactions, amortization of acquired intangible assets, and acquisition-related expenses.

Cash generation weakened. Operating cash flow was $2.7 million in the quarter, down 45.3% from the prior-year quarter. Year-to-date operating cash flow was negative $7.4 million, down 209.8% from the prior-year period. Capital expenditures were $0.08 million in the quarter, down 22.7%, and $1.4 million year to date, down 59.6%. Free cash flow, a non-GAAP measure, was $1.8 million in the quarter. Deferred revenue was $142.9 million at October 31, 2021, up 32.6% from the prior-year quarter. Remaining performance obligations were $123.0 million, up 26.5%. The customer base expanded to 14,486 paid customers, compared with 13,725 a year earlier. Customers with annual recurring revenue over $100,000 totaled 543, compared with 401. Dollar-based net retention was 124%, compared with 119%. International revenue was 24% of revenue, consistent with the year ago period.

Management gave guidance for the fourth quarter and the full fiscal year. For the fourth quarter of fiscal 2022, PagerDuty expects revenue of $75.5 million to $76.5 million, representing growth of 27% to 29% year over year. It expects non-GAAP net loss per share of $0.06 to $0.05, assuming approximately 86 million shares. For the full fiscal year 2022, the company expects revenue of $278.5 million to $279.5 million, growth of 30% to 31% year over year. It expects non-GAAP net loss per share of $0.34 to $0.33, assuming approximately 84 million shares. The company also highlighted fall product releases to enhance the PagerDuty Operations Cloud, an update to PagerDuty for Salesforce Service Cloud, new integrations to Datadog Status Dashboard by PagerDuty and Incidents by PagerDuty, and plans for a cross-functional hub in Lisbon, Portugal. It cited customer wins including Albertsons, Cox Automotive, Cuscal, Guidewire, Hopin, Lululemon Athletica, Saviynt, Shopify, and Truist Financial. It featured case studies from Guidewire and SPS Commerce. Risks include the ongoing COVID-19 pandemic, the ability to achieve and maintain future 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 revenue from a single product, competition, and general market, political, economic, and business conditions. The company also noted that virtual-only events and sales interactions may be less effective than in-person events, and that small and medium business demand may remain variable. PagerDuty's MD&A also mentions that it has begun to release travel restrictions and has extended paid time off and sick leave benefits for employees affected by COVID-19.