Summary
PagerDuty ended fiscal 2022 with fourth quarter revenue of $78.5 million, up 32.4% from the prior-year quarter. Full-year revenue was $281.4 million, up 31.8%. Gross profit was $64.6 million in the quarter, but the margin on that revenue is thinner than it used to be. Fourth quarter gross margin was 82.3%, down 1.9 percentage points from 84.1% a year earlier, and the full-year gross margin of 82.8% was down 2.8 percentage points from 85.6%. Cost of revenue is growing faster than the top line, and that showed up across the fiscal year.
Profitability is still the open question. The fourth quarter GAAP operating loss was $27.2 million, with an operating margin of -34.6%, down 3.6 percentage points from -31.0% in the prior-year quarter. Net loss for the quarter was $28.9 million, wider than the $22.1 million loss a year earlier. For the full fiscal year the GAAP operating loss was $101.7 million and the net loss was $107.5 million, against losses of $66.3 million and $68.9 million in the prior fiscal year. GAAP diluted net loss per share was $1.27 for the year, wider than the $0.87 loss a year earlier. Management leans on non-GAAP numbers that strip out stock-based compensation and other items: non-GAAP operating loss was $2.5 million in the quarter and $23.1 million for the year, and non-GAAP net loss per share was $0.04 for the quarter and $0.32 for the year. The gap between the two sets of numbers is the central debate on this name.
Cash generation slipped at the end of the year. Operating cash flow was $1.3 million in the fourth quarter, down 60.3% from $3.4 million in the prior-year quarter, and it was -$6.0 million for the full fiscal year against $10.1 million a year earlier. Free cash flow, a non-GAAP measure that also subtracts capitalized internal-use software, was -$1.4 million in the quarter and -$12.8 million for the year. Capital expenditures of $2.1 million in the quarter were up 227.2% from a year earlier. Liquidity is not the problem yet: cash, cash equivalents and current investments totaled $543.4 million as of January 31, 2022. Deferred revenue of $170.2 million was up 31.0% year over year and remaining performance obligations of $143.9 million were up 19.4%, so billings and backlog still look healthy.
The customer base kept expanding. Dollar-based net retention was 124% as of January 31, 2022, compared with 121% in the year-ago period. Customers generating more than $100,000 of annual recurring revenue totaled 594, up from 426, and accounts above $1 million of ARR reached 43, up from 26. Total paid customers were 14,865, compared with 13,837 a year earlier. International revenue was 24% of total revenue for the fiscal year, consistent with the prior-year period, and the 10 largest customers accounted for about 11% of fiscal 2022 revenue. ARR churn stayed below 5% of beginning ARR for the year. Those are healthy expansion signals for a company that still loses money on a GAAP basis.
Guidance sets a lower growth bar than the company just cleared. For the first quarter of fiscal 2023, PagerDuty expects total revenue growth of 28% to 31% year over year and a non-GAAP net loss per share of $0.09 to $0.08. For the full fiscal year 2023, the company guides to revenue growth of 28% to 30% year over year and a non-GAAP net loss per share of $0.23 to $0.17. The full-year growth range sits below the 31.8% reported for fiscal 2022, and the company does not reconcile the forward non-GAAP loss per share figures to GAAP.
The risk list in the filing is familiar but real. PagerDuty flags the ongoing effects of the COVID-19 pandemic on demand, sales cycles and customer retention, competition in an increasingly crowded market, dependence on revenue from a single product, the need to attract new customers and expand within existing accounts, and general market, political, economic and business conditions. The filing also notes that sales of subscriptions to Modern Incident Response account for a significant majority of revenue, and that achieving and maintaining future profitability is not assured. With GAAP operating losses widening year over year and non-GAAP targets still negative, execution on expense discipline and product breadth matters as much as the revenue line.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2022 | Q3 FY2022 | QoQ | Q4 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $78.5M | $71.8M | +9.4% | $59.3M | +32.4% |
| Gross profit | $64.6M | $59.7M | +8.1% | $49.9M | +29.5% |
| Gross margin | 82.3% | 83.2% | -1.0 pp | 84.1% | -1.9 pp |
| Research & development | $27.6M | $24.6M | +12.5% | $17.9M | +54.7% |
| Sales & marketing | $43.4M | $40.2M | +8.0% | $33.9M | +28.1% |
| General & administrative | $20.8M | $19.8M | +4.8% | $16.5M | +25.5% |
| Total operating expenses | $91.8M | $84.5M | +8.6% | $68.3M | +34.4% |
| Operating income (loss) | -$27.2M | -$24.8M | -9.6% | -$18.4M | -47.9% |
| Operating margin | -34.6% | -34.6% | -0.1 pp | -31.0% | -3.6 pp |
| Net income (loss) | -$28.9M | -$26.3M | -9.7% | -$22.1M | -30.5% |
| Net margin | -36.8% | -36.7% | -0.1 pp | -37.4% | +0.6 pp |
| Diluted EPS | -$0.34 | -$0.31 | -$0.03 | — | — |
| Net retention rate | 124.0% | 124.0% | ±0.0 pp | 121.0% | +3.0 pp |
Risks
PagerDuty has a history of operating losses and expects costs to increase; net loss widened to $107.5 million for FY2022 year to date from $68.9 million for FY2021 year to date, and operating loss widened to $101.7 million from $66.3 million over the same periods. Accumulated deficit was $348.8 million as of January 31, 2022.
Operating cash flow deteriorated to negative $6.0 million for FY2022 year to date from positive $10.1 million for FY2021 year to date, and MD&A reports free cash flow of negative $12.8 million for FY2022 versus positive $5.2 million for FY2021. The company may need additional equity or debt financing if cash flows do not improve.
The digital operations market is highly fragmented and competitive, with competitors such as Atlassian, Splunk, and ServiceNow able to bundle competing solutions at lower prices or no additional cost. Open-source alternatives and in-house solutions also create pricing pressure and lower barriers to entry.
Sales of subscriptions to the incident response offerings account for a significant majority of PagerDuty's revenue, so a decline in demand for that product or failure of the broader platform to gain acceptance would harm results more than if revenue were diversified across products.
A security compromise of PagerDuty, its customers, or third-party providers could lead to data loss, litigation, indemnity obligations, and reputational damage; the risk is elevated by increased ransomware and supply-chain attacks and by remote work utilizing network connections outside company premises.
The COVID-19 pandemic continues to create uncertainty; customers most affected such as small and medium businesses or those in transportation, hospitality, retail and energy have reduced IT spending, and MD&A notes greater variability in demand from small and medium business customers. Virtual-only events such as Summit may be less successful at generating customer sign-ups and leads.
Gross margin declined to 82.8% for FY2022 year to date from 85.6% for FY2021 year to date, and cost of revenue increased 58% for FY2022 versus FY2021 due to higher personnel, hosting, software and telecom costs. Continued investment in platform infrastructure and customer support could further pressure margins.
As PagerDuty targets new and existing mid-market and enterprise customers, it faces more complex requirements, longer sales cycles, greater upfront costs, and less predictability, and new sales personnel currently represent the majority of the sales force. These factors could delay revenue recognition and increase expenses.
Competition for software developers, sales personnel, and executives is intense; the company has no key person insurance and relies on CEO Jennifer Tejada and other key employees, some of whom hold fully vested equity that may reduce retention incentives. Immigration restrictions could also limit hiring.
The company is subject to privacy and data security regulations such as the EU GDPR and U.K. GDPR, and to evolving network neutrality rules in the United States. Noncompliance or adverse regulatory changes could increase costs, restrict data processing, or impair service delivery.
The 1.25% Convertible Senior Notes due 2025 may convert into a significant number of shares, diluting existing stockholders; the related Capped Calls expose PagerDuty to counterparty credit risk and the counterparties' hedging activity could increase stock price volatility.
PagerDuty has limited experience making acquisitions, including Rundeck, and may fail to integrate acquired personnel, technology, or operations or achieve expected returns, potentially leading to goodwill impairment charges and management distraction.
Customers outside the United States generated 24% of revenue for FY2022, and approximately 29% of full-time employees were located outside the United States as of January 31, 2022. International expansion carries risks including currency fluctuations, tax and labor regulation, and geopolitical instability.
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
Customers with ARR > $100,000
Summary, forecast, risks and KPIs are extracted from PagerDuty, Inc.'s SEC filings for Q4 FY2022 (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.