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PagerDuty (NYSE:PD) Beats Q1 Sales Targets, Next Quarter Growth Looks Optimistic


Kayode Omotosho /
2022/06/02 4:21 pm EDT
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IT incident response platform PagerDuty (NYSE:PD) announced better-than-expected results in the Q1 FY2023 quarter, with revenue up 34.2% year on year to $85.3 million. The company expects that next quarter's revenue would be around $88 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. PagerDuty made a GAAP loss of $32.8 million, down on its loss of $22.5 million, in the same quarter last year.

Is now the time to buy PagerDuty? Access our full analysis of the earnings results here, it's free.

PagerDuty (PD) Q1 FY2023 Highlights:

  • Revenue: $85.3 million vs analyst estimates of $82.9 million (2.95% beat)
  • EPS (non-GAAP): -$0.04 vs analyst estimates of -$0.08
  • Revenue guidance for Q2 2023 is $88 million at the midpoint, above analyst estimates of $87.4 million
  • The company reconfirmed revenue guidance for the full year, at $366.5 million at the midpoint
  • Free cash flow was negative $5.83 million, compared to negative free cash flow of $1.38 million in previous quarter
  • Customers: 15,040, up from 14,865 in previous quarter
  • Gross Margin (GAAP): 81.5%, down from 83.6% same quarter last year

“PagerDuty revenue accelerated in Q1, growing 34% year over year in a sustained demand environment, even as we continue to improve our operating leverage. Our Operations Cloud combines Incident Response, AIOps and Automation to orchestrate and resolve mission critical, time sensitive interrupt work, servicing a large Digital Operations TAM as companies strive for efficiency and productivity,” said Jennifer Tejada, Chairperson and CEO at PagerDuty.

Started by three former Amazon engineers, PagerDuty (NYSE:PD) is a software as a service platform that helps companies respond to IT incidents fast and make sure that any downtime is minimized.

Software is eating the world, increasing organizations’ reliance on digital-only solutions. As more workloads and applications move to the cloud, the reliability of the underlying cloud infrastructure becomes ever more critical, and ever more complex. To solve the challenge, companies and their engineering teams have turned to a range of cloud monitoring tools that provide them with visibility to troubleshoot the issues in real time.

Sales Growth

As you can see below, PagerDuty's revenue growth has been very strong over the last year, growing from quarterly revenue of $63.5 million, to $85.3 million.

PagerDuty Total Revenue

And unsurprisingly, this was another great quarter for PagerDuty with revenue up 34.2% year on year. Quarter on quarter the revenue increased by $6.86 million in Q1, which was in line with Q4 2022. This steady quarter-on-quarter growth shows the company is able to maintain a strong growth trajectory.

Guidance for the next quarter indicates PagerDuty is expecting revenue to grow 30.3% year on year to $88 million, in line with the 33.1% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 27% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Customer Growth

You can see below that PagerDuty reported 15,040 customers at the end of the quarter, an increase of 175 on last quarter. That is a little slower customer growth than what we are used to seeing lately, suggesting that the customer acquisition momentum is slowing a little bit.

PagerDuty Customers

Key Takeaways from PagerDuty's Q1 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on PagerDuty’s balance sheet, but we note that with a market capitalization of $2.22 billion and more than $467.4 million in cash, the company has the capacity to continue to prioritise growth over profitability.

It was good to see PagerDuty deliver strong revenue growth this quarter. And we were also excited to see that it outperformed analysts' revenue expectations. On the other hand, it was unfortunate to see the slowdown in customer growth. Overall, this quarter's results were mixed, but shown that PageDuty is staying on target. The company is flat on the results and currently trades at $27.4 per share.

Should you invest in PagerDuty right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.