PagerDuty (NYSE:PD) Exceeds Q4 Expectations But Full Year Guidance Underwhelms

Adam Hejl /
2023/03/15 4:14 pm EDT

IT incident response platform PagerDuty (NYSE:PD) reported results ahead of analyst expectations in the Q4 FY2023 quarter, with revenue up 28.6% year on year to $101 million. However, guidance for the next quarter was less impressive, coming in at $103 million at the midpoint, being 1.7% below analyst estimates. PagerDuty made a GAAP loss of $25 million, improving on its loss of $28.9 million, in the same quarter last year.

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PagerDuty (PD) Q4 FY2023 Highlights:

  • Revenue: $101 million vs analyst estimates of $99 million (1.99% beat)
  • EPS (non-GAAP): $0.08 vs analyst estimates of $0.02 ($0.06 beat)
  • Revenue guidance for Q1 2024 is $103 million at the midpoint, below analyst estimates of $104.8 million
  • Management's revenue guidance for upcoming financial year 2024 is $449 million at the midpoint, missing analyst estimates by 0.55% and predicting 21.1% growth (vs 31.9% in FY2023)
  • Free cash flow of $15.6 million, up from negative free cash flow of $2.25 million in previous quarter
  • Customers: 15,244, down from 15,265 in previous quarter
  • Gross Margin (GAAP): 81.8%, in line with same quarter last year

“PagerDuty had another strong year where we grew revenue 32% year-over-year and achieved non-GAAP profitability a year ahead of plan,” 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.

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Sales Growth

As you can see below, PagerDuty's revenue growth has been very strong over the last two years, growing from quarterly revenue of $59.3 million in Q4 FY2021, to $101 million.

PagerDuty Total Revenue

This quarter, PagerDuty's quarterly revenue was once again up a very solid 28.6% year on year. On top of that, revenue increased $6.76 million quarter on quarter, a very strong improvement on the $3.95 million increase in Q3 2023, which shows acceleration of growth, and is great to see.

Guidance for the next quarter indicates PagerDuty is expecting revenue to grow 20.6% year on year to $103 million, slowing down from the 34.3% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $449 million at the midpoint, growing 21.1% compared to 31.8% increase in FY2023.

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Customer Growth

You can see below that PagerDuty reported 15,244 customers at the end of the quarter, a decrease of 21 on last quarter. That is suggesting that the customer acquisition momentum is slowing a little bit. That is 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 Q4 Results

With a market capitalization of $2.51 billion PagerDuty is among smaller companies, but its more than $477 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

It was good to see PagerDuty deliver strong revenue growth this quarter. And we were happy to see it topped analysts’ revenue expectations, even if just narrowly. The magnitude of free cash flow generation was also a positive. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations and there was a slowdown in customer growth. Overall, this quarter's results were mixed. The company is up 2.37% on the results and currently trades at $28.5 per share.

PagerDuty may have had a tough quarter, but does that actually create an opportunity to invest 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.