PagerDuty (NYSE:PD) Posts Better-Than-Expected Sales In Q3, Stock Soars

Petr Huřťák /
2022/12/01 4:26 pm EST

IT incident response platform PagerDuty (NYSE:PD) reported results ahead of analyst expectations in the Q3 FY2023 quarter, with revenue up 31.2% year on year to $94.2 million. The company expects that next quarter's revenue would be around $99 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 $26.3 million, in the same quarter last year.

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PagerDuty (PD) Q3 FY2023 Highlights:

  • Revenue: $94.2 million vs analyst estimates of $92.8 million (1.51% beat)
  • EPS (non-GAAP): $0.04 vs analyst estimates of -$0.04 ($0.07 beat)
  • Revenue guidance for Q4 2023 is $99 million at the midpoint, roughly in line with what analysts were expecting
  • Free cash flow was negative $2.25 million, down from positive free cash flow of $1.01 million in previous quarter
  • Customers: 15,265, up from 15,174 in previous quarter
  • Gross Margin (GAAP): 80.8%, down from 83.2% same quarter last year

"PagerDuty delivered another strong quarter, exceeding the high end of both our top and bottom line ranges, with revenue up 31% year on year, and operating margin improving 1,000 basis points to achieve profitability a quarter ahead of expectations," said Jennifer Tejada, Chair 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 $53.7 million in Q3 FY2021, to $94.2 million.

PagerDuty Total Revenue

And unsurprisingly, this was another great quarter for PagerDuty with revenue up 31.2% year on year. But the growth did slow down a little compared to last quarter, as PagerDuty increased revenue by $3.95 million in Q3, compared to $4.88 million revenue add in Q2 2023. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates PagerDuty is expecting revenue to grow 26.1% year on year to $99 million, slowing down from the 32.4% 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 24% over the next twelve months.

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Customer Growth

You can see below that PagerDuty reported 15,265 customers at the end of the quarter, an increase of 91 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 Q3 Results

With a market capitalization of $1.98 billion PagerDuty is among smaller companies, but its more than $262.3 million in cash and the fact it is operating close to free cash flow break-even put it in a robust financial position to invest in growth.

It was good to see PagerDuty deliver strong revenue growth this quarter. And we were also glad to see the improvement in gross margin. On the other hand, it was unfortunate to see the slowdown in customer growth. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. The company is up 5.93% on the results and currently trades at $23.9 per share.

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