PagerDuty (NYSE:PD) Q2 Sales Beat Estimates, Customer Growth Accelerates

Radek Strnad /
2023/08/31 4:26 pm EDT

IT incident response platform PagerDuty (NYSE:PD) beat analysts' expectations in Q2 FY2024, with revenue up 19.2% year on year to $107.6 million. The company also expects next quarter's revenue to be around $107.5 million, in line with analysts' estimates. Turning to EPS, PagerDuty made a non-GAAP profit of $0.19 per share, improving from its loss of $0.04 per share in the same quarter last year.

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PagerDuty (PD) Q2 FY2024 Highlights:

  • Revenue: $107.6 million vs analyst estimates of $104.9 million (2.59% beat)
  • EPS (non-GAAP): $0.19 vs analyst estimates of $0.11 ($0.08 beat)
  • Revenue Guidance for Q3 2024 is $107.5 million at the midpoint, roughly in line with what analysts were expecting
  • The company reconfirmed its revenue guidance for the full year of $428 million at the midpoint
  • Free Cash Flow of $8.74 million, down 58.1% from the previous quarter
  • Customers: 15,146, up from 15,089 in the previous quarter
  • Gross Margin (GAAP): 81.6%, up from 79.7% in the same quarter last year

“PagerDuty delivered durable growth with continued improvement in operational efficiency, exceeding our guidance on both the top and bottom line,” said Jennifer Tejada, Chairperson and CEO, 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 strong over the last two years, growing from $67.5 million in Q2 FY2022 to $107.6 million this quarter.

PagerDuty Total Revenue

This quarter, PagerDuty's quarterly revenue was once again up 19.2% year on year. We can see that PagerDuty's revenue increased by $4.37 million quarter on quarter, which is a solid improvement from the $2.28 million increase in Q1 2024. Shareholders should applaud the acceleration of growth.

Next quarter's guidance suggests that PagerDuty is expecting revenue to grow 14.1% year on year to $107.5 million, slowing down from the 31.3% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 13% over the next 12 months before the earnings results announcement.

The pandemic fundamentally changed several consumer habits. There is a founder-led company that is massively benefiting from this shift. The business has grown astonishingly fast, with 40%+ free cash flow margins. Its fundamentals are undoubtedly best-in-class. Still, the total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.

Customer Growth

PagerDuty reported 15,146 customers at the end of the quarter, an increase of 57 from the previous quarter. That's a little better customer growth than last quarter and quite a bit above the typical growth we've seen in past quarters, demonstrating that the business has strong sales momentum. We've no doubt shareholders will take this as an indication that PagerDuty's go-to-market strategy is working very well.

PagerDuty Customers

Key Takeaways from PagerDuty's Q2 Results

Sporting a market capitalization of $2.37 billion, PagerDuty is among smaller companies, but its more than $504.5 million in cash on hand and positive free cash flow over the last 12 months puts it in an attractive position to invest in growth.

We were impressed by PagerDuty's strong growth in customers this quarter. We were also glad that its revenue outperformed Wall Street's estimates. On the other hand, its gross margin fell. With regards to guidance, next quarter's revenue guidance was in line while non-GAAP EPS guidance was slightly below. Full year guidance was largely maintained. Overall, we think this was mixed but overall good quarter that should please shareholders. The market was likely expecting more, however, and the stock is down 2.33% after reporting, trading at $25.13 per share.

So should you invest in PagerDuty right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 50% year on year and best-in-class SaaS metrics it should definitely be on your radar.

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