PagerDuty (PD) Reports Q4 Exceeding Expectations, Guides For Steady Growth To Continue In FY 2022

Jabin Bastian /
2021/03/17 4:12 pm EDT
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IT incident response platform PagerDuty (PD) reported Q4 FY2021 results beating Wall St's expectations, with revenue up 29.09% year on year to $59.28 million. PagerDuty made a GAAP loss of $22.15 million, down on its loss of $10.44 million, in the same quarter last year.

PagerDuty (PD) Q4 FY2021 Highlights:

  • Revenue: $59.28 million vs analyst estimates of $57.48 million (3.1% beat)
  • EPS (non-GAAP): -$0.07 vs analyst estimates of -$0.11
  • Revenue guidance for Q1 2022 is $62.00 million at the midpoint, above analyst estimates of $60.90 million
  • Management's revenue guidance for FY2022 of $267.0 million at the midpoint, predicting 25.03% growth (vs 28.49% in FY2021)
  • Free cash flow of $2.271 million, down 49.72% from previous quarter
  • 13,800 customers, up from 13,725 in previous quarter
  • Gross Margin (GAAP): 84.14%, in line with previous quarter

"The fourth quarter was outstanding for PagerDuty. We added $59 million in revenue, reaccelerating growth sequentially to 29% year over year, as our momentum built to close out an unparalleled year,” said Jennifer Tejada, CEO at PagerDuty.

Who Is On Call?

What started in 2009 as a plan to build a bootstrapped software company, retire early and sip drinks on the beach has very quickly outgrown the wildest dreams of the three ex-Amazon founders. PagerDuty (PD) is a software as a service platform that helps companies respond to IT incidents fast and make sure that any downtime is minimized. The name PagerDuty comes from a software engineering practice which used to literally involve a pager on your belt that went off when the piece of the software you were responsible for broke and you were on-call to fix it, even in the middle of the night.

Today the methods of communication have changed but the principle stays the same. If a part of a website goes down, PagerDuty helps teams identify the source of the problem, alerts the engineers who are on-call to fix it, informs relevant stakeholders and provides collaborative space to work on the issue. This ensures that there is a clear accountability for incident response and that any issues are fixed fast.

The on-call incident response practice is something that pretty much every large engineering team has to establish and they either build the tools for it internally or use a third party tool like PagerDuty.

As you can see below, PagerDuty's revenue growth has been strong over the last twelve months, growing from $45.93 million to $59.28 million.

PagerDuty Total Revenue

This quarter, PagerDuty's quarterly revenue was once again up a very solid 29.09% year on year. On top of that, revenue increased $5.512 million quarter on quarter, a very strong improvement on the $3.058 million increase in Q3 2021, which shows re-acceleration of growth, and is great to see.

One of the reasons why the cloud based software as a service model is so powerful is because it makes possible to offer very sales-light and easy to try products. PagerDuty offers a self-service free plan that can be used by a small number of engineers on the team, allowing them to try the product and decide whether they like it without needing to talk to any sales people or go through any internal procurement process. This is an important part of the company's go-to-market strategy. You can see below that PagerDuty reported 13,800 customers at the end of the quarter, an increase of 75 on last quarter. That is a bit slower customer growth that 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 market capitalisation of $3.357 billion PagerDuty is among smaller companies, but its more than $560.3 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 outperform Wall St’s revenue expectations. And we were also glad that the revenue guidance for the next quarter exceeded analysts' expectations. On the other hand, it was disappointing to see the slowdown in customer growth. Zooming out, we think this was still a decent, albeit mixed, quarter. While there are probably more inspiring growth stocks than PagerDuty, it continues to be a decent company to watch.

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