Business Wire | Sep 2, 2021 04:05PM EDT

PagerDuty Announces Second Quarter Fiscal 2022 Financial Results

Sep. 02, 2021

SAN FRANCISCO--(BUSINESS WIRE)--Sep. 02, 2021--PagerDuty, Inc. (NYSE:PD), a global leader in digital operations management, today announced financial results for the second quarter of fiscal 2022, ended July 31, 2021.

"Q2 was an inflection point for PagerDuty. We delivered strong financial results and demonstrated increasing market share leadership. The durability of our growth, the long term potential for our platform and the legacy we are building are clear. Our solid topline beat was driven by accelerating demand for both our new Automation offering and our comprehensive Digital Operations plan, especially in the enterprise and mid-market segments," said Jennifer Tejada, CEO at PagerDuty. "Nearly 18,000 companies now run on our platform and as the world's greatest enterprises transform into digital leaders, PagerDuty is becoming the Operations Cloud for the modern enterprise."

Second Quarter Fiscal 2022 Financial Highlights

* Revenue: Total revenue was $67.5 million, up 33.2% year over year. * Gross Margin: GAAP gross margin was 82.3% compared to 86.9% in the second quarter of fiscal 2021. Non-GAAP gross margin was 84.2% compared to 87.4% in the second quarter of fiscal 2021. * Operating Loss: GAAP operating loss was $28.5 million, or GAAP operating margin of negative 42.1%, compared to a $13.4 million GAAP operating loss, or GAAP operating margin of negative 26.5%, in the second quarter of fiscal 2021. Non-GAAP operating loss was $9.9 million, or non-GAAP operating margin of negative 14.7%, compared to a $3.2 million non-GAAP operating loss, or non-GAAP operating margin of negative 6.4%, in the second quarter of fiscal 2021. * Net Loss: GAAP net loss was $29.7 million, compared to $14.7 million in the second quarter of fiscal 2021. GAAP net loss per share was $0.35, compared to $0.19 in the second quarter of fiscal 2021. Non-GAAP net loss was $10.7 million, compared to $3.2 million in the second quarter of fiscal 2021. Non-GAAP net loss per share was $0.13, compared to $0.04 in the second quarter of fiscal 2021. * Cash Flow: Net cash used in operations was $11.6 million, or negative 17.2% of revenue, compared to net cash provided by operating activities of $2.0 million, or 4.0% of revenue, in the second quarter of fiscal 2021. Free cash flow was negative $12.9 million, or negative 19.1% of revenue, compared to $1.4 million, or 2.7% of revenue, in the second quarter of fiscal 2021. * Cash and Cash Equivalents and Current Investments were $546.8 million as of July 31, 2021.

The section titled "Non-GAAP Financial Measures" below contains a description of the non-GAAP financial measures and reconciliations between historical GAAP and non-GAAP information.

Recent Highlights

* Land and expand: PagerDuty expanded with customers across the globe including Anheuser-Busch, Autodesk, Datadog, Nvidia, Snowflake and Ultimate Kronos Group. In the quarter, international revenue accounted for nearly 25% of total revenue. * Companies on the platform: New PagerDuty customers including Alkeon Capital Management, Citigroup, EnterpriseDB Corporation, Mattress Firm, Via Varejo S.A., and Selfridges, were part of PagerDuty's total customer base of almost 18,000 companies, as of July 31, 2021. * Platform Integration: PagerDuty continues to build its leading integration ecosystem with over 600 direct integrations across security, workflow, data observability, digital experience, and other use cases.

Financial Outlook

For the third quarter of fiscal 2022, PagerDuty currently expects:

* Total revenue of $69.0 million - $71.0 million, representing a growth rate of 28% - 32% year over year * Non-GAAP net loss per share of $0.10 - $0.09 assuming approximately 85 million shares

For the full fiscal year 2022, PagerDuty currently expects:

* Total revenue of $273.0 million - $276.0 million, representing a growth rate of 28% - 29% year over year * Non-GAAP net loss per share of $0.39 - $0.35 assuming approximately 84 million shares

These statements are forward-looking and actual results may differ materially. Please refer to the Forward-Looking Statements section below for information on the factors that could cause our actual results to differ materially from these forward-looking statements.

PagerDuty has not reconciled its expectations as to non-GAAP net loss per share to GAAP net loss per share because certain items are out of its control or cannot be reasonably predicted. Accordingly, a reconciliation for forward-looking non-GAAP net loss per share is not available without unreasonable effort.

Conference Call Information:

PagerDuty will host a conference call and live webcast for analysts and investors at 2:00 p.m. Pacific Time on September 2, 2021. This news release with the financial results will be accessible from PagerDuty's website at investor.pagerduty.com prior to the conference call. A live webcast of the conference call will be accessible from the PagerDuty investor relations website at investor.pagerduty.com.

Supplemental Financial and Other Information:

Supplemental financial and other information can be accessed through PagerDuty's investor relations website at investor.pagerduty.com. PagerDuty uses the investor relations section on its website as the means of complying with its disclosure obligations under Regulation FD. Accordingly, we recommend that investors should monitor PagerDuty's investor relations website in addition to following PagerDuty's press releases, SEC filings, social media, including PagerDuty's Twitter account (twitter.com/pagerduty), the Twitter account @jenntejada and Facebook page (facebook.com/pagerduty), and public conference calls and webcasts.

Non-GAAP Financial Measures:

This press release and the accompanying tables contain the following non-GAAP financial measures: non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating loss, non-GAAP operating margin, non-GAAP net loss, non-GAAP net loss per share, and free cash flow.

PagerDuty believes that non-GAAP financial measures, when taken collectively, may be helpful to investors because they provide consistency and comparability with past financial performance and can assist in comparisons with other companies, some of which use similar non-GAAP financial measures to supplement their GAAP results. The non-GAAP financial information is presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly-titled non-GAAP measures used by other companies.

The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in PagerDuty's financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by PagerDuty's management about which expenses and income are excluded or included in determining these non-GAAP financial measures. A reconciliation is provided below for each historical non-GAAP financial measure to the most directly comparable financial measure presented in accordance with GAAP.

Specifically, PagerDuty excludes the following from its historical and prospective non-GAAP financial measures, as applicable:

Share-based Compensation: PagerDuty utilizes share-based compensation to attract and retain employees. It is principally aimed at aligning their interests with those of its stockholders and at long-term retention, rather than to address operational performance for any particular period. As a result, share-based compensation expenses vary for reasons that are generally unrelated to financial and operational performance in any particular period.

Employer Taxes Related to Employee Stock Transactions: PagerDuty views the amount of employer taxes related to its employee stock transactions as an expense that is dependent on its stock price, employee exercise and other award disposition activity, and other factors that are beyond PagerDuty's control. As a result, employer taxes related to employee stock transactions vary for reasons that are generally unrelated to financial and operational performance in any particular period.

Amortization of Acquired Intangible Assets: PagerDuty views amortization of acquired intangible assets as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are evaluated for impairment regularly, amortization of the cost of purchased intangibles is an expense that is not typically affected by operations during any particular period.

Acquisition-Related Expenses: PagerDuty views acquisition-related expenses, such as transaction costs and acquisition-related retention payments, as events that are not necessarily reflective of operational performance during a period. In particular, PagerDuty believes the consideration of measures that exclude such expenses can assist in the comparison of operational performance in different periods which may or may not include such expenses.

Amortization of Debt Issuance Costs For the three and six months ended July 31, 2021, the imputed interest rate of the Convertible Senior Notes (the "Notes") was approximately 1.93%. This is a result of the debt issuance costs, which reduce the carrying value of the convertible debt instruments. For the three and six months ended July 31, 2020, the imputed interest rate of the Notes was approximately 7.88%. This was a result of the debt discount and debt issuance costs, which reduce the carrying value of the convertible debt instruments. The debt issuance costs and debt discount are amortized as interest expense. The expense for the amortization of the debt issuance costs and the debt discount is a non-cash item, and we believe the exclusion of this interest expense will provide for a more useful comparison of our operational performance in different periods.

Acquisition-Related Income Tax Benefit PagerDuty views acquisition-related income tax benefits as events that are not necessarily reflective of operational performance during a period. In particular, PagerDuty believes the consideration of measures that exclude such benefits can assist in the comparison of operational performance in different periods which may or may not include such benefits.

PagerDuty defines non-GAAP operating loss as GAAP loss from operations excluding stock-based compensation expense, employer taxes related to employee stock transactions, amortization of acquired intangible assets, and acquisition-related expenses. PagerDuty defines non-GAAP net loss (which is used in calculating non-GAAP net loss per share) as GAAP net loss excluding amortization of debt issuance costs and debt discount, stock-based compensation expense, employer taxes related to employee stock transactions, amortization of acquired intangible assets, and acquisition-related expenses. There are a number of limitations related to the use of these non-GAAP measures as compared to GAAP operating loss and net loss, including that the non-GAAP measures exclude stock-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense in PagerDuty's business and an important part of its compensation strategy.

PagerDuty defines free cash flow as net cash provided by (used in) operating activities, less cash used for purchases of property and equipment and capitalized internal-use software. In addition to the reasons stated above, PagerDuty believes that free cash flow is useful to investors as a liquidity measure because it measures PagerDuty's ability to generate or use cash in excess of its capital investments in property and equipment to strengthen its balance sheet and further invest in its business and potential strategic initiatives. PagerDuty uses free cash flow in conjunction with traditional GAAP measures as part of its overall assessment of its liquidity, including the preparation of PagerDuty's annual operating budget and quarterly forecasts, to evaluate the effectiveness of its business strategies, and to assess its liquidity.

There are a number of limitations related to the use of free cash flow as compared to net cash provided by (used in) operating activities, including that free cash flow includes capital expenditures, the benefits of which are realized in periods subsequent to those when expenditures are made.

PagerDuty encourages investors to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, which it includes in press releases announcing quarterly financial results, including this press release, and not to rely on any single financial measure to evaluate PagerDuty's business.

Please see the reconciliation tables at the end of this release for the reconciliation of GAAP and non-GAAP results.

Forward-Looking Statements:

This press release contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our future financial performance and outlook and market positioning. Words such as "expect," "anticipate," "should," "believe," "hope," "target," "project," "goals," "estimate," "potential," "predict," "may," "will," "might," "could," "intend," "shall" and variations of these terms or the negative of these terms and similar expressions are intended to identify these forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond our control. Our actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, risks and other factors detailed in our Annual Report Form 10-K filed with the Securities and Exchange Commission (SEC) on March 19, 2021 and our Form 10-Q filed with the SEC on June 4, 2021. Additional information will be made available in our Quarterly Report on Form 10-Q for the quarter ended July 31, 2021 and other filings and reports that we may file from time to time with the SEC. In particular, the following risks and uncertainties, among others, could cause results to differ materially from those expressed or implied by such forward-looking statements: the effect of uncertainties related to the COVID-19 pandemic on U.S. and global markets, our business, operations, revenue results, cash flow, operating expenses, demand for our solutions, sales cycles, customer retention and our customers' businesses; our ability to achieve and maintain future profitability; our ability to attract new customers and retain and sell additional functionality and services to our existing customers; our ability to sustain and manage our growth; our dependence on revenue from a single product; our ability to compete effectively in an increasingly competitive market; and general market, political, economic, and business conditions.

Past performance is not necessarily indicative of future results. The forward-looking statements included in this press release represent our views as of the date of this press release. We anticipate that subsequent events and developments will cause our views to change. We undertake no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.

About PagerDuty

PagerDuty, Inc. (NYSE:PD) is a leader in digital operations management. In an always-on world, organizations of all sizes trust PagerDuty to help them deliver a perfect digital experience to their customers, every time. Teams use PagerDuty to identify issues and opportunities in real time and bring together the right people to fix problems faster and prevent them in the future. Notable customers include GE, Cisco, Genentech, Electronic Arts, Cox Automotive, Netflix, Shopify, Zoom, DoorDash, Lululemon and more. To learn more and try PagerDuty for free, visit www.pagerduty.com. Follow our blog and connect with us on Twitter, LinkedIn, YouTube and Facebook.

PagerDuty, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share data)

(unaudited)

Three Months Ended July Six Months Ended July 31, 31,

2021 2020 2021 2020

Revenue $ 67,536 $ 50,714 $ 131,127 $ 100,500

Cost of revenue^(1) 11,976 6,637 22,394 13,600

Gross profit 55,560 44,077 108,733 86,900

Operating expenses:

Research and development^ 22,909 15,535 43,508 30,549 (1)

Sales and marketing^(1) 40,814 27,511 78,048 54,247

General and 20,294 14,480 36,872 28,153 administrative^(1)

Total operating expenses 84,017 57,526 158,428 112,949

Loss from operations (28,457 ) (13,449 ) (49,695 ) (26,049 )

Interest income 783 1,048 1,601 2,401

Interest expense (1,378 ) (1,608 ) (2,695 ) (1,608 )

Other expense, net (586 ) (431 ) (1,202 ) (412 )

Loss before provision for (29,638 ) (14,440 ) (51,991 ) (25,668 )income taxes

Provision for income (23 ) (248 ) (228 ) (479 )taxes

Net loss $ (29,661 ) $ (14,688 ) $ (52,219 ) $ (26,147 )

Other comprehensive (loss) income

Unrealized (loss) gain on (108 ) 277 (312 ) 919 investments

Total comprehensive loss $ (29,769 ) $ (14,411 ) $ (52,531 ) $ (25,228 )

Net loss per share, basic $ (0.35 ) $ (0.19 ) $ (0.63 ) $ (0.33 )and diluted

Weighted-average sharesused in calculating net 83,895 78,775 83,413 78,278 loss per share, basic anddiluted

(1) Includes stock-based compensation expense as follows:

Three Months Ended July 31,

Six Months Ended July 31,

2021

2020

2021

2020

Cost of revenue

$

1,023

$

263

$

1,699

$

607

Research and development

5,607

2,469

10,047

4,652

Sales and marketing

4,401

2,870

8,355

5,155

General and administrative

5,445

4,366

9,987

7,862

Total

$

16,476

$

9,968

$

30,088

$

18,276

(1) Includes stock-based compensation expense as follows:

Three Months Ended July Six Months Ended July 31, 31,

2021 2020 2021 2020

Cost of revenue $ 1,023 $ 263 $ 1,699 $ 607

Research and development 5,607 2,469 10,047 4,652

Sales and marketing 4,401 2,870 8,355 5,155

General and 5,445 4,366 9,987 7,862 administrative

Total $ 16,476 $ 9,968 $ 30,088 $ 18,276

PagerDuty, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

As of July 31, 2021

As of January 31, 2021

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

354,525

$

339,166

Investments

192,296

221,112

Accounts receivable, net of allowance for doubtful accounts of $1,008 and $1,188 as of July 31, 2021 and January 31, 2021, respectively

48,148

55,119

Deferred contract costs, current

13,826

12,330

Prepaid expenses and other current assets

14,987

10,587

Total current assets

623,782

638,314

Property and equipment, net

14,116

12,639

Deferred contract costs, non-current

20,434

19,257

Lease right-of-use assets

22,482

24,691

Goodwill

72,126

72,126

Intangible assets, net

24,883

26,633

Other assets

689

1,783

Total assets

$

778,512

$

795,443

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

6,949

$

5,747

Accrued expenses and other current liabilities

14,101

9,627

Accrued compensation

24,542

28,372

Deferred revenue, current

128,145

123,686

Lease liabilities, current

5,469

5,262

Total current liabilities

179,206

172,694

Convertible senior notes, net

280,162

217,528

Deferred revenue, non-current

5,857

6,286

Lease liabilities, non-current

23,831

26,542

Other liabilities

4,284

5,666

Total liabilities

493,340

428,716

Stockholders' equity:

Common stock

-

-

Additional paid-in-capital

578,728

614,494

Accumulated other comprehensive income

31

343

Accumulated deficit

(293,587

)

(248,110

)

Total stockholders' equity

285,172

366,727

Total liabilities and stockholders' equity

$

778,512

$

795,443

PagerDuty, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

As of July As of 31, 2021 January 31, 2021

(unaudited)

Assets

Current assets:

Cash and cash equivalents $ 354,525 $ 339,166

Investments 192,296 221,112

Accounts receivable, net of allowance for doubtfulaccounts of $1,008 and $1,188 as of July 31, 2021 and 48,148 55,119 January 31, 2021, respectively

Deferred contract costs, current 13,826 12,330

Prepaid expenses and other current assets 14,987 10,587

Total current assets 623,782 638,314

Property and equipment, net 14,116 12,639

Deferred contract costs, non-current 20,434 19,257

Lease right-of-use assets 22,482 24,691

Goodwill 72,126 72,126

Intangible assets, net 24,883 26,633

Other assets 689 1,783

Total assets $ 778,512 $ 795,443

Liabilities and stockholders' equity

Current liabilities:

Accounts payable $ 6,949 $ 5,747

Accrued expenses and other current liabilities 14,101 9,627

Accrued compensation 24,542 28,372

Deferred revenue, current 128,145 123,686

Lease liabilities, current 5,469 5,262

Total current liabilities 179,206 172,694

Convertible senior notes, net 280,162 217,528

Deferred revenue, non-current 5,857 6,286

Lease liabilities, non-current 23,831 26,542

Other liabilities 4,284 5,666

Total liabilities 493,340 428,716

Stockholders' equity:

Common stock - -

Additional paid-in-capital 578,728 614,494

Accumulated other comprehensive income 31 343

Accumulated deficit (293,587 ) (248,110 )

Total stockholders' equity 285,172 366,727

Total liabilities and stockholders' equity $ 778,512 $ 795,443

PagerDuty, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Three Months Ended July 31,

Six Months Ended July 31,

2021

2020

2021

2020

Cash flows from operating activities

Net loss

$

(29,661

)

$

(14,688

)

$

(52,219

)

$

(26,147

)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation and amortization

2,055

1,016

4,027

2,039

Amortization of deferred contract costs

3,562

2,624

6,812

5,064

Amortization of debt discount and issuance costs (1)

460

1,258

898

1,258

Stock-based compensation

16,476

9,968

30,088

18,276

Non-cash lease expense

1,112

1,115

2,209

2,204

Other

892

683

1,695

1,426

Changes in operating assets and liabilities:

Accounts receivable

(10,892

)

(1,285

)

6,473

(1,293

)

Deferred contract costs

(5,753

)

(3,343

)

(9,485

)

(6,199

)

Prepaid expenses and other assets

(1,189

)

(2,070

)

(2,762

)

(4,989

)

Accounts payable

2,743

(500

)

1,179

(1,549

)

Accrued expenses and other liabilities

1,441

2,999

3,373

3,618

Accrued compensation

581

287

(3,830

)

1,287

Deferred revenue

7,946

4,734

4,030

8,611

Lease liabilities

(1,368

)

(751

)

(2,504

)

(1,744

)

Net cash (used in) provided by operating activities

(11,595

)

2,047

(10,016

)

1,862

Cash flows from investing activities

Purchases of property and equipment

(364

)

(579

)

(1,291

)

(3,292

)

Capitalization of internal-use software costs

(915

)

(111

)

(1,917

)

(111

)

Payments related to a business acquisition

-

-

(160

)

-

Proceeds from maturities of held-to-maturity of investments

-

9,040

-

24,040

Purchases of available-for-sale investments

(38,572

)

(67,899

)

(116,103

)

(100,029

)

Proceeds from maturities of available-for-sale investments

49,146

41,067

116,150

71,632

Proceeds from sales of available-for-sale investments

27,380

4,189

27,380

7,285

Net cash provided by (used in) investing activities

36,675

(14,293

)

24,059

(475

)

Cash flows from financing activities

Proceeds from issuance of convertible senior notes, net of issuance costs paid of $8,151

-

279,349

-

279,349

Purchase of capped call related to convertible senior notes

-

(35,708

)

-

(35,708

)

Proceeds from employee stock purchase plan

4,889

3,558

4,889

3,558

Proceeds from issuance of common stock upon exercise of stock options

4,596

3,927

7,430

5,771

Employee payroll taxes paid related to net share settlement of restricted stock units

(6,073

)

(1,697

)

(11,003

)

(1,743

)

Net cash provided by financing activities

3,412

249,429

1,316

251,227

Net increase in cash, cash equivalents, and restricted cash

28,492

237,183

15,359

252,614

Cash, cash equivalents, and restricted cash at beginning of period

326,033

139,455

339,166

124,024

Cash, cash equivalents, and restricted cash at end of period

$

354,525

$

376,638

$

354,525

$

376,638

PagerDuty, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Three Months Ended July Six Months Ended July 31, 31,

2021 2020 2021 2020

Cash flows from operating activities

Net loss $ (29,661 ) $ (14,688 ) $ (52,219 ) $ (26,147 )

Adjustments to reconcilenet loss to net cash (used in) provided byoperating activities:

Depreciation and 2,055 1,016 4,027 2,039 amortization

Amortization of deferred 3,562 2,624 6,812 5,064 contract costs

Amortization of debtdiscount and issuance 460 1,258 898 1,258 costs ^(1)

Stock-based compensation 16,476 9,968 30,088 18,276

Non-cash lease expense 1,112 1,115 2,209 2,204

Other 892 683 1,695 1,426

Changes in operating assets and liabilities:

Accounts receivable (10,892 ) (1,285 ) 6,473 (1,293 )

Deferred contract costs (5,753 ) (3,343 ) (9,485 ) (6,199 )

Prepaid expenses and (1,189 ) (2,070 ) (2,762 ) (4,989 )other assets

Accounts payable 2,743 (500 ) 1,179 (1,549 )

Accrued expenses and 1,441 2,999 3,373 3,618 other liabilities

Accrued compensation 581 287 (3,830 ) 1,287

Deferred revenue 7,946 4,734 4,030 8,611

Lease liabilities (1,368 ) (751 ) (2,504 ) (1,744 )

Net cash (used in)provided by operating (11,595 ) 2,047 (10,016 ) 1,862 activities

Cash flows from investing activities

Purchases of property and (364 ) (579 ) (1,291 ) (3,292 )equipment

Capitalization ofinternal-use software (915 ) (111 ) (1,917 ) (111 )costs

Payments related to a - - (160 ) - business acquisition

Proceeds from maturitiesof held-to-maturity of - 9,040 - 24,040 investments

Purchases ofavailable-for-sale (38,572 ) (67,899 ) (116,103 ) (100,029 )investments

Proceeds from maturitiesof available-for-sale 49,146 41,067 116,150 71,632 investments

Proceeds from sales ofavailable-for-sale 27,380 4,189 27,380 7,285 investments

Net cash provided by(used in) investing 36,675 (14,293 ) 24,059 (475 )activities

Cash flows from financing activities

Proceeds from issuance ofconvertible senior notes, - 279,349 - 279,349 net of issuance costspaid of $8,151

Purchase of capped callrelated to convertible - (35,708 ) - (35,708 )senior notes

Proceeds from employee 4,889 3,558 4,889 3,558 stock purchase plan

Proceeds from issuance ofcommon stock upon 4,596 3,927 7,430 5,771 exercise of stock options

Employee payroll taxespaid related to net share (6,073 ) (1,697 ) (11,003 ) (1,743 )settlement of restrictedstock units

Net cash provided by 3,412 249,429 1,316 251,227 financing activities

Net increase in cash,cash equivalents, and 28,492 237,183 15,359 252,614 restricted cash

Cash, cash equivalents,and restricted cash at 326,033 139,455 339,166 124,024 beginning of period

Cash, cash equivalents,and restricted cash at $ 354,525 $ 376,638 $ 354,525 $ 376,638 end of period

(1) During the first quarter of fiscal 2022, the Company early adopted ASU 2020-06 which resulted in the elimination of amortization of the debt discount on the convertible senior notes from February 1, 2021.

^(1) During the first quarter of fiscal 2022, the Company early adopted ASU2020-06 which resulted in the elimination of amortization of the debt discounton the convertible senior notes from February 1, 2021.

PagerDuty, Inc.

Reconciliation of GAAP to Non-GAAP Data

(in thousands, except percentages and per share data)

(unaudited)

Three Months Ended July 31,

Six Months Ended July 31,

2021

2020

2021

2020

Reconciliation of gross profit and gross margin

GAAP gross profit

$

55,560

$

44,077

$

108,733

$

86,900

Plus: Share-based compensation

1,023

263

1,699

607

Plus: Employer taxes related to employee stock transactions

30

8

56

9

Plus: Amortization of acquired intangible assets

280

-

560

-

Non-GAAP gross profit

$

56,893

$

44,348

$

111,048

$

87,516

GAAP gross margin

82.3

%

86.9

%

82.9

%

86.5

%

Non-GAAP adjustments

1.9

%

0.5

%

1.8

%

0.6

%

Non-GAAP gross margin

84.2

%

87.4

%

84.7

%

87.1

%

Reconciliation of operating expenses

GAAP research and development

$

22,909

$

15,535

$

43,508

$

30,549

Less: Share-based compensation

(5,607

)

(2,469

)

(10,047

)

(4,652

)

Less: Employer taxes related to employee stock transactions

(208

)

(76

)

(406

)

(122

)

Less: Acquisition-related expenses

(457

)

-

(906

)

-

Non-GAAP research and development

$

16,637

$

12,990

$

32,149

$

25,775

GAAP sales and marketing

$

40,814

$

27,511

$

78,048

$

54,247

Less: Share-based compensation

(4,401

)

(2,870

)

(8,355

)

(5,155

)

Less: Employer taxes related to employee stock transactions

(157

)

(110

)

(358

)

(188

)

Less: Amortization of acquired intangible assets

(595

)

-

(1,190

)

-

Non-GAAP sales and marketing

$

35,661

$

24,531

$

68,145

$

48,904

GAAP general and administrative

$

20,294

$

14,480

$

36,872

$

28,153

Less: Share-based compensation

(5,445

)

(4,366

)

(9,987

)

(7,862

)

Less: Employer taxes related to employee stock transactions

(315

)

(60

)

(571

)

(87

)

Less: Acquisition-related expenses

2

-

(8

)

-

Non-GAAP general and administrative

$

14,536

$

10,054

$

26,306

$

20,204

Reconciliation of operating loss and operating margin

GAAP operating loss

$

(28,457

)

$

(13,449

)

$

(49,695

)

$

(26,049

)

Plus: Share-based compensation

16,476

9,968

30,088

18,276

Plus: Employer taxes related to employee stock transactions

710

254

1,391

406

Plus: Amortization of acquired intangible assets

875

-

1,750

-

Plus: Acquisition-related expenses

455

-

914

-

Non-GAAP operating loss

$

(9,941

)

$

(3,227

)

$

(15,552

)

$

(7,367

)

GAAP operating margin

(42.1

)%

(26.5

)%

(37.9

)%

(25.9

)%

Non-GAAP adjustments

27.4

%

20.1

%

26.0

%

18.6

%

Non-GAAP operating margin

(14.7

)%

(6.4

)%

(11.9

)%

(7.3

)%

Reconciliation of net loss

GAAP net loss

$

(29,661

)

$

(14,688

)

$

(52,219

)

$

(26,147

)

Plus: Share-based compensation

16,476

9,968

30,088

18,276

Plus: Employer taxes related to employee stock transactions

710

254

1,391

406

Plus: Amortization of debt discount and issuance costs (1)

460

1,258

898

1,258

Plus: Amortization of acquired intangible assets

875

-

1,750

-

Plus: Acquisition-related expenses

455

-

914

-

Non-GAAP net loss

$

(10,685

)

$

(3,208

)

$

(17,178

)

$

(6,207

)

Reconciliation of net loss per share, basic and diluted

GAAP net loss per share, basic and diluted

$

(0.35

)

$

(0.19

)

$

(0.63

)

$

(0.33

)

Non-GAAP adjustments to net loss

0.23

0.15

0.42

0.26

Non-GAAP net loss per share, basic and diluted

$

(0.13

)

$

(0.04

)

$

(0.21

)

$

(0.08

)

Weighted-average shares used in calculating net loss per share, basic and diluted

83,895

78,775

83,413

78,278

PagerDuty, Inc.

Reconciliation of GAAP to Non-GAAP Data

(in thousands, except percentages and per share data)

(unaudited)

Three Months Ended July Six Months Ended July 31, 31,

2021 2020 2021 2020

Reconciliation of gross profit and gross margin

GAAP gross profit $ 55,560 $ 44,077 $ 108,733 $ 86,900

Plus: Share-based 1,023 263 1,699 607 compensation

Plus: Employer taxesrelated to employee stock 30 8 56 9 transactions

Plus: Amortization ofacquired intangible 280 - 560 - assets

Non-GAAP gross profit $ 56,893 $ 44,348 $ 111,048 $ 87,516

GAAP gross margin 82.3 % 86.9 % 82.9 % 86.5 %

Non-GAAP adjustments 1.9 % 0.5 % 1.8 % 0.6 %

Non-GAAP gross margin 84.2 % 87.4 % 84.7 % 87.1 %



Reconciliation of operating expenses

GAAP research and $ 22,909 $ 15,535 $ 43,508 $ 30,549 development

Less: Share-based (5,607 ) (2,469 ) (10,047 ) (4,652 )compensation

Less: Employer taxesrelated to employee stock (208 ) (76 ) (406 ) (122 )transactions

Less: Acquisition-related (457 ) - (906 ) - expenses

Non-GAAP research and $ 16,637 $ 12,990 $ 32,149 $ 25,775 development



GAAP sales and marketing $ 40,814 $ 27,511 $ 78,048 $ 54,247

Less: Share-based (4,401 ) (2,870 ) (8,355 ) (5,155 )compensation

Less: Employer taxesrelated to employee stock (157 ) (110 ) (358 ) (188 )transactions

Less: Amortization ofacquired intangible (595 ) - (1,190 ) - assets

Non-GAAP sales and $ 35,661 $ 24,531 $ 68,145 $ 48,904 marketing



GAAP general and $ 20,294 $ 14,480 $ 36,872 $ 28,153 administrative

Less: Share-based (5,445 ) (4,366 ) (9,987 ) (7,862 )compensation

Less: Employer taxesrelated to employee stock (315 ) (60 ) (571 ) (87 )transactions

Less: Acquisition-related 2 - (8 ) - expenses

Non-GAAP general and $ 14,536 $ 10,054 $ 26,306 $ 20,204 administrative



Reconciliation ofoperating loss and operating margin

GAAP operating loss $ (28,457 ) $ (13,449 ) $ (49,695 ) $ (26,049 )

Plus: Share-based 16,476 9,968 30,088 18,276 compensation

Plus: Employer taxesrelated to employee stock 710 254 1,391 406 transactions

Plus: Amortization ofacquired intangible 875 - 1,750 - assets

Plus: Acquisition-related 455 - 914 - expenses

Non-GAAP operating loss $ (9,941 ) $ (3,227 ) $ (15,552 ) $ (7,367 )

GAAP operating margin (42.1 ) (26.5 ) (37.9 ) (25.9 ) % % % %

Non-GAAP adjustments 27.4 % 20.1 % 26.0 % 18.6 %

Non-GAAP operating margin (14.7 ) (6.4 ) (11.9 ) (7.3 ) % % % %



Reconciliation of net loss

GAAP net loss $ (29,661 ) $ (14,688 ) $ (52,219 ) $ (26,147 )

Plus: Share-based 16,476 9,968 30,088 18,276 compensation

Plus: Employer taxesrelated to employee stock 710 254 1,391 406 transactions

Plus: Amortization ofdebt discount and 460 1,258 898 1,258 issuance costs^ (1)

Plus: Amortization ofacquired intangible 875 - 1,750 - assets

Plus: Acquisition-related 455 - 914 - expenses

Non-GAAP net loss $ (10,685 ) $ (3,208 ) $ (17,178 ) $ (6,207 )



Reconciliation of netloss per share, basic and diluted

GAAP net loss per share, $ (0.35 ) $ (0.19 ) $ (0.63 ) $ (0.33 )basic and diluted

Non-GAAP adjustments to 0.23 0.15 0.42 0.26 net loss

Non-GAAP net loss per $ (0.13 ) $ (0.04 ) $ (0.21 ) $ (0.08 )share, basic and diluted



Weighted-average sharesused in calculating net 83,895 78,775 83,413 78,278 loss per share, basic anddiluted

Note: Certain figures may not sum due to rounding.

(1) During the first quarter of fiscal 2022, the Company early adopted ASU 2020-06 which resulted in the elimination of amortization of debt discount on the convertible senior notes from February 1, 2021.

Note: Certain figures may not sum due to rounding.

^(1) During the first quarter of fiscal 2022, the Company early adopted ASU2020-06 which resulted in the elimination of amortization of debt discount onthe convertible senior notes from February 1, 2021.

PagerDuty, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(in thousands, except percentages and per share data)

(unaudited)

Free Cash Flow

Three Months Ended July 31,

Six Months Ended July 31,

2021

2020

2021

2020

Net cash (used in) provided by operating activities

$

(11,595

)

$

2,047

$

(10,016

)

$

1,862

Less:

Purchases of property and equipment

(364

)

(579

)

(1,291

)

(3,292

)

Capitalization of internal-use software costs

(915

)

(111

)

(1,917

)

(111

)

Free cash flow

$

(12,874

)

$

1,357

$

(13,224

)

$

(1,541

)

Net cash provided by (used in) investing activities

$

36,675

$

(14,293

)

$

24,059

$

(475

)

Net cash provided by financing activities

$

3,412

$

249,429

$

1,316

$

251,227

Free cash flow margin

(19.1

)%

2.7

%

(10.1

)%

(1.5

)%

View source version on businesswire.com: https://www.businesswire.com/news/home/20210902005830/en/

CONTACT: Investor Relations Contact: Christine Cloonan investor@pagerduty.com

CONTACT: SOURCE PagerDuty