PagerDuty Inc
For the period ended Oct 31, 2024. Filed Nov 27, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Oct 31, 2024 · Filed Nov 27, 2024
PD$15.68-3.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-07-31; filed 2024-09-04.
0001568100-24-000109
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-10-31; filed 2024-11-27.
0001568100-24-000139
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 129 previous paragraphs and 131 current paragraphs.
106 unchanged; 22 reworded; 3 added; 1 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 19 previous and 19 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (3)
Current report
The change in research and development expenses was not significant period over period.
Current report
Gain on partial extinguishment of convertible senior notes: During the three months ended October 31, 2023, the Company recorded a gain on partial extinguishment of convertible senior notes as a result of the October 2023 repurchase of the 2025 Notes. No such gain was recorded during the three months ended October 31, 2024.Refer to Note 9. Debt and Financing Arrangements in the notes to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion.
Current report
Gain on partial extinguishment of convertible senior notes: During the nine months ended October 31, 2023, the Company recorded a gain on partial extinguishment of convertible senior notes as a result of the October 2023 repurchase of the 2025 Notes. No such gain was recorded during the nine months ended October 31, 2024. Refer to Note 9. Debt and Financing Arrangements in the notes to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion.
Removed paragraphs (1)
Previous report
Research and development expenses decreased driven primarily by: (i) a decrease in personnel costs of $0.6 million as a result of a decrease in stock-based compensation related to research and development employees and a decrease in salaries to higher capitalized time for software development projects; (ii) a decrease of $0.4 million in outside services spend due to higher leverage of internal resources; and (iii) a decrease of $0.4 million in costs to support the business and related infrastructure, which include allocated overhead costs.
Reworded paragraphs (22)
Previous wording
We continuously monitor geopolitical conflicts around the world and their effects on our business. While we do not believe the ongoing Russia-Ukraine conflict or the conflict in Israel and the surrounding areas will have a material impact on our business and results of operations, our business and results of operations could be materially impacted if these conflicts continue or worsen, leading to greater global economic disruptions and uncertainty. Our customers in regions impacted by conflict represented an immaterial portion of our net assets and total consolidated revenue both as of and for the three and six months ended July 31, 2024 and 2023.
Current wording
We continuously monitor geopolitical conflicts around the world and their effects on our business. While we do not believe the ongoing Russia-Ukraine conflict or the conflict in Israel and the surrounding areas will have a material impact on our business and results of operations, our business and results of operations could be materially impacted if these conflicts continue or worsen, leading to greater global economic disruptions and uncertainty. Our customers in regions impacted by conflict represented an immaterial portion of our net assets and total consolidated revenue both as of and for the three and nine months ended October 31, 2024 and 2023.
Previous wording
The increase in cost of revenue is primarily due to: (i) an increase of $1.3 million in outside services spend for the customer service team; (ii) an increase of $1.2 million in amortization of internally developed software; (iii) an increase of $0.6 million in hosting, software, and telecom costs; and (iv) an increase of $0.5 million in amortization of acquired intangible assets; offset by (v) a decrease of $2.2 million in personnel costs as a result of changes in the components of compensation plans compared to the prior year.
Current wording
The increase in cost of revenue is primarily due to: (i) an increase of $0.4 million for amortization of internally developed software; (ii) an increase of $0.3 million in personnel costs as a result of an increase in headcount, offset by changes in the components of compensation plans; (iii) an increase of $0.2 million in hosting, software, and telecom costs; and (iv) an increase of $0.2 million in training and travel-related costs; offset by (v) a decrease of $0.5 million in costs to support the business and related infrastructure, which include allocated overhead costs, primarily as a result of decreased lease expenses.
Previous wording
Sales and marketing expenses increased primarily due to: (i) an increase of $1.2 million in outside services for consulting services; (ii) an increase of $1.1 million in marketing costs for media campaigns during the current period; and (iii) an increase of $0.5 million in training and travel-related costs; offset by (iv) a decrease of $1.1 million in bad debt expense; and (v) a decrease of $0.7 million in costs to support the business and related infrastructure, which include allocated overhead costs.
Current wording
Sales and marketing expenses decreased primarily due to: (i) a decrease of $1.0 million in other expenses, primarily related to a training event that occurred during the three months ended October 31, 2023 that did not recur in the current period; (ii) a decrease of $0.9 million in costs to support the business and related infrastructure, which include allocated overhead costs; offset by (iii) an increase of $0.8 million in training and travel-related costs; and (iv) an increase of $0.6 million in marketing costs for media campaigns during the current period.
Previous wording
General and administrative expenses decreased primarily due to: (i) a decrease of $1.3 million primarily related to prior year real estate impairment charges that did not recur in the current period; (ii) a decrease of $0.5 million in insurance, business taxes, and licenses costs; and (iii) a decrease of $0.4 million in personnel expenses, driven largely by a decrease in stock-based compensation for general and administrative employees.
Current wording
General and administrative expenses decreased primarily due to: (i) a decrease of $0.4 million in insurance, business taxes, and licenses costs; (ii) a decrease of $0.2 million in costs to support the business and related infrastructure, which include allocated overhead costs; (iii) a decrease of $0.1 million in training and travel-related costs; and (iv) a decrease of $0.1 million in outside services spend due to higher leverage of internal resources; offset by (v) an increase of $0.4 million in personnel expenses, driven largely by an increase in bonuses for general and administrative employees.
Previous wording
Interest income increased primarily due to higher interest rates and accretion on our cash, cash equivalent and investment balances in the current year.
Current wording
Interest income increased primarily due to accretion on our cash, cash equivalent and investment balances in the current year.
Previous wording
Interest expense: Interest expense consists primarily of contractual interest expense and amortization of debt issuance costs on our 1.25% Convertible senior notes due 2025 (the “2025 Notes”) that were outstanding in the three and six months ended July 31, 2023 and partially extinguished in October 2023. Interest expense for the three and six months ended July 31, 2024 also includes the contractual interest expense and amortization of debt issuance costs on our 1.50% Convertible Senior Notes due 2028 (the “2028 Notes”) that were issued in October 2023.
Current wording
Interest expense: Interest expense consists primarily of contractual interest expense and amortization of debt issuance costs on our 1.25% Convertible senior notes due 2025 (the “2025 Notes”) that were outstanding in the three and nine months ended October 31, 2023 and partially extinguished in October 2023. Interest expense for the three and nine months ended October 31, 2024 also includes the contractual interest expense and amortization of debt issuance costs on our 1.50% Convertible Senior Notes due 2028 (the “2028 Notes”) that were issued in October 2023.
Previous wording
The change in provision for income taxes was primarily driven by foreign, federal, and state income taxes. The provision may fluctuate to the extent the mix of earnings fluctuates between jurisdictions with different tax rates.
Current wording
The change in (provision for) benefit from income taxes was primarily driven by foreign, federal, and state income taxes. The provision may fluctuate to the extent the mix of earnings fluctuates between jurisdictions with different tax rates.
Previous wording
Six months ended July 31, 2024 compared to six months ended July 31, 2023
Current wording
Nine months ended October 31, 2024 compared to nine months ended October 31, 2023
Previous wording
The increase in cost of revenue is primarily due to: (i) an increase of $0.5 million in outside services spend for the customer service team; (ii) an increase of $0.5 million for amortization of internally developed software; (iii) an increase of $0.3 million in hosting, software, and telecom costs; and (iv) an increase of $0.2 million in amortization of acquired intangible assets; offset by (v) a decrease of $1.2 million in personnel costs as a result of changes in the components of compensation plans compared to the prior year; and (vi) a decrease of $0.4 million in costs to support the business and related infrastructure, which include allocated overhead costs.
Current wording
The increase in cost of revenue is primarily due to: (i) an increase of $1.6 million in amortization of internally developed software; (ii) an increase of $1.4 million in outside services spend for the customer service team; (iii) an increase of $0.8 million in hosting, software, and telecom costs; (iv) an increase of $0.6 million in amortization of acquired intangible assets; and (v) an increase of $0.4 million for training and travel-related costs; offset by (vi) a decrease of $1.9 million in personnel costs primarily as a result of changes in the components of compensation plans compared to the prior year; and (vii) a decrease of $0.9 million in costs to support the business and related infrastructure, which include allocated overhead costs.
Previous wording
Research and development: Research and development expenses increased driven primarily by: (i) an increase in personnel costs of $2.9 million as a result of increased bonuses and severance during the current period; and (ii) an increase of $0.4 million in costs to support the business and related infrastructure, which include allocated overhead costs; offset by (iii) a decrease of $0.9 million in outside services spend due to higher leverage of internal resources.
Current wording
Research and development: Research and development expenses increased driven primarily by: (i) an increase in personnel costs of $3.3 million as a result of increased bonuses and stock-based compensation for research and development employees during the current period; offset by (ii) a decrease of $0.9 million in outside services spend due to higher leverage of internal resources.
Previous wording
Sales and marketing: Sales and marketing expenses increased primarily due to: (i) an increase in outside services of $2.5 million for consulting services; (ii) an increase of $2.1 million in marketing costs for media campaigns in the current period; (iii) an increase of $1.7 million in personnel costs, primarily related to an increase in stock-based compensation; and (iv) an increase of $1.4 million in training and travel-related costs; offset by (v) a decrease of $1.2 million in bad debt expense.
Current wording
Sales and marketing: Sales and marketing expenses increased primarily due to: (i) an increase of $2.7 million in marketing costs for media campaigns in the current period; (ii) an increase in outside consulting services of $2.6 million; (iii) an increase of $2.2 million in training and travel-related costs; and (iv) an increase of $1.6 million in personnel costs, primarily related to an increase in stock-based compensation, commissions, and bonuses; offset by (v) a decrease of $1.6 million in costs to support the business and related infrastructure, which include allocated overhead costs; (vi) a decrease of $1.2 million in other expenses, primarily related to a training event that occurred during the nine months ended October 31, 2023 that did not recur in the current period; and (vii) a decrease of $0.8 million in bad debt expense.
Previous wording
General and administrative: General and administrative expenses increased primarily due to: (i) an increase of $2.3 million in personnel costs, driven by increased salaries, bonuses, and stock compensation related to general and administrative employees; (ii) an increase of $1.0 million in outside services costs; and (iii) an increase of $0.5 million in training and travel-related costs; offset by (iv) a decrease of $1.1 million in costs primarily related to prior year real estate impairment charges that did not recur in the current period; and (v) a decrease of $0.8 million in costs related to insurance, business taxes, and licenses.
Current wording
General and administrative: General and administrative expenses increased primarily due to: (i) an increase of $2.7 million in personnel costs, primarily driven by increased bonuses and stock-based compensation related to general and administrative employees; and (ii) an increase of $1.0 million in outside services costs; offset by (iii) a decrease of $1.3 million in costs primarily related to prior year real estate impairment charges that did not recur in the current period; and (iv) a decrease of $1.2 million in costs related to insurance, business taxes, and licenses.
Previous wording
Other expense, net: The increase in other expense, net was due to fluctuations in foreign currency during the period.
Current wording
Other income (expense), net: The increase in other income (expense), net was due to fluctuations in foreign currency during the period.
Previous wording
(Provision for) benefit from income taxes: The change in provision for income taxes was primarily driven by foreign, federal, and state income taxes. The provision may fluctuate to the extent the mix of earnings fluctuates between jurisdictions with different tax rates.
Current wording
(Provision for) benefit from income taxes: The change in (provision for) benefit from income taxes was primarily driven by foreign, federal, and state income taxes. The provision may fluctuate to the extent the mix of earnings fluctuates between jurisdictions with different tax rates.
Previous wording
Specifically, we exclude the following from its historical and prospective non-GAAP financial measures, as applicable:
Current wording
Specifically, we exclude the following from historical and prospective non-GAAP financial measures, as applicable:
Previous wording
As of July 31, 2024, our principal sources of liquidity were cash and cash equivalents and investments totaling $599.3 million. We believe that our existing cash and cash equivalents, investments, and net cash generated from our operating activities will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. Since inception, we have financed operations primarily through sales of our cloud-hosted software subscriptions, net proceeds received from sales of equity securities, and the issuance of our 2025 Notes and 2028 Notes. We believe we will meet long-term expected future cash requirements and obligations through a combination of cash flows from operating activities and available cash and short-term investment balances.
Current wording
As of October 31, 2024, our principal sources of liquidity were cash and cash equivalents and investments totaling $542.2 million. We believe that our existing cash and cash equivalents, investments, and net cash generated from our operating activities will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. Since inception, we have financed operations primarily through sales of our cloud-hosted software subscriptions, net proceeds received from sales of equity securities, and the issuance of our 2025 Notes and 2028 Notes. We believe we will meet long-term expected future cash requirements and obligations through a combination of cash flows from operating activities and available cash and short-term investment balances.
Previous wording
A significant majority of our customers pay in advance for our cloud-hosted and term-license software subscriptions. Therefore, a substantial source of our cash is from our deferred revenue, which is included in the liabilities section of our condensed consolidated balance sheet. Deferred revenue consists of the unearned portion of customer billings, which is recognized as revenue in accordance with our revenue recognition policy. As of July 31, 2024, we had deferred revenue of $217.9 million, of which $214.5 million was recorded as a current liability and expected to be recorded as revenue in the next 12 months, provided all other revenue recognition criteria are met.
Current wording
A significant majority of our customers pay in advance for our cloud-hosted and term-license software subscriptions. Therefore, a substantial source of our cash is from our deferred revenue, which is included in the liabilities section of our condensed consolidated balance sheet. Deferred revenue consists of the unearned portion of customer billings, which is recognized as revenue in accordance with our revenue recognition policy. As of October 31, 2024, we had deferred revenue of $216.7 million, of which $214.1 million was recorded as a current liability and expected to be recorded as revenue in the next 12 months, provided all other revenue recognition criteria are met.
Previous wording
In May 2024, we announced that our Board of Directors approved a share repurchase program (the “2024 Share Repurchase Program”) for the repurchase of shares of our common stock in an aggregate amount of up to $100.0 million. The 2024 Share Repurchase Program does not obligate us to acquire a specified number of shares, and may be suspended, modified, or terminated at any time, without prior notice. The repurchases are expected to be executed from time to time through May 2026, subject to general business and market conditions and other investment opportunities, through open market purchases or other legally permissible means, including through Rule 10b5-1 plans. As of July 31, 2024, we had repurchased a total of 1,313,248 shares, and subsequently retired 1,234,484 of those shares. The cost of the remaining 78,764 shares is recorded as treasury stock in the condensed consolidated balance sheets. As of July 31, 2024, $72.0 million of the total amount authorized to be repurchased remained available.
Current wording
In May 2024, we announced that our Board of Directors approved a share repurchase program (the “2024 Share Repurchase Program”) for the repurchase of shares of our common stock in an aggregate amount of up to $100.0 million. The 2024 Share Repurchase Program does not obligate us to acquire a specified number of shares, and may be suspended, modified, or terminated at any time, without prior notice. The repurchases are expected to be executed from time to time through May 2026, subject to general business and market conditions and other investment opportunities, through open market purchases or other legally permissible means, including through Rule 10b5-1 plans. As of October 31, 2024, we had repurchased a total of 5,144,009 shares, and subsequently retired 5,082,593 of those shares. The cost of the remaining 61,416 shares is recorded as treasury stock in the condensed consolidated balance sheets. As of October 31, 2024, $1.5 million of the total amount authorized to be repurchased remained available.
Previous wording
Our estimated future obligations as of July 31, 2024 include both current and long-term obligations. Our debt obligations total $449.3 million, of which $57.2 million is short-term, and the remainder is long-term. Additionally, we had $3.5 million of irrevocable standby letters of credit outstanding which were fully collateralized by our restricted cash, all of which represents a long-term cash obligation. Under our operating leases, we had a current obligation of $4.6 million and a long-term obligation of $6.6 million. Operating lease obligations primarily represent the initial contracted term for leases that have commenced as of July 31, 2024, not including any future optional renewal periods.
Current wording
Our estimated future obligations as of October 31, 2024 include both current and long-term obligations. Our debt obligations total $450.0 million, of which $57.3 million is short-term, and the remainder is long-term. Additionally, we had $3.5 million of irrevocable standby letters of credit outstanding which were fully collateralized by our restricted cash, all of which represents a long-term cash obligation. Under our operating leases, we had a current obligation of $3.6 million and a long-term obligation of $6.1 million. Operating lease obligations primarily represent the initial contracted term for leases that have commenced as of October 31, 2024, not including any future optional renewal periods.
Previous wording
Net cash provided by operating activities improved, primarily due to improvements in our operating loss performance due to the 7.7% increase in revenue and the 57.3% increase in interest income. Cash provided operating activities is subject to variability period-over-period as a result of timing differences, including with respect to the collection of receivables and payments of accounts payable, and other items.
Current wording
Net cash provided by operating activities improved, primarily due to improvements in our operating loss performance due to the 8.3% increase in revenue and the 40.5% increase in interest income. Cash provided by operating activities is subject to variability period-over-period as a result of timing differences, including with respect to the collection of receivables and payments of accounts payable, and other items.
Previous wording
Net cash used in financing activities increased, primarily as a result of repurchases of common stock, which did not occur during the six months ended July 31, 2023.
Current wording
Net cash used in financing activities increased, primarily as a result of an increase in repurchases of common stock and net cash inflow activity related to the conversion of our 2025 Notes which occurred during the nine months ended October 31, 2023 and did not recur during the nine months ended October 31, 2024.
Previous wording
Our changes in cash can be impacted by the effect of fluctuating exchange rates. Foreign exchange had a negative effect on cash in the six months ended July 31, 2023, decreasing our total cash balance by $0.3 million as of July 31, 2023, and a negative effect on cash in the six months ended July 31, 2024, decreasing our total cash balance by $23.0 thousand as of July 31, 2024.
Current wording
Our changes in cash can be impacted by the effect of fluctuating exchange rates. Foreign exchange had a negative effect on cash in the nine months ended October 31, 2023, decreasing our total cash balance by $0.5 million as of October 31, 2023, and a negative effect on cash in the nine months ended October 31, 2024, decreasing our total cash balance by $0.1 million as of October 31, 2024.