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PagerDuty's (NYSE:PD) Q3 Earnings Results: Revenue In Line With Expectations, Stock Soars

StockStory - Thu Nov 30, 2023

PD Cover Image

IT incident response platform PagerDuty (NYSE:PD) reported Q3 FY2024 results exceeding Wall Street analysts' expectations, with revenue up 15.4% year on year to $108.7 million. The company expects next quarter's revenue to be around $110.5 million, in line with analysts' estimates. It made a non-GAAP profit of $0.20 per share, improving from its profit of $0.04 per share in the same quarter last year.

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PagerDuty (PD) Q3 FY2024 Highlights:

  • Revenue: $108.7 million vs analyst estimates of $107.7 million (0.9% beat)
  • EPS (non-GAAP): $0.20 vs analyst estimates of $0.14 (43.7% beat)
  • Revenue Guidance for Q4 2024 is $110.5 million at the midpoint, roughly in line with what analysts were expecting
  • Free Cash Flow of $15.23 million, up 74.3% from the previous quarter
  • Customers: 15,049, down from 15,146 in the previous quarter
  • Gross Margin (GAAP): 81.9%, up from 80.9% in the same quarter last year

“Results in the third quarter were above our guidance ranges with 15% revenue growth and a non-GAAP operating margin of 14%,” 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.

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Sales Growth

As you can see below, PagerDuty's revenue growth has been strong over the last two years, growing from $71.76 million in Q3 FY2022 to $108.7 million this quarter.

PagerDuty Total Revenue

This quarter, PagerDuty's quarterly revenue was once again up 15.4% year on year. However, its growth did slow down compared to last quarter as the company's revenue increased by just $1.10 million in Q3 compared to $4.37 million in Q2 2024. While we'd like to see revenue increase by a greater amount each quarter, a one-off fluctuation is usually not concerning.

Next quarter, PagerDuty is guiding for a 8.6% year-on-year revenue decline to $110.5 million, a further deceleration from the 28.6% year-on-year decrease it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 11.8% over the next 12 months before the earnings results announcement.

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Customer Growth

PagerDuty reported 15,049 customers at the end of the quarter, a decrease of 97 from the previous quarter. That's slower customer growth than what we've observed in past quarters, suggesting that the company's customer acquisition momentum is slowing.

PagerDuty Customers

Key Takeaways from PagerDuty's Q3 Results

Sporting a market capitalization of $2.05 billion, PagerDuty is among smaller companies, but its more than $575.3 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.

With a market capitalization of $2.05 billion, PagerDuty is among smaller companies, but its $575.3 million cash balance and positive free cash flow over the last 12 months give us confidence that it has the resources needed to pursue a high-growth business strategy.

It was great to see PagerDuty blow past analysts' EPS and free cash flow estimates this quarter. That really stood out as a positive in these results. On the other hand, its customer growth slowed, but at least the revenue coming in from existing customers was strong enough to let the company slightly beat Wall Street's expectations.

In terms of company updates, three key events occurred during the quarter: 1) PagerDuty closed a $350 million convertible senior note offering, 2) It acquired Jeli, an all-in-one incident management solution, and 3) It appointed Eric Johnson, previously Chief Information Officer (CIO) at SurveyMonkey, as its CIO.

Overall, this was a mixed quarter for PagerDuty, but the stock is up 5.7% after reporting, likely because of its EPS and free cash flow performance. It currently trades at $23.05 per share.

PagerDuty may not have had the best quarter, but does that create an opportunity to invest 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.

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