UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________________

FORM 10-Q

_________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the quarterly period ended ~~July~~October 31, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38856

PAGERDUTY, INC.

(Exact name of registrant as specified in its charter)

_________________________


Delaware						27-2793871
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

600 Townsend St., Suite 200

San Francisco, CA 94103

(844) 800-3889

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

_________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, $0.000005 par value

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically on its corporate Web site every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

The total number of shares of common stock outstanding as of ~~September 1,~~December 6, 2021, was ~~84,972,465.~~85,980,013.

Table of Contents

PAGERDUTY, INC.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION


Item 1	Financial Statements (unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss	6
	Condensed Consolidated Statements of Stockholders’ Equity	7
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2627
Item 3	Quantitative and Qualitative Disclosures about Market Risk	4244
Item 4	Controls and Procedures	4345

Part II - OTHER INFORMATION


Item 1	Legal Proceedings	4446
Item 1A	Risk Factors	4446
Item 2	Unregistered Sale of Equity Securities and Use of Proceeds	4547
Item 6	Exhibits	4547
	Signatures	4749

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or this Form 10-Q, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which statements involve substantial risk and uncertainties. All statements contained in this ~~report~~Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, market growth and trends, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “potentially,” “likely,” and similar expressions are intended to identify forward-looking statements.

Forward-looking statement contained in this Form 10-Q include, but are not limited to, statements about our expectations regarding:

•the effect of uncertainties related to the novel coronavirus and resulting 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;

•trends in key business metrics, including number of customers and dollar-based net retention rate, and non-GAAP financial measures and their usefulness in evaluating our business;

•trends in revenue, cost of revenue, and gross margin;

•trends in operating expenses, including research and development, sales and marketing, and general and administrative expense, and expectations regarding these expenses as a percentage of revenue;

•our existing cash and cash equivalents and cash provided by sales of our subscriptions being sufficient to support working capital and capital expenditures for at least the next 12 months;

•our ability to successfully identify, acquire, and integrate complementary companies, technologies, and assets;

•our ability to service the interest on our convertible notes and repay such notes, to the extent required;

•our efforts to maintain proper and effective internal controls;

•our ability to expand our operations and increase adoption of our platform internationally;

•our ability to stay abreast of new or modified laws and regulations that currently apply or become applicable to our business both in the United States and internationally;

•the increased expenses and administrative workload associated with being a public company; and

•other statements regarding our future operations, financial condition, and prospects and business strategies.

Such forward-looking statements are based on our expectations as of the date of this filing and are subject to a number of risks, uncertainties and assumptions, including but not limited to, risks detailed in the “Risk Factors” section of this Form 10-Q and in our Annual Report on Form 10-K. Readers are urged to carefully review and consider the various disclosures made in this Form 10-Q and in other documents we file from time to time with the Securities and Exchange Commission, or the SEC, that disclose risks and uncertainties that may affect our business. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Form 10-Q may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

Table of Contents

You should not rely on forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or may not occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. In addition, the forward-looking statements in this Form 10-Q are made as of the date of this filing, and we do not undertake, and expressly disclaim any duty, to update any of these forward-looking statements for any reason after the date of this Form 10-Q or to conform these statements to actual results or revised expectations.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

PAGERDUTY, INC.

Condensed Consolidated Balance Sheets

(in thousands)


		As of July 31, 2021		As of January 31, 2021			As of October 31, 2021		As of January 31, 2021
		(unaudited)					(unaudited)
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	354,525	$	339,166	Cash and cash equivalents	$	359,738	$	339,166
Investments	Investments	192,296		221,112		Investments	185,545		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
Accounts receivable, net of allowance for doubtful accounts of $1,218 and $1,188 as of October 31, 2021 and January 31, 2021, respectively						Accounts receivable, net of allowance for doubtful accounts of $1,218 and $1,188 as of October 31, 2021 and January 31, 2021, respectively	53,965		55,119
Deferred contract costs, current	Deferred contract costs, current	13,826		12,330		Deferred contract costs, current	15,075		12,330
Prepaid expenses and other current assets	Prepaid expenses and other current assets	14,987		10,587		Prepaid expenses and other current assets	11,833		10,587
Total current assets	Total current assets	623,782		638,314		Total current assets	626,156		638,314
Property and equipment, net	Property and equipment, net	14,116		12,639		Property and equipment, net	14,625		12,639
Deferred contract costs, non-current	Deferred contract costs, non-current	20,434		19,257		Deferred contract costs, non-current	22,703		19,257
Lease right-of-use assets	Lease right-of-use assets	22,482		24,691		Lease right-of-use assets	21,360		24,691
Goodwill	Goodwill	72,126		72,126		Goodwill	72,126		72,126
Intangible assets, net	Intangible assets, net	24,883		26,633		Intangible assets, net	24,008		26,633
Other assets	Other assets	689		1,783		Other assets	1,108		1,783
Total assets	Total assets	$	778,512	$	795,443	Total assets	$	782,086	$	795,443
Liabilities and stockholders’ equity	Liabilities and stockholders’ equity					Liabilities and stockholders’ equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	6,949	$	5,747	Accounts payable	$	9,564	$	5,747
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	14,101		9,627		Accrued expenses and other current liabilities	11,167		9,627
Accrued compensation	Accrued compensation	24,542		28,372		Accrued compensation	32,253		28,372
Deferred revenue, current	Deferred revenue, current	128,145		123,686		Deferred revenue, current	137,353		123,686
Lease liabilities, current	Lease liabilities, current	5,469		5,262		Lease liabilities, current	5,554		5,262
Total current liabilities	Total current liabilities	179,206		172,694		Total current liabilities	195,891		172,694
Convertible senior notes, net	Convertible senior notes, net	280,162		217,528		Convertible senior notes, net	280,615		217,528
Deferred revenue, non-current	Deferred revenue, non-current	5,857		6,286		Deferred revenue, non-current	5,497		6,286
Lease liabilities, non-current	Lease liabilities, non-current	23,831		26,542		Lease liabilities, non-current	22,438		26,542
Other liabilities	Other liabilities	4,284		5,666		Other liabilities	4,256		5,666
Total liabilities	Total liabilities	493,340		428,716		Total liabilities	508,697		428,716
Commitments and contingencies (Note 10)		0		0
Commitments and contingencies (Note 11)						Commitments and contingencies (Note 11)	0		0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock	Common stock	—		—		Common stock	—		—
Additional paid-in capital	Additional paid-in capital	578,728		614,494		Additional paid-in capital	593,508		614,494
Accumulated other comprehensive income		31		343
Accumulated other comprehensive (loss) income						Accumulated other comprehensive (loss) income	(191)		343
Accumulated deficit	Accumulated deficit	(293,587)		(248,110)		Accumulated deficit	(319,928)		(248,110)
Total stockholders’ equity	Total stockholders’ equity	285,172		366,727		Total stockholders’ equity	273,389		366,727
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	778,512	$	795,443	Total liabilities and stockholders’ equity	$	782,086	$	795,443

See Notes to Condensed Consolidated Financial Statements

Table of Contents

PAGERDUTY, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share data)

(unaudited)


		Three Months Ended July 31,				Six Months Ended July 31,					Three Months Ended October 31,				Nine Months Ended October 31,
		2021		2020		2021		2020			2021		2020		2021		2020
Revenue	Revenue	$	67,536	$	50,714	$	131,127	$	100,500	Revenue	$	71,760	$	53,772	$	202,887	$	154,272
Cost of revenue	Cost of revenue	11,976		6,637		22,394		13,600		Cost of revenue	12,039		7,685		34,433		21,285
Gross profit	Gross profit	55,560		44,077		108,733		86,900		Gross profit	59,721		46,087		168,454		132,987
Operating expenses:	Operating expenses:									Operating expenses:
Research and development	Research and development	22,909		15,535		43,508		30,549		Research and development	24,554		16,156		68,062		46,705
Sales and marketing	Sales and marketing	40,814		27,511		78,048		54,247		Sales and marketing	40,176		34,024		118,224		88,271
General and administrative	General and administrative	20,294		14,480		36,872		28,153		General and administrative	19,808		17,746		56,680		45,899
Total operating expenses	Total operating expenses	84,017		57,526		158,428		112,949		Total operating expenses	84,538		67,926		242,966		180,875
Loss from operations	Loss from operations	(28,457)		(13,449)		(49,695)		(26,049)		Loss from operations	(24,817)		(21,839)		(74,512)		(47,888)
Interest income	Interest income	783		1,048		1,601		2,401		Interest income	705		974		2,306		3,375
Interest expense	Interest expense	(1,378)		(1,608)		(2,695)		(1,608)		Interest expense	(1,350)		(4,133)		(4,045)		(5,741)
Other expense, net	Other expense, net	(586)		(431)		(1,202)		(412)		Other expense, net	(729)		(449)		(1,931)		(861)
Loss before provision for income taxes		(29,638)		(14,440)		(51,991)		(25,668)
Provision for income taxes		(23)		(248)		(228)		(479)
Loss before (provision for) benefit from income taxes										Loss before (provision for) benefit from income taxes	(26,191)		(25,447)		(78,182)		(51,115)
(Provision for) benefit from income taxes										(Provision for) benefit from income taxes	(150)		4,839		(378)		4,360
Net loss	Net loss	$	(29,661)	$	(14,688)	$	(52,219)	$	(26,147)	Net loss	$	(26,341)	$	(20,608)	$	(78,560)	$	(46,755)
Other comprehensive (loss) income:	Other comprehensive (loss) income:									Other comprehensive (loss) income:
Unrealized (loss) gain on investments	Unrealized (loss) gain on investments	(108)		277		(312)		919		Unrealized (loss) gain on investments	(222)		(422)		(534)		497
Total comprehensive loss	Total comprehensive loss	$	(29,769)	$	(14,411)	$	(52,531)	$	(25,228)	Total comprehensive loss	$	(26,563)	$	(21,030)	$	(79,094)	$	(46,258)
Net loss per share, basic and diluted	Net loss per share, basic and diluted	$	(0.35)	$	(0.19)	$	(0.63)	$	(0.33)	Net loss per share, basic and diluted	$	(0.31)	$	(0.26)	$	(0.94)	$	(0.59)
Weighted average shares used in calculating net loss per share, basic and diluted	Weighted average shares used in calculating net loss per share, basic and diluted	83,895		78,775		83,413		78,278		Weighted average shares used in calculating net loss per share, basic and diluted	85,092		79,937		83,979		78,835

See Notes to Condensed Consolidated Financial Statements

Table of Contents

PAGERDUTY, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

(unaudited)


		Three Months Ended July 31, 2021																		Three Months Ended October 31, 2021
		Common Stock			Additional Paid-in Capital				Accumulated Other Comprehensive Income			Accumulated Deficit				Total Stockholders’ Equity				Common Stock					Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity
		Shares	Amount								Shares								Amount
Balances as of April 30, 2021		83,595,225	$	—			$	557,843						$	139			$	(263,926)		$	294,056
Balances as of July 31, 2021																			Balances as of July 31, 2021	84,801,124			$	—		$	578,728		$	31		$	(293,587)		$	285,172
Issuance of common stock upon exercise of stock options and restricted stock agreements	Issuance of common stock upon exercise of stock options and restricted stock agreements	749,673	—		5,379				—			—				5,379			Issuance of common stock upon exercise of stock options and restricted stock agreements	724,725			—		4,286			—			—			4,286
Vesting of restricted stock units, net of employee payroll taxes	Vesting of restricted stock units, net of employee payroll taxes	233,752	—		(6,073)				—			—				(6,073)			Vesting of restricted stock units, net of employee payroll taxes	269,436			—		(7,616)			—			—			(7,616)
Issuance of common stock in connection with employee stock purchase plan		222,474	—		4,889				—			—				4,889
Other comprehensive loss	Other comprehensive loss	—	—		—				(108)			—				(108)			Other comprehensive loss	—			—		—			(222)			—			(222)
Stock-based compensation	Stock-based compensation	—	—		16,690				—			—				16,690			Stock-based compensation	—			—		18,110			—			—			18,110
Net loss	Net loss	—	—		—				—			(29,661)				(29,661)			Net loss	—			—		—			—			(26,341)			(26,341)
Balances as of July 31, 2021		84,801,124	$	—	$	578,728			$	31		$	(293,587)			$	285,172
Balances as of October 31, 2021																			Balances as of October 31, 2021	85,795,285			$	—	$	593,508		$	(191)		$	(319,928)		$	273,389


		Six Months Ended July 31, 2021																		Nine Months Ended October 31, 2021
		Common Stock			Additional Paid-in Capital				Accumulated Other Comprehensive Income			Accumulated Deficit				Total Stockholders’ Equity				Common Stock						Additional Paid-in Capital				Accumulated Other Comprehensive Income (Loss)				Accumulated Deficit				Total Stockholders’ Equity
		Shares	Amount								Shares								Amount
Balances as of January 31, 2021	Balances as of January 31, 2021	82,882,424	$	—			$	614,494						$	343			$	(248,110)		$	366,727	Balances as of January 31, 2021		82,882,424			$	—			$	614,494			$	343			$	(248,110)	$	366,727
Cumulative effect adjustment due to adoption of ASU 2020-06 (Note 2)	Cumulative effect adjustment due to adoption of ASU 2020-06 (Note 2)	—	—		(68,478)				—			6,742				(61,736)			Cumulative effect adjustment due to adoption of ASU 2020-06 (Note 2)	—			—				(68,478)				—				6,742				(61,736)
Issuance of common stock upon exercise of stock options and restricted stock agreements	Issuance of common stock upon exercise of stock options and restricted stock agreements	1,286,266	—		8,222				—			—				8,222			Issuance of common stock upon exercise of stock options and restricted stock agreements	2,010,991			—			12,508				—				—				12,508
Vesting of restricted stock units, net of employee payroll taxes	Vesting of restricted stock units, net of employee payroll taxes	407,887	—		(11,003)				—			—				(11,003)			Vesting of restricted stock units, net of employee payroll taxes	677,323			—			(18,619)				—				—				(18,619)
Shares issued related to a business combination	Shares issued related to a business combination	2,073	—		—				—			—				—			Shares issued related to a business combination	2,073			—			—				—				—				—
Issuance of common stock in connection with employee stock purchase plan	Issuance of common stock in connection with employee stock purchase plan	222,474	—		4,889				—			—				4,889			Issuance of common stock in connection with employee stock purchase plan	222,474			—			4,889				—				—				4,889
Other comprehensive loss	Other comprehensive loss	—	—		—				(312)			—				(312)			Other comprehensive loss	—			—			—				(534)				—				(534)
Stock-based compensation	Stock-based compensation	—	—		30,604				—			—				30,604			Stock-based compensation	—			—			48,714				—				—				48,714
Net loss	Net loss	—	—		—				—			(52,219)				(52,219)			Net loss	—			—			—				—				(78,560)				(78,560)
Balances as of July 31, 2021		84,801,124	$	—	$	578,728			$	31		$	(293,587)			$	285,172
Balances as of October 31, 2021																			Balances as of October 31, 2021	85,795,285			$	—		$	593,508			$	(191)			$	(319,928)			$	273,389

See Notes to Condensed Consolidated Financial Statements

Table of Contents

Three Months Ended July 31, 2020
Common Stock Additional
Paid-in
Capital Accumulated Other Comprehensive Income Accumulated
Deficit Total
Stockholders’
Equity
Shares Amount
Balances as of April 30, 2020 78,526,004 $ — $ 497,430 $ 779 $ (190,666) $ 307,543
Issuance of common stock upon exercise of stock options and restricted stock agreements 557,467 — 3,927 — — 3,927
Vesting of restricted stock units, net of employee payroll taxes 90,903 — (1,697) — — (1,697)
Vesting of early exercised options — — 191 — — 191
Equity component of convertible senior notes, net of issuance costs — — 68,478 — — 68,478
Purchases of capped calls related to convertible senior notes — — (35,708) — — (35,708)
Issuance of common stock in connection with employee stock purchase plan 181,253 — 3,558 — — 3,558
Other comprehensive income — — — 277 — 277
Stock-based compensation — — 9,990 — — 9,990
Net loss — — — — (14,688) (14,688)
Balances as of July 31, 2020 79,355,627 $ — $ 546,169 $ 1,056 $ (205,354) $ 341,871


	Three Months Ended October 31, 2020
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balances as of July 31, 2020	79,355,627	$	—	$	546,169	$	1,056	$	(205,354)	$	341,871
Issuance of common stock upon exercise of stock options and restricted stock agreements	782,554	—		3,938		—		—		3,938
Vesting of restricted stock units, net of employee payroll taxes	146,174	—		(2,591)		—		—		(2,591)
Shares issued related to a business combination	1,499,651	—		38,875		—		—		38,875
Other comprehensive loss	—	—		—		(422)		—		(422)
Stock-based compensation	—	—		13,495		—		—		13,495
Net loss	—	—		—		—		(20,608)		(20,608)
Balances as of October 31, 2020	81,784,006	$	—	$	599,886	$	634	$	(225,962)	$	374,558


		Six Months Ended July 31, 2020																		Nine Months Ended October 31, 2020
		Common Stock			Additional Paid-in Capital				Accumulated Other Comprehensive Income			Accumulated Deficit				Total Stockholders’ Equity				Common Stock						Additional Paid-in Capital				Accumulated Other Comprehensive Income				Accumulated Deficit				Total Stockholders’ Equity
		Shares	Amount								Shares								Amount
Balances as of January 31, 2020	Balances as of January 31, 2020	77,793,540	$	—			$	487,008						$	137			$	(179,207)		$	307,938	Balances as of January 31, 2020		77,793,540			$	—			$	487,008			$	137			$	(179,207)	$	307,938
Issuance of common stock upon exercise of stock options and restricted stock agreements	Issuance of common stock upon exercise of stock options and restricted stock agreements	1,286,892	—		5,771				—			—				5,771			Issuance of common stock upon exercise of stock options and restricted stock agreements	2,069,446			—				9,709				—				—				9,709
Vesting of restricted stock units, net of employee payroll taxes	Vesting of restricted stock units, net of employee payroll taxes	93,942	—		(1,743)				—			—				(1,743)			Vesting of restricted stock units, net of employee payroll taxes	240,116			—			(4,334)				—				—				(4,334)
Vesting of early exercised options	Vesting of early exercised options	—	—		507				—			—				507			Vesting of early exercised options	—			—			507				—				—				507
Equity component of convertible senior notes, net of issuance costs	Equity component of convertible senior notes, net of issuance costs	—	—		68,478				—			—				68,478			Equity component of convertible senior notes, net of issuance costs	—			—			68,478				—				—				68,478
Purchases of capped calls related to convertible senior notes	Purchases of capped calls related to convertible senior notes	—	—		(35,708)				—			—				(35,708)			Purchases of capped calls related to convertible senior notes	—			—			(35,708)				—				—				(35,708)
Shares issued related to a business combination																			Shares issued related to a business combination	1,499,651			—			38,875				—				—				38,875
Issuance of common stock in connection with employee stock purchase plan	Issuance of common stock in connection with employee stock purchase plan	181,253	—		3,558				—			—				3,558			Issuance of common stock in connection with employee stock purchase plan	181,253			—			3,558				—				—				3,558
Other comprehensive income	Other comprehensive income	—	—		—				919			—				919			Other comprehensive income	—			—			—				497				—				497
Stock-based compensation	Stock-based compensation	—	—		18,298				—			—				18,298			Stock-based compensation	—			—			31,793				—				—				31,793
Net loss	Net loss	—	—		—				—			(26,147)				(26,147)			Net loss	—			—			—				—				(46,755)				(46,755)
Balances as of July 31, 2020		79,355,627	$	—	$	546,169			$	1,056		$	(205,354)			$	341,871
Balances as of October 31, 2020																			Balances as of October 31, 2020	81,784,006			$	—		$	599,886			$	634			$	(225,962)			$	374,558

See Notes to Condensed Consolidated Financial Statements

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PAGERDUTY, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Nine Months Ended October 31,
	2021		2020
Cash flows from operating activities
Net loss	$	(78,560)	$	(46,755)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	6,160		3,352
Amortization of deferred contract costs	10,651		7,894
Amortization of debt discount and issuance costs (1)	1,350		4,493
Stock-based compensation	47,866		31,735
Non-cash lease expense	3,331		3,299
Other	2,592		1,897
Changes in operating assets and liabilities:
Accounts receivable	360		(3,879)
Deferred contract costs	(16,842)		(10,944)
Prepaid expenses and other assets	(857)		(3,605)
Accounts payable	3,836		(210)
Accrued expenses and other liabilities	(79)		2,224
Accrued compensation	3,760		7,689
Deferred revenue	12,878		12,475
Lease liabilities	(3,812)		(2,959)
Net cash (used in) provided by operating activities	(7,366)		6,706
Cash flows from investing activities
Purchases of property and equipment	(1,376)		(3,402)
Capitalization of internal-use software costs	(2,701)		(328)
Business acquisitions, net of cash acquired	(160)		(49,656)
Proceeds from maturities of held-to-maturity investments	—		28,040
Purchases of available-for-sale investments	(150,608)		(153,254)
Proceeds from maturities of available-for-sale investments	156,616		123,352
Proceeds from sales of available-for-sale investments	27,380		9,285
Net cash provided by (used in) investing activities	29,151		(45,963)
Cash flows from financing activities
Proceeds from issuance of convertible senior notes, net of issuance costs paid of $8,835	—		278,665
Purchases of capped calls related to convertible senior notes	—		(35,708)
Proceeds from employee stock purchase plan	4,889		3,558
Proceeds from issuance of common stock upon exercise of stock options	12,517		9,709
Employee payroll taxes paid related to net share settlement of restricted stock units	(18,619)		(4,334)
Net cash (used in) provided by financing activities	(1,213)		251,890
Net increase in cash, cash equivalents, and restricted cash	20,572		212,633
Cash, cash equivalents, and restricted cash at beginning of period	339,166		124,024
Cash, cash equivalents, and restricted cash at end of period	$	359,738	$	336,657

Supplemental cash flow data:
Cash paid for income taxes	$	126	$	—
Cash paid for interest	$	1,797	$	—
Non-cash investing and financing activities:
Vesting of early exercised options	$	—	$	507
Purchase of property and equipment, accrued but not yet paid	$	823	$	274
Costs related to issuance of convertible senior notes, accrued but not yet paid	$	—	$	470
Stock-based compensation capitalized in internal use software	$	848	$	—
Bonuses capitalized in internal use software	$	121	$	—

Six Months Ended July 31,
2021 2020
Cash flows from operating activities
Net loss $ (52,219) $ (26,147)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization 4,027 2,039
Amortization of deferred contract costs 6,812 5,064
Amortization of debt discount and issuance costs (1)
898 1,258
Stock-based compensation 30,088 18,276
Non-cash lease expense 2,209 2,204
Other 1,695 1,426
Changes in operating assets and liabilities:
Accounts receivable 6,473 (1,293)
Deferred contract costs (9,485) (6,199)
Prepaid expenses and other assets (2,762) (4,989)
Accounts payable 1,179 (1,549)
Accrued expenses and other liabilities 3,373 3,618
Accrued compensation (3,830) 1,287
Deferred revenue 4,030 8,611
Lease liabilities (2,504) (1,744)
Net cash (used in) provided by operating activities (10,016) 1,862
Cash flows from investing activities
Purchases of property and equipment (1,291) (3,292)
Capitalization of internal-use software costs (1,917) (111)
Payments related to a business acquisition (160) —
Proceeds from maturities of held-to-maturity investments — 24,040
Purchases of available-for-sale investments (116,103) (100,029)
Proceeds from maturities of available-for-sale investments 116,150 71,632
Proceeds from sales of available-for-sale investments 27,380 7,285
Net cash provided by (used in) investing activities 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
Purchases of capped calls related to convertible senior notes — (35,708)
Proceeds from employee stock purchase plan 4,889 3,558
Proceeds from issuance of common stock upon exercise of stock options 7,430 5,771
Employee payroll taxes paid related to net share settlement of restricted stock units (11,003) (1,743)
Net cash provided by financing activities 1,316 251,227
Net increase in cash, cash equivalents, and restricted cash 15,359 252,614
Cash, cash equivalents, and restricted cash at beginning of period 339,166 124,024
Cash, cash equivalents, and restricted cash at end of period $ 354,525 $ 376,638
Supplemental cash flow data:
Cash paid for income taxes $ 72 $ —
Cash paid for interest $ 1,797 $ —
Non-cash investing and financing activities:
Vesting of early exercised options $ — $ 507
Purchase of property and equipment, accrued but not yet paid $ 402 $ 385
Costs related to issuance of convertible senior notes, accrued but not yet paid $ — $ 1,154
Stock-based compensation capitalized in internal use software $ 516 $ —
Receivables for cash in-transit on stock option exercises $ 792 $ —
(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 our 1.25% Convertible Senior Notes (the “Notes”) from February 1, 2021.

See Notes to Condensed Consolidated Financial Statements

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PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Description of Business and Basis of Presentation

Description of Business

PagerDuty, Inc. was incorporated under the laws of the state of Delaware in May 2010.

PagerDuty acts as the central nervous system for the digital enterprise. PagerDuty harnesses digital signals from virtually any software-enabled system or device, combines it with human response data and orchestrates teams to take the right actions in real time. The Company’s products help organizations improve operations, accelerate innovation, increase revenue, mitigate security risk, and deliver a great customer experience.

As used herein, “PagerDuty”, “we”, “our”, “the Company” and similar terms include PagerDuty, Inc., unless the context indicates otherwise.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The condensed consolidated balance sheet as of January 31, 2021 was derived from the audited consolidated financial statements as of that date but does not include all of the information and notes required by GAAP for complete financial statements. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended January 31, 2021, included in the Company’s Annual Report on Form 10-K, filed with the SEC.

The condensed consolidated financial statements include the results of PagerDuty, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.

In the opinion of management, the information contained herein reflects all adjustments necessary for a fair presentation of the Company’s financial position, results of operations ~~financial position, cash flows,~~ and comprehensive loss, statements of stockholders’ ~~equity.~~equity, and cash flows. The results of operations for the three and ~~six~~nine months ended ~~July~~October 31, 2021 are not necessarily indicative of the results to be expected for the full year ending January 31, 2022 or for any other interim period, or for any future year.

The Company’s fiscal year ends on January 31. References to fiscal 2022, for example, refer to the fiscal year ending January 31, 2022.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make, on an ongoing basis, estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates. The Company’s most significant estimates and judgments involve the fair value of stock awards, period of benefit for amortizing deferred contract costs, the determination of the allowance for doubtful accounts, the provision for income taxes, including the related valuation allowance and any uncertain tax positions, fair value of acquired assets and assumed liabilities, impairment of goodwill and intangible assets, the incremental borrowing rate for lease liabilities, and estimates related to our revenue recognition, such as the assessment of performance obligations in our revenue arrangements and the fair value assigned to each performance obligation, among others. Management bases its

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PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

In December 2019, the novel coronavirus and resulting disease (“COVID-19”) was reported and in March 2020 the World Health Organization declared it a pandemic. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts on the condensed consolidated financial statements during the three and ~~six~~nine months ended ~~July~~October 31, 2021 and 2020. As events continue to evolve and additional information becomes available, our assumptions and estimates may change materially in future periods.

2. Summary of Significant Accounting Policies

Concentrations of Risk and Significant Customers

The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, available-for-sale investments, and accounts receivable. All of the Company’s cash and cash equivalents and investments are invested in money market funds, ~~United States (“~~U.S.”) Treasury securities, commercial paper, corporate debt securities, or U.S. Government agency securities that management believes to be of high credit quality.

No single customer accounted for 10% of the total accounts receivable balance as of ~~July~~October 31, 2021 or January 31, 2021. No single customer represented 10% or more of revenue for the three and ~~six~~nine months ended ~~July~~October 31, 2021 or 2020.

Segment Information

The Company manages its operations and allocates resources as 1 operating segment. The Company’s chief operating decision maker (“CODM”) is its chief executive officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance, and allocating resources. Refer to Note ~~15,~~16, “Geographic Information” for information regarding the Company's long-lived assets and revenue by geography.

Related Party Transactions

Certain members of the Company’s Board of Directors serve as directors of, or are executive officers of, and in some cases are investors in, companies that are customers or vendors of the Company. The Company recognized $1.1 million of revenues associated with related parties during the nine months ended October 31, 2021 and billed ~~$1.1~~$2.2 million to entities associated with related parties during the ~~three and six~~nine months ended ~~July 31, 2021, which were included in the accounts receivable balance as of July~~October 31, 2021. Other related party transactions were not material for the three and ~~six~~nine months ended ~~July~~October 31, 2021 and 2020.

Significant Accounting Policies

There have been no significant changes to our significant accounting policies as compared to those described in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021, other than as set forth below.

Stock-Based Compensation

The Company recognizes compensation expense for all stock-based payment awards, including stock options, restricted stock units (“RSUs”), and performance stock units (“PSUs”), based on the estimated fair value of the award on the grant date.

The Company estimates the fair value of stock options issued to employees on the date of grant using the Black-Scholes option pricing model, which is impacted by the estimated fair value of the Company’s common stock, as well as certain assumptions including the expected volatility over the term of the option awards, the expected term of the awards, risk-free interest rates and the expected dividend yield. Assumptions and estimates used in the determination of the fair value of stock options are as follows:

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PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Expected volatility—Expected volatility is a measure of the amount by which the stock price is expected to fluctuate. Since the Company does not have sufficient trading history for its common stock, it estimates the expected volatility of its stock options by taking the average historical volatility of a group of comparable publicly traded companies over a period equal to the expected life of the options.

Expected term—The Company determines the expected term based on the average period the stock options are expected to remain outstanding, generally calculated as the midpoint of the stock options’ vesting term and contractual expiration period, as the Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior.

Risk-free rate—The Company uses the U.S. Treasury yield for its risk-free interest rate that corresponds with the expected term.

Expected dividend yield—The Company utilizes a dividend yield of zero, as it does not currently issue dividends and does not expect to in the future.

The Company estimates the fair value of RSUs and PSUs at our stock price on the grant date.

The Company estimates the fair value of shares to be issued under the employee stock purchase plan (the “ESPP”) on the first day of the offering period using the Black-Scholes valuation model, which is impacted by the estimated fair value of the Company’s common stock, as well as certain assumptions including the expected volatility over the term of the offering period, the expected term of the awards, risk-free interest rates and the expected dividend yield. Assumptions used in the determination of the fair value of the ESPP are the same as those used in the determination of the fair value of our stock options.

The Company generally recognizes compensation expense for employee stock-based payment awards on a straight-line basis over the period during which an award recipient is required to provide services in exchange for the award (generally the vesting period of the award), with the exception of PSUs which are recognized using the accelerated attribution method. The Company accounts for forfeitures as they occur.

The fair value of each non-employee stock option is estimated at the date of grant using the Black-Scholes option pricing model and is not remeasured over the vesting term. Assumptions used in valuing non-employee stock options are generally consistent with those used for employee stock options with the exception that the expected term is over the contractual life.

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued Accounting Standard Update No. 2020-06 (“ASU 2020-06”), Debt—Debt with Conversion Options (“Subtopic 470-20”) and Derivatives and Hedging—Contracts in Entity’s Own Equity (“Subtopic 815-40”)~~(“ASU 2020-06”)~~, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity's own equity. ASU 2020-06 also improves and amends the related Earnings Per Share guidance for both Subtopics. The ASU is part of the FASB's simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. The Company early adopted ASU 2020-06 as of February 1, 2021 using the modified retrospective approach. As a result of the adoption of ASU 2020-06, the Convertible Notes due July 2025 (the “Notes”) are no longer bifurcated into separate liability and equity components in the ~~July~~October 31, 2021 condensed consolidated balance sheets. Rather, the $287.5 million principal amount of the Company’s Convertible Notes was classified only as a liability in the ~~July~~October 31, 2021 condensed consolidated balance sheets. Upon adoption, the Company recognized an increase to long-term debt of $61.7 million, a decrease to additional paid in capital of $68.5 million, and a decrease in accumulated deficit of $6.7 million on its condensed consolidated balance sheets as of February 1, 2021. The adoption did not affect the ~~Company’s condensed~~

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PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Company’s condensed consolidated statements of operations or condensed consolidated statements of cash flows. Refer to Note 9.10, “Debt and Financing ~~Instruments”~~Arrangements” for further information.


	As of January 31, 2021		ASU 2020-06 Adoption Adjustment		As of February 1, 2021
	(in thousands)
Liabilities
Outstanding principal	$	287,500	$	—	$	287,500
Unamortized debt discount and issuance costs	(69,972)		61,736		(8,236)
Net carrying amount	$	217,528	$	61,736	$	279,264

Equity
Additional paid-in-capital	$	(614,494)	$	68,478	$	(546,016)
Accumulated deficit	(248,110)		6,742		(241,368)

Recently Issued Accounting Pronouncements

In October 2021, the FASB issued Accounting Standard Update No. 2021-08 (“ASU 2021-08”), Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606 (Revenue from Contracts with Customers). At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. The ASU is part of the FASB's simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. ASU 2021-08 will be effective for annual reporting periods beginning after December 15, 2022. Early adoption is permitted, including adoption in an interim period. The adoption of the standard will impact future business combinations and require the Company to measure acquired contract assets and liabilities in accordance with ASC 606. The Company does not expect the adoption of ASU 2021-08 to have a material impact on the consolidated financial statements.

3. Cash, Cash Equivalents, and Investments

Cash, cash equivalents, and investments consisted of the following:


		As of July 31, 2021		As of January 31, 2021			As of October 31, 2021		As of January 31, 2021
		(in thousands)					(in thousands)
Cash and cash equivalents	Cash and cash equivalents					Cash and cash equivalents
Cash	Cash	$	326,999	$	184,308	Cash	$	297,777	$	184,308
Money market funds	Money market funds	27,526		139,870		Money market funds	59,961		139,870
Commercial paper						Commercial paper	2,000		—
U.S. Treasury securities	U.S. Treasury securities	—		14,988		U.S. Treasury securities	—		14,988
Total cash and cash equivalents	Total cash and cash equivalents	$	354,525	$	339,166	Total cash and cash equivalents	$	359,738	$	339,166
Available-for-sale investments:	Available-for-sale investments:					Available-for-sale investments:
U.S. Treasury securities	U.S. Treasury securities	$	50,390	$	45,026	U.S. Treasury securities	$	39,217	$	45,026
Commercial paper	Commercial paper	24,635		34,598		Commercial paper	39,778		34,598
Corporate debt securities	Corporate debt securities	117,271		141,488		Corporate debt securities	106,550		141,488
Total available-for-sale investments	Total available-for-sale investments	$	192,296	$	221,112	Total available-for-sale investments	$	185,545	$	221,112

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PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The following tables summarize the Company’s investments’ adjusted cost, net unrealized gains (losses), and fair value by significant investment category as of ~~July~~October 31, 2021 and January 31, 2021. Gross realized gains or losses from sales of available-for-sale securities were not material for the three and ~~six~~nine months ended ~~July~~October 31, 2021.

As of July 31, 2021
Cost Basis Unrealized Gain (Loss), Net Recorded Basis
(in thousands)
Available-for-sale investments:
U.S. Treasury securities $ 50,392 $ (2) $ 50,390
Commercial paper 24,632 3 24,635
Corporate debt securities 117,241 30 117,271
Total available-for-sale investments $ 192,265 $ 31 $ 192,296

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~~PAGERDUTY, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(unaudited)~~


	As of October 31, 2021
	Cost Basis		Unrealized Loss, Net		Recorded Basis
	(in thousands)
Available-for-sale investments:
U.S. Treasury securities	$	39,221	$	(4)	$	39,217
Commercial paper	39,791		(13)		39,778
Corporate debt securities	106,724		(174)		106,550
Total available-for-sale investments	$	185,736	$	(191)	$	185,545


	As of January 31, 2021
	Cost Basis		Unrealized Gain (Loss), Net		Recorded Basis
	(in thousands)
Available-for-sale investments:
U.S. Treasury securities	$	45,023	$	3	$	45,026
Commercial paper	34,607		(9)		34,598
Corporate debt securities	141,139		349		141,488
Total available-for-sale investments	$	220,769	$	343	$	221,112

The following ~~table presents~~tables present the Company’s available-for-sale securities by contractual maturity date as of ~~July~~October 31, 2021 and January 31, 2021:


		As of July 31, 2021					As of October 31, 2021
		Cost Basis		Recorded Basis			Cost Basis		Recorded Basis
		(in thousands)					(in thousands)
Due within one year	Due within one year	$	149,399	$	149,458	Due within one year	$	145,249	$	145,192
Due between one to five years	Due between one to five years	42,866		42,838		Due between one to five years	40,487		40,353
Total	Total	$	192,265	$	192,296	Total	$	185,736	$	185,545


	As of January 31, 2021
	Cost Basis		Recorded Basis
	(in thousands)
Due within one year	$	171,498	$	171,837
Due between one to five years	49,271		49,275
Total	$	220,769	$	221,112

As of October 31, 2021, there were 65 available-for-sale securities in an unrealized loss position, 1 of which was in a continuous unrealized loss position for the last 12 months. The total unrealized loss related to these securities was $0.2 million. Unrealized losses for securities that were in an unrealized loss position as of January 31, 2021 were not material.

When evaluating investments for impairment, the Company reviews factors such as the extent to which fair value has been below cost basis, the financial condition of the issuer and any changes thereto, and the Company’s

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PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

intent to sell, or whether it is more likely than not that the Company will be required to sell, the investment before recovery of the investment’s amortized cost. No impairment loss has been recorded on the securities included in the tables above, as the Company believes that any decrease in fair value of these securities is temporary and the Company expects to recover at least up to the initial cost of the investment for these securities. The Company has not recorded an allowance for credit losses, as the Company believes any such losses would be immaterial based on the high-grade credit rating for each of its marketable securities as of the end of each period.

4. Fair Value Measurements

The Company measures its financial assets and liabilities at fair value each reporting period using a fair value hierarchy that prioritizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value, as follows:

Level 1—Valuations based on observable inputs that reflect quoted prices for identical assets or liabilities in active markets.

Level 2—Valuations based on inputs that are directly or indirectly observable in the marketplace.

Level 3—Valuations based on unobservable inputs that are supported by little or no market activity.

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~~PAGERDUTY, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(unaudited)~~

The following ~~table presents~~tables present information about the Company’s financial assets that are required to be measured or disclosed at fair value using the above input categories:


		As of July 31, 2021									As of October 31, 2021
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
		(in thousands)									(in thousands)
Money market funds	Money market funds	$	27,526	$	—	$	—	$	27,526	Money market funds	$	59,961	$	—	$	—	$	59,961
U.S. Treasury securities	U.S. Treasury securities	—		50,390		—		50,390		U.S. Treasury securities	—		39,217		—		39,217
Commercial paper	Commercial paper	—		24,635		—		24,635		Commercial paper	2,000		39,778		—		41,778
Corporate debt securities	Corporate debt securities	—		117,271		—		117,271		Corporate debt securities	—		106,550		—		106,550
Total	Total	$	27,526	$	192,296	$	—	$	219,822	Total	$	61,961	$	185,545	$	—	$	247,506
Included in cash equivalents	Included in cash equivalents							$	27,526	Included in cash equivalents							$	61,961
Included in investments	Included in investments							$	192,296	Included in investments							$	185,545


	As of January 31, 2021
	Level 1		Level 2		Level 3		Total
	(in thousands)
Money market funds	$	139,870	$	—	$	—	$	139,870
U.S. Treasury securities	14,988		45,026		—		60,014
Commercial paper	—		34,598		—		34,598
Corporate debt securities	—		141,488		—		141,488
Total	$	154,858	$	221,112	$	—	$	375,970
Included in cash equivalents							$	154,858
Included in investments							$	221,112

The Company’s assets that are measured by management at fair value on a recurring basis are generally classified within Level 1 or Level 2 of the fair value hierarchy.

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PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of ~~July~~October 31, 2021 and January 31, 2021, the Company’s Level 2 securities were priced by pricing vendors. These pricing vendors utilize observable market information in pricing these securities or, if specific prices are not available for these securities, use other observable inputs like market transactions involving identical or comparable securities.

The carrying amounts of certain financial instruments, including cash held in banks, accounts receivable, and accounts payable approximate fair value due to their short-term maturities and are excluded from the fair value table above.

Convertible Senior Notes

As of ~~July~~October 31, 2021, the estimated fair value of the Notes was approximately ~~$364.2~~$369.3 million. The fair value was determined based on the quoted price for the Notes in an inactive market on the last trading day of the reporting period and is considered as Level 2 in the fair value hierarchy.

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~~PAGERDUTY, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(unaudited)~~

5. Goodwill and Acquired Intangible Assets

There have been no changes in the carrying amount of goodwill since January 31, 2021.

Acquired intangible assets subject to amortization as of ~~July~~October 31, 2021 were as follows:


		Cost		Accumulated Amortization		Net		Weighted Average Remaining Useful Life		Cost		Accumulated Amortization		Net		Weighted Average Remaining Useful Life
		(in thousands)						(in years)		(in thousands)						(in years)
Customer relationships	Customer relationships	$	21,800	$	(1,817)	$	19,983	9.2	Customer relationships	$	21,800	$	(2,362)	$	19,438	8.9
Developed technology	Developed technology	5,600		(933)		4,667		4.2	Developed technology	5,600		(1,213)		4,387		3.9
Trademarks	Trademarks	400		(167)		233		1.2	Trademarks	400		(217)		183		0.9
Total acquired intangibles, net	Total acquired intangibles, net	$	27,800	$	(2,917)	$	24,883		Total acquired intangibles, net	$	27,800	$	(3,792)	$	24,008

For the three ~~and six~~ months ended ~~July~~October 31, 2021 and 2020, amortization expense related to ~~acquired~~ intangible assets was $0.9 million and ~~$1.8~~$0.3 million, respectively. NoFor the nine months ended October 31, 2021 and 2020, amortization expense related to intangible assets was $2.6 million and $0.3 million, respectively.

6. Business Combinations

On October 1, 2020, the Company completed the acquisition of Rundeck Inc (“Rundeck”), a leading provider of DevOps automation for enterprise. The Company acquired Rundeck for purchase consideration of $95.5 million in a combination of cash and common stock. The acquisition was accounted for as a business combination and the total purchase consideration was allocated to the net tangible and intangible assets and liabilities based on their fair values on the acquisition date and the excess was recorded ~~during~~as goodwill. This resulted in increases of $72.1 million to goodwill, $21.8 million to customer relationships, $5.6 million to developed technology, and $0.4 million to trademarks.

From the date of the acquisition, the financial results of Rundeck have been included in and are immaterial to our condensed consolidated financial statements. Pro forma revenue and results of operations have not been presented because the historical results are not material to our condensed consolidated financial statements in any period presented.

The Company did not complete any acquisitions in the three and ~~six~~nine months ended ~~July~~October 31, ~~2020.~~2021.

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PAGERDUTY, INC.

6.Notes to Condensed Consolidated Financial Statements

(unaudited)

7. Property and Equipment, Net

Property and equipment, net, consisted of the following:


		As of July 31, 2021		As of January 31, 2021			As of October 31, 2021		As of January 31, 2021
		(in thousands)					(in thousands)
Leasehold improvements	Leasehold improvements	$	12,957	$	12,767	Leasehold improvements	$	13,246	$	12,767
Computers and equipment	Computers and equipment	7,510		6,562		Computers and equipment	7,425		6,562
Furniture and fixtures	Furniture and fixtures	3,002		3,017		Furniture and fixtures	3,040		3,017
Capitalized internal-use software	Capitalized internal-use software	3,936		1,355		Capitalized internal-use software	5,180		1,355
Gross property and equipment (1)	Gross property and equipment (1)	27,405		23,701		Gross property and equipment (1)	28,891		23,701
Accumulated depreciation and amortization	Accumulated depreciation and amortization	(13,289)		(11,062)		Accumulated depreciation and amortization	(14,266)		(11,062)
Property and equipment, net	Property and equipment, net	$	14,116	$	12,639	Property and equipment, net	$	14,625	$	12,639

(1) Gross property and equipment includes construction-in-progress for leasehold improvements and capitalized internal-use software of ~~$0.7~~$2.7 million and ~~$0.5~~$1.5 million that had not yet been placed in service as of ~~July~~October 31, 2021 and January 31, 2021, respectively. The costs associated with construction-in-progress are not amortized until the asset is available for its intended use.

Depreciation and amortization expense was ~~$1.1~~$1.3 million and $1.0 million for the three months ended ~~July~~October 31, 2021 and 2020, respectively, and ~~$2.1~~$3.4 million and ~~$1.9~~$2.9 million for the ~~six~~nine months ended ~~July~~October 31, 2021 and 2020, respectively.

7.8. Deferred Contract Costs

Deferred contract costs, which primarily consist of deferred sales commissions, were ~~$34.3~~$37.8 million and $31.6 million as of ~~July~~October 31, 2021 and January 31, 2021, respectively. Amortization expense for deferred contract costs was ~~$3.6~~$3.9 million and ~~$2.6~~$2.8 million for the three months ended ~~July~~October 31, 2021 and 2020, respectively, and ~~$6.8~~$10.7 million and ~~$5.1~~$7.9 million for the ~~six~~nine months ended ~~July~~October 31, 2021 and 2020, respectively. There was no impairment charge related to the costs capitalized for the periods presented.

8.9. Leases

Operating Leases

The Company has entered into various non-cancellable operating leases for its office spaces with lease periods expiring between fiscal 2022 and fiscal 2029. The operating lease agreements generally provide for rental payments on a graduated basis and for options to renew, which could increase future minimum lease payments if exercised.

Lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The lease right-of-use assets also include any lease payments made and exclude lease incentives such as tenant improvement allowances.

The operating leases typically include non-lease components such as common-area maintenance costs. The Company has elected to include non-lease components with lease payments for the purpose of calculating lease right-of-use assets and liabilities, to the extent that they are fixed. Non-lease components that are not fixed are expensed as incurred as variable lease payments.

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PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Leases with a term of one year or less are not recognized on our condensed consolidated balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.

The following ~~tables present~~table presents information about leases on the condensed consolidated balance sheet.


		As of July 31, 2021		As of January 31, 2021			As of October 31, 2021		As of January 31, 2021
		(in thousands)					(in thousands)
Assets	Assets					Assets
Lease right-of-use assets	Lease right-of-use assets	$	22,482	$	24,691	Lease right-of-use assets	$	21,360	$	24,691
Liabilities	Liabilities					Liabilities
Lease liabilities	Lease liabilities	5,469		5,262		Lease liabilities	5,554		5,262
Lease liabilities, non-current	Lease liabilities, non-current	23,831		26,542		Lease liabilities, non-current	22,438		26,542

As of ~~July~~October 31, 2021, the weighted average remaining lease term was ~~5.3~~5.0 years and the weighted average discount rate used to determine the net present value of the lease liabilities was 3.7%.

The following table presents information about leases on the condensed consolidated statement of operations.

Three Months Ended July 31, Six Months Ended July 31,
2021 2020 2021 2020
(in thousands)
Operating lease expense $ 1,403 $ 1,445 $ 2,772 $ 2,887
Short-term lease expense 79 261 169 560
Variable lease expense 202 361 315 663

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~~PAGERDUTY, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(unaudited)~~


	Three Months Ended October 31,				Nine Months Ended October 31,
	2021		2020		2021		2020
	(in thousands)
Operating lease expense	$	1,401	$	1,448	$	4,173	$	4,335
Short-term lease expense	304		105		473		665
Variable lease expense	313		335		628		998

The following table presents supplemental cash flow information about the Company’s leases.

Three Months Ended July 31, Six Months Ended July 31,
2021 2020 2021 2020
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities $ 1,571 $ 1,149 $ 3,143 $ 2,287


	Three Months Ended October 31,				Nine Months Ended October 31,
	2021		2020		2021		2020
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities	$	1,581	$	1,524	$	4,724	$	3,811

9.10. Debt and Financing Arrangements

Convertible Senior Notes

On June 25, 2020, the Company issued $287.5 million in aggregate principal amount of the Notes in a private offering pursuant to an Indenture dated June 25, 2020 (the “Indenture”). The total net proceeds from the debt offering, after deducting initial purchaser discounts and debt issuance costs, paid or payable by us, were $278.2 million.

The Notes are senior, unsecured obligations of the Company and accrue interest payable semiannually in arrears on January 1 and July 1 of each year, beginning on January 1, 2021, at a rate of 1.25% per year. The Notes will mature on July 1, 2025, unless such notes are converted, redeemed or repurchased earlier. The Notes are convertible into cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election in the manner and subject to the terms and conditions provided in the Indenture.

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PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Holders of the Notes may convert all or any portion of their Notes at their option at any time prior to the close of business on April 1, 2025, only under the following circumstances:

•During any fiscal quarter commencing after the fiscal quarter ended October 31, 2020 (and only during such fiscal quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

•During the 5 business day period after any 10 consecutive trading day period (the measurement period) in which the “trading price” (as defined in the Indenture) per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;

•If the Company calls such Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or

•Upon the occurrence of specified corporate events, as noted in the Indenture.

On or after April 1, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Notes may convert all or any portion of their Notes at any time, regardless of the foregoing circumstances.

The conversion rate will initially be 24.9507 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $40.08 per share of common stock. The conversion rate is subject to adjustment under certain circumstances in accordance with the terms of the Indenture, but will not be adjusted for accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Notes in connection with ~~such~~ a fundamental change, as defined in the Indenture.

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~~PAGERDUTY, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(unaudited)~~

The Company may not redeem the Notes prior to July 6, 2023. The Company may redeem for cash all or any portion of the Notes, at its option, on a redemption date occurring on or after July 6, 2023 and prior to the 41st scheduled trading day immediately preceding the maturity date, if the last reported sale price of the common stock has been at least 130% of the conversion price for the Notes then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Notes.

If the Company undergoes a fundamental change (as defined in the Indenture), holders may require the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, the trustee or the holders of at least 25% in aggregate principal amount of the outstanding Notes may declare the entire principal of all the Notes plus accrued and unpaid interest to be immediately due and payable.

Prior to the adoption of ASU 2020-06 on February 1, 2021 and in accounting for the issuance of the Notes, the Company separated the Notes into liability and equity components. The carrying amount of the liability component was calculated using a discount rate of 7.30%, which was determined by measuring the fair value of a similar debt instrument that does not have an associated conversion feature. The carrying amount of the equity component representing the conversion option was $70.8 million and was determined by deducting the fair value of the liability component from the par value of the Notes. The equity component was not remeasured as long as it continued to meet the conditions for equity classification, and the equity component was recorded in additional ~~paid-in-capital~~paid-

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PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

in-capital in the accompanying condensed consolidated balance sheet. The excess of the principal amount of the liability component over its carrying amount, or the debt discount, was amortized to interest expense at an annual effective interest rate of 7.88% over the contractual terms of the Notes. The interest rate was based on the interest rate of similar liabilities at the time of issuance that did not have associated convertible features. The debt component was classified as a long-term liability as of January 31, 2021.

Prior to the adoption of ASU 2020-06 on February 1, 2021 and in accounting for the issuance costs of $9.3 million related to the Notes, the Company allocated the total amount incurred to the liability and equity components of the Notes based on their relative values. Issuance costs attributable to the liability component were $7.0 million and were amortized to interest expense using the effective interest method over the contractual term of the Notes. Issuance costs attributable to the equity component were $2.3 million and were netted with the equity component in additional paid-in capital.

On February 1, 2021, the Company elected to early adopt ASU 2020-06 based on a modified retrospective transition method. Under such transition, prior-period information has not been retrospectively adjusted.

In accounting for the Notes after adoption of ASU 2020-06, the Notes are accounted for as a single liability, and the carrying amount of the Notes is ~~$280.2~~$280.6 million as of ~~July~~October 31, 2021, with principal of $287.5 million, net of unamortized issuance costs of ~~$7.3~~$6.9 million. The Notes were classified as ~~long term~~long-term liabilities as of ~~July~~October 31, 2021. The issuance costs related to the Notes are being amortized to interest expense over the contractual term of the Notes at an effective interest rate of 1.93%.

The net carrying amount of the liability component of the Notes as of ~~July~~October 31, 2021 (post-ASU 2020-06 adoption) and as of January 31, 2021 (pre-ASU 2020-06 adoption) was as follows:

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~~PAGERDUTY, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(unaudited)~~


		As of July 31, 2021		As of January 31, 2021			As of October 31, 2021		As of January 31, 2021
		(in thousands)					(in thousands)
Principal	Principal	$	287,500	$	287,500	Principal	$	287,500	$	287,500
Less: unamortized debt discount	Less: unamortized debt discount	—		(63,664)		Less: unamortized debt discount	—		(63,664)
Less: unamortized issuance costs	Less: unamortized issuance costs	(7,338)		(6,308)		Less: unamortized issuance costs	(6,885)		(6,308)
Net carrying amount	Net carrying amount	$	280,162	$	217,528	Net carrying amount	$	280,615	$	217,528

The net carrying amount of the equity component of the Notes as of ~~July~~October 31, 2021 (post-ASU 2020-06 adoption) and as of January 31, 2021 (pre-ASU 2020-06 adoption) was as follows:


	As of ~~July~~October 31, 2021		As of January 31, 2021
	(in thousands)
Proceeds allocated to the conversion options (debt discount)	$	—	$	70,768
Less: issuance costs	—		(2,290)
Carrying amount of the equity component	$	—	$	68,478

Interest expense recognized related to the Notes is as follows:

Three Months Ended July 31, Six Months Ended July 31,
2021 2020 2021 2020
(in thousands)
Contractual interest expense $ 918 $ 349 $ 1,797 $ 349
Amortization of debt discount — 1,145 — 1,145
Amortization of debt issuance costs 460 114 898 114
Total interest expense related to the Notes $ 1,378 $ 1,608 $ 2,695 $ 1,608

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PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)


	Three Months Ended October 31,				Nine Months Ended October 31,
	2021		2020		2021		2020
	(in thousands)
Contractual interest expense	$	898	$	898	$	2,695	$	1,248
Amortization of debt discount	—		2,943		—		4,088
Amortization of debt issuance costs	452		292		1,350		405
Total interest expense related to the Notes	$	1,350	$	4,133	$	4,045	$	5,741

Capped Call Transactions

In connection with the offering of the Notes, the Company entered into privately negotiated capped call transactions (the “Capped Calls”) with certain financial institution counterparties (the “Option Counterparties”). The Capped Calls are generally intended to reduce or offset the potential dilution to the common stock upon any conversion of the Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price. For accounting purposes, the Capped Calls are separate transactions, and not part of the terms of the Notes. The Capped Calls are recorded in stockholders’ equity and are not accounted for as derivatives. The cost of $35.7 million incurred to purchase the Capped Calls were recorded as a reduction to additional paid-in capital in the accompanying condensed consolidated balance sheet.

The Capped Calls each have an initial strike price of approximately $40.08 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Notes. The Capped Calls have an initial cap price of $61.66 per share, subject to certain adjustments. The Capped Calls cover, subject to anti-dilution adjustments, approximately 7.2 million shares of our common stock. The Capped Calls are subject to automatic exercise over a 40 trading day period commencing on May 2, 2025, subject to earlier termination under certain circumstances.

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~~10.~~11. Commitments and Contingencies

Legal Matters

From time to time in the normal course of business, the Company may be subject to various claims and other legal matters arising in the ordinary course of business. The Company investigates these claims as they arise and accrues estimates for resolution of legal and other contingencies when losses are probable and estimable. The Company is not currently a party to any legal proceedings and does not anticipate any pending or threatened litigation that would be expected to have a material adverse effect on its financial condition, results of operations, or cash flows.

Warranties and Indemnification

The Company has entered into service-level agreements with a portion of its customers defining levels of uptime reliability and performance and permitting those customers to receive credits if the Company fails to meet the defined levels of uptime. To date, the Company has not experienced any significant failures to meet defined levels of uptime reliability and performance as a result of those agreements and, as a result, the Company has not incurred or accrued any material liabilities related to these agreements in the financial statements.

In the ordinary course of business, we may agree to indemnify customers, vendors, lessors, business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, services to be provided by us, or from intellectual property infringement claims made by third parties. As permitted under Delaware law, we have entered into indemnification agreements with our directors and certain officers and employees that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers, or employees. No demands have been made upon us to provide indemnification under such agreements, and there are no claims that we are aware of that could have a

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material effect on our consolidated balance sheets, consolidated statements of operations and comprehensive loss, or consolidated statements of cash flows.

~~11.~~12. Deferred Revenue and Performance Obligations

The following table presents the changes to the Company’s deferred revenue:


		Three Months Ended July 31,				Six Months Ended July 31,					Three Months Ended October 31,				Nine Months Ended October 31,
		2021		2020		2021		2020			2021		2020		2021		2020
		(in thousands)									(in thousands)
Deferred revenue, beginning of period	Deferred revenue, beginning of period	$	126,056	$	96,446	$	129,972	$	92,569	Deferred revenue, beginning of period	$	134,002	$	101,180	$	129,972	$	92,569
Billings	Billings	75,482		55,448		135,157		109,111		Billings	80,608		57,636		215,765		166,747
Deferred revenue assumed in the Rundeck acquisition										Deferred revenue assumed in the Rundeck acquisition	—		2,680		—		2,680
Revenue recognized	Revenue recognized	(67,536)		(50,714)		(131,127)		(100,500)		Revenue recognized	(71,760)		(53,772)		(202,887)		(154,272)
Deferred revenue, end of period	Deferred revenue, end of period	$	134,002	$	101,180	$	134,002	$	101,180	Deferred revenue, end of period	$	142,850	$	107,724	$	142,850	$	107,724

For the three ~~and six~~ months ended ~~July~~October 31, 2021 and 2020, the majority of revenue recognized was from the deferred revenue balances at the beginning of each quarter. For the nine months ended October 31, 2021 and 2020, approximately half of revenue recognized was from the deferred revenue balance at the beginning of each period.

As of ~~July~~October 31, 2021, future estimated revenue related to performance obligations for cloud-hosted and term-license software subscriptions with terms of more than one year that are unsatisfied or partially unsatisfied at the end of the reporting periods was approximately ~~$118.2~~$123.0 million. The Company expects to satisfy the substantial majority of these unsatisfied performance obligations over the next 24 months and the remainder thereafter. The Company applied the optional exemption for subscriptions with terms of less than one year.

~~12.~~13. Common Stock and Stockholders’ Equity

Equity Incentive Plans

The Company has 2 equity incentive plans: the 2010 Stock Plan (the “2010 Plan”) and the 2019 Equity Incentive Plan (the “2019 Plan”, collectively the “Stock Plans”). Upon completion of the Company’s ~~IPO~~initial public offering (“IPO”) in April 2019, the Company ceased granting awards under the 2010 Plan, and all shares that remained available for future issuance under the 2010 Plan at that time were transferred to the 2019 Plan. The 2019 Plan superseded and replaced the 2010 Plan. As of ~~July~~October 31, 2021 and January 31, 2021, the Company was authorized to grant up to ~~22,964,193~~23,156,318 shares and 18,059,506 shares of common stock, respectively, under the Stock Plans.

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The Company currently uses authorized and unissued shares to satisfy stock award ~~exercises.~~exercises and settlement of RSUs and PSUs. As of ~~July~~October 31, 2021 and January 31, 2021, there were ~~15,693,636~~14,102,032 shares and 13,060,282 shares available for future issuance under the Stock Plans, respectively.

Shares of common stock reserved for future issuance are as follows:


			~~July~~October 31, 2021
Outstanding stock options and unvested RSUs and PSUs ~~outstanding~~			~~14,965,580~~15,563,023
Available for future stock option, RSU, and PSU grants			~~15,693,636~~14,102,032
Available for ESPP			2,721,649
Total common stock reserved at ~~July~~October 31, 2021			~~33,380,865~~32,386,704

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Stock Option Activity

Stock option activity is as follows:


		Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value			Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
						(in thousands)							(in thousands)
Outstanding at January 31, 2021	Outstanding at January 31, 2021	11,177,838	$	8.25	6.9 years	$	452,452	Outstanding at January 31, 2021	11,177,838	$	8.25	6.9 years	$	452,452
Granted	Granted	48,866	$	41.52				Granted	151,296	$	42.05
Exercised	Exercised	(1,286,266)	$	6.36				Exercised	(2,010,991)	$	6.19
Canceled	Canceled	(283,443)	$	16.61				Canceled	(323,928)	$	17.81
Outstanding at July 31, 2021		9,656,995	$	8.43	6.5 years	$	310,586
Vested as of July 31, 2021		7,153,532	$	6.23	6.1 years	$	245,762
Outstanding at October 31, 2021								Outstanding at October 31, 2021	8,994,215	$	8.94	6.3 years	$	295,119
Vested as of October 31, 2021								Vested as of October 31, 2021	6,831,241	$	6.49	5.9 years	$	240,896

The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock options on the date of grant. The Company accounts for forfeitures as they occur. The following assumptions were used to calculate the fair value of employee stock option grants made during the periods:


		Three Months Ended July 31,				Six Months Ended July 31,					Three Months Ended October 31,				Nine Months Ended October 31,
		2021		2020		2021		2020			2021		2020		2021		2020
Expected dividend yield	Expected dividend yield	—	%	—	%	—	%	—	%	Expected dividend yield	—	%	—	%	—	%	—	%
Expected volatility	Expected volatility	46.5%		43.9	%	43.8% - 46.5%		43.3% - 43.9%		Expected volatility	46.0%		43.0% - 44.1%		43.8% - 46.5%		43.0% - 44.1%
Expected term (years)	Expected term (years)	6.1		6.1		6.1		6.1		Expected term (years)	6.1		3.7 - 6.1		6.1		3.7 - 6.1
Risk-free interest rate	Risk-free interest rate	1.04%		0.41%		1.04% - 1.16%		0.41% - 0.47%		Risk-free interest rate	1.11%		0.20% - 0.39%		1.04% - 1.16%		0.20% - 0.47%

Stock options granted during the three months ended ~~July~~October 31, 2021 and 2020 had a weighted average grant date fair value of ~~$19.08~~$19.01 and ~~$12.59~~$23.04 per share, respectively. The aggregate intrinsic value of stock options exercised during the three months ended ~~July~~October 31, 2021 and 2020 was ~~$25.6~~$27.3 million and ~~$11.6~~$19.0 million, respectively.

Stock options granted during the ~~six~~nine months ended ~~July~~October 31, 2021 and 2020 had a weighted average grant date fair value of ~~$18.23~~$18.76 and ~~$8.96~~$14.64 per share, respectively. The aggregate intrinsic value of stock options exercised during the ~~six~~nine months ended ~~July~~October 31, 2021 and 2020 was ~~$46.1~~$73.4 million and ~~$23.0~~$42.0 million, respectively.

The intrinsic value for options exercised is the difference between the market value of the stock and the exercise price of the stock option at the date of exercise.

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As of ~~July~~October 31, 2021, there was approximately ~~$23.5~~$21.6 million of total unrecognized compensation cost related to unvested stock options granted under the Stock Plans, which will be recognized over a weighted average period of 2.3 years.

Restricted Stock Units

A summary of the Company’s RSU activity and related information is as follows:

Number of RSUs Weighted
Average Grant Date Fair Value Per Share
Outstanding at January 31, 2021 3,971,128 $ 23.60
Granted 2,127,307 $ 41.31
Vested (407,887) $ 23.84
Canceled (636,581) $ 26.43
Outstanding at July 31, 2021 5,053,967 $ 30.68

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	Number of RSUs	Weighted Average Grant Date Fair Value Per Share
Outstanding at January 31, 2021	3,971,128	$	23.60
Granted	4,097,275	$	41.79
Vested	(677,323)	$	25.31
Forfeited or canceled	(1,057,674)	$	27.65
Outstanding at October 31, 2021	6,333,406	$	34.50

The ~~Company uses the~~ fair value of RSUs is based on the fair value of the underlying shares on the date of grant. The Company accounts for forfeitures as they occur.

As of ~~July~~October 31, 2021, there was ~~$145.2~~$208.2 million of unrecognized stock-based compensation expense related to unvested RSUs, which is expected to be recognized over a weighted average period of ~~3.3~~3.1 years based on vesting under the award service conditions.

Performance Stock Units

A summary of the Company’s PSU activity and related information is as follows:


	Number of PSUs	Weighted Average Grant Date Fair Value Per Share
Outstanding at January 31, 2021	—	$	—
Granted	127,309	$	41.17
Vested	—	$	—
Forfeited or canceled	(9,608)	$	41.17
Outstanding at October 31, 2021	117,701	$	41.17

In April 2021, the Company granted 127,309 PSUs, with a weighted-average grant date fair value of $41.17 per share, to certain employees of the Company for which the ultimate number of units that will vest are determined based on the achievement of performance at the end of the stated performance period. The performance condition is based on the level of achievement of a Company target related to PagerDuty’s operating plan for fiscal ~~2022 ("2022 operating plan").~~2022. The PSUs will vest over a three-year period, subject to continuous service with the Company.

During the three and ~~six~~nine months ended ~~July~~October 31, 2021, the Company recorded stock-based compensation expense for the number of PSUs considered probable of vesting based on the expected attainment of the performance targets.

As of ~~July~~October 31, 2021, total unrecognized stock-based compensation cost related to PSUs was ~~$3.4~~$3.0 million. This unrecognized stock-based compensation cost is expected to be recognized using the accelerated attribution method over a weighted-average period of approximately ~~1.5~~1.3 years.

Employee Stock Purchase Plan

In April 2019, the Board of Directors adopted and approved the 2019 ~~Employee Stock Purchase Plan,~~ESPP, which became effective on April 11, 2019. The ESPP generally provides for 24-month offering periods beginning June 15 and December 15 of each year, with each offering period consisting of 4 six-month purchase periods. On each purchase date, eligible employees will purchase the shares at a price per share equal to 85% of the lesser of (1) the fair market value of the Company’s stock as of the beginning of the offering period or (2) the fair market value of the Company’s stock on the purchase date, as defined in the ESPP.

During the three months ended ~~July~~October 31, 2021 and 2020, the Company recognized ~~$1.3~~$0.8 million and ~~$1.2~~$1.1 million of stock-based compensation expense related to the ESPP, respectively. During the ~~six~~nine months ended ~~July~~

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October 31, 2021 and 2020, the Company recognized ~~$3.1~~$3.9 million and ~~$2.8~~$3.9 million of stock-based compensation expense related to the ESPP, respectively.

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During the three months ended ~~July~~October 31, 2021 and 2020, the Company withheld ~~$2.0~~$2.2 million and ~~$1.6~~$1.7 million in contributions from employees, respectively. During the ~~six~~nine months ended ~~July~~October 31, 2021 and 2020, the Company withheld ~~$5.0~~$7.2 million and ~~$3.5~~$5.2 million, respectively.

During the three ~~and six~~ months ended ~~July~~October 31, 2021 ~~171,796, 20,269,~~ and ~~30,409~~2020 there were no purchases related to the ESPP. During the nine months ended October 31, 2021, 222,474 shares of common stock were issued under the ESPP at a weighted average purchase ~~prices~~price of ~~$19.63, $23.03, and $34.54, respectively.~~$21.98. During the ~~three and six~~nine months ended ~~July~~October 31, 2020, 181,253 shares of common stock were issued under the ESPP at a purchase price of $19.63 per share.

Stock-Based Compensation

Stock-based compensation expense included in the Company’s condensed consolidated statements of operations is as follows:


		Three Months Ended July 31,				Six Months Ended July 31,					Three Months Ended October 31,				Nine Months Ended October 31,
		2021		2020		2021		2020			2021		2020		2021		2020
		(in thousands)									(in thousands)
Cost of revenue	Cost of revenue	$	1,023	$	263	$	1,699	$	607	Cost of revenue	$	861	$	488	$	2,560	$	1,095
Research and development	Research and development	5,607		2,469		10,047		4,652		Research and development	6,183		2,807		16,230		7,459
Sales and marketing	Sales and marketing	4,401		2,870		8,355		5,155		Sales and marketing	4,606		6,254		12,961		11,409
General and administrative	General and administrative	5,445		4,366		9,987		7,862		General and administrative	6,128		3,910		16,115		11,772
Total	Total	$	16,476	$	9,968	$	30,088	$	18,276	Total	$	17,778	$	13,459	$	47,866	$	31,735

In the three and nine months ended October 31, 2020, we recorded a one-time stock-based compensation expense of $3.1 million related to the modification of certain option awards.

~~13.~~14. Net Loss per Share

The following table presents the calculation of basic and diluted net loss per share:


		Three Months Ended July 31,				Six Months Ended July 31,					Three Months Ended October 31,				Nine Months Ended October 31,
		2021		2020		2021		2020			2021		2020		2021		2020
		(in thousands, except per share data)									(in thousands, except per share data)
Numerator:	Numerator:									Numerator:
Net loss	Net loss	$	(29,661)	$	(14,688)	$	(52,219)	$	(26,147)	Net loss	$	(26,341)	$	(20,608)	$	(78,560)	$	(46,755)
Denominator:	Denominator:									Denominator:
Weighted average shares used in calculating net loss per share, basic and diluted	Weighted average shares used in calculating net loss per share, basic and diluted	83,895		78,775		83,413		78,278		Weighted average shares used in calculating net loss per share, basic and diluted	85,092		79,937		83,979		78,835
Net loss per share, basic and diluted	Net loss per share, basic and diluted	$	(0.35)	$	(0.19)	$	(0.63)	$	(0.33)	Net loss per share, basic and diluted	$	(0.31)	$	(0.26)	$	(0.94)	$	(0.59)

Since the Company was in a loss position for the periods presented, basic net loss per share is the same as diluted net loss per share as the inclusion of all potential common ~~shares~~stock outstanding would have been anti-dilutive.

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Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows:


		As of July 31,			As of October 31,
		2021	2020		2021	2020
		(in thousands)			(in thousands)
Shares subject to outstanding common stock awards	Shares subject to outstanding common stock awards	14,838	16,298	Shares subject to outstanding common stock awards	15,448	15,995
Convertible senior notes	Convertible senior notes	7,173	7,173	Convertible senior notes	7,173	7,173
Restricted stock awards purchased with promissory notes	Restricted stock awards purchased with promissory notes	—	142	Restricted stock awards purchased with promissory notes	—	124
Restricted stock issued to Rundeck key personnel	Restricted stock issued to Rundeck key personnel	191	—	Restricted stock issued to Rundeck key personnel	139	278
Shares issuable pursuant to the 2019 Employee Stock Purchase Plan		72	64
Shares issuable pursuant to the 2019 employee stock purchase plan				Shares issuable pursuant to the 2019 employee stock purchase plan	163	150
Total	Total	22,274	23,677	Total	22,923	23,720

~~14.~~15. Income Taxes

The Company's provision for income taxes for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in such period.

The Company's quarterly tax provision, and estimate of its annual effective tax rate, is subject to variation due to several factors, including variability in pre-tax income (or loss), the mix of jurisdictions to which such income (or loss) relates, changes in how the Company does business, and tax law developments. The Company's estimated effective tax rate for the year differs from the U.S. statutory rate of 21% as a result of our U.S. losses for which no benefit will be realized, our foreign operations which are subject to tax rates that differ from those in the U.S, as well as the benefit for non-U.S. income tax credits.

The Company recorded income tax expense of $0.2 million for the three months ended ~~July 31, 2020, and $0.2 million and $0.5 million for the six months ended July~~October 31, 2021, and ~~2020, respectively. Income~~an income tax ~~expense~~benefit of $4.8 million for the three months ended ~~July~~October 31, 2020. The Company recorded income tax expense of $0.4 million for the nine months ended October 31, 2021 ~~was not material.~~and an income tax benefit of $4.4 million for the nine months ended October 31, 2020.

~~15.~~

16. Geographic Information

Revenue by location is determined by the billing address of the customer. The following table sets forth revenue by geographic area:


		Three Months Ended July 31,				Six Months Ended July 31, 2021					Three Months Ended October 31,				Nine Months Ended October 31, 2021
		2021		2020		2021		2020			2021		2020		2021		2020
		(in thousands)									(in thousands)
United States	United States	$	51,019	$	38,997	$	98,761	$	77,269	United States	$	54,287	$	40,966	$	153,048	$	118,234
International	International	16,517		11,717		32,366		23,231		International	17,473		12,806		49,839		36,038
Total	Total	$	67,536	$	50,714	$	131,127	$	100,500	Total	$	71,760	$	53,772	$	202,887	$	154,272

Other than the United States, no other individual country accounted for 10% or more of revenue for the three and ~~six~~nine months ended ~~July~~October 31, 2021 or 2020. As of ~~July~~October 31, 2021, ~~85%~~84% of the Company’s long-lived assets, including property and equipment and right-of-use lease assets, were located in the United States, and ~~15%~~16% were

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located in Canada. As of January 31, 2021, 87% of the Company’s long-lived assets, including property and equipment and right-of-use lease assets, ~~was~~were located in the United States and 13% ~~was~~were located in Canada.

~~16.~~17. Subsequent Events

The Company has evaluated subsequent events through ~~September 3,~~December 8, 2021.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations together should be read in conjunction with our condensed consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended January 31, 2021, filed with the SEC on March 19, 2021. You should review the sections titled “Special Note Regarding Forward-Looking Statements” above in this Quarterly Report on Form 10-Q for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Factors that could cause or contribute to such differences include, but are not limited to, impacts on our business and general economic conditions due to the current COVID-19 pandemic, those identified below, and those discussed in the section titled “Risk Factors” included in Part II, Item 1A below. The last day of our fiscal year is January 31. Our fiscal quarters end on April 30, July 31, October 31 and January 31.

Overview

PagerDuty is a digital operations management platform that empowers the right action, when seconds matter.

Our platform, which includes our auto remediation software, is the best way to manage urgent, mission-critical work—and keep digital services always on. It sits at the center of a company’s digital ecosystem ingesting signals and using machine learning and automation to ~~prevent and~~ automate real-time work, predict and avoid downtime. We enable teams to reduce outages, improve productivity and accelerate digital transformations.

We collect data from virtually any software-enabled system or device and combine it with human response data, correlating and processing it to understand digital opportunities and issues that need to be addressed in real time. Using the world’s broadest integrations, event management, automated remediation and diagnostics, and human driven runbook automation, we bring together the right people with the right information so they can resolve issues and act on opportunities in minutes and seconds, not hours, days or even weeks like legacy solutions.

Since our founding in 2009, we have expanded our capabilities from a single product focused on on-call management for technical teams to one that serves many roles across the company, delivering a real-time source of truth to security, customer service, and executive stakeholders alike. ~~Growing~~We have grown from an on-call tool into a full digital operations management platform, spanning incident response, on-call management, business visibility, advanced analytics, and AI Ops capabilities across automation and event management to reduce the noise, interruptions and redundant tasks from our customer’s lives. We have invested in developing the scalability, reliability, and security of our platform, allowing us to address the needs of even the largest and most demanding customers. We have spent years building deep product integrations to our platform, and our ecosystem now includes over 600 direct integrations to enable our customers to gather and correlate digital signals from virtually any software-enabled system or device. Those same integrations allow ~~PagerDuty~~us to connect with popular collaboration tools and business applications, as well as all types of technology stacks to drive automation of work.

Our platform is easy to adopt and scalable for businesses of all sizes. We generate revenue primarily from cloud-hosted subscription fees with the majority of our revenue from such arrangements. We also generate an immaterial amount of revenue from term license software subscription fees. We offer a three-tiered range of pricing plans aligned with our customers’ needs and the sophistication of their digital operations. In addition, our Rundeck automation offering is available on a term license software subscription basis. We also offer a “freemium” plan for less than five users to introduce new users to the platform. We have a land-and-expand business model that leads to

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viral adoption of our products and subsequent expansion. Our online self-service model is the primary mechanism for landing new customers and enabling teams to get started without assistance. We complement our self-service model with high-velocity inside sales focused on small and medium businesses, a commercial team focused on mid-market customers, and a field sales team focused on enterprise customers. Our mid-market and enterprise customers

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account for the majority of our revenue today. These teams drive expansion to additional users, additional teams, and new use cases, as well as upsell premium functionality.

COVID-19 Update

In December 2019, a novel coronavirus and the resulting disease (“COVID-19”) was reported, and in January 2020, the World Health Organization (“WHO”) declared it a Public Health Emergency of International Concern. In February 2020, the WHO raised its assessment of the COVID-19 threat from high to very high at a global level due to the continued increase in the number of cases and affected countries, and in March 2020, the WHO characterized COVID-19 as a pandemic.

The extent and continued impact of the COVID-19 pandemic on our business continues to depend on certain developments including the duration and spread of the pandemic; government responses to the pandemic; the widespread availability and distribution of vaccines; impact on our customers and our sales cycles; industry or employee events; and effect on our partners and vendors, all of which are uncertain and cannot be predicted. While our revenues, billings, and earnings are relatively predictable as a result of our subscription-based business model and the majority of our revenues are generated from annual subscriptions, the effect of the COVID-19 pandemic, along with the seasonality we historically experience, may not be fully reflected in our results of operations and overall financial performance until future periods, if at all. In addition, while the majority of our revenues are generated from annual subscriptions, we have seen, and may continue to see, greater variability in the demand of our product from small and medium business customers. While we see risks associated with more highly impacted companies and industries, we are also seeing new interest from other organizations, driven by rapidly changing work and business environments. As workforces have transitioned to working from home in a distributed model, PagerDuty has become an increasingly critical service.

The majority of our employees continue to work remotely in order to minimize the spread of COVID-19 among our employee base and comply with local regulations within the United States and internationally. ~~In addition,~~As we continue to monitor the local regulations related to COVID-19, we have ~~implemented~~begun to release travel restrictions on ~~all~~ business-related ~~travel.~~travel, allowing certain employees to travel on a voluntary basis. We have also extended our paid time off and sick leave benefits for employees directly impacted by COVID-19 or caring for children or a member of their household impacted by COVID-19. In addition, we have provided allowances to our employees to cover expenses related to transitioning to a work from home environment. We also continue to offer local employee assistance programs to employees if needed. These changes remain in effect and could extend into future quarters. The impact, if any, of these and any additional operational changes we may implement to facilitate remote work is uncertain, but changes we have implemented have not affected and are not expected to affect our ability to maintain operations, including financial reporting systems, internal control over financial reporting and disclosure controls and procedures.

InSince 2020, we ~~converted~~have shifted to virtual-only events and experiences, including shifting Summit, our global customer conference series, to virtual events. We have also canceled or shifted other planned events to virtual-only experiences and may determine to alter, postpone or cancel additional customer, employee or industry events in the future.series. We have typically relied on marketing and promotional events such as Summit and other in-person conferences, events, and meetings to facilitate customer sign-ups and generate leads for potential customers, and we cannot predict whether virtual marketing events and phone or virtual sales interactions will be as successful as in-person events and meetings or for how long, ornor the extent to which the COVID-19 pandemic may continue to constrain our marketing, promotional, and sales activities.

On March 27, 2020, the former President of the United States signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which includes several significant provisions for corporations, including modifications to the limitation on business interest expense and the usage of net operating losses, and a payment deferral of employer payroll taxes. We elected to defer the payment of employer payroll taxes in the nine months ended October 31, 2020. We are no longer deferring the payment of our employer payroll taxes. We have begun to pay the amounts deferred and will continue these payments during the fiscal years ending January 31, 2022 and 2023.

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Refer to Item 1A, “Risk Factors”, for further discussion of the possible impact of the COVID-19 pandemic on our business.

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Key Business Metrics

We review the following key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.

While these numbers are based on what we believe to be a reasonable representation of our customer base for the applicable period of measurement, we rely on a third party to validate legal entities, which uses the best available data at period end, and therefore is subject to change as new information becomes available. In addition, we are continually seeking to improve our methodology, which may result in future changes to our key metrics.

Our key metrics include the results of Rundeck, to the extent applicable, beginning on the acquisition date of October 1, 2020.

Number of Customers

We believe that the number of customers using our platform, particularly those that have subscription agreements for more than $100,000 in annual recurring revenue (“ARR”), are indicators of our market penetration, particularly within enterprise accounts, the growth of our business, and our potential future business opportunities. We define ARR as the annualized recurring value of all active contracts at the end of a reporting period. We define a customer as a separate legal entity, such as a company or an educational or government institution, that has an active subscription with us or one of our partners to access our platform. In situations where an organization has multiple subsidiaries or divisions, we treat the parent entity as the customer instead of treating each subsidiary or division as a separate customer. Increasing awareness of our platform and its broad range of capabilities, coupled with the fact that the world is always on and powered by increasingly complex technology, has expanded the diversity of our customer base to include organizations of all sizes across virtually all industries. Over time, enterprise and mid-market customers have constituted a greater share of our revenue.


		As of July 31,			As of October 31,
		2021	2020		2021	2020
Customers	Customers	14,169	13,346	Customers	14,486	13,725
Customers greater than $100,000 in ARR	Customers greater than $100,000 in ARR	501	369	Customers greater than $100,000 in ARR	543	401

Dollar-based Net Retention Rate

We use dollar-based net retention rate to evaluate the long-term value of our customer relationships, since this metric reflects our ability to retain and expand the ARR from our existing customers. Our dollar-based net retention rate compares our ARR from the same set of customers across comparable periods.

We calculate dollar-based net retention rate as of a period end by starting with the ARR from the cohort of all customers as of 12 months prior to such period end, or Prior Period ARR. We then calculate the ARR from these same customers as of the current period end, or Current Period ARR. Current Period ARR includes any expansion and is net of downgrades or churn over the last 12 months but excludes ARR from new customers in the current period. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the dollar-based net retention rate. The calculation of dollar-based net retention rate includes the Current Period ARR of Rundeck customers to the extent that they were PagerDuty customers as of 12 months prior to period end.

Last 12 Months Ended July 31,
2021 2020
Dollar-based net retention rate for all customers 126 % 116 %


	Last 12 Months Ended October 31,
	2021		2020
Dollar-based net retention rate for all customers	124	%	119	%

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Components of Results of Operations

Revenue

We generate revenue primarily from cloud-hosted software subscription fees with the majority of our revenue from such arrangements. We also generate an immaterial amount of revenue from term license software subscription fees. Our subscriptions are typically one year in duration but can range from monthly to multi-year. Subscription revenue is driven primarily by the number of customers, the number of users per customer, and the level of subscription purchased. We generally invoice customers in advance in annual installments for subscriptions to our ~~platform.~~software. For our cloud-hosted software subscriptions, we recognize subscription revenue ratably over the term of the subscription period beginning on the date we grant access to our platform, assuming that all other revenue recognition criteria have been met. For our term-license software subscriptions, we recognize license revenue upon delivery and software maintenance revenue ratably, typically beginning on the start of the contractual term of the arrangement.

Due to the low complexity of implementation and integration of our platform with our customers’ existing infrastructure, revenue from professional services has been immaterial to date.

Cost of Revenue

Cost of revenue primarily consists of expenses related to providing our platform to customers, including personnel expenses for operations and global support, payments to our third-party cloud infrastructure providers for hosting our software, payment processing fees, amortization of capitalized internal-use software costs, amortization of acquired developed technology, and allocated overhead costs for facilities, information technology, and other allocated overhead costs. We will continue to invest additional resources in our platform infrastructure and our customer support and success organizations to expand the capability of our platform and ensure that our customers are realizing the full benefit of our offerings. The level and timing of investment in these areas could affect our cost of revenue in the future.

Gross Profit and Gross Margin

Gross profit represents revenue less cost of revenue. Gross margin is gross profit expressed as a percentage of revenue. Our gross margin may fluctuate from period to period as our revenue fluctuates, and as a result of the timing and amount of investments to expand the capacity of our third-party cloud infrastructure providers and our continued efforts to enhance our platform support and customer success teams.

Operating Expenses

Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. Personnel expenses are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation expense, and sales commissions. Operating expenses also include amortization of acquired intangible assets, acquisition-related expenses, allocated overhead costs for facilities, shared IT related expenses, including depreciation expense, and certain company-wide events and functions.

Research and development

Research and development expenses consist primarily of personnel costs for our engineering, product, and design teams. Additionally, research and development expenses include contractor fees, depreciation of equipment used in research and development activities, acquisition-related expenses, and allocated overhead costs. We expect that our research and development expenses will increase in dollar value as our business grows.

Sales and marketing

Sales and marketing expenses consist primarily of personnel costs, costs of general marketing activities and promotional activities, travel related expenses, amortization of acquired intangible assets, allocated overhead costs, and bad debt expense. Sales commissions earned by our sales force that are considered incremental and recoverable

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costs of obtaining a subscription with a customer are deferred and amortized on a straight-line basis over the expected period of benefit, which we have determined to be four years. We expect that our sales and marketing expenses will increase in dollar value and continue to be our largest operating expense for the foreseeable future as we expand our sales and marketing efforts.

General and administrative

General and administrative expenses consist primarily of personnel costs and contractor fees for finance, legal, human resources, information technology, and other administrative functions. In addition, general and administrative expenses include non-personnel costs, such as legal, accounting, and other professional fees, hardware and software costs, certain tax, license and insurance-related expenses, acquisition-related expenses, and allocated overhead costs. We expect that our general and administrative expenses will increase in dollar value as our business grows. However, we expect that our general and administrative expenses will decrease as a percentage of our revenue over the longer term as we expect our investments to allow for improved efficiency for future growth in the business.

Interest Income

Interest income consists of income earned on our cash and cash equivalents and interest earned on our short-term investments which consist of U.S. Treasury securities, commercial paper, corporate debt securities, and U.S. Government agency securities.

Interest Expense

Interest expense consists primarily of contractual interest expense and amortization of debt issuance costs on our 1.25% Convertible Senior Notes (the “Notes”) due 2025. Refer to Note 9,10, “Debt and Financing Arrangements” for additional details.

Other (Expense) Income, Net

Other (expense) income, net primarily consists of accretion income and amortization expense on our available-for-sale investments and foreign currency transaction gains and losses.

(Provision ~~for~~for) Benefit from Income Taxes

(Provision ~~for~~for) benefit from income taxes consists primarily of income taxes in certain foreign jurisdictions in which we conduct business. We maintain a full valuation allowance on our net federal and state deferred tax assets as we have concluded that it is more likely than not that the deferred tax assets will not be realized. (Provision for) benefit from income taxes also includes the deferred tax liability associated with acquired intangible assets from the Company’s acquisitions.

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Results of Operations

The following table sets forth our condensed consolidated statements of operations data for the periods indicated:


		Three Months Ended July 31,				Six Months Ended July 31,					Three Months Ended October 31,				Nine Months Ended October 31,
		2021		2020		2021		2020			2021		2020		2021		2020
		(in thousands)									(in thousands)
Revenue	Revenue	$	67,536	$	50,714	$	131,127	$	100,500	Revenue	$	71,760	$	53,772	$	202,887	$	154,272
Cost of revenue(1)	Cost of revenue(1)	11,976		6,637		22,394		13,600		Cost of revenue(1)	12,039		7,685		34,433		21,285
Gross profit	Gross profit	55,560		44,077		108,733		86,900		Gross profit	59,721		46,087		168,454		132,987
Operating expenses:	Operating expenses:									Operating expenses:
Research and development(1)	Research and development(1)	22,909		15,535		43,508		30,549		Research and development(1)	24,554		16,156		68,062		46,705
Sales and marketing(1)	Sales and marketing(1)	40,814		27,511		78,048		54,247		Sales and marketing(1)	40,176		34,024		118,224		88,271
General and administrative(1)	General and administrative(1)	20,294		14,480		36,872		28,153		General and administrative(1)	19,808		17,746		56,680		45,899
Total operating expenses	Total operating expenses	84,017		57,526		158,428		112,949		Total operating expenses	84,538		67,926		242,966		180,875
Loss from operations	Loss from operations	(28,457)		(13,449)		(49,695)		(26,049)		Loss from operations	(24,817)		(21,839)		(74,512)		(47,888)
Interest income	Interest income	783		1,048		1,601		2,401		Interest income	705		974		2,306		3,375
Interest expense	Interest expense	(1,378)		(1,608)		(2,695)		(1,608)		Interest expense	(1,350)		(4,133)		(4,045)		(5,741)
Other expense, net	Other expense, net	(586)		(431)		(1,202)		(412)		Other expense, net	(729)		(449)		(1,931)		(861)
Loss before provision for income taxes		(29,638)		(14,440)		(51,991)		(25,668)
Provision for income taxes		(23)		(248)		(228)		(479)
Loss before (provision for) benefit from income taxes										Loss before (provision for) benefit from income taxes	(26,191)		(25,447)		(78,182)		(51,115)
(Provision for) benefit from income taxes										(Provision for) benefit from income taxes	(150)		4,839		(378)		4,360
Net loss	Net loss	$	(29,661)	$	(14,688)	$	(52,219)	$	(26,147)	Net loss	$	(26,341)	$	(20,608)	$	(78,560)	$	(46,755)

______________

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


		Three Months Ended July 31,				Six Months Ended July 31,					Three Months Ended October 31,				Nine Months Ended October 31,
		2021		2020		2021		2020			2021		2020		2021		2020
		(in thousands)									(in thousands)
Cost of revenue	Cost of revenue	$	1,023	$	263	$	1,699	$	607	Cost of revenue	$	861	$	488	$	2,560	$	1,095
Research and development	Research and development	5,607		2,469		10,047		4,652		Research and development	6,183		2,807		16,230		7,459
Sales and marketing	Sales and marketing	4,401		2,870		8,355		5,155		Sales and marketing	4,606		6,254		12,961		11,409
General and administrative	General and administrative	5,445		4,366		9,987		7,862		General and administrative	6,128		3,910		16,115		11,772
Total	Total	$	16,476	$	9,968	$	30,088	$	18,276	Total	$	17,778	$	13,459	$	47,866	$	31,735

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The following table sets forth our condensed consolidated statements of operations data expressed as a percentage of revenue:


		Three Months Ended July 31,				Six Months Ended July 31,					Three Months Ended October 31,				Nine Months Ended October 31,
		2021		2020		2021		2020			2021		2020		2021		2020
Revenue	Revenue	100	%	100	%	100	%	100	%	Revenue	100	%	100	%	100	%	100	%
Cost of revenue	Cost of revenue	18		13		17		14		Cost of revenue	17		14		17		14
Gross profit	Gross profit	82	%	87	%	83	%	86	%	Gross profit	83	%	86	%	83	%	86	%
Operating expenses:	Operating expenses:									Operating expenses:
Research and development	Research and development	34		31		33		30		Research and development	34		30		34		30
Sales and marketing	Sales and marketing	60		54		60		54		Sales and marketing	56		63		58		57
General and administrative	General and administrative	30		29		28		28		General and administrative	28		33		28		30
Total operating expenses	Total operating expenses	124		113		121		112		Total operating expenses	118		126		120		117
Loss from operations	Loss from operations	(42)		(27)		(38)		(26)		Loss from operations	(35)		(41)		(37)		(31)
Interest income	Interest income	1		2		1		2		Interest income	1		2		1		2
Interest expense	Interest expense	(2)		(3)		(2)		(2)		Interest expense	(2)		(8)		(2)		(4)
Other expense, net	Other expense, net	(1)		(1)		(1)		—		Other expense, net	(1)		(1)		(1)		(1)
Loss before provision for income taxes		(44)		(28)		(40)		(26)
Provision for income taxes		—		—		—		—
Loss before (provision for) benefit from income taxes										Loss before (provision for) benefit from income taxes	(36)		(47)		(39)		(33)
(Provision for) benefit from income taxes										(Provision for) benefit from income taxes	—		9		—		3
Net loss	Net loss	(44)	%	(29)	%	(40)	%	(26)	%	Net loss	(37)	%	(38)	%	(39)	%	(30)	%

__________

Note: Certain figures may not sum due to rounding.

Comparison of the Three Months Ended ~~July~~October 31, 2021 and 2020

Revenue

Three Months Ended July 31,
2021 2020 Change % Change
(dollars in thousands)
Revenue $ 67,536 $ 50,714 $ 16,822 33 %


	Three Months Ended October 31,
	2021		2020		Change		% Change
	(dollars in thousands)
Revenue	$	71,760	$	53,772	$	17,988	33	%

Revenue increased by ~~$16.8~~$18.0 million, or 33%, for the three months ended ~~July~~October 31, 2021 compared to the three months ended ~~July~~October 31, 2020. The increase in revenue was attributable to a combination of growth from both new and existing customers, including customers from the Rundeck acquisition. Growth from existing customers is attributable to both increases in the number of users and upsell of additional ~~products.~~products and services.

Cost of Revenue and Gross Margin


		Three Months Ended July 31,											Three Months Ended October 31,
		2021			2020			Change		% Change			2021			2020			Change		% Change
		(dollars in thousands)											(dollars in thousands)
Cost of revenue	Cost of revenue	$	11,976		$	6,637		$	5,339	80	%	Cost of revenue	$	12,039		$	7,685		$	4,354	57	%
Gross margin	Gross margin	82		%	87		%					Gross margin	83		%	86		%

Cost of revenue increased by ~~$5.3~~$4.4 million, or ~~80%~~57%, primarily due to an increase of ~~$3.1~~$2.1 million in personnel expenses as a result of increased headcount, ~~and~~ increases of ~~$0.9~~$1.1 million in hosting, software, and telecom costs and

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~~an $0.6~~$0.4 million in outside services, both of which are related to the support of the continued growth of the business and related ~~infrastructure.~~infrastructure, and an increase of $0.2 million in other costs.

Research and Development


		Three Months Ended July 31,											Three Months Ended October 31,
		2021			2020			Change		% Change			2021			2020			Change		% Change
		(dollars in thousands)											(dollars in thousands)
Research and development	Research and development	$	22,909		$	15,535		$	7,374	47	%	Research and development	$	24,554		$	16,156		$	8,398	52	%
Percentage of revenue	Percentage of revenue	34		%	31		%					Percentage of revenue	34		%	30		%

Research and development expenses increased by ~~$7.4~~$8.4 million, or ~~47%~~52%, for the three months ended ~~July~~October 31, 2021 compared to the three months ended ~~July~~October 31, 2020. The increase was primarily driven by an increase in personnel expenses of ~~$6.1~~$6.8 million as a result of increased headcount to support our continued investment in our platform and a ~~$0.7~~$0.9 million increase in costs to support the growth of the business and related infrastructure, which includes allocated overhead costs.

Sales and Marketing


		Three Months Ended July 31,											Three Months Ended October 31,
		2021			2020			Change		% Change			2021			2020			Change		% Change
		(dollars in thousands)											(dollars in thousands)
Sales and marketing	Sales and marketing	$	40,814		$	27,511		$	13,303	48	%	Sales and marketing	$	40,176		$	34,024		$	6,152	18	%
Percentage of revenue	Percentage of revenue	60		%	54		%					Percentage of revenue	56		%	63		%

Sales and marketing expenses increased by ~~$13.3~~$6.2 million, or ~~48%~~18%, for the three months ended ~~July~~October 31, 2021 compared to the three months ended ~~July~~October 31, 2020. This increase was primarily due to an increase of ~~$6.0~~$3.2 million in personnel expenses driven by headcount growth and amortization of deferred contract costs, ~~an increase in marketing expenses of $4.3 million~~partially offset by a one-time stock-based compensation charge due to ~~increased volume~~the modification of ~~marketing and advertising activities,~~certain option awards incurred in the third quarter of the prior fiscal year, an increase of ~~$1.4~~$1.9 million in costs to support the business and related infrastructure which includes allocated overhead costs, an increase of ~~$0.7~~$1.4 million in outside services due to a higher volume of activities to assist with the continued growth of the business, an increase of $0.4 million in travel and other program related costs as a result of increased travel due to reduced travel restrictions related to the COVID-19 pandemic, and an increase of ~~$0.6~~$0.4 million in amortization of intangibles related to the acquisition of Rundeck. This was partially offset by a decrease in marketing expenses of $1.3 million primarily due to a change in timing of our annual Summit conference.

General and Administrative


		Three Months Ended July 31,											Three Months Ended October 31,
		2021			2020			Change		% Change			2021			2020			Change		% Change
		(dollars in thousands)											(dollars in thousands)
General and administrative	General and administrative	$	20,294		$	14,480		$	5,814	40	%	General and administrative	$	19,808		$	17,746		$	2,062	12	%
Percentage of revenue	Percentage of revenue	30		%	29		%					Percentage of revenue	28		%	33		%

General and administrative expenses increased by ~~$5.8~~$2.1 million, or ~~40%~~12%, for the three months ended ~~July~~October 31, 2021 compared to the three months ended ~~July~~October 31, 2020. The increase was driven by an increase of ~~$3.5~~$4.3 million in personnel expenses as a result of increased headcount and an increase of $0.4 million in travel and other program related costs as a result of increased travel due to reduced travel restrictions related to the COVID-19 pandemic. This was partially offset by a decrease in outside services of ~~$3.1~~$1.8 million, the majority of which was due to ~~non-recurring strategic consulting fees. This was partially offset by~~transaction costs related to the Rundeck acquisition, and a decrease of ~~$1.4~~$1.2 million in costs to support the business and related infrastructure which includes allocated overhead costs.

~~Interest Expense~~

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Three Months Ended July 31,
2021 2020 Change % Change
(dollars in thousands)
Interest expense $ 1,378 $ 1,608 $ (230) (14) %
Interest Expense


	Three Months Ended October 31,
	2021		2020		Change		% Change
	(dollars in thousands)
Interest expense	$	1,350	$	4,133	$	(2,783)	(67)	%

Interest expense decreased by ~~$0.2~~$2.8 million for the three months ended ~~July~~October 31, 2021 compared to the three months ended ~~July~~October 31, 2020, due to the adoption of Accounting Standard Update (“ASU”) 2020-06. Refer to Note 2,, ~~"Summary~~ "Summary of Significant Accounting Policies", for additional details.

Interest Income and Other (Expense) Income, Net


		Three Months Ended July 31,									Three Months Ended October 31,
		2021		2020		Change		% Change			2021		2020		Change		% Change
		(dollars in thousands)									(dollars in thousands)
Interest income	Interest income	$	783	$	1,048	$	(265)	(25)	%	Interest income	$	705	$	974	$	(269)	(28)	%
Other expense, net	Other expense, net	$	(586)	$	(431)	$	(155)	36	%	Other expense, net	$	(729)	$	(449)	$	(280)	62	%

Interest income decreased by $0.3 million and ~~and~~ other expense, net increased by ~~$0.2~~$0.3 million for the three months ended ~~July~~October 31, 2021 compared to the three months ended ~~July~~October 31, 2020, primarily due to lower interest rates on our cash, cash equivalent and investment balances in the current year.

Comparison of the ~~Six~~Nine Months Ended ~~July~~October 31, 2021 and 2020

Revenue

Six Months Ended July 31,
2021 2020 Change % Change
(dollars in thousands)
Revenue $ 131,127 $ 100,500 $ 30,627 30 %


	Nine Months Ended October 31,
	2021		2020		Change		% Change
	(dollars in thousands)
Revenue	$	202,887	$	154,272	$	48,615	32	%

Revenue increased by ~~$30.6~~$48.6 million, or ~~30%~~32%, for the ~~six~~nine months ended ~~July~~October 31, 2021 compared to the ~~six~~nine months ended ~~July~~October 31, 2020. The increase in revenue was attributable to a combination of growth from both new and existing customers, including customers from the Rundeck acquisition. Growth from existing customers is attributable to both increases in the number of users and upsell of additional ~~products.~~products and services.

Cost of Revenue and Gross Margin


		Six Months Ended July 31,											Nine Months Ended October 31,
		2021			2020			Change		% Change			2021			2020			Change		% Change
		(dollars in thousands)											(dollars in thousands)
Cost of revenue	Cost of revenue	$	22,394		$	13,600		$	8,794	65	%	Cost of revenue	$	34,433		$	21,285		$	13,148	62	%
Gross margin	Gross margin	83		%	86		%					Gross margin	83		%	86		%

Cost of revenue increased by ~~$8.8~~$13.1 million, or ~~65%~~62% for the ~~six~~nine months ended ~~July~~October 31, 2021 compared to the ~~six~~nine months ended ~~July~~October 31, 2020. The increase is primarily due to an increase of ~~$5.4~~$7.4 million in personnel expenses as a result of increased headcount, increases of ~~$1.4~~$2.5 million in hosting, software, and telecom costs and ~~$0.9~~$1.3 million in outside services, both of which are related to the support of the continued growth of the business and related infrastructure, and an increase of ~~$0.6~~$0.7 million in amortization of intangibles related to the acquisition of Rundeck.

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Research and Development


		Six Months Ended July 31,											Nine Months Ended October 31,
		2021			2020			Change		% Change			2021			2020			Change		% Change
		(dollars in thousands)											(dollars in thousands)
Research and development	Research and development	$	43,508		$	30,549		$	12,959	42	%	Research and development	$	68,062		$	46,705		$	21,357	46	%
Percentage of revenue	Percentage of revenue	33		%	30		%					Percentage of revenue	34		%	30		%

Research and development expenses increased by ~~$13.0~~$21.4 million, or ~~42%~~46%, for the ~~six~~nine months ended ~~July~~October 31, 2021 compared to the ~~six~~nine months ended ~~July~~October 31, 2020. The increase was primarily driven by an increase in personnel expenses of ~~$10.8~~$17.6 million as a result of increased headcount to support our continued investment in our platform, a ~~$1.3~~$2.2 million increase in costs to support the growth of the business and related infrastructure, which includes allocated overhead costs, and an increase of ~~$0.7~~$1.3 million in outside services due to a higher volume of activities to assist with the continued growth of the business.

Sales and Marketing


		Six Months Ended July 31,											Nine Months Ended October 31,
		2021			2020			Change		% Change			2021			2020			Change		% Change
		(dollars in thousands)											(dollars in thousands)
Sales and marketing	Sales and marketing	$	78,048		$	54,247		$	23,801	44	%	Sales and marketing	$	118,224		$	88,271		$	29,953	34	%
Percentage of revenue	Percentage of revenue	60		%	54		%					Percentage of revenue	58		%	57		%

Sales and marketing expenses increased by ~~$23.8~~$30.0 million, or ~~44%~~34%, for the ~~six~~nine months ended ~~July~~October 31, 2021 compared to the ~~six~~nine months ended ~~July~~October 31, 2020. This increase was primarily due to an increase of ~~$13.1~~$16.3 million in personnel expenses driven by headcount growth and amortization of deferred contract costs partially offset by a one-time stock-based compensation charge due to the modification of certain option awards incurred in the third fiscal quarter of the prior fiscal year, an increase in marketing expenses of ~~$6.6~~$5.3 million due to increased volume of marketing and advertising activities, an increase of ~~$2.2~~$3.9 million in costs to support the business and related infrastructure which includes allocated overhead costs, an increase of $3.5 million in outside services due to a higher volume of activities to assist with the continued growth of the business, ~~an increase of $2.0 million in costs to support the business and related infrastructure which includes allocated overhead costs,~~ and an increase of ~~$1.2~~$1.6 million in amortization of intangibles related to the acquisition of Rundeck. ~~This was partially offset by a decrease of $0.9 million in travel and other program related costs due to the COVID-19 pandemic.~~

General and Administrative


		Six Months Ended July 31,											Nine Months Ended October 31,
		2021			2020			Change		% Change			2021			2020			Change		% Change
		(dollars in thousands)											(dollars in thousands)
General and administrative	General and administrative	$	36,872		$	28,153		$	8,719	31	%	General and administrative	$	56,680		$	45,899		$	10,781	23	%
Percentage of revenue	Percentage of revenue	28		%	28		%					Percentage of revenue	28		%	30		%

General and administrative expenses increased by ~~$8.7~~$10.8 million, or ~~31%~~23%, for the ~~six~~nine months ended ~~July~~October 31, 2021 compared to the ~~six~~nine months ended ~~July~~October 31, 2020. The increase was driven by an increase of ~~$6.2~~$10.5 million in personnel expenses as a result of increased headcount, ~~and increases~~an increase in outside services of ~~$3.7~~$1.9 million, the majority of which was due to non-recurring strategic consulting fees, and an increase in insurance, business taxes and licenses of ~~$0.6~~$0.8 million due to a higher volume of activities to support the continued growth of the business. This was partially offset by a decrease of ~~$2.0~~$3.2 million in costs to support the business and related infrastructure which includes allocated overhead costs.

Interest Expense

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Six Months Ended July 31,
2021 2020 Change % Change
(dollars in thousands)
Interest expense $ 2,695 $ 1,608 $ 1,087 68 %


	Nine Months Ended October 31,
	2021		2020		Change		% Change
	(dollars in thousands)
Interest expense	$	4,045	$	5,741	$	(1,696)	(30)	%

Interest expense ~~increased~~decreased by ~~$1.1~~$1.7 million for the ~~six~~nine months ended ~~July~~October 31, 2021 compared to the ~~six~~nine months ended ~~July~~October 31, 2020, primarily due to ~~interest expense on~~ the ~~Notes which were issued in June 2020.~~adoption of ASU 2020-06. Refer to Note 2, "Summary of Significant Accounting Policies", for additional details.

Interest Income and Other (Expense) Income, Net


		Six Months Ended July 31,									Nine Months Ended October 31,
		2021		2020		Change		% Change			2021		2020		Change		% Change
		(dollars in thousands)									(dollars in thousands)
Interest income	Interest income	$	1,601	$	2,401	$	(800)	(33)	%	Interest income	$	2,306	$	3,375	$	(1,069)	(32)	%
Other expense, net	Other expense, net	$	(1,202)	$	(412)	$	(790)	192	%	Other expense, net	$	(1,931)	$	(861)	$	(1,070)	124	%

Interest income decreased by ~~$0.8~~$1.1 million and other expense, net increased by ~~$0.8~~$1.1 million for the ~~six~~nine months ended ~~July~~October 31, 2021 compared to the ~~six~~nine months ended ~~July~~October 31, 2020, primarily due to lower interest rates on our cash, cash equivalent and investment balances in the current year.

Non-GAAP Financial Measures

In addition to our results determined in accordance with U.S. GAAP, we believe the following non-GAAP financial measures are useful in evaluating our operating performance. We use the below referenced non-GAAP financial information, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their U.S. 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 U.S. 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 that are required by U.S. GAAP to be recorded in our financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by our management about which expenses are excluded or included in determining these non-GAAP financial measures. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with U.S. GAAP.

Non-GAAP Gross Profit and Non-GAAP Gross Margin

We define non-GAAP gross profit as gross profit adjusted for stock-based compensation expense and related employer taxes, and amortization of acquired intangible assets. We define non-GAAP gross margin as non-GAAP gross profit as a percentage of revenue.

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		Three Months Ended July 31,						Six Months Ended July 31,							Three Months Ended October 31,						Nine Months Ended October 31,
		2021			2020			2021			2020				2021			2020			2021			2020
		(in thousands)													(in thousands)
Gross profit	Gross profit	$	55,560		$	44,077		$	108,733		$	86,900		Gross profit	$	59,721		$	46,087		$	168,454		$	132,987
Add:	Add:													Add:
Stock-based compensation	Stock-based compensation	1,023			263			1,699			607			Stock-based compensation	861			488			2,560			1,095
Employer taxes related to employee stock transactions	Employer taxes related to employee stock transactions	30			8			56			9			Employer taxes related to employee stock transactions	22			14			78			23
Amortization of acquired intangible assets	Amortization of acquired intangible assets	280			—			560			—			Amortization of acquired intangible assets	280			93			840			93
Non-GAAP gross profit	Non-GAAP gross profit	$	56,893		$	44,348		$	111,048		$	87,516		Non-GAAP gross profit	$	60,884		$	46,682		$	171,932		$	134,198

Gross margin	Gross margin	82		%	87		%	83		%	87		%	Gross margin	83		%	86		%	83		%	86		%
Non-GAAP gross margin	Non-GAAP gross margin	84		%	87		%	85		%	87		%	Non-GAAP gross margin	85		%	87		%	85		%	87		%

Non-GAAP Operating Loss and Non-GAAP Operating Margin

We define non-GAAP operating loss as loss from operations plus our stock-based compensation expense and related employer taxes, amortization of acquired intangible assets, and acquisition-related expenses, which include transaction costs and acquisition-related retention payments, which are not necessarily reflective of operational performance during a given period. We define non-GAAP operating margin as non-GAAP operating loss as a percentage of revenue.


		Three Months Ended July 31,						Six Months Ended July 31,							Three Months Ended October 31,						Nine Months Ended October 31,
		2021			2020			2021			2020				2021			2020			2021			2020
		(in thousands)													(in thousands)
Loss from operations	Loss from operations	$	(28,457)		$	(13,449)		$	(49,695)		$	(26,049)		Loss from operations	$	(24,817)		$	(21,839)		$	(74,512)		$	(47,888)
Add:	Add:													Add:
Stock-based compensation	Stock-based compensation	16,476			9,968			30,088			18,276			Stock-based compensation	17,778			13,459			47,866			31,735
Employer taxes related to employee stock transactions	Employer taxes related to employee stock transactions	710			254			1,391			406			Employer taxes related to employee stock transactions	695			383			2,086			787
Amortization of acquired intangible assets	Amortization of acquired intangible assets	875			—			1,750			—			Amortization of acquired intangible assets	875			292			2,625			292
Acquisition-related expenses	Acquisition-related expenses	455			—			914			—			Acquisition-related expenses	442			1,786			1,356			1,786
Non-GAAP operating loss	Non-GAAP operating loss	$	(9,941)		$	(3,227)		$	(15,552)		$	(7,367)		Non-GAAP operating loss	$	(5,027)		$	(5,919)		$	(20,579)		$	(13,288)

Operating margin	Operating margin	(42)		%	(27)		%	(38)		%	(26)		%	Operating margin	(35)		%	(41)		%	(37)		%	(31)		%
Non-GAAP operating margin	Non-GAAP operating margin	(15)		%	(6)		%	(12)		%	(7)		%	Non-GAAP operating margin	(7)		%	(11)		%	(10)		%	(9)		%

Non-GAAP Net Loss

We define non-GAAP net loss as net loss plus our stock-based compensation expense and related employer taxes, amortization of debt issuance costs, amortization of acquired intangible assets, acquisition-related expenses, which include transaction costs and acquisition-related retention payments, which are not necessarily reflective of operational performance during a given period, and acquisition-related tax benefit.

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		Three Months Ended July 31,				Six Months Ended July 31,					Three Months Ended October 31,				Nine Months Ended October 31,
		2021		2020		2021		2020			2021		2020		2021		2020
		(in thousands)									(in thousands)
Net loss	Net loss	$	(29,661)	$	(14,688)	$	(52,219)	$	(26,147)	Net loss	$	(26,341)	$	(20,608)	$	(78,560)	$	(46,755)
Add:	Add:									Add:
Stock-based compensation	Stock-based compensation	16,476		9,968		30,088		18,276		Stock-based compensation	17,778		13,459		47,866		31,735
Amortization of debt discount and issuance costs (1)	Amortization of debt discount and issuance costs (1)	460		1,258		898		1,258		Amortization of debt discount and issuance costs (1)	452		3,235		1,350		4,493
Employer taxes related to employee stock transactions	Employer taxes related to employee stock transactions	710		254		1,391		406		Employer taxes related to employee stock transactions	695		383		2,086		787
Amortization of acquired intangibles assets	Amortization of acquired intangibles assets	875		—		1,750		—		Amortization of acquired intangibles assets	875		292		2,625		292
Acquisition-related expenses	Acquisition-related expenses	455		—		914		—		Acquisition-related expenses	442		1,786		1,356		1,786
Acquisition-related tax benefit										Acquisition-related tax benefit	—		(5,058)		—		(5,058)
Non-GAAP net loss	Non-GAAP net loss	$	(10,685)	$	(3,208)	$	(17,178)	$	(6,207)	Non-GAAP net loss	$	(6,099)	$	(6,511)	$	(23,277)	$	(12,720)

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

Free Cash Flow

We define free cash flow as net cash (used in) provided by operating activities, less cash used for purchases of property and equipment and capitalized internal-use software costs. In addition to the reasons stated above, we believe that free cash flow is useful to investors as a liquidity measure because it measures our ability to generate or use cash in excess of our capital investments in property and equipment in order to enhance the strength of our balance sheet and further invest in our business and potential strategic initiatives. A limitation of the utility of free cash flow as a measure of our liquidity is that it does not represent the total increase or decrease in our cash balance for the period. We use free cash flow in conjunction with traditional U.S. GAAP measures as part of our overall assessment of our liquidity, including the preparation of our annual operating budget and quarterly forecasts and to evaluate the effectiveness of our business ~~strategies, and to assess our liquidity.~~strategies.


		Three Months Ended July 31,				Six Months Ended July 31,					Three Months Ended October 31,				Nine Months Ended October 31,
		2021		2020		2021		2020			2021		2020		2021		2020
		(in thousands)									(in thousands)
Net cash (used in) provided by operating activities		$	(11,595)	$	2,047	$	(10,016)	$	1,862
Net cash provided by (used in) operating activities										Net cash provided by (used in) operating activities	$	2,650	$	4,844	$	(7,366)	$	6,706
Less:	Less:									Less:
Purchases of property and equipment	Purchases of property and equipment	(364)		(579)		(1,291)		(3,292)		Purchases of property and equipment	(85)		(110)		(1,376)		(3,402)
Capitalization of internal-use software costs	Capitalization of internal-use software costs	(915)		(111)		(1,917)		(111)		Capitalization of internal-use software costs	(784)		(217)		(2,701)		(328)
Free cash flow	Free cash flow	$	(12,874)	$	1,357	$	(13,224)	$	(1,541)	Free cash flow	$	1,781	$	4,517	$	(11,443)	$	2,976
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	$	36,675	$	(14,293)	$	24,059	$	(475)	Net cash provided by (used in) investing activities	$	5,092	$	(45,488)	$	29,151	$	(45,963)
Net cash provided by financing activities		$	3,412	$	249,429	$	1,316	$	251,227
Net cash (used in) provided by financing activities										Net cash (used in) provided by financing activities	$	(2,529)	$	663	$	(1,213)	$	251,890

Liquidity and Capital Resources

Since inception, we have financed operations primarily through sales of our cloud-hosted software subscriptions, net proceeds we have received from sales of equity securities, and the issuance of our Notes.

On April 15, 2019, upon the closing of our IPO, we received net proceeds of $213.7 million, after deducting underwriters' discounts and commissions of $16.6 million and other issuance costs of $6.4 million.

On June 25, 2020, we issued $287.5 million aggregate principal amount of convertible senior notes in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The total net

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proceeds from the sale of the Notes, after deducting the initial purchasers’ discounts and debt issuance costs of $9.3 million, and purchases of the Capped Calls of $35.7 million, were $242.5 million.

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As of ~~July~~October 31, 2021, our principal sources of liquidity were cash and cash equivalents and investments totaling ~~$546.8~~$545.3 million. We believe that our existing cash and cash equivalents, investments, and cash provided by sales of our subscriptions will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. Our future capital requirements will depend on many factors, including the effects of the COVID-19 pandemic, our subscription growth rate, subscription renewal activity, including the timing and the amount of cash received from customers, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced product offerings, and the continuing market adoption of our platform. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, and technologies. We may be required to seek additional equity or debt financing. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, operations, and financial condition.

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~~October 31, 2021, we had deferred revenue of ~~$134.0~~$142.9 million, of which ~~$128.1~~$137.4 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 have been met.

Cash Flows

The following table shows a summary of our cash flows for the periods presented:


		Six Months Ended July 31,					Nine Months Ended October 31,
		2021		2020			2021		2020
		(in thousands)					(in thousands)
Net cash (used in) provided by operating activities	Net cash (used in) provided by operating activities	$	(10,016)	$	1,862	Net cash (used in) provided by operating activities	$	(7,366)	$	6,706
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	$	24,059	$	(475)	Net cash provided by (used in) investing activities	$	29,151	$	(45,963)
Net cash provided by financing activities		$	1,316	$	251,227
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	$	(1,213)	$	251,890

Operating Activities

Our largest source of operating cash is cash collection from sales of our cloud-hosted and term license software subscriptions to our customers. Our primary uses of cash from operating activities are for personnel expenses, marketing expenses and hosting and software expenses. In the last several years, we have had periods in which we generated negative cash flows from operating activities and have supplemented working capital requirements through net proceeds from both private and public sales of equity securities and issuance of the Notes.

Cash used in operating activities for the ~~six~~nine months ended ~~July~~October 31, 2021 of ~~$10.0~~$7.4 million primarily related to our net loss of ~~$52.2~~$78.6 million, adjusted for non-cash charges of ~~$45.7~~$72.0 million and net cash outflows of ~~$3.5~~$0.8 million due to changes in our operating assets and liabilities. Non-cash charges primarily consisted of stock-based compensation of ~~$30.1~~$47.9 million, amortization of our deferred contract costs of ~~$6.8~~$10.7 million, depreciation and amortization of property and equipment, capitalized implementation costs, and acquired intangible assets of ~~$4.0~~$6.2 million, and non-cash lease expense of ~~$2.2~~$3.3 million. Changes in operating assets and liabilities reflected cash outflows from a ~~$9.5~~$16.8 million increase in deferred contract costs due to commissions paid on new bookings in line with revenue growth, a $3.8 million ~~decrease~~ in ~~accrued compensation~~payments for operating lease liabilities, and ~~related benefits,~~ a ~~$2.8~~$0.9 million increase in prepaid expenses and other assets related to timing of payments made in advance for future ~~services, and $2.5 million in payments for operating lease liabilities.~~services. These amounts were partially offset by cash inflows from a ~~$6.5~~$12.9 million ~~decrease~~increase in ~~accounts receivable due to timing~~deferred revenue resulting primarily from increased

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billings for subscriptions, a ~~$4.6~~$3.8 million increase in accounts payable and accrued expenses and liabilities, and a ~~$4.0~~$3.8 million increase in ~~deferred revenue resulting primarily from increased billings for subscriptions.~~

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accrued compensation and related benefits.

Cash provided by operating activities for the ~~six~~nine months ended ~~July~~October 31, 2020 of ~~$1.9~~$6.7 million primarily related to our net loss of ~~$26.1~~$46.8 million, adjusted for non-cash charges of ~~$30.3~~$52.7 million and net cash ~~outflows~~inflows of ~~$2.3~~$0.8 million due to changes in our operating assets and liabilities. Non-cash charges primarily consisted of stock-based compensation of ~~$18.3~~$31.7 million, amortization of our deferred contract costs of ~~$5.1~~$7.9 million, ~~non-cash lease expense~~amortization of ~~$2.2~~debt discount and issuance costs of $4.5 million, ~~and~~ depreciation and amortization of property and equipment, ~~and~~ capitalized implementation costs, and acquired intangible assets of ~~$2.0~~$3.4 million, and non-cash lease expense of $3.3 million. Changes in operating assets and liabilities reflected cash inflows from an $12.5 million increase in deferred revenue resulting primarily from increased billings for subscriptions, a $7.7 million increase in accrued compensation and related benefits, and a $2.0 million increase in accounts payable and accrued expenses and other liabilities. This was partially offset by outflows from a ~~$6.2~~$10.9 million increase in deferred contract costs due to commissions paid on new bookings in line with revenue growth, a ~~$5.0~~$3.9 million increase in accounts receivable due to timing of cash collections, a $3.6 million increase in prepaid expenses and other assets related to timing of payments made in advance for future services, and $~~1.7~~3.0 million in payments for operating lease liabilitiesand a $1.3 million increase in accounts receivable due to timing of cash collections. These amounts were partially offset by inflows from an $8.6 million increase in deferred revenue resulting primarily from increased billings for subscriptions, a $2.1 million increase in accounts payable and accrued expenses and other liabilities, and a $1.3 million increase in accrued compensation primarily due to employee contributions for the employee stock purchase plan (the “ESPP”) and increased headcount..

Investing Activities

Cash provided by investing activities for the ~~six~~nine months ended ~~July~~October 31, 2021 of ~~$24.1~~$29.2 million consisted of proceeds from sales and maturities of investments of ~~$143.5 million. This was partially~~$184.0 million, offset by purchases of available-for-sale investments of ~~$116.1~~$150.6 million, capitalization of internal-use software of ~~$1.9~~$2.7 million, and purchases of property and equipment of ~~$1.3~~$1.4 million primarily for purchases of computers for new employees and to support office space for our San Francisco office.

Cash used in investing activities for the ~~six~~nine months ended ~~July~~October 31, 2020 of ~~$0.5~~$46.0 million consisted of purchases of available-for-sale investments of ~~$100.0~~$153.3 million, net cash paid for the Rundeck acquisition of $49.7 million, and purchases of property and equipment of ~~$3.3~~$3.4 million primarily to support additional office space for our Atlanta office and purchases of computers for new employees. ~~This was~~These payments were partially offset by proceeds from maturities and sales of investments of ~~$103.0~~$160.7 million.

Financing Activities

Cash ~~provided by~~used in financing activities for the ~~six~~nine months ended ~~July~~October 31, 2021 of ~~$1.3~~$1.2 million consisted of $18.6 million in employee payroll taxes paid related to vesting of restricted stock units, partially offset by proceeds of ~~$7.4~~$12.5 million from the exercise of stock options and proceeds from the ESPP of $4.9 million. ~~This was partially offset by $11.0 million in employee payroll taxes paid related to vesting of restricted stock units.~~

Cash provided by financing activities for the ~~six~~nine months ended ~~July~~October 31, 2020 of ~~$251.2~~$251.9 million consisted primarily of net proceeds of ~~$279.3~~$278.7 million related to the issuance of the Notes, proceeds ~~from the ESPP~~ of ~~$3.6 million, and proceeds of $5.8~~$9.7 million from the exercise of stock ~~options.~~options, and proceeds from the ESPP of $3.6 million. This was partially offset by purchases of the Capped Calls of $35.7 million.

Contractual Obligations and Commitments

There were no material changes during the ~~six~~nine months ended ~~July~~October 31, 2021 to our contractual obligations and other commitments, as disclosed in the Annual Report on Form 10-K for the fiscal year ended January 31, 2021, filed with the SEC on March 19, 2021.

For further information on our commitments and contingencies, refer to Note ~~10,~~11, “Commitments and Contingencies”, in the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q.

Indemnification Agreements

In the ordinary course of business, we ~~enter into agreements of varying scope and terms pursuant to which we~~may agree to indemnify customers, vendors, lessors, business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, services to be provided by us, or from intellectual property infringement claims made by third parties. ~~In addition,~~

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As permitted under Delaware law, we have entered into indemnification agreements with our directors and certain officers and employees that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers, or employees. No demands have been made upon us to provide indemnification under such agreements, and

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there are no claims that we are aware of that could have a material effect on our consolidated balance sheets, consolidated statements of operations and comprehensive loss, or consolidated statements of cash flows.

Off-Balance Sheet Arrangements

We do not currently have and, as of ~~July~~October 31, 2021 or during the periods presented, did not have any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies and Estimates

We prepare our condensed consolidated financial statements in accordance with U.S. GAAP. In the preparation of these condensed consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting policies and estimates.

Other than as set forth below, there have been no significant changes to our critical accounting policies described in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021, filed with the SEC on March 19, 2021, that had a material impact on our condensed consolidated financial statements and related notes.

Stock-Based Compensation

Risk-free rate—The Company uses the U.S. Treasury yield for its risk-free interest rate that corresponds with the expected term.

Expected dividend yield—The Company utilizes a dividend yield of zero, as it does not currently issue dividends and does not expect to in the future.

The Company estimates the fair value of RSUs and PSUs at our stock price on the grant date.

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The Company estimates the fair value of shares to be issued under the ESPP on the first day of the offering period using the Black-Scholes valuation model, which is impacted by the estimated fair value of the Company’s common stock, as well as certain assumptions including the expected volatility over the term of the offering period, the expected term of the awards, risk-free interest rates and the expected dividend yield. Assumptions used in the

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determination of the fair value of the ESPP are the same as those used in the determination of the fair value of our stock options.

The Company generally recognizes compensation expense for employee stock-based payment awards on a straight-line basis over the period during which an award recipient is required to provide services in exchange for the award (generally the vesting period of the award), with the exception of PSUs which are recognized using the accelerated attribution method and based on management’s judgment around the probability of achievement of a performance condition. The Company accounts for forfeitures as they occur.

Recent Accounting Pronouncements

For further information on our recently adopted accounting pronouncements, refer to Note 2, "Summary of Significant Accounting Policies", in the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes in our market risk as compared to the disclosures in Part II, Item 7A in our Annual Report on Form 10-K for the year ended January 31, 2021, ~~which was~~ filed with the SEC on March 19, 2021.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management, with the participation and supervision of our chief executive officer and our chief financial officer, have evaluated the effectiveness of our disclosure controls and procedures ~~(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, the Exchange Act)~~ as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our chief executive officer and chief financial officer have concluded that as of such date, our disclosure controls and procedures were, in design and operation, effective at a reasonable assurance level.

Limitations on the Effectiveness of Controls

The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, in designing and evaluating the disclosure controls and procedures, management recognizes that any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.

Changes in Internal Controls Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended ~~July~~October 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, other than as described above.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any material pending legal proceedings. From time to time, we may be subject to legal proceedings and claims arising in the ordinary course of business.

Item 1A. Risk Factors

~~Our business involves significant risks, some of which are~~There have been no material changes from the risk factors described ~~below. You should carefully consider the following risks, together with all of the other information~~ in ~~this Quarterly~~“Part I. Item 1A., “Risk Factors” in our Annual Report on Form ~~10-Q, including our condensed consolidated financial statements~~10-K for the year ended January 31, 2021. The risks described in “Risk Factors” and ~~the related notes included elsewhere~~ in ~~this Quarterly Report on~~any subsequent Form ~~10-Q. Any of the following risks~~10-Qs could ~~have an adverse effect on~~materially and adversely affect our business, results of operations, financial condition or prospects, and could cause the trading price of our common stock to decline. ~~Our~~These risk factors do not identify all risks that we face— our business, results of operations, financial condition or prospects could also be ~~harmed~~affected by ~~risks and uncertainties~~factors that are not ~~currently~~presently known to us or that we currently doconsider to be immaterial. Due to risks and uncertainties, known and unknown, our past financial results may not ~~believe are material.~~

~~There have been no material changes~~be a reliable indicator of future performance and historical trends should not be used to ~~the Risk Factors described under “Part I—Item 1A. Risk Factors”~~anticipate results or trends in ~~our Annual Report on Form 10-K for the year ended January 31, 2021.~~future periods.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~Purchases of Equity Securities by the Issuer and Affiliated Purchasers~~

None.

Items 3, 4, and 5 are not applicable and have been omitted.

Item 6. Exhibits

The documents listed in the Exhibit Index of this Quarterly Report on Form 10-Q are incorporated by reference or are filed with this Quarterly Report on Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).

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EXHIBIT INDEX

Exhibit

Number

Description

Form

File No.

Incorporated by Exhibit Reference

Filing Date

3.1

Amended and Restated Certificate of Incorporation of PagerDuty, Inc.

8-K

001-38856

3.1

April 15, 2019

3.2

Amended and Restated Bylaws of PagerDuty, Inc.

8-K

001-38856

3.2

April 15, 2019

31.1

Certification of the Chief Executive Officer pursuant to Exchange Act Rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed herewith

31.2

Certification of the Chief Financial Officer pursuant to Exchange Act Rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed herewith

32.1*

Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Furnished herewith

101.INS

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Filed herewith

101.SCH

XBRL Taxonomy Extension Schema Document.

Filed herewith

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document.

Filed herewith

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document.

Filed herewith

101.LAB

XBRL Taxonomy Extension Label Linkbase Document.

Filed herewith

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document.

Filed herewith

104

Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, and 101.PRE).

* The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

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SIGNATURES

Pursuant to the requirements of ~~Section 13 or 15(d) of~~ the Securities Exchange Act of 1934, the ~~Registrant~~registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly ~~authorized on this September 3, 2021.~~authorized.


		PAGERDUTY, INC.

Date: December 8, 2021	By:	/s/ Jennifer G. Tejada
		Jennifer G. Tejada
		Chief Executive Officer
		(Principal Executive Officer)

Date: December 8, 2021	By:	/s/ Owen Howard Wilson
		Owen Howard Wilson
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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	Three Months Ended July 31, 2020
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balances as of April 30, 2020	78,526,004	$	—	$	497,430	$	779	$	(190,666)	$	307,543
Issuance of common stock upon exercise of stock options and restricted stock agreements	557,467	—		3,927		—		—		3,927
Vesting of restricted stock units, net of employee payroll taxes	90,903	—		(1,697)		—		—		(1,697)
Vesting of early exercised options	—	—		191		—		—		191
Equity component of convertible senior notes, net of issuance costs	—	—		68,478		—		—		68,478
Purchases of capped calls related to convertible senior notes	—	—		(35,708)		—		—		(35,708)
Issuance of common stock in connection with employee stock purchase plan	181,253	—		3,558		—		—		3,558
Other comprehensive income	—	—		—		277		—		277
Stock-based compensation	—	—		9,990		—		—		9,990
Net loss	—	—		—		—		(14,688)		(14,688)
Balances as of July 31, 2020	79,355,627	$	—	$	546,169	$	1,056	$	(205,354)	$	341,871


	Last 12 Months Ended July 31,
	2021		2020
Dollar-based net retention rate for all customers	126	%	116	%