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 ~~October~~July 31, ~~2022~~2023


☐			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, or an emerging growth company. See the 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)~~13(a) of the ~~Securities~~Exchange 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 ~~November~~August 30, ~~2022,~~2023, was ~~89,975,860.~~93,311,288.

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PAGERDUTY, INC.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Part II - OTHER INFORMATION


Item 1	Legal Proceedings	4542
Item 1A	Risk Factors	4542
Item 2	Unregistered Sale of Equity Securities and Use of Proceeds	4845
Item 6	Exhibits	4845
	Signatures	5047

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q ~~or this Form 10-Q,~~(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 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,” “target,” 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 impact of an economic downturn or recession, rising inflation or significant market volatility in the global economy on our customers, partners, employees and business;

•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;~~months and our ability to meet longer-term expected future cash requirements and obligations, through a combination of cash flows from operating activities and available cash and short-term investment balances;

•anticipated charges and future cost savings in connection with our reduction in headcount and real estate rationalization;

•our ability to ~~successfully~~effectively identify, acquire, and integrate complementary companies, technologies, and ~~assets;~~assets, including our ability to successfully integrate artificial intelligence and machine learning in our offerings;

•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.~~10-K for the year ended January 31, 2023, filed with the SEC on March 16, 2023 (“Annual Report”). Readers are urged to carefully review and consider the various

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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,

~~Table of Contents~~

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.

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.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

PAGERDUTY, INC.

Condensed Consolidated Balance Sheets

(in thousands)

As of October 31, 2022 As of January 31, 2022
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 262,333 $ 349,785
Investments 197,104 193,571
Accounts receivable, net of allowance for credit losses of $1,515 and $1,809 as of October 31, 2022 and January 31, 2022, respectively 72,628 75,279
Deferred contract costs, current 18,007 16,672
Prepaid expenses and other current assets 13,545 9,777
Total current assets 563,617 645,084
Property and equipment, net 18,339 18,229
Deferred contract costs, non-current 26,968 26,159
Lease right-of-use assets 15,141 20,227
Goodwill 118,862 72,126
Intangible assets, net 40,029 23,133
Other assets 1,054 1,490
Total assets $ 784,010 $ 806,448
Liabilities, redeemable non-controlling interest, and stockholders’ equity
Current liabilities:
Accounts payable $ 7,692 $ 9,505
Accrued expenses and other current liabilities 12,884 13,640
Accrued compensation 34,955 35,327
Deferred revenue, current 175,380 162,881
Lease liabilities, current 6,438 5,637
Total current liabilities 237,349 226,990
Convertible senior notes, net 282,445 281,069
Deferred revenue, non-current 4,335 7,343
Lease liabilities, non-current 14,155 20,912
Other liabilities 3,826 3,159
Total liabilities 542,110 539,473
Commitments and contingencies (Note 12)
Redeemable non-controlling interest (Note 3) 1,551 —
Stockholders’ equity:
Common stock — —
Additional paid-in capital 696,169 616,467
Accumulated other comprehensive loss (3,136) (669)
Accumulated deficit (452,684) (348,823)
Total stockholders’ equity 240,349 266,975
Total liabilities, redeemable non-controlling interest, and stockholders’ equity $ 784,010 $ 806,448
(unaudited)


	As of July 31, 2023		As of January 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	298,558	$	274,019
Investments	205,919		202,948
Accounts receivable, net of allowance for credit losses of $2,485 and $2,014 as of July 31, 2023 and January 31, 2023, respectively	65,633		91,345
Deferred contract costs, current	18,442		18,674
Prepaid expenses and other current assets	14,336		13,350
Total current assets	602,888		600,336
Property and equipment, net	17,894		18,390
Deferred contract costs, non-current	24,549		27,715
Lease right-of-use assets	11,225		13,982
Goodwill	118,862		118,862
Intangible assets, net	31,612		37,224
Other assets	4,868		1,364
Total assets	$	811,898	$	817,873
Liabilities, redeemable non-controlling interest, and stockholders’ equity
Current liabilities:
Accounts payable	$	7,145	$	7,398
Accrued expenses and other current liabilities	10,982		11,804
Accrued compensation	23,125		41,834
Deferred revenue, current	192,302		204,137
Lease liabilities, current	6,021		5,904
Total current liabilities	239,575		271,077
Convertible senior notes, net	283,841		282,908
Deferred revenue, non-current	4,303		4,914
Lease liabilities, non-current	9,944		12,704
Other liabilities	4,917		4,184
Total liabilities	542,580		575,787
Commitments and contingencies (Note 10)
Redeemable non-controlling interest (Note 3)	3,431		1,108
Stockholders’ equity:
Common stock	—		—
Additional paid-in capital	779,192		719,816
Accumulated other comprehensive loss	(1,788)		(1,592)
Accumulated deficit	(511,517)		(477,246)
Total stockholders’ equity	265,887		240,978
Total liabilities, redeemable non-controlling interest, and stockholders’ equity	$	811,898	$	817,873

See Notes to Condensed Consolidated Financial Statements

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PAGERDUTY, INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2022		2021		2022		2021			2023		2022		2023		2022
Revenue	Revenue	$	94,203	$	71,760	$	269,827	$	202,887	Revenue	$	107,616	$	90,253	$	210,862	$	175,624
Cost of revenue	Cost of revenue	18,007		12,039		52,090		34,433		Cost of revenue	19,833		18,367		37,769		34,083
Gross profit	Gross profit	76,196		59,721		217,737		168,454		Gross profit	87,783		71,886		173,093		141,541
Operating expenses:	Operating expenses:									Operating expenses:
Research and development	Research and development	35,004		24,554		100,307		68,062		Research and development	36,441		34,014		69,949		65,303
Sales and marketing	Sales and marketing	47,118		40,176		143,001		118,224		Sales and marketing	49,724		50,331		93,525		95,883
General and administrative	General and administrative	26,616		19,808		77,316		56,680		General and administrative	27,791		25,429		51,592		50,700
Total operating expenses	Total operating expenses	108,738		84,538		320,624		242,966		Total operating expenses	113,956		109,774		215,066		211,886
Loss from operations	Loss from operations	(32,542)		(24,817)		(102,887)		(74,512)		Loss from operations	(26,173)		(37,888)		(41,973)		(70,345)
Interest income	Interest income	1,382		705		2,760		2,306		Interest income	3,655		830		6,778		1,378
Interest expense	Interest expense	(1,360)		(1,350)		(4,072)		(4,045)		Interest expense	(1,396)		(1,387)		(2,730)		(2,712)
Other expense, net		(172)		(729)		(1,326)		(1,931)
Loss before (provision for) benefit from income taxes		(32,692)		(26,191)		(105,525)		(78,182)
(Provision for) benefit from income taxes		(112)		(150)		1,302		(378)
Other income (expense), net										Other income (expense), net	1,242		(364)		2,309		(1,154)
Loss before benefit from income taxes										Loss before benefit from income taxes	(22,672)		(38,809)		(35,616)		(72,833)
Benefit from income taxes										Benefit from income taxes	50		210		156		1,414
Net loss	Net loss	$	(32,804)	$	(26,341)	$	(104,223)	$	(78,560)	Net loss	$	(22,622)	$	(38,599)	$	(35,460)	$	(71,419)
Net loss attributable to redeemable non-controlling interest	Net loss attributable to redeemable non-controlling interest	(262)		—		(362)		—		Net loss attributable to redeemable non-controlling interest	(569)		(100)		(1,189)		(100)
Net loss attributable to PagerDuty, Inc.	Net loss attributable to PagerDuty, Inc.	$	(32,542)	$	(26,341)	$	(103,861)	$	(78,560)	Net loss attributable to PagerDuty, Inc.	$	(22,053)	$	(38,499)	$	(34,271)	$	(71,319)
Net loss per share, basic and diluted, attributable to PagerDuty, Inc.		$	(0.36)	$	(0.31)	$	(1.18)	$	(0.94)
Adjustment attributable to redeemable non-controlling interest										Adjustment attributable to redeemable non-controlling interest	1,729		—		1,729		—
Net loss attributable to PagerDuty, Inc. common stockholders										Net loss attributable to PagerDuty, Inc. common stockholders	$	(23,782)	$	(38,499)	$	(36,000)	$	(71,319)
Net loss per share, basic and diluted, attributable to PagerDuty, Inc. common stockholders										Net loss per share, basic and diluted, attributable to PagerDuty, Inc. common stockholders	$	(0.26)	$	(0.44)	$	(0.39)	$	(0.81)
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	89,285		85,092		88,200		83,979		Weighted average shares used in calculating net loss per share, basic and diluted	92,542		88,153		92,041		87,648

See Notes to Condensed Consolidated Financial Statements

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PAGERDUTY, INC.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(unaudited)


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2022		2021		2022		2021			2023		2022		2023		2022
Net loss	Net loss	$	(32,804)	$	(26,341)	$	(104,223)	$	(78,560)	Net loss	$	(22,622)	$	(38,599)	$	(35,460)	$	(71,419)
Unrealized loss on investments		(1,050)		(222)		(1,952)		(534)
Unrealized (loss) gain on investments										Unrealized (loss) gain on investments	(312)		(54)		68		(902)
Foreign currency translation adjustments	Foreign currency translation adjustments	(374)		—		(515)		—		Foreign currency translation adjustments	(198)		(141)		(264)		(141)
Total comprehensive loss	Total comprehensive loss	$	(34,228)	$	(26,563)	$	(106,690)	$	(79,094)	Total comprehensive loss	$	(23,132)	$	(38,794)	$	(35,656)	$	(72,462)
Less comprehensive loss attributable to redeemable non-controlling interest:	Less comprehensive loss attributable to redeemable non-controlling interest:									Less comprehensive loss attributable to redeemable non-controlling interest:
Net loss attributable to redeemable non-controlling interest	Net loss attributable to redeemable non-controlling interest	(262)		—		(362)		—		Net loss attributable to redeemable non-controlling interest	(569)		(100)		(1,189)		(100)
Foreign currency translation adjustments, attributable to redeemable non-controlling interest	Foreign currency translation adjustments, attributable to redeemable non-controlling interest	2		—		5		—		Foreign currency translation adjustments, attributable to redeemable non-controlling interest	(2)		3		2		3
Comprehensive loss attributable to redeemable non-controlling interest	Comprehensive loss attributable to redeemable non-controlling interest	(260)		—		(357)		—		Comprehensive loss attributable to redeemable non-controlling interest	(571)		(97)		(1,187)		(97)
Comprehensive loss attributable to PagerDuty, Inc.	Comprehensive loss attributable to PagerDuty, Inc.	$	(33,968)	$	(26,563)	$	(106,333)	$	(79,094)	Comprehensive loss attributable to PagerDuty, Inc.	$	(22,561)	$	(38,697)	$	(34,469)	$	(72,365)

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PAGERDUTY, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

(unaudited)


		Three Months Ended October 31, 2022																		Three Months Ended July 31, 2023
		Common Stock			Additional Paid-in Capital				Accumulated Other Comprehensive Loss			Accumulated Deficit				Total Stockholders’ Equity				Common Stock					Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity
		Shares	Amount								Shares								Amount
Balances as of July 31, 2022		88,928,089	$	—			$	672,126						$	(1,712)			$	(420,142)		$	250,272
Balances as of April 30, 2023																			Balances as of April 30, 2023	92,094,542			$	—		$	743,218		$	(1,278)		$	(489,464)		$	252,476
Issuance of common stock upon exercise of stock options	Issuance of common stock upon exercise of stock options	328,471	—		2,137				—			—				2,137			Issuance of common stock upon exercise of stock options	260,690			—		2,649			—			—			2,649
Vesting of restricted stock units, net of employee payroll taxes	Vesting of restricted stock units, net of employee payroll taxes	709,089	—		(9,864)				—			—				(9,864)			Vesting of restricted stock units, net of employee payroll taxes	568,076			—		(7,166)			—			—			(7,166)
Issuance of common stock in connection with the Employee Stock Purchase Plan																			Issuance of common stock in connection with the Employee Stock Purchase Plan	325,983			—		6,292			—			—			6,292
Other comprehensive loss	Other comprehensive loss	—	—		—				(1,424)			—				(1,424)			Other comprehensive loss	—			—		—			(510)			—			(510)
Stock-based compensation	Stock-based compensation	—	—		31,770				—			—				31,770			Stock-based compensation	—			—		35,928			—			—			35,928
Adjustment to redeemable non-controlling interest																			Adjustment to redeemable non-controlling interest	—			—		(1,729)			—			—			(1,729)
Net loss attributable to PagerDuty, Inc.	Net loss attributable to PagerDuty, Inc.	—	—		—				—			(32,542)				(32,542)			Net loss attributable to PagerDuty, Inc.	—			—		—			—			(22,053)			(22,053)
Balances as of October 31, 2022		89,965,649	$	—	$	696,169			$	(3,136)		$	(452,684)			$	240,349
Balances as of July 31, 2023																			Balances as of July 31, 2023	93,249,291			$	—	$	779,192		$	(1,788)		$	(511,517)		$	265,887


	Six Months Ended July 31, 2023
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balances as of January 31, 2023	91,178,671	$	—	$	719,816	$	(1,592)	$	(477,246)	$	240,978
Issuance of common stock upon exercise of stock options	780,542	—		6,981		—		—		6,981
Vesting of restricted stock units, net of employee payroll taxes	964,095	—		(15,986)		—		—		(15,986)
Issuance of common stock in connection with the Employee Stock Purchase Plan	325,983	—		6,292		—		—		6,292
Other comprehensive loss	—	—		—		(196)		—		(196)
Stock-based compensation	—	—		63,818		—		—		63,818
Adjustment to redeemable non-controlling interest	—	—		(1,729)		—		—		(1,729)
Net loss attributable to PagerDuty, Inc.	—	—		—		—		(34,271)		(34,271)
Balances as of July 31, 2023	93,249,291	$	—	$	779,192	$	(1,788)	$	(511,517)	$	265,887

Nine Months Ended October 31, 2022
Common Stock Additional
Paid-in
Capital Accumulated Other Comprehensive Loss Accumulated
Deficit Total
Stockholders’
Equity
Shares Amount
Balances as of January 31, 2022 86,758,380 $ — $ 616,467 $ (669) $ (348,823) $ 266,975
Issuance of common stock upon exercise of stock options 1,513,581 — 8,728 — — 8,728
Vesting of restricted stock units, net of employee payroll taxes 1,349,991 — (22,187) — — (22,187)
Shares issued related to an asset acquisition 62,972 — — — — —
Issuance of common stock in connection with the Employee Stock Purchase Plan 280,725 — 5,736 — — 5,736
Other comprehensive loss — — — (2,467) — (2,467)
Stock-based compensation — — 87,425 — — 87,425
Net loss attributable to PagerDuty, Inc. — — — (103,861) (103,861)
Balances as of October 31, 2022 89,965,649 $ — $ 696,169 $ (3,136) $ (452,684) $ 240,349

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Three Months Ended October 31, 2021
Common Stock Additional
Paid-in
Capital Accumulated Other Comprehensive Income (Loss) Accumulated
Deficit Total
Stockholders’
Equity
Shares Amount
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 724,725 — 4,286 — — 4,286
Vesting of restricted stock units, net of employee payroll taxes 269,436 — (7,616) — — (7,616)
Other comprehensive loss — — — (222) — (222)
Stock-based compensation — — 18,110 — — 18,110
Net loss — — — — (26,341) (26,341)
Balances as of October 31, 2021 85,795,285 $ — $ 593,508 $ (191) $ (319,928) $ 273,389


	Three Months Ended July 31, 2022
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balances as of April 30, 2022	87,757,527	$	—	$	639,318	$	(1,517)	$	(381,643)	$	256,158
Issuance of common stock upon exercise of stock options	439,346	—		2,785		—		—		2,785
Vesting of restricted stock units, net of employee payroll taxes	387,519	—		(6,153)		—		—		(6,153)
Shares issued related to an asset acquisition	62,972	—		—		—		—		—
Issuance of common stock in connection with the Employee Stock Purchase Plan	280,725	—		5,736		—		—		5,736
Other comprehensive loss	—	—		—		(195)		—		(195)
Stock-based compensation	—	—		30,440		—		—		30,440
Net loss attributable to PagerDuty, Inc.	—	—		—		—		(38,499)		(38,499)
Balances as of July 31, 2022	88,928,089	$	—	$	672,126	$	(1,712)	$	(420,142)	$	250,272

Nine Months Ended October 31, 2021
Common Stock Additional
Paid-in
Capital Accumulated Other Comprehensive Income (Loss) Accumulated
Deficit Total
Stockholders’
Equity
Shares Amount
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 — — (68,478) — 6,742 (61,736)
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 677,323 — (18,619) — — (18,619)
Shares issued related to a business combination 2,073 — — — — —
Issuance of common stock in connection with employee stock purchase
plan
222,474 — 4,889 — — 4,889
Other comprehensive loss — — — (534) — (534)
Stock-based compensation — — 48,714 — — 48,714
Net loss — — — — (78,560) (78,560)
Balances as of October 31, 2021 85,795,285 $ — $ 593,508 $ (191) $ (319,928) $ 273,389


	Six Months Ended July 31, 2022
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balances as of January 31, 2022	86,758,380	$	—	$	616,467	$	(669)	$	(348,823)	$	266,975
Issuance of common stock upon exercise of stock options	1,185,110	—		6,591		—		—		6,591
Vesting of restricted stock units, net of employee payroll taxes	640,902	—		(12,323)		—		—		(12,323)
Shares issued related to an asset acquisition	62,972	—		—		—		—		—
Issuance of common stock in connection with the Employee Stock Purchase Plan	280,725	—		5,736		—		—		5,736
Other comprehensive loss	—	—		—		(1,043)		—		(1,043)
Stock-based compensation	—	—		55,655		—		—		55,655
Net loss attributable to PagerDuty, Inc.	—	—		—		—		(71,319)		(71,319)
Balances as of July 31, 2022	88,928,089	$	—	$	672,126	$	(1,712)	$	(420,142)	$	250,272

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,					Six Months Ended July 31,
		2022		2021			2023		2022
Cash flows from operating activities	Cash flows from operating activities					Cash flows from operating activities
Net loss attributable to PagerDuty, Inc.		$	(103,861)	$	(78,560)
Net loss attributable to redeemable non-controlling interest (Note 3)		(362)		—
Net loss attributable to PagerDuty, Inc. common stockholders						Net loss attributable to PagerDuty, Inc. common stockholders	$	(36,000)	$	(71,319)
Net loss and adjustment attributable to redeemable non-controlling interest (Note 3)						Net loss and adjustment attributable to redeemable non-controlling interest (Note 3)	540		(100)
Net loss	Net loss	(104,223)		(78,560)		Net loss	(35,460)		(71,419)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:						Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	Depreciation and amortization	12,778		6,160		Depreciation and amortization	9,991		8,280
Amortization of deferred contract costs	Amortization of deferred contract costs	14,178		10,651		Amortization of deferred contract costs	10,163		9,256
Amortization of debt issuance costs	Amortization of debt issuance costs	1,376		1,350		Amortization of debt issuance costs	933		915
Stock-based compensation	Stock-based compensation	86,478		47,866		Stock-based compensation	63,082		55,034
Non-cash lease expense	Non-cash lease expense	2,913		3,331		Non-cash lease expense	2,319		2,302
Tax benefit related to release of valuation allowance	Tax benefit related to release of valuation allowance	(1,330)		—		Tax benefit related to release of valuation allowance	—		(1,330)
Other	Other	1,686		2,592		Other	98		1,810
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	3,048		360		Accounts receivable	24,404		16,521
Deferred contract costs	Deferred contract costs	(16,323)		(16,842)		Deferred contract costs	(6,765)		(10,033)
Prepaid expenses and other assets	Prepaid expenses and other assets	(2,934)		(857)		Prepaid expenses and other assets	(1,385)		(1,510)
Accounts payable	Accounts payable	(1,117)		3,836		Accounts payable	(245)		(2,226)
Accrued expenses and other liabilities	Accrued expenses and other liabilities	(1,350)		(79)		Accrued expenses and other liabilities	(15)		3,243
Accrued compensation	Accrued compensation	(624)		3,760		Accrued compensation	(18,792)		(6,658)
Deferred revenue	Deferred revenue	8,635		12,878		Deferred revenue	(12,428)		(1,546)
Lease liabilities	Lease liabilities	(3,783)		(3,812)		Lease liabilities	(2,998)		(2,783)
Net cash used in operating activities		(592)		(7,366)
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	32,902		(144)
Cash flows from investing activities	Cash flows from investing activities					Cash flows from investing activities
Purchases of property and equipment	Purchases of property and equipment	(3,755)		(1,376)		Purchases of property and equipment	(948)		(2,940)
Capitalization of internal-use software costs	Capitalization of internal-use software costs	(2,725)		(2,701)		Capitalization of internal-use software costs	(2,371)		(1,737)
Business acquisition, net of cash acquired	Business acquisition, net of cash acquired	(66,262)		(160)		Business acquisition, net of cash acquired	—		(66,262)
Asset acquisition	Asset acquisition	(1,845)		—		Asset acquisition	—		(1,845)
Purchases of available-for-sale investments	Purchases of available-for-sale investments	(155,310)		(150,608)		Purchases of available-for-sale investments	(108,057)		(95,468)
Proceeds from maturities of available-for-sale investments	Proceeds from maturities of available-for-sale investments	149,625		156,616		Proceeds from maturities of available-for-sale investments	107,564		95,200
Proceeds from sales of available-for-sale investments		—		27,380
Net cash (used in) provided by investing activities		(80,272)		29,151
Purchases of non-marketable equity investments						Purchases of non-marketable equity investments	(200)		—
Net cash used in investing activities						Net cash used in investing activities	(4,012)		(73,052)
Cash flows from financing activities	Cash flows from financing activities					Cash flows from financing activities
Investment from redeemable non-controlling interest holder	Investment from redeemable non-controlling interest holder	1,908		—		Investment from redeemable non-controlling interest holder	1,781		1,908
Proceeds from employee stock purchase plan	Proceeds from employee stock purchase plan	5,736		4,889		Proceeds from employee stock purchase plan	6,292		5,736
Proceeds from issuance of common stock upon exercise of stock options	Proceeds from issuance of common stock upon exercise of stock options	8,459		12,517		Proceeds from issuance of common stock upon exercise of stock options	7,417		6,560
Employee payroll taxes paid related to net share settlement of restricted stock units	Employee payroll taxes paid related to net share settlement of restricted stock units	(22,187)		(18,619)		Employee payroll taxes paid related to net share settlement of restricted stock units	(15,986)		(12,323)
Net cash used in financing activities		(6,084)		(1,213)
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(496)		1,881
Effects of foreign currency exchange rates on cash, cash equivalents, and restricted cash	Effects of foreign currency exchange rates on cash, cash equivalents, and restricted cash	(504)		—		Effects of foreign currency exchange rates on cash, cash equivalents, and restricted cash	(274)		(139)
Net (decrease) increase in cash, cash equivalents, and restricted cash		(87,452)		20,572
Net increase (decrease) in cash, cash equivalents, and restricted cash						Net increase (decrease) in cash, cash equivalents, and restricted cash	28,120		(71,454)
Cash, cash equivalents, and restricted cash at beginning of period	Cash, cash equivalents, and restricted cash at beginning of period	349,785		339,166		Cash, cash equivalents, and restricted cash at beginning of period	274,019		349,785
Cash, cash equivalents, and restricted cash at end of period	Cash, cash equivalents, and restricted cash at end of period	$	262,333	$	359,738	Cash, cash equivalents, and restricted cash at end of period	$	302,139	$	278,331
Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets						Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets
Cash and cash equivalents						Cash and cash equivalents	298,558		278,331
Restricted cash in other long-term assets						Restricted cash in other long-term assets	3,581		—
Total cash, cash equivalents and restricted cash						Total cash, cash equivalents and restricted cash	$	302,139	$	278,331

Supplemental cash flow data:	Supplemental cash flow data:					Supplemental cash flow data:
Cash paid for income taxes	Cash paid for income taxes	$	130	$	126	Cash paid for income taxes	$	141	$	25
Cash paid for interests	Cash paid for interests	$	1,797	$	1,797	Cash paid for interests	$	1,797	$	1,797
Non-cash investing and financing activities:	Non-cash investing and financing activities:					Non-cash investing and financing activities:
Purchase of property and equipment, accrued but not yet paid	Purchase of property and equipment, accrued but not yet paid	$	828	$	823	Purchase of property and equipment, accrued but not yet paid	$	92	$	1,414
Stock-based compensation capitalized in internal use software	Stock-based compensation capitalized in internal use software	$	947	$	848	Stock-based compensation capitalized in internal use software	$	736	$	622
Bonuses capitalized in internal use software	Bonuses capitalized in internal use software	$	263	$	121	Bonuses capitalized in internal use software	$	99	$	188
Receivables for cash in-transit on stock options	Receivables for cash in-transit on stock options	$	269	$	9	Receivables for cash in-transit on stock options	$	—	$	30

See Notes to Condensed Consolidated Financial Statements

Table of Contents

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 is a digital operations management platform that manages urgent and mission-critical work for a modern, digital business. PagerDuty collects data and digital signals from virtually any software-enabled system or device and leverages powerful machine learning to correlate, process, and predict opportunities and issues. Using incident response, event management, and automation, the Company brings together the right people with the right information so they can resolve issues and act on opportunities in minutes or seconds from wherever they are.

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, ~~2022~~2023 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, ~~2022,~~2023, included in the ~~Company’s~~ Annual ~~Report on Form 10-K, filed with the SEC.~~Report.

The condensed consolidated financial statements include the results of the Company, its wholly owned subsidiaries, and subsidiaries in which the Company holds a controlling interest. All intercompany balances and transactions have been eliminated in consolidation.

In the opinion of management, the information contained herein reflects all adjustments necessary for a fair ~~presentation~~statement of the Company’s financial position, results of operations and comprehensive loss, statements of stockholders’ equity, and cash flows. The results of operations for the three and ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023 are not necessarily indicative of the results to be expected for the full year ending January 31, ~~2023~~2024 or for any other interim period, or for any future year.

The Company’s fiscal year ends on January 31. References to fiscal ~~2023,~~2024, for example, refer to the fiscal year ending January 31, ~~2023.~~2024.

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 period of benefit for amortizing deferred contract costs, the determination of the allowance for credit losses, ~~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,~~stock-based compensation, and estimates related to ~~our~~the Company’s revenue recognition, such as the assessment of

~~Table of Contents~~

~~PAGERDUTY, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(unaudited)~~

performance obligations in ~~our~~the Company’s revenue arrangements and the fair value assigned to each performance obligation, among others. Management bases its estimates on historical experience and on various other assumptions which

Table of Contents

PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

~~Foreign Currency Translations~~

The functional currency for the large majority of the Company's foreign operations is the U.S. dollar, although the Company has one subsidiary use the local currency as its functional currency for the three and nine months ended October 31, 2022. When a consolidated entity’s functional currency is the local currency, the Company translates the foreign functional currency financial statements to U.S. dollars using the exchange rates at the balance sheet date for assets and liabilities, the period average exchange rates for revenues and expenses, and the historical exchange rates for equity.

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. The Company’s cash, cash equivalents, and available-for-sale investments are spread across several different financial institutions.

No single customer accounted for more than 10% of the total accounts receivable balance as of ~~October~~July 31, ~~2022~~2023 or January 31, ~~2022.~~2023. No single customer represented 10% or more of revenue for the three and ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023 or ~~2021.~~2022.

Segment Information

The Company manages its operations and allocates resources as one 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 ~~17,~~15, “Geographic Information” for information regarding the Company's long-lived assets and revenue by geography.

Related Party ~~Transaction~~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 billed ~~$1.6~~$3.8 million and ~~$2.2~~$2.5 million to entities associated with related parties during the ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023 and ~~2021,~~2022, respectively. The Company recognized ~~$1.1~~$1.5 million of revenue associated with related parties during the ~~nine~~six months ended ~~October~~July 31, ~~2021.~~2023. The Company recognized $1.3 million in accounts receivable associated with related parties as of July 31, 2022. Other related party transactions were not material for the three and ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023 and ~~2021.~~2022.

Significant Accounting Policies

There have been no significant changes to ~~our~~the Company’s significant accounting policies as compared to those described in ~~our~~the Annual Report, ~~on Form 10-K for the fiscal year ended January 31, 2022~~ other than as set forth below.

Restricted Cash

The Company has classified cash that is not available for use in its operations as restricted cash. Restricted cash consists primarily of collateral for letters of credit related to security deposits for the Company’s office facility lease arrangements. As of July 31, 2023, the Company had restricted cash of $3.6 million, all of which was classified as non-current. The Company had no restricted cash as of January 31, 2023.

Redeemable Non-Controlling Interest

During the quarter ended July 31, 2022, the Company established a joint venture with Japan Cloud Computing II L.P. (the “Investor”) in Japan (“PagerDuty K.K.”), which is a variable interest entity, obtaining a 51% controlling interest. The Company has consolidated the financial results of the joint venture.

~~Table of Contents~~

~~PAGERDUTY, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(unaudited)~~

The agreements with the non-controlling interest holders of PagerDuty K.K. contain redemption features whereby the interest held by the non-controlling interest holders is redeemable either (i) at the option of the non-controlling interest holders or (ii) at the option of the Company, both beginning on the tenth anniversary of the initial capital contribution. The balance of the redeemable non-controlling interest is reported at the greater of the initial

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PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

carrying amount adjusted for the redeemable non-controlling interest's share of earnings or losses and other comprehensive income or loss, or its estimated redemption value. The resulting changes in the estimated redemption amount are recorded with corresponding adjustments against additional paid-in-capital due to the absence of retained earnings. The carrying amount of the redeemable non-controlling interest is recorded on the Company's condensed consolidated balance sheets as temporary equity. During the three and six months ended July 31, 2023, the Company recorded an adjustment attributable to the redeemable non-controlling interest of $1.7 million. There were no adjustments attributable to the redeemable non-controlling interest inrecorded during the three and ~~nine~~six months ended ~~October~~July 31, 2022.

~~Recently Adopted Accounting Pronouncements~~

~~In March 2022, the FASB issued Accounting Standard Update No. 2022-01 (“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. The Company early adopted ASU 2022-01 as of February 1, 2022 using the prospective method. The adoption of the standard impacted the accounting for the acquisition of Catalytic, Inc. (“Catalytic”) requiring the Company to measure acquired contract assets and liabilities in accordance with ASC 606. The adoption of ASU 2021-08 did not have a material impact on the condensed consolidated financial statements.

3. Redeemable Non-Controlling Interest

In May 2022, the Company established a joint venture, PagerDuty K.K, which is a variable interest entity. The Company obtained a 51% controlling interest and has consolidated the financial results of the joint venture.

The following table summarizes the activity in the redeemable non-controlling interest for the period indicated below:


							Three Months Ended July 31,				Six Months Ended July 31,
		Three Months Ended October 31, 2022		Nine Months Ended October 31, 2022			2023		2022		2023		2022
		(in thousands)					(in thousands)
Balance at beginning of period	Balance at beginning of period	$	1,811	$	—	Balance at beginning of period	$	492	$	—	$	1,108	$	—
Investment by redeemable non-controlling interest	Investment by redeemable non-controlling interest	—		1,908		Investment by redeemable non-controlling interest	1,781		1,908		1,781		1,908
Net loss attributable to redeemable non-controlling interest	Net loss attributable to redeemable non-controlling interest	(262)		(362)		Net loss attributable to redeemable non-controlling interest	(569)		(100)		(1,189)		(100)
Adjustment to redeemable non-controlling interest						Adjustment to redeemable non-controlling interest	1,729		—		1,729		—
Foreign currency translation adjustments	Foreign currency translation adjustments	2		5		Foreign currency translation adjustments	(2)		3		2		3
Balance at end of period	Balance at end of period	$	1,551	$	1,551	Balance at end of period	$	3,431	$	1,811	$	3,431	$	1,811

4. Cash, Cash Equivalents, and Investments

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


	As of July 31, 2023		As of January 31, 2023
	(in thousands)
Cash and cash equivalents
Cash	$	66,686	$	67,151
Money market funds	229,887		206,868
U.S. Treasury securities	1,985		—
Total cash and cash equivalents	$	298,558	$	274,019
Available-for-sale investments:
U.S. Treasury securities	$	57,257	$	51,387
Commercial paper	21,980		34,798
Corporate debt securities	111,516		108,827
U.S. Government agency securities	15,166		7,936
Total available-for-sale investments	$	205,919	$	202,948

Table of Contents

PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

As of October 31, 2022 As of January 31, 2022
(in thousands)
Cash and cash equivalents
Cash $ 118,604 $ 268,091
Money market funds 141,730 73,194
Commercial paper 1,999 5,500
U.S. Treasury securities — 3,000
Total cash and cash equivalents $ 262,333 $ 349,785
Available-for-sale investments:
U.S. Treasury securities $ 50,569 $ 41,105
Commercial paper 31,638 39,483
Corporate debt securities 108,964 112,983
U.S. Government agency securities 5,933 —
Total available-for-sale investments $ 197,104 $ 193,571

The following tables summarize the Company’s investments’ adjusted cost, net unrealized losses, and fair value by significant investment category as of ~~October~~July 31, ~~2022~~2023 and January 31, ~~2022.~~2023. Gross realized gains or losses from sales of available-for-sale securities were not material for the three and ~~nine~~six months ended ~~October~~July 31, ~~2022.~~2023.


		As of October 31, 2022							As of July 31, 2023
		Cost Basis		Unrealized Loss		Recorded Basis			Cost Basis		Unrealized Loss, Net		Estimated Fair Value
		(in thousands)							(in thousands)
Available-for-sale investments:	Available-for-sale investments:							Available-for-sale investments:
U.S. Treasury securities	U.S. Treasury securities	$	50,685	$	(116)	$	50,569	U.S. Treasury securities	$	57,277	$	(20)	$	57,257
Commercial paper	Commercial paper	31,918		(280)		31,638		Commercial paper	22,005		(25)		21,980
Corporate debt securities	Corporate debt securities	111,124		(2,160)		108,964		Corporate debt securities	112,669		(1,153)		111,516
U.S. Government agency securities	U.S. Government agency securities	5,998		(65)		5,933		U.S. Government agency securities	15,341		(175)		15,166
Total available-for-sale investments	Total available-for-sale investments	$	199,725	$	(2,621)	$	197,104	Total available-for-sale investments	$	207,292	$	(1,373)	$	205,919


		As of January 31, 2022							As of January 31, 2023
		Cost Basis		Unrealized Loss, Net		Recorded Basis			Cost Basis		Unrealized Loss, Net		Estimated Fair Value
		(in thousands)							(in thousands)
Available-for-sale investments:	Available-for-sale investments:							Available-for-sale investments:
U.S. Treasury securities	U.S. Treasury securities	$	41,147	$	(42)	$	41,105	U.S. Treasury securities	$	51,400	$	(13)	$	51,387
Commercial paper	Commercial paper	39,528		(45)		39,483		Commercial paper	34,926		(128)		34,798
Corporate debt securities	Corporate debt securities	113,565		(582)		112,983		Corporate debt securities	110,063		(1,236)		108,827
U.S. Government agency securities								U.S. Government agency securities	8,000		(64)		7,936
Total available-for-sale investments	Total available-for-sale investments	$	194,240	$	(669)	$	193,571	Total available-for-sale investments	$	204,389	$	(1,441)	$	202,948

The following tables present the Company’s available-for-sale securities by contractual maturity date as of ~~October~~July 31, ~~2022~~2023 and January 31, ~~2022:~~2023:


	As of July 31, 2023
	Cost Basis		Recorded Basis
	(in thousands)
Due within one year	$	151,392	$	150,527
Due between one to five years	55,900		55,392
Total	$	207,292	$	205,919


	As of January 31, 2023
	Cost Basis		Recorded Basis
	(in thousands)
Due within one year	$	139,443	$	138,625
Due between one to five years	64,946		64,323
Total	$	204,389	$	202,948

As of July 31, 2023, the Company had 96 securities in an unrealized loss position with an aggregate fair value of $198.0 million, of which $37.2 million were in a continuous unrealized loss position for more than 12 months. As of January 31, 2023, the Company had 81 securities in an unrealized loss position with an aggregate fair value of $174.1 million, of which $39.9 million were in a continuous unrealized loss position for more than 12 months.

Table of Contents

PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

As of October 31, 2022
Cost Basis Recorded Basis
(in thousands)
Due within one year $ 150,320 $ 148,732
Due between one to five years 49,405 48,372
Total $ 199,725 $ 197,104

As of January 31, 2022
Cost Basis Recorded Basis
(in thousands)
Due within one year $ 154,692 $ 154,455
Due between one to five years 39,548 39,116
Total $ 194,240 $ 193,571

As of October 31, 2022, there were 92 available-for-sale securities in an unrealized loss position, 27 of which were in a continuous unrealized loss position for the last 12 months. The total unrealized loss related to the 27 securities was $1.0 million. As of January 31, 2022, there were 69 available-for-sale securities in an unrealized loss position, seven of which were in a continuous unrealized loss position for the last 12 months. The total unrealized loss related to the seven securities was $0.7 million.

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 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.

5. 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.

The following 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, 2023
	Level 1		Level 2		Level 3		Total
	(in thousands)
Money market funds	$	229,887	$	—	$	—	$	229,887
U.S. Treasury securities	—		59,242		—		59,242
Commercial paper	—		21,980		—		21,980
Corporate debt securities	—		111,516		—		111,516
U.S. Government agency securities	—		15,166		—		15,166
Total	$	229,887	$	207,904	$	—	$	437,791
Included in cash equivalents							$	231,872
Included in investments							$	205,919


	As of January 31, 2023
	Level 1		Level 2		Level 3		Total
	(in thousands)
Money market funds	$	206,868	$	—	$	—	$	206,868
U.S. Treasury securities	—		51,387		—		51,387
Commercial paper	—		34,798		—		34,798
Corporate debt securities	—		108,827		—		108,827
U.S. Government agency securities	—		7,936		—		7,936
Total	$	206,868	$	202,948	$	—	$	409,816
Included in cash equivalents							$	206,868
Included in investments							$	202,948

Table of Contents

PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

As of October 31, 2022
Level 1 Level 2 Level 3 Total
(in thousands)
Money market funds $ 141,730 $ — $ — $ 141,730
U.S. Treasury securities — 50,569 — 50,569
Commercial paper 1,999 31,638 — 33,637
Corporate debt securities — 108,964 — 108,964
U.S. Government agency securities — 5,933 — 5,933
Total $ 143,729 $ 197,104 $ — $ 340,833
Included in cash equivalents $ 143,729
Included in investments $ 197,104

As of January 31, 2022
Level 1 Level 2 Level 3 Total
(in thousands)
Money market funds $ 73,194 $ — $ — $ 73,194
U.S. Treasury securities 3,000 41,105 — 44,105
Commercial paper 5,500 39,483 — 44,983
Corporate debt securities — 112,983 — 112,983
Total $ 81,694 $ 193,571 $ — $ 275,265
Included in cash equivalents $ 81,694
Included in investments $ 193,571

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.

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of ~~October~~July 31, ~~2022~~2023 and January 31, ~~2022,~~2023, 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 ~~October~~July 31, ~~2022,~~2023, the estimated fair value of our 1.25% Convertible Senior Notes due 2025 (the “Notes”) was approximately ~~$282.6~~$284.7 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.

6. ~~Business Combinations~~

On March 8, 2022, the Company completed the acquisition of Catalytic, a provider of a no-code/low-code workflow automation application. The Company acquired Catalytic for purchase consideration of $68.8 million in cash. The acquisition was accounted for as a business combination and the acquired assets and liabilities were recorded at their preliminary fair values on the acquisition date and any excess was recorded as goodwill. The values

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~~PAGERDUTY, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(unaudited)~~

assigned to the assets acquired and liabilities assumed are based on preliminary estimates of fair value available as of the date of this Quarterly Report on Form 10-Q and may be adjusted during the measurement period of up to 12 months from the date of acquisition as further information becomes available. Any changes in the fair values of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill. As of October 31, 2022, the primary area that remains preliminary relates to the valuation of certain tax-related items.

~~The following table presents the preliminary fair values of acquired assets and liabilities recorded in the Company’s condensed consolidated balance sheet as of the acquisition date:~~


	~~(in thousands)~~
~~Cash and cash equivalents~~	$	~~2,506~~
~~Accounts receivable and other assets~~	~~801~~
~~Prepaid and other current assets~~	~~841~~
~~Intangible assets~~	~~21,800~~
~~Goodwill~~	~~46,736~~
~~Accounts payable and other liabilities~~	~~(408)~~
~~Deferred revenue~~	~~(856)~~
~~Other tax liabilities~~	~~(1,322)~~
~~Deferred tax liability~~	~~(1,330)~~
~~Total purchase consideration~~	$	~~68,768~~

~~The goodwill was primarily attributed to the value of synergies created with the Company’s current and future offerings. Goodwill is not deductible for income tax purposes.~~

In connection with the acquisition, the Company recognized a net deferred tax liability for approximately $1.3 million, generated primarily from the difference between the tax basis and fair value of the acquired intangible assets, which increased goodwill. As the Company has a full valuation allowance as of October 31, 2022, the Company recorded an income tax benefit for this net deferred tax liability in the condensed consolidated statement of operations for the nine months ended October 31, 2022. Refer to ~~Note 16, "Income Taxes", for further information.~~

~~The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition:~~

Fair Value Useful Life
(in thousands) (in years)
Developed technology $ 19,200 3
Customer relationships $ 2,600 10

This business combination resulted in increases of $46.7 million to goodwill, $19.2 million to developed technology and $2.6 million to customer relationships. The Company also entered into holdback agreements with the two founders of Catalytic with $3.4 million held back in cash which are subject to the recipients’ continued service with the Company and thus excluded from the purchase price and will be recognized ratably as research and development expense over the required two-year service period.

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

~~Table of Contents~~

~~PAGERDUTY, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(unaudited)~~

~~The Company did not complete any other business combinations in the three and nine months ended October 31, 2022.~~

~~7. Goodwill and Acquired Intangible Assets~~

~~The changes in the carrying amount of goodwill for the nine months ended October 31, 2022 are as follows:~~


	~~Goodwill~~
	~~(in thousands)~~
~~Balance as of January 31, 2022~~	$	~~72,126~~
~~Goodwill resulting from business combination~~	~~46,736~~
~~Balance as of October 31, 2022~~	$	~~118,862~~

~~Acquired intangible assets subject to amortization consist of the following:~~

As of October 31, 2022
Cost Accumulated Amortization Net Weighted Average
Remaining Useful Life
(in thousands) (in years)
Customer relationships $ 24,400 $ (4,709) $ 19,691 8.1
Developed technology 24,800 (6,462) 18,338 2.5
Trademarks 400 (400) — 0.0
Assembled workforce 2,527 (527) 2,000 1.6
Total acquired intangibles, net $ 52,127 $ (12,098) $ 40,029

As of January 31, 2022
Cost Accumulated Amortization Net Weighted Average
Remaining Useful Life
(in thousands) (in years)
Customer relationships $ 21,800 $ (2,907) $ 18,893 8.7
Developed technology 5,600 (1,493) 4,107 3.7
Trademarks 400 (267) 133 0.7
Total acquired intangibles, net $ 27,800 $ (4,667) $ 23,133

For the three months ended October 31, 2022 and 2021, amortization expense related to intangible assets was $2.6 million and $0.9 million, respectively. For the nine months ended October 31, 2022 and 2021, amortization expense related to acquired intangible assets was $7.4 million and $2.6 million, respectively.

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~~PAGERDUTY, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(unaudited)~~

8. Property and Equipment, Net

Property and equipment, net, consisted of the following:


		As of October 31, 2022		As of January 31, 2022			As of July 31, 2023		As of January 31, 2023
		(in thousands)					(in thousands)
Leasehold improvements	Leasehold improvements	$	15,599	$	15,392	Leasehold improvements	$	13,177	$	15,585
Computers and equipment	Computers and equipment	9,168		7,483		Computers and equipment	8,323		9,426
Furniture and fixtures	Furniture and fixtures	4,774		4,686		Furniture and fixtures	4,338		4,730
Capitalized internal-use software	Capitalized internal-use software	9,389		6,136		Capitalized internal-use software	14,177		10,971
Gross property and equipment (1)	Gross property and equipment (1)	38,930		33,697		Gross property and equipment (1)	40,015		40,712
Accumulated depreciation and amortization	Accumulated depreciation and amortization	(20,591)		(15,468)		Accumulated depreciation and amortization	(22,121)		(22,322)
Property and equipment, net	Property and equipment, net	$	18,339	$	18,229	Property and equipment, net	$	17,894	$	18,390

(1) Gross property and equipment includes construction-in-progress for leasehold improvements and capitalized internal-use software of ~~$4.6~~$3.4 million and ~~$6.9~~$6.0 million that had not yet been placed in service as of ~~October~~July 31, ~~2022~~2023 and January 31, ~~2022,~~2023, 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 ~~$1.8~~$2.4 million and ~~$1.3~~$1.6 million for the three months ended ~~October~~July 31, ~~2022~~2023 and ~~2021,~~2022, respectively. Depreciation and amortization expense was ~~$5.1~~$4.2 million and ~~$3.4~~$3.3 million for the ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

In ~~the nine~~three and six months ended ~~October~~July 31, ~~2022,~~2023, the Company recorded an impairment charge of ~~$0.7~~$0.4 million related to leasehold improvements abandoned in the period. The impairment charge was recorded in general and administrative expenses on its capitalized internal-use software included in construction-in-progress. It was determined that the developed technology would not be placed in service as the technology was replaced with the acquired technologyour consolidated statement of ~~Catalytic.~~operations.

9.7. Deferred Contract Costs

Deferred contract costs, which primarily consist of deferred sales commissions, were ~~$45.0~~$43.0 million and ~~$42.8~~$46.4 million as of ~~October~~July 31, ~~2022~~2023 and January 31, ~~2022,~~2023, respectively. Amortization expense for deferred contract costs was ~~$4.9~~$5.2 million and ~~$3.9~~$4.8 million for the three months ended ~~October~~July 31, ~~2022~~2023 and ~~2021,~~2022, respectively. Amortization

expense for deferred contract costs was ~~$14.2~~$10.2 million and ~~$10.7~~$9.3 million for the ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023 and ~~2021,~~2022, respectively. There was no impairment charge related to the costs capitalized for the periods presented.

~~10.~~8. Leases

Operating Leases

The Company has entered into various non-cancellable operating leases for its office spaces with lease periods expiring between fiscal ~~2023~~2024 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.

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~~PAGERDUTY, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(unaudited)~~

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.

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.

In the three and six months ended July 31, 2023, the Company entered into a sublease of one office location. The sublease has a remaining lease term of less than two years. Sublease income, which is recorded as a reduction of rent expense, was immaterial for the three and six months ended July 31, 2023.

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


		As of October 31, 2022		As of January 31, 2021			As of July 31, 2023		As of January 31, 2023
		(in thousands)					(in thousands)
Assets	Assets					Assets
Lease right-of-use assets	Lease right-of-use assets	$	15,141	$	20,227	Lease right-of-use assets	$	11,225	$	13,982
Liabilities	Liabilities					Liabilities
Lease liabilities	Lease liabilities	6,438		5,637		Lease liabilities	6,021		5,904
Lease liabilities, non-current	Lease liabilities, non-current	14,155		20,912		Lease liabilities, non-current	9,944		12,704

As of ~~October~~July 31, ~~2022,~~2023, the weighted average remaining lease term was ~~3.9~~3.4 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 October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2022		2021		2022		2021			2023		2022		2023		2022
		(in thousands)									(in thousands)
Operating lease expense	Operating lease expense	$	1,371	$	1,401	$	4,293	$	4,173	Operating lease expense	$	1,313	$	1,399	$	2,671	$	2,922
Short-term lease expense	Short-term lease expense	484		304		1,342		473		Short-term lease expense	197		498		768		858
Variable lease expense	Variable lease expense	285		313		957		628		Variable lease expense	242		358		597		672

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PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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

Three Months Ended October 31, Nine Months Ended October 31,
2022 2021 2022 2021
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities $ 1,601 $ 1,581 $ 4,840 $ 4,724


	Three Months Ended July 31,				Six Months Ended July 31,
	2023		2022		2023		2022
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities	$	1,665	$	1,621	$	3,322	$	3,239

In the three and six months ended July 31, 2023, the Company recorded an impairment charge of $0.8 million to the right-of-use asset associated with the subleased office, which is the amount the carrying value of the right-of-use asset exceeded its estimated fair value. The estimated fair value was based on the present value of the estimated cash flows that could be generated from subleasing the property for the remaining lease term. The impairment charge was recorded in general and administrative expenses on our condensed consolidated statement of operations.

~~11.~~9. 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,~~the Company, 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

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~~PAGERDUTY, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(unaudited)~~

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.

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 five business day period after any ten 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

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PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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 a fundamental change, as defined in the Indenture.

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.

The Company accounts for the Notes as a single liability in accordance with ASU 2020-06 “Accounting for Convertible Instruments and Contracts in an Entity’s Own ~~Equity”.~~

~~Table of Contents~~

~~PAGERDUTY, INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(unaudited)~~

Equity.”

The carrying amount of the Notes is ~~$282.4~~$283.8 million as of ~~October~~July 31, ~~2022,~~2023, with principal of $287.5 million, net of unamortized issuance costs of ~~$5.1~~$3.7 million. The Notes ~~were~~are classified as long-term liabilities as of ~~October~~July 31, ~~2022.~~2023. 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 Notes as of ~~October~~July 31, ~~2022~~2023 and as of January 31, ~~2022~~2023 was as follows:


		As of October 31, 2022		As of January 31, 2022			As of July 31, 2023		As of January 31, 2023
		(in thousands)					(in thousands)
Principal	Principal	$	287,500	$	287,500	Principal	$	287,500	$	287,500
Less: unamortized issuance costs	Less: unamortized issuance costs	(5,055)		(6,431)		Less: unamortized issuance costs	(3,659)		(4,592)
Net carrying amount	Net carrying amount	$	282,445	$	281,069	Net carrying amount	$	283,841	$	282,908

Interest expense recognized related to the Notes is as follows:


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2022		2021		2022		2021			2023		2022		2023		2022
		(in thousands)									(in thousands)
Contractual interest expense	Contractual interest expense	$	899	$	898	$	2,696	$	2,695	Contractual interest expense	$	918	$	919	$	1,797	$	1,797
Amortization of debt issuance costs	Amortization of debt issuance costs	461		452		1,376		1,350		Amortization of debt issuance costs	478		468		933		915
Total interest expense related to the Notes	Total interest expense related to the Notes	$	1,360	$	1,350	$	4,072	$	4,045	Total interest expense related to the Notes	$	1,396	$	1,387	$	2,730	$	2,712

Capped Call Transactions

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PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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”).~~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.

~~12.~~10. 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 ~~outcomes of legal proceedings are subject to significant uncertainties. The~~ Company is not currently a party to any ~~pending~~ legal proceedings ~~for which management believes the outcome, individually~~and does not anticipate any pending or ~~in the aggregate,~~threatened litigation that would be expected to have a material adverse effect on its ~~business, operating~~financial condition, results of operations, or cash ~~flows, or financial condition.~~

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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, the Company 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 the Company, or from intellectual property infringement claims made by third parties. As permitted under Delaware law, the Company has entered into indemnification agreements with its directors and certain officers and employees that will require the Company, 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 the Company to provide indemnification under such agreements, and there are no claims that the Company is aware of that could have a material effect on its consolidated balance sheets, consolidated statements of operations and comprehensive loss, or consolidated statements of cash flows.

~~13.~~

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PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

11. Deferred Revenue and Performance Obligations

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


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2022		2021		2022		2021			2023		2022		2023		2022
		(in thousands)									(in thousands)
Deferred revenue, beginning of period	Deferred revenue, beginning of period	$	169,534	$	134,002	$	170,224	$	129,972	Deferred revenue, beginning of period	$	201,805	$	167,309	$	209,051	$	170,224
Billings	Billings	104,384		80,608		278,462		215,765		Billings	102,416		92,478		198,416		174,078
Deferred revenue assumed in the Catalytic acquisition	Deferred revenue assumed in the Catalytic acquisition	—		—		856		—		Deferred revenue assumed in the Catalytic acquisition	—		—		—		856
Revenue recognized	Revenue recognized	(94,203)		(71,760)		(269,827)		(202,887)		Revenue recognized	(107,616)		(90,253)		(210,862)		(175,624)
Deferred revenue, end of period	Deferred revenue, end of period	$	179,715	$	142,850	$	179,715	$	142,850	Deferred revenue, end of period	$	196,605	$	169,534	$	196,605	$	169,534

For the three and six months ended ~~October~~July 31, ~~2022~~2023 and ~~2021,~~2022, the majority of revenue recognized was from the deferred revenue balances at the beginning of each quarter. ~~For the nine months ended October 31, 2022 and 2021, approximately half of revenue recognized was from the deferred revenue balance at the beginning of the period.~~

As of ~~October~~July 31, ~~2022,~~2023, 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 ~~$174.3~~$170.7 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.

~~14.~~12. Common Stock and Stockholders’ Equity

Equity Incentive Plans

The Company has two 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 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 ~~October~~July 31, ~~2022~~2023 and January 31, ~~2022,~~2023, the Company was

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authorized to grant up to ~~28,626,857~~31,516,441 shares and ~~23,343,378~~28,881,327 shares of common stock, respectively, under the ~~Stock Plans.~~2019 Plan.

The Company currently uses authorized and unissued shares to satisfy stock award exercises and settlement of ~~RSUs~~Restricted Stock Units (“RSUs”) and ~~PSUs.~~Performance Stock Units (“PSUs”). As of ~~October~~July 31, ~~2022~~2023 and January 31, ~~2022,~~2023, there were ~~13,340,710~~16,714,070 shares and ~~14,185,048~~13,581,239 shares available for future issuance under the Stock Plans, respectively.

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


			~~October~~July 31, ~~2022~~2023
Outstanding stock options and unvested RSUs and PSUs			~~16,970,374~~15,435,127
Available for future stock option, RSU, and PSU grants			~~13,340,710~~16,714,070
Available for ~~ESPP~~Employee Stock Purchase Plan (“ESPP”)			~~3,185,930~~3,557,026
Total common stock reserved at ~~October~~July 31, ~~2022~~2023			~~33,497,014~~35,706,223

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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
(in thousands)
Outstanding at January 31, 2022 8,375,866 $ 9.28 6.1 years $ 198,828
Granted 24,882 $ 34.22
Exercised (1,513,561) $ 5.77
Canceled (136,356) $ 14.62
Outstanding at October 31, 2022 6,750,831 $ 10.05 5.5 years $ 100,491
Vested as of October 31, 2022 5,956,791 $ 8.49 5.2 years $ 97,979

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 October 31, Nine Months Ended October 31,
2022 2021 2022 2021
Expected dividend yield N/A — % — % — %
Expected volatility N/A 46.0% 47.1% 43.8% - 46.5%
Expected term (years) N/A 6.1 6.1 6.1
Risk-free interest rate N/A 1.11% 2.50% 1.04% - 1.16%


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
					(in thousands)
Outstanding at January 31, 2023	6,150,981	$	10.61	5.3 years	$	117,986
Granted	—	$	—
Exercised	(780,542)	$	8.94
Canceled	(22,656)	$	22.25
Outstanding at July 31, 2023	5,347,783	$	10.80	4.9 years	$	80,848
Vested as of July 31, 2023	4,995,691	$	9.74	4.7 years	$	80,838

No stock options were granted during the three and six months ended ~~October~~July 31, ~~2022. Stock options granted during the three months ended October 31, 2021 had a weighted average grant date fair value of $19.01 per share.~~2023. The aggregate intrinsic value of stock options exercised during the three months ended ~~October~~July 31, 2023 and 2022 ~~and 2021~~ was ~~$6.4~~$3.9 million and ~~$27.3~~$9.3 million, ~~respectively.~~

~~Stock options granted during the nine months ended October 31, 2022 and 2021 had a weighted average grant date fair value of $16.46 and $18.76 per share,~~ respectively. The aggregate intrinsic value of stock options exercised during the ~~nine~~six months ended ~~October~~July 31, 2023 and 2022 ~~and 2021~~ was ~~$37.0~~$16.0 million and ~~$73.4~~$30.6 million, respectively.

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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.

As of ~~October~~July 31, ~~2022,~~2023, there was approximately ~~$9.7~~$4.6 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 ~~1.8~~1.4 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			Number of RSUs	Weighted Average Grant Date Fair Value Per Share
Outstanding at January 31, 2022		6,028,201	$	34.77
Outstanding at January 31, 2023					Outstanding at January 31, 2023	8,012,482	$	32.55
Granted	Granted	5,716,516	$	31.03	Granted	3,389,642	$	33.17
Vested	Vested	(1,310,826)	$	34.09	Vested	(952,945)	$	30.99
Forfeited or canceled	Forfeited or canceled	(1,815,857)	$	33.77	Forfeited or canceled	(1,582,217)	$	32.14
Outstanding at October 31, 2022		8,618,034	$	32.60
Outstanding at July 31, 2023					Outstanding at July 31, 2023	8,866,962	$	33.03

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 ~~October~~July 31, ~~2022,~~2023, there was ~~$269.0~~$270.0 million of unrecognized stock-based compensation expense related to unvested RSUs, which is expected to be recognized over a weighted average period of ~~2.9~~2.5 years based on vesting under the award service conditions.

Performance and Market Stock Units

On March 8, 2022, the Compensation Committee of the Board certified the results of PagerDuty’s operating plan for the fiscal year ended January 31, 2022. Based on the results, the PSUs granted in April 2021 (“2021 PSU Awards”) were earned at an attainment of 129%.

~~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, 2022 117,701 $ 41.17
Granted(1)
767,409 $ 32.64
Vested (40,007) $ 41.17
Forfeited or canceled (42,225) $ 40.66
Performance adjustment for 2021 PSU Awards 34,332 $ 41.17
Outstanding at October 31, 2022 837,210 $ 33.38
(1)This amount represents awards granted at 100% attainment.

The Company grants PSUs to certain employees of the Company for which the ultimate number of units that will vest are determined based on the achievement of market and/or performance conditions at the end of the stated performance period. ~~The performance condition is~~

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In April 2023, the Company granted shares of PSUs to certain employees of the Company, which are to vest based on the level of achievement of a Company target related to PagerDuty’s operating ~~plan.~~plan and the relative growth of the per share price of the Company’s common stock as compared to the S&P Software & Services Select Index over the one-year performance period. The PSUs vest over a ~~three-year~~three-year period, subject to continuous service with the Company. The number of shares of the Company’s common stock that will vest based on the performance ~~condition~~and market conditions can range from 0% to 200% of the target amount. Compensation expense for PSUs with performance conditions is measured using the fair value at the

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date of grant, ~~and recorded over the vesting period under the graded-vesting attribution method,~~ and may be adjusted over the vesting period based on interim estimates of performance against the performance condition. Compensation expense for PSUs with market conditions is measured using a Monte Carlo simulation approach. Expense is recorded over the vesting period under the graded-vesting attribution method.

During the three ~~and nine~~ months ended ~~October 31, 2022 and 2021,~~April 30, 2023, the ~~Company recorded stock-based~~ compensation ~~expense~~committee of the Board certified the results of PagerDuty’s operating plan for the ~~number of PSUs considered probable of vesting based~~fiscal year ended January 31, 2023. Based on the ~~expected attainment~~results, the PSUs granted in April 2022 (“2022 PSU Awards”) were cancelled as the target was not met.

A summary of the ~~performance targets.~~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, 2023	825,058	$	33.27
Granted(1)	594,290	$	34.98
Vested	(11,150)	$	41.17
Forfeited or canceled	(83,123)	$	35.71
Performance adjustment for 2022 PSU Awards	(698,983)	$	29.22
Outstanding at July 31, 2023	626,092	$	35.29
(1)This amount represents awards granted at 100% attainment.

As of ~~October~~July 31, ~~2022,~~2023, total unrecognized stock-based compensation cost related to PSUs was ~~$9.4~~$13.6 million. This unrecognized stock-based compensation cost is expected to be recognized using the accelerated attribution method over a weighted-average period of approximately ~~1.3~~1.5 years.

Employee Stock Purchase Plan

~~In April 2019, the Board of Directors adopted and approved the 2019 ESPP, which became effective on April 11, 2019.~~ The ESPP ~~generally provides for~~allows eligible employees to purchase shares of the Company’s common stock through payroll deductions over 24-month offering periods beginning June 15 and December 15 of each year, with each offering period consisting of four 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 common stock as of the beginning of the offering period or (2) the fair market value of the Company’s common stock on the purchase date, as defined in the ESPP.

During the three months ended ~~October~~July 31, ~~2022~~2023 and ~~2021,~~2022, the Company recognized ~~$1.2~~$1.6 million and ~~$0.8~~$1.1 million, respectively, of stock-based compensation expense related to the ESPP. During the ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023 and ~~2021,~~2022, the Company recognized $3.4 million and ~~$3.9~~$2.2 million, respectively, of stock-based compensation expense related to the ESPP.

During the three months ended ~~October~~July 31, ~~2022~~2023 and ~~2021,~~2022, the Company withheld $2.1 million and ~~$2.2~~$3.8 million, respectively, in contributions from employees. During the ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023 and ~~2021,~~2022, the Company withheld ~~$7.7~~$5.8 million and ~~$7.2~~$5.6 million, respectively, in contributions from employees.

During the three and six months ended ~~October~~July 31, 2022 and 2021 there were no purchases related to the ESPP. During the nine months ended October 31, 2022, 280,725 shares of common stock were issued under the ESPP at a purchase price of $20.43 per share. During the nine months ended October 31, 2021, 222,4742023, 325,983 shares of common stock were issued under the ESPP at a weighted average purchase price of ~~$21.98~~$19.30 per share. During the three and six months ended July 31, 2022, 280,725 shares of common stock were issued under the ESPP at a weighted average purchase price of $20.43 per share.

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Stock-Based Compensation

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


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2022		2021		2022		2021			2023		2022		2023		2022
		(in thousands)									(in thousands)
Cost of revenue	Cost of revenue	$	1,937	$	861	$	4,948	$	2,560	Cost of revenue	$	2,164	$	1,787	$	4,040	$	3,011
Research and development	Research and development	10,824		6,183		30,066		16,230		Research and development	12,773		10,567		22,874		19,242
Sales and marketing	Sales and marketing	8,004		4,606		22,533		12,961		Sales and marketing	8,317		8,148		14,268		14,529
General and administrative	General and administrative	10,679		6,128		28,931		16,115		General and administrative	12,283		9,623		21,900		18,252
Total	Total	$	31,444	$	17,778	$	86,478	$	47,866	Total	$	35,537	$	30,125	$	63,082	$	55,034

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~~15.~~13. Net Loss per Share

The following table presents the calculation of basic and diluted net loss per share attributable to PagerDuty, Inc.: common stockholders:


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2022		2021		2022		2021			2023		2022		2023		2022
		(in thousands, except per share data)									(in thousands, except per share data)
Numerator:	Numerator:									Numerator:
Net loss attributable to PagerDuty, Inc.		$	(32,542)	$	(26,341)	$	(103,861)	$	(78,560)
Net loss attributable to PagerDuty, Inc. common stockholders										Net loss attributable to PagerDuty, Inc. common stockholders	$	(23,782)	$	(38,499)	$	(36,000)	$	(71,319)
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	89,285		85,092		88,200		83,979		Weighted average shares used in calculating net loss per share, basic and diluted	92,542		88,153		92,041		87,648
Net loss per share, basic and diluted, attributable to PagerDuty, Inc.	Net loss per share, basic and diluted, attributable to PagerDuty, Inc.	$	(0.36)	$	(0.31)	$	(1.18)	$	(0.94)	Net loss per share, basic and diluted, attributable to PagerDuty, Inc.	$	(0.26)	$	(0.44)	$	(0.39)	$	(0.81)

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


		As of October 31,			As of July 31,
		2022	2021		2023	2022
		(in thousands)			(in thousands)
Shares subject to outstanding common stock awards	Shares subject to outstanding common stock awards	16,970	15,448	Shares subject to outstanding common stock awards	14,841	17,412
Convertible senior notes	Convertible senior notes	7,173	7,173	Convertible senior notes	7,173	7,173
Restricted stock issued to acquire key personnel	Restricted stock issued to acquire key personnel	63	139	Restricted stock issued to acquire key personnel	44	115
Shares issuable pursuant to the 2019 employee stock purchase plan		202	163
Shares issuable pursuant to the ESPP				Shares issuable pursuant to the ESPP	85	94
Total	Total	24,408	22,923	Total	22,143	24,794

~~16.~~

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14. 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 an income tax ~~expense~~benefit of $0.1 million and $0.2 million for the three months ended ~~October~~July 31, ~~2022~~2023 and ~~2021,~~2022, respectively. The Company recorded an income tax benefit of ~~$1.3~~$0.2 million and $1.4 million for the ~~nine~~six months ended ~~October~~July 31, 2023 and 2022, ~~and income tax expense of $0.4 million for~~respectively. The decrease in the ~~nine months ended October 31, 2021. The~~Company’s income tax benefit ~~recorded in~~for the ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023, relative to the prior period, was primarily due to ~~a reduction in the Company’s valuation allowance from the increase in~~ the deferred tax ~~liability~~benefit of $1.3 million associated with the ~~acquired intangible assets from~~Company’s acquisition in the ~~acquisition of Catalytic, resulting in a $1.3 million deferred tax benefit.~~prior period.

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~~17.~~15. Geographic Information

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


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2022		2021		2022		2021			2023		2022		2023		2022
		(in thousands)									(in thousands)
United States	United States	$	72,267	$	54,287	$	206,127	$	153,048	United States	$	78,255	$	69,096	$	153,089	$	133,860
International	International	21,936		17,473		63,700		49,839		International	29,361		21,157		57,773		41,764
Total	Total	$	94,203	$	71,760	$	269,827	$	202,887	Total	$	107,616	$	90,253	$	210,862	$	175,624

Other than the United States, no other individual country accounted for 10% or more of revenue for the three and ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023 or ~~2021.~~2022. As of ~~October~~July 31, 2022, 89% of the Company’s long-lived assets, including property and equipment and right-of-use lease assets, were located in the United States, and 11% were located in Canada. As of January 31, 2022,2023, 86% of the Company’s long-lived assets, including property and equipment and right-of-use lease assets, were located in the United States, and 14% were located in Canada. As of January 31, 2023, 88% of the Company’s long-lived assets, including property and equipment and right-of-use lease assets, were located in the United States, 10% were located in Canada, 1% were located in Portugal, and 1% were located in the United Kingdom.

~~18. Subsequent Events~~

~~The Company has evaluated subsequent events through December 2, 2022.~~

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~~thereto included elsewhere in this ~~Quarterly Report on~~ Form 10-Q and in our Annual ~~Report on Form 10-K for the year ended January 31, 2022, filed with the SEC on March 17, 2022.~~Report. 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 that involve risks and ~~important factors that could cause~~uncertainties. Our actual results tocould differ materially from ~~the results described in or implied by the forward-looking statements contained in the following discussion and analysis.~~those discussed below. 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.~~our Annual Report. The last day of our fiscal year is January 31. Our fiscal quarters end on April 30, July 31, October 31 and January 31.

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Overview

PagerDuty is a digital operations management platform that manages urgent and mission critical work for a modern, digital enterprise. We empower teams to respond rapidly to incidents to resolve or avoid customer issues, reduce noise, predict and avoid performance degradation, improve productivity, and accelerate digital transformation.

Today, nearly every business is a digital business. As such, organizations are under pressure to enhance their digital operations in order to meet escalating customer expectations, resolve incidents proactively and free up time for innovation projects. This means critical, time sensitive, and unpredictable work needs to be detected and orchestrated.

We collect data and digital signals from virtually any software-enabled system or device and leverage powerful machine learning to correlate, process, and predict opportunities and issues. Using incident response, event

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management, and automation, we bring together the right people with the right information so they can resolve issues and act on opportunities in minutes or seconds from wherever they are.

Since our founding in 2009, we have expanded our capabilities from a single product focused on on-call management for developers to a multi-product platform that crosses silos into IT operations, security, customer service, and executive stakeholder roles across the organization. We have evolved from an on-call tool into the platform for digital operations, which resides at the center of a company’s technology ecosystem.

We have spent more than a decade building deep product integrations to our platform, and our ecosystem now includes over 700 direct integrations to enable our customers to gather and correlate digital signals from virtually any software-enabled system or device. This allows technical teams to collect digital signals from any system or platform in their environment, and without the effects of context switching. Those same integrations connect with popular collaboration tools and business applications, as well as all types of technology stacks to drive automation of work.

We generate revenue primarily from cloud-hosted subscription fees. We also generate revenue from term-license software subscription fees. We have a land-and-expand business model that leads to 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 account for the majority of our revenue today. These teams drive expansion to additional users, new use cases, and add-on products, as well as upsell to higher value plans.

~~COVID-19 Update~~Macroeconomic Environment

~~The COVID-19 pandemic continued during fiscal year 2023. While our revenue, billings,~~Our business 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,~~financial performance may be subject to the effects of the ~~COVID-19 pandemic may have a delayed impact on our results of operations. We continue~~worldwide macroeconomic conditions, including, but not limited to ~~ascertain~~global inflation and the ~~long-term impact of~~rise in interest rates, existing and new laws and regulations, recession or economic downturn globally or in the jurisdictions in which we do business, the COVID-19 pandemic, volatility in foreign currency exchange rates, and recent bank failures.

We continuously monitor geopolitical conflicts around the world and their effects on our business. ~~We continue to focus on supporting our employees, customers, and community.~~

As our offices have now reopened, we have incurred incremental expenses related to onsite services and related in-office costs. However, 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. As we continue to monitor the local regulations related to COVID-19, we have begun to release travel restrictions on business-related travel, allowing certain employees to travel on a voluntary basis. 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.

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

~~Recent Events~~

~~We are closely monitoring the invasion of Ukraine by Russia in February 2022 and its global impacts.~~ While ~~the conflict is still unfolding and the outcome remains highly uncertain,~~ we do not believe the ongoing Russia-Ukraine conflict will have a material impact on our business and results of ~~operation. However,~~operations, our business and results of operations could be materially impacted if the Russia-Ukraine conflict continues or worsens, leading to greater global economic disruptions and ~~uncertainty, our business and results of operations could be materially impacted.~~uncertainty. Our customers in Russia represented an immaterial portion of our net assets as of July 31, 2023 and January 31, 2023, and of our total consolidated ~~revenue both as~~revenues for each of ~~and for~~ the three and ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023 and ~~January 31,~~ 2022.

We will continue to monitor the direct and indirect impacts of these or similar circumstances on our business and financial results. For additional information on the potential impact of macroeconomic conditions on our business, see Item 1A, “Risk Factors”.

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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 Catalytic, Inc. (“Catalytic”) to the extent applicable, beginning on the acquisition date of March 8, 2022.

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 October 31,			As of July 31,
		2022	2021		2023	2022
Customers	Customers	15,265	14,486	Customers	15,146	15,174
Customers greater than $100,000 in ARR	Customers greater than $100,000 in ARR	710	543	Customers greater than $100,000 in ARR	773	689

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.~~ARR”). We then calculate the ARR from these same customers as of the current period end or (“Current Period ~~ARR.~~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 Catalytic customers to the extent that they were PagerDuty customers as of 12 months prior to period end.

Last 12 Months Ended October 31,
2022 2021
Dollar-based net retention rate for all customers 123 % 124 %


	Last 12 Months Ended July 31,
	2023		2022
Dollar-based net retention rate for all customers	114	%	124	%

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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 revenue from term-license software subscription fees. Our subscriptions are typically one year in duration but can range from monthly to multi-year. Subscription fees are 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 software. Revenue related to our cloud-hosted software subscriptions is recognized ratably over the related contractual term beginning on the date that our platform is made available to a customer. 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 costs of obtaining a subscription with a customer are deferred and amortized on a straight-line basis over the

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expected period of benefit, which we have determined to be four years. We expect that our sales and marketing expenses will generally 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 due 2025 (the “Notes”). Refer to Note ~~11,~~9, “Debt and Financing Arrangements” for additional details.

Other Income (Expense) ~~Income,~~, Net

Other income (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)~~ Benefit ~~From~~from Income Taxes

~~(Provision for) benefit~~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~~Benefit from income taxes also includes the benefit associated with the reduction in our valuation allowance from the increase in the deferred tax liability associated with acquired intangible assets from our ~~acquisitions.~~acquisition during the six months ended July 31, 2022.

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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 October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2022		2021		2022		2021			2023		2022		2023		2022
		(in thousands)									(in thousands)
Revenue	Revenue	$	94,203	$	71,760	$	269,827	$	202,887	Revenue	$	107,616	$	90,253	$	210,862	$	175,624
Cost of revenue(1)	Cost of revenue(1)	18,007		12,039		52,090		34,433		Cost of revenue(1)	19,833		18,367		37,769		34,083
Gross profit	Gross profit	76,196		59,721		217,737		168,454		Gross profit	87,783		71,886		173,093		141,541
Operating expenses:	Operating expenses:									Operating expenses:
Research and development(1)	Research and development(1)	35,004		24,554		100,307		68,062		Research and development(1)	36,441		34,014		69,949		65,303
Sales and marketing(1)	Sales and marketing(1)	47,118		40,176		143,001		118,224		Sales and marketing(1)	49,724		50,331		93,525		95,883
General and administrative(1)	General and administrative(1)	26,616		19,808		77,316		56,680		General and administrative(1)	27,791		25,429		51,592		50,700
Total operating expenses	Total operating expenses	108,738		84,538		320,624		242,966		Total operating expenses	113,956		109,774		215,066		211,886
Loss from operations	Loss from operations	(32,542)		(24,817)		(102,887)		(74,512)		Loss from operations	(26,173)		(37,888)		(41,973)		(70,345)
Interest income	Interest income	1,382		705		2,760		2,306		Interest income	3,655		830		6,778		1,378
Interest expense	Interest expense	(1,360)		(1,350)		(4,072)		(4,045)		Interest expense	(1,396)		(1,387)		(2,730)		(2,712)
Other expense, net		(172)		(729)		(1,326)		(1,931)
Loss before (provision for) benefit from income taxes		(32,692)		(26,191)		(105,525)		(78,182)
(Provision for) benefit from income taxes		(112)		(150)		1,302		(378)
Other income (expense), net										Other income (expense), net	1,242		(364)		2,309		(1,154)
Loss before benefit from income taxes										Loss before benefit from income taxes	(22,672)		(38,809)		(35,616)		(72,833)
Benefit from income taxes										Benefit from income taxes	50		210		156		1,414
Net loss	Net loss	$	(32,804)	$	(26,341)	$	(104,223)	$	(78,560)	Net loss	$	(22,622)	$	(38,599)	$	(35,460)	$	(71,419)
Net loss attributable to redeemable non-controlling interest	Net loss attributable to redeemable non-controlling interest	(262)		—		(362)		—		Net loss attributable to redeemable non-controlling interest	(569)		(100)		(1,189)		(100)
Net loss attributable to PagerDuty, Inc.	Net loss attributable to PagerDuty, Inc.	$	(32,542)	$	(26,341)	$	(103,861)	$	(78,560)	Net loss attributable to PagerDuty, Inc.	$	(22,053)	$	(38,499)	$	(34,271)	$	(71,319)
Adjustment attributable to redeemable non-controlling interest										Adjustment attributable to redeemable non-controlling interest	1,729		—		1,729		—
Net loss attributable to PagerDuty, Inc. common stockholders										Net loss attributable to PagerDuty, Inc. common stockholders	$	(23,782)	$	(38,499)	$	(36,000)	$	(71,319)

______________

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


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2022		2021		2022		2021			2023		2022		2023		2022
		(in thousands)									(in thousands)
Cost of revenue	Cost of revenue	$	1,937	$	861	$	4,948	$	2,560	Cost of revenue	$	2,164	$	1,787	$	4,040	$	3,011
Research and development	Research and development	10,824		6,183		30,066		16,230		Research and development	12,773		10,567		22,874		19,242
Sales and marketing	Sales and marketing	8,004		4,606		22,533		12,961		Sales and marketing	8,317		8,148		14,268		14,529
General and administrative	General and administrative	10,679		6,128		28,931		16,115		General and administrative	12,283		9,623		21,900		18,252
Total	Total	$	31,444	$	17,778	$	86,478	$	47,866	Total	$	35,537	$	30,125	$	63,082	$	55,034

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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 October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2022		2021		2022		2021			2023		2022		2023		2022
Revenue	Revenue	100	%	100	%	100	%	100	%	Revenue	100	%	100	%	100	%	100	%
Cost of revenue	Cost of revenue	19		17		19		17		Cost of revenue	18		20		18		19
Gross profit	Gross profit	81	%	83	%	81	%	83	%	Gross profit	82	%	80	%	82	%	81	%
Operating expenses:	Operating expenses:									Operating expenses:
Research and development	Research and development	37		34		37		34		Research and development	34		38		33		37
Sales and marketing	Sales and marketing	50		56		53		58		Sales and marketing	46		56		44		55
General and administrative	General and administrative	28		28		29		28		General and administrative	26		28		24		29
Total operating expenses	Total operating expenses	115		118		119		120		Total operating expenses	106		122		102		121
Loss from operations	Loss from operations	(35)		(35)		(38)		(37)		Loss from operations	(24)		(42)		(20)		(40)
Interest income	Interest income	1		1		1		1		Interest income	3		1		3		1
Interest expense	Interest expense	(1)		(2)		(2)		(2)		Interest expense	(1)		(2)		(1)		(2)
Other expense, net		—		(1)		—		(1)
Loss before (provision for) benefit from income taxes		(35)		(36)		(39)		(39)
(Provision for) benefit from income taxes		—		—		—		—
Other income (expense), net										Other income (expense), net	1		—		1		(1)
Loss before benefit from income taxes										Loss before benefit from income taxes	(21)		(43)		(17)		(41)
Benefit from income taxes										Benefit from income taxes	—		—		—		1
Net loss	Net loss	(35)		(37)		(39)		(39)		Net loss	(21)		(43)		(17)		(41)
Net loss attributable to redeemable non-controlling interest	Net loss attributable to redeemable non-controlling interest	—	%	—		—	%	—		Net loss attributable to redeemable non-controlling interest	(1)		—		(1)		—
Net loss attributable to PagerDuty, Inc.	Net loss attributable to PagerDuty, Inc.	(35)	%	(37)	%	(38)	%	(39)	%	Net loss attributable to PagerDuty, Inc.	(21)		(43)		(16)		(41)
Adjustment attributable to redeemable non-controlling interest										Adjustment attributable to redeemable non-controlling interest	2		—		1		—
Net loss attributable to PagerDuty, Inc. common stockholders										Net loss attributable to PagerDuty, Inc. common stockholders	(22)	%	(43)	%	(17)	%	(41)	%

__________

Note: Certain figures may not sum due to rounding.

Comparison of the Three Months Ended ~~October~~July 31, ~~2022~~2023 and ~~2021~~2022

Revenue

Three Months Ended October 31,
2022 2021 Change % Change
(dollars in thousands)
Revenue $ 94,203 $ 71,760 $ 22,443 31 %


	Three Months Ended July 31,
	2023		2022		Change		% Change
	(dollars in thousands)
Revenue	$	107,616	$	90,253	$	17,363	19	%

Revenue increased by ~~$22.4~~$17.4 million, or ~~31%~~19%, for the three months ended ~~October~~July 31, ~~2022~~2023 compared to the three months ended ~~October~~July 31, ~~2021.~~2022. The increase in revenue was attributable to a combination of growth from both new and existing customers. Growth from existing customers was attributable to both increases in the number of users and upsell of additional products and services.

~~Cost of Revenue and Gross Margin~~

Three Months Ended October 31,
2022 2021 Change % Change
(dollars in thousands)
Cost of revenue $ 18,007 $ 12,039 $ 5,968 50 %
Gross margin 81 % 83 %

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Cost of Revenue and Gross Margin


	Three Months Ended July 31,
	2023			2022			Change		% Change
	(dollars in thousands)
Cost of revenue	$	19,833		$	18,367		$	1,466	8	%
Gross margin	82		%	80		%

Cost of revenue increased by ~~$6.0~~$1.5 million, or ~~50%~~8%, for the three months ended July 31, 2023 compared to the three months ended July 31, 2022, primarily due to an increase of ~~$2.5~~$0.8 million in personnel expenses as a result of increased headcount and salaries and an increase of ~~$1.7~~$0.4 million in amortization of acquired intangible assets, primarily related to the acquisition of Catalytic, and an increase of $0.9 million in hosting, software, and telecom costs related to the support of the continued growth of the business and related infrastructure.internally developed software.

Research and Development


		Three Months Ended October 31,											Three Months Ended July 31,
		2022			2021			Change		% Change			2023			2022			Change		% Change
		(dollars in thousands)											(dollars in thousands)
Research and development	Research and development	$	35,004		$	24,554		$	10,450	43	%	Research and development	$	36,441		$	34,014		$	2,427	7	%
Percentage of revenue	Percentage of revenue	37		%	34		%					Percentage of revenue	34		%	38		%

Research and development expenses increased by ~~$10.5~~$2.4 million, or ~~43%~~7%, for the three months ended ~~October~~July 31, ~~2022~~2023 compared to the three months ended ~~October~~July 31, ~~2021.~~2022. The increase was primarily driven by an increase in personnel expenses of ~~$8.9~~$2.0 million as a result of increased headcount and salaries to support our continued investment in our platform and ~~a $1.3~~an increase of $0.9 million ~~increase~~ in costs to support ~~the growth of~~ the business and related infrastructure, which ~~includes~~include allocated overhead costs. This was partially offset by a $0.5 million decrease in outside services spend due to higher leverage of internal resources through hiring.

Sales and Marketing


		Three Months Ended October 31,											Three Months Ended July 31,
		2022			2021			Change		% Change			2023			2022			Change		% Change
		(dollars in thousands)											(dollars in thousands)
Sales and marketing	Sales and marketing	$	47,118		$	40,176		$	6,942	17	%	Sales and marketing	$	49,724		$	50,331		$	(607)	(1)	%
Percentage of revenue	Percentage of revenue	50		%	56		%					Percentage of revenue	46		%	56		%

Sales and marketing expenses ~~increased~~decreased by ~~$6.9~~$0.6 million, or ~~17%~~1%, for the three months ended ~~October~~July 31, ~~2022~~2023 compared to the three months ended ~~October~~July 31, ~~2021.~~2022. This ~~increase~~decrease was primarily due to ~~an increase~~a decrease of ~~$6.6~~$0.8 million in personnel expenses ~~driven by headcount growth, increased salaries, and amortization~~due to a decrease in commissions, a decrease of ~~deferred contract costs, an increase of $0.8~~$0.5 million in ~~costs~~marketing expenses due to ~~support~~a shift in marketing spend to smaller events during the ~~growth~~period, and a decrease of ~~the business and related infrastructure which includes allocated overhead costs, and an increase of $0.6~~$0.5 million in ~~travel and other program related costs as a result of increased travel~~outside services spend due to ~~reduced travel restrictions related to the COVID-19 pandemic.~~higher leverage of internal resources through hiring. This was partially offset by ~~a decrease~~an increase of $1.1 million in ~~outside services of $0.6 million.~~bad debt expense.

General and Administrative


		Three Months Ended October 31,											Three Months Ended July 31,
		2022			2021			Change		% Change			2023			2022			Change		% Change
		(dollars in thousands)											(dollars in thousands)
General and administrative	General and administrative	$	26,616		$	19,808		$	6,808	34	%	General and administrative	$	27,791		$	25,429		$	2,362	9	%
Percentage of revenue	Percentage of revenue	28		%	28		%					Percentage of revenue	26		%	28		%

General and administrative expenses increased by ~~$6.8~~$2.4 million, or ~~34%~~9%, for the three months ended ~~October~~July 31, ~~2022~~2023 compared to the three months ended ~~October~~July 31, ~~2021.~~2022. The increase was driven primarily by an increase of ~~$7.2~~ $1.9

Table of Contents

million in personnel expenses as a result of increased headcount and salaries and an increase of ~~$0.6~~$1.2 million in ~~outside services.~~real estate impairment charges. This was partially offset by a decrease of ~~$1.2~~$1.0 million in ~~costs~~outside services spend due to ~~support the business and related infrastructure which includes allocated overhead costs.~~higher leverage of internal resources through hiring.

Interest Expense

~~Table of Contents~~

Three Months Ended October 31,
2022 2021 Change % Change
(dollars in thousands)
Interest expense $ 1,360 $ 1,350 $ 10 1 %


	Three Months Ended July 31,
	2023		2022		Change		% Change
	(dollars in thousands)
Interest expense	$	1,396	$	1,387	$	9	1	%

Interest expense was consistent for the three months ended ~~October~~July 31, ~~2022~~2023 compared to the three months ended ~~October~~July 31, ~~2021~~2022 and related to contractual interest and amortization of debt issuance costs for the Notes.

Interest Income and Other ~~Expense,~~Income (Expense), Net


		Three Months Ended October 31,									Three Months Ended July 31,
		2022		2021		Change		% Change			2023		2022		Change		% Change
		(dollars in thousands)									(dollars in thousands)
Interest income	Interest income	$	1,382	$	705	$	677	96	%	Interest income	$	3,655	$	830	$	2,825	340	%
Other expense, net		$	(172)	$	(729)	$	557	76	%
Other income (expense), net										Other income (expense), net	$	1,242	$	(364)	$	1,606	441	%

Interest income increased by ~~$0.7~~$2.8 million and other ~~expense,~~income, net ~~decreased~~increased by ~~$0.6~~$1.6 million for the three months ended ~~October~~July 31, ~~2022~~2023 compared to the three months ended ~~October~~July 31, ~~2021.~~2022. The increase ~~in interest income~~ was primarily due to higher interest rates and accretion on our cash, cash equivalent and investment balances in the current year. ~~The decrease in other expense, net was due to higher accretion on our cash, cash equivalent and investment balances in the current year, offset by changes in foreign currency rates.~~

Comparison of the ~~Nine~~Six Months Ended ~~October~~July 31, ~~2022~~2023 and ~~2021~~2022

Revenue

Nine Months Ended October 31,
2022 2021 Change % Change
(dollars in thousands)
Revenue $ 269,827 $ 202,887 $ 66,940 33 %


	Six Months Ended July 31,
	2023		2022		Change		% Change
	(dollars in thousands)
Revenue	$	210,862	$	175,624	$	35,238	20	%

Revenue increased by ~~$66.9~~$35.2 million, or ~~33%~~20%, for the ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023 compared to the ~~nine~~six months ended ~~October~~July 31, ~~2021.~~2022. The increase in revenue was primarily attributable to a combination of growth from both new and existing customers. Growth from existing customers was ~~attributable to~~largely driven by both increases in the number of users and upsell of additional products and services.

Cost of Revenue and Gross Margin


		Nine Months Ended October 31,											Six Months Ended July 31,
		2022			2021			Change		% Change			2023			2022			Change		% Change
		(dollars in thousands)											(dollars in thousands)
Cost of revenue	Cost of revenue	$	52,090		$	34,433		$	17,657	51	%	Cost of revenue	$	37,769		$	34,083		$	3,686	11	%
Gross margin	Gross margin	81		%	83		%					Gross margin	82		%	81		%

Cost of revenue increased by ~~$17.7~~$3.7 million, or ~~51%~~11%, for the ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023 compared to the ~~nine~~six months ended ~~October~~July 31, ~~2021. The increase was~~2022, primarily due to an increase of ~~$5.4~~$2.2 million in personnel expenses as a result of increased headcount and salaries, an increase of ~~$4.5~~$0.8 million in amortization of ~~intangibles~~acquired intangible assets related to acquisitions, increases of $4.2 million in hosting, software, and telecom costs and $0.7 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 $0.9 million in other expenses, primarily related to increased merchant fees.

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acquisitions, an increase of $0.6 million in amortization of internally developed software, and an increase of $0.6 million in hosting, software, and telecom costs.

Research and Development


		Nine Months Ended October 31,											Six Months Ended July 31,
		2022			2021			Change		% Change			2023			2022			Change		% Change
		(dollars in thousands)											(dollars in thousands)
Research and development	Research and development	$	100,307		$	68,062		$	32,245	47	%	Research and development	$	69,949		$	65,303		$	4,646	7	%
Percentage of revenue	Percentage of revenue	37		%	34		%					Percentage of revenue	33		%	37		%

Research and development expenses increased by ~~$32.2~~$4.6 million, or ~~47%~~7%, for the ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023 compared to the ~~nine~~six months ended ~~October~~July 31, ~~2021.~~2022. The increase was primarily driven by an increase in personnel expenses of ~~$26.8~~$5.5 million as a result of increased headcount and salaries to support our continued investment in our platform a $3.8 million increase in costs to support the growth of the business and related infrastructure, which included allocated overhead costs, an increase of $1.1 million in travel related costs as a result of increased travel due to reduced travel restrictions related to the COVID-19 pandemic, and an increase of ~~$0.7 million acquisition-related impairment charge related to software development not placed in service.~~

~~Sales and Marketing~~

Nine Months Ended October 31,
2022 2021 Change % Change
(dollars in thousands)
Sales and marketing $ 143,001 $ 118,224 $ 24,777 21 %
Percentage of revenue 53 % 58 %

Sales and marketing expenses increased by $24.8 million, or 21%, for the nine months ended October 31, 2022 compared to the nine months ended October 31, 2021.This increase was primarily due to an increase of $21.6 million in personnel expenses driven by headcount growth, increased salaries, and amortization of deferred contract costs, an increase of $4.1 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 $3.7$0.8 million in costs to support the business and related infrastructure, which ~~included~~include allocated overhead costs. This was partially offset by a $0.9 million decrease in ~~marketing expenses of $3.6 million primarily~~the outside services spend due to ~~decreases in brand campaigns and digital marketing~~higher leverage of internal resources through hiring, and a decrease of ~~$1.1~~$0.7 million in ~~outside services.~~the impairment charge related to software development not placed in service in the prior period.

Sales and Marketing


	Six Months Ended July 31,
	2023			2022			Change		% Change
	(dollars in thousands)
Sales and marketing	$	93,525		$	95,883		$	(2,358)	(2)	%
Percentage of revenue	44		%	55		%

Sales and marketing expenses decreased by $2.4 million, or 2%, for the six months ended July 31, 2023 compared to the six months ended July 31, 2022. This decrease was primarily due to a decrease of $1.0 million in travel and other program related costs and a decrease of $0.9 million in marketing expenses, both due to a shift in marketing spend to smaller events during the period, a decrease of $0.5 million in personnel expenses due to a decrease in commissions, and a decrease of $0.5 million in costs to support the business and related infrastructure, which include allocated overhead costs. This was partially offset by an increase of $0.7 million in bad debt expense.

General and Administrative


		Nine Months Ended October 31,											Six Months Ended July 31,
		2022			2021			Change		% Change			2023			2022			Change		% Change
		(dollars in thousands)											(dollars in thousands)
General and administrative	General and administrative	$	77,316		$	56,680		$	20,636	36	%	General and administrative	$	51,592		$	50,700		$	892	2	%
Percentage of revenue	Percentage of revenue	29		%	28		%					Percentage of revenue	24		%	29		%

General and administrative expenses increased by ~~$20.6~~$0.9 million, or ~~36%~~2%, for the ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023 compared to the ~~nine~~six months ended ~~October~~July 31, ~~2021.~~2022. The increase was primarily driven by an increase of ~~$20.9~~$3.3 million in personnel expenses as a result of increased headcount and salaries and an increase of ~~$1.5~~$1.2 million in ~~travel related costs as a result of increased travel due to reduced travel restrictions related to the COVID-19 pandemic.~~real estate impairment charges. This was partially offset by a decrease of ~~$2.3~~$3.2 million in outside services related to transaction costs ~~to support~~for the ~~business and related infrastructure which includes allocated overhead costs.~~acquisition of Catalytic in the prior year.

Interest Expense

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Nine Months Ended October 31,
2022 2021 Change % Change
(dollars in thousands)
Interest expense $ (4,072) $ (4,045) $ (27) 1 %


	Six Months Ended July 31,
	2023		2022		Change		% Change
	(dollars in thousands)
Interest expense	$	2,730	$	2,712	$	18	1	%

Interest expense was consistent for the ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023 compared to the ~~nine~~six months ended ~~October~~July 31, ~~2021~~2022 and related to contractual interest and amortization of debt issuance costs for the Notes.

Interest Income and Other ~~Expense,~~Income (Expense), Net


		Nine Months Ended October 31,									Six Months Ended July 31,
		2022		2021		Change		% Change			2023		2022		Change		% Change
		(dollars in thousands)									(dollars in thousands)
Interest income	Interest income	$	2,760	$	2,306	$	454	20	%	Interest income	$	6,778	$	1,378	$	5,400	392	%
Other expense, net		$	(1,326)	$	(1,931)	$	605	31	%
Other income (expense), net										Other income (expense), net	2,309		(1,154)		$	3,463	300	%

Interest income increased by ~~$0.5~~$5.4 million and other ~~expense decreased~~income, net increased by ~~$0.6~~$3.5 million for the ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023 compared to the ~~nine~~six months ended ~~October~~July 31, ~~2021.~~2022. The increase ~~in interest income~~ was primarily due to higher interest rates and accretion on our cash, cash equivalent and investment balances in the current year. ~~The decrease in other expense, net was due to higher accretion on our cash, cash equivalent and investment balances in the current year, offset by changes in foreign currency rates.~~

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~~excluding stock-based compensation expense, ~~and related~~ employer taxes ~~and~~related to employee stock transactions, amortization of acquired intangible ~~assets.~~assets, and restructuring costs. We define non-GAAP gross margin as non-GAAP gross profit as a percentage of revenue.

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		Three Months Ended October 31,						Nine Months Ended October 31,							Three Months Ended July 31,						Six Months Ended July 31,
		2022			2021			2022			2021				2023			2022			2023			2022
		(in thousands)													(in thousands)
Gross profit	Gross profit	$	76,196		$	59,721		$	217,737		$	168,454		Gross profit	$	87,783		$	71,886		$	173,093		$	141,541
Add:	Add:													Add:
Stock-based compensation	Stock-based compensation	1,937			861			4,948			2,560			Stock-based compensation	2,164			1,787			4,040			3,011
Employer taxes related to employee stock transactions	Employer taxes related to employee stock transactions	38			22			79			78			Employer taxes related to employee stock transactions	45			34			117			41
Amortization of acquired intangible assets	Amortization of acquired intangible assets	1,949			280			5,314			840			Amortization of acquired intangible assets	2,086			2,156			4,173			3,365
Restructuring costs														Restructuring costs	—			—			137			—
Non-GAAP gross profit	Non-GAAP gross profit	$	80,120		$	60,884		$	228,078		$	171,932		Non-GAAP gross profit	$	92,078		$	75,863		$	181,560		$	147,958

Gross margin	Gross margin	81		%	83		%	81		%	83		%	Gross margin	82		%	80		%	82		%	81		%
Non-GAAP gross margin	Non-GAAP gross margin	85		%	85		%	85		%	85		%	Non-GAAP gross margin	86		%	84		%	86		%	84		%

Non-GAAP Operating Income (Loss) and Non-GAAP Operating Margin

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


		Three Months Ended October 31,						Nine Months Ended October 31,							Three Months Ended July 31,						Six Months Ended July 31,
		2022			2021			2022			2021				2023			2022			2023			2022
		(in thousands)													(in thousands)
Loss from operations	Loss from operations	$	(32,542)		$	(24,817)		$	(102,887)		$	(74,512)		Loss from operations	$	(26,173)		$	(37,888)		$	(41,973)		$	(70,345)
Add:	Add:													Add:
Stock-based compensation	Stock-based compensation	31,444			17,778			86,478			47,866			Stock-based compensation	35,537			30,125			63,082			55,034
Employer taxes related to employee stock transactions	Employer taxes related to employee stock transactions	583			695			1,756			2,086			Employer taxes related to employee stock transactions	703			521			1,900			1,173
Amortization of acquired intangible assets	Amortization of acquired intangible assets	2,628			875			7,431			2,625			Amortization of acquired intangible assets	2,805			2,961			5,611			4,803
Acquisition-related expenses	Acquisition-related expenses	902			442			4,554			1,356			Acquisition-related expenses	162			899			323			3,652
Restructuring costs														Restructuring costs	1,258			—			1,402			—
Non-GAAP operating income (loss)	Non-GAAP operating income (loss)	$	3,015		$	(5,027)		$	(2,668)		$	(20,579)		Non-GAAP operating income (loss)	$	14,292		$	(3,382)		$	30,345		$	(5,683)

Operating margin	Operating margin	(35)		%	(35)		%	(38)		%	(37)		%	Operating margin	(24)		%	(42)		%	(20)		%	(40)		%
Non-GAAP operating margin	Non-GAAP operating margin	3		%	(7)		%	(1)		%	(10)		%	Non-GAAP operating margin	13		%	(4)		%	14		%	(3)		%

Non-GAAP Net Income (Loss) Attributable to PagerDuty, Inc. Common Stockholders

We define non-GAAP net income (loss) attributable to PagerDuty, Inc. common stockholders as net loss attributable to PagerDuty, Inc. ~~plus our~~common stockholders excluding stock-based compensation expense, ~~and~~employer taxes related ~~employer taxes,~~to employee stock transactions, amortization of debt issuance costs, amortization of acquired intangible assets, acquisition-related expenses, which include transaction costs, acquisition-related retention payments and ~~an acquisition-related~~ asset impairment, restructuring costs, adjustment attributable to redeemable non-controlling interest, and the associated tax impact of these items, where applicable, which are not necessarily reflective of operational performance during a given period, ~~and the income tax effect of non-GAAP adjustments.~~.

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		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2022		2021		2022		2021			2023		2022		2023		2022
		(in thousands)									(in thousands)
Net loss attributable to PagerDuty, Inc.		$	(32,542)	$	(26,341)	$	(103,861)	$	(78,560)
Net loss attributable to PagerDuty, Inc. common stockholders										Net loss attributable to PagerDuty, Inc. common stockholders	$	(23,782)	$	(38,499)	$	(36,000)	$	(71,319)
Add (Less):	Add (Less):									Add (Less):
Stock-based compensation	Stock-based compensation	31,444		17,778		86,478		47,866		Stock-based compensation	35,537		30,125		63,082		55,034
Employer taxes related to employee stock transactions										Employer taxes related to employee stock transactions	703		521		1,900		1,173
Amortization of debt issuance costs	Amortization of debt issuance costs	461		452		1,376		1,350		Amortization of debt issuance costs	478		468		933		915
Employer taxes related to employee stock transactions		583		695		1,756		2,086
Amortization of acquired intangible assets	Amortization of acquired intangible assets	2,628		875		7,431		2,625		Amortization of acquired intangible assets	2,805		2,961		5,611		4,803
Acquisition-related expenses	Acquisition-related expenses	902		442		4,554		1,356		Acquisition-related expenses	162		899		323		3,652
Restructuring costs										Restructuring costs	1,258		—		1,402		—
Adjustment attributable to redeemable non-controlling interest										Adjustment attributable to redeemable non-controlling interest	1,729		—		1,729		—
Income tax effect of non-GAAP adjustments	Income tax effect of non-GAAP adjustments	—		—		(1,330)		—		Income tax effect of non-GAAP adjustments	(662)		—		(1,454)		(1,330)
Non-GAAP net income (loss) attributable to PagerDuty, Inc.		$	3,476	$	(6,099)	$	(3,596)	$	(23,277)
Non-GAAP net income (loss) attributable to PagerDuty, Inc. attributable to common stockholders										Non-GAAP net income (loss) attributable to PagerDuty, Inc. attributable to common stockholders	$	18,228	$	(3,525)	$	37,526	$	(7,072)

Free Cash Flow

We define free cash flow as net cash provided by (used in) ~~provided by~~ operating activities, less cash used for purchases of property and equipment and capitalization of 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.~~strategies, and to assess its liquidity.

Three Months Ended October 31, Nine Months Ended October 31,
2022 2021 2022 2021
(in thousands)
Net cash (used in) provided by operating activities $ (448) $ 2,650 $ (592) $ (7,366)
Less:
Purchases of property and equipment (815) (85) (3,755) (1,376)
Capitalization of internal-use software costs (988) (784) (2,725) (2,701)
Free cash flow $ (2,251) $ 1,781 $ (7,072) $ (11,443)
Net cash (used in) provided by investing activities $ (7,220) $ 5,092 $ (80,272) $ 29,151
Net cash used in financing activities $ (7,965) $ (2,529) $ (6,084) $ (1,213)
There are a number of limitations related to the use of free cash flow as compared to net cash provided by (used in) operating activities, including that free cash flow includes capital expenditures, the benefits of which are realized in periods subsequent to those when expenditures are made.


	Three Months Ended July 31,				Six Months Ended July 31,
	2023		2022		2023		2022
	(in thousands)
Net cash provided by (used in) operating activities	$	10,750	$	2,841	$	32,902	$	(144)
Less:
Purchases of property and equipment	(713)		(862)		(948)		(2,940)
Capitalization of internal-use software costs	(1,299)		(965)		(2,371)		(1,737)
Free cash flow	$	8,738	$	1,014	$	29,583	$	(4,821)
Net cash used in investing activities	$	(12,575)	$	(2,695)	$	(4,012)	$	(73,052)
Net cash provided by (used in) financing activities	$	3,573	$	4,465	$	(496)	$	1,881

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 the Notes.

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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 the Notes in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The total net 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 ~~October~~July 31, ~~2022,~~2023, our principal sources of liquidity were cash and cash equivalents and investments totaling ~~$459.4~~$504.5 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. We believe we will meet longer-term expected future cash requirements and obligations, through a combination of cash flows from operating activities and available cash and short-term investment balances. Our future capital requirements will depend on many factors, including the effects of the worldwide macroeconomic conditions, including but not limited to, global inflation and the rise in interest rates, existing and new laws and regulations, recession or economic downturn globally or in the jurisdictions in which we do business, ongoing geopolitical conflict in Ukraine and other areas of the world, the COVID-19 pandemic, bank failures, volatility in foreign currency exchange rates, 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 ~~October~~July 31, ~~2022,~~2023, we had deferred revenue of ~~$179.7~~$196.6 million, of which ~~$175.4~~$192.3 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:

Nine Months Ended October 31,
2022 2021
(in thousands)
Net cash used in operating activities $ (592) $ (7,366)
Net cash (used in) provided by investing activities $ (80,272) $ 29,151
Net cash used in financing activities $ (6,084) $ (1,213)


	Six Months Ended July 31,
	2023		2022
	(in thousands)
Net cash provided by (used in) operating activities	$	32,902	$	(144)
Net cash used in investing activities	$	(4,012)	$	(73,052)
Net cash (used in) provided by financing activities	$	(496)	$	1,881

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.

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Cash ~~used in~~provided by operating activities for the ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023 of ~~$0.6~~$32.9 million primarily related to our net loss of ~~$104.2~~$35.5 million, adjusted for non-cash ~~charges/benefits~~charges of ~~$118.1~~$86.6 million and net cash outflows of ~~$14.4~~$18.2 million due to changes in our operating assets and liabilities. Non-cash ~~charges/benefits primarily~~charges consisted of stock-based compensation of ~~$86.5~~$63.1 million, amortization of our deferred contract costs of ~~$14.2~~$10.2 million, depreciation and amortization of property and equipment, capitalized implementation costs, and acquired intangible assets of ~~$12.8~~$10.0 million, non-cash lease expense of ~~$2.9~~$2.3 million, ~~other charges of $1.7 million, which consist primarily of the acquisition-related asset impairment and bad debt expense,~~ amortization of debt issuance costs of ~~$1.4~~$0.9 million, and ~~a tax benefit related to the release~~other costs of ~~our valuation allowance~~$0.1 million, which consist primarily of ~~$1.3 million.~~impairment charges, accretion on investments and bad debt expense. Changes in operating assets and liabilities reflected cash outflows from a ~~$16.3~~$19.1 million decrease in accounts payable, accrued expenses and other liabilities, and accrued compensation, a $12.4 million decrease in deferred revenue resulting from decreased billings for subscriptions, a $6.8 million increase in deferred contract costs due to commissions paid on new bookings in line with revenue growth, ~~$3.8~~$3.0 million in payments for operating lease liabilities, ~~a $2.9 million increase in prepaid expenses and other assets related to timing of payments made in~~

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~~advance for future services,~~ and a $3.1 million decrease in accounts payable, accrued expenses and other liabilities, and accrued compensation. These amounts were partially offset by a $8.6 million increase in deferred revenue resulting from increased billings for subscriptions, and a $3.0 million decrease in accounts receivable due to timing of cash collections.

Cash used in operating activities for the nine months ended October 31, 2021 of $7.4 million primarily related to our net loss of $78.6 million, adjusted for non-cash charges of $72.0 million and net cash outflows of $0.8 million due to changes in our operating assets and liabilities. Non-cash charges primarily consisted of stock-based compensation of $47.9 million, amortization of our deferred contract costs of $10.7 million, depreciation and amortization of property and equipment, capitalized implementation costs, and acquired intangible assets of $6.2 million, and non-cash lease expense of $3.3 million. Changes in operating assets and liabilities reflected cash outflows from a $16.8 million increase ~~in deferred contract costs due to commissions paid on new bookings in line with revenue growth,~~ ~~$3.8 million increase in~~ ~~payments for operating lease liabilities, and a $0.9~~$1.4 million increase in prepaid expenses and other assets related to timing of payments made in advance for future services. These amounts were ~~partially~~ offset by ~~cash inflows from~~ a ~~$12.9~~$24.4 million ~~increase in deferred revenue resulting primarily from increased~~ ~~billings for subscriptions, a $3.8 million increase~~decrease in accounts ~~payable and accrued expenses and liabilities, and a $3.8 million increase in accrued compensation and related benefits.~~receivable due to timing of cash collections.

Investing Activities

Cash used in investing activities for the ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023 of ~~$80.3~~$4.0 million consisted primarily of purchases of available-for-sale investments of ~~$155.3~~$108.1 million, ~~cash paid for the Catalytic acquisition, net~~capitalization of ~~cash acquired,~~internal-use software of ~~$66.3~~$2.4 million, and purchases of property and equipment of ~~$3.8~~$0.9 million primarily for purchases of computers for new employees, ~~and to support office space for our San Francisco office, capitalization of internal-use software of $2.7 million, and cash paid for an asset acquisition of $1.8 million. This was~~partially offset by proceeds from maturities of investments of ~~$149.6~~$107.6 million.

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

Financing Activities

Cash used in financing activities for the ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023 of ~~$6.1~~$0.5 million consisted of ~~$22.2~~$16.0 million in employee payroll taxes paid related to vesting of restricted stock units, offset by proceeds of ~~$8.5~~$7.4 million from the exercise of stock options, proceeds from the ESPP purchase of ~~$5.7~~$6.3 million, and ~~$1.9~~$1.8 million of cash received from the non-controlling shareholder of PagerDuty K.K.

Cash used in financing activities for the nine months ended October 31, 2021 of $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 $12.5 million from the exercise of stock options and proceeds from the ESPP of $4.9 million.

Contractual Obligations and Commitments

There were no material changes during the ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023 to our contractual obligations and other commitments, as disclosed in ~~the~~our Annual ~~Report on Form 10-K for the fiscal year ended January 31, 2022, filed with the SEC on March 17, 2022.~~Report.

For further information on our commitments and contingencies, refer to Note ~~12,~~10, “Commitments and Contingencies” in the condensed consolidated financial statements contained within this ~~Quarterly Report on~~ Form 10-Q.

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Indemnification Agreements

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 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 October 31, 2022 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~~Our condensed consolidated financial statements and the related notes thereto included elsewhere in this Form 10-Q are prepared in accordance with U.S. GAAP. ~~In the~~The preparation of these condensed consolidated financial statements ~~we are required~~also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by management. To the extent that there are ~~material~~ differences between ~~these~~our estimates and actual

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results, our future financial statement presentation, financial condition, or results of operations, ~~would~~and cash flows will 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.

There have been no significant changes to our critical accounting policies described in Part II, Item 7 in our Annual Report, ~~on Form 10-K for the fiscal year ended January 31, 2022, filed with the SEC on March 17, 2022,~~ that had a material impact on our condensed consolidated financial statements and related notes.

~~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, 2022, filed with the SEC on March 17, 2022.~~.

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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 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 ~~October~~July 31, ~~2022~~2023 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

Other than the risk factors below, there have been no material changes from the risk factors described in Part I. Item 1A., “Risk Factors” in our Annual Report on Form 10-K for the year ended January 31, ~~2022. The~~2023. Our business involves significant risks, some of which are described below. You should carefully consider the following risks, together with all of the other information in ~~“Risk Factors”~~this Form 10-Q, including our condensed consolidated financial statements and the related notes included elsewhere in ~~any subsequent~~this Form ~~10-Qs~~10-Q. Any of the following risks could ~~materially and adversely affect~~have an adverse effect on our business, results of operations, financial condition or prospects, and could cause the trading price of our common stock to decline. ~~These risk factors do not identify all risks that we face— our~~Our business, results of operations, financial condition or prospects could also be ~~affected~~harmed by ~~factors that are~~risks and uncertainties not ~~presently~~currently known to us or that we currently ~~consider to be immaterial. Due to risks and uncertainties, known and unknown, our past financial results may~~do not ~~be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods.~~believe are material.

Unfavorable conditions in our industry or the global economy, or reductions in information technology spending, could limit our ability to grow our business and negatively affect our results of operations.

Our results of operations may vary based on the impact of changes in our industry or the global economy on us or our customers and potential customers. Negative conditions in the general economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, rising inflation, rising interest rates, supply chain disruptions, labor shortages, weakening exchange rates, international trade relations, political turmoil, natural catastrophes, health epidemics or pandemics (such as the COVID-19 pandemic), warfare (such as~~Russia’s invasion of Ukraine),~~and terrorist attacks on the United States, Europe, the Asia Pacific region, Japan, or elsewhere, could cause a decrease in business investments, including spending on information technology, and negatively affect the growth of our business. In addition, the United States has recently experienced historically high levels of inflation. The rising inflation may increase our supply, employees and facilities costs and decrease demand for our products. Competitors, many of whom are larger and have greater financial resources thanIf we do, may respond to challenging market conditions by lowering prices in an attempt to attract our customers. In addition, the increased pace of consolidation in certain industries may result in reduced overall spending on our products. We cannot predict the timing, strength, or duration of any economic slowdown, instability, or recovery, generally or within any particular industry or how any such event may impact our business.

~~Our current operations are international in scope, and we plan further geographic expansion, creating a variety of operational challenges.~~

A component of our growth strategy involves the further expansion of our operations and customer base internationally. In each of the fiscal years ended January 31, 2022, 2021, and 2020 customers outside of the United States generated 24%, 24%, and 22%, respectively, of our revenue. We currently have offices in Australia, Canada, Portugal, the United Kingdom (U.K.), and the United States. We are continuing to adapt to and develop strategies to address international markets, but there is no guarantee that such efforts will have the desired effect. As of January 31, 2022, approximately 29% of our full-time employees were located outside of the United States. We expect that our international activities will continue to grow for the foreseeable future as we continue to pursue opportunities in existing and new international markets, which will require significant dedication of management attention and financial resources.

~~Our current and future international business and operations involve a variety of risks, including:~~

•~~changes in a specific country’s or region’s political or economic conditions;~~

•~~health epidemics or pandemics, such as the COVID-19 pandemic, influenza and other highly communicable diseases or viruses;~~

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•continuing uncertainty regarding social, political, immigration, and tax and trade policies in the U.S. and abroad, including as a result of the United Kingdom's withdrawal from the European Union (“EU”);

•~~the need~~fail to adapt and ~~localize~~respond effectively to rapidly changing technology, evolving industry standards, changing regulations, and changing customer needs, requirements, or preferences, our products ~~for specific countries;~~may become less competitive.

•~~greater difficulty collecting accounts receivable~~The market in which we compete is relatively new and ~~longer payment cycles;~~

•~~potential changes~~subject to rapid technological change, evolving industry standards, and changing regulations, as well as changing customer needs, requirements, and preferences. The success of our business will depend, in ~~trade relations, regulations, or laws;~~

•~~unexpected changes in laws, regulatory requirements, or tax laws;~~

•~~more stringent regulations relating to privacy and data security and the unauthorized use of, or access to, commercial and personal information, particularly in Europe;~~

•differing and potentially more onerous labor regulations, especially in Europe, where labor laws are generally more advantageous to employees as compared to the United States, including deemed hourly wage and overtime regulations in these locations;

•challenges inherent in efficiently managing, and the increased costs associated with, an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, and compliance programs that are specific to each jurisdiction;

•~~difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems, and regulatory systems;~~

•~~increased travel, real estate, infrastructure, and legal compliance costs associated with international operations;~~

•~~currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions if we chose to do so in the future;~~

•~~limitations~~part, on our ability to ~~reinvest earnings from~~adapt and respond effectively to these changes on a timely basis. In particular, advancements in technology such as artificial intelligence (“AI”) and machine learning (“ML”) are changing the technology landscape, and businesses that are slow to adopt these new technologies may face a competitive disadvantage. If we were unable to continue enhancing and evolving our digital operations ~~in one country~~platform or delivering new products that keep pace with rapid technological and regulatory change, or if new technologies emerge that are able to ~~fund the capital needs~~deliver competitive value at lower prices, more efficiently, more conveniently, more reliably, or more securely than our products, our business, results of operations, and financial condition would be adversely affected.

If our information technology systems or data, or those of our ~~operations in~~customers or the third-party providers upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruption of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; decreased value of our business and common stock; and other ~~countries;~~adverse consequences.

•~~laws~~Our business involves the processing, storage and ~~business practices favoring local competitors~~transmission of proprietary, sensitive, or ~~general market preferences for local vendors;~~

•~~limited or insufficient~~confidential data of our customers and their employees and customers, including personal information, intellectual property, ~~protection or difficulties enforcing our intellectual property;~~

•~~political instability, including military actions;~~

•~~terrorist activities;~~

•~~exposure to liabilities under anti-corruption~~ and ~~anti-money laundering laws, including the U.S. Foreign Corrupt Practices Act, or FCPA, U.S. bribery laws, the UK Bribery Act,~~trade secrets. Cyber-attacks, malicious internet-based activity, online and ~~similar laws and regulations in other jurisdictions; and~~

•~~adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash.~~

Political actions, including trade protection and national security policies of U.S. and foreign government bodies, such as tariffs, import or export regulations, trade and economic sanctions, quotas or other trade barriers and restrictions could affect our ability to fulfill our contractual obligations and have a material adverse effect on our business. In addition, following Russia’s military invasion of Ukraine in February 2022, NATO deployed additional military forces to Eastern Europe, and the United States, European Union,offline fraud, and other ~~nations announced various sanctions against Russia. The invasion~~similar activities threaten the confidentiality, integrity, and availability of ~~Ukraine~~our sensitive information and ~~the retaliatory measures that have been taken,~~information technology systems, and could be taken in future, by the United States, NATO, and other countries have created global security concerns that could result in a regional conflict and otherwise have a lasting impact on regional and global economies, any or allthose of ~~which could adversely affect our business. Further, due to political uncertainty and military actions involving~~

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~~Russia, Ukraine, and surrounding regions, we and~~ the third parties upon which we rely. Such threats are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors. Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we, the third parties upon which we rely, and our customers may be vulnerable to a heightened risk of ~~security breaches, computer malware, social-engineering~~these attacks, ~~supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, and other~~including retaliatory cyber-attacks, ~~including attacks~~ that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services. Providers of cloud-based services have frequently been targeted by such attacks. These cybersecurity challenges, including threats to our own IT infrastructure or those of our customers or third-party providers, may take a variety of forms including but not limited to malware (including as a result of advanced persistent threat intrusions), social engineering attacks (including through phishing, smishing, and vishing), ransomware attacks, man-in-the-middle attacks, session hijacking, denial-of-service attacks (such as credential

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stuffing), supply-chain attacks, software bugs, server malfunctions, software or hardware failures, credential harvesting, personnel misconduct or error, malicious code (such as viruses or worms), loss of data or other information technology assets, adware, telecommunications failures, “mega breaches” targeted against cloud-based services and other hosted software (which could be initiated by individual or groups of hackers or sophisticated cyber criminals), earthquakes, fires, floods, and other similar threats.

In particular, severe ransomware attacks, including those perpetrated by organized criminal threat actors, nation-states, and nation-state-supported actors, are becoming increasingly prevalent and severe – and can lead to significant interruptions in our operations, loss of data and income, reputational harm, and diversion of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.

Remote work has also become more common and has increased risks to our information technology systems and data, as more of our employees utilize network connections, computers and devices outside our premises or network, including working at home, while in transit and in public locations. Furthermore, future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies. We may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.

We use third-party service providers and technologies to help us deliver services and process information on our behalf in a variety of contexts, including, without limitation, encryption and authentication technology, employee email, content delivery to customers, and other functions. Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place. If our third-party service providers experience a security incident or other interruption that results in data loss, deletion or destruction, unauthorized access to, loss of, unauthorized acquisition or disclosure of, or inadvertent exposure disclosure of, proprietary, sensitive, or confidential data, or any compromise related to the security, confidentiality, integrity or availability of our (or their) information technology, software, services, communications or data, it may result in adverse consequences such as litigation, indemnity obligations, interruption to our business operations, and other possible liabilities, as well as negative publicity, which would damage our reputation and business, impair our sales, and harm our customers. While we may be entitled to damages if our third-party service providers fail to satisfy their data privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award. In addition, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties’ infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised.

We use AI and ML technologies in our products and services. The development and use of AI and ML is subject to privacy, data protection, and information security laws, industry standards, external and internal privacy and security policies, and contractual requirements, as well as increasing regulation and scrutiny. If we do ~~business. These attacks are expected~~not incorporate AI and ML in a manner consistent with these factors, and consistent with customer expectations, it may result in an adverse impact to ~~occur in the future.~~our reputation, our business may be less efficient, or we may be at a competitive disadvantage.

~~If any~~Any of the ~~above~~previously identified or similar threats could cause a security incident, production downtime or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information or our information technology systems, or those of the third parties upon whom we rely. A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to provide our service. As we increase our customer base and our brand becomes more widely known and recognized, third parties may increasingly seek to compromise our security controls or gain unauthorized access to our sensitive corporate information or our customers’ data. We may be required to expend significant resources, fundamentally change our business activities and practices, or modify our services, software, operations or information technology to protect against security breaches and to mitigate, detect, and remediate actual and potential vulnerabilities. Certain data privacy and security obligations may require us to implement and maintain specific security measures or industry-standard or reasonable security measures to

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protect our information technology systems and sensitive information. While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective. We take steps to detect and remediate vulnerabilities, but we may not be able to detect and remediate all vulnerabilities because the threats and techniques used to exploit the vulnerability change frequently and are often sophisticated in nature. Therefore, such vulnerabilities could be exploited but may not be detected until after a security incident has occurred. These vulnerabilities pose material risks ~~materializes,~~to our business. Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities.

In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position.

The reliability and continuous availability of our service is critical to our success. However, software such as ours can contain errors, defects, security vulnerabilities or software bugs that are difficult to detect and correct, particularly when such vulnerabilities are first introduced or when new versions or enhancements of our service are released. Additionally, even if we are able to develop a patch or other fix to address such vulnerabilities, such a fix may be difficult to push out to our customers or otherwise be delayed. Additionally, our business depends upon the appropriate and successful implementation of our service by our customers. If our customers fail to use our service according to our specifications, our customers may suffer a security incident on their own systems or other adverse consequences. Even if such an incident is unrelated to our security practices, it could result in our incurring significant economic and operational costs in investigating, remediating, and implementing additional measures to further protect our customers from their own vulnerabilities, and could result in reputational harm.

Many governments have enacted laws requiring companies to notify individuals of security incidents or unauthorized transfers involving certain types of personal information. Such notifications are costly, and the notifications or the failure to comply with requirements to provide them could lead to adverse consequences. In addition, some of our customers contractually require notification by us of any security incident. Accordingly, security incidents experienced by our competitors, our customers, us, or our service providers may lead to public disclosures, which may lead to widespread negative publicity. Any security incident or security compromise in our industry, whether actual or perceived, and attendant consequences could harm our ~~business~~reputation, erode customer confidence in the effectiveness of our security measures, negatively affect our ability to attract new customers, cause existing customers to stop using our services or elect not to renew their subscriptions, and ~~prospects. In addition,~~subject us to government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information (including personal information); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in our ~~limited experience~~operations (including availability of data); financial loss; and other similar harms.

Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in ~~operating~~ our ~~business internationally~~contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations. While we maintain general liability insurance coverage and coverage for errors or omissions, we cannot assure you that such coverage would be adequate or would otherwise protect us from liabilities or damages with respect to claims alleging compromises of customer data, that such coverage will continue to be available to us on acceptable terms or at all, or that such coverage will pay future claims. The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the ~~risk that any potential future expansion efforts that we may undertake will not be successful. If we invest substantial time and resources to further expand~~imposition of large deductible or co-insurance requirements), could have an adverse effect on our ~~international operations and are unable to do so successfully and in a timely manner, our business and operating results will suffer.~~business.

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

None.

Items 3 4, and 54 are not applicable and have been omitted.

Item 5. Other Information

Trading Arrangements of Directors and Executive Officers

During the Company’s last fiscal quarter, the Company’s directors and officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated the contracts, instructions or written plans for the purchase or sale of the Company’s securities set forth in the table below.

Name and Position

Action

Adoption or Termination Date

Type of Trading Arrangement

Total Shares of Common Stock to be Sold***

Expiration Date

Rule
10b5-1*

Non-Rule 10b5-1**

Shelley Webb, Senior Vice President, Legal, General Counsel and Secretary

Adoption

July 10, 2023

64,208

October 18, 2024

William E. Losch, Director

Adoption

June 14, 2023

5,364

June 30, 2024

* Contract, instruction or written plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act.

** “Non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K under the Exchange Act.

*** Represents the maximum number of shares that may be sold pursuant to the 10b5- 1 arrangement. The actual number of shares sold will be dependent on the satisfaction of certain conditions as set forth in the written plan.

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).

4845

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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.

† Indicates a management contract or compensatory plan.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PAGERDUTY, INC.

Date: ~~December 2, 2022~~September 1, 2023

By:

/s/ Jennifer G. Tejada

Jennifer G. Tejada

Chief Executive Officer

(Principal Executive Officer)

Date: ~~December 2, 2022~~September 1, 2023

By:

/s/ Owen Howard Wilson

Owen Howard Wilson

Chief Financial Officer

(Principal Financial Officer)

Date: ~~December 2, 2022~~September 1, 2023

By:

/s/ Mitra Rezvan

Mitra Rezvan

Senior Vice President, Finance and ~~Corporate Controller~~Chief Accounting Officer

(Principal Accounting Officer)

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Item 1	Financial Statements (unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations	6
	Condensed Consolidated Statements of Comprehensive Loss	7
	Condensed Consolidated Statements of Stockholders’ Equity	8
	Condensed Consolidated Statements of Cash Flows	10
	Notes to Condensed Consolidated Financial Statements	11
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2825
Item 3	Quantitative and Qualitative Disclosures about Market Risk	4340
Item 4	Controls and Procedures	4441


	Three Months Ended October 31, 2021
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
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	724,725	—		4,286		—		—		4,286
Vesting of restricted stock units, net of employee payroll taxes	269,436	—		(7,616)		—		—		(7,616)
Other comprehensive loss	—	—		—		(222)		—		(222)
Stock-based compensation	—	—		18,110		—		—		18,110
Net loss	—	—		—		—		(26,341)		(26,341)
Balances as of October 31, 2021	85,795,285	$	—	$	593,508	$	(191)	$	(319,928)	$	273,389


	Nine Months Ended October 31, 2021
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
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	—	—		(68,478)		—		6,742		(61,736)
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	677,323	—		(18,619)		—		—		(18,619)
Shares issued related to a business combination	2,073	—		—		—		—		—
Issuance of common stock in connection with employee stock purchase plan	222,474	—		4,889		—		—		4,889
Other comprehensive loss	—	—		—		(534)		—		(534)
Stock-based compensation	—	—		48,714		—		—		48,714
Net loss	—	—		—		—		(78,560)		(78,560)
Balances as of October 31, 2021	85,795,285	$	—	$	593,508	$	(191)	$	(319,928)	$	273,389


	Fair Value		Useful Life
	(in thousands)		(in years)
Developed technology	$	19,200	3
Customer relationships	$	2,600	10


	As of October 31, 2022
	Cost		Accumulated Amortization		Net		Weighted Average Remaining Useful Life
	(in thousands)						(in years)
Customer relationships	$	24,400	$	(4,709)	$	19,691	8.1
Developed technology	24,800		(6,462)		18,338		2.5
Trademarks	400		(400)		—		0.0
Assembled workforce	2,527		(527)		2,000		1.6
Total acquired intangibles, net	$	52,127	$	(12,098)	$	40,029


	Last 12 Months Ended October 31,
	2022		2021
Dollar-based net retention rate for all customers	123	%	124	%