Q1 2025 PagerDuty Inc Earnings Call Transcript
Key Points
- PagerDuty Inc (PD) delivered a solid first quarter with revenue growth of 8%, near the midpoint of their guidance range.
- The company achieved a non-GAAP operating margin of 14%, which was 4 points above the guidance range.
- Annual recurring revenue (ARR) increased by approximately $11 million to $463 million, with ARR growth stabilizing at 10% for the second consecutive quarter.
- PagerDuty Inc (PD) saw strong momentum in large multi-year, multi-product contracts, with customers spending more than $100,000 growing by 6%, and those spending more than $500,000 and $1 million growing in the high teens.
- The company introduced a new enterprise plan for incident management, which has already exceeded ARR contribution targets and demonstrated strong applicability in displacing point solutions.
- The macro environment continues to exert pressure on gross retention, particularly in the SMB segment due to capital constraints.
- Despite overall growth, SMB remains a headwind with high levels of churn and downgrades.
- The company anticipates gross margin trending closer to 84% by the fourth quarter due to increased services capacity to support the growing enterprise base.
- There were select downgrades in some larger customers, symptomatic of cautious and constrained spending consistent with macro volatility.
- The company is not anticipating significant contributions from the federal sector or improvements in the macro environment for the remainder of the year, which could limit upside potential.
Good afternoon, and thank you for joining us to discuss PagerDuty's first quarter fiscal year 2025 results. With me on today's call are Jennifer Tejada, PagerDuty's Chairperson and Chief Executive Officer; and Howard Wilson, our Chief Financial Officer.
Before we begin, let me remind everyone that statements made on this call include forward-looking statements based on the environment as we currently see it, which involve known and unknown risks and uncertainties that may cause our actual results, performance, or achievements to be materially different from those expressed or implied by the forward-looking statements.
These forward-looking statements include our growth prospects, future revenue, operating margins, net income, cash balance, and total addressable market, among others, and represent our management's belief and assumptions only as of the date such statements are made. And we undertake no obligation to update these.
During today's call, we will discuss non-GAAP financial measures, which are in
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