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Valuation of Cloud Platform PagerDuty Soars after IPO

Posted on Monday, Jun 10th 2019

According to PricewaterhouseCoopers, 32% of all customers say they will walk away from a brand after just one bad experience. Delivering a great digital experience is the new requirement for disruption and competitive advantage. However, billions of digital signals from technological infrastructure make it difficult to separate important signals from noise. Billion Dollar Unicorn PagerDuty is a SaaS-based digital operations management platform that recently went public and reported a strong first quarter.

PagerDuty’s Offerings

San Francisco-based PagerDuty was founded in 2009 by three ex-Amazon developers who were often asked to provide on-call support for their applications. Frustrated with the inefficiencies of existing solutions, they started PagerDuty with the goal of building effective, easy-to-use software that enhances the lives of on-call responders while improving their productivity.

Since then, PagerDuty has expanded into a real-time operations platform, spanning event intelligence, incident response, on-call management, business visibility, and analytics. Its platform collects signals from virtually any software-enabled system or device, correlates and interprets signals to identify events, and engages the right team members to take action in real-time. PagerDuty mines machine data and human response data to embed analytics, machine learning, and automation within its platform. Its platform learns from every incident, allowing teams to be proactive and incorporate best practices into their operations to improve performance.

The majority of its revenue is derived from mid-market and enterprise customers through sales of subscriptions to its services. It offers four subscription pricing levels: Starter, Platform Team, Platform Business, and Enterprise. Customers can add on products, including Analytics, Visibility, Event Intelligence, and Modern Incident Response to any subscription pricing level.

PagerDuty’s Financials

PagerDuty had revenue of 117.8 million and loss of $40.7 million, or $1.90 a share in the fiscal year ended Jan. 31, 2019 compared to loss of $38.1 million, or $1.91 a share, on revenue of $79.6 million a year ago.

First quarter revenue was $37.3 million, up 49%. GAAP loss was $12.1 million or $0.37 a share. Adjusted loss was $0.22 a share. Analysts expected adjusted loss of $0.23 a share on sales of $35 million.

PagerDuty has over 11,600 customers including Box, Okta, Slack, Zendesk, Yahoo! Japan, SoundCloud, TripActions, Aveanna Healthcare, Vocalink, and REA Group.

For the second quarter, the company expects revenue of $38.5 million-$39.5 million, representing a growth rate of 39% – 43% and non-GAAP net loss per share of $0.09 – $0.10. For the full year, it expects non-GAAP loss per share of $0.37 – $0.38 and revenue of $161 million to $163 million, representing a growth rate of 37%-38%. Analysts expect full-year losses of $0.39 cents per share on revenue of $155.8 million.

PagerDuty’s primary competitors include OpsGenie that was acquired by Atlassian for $295 million and VictorOps that was acquired by Splunk for $120 million last year. Both OpsGenie and VictorOps were capital-efficient startups, having raised $10 million and $33.7 million, respectively.

PagerDuty, on the other hand, has taken the IPO route after raising $173.6 million in venture capital funding in six funding rounds from investors including Wellington Management, Bessemer Venture Partners, T. Rowe Price, Baseline Ventures, and Accel. In its last round of funding, it raised $90 million at a valuation of $1.3 billion.

PagerDuty went public on NYSE under the ticker PD in April, raising $217.7 million at a list price of $24 and valuation of $1.8 billion. Its stock is currently trading at $47.56 with a market cap of $3.5 billion.

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