PagerDuty posts flat growth as margins expand
The incident-response platform raised its full-year non-GAAP earnings guidance to $1.27-$1.32 a share.
The incident-response platform provider PagerDuty (PD) reported first-quarter revenue growth of 1% year-over-year to $121.0 million, marking a slowdown from the prior quarter’s 2.7% expansion and extending a trend of decelerating top-line momentum. The results underscored a quarter in which profitability gains offset stagnant demand for the company’s digital-operations software.
The quarter’s defining tension emerged between flat annual recurring revenue and widening margins. Annual recurring revenue held steady at $496 million, unchanged from a year earlier and down slightly from $499 million in the prior quarter. Dollar-based net retention slipped to 97%, its lowest level in at least two years, as customers trimmed spending on existing contracts. Yet non-GAAP operating margin reached 24.6%, up from 23.9% in the prior quarter and 20.3% a year earlier, while GAAP operating margin turned positive for the fourth consecutive quarter at 7.6%.
Revenue growth deceleration was most pronounced in the company’s core enterprise segment. Customers generating more than $100,000 in annual recurring revenue grew just 1% year-over-year to 860, matching the prior quarter’s pace. Total paid customers inched up to 15,380 from 15,351, a slower rate than in prior periods. Remaining performance obligations fell to $441 million from $449 million in the prior quarter, though 72% remained slated for recognition within the next 12 months.
Profitability gains were driven by disciplined cost management. Stock-based compensation declined to $17.96 million from $23.52 million in the prior quarter and $25.75 million a year earlier. Free cash flow totaled $41.2 million, down from $44.3 million in the prior quarter, but free cash flow margin improved to 34.1% from 18.1%. Non-GAAP net income per diluted share rose to $0.32 from $0.29 in the prior quarter.
The company reiterated its second-quarter revenue guidance of $122.0-$124.0 million, implying 1-2% sequential growth. For the full year, PagerDuty raised its non-GAAP earnings guidance to $1.27-$1.32 a share from $1.23-$1.28, while maintaining its revenue outlook.
PagerDuty also disclosed a new $100 million share repurchase program, signaling confidence in its cash-generation capacity amid stagnant growth. The buyback authorization marked the company’s first such program in at least two years.