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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 April 30, 2021
or
☐ 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 PD New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x No  o
Indicate by check mark whether the registrant has submitted electronically on its corporate Web site every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
Accelerated filer
o
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐   No  x
The total number of shares of common stock outstanding as of June 2, 2021, was 83,641,856.

Table of Contents
PAGERDUTY, INC.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1
5
5
6
7
8
9
Item 2
24
Item 3
39
Item 4
40
Part II - OTHER INFORMATION
Item 1
41
Item 1A
41
Item 2
42
Item 6
42
44


Table of Contents
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, or this Form 10-Q, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which statements involve substantial risk and uncertainties. All statements contained in this report other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, market growth and trends, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “potentially,” “likely,” and similar expressions are intended to identify forward-looking statements.
Forward-looking statement contained in this Form 10-Q include, but are not limited to, statements about our expectations regarding:
•the effect of uncertainties related to the novel coronavirus and resulting COVID-19 pandemic on U.S. and global markets, our business, operations, revenue results, cash flow, operating expenses, demand for our solutions, sales cycles, customer retention, and our customers’ businesses;
•trends in key business metrics, including number of customers and dollar-based net retention rate, and non-GAAP financial measures and their usefulness in evaluating our business;
•trends in revenue, cost of revenue, and gross margin;
•trends in operating expenses, including research and development, sales and marketing, and general and administrative expense, and expectations regarding these expenses as a percentage of revenue;
•our existing cash and cash equivalents and cash provided by sales of our subscriptions being sufficient to support working capital and capital expenditures for at least the next 12 months;
•our ability to successfully identify, acquire, and integrate complementary companies, technologies, and assets;
•our ability to service the interest on our convertible notes and repay such notes, to the extent required;
•our efforts to maintain proper and effective internal controls;
•our ability to expand our operations and increase adoption of our platform internationally;
•our ability to stay abreast of new or modified laws and regulations that currently apply or become applicable to our business both in the United States and internationally;
•the increased expenses and administrative workload associated with being a public company; and
•other statements regarding our future operations, financial condition, and prospects and business strategies.
Such forward-looking statements are based on our expectations as of the date of this filing and are subject to a number of risks, uncertainties and assumptions, including but not limited to, risks detailed in the “Risk Factors” section of this Form 10-Q. Readers are urged to carefully review and consider the various disclosures made in this Form 10-Q and in other documents we file from time to time with the Securities and Exchange Commission, or the SEC, that disclose risks and uncertainties that may affect our business. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Form 10-Q may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

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

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
PAGERDUTY, INC.
Condensed Consolidated Balance Sheets
(in thousands)
As of April 30, 2021 As of January 31, 2021
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 326,033  $ 339,166 
Investments 230,932  221,112 
Accounts receivable, net of allowance for doubtful accounts of $1,072 and $1,188 as of April 30, 2021 and January 31, 2021, respectively
37,572  55,119 
Deferred contract costs, current 12,870  12,330 
Prepaid expenses and other current assets 12,287  10,587 
Total current assets 619,694  638,314 
Property and equipment, net 13,501  12,639 
Deferred contract costs, non-current 19,199  19,257 
Lease right-of-use assets 23,594  24,691 
Goodwill 72,126  72,126 
Intangible assets, net 25,758  26,633 
Other assets 1,483  1,783 
Total assets $ 775,355  $ 795,443 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 4,150  $ 5,747 
Accrued expenses and other current liabilities 11,676  9,627 
Accrued compensation 23,961  28,372 
Deferred revenue, current 120,085  123,686 
Lease liabilities, current 5,390  5,262 
Total current liabilities 165,262  172,694 
Convertible senior notes, net 279,703  217,528 
Deferred revenue, non-current 5,971  6,286 
Lease liabilities, non-current 25,278  26,542 
Other liabilities 5,085  5,666 
Total liabilities 481,299  428,716 
Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock
—  — 
Additional paid-in capital 557,843  614,494 
Accumulated other comprehensive income 139  343 
Accumulated deficit (263,926) (248,110)
Total stockholders’ equity 294,056  366,727 
Total liabilities and stockholders’ equity
$ 775,355  $ 795,443 
See Notes to Condensed Consolidated Financial Statements
5
Table of Contents
PAGERDUTY, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share data)
(unaudited)

Three Months Ended April 30,
2021 2020
Revenue $ 63,591  $ 49,786 
Cost of revenue 10,418  6,963 
Gross profit 53,173  42,823 
Operating expenses:
Research and development 20,599  15,014 
Sales and marketing 37,234  26,736 
General and administrative 16,578  13,673 
Total operating expenses 74,411  55,423 
Loss from operations (21,238) (12,600)
Interest income 818  1,353 
Interest expense (1,317) — 
Other (expense) income, net (616) 19 
Loss before provision for income taxes (22,353) (11,228)
Provision for income taxes (205) (231)
Net loss $ (22,558) $ (11,459)
Other comprehensive (loss) income:
Unrealized (loss) gain on investments (204) 642 
Total comprehensive loss $ (22,762) $ (10,817)
Net loss per share, basic and diluted $ (0.27) $ (0.15)
Weighted average shares used in calculating net loss per share, basic and diluted
82,915  77,770 
See Notes to Condensed Consolidated Financial Statements
6
Table of Contents
PAGERDUTY, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except share data)
(unaudited)
Three Months Ended April 30, 2021
Common Stock Additional
Paid-in
Capital 		Accumulated Other Comprehensive Income 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 (Note 2) —  —  (68,478) —  6,742  (61,736)
Issuance of common stock upon exercise of stock options and restricted stock agreements, net of repurchases 536,593  —  2,843  —  —  2,843 
Vesting of restricted stock units, net of employee payroll taxes
174,135  —  (4,930) —  —  (4,930)
Shares issued related to a business combination 2,073  —  —  —  —  — 
Other comprehensive loss —  —  —  (204) —  (204)
Stock-based compensation
—  —  13,914  —  —  13,914 
Net loss
—  —  —  —  (22,558) (22,558)
Balances as of April 30, 2021 83,595,225  $ —  $ 557,843  $ 139  $ (263,926) $ 294,056 

Three Months Ended April 30, 2020
Common Stock Additional
Paid-in
Capital 		Accumulated Other Comprehensive Income Accumulated
Deficit 		Total
Stockholders’
Equity
Shares Amount
Balances as of January 31, 2020 77,793,540  $ —  $ 487,008  $ 137  $ (179,207) $ 307,938 
Issuance of common stock upon exercise of stock options and restricted stock agreements, net of repurchases 729,425  —  1,844  —  —  1,844 
Vesting of restricted stock units, net of employee payroll taxes 3,039  —  (46) —  —  (46)
Vesting of early exercised options —  —  316  —  —  316 
Stock-based compensation —  —  8,308  —  —  8,308 
Other comprehensive income —  —  —  642  —  642 
Net loss —  —  —  —  (11,459) (11,459)
Balances as of April 30, 2020 78,526,004  $ —  $ 497,430  $ 779  $ (190,666) $ 307,543 

See Notes to Condensed Consolidated Financial Statements
7
Table of Contents
PAGERDUTY, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended April 30,
2021 2020
Cash flows from operating activities
Net loss $ (22,558) $ (11,459)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 1,972  1,023 
Amortization of deferred contract costs 3,250  2,440 
Amortization of debt issuance costs 438  — 
Stock-based compensation 13,612  8,308 
Non-cash lease expense 1,097  1,089 
Other 803  743 
Changes in operating assets and liabilities:
Accounts receivable 17,365  (8)
Deferred contract costs (3,732) (2,856)
Prepaid expenses and other assets (1,573) (2,919)
Accounts payable (1,564) (1,049)
Accrued expenses and other liabilities 1,932  619 
Accrued compensation (4,411) 1,000 
Deferred revenue (3,916) 3,877 
Lease liabilities (1,136) (993)
Net cash provided by (used in) operating activities 1,579  (185)
Cash flows from investing activities
Purchases of property and equipment (927) (2,713)
Capitalization of internal-use software costs (1,002) — 
Payments related to a business acquisition (160) — 
Proceeds from maturities of held-to-maturity investments —  15,000 
Purchases of available-for-sale investments (77,531) (32,130)
Proceeds from maturities of available-for-sale investments 67,004  30,565 
Proceeds from sales of available-for-sale investments —  3,096 
Net cash (used in) provided by investing activities (12,616) 13,818 
Cash flows from financing activities
Proceeds from issuance of common stock upon exercise of stock options 2,834  1,844 
Employee payroll taxes paid related to net share settlement of restricted stock units (4,930) (46)
Net cash (used in) provided by financing activities (2,096) 1,798 
Net increase in cash, cash equivalents, and restricted cash (13,133) 15,431 
Cash, cash equivalents, and restricted cash at beginning of period 339,166  124,024 
Cash, cash equivalents, and restricted cash at end of period $ 326,033  $ 139,455 
Supplemental cash flow data:
Cash paid for income taxes $ 62  $ — 
Non-cash investing and financing activities:
Vesting of early exercised options $ —  $ 316 
Purchase of property and equipment, accrued but not yet paid $ 236  $ 552 
Stock-based compensation capitalized in internal use software $ 302  $ — 
See Notes to Condensed Consolidated Financial Statements
8
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 acts as the central nervous system for the digital enterprise. PagerDuty harnesses digital signals from virtually any software-enabled system or device, combines it with human response data and orchestrates teams to take the right actions in real time. The Company’s products help organizations improve operations, accelerate innovation, increase revenue, mitigate security risk, and deliver a great customer experience.
As used herein, “PagerDuty”, “we”, “our”, “the Company” and similar terms include PagerDuty, Inc., unless the context indicates otherwise.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The condensed consolidated balance sheet as of January 31, 2021 was derived from the audited consolidated financial statements as of that date but does not include all of the information and notes required by GAAP for complete financial statements. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended January 31, 2021, included in the Company’s Annual Report on Form 10-K, filed with the SEC.
The condensed consolidated financial statements include the results of PagerDuty, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.
In the opinion of management, the information contained herein reflects all adjustments necessary for a fair presentation of the Company’s results of operations, financial position, cash flows, and statements of stockholders’ equity. The results of operations for the three months ended April 30, 2021 are not necessarily indicative of the results to be expected for the full year ending January 31, 2022 or for any other interim period, or for any future year.
The Company’s fiscal year ends on January 31. References to fiscal 2022, for example, refer to the fiscal year ended January 31, 2022.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make, on an ongoing basis, estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates. The Company’s most significant estimates and judgments involve the fair value of stock awards, period of benefit for amortizing deferred contract costs, the determination of the allowance for doubtful accounts, the provision for income taxes, including the related valuation allowance and any uncertain tax positions, fair value of acquired assets and assumed liabilities, impairment of goodwill and intangible assets, the incremental borrowing rate for lease liabilities, and estimates related to our revenue recognition, such as the assessment of performance obligations in our revenue arrangements and the fair value assigned to each performance obligation, among others. Management bases its
9
PAGERDUTY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
In December 2019, the novel coronavirus and resulting disease (“COVID-19”) was reported and in March 2020 the World Health Organization declared it a pandemic. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts on the condensed consolidated financial statements during the three months ended April 30, 2021 and 2020. As events continue to evolve and additional information becomes available, our assumptions and estimates may change materially in future periods.
2. Summary of Significant Accounting Policies
Concentrations of Risk and Significant Customers
The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, available-for-sale investments, and accounts receivable. All of the Company’s cash and cash equivalents and investments are invested in money market funds, United States (“U.S.”) Treasury securities, commercial paper, corporate debt securities, or U.S. Government agency securities that management believes to be of high credit quality.
No single customer accounted for 10% of the total accounts receivable balance as of April 30, 2021 or January 31, 2021. No single customer represented 10% or more of revenue for the three months ended April 30, 2021 or 2020.
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 15, “Geographic Information” for information regarding the Company's long-lived assets and revenue by geography.
Significant Accounting Policies
There have been no significant changes to our significant accounting policies as compared to those described in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021, other than as set forth below.
Stock-Based Compensation
The Company recognizes compensation expense for all stock-based payment awards, including stock options, restricted stock units (“RSUs”), and performance stock units (“PSUs”), based on the estimated fair value of the award on the grant date.
The Company estimates the fair value of stock options issued to employees on the date of grant using the Black-Scholes option pricing model, which is impacted by the estimated fair value of the Company’s common stock, as well as certain assumptions including the expected volatility over the term of the option awards, the expected term of the awards, risk-free interest rates and the expected dividend yield. Assumptions and estimates used in the determination of the fair value of stock options are as follows:
Expected volatility—Expected volatility is a measure of the amount by which the stock price is expected to fluctuate. Since the Company does not have sufficient trading history for its common stock, it estimates the expected volatility of its stock options by taking the average historical volatility of a group of comparable publicly traded companies over a period equal to the expected life of the options.
Expected term—The Company determines the expected term based on the average period the stock options are expected to remain outstanding, generally calculated as the midpoint of the stock options’ vesting term
10
PAGERDUTY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
and contractual expiration period, as the Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior.
Risk-free rate—The Company uses the U.S. Treasury yield for its risk-free interest rate that corresponds with the expected term.
Expected dividend yield—The Company utilizes a dividend yield of zero, as it does not currently issue dividends and does not expect to in the future.
The Company estimates the fair value of RSUs and PSUs at our stock price on the grant date.
The Company estimates the fair value of shares to be issued under the employee stock purchase plan (the “ESPP”) on the first day of the offering period using the Black-Scholes valuation model, which is impacted by the estimated fair value of the Company’s common stock, as well as certain assumptions including the expected volatility over the term of the offering period, the expected term of the awards, risk-free interest rates and the expected dividend yield. Assumptions used in the determination of the fair value of the ESPP are the same as those used in the determination of the fair value of our stock options.
The Company generally recognizes compensation expense for employee stock-based payment awards on a straight-line basis over the period during which an award recipient is required to provide services in exchange for the award (generally the vesting period of the award), with the exception of PSUs which are recognized using the accelerated attribution method. The Company accounts for forfeitures as they occur.
The fair value of each non-employee stock option is estimated at the date of grant using the Black-Scholes option pricing model and is not remeasured over the vesting term. Assumptions used in valuing non-employee stock options are generally consistent with those used for employee stock options with the exception that the expected term is over the contractual life.
Recently Adopted Accounting Pronouncements
In August 2020, the FASB issued Accounting Standard Update No. 2020-06, Debt—Debt with Conversion Options (“Subtopic 470-20”) and Derivatives and Hedging—Contracts in Entity’s Own Equity (“Subtopic 815-40”) (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity's own equity. ASU 2020-06 also improves and amends the related Earnings Per Share guidance for both Subtopics. The ASU is part of the FASB's simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. The Company early adopted ASU 2020-06 as of February 1, 2021 using the modified retrospective approach. As a result of the adoption of ASU 2020-06, the Convertible Notes due July 2025 are no longer bifurcated into separate liability and equity components in the April 30, 2021 condensed consolidated balance sheets. Rather, the $287.5 million principal amount of the Company’s Convertible Notes was classified only as a liability in the April 30, 2021 condensed consolidated balance sheets. Upon adoption, the Company recognized an increase to long-term debt of $61.7 million, a decrease to additional paid in capital of $68.5 million, and a decrease in accumulated deficit of $6.7 million on its condensed consolidated balance sheets as of February 1, 2021. The adoption did not affect the Company’s condensed
11
PAGERDUTY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
consolidated statements of operations or condensed consolidated statements of cash flows. Refer to Note 9. “Debt and Financing Instruments” for further information.
As of January 31, 2021 ASU 2020-06 Adoption Adjustment As of February 1, 2021
(in thousands)
Liabilities
Outstanding principal $ 287,500  $ —  $ 287,500 
Unamortized debt discount and issuance costs (69,972) 61,736  (8,236)
Net carrying amount $ 217,528  $ 61,736  $ 279,264 
Equity
Additional paid-in-capital $ (614,494) $ 68,478  $ (546,016)
Accumulated deficit (248,110) 6,742  (241,368)
3. Cash, Cash Equivalents, and Investments
Cash, cash equivalents, and investments consisted of the following:
As of April 30, 2021 As of January 31, 2021
(in thousands)
Cash and cash equivalents
Cash
$ 136,274  $ 184,308 
Money market funds
189,759  139,870 
U.S. Treasury securities —  14,988 
Total cash and cash equivalents $ 326,033  $ 339,166 
Available-for-sale investments:
U.S. Treasury securities $ 57,873  $ 45,026 
Commercial paper
43,361  34,598 
Corporate debt securities
129,698  141,488 
Total available-for-sale investments $ 230,932  $ 221,112 
The following tables summarize the Company’s investments’ adjusted cost, net unrealized gains (losses), and fair value by significant investment category as of April 30, 2021 and January 31, 2021. Gross realized gains or losses from sales of available-for-sale securities were not material for the three months ended April 30, 2021.
As of April 30, 2021
Cost Basis Unrealized Gain (Loss), Net Recorded Basis
(in thousands)
Available-for-sale investments:
U.S. Treasury securities $ 57,870  $ 3  $ 57,873 
Commercial paper 43,362  (1) 43,361 
Corporate debt securities 129,561  137  129,698 
Total available-for-sale investments $ 230,793  $ 139  $ 230,932 
12
PAGERDUTY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
As of January 31, 2021
Cost Basis Unrealized Gain, Net Recorded Basis
(in thousands)
Available-for-sale investments:
U.S. Treasury securities $ 45,023  $ 3  $ 45,026 
Commercial paper 34,607  (9) 34,598 
Corporate debt securities 141,139  349  141,488 
Total available-for-sale investments $ 220,769  $ 343  $ 221,112 
The following table presents the Company’s available-for-sale securities by contractual maturity date as of April 30, 2021 and January 31, 2021:
As of April 30, 2021
Cost Basis Recorded Basis
(in thousands)
Due within one year $ 180,327  $ 180,494 
Due between one to five years 50,466  50,438 
Total $ 230,793  $ 230,932 
As of January 31, 2021
Cost Basis Recorded Basis
(in thousands)
Due within one year $ 171,498  $ 171,837 
Due between one to five years 49,271  49,275 
Total $ 220,769  $ 221,112 
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 our 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 our marketable securities as of the end of each period.

4. Fair Value Measurements
The Company measures its financial assets and liabilities at fair value each reporting period using a fair value hierarchy that prioritizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value, as follows:
Level 1—Valuations based on observable inputs that reflect quoted prices for identical assets or liabilities in active markets.
Level 2—Valuations based on inputs that are directly or indirectly observable in the marketplace.
Level 3—Valuations based on unobservable inputs that are supported by little or no market activity.
13
PAGERDUTY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The following table presents 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 April 30, 2021
Level 1 Level 2 Level 3 Total
(in thousands)
Money market funds $ 189,759  $ —  $ —  $ 189,759 
U.S. Treasury securities —  57,873  —  57,873 
Commercial paper —  43,361  —  43,361 
Corporate debt securities —  129,698  —  129,698 
Total $ 189,759  $ 230,932  $ —  $ 420,691 
Included in cash equivalents $ 189,759 
Included in investments $ 230,932 
As of January 31, 2021
Level 1 Level 2 Level 3 Total
(in thousands)
Money market funds $ 139,870  $ —  $ —  $ 139,870 
U.S. Treasury securities 14,988  45,026  —  60,014 
Commercial paper —  34,598  —  34,598 
Corporate debt securities —  141,488  —  141,488 
Total $ 154,858  $ 221,112  $ —  $ 375,970 
Included in cash equivalents $ 154,858 
Included in investments $ 221,112 
The Company’s assets that are measured by management at fair value on a recurring basis are generally classified within Level 1 or Level 2 of the fair value hierarchy.
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of April 30, 2021 and January 31, 2021, the Company’s Level 2 securities were priced by pricing vendors. These pricing vendors utilize observable market information in pricing these securities or, if specific prices are not available for these securities, use other observable inputs like market transactions involving identical or comparable securities.
The carrying amounts of certain financial instruments, including cash held in banks, accounts receivable and accounts payable approximate fair value due to their short-term maturities and are excluded from the fair value table above.
Convertible Senior Notes
As of April 30, 2021, the estimated fair value of the Notes was approximately $371.6 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.

14
PAGERDUTY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
5. Goodwill and Acquired Intangible Assets
There have been no changes in the carrying amount of goodwill since January 31, 2021.
Acquired intangible assets subject to amortization as of April 30, 2021 were as follows:
Cost Accumulated Amortization Net Weighted Average
Remaining Useful Life
(in thousands) (in years)
Customer relationships $ 21,800  $ (1,272) $ 20,528  9.4
Developed technology 5,600  (653) 4,947  4.4
Trademarks 400  (117) 283  1.4
Total acquired intangibles, net $ 27,800  $ (2,042) $ 25,758 
For the three months ended April 30, 2021, amortization expense related to acquired intangible assets was $0.9 million. No amortization expense was recorded during the three months ended April 30, 2020.

6. Property and Equipment, Net
Property and equipment, net, consisted of the following:
As of April 30, 2021 As of January 31, 2021
(in thousands)
Leasehold improvements $ 12,843  $ 12,767 
Computers and equipment 7,095  6,562 
Furniture and fixtures 3,001  3,017 
Capitalized internal-use software 2,735  1,355 
Gross property and equipment (1)
25,674  23,701 
Accumulated depreciation and amortization (12,173) (11,062)
Property and equipment, net $ 13,501  $ 12,639 
(1) Gross property and equipment includes construction-in-progress for leasehold improvements and furniture and fixtures of $0.6 million and $0.5 million that had not yet been placed in service as of April 30, 2021 and January 31, 2021, respectively. The costs associated with construction-in-progress are not amortized until placed in service.
Depreciation and amortization expense was $1.0 million and $1.0 million for the three months ended April 30, 2021 and 2020, respectively.

7. Deferred Contract Costs
Deferred contract costs, which primarily consist of deferred sales commissions, were $32.1 million and $31.6 million as of April 30, 2021 and January 31, 2021, respectively. Amortization expense for deferred contract costs was $3.3 million and $2.4 million for the three months ended April 30, 2021 and 2020, respectively. There was no impairment charge related to the costs capitalized for the periods presented.

15
PAGERDUTY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
8. Leases
Operating Leases
The Company has entered into various non-cancellable operating leases for its office spaces with lease periods expiring between fiscal 2022 and fiscal 2029. The operating lease agreements generally provide for rental payments on a graduated basis and for options to renew, which could increase future minimum lease payments if exercised.
Lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The lease right-of-use assets also include any lease payments made and exclude lease incentives such as tenant improvement allowances.
The operating leases typically include non-lease components such as common-area maintenance costs. The Company has elected to include non-lease components with lease payments for the purpose of calculating lease right-of-use assets and liabilities, to the extent that they are fixed. Non-lease components that are not fixed are expensed as incurred as variable lease payments.
Leases with a term of one year or less are not recognized on our condensed consolidated balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.
The following tables present information about leases on the condensed consolidated balance sheet.
As of April 30, 2021 As of January 31, 2021
(in thousands)
Assets
Lease right-of-use assets $ 23,594  $ 24,691 
Liabilities
Lease liabilities 5,390  5,262 
Lease liabilities, non-current 25,278  26,542 
As of April 30, 2021, the weighted average remaining lease term was 5.5 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 April 30,
2021 2020
(in thousands)
Operating lease expense $ 1,369  $ 1,442 
Short-term lease expense 90  299
Variable lease expense 113  302
16
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 April 30,
2021 2020
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities $ 1,572  $ 1,138 


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, were $278.2 million.
The Notes are senior, unsecured obligations of the Company and will accrue interest payable semiannually in arrears on January 1 and July 1 of each year, beginning on January 1, 2021, at a rate of 1.25% per year. The Notes will mature on July 1, 2025, unless such notes are converted, redeemed or repurchased earlier. The Notes are convertible into cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election in the manner and subject to the terms and conditions provided in the Indenture.
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 ending on 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 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
17
PAGERDUTY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
prior to the maturity date, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Notes in connection with such a fundamental change, as defined in the Indenture.
The Company may not redeem the Notes prior to July 6, 2023. The Company may redeem for cash all or any portion of the Notes, at its option, on a redemption date occurring on or after July 6, 2023 and prior to the 41st scheduled trading day immediately preceding the maturity date, if the last reported sale price of the common stock has been at least 130% of the conversion price for the Notes then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Notes.
If the Company undergoes a fundamental change (as defined in the Indenture), holders may require the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
The Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, the trustee or the holders of at least 25% in aggregate principal amount of the outstanding Notes may declare the entire principal of all the Notes plus accrued and unpaid interest to be immediately due and payable.
Prior to the adoption of ASU 2020-06 on February 1, 2021 and in accounting for the issuance of the Notes, the Company separated the Notes into liability and equity components. The carrying amount of the liability component was calculated using a discount rate of 7.30%, which was determined by measuring the fair value of a similar debt instrument that does not have an associated conversion feature. The carrying amount of the equity component representing the conversion option was $70.8 million and was determined by deducting the fair value of the liability component from the par value of the Notes. The equity component was not remeasured as long as it continued to meet the conditions for equity classification, and the equity component was recorded in additional paid-in-capital in the accompanying condensed consolidated balance sheet. The excess of the principal amount of the liability component over its carrying amount, or the debt discount, was amortized to interest expense at an annual effective interest rate of 7.88% over the contractual terms of the Notes. The interest rate was based on the interest rate of similar liabilities at the time of issuance that did not have associated convertible features. The debt component was classified as a long-term liability as of January 31, 2021.
Prior to the adoption of ASU 2020-06 on February 1, 2021 and in accounting for the issuance costs of $9.3 million related to the Notes, the Company allocated the total amount incurred to the liability and equity components of the Notes based on their relative values. Issuance costs attributable to the liability component were $7.0 million and were amortized to interest expense using the effective interest method over the contractual term of the Notes. Issuance costs attributable to the equity component were $2.3 million and were netted with the equity component in additional paid-in capital.
On February 1, 2021, the Company elected to early adopt ASU 2020-06 based on a modified retrospective transition method. Under such transition, prior-period information has not been retrospectively adjusted.
In accounting for the Notes after adoption of ASU 2020-06, the Notes are accounted for as a single liability, and the carrying amount of the Notes is $279.7 million as of April 30, 2021, with principal of $287.5 million, net of unamortized issuance costs of $7.8 million. The Notes were classified as long term liabilities as of April 30, 2021. The issuance costs related to the 2025 convertible senior notes are being amortized to interest expense over the contractual term of the 2025 convertible senior notes at an effective interest rate of 1.93%.
The net carrying amount of the liability component of the Notes as of April 30, 2021 (post-ASU 2020-06 adoption) and as of January 31, 2021 (pre-ASU 2020-06 adoption) was as follows:
18
PAGERDUTY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
As of April 30, 2021 As of January 31, 2021
(in thousands)
Principal $ 287,500  $ 287,500 
Less: unamortized debt discount —  (63,664)
Less: unamortized issuance costs (7,797) (6,308)
Net carrying amount $ 279,703  $ 217,528 
The net carrying amount of the equity component of the Notes as of April 30, 2021 (post-ASU 2020-06 adoption) and as of January 31, 2021 (pre-ASU 2020-06 adoption) was as follows:
As of April 30, 2021 As of January 31, 2021
(in thousands)
Proceeds allocated to the conversion options (debt discount) $ —  $ 70,768 
Less: issuance costs —  (2,290)
Carrying amount of the equity component $ —  $ 68,478 
Interest expense recognized related to the Notes is as follows. There was no interest expense associated with the Notes for the three months ended April 30, 2020.
Three Months Ended April 30, 2021
(in thousands)
Contractual interest expense $ 879 
Amortization of debt issuance costs 438 
Total interest expense related to the Notes $ 1,317 
Capped Call Transactions
In connection with the offering of the Notes, the Company entered into privately negotiated capped call transactions (the “Capped Calls”) with certain financial institution counterparties (the “Option Counterparties”). The Capped Calls are generally intended to reduce or offset the potential dilution to the common stock upon any conversion of the Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price. For accounting purposes, the Capped Calls are separate transactions, and not part of the terms of the Notes. The Capped Calls are recorded in stockholders’ equity and are not accounted for as derivatives. The cost of $35.7 million incurred to purchase the Capped Calls were recorded as a reduction to additional paid-in capital in the accompanying condensed consolidated balance sheet.
The Capped Calls each have an initial strike price of approximately $40.08 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Notes. The Capped Calls have an initial cap price of $61.66 per share, subject to certain adjustments. The Capped Calls cover, subject to anti-dilution adjustments, approximately 7.2 million shares of our common stock. The Capped Calls are subject to automatic exercise over a 40 trading day period commencing on May 2, 2025, subject to earlier termination under certain circumstances.

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
19
accrues estimates for resolution of legal and other contingencies when losses are probable and estimable. The Company is not currently a party to any legal proceedings and does not anticipate any pending or threatened litigation that would be expected to have a material adverse effect on its financial condition, results of operations, or cash flows.
Warranties and Indemnification
The Company has entered into service-level agreements with a portion of its customers defining levels of uptime reliability and performance and permitting those customers to receive credits if the Company fails to meet the defined levels of uptime. To date, the Company has not experienced any significant failures to meet defined levels of uptime reliability and performance as a result of those agreements and, as a result, the Company has not incurred or accrued any material liabilities related to these agreements in the financial statements.

11. Deferred Revenue and Performance Obligations
The following table presents the changes to the Company’s deferred revenue:
Three Months Ended April 30,
2021 2020
(in thousands)
Deferred revenue, beginning of period $ 129,972  $ 92,569 
Billings 59,675  53,663 
Revenue recognized (63,591) (49,786)
Deferred revenue, end of period $ 126,056  $ 96,446 
For the three months ended April 30, 2021 and 2020, the majority of revenue recognized was from the deferred revenue balances at the beginning of each quarter.
As of April 30, 2021, future estimated revenue related to performance obligations for cloud-hosted and term-license software subscriptions with terms of more than one year that are unsatisfied or partially unsatisfied at the end of the reporting periods was approximately $114.1 million. The Company expects to satisfy the substantial majority of these unsatisfied performance obligations over the next 24 months and the remainder thereafter. The Company applied the optional exemption for subscriptions with terms of less than one year.

12. 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 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 April 30, 2021 and January 31, 2021, respectively, the Company was authorized to grant up to 22,233,800 shares and 18,059,506 shares of common stock under the Stock Plans.
The Company currently uses authorized and unissued shares to satisfy stock award exercises. As of April 30, 2021 and January 31, 2021, there were 15,344,651 shares and 13,060,282 shares available for future issuance under the Stock Plans, respectively.
Shares of common stock reserved for future issuance are as follows:
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April 30, 2021
Outstanding stock options and unvested RSUs and PSUs outstanding 16,170,681 
Available for future stock option, RSU, and PSU grants 15,344,651 
Available for ESPP 2,944,123 
Total common stock reserved at April 30, 2021 34,459,455 
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, 2021 11,177,838  $ 8.25  6.9 years $ 452,452 
Granted 32,428  $ 41.17 
Exercised (536,593) $ 5.23 
Canceled (40,185) $ 9.09 
Outstanding at April 30, 2021 10,633,488  $ 8.50  6.7 years $ 361,089 
Vested as of April 30, 2021 7,447,293  $ 6.00  6.2 years $ 271,497 
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 April 30,
2021 2020
Expected dividend yield —  % —  %
Expected volatility
43.8%
43.3  %
Expected term (years)
6.1
6.1
Risk-free interest rate
1.16%
0.46% - 0.47%
Stock options granted during the three months ended April 30, 2021 and 2020 had a weighted average grant date fair value of $17.80 and $6.61 per share, respectively. The aggregate intrinsic value of stock options exercised during the three months ended April 30, 2021 and 2020 was $20.5 million and $11.5 million, respectively.
The intrinsic value for options exercised is the difference between the market value of the stock and the exercise price of the stock option at the date of exercise.
As of April 30, 2021 there was approximately $29.0 million of total unrecognized compensation cost related to unvested stock options granted under the Stock Plans, which will be recognized over a weighted average period of 2.5 years.
Restricted Stock Units
A summary of the Company’s RSU activity and related information is as follow:
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Number of RSUs Weighted
Average Grant Date Fair Value Per Share
Outstanding at January 31, 2021 3,971,128  $ 23.60 
Granted 1,839,607  $ 41.17 
Vested (174,135) $ 18.48 
Canceled (226,716) $ 24.10 
Outstanding at April 30, 2021 5,409,884  $ 29.72 
The Company uses the fair value of RSUs based on the fair value of the underlying shares on the date of grant. The Company accounts for forfeitures as they occur.
As of April 30, 2021, there was $151.5 million of unrecognized stock-based compensation expense related to unvested RSUs, which is expected to be recognized over a weighted average period of 3.5 years based on vesting under the award service conditions.
Performance Stock Units
In April 2021, the Company granted 127,309 PSUs, with a weighted-average grant date fair value of $41.17, to certain employees of the company for which the ultimate number of stock units that will vest are determined based on the achievement of performance at the end of the stated performance period. The performance condition is based on the level of achievement of a Company target related to PagerDuty’s operating plan for the fiscal year 2022 ("2022 operating plan"). The PSUs will vest over a three-year period, subject to continuous service with the Company.
As of April 30, 2021, the Company recorded stock-based compensation expense for the number of PSUs considered probable of vesting based on the expected attainment of the performance targets.
As of April 30, 2021, total unrecognized stock-based compensation cost related to PSUs was $4.6 million. This unrecognized stock-based compensation cost is expected to be recognized using the accelerated attribution method over a weighted-average period of approximately 1.7 years.
Employee Stock Purchase Plan
In April 2019, the Board of Directors adopted and approved the 2019 Employee Stock Purchase Plan, which became effective on April 11, 2019. The ESPP generally provides for 24-month offering periods beginning June 15 and December 15 of each year, with each offering period consisting of 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 stock as of the beginning of the offering period or (2) the fair market value of the Company’s stock on the purchase date, as defined in the ESPP.
During the three months ended April 30, 2021 and 2020, the Company recognized $1.8 million and $1.6 million of stock-based compensation expense related to the ESPP, respectively.
During the three months ended April 30, 2021 and 2020, the Company withheld $3.0 million and $1.9 million in contributions from employees, respectively.
There were no purchases related to the ESPP during the three months ended April 30, 2021 or 2020.
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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 April 30,
2021 2020
(in thousands)
Cost of revenue $ 676  $ 344 
Research and development 4,440  2,183 
Sales and marketing 3,954  2,285 
General and administrative 4,542  3,496 
Total $ 13,612  $ 8,308 

13. Net Loss per Share
The following table presents the calculation of basic and diluted net loss per share:
Three Months Ended April 30,
2021 2020
(in thousands, except per share data)
Numerator:
Net loss $ (22,558) $ (11,459)
Denominator:
Weighted average shares used in calculating net loss per share, basic and diluted
82,915  77,770 
Net loss per share, basic and diluted $ (0.27) $ (0.15)

Since the Company was in a loss position for the periods presented, basic net loss per share is the same as diluted net loss per share as the inclusion of all potential common shares 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 April 30,
2021 2020
(in thousands)
Shares subject to outstanding common stock awards 16,171  16,780 
Convertible senior notes 7,173  — 
Unvested early exercised stock options —  27 
Restricted stock awards purchased with promissory notes —  180 
Restricted stock issued to Rundeck key personnel 209  — 
Shares issuable pursuant to the 2019 Employee Stock Purchase Plan 204  165 
Total 23,757  17,152 

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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, as well as our foreign operations which are subject to tax rates that differ from those in the U.S.
The Company recorded income tax expense of $0.2 million for the three months ended April 30, 2021 and 2020.

15. Geographic Information
Revenue by location is determined by the billing address of the customer. The following table sets forth revenue by geographic area:
Three Months Ended April 30,
2021 2020
(in thousands)
United States $ 47,742  $ 38,272 
International 15,849  11,514 
Total $ 63,591  $ 49,786 
Other than the United States, no other individual country accounted for 10% or more of revenue for the three months ended April 30, 2021 or 2020. As of April 30, 2021, 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, 2021, 87% of the Company’s property and equipment and right-of-use lease assets was located in the United States and 13% was located in Canada.

16. Subsequent Events
The Company has evaluated subsequent events through June 4, 2021.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended January 31, 2021, filed with the SEC on March 19, 2021. You should review the sections titled “Special Note Regarding Forward-Looking Statements” above in this Quarterly Report on Form 10-Q for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Factors that could cause or contribute to such differences include, but are not limited to, impacts on our business and general economic conditions due to the current COVID-19 pandemic, those identified below, and those discussed in the section titled “Risk Factors”
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included in Part II, Item 1A below. The last day of our fiscal year is January 31. Our fiscal quarters end on April 30, July 31, October 31 and January 31.
Overview
PagerDuty is a digital operations management platform that empowers the right action, when seconds matter.
Our platform, which includes our auto remediation software, is the best way to manage urgent, mission-critical work—and keep digital services always on. It sits at the center of a company’s digital ecosystem ingesting signals and using machine learning and automation to prevent and automate real-time work, predict and avoid downtime. We enable teams to reduce outages, improve productivity and accelerate digital transformations.
We collect data from virtually any software-enabled system or device and combine it with human response data correlating and processing it to understand digital opportunities and issues that need to be addressed in real time. Using the world’s broadest integrations, event management, automated remediation and diagnostics, and human driven runbook automation, we bring together the right people with the right information so they can resolve issues and act on opportunities in minutes and seconds, not hours, days or even weeks like legacy solutions.
Since our founding in 2009, we have expanded our capabilities from a single product focused on on-call management for technical teams to one that serves many roles across the company, delivering a real-time source of truth to security, customer service, and executive stakeholders alike. Growing from an on-call tool into a full digital operations management platform, spanning incident response, on-call management, business visibility, advanced analytics, and AI Ops capabilities across automation and event management to reduce the noise, interruptions and redundant tasks from our customer’s lives. We have invested in developing the scalability, reliability, and security of our platform, allowing us to address the needs of even the largest and most demanding customers. We have spent years building deep product integrations to our platform, and our ecosystem now includes over 560 direct integrations to enable our customers to gather and correlate digital signals from virtually any software-enabled system or device. Those same integrations allow PagerDuty to connect with popular collaboration tools and business applications, as well as all types of technology stacks to drive automation of work.
Our platform is easy to adopt and scalable for businesses of all sizes. We generate revenue primarily from cloud-hosted subscription fees with the majority of our revenue from such arrangements. We also generate an immaterial amount of revenue from term license software subscription fees. We offer a three-tiered range of pricing plans aligned with our customers’ needs and the sophistication of their digital operations. In addition, our Rundeck automation offering is available on a term license software subscription basis. We also offer a “freemium” plan for less than five users to introduce new users to the platform. We have a land-and-expand business model that leads to 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, additional teams, and new use cases, as well as upsell premium functionality.
COVID-19 Update
In December 2019, a novel coronavirus and the resulting disease (“COVID-19”) was reported, and in January 2020, the World Health Organization (“WHO”) declared it a Public Health Emergency of International Concern. In February 2020, the WHO raised its assessment of the COVID-19 threat from high to very high at a global level due to the continued increase in the number of cases and affected countries, and in March 2020, the WHO characterized COVID-19 as a pandemic. 
The extent and continued impact of the COVID-19 pandemic on our business continues to depend on certain developments including the duration and spread of the pandemic; government responses to the pandemic; the widespread availability and distribution of vaccines; impact on our customers and our sales cycles; industry or employee events; and effect on our partners and vendors, all of which are uncertain and cannot be predicted. While our revenues, billings, and earnings are relatively predictable as a result of our subscription-based business model
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and the majority of our revenues are generated from annual subscriptions, the effect of the COVID-19 pandemic, along with the seasonality we historically experience, may not be fully reflected in our results of operations and overall financial performance until future periods, if at all. In addition, while the majority of our revenues are generated from annual subscriptions, we have seen, and anticipate there may continue to be greater variability in the demand of our product from small and medium business customers. We also have experienced an increase in churn and a decline in the number of users that we believe to be associated with the impact of COVID-19, and may continue to see a decline in the number of users if our customers are required to make workforce reductions. Because of this, we have, and may continue to experience declines in customer demand, reduced customer spend or contract duration, and lengthened payment terms that could materially adversely impact our business, results of operations, and overall financial performance in future periods.
In March 2020, we temporarily closed all of our offices, transitioned our employees to work remotely, and implemented travel restrictions on all business-related travel. We have extended our paid time off and sick leave benefits for employees directly impacted by COVID-19 or caring for children or a member of their household impacted by COVID-19. In addition, we are providing allowances to our employees to cover expenses related to transitioning to a work from home environment. We also continue to offer local employee assistance programs to employees if needed. These changes remain in effect and could extend into future quarters. We have a limited history of remote working and it is difficult to measure and predict the medium and long-term impacts on productivity across our workforce, and the resulting types of continuing investments for, our employee base is uncertain. The impact, if any, of these and any additional operational changes we may implement 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.
In addition, due to restrictions on travel and in-person meetings, we have converted Summit, our global customer conference series, to virtual events. We have also canceled or shifted other planned events to virtual-only experiences and may determine to alter, postpone or cancel additional customer, employee or industry events in the future. We have typically relied on marketing and promotional events such as Summit and other in-person conferences, events, and meetings to facilitate customer sign-ups and generate leads for potential customers, and we cannot predict whether virtual marketing events and phone or virtual sales interactions will be as successful as in-person events and meetings or, for how long, or the extent to which the COVID-19 pandemic may continue to constrain our marketing, promotional, and sales activities.
On March 27, 2020, the President of the United States signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which includes several significant provisions for corporations, including modifications to the limitation on business interest expense and the usage of net operating losses, and a payment deferral of employer payroll taxes. We elected to defer the payment of employer payroll taxes in the nine months ended October 31, 2020. We are no longer deferring the payment of our employer payroll taxes, and expect to pay the amounts deferred during the fiscal years ended January 31, 2022 and 2023.
Refer to Item 1A, “Risk Factors”, for further discussion of the possible impact of the COVID-19 pandemic on our business.
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Key Business Metrics
We review the following key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.
While these numbers are based on what we believe to be a reasonable representation of our customer base for the applicable period of measurement, we rely on a third party to validate legal entities, which uses the best available data at period end, and therefore is subject to change as new information becomes available. In addition, we are continually seeking to improve our methodology, which may result in future changes to our key metrics.
Our key metrics include the results of Rundeck, to the extent applicable, beginning on the acquisition date of October 1, 2020.
Number of Customers
We believe that the number of customers using our platform, particularly those that have subscription agreements for more than $100,000 in annual recurring revenue, (“ARR”), are indicators of our market penetration, particularly within enterprise accounts, the growth of our business, and our potential future business opportunities. We define ARR as the annualized recurring value of all active contracts at the end of a reporting period. We define a customer as a separate legal entity, such as a company or an educational or government institution, that has an active subscription with us or one of our partners to access our platform. In situations where an organization has multiple subsidiaries or divisions, we treat the parent entity as the customer instead of treating each subsidiary or division as a separate customer. Increasing awareness of our platform and its broad range of capabilities, coupled with the fact that the world is always on and powered by increasingly complex technology, has expanded the diversity of our customer base to include organizations of all sizes across virtually all industries. Over time, enterprise and mid-market customers have constituted a greater share of our revenue.
As of April 30,
2021 2020
Customers 13,918  13,060 
Customers greater than $100,000 in ARR 458  348 
Dollar-based Net Retention Rate
We use dollar-based net retention rate to evaluate the long-term value of our customer relationships, since this metric reflects our ability to retain and expand the ARR from our existing customers. Our dollar-based net retention rate compares our ARR from the same set of customers across comparable periods.
We calculate dollar-based net retention rate as of a period end by starting with the ARR from the cohort of all customers as of 12 months prior to such period end, or Prior Period ARR. We then calculate the ARR from these same customers as of the current period end, or Current Period ARR. Current Period ARR includes any expansion and is net of downgrades or churn over the last 12 months but excludes ARR from new customers in the current period. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the dollar-based net retention rate. The calculation of dollar-based net retention rate includes the Current Period ARR of Rundeck customers to the extent that they were PagerDuty customers as of 12 months prior to period end.
Last 12 Months Ended April 30,
2021 2020
Dollar-based net retention rate for all customers
121  % 121  %
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Components of Results of Operations
Revenue
We generate revenue primarily from cloud-hosted software subscription fees with the majority of its revenue from such arrangements. We also generate an immaterial amount of revenue from term license software subscription fees. Our subscriptions are typically one year in duration but can range from monthly to multi-year. Subscription revenue is driven primarily by the number of customers, the number of users per customer, and the level of subscription purchased. We generally invoice customers in advance in annual installments for subscriptions to our platform. For our cloud-hosted software subscriptions, we recognize subscription revenue ratably over the term of the subscription period beginning on the date we grant access to our platform, assuming that all other revenue recognition criteria have been met. For our term-license software subscriptions, we recognize license revenue upon delivery and software maintenance revenue ratably, typically beginning on the start of the contractual term of the arrangement.
Due to the low complexity of implementation and integration of our platform with our customers’ existing infrastructure, revenue from professional services has been immaterial to date.
Cost of Revenue
Cost of revenue primarily consists of expenses related to providing our platform to customers, including personnel expenses for operations and global support, payments to our third-party cloud infrastructure providers for hosting our software, payment processing fees, amortization of capitalized internal-use software costs, amortization of acquired developed technology, and allocated overhead costs for facilities, information technology, and other allocated overhead costs. We will continue to invest additional resources in our platform infrastructure and our customer support and success organizations to expand the capability of our platform and ensure that our customers are realizing the full benefit of our offerings. The level and timing of investment in these areas could affect our cost of revenue in the future.
Gross Profit and Gross Margin
Gross profit represents revenue less cost of revenue. Gross margin is gross profit expressed as a percentage of revenue. Our gross margin may fluctuate from period to period as our revenue fluctuates, and as a result of the timing and amount of investments to expand the capacity of our third-party cloud infrastructure providers and our continued efforts to enhance our platform support and customer success teams.
Operating Expenses
Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. Personnel expenses are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation expense, and sales commissions. Operating expenses also include amortization of acquired intangible assets, acquisition-related expenses, allocated overhead costs for facilities, shared IT related expenses, including depreciation expense, and certain company-wide events and functions.
Research and development
Research and development expenses consist primarily of personnel costs for our engineering, product, and design teams. Additionally, research and development expenses include contractor fees, depreciation of equipment used in research and development activities, acquisition-related expenses, and allocated overhead costs. We expect that our research and development expenses will increase in dollar value as our business grows.
Sales and marketing
Sales and marketing expenses consist primarily of personnel costs, costs of general marketing activities and promotional activities, travel related expenses, amortization of acquired intangible assets, allocated overhead costs, and bad debt expense. Sales commissions earned by our sales force that are considered incremental and recoverable
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costs of obtaining a subscription with a customer are deferred and amortized on a straight-line basis over the expected period of benefit, which we have determined to be four years. We expect that our sales and marketing expenses will increase in dollar value and continue to be our largest operating expense for the foreseeable future as we expand our sales and marketing efforts.
General and administrative
General and administrative expenses consist primarily of personnel costs and contractor fees for finance, legal, human resources, information technology, and other administrative functions. In addition, general and administrative expenses include non-personnel costs, such as legal, accounting, and other professional fees, hardware and software costs, certain tax, license and insurance-related expenses, acquisition-related expenses, and allocated overhead costs. We expect that our general and administrative expenses will increase in dollar value as our business grows. However, we expect that our general and administrative expenses will decrease as a percentage of our revenue over the longer term as we expect our investments to allow for improved efficiency for future growth in the business.
Interest Income
Interest income consists of income earned on our cash and cash equivalents and interest earned on our short-term investments which consist of U.S. Treasury securities, commercial paper, corporate debt securities, and U.S. Government agency securities.
Interest Expense
Interest expense consists primarily of contractual interest expense and amortization of debt issuance costs on our 1.25% Convertible Senior Notes (the “Notes”) due 2025. Refer to Note 9, “Debt and Financing Arrangements” for additional details.
Other (Expense) Income, Net
Other (expense) income, net primarily consists of accretion income and amortization expense on our available-for-sale investments and foreign currency transaction gains and losses.
Provision for Income Taxes
Provision for 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.
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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 April 30,
2021 2020
(in thousands)
Revenue $ 63,591  $ 49,786 
Cost of revenue(1)
10,418  6,963 
Gross profit 53,173  42,823 
Operating expenses:
Research and development(1)
20,599  15,014 
Sales and marketing(1)
37,234  26,736 
General and administrative(1)
16,578  13,673 
Total operating expenses 74,411  55,423 
Loss from operations (21,238) (12,600)
Interest income 818  1,353 
Interest expense (1,317) — 
Other (expense) income, net (616) 19 
Loss before provision for income taxes (22,353) (11,228)
Provision for income taxes (205) (231)
Net loss $ (22,558) $ (11,459)
______________
(1)    Includes stock-based compensation expense as follows:
Three Months Ended April 30,
2021 2020
(in thousands)
Cost of revenue $ 676  $ 344 
Research and development 4,440  2,183 
Sales and marketing 3,954  2,285 
General and administrative 4,542  3,496 
Total $ 13,612  $ 8,308 

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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 April 30,
2021 2020
Revenue 100  % 100  %
Cost of revenue 16  14 
Gross profit 84  % 86  %
Operating expenses:
Research and development 32  30 
Sales and marketing 59  54 
General and administrative 26  27 
Total operating expenses 117  111 
Loss from operations (33) (25)
Interest income 1  3 
Interest expense (2) — 
Other (expense) income, net (1) — 
Loss before provision for income taxes (35) (23)
Provision for income taxes —  — 
Net loss (36) % (23) %
__________
Note: Certain figures may not sum due to rounding.
Comparison of the Three Months Ended April 30, 2021 and 2020
Revenue
Three Months Ended April 30,
2021 2020 Change % Change
(dollars in thousands)
Revenue $ 63,591  $ 49,786  $ 13,805  28  %
Revenue increased by $13.8 million, or 28%, for the three months ended April 30, 2021 compared to the three months ended April 30, 2020. The increase in revenue was attributable to a combination of growth from both new and existing customers, including customers from the Rundeck acquisition. Growth from existing customers is attributable to both increases in the number of users and upsell of additional products.
Cost of Revenue and Gross Margin
Three Months Ended April 30,
2021 2020 Change % Change
(dollars in thousands)
Cost of revenue $ 10,418  $ 6,963  $ 3,455  50  %
Gross margin 84  % 86  %  
Cost of revenue increased by $3.5 million, or 50%, primarily due to an increase of $2.3 million in personnel expenses as a result of increased headcount and an increase of $0.5 million in hosting, software, and telecom costs,
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and an increase of $0.4 million in outside services, which are related to the support of the continued growth of the business and related infrastructure.
Research and Development
Three Months Ended April 30,
2021 2020 Change % Change
(dollars in thousands)
Research and development $ 20,599  $ 15,014  $ 5,585  37  %
Percentage of revenue 32  % 30  %
Research and development expenses increased by $5.6 million, or 37%, for the three months ended April 30, 2021 compared to the three months ended April 30, 2020. The increase was primarily driven by an increase in personnel expenses of $4.7 million as a result of increased headcount to support our continued investment in our platform and a $0.6 million increase in costs to support the growth of the business and related infrastructure, which includes allocated overhead costs.
Sales and Marketing
Three Months Ended April 30,
2021 2020 Change % Change
(dollars in thousands)
Sales and marketing $ 37,234  $ 26,736  $ 10,498  39  %
Percentage of revenue 59  % 54  %
Sales and marketing expenses increased by $10.5 million, or 39%, for the three months ended April 30, 2021 compared to the three months ended April 30, 2020. This increase was primarily due to an increase of $7.1 million in personnel expenses driven by headcount growth and amortization of deferred contract costs, an increase in marketing expenses of $2.3 million due to increased volume of marketing and advertising activities, an increase of $1.4 million in outside services due to a higher volume of activities to assist with the continued growth of the business, an increase of $0.6 million in costs to support the business and related infrastructure which includes allocated overhead costs, and an increase of $0.6 million in amortization of intangibles as a result of the Rundeck acquisition. This was partially offset by a decrease of $1.1 million in travel and other program related costs due to the COVID-19 pandemic and a decrease in bad debt expense of $0.4 million.
General and Administrative
Three Months Ended April 30,
2021 2020 Change % Change
(dollars in thousands)
General and administrative $ 16,578  $ 13,673  $ 2,905  21  %
Percentage of revenue 26  % 27  %
General and administrative expenses increased by $2.9 million, or 21%, for the three months ended April 30, 2021 compared to the three months ended April 30, 2020. The increase was driven by an increase of $2.7 million in personnel expenses as a result of increased headcount, and an increase in outside services of $0.6 million due to a higher volume of activities to support the continued growth of the business. This was partially offset by a decrease of $0.6 million in costs to support the business and related infrastructure which includes allocated overhead costs.
Interest Expense
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Three Months Ended April 30,
2021 2020 Change  % Change
(dollars in thousands)
Interest expense $ 1,317  $ —  $ 1,317  N/A
Interest expense increased by $1.3 million for the three months ended April 30, 2021 compared to the three months ended April 30, 2020, due to contractual interest expense and amortization of debt issuance costs on the Notes.
Interest Income and Other (Expense) Income, Net
Three Months Ended April 30,
2021 2020 Change % Change
(dollars in thousands)
Interest income $ 818  $ 1,353  $ (535) (40) %
Other (expense) income, net $ (616) $ 19  $ (635) (3,342) %
Interest income and other income decreased by $0.5 million and $0.6 million, respectively, for the three months ended April 30, 2021 compared to the three months ended April 30, 2020, primarily due to lower interest rates on our cash, cash equivalent and investment balances in the current year.

Non-GAAP Financial Measures
In addition to our results determined in accordance with 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 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 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 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
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reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP.
Non-GAAP Gross Profit and Non-GAAP Gross Margin
We define non-GAAP gross profit as gross profit adjusted for stock-based compensation expense and related employer taxes, and amortization of acquired intangible assets. We define non-GAAP gross margin as non-GAAP gross profit as a percentage of revenue.
Three Months Ended April 30,
2021 2020
(in thousands)
Gross profit $ 53,173  $ 42,823 
Add:
Stock-based compensation 676  344 
Employer taxes related to employee stock transactions 26  1 
Amortization of acquired intangible assets 280  — 
Non-GAAP gross profit $ 54,155  $ 43,168 
Gross margin 84  % 86  %
Non-GAAP gross margin 85  % 87  %

Non-GAAP Operating Loss and Non-GAAP Operating Margin
We define non-GAAP operating loss as loss from operations plus our stock-based compensation expense and related employer taxes, amortization of acquired intangible assets, and acquisition-related expenses, which include transaction costs and acquisition-related retention payments, which are not necessarily reflective of operational performance during a given period. We define non-GAAP operating margin as non-GAAP operating loss as a percentage of revenue.
Three Months Ended April 30,
2021 2020
(in thousands)
Loss from operations $ (21,238) $ (12,600)
Add:
Stock-based compensation 13,612  8,308 
Employer taxes related to employee stock transactions 681  150 
Amortization of acquired intangible assets 875  — 
Acquisition-related expenses 459  — 
Non-GAAP operating loss $ (5,611) $ (4,142)
Operating margin (33) % (25) %
Non-GAAP operating margin (9) % (8) %
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Non-GAAP Net Loss
We define non-GAAP net loss as net loss plus our stock-based compensation expense and related employer taxes, amortization of debt issuance costs, amortization of acquired intangible assets, acquisition-related expenses, which include transaction costs and acquisition-related retention payments, which are not necessarily reflective of operational performance during a given period, and acquisition-related tax benefit.
Three Months Ended April 30,
2021 2020
(in thousands)
Net loss $ (22,558) $ (11,459)
Add:
Stock-based compensation 13,612  8,308 
Amortization of debt issuance costs 438  — 
Employer taxes related to employee stock transactions 681  150 
Amortization of acquired intangibles assets 875  — 
Acquisition-related expenses 459  — 
Non-GAAP net loss $ (6,493) $ (3,001)
Free Cash Flow
We define free cash flow as net cash provided by (used in) operating activities, less cash used for purchases of property and equipment and capitalized internal-use software costs. In addition to the reasons stated above, we believe that free cash flow is useful to investors as a liquidity measure because it measures our ability to generate or use cash in excess of our capital investments in property and equipment 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 GAAP measures as part of our overall assessment of our liquidity, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to assess our liquidity.
Three Months Ended April 30,
2021 2020
(in thousands)
Net cash provided by (used in) operating activities $ 1,579  $ (185)
Less:
Purchases of property and equipment (927) (2,713)
Capitalization of internal-use software costs (1,002) — 
Free cash flow $ (350) $ (2,898)
Net cash (used in) provided by investing activities $ (12,616) $ 13,818 
Net cash (used in) provided by financing activities $ (2,096) $ 1,798 
Liquidity and Capital Resources
Since inception, we have financed operations primarily through sales of our cloud-hosted software subscriptions, net proceeds we have received from sales of equity securities, and the issuance of our Notes.
On April 15, 2019, upon the closing of our IPO, we received net proceeds of $213.7 million, after deducting underwriters' discounts and commissions of $16.6 million and other issuance costs of $6.4 million.
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On June 25, 2020, we issued $287.5 million aggregate principal amount of convertible senior notes in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The total net 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.
As of April 30, 2021, our principal sources of liquidity were cash and cash equivalents and investments totaling $557.0 million. We believe that our existing cash and cash equivalents, investments, and cash provided by sales of our subscriptions will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. Our future capital requirements will depend on many factors, including the effects of the COVID-19 pandemic, our subscription growth rate, subscription renewal activity, including the timing and the amount of cash received from customers, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced product offerings, and the continuing market adoption of our platform. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, and technologies. We may be required to seek additional equity or debt financing. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, operations, and financial condition.
A significant majority of our customers pay in advance for our cloud-hosted and term license software subscriptions. Therefore, a substantial source of our cash is from our deferred revenue, which is included in the liabilities section of our condensed consolidated balance sheet. Deferred revenue consists of the unearned portion of customer billings, which is recognized as revenue in accordance with our revenue recognition policy. As of April 30, 2021, we had deferred revenue of $126.1 million, of which $120.1 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:
Three Months Ended April 30,
2021 2020
(in thousands)
Net cash provided by (used in) operating activities $ 1,579  $ (185)
Net cash (used in) provided by investing activities $ (12,616) $ 13,818 
Net cash (used in) provided by financing activities $ (2,096) $ 1,798 
Operating Activities
Our largest source of operating cash is cash collection from sales of our cloud-hosted and term license software subscriptions to our customers. Our primary uses of cash from operating activities are for personnel expenses, marketing expenses and hosting and software expenses. In the last several years, we have had periods in which we generated negative cash flows from operating activities and have supplemented working capital requirements through net proceeds from both private and public sales of equity securities and issuance of the Notes.
Cash provided by operating activities for the three months ended April 30, 2021 of $1.6 million primarily related to our net loss of $22.6 million, adjusted for non-cash charges of $21.2 million and net cash inflows of $3.0 million due to changes in our operating assets and liabilities. Non-cash charges primarily consisted of stock-based compensation of $13.6 million, amortization of our deferred contract costs of $3.3 million, depreciation and amortization of property and equipment, capitalized implementation costs, and acquired intangible assets of $2.0 million, and non-cash lease expense of $1.1 million. Changes in operating assets and liabilities reflected cash inflows from a $17.4 million decrease in accounts receivable due to timing of cash collections. This was partially offset by outflows from a $4.4 million decrease in accrued compensation and related benefits, a $3.9 million decrease in deferred revenue due to timing of renewals, a $3.7 million increase in deferred contract costs due to
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commissions paid on new bookings in line with revenue growth, a $1.6 million increase in prepaid expenses and other assets related to timing of payments made in advance for future services, and $1.1 million in payments for operating lease liabilities.
Cash used in operating activities for the three months ended April 30, 2020 of $0.2 million primarily related to our net loss of $11.5 million, adjusted for non-cash charges of $13.6 million and net cash outflows of $2.3 million due to changes in our operating assets and liabilities. Non-cash charges primarily consisted of stock-based compensation of $8.3 million, amortization of our deferred contract costs of $2.4 million, non-cash lease expense of $1.1 million and depreciation and amortization of property and equipment of $1.0 million. Changes in operating assets and liabilities reflected cash outflows from a $2.9 million increase in prepaid expenses and other assets related to timing of payments made in advance for future services, a $2.9 million increase in deferred contract costs due to commissions paid on new bookings in line with revenue growth, $1.0 million in payments for operating lease liabilities, and a $0.4 million decrease in accounts payable and accrued expenses and other liabilities. These amounts were partially offset by inflows from a $3.9 million increase in deferred revenue resulting primarily from increased billings for subscriptions, and a $1.0 million increase in accrued compensation primarily due to employee contributions for the ESPP and increased headcount.
Investing Activities
Cash used in investing activities for the three months ended April 30, 2021 of $12.6 million consisted of purchases of available-for-sale investments of $77.5 million, capitalization of internal-use software of $1.0 million, and purchases of property and equipment of $0.9 million primarily for purchases of computers for new employees and to support office space for our San Francisco office. This was partially offset by proceeds from sales and maturities of investments of $67.0 million.
Cash provided by investing activities for the three months ended April 30, 2020 of $13.8 million consisted of proceeds from maturities and sales of available-for-sale and held-to-maturity investments of $48.7 million. This was partially offset by $32.1 million of purchases of available-for-sale investments and purchases of property and equipment of $2.7 million primarily to support additional office space for our Atlanta office and purchases of computers for new employees.
Financing Activities
Cash used in financing activities for the three months ended April 30, 2021 of $2.1 million consisted of $4.9 million in employee payroll taxes paid related to vesting of restricted stock units. These outflows were partially offset by proceeds of $2.8 million from the exercise of stock options.
Cash provided by financing activities for the three months ended April 30, 2020 of $1.8 million consisted primarily of proceeds from the exercise of stock options.
Contractual Obligations and Commitments
There were no material changes during the three months ended April 30, 2021 to our contractual obligations and other commitments, as disclosed in the Annual Report on Form 10-K for the fiscal year ended January 31, 2021 filed with the SEC on March 19, 2021.
For further information on our commitments and contingencies, refer to Note 10, “Commitments and Contingencies”, in the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q.
Indemnification Agreements
In the ordinary course of business, we enter into agreements of varying scope and terms pursuant to which we agree to indemnify customers, vendors, lessors, business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, services to be provided by us, or from intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with our directors and certain officers and employees that will require us, among other
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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 April 30, 2021 or during the periods presented, did not have any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Critical Accounting Policies and Estimates
We prepare our condensed consolidated financial statements in accordance with U.S. GAAP. In the preparation of these condensed consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting policies and estimates.
Other than as set forth below, there have been no significant changes to our critical accounting policies described in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021 filed with the SEC on March 19, 2021, that had a material impact on our condensed consolidated financial statements and related notes.
Stock-Based Compensation
The Company recognizes compensation expense for all stock-based payment awards, including stock options, restricted stock units (“RSUs”), and performance stock units (“PSUs”), based on the estimated fair value of the award on the grant date.
The Company estimates the fair value of stock options issued to employees on the date of grant using the Black-Scholes option pricing model, which is impacted by the estimated fair value of the Company’s common stock, as well as certain assumptions including the expected volatility over the term of the option awards, the expected term of the awards, risk-free interest rates and the expected dividend yield. Assumptions and estimates used in the determination of the fair value of stock options are as follows:
Expected volatility—Expected volatility is a measure of the amount by which the stock price is expected to fluctuate. Since the Company does not have sufficient trading history for its common stock, it estimates the expected volatility of its stock options by taking the average historical volatility of a group of comparable publicly traded companies over a period equal to the expected life of the options.
Expected term—The Company determines the expected term based on the average period the stock options are expected to remain outstanding, generally calculated as the midpoint of the stock options’ vesting term and contractual expiration period, as the Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior.
Risk-free rate—The Company uses the U.S. Treasury yield for its risk-free interest rate that corresponds with the expected term.
Expected dividend yield—The Company utilizes a dividend yield of zero, as it does not currently issue dividends and does not expect to in the future.
The Company estimates the fair value of RSUs and PSUs at our stock price on the grant date.
The Company estimates the fair value of shares to be issued under the ESPP on the first day of the offering period using the Black-Scholes valuation model, which is impacted by the estimated fair value of the Company’s
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common stock, as well as certain assumptions including the expected volatility over the term of the offering period, the expected term of the awards, risk-free interest rates and the expected dividend yield. Assumptions used in the determination of the fair value of the ESPP are the same as those used in the determination of the fair value of our stock options.
The Company generally recognizes compensation expense for employee stock-based payment awards on a straight-line basis over the period during which an award recipient is required to provide services in exchange for the award (generally the vesting period of the award), with the exception of PSUs which are recognized using the accelerated attribution method and based on management’s judgment around the probability of achievement of a performance condition. The Company accounts for forfeitures as they occur.
The fair value of each non-employee stock option is estimated at the date of grant using the Black-Scholes option pricing model and is not remeasured over the vesting term. Assumptions used in valuing non-employee stock options are generally consistent with those used for employee stock options with the exception that the expected term is over the contractual life.
Recent Accounting Pronouncements
For further information on our recently adopted accounting pronouncements, refer to Note 2, "Summary of Significant Accounting Policies", in the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in our market risk as compared to the disclosures in Part II, Item 7A in our Annual Report on Form 10-K for the year ended January 31, 2021, which was filed with the SEC on March 19, 2021.

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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Our management, with the participation and supervision of our chief executive officer and our chief financial officer, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our chief executive officer and chief financial officer have concluded that as of such date, our disclosure controls and procedures were, in design and operation, effective at a reasonable assurance level.
Limitations on the Effectiveness of Controls
The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, in designing and evaluating the disclosure controls and procedures, management recognizes that any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.
Changes in Internal Controls Over Financial Reporting
 There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended April 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, other than as described above.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are not a party to any material pending legal proceedings. From time to time, we may be subject to legal proceedings and claims arising in the ordinary course of business.
Item 1A. Risk Factors
Our business involves significant risks, some of which are described below. You should carefully consider the following risks, together with all of the other information in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. Any of the following risks could 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. Our business, results of operations, financial condition or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material.
There have been no material changes to the Risk Factors described under “Part I—Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended January 31, 2021.

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Item 2.    Unregistered Sales of Securities and Use of Proceeds
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Items 3, 4, and 5 are not applicable and have been omitted.
Item 6.    Exhibits
The documents listed in the Exhibit Index of this Quarterly Report on Form 10-Q are incorporated by reference or are filed with this Quarterly Report on Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).

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EXHIBIT INDEX
Exhibit
Number
Description Form File No. Incorporated by Exhibit Reference Filing Date
3.1
8-K 001-38856 3.1 April 15, 2019
3.2
8-K 001-38856 3.2 April 15, 2019
Filed herewith
Filed herewith
Filed herewith
Furnished herewith
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. Filed herewith
101.SCH XBRL Taxonomy Extension Schema Document. Filed herewith
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. Filed herewith
101.DEF XBRL Taxonomy Extension Definition Linkbase Document. Filed herewith
101.LAB XBRL Taxonomy Extension Label Linkbase Document. Filed herewith
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. Filed herewith
104
Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, and 101.PRE).
* The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this June 4, 2021.
PAGERDUTY, INC.
     
  By: /s/ Jennifer G. Tejada
    Jennifer G. Tejada
    Chief Executive Officer
    (Principal Executive Officer)
     
  By: /s/ Owen Howard Wilson
    Owen Howard Wilson
    Chief Financial Officer
    (Principal Financial and Accounting Officer)


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EXHIBIT 10.1

PAGERDUTY, INC.
2019 EQUITY INCENTIVE PLAN –
PERFORMANCE STOCK UNIT GRANT NOTICE
PagerDuty, Inc. (the “Company”), pursuant to its 2019 Equity Incentive Plan (the “Plan”), hereby awards to Participant a Performance Stock Unit Award for the number of shares of the Company’s Common Stock (“Performance Stock Units”) set forth below (the “Award”). The Award is subject to all of the terms and conditions as set forth in this notice of grant (this “Performance Stock Unit Grant Notice”), and in the Plan and the Performance Stock Unit Award Agreement (including Exhibit A to the Performance Stock Unit Award Agreement), both of which are attached hereto and incorporated herein in their entirety. Capitalized terms not explicitly defined herein will have the meanings set forth in the Plan or the Performance Stock Unit Award Agreement (including Exhibit A to the Performance Stock Unit Award Agreement). In the event of any conflict between the terms in this Performance Stock Unit Grant Notice or the Performance Stock Unit Award Agreement (including Exhibit A to the Performance Stock Unit Award Agreement) and the Plan, the terms of the Plan will control.
Participant:
Date of Grant:
Vesting Commencement Date:
Target Number of Performance Stock Units (“Target PSUs”):

Vesting Schedule: This Award shall vest in accordance with Section 2 of the Performance Stock Unit Agreement and Exhibit A to the Performance Stock Unit Award Agreement.
Issuance Schedule: Subject to any Capitalization Adjustment, one share of Common Stock will be issued for each Performance Stock Unit that vests at the time set forth in Section 6 of the Performance Stock Unit Award Agreement.
Additional Terms/Acknowledgments: Participant acknowledges receipt of, and understands and agrees to, this Performance Stock Unit Grant Notice, the Performance Stock Unit Award Agreement (including Exhibit A to the Performance Stock Unit Award Agreement) and the Plan. Participant further acknowledges that as of the Date of Grant, this Performance Stock Unit Grant Notice, the Performance Stock Unit Award Agreement (including Exhibit A to the Performance Stock Unit Award Agreement) and the Plan set forth the entire understanding between Participant and the Company regarding the acquisition of the Common Stock pursuant to the Award specified above and supersede all prior oral and written agreements on the terms of this Award, with the exception, if applicable, of (i) equity awards previously granted and delivered to Participant, (ii) any compensation recovery policy that is adopted by the Company or is otherwise required by applicable law; and (iii) any written employment agreement or severance arrangement that would provide for vesting acceleration of this Award upon the terms and conditions set forth therein.
By accepting this Award, Participant acknowledges having received and read the Performance Stock Unit Grant Notice, the Performance Stock Unit Award Agreement (including Exhibit A to the Performance Stock Unit Award Agreement) and the Plan and agrees to all of the terms and conditions set forth in these documents. Participant consents to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.
    1.


PAGERDUTY, INC. PARTICIPANT
By: By:
Signature Signature
Title: Date:
Date:


ATTACHMENTS: Performance Stock Unit Award Agreement (including Exhibit A) and 2019 Equity Incentive Plan
    2.


ATTACHMENT I
PAGERDUTY, INC.
2019 EQUITY INCENTIVE PLAN –
PERFORMANCE STOCK UNIT AWARD AGREEMENT
Pursuant to the Performance Stock Unit Grant Notice (the “Grant Notice”) and this Performance Stock Unit Award Agreement, including Exhibit A to this Agreement, PagerDuty, Inc. (the “Company”) has awarded you (“Participant”) a Performance Stock Unit Award (the “Award”) pursuant to the Company’s 2019 Equity Incentive Plan (the “Plan”) for the number of Performance Stock Units/shares indicated in the Grant Notice. Capitalized terms not explicitly defined in this Performance Stock Unit Award Agreement or the Grant Notice will have the same meanings given to them in the Plan. The terms of your Award, in addition to those set forth in the Grant Notice, are as follows.
1.Grant of the Award. This Award represents the right to be issued on a future date one (1) share of Common Stock for each Performance Stock Unit that vests on the applicable vesting date(s) (subject to any adjustment under Section 3 below) as indicated in the Grant Notice. As of the Date of Grant, the Company will credit to a bookkeeping account maintained by the Company for your benefit (the “Account”) the number of Performance Stock Units/shares of Common Stock subject to the Award. This Award was granted in consideration of your services to the Company. Except as otherwise provided herein, you will not be required to make any payment to the Company or an Affiliate (other than services to the Company or an Affiliate) with respect to your receipt of the Award, the vesting of the Performance Stock Units or the delivery of the Company’s Common Stock to be issued in respect of the Award. Notwithstanding the foregoing, the Company reserves the right to issue you the cash equivalent of Common Stock, in part or in full satisfaction of the delivery of Common Stock upon the vesting of the Performance Stock Units, and, to the extent applicable, references in this Performance Stock Unit Award Agreement and the Grant Notice to Common Stock issuable in connection with your Performance Stock Units will include the potential issuance of its cash equivalent pursuant to such right.
2.Vesting. Subject to the limitations contained herein, your Award will vest, if at all, in accordance with the vesting schedule provided in Exhibit A to this Agreement.
3.Number of Shares. The number of Performance Stock Units subject to your Award may be adjusted from time to time for Capitalization Adjustments, as provided in the Plan. Any additional Performance Stock Units, shares, cash or other property that becomes subject to the Award pursuant to this Section 3, if any, will be subject, in a manner determined by the Board, to the same forfeiture restrictions, restrictions on transferability, and time and manner of delivery as applicable to the other Performance Stock Units and shares covered by your Award. Notwithstanding the provisions of this Section 3, no fractional shares or rights for fractional shares of Common Stock will be created pursuant to this Section 3. Any fraction of a share will be rounded down to the nearest whole share.
4.Securities Law Compliance. You may not be issued any Common Stock under your Award unless the shares of Common Stock underlying the Performance Stock Units are either (i) then registered under the Securities Act, or (ii) the Company has determined that such issuance would be exempt from the registration requirements of the Securities Act. Your Award must also comply with other applicable laws and regulations governing the Award, and you will not receive such Common Stock if the Company determines that such receipt would not be in material compliance with such laws and regulations.
5.Transfer Restrictions. Prior to the time that shares of Common Stock have been delivered to you, you may not transfer, pledge, sell or otherwise dispose of this Award or the shares issuable in respect of your Award, except as expressly provided in this Section 5. For example, you may not use shares that may be issued in respect of your Performance Stock Units as security for a loan. The
    3.


restrictions on transfer set forth herein will lapse upon delivery to you of shares in respect of your vested Performance Stock Units.
(a)Death. Your Award is transferable by will and by the laws of descent and distribution. At your death, vesting of your Award will accelerate as provided in Exhibit A to this Agreement and your personal representative will be entitled to receive, on behalf of your estate, any Common Stock or other consideration that vested (including as a result of vesting acceleration due to your death as provided in Exhibit A to this Agreement) but was not issued before your death.
6.Date of Issuance.
(a)The issuance of shares in respect of the Performance Stock Units is intended to comply with Treasury Regulations Section 1.409A-1(b)(4) and will be construed and administered in such a manner. Subject to the satisfaction of the Withholding Obligation set forth in Section 9 of this Performance Stock Unit Award Agreement, in the event one or more Performance Stock Units vests, the Company will issue to you one (1) share of Common Stock for each Performance Stock Unit that vests on the applicable vesting date(s) (subject to any adjustment under Section 3 above, and subject to any different provisions in the Grant Notice). Each issuance date determined by this paragraph is referred to as an “Original Issuance Date”.
(b)If the Original Issuance Date falls on a date that is not a business day, delivery will instead occur on the next following business day. In addition, if:
(i)the Original Issuance Date does not occur (1) during an “open window period” applicable to you, as determined by the Company in accordance with the Company’s then-effective policy on trading in Company securities (“Insider Trading Policy”), or (2) on a date when you are otherwise permitted to sell shares of Common Stock on an established stock exchange or stock market (including but not limited to under a previously established written trading plan that meets the requirements of Rule 10b5-1 under the Exchange Act and was entered into in compliance with the Company's policies (a “10b5-1 Arrangement”)), and
(ii)either (1) the Company’s then-effective Insider Trading Policy does not permit sell to cover transactions in satisfaction of applicable Withholding Obligations, (2) a Withholding Obligation does not apply, or (3) the Company decides, prior to the Original Issuance Date, (A) not to satisfy the Withholding Obligation by withholding shares of Common Stock from the shares otherwise due, on the Original Issuance Date, to you under this Award, and (B) not to permit you to enter into a “same day sale” commitment with a broker-dealer pursuant to Section 9 of this Performance Stock Unit Award Agreement (including but not limited to a commitment under a 10b5-1 Arrangement) and (C) not to permit you to pay your Withholding Obligation in cash, then the shares that would otherwise be issued to you on the Original Issuance Date will not be delivered on such Original Issuance Date and will instead be delivered on the first business day when you are not prohibited from selling shares of the Company’s Common Stock in the open public market, but in no event later than December 31 of the calendar year in which the Original Issuance Date occurs (that is, the last day of your taxable year in which the Original Issuance Date occurs), or, if and only if permitted in a manner that complies with Treasury Regulations Section 1.409A-1(b)(4), no later than the date that is the 15th day of the third calendar month of the applicable year following the year in which the shares of Common Stock under this Award are no longer subject to a “substantial risk of forfeiture” within the meaning of Treasury Regulations Section 1.409A-1(d).
(c)The form of delivery of the shares of Common Stock in respect of your Award (e.g., a stock certificate or electronic entry evidencing such shares) will be determined by the Company.
7.Dividends. You will receive no benefit or adjustment to your Award with respect to any cash dividend, stock dividend or other distribution that does not result from a Capitalization Adjustment;
    4.


provided, however, that this sentence will not apply with respect to any shares of Common Stock that are delivered to you in connection with your Award after such shares have been delivered to you.
8.Award Not A Service Contract.
(a)Your Continuous Service with the Company or an Affiliate is not for any specified term and may be terminated by you or by the Company or an Affiliate at any time, for any reason, with or without cause and with or without notice. Nothing in this Performance Stock Unit Award Agreement (including, but not limited to, the vesting of your Award or the issuance of the shares subject to your Award), the Plan or any covenant of good faith and fair dealing that may be found implicit in this Performance Stock Unit Award Agreement or the Plan will: (i) confer upon you any right to continue in the employ or service of, or affiliation with, the Company or an Affiliate; (ii) constitute any promise or commitment by the Company or an Affiliate regarding the fact or nature of future positions, future work assignments, future compensation or any other term or condition of employment or affiliation; (iii) confer any right or benefit under this Performance Stock Unit Award Agreement or the Plan unless such right or benefit has specifically accrued under the terms of this Performance Stock Unit Award Agreement or Plan; or (iv) deprive the Company of the right to terminate you at will and without regard to any future vesting opportunity that you may have.
(b)By accepting this Award, you acknowledge and agree that the right to continue vesting in the Award is earned only by continuing as an Employee, Director or Consultant at the will of the Company or an Affiliate and that the Company has the right to reorganize, sell, spin-out or otherwise restructure one or more of its businesses or Affiliates at any time or from time to time, as it deems appropriate (a “reorganization”). You acknowledge and agree that such a reorganization could result in the termination of your Continuous Service, or the termination of Affiliate status of your employer and the loss of benefits available to you under this Performance Stock Unit Award Agreement, including but not limited to, the termination of the right to continue vesting in the Award. You further acknowledge and agree that this Performance Stock Unit Award Agreement, the Plan, the transactions contemplated hereunder and the vesting schedule set forth in Exhibit A to this Agreement or any covenant of good faith and fair dealing that may be found implicit in any of them do not constitute an express or implied promise of continued engagement as an employee or consultant for the term of this Performance Stock Unit Award Agreement, for any period, or at all, and will not interfere in any way with the Company’s right to terminate your Continuous Service at any time, with or without your cause or notice, or to conduct a reorganization.
9.Withholding Obligation.
(a)On each vesting date, and on or before the time you receive a distribution of the shares of Common Stock underlying your Performance Stock Units, and at any other time as reasonably requested by the Company in accordance with applicable tax laws, you hereby authorize any required withholding from the Common Stock issuable to you and/or otherwise agree to make adequate provision, including in cash, for any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or any Affiliate that arise in connection with your Award (the “Withholding Obligation”).
(b)By accepting this Award, you acknowledge and agree that the Company or any Affiliate may, in its sole discretion, satisfy all or any portion of the Withholding Obligation relating to your Award by any of the following means or by a combination of such means: (i) causing you to pay any portion of the Withholding Obligation in cash; (ii) withholding from any compensation otherwise payable to you by the Company or an Affiliate; (iii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to you in connection with the Award with a Fair Market Value (measured as of the date shares of Common Stock are issued pursuant to Section 6) equal to the amount of such Withholding Obligation; provided, however, that the number of such shares of Common Stock so withheld will not exceed the amount necessary to satisfy the Withholding Obligation using the maximum
    5.


statutory withholding rates for federal, state, local and foreign tax purposes, including payroll taxes, that are applicable to supplemental taxable income; and provided, further, that to the extent necessary to qualify for an exemption from application of Section 16(b) of the Exchange Act, if applicable, such share withholding procedure will be subject to the express prior approval of the Board or the Company’s Compensation Committee; and/or (iv) permitting or requiring you to enter into a “same day sale” commitment, if applicable, with a broker-dealer that is a member of the Financial Industry Regulatory Authority (a “FINRA Dealer”), pursuant to this authorization and without further consent, whereby you irrevocably elect to sell a portion of the shares to be delivered in connection with your Performance Stock Units to satisfy the Withholding Obligation and whereby the FINRA Dealer irrevocably commits to forward the proceeds necessary to satisfy the Withholding Obligation directly to the Company and/or its Affiliates.
(c)Unless the Withholding Obligation is satisfied, the Company will have no obligation to deliver to you any Common Stock or other consideration pursuant to this Award.
(d)In the event the Withholding Obligation arises prior to the delivery to you of Common Stock or it is determined after the delivery of Common Stock to you that the amount of the Withholding Obligation was greater than the amount withheld by the Company, you agree to indemnify and hold the Company harmless from any failure by the Company to withhold the proper amount.
10.Tax Consequences. The Company has no duty or obligation to minimize the tax consequences to you of this Award and will not be liable to you for any adverse tax consequences to you arising in connection with this Award. You are hereby advised to consult with your own personal tax, financial and/or legal advisors regarding the tax consequences of this Award and by signing the Grant Notice, you have agreed that you have done so or knowingly and voluntarily declined to do so. You understand that you (and not the Company) will be responsible for your own tax liability that may arise as a result of this investment or the transactions contemplated by this Performance Stock Unit Award Agreement.
11.Unsecured Obligation. Your Award is unfunded, and as a holder of a vested Award, you will be considered an unsecured creditor of the Company with respect to the Company’s obligation, if any, to issue shares or other property pursuant to this Performance Stock Unit Award Agreement. You will not have voting or any other rights as a stockholder of the Company with respect to the shares to be issued pursuant to this Performance Stock Unit Award Agreement until such shares are issued to you pursuant to Section 6 of this Performance Stock Unit Award Agreement. Upon such issuance, you will obtain full voting and other rights as a stockholder of the Company. Nothing contained in this Performance Stock Unit Award Agreement, and no action taken pursuant to its provisions, will create or be construed to create a trust of any kind or a fiduciary relationship between you and the Company or any other person.
12.Notices. Any notice or request required or permitted hereunder will be given in writing (including electronically) and will be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company. The Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan and this Award by electronic means or to request your consent to participate in the Plan by electronic means. By accepting this Award, you consent to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
13.Additional Acknowledgements. You hereby consent and acknowledge that:
(a)Receipt of the Award is voluntary and therefore you must accept the terms and conditions of this Performance Stock Unit Award Agreement and Grant Notice as a condition to receipt of this Award. This Award is voluntary and occasional and does not create any contractual or other right to receive future awards or other benefits in lieu of future awards, even if similar awards have been granted
    6.


repeatedly in the past. All determinations with respect to any such future awards, including, but not limited to, the time or times when such awards are made, the size of such awards and performance and other conditions applied to the awards, will be at the sole discretion of the Company.
(b)The future value of your Award is unknown and cannot be predicted with certainty. You do not have, and will not assert, any claim or entitlement to compensation, indemnity or damages arising from the termination of this Award or diminution in value of this Award and you irrevocably release the Company, its Affiliates and, if applicable, your employer, if different from the Company, from any such claim that may arise.
(c)The rights and obligations of the Company under your Award will be transferable by the Company to any one or more persons or entities, and all covenants and agreements hereunder will inure to the benefit of, and be enforceable by, the Company’s successors and assigns.
(d)You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Award.
(e)You acknowledge and agree that you have reviewed your Award in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Award and fully understand all provisions of your Award.
(f)This Performance Stock Unit Award Agreement will be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
(g)All obligations of the Company under the Plan and this Performance Stock Unit Award Agreement will be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and assets of the Company.
14.Clawback. Your Award (and any compensation paid or shares issued under your Award) is subject to recoupment in accordance with The Dodd–Frank Wall Street Reform and Consumer Protection Act and any implementing regulations thereunder, any clawback policy adopted by the Company and any compensation recovery policy otherwise required by applicable law. No recovery of compensation under such a clawback policy will be an event giving rise to a right to voluntarily terminate employment upon a resignation for “good reason,” or for a “constructive termination” or any similar term under any plan of or agreement with the Company.
15.Governing Plan Document. Your Award is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. Your Award (and any compensation paid or shares issued under your Award) is subject to recoupment in accordance with The Dodd–Frank Wall Street Reform and Consumer Protection Act and any implementing regulations thereunder, any clawback policy adopted by the Company and any compensation recovery policy otherwise required by applicable law. No recovery of compensation under such a clawback policy will be an event giving rise to a right to voluntarily terminate employment upon a resignation for “good reason,” or for a “constructive termination” or any similar term under any plan of or agreement with the Company.
16.Effect on Other Employee Benefit Plans. The value of the Award subject to this Performance Stock Unit Award Agreement will not be included as compensation, earnings, salaries, or other similar terms used when calculating benefits under any employee benefit plan (other than the Plan) sponsored by the Company or any Affiliate except as such plan otherwise expressly provides. The
    7.


Company expressly reserves its rights to amend, modify, or terminate any or all of the employee benefit plans of the Company or any Affiliate.
17.Severability. If all or any part of this Performance Stock Unit Award Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Performance Stock Unit Award Agreement or the Plan not declared to be unlawful or invalid. Any Section of this Performance Stock Unit Award Agreement (or part of such a Section) so declared to be unlawful or invalid will, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
18.Other Documents. You hereby acknowledge receipt or the right to receive a document providing the information required by Rule 428(b)(1) promulgated under the Securities Act. In addition, you acknowledge receipt of the Company’s policy permitting certain individuals to sell shares only during certain "window" periods and the Company's Insider Trading Policy, in effect from time to time.
19.Data Privacy.
(a)You explicitly and unambiguously acknowledge and consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this document by and among, as applicable, your employer, the Company and its Affiliates for the exclusive purpose of implementing, administering and managing your participation in the Plan. You understand that the Company, its Affiliates and your employer hold certain personal information about you, including, but not limited to, name, home address and telephone number, date of birth, social security number (or other identification number), salary, nationality, job title, any shares of stock or directorships held in the Company, details of all options or any other entitlement to shares of stock awarded, canceled, purchased, exercised, vested, unvested or outstanding in your favor for the purpose of implementing, managing and administering the Plan (“Data”). You understand that the Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in your country or elsewhere, in particular in the US, and that the recipient country may have different data privacy laws providing less protections of your personal data than your country. You may request a list with the names and addresses of any potential recipients of the Data by contacting as the stock plan administrator at the Company (the “Stock Plan Administrator”). You acknowledge that the recipients may receive, possess, process, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data, as may be required to a broker or other third party with whom you may elect to deposit any shares of Common Stock acquired upon the exercise of your option. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the Plan. You may, at any time, view the Data, request additional information about the storage and processing of the Data, require any necessary amendments to the Data or refuse or withdraw the consents herein, in any case without cost, by contacting the Stock Plan Administrator in writing.
(b)For the purposes of operating the Plan in the European Union (including the UK, if the UK leaves the European Union), the Company will collect and process information relating to you in accordance with the privacy notice from time to time in force.
20.Language and Currency. If you have received this Performance Stock Unit Award Agreement, or any other document related to this Award and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control. Neither the Company nor any Affiliate shall be liable for any exchange rate fluctuation between your local currency and the United States Dollar that may affect the value of your Award or of any amounts due to you on the subsequent sale of any shares of Common Stock distributed to you in respect of your Award.
    8.


21.Amendment. This Performance Stock Unit Award Agreement may not be modified, amended or terminated except by an instrument in writing, signed by you and by a duly authorized representative of the Company. Notwithstanding the foregoing, this Performance Stock Unit Award Agreement may be amended solely by the Board by a writing which specifically states that it is amending this Performance Stock Unit Award Agreement, so long as a copy of such amendment is delivered to you, and provided that, except as otherwise expressly provided in the Plan, no such amendment materially adversely affecting your rights hereunder may be made without your written consent. Without limiting the foregoing, the Board reserves the right to change, by written notice to you, the provisions of this Performance Stock Unit Award Agreement in any way it may deem necessary or advisable to carry out the purpose of the Award as a result of any change in applicable laws or regulations or any future law, regulation, ruling, or judicial decision, provided that any such change will be applicable only to rights relating to that portion of the Award which is then subject to restrictions as provided herein.
This Performance Stock Unit Award Agreement will be deemed to be signed by the Company and the Participant upon the signing by the Participant of the Performance Stock Unit Grant Notice to which it is attached.
    9.


Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jennifer G. Tejada, certify that:
1.    I have reviewed this Quarterly Report on Form 10-Q of PagerDuty, Inc.;
2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.    The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.    The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 4, 2021
/s/ Jennifer G. Tejada        
Jennifer G. Tejada
Chief Executive Officer
(Principal Executive Officer)




Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Owen Howard Wilson, certify that:
1.    I have reviewed this Quarterly Report on Form 10-Q of PagerDuty, Inc.;
2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.    The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.    The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 4, 2021
/s/ Owen Howard Wilson
Owen Howard Wilson
Chief Financial Officer
(Principal Financial Officer)



Exhibit 32.1
CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Jennifer G. Tejada, the Chief Executive Officer of PagerDuty, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of PagerDuty, Inc. for the fiscal quarter ended April 30, 2019 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of PagerDuty, Inc. 


Date: June 4, 2021
/s/ Jennifer G. Tejada        
Jennifer G. Tejada
Chief Executive Officer
(Principal Executive Officer)



I, Owen Howard Wilson, the Chief Financial Officer of PagerDuty, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of PagerDuty, Inc. for the fiscal quarter ended April 30, 2019 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of PagerDuty, Inc.  

 
Date: June 4, 2021
/s/ Owen Howard Wilson        
Owen Howard Wilson
Chief Financial Officer
(Principal Financial Officer)