10-Q

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 July 31, 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 September 1, 2021, was 84,972,465.

PAGERDUTY, INC.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1	Financial Statements (unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss	6
	Condensed Consolidated Statements of Stockholders’ Equity	7
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3	Quantitative and Qualitative Disclosures about Market Risk	42
Item 4	Controls and Procedures	43

Part II - OTHER INFORMATION

Item 1	Legal Proceedings	44
Item 1A	Risk Factors	44
Item 2	Unregistered Sale of Equity Securities and Use of Proceeds	45
Item 6	Exhibits	45
	Signatures	47

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 and in our Annual Report on Form 10-K. 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.

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.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

PAGERDUTY, INC.

Condensed Consolidated Balance Sheets

(in thousands)

	As of July 31, 2021		As of January 31, 2021
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	354,525	$	339,166
Investments	192,296		221,112
Accounts receivable, net of allowance for doubtful accounts of $1,008 and $1,188 as of July 31, 2021 and January 31, 2021, respectively	48,148		55,119
Deferred contract costs, current	13,826		12,330
Prepaid expenses and other current assets	14,987		10,587
Total current assets	623,782		638,314
Property and equipment, net	14,116		12,639
Deferred contract costs, non-current	20,434		19,257
Lease right-of-use assets	22,482		24,691
Goodwill	72,126		72,126
Intangible assets, net	24,883		26,633
Other assets	689		1,783
Total assets	$	778,512	$	795,443
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	6,949	$	5,747
Accrued expenses and other current liabilities	14,101		9,627
Accrued compensation	24,542		28,372
Deferred revenue, current	128,145		123,686
Lease liabilities, current	5,469		5,262
Total current liabilities	179,206		172,694
Convertible senior notes, net	280,162		217,528
Deferred revenue, non-current	5,857		6,286
Lease liabilities, non-current	23,831		26,542
Other liabilities	4,284		5,666
Total liabilities	493,340		428,716
Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock	—		—
Additional paid-in capital	578,728		614,494
Accumulated other comprehensive income	31		343
Accumulated deficit	(293,587)		(248,110)
Total stockholders’ equity	285,172		366,727
Total liabilities and stockholders’ equity	$	778,512	$	795,443

See Notes to Condensed Consolidated Financial Statements

5

PAGERDUTY, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share data)

(unaudited)

	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
Revenue	$	67,536	$	50,714	$	131,127	$	100,500
Cost of revenue	11,976		6,637		22,394		13,600
Gross profit	55,560		44,077		108,733		86,900
Operating expenses:
Research and development	22,909		15,535		43,508		30,549
Sales and marketing	40,814		27,511		78,048		54,247
General and administrative	20,294		14,480		36,872		28,153
Total operating expenses	84,017		57,526		158,428		112,949
Loss from operations	(28,457)		(13,449)		(49,695)		(26,049)
Interest income	783		1,048		1,601		2,401
Interest expense	(1,378)		(1,608)		(2,695)		(1,608)
Other expense, net	(586)		(431)		(1,202)		(412)
Loss before provision for income taxes	(29,638)		(14,440)		(51,991)		(25,668)
Provision for income taxes	(23)		(248)		(228)		(479)
Net loss	$	(29,661)	$	(14,688)	$	(52,219)	$	(26,147)
Other comprehensive (loss) income:
Unrealized (loss) gain on investments	(108)		277		(312)		919
Total comprehensive loss	$	(29,769)	$	(14,411)	$	(52,531)	$	(25,228)
Net loss per share, basic and diluted	$	(0.35)	$	(0.19)	$	(0.63)	$	(0.33)
Weighted average shares used in calculating net loss per share, basic and diluted	83,895		78,775		83,413		78,278

See Notes to Condensed Consolidated Financial Statements

6

PAGERDUTY, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

(unaudited)

	Three Months Ended July 31, 2021
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balances as of April 30, 2021	83,595,225	$	—	$	557,843	$	139	$	(263,926)	$	294,056
Issuance of common stock upon exercise of stock options and restricted stock agreements	749,673	—		5,379		—		—		5,379
Vesting of restricted stock units, net of employee payroll taxes	233,752	—		(6,073)		—		—		(6,073)
Issuance of common stock in connection with employee stock purchase plan	222,474	—		4,889		—		—		4,889
Other comprehensive loss	—	—		—		(108)		—		(108)
Stock-based compensation	—	—		16,690		—		—		16,690
Net loss	—	—		—		—		(29,661)		(29,661)
Balances as of July 31, 2021	84,801,124	$	—	$	578,728	$	31	$	(293,587)	$	285,172

	Six Months Ended July 31, 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	1,286,266	—		8,222		—		—		8,222
Vesting of restricted stock units, net of employee payroll taxes	407,887	—		(11,003)		—		—		(11,003)
Shares issued related to a business combination	2,073	—		—		—		—		—
Issuance of common stock in connection with employee stock purchase plan	222,474	—		4,889		—		—		4,889
Other comprehensive loss	—	—		—		(312)		—		(312)
Stock-based compensation	—	—		30,604		—		—		30,604
Net loss	—	—		—		—		(52,219)		(52,219)
Balances as of July 31, 2021	84,801,124	$	—	$	578,728	$	31	$	(293,587)	$	285,172

See Notes to Condensed Consolidated Financial Statements

7

	Three Months Ended July 31, 2020
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balances as of April 30, 2020	78,526,004	$	—	$	497,430	$	779	$	(190,666)	$	307,543
Issuance of common stock upon exercise of stock options and restricted stock agreements	557,467	—		3,927		—		—		3,927
Vesting of restricted stock units, net of employee payroll taxes	90,903	—		(1,697)		—		—		(1,697)
Vesting of early exercised options	—	—		191		—		—		191
Equity component of convertible senior notes, net of issuance costs	—	—		68,478		—		—		68,478
Purchases of capped calls related to convertible senior notes	—	—		(35,708)		—		—		(35,708)
Issuance of common stock in connection with employee stock purchase plan	181,253	—		3,558		—		—		3,558
Other comprehensive income	—	—		—		277		—		277
Stock-based compensation	—	—		9,990		—		—		9,990
Net loss	—	—		—		—		(14,688)		(14,688)
Balances as of July 31, 2020	79,355,627	$	—	$	546,169	$	1,056	$	(205,354)	$	341,871

	Six Months Ended July 31, 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	1,286,892	—		5,771		—		—		5,771
Vesting of restricted stock units, net of employee payroll taxes	93,942	—		(1,743)		—		—		(1,743)
Vesting of early exercised options	—	—		507		—		—		507
Equity component of convertible senior notes, net of issuance costs	—	—		68,478		—		—		68,478
Purchases of capped calls related to convertible senior notes	—	—		(35,708)		—		—		(35,708)
Issuance of common stock in connection with employee stock purchase plan	181,253	—		3,558		—		—		3,558
Other comprehensive income	—	—		—		919		—		919
Stock-based compensation	—	—		18,298		—		—		18,298
Net loss	—	—		—		—		(26,147)		(26,147)
Balances as of July 31, 2020	79,355,627	$	—	$	546,169	$	1,056	$	(205,354)	$	341,871

See Notes to Condensed Consolidated Financial Statements

8

PAGERDUTY, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Six Months Ended July 31,
	2021		2020
Cash flows from operating activities
Net loss	$	(52,219)	$	(26,147)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	4,027		2,039
Amortization of deferred contract costs	6,812		5,064
Amortization of debt discount and issuance costs (1)	898		1,258
Stock-based compensation	30,088		18,276
Non-cash lease expense	2,209		2,204
Other	1,695		1,426
Changes in operating assets and liabilities:
Accounts receivable	6,473		(1,293)
Deferred contract costs	(9,485)		(6,199)
Prepaid expenses and other assets	(2,762)		(4,989)
Accounts payable	1,179		(1,549)
Accrued expenses and other liabilities	3,373		3,618
Accrued compensation	(3,830)		1,287
Deferred revenue	4,030		8,611
Lease liabilities	(2,504)		(1,744)
Net cash (used in) provided by operating activities	(10,016)		1,862
Cash flows from investing activities
Purchases of property and equipment	(1,291)		(3,292)
Capitalization of internal-use software costs	(1,917)		(111)
Payments related to a business acquisition	(160)		—
Proceeds from maturities of held-to-maturity investments	—		24,040
Purchases of available-for-sale investments	(116,103)		(100,029)
Proceeds from maturities of available-for-sale investments	116,150		71,632
Proceeds from sales of available-for-sale investments	27,380		7,285
Net cash provided by (used in) investing activities	24,059		(475)
Cash flows from financing activities
Proceeds from issuance of convertible senior notes, net of issuance costs paid of $8,151	—		279,349
Purchases of capped calls related to convertible senior notes	—		(35,708)
Proceeds from employee stock purchase plan	4,889		3,558
Proceeds from issuance of common stock upon exercise of stock options	7,430		5,771
Employee payroll taxes paid related to net share settlement of restricted stock units	(11,003)		(1,743)
Net cash provided by financing activities	1,316		251,227
Net increase in cash, cash equivalents, and restricted cash	15,359		252,614
Cash, cash equivalents, and restricted cash at beginning of period	339,166		124,024
Cash, cash equivalents, and restricted cash at end of period	$	354,525	$	376,638
Supplemental cash flow data:
Cash paid for income taxes	$	72	$	—
Cash paid for interest	$	1,797	$	—
Non-cash investing and financing activities:
Vesting of early exercised options	$	—	$	507
Purchase of property and equipment, accrued but not yet paid	$	402	$	385
Costs related to issuance of convertible senior notes, accrued but not yet paid	$	—	$	1,154
Stock-based compensation capitalized in internal use software	$	516	$	—
Receivables for cash in-transit on stock option exercises	$	792	$	—

(1) During the first quarter of fiscal 2022, the Company early adopted ASU 2020-06 which resulted in the elimination of amortization of debt discount on our 1.25% Convertible Senior Notes (the “Notes”) from February 1, 2021.

See Notes to Condensed Consolidated Financial Statements

9

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 and six months ended July 31, 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 ending 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

10

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 and six months ended July 31, 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 July 31, 2021 or January 31, 2021. No single customer represented 10% or more of revenue for the three and six months ended July 31, 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.

Related Party Transactions

Certain members of the Company’s Board of Directors serve as directors of, or are executive officers of, and in some cases are investors in, companies that are customers or vendors of the Company. The Company billed $1.1 million to entities associated with related parties during the three and six months ended July 31, 2021, which were included in the accounts receivable balance as of July 31, 2021. Other related party transactions were not material for the three and six months ended July 31, 2021 and 2020.

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:

11

PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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 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 July 31, 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 July 31, 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

12

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 July 31, 2021		As of January 31, 2021
	(in thousands)
Cash and cash equivalents
Cash	$	326,999	$	184,308
Money market funds	27,526		139,870
U.S. Treasury securities	—		14,988
Total cash and cash equivalents	$	354,525	$	339,166
Available-for-sale investments:
U.S. Treasury securities	$	50,390	$	45,026
Commercial paper	24,635		34,598
Corporate debt securities	117,271		141,488
Total available-for-sale investments	$	192,296	$	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 July 31, 2021 and January 31, 2021. Gross realized gains or losses from sales of available-for-sale securities were not material for the three and six months ended July 31, 2021.

	As of July 31, 2021
	Cost Basis		Unrealized Gain (Loss), Net		Recorded Basis
	(in thousands)
Available-for-sale investments:
U.S. Treasury securities	$	50,392	$	(2)	$	50,390
Commercial paper	24,632		3		24,635
Corporate debt securities	117,241		30		117,271
Total available-for-sale investments	$	192,265	$	31	$	192,296

13

PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

	As of January 31, 2021
	Cost Basis		Unrealized Gain (Loss), 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 July 31, 2021 and January 31, 2021:

	As of July 31, 2021
	Cost Basis		Recorded Basis
	(in thousands)
Due within one year	$	149,399	$	149,458
Due between one to five years	42,866		42,838
Total	$	192,265	$	192,296

	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 the Company’s intent to sell, or whether it is more likely than not that the Company will be required to sell, the investment before recovery of the investment’s amortized cost. No impairment loss has been recorded on the securities included in the tables above, as the Company believes that any decrease in fair value of these securities is temporary and the Company expects to recover at least up to the initial cost of the investment for these securities. The Company has not recorded an allowance for credit losses, as the Company believes any such losses would be immaterial based on the high-grade credit rating for each of its marketable securities as of the end of each period.

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.

14

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 July 31, 2021
	Level 1		Level 2		Level 3		Total
	(in thousands)
Money market funds	$	27,526	$	—	$	—	$	27,526
U.S. Treasury securities	—		50,390		—		50,390
Commercial paper	—		24,635		—		24,635
Corporate debt securities	—		117,271		—		117,271
Total	$	27,526	$	192,296	$	—	$	219,822
Included in cash equivalents							$	27,526
Included in investments							$	192,296

	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 July 31, 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 July 31, 2021, the estimated fair value of the Notes was approximately $364.2 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.

15

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 July 31, 2021 were as follows:

	Cost		Accumulated Amortization		Net		Weighted Average Remaining Useful Life
	(in thousands)						(in years)
Customer relationships	$	21,800	$	(1,817)	$	19,983	9.2
Developed technology	5,600		(933)		4,667		4.2
Trademarks	400		(167)		233		1.2
Total acquired intangibles, net	$	27,800	$	(2,917)	$	24,883

For the three and six months ended July 31, 2021, amortization expense related to acquired intangible assets was $0.9 million, and $1.8 million, respectively. No amortization expense was recorded during the three and six months ended July 31, 2020.

6. Property and Equipment, Net

Property and equipment, net, consisted of the following:

	As of July 31, 2021		As of January 31, 2021
	(in thousands)
Leasehold improvements	$	12,957	$	12,767
Computers and equipment	7,510		6,562
Furniture and fixtures	3,002		3,017
Capitalized internal-use software	3,936		1,355
Gross property and equipment (1)	27,405		23,701
Accumulated depreciation and amortization	(13,289)		(11,062)
Property and equipment, net	$	14,116	$	12,639

(1) Gross property and equipment includes construction-in-progress for leasehold improvements of $0.7 million and $0.5 million that had not yet been placed in service as of July 31, 2021 and January 31, 2021, respectively. The costs associated with construction-in-progress are not amortized until the asset is available for its intended use.

Depreciation and amortization expense was $1.1 million and $1.0 million for the three months ended July 31, 2021 and 2020, respectively, and $2.1 million and $1.9 million for the six months ended July 31, 2021 and 2020, respectively.

7. Deferred Contract Costs

Deferred contract costs, which primarily consist of deferred sales commissions, were $34.3 million and $31.6 million as of July 31, 2021 and January 31, 2021, respectively. Amortization expense for deferred contract costs was $3.6 million and $2.6 million for the three months ended July 31, 2021 and 2020, respectively, and $6.8 million and $5.1 million for the six months ended July 31, 2021 and 2020, respectively. There was no impairment charge related to the costs capitalized for the periods presented.

16

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 July 31, 2021		As of January 31, 2021
	(in thousands)
Assets
Lease right-of-use assets	$	22,482	$	24,691
Liabilities
Lease liabilities	5,469		5,262
Lease liabilities, non-current	23,831		26,542

As of July 31, 2021, the weighted average remaining lease term was 5.3 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 July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands)
Operating lease expense	$	1,403	$	1,445	$	2,772	$	2,887
Short-term lease expense	79		261		169		560
Variable lease expense	202		361		315		663

17

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 July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities	$	1,571	$	1,149	$	3,143	$	2,287

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 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 ended October 31, 2020 (and only during such fiscal quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

•During the five business day period after any ten consecutive trading day period (the measurement period) in which the “trading price” (as defined in the Indenture) per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;

•If the Company calls such Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or

•Upon the occurrence of specified corporate events, as noted in the Indenture.

On or after April 1, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Notes may convert all or any portion of their Notes at any time, regardless of the foregoing circumstances.

The conversion rate will initially be 24.9507 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $40.08 per share of common stock. The conversion rate is subject to adjustment under certain circumstances in accordance with the terms of the Indenture, but will not be adjusted for accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Notes in connection with such a fundamental change, as defined in the Indenture.

18

PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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 $280.2 million as of July 31, 2021, with principal of $287.5 million, net of unamortized issuance costs of $7.3 million. The Notes were classified as long term liabilities as of July 31, 2021. The issuance costs related to the Notes are being amortized to interest expense over the contractual term of the Notes at an effective interest rate of 1.93%.

The net carrying amount of the liability component of the Notes as of July 31, 2021 (post-ASU 2020-06 adoption) and as of January 31, 2021 (pre-ASU 2020-06 adoption) was as follows:

19

PAGERDUTY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

	As of July 31, 2021		As of January 31, 2021
	(in thousands)
Principal	$	287,500	$	287,500
Less: unamortized debt discount	—		(63,664)
Less: unamortized issuance costs	(7,338)		(6,308)
Net carrying amount	$	280,162	$	217,528

The net carrying amount of the equity component of the Notes as of July 31, 2021 (post-ASU 2020-06 adoption) and as of January 31, 2021 (pre-ASU 2020-06 adoption) was as follows:

	As of July 31, 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:

	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands)
Contractual interest expense	$	918	$	349	$	1,797	$	349
Amortization of debt discount	—		1,145		—		1,145
Amortization of debt issuance costs	460		114		898		114
Total interest expense related to the Notes	$	1,378	$	1,608	$	2,695	$	1,608

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.

20

10. Commitments and Contingencies

Legal Matters

From time to time in the normal course of business, the Company may be subject to various claims and other legal matters arising in the ordinary course of business. The Company investigates these claims as they arise and accrues estimates for resolution of legal and other contingencies when losses are probable and estimable. The 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 July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands)
Deferred revenue, beginning of period	$	126,056	$	96,446	$	129,972	$	92,569
Billings	75,482		55,448		135,157		109,111
Revenue recognized	(67,536)		(50,714)		(131,127)		(100,500)
Deferred revenue, end of period	$	134,002	$	101,180	$	134,002	$	101,180

For the three and six months ended July 31, 2021 and 2020, the majority of revenue recognized was from the deferred revenue balances at the beginning of each quarter.

As of July 31, 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 $118.2 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 July 31, 2021 and January 31, 2021, the Company was authorized to grant up to 22,964,193 shares and 18,059,506 shares of common stock, respectively, under the Stock Plans.

21

The Company currently uses authorized and unissued shares to satisfy stock award exercises. As of July 31, 2021 and January 31, 2021, there were 15,693,636 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:

	July 31, 2021
Outstanding stock options and unvested RSUs and PSUs outstanding	14,965,580
Available for future stock option, RSU, and PSU grants	15,693,636
Available for ESPP	2,721,649
Total common stock reserved at July 31, 2021	33,380,865

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	48,866	$	41.52
Exercised	(1,286,266)	$	6.36
Canceled	(283,443)	$	16.61
Outstanding at July 31, 2021	9,656,995	$	8.43	6.5 years	$	310,586
Vested as of July 31, 2021	7,153,532	$	6.23	6.1 years	$	245,762

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 July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
Expected dividend yield	—	%	—	%	—	%	—	%
Expected volatility	46.5%		43.9	%	43.8% - 46.5%		43.3% - 43.9%
Expected term (years)	6.1		6.1		6.1		6.1
Risk-free interest rate	1.04%		0.41%		1.04% - 1.16%		0.41% - 0.47%

Stock options granted during the three months ended July 31, 2021 and 2020 had a weighted average grant date fair value of $19.08 and $12.59 per share, respectively. The aggregate intrinsic value of stock options exercised during the three months ended July 31, 2021 and 2020 was $25.6 million and $11.6 million, respectively.

Stock options granted during the six months ended July 31, 2021 and 2020 had a weighted average grant date fair value of $18.23 and $8.96 per share, respectively. The aggregate intrinsic value of stock options exercised during the six months ended July 31, 2021 and 2020 was $46.1 million and $23.0 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.

22

As of July 31, 2021, there was approximately $23.5 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 2.3 years.

Restricted Stock Units

A summary of the Company’s RSU activity and related information is as follows:

	Number of RSUs	Weighted Average Grant Date Fair Value Per Share
Outstanding at January 31, 2021	3,971,128	$	23.60
Granted	2,127,307	$	41.31
Vested	(407,887)	$	23.84
Canceled	(636,581)	$	26.43
Outstanding at July 31, 2021	5,053,967	$	30.68

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 July 31, 2021, there was $145.2 million of unrecognized stock-based compensation expense related to unvested RSUs, which is expected to be recognized over a weighted average period of 3.3 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 per share, to certain employees of the Company for which the ultimate number of 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 fiscal 2022 ("2022 operating plan"). The PSUs will vest over a three-year period, subject to continuous service with the Company.

During the three and six months ended July 31, 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 July 31, 2021, total unrecognized stock-based compensation cost related to PSUs was $3.4 million. This unrecognized stock-based compensation cost is expected to be recognized using the accelerated attribution method over a weighted-average period of approximately 1.5 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 July 31, 2021 and 2020, the Company recognized $1.3 million and $1.2 million of stock-based compensation expense related to the ESPP, respectively. During the six months ended July 31, 2021 and 2020, the Company recognized $3.1 million and $2.8 million of stock-based compensation expense related to the ESPP, respectively.

23

During the three months ended July 31, 2021 and 2020, the Company withheld $2.0 million and $1.6 million in contributions from employees, respectively. During the six months ended July 31, 2021 and 2020, the Company withheld $5.0 million and $3.5 million, respectively.

During the three and six months ended July 31, 2021, 171,796, 20,269, and 30,409 shares of common stock were issued under the ESPP at purchase prices of $19.63, $23.03, and $34.54, respectively. During the three and six months ended July 31, 2020, 181,253 shares of common stock were issued under the ESPP at a purchase price of $19.63 per share.

Stock-Based Compensation

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

	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands)
Cost of revenue	$	1,023	$	263	$	1,699	$	607
Research and development	5,607		2,469		10,047		4,652
Sales and marketing	4,401		2,870		8,355		5,155
General and administrative	5,445		4,366		9,987		7,862
Total	$	16,476	$	9,968	$	30,088	$	18,276

13. Net Loss per Share

The following table presents the calculation of basic and diluted net loss per share:

	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands, except per share data)
Numerator:
Net loss	$	(29,661)	$	(14,688)	$	(52,219)	$	(26,147)
Denominator:
Weighted average shares used in calculating net loss per share, basic and diluted	83,895		78,775		83,413		78,278
Net loss per share, basic and diluted	$	(0.35)	$	(0.19)	$	(0.63)	$	(0.33)

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.

24

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

	As of July 31,
	2021	2020
	(in thousands)
Shares subject to outstanding common stock awards	14,838	16,298
Convertible senior notes	7,173	7,173
Restricted stock awards purchased with promissory notes	—	142
Restricted stock issued to Rundeck key personnel	191	—
Shares issuable pursuant to the 2019 Employee Stock Purchase Plan	72	64
Total	22,274	23,677

14. Income Taxes

The Company's provision for income taxes for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in such period.

The Company's quarterly tax provision, and estimate of its annual effective tax rate, is subject to variation due to several factors, including variability in pre-tax income (or loss), the mix of jurisdictions to which such income (or loss) relates, changes in how the Company does business, and tax law developments. The Company's estimated effective tax rate for the year differs from the U.S. statutory rate of 21% as a result of our U.S. losses for which no benefit will be realized, our foreign operations which are subject to tax rates that differ from those in the U.S, as well as the benefit for non-U.S. income tax credits.

The Company recorded income tax expense of $0.2 million for the three months ended July 31, 2020, and $0.2 million and $0.5 million for the six months ended July 31, 2021 and 2020, respectively. Income tax expense for the three months ended July 31, 2021 was not material.

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 July 31,				Six Months Ended July 31, 2021
	2021		2020		2021		2020
	(in thousands)
United States	$	51,019	$	38,997	$	98,761	$	77,269
International	16,517		11,717		32,366		23,231
Total	$	67,536	$	50,714	$	131,127	$	100,500

Other than the United States, no other individual country accounted for 10% or more of revenue for the three and six months ended July 31, 2021 or 2020. As of July 31, 2021, 85% of the Company’s long-lived assets, including property and equipment and right-of-use lease assets, were located in the United States, and 15% 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.

25

16. Subsequent Events

The Company has evaluated subsequent events through September 3, 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” 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 600 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

26

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 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 may continue to see greater variability in the demand of our product from small and medium business customers. While we see risks associated with more highly impacted companies and industries, we are also seeing new interest from other organizations, driven by rapidly changing work and business environments. As workforces have transitioned to working from home in a distributed model, PagerDuty has become an increasingly critical service.

The majority of our employees continue to work remotely in order to minimize the spread of COVID-19 among our employee base and comply with local regulations within the United States and internationally. In addition, we have 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 have provided 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. 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 2020, we 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 former 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. We have begun to pay the amounts deferred and will continue these payments during the fiscal years ending 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.

27

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 July 31,
	2021	2020
Customers	14,169	13,346
Customers greater than $100,000 in ARR	501	369

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 July 31,
	2021		2020
Dollar-based net retention rate for all customers	126	%	116	%

28

Components of Results of Operations

Revenue

We generate revenue primarily from cloud-hosted software subscription fees with the majority of our revenue from such arrangements. We also generate 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

29

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.

30

Results of Operations

The following table sets forth our condensed consolidated statements of operations data for the periods indicated:

	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands)
Revenue	$	67,536	$	50,714	$	131,127	$	100,500
Cost of revenue(1)	11,976		6,637		22,394		13,600
Gross profit	55,560		44,077		108,733		86,900
Operating expenses:
Research and development(1)	22,909		15,535		43,508		30,549
Sales and marketing(1)	40,814		27,511		78,048		54,247
General and administrative(1)	20,294		14,480		36,872		28,153
Total operating expenses	84,017		57,526		158,428		112,949
Loss from operations	(28,457)		(13,449)		(49,695)		(26,049)
Interest income	783		1,048		1,601		2,401
Interest expense	(1,378)		(1,608)		(2,695)		(1,608)
Other expense, net	(586)		(431)		(1,202)		(412)
Loss before provision for income taxes	(29,638)		(14,440)		(51,991)		(25,668)
Provision for income taxes	(23)		(248)		(228)		(479)
Net loss	$	(29,661)	$	(14,688)	$	(52,219)	$	(26,147)

______________

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

	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands)
Cost of revenue	$	1,023	$	263	$	1,699	$	607
Research and development	5,607		2,469		10,047		4,652
Sales and marketing	4,401		2,870		8,355		5,155
General and administrative	5,445		4,366		9,987		7,862
Total	$	16,476	$	9,968	$	30,088	$	18,276

31

The following table sets forth our condensed consolidated statements of operations data expressed as a percentage of revenue:

	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
Revenue	100	%	100	%	100	%	100	%
Cost of revenue	18		13		17		14
Gross profit	82	%	87	%	83	%	86	%
Operating expenses:
Research and development	34		31		33		30
Sales and marketing	60		54		60		54
General and administrative	30		29		28		28
Total operating expenses	124		113		121		112
Loss from operations	(42)		(27)		(38)		(26)
Interest income	1		2		1		2
Interest expense	(2)		(3)		(2)		(2)
Other expense, net	(1)		(1)		(1)		—
Loss before provision for income taxes	(44)		(28)		(40)		(26)
Provision for income taxes	—		—		—		—
Net loss	(44)	%	(29)	%	(40)	%	(26)	%

__________

Note: Certain figures may not sum due to rounding.

Comparison of the Three Months Ended July 31, 2021 and 2020

Revenue

	Three Months Ended July 31,
	2021		2020		Change		% Change
	(dollars in thousands)
Revenue	$	67,536	$	50,714	$	16,822	33	%

Revenue increased by $16.8 million, or 33%, for the three months ended July 31, 2021 compared to the three months ended July 31, 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 July 31,
	2021			2020			Change		% Change
	(dollars in thousands)
Cost of revenue	$	11,976		$	6,637		$	5,339	80	%
Gross margin	82		%	87		%

Cost of revenue increased by $5.3 million, or 80%, primarily due to an increase of $3.1 million in personnel expenses as a result of increased headcount and increases of $0.9 million in hosting, software, and telecom costs and

32

an $0.6 million in outside services, both of which are related to the support of the continued growth of the business and related infrastructure.

Research and Development

	Three Months Ended July 31,
	2021			2020			Change		% Change
	(dollars in thousands)
Research and development	$	22,909		$	15,535		$	7,374	47	%
Percentage of revenue	34		%	31		%

Research and development expenses increased by $7.4 million, or 47%, for the three months ended July 31, 2021 compared to the three months ended July 31, 2020. The increase was primarily driven by an increase in personnel expenses of $6.1 million as a result of increased headcount to support our continued investment in our platform and a $0.7 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 July 31,
	2021			2020			Change		% Change
	(dollars in thousands)
Sales and marketing	$	40,814		$	27,511		$	13,303	48	%
Percentage of revenue	60		%	54		%

Sales and marketing expenses increased by $13.3 million, or 48%, for the three months ended July 31, 2021 compared to the three months ended July 31, 2020. This increase was primarily due to an increase of $6.0 million in personnel expenses driven by headcount growth and amortization of deferred contract costs, an increase in marketing expenses of $4.3 million due to increased volume of marketing and advertising activities, an increase of $1.4 million in costs to support the business and related infrastructure which includes allocated overhead costs, an increase of $0.7 million in outside services due to a higher volume of activities to assist with the continued growth of the business, and an increase of $0.6 million in amortization of intangibles related to the acquisition of Rundeck.

General and Administrative

	Three Months Ended July 31,
	2021			2020			Change		% Change
	(dollars in thousands)
General and administrative	$	20,294		$	14,480		$	5,814	40	%
Percentage of revenue	30		%	29		%

General and administrative expenses increased by $5.8 million, or 40%, for the three months ended July 31, 2021 compared to the three months ended July 31, 2020. The increase was driven by an increase of $3.5 million in personnel expenses as a result of increased headcount, and an increase in outside services of $3.1 million, the majority of which was due to non-recurring strategic consulting fees. This was partially offset by a decrease of $1.4 million in costs to support the business and related infrastructure which includes allocated overhead costs.

Interest Expense

33

	Three Months Ended July 31,
	2021		2020		Change		% Change
	(dollars in thousands)
Interest expense	$	1,378	$	1,608	$	(230)	(14)	%

Interest expense decreased by $0.2 million for the three months ended July 31, 2021 compared to the three months ended July 31, 2020, due to the adoption of Accounting Standard Update (“ASU”) 2020-06. Refer to Note 2, "Summary of Significant Accounting Policies", for additional details.

Interest Income and Other (Expense) Income, Net

	Three Months Ended July 31,
	2021		2020		Change		% Change
	(dollars in thousands)
Interest income	$	783	$	1,048	$	(265)	(25)	%
Other expense, net	$	(586)	$	(431)	$	(155)	36	%

Interest income decreased by $0.3 million and and other expense increased by $0.2 million for the three months ended July 31, 2021 compared to the three months ended July 31, 2020, primarily due to lower interest rates on our cash, cash equivalent and investment balances in the current year.

Comparison of the Six Months Ended July 31, 2021 and 2020

Revenue

	Six Months Ended July 31,
	2021		2020		Change		% Change
	(dollars in thousands)
Revenue	$	131,127	$	100,500	$	30,627	30	%

Revenue increased by $30.6 million, or 30%, for the six months ended July 31, 2021 compared to the six months ended July 31, 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

	Six Months Ended July 31,
	2021			2020			Change		% Change
	(dollars in thousands)
Cost of revenue	$	22,394		$	13,600		$	8,794	65	%
Gross margin	83		%	86		%

Cost of revenue increased by $8.8 million, or 65% for the six months ended July 31, 2021 compared to the six months ended July 31, 2020. The increase is primarily due to an increase of $5.4 million in personnel expenses as a result of increased headcount, increases of $1.4 million in hosting, software, and telecom costs and $0.9 million in outside services, both of which are related to the support of the continued growth of the business and related infrastructure, and an increase of $0.6 million in amortization of intangibles related to the acquisition of Rundeck.

34

Research and Development

	Six Months Ended July 31,
	2021			2020			Change		% Change
	(dollars in thousands)
Research and development	$	43,508		$	30,549		$	12,959	42	%
Percentage of revenue	33		%	30		%

Research and development expenses increased by $13.0 million, or 42%, for the six months ended July 31, 2021 compared to the six months ended July 31, 2020. The increase was primarily driven by an increase in personnel expenses of $10.8 million as a result of increased headcount to support our continued investment in our platform, a $1.3 million increase in costs to support the growth of the business and related infrastructure, which includes allocated overhead costs, and an increase of $0.7 million in outside services due to a higher volume of activities to assist with the continued growth of the business.

Sales and Marketing

	Six Months Ended July 31,
	2021			2020			Change		% Change
	(dollars in thousands)
Sales and marketing	$	78,048		$	54,247		$	23,801	44	%
Percentage of revenue	60		%	54		%

Sales and marketing expenses increased by $23.8 million, or 44%, for the six months ended July 31, 2021 compared to the six months ended July 31, 2020. This increase was primarily due to an increase of $13.1 million in personnel expenses driven by headcount growth and amortization of deferred contract costs, an increase in marketing expenses of $6.6 million due to increased volume of marketing and advertising activities, an increase of $2.2 million in outside services due to a higher volume of activities to assist with the continued growth of the business, an increase of $2.0 million in costs to support the business and related infrastructure which includes allocated overhead costs, and an increase of $1.2 million in amortization of intangibles related to the acquisition of Rundeck. This was partially offset by a decrease of $0.9 million in travel and other program related costs due to the COVID-19 pandemic.

General and Administrative

	Six Months Ended July 31,
	2021			2020			Change		% Change
	(dollars in thousands)
General and administrative	$	36,872		$	28,153		$	8,719	31	%
Percentage of revenue	28		%	28		%

General and administrative expenses increased by $8.7 million, or 31%, for the six months ended July 31, 2021 compared to the six months ended July 31, 2020. The increase was driven by an increase of $6.2 million in personnel expenses as a result of increased headcount and increases in outside services of $3.7 million, the majority of which was due to non-recurring strategic consulting fees, and an increase in insurance, business taxes and licenses 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 $2.0 million in costs to support the business and related infrastructure which includes allocated overhead costs.

Interest Expense

35

	Six Months Ended July 31,
	2021		2020		Change		% Change
	(dollars in thousands)
Interest expense	$	2,695	$	1,608	$	1,087	68	%

Interest expense increased by $1.1 million for the six months ended July 31, 2021 compared to the six months ended July 31, 2020, due to interest expense on the Notes which were issued in June 2020.

Interest Income and Other (Expense) Income, Net

	Six Months Ended July 31,
	2021		2020		Change		% Change
	(dollars in thousands)
Interest income	$	1,601	$	2,401	$	(800)	(33)	%
Other expense, net	$	(1,202)	$	(412)	$	(790)	192	%

Interest income decreased by $0.8 million and other expense increased by $0.8 million for the six months ended July 31, 2021 compared to the six months ended July 31, 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 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.

36

	Three Months Ended July 31,						Six Months Ended July 31,
	2021			2020			2021			2020
	(in thousands)
Gross profit	$	55,560		$	44,077		$	108,733		$	86,900
Add:
Stock-based compensation	1,023			263			1,699			607
Employer taxes related to employee stock transactions	30			8			56			9
Amortization of acquired intangible assets	280			—			560			—
Non-GAAP gross profit	$	56,893		$	44,348		$	111,048		$	87,516
Gross margin	82		%	87		%	83		%	87		%
Non-GAAP gross margin	84		%	87		%	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 July 31,						Six Months Ended July 31,
	2021			2020			2021			2020
	(in thousands)
Loss from operations	$	(28,457)		$	(13,449)		$	(49,695)		$	(26,049)
Add:
Stock-based compensation	16,476			9,968			30,088			18,276
Employer taxes related to employee stock transactions	710			254			1,391			406
Amortization of acquired intangible assets	875			—			1,750			—
Acquisition-related expenses	455			—			914			—
Non-GAAP operating loss	$	(9,941)		$	(3,227)		$	(15,552)		$	(7,367)
Operating margin	(42)		%	(27)		%	(38)		%	(26)		%
Non-GAAP operating margin	(15)		%	(6)		%	(12)		%	(7)		%

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.

37

	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands)
Net loss	$	(29,661)	$	(14,688)	$	(52,219)	$	(26,147)
Add:
Stock-based compensation	16,476		9,968		30,088		18,276
Amortization of debt discount and issuance costs (1)	460		1,258		898		1,258
Employer taxes related to employee stock transactions	710		254		1,391		406
Amortization of acquired intangibles assets	875		—		1,750		—
Acquisition-related expenses	455		—		914		—
Non-GAAP net loss	$	(10,685)	$	(3,208)	$	(17,178)	$	(6,207)

(1) During the first quarter of fiscal 2022, the Company early adopted ASU 2020-06 which resulted in the elimination of amortization of debt discount on the convertible senior notes from February 1, 2021.

Free Cash Flow

We define free cash flow as net cash (used in) provided by 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 July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands)
Net cash (used in) provided by operating activities	$	(11,595)	$	2,047	$	(10,016)	$	1,862
Less:
Purchases of property and equipment	(364)		(579)		(1,291)		(3,292)
Capitalization of internal-use software costs	(915)		(111)		(1,917)		(111)
Free cash flow	$	(12,874)	$	1,357	$	(13,224)	$	(1,541)
Net cash provided by (used in) investing activities	$	36,675	$	(14,293)	$	24,059	$	(475)
Net cash provided by financing activities	$	3,412	$	249,429	$	1,316	$	251,227

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.

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.

38

As of July 31, 2021, our principal sources of liquidity were cash and cash equivalents and investments totaling $546.8 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 July 31, 2021, we had deferred revenue of $134.0 million, of which $128.1 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:

	Six Months Ended July 31,
	2021		2020
	(in thousands)
Net cash (used in) provided by operating activities	$	(10,016)	$	1,862
Net cash provided by (used in) investing activities	$	24,059	$	(475)
Net cash provided by financing activities	$	1,316	$	251,227

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 used in operating activities for the six months ended July 31, 2021 of $10.0 million primarily related to our net loss of $52.2 million, adjusted for non-cash charges of $45.7 million and net cash outflows of $3.5 million due to changes in our operating assets and liabilities. Non-cash charges primarily consisted of stock-based compensation of $30.1 million, amortization of our deferred contract costs of $6.8 million, depreciation and amortization of property and equipment, capitalized implementation costs, and acquired intangible assets of $4.0 million, and non-cash lease expense of $2.2 million. Changes in operating assets and liabilities reflected cash outflows from a $9.5 million increase in deferred contract costs due to commissions paid on new bookings in line with revenue growth, a $3.8 million decrease in accrued compensation and related benefits, a $2.8 million increase in prepaid expenses and other assets related to timing of payments made in advance for future services, and $2.5 million in payments for operating lease liabilities. These amounts were partially offset by cash inflows from a $6.5 million decrease in accounts receivable due to timing of cash collections, a $4.6 million increase in accounts payable and accrued expenses and liabilities, and a $4.0 million increase in deferred revenue resulting primarily from increased billings for subscriptions.

39

Cash provided by operating activities for the six months ended July 31, 2020 of $1.9 million primarily related to our net loss of $26.1 million, adjusted for non-cash charges of $30.3 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 $18.3 million, amortization of our deferred contract costs of $5.1 million, non-cash lease expense of $2.2 million and depreciation and amortization of property and equipment and capitalized implementation costs of $2.0 million. Changes in operating assets and liabilities reflected cash outflows from a $6.2 million increase in deferred contract costs due to commissions paid on new bookings in line with revenue growth, a $5.0 million increase in prepaid expenses and other assets related to timing of payments made in advance for future services, $1.7 million in payments for operating lease liabilities, and a $1.3 million increase in accounts receivable due to timing of cash collections. These amounts were partially offset by inflows from an $8.6 million increase in deferred revenue resulting primarily from increased billings for subscriptions, a $2.1 million increase in accounts payable and accrued expenses and other liabilities, and a $1.3 million increase in accrued compensation primarily due to employee contributions for the employee stock purchase plan (the “ESPP”) and increased headcount.

Investing Activities

Cash provided by investing activities for the six months ended July 31, 2021 of $24.1 million consisted of proceeds from sales and maturities of investments of $143.5 million. This was partially offset by purchases of available-for-sale investments of $116.1 million, capitalization of internal-use software of $1.9 million, and purchases of property and equipment of $1.3 million primarily for purchases of computers for new employees and to support office space for our San Francisco office.

Cash used in investing activities for the six months ended July 31, 2020 of $0.5 million consisted of purchases of available-for-sale investments of $100.0 million and purchases of property and equipment of $3.3 million primarily to support additional office space for our Atlanta office and purchases of computers for new employees. This was partially offset by proceeds from maturities and sales of investments of $103.0 million.

Financing Activities

Cash provided by financing activities for the six months ended July 31, 2021 of $1.3 million consisted of proceeds of $7.4 million from the exercise of stock options and proceeds from the ESPP of $4.9 million. This was partially offset by $11.0 million in employee payroll taxes paid related to vesting of restricted stock units.

Cash provided by financing activities for the six months ended July 31, 2020 of $251.2 million consisted primarily of net proceeds of $279.3 million related to the issuance of the Notes, proceeds from the ESPP of $3.6 million, and proceeds of $5.8 million from the exercise of stock options. This was partially offset by purchases of the Capped Calls of $35.7 million.

Contractual Obligations and Commitments

There were no material changes during the six months ended July 31, 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 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

40

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 July 31, 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 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

41

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.

42

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 July 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, other than as described above.

43

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.

44

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).

45

EXHIBIT INDEX

Exhibit Number	Description	Form	File No.	Incorporated by Exhibit Reference	Filing Date
3.1	Amended and Restated Certificate of Incorporation of PagerDuty, Inc.	8-K	001-38856	3.1	April 15, 2019
3.2	Amended and Restated Bylaws of PagerDuty, Inc.	8-K	001-38856	3.2	April 15, 2019
31.1	Certification of the Chief Executive Officer pursuant to Exchange Act Rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002			Filed herewith
31.2	Certification of the Chief Financial Officer pursuant to Exchange Act Rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002			Filed herewith
32.1*	Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002			Furnished herewith
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.			Filed herewith
101.SCH	XBRL Taxonomy Extension Schema Document.			Filed herewith
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.			Filed herewith
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.			Filed herewith
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.			Filed herewith
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.			Filed herewith
104	Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, and 101.PRE).

* The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

46

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 September 3, 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)

47

EX-31.1

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: September 3, 2021

/s/ Jennifer G. Tejada

Jennifer G. Tejada

Chief Executive Officer

(Principal Executive Officer)

EX-31.2

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: September 3, 2021

/s/ Owen Howard Wilson

Owen Howard Wilson

Chief Financial Officer

(Principal Financial Officer)

EX-32.1

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: September 3, 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: September 3, 2021

/s/ Owen Howard Wilson

Owen Howard Wilson

Chief Financial Officer

(Principal Financial Officer)

XML

Cover Page - shares	6 Months Ended
	Jul. 31, 2021	Sep. 01, 2021
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jul. 31, 2021
Document Transition Report	false
Entity File Number	001-38856
Entity Registrant Name	PAGERDUTY, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	27-2793871
Entity Address, Address Line One	600 Townsend St.
Entity Address, Address Line Two	Suite 200
Entity Address, City or Town	San Francisco
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94103
City Area Code	844
Local Phone Number	800-3889
Title of 12(b) Security	Common Stock, $0.000005 par value
Trading Symbol	PD
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		84,972,465
Entity Central Index Key	0001568100
Current Fiscal Year End Date	--01-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jul. 31, 2021	Jan. 31, 2021
Current assets:
Cash and cash equivalents	$ 354,525	$ 339,166
Investments	192,296	221,112
Accounts receivable, net of allowance for doubtful accounts of $1,008 and $1,188 as of July 31, 2021 and January 31, 2021, respectively	48,148	55,119
Deferred contract costs, current	13,826	12,330
Prepaid expenses and other current assets	14,987	10,587
Total current assets	623,782	638,314
Property and equipment, net	14,116	12,639
Deferred contract costs, non-current	20,434	19,257
Lease right-of-use assets	22,482	24,691
Goodwill	72,126	72,126
Intangible assets, net	24,883	26,633
Other assets	689	1,783
Total assets	778,512	795,443
Current liabilities:
Accounts payable	6,949	5,747
Accrued expenses and other current liabilities	14,101	9,627
Accrued compensation	24,542	28,372
Deferred revenue, current	128,145	123,686
Lease liabilities, current	5,469	5,262
Total current liabilities	179,206	172,694
Convertible senior notes, net	280,162	217,528
Deferred revenue, non-current	5,857	6,286
Lease liabilities, non-current	23,831	26,542
Other liabilities	4,284	5,666
Total liabilities	493,340	428,716
Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock	0	0
Additional paid-in capital	578,728	614,494
Accumulated other comprehensive income	31	343
Accumulated deficit	(293,587)	(248,110)
Total stockholders’ equity	285,172	366,727
Total liabilities and stockholders’ equity	$ 778,512	$ 795,443

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jul. 31, 2021	Jan. 31, 2021
Current assets:
Allowance for doubtful accounts	$ 1,008	$ 1,188

XML

Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2021	Jul. 31, 2020	Jul. 31, 2021	Jul. 31, 2020
Income Statement And Statement Of Comprehensive Income [Abstract]
Revenue	$ 67,536	$ 50,714	$ 131,127	$ 100,500
Cost of revenue	11,976	6,637	22,394	13,600
Gross profit	55,560	44,077	108,733	86,900
Operating expenses:
Research and development	22,909	15,535	43,508	30,549
Sales and marketing	40,814	27,511	78,048	54,247
General and administrative	20,294	14,480	36,872	28,153
Total operating expenses	84,017	57,526	158,428	112,949
Loss from operations	(28,457)	(13,449)	(49,695)	(26,049)
Interest income	783	1,048	1,601	2,401
Interest expense	(1,378)	(1,608)	(2,695)	(1,608)
Other expense, net	(586)	(431)	(1,202)	(412)
Loss before provision for income taxes	(29,638)	(14,440)	(51,991)	(25,668)
Provision for income taxes	(23)	(248)	(228)	(479)
Net loss	(29,661)	(14,688)	(52,219)	(26,147)
Other comprehensive (loss) income:
Unrealized (loss) gain on investments	(108)	277	(312)	919
Total comprehensive loss	$ (29,769)	$ (14,411)	$ (52,531)	$ (25,228)
Net loss per share, basic (in dollars per share)	$ (0.35)	$ (0.19)	$ (0.63)	$ (0.33)
Net loss per share, diluted (in dollars per share)	$ (0.35)	$ (0.19)	$ (0.63)	$ (0.33)
Weighted average shares used in calculating net loss per share, basic (in shares)	83,895	78,775	83,413	78,278
Weighted average shares used in calculating net loss per share, diluted (in shares)	83,895	78,775	83,413	78,278

XML

Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Cumulative Effect, Period of Adoption, Adjustment	Common Stock	Additional Paid-in Capital	Additional Paid-in Capital Cumulative Effect, Period of Adoption, Adjustment	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit	Accumulated Deficit Cumulative Effect, Period of Adoption, Adjustment
Beginning balance (in shares) at Jan. 31, 2020			77,793,540
Beginning balance at Jan. 31, 2020	$ 307,938		$ 0	$ 487,008		$ 137	$ (179,207)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock upon exercise of stock options and restricted stock agreements, net of repurchases (in shares)			1,286,892
Issuance of common stock upon exercise of stock options and restricted stock agreements	5,771			5,771
Vesting of restricted stock units, net of employee payroll taxes (in shares)			93,942
Vesting of restricted stock units, net of employee payroll taxes	(1,743)			(1,743)
Vesting of early exercised options	507			507
Equity component of convertible senior notes, net of issuance costs	68,478			68,478
Purchases of capped calls related to convertible senior notes	(35,708)			(35,708)
Issuance of common stock in connection with employee stock purchase plan (in shares)			181,253
Issuance of common stock in connection with employee stock purchase plan	3,558			3,558
Other comprehensive income (loss)	919					919
Stock-based compensation	18,298			18,298
Net loss	(26,147)						(26,147)
Ending balance (in shares) at Jul. 31, 2020			79,355,627
Ending balance at Jul. 31, 2020	341,871		$ 0	546,169		1,056	(205,354)
Beginning balance (in shares) at Apr. 30, 2020			78,526,004
Beginning balance at Apr. 30, 2020	307,543		$ 0	497,430		779	(190,666)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock upon exercise of stock options and restricted stock agreements, net of repurchases (in shares)			557,467
Issuance of common stock upon exercise of stock options and restricted stock agreements	3,927			3,927
Vesting of restricted stock units, net of employee payroll taxes (in shares)			90,903
Vesting of restricted stock units, net of employee payroll taxes	(1,697)			(1,697)
Vesting of early exercised options	191			191
Equity component of convertible senior notes, net of issuance costs	68,478			68,478
Purchases of capped calls related to convertible senior notes	(35,708)			(35,708)
Issuance of common stock in connection with employee stock purchase plan (in shares)			181,253
Issuance of common stock in connection with employee stock purchase plan	3,558			3,558
Other comprehensive income (loss)	277					277
Stock-based compensation	9,990			9,990
Net loss	(14,688)						(14,688)
Ending balance (in shares) at Jul. 31, 2020			79,355,627
Ending balance at Jul. 31, 2020	341,871		$ 0	546,169		1,056	(205,354)
Beginning balance (in shares) at Jan. 31, 2021			82,882,424
Beginning balance at Jan. 31, 2021	366,727	$ (61,736)	$ 0	614,494	$ (68,478)	343	(248,110)	$ 6,742
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock upon exercise of stock options and restricted stock agreements, net of repurchases (in shares)			1,286,266
Issuance of common stock upon exercise of stock options and restricted stock agreements	8,222			8,222
Vesting of restricted stock units, net of employee payroll taxes (in shares)			407,887
Vesting of restricted stock units, net of employee payroll taxes	(11,003)			(11,003)
Shares issued related to a business combination (in shares)			2,073
Issuance of common stock in connection with employee stock purchase plan (in shares)			222,474
Issuance of common stock in connection with employee stock purchase plan	4,889			4,889
Other comprehensive income (loss)	(312)					(312)
Stock-based compensation	30,604			30,604
Net loss	(52,219)						(52,219)
Ending balance (in shares) at Jul. 31, 2021			84,801,124
Ending balance at Jul. 31, 2021	285,172		$ 0	578,728		31	(293,587)
Beginning balance (in shares) at Apr. 30, 2021			83,595,225
Beginning balance at Apr. 30, 2021	294,056		$ 0	557,843		139	(263,926)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock upon exercise of stock options and restricted stock agreements, net of repurchases (in shares)			749,673
Issuance of common stock upon exercise of stock options and restricted stock agreements	5,379			5,379
Vesting of restricted stock units, net of employee payroll taxes (in shares)			233,752
Vesting of restricted stock units, net of employee payroll taxes	(6,073)			(6,073)
Issuance of common stock in connection with employee stock purchase plan (in shares)			222,474
Issuance of common stock in connection with employee stock purchase plan	4,889			4,889
Other comprehensive income (loss)	(108)					(108)
Stock-based compensation	16,690			16,690
Net loss	(29,661)						(29,661)
Ending balance (in shares) at Jul. 31, 2021			84,801,124
Ending balance at Jul. 31, 2021	$ 285,172		$ 0	$ 578,728		$ 31	$ (293,587)

XML

Condensed Consolidated Statements of Stockholders' Equity (Parenthetical)	6 Months Ended
	Jul. 31, 2021
Statement of Stockholders' Equity [Abstract]
Accounting Standards Update [Extensible List]	Accounting Standards Update 2020-06

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands		6 Months Ended
		Jul. 31, 2021	Jul. 31, 2020
Cash flows from operating activities
Net loss		$ (52,219)	$ (26,147)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		4,027	2,039
Amortization of deferred contract costs		6,812	5,064
Amortization of debt discount and issuance costs	[1]	898	1,258
Stock-based compensation		30,088	18,276
Non-cash lease expense		2,209	2,204
Other		1,695	1,426
Changes in operating assets and liabilities:
Accounts receivable		6,473	(1,293)
Deferred contract costs		(9,485)	(6,199)
Prepaid expenses and other assets		(2,762)	(4,989)
Accounts payable		1,179	(1,549)
Accrued expenses and other liabilities		3,373	3,618
Accrued compensation		(3,830)	1,287
Deferred revenue		4,030	8,611
Lease liabilities		(2,504)	(1,744)
Net cash (used in) provided by operating activities		(10,016)	1,862
Cash flows from investing activities
Purchases of property and equipment		(1,291)	(3,292)
Capitalization of internal-use software costs		(1,917)	(111)
Payments related to a business acquisition		(160)	0
Proceeds from maturities of held-to-maturity investments		0	24,040
Purchases of available-for-sale investments		(116,103)	(100,029)
Proceeds from maturities of available-for-sale investments		116,150	71,632
Proceeds from sales of available-for-sale investments		27,380	7,285
Net cash provided by (used in) investing activities		24,059	(475)
Cash flows from financing activities
Proceeds from issuance of convertible senior notes, net of issuance costs paid of $8,151		0	279,349
Purchases of capped calls related to convertible senior notes		0	(35,708)
Proceeds from employee stock purchase plan		4,889	3,558
Proceeds from issuance of common stock upon exercise of stock options		7,430	5,771
Employee payroll taxes paid related to net share settlement of restricted stock units		(11,003)	(1,743)
Net cash provided by financing activities		1,316	251,227
Net increase in cash, cash equivalents, and restricted cash		15,359	252,614
Cash, cash equivalents, and restricted cash at beginning of period		339,166	124,024
Cash, cash equivalents, and restricted cash at end of period		354,525	376,638
Supplemental cash flow data:
Cash paid for income taxes		72	0
Cash paid for interest		1,797	0
Non-cash investing and financing activities:
Vesting of early exercised options		0	507
Purchase of property and equipment, accrued but not yet paid		402	385
Costs related to issuance of convertible senior notes, accrued but not yet paid		0	1,154
Stock-based compensation capitalized in internal use software		516	0
Receivables for cash in-transit on stock option exercises		$ 792	$ 0

[1] During the first quarter of fiscal 2022, the Company early adopted ASU 2020-06 which resulted in the elimination of amortization of debt discount on our 1.25% Convertible Senior Notes (the “Notes”) from February 1, 2021.

XML

Condensed Consolidated Statements of Cash Flows (Parenthetical) $ in Thousands	6 Months Ended
	Jul. 31, 2020 USD ($)
Issuance of convertible senior notes, issuance costs paid	$ 8,151

XML

Description of Business and Basis of Presentation

6 Months Ended

Jul. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of Business and Basis of Presentation

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 and six months ended July 31, 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 ending 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

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 and six months ended July 31, 2021 and 2020. As events continue to evolve and additional information becomes available, our assumptions and estimates may change materially in future periods.

XML

Summary of Significant Accounting Policies

6 Months Ended

Jul. 31, 2021

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

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 July 31, 2021 or January 31, 2021. No single customer represented 10% or more of revenue for the three and six months ended July 31, 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.

Related Party Transactions

Certain members of the Company’s Board of Directors serve as directors of, or are executive officers of, and in some cases are investors in, companies that are customers or vendors of the Company. The Company billed $1.1 million to entities associated with related parties during the three and six months ended July 31, 2021, which were included in the accounts receivable balance as of July 31, 2021. Other related party transactions were not material for the three and six months ended July 31, 2021 and 2020.

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 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 July 31, 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 July 31, 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

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)

XML

Cash, Cash Equivalents, and Investments

6 Months Ended

Jul. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Cash, Cash Equivalents, and Investments

Cash, Cash Equivalents, and Investments

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

	As of July 31, 2021		As of January 31, 2021
	(in thousands)
Cash and cash equivalents
Cash	$	326,999	$	184,308
Money market funds	27,526		139,870
U.S. Treasury securities	—		14,988
Total cash and cash equivalents	$	354,525	$	339,166
Available-for-sale investments:
U.S. Treasury securities	$	50,390	$	45,026
Commercial paper	24,635		34,598
Corporate debt securities	117,271		141,488
Total available-for-sale investments	$	192,296	$	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 July 31, 2021 and January 31, 2021. Gross realized gains or losses from sales of available-for-sale securities were not material for the three and six months ended July 31, 2021.

	As of July 31, 2021
	Cost Basis		Unrealized Gain (Loss), Net		Recorded Basis
	(in thousands)
Available-for-sale investments:
U.S. Treasury securities	$	50,392	$	(2)	$	50,390
Commercial paper	24,632		3		24,635
Corporate debt securities	117,241		30		117,271
Total available-for-sale investments	$	192,265	$	31	$	192,296

	As of January 31, 2021
	Cost Basis		Unrealized Gain (Loss), 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 July 31, 2021 and January 31, 2021:

	As of July 31, 2021
	Cost Basis		Recorded Basis
	(in thousands)
Due within one year	$	149,399	$	149,458
Due between one to five years	42,866		42,838
Total	$	192,265	$	192,296

	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 the Company’s intent to sell, or whether it is more likely than not that the Company will be required to sell, the investment before recovery of the investment’s amortized cost. No impairment loss has been recorded on the securities included in the tables above, as the Company believes that any decrease in fair value of these securities is temporary and the Company expects to recover at least up to the initial cost of the investment for these securities. The Company has not recorded an allowance for credit losses, as the Company believes any such losses would be immaterial based on the high-grade credit rating for each of its marketable securities as of the end of each period.

XML

Fair Value Measurements

6 Months Ended

Jul. 31, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The Company measures its financial assets and liabilities at fair value each reporting period using a fair value hierarchy that prioritizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value, as follows:

Level 1—Valuations based on observable inputs that reflect quoted prices for identical assets or liabilities in active markets.

Level 2—Valuations based on inputs that are directly or indirectly observable in the marketplace.

Level 3—Valuations based on unobservable inputs that are supported by little or no market activity.

The following 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 July 31, 2021
	Level 1		Level 2		Level 3		Total
	(in thousands)
Money market funds	$	27,526	$	—	$	—	$	27,526
U.S. Treasury securities	—		50,390		—		50,390
Commercial paper	—		24,635		—		24,635
Corporate debt securities	—		117,271		—		117,271
Total	$	27,526	$	192,296	$	—	$	219,822
Included in cash equivalents							$	27,526
Included in investments							$	192,296

	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 July 31, 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 July 31, 2021, the estimated fair value of the Notes was approximately $364.2 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.

XML

Goodwill and Acquired Intangible Assets

6 Months Ended

Jul. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Acquired Intangible Assets

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 July 31, 2021 were as follows:

	Cost		Accumulated Amortization		Net		Weighted Average Remaining Useful Life
	(in thousands)						(in years)
Customer relationships	$	21,800	$	(1,817)	$	19,983	9.2
Developed technology	5,600		(933)		4,667		4.2
Trademarks	400		(167)		233		1.2
Total acquired intangibles, net	$	27,800	$	(2,917)	$	24,883

For the three and six months ended July 31, 2021, amortization expense related to acquired intangible assets was $0.9 million, and $1.8 million, respectively. No amortization expense was recorded during the three and six months ended July 31, 2020.

XML

Property and Equipment, Net

6 Months Ended

Jul. 31, 2021

Property, Plant and Equipment [Abstract]

Property and Equipment, Net

Property and Equipment, Net

Property and equipment, net, consisted of the following:

	As of July 31, 2021		As of January 31, 2021
	(in thousands)
Leasehold improvements	$	12,957	$	12,767
Computers and equipment	7,510		6,562
Furniture and fixtures	3,002		3,017
Capitalized internal-use software	3,936		1,355
Gross property and equipment (1)	27,405		23,701
Accumulated depreciation and amortization	(13,289)		(11,062)
Property and equipment, net	$	14,116	$	12,639

(1) Gross property and equipment includes construction-in-progress for leasehold improvements of $0.7 million and $0.5 million that had not yet been placed in service as of July 31, 2021 and January 31, 2021, respectively. The costs associated with construction-in-progress are not amortized until the asset is available for its intended use.

Depreciation and amortization expense was $1.1 million and $1.0 million for the three months ended July 31, 2021 and 2020, respectively, and $2.1 million and $1.9 million for the six months ended July 31, 2021 and 2020, respectively.

XML

Deferred Contract Costs

6 Months Ended

Jul. 31, 2021

Revenue from Contract with Customer [Abstract]

Deferred Contract Costs

Deferred Contract CostsDeferred contract costs, which primarily consist of deferred sales commissions, were $34.3 million and $31.6 million as of July 31, 2021 and January 31, 2021, respectively. Amortization expense for deferred contract costs was $3.6 million and $2.6 million for the three months ended July 31, 2021 and 2020, respectively, and $6.8 million and $5.1 million for the six months ended July 31, 2021 and 2020, respectively. There was no impairment charge related to the costs capitalized for the periods presented.Deferred Revenue and Performance Obligations

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

	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands)
Deferred revenue, beginning of period	$	126,056	$	96,446	$	129,972	$	92,569
Billings	75,482		55,448		135,157		109,111
Revenue recognized	(67,536)		(50,714)		(131,127)		(100,500)
Deferred revenue, end of period	$	134,002	$	101,180	$	134,002	$	101,180

For the three and six months ended July 31, 2021 and 2020, the majority of revenue recognized was from the deferred revenue balances at the beginning of each quarter.

As of July 31, 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 $118.2 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.

XML

Leases

6 Months Ended

Jul. 31, 2021

Leases [Abstract]

Leases

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 July 31, 2021		As of January 31, 2021
	(in thousands)
Assets
Lease right-of-use assets	$	22,482	$	24,691
Liabilities
Lease liabilities	5,469		5,262
Lease liabilities, non-current	23,831		26,542

As of July 31, 2021, the weighted average remaining lease term was 5.3 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 July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands)
Operating lease expense	$	1,403	$	1,445	$	2,772	$	2,887
Short-term lease expense	79		261		169		560
Variable lease expense	202		361		315		663

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

	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities	$	1,571	$	1,149	$	3,143	$	2,287

XML

Debt and Financing Arrangements

6 Months Ended

Jul. 31, 2021

Debt Disclosure [Abstract]

Debt and Financing Arrangements

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 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 ended October 31, 2020 (and only during such fiscal quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

•During the five business day period after any ten consecutive trading day period (the measurement period) in which the “trading price” (as defined in the Indenture) per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;

•If the Company calls such Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or

•Upon the occurrence of specified corporate events, as noted in the Indenture.

On or after April 1, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Notes may convert all or any portion of their Notes at any time, regardless of the foregoing circumstances.

The conversion rate will initially be 24.9507 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $40.08 per share of common stock. The conversion rate is subject to adjustment under certain circumstances in accordance with the terms of the Indenture, but will not be adjusted for accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Notes in connection with 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 $280.2 million as of July 31, 2021, with principal of $287.5 million, net of unamortized issuance costs of $7.3 million. The Notes were classified as long term liabilities as of July 31, 2021. The issuance costs related to the Notes are being amortized to interest expense over the contractual term of the Notes at an effective interest rate of 1.93%.

The net carrying amount of the liability component of the Notes as of July 31, 2021 (post-ASU 2020-06 adoption) and as of January 31, 2021 (pre-ASU 2020-06 adoption) was as follows:

	As of July 31, 2021		As of January 31, 2021
	(in thousands)
Principal	$	287,500	$	287,500
Less: unamortized debt discount	—		(63,664)
Less: unamortized issuance costs	(7,338)		(6,308)
Net carrying amount	$	280,162	$	217,528

The net carrying amount of the equity component of the Notes as of July 31, 2021 (post-ASU 2020-06 adoption) and as of January 31, 2021 (pre-ASU 2020-06 adoption) was as follows:

	As of July 31, 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:

	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands)
Contractual interest expense	$	918	$	349	$	1,797	$	349
Amortization of debt discount	—		1,145		—		1,145
Amortization of debt issuance costs	460		114		898		114
Total interest expense related to the Notes	$	1,378	$	1,608	$	2,695	$	1,608

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.

XML

Commitments and Contingencies

6 Months Ended

Jul. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Legal Matters

From time to time in the normal course of business, the Company may be subject to various claims and other legal matters arising in the ordinary course of business. The Company investigates these claims as they arise and accrues estimates for resolution of legal and other contingencies when losses are probable and estimable. The 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.

XML

Deferred Revenue and Performance Obligations

6 Months Ended

Jul. 31, 2021

Revenue from Contract with Customer [Abstract]

Deferred Revenue and Performance Obligations

Deferred Contract CostsDeferred contract costs, which primarily consist of deferred sales commissions, were $34.3 million and $31.6 million as of July 31, 2021 and January 31, 2021, respectively. Amortization expense for deferred contract costs was $3.6 million and $2.6 million for the three months ended July 31, 2021 and 2020, respectively, and $6.8 million and $5.1 million for the six months ended July 31, 2021 and 2020, respectively. There was no impairment charge related to the costs capitalized for the periods presented.Deferred Revenue and Performance Obligations

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

	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands)
Deferred revenue, beginning of period	$	126,056	$	96,446	$	129,972	$	92,569
Billings	75,482		55,448		135,157		109,111
Revenue recognized	(67,536)		(50,714)		(131,127)		(100,500)
Deferred revenue, end of period	$	134,002	$	101,180	$	134,002	$	101,180

For the three and six months ended July 31, 2021 and 2020, the majority of revenue recognized was from the deferred revenue balances at the beginning of each quarter.

As of July 31, 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 $118.2 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.

XML

Common Stock and Stockholders' Equity

6 Months Ended

Jul. 31, 2021

Equity [Abstract]

Common Stock and Stockholders' Equity

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 July 31, 2021 and January 31, 2021, the Company was authorized to grant up to 22,964,193 shares and 18,059,506 shares of common stock, respectively, under the Stock Plans.

The Company currently uses authorized and unissued shares to satisfy stock award exercises. As of July 31, 2021 and January 31, 2021, there were 15,693,636 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:

	July 31, 2021
Outstanding stock options and unvested RSUs and PSUs outstanding	14,965,580
Available for future stock option, RSU, and PSU grants	15,693,636
Available for ESPP	2,721,649
Total common stock reserved at July 31, 2021	33,380,865

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	48,866	$	41.52
Exercised	(1,286,266)	$	6.36
Canceled	(283,443)	$	16.61
Outstanding at July 31, 2021	9,656,995	$	8.43	6.5 years	$	310,586
Vested as of July 31, 2021	7,153,532	$	6.23	6.1 years	$	245,762

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 July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
Expected dividend yield	—	%	—	%	—	%	—	%
Expected volatility	46.5%		43.9	%	43.8% - 46.5%		43.3% - 43.9%
Expected term (years)	6.1		6.1		6.1		6.1
Risk-free interest rate	1.04%		0.41%		1.04% - 1.16%		0.41% - 0.47%

Stock options granted during the three months ended July 31, 2021 and 2020 had a weighted average grant date fair value of $19.08 and $12.59 per share, respectively. The aggregate intrinsic value of stock options exercised during the three months ended July 31, 2021 and 2020 was $25.6 million and $11.6 million, respectively.

Stock options granted during the six months ended July 31, 2021 and 2020 had a weighted average grant date fair value of $18.23 and $8.96 per share, respectively. The aggregate intrinsic value of stock options exercised during the six months ended July 31, 2021 and 2020 was $46.1 million and $23.0 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 July 31, 2021, there was approximately $23.5 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 2.3 years.

Restricted Stock Units

A summary of the Company’s RSU activity and related information is as follows:

	Number of RSUs	Weighted Average Grant Date Fair Value Per Share
Outstanding at January 31, 2021	3,971,128	$	23.60
Granted	2,127,307	$	41.31
Vested	(407,887)	$	23.84
Canceled	(636,581)	$	26.43
Outstanding at July 31, 2021	5,053,967	$	30.68

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 July 31, 2021, there was $145.2 million of unrecognized stock-based compensation expense related to unvested RSUs, which is expected to be recognized over a weighted average period of 3.3 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 per share, to certain employees of the Company for which the ultimate number of 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 fiscal 2022 ("2022 operating plan"). The PSUs will vest over a three-year period, subject to continuous service with the Company.

During the three and six months ended July 31, 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 July 31, 2021, total unrecognized stock-based compensation cost related to PSUs was $3.4 million. This unrecognized stock-based compensation cost is expected to be recognized using the accelerated attribution method over a weighted-average period of approximately 1.5 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 July 31, 2021 and 2020, the Company recognized $1.3 million and $1.2 million of stock-based compensation expense related to the ESPP, respectively. During the six months ended July 31, 2021 and 2020, the Company recognized $3.1 million and $2.8 million of stock-based compensation expense related to the ESPP, respectively.

During the three months ended July 31, 2021 and 2020, the Company withheld $2.0 million and $1.6 million in contributions from employees, respectively. During the six months ended July 31, 2021 and 2020, the Company withheld $5.0 million and $3.5 million, respectively.

During the three and six months ended July 31, 2021, 171,796, 20,269, and 30,409 shares of common stock were issued under the ESPP at purchase prices of $19.63, $23.03, and $34.54, respectively. During the three and six months ended July 31, 2020, 181,253 shares of common stock were issued under the ESPP at a purchase price of $19.63 per share.

Stock-Based Compensation

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

	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands)
Cost of revenue	$	1,023	$	263	$	1,699	$	607
Research and development	5,607		2,469		10,047		4,652
Sales and marketing	4,401		2,870		8,355		5,155
General and administrative	5,445		4,366		9,987		7,862
Total	$	16,476	$	9,968	$	30,088	$	18,276

XML

Net Loss Per Share

6 Months Ended

Jul. 31, 2021

Earnings Per Share [Abstract]

Net Loss Per Share

Net Loss per Share

The following table presents the calculation of basic and diluted net loss per share:

	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands, except per share data)
Numerator:
Net loss	$	(29,661)	$	(14,688)	$	(52,219)	$	(26,147)
Denominator:
Weighted average shares used in calculating net loss per share, basic and diluted	83,895		78,775		83,413		78,278
Net loss per share, basic and diluted	$	(0.35)	$	(0.19)	$	(0.63)	$	(0.33)

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 July 31,
	2021	2020
	(in thousands)
Shares subject to outstanding common stock awards	14,838	16,298
Convertible senior notes	7,173	7,173
Restricted stock awards purchased with promissory notes	—	142
Restricted stock issued to Rundeck key personnel	191	—
Shares issuable pursuant to the 2019 Employee Stock Purchase Plan	72	64
Total	22,274	23,677

XML

Income Taxes

6 Months Ended

Jul. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company's provision for income taxes for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in such period.

The Company's quarterly tax provision, and estimate of its annual effective tax rate, is subject to variation due to several factors, including variability in pre-tax income (or loss), the mix of jurisdictions to which such income (or loss) relates, changes in how the Company does business, and tax law developments. The Company's estimated effective tax rate for the year differs from the U.S. statutory rate of 21% as a result of our U.S. losses for which no benefit will be realized, our foreign operations which are subject to tax rates that differ from those in the U.S, as well as the benefit for non-U.S. income tax credits.

The Company recorded income tax expense of $0.2 million for the three months ended July 31, 2020, and $0.2 million and $0.5 million for the six months ended July 31, 2021 and 2020, respectively. Income tax expense for the three months ended July 31, 2021 was not material.

XML

Geographic Information

6 Months Ended

Jul. 31, 2021

Segment Reporting [Abstract]

Geographic Information

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 July 31,				Six Months Ended July 31, 2021
	2021		2020		2021		2020
	(in thousands)
United States	$	51,019	$	38,997	$	98,761	$	77,269
International	16,517		11,717		32,366		23,231
Total	$	67,536	$	50,714	$	131,127	$	100,500

Other than the United States, no other individual country accounted for 10% or more of revenue for the three and six months ended July 31, 2021 or 2020. As of July 31, 2021, 85% of the Company’s long-lived assets, including property and equipment and right-of-use lease assets, were located in the United States, and 15% 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.

XML

Subsequent Events	6 Months Ended
	Jul. 31, 2021
Subsequent Events [Abstract]
Subsequent Events	Subsequent EventsThe Company has evaluated subsequent events through September 3, 2021.

XML

Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jul. 31, 2021

Accounting Policies [Abstract]

Basis of Presentation

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 and six months ended July 31, 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 ending January 31, 2022.

Use of Estimates

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

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.

Concentrations of Risk and Significant Customers

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.

Segment Information

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.

Stock-Based Compensation

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 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

Recently Adopted Accounting PronouncementsIn 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 July 31, 2021 condensed consolidated balance sheets.

Operating 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.

XML

Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jul. 31, 2021

Accounting Policies [Abstract]

Accounting Standards Update and Change in Accounting Principle

	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)

XML

Cash, Cash Equivalents, and Investments (Tables)

6 Months Ended

Jul. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Components of Cash and Cash Equivalents

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

	As of July 31, 2021		As of January 31, 2021
	(in thousands)
Cash and cash equivalents
Cash	$	326,999	$	184,308
Money market funds	27,526		139,870
U.S. Treasury securities	—		14,988
Total cash and cash equivalents	$	354,525	$	339,166
Available-for-sale investments:
U.S. Treasury securities	$	50,390	$	45,026
Commercial paper	24,635		34,598
Corporate debt securities	117,271		141,488
Total available-for-sale investments	$	192,296	$	221,112

Components of Available-for-sale Investments

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

	As of July 31, 2021		As of January 31, 2021
	(in thousands)
Cash and cash equivalents
Cash	$	326,999	$	184,308
Money market funds	27,526		139,870
U.S. Treasury securities	—		14,988
Total cash and cash equivalents	$	354,525	$	339,166
Available-for-sale investments:
U.S. Treasury securities	$	50,390	$	45,026
Commercial paper	24,635		34,598
Corporate debt securities	117,271		141,488
Total available-for-sale investments	$	192,296	$	221,112

Components of Held-to-maturity Investments

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

	As of July 31, 2021		As of January 31, 2021
	(in thousands)
Cash and cash equivalents
Cash	$	326,999	$	184,308
Money market funds	27,526		139,870
U.S. Treasury securities	—		14,988
Total cash and cash equivalents	$	354,525	$	339,166
Available-for-sale investments:
U.S. Treasury securities	$	50,390	$	45,026
Commercial paper	24,635		34,598
Corporate debt securities	117,271		141,488
Total available-for-sale investments	$	192,296	$	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 July 31, 2021 and January 31, 2021. Gross realized gains or losses from sales of available-for-sale securities were not material for the three and six months ended July 31, 2021.

	As of July 31, 2021
	Cost Basis		Unrealized Gain (Loss), Net		Recorded Basis
	(in thousands)
Available-for-sale investments:
U.S. Treasury securities	$	50,392	$	(2)	$	50,390
Commercial paper	24,632		3		24,635
Corporate debt securities	117,241		30		117,271
Total available-for-sale investments	$	192,265	$	31	$	192,296

	As of January 31, 2021
	Cost Basis		Unrealized Gain (Loss), 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

Summary of Carrying Value of Available-for-sale Investments

The following tables summarize the Company’s investments’ adjusted cost, net unrealized gains (losses), and fair value by significant investment category as of July 31, 2021 and January 31, 2021. Gross realized gains or losses from sales of available-for-sale securities were not material for the three and six months ended July 31, 2021.

	As of July 31, 2021
	Cost Basis		Unrealized Gain (Loss), Net		Recorded Basis
	(in thousands)
Available-for-sale investments:
U.S. Treasury securities	$	50,392	$	(2)	$	50,390
Commercial paper	24,632		3		24,635
Corporate debt securities	117,241		30		117,271
Total available-for-sale investments	$	192,265	$	31	$	192,296

	As of January 31, 2021
	Cost Basis		Unrealized Gain (Loss), 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

Summary of Contractual Maturities of Available-for-sale Securities

The following table presents the Company’s available-for-sale securities by contractual maturity date as of July 31, 2021 and January 31, 2021:

	As of July 31, 2021
	Cost Basis		Recorded Basis
	(in thousands)
Due within one year	$	149,399	$	149,458
Due between one to five years	42,866		42,838
Total	$	192,265	$	192,296

	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

XML

Fair Value Measurements (Tables)

6 Months Ended

Jul. 31, 2021

Fair Value Disclosures [Abstract]

Summary of Information about Company's Financial Assets

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 July 31, 2021
	Level 1		Level 2		Level 3		Total
	(in thousands)
Money market funds	$	27,526	$	—	$	—	$	27,526
U.S. Treasury securities	—		50,390		—		50,390
Commercial paper	—		24,635		—		24,635
Corporate debt securities	—		117,271		—		117,271
Total	$	27,526	$	192,296	$	—	$	219,822
Included in cash equivalents							$	27,526
Included in investments							$	192,296

	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

XML

Goodwill and Acquired Intangible Assets (Tables)

6 Months Ended

Jul. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Other Intangible Assets Subject to Amortization

Acquired intangible assets subject to amortization as of July 31, 2021 were as follows:

	Cost		Accumulated Amortization		Net		Weighted Average Remaining Useful Life
	(in thousands)						(in years)
Customer relationships	$	21,800	$	(1,817)	$	19,983	9.2
Developed technology	5,600		(933)		4,667		4.2
Trademarks	400		(167)		233		1.2
Total acquired intangibles, net	$	27,800	$	(2,917)	$	24,883

XML

Property and Equipment, Net (Tables)

6 Months Ended

Jul. 31, 2021

Property, Plant and Equipment [Abstract]

Property and Equipment, Net

Property and equipment, net, consisted of the following:

	As of July 31, 2021		As of January 31, 2021
	(in thousands)
Leasehold improvements	$	12,957	$	12,767
Computers and equipment	7,510		6,562
Furniture and fixtures	3,002		3,017
Capitalized internal-use software	3,936		1,355
Gross property and equipment (1)	27,405		23,701
Accumulated depreciation and amortization	(13,289)		(11,062)
Property and equipment, net	$	14,116	$	12,639

(1) Gross property and equipment includes construction-in-progress for leasehold improvements of $0.7 million and $0.5 million that had not yet been placed in service as of July 31, 2021 and January 31, 2021, respectively. The costs associated with construction-in-progress are not amortized until the asset is available for its intended use.

XML

Leases (Tables)

6 Months Ended

Jul. 31, 2021

Leases [Abstract]

Information About Lease on Condensed Consolidated Balance Sheet

The following tables present information about leases on the condensed consolidated balance sheet.

	As of July 31, 2021		As of January 31, 2021
	(in thousands)
Assets
Lease right-of-use assets	$	22,482	$	24,691
Liabilities
Lease liabilities	5,469		5,262
Lease liabilities, non-current	23,831		26,542

Information About Leases on Condensed Consolidated Statement of Operations and Supplemental Cash Flow Information

The following table presents information about leases on the condensed consolidated statement of operations.

	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands)
Operating lease expense	$	1,403	$	1,445	$	2,772	$	2,887
Short-term lease expense	79		261		169		560
Variable lease expense	202		361		315		663

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

	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities	$	1,571	$	1,149	$	3,143	$	2,287

XML

Debt and Financing Arrangements (Tables)

6 Months Ended

Jul. 31, 2021

Debt Disclosure [Abstract]

Net Carrying Amount of Liability and Equity Components of Convertible Notes

The net carrying amount of the liability component of the Notes as of July 31, 2021 (post-ASU 2020-06 adoption) and as of January 31, 2021 (pre-ASU 2020-06 adoption) was as follows:

	As of July 31, 2021		As of January 31, 2021
	(in thousands)
Principal	$	287,500	$	287,500
Less: unamortized debt discount	—		(63,664)
Less: unamortized issuance costs	(7,338)		(6,308)
Net carrying amount	$	280,162	$	217,528

The net carrying amount of the equity component of the Notes as of July 31, 2021 (post-ASU 2020-06 adoption) and as of January 31, 2021 (pre-ASU 2020-06 adoption) was as follows:

	As of July 31, 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:

	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands)
Contractual interest expense	$	918	$	349	$	1,797	$	349
Amortization of debt discount	—		1,145		—		1,145
Amortization of debt issuance costs	460		114		898		114
Total interest expense related to the Notes	$	1,378	$	1,608	$	2,695	$	1,608

XML

Deferred Revenue and Performance Obligations (Tables)

6 Months Ended

Jul. 31, 2021

Revenue from Contract with Customer [Abstract]

Summary of Deferred Revenue

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

	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands)
Deferred revenue, beginning of period	$	126,056	$	96,446	$	129,972	$	92,569
Billings	75,482		55,448		135,157		109,111
Revenue recognized	(67,536)		(50,714)		(131,127)		(100,500)
Deferred revenue, end of period	$	134,002	$	101,180	$	134,002	$	101,180

XML

Common Stock and Stockholders' Equity (Tables)

6 Months Ended

Jul. 31, 2021

Equity [Abstract]

Summary of Shares of Common Stock Reserved for Future Issuance

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

	July 31, 2021
Outstanding stock options and unvested RSUs and PSUs outstanding	14,965,580
Available for future stock option, RSU, and PSU grants	15,693,636
Available for ESPP	2,721,649
Total common stock reserved at July 31, 2021	33,380,865

Schedule of 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	48,866	$	41.52
Exercised	(1,286,266)	$	6.36
Canceled	(283,443)	$	16.61
Outstanding at July 31, 2021	9,656,995	$	8.43	6.5 years	$	310,586
Vested as of July 31, 2021	7,153,532	$	6.23	6.1 years	$	245,762

Schedule of Assumptions Used to Calculate Fair Value of Employee Stock Option Grants Made

The following assumptions were used to calculate the fair value of employee stock option grants made during the periods:

	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
Expected dividend yield	—	%	—	%	—	%	—	%
Expected volatility	46.5%		43.9	%	43.8% - 46.5%		43.3% - 43.9%
Expected term (years)	6.1		6.1		6.1		6.1
Risk-free interest rate	1.04%		0.41%		1.04% - 1.16%		0.41% - 0.47%

Schedule of Restricted Stock Unit Activity

A summary of the Company’s RSU activity and related information is as follows:

	Number of RSUs	Weighted Average Grant Date Fair Value Per Share
Outstanding at January 31, 2021	3,971,128	$	23.60
Granted	2,127,307	$	41.31
Vested	(407,887)	$	23.84
Canceled	(636,581)	$	26.43
Outstanding at July 31, 2021	5,053,967	$	30.68

Schedule of Stock-based Compensation Expense

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

	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands)
Cost of revenue	$	1,023	$	263	$	1,699	$	607
Research and development	5,607		2,469		10,047		4,652
Sales and marketing	4,401		2,870		8,355		5,155
General and administrative	5,445		4,366		9,987		7,862
Total	$	16,476	$	9,968	$	30,088	$	18,276

XML

Net Loss Per Share (Tables)

6 Months Ended

Jul. 31, 2021

Earnings Per Share [Abstract]

Calculation of Basic and Diluted Net Loss Per Share

The following table presents the calculation of basic and diluted net loss per share:

	Three Months Ended July 31,				Six Months Ended July 31,
	2021		2020		2021		2020
	(in thousands, except per share data)
Numerator:
Net loss	$	(29,661)	$	(14,688)	$	(52,219)	$	(26,147)
Denominator:
Weighted average shares used in calculating net loss per share, basic and diluted	83,895		78,775		83,413		78,278
Net loss per share, basic and diluted	$	(0.35)	$	(0.19)	$	(0.63)	$	(0.33)

Schedule of Anti-dilutive Securities That Were Not Included in Diluted Per Share Calculations

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

	As of July 31,
	2021	2020
	(in thousands)
Shares subject to outstanding common stock awards	14,838	16,298
Convertible senior notes	7,173	7,173
Restricted stock awards purchased with promissory notes	—	142
Restricted stock issued to Rundeck key personnel	191	—
Shares issuable pursuant to the 2019 Employee Stock Purchase Plan	72	64
Total	22,274	23,677

XML

Geographic Information (Tables)

6 Months Ended

Jul. 31, 2021

Segment Reporting [Abstract]

Disaggregation of Revenue By Geographic Location

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

	Three Months Ended July 31,				Six Months Ended July 31, 2021
	2021		2020		2021		2020
	(in thousands)
United States	$	51,019	$	38,997	$	98,761	$	77,269
International	16,517		11,717		32,366		23,231
Total	$	67,536	$	50,714	$	131,127	$	100,500

XML

Summary of Significant Accounting Policies - Narrative (Details)	3 Months Ended	6 Months Ended
	Jul. 31, 2021 USD ($)	Jul. 31, 2021 USD ($) segment	Apr. 30, 2021 USD ($)	Feb. 01, 2021 USD ($)	Jan. 31, 2021 USD ($)	Jul. 31, 2020 USD ($)	Jun. 25, 2020 USD ($)	Apr. 30, 2020 USD ($)	Jan. 31, 2020 USD ($)
Accounting Policies [Abstract]
Number of operating segments | segment		1
Related party transaction, receivable	$ 1,100,000	$ 1,100,000
Expected dividend yield		0.00%
Item Effected [Line Items]
Convertible senior notes, net	280,162,000	$ 280,162,000		$ 279,264,000	$ 217,528,000
Accumulated deficit	285,172,000	285,172,000	$ 294,056,000		366,727,000	$ 341,871,000		$ 307,543,000	$ 307,938,000
Accumulated Deficit
Item Effected [Line Items]
Accumulated deficit	(293,587,000)	(293,587,000)	(263,926,000)		(248,110,000)	(205,354,000)		(190,666,000)	(179,207,000)
Additional Paid-in Capital
Item Effected [Line Items]
Accumulated deficit	578,728,000	578,728,000	$ 557,843,000		614,494,000	$ 546,169,000		$ 497,430,000	$ 487,008,000
Cumulative Effect, Period of Adoption, Adjustment
Item Effected [Line Items]
Accumulated deficit					(61,736,000)
Cumulative Effect, Period of Adoption, Adjustment | Accumulated Deficit
Item Effected [Line Items]
Accumulated deficit					6,742,000
Cumulative Effect, Period of Adoption, Adjustment | Additional Paid-in Capital
Item Effected [Line Items]
Accumulated deficit					(68,478,000)
Accounting Standards Update 2020-06
Item Effected [Line Items]
Convertible senior notes, net					$ 61,700,000
Convertible Senior Notes
Item Effected [Line Items]
Aggregate principal amount of debt issued	$ 287,500,000	$ 287,500,000					$ 287,500,000

XML

Summary of Significant Accounting Policies - Adjusted Financial Statements to Apply Adopted Guidance (Details) - USD ($) $ in Thousands	Jul. 31, 2021	Feb. 01, 2021	Jan. 31, 2021
Liabilities
Principal		$ 287,500
Unamortized debt discount and issuance costs		(8,236)
Net carrying amount	$ 280,162	279,264	$ 217,528
Equity
Additional paid-in capital	(578,728)	(546,016)	(614,494)
Accumulated deficit	$ (293,587)	$ (241,368)	(248,110)
Accounting Standards Update 2020-06
Liabilities
Net carrying amount			61,700
Previously Reported
Liabilities
Principal			287,500
Unamortized debt discount and issuance costs			(69,972)
Net carrying amount			217,528
Equity
Additional paid-in capital			(614,494)
Accumulated deficit			(248,110)
ASU 2020-06 Adoption Adjustment | Accounting Standards Update 2020-06
Liabilities
Principal			0
Unamortized debt discount and issuance costs			61,736
Net carrying amount			61,736
Equity
Additional paid-in capital			68,478
Accumulated deficit			$ 6,742

XML

Cash, Cash Equivalents, and Investments - Components of Cash and Cash Equivalents and Investments (Details) - USD ($) $ in Thousands	Jul. 31, 2021	Jan. 31, 2021
Cash and cash equivalents
Cash	$ 326,999	$ 184,308
Money market funds	27,526	139,870
U.S. Treasury securities	0	14,988
Total cash and cash equivalents	354,525	339,166
Debt Securities, Available-for-sale [Line Items]
Total available-for-sale investments	192,296	221,112
U.S. Treasury securities
Debt Securities, Available-for-sale [Line Items]
Total available-for-sale investments	50,390	45,026
Commercial paper
Debt Securities, Available-for-sale [Line Items]
Total available-for-sale investments	24,635	34,598
Corporate debt securities
Debt Securities, Available-for-sale [Line Items]
Total available-for-sale investments	$ 117,271	$ 141,488

XML

Cash, Cash Equivalents, and Investments - Carrying Value of Investments (Details) - USD ($) $ in Thousands	Jul. 31, 2021	Jan. 31, 2021
Debt Securities, Available-for-sale [Line Items]
Cost Basis	$ 192,265	$ 220,769
Unrealized Gain (Loss), Net	31	343
Recorded Basis	192,296	221,112
U.S. Treasury securities
Debt Securities, Available-for-sale [Line Items]
Cost Basis	50,392	45,023
Unrealized Gain (Loss), Net	(2)	3
Recorded Basis	50,390	45,026
Commercial paper
Debt Securities, Available-for-sale [Line Items]
Cost Basis	24,632	34,607
Unrealized Gain (Loss), Net	3	(9)
Recorded Basis	24,635	34,598
Corporate debt securities
Debt Securities, Available-for-sale [Line Items]
Cost Basis	117,241	141,139
Unrealized Gain (Loss), Net	30	349
Recorded Basis	$ 117,271	$ 141,488

XML

Cash, Cash Equivalents, and Investments - Contractual Maturity (Details) - USD ($) $ in Thousands	Jul. 31, 2021	Jan. 31, 2021
Cost Basis
Due within one year	$ 149,399	$ 171,498
Due between one to five years	42,866	49,271
Cost Basis	192,265	220,769
Recorded Basis
Due within one year	149,458	171,837
Due between one to five years	42,838	49,275
Recorded Basis	$ 192,296	$ 221,112

XML

Cash, Cash Equivalents, and Investments - Additional Information (Details)	6 Months Ended
	Jul. 31, 2021 USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Impairment loss recorded	$ 0

XML

Fair Value Measurements (Details) - Recurring - USD ($) $ in Thousands	Jul. 31, 2021	Jan. 31, 2021
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	$ 27,526	$ 154,858
Included in investments	192,296	221,112
Total	219,822	375,970
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	27,526	154,858
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	192,296	221,112
Fair value of convertible senior notes	364,200
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	0	0
U.S. Treasury securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Included in investments	50,390	60,014
U.S. Treasury securities | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Included in investments	0	14,988
U.S. Treasury securities | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Included in investments	50,390	45,026
U.S. Treasury securities | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Included in investments	0	0
Commercial paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Included in investments	24,635	34,598
Commercial paper | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Included in investments	0	0
Commercial paper | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Included in investments	24,635	34,598
Commercial paper | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Included in investments	0	0
Corporate debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Included in investments	117,271	141,488
Corporate debt securities | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Included in investments	0	0
Corporate debt securities | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Included in investments	117,271	141,488
Corporate debt securities | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Included in investments	0	0
Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	27,526	139,870
Money market funds | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	27,526	139,870
Money market funds | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	0	0
Money market funds | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	$ 0	$ 0

XML

Goodwill and Acquired Intangible Assets - Schedule of Other Intangible Assets Subject to Amortization (Details) $ in Thousands	6 Months Ended
	Jul. 31, 2021 USD ($)
Finite-Lived Intangible Assets [Line Items]
Cost	$ 27,800
Accumulated Amortization	(2,917)
Net	24,883
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Cost	21,800
Accumulated Amortization	(1,817)
Net	$ 19,983
Weighted Average Remaining Useful Life	9 years 2 months 12 days
Developed technology
Finite-Lived Intangible Assets [Line Items]
Cost	$ 5,600
Accumulated Amortization	(933)
Net	$ 4,667
Weighted Average Remaining Useful Life	4 years 2 months 12 days
Trademarks
Finite-Lived Intangible Assets [Line Items]
Cost	$ 400
Accumulated Amortization	(167)
Net	$ 233
Weighted Average Remaining Useful Life	1 year 2 months 12 days

XML

Goodwill and Acquired Intangible Assets - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jul. 31, 2021	Jul. 31, 2020	Jul. 31, 2021	Jul. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]
Changes in goodwill			$ 0
Amortization expense related to intangible assets	$ 900,000	$ 0	$ 1,800,000	$ 0

XML

Property and Equipment, Net (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2021	Jul. 31, 2020	Jul. 31, 2021	Jul. 31, 2020	Jan. 31, 2021
Property, Plant and Equipment [Line Items]
Gross property and equipment	$ 27,405		$ 27,405		$ 23,701
Accumulated depreciation and amortization	(13,289)		(13,289)		(11,062)
Property and equipment, net	14,116		14,116		12,639
Depreciation and amortization	1,100	$ 1,000	2,100	$ 1,900
Leasehold improvements
Property, Plant and Equipment [Line Items]
Gross property and equipment	12,957		12,957		12,767
Computers and equipment
Property, Plant and Equipment [Line Items]
Gross property and equipment	7,510		7,510		6,562
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Gross property and equipment	3,002		3,002		3,017
Capitalized internal-use software
Property, Plant and Equipment [Line Items]
Gross property and equipment	3,936		3,936		1,355
Construction-in-progress
Property, Plant and Equipment [Line Items]
Gross property and equipment	$ 700		$ 700		$ 500

XML

Deferred Contract Costs (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jul. 31, 2021	Jul. 31, 2020	Jul. 31, 2021	Jul. 31, 2020	Jan. 31, 2021
Revenue from Contract with Customer [Abstract]
Deferred contract costs	$ 34,300,000		$ 34,300,000		$ 31,600,000
Amortization of deferred contract costs	$ 3,600,000	$ 2,600,000	6,812,000	$ 5,064,000
Impairment loss in relation to costs capitalized			$ 0	$ 0

XML

Leases - Information About Lease on Condensed Consolidated Balance Sheet (Details) - USD ($) $ in Thousands	Jul. 31, 2021	Jan. 31, 2021
Assets
Lease right-of-use assets	$ 22,482	$ 24,691
Liabilities
Lease liabilities	5,469	5,262
Lease liabilities, non-current	$ 23,831	$ 26,542

XML

Leases - Additional Information (Details)	Jul. 31, 2021
Leases [Abstract]
Weighted average remaining lease term (in years)	5 years 3 months 18 days
Weighted average discount rate	3.70%

XML

Leases - Information About Leases on Condensed Consolidated Statement of Operations (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2021	Jul. 31, 2020	Jul. 31, 2021	Jul. 31, 2020
Leases [Abstract]
Operating lease expense	$ 1,403	$ 1,445	$ 2,772	$ 2,887
Short-term lease expense	79	261	169	560
Variable lease expense	$ 202	$ 361	$ 315	$ 663

XML

Leases - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2021	Jul. 31, 2020	Jul. 31, 2021	Jul. 31, 2020
Leases [Abstract]
Cash paid for amounts included in the measurement of lease liabilities	$ 1,571	$ 1,149	$ 3,143	$ 2,287

XML

Debt and Financing Arrangements - Additional Information (Details) $ / shares in Units, shares in Millions		6 Months Ended
	Jun. 25, 2020 USD ($) day $ / shares shares	Jul. 31, 2021 USD ($)	Jul. 31, 2020 USD ($)	Jan. 31, 2021 USD ($)
Debt Instrument [Line Items]
Conversion rate	0.0249507
Net cost incurred to purchase capped calls		$ 0	$ 35,708,000
Convertible Senior Notes
Debt Instrument [Line Items]
Aggregate principal amount of debt issued	$ 287,500,000	$ 287,500,000
Net proceeds from debt offering, after deducting initial purchaser discounts and debt issuance costs paid or payable	$ 278,200,000
Stated interest rate	1.25%	1.25%
Initial conversion price (in dollars per share) | $ / shares	$ 40.08
Event of default, option to accelerate amounts due, minimum percentage of aggregate principal amount of outstanding debt	25.00%
Carrying amount of equity component representing conversion option	$ 70,800,000	$ 0		$ 70,768,000
Effective interest rate	7.88%	1.93%
Issuance costs attributable to company				9,300,000
Issuance costs attributable to liability component				7,000,000
Less: issuance costs		$ 0		2,290,000
Long-term debt		280,162,000		217,528,000
Unamortized issuance costs		$ 7,338,000		$ 6,308,000
Net cost incurred to purchase capped calls	$ 35,700,000
Convertible Senior Notes | Capped Calls
Debt Instrument [Line Items]
Initial strike price (in dollars per share) | $ / shares	$ 40.08
Cap price (in dollars per share) | $ / shares	$ 61.66
Number of shares of common stock covered by capped calls (in shares) | shares	7.2
Automatic exercise period for capped calls, trading days | day	40
Convertible Senior Notes | Debt Conversion Terms, One
Debt Instrument [Line Items]
Threshold trading days | day	20
Threshold consecutive trading days | day	30
Threshold percentage of stock price trigger	130.00%
Convertible Senior Notes | Debt Conversion Terms, Two
Debt Instrument [Line Items]
Threshold trading days | day	5
Threshold consecutive trading days | day	10
Threshold percentage of product of last reported sales price of common stock and conversion rate on each such trading day	98.00%
Convertible Senior Notes | Discount Rate
Debt Instrument [Line Items]
Liability component calculation, measurement input	0.0730
Convertible Senior Notes | On or after July 6, 2023
Debt Instrument [Line Items]
Threshold trading days | day	20
Threshold consecutive trading days | day	30
Threshold percentage of stock price trigger	130.00%
Redemption, threshold trading days immediately preceding maturity date | day	41
Redemption price, percentage of principal amount to be redeemed	100.00%
Convertible Senior Notes | Fundamental Change
Debt Instrument [Line Items]
Redemption price, percentage of principal amount to be redeemed	100.00%

XML

Debt and Financing Arrangements - Net Carrying Amount (Details) - USD ($) $ in Thousands	Jul. 31, 2021	Feb. 01, 2021	Jan. 31, 2021	Jun. 25, 2020
Liability Component:
Principal		$ 287,500
Convertible Senior Notes
Liability Component:
Principal	$ 287,500		$ 287,500
Less: unamortized debt discount	0		(63,664)
Less: unamortized issuance costs	(7,338)		(6,308)
Net carrying amount	280,162		217,528
Proceeds allocated to the conversion options (debt discount)	0		70,768	$ 70,800
Less: issuance costs	0		2,290
Carrying amount of the equity component	0		68,478
Equity
Proceeds allocated to the conversion options (debt discount)	0		70,768	$ 70,800
Less: issuance costs	0		(2,290)
Carrying amount of the equity component	$ 0		$ 68,478

XML

Debt and Financing Arrangements - Interest Expense (Details) - Convertible Senior Notes - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2021	Jul. 31, 2020	Jul. 31, 2021	Jul. 31, 2020
Debt Instrument [Line Items]
Contractual interest expense	$ 918	$ 349	$ 1,797	$ 349
Amortization of debt discount	0	1,145	0	1,145
Amortization of debt issuance costs	460	114	898	114
Total interest expense related to the Notes	$ 1,378	$ 1,608	$ 2,695	$ 1,608

XML

Deferred Revenue and Performance Obligations - Deferred Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2021	Jul. 31, 2020	Jul. 31, 2021	Jul. 31, 2020
Increase (Decrease) In Contract with Customer, Liability [Roll Forward]
Deferred revenue, beginning of period	$ 126,056	$ 96,446	$ 129,972	$ 92,569
Billings	75,482	55,448	135,157	109,111
Revenue recognized	(67,536)	(50,714)	(131,127)	(100,500)
Deferred revenue, end of period	$ 134,002	$ 101,180	$ 134,002	$ 101,180

XML

Deferred Revenue and Performance Obligations - Additional Information (Details) $ in Millions	Jul. 31, 2021 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Future estimated revenue related to performance obligations	$ 118.2
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-08-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation, period	24 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-08-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation, period

XML

Common Stock and Stockholders' Equity - Additional Information (Details) $ / shares in Units, $ in Thousands		3 Months Ended		6 Months Ended
	Apr. 11, 2019 purchase_period	Jul. 31, 2021 USD ($) $ / shares shares	Jul. 31, 2020 USD ($) $ / shares shares	Jul. 31, 2021 USD ($) equityIncentivePlan $ / shares shares	Jul. 31, 2020 USD ($) $ / shares shares	Jan. 31, 2021 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of equity incentive plans | equityIncentivePlan				2
Number of shares authorized for grant (in shares)		22,964,193		22,964,193		18,059,506
Number of shares available for grant (in shares)		15,693,636		15,693,636		13,060,282
Weighted average grant date fair value of stock options (in dollars per share) | $ / shares		$ 19.08	$ 12.59	$ 18.23	$ 8.96
Aggregate intrinsic value of stock options exercised | $		$ 25,600	$ 11,600	$ 46,100	$ 23,000
Unrecognized compensation cost related to unvested stock options | $		23,500		23,500
Stock-based compensation expense | $		16,476	9,968	$ 30,088	18,276
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost related to unvested awards, period for recognition				2 years 3 months 18 days
RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost related to unvested awards, period for recognition				3 years 3 months 18 days
Unrecognized compensation cost related to unvested RSUs | $		145,200		$ 145,200
Awards granted (in shares)				2,127,307
Weight-average grant date fair value (in dollars per share) | $ / shares				$ 41.31
PSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost related to unvested awards, period for recognition				1 year 6 months
Unrecognized compensation cost related to unvested RSUs | $		$ 3,400		$ 3,400
Awards granted (in shares)				127,309
Weight-average grant date fair value (in dollars per share) | $ / shares				$ 41.17
Vesting period				3 years
ESPP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for grant (in shares)		2,721,649		2,721,649
Offering period	24 months
Number of purchase periods within each offering period | purchase_period	4
Purchase period	6 months
Purchase price as a percentage of fair market value of stock on the offering date or the purchase date	85.00%
Stock-based compensation expense | $		$ 1,300	1,200	$ 3,100	2,800
Amount withheld on behalf of employees for future purchase | $		$ 2,000	$ 1,600	$ 5,000	$ 3,500
Shares purchased (in shares)			181,253		181,253
Purchase price (in dollars per share) | $ / shares			$ 19.63		$ 19.63
ESPP | Award One
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares purchased (in shares)			171,796		171,796
Purchase price (in dollars per share) | $ / shares		$ 19.63		$ 19.63
ESPP | Award Two
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares purchased (in shares)			20,269		20,269
Purchase price (in dollars per share) | $ / shares		23.03		23.03
ESPP | Award Three
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares purchased (in shares)			30,409		30,409
Purchase price (in dollars per share) | $ / shares		$ 34.54		$ 34.54

XML

Common Stock and Stockholders' Equity - Shares Available for Issuance (Details) - shares	Jul. 31, 2021	Jan. 31, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for grant (in shares)	15,693,636	13,060,282
Total common stock reserved at period end (in shares)	33,380,865
Stock options, RSUs and PSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding stock options and unvested RSUs outstanding (in shares)	14,965,580
Number of shares available for grant (in shares)	15,693,636
ESPP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for grant (in shares)	2,721,649

XML

Common Stock and Stockholders' Equity - Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended	12 Months Ended
	Jul. 31, 2021	Jan. 31, 2021
Number of Shares
Outstanding, beginning balance (in shares)	11,177,838
Granted (in shares)	48,866
Exercised (in shares)	(1,286,266)
Canceled (in shares)	(283,443)
Outstanding, ending balance (in shares)	9,656,995	11,177,838
Weighted Average Exercise Price
Outstanding, beginning balance (in dollars per share)	$ 8.25
Granted (in dollars per share)	41.52
Exercised (in dollars per share)	6.36
Canceled (in dollars per share)	16.61
Outstanding, ending balance (in dollars per share)	$ 8.43	$ 8.25
Weighted Average Remaining Contractual Term
Outstanding	6 years 6 months	6 years 10 months 24 days
Aggregate Intrinsic Value
Outstanding	$ 310,586	$ 452,452
Vested
Number of shares (in shares)	7,153,532
Weighted average exercise price (in dollars per share)	$ 6.23
Weighted average remaining contractual term (in years)	6 years 1 month 6 days
Aggregate Intrinsic Value	$ 245,762

XML

Common Stock and Stockholders' Equity - Assumptions Used to Calculate Fair Value of Employee Stock Option Grants Made (Details)	3 Months Ended		6 Months Ended
	Jul. 31, 2021	Jul. 31, 2020	Jul. 31, 2021	Jul. 31, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected dividend yield			0.00%
Employee | Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected dividend yield	0.00%	0.00%	0.00%	0.00%
Expected volatility, minimum			43.80%	43.30%
Expected volatility, maximum	46.50%	43.90%	46.50%	43.90%
Expected term (years)	6 years 1 month 6 days	6 years 1 month 6 days	6 years 1 month 6 days	6 years 1 month 6 days
Risk-free interest rate	1.04%	0.41%
Risk-free interest rate, minimum			1.04%	0.41%
Risk-free interest rate, maximum			1.16%	0.47%

XML

Common Stock and Stockholders' Equity - Restricted Stock Units Activity (Details) - RSUs	6 Months Ended
	Jul. 31, 2021 $ / shares shares
Number of RSUs
Outstanding, beginning balance (in shares) | shares	3,971,128
Granted (in shares) | shares	2,127,307
Vested, net of shares withheld for employee payroll taxes (in shares) | shares	(407,887)
Canceled (in shares) | shares	(636,581)
Outstanding, ending balance (in shares) | shares	5,053,967
Weighted Average Grant Date Fair Value Per Share
Outstanding, beginning balance (in dollars per share) | $ / shares	$ 23.60
Granted (in dollars per share) | $ / shares	41.31
Vested, net of shares withheld for employee payroll taxes (in dollars per share) | $ / shares	23.84
Canceled (in dollars per share) | $ / shares	26.43
Outstanding, ending balance (in dollars per share) | $ / shares	$ 30.68

XML

Common Stock and Stockholders' Equity - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2021	Jul. 31, 2020	Jul. 31, 2021	Jul. 31, 2020
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expense	$ 16,476	$ 9,968	$ 30,088	$ 18,276
Cost of revenue
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expense	1,023	263	1,699	607
Research and development
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expense	5,607	2,469	10,047	4,652
Sales and marketing
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expense	4,401	2,870	8,355	5,155
General and administrative
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expense	$ 5,445	$ 4,366	$ 9,987	$ 7,862

XML

Net Loss Per Share - Calculation of Basic and Diluted Net Loss Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2021	Jul. 31, 2020	Jul. 31, 2021	Jul. 31, 2020
Numerator:
Net loss	$ (29,661)	$ (14,688)	$ (52,219)	$ (26,147)
Denominator:
Weighted average shares used in calculating net loss per share, diluted (in shares)	83,895	78,775	83,413	78,278
Weighted Average Number of Shares Outstanding, Basic	83,895	78,775	83,413	78,278
Net loss per share, basic (in dollars per share)	$ (0.35)	$ (0.19)	$ (0.63)	$ (0.33)
Net loss per share, diluted (in dollars per share)	$ (0.35)	$ (0.19)	$ (0.63)	$ (0.33)

XML

Net Loss Per Share - Anti-dilutive Securities (Details) - shares shares in Thousands	6 Months Ended
	Jul. 31, 2021	Jul. 31, 2020
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	22,274	23,677
Shares subject to outstanding common stock awards
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	14,838	16,298
Convertible senior notes
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	7,173	7,173
Restricted stock awards purchased with promissory notes
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	0	142
Restricted stock issued to Rundeck key personnel
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	191	0
Shares issuable pursuant to the 2019 Employee Stock Purchase Plan
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	72	64

XML

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2021	Jul. 31, 2020	Jul. 31, 2021	Jul. 31, 2020
Income Tax Disclosure [Abstract]
Income tax expense	$ 23	$ 248	$ 228	$ 479

XML

Geographic Information - Revenue by Location (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2021	Jul. 31, 2020	Jul. 31, 2021	Jul. 31, 2020
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 67,536	$ 50,714	$ 131,127	$ 100,500
United States
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	51,019	38,997	98,761	77,269
International
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 16,517	$ 11,717	$ 32,366	$ 23,231

XML

Geographic Information - Additional Information (Details) - Long-Lived Assets - Geographic Concentration Risk	6 Months Ended	12 Months Ended
	Jul. 31, 2021	Jan. 31, 2021
United States
Concentration Risk [Line Items]
Concentration risk, percentage	85.00%	87.00%
Canada
Concentration Risk [Line Items]
Concentration risk, percentage	15.00%	13.00%