Attention: | Barbara C. Jacobs, Assistant Director |
Re: | PagerDuty, Inc. |
1. | Your response to prior comment 4 states that the company does not believe that the number of paid users to be a key metric. However, the majority of your revenue is generated from your existing customer base and you expand your existing customer base by adding more users and creating additional use cases, as noted in the chart of page 55. Since the number of users and use cases per customer appear to impact your revenue, tell us what consideration you have given to disclosing the number of users per customer and use cases per customer as key metrics. Consider disclosing whether the increase in customers with over $100,000 in annual recurring revenue were existing customers that expanded their subscription or were new customers. In addition, consider stratifying your customer base to indicate the portion of customers that are small or medium size. |
March 11, 2019 Page 2 |
March 11, 2019 Page 3 |
2. | You disclose that revenue increased by 48% for the nine months ended October 31, 2018 compared to the nine months ended October 31, 2017 and that this increase was primarily attributable to increases in revenues from both existing and new customers. Please revise your disclosures to separately quantify the amount of this increase that is attributable from existing customers versus new customers. Your disclosures should also quantify the underlying drivers that are increasing existing customer sales such as disclosing the amount that is attributable to an increase in the number of users and to purchases of additional functionality. Refer to Section III.D of SEC Release No. 33-6835. |
3. | Please provide us with a listing of all share options granted in the nine months ended October 31, 2018 and any granted subsequent to this date and the fair value of the underlying ordinary shares used to value such awards at the grant date. To the extent there were any significant fluctuations in the fair values from period-to-period, please describe for us the factors that contributed to these fluctuations, including any intervening events within the company or changes in your valuation assumptions or methodology. |
March 11, 2019 Page 4 |
Event | Event Date | Number of Awards | Exercise Price | Common Stock Fair Value Per Share for Financial Reporting |
Option grants | 2/26/2018 | 432,800 | $5.87 | $7.17 |
Option grants | 3/5/2018 | 465,780 | $5.87 | $7.20 |
Option grants | 3/30/2018 | 157,800 | $5.87 | $7.30 |
Option grants | 4/2/2018 | 234,500 | $5.87 | $7.31 |
Option grants | 4/9/2018 | 416,700 | $5.87 | $7.34 |
Third-Party Valuation | 4/30/2018 | — | — | $7.43 |
Option grants | 6/27/2018 | 301,625 | $7.43 | $9.52 |
Warrant issued to Tides Foundation | 6/29/2018 | 648,092** | $0.01 | $9.59 |
Option grants | 7/3/2018 | 190,120 | $7.43 | $9.74 |
Option grants | 7/10/2018 | 1,030,000 | $7.43 | $9.99 |
Option grants | 7/11/2018 | 120,000 | $7.43 | $10.02 |
Option grants | 7/18/2018 | 79,100 | $7.43 | $10.28 |
Third-Party Valuation | 8/24/2018 | — | — | $11.61 |
Option grants | 9/27/2018 | 33,000 | $11.61 | $12.01 |
Option grants | 10/16/2018 | 521,150 | $11.61 | $12.23 |
Option grants | 10/23/2018 | 244,306 | $11.61 | $12.32 |
Third-Party Valuation | 10/31/2018 | — | — | $12.41 |
Option grants | 1/15/2019 | 460,610 | $12.41 | $14.15 |
Third-Party Valuation | 1/31/2019 | — | — | $14.52 |
Option grants | 3/8/2019 | 3,041,000 | 14.52 |
March 11, 2019 Page 5 |
• | August 2017 – Global Expansion – The Company launched its local team in Sydney, Australia. The global expansion helped the Company further grow its presence in the Asia-Pacific region and address the increasing customer demand for the Company’s digital operations management platform. |
• | September 2017 – Product Launch – The Company introduced new capabilities in machine learning and advanced response automation that enable organizations to orchestrate the right response to incidents. |
• | October 2017 – Global Expansion – The Company launched in Europe with the opening of a London office. |
• | October 2017 – Global Expansion – The Company announced plans to grow its presence in Canada and continue its international expansion. |
• | April 2018 – Annual Recurring Revenue (“ARR”) Growth – The Company’s ARR increased from $70.3 million in April 2017 to $104.5 million in April 2018, a 48.6% increase period over period. |
March 11, 2019 Page 6 |
• | June 2018 – Product Launch – The Company introduced Event Intelligence, a new product that builds on its market-leading digital operations management platform. |
• | June 2018 – Key Board of Directors Appointment – The Company announced Zach Nelson, former CEO of NetSuite, had joined its board of directors as its first independent, non-venture investor affiliated, board member. Mr. Nelson’s experience in the cloud software and enterprise SaaS industry strengthened the Company’s strategic vision and execution. |
• | August 2018 – Financing – The Company raised $90 million in an equity financing at a valuation of $1.3 billion. T. Rowe Price Associates, Inc. and Wellington Management led the financing, with participation from existing investors Accel, Andreessen Horowitz, and Bessemer Venture Partners. |
• | November 2018 – Key Board of Directors Appointment – The Company announced Elena Gomez, CFO of Zendesk, had joined its board of directors as its second independent, non-venture investor affiliated, board member. As a senior finance executive with over 20 years of leadership experience at public companies, Ms. Gomez was elected to the board of directors to help the Company drive global growth and scale its finance operations, as it prepares for a potential initial public offering. |
March 11, 2019 Page 7 |
• | November 2018 – The Company held an organizational meeting with underwriters and the Company’s other advisers to formally begin its potential initial public offering process and held multiple drafting sessions with management and its advisers thereafter. |
• | December 2018 – The Company initially submitted a draft registration statement on Form S-1 on December 20, 2018, and since that time, the Company has continued to make preparations for a potential initial public offering. |
• | January 2019 – The Company increased the probability of an initial public offering from 25.0% as of the October 2018 Valuation Report to 40.0% as of the January 2019 Valuation Report. |
Sincerely, |
/s/ David J. Segre |
David J. Segre |
cc: | Howard Wilson, PagerDuty, Inc. |
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