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What changed in PagerDuty, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of PagerDuty, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+385 added−338 removedSource: 10-K (2023-03-16) vs 10-K (2022-03-17)

Top changes in PagerDuty, Inc.'s 2023 10-K

385 paragraphs added · 338 removed · 273 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeFor a discussion of risks related to these various areas of government regulation, see “Risk Factors—We are subject to governmental regulation and other legal obligations, particularly those related to privacy, data protection and information security, and our actual or perceived failure to comply with such obligations could harm our business, by resulting in litigation, fines, penalties or adverse publicity and reputational damage that may negatively affect the value of our business and decrease the price of our common stock.
Biggest changeOur actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; adverse publicity and reputational damage; loss of revenue or profits; loss of customers or sales; decrease the price of our common stock; and other adverse business consequences.
We provide our customers with a complete platform that spans end-to-end digital operations management needs: harness digital data, make sense of data, automate, respond and engage teams, and analyze and learn from a team’s actions. We have continued to extend our core capabilities around on-call management and modern incident response to include AI Ops and automation.
We provide our customers with a complete platform that spans end-to-end digital operations management needs: harness digital data, make sense of data, automate, respond and engage teams, and analyze and learn from a team’s actions. We have continued to extend our core capabilities around on-call management and incident response to include AI Ops and automation.
We will continue to target our potential customers with community building and marketing programs that include digital campaigns, our annual user conference, broader industry events, customer marketing activities, and user meet-ups. • Expand usage within our existing customer base across development, IT operations, security operations, customer service and support, as well as with new user groups such as business and industrial operations.
We will continue to target our potential customers with community building and marketing programs that include digital campaigns, our user events, broader industry events, customer marketing activities, and user meet-ups. • Expand usage within our existing customer base across development, IT operations, security operations, customer service and support, as well as with new user groups such as business and industrial operations.
We have delivered 99.9% uptime to our customers over the past 24 months. Security is a critical customer requirement, and we have adopted governance, access control, and vulnerability testing to support the needs of our most sophisticated customers. • Designed for the user. Our software is instant on and easy to adopt and use.
We have delivered 99.98% uptime to our customers over the past 24 months. Security is a critical customer requirement, and we have adopted governance, access control, and vulnerability testing to support the needs of our most sophisticated customers. • Designed for the user. Our software is instant on and easy to adopt and use.
We made early investments in ESG in 2020, including forming a cross-functional ESG Steering Committee of business leadership, to ensure that how we operate as a business produces positive impact. In 2021 we strengthened this work, conducting our first materiality assessment and first two years of greenhouse gas inventories.
We made our foundational investments in ESG in 2020, including forming a cross-functional ESG Steering Committee of business leadership, to ensure that how we operate as a business produces positive impact. In 2021 we strengthened this work, conducting our first materiality assessment and first two years of greenhouse gas inventories.
We utilize our data from every incident and leverage it across our platform, allowing us to build advanced machine-learning capabilities, provide richer contextual insights to teams, and share in-depth analytics, benchmarking, and best practices with our customers. • Over 650 integrations across the technology ecosystem.
We utilize our data from every incident and leverage it across our platform, allowing us to build advanced machine-learning capabilities, provide richer contextual insights to teams, and share in-depth analytics, benchmarking, and best practices with our customers. • Over 700 integrations across the technology ecosystem.
We compete on the basis of a number of factors, including: • platform functionality and breadth of offering; • integrations; • performance, security, scalability, and reliability; • real-time response, workflow, and automation capabilities; • focus on modern, contemporary digital services and operations; • brand recognition, reputation, and customer satisfaction; • ease of implementation and ease of use, and; • time-to-value, total cost of ownership, and return on investment.
We compete on the basis of a number of factors, including: • platform functionality and breadth of offering; • integrations; • performance, security, scalability, and reliability; • real-time response, workflow, and automation capabilities; • focus on modern, contemporary digital services and operations; 10 Table of Contents • brand recognition, reputation, and customer satisfaction; • ease of implementation and ease of use, and; • time-to-value, total cost of ownership, and return on investment.
We have spent more than a decade building deep product integrations to our platform, and our ecosystem now includes over 650 direct integrations to enable our customers to gather and correlate digital signals from any system or device.
We have spent more than a decade building deep product integrations to our platform, and our ecosystem now includes over 700 direct integrations to enable our customers to gather and correlate digital signals from any system or device.
The PagerDuty.org Fund works to meet urgent needs faster to advance justice and health through integrated investments of grants, donated product, and employee expertise in our core areas of Time-Critical Health and Just and Equitable Communities.
The PagerDuty.org Fund works to meet urgent needs faster to advance justice and health through integrated investments of grants, donated product, and employee expertise in our core areas of Time-Critical Health and Climate Just.
If human intervention is required, it provides advanced incident response capabilities to quickly identify and mobilize the right responders while equipping responders with context, recommendations, and remediation to accelerate resolution of issues. • PagerDuty Rundeck Automation.
If human intervention is required, it provides advanced incident response capabilities to quickly identify and mobilize the right responders while equipping responders with context, recommendations, and remediation to accelerate resolution of issues.
PagerDuty Event Intelligence (AI Ops) applies machine learning to correlate and automate the identification of incidents from billions of events. Event Intelligence groups related events into a single incident, performs advanced suppression to prevent notification of non-actionable events, and continuously learns from similar incidents to provide teams better context and insight.
PagerDuty Event Intelligence (“AI Ops”) applies machine learning to correlate and automate the identification of incidents from billions of events. Event Intelligence groups related events into a single incident, performs advanced suppression to prevent notification of non-actionable events, and continuously learns from similar incidents to provide teams better context and insight.
There is no concept of queued tickets or queued work on our platform because we are built to understand these situations and solve incidents within seconds or minutes, not hours or days. • Nearly 13 years’ of data from over 14,500 paying customers.
There is no concept of queued tickets or queued work on our platform because we are built to understand these situations and solve incidents within seconds or minutes, not hours or days. • Nearly 14 years’ of data from over 15,200 paying customers.
PagerDuty Rundeck Automation empowers users with the ability to create automated workflows and runbooks that span different scripts, tools, APIs, and system commands to safely hand off the knowledge required to use these tools correctly and consistently. With this self-service functionality, organizations can safely extend operations privileges to other teams and business units. • PagerDuty Event Intelligence.
PagerDuty Process Automation products empower users with the ability to create automated workflows and runbooks that span different scripts, tools, APIs, and system commands to safely hand off the knowledge required to use these tools correctly and consistently. With this self-service functionality, organizations can safely extend operations privileges to other teams and business units. • PagerDuty Event Intelligence.
To calculate our total addressable market, we multiply our estimate of 72 million potential users by our applicable product average revenue per user. We believe that we have less than 1% penetration worldwide within these markets. In addition to our core use cases, we are seeing customers use our platform across their business operations and industrial operations.
To calculate our total addressable market, we multiply our estimate of 75 million potential users by our applicable product average revenue per user. We believe that we have approximately 1% penetration worldwide within these markets. In addition to our core use cases, we are seeing customers use our platform across their business operations and industrial operations.
We have invested extensively in an ecosystem that includes over 650 integrations, allowing us to harness data from software-enabled systems and devices. We have deep integrations to a range of widely used technologies, such as Amazon Web Services (“AWS”), Datadog, HashiCorp, New Relic, and Splunk, and many integrations such as Atlassian, Microsoft VSTS, Salesforce, ServiceNow, and Slack are bi-directional.
We have invested extensively in an ecosystem that includes over 700 integrations, allowing us to harness data from software-enabled systems and devices. We have deep integrations to a range of widely used technologies, such as Amazon Web Services (“AWS”), Datadog, HashiCorp, New Relic, and Splunk, and many bidirectional integrations such as Atlassian, Microsoft VSTS, Salesforce, ServiceNow, and Slack.
These teams drive expansion to additional users, new use cases, and add-on products, as well as the upsell to higher value plans. Our business has experienced rapid growth since our inception. For the fiscal years ended January 31, 2022 and 2021, our revenue was $281.4 million and $213.6 million, respectively.
These teams drive expansion to additional users, new use cases, and add-on products, as well as the upsell to higher value plans. Our business has experienced rapid growth since our inception. For the fiscal years ended January 31, 2023 and 2022, our revenue was $370.8 million and $281.4 million, respectively.
Beginning with new hires, our rewards and recognition programs honor and celebrate the contributions employees make in giving their time, expertise, or capital. Ninety-two percent of our employees participated in volunteering or giving back in 2021.
Beginning with new hires, our rewards and recognition programs honor and celebrate the contributions employees make in giving their time, expertise, or capital. Ninety-five percent of our employees participated in volunteering or giving back in 2022.
While we had 14 issued patents and eight patent 10 Table of Contents applications pending examination in the United States as of January 31, 2022 that, with respect to the issued patents, are expected to have terms ending between 2033 and 2040, and we actively seek patent protection covering inventions originating from our company, we do not believe that we are materially dependent on any one or more of our patents.
While we had 15 issued patents and 13 patent applications pending examination in the United States as of January 31, 2023 that, with respect to the issued patents, are expected to have terms ending between 2033 and 2040, and we actively seek patent protection covering inventions originating from our company, we do not believe that we are materially dependent on any one or more of our patents.
We continue to invest in our business and had a net loss of $107.5 million and $68.9 million for the fiscal years ended January 31, 2022 and 2021, respectively. Our Platform and Key Customer Benefits We have invested aggressively in research and development to build innovative products that deliver value to our customers.
We continue to invest in our business and had a net loss attributable to PagerDuty of $128.4 million and $107.5 million for the fiscal years ended January 31, 2023 and 2022, respectively. Our Platform and Key Customer Benefits We have invested aggressively in research and development to build innovative products that deliver value to our customers.
We are continually investing in our global workforce to further drive diversity and inclusion, provide fair and market-competitive pay and benefits to support our employees’ well-being, and foster their growth and development. As of January 31, 2022, we had 950 employees, of which approximately 71% were in the United States and 29% were in our international locations.
We are continually investing in our global workforce to further drive diversity and inclusion, provide fair and market-competitive pay and benefits to support our employees’ well-being, and foster their growth and development. As of January 31, 2023, we had 1,166 employees, of which approximately 65% were in the United States and 35% were in our international locations.
The PagerDuty Operations Platform consists of the following products, which empowers teams to address broader digital operations management requirements. • PagerDuty Modern Incident Response. PagerDuty Modern Incident Response provides a real-time view across the status of a digital service while incorporating noise reduction to remove false positives. When an incident does occur, task automation automates diagnostics and remediation wherever possible.
The PagerDuty Operations Platform consists of the following products, which empowers teams to address broader digital operations management requirements. • PagerDuty Incident Response. PagerDuty Incident Response provides a real-time view across the status of a digital service while incorporating noise reduction to remove false positives. Templated, automated runbooks guide major incidents while task automation automates diagnostics and remediation wherever possible.
Our sales teams are organized by geography, consisting of the Americas, EMEA, Asia Pacific, and Japan, as well as by target organization size. We offer a four-tiered range of pricing plans aligned with our customers’ needs and the maturity of their digital operations: Professional, Business, and Digital Operations.
Our sales teams are organized by geography, consisting of the Americas, EMEA, Asia Pacific, and Japan, as well as by target organization size. Our core Incident Response and Customer Service Operations products offer pricing plans aligned with our customers’ needs and the maturity of their digital operations: Free, Professional, Business, and Digital Operations.
The renewals team works proactively to reduce churn/downgrade and provide customers with a positive on-time renewal experience. Research and Development Our research and development team consists of our user experience, product management, and engineering teams and technical operations. These groups are responsible for the design, development, testing, and delivery of new technologies and features for our platform.
The renewals team works proactively to reduce churn/downgrade and provide customers with a positive on-time renewal experience. Research and Development Our research and development team consists of our user experience, product management, engineering and technical operations teams.
Our ID&E mission is to activate the potential of all employees through systemic and programmatic equity, sustainable community development, and life-altering learning experiences. Our ID&E vision is a people-first, data-driven organization where power is equitably distributed across the mosaic of our employees’ identities.
Regardless of identity, it is important that all our employees feel welcome, safe, and heard. Our ID&E mission—to activate the potential of all PagerDuty employees, or Dutonians, through systemic and programmatic equity, sustainable community development and impactful learning experiences. Our ID&E vision is a people-first, data-driven organization where power is equitably distributed across the mosaic of our employees’ identities.
We estimated that in 2021, there were approximately 72 million potential users worldwide in the development, IT operations, customer service and support, and security operations segments, comprised of approximately: • 22.0 million development personnel • 20.8 million IT operations personnel • 27.4 million customer service and support personnel • 1.6 million security operations personnel We estimate our total addressable market is over $36 billion.
We estimated that in 2022, there were approximately 75 million potential users worldwide in the development, IT operations, customer service and support, and security operations segments, comprised of approximately: • 25.0 million development personnel • 21.0 million IT operations personnel • 27.0 million customer service and support personnel • 2.0 million security operations personnel We estimate our total addressable market is over $38 billion.
Human Capital Our corporate culture is a critical component of our success and we will continue taking steps to help foster innovation, teamwork, diversity, and inclusion. We promote an environment that values the democratization of ideas and the adoption of a DevOps culture internally, resulting in a mindset that is empowering our team to be more innovative, productive, and collaborative.
We promote an environment that values the democratization of ideas and the adoption of a DevOps culture internally, resulting in a mindset that is empowering our team to be more innovative, productive, and collaborative.
We intend to increase our inside and field sales and customer success efforts as well as leverage partners to continue to drive adoption across our existing customers. • Introduce new products and functionality. We will continue to make investments in research and development to bolster our existing products, increase the reach of our integrations, and innovate on our platform.
We intend to increase our inside and field sales and customer success efforts as well as leverage partners to continue to drive adoption across our existing customers. 8 Table of Contents • Introduce new products and functionality.
Compliance with such laws could also result in additional costs and liabilities to us or inhibit sales of our solutions.” Geographic Information For a description of our revenue and long-lived assets by geographic location, see Note 14, “Geographic Information” of the Notes to our Consolidated Financial Statements included elsewhere in this Form 10-K.
Geographic Information For a description of our revenue and long-lived assets by geographic location, see Note 1 5 , “Geographic Information” of the Notes to our Consolidated Financial Statements included elsewhere in this Form 10-K.
Our international operations generated 24% of our revenue in the fiscal year ended January 31, 2022. Our Market Opportunity Our platform has demonstrated core use cases across development, IT operations, customer service and support, and security operations.
The self-service, low friction nature of our offering allows us to expand our reach into other regions where we see significant opportunity. Our international operations generated 24% of our revenue in the fiscal year ended January 31, 2023. Our Market Opportunity Our platform has demonstrated core use cases across development, IT operations, customer service and support, and security operations.
We also use employee survey information to gain insights into how and where we work. 12 Table of Contents Social Impact and Environmental, Social and Governance (“ESG”) Initiatives We launched PagerDuty.org in 2018 to ensure a sustainable contribution to the communities in which we live, work, and service by integrating social impact and environmental, social and governance goals into our business.
Social Impact and Environmental, Social and Governance (“ESG”) Initiatives We launched PagerDuty.org in 2018 to ensure a sustainable contribution to the communities in which we live, work, and serve by integrating social impact and ESG goals across our business.
To articulate our progress against social impact, equity, and ESG goals and commitments, PagerDuty.org publishes an annual Impact Report. We will track and report annually on our progress against social impact, equity and ESG commitments as we formalize new areas of investment in social impact, inclusion, diversity and equity, and ESG.
We track and report annually on our progress on social impact, equity and ESG commitments as we formalize new areas of investment in social impact, ID&E, and ESG.
We offer a wide array of benefits including comprehensive health and welfare insurance, generous paid time-off and leave, and retirement support. We provide emotional well-being services through our Employee Assistance Program and a variety of interactive applications.
We offer a wide selection of benefits including, but not limited to, medical, dental, and vision benefits, flexible spending and health savings accounts, generous paid time-off and leave programs, and retirement plans. We also provide emotional well-being services through our Employee Assistance Program and a variety of other behavioral health support applications.
The ERGs are the cultural backbone of our vibrant community and support our ID&E efforts through education, awareness, and celebration. Additional information on our diversity and inclusion strategy, and diversity metrics and programs can be found on our website at pagerduty.com/careers/diversity/. Nothing on our website shall be deemed incorporated by reference into this Form 10-K.
Additional information on our diversity and inclusion strategy, and diversity metrics and programs can be found on our website at https://www.pagerduty.com/careers/diversity/. Nothing on our website shall be deemed incorporated by reference into this Form 10-K. Compensation, Benefits, and Well Being We offer equitable, competitive compensation and benefits that support our employees’ overall well-being and attract and retain high performing talent.
We also host and present at regional, national, and global events, including our PagerDuty Summit, to engage both customers and prospects, deliver product training, share best practices, and foster community. Our technical leaders and evangelists frequently speak as subject matter experts at market-leading developer events like DevOps Days.
We use diverse marketing tactics to engage with prospective customers, including email marketing, event marketing, digital advertising, social media, public relations, and community initiatives. We also host and present at regional, national, and global events, including our PagerDuty Summit, to engage both customers and prospects, deliver product training, share best practices, and foster community.
Our distributed research and development efforts enable us to attract the best talent across our multiple locations, including San Francisco, Atlanta, Toronto, London, and Sydney.
We invest substantial resources in research and development to drive core technology innovation and bring new products to market. Our distributed research and development efforts enable us to attract the best talent across our multiple locations, including San Francisco, Atlanta, Toronto, and Lisbon as well as fully remote workers not located near our hubs.
Through our Impact Pricing program, we provide discounted pricing to nonprofit organizations and social enterprises globally to ensure they can access PagerDuty’s platform for digital operations. Our volunteer time off policy offers employees 20 hours annually to volunteer, vote, and participate in non-partisan voter engagement efforts and peaceful demonstration.
Further, we continue to empower PagerDuty Employee Resource Groups and global champions to fund organizations and issues aligned to their community through our Dutonian-led grantmaking program. Our volunteer time off policy offers employees 20 hours annually to volunteer, vote, and participate in non-partisan voter engagement efforts and peaceful demonstration.
Compensation, Benefits, and Well Being We offer fair, competitive compensation and benefits that support our employees’ overall well-being. To ensure alignment with our short- and long-term objectives, our compensation programs include base pay, short-term incentives, and opportunities for long-term incentives.
We regularly evaluate our compensation and benefits to ensure we are providing a package that is competitive with a constantly changing market, as well as meets the needs of our employees. Aligned with our company strategy and objectives, our compensation programs include fixed base pay and opportunities for short-term and long-term incentives for those eligible.
Our expanding portfolio of products provides us additional opportunities to upsell and 8 Table of Contents cross-sell into our customer base. In addition to internal development, we can expand our product portfolio and offerings through acquisitions. • Grow our international presence.
We will continue to make investments in research and development to bolster our existing products, increase the reach of our integrations, and innovate on our platform. Our expanding portfolio of products provides us additional opportunities to upsell and cross-sell into our customer base.
We garnered a silver rating by EcoVadis, incorporated ESG into the Board charter with Nominating and Corporate Governance oversight, opened a dedicated ESG role, and are preparing our first ESG disclosures. While 13 Table of Contents many ESG elements are already in place, we identified areas for further development as we build an integrated cross-company ESG strategy.
We garnered a silver rating by EcoVadis and incorporated ESG oversight into the charter of the Nominating and Corporate Governance Committee of our board of directors (the “Nominating and Corporate Governance Committee”). In 2022, we hired a dedicated ESG director, released our first ESG disclosures, and maintained our silver rating by EcoVadis.
We intend to build on our success to date and grow our sales outside North America, particularly throughout EMEA, Asia Pacific, and Japan. The self-service, low friction nature of our offering allows us to expand our reach into other regions where we see significant opportunity.
In addition to internal development, we can expand our product portfolio and offerings through acquisitions. • Grow our international presence. We intend to build on our success to date and grow our sales outside North America, particularly throughout EMEA, Asia Pacific, and Japan.
Inclusion, Diversity, and Equity 11 Table of Contents At PagerDuty, we seek to enable employees of all backgrounds to be champions, facilitators, and practitioners of Inclusion, Diversity, and Equity (“ID&E”) everywhere. Regardless of identity, it is important that all our employees feel welcome, safe, and heard.
Inclusion, Diversity, and Equity Our vision is to build an equitable world where we transform critical work so all teams can delight their customers and build trust. We seek to enable employees of all backgrounds to be champions, facilitators, and practitioners of Inclusion, Diversity, and Equity (“ID&E”) everywhere.
They are also responsible for scaling our platform and maintaining our cloud infrastructure. We invest substantial resources in research and development to drive core technology 9 Table of Contents innovation and bring new products to market.
These groups are responsible for the design, development, testing, delivery and support 9 Table of Contents of new and existing technologies and features for our platform. They are also responsible for scaling our platform and improving our cloud infrastructure and ultimately, our high availability.
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Rundeck automation is a stand-alone offering 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 PagerDuty platform. We use diverse marketing tactics to engage with prospective customers, including email marketing, event marketing, digital advertising, social media, public relations, and community initiatives.
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We also keep all users in the loop during an incident, providing templated stakeholder updates as well as PagerDuty Status Pages to communicate with end-users. • PagerDuty Process Automation.
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Competition The market for digital operations management is large, fragmented, and constantly evolving. We primarily replace manual processes, in-house solutions, queued ticketing offerings and software providers that may compete against certain components of our offering. Our primary competitors include Atlassian OpsGenie and Splunk On-Call (formerly VictorOps).
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Customers may begin their journey on the PagerDuty platform with the Free plan for less than 5 users and grow into full Digital Operations capabilities, streamlining incident response, automating diagnosis and remediation. Status Pages is available as an add-on to these Plans to enhance and automate the end-user engagement in managing an incident.
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Currently, the majority of our employees 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.
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AI Ops add-ons, PagerDuty Event Intelligence and PagerDuty Automation Actions, are also available for a more incremental upgrade as an alternative to upgrading to the full Digital Operations plan. Customers can also take an automation first approach, beginning their PagerDuty journey with subscriptions to PagerDuty Process Automation (previously Rundeck) or its SaaS counterpart, PagerDuty Runbook Automation.
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As we continue to monitor the local regulations related to COVID-19, we have begun to release travel restrictions on business-related travel, allowing certain employees to travel on a voluntary basis. 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.
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Our technical leaders and evangelists frequently speak as subject matter experts at market-leading developer events like DevOps Days. Competition PagerDuty has largely competed to replace manual work and homegrown systems.
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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 and have implemented scheduled company-wide paid days off to help employees balance their work and life responsibilities.
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Most commercial competition for the Developer market has been against OpsGenie, xMatters and Splunk On-Call (formerly VictorOps), as well as a long-tail of vendors within niche customer, geography or use-case segments.
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Employee Engagement and Development We invest significant resources to develop our in-house talent and deepen our employees’ skill sets, both to strengthen our company and help further our employees’ personal career goals. We empower our employees to drive their career development and set personal development objectives in partnership with their managers.
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In larger Enterprise customers and particularly when engaging key Central Ops Teams and CIO / IT buying centers, we also commonly encounter ServiceNow via their bundled Notify solution and Information Technology Operations Management suite. Over time, our competitive landscape is shifting from point-product to multi-solution and platform competition.
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To strengthen these conversations, we train managers to partner with employees through career conversations so that they can successfully leverage the many tools in place to support them. In order to ensure we are listening to our employees, we regularly survey our employees to obtain their views and assess employee satisfaction.
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For a discussion of risks related to these various areas of government regulation, see “Risk Factors—We are subject to evolving and increasingly stringent U.S. and foreign laws, regulations, rules, contractual obligations, policies and other legal obligations related to data privacy and security.
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We use the views expressed in the surveys to influence our people strategy and policies.
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Human Capital 11 Table of Contents Our corporate culture is a critical component of our success and we will continue taking steps to help foster innovation, teamwork, diversity, and inclusion.
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We deployed approximately $1.9 million in the fiscal year ended January 31, 2022, including a portfolio of grants (inclusive of Care Message, WeRobotics, Turn.io) to support equitable COVID-19 Vaccine Access and Delivery, a public-private partnership with COVAX/GAVI and the World Health Organization, and new and follow-on funding to help organizations respond to urgent needs faster to advance health (NexLeaf Analytics, Trek Medics, SIRUM).
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The ERGs are the cultural backbone of our vibrant community and support our ID&E efforts through education, awareness, and celebration. Additional components of our strategy include an ID&E Ambassador Program, which provides a global perspective on cultural and business norms for every region, and ID&E Guiding Principles to promote model leadership across all levels.
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Through our Just and Equity Communities portfolio, we made investments in community-based approaches to vaccine equity and trust, and launched a new grant making program to empower PagerDuty Employee Resource Groups to fund organizations and issues aligned to their community.
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Employee Engagement and Development We are deeply committed and invested in ensuring our employees are provided with the resources and tools to not only thrive at PagerDuty, but to work better together as a distributed global company.
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With the recent forming of our Culture & Strategy team, our mission is to increase employee engagement throughout the entire employee lifecycle through intentional listening, activating our company values and practice, and communicating our employee value proposition to employees, customers and partners.
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Through different methods of listening, such as our quarterly Engagement surveys, we gather specific feedback on drivers of engagement to better create an engaging and equitable experience for all Dutonians. Our People Development team equips our leaders with the coaching and training necessary to have conversations with our employees to empower them to own and drive their career development goals.
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These two teams work together to provide a holistic experience where our employees feel 12 Table of Contents engaged and connected to our company's goals, as well as seeing themselves growing and developing within our organization.
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We deployed approximately $1.4 million in the fiscal year ended January 31, 2023, including the launch of the PagerDuty Impact Accelerator to help tech-forward organizations in our focus areas of time-critical health and climate equity amplify their impact by providing unrestricted funding, product credits and discounts, technical pro bono support, and voice amplification.
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We also focus on addressing community inequities in another area impacted by structural racism—the effects of climate change and environmental pollution. Through our Climate Equity portfolio, we made investments in community-based approaches to climate equity (inclusive of Earth Guardians, Earth Hacks, OpenAQ and The Solutions Project).
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We also signaled our commitment to the carbon budgets laid out in the Paris Accord and are preparing science-based targets to meet these commitments.
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This work continues to be overseen by the ESG Steering Committee, our chief financial officer as ESG Executive Sponsor, and the Nominating and Corporate Governance Committee. 13 Table of Contents To articulate our progress against social impact, equity, and ESG goals and commitments, PagerDuty.org publishes an annual Impact Report.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur current and future international business and operations involve a variety of risks, including: • changes in a specific country’s or region’s political or economic conditions; • health epidemics or pandemics, such as the COVID-19 pandemic, influenza and other highly communicable diseases or viruses; • continuing uncertainty regarding social, political, immigration, and tax and trade policies in the U.S. and abroad, including as a result of the United Kingdom's withdrawal from the European Union (“EU”); • the need to adapt and localize our products for specific countries; • greater difficulty collecting accounts receivable and longer payment cycles; • potential changes in trade relations, regulations, or laws; • unexpected changes in laws, regulatory requirements, or tax laws; 28 Table of Contents • more stringent regulations relating to privacy and data security and the unauthorized use of, or access to, commercial and personal information, particularly in Europe; • differing and potentially more onerous labor regulations, especially in Europe, where labor laws are generally more advantageous to employees as compared to the United States, including deemed hourly wage and overtime regulations in these locations; • challenges inherent in efficiently managing, and the increased costs associated with, an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, and compliance programs that are specific to each jurisdiction; • difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems, and regulatory systems; • increased travel, real estate, infrastructure, and legal compliance costs associated with international operations; • currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions if we chose to do so in the future; • limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries; • laws and business practices favoring local competitors or general market preferences for local vendors; • limited or insufficient intellectual property protection or difficulties enforcing our intellectual property; • political instability, including military actions; • terrorist activities; • exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S.
Biggest changeWe expect that our international activities will continue to grow for the foreseeable future as we continue to pursue opportunities in existing and new international markets, which will require significant dedication of management attention and financial resources. 29 Table of Contents Our current and future international business and operations involve a variety of risks, including: • recession or economic downturn globally or in the jurisdictions in which we do business; • inflation, as well as changes in existing and expected rates of inflation, which may vary across the jurisdictions in which we do business; • changes in a specific country’s or region’s political or economic conditions; • health epidemics or pandemics, such as the COVID-19 pandemic, influenza and other highly communicable diseases or viruses; • continuing uncertainty regarding social, political, immigration, and tax and trade policies in the U.S. and abroad, including as a result of the United Kingdom's withdrawal from the European Union (“EU”); • the need to adapt and localize our products for specific countries; • greater difficulty collecting accounts receivable and longer payment cycles; • potential changes in trade relations, regulations, or laws; • unexpected changes in laws, regulatory requirements, or tax laws; • more stringent regulations relating to privacy and data security and the unauthorized use of, or access to, commercial and personal information, particularly in Europe; • differing and potentially more onerous labor regulations, especially in Europe, where labor laws are generally more advantageous to employees as compared to the United States, including deemed hourly wage and overtime regulations in these locations; • challenges inherent in efficiently managing, and the increased costs associated with, an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, and compliance programs that are specific to each jurisdiction; • difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems, and regulatory systems; • increased travel, real estate, infrastructure, and legal compliance costs associated with international operations; • currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions if we chose to do so in the future; • limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries; • laws and business practices favoring local competitors or general market preferences for local vendors; • limited or insufficient intellectual property protection or difficulties enforcing our intellectual property; • political instability, including military actions; • terrorist activities; • exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S.
As we continue to pursue sales to new and existing mid-market and enterprise customers, our sales cycle, forecasting processes, and deployment processes may become more unpredictable and require greater time and expense. While we rely predominantly on self-service purchases to establish new customer relationships, our inside and field sales teams target expansion opportunities with existing mid-market and enterprise customers.
As we continue to pursue sales to new and existing enterprise customers, our sales cycle, forecasting processes, and deployment processes may become more unpredictable and require greater time and expense. While we rely predominantly on self-service purchases to establish new customer relationships, our inside and field sales teams target expansion opportunities with existing mid-market and enterprise customers.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: • authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our common stock; • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; 45 Table of Contents • specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, or our chief executive officer; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; • establish that our board of directors is divided into three classes, with each class serving three-year staggered terms; • prohibit cumulative voting in the election of directors; • provide that our directors may be removed for cause only upon the vote of sixty-six and two-thirds percent (66 2/3%) of our outstanding shares of common stock; • provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; and • require the approval of our board of directors or the holders of at least sixty-six and two-thirds percent (66 2/3%) of our outstanding shares of common stock to amend our bylaws and certain provisions of our certificate of incorporation.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: • authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our common stock; • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; • specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, or our chief executive officer; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; • establish that our board of directors is divided into three classes, with each class serving three-year staggered terms; • prohibit cumulative voting in the election of directors; • provide that our directors may be removed for cause only upon the vote of sixty-six and two-thirds percent (66 2/3%) of our outstanding shares of common stock; • provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; and 47 Table of Contents • require the approval of our board of directors or the holders of at least sixty-six and two-thirds percent (66 2/3%) of our outstanding shares of common stock to amend our bylaws and certain provisions of our certificate of incorporation.
Selling to such entities can be highly competitive, expensive, and time-consuming, often requiring significant upfront time and expense without any assurance that these efforts will generate a sale. Government contracting requirements may change and in doing so restrict our ability to sell into the government sector until we have attained the revised certification.
Selling to such entities can also be highly competitive, expensive, and time-consuming, often requiring significant upfront time and expense without any assurance that these efforts will generate a sale. Government contracting requirements may change and in doing so restrict our ability to sell into the government sector until we have attained the revised certification.
In particular, we compete with many other companies for software developers with high levels of experience in designing, developing, and managing cloud-based software, as well as for skilled sales and operations professionals. While the market for such personnel is particularly competitive in Silicon Valley, it is also competitive in other markets where we maintain operations, including Canada.
In particular, we compete with many other companies for software developers with high levels of experience in designing, developing, and managing cloud-based software, as well as for skilled sales and operations professionals. While the market for such personnel is particularly competitive in Silicon Valley, it is also competitive in other markets where we maintain operations, including Canada and Portugal.
Ransomware attacks, including those perpetrated by organized criminal threat actors, nation-states, and nation-state-supported actors, are becoming increasingly prevalent and severe – and can lead to significant interruptions in our operations, loss of data and income, reputational harm, and diversion of funds.
In particular, severe ransomware attacks, including those perpetrated by organized criminal threat actors, nation-states, and nation-state-supported actors, are becoming increasingly prevalent and severe – and can lead to significant interruptions in our operations, loss of data and income, reputational harm, and diversion of funds.
If we do complete acquisitions, we may not ultimately strengthen our competitive position or achieve the anticipated benefits from such acquisitions, due to a number of factors, including: • acquisition-related costs, liabilities, or tax impacts, some of which may be unanticipated; • difficulty integrating and retaining the personnel, intellectual property, technology infrastructure, and operations of an acquired business; • ineffective or inadequate, controls, procedures, or policies at an acquired business, including cybersecurity risks and vulnerabilities; • multiple product lines or services offerings, as a result of our acquisitions, that are offered, priced, and supported differently; • potential unknown liabilities or risks associated with an acquired business, including those arising from existing contractual obligations or litigation matters; • inability to maintain relationships with key customers, suppliers, and partners of an acquired business; • lack of experience in new markets, products or technologies; • diversion of management’s attention from other business concerns; and • use of resources that are needed in other parts of our business.
If we do complete acquisitions, we may not ultimately strengthen our competitive position or achieve the anticipated benefits from such acquisitions, due to a number of factors, including: • acquisition-related costs, liabilities, or tax impacts, some of which may be unanticipated; • difficulty integrating and retaining the personnel, intellectual property, technology infrastructure, and operations of an acquired business; 42 Table of Contents • ineffective or inadequate, controls, procedures, or policies at an acquired business, including cybersecurity risks and vulnerabilities; • multiple product lines or services offerings, as a result of our acquisitions, that are offered, priced, and supported differently; • potential unknown liabilities or risks associated with an acquired business, including those arising from existing contractual obligations or litigation matters; • inability to maintain relationships with key customers, suppliers, and partners of an acquired business; • lack of experience in new markets, products or technologies; • diversion of management’s attention from other business concerns; and • use of resources that are needed in other parts of our business.
We may experience additional outages or discover additional defects in the future that could result in data unavailability or unauthorized access to, or loss or corruption of, our customers’ data. We may not be able to detect and correct defects or errors before implementing our platform.
We may experience additional outages or discover additional defects in the future that could result in data unavailability or unauthorized access to, or loss or corruption of, our customers’ data. We may not be able to detect and correct defects or errors before implementing platform enhancements.
European legislative proposals and existing laws and regulations apply to cookies and similar tracking technologies, electronic communications, and marketing. In the EU and the UK, regulators are increasingly focusing on compliance with requirements related to the online behavioral advertising ecosystem.
European legislative proposals and existing laws and regulations also apply to cookies and similar tracking technologies, electronic communications, and marketing. In the EU and the UK, regulators are increasingly focusing on compliance with requirements related to the online behavioral advertising ecosystem.
If securities or industry analysts do not publish research or publish unfavorable or inaccurate research about our business, our stock price and trading volume could decline. Our stock price and trading volume following is heavily influenced by the way analysts and investors interpret our financial information and other disclosures.
If securities or industry analysts do not publish research or publish unfavorable or inaccurate research about our business, our stock price and trading volume could decline. Our stock price and trading volume is heavily influenced by the way analysts and investors interpret our financial information and other disclosures.
We are subject to the requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the New York Stock Exchange, and other applicable securities rules and regulations impose various requirements on public companies.
We are subject to the requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the New York Stock Exchange, and other applicable securities rules and regulations that impose various requirements on public companies.
If our policies, procedures, or measures relating to privacy, data protection, information security, marketing, or customer communications fail to comply with applicable laws, regulations, policies, legal obligations, or industry standards, we may be subject to governmental enforcement actions, litigation, regulatory investigations, fines, penalties, and negative publicity, which could cause our application providers, customers and partners to lose trust in us, and have an adverse effect on our business, operating results, and financial condition.
If our policies, procedures, or measures relating to data privacy and security, marketing, or customer communications fail to comply with applicable laws, regulations, policies, legal obligations, or industry standards, we may be subject to governmental enforcement actions, litigation, regulatory investigations, fines, penalties, and negative publicity, which could cause our application providers, customers and partners to lose trust in us, and have an adverse effect on our business, operating results, and financial condition.
The degree to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and severity of the pandemic, the actions taken to contain the virus or treat its impact, vaccination rates, the impact of variants, other actions taken by governments, businesses, and individuals in response to the virus and resulting economic disruption, and how quickly and to what extent normal economic and operating conditions can resume.
The degree to which COVID-19 and its variants continues to impact our results will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and severity of the pandemic, the actions taken to contain the virus or treat its impact, vaccination rates, the impact of variants, other actions taken by governments, businesses, and individuals in response to the virus and resulting economic disruption, and how quickly and to what extent normal economic and operating conditions can resume.
In addition, if the market for our platform and products grows more slowly than anticipated, or if demand for our digital operations platform does not grow as quickly as anticipated, whether as a result of competition, pricing sensitivities, product obsolescence, technological change, unfavorable economic conditions, uncertain geopolitical environment, budgetary constraints of our customers, or other factors, our business, results of operations, and financial condition would be adversely affected.
In addition, if the market for our platform and products grows more slowly than anticipated, or if demand for our digital operations platform does not grow as quickly as anticipated, whether as a result of competition, pricing sensitivities, product obsolescence, technological change, unfavorable economic conditions, bank failures, uncertain geopolitical environment, budgetary constraints of our customers, or other factors, our business, results of operations, and financial condition would be adversely affected.
As a result, our operating results could suffer due to: • any decline in demand for our incident response product; • the failure of our broader platform and other products to achieve market acceptance; • the market for our digital operations platform not continuing to grow, or growing more slowly than we expect; • the introduction of products and technologies that serve as a replacement or substitute for, or represent an improvement over, our platform and products; • technological innovations or new standards that our platform and products do not address; • sensitivity to current or future prices offered by us or our competitors; and • our inability to release enhanced versions of our platform and products on a timely basis.
As a result, our operating results could suffer due to: • any decline in demand for our incident response product; • the failure of our broader platform and other products to achieve market acceptance; • the market for our digital operations platform not continuing to grow, or growing more slowly than we expect; • the introduction of products and technologies that serve as a replacement or substitute for, or represent an improvement over, our platform and products; • technological innovations or new standards that our platform and products do not address; 18 Table of Contents • sensitivity to current or future prices offered by us or our competitors; and • our inability to release enhanced versions of our platform and products on a timely basis.
Because the interpretation and application of privacy, data protection, and information security laws, regulations, rules, and other standards are still uncertain, it is possible that these laws, rules, regulations, and other actual or alleged legal obligations, such as contractual or self-regulatory obligations, may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the functionality of our platform.
Because the interpretation and application of data privacy and security laws, regulations, rules, and other standards are still uncertain, it is possible that these laws, rules, regulations, and other actual or alleged legal obligations, such as contractual or self-regulatory obligations, may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the functionality of our platform.
We rely upon our marketing strategy of offering a 14-day free trial and “freemium” plan, a free version of PagerDuty, for less than five users and an open source version of Rundeck Automation as well as other inbound, lead-generation strategies to generate new sales opportunities. Most of our customers start with the free version of our products.
We rely upon our marketing strategy of offering a 14-day free trial and “freemium” plan, a free version of PagerDuty, for less than five users and an open source version of PagerDuty Process Automation as well as other inbound, lead-generation strategies to generate new sales opportunities. Most of our customers start with the free version of our products.
While we maintain general liability insurance coverage and coverage for errors or omissions, we cannot assure you that such coverage would be adequate or would otherwise protect us from liabilities or damages with respect to claims alleging compromises of customer data or that such coverage will continue to be available to us on acceptable terms or at all.
While we maintain general liability insurance coverage and coverage for errors or omissions, we cannot assure you that such coverage would be adequate or would otherwise protect us from liabilities or damages with respect to claims alleging compromises of customer data, that such coverage will continue to be available to us on acceptable terms or at all, or that such coverage will pay future claims.
If we are unable to attract new customers, our revenue growth will be adversely affected. To increase our revenue, we must continue to attract new customers and increase sales to new customers.
If we are unable to attract new customers, our revenue growth will be adversely affected. To increase our revenue, we must continue to attract new customers and increase sales to existing customers.
We have also 14 Table of Contents experienced curtailed customer demand, reduced customer spend and contract duration during the COVID-19 pandemic, which have since normalized, but we may experience these effects again in the future, along with delayed collections, lengthened payment terms and increased competition due to changes in terms and conditions and pricing of our competitors’ products and services that could materially adversely impact our business, results of operations and overall financial performance in future periods.
We have also experienced curtailed customer demand, reduced customer spend and contract duration during the COVID-19 pandemic, which have since normalized, but we may experience these effects again in the future, along with delayed collections, lengthened payment terms and increased competition due to changes in terms and conditions and pricing of our competitors’ products and services that could materially adversely impact our business, results of operations and overall financial performance in future periods.
The occurrence of any defects, errors, disruptions in service, or other performance problems with our software, whether in connection with day-to-day operations, upgrades, or otherwise, could result in: • loss of customers; • lost or delayed market acceptance and sales of our products; • delays in payment to us by customers; • injury to our reputation and brand; • legal claims, including warranty and service level agreement claims, against us; or 22 Table of Contents • diversion of our resources, including through increased service and warranty expenses or financial concessions, and increased insurance costs.
The occurrence of any defects, errors, disruptions in service, or other performance problems with our software, whether in connection with day-to-day operations, upgrades, or otherwise, could result in: • loss of customers; • lost or delayed market acceptance and sales of our products; • delays in payment to us by customers; • injury to our reputation and brand; • legal claims, including warranty and service level agreement claims, against us; or • diversion of our resources, including through increased service and warranty expenses or financial concessions, and increased insurance costs.
If we do not or cannot maintain the compatibility of our platform with third-party applications that our customers use in their businesses, or with those of our partners, our revenue and growth prospects will decline. The functionality and popularity of our platform depend, in part, on our ability to integrate our platform with third-party applications, tools, and software.
If we do not or cannot maintain the compatibility of our platform with third-party applications that our customers use in their businesses, our revenue and growth prospects will decline. The functionality and popularity of our platform depend, in part, on our ability to integrate our platform with third-party applications, tools, and software.
In addition, although we carry general liability insurance, our insurance may not be adequate to cover our indemnification obligations or to indemnify us for all liability that may be imposed or otherwise protect us from liabilities or damages with respect to claims alleging compromises of customer data, and any such coverage may not continue to be available to us on acceptable terms or at all.
In addition, although we carry various insurance policies, our insurance may not be adequate to cover our indemnification obligations or to indemnify us for all liability that may be imposed or otherwise protect us from liabilities or damages with respect to claims alleging compromises of customer data, and any such coverage may not continue to be available to us on acceptable terms or at all.
We cannot predict the outcome of lawsuits and cannot assure you that the results of any such actions will not have an adverse effect on our business, operating results, or financial condition. Our industry is characterized by the existence of a large number of patents, copyrights, trademarks, trade secrets, and other intellectual and proprietary rights.
We cannot predict the outcome of lawsuits and cannot assure you that the results of any such actions will not have an adverse effect on our business, operating results, or financial condition. 34 Table of Contents Our industry is characterized by the existence of a large number of patents, copyrights, trademarks, trade secrets, and other intellectual and proprietary rights.
In addition, if we are unable to increase sales of our platform to mid-market and larger enterprise customers while mitigating the risks associated with serving such customers, our business, financial position, and operating results may be adversely affected. If we cannot maintain our company culture as we grow, our success and our business may be harmed.
In addition, if we are unable to increase sales of our platform to mid-market and larger enterprise customers while mitigating the risks associated with serving such customers, our business, financial position, and operating results may be adversely affected. 23 Table of Contents If we cannot maintain our company culture as we grow, our success and our business may be harmed.
Any acquisition we complete could be viewed negatively by users, developers, partners, or investors, and could have adverse effects on our existing business relationships. In addition, we may not successfully evaluate or 41 Table of Contents utilize acquired technology or accurately forecast the financial impact of an acquisition transaction, including accounting charges.
Any acquisition we complete could be viewed negatively by users, developers, partners, or investors, and could have adverse effects on our existing business relationships. In addition, we may not successfully evaluate or utilize acquired technology or accurately forecast the financial impact of an acquisition transaction, including accounting charges.
Furthermore, legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights are uncertain. Despite our precautions, it may be possible for unauthorized third parties to copy our products and use information that we regard as proprietary to create products and services that compete with ours.
Furthermore, legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights are uncertain. Despite our precautions, it may be possible for unauthorized third parties to copy our products 33 Table of Contents and use information that we regard as proprietary to create products and services that compete with ours.
If a court were to find either choice of forum provision 46 Table of Contents contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions. Item 1B. Unresolved Staff Comments None.
If a court were to find either choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions. Item 1B. Unresolved Staff Comments None.
We also could be harmed by government investigations, litigation, or changes in laws and regulations directed at our business partners, or suppliers in the technology industry that have the effect of limiting our ability to do 37 Table of Contents business with those entities or that affect the services we can obtain from them.
We also could be harmed by government investigations, litigation, or changes in laws and regulations directed at our business partners, or suppliers in the technology industry that have the effect of limiting our ability to do business with those entities or that affect the services we can obtain from them.
Additionally, 21 Table of Contents the performance of our partners may affect our brand and reputation if customers do not have a positive experience with our partners’ services. Our brand promotion activities may not generate customer awareness or yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incur in building our brand.
Additionally, the performance of our partners may affect our brand and reputation if customers do not have a positive experience with our partners’ services. Our brand promotion activities may not generate customer awareness or yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incur in building our brand.
Any change in export or import regulations, economic sanctions or related legislation, increased export and import 38 Table of Contents controls, or change in the countries, governments, persons, or technologies targeted by such regulations, could result in decreased use of our platform by, or in our decreased ability to export or sell our products to, existing or potential end-customers with international operations.
Any change in export or import regulations, economic sanctions or related legislation, increased export and import controls, or change in the countries, governments, persons, or technologies targeted by such regulations, could result in decreased use of our platform by, or in our decreased ability to export or sell our products to, existing or potential end-customers with international operations.
As a result, our stockholders bear the risk of future issuance of debt or equity securities reducing the value of our common stock and diluting their interests. 43 Table of Contents Concentration of ownership of our common stock among our existing executive officers, directors, and principal stockholders may prevent new investors from influencing significant corporate decisions.
As a result, our stockholders bear the risk of future issuance of debt or equity securities reducing the value of our common stock and diluting their interests. Concentration of ownership of our common stock among our existing executive officers, directors, and principal stockholders may prevent new investors from influencing significant corporate decisions.
In general, under Section 382 of the United States Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs to offset future taxable income.
In 31 Table of Contents general, under Section 382 of the United States Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs to offset future taxable income.
Compliance with new or modified laws and regulations could increase our cost of conducting the business, limit the opportunities to increase our revenues, or prevent us from offering products or services.
Compliance with new or modified laws and regulations could increase our cost of conducting the business, limit the opportunities to increase our revenue, or prevent us from offering products or services.
We also face increased compliance costs associated with growth, the expansion of 15 Table of Contents our customer base, and being a public company. Our efforts to grow our business may be costlier than we expect, and we may not be able to increase our revenue enough to offset our increased operating expenses.
We also face increased compliance costs associated with growth, the expansion of our customer base, and being a public company. Our efforts to grow our business may be costlier than we expect, and we may not be able to increase our revenue enough to offset our increased operating expenses.
The first fiscal quarter of each year is usually our lowest billings and bookings quarter. In fact, billings and bookings during our first fiscal quarter are typically lower than the prior fiscal fourth quarter. We believe that this results from the procurement, budgeting, and deployment cycles of many of our customers, particularly our enterprise customers.
The first fiscal quarter of each year is usually our lowest billings and bookings quarter. In fact, billings and bookings during our first fiscal quarter are typically lower than the prior fiscal fourth quarter. We believe that this results from the procurement, budgeting, and deployment cycles of many of our customers, particularly our 21 Table of Contents enterprise customers.
The COVID-19 pandemic has adversely affected significant portions of our business and could have a material adverse effect on our financial condition and results of operations. We are subject to numerous pandemic-related risks, including those described below.
The ongoing global COVID-19 pandemic could harm our business, results of operations, and financial condition. The COVID-19 pandemic has adversely affected significant portions of our business and could have a material adverse effect on our financial condition and results of operations. We are subject to numerous pandemic-related risks, including those described below.
Lawsuits are time-consuming and expensive to resolve and they divert management’s time and attention. Although we carry general liability insurance, our insurance may not cover potential claims of this type or may not be adequate to indemnify us for all liability that may be imposed.
Lawsuits are time-consuming and expensive to resolve and they divert management’s time and attention. Although we carry various insurance policies, our insurance may not cover potential claims of this type or may not be adequate to indemnify us for all liability that may be imposed.
Any difficulties or delays in implementing these controls could impact our ability to timely report our financial results. For these reasons, we 44 Table of Contents may encounter difficulties in the timely and accurate reporting of our financial results, which would impact our ability to provide our investors with information in a timely manner.
Any difficulties or delays in implementing these controls could impact our ability to timely report our financial results. For these reasons, we may encounter difficulties in the timely and accurate reporting of our financial results, which would impact our ability to provide our investors with information in a timely manner.
We could also face subscription terminations, which could significantly affect both our current and future revenue. Any service-level failures could also damage our reputation, which could also adversely affect our business and results of operations. 27 Table of Contents If we fail to offer high-quality support, our business and reputation could suffer.
We could also face subscription terminations, which could significantly affect both our current and future revenue. Any service-level failures could also damage our reputation, which could also adversely affect our business and results of operations. If we fail to offer high-quality support, our business and reputation could suffer.
As a result, subject to the satisfaction of applicable exercise and/or vesting 42 Table of Contents periods, the shares issued upon exercise of outstanding stock options or upon settlement of outstanding RSU awards will be available for immediate resale in the U.S. in the open market.
As a result, subject to the satisfaction of applicable exercise and/or vesting periods, the shares issued upon exercise of outstanding stock options or upon settlement of outstanding RSU awards will be available for immediate resale in the U.S. in the open market.
At the same time, re-adoption of network neutrality rules could affect the services used by us and our customers by restricting the offerings made by internet service providers or reducing their incentives to invest in their networks.
At the same time, re-adoption of network neutrality rules could affect the services used by us and our customers by restricting the offerings made by internet service providers or reducing 28 Table of Contents their incentives to invest in their networks.
As a result, we are required to devote significant management effort and incur additional expenses, which include higher legal fees, accounting and related fees and fees associated with investor relations activities, among others, to ensure compliance with the various reporting requirements. These requirements may also place a strain on our systems and processes.
As a result, we are required to devote significant management effort and incur additional 45 Table of Contents expenses, which include higher legal fees, accounting and related fees and fees associated with investor relations activities, among others, to ensure compliance with the various reporting requirements. These requirements may also place a strain on our systems and processes.
Our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, and customer requirements. An existing competitor or new entrant could introduce new technology that reduces demand for our platform. In addition to product and technology competition, we face pricing competition.
Our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, and customer requirements. An existing competitor or new entrant could introduce new technology that reduces demand for our platform. In addition to product and technology 19 Table of Contents competition, we face pricing competition.
If we are unable to enhance our platform or develop new functionality to keep pace with rapid technological and regulatory change, our business, results of operations, and financial condition could be adversely affected.
If we are unable to enhance our platform or develop 22 Table of Contents new functionality to keep pace with rapid technological and regulatory change, our business, results of operations, and financial condition could be adversely affected.
Failure to comply with governmental laws and regulations could harm our business. Our business is subject to regulation by various federal, state, local, and foreign governments. For example, the Telephone Consumer Protection Act of 1991 restricts telemarketing and the use of automatic text messages without proper consent.
Failure to comply with governmental laws and regulations could harm our business. Our business is subject to regulation by various federal, state, local, and foreign governments. For example, the Telephone Consumer Protection Act of 1991 restricts telemarketing and the use of automatic short message service (“SMS”) text messages without proper consent.
In January 2018, the Federal Communications Commission, or the FCC, repealed the “network neutrality” rules adopted during the Obama Administration, which barred internet service providers from blocking or slowing down access to online content, protecting services like ours from such interference. The 2018 decision was largely affirmed by the U.S.
In January 2018, the Federal Communications Commission, or the FCC, repealed “network neutrality” rules, which barred internet service providers from blocking or slowing down access to online content, protecting services like ours from such interference. The 2018 decision was largely affirmed by the U.S.
Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly to generally prohibit companies, their employees and their third-party intermediaries from authorizing, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector.
Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly to generally prohibit companies, their 35 Table of Contents employees and their third-party intermediaries from authorizing, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector.
The market price of our common stock may be highly volatile and may fluctuate or decline substantially as a result of a variety of factors, some of which are beyond our control, including: • actual or anticipated fluctuations in our operating results or financial condition; • variance in our financial performance from expectations of securities analysts; • changes in the pricing of subscriptions to our platform and products; • changes in our projected operating and financial results; • changes in laws or regulations applicable to our platform and products; • announcements by us or our competitors of significant business developments, acquisitions, or new offerings; • our involvement in litigation; • future sales of our common stock by us or our stockholders; • changes in senior management or key personnel; • the trading volume of our common stock; • changes in the anticipated future size and growth rate of our market; and • general economic and market conditions.
The market price of our common stock may be highly volatile and may fluctuate or decline substantially as a result of a variety of factors, some of which are beyond our control, including: • actual or anticipated fluctuations in our operating results or financial condition; • variance in our financial performance from expectations of securities analysts; • changes in the pricing of subscriptions to our platform and products; • changes in our projected operating and financial results; • changes in laws or regulations applicable to our platform and products; 43 Table of Contents • announcements by us or our competitors of significant business developments, acquisitions, or new offerings; • our involvement in litigation; • future sales of our common stock by us or our stockholders, including our large stockholders, or perceptions that such sales might occur; • changes in senior management or key personnel; • the trading volume of our common stock; • changes in the anticipated future size and growth rate of our market; and • general economic and market conditions.
The nature of our business exposes us to inherent liability risks. Our platform and related products, including our Event Intelligence and Rundeck Automation, are designed to provide quick, reliable alerts, to communicate information frequently during critical business events, such as information relevant to mitigating the damaging effects of system problems, and to automatically remediate systems 19 Table of Contents problems.
The nature of our business exposes us to inherent liability risks. Our platform and related products, including our Event Intelligence and Process Automation, are designed to provide quick, reliable alerts, to communicate information frequently during critical business events, such as information relevant to mitigating the damaging effects of system problems, and to automatically remediate systems problems.
Our corporate structure and associated transfer pricing policies contemplate future growth in international markets, and 29 Table of Contents consider the functions, risks, and assets of the various entities involved in intercompany transactions.
Our corporate structure and associated transfer pricing policies contemplate future growth in international markets, and consider the functions, risks, and assets of the various entities involved in intercompany transactions.
Foreign Corrupt Practices Act, or FCPA, U.S. bribery laws, the UK Bribery Act, and similar laws and regulations in other jurisdictions; and • adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash.
Foreign Corrupt Practices Act, or FCPA, U.S. bribery laws, the UK Bribery Act, and similar laws and regulations in other jurisdictions; and 30 Table of Contents • adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash.
If we fail to meaningfully protect our intellectual property and proprietary rights, our business, operating results, and financial condition could be adversely affected. 32 Table of Contents Any future litigation against us could be costly and time-consuming to defend.
If we fail to meaningfully protect our intellectual property and proprietary rights, our business, operating results, and financial condition could be adversely affected. Any future litigation against us could be costly and time-consuming to defend.
In addition, we expect to continue to expend substantial financial and other resources on: • sales and marketing, including a significant expansion of our sales organization; • our technology infrastructure, including systems architecture, scalability, availability, performance, and security; • product development, including investments in our product development team and the development of new products and new functionality for our platform; • acquisitions or strategic investments; • international expansion; and • general administration, including increased legal, accounting, and compliance expenses associated with being a public company.
In addition, we expect to continue to expend substantial financial and other resources on: • sales and marketing, including expansion to serve customers internationally; • our technology infrastructure, including systems architecture, scalability, availability, performance, and security; 15 Table of Contents • product development, including investments in our product development team and the development of new products and new functionality for our platform; • acquisitions or strategic investments; • international expansion; and • general administration, including increased legal, accounting, and compliance expenses associated with being a public company.
In addition, if we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase. The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and results of operations.
Any of these factors could harm our business, results of operations, and financial condition. In addition, if we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase. The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and results of operations.
In addition, any of our future debt agreements may contain restrictive covenants that may prohibit us from adopting any of these alternatives.
In 40 Table of Contents addition, any of our future debt agreements may contain restrictive covenants that may prohibit us from adopting any of these alternatives.
We have from time to time in the past experienced service disruptions, and we cannot assure you that we will not experience interruptions or delays in our service in the future.
We 27 Table of Contents have from time to time in the past experienced service disruptions, and we cannot assure you that we will not experience interruptions or delays in our service in the future.
If any of the above risks materializes, it could harm our business and prospects. In addition, our limited experience in operating our business internationally increases the risk that any potential future expansion efforts that we may undertake will not be successful.
These attacks are expected to occur in the future. If any of the above risks materializes, it could harm our business and prospects. In addition, our limited experience in operating our business internationally increases the risk that any potential future expansion efforts that we may undertake will not be successful.
For example, it could; • make us more vulnerable to adverse changes in general U.S. and worldwide economic, industry, and competitive conditions and adverse changes in government regulation; • limit our flexibility in planning for, or reacting to, changes in our business and our industry; • place us at a disadvantage compared to our competitors who have less debt; • limit our ability to borrow additional amounts for funding acquisitions, for working capital, and for other general corporate purposes; and • make an acquisition of our company less attractive or more difficult. 39 Table of Contents Any of these factors could harm our business, results of operations, and financial condition.
For example, it could; • make us more vulnerable to adverse changes in general U.S. and worldwide economic, industry, and competitive conditions and adverse changes in government regulation; • limit our flexibility in planning for, or reacting to, changes in our business and our industry; • place us at a disadvantage compared to our competitors who have less debt; • limit our ability to borrow additional amounts for funding acquisitions, for working capital, and for other general corporate purposes; and • make an acquisition of our company less attractive or more difficult.
Our management team has limited experience managing a publicly traded company, interacting with public company investors and securities analysts, and complying with the increasingly complex laws pertaining to public companies.
Certain members of our management team have limited experience managing a public company. Certain members of our management team have limited experience managing a publicly traded company, interacting with public company investors and securities analysts, and complying with the increasingly complex laws pertaining to public companies.
In addition to the other risks described herein, factors that may affect our operating results include the following: • health epidemics or pandemics, such as the COVID-19 pandemic, influenza and other highly communicable diseases or viruses; • fluctuations in demand for or pricing of our platform; • our ability to attract new customers; • our ability to retain our existing customers; • customer expansion rates; • the pricing and quantity of subscriptions renewed; • the timing of our customer purchases; • fluctuations or delays in purchasing decisions in anticipation of new products or product enhancements by us or our competitors; • changes in customers’ budgets and in the timing of their budget cycles and purchasing decisions; • potential and existing customers choosing our competitors’ products or developing their own solutions in-house; • our ability to control costs, including our operating expenses; • the amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses, including commissions; • the amount and timing of non-cash expenses, including stock-based compensation, goodwill impairments, and other non-cash charges; • the amount and timing of costs associated with recruiting, training, and integrating new employees and retaining and motivating existing employees; • the effects of acquisitions and their integration; • general economic conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers participate; • the impact of new accounting pronouncements; 20 Table of Contents • changes in the competitive dynamics of our market, including consolidation among competitors or customers; • significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our platform; and • awareness of our brand and our reputation in our target markets.
In addition to the other risks described herein, factors that may affect our operating results include the following: • fluctuations in demand for or pricing of our platform due to customers reducing their expenditures, whether as a cost-cutting measure or a result of their insolvency or bankruptcy, and whether due to inflationary pressures, rising global interest rates, bank failures, the ongoing COVID-19 pandemic or other reasons; • our ability to attract new customers; • our ability to retain our existing customers; • customer expansion rates; • the pricing and quantity of subscriptions renewed; • the timing of our customer purchases; 20 Table of Contents • fluctuations or delays in purchasing decisions in anticipation of new products or product enhancements by us or our competitors; • changes in customers’ budgets and in the timing of their budget cycles and purchasing decisions; • potential and existing customers choosing our competitors’ products or developing their own solutions in-house; • our ability to control costs, including our operating expenses; • the amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses, including commissions; • the amount and timing of non-cash expenses, including stock-based compensation, goodwill impairments, and other non-cash charges; • the amount and timing of costs associated with recruiting, training, and integrating new employees and retaining and motivating existing employees; • the effects of acquisitions and their integration; • general economic conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers participate; • the impact of new accounting pronouncements; • changes in the competitive dynamics of our market, including consolidation among competitors or customers; • significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our platform; and • awareness of our brand and our reputation in our target markets.
Negative conditions in the general economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, inflation, international trade relations, political turmoil, natural catastrophes, health epidemics or pandemics (such as the COVID-19 pandemic), warfare and terrorist attacks on the United States, Europe, the Asia Pacific region, Japan, or elsewhere, could cause a decrease in business investments, including spending on information technology, and negatively affect the growth of our business.
Negative conditions in the general economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, rising inflation, rising interest rates, bank failures, supply chain disruptions, labor shortages, weakening exchange rates, international trade relations, political turmoil, natural catastrophes, health epidemics or pandemics (such as the COVID-19 pandemic), warfare (such as Russia’s invasion of Ukraine), and terrorist attacks on the United States, Europe, the Asia Pacific region, Japan, or elsewhere, could cause a decrease in business investments, including spending on information technology, and negatively affect the growth of our business.
The loss of one or more of our senior management, particularly Jennifer Tejada, our Chief Executive Officer, or other key employees could harm our business, and we may not be able to find adequate replacements.
The loss of one or more of our senior management, particularly Jennifer Tejada, our Chief Executive Officer, or other key employees could harm our business, and we may not be able to find adequate replacements. We cannot ensure that we will be able to retain the services of any members of our senior management or other key employees.
Our revenue was $281.4 million, $213.6 million, and $166.4 million for the fiscal years ended January 31, 2022, 2021, and 2020, respectively.
Our revenue was $370.8 million, $281.4 million, and $213.6 million for the fiscal years ended January 31, 2023, 2022, and 2021, respectively.
Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations. As of January 31, 2022, we had federal net operating loss (“NOL”) carryforwards in the amount of $396.8 million. Beginning in 2030, $56.3 million of the federal NOLs will begin to expire. The remaining $340.5 million will carry forward indefinitely.
Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations. As of January 31, 2023, we had federal net operating loss (“NOL”) carryforwards in the amount of $451.5 million. Beginning in 2030, $70.5 million of the federal NOLs will begin to expire. The remaining $381.0 million will carry forward indefinitely.
We cannot predict the timing, strength, or duration of any economic slowdown, instability, or recovery, generally or within any particular industry or how any such event may impact our business. We have a history of operating losses and may not achieve or sustain profitability in the future. We were incorporated in 2010 and have experienced net losses since inception.
We cannot predict the timing, strength, or duration of any economic slowdown, instability, or recovery, generally or within any particular industry or how any such event may impact our business. 14 Table of Contents We have a history of operating losses and may not achieve or sustain profitability in the future.
These cybersecurity challenges, including threats to our own IT infrastructure or those of our customers or third-party providers, may take a variety of forms including but not limited to malware (including as a result of advanced persistent threat intrusions), social engineering attacks (including through phishing), ransomware, man-in-the-middle attacks, session hijacking, denial-of-service (such as credential stuffing), supply-chain attacks, password attacks, personnel misconduct or error, viruses, worms and other malicious software programs or cybersecurity attacks, and “mega breaches” targeted against cloud-based services and other hosted software, which could be initiated by individual or groups of hackers or sophisticated cyber criminals.
These cybersecurity challenges, including threats to our own IT infrastructure or those of our customers or third-party providers, may take a variety of forms including but not limited to malware (including as a result of advanced persistent threat intrusions), social engineering attacks (including through phishing, smishing, and vishing), ransomware attacks, man-in-the-middle attacks, session hijacking, denial-of-service attacks (such as credential stuffing), supply-chain attacks, software bugs, server malfunctions, software or hardware failures, credential harvesting, personnel misconduct or error, malicious code (such as viruses or worms), loss of data or other information technology assets, adware, telecommunications failures, “mega breaches” targeted against cloud-based services and other hosted software (which could be initiated by individual or groups of hackers or sophisticated cyber criminals), earthquakes, fires, floods, and other similar threats.
Furthermore, any errors or defects in third-party hardware, software, or infrastructure, or delays or complications with respect to the transition of critical business functions from one third-party product to another, could result in errors or a failure of our platform, which could harm our business and results of operations. 31 Table of Contents Our management team has limited experience managing a public company.
Furthermore, any errors or defects in third-party hardware, software, or infrastructure, or delays or complications with respect to the transition of critical business functions from one third-party product to another, could result in errors or a failure of our platform, which could harm our business and results of operations.
Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, the forecasts of market growth should not be taken as indicative of our future growth. Our security measures have on occasion in the past been, and may in the future be, compromised.
Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, the forecasts of market growth should not be taken as indicative of our future growth.
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. Risks Related to Our Business and Industry The ongoing global COVID-19 pandemic could harm our business, results of operations, and financial condition.
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.
For example, companies that compete with certain components of our offerings include Atlassian through its acquisition of OpsGenie, Splunk through its 18 Table of Contents acquisition of VictorOps, and parts of ServiceNow’s product suite. In addition, new entrants not currently considered to be competitors may enter the market through product development, acquisitions, partnerships, or strategic relationships.
For example, some companies that compete with certain components of our offerings include ServiceNow, Atlassian and Splunk. In addition, new entrants not currently considered to be competitors may enter the market through product development, acquisitions, partnerships, or strategic relationships.
If our renewal or expansion rates fall significantly below the expectations of the public market, securities analysts, or investors, the trading price of our common stock would likely decline. We derive a significant majority of all of our revenue from a single platform.
If our renewal or expansion rates fall significantly below the expectations of the public market, securities analysts, or investors, the trading price of our common stock would likely decline. We derive a significant majority of our revenue from a single product. Sales of subscriptions to our incident response offerings account for a significant majority of our revenue.
Currently, the SCCs are a valid mechanism to transfer personal information, but impose obligations onto parties relying on them such as to conduct transfer impact assessments to determine whether additional security measures are necessary to protect the transferred personal information.
Currently, the SCCs are a valid mechanism to transfer personal information, but impose obligations onto parties relying on them such as to conduct transfer impact assessments to determine whether additional security measures are necessary to protect the transferred personal information. In addition, laws in the UK similarly restrict transfers of personal information outside of those jurisdictions.
If we are unable to retain our current customers or sell additional functionality and services to them, our revenue growth will be adversely affected.
Any failure to attract or retain qualified personnel could adversely affect our business. If we are unable to retain our current customers or sell additional functionality and services to them, our revenue growth will be adversely affected.
Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments. Similarly, supply-chain attacks have increased in frequency and severity.
Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.
A component of our growth strategy involves the further expansion of our operations and customer base internationally. In each of the fiscal years ended January 31, 2022, 2021, and 2020 customers outside of the United States generated 24%, 24%, and 22%, respectively, of our revenue. We currently have offices in Australia, Canada, the United Kingdom (U.K.), and the United States.
A component of our growth strategy involves the further expansion of our operations and customer base internationally. In each of the fiscal years ended January 31, 2023, 2022, and 2021 customers outside of the United States generated 24%, 24%, and 24%, respectively, of our revenue.
As of January 31, 2022, we had state and foreign net operating loss carryforwards in the amount of $21.2 million, and $1.9 million, respectively, which begin to expire in 2030.
As of January 31, 2023, we had state and foreign net operating loss carryforwards in the amount of $27.9 million, and $3.2 million, respectively, which begin to expire in 2028 and 2033, respectively.
We have acquired, and may in the future acquire, other businesses, which could require significant management attention, disrupt our business, or dilute stockholder value. As part of our business strategy, we have acquired, and may in the future acquire, other companies, employee teams, or technologies to complement or expand our products, obtain personnel, or otherwise grow our business.
As part of our business strategy, we have acquired, and may in the future acquire, other companies, employee teams, or technologies to complement or expand our products, obtain personnel, or otherwise grow our business.
If we are unable to implement a valid mechanism for personal information transfers to the United States or other countries, we will face increased exposure to regulatory actions, substantial fines, and injunctions against processing or transferring personal information from Europe and other countries, and we may be required to increase our data processing capabilities in Europe and other countries at significant expense.
If there is no lawful manner for us to transfer personal information to the United States or other countries, or we are unable to implement, such transfers because the requirements are too onerous, we may face increased exposure to regulatory actions, substantial fines, and injunctions against processing or transferring personal information from Europe and other countries, and we may be required to increase our data processing capabilities in Europe and other countries at significant expense.
As a public company, we are required to comply with various regulatory and reporting requirements, including those required by the SEC. Complying with these reporting and other regulatory requirements is time-consuming and will continue to result in increased costs to us and could have a negative effect on our business, financial condition and results of operations.
Complying with these reporting and other regulatory requirements is time-consuming and will continue to result in increased costs to us and could have a negative effect on our business, financial condition and results of operations.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our corporate headquarters is located in San Francisco, California, and consists of approximately 59,000 square feet of space under a lease that is expected to expire in 2025. We also have office locations in Atlanta, Georgia; Toronto, Canada; London, England; and Sydney, Australia.
Biggest changeItem 2. Properties Our corporate headquarters is located in San Francisco, California, and consists of approximately 59,000 square feet of space under a lease that is expected to expire in 2025. We also have office locations in Atlanta, Georgia; Toronto, Canada; London, England; Sydney, Australia; Lisbon, Portugal; and Tokyo, Japan.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings From time to time, we are involved in various legal proceedings arising from the normal course of business activities.
Biggest changeItem 3. Legal Proceedings 48 Table of Contents From time to time, we are involved in various legal proceedings arising from the normal course of business activities.
We are not presently a party to any litigation the outcome of which, we believe, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows, or financial condition. Item 4. Mine Safety Disclosures Not applicable. 47 Table of Contents Part II.
We are not presently a party to any litigation the outcome of which, we believe, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows, or financial condition. Item 4. Mine Safety Disclosures Not applicable. 49 Table of Contents Part II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following graph compares (i) the cumulative total stockholder return on our common stock from April 11, 2019 (the date our common stock commenced trading on the NYSE through January 31, 2022 with (ii) the cumulative total return of the Standard & Poor's (S&P) 500 Index and S&P Software & Services Select Industry Index over the same period, assuming the investment of $100 in our common stock and in both of the other indices on April 11, 2019 and the reinvestment of dividends.
Biggest changeThe following graph compares (i) the cumulative total stockholder return on our common stock from April 11, 2019 (the date our common stock commenced trading on the NYSE through January 31, 2023 with (ii) the cumulative total return of the Standard & Poor (S&P) 500 Index and S&P Software & Services Select Industry Index over the same period, assuming the investment of $100 in our common stock and in both of the other indices on April 11, 2019 and the reinvestment of dividends.
As discussed above, we have never declared or paid a cash dividend on our common stock and do not anticipate declaring or paying a cash dividend in the foreseeable future. 48 Table of Contents Unregistered Sales of Equity Securities and Use of Proceeds None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved]
As discussed above, we have never declared or paid a cash dividend on our common stock and do not anticipate declaring or paying a cash dividend in the foreseeable future. 50 Table of Contents Unregistered Sales of Equity Securities and Use of Proceeds None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved]
Holders of Record As of January 31, 2022, we had 39 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
Holders of Record As of January 31, 2023, we had 30 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear Ended January 31, 2022 2021 2020 (dollars in thousands) Loss from operations $ (101,711) $ (66,282) $ (55,559) Add: Stock-based compensation (1) 70,033 43,231 27,205 Employer taxes related to employee stock transactions 3,017 1,609 384 Amortization of acquired intangible assets 3,500 1,167 — Acquisition-related expenses 2,108 2,437 — Non-GAAP operating loss $ (23,053) $ (17,838) $ (27,970) Operating margin (36) % (31) % (33) % Non-GAAP operating margin (8) % (8) % (17) % ______________ (1) Stock-based compensation expense above includes a one-time stock-based compensation expense of $3.1 million related to the modification of certain stock option awards in the fiscal year ended January 31, 2021. 59 Table of Contents 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.
Biggest changeWe define non-GAAP operating margin as non-GAAP operating income (loss) as a percentage of revenue. 62 Table of Contents Year Ended January 31, 2023 2022 2021 (dollars in thousands) Loss from operations $ (129,377) $ (101,711) $ (66,282) Add: Stock-based compensation (1) 109,907 70,033 43,231 Employer taxes related to employee stock transactions 3,096 3,017 1,609 Amortization of acquired intangible assets 10,237 3,500 1,167 Acquisition-related expenses 4,559 2,108 2,437 Restructuring costs 5,035 — — Non-GAAP operating income (loss) $ 3,457 $ (23,053) $ (17,838) Operating margin (35) % (36) % (31) % Non-GAAP operating margin 1 % (8) % (8) % ______________ (1) Stock-based compensation expense above includes a one-time stock-based compensation expense of $3.1 million related to the modification of certain stock option awards in the fiscal year ended January 31, 2021.
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) Benefit from Income Taxes (Provision for) benefit from income taxes consists primarily of income taxes in certain foreign jurisdictions in which we conduct business.
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. Benefit from (Provision for) Income Taxes Benefit from (provision for) income taxes consists primarily of income taxes in certain foreign jurisdictions in which we conduct business.
Financing Activities Cash used in financing activities for the fiscal year ended January 31, 2022 of $0.7 million consisted primarily of $23.6 million in employee payroll taxes related to vesting of restricted stock units, partially offset by proceeds from the exercise of stock options of $15.1 million and proceeds from our ESPP of $7.7 million.
Cash used in financing activities for the fiscal year ended January 31, 2022 of $0.7 million consisted primarily of $23.6 million in employee payroll taxes related to vesting of restricted stock units, partially offset by proceeds from the exercise of stock options of $15.1 million and proceeds from our ESPP of $7.7 million.
Stock-Based Compensation We recognize compensation expense for all stock-based payment awards, including stock options, restricted stock units (“RSUs”), and performance stock options (“PSUs”, based on the estimated fair value of the award on the grant date.
Stock-Based Compensation We recognize 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.
These amounts were partially offset by a $17.6 million increase in accounts receivable due a combination of timing of cash collections and a growth in billings, a $16.9 million increase in deferred contract costs due to commissions paid on new bookings, payments for operating lease liabilities of $4.1 million, and a $2.0 million increase in prepaid expenses and other assets related to timing of payments made in advance for future services.
These amounts were partially offset by a $17.6 million increase in accounts receivable due to a combination of timing of cash collections and a growth in billings, a $16.9 million increase in deferred contract costs due to commissions paid on new bookings, payments for operating lease liabilities of $4.1 million, and an increase of $2.0 million in prepaid expenses and other assets related to timing of payments made in advance for future services.
Investing Activities Cash provided by investing activities for the fiscal year ended January 31, 2022 of $17.4 million consisted of proceeds from maturities and sales of investments of $221.4 million, offset by purchases of investments of $197.1 million, capitalization of internal use software costs of $3.4 million, and purchases of property and equipment of $3.5 million primarily for purchases of computers for new employees and to support office space for our San Francisco office.
Cash provided by investing activities for the fiscal year ended January 31, 2022 of $17.4 million consisted of proceeds from maturities of investments of $221.4 million, offset by purchases of investments of $197.1 million, capitalization of internal use software costs of $3.4 million, and purchases of property and equipment of $3.5 million primarily for purchases of computers for new employees and to support office space for our San Francisco office.
While sales of subscriptions to our Modern Incident Response product account for a significant majority of our revenue, we intend to continue to invest in building additional products, features, and functionality that expand our capabilities and facilitate the extension of our platform to new use cases.
While sales of subscriptions to our Incident Response product account for a significant majority of our revenue, we intend to continue to invest in building additional products, features, and functionality that expand our capabilities and facilitate the extension of our platform to new use cases.
As such, we have developed a loyal customer base, with total ARR churn representing less than 5% of beginning ARR for the fiscal year ended January 31, 2022. Our ARR churn rate represents lost revenue from customers that were no longer contributing revenue at the end of the current period but did contribute revenue in the equivalent prior year period.
As such, we have developed a loyal customer base, with total ARR churn representing less than 5% of beginning ARR for the fiscal year ended January 31, 2023. Our ARR churn rate represents lost revenue from customers that were no longer contributing revenue at the end of the current period but did contribute revenue in the equivalent prior year period.
Overview PagerDuty is a digital operations management platform that manages urgent and mission critical work for a modern, digital enterprise. We empower teams to respond rapidly to incidents to resolve or avoid customer issues, 49 Table of Contents reduce noise, predict and avoid performance degradation, improve productivity, and accelerate digital transformation. Today, nearly every business is a digital business.
Overview PagerDuty is a digital operations management platform that manages urgent and mission critical work for a modern, digital enterprise. We empower teams to respond rapidly to incidents to resolve or avoid customer issues, 51 Table of Contents reduce noise, predict and avoid performance degradation, improve productivity, and accelerate digital transformation. Today, nearly every business is a digital business.
We generally bill monthly subscriptions monthly and subscriptions with terms of greater than one year annually in advance. We expand within our existing customer base by adding more users, creating additional use cases, and upselling higher priced packages and additional products. Once our platform is deployed, we typically see 50 Table of Contents significant expansion within our customer base.
We generally bill monthly subscriptions monthly and subscriptions with terms of greater than one year annually in advance. We expand within our existing customer base by adding more users, creating additional use cases, and upselling higher priced packages and additional products. Once our platform is deployed, we typically see 52 Table of Contents significant expansion within our customer base.
A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with U.S. 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, amortization of acquired intangible assets.
A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with U.S. 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, amortization of acquired intangible assets, and restructuring costs.
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 ARR, are indicators of our market penetration, particularly within enterprise 52 Table of Contents accounts, the growth of our business, and our potential future business opportunities.
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 ARR, are indicators of our market penetration, particularly within enterprise 55 Table of Contents accounts, the growth of our business, and our potential future business opportunities.
Cash used in investing activities for the fiscal year ended January 31, 2021 of $49.3 million consisted of purchases of investments of $222.0 million, cash paid for the Rundeck acquisition, net of cash acquired of $49.7 million, purchases of property and equipment of $4.0 million primarily to support additional office space for our San Francisco and Atlanta offices and purchases of computers for new employees, and capitalization of internal use 62 Table of Contents software costs of $0.8 million.
Cash used in investing activities for the fiscal year ended January 31, 2021 of $49.3 million consisted of purchases of investments of $222.0 million, cash paid for the Rundeck acquisition, net of cash acquired of $49.7 million, purchases of property and equipment of $4.0 million primarily to support additional office space for our San Francisco and Atlanta offices and purchases of computers for new employees, and capitalization of internal use software costs of $0.8 million.
We have spent more than a decade building deep product integrations to our platform, and our ecosystem now includes over 650 direct integrations to enable our customers to gather and correlate digital signals from virtually any software-enabled system or device.
We have spent more than a decade building deep product integrations to our platform, and our ecosystem now includes over 700 direct integrations to enable our customers to gather and correlate digital signals from virtually any software-enabled system or device.
For a discussion of the year ended January 31, 2021 compared to the year ended January 31, 2020, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended January 31, 2021.
For a discussion of the year ended January 31, 2022 compared to the year ended January 31, 2021, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended January 31, 2022.
We estimate 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 our common stock, as well as certain 65 Table of Contents 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.
We estimate 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 our 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.
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.
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 56 Table of Contents of acquired developed technology, and allocated overhead costs for facilities, information technology, and other allocated overhead costs.
Recently Issued and Adopted Accounting Pronouncements For further information on our recently adopted accounting pronouncements, refer to Note 2, “Summary of Significant Accounting Policies” in the consolidated financial statements contained within this Form 10-K.
Recently Adopted Accounting Pronouncements For further information on our recently adopted accounting pronouncements, refer to Note 2, “Summary of Significant Accounting Policies” in the consolidated financial statements contained within this Form 10-K.
Changes in operating assets and liabilities reflected cash outflows from a $26.2 million increase in deferred contract costs due to commissions paid on new bookings, a $21.6 million increase in accounts receivable due a combination of timing of cash collections and growth in billings, and payments for operating lease liabilities of $5.3 million.
Changes in operating assets and liabilities reflected cash 65 Table of Contents outflows from a $26.2 million increase in deferred contract costs due to commissions paid on new bookings, a $21.6 million increase in accounts receivable due a combination of timing of cash collections and a growth in billings, and payments for operating lease liabilities of $5.3 million.
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. 63 Table of Contents Revenue Recognition We generate revenue primarily from cloud-hosted subscription fees with the majority of our revenue from such arrangements. We also generate revenue from term license software subscription fees.
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. Revenue Recognition We generate revenue primarily from cloud-hosted subscription fees with the majority of our revenue from such arrangements. We also generate revenue from term license software subscription fees.
We will continue to invest additional resources in our platform infrastructure and our 53 Table of Contents 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.
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.
Cash provided by financing activities for the fiscal year ended January 31, 2021 of $254.4 million consisted primarily of net proceeds of $278.2 million related to the issuance of the Notes, proceeds from the exercise of stock options of $14.1 million, and proceeds from our ESPP of $6.0 million.
Cash provided by financing activities for the fiscal year ended January 31, 2021 of $254.4 million consisted primarily of net proceeds of $278.2 million related to the issuance of the Notes, proceeds from the exercise of stock 66 Table of Contents options of $14.1 million, and proceeds from our ESPP of $6.0 million.
Amounts anticipated to be recognized within one year of the balance sheet date are recorded as deferred contract costs, current, with the remaining portion recorded as deferred contract costs, noncurrent, on the consolidated balance sheets. Amortization expense of deferred contract costs is recorded as sales and marketing expense in the consolidated statements of operations.
Amounts anticipated to be recognized within 68 Table of Contents one year of the balance sheet date are recorded as deferred contract costs, current, with the remaining portion recorded as deferred contract costs, noncurrent, on the consolidated balance sheets. Amortization expense of deferred contract costs is recorded as sales and marketing expense in the consolidated statements of operations.
GAAP measures as part of our overall assessment of our liquidity, including the preparation of our annual operating budget and quarterly forecasts and to evaluate the effectiveness of our business strategies.
GAAP measures as part of our overall assessment of our liquidity, including the preparation of our annual operating budget and quarterly forecasts and to evaluate the effectiveness of our business strategies, and to assess its liquidity.
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 58 Table of Contents measures.
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.
Our 10 largest customers represented approximately 11% of our revenue for the fiscal year ended January 31, 2022, and no single customer represented more than 10% of our revenue in the same period, highlighting the breadth of our customer base. We serve a vital role in our customers’ digital operations and grow with them as their needs expand.
Our 10 largest customers represented approximately 9% of our revenue for the fiscal year ended January 31, 2023, and no single customer represented more than 10% of our revenue in the same period, highlighting the breadth of our customer base. We serve a vital role in our customers’ digital operations and grow with them as their needs expand.
Our dollar-based net retention rate was 124% for the fiscal year ended January 31, 2022. We have an efficient operating model, which comes from a combination of our cloud-native architecture, optimal utilization of our third-party hosting providers, and prudent approach to headcount expansion.
Our dollar-based net retention rate was 120% for the fiscal year ended January 31, 2023. We have an efficient operating model, which comes from a combination of our cloud-native architecture, optimal utilization of our third-party hosting providers, and prudent approach to headcount expansion.
Last 12 Months Ended January 31, 2022 2021 2020 Dollar-based net retention rate for all customers 124 % 121 % 122 % 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 revenue from term-license software subscription fees.
Last 12 Months Ended January 31, 2023 2022 2021 Dollar-based net retention rate for all customers 120 % 124 % 121 % 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 revenue from term-license software subscription fees.
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.
We may in the future enter into arrangements to acquire or invest in 64 Table of Contents 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.
We estimate 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 our 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.
We estimate 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 our 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.
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 for the year ended January 31, 2021 includes the Current Period ARR of Rundeck customers to the extent that they were PagerDuty customers as of 12 months prior to period end.
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 for the year ended January 31, 2023 includes the Current Period ARR of Catalytic customers to the extent that they were PagerDuty customers as of 12 months prior to period end.
If a directly observable stand-alone selling price does not exist, we estimate a stand-alone selling price range by reviewing external and internal market factor categories, which may include pricing practices, 64 Table of Contents historical discounting, industry practices, service groups, and geographic considerations.
If a directly observable stand-alone selling price does not exist, we estimate a stand-alone selling price range by reviewing external and internal market factor categories, which may include pricing practices, historical discounting, industry practices, service groups, and geographic considerations.
Interest Expense 54 Table of Contents 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 8, “Debt and Financing Arrangements” for additional details.
Interest Expense 57 Table of Contents 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.
Our customers use our products across a broad range of use cases such as Engineering, IT Operations, Security, and Customer Service. Of these customers, 594 customers contribute annual recurring revenue (“ARR”) in excess of $100,000, and 43 customers contribute ARR in excess of $1,000,000.
Our customers use our products across a broad range of use cases such as Engineering, IT Operations, Security, and Customer Service. Of these customers, 752 customers contribute annual recurring revenue (“ARR”) in excess of $100,000, and 50 customers contribute ARR in excess of $1,000,000.
This has allowed us to achieve gross margins of over 82% for the fiscal year ended January 31, 2022. Our strong gross margins allow us the flexibility to invest more in our platform and go-to market function while maintaining strong operating leverage on our path to profitability.
This has allowed us to achieve gross margin of over 80% for the fiscal year ended January 31, 2023. Our strong gross margins allow us the flexibility to invest more in our platform and go-to market function while maintaining strong operating leverage on our path to profitability.
As of January 31, 2022, we had over 14,500 paying customers spanning organizations of a broad range of sizes and industries, compared to over 13,500 as of January 31, 2021. Expanding Within our Customer Base The majority of our revenue is generated from our existing customer base.
As of January 31, 2023, we had over 15,200 paying customers spanning organizations of a broad range of sizes and industries, compared to over 14,500 as of January 31, 2022. Expanding Within our Customer Base The majority of our revenue is generated from our existing customer base.
The total net proceeds from the sale of the Notes, after deducting the initial purchasers’ discounts and debt issuance costs of $9.3 million, and purchases of the Capped Calls of $35.7 million, were $242.5 million. As of January 31, 2022, our principal sources of liquidity were cash and cash equivalents and investments totaling $543.4 million.
The total net proceeds from the sale of the Notes, after deducting the initial purchasers’ discounts and debt issuance costs of $9.3 million, and purchases of the Capped Calls of $35.7 million, were $242.5 million. As of January 31, 2023, our principal sources of liquidity were cash and cash equivalents and investments totaling $477.0 million.
As of January 31, 2022, we had more than 14,500 paying customers globally, ranging from the most disruptive startups to established Fortune 100 companies across every industry including software and technology, telecommunications, retail, travel and hospitality, media and entertainment, and financial services.
As of January 31, 2023, we had more than 15,200 paying customers globally, ranging from the most disruptive startups to established Fortune 100 companies across every industry including software and technology, telecommunications, retail, travel and hospitality, media and entertainment, and financial services.
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 and services.
The increase in revenue was attributable to a combination of growth from both new and existing customers. Growth from existing customers was attributable to both increases in the number of users and upsell of additional products and services.
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.
Assumptions used in valuing non-employee stock 69 Table of Contents options are generally consistent with those used for employee stock options with the exception that the expected term is over the contractual life.
As of January 31, 2022 2021 2020 Customers 14,865 13,837 12,774 Customers greater than $100,000 in ARR 594 426 323 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.
As of January 31, 2023 2022 2021 Customers 15,244 14,865 13,837 Customers greater than $100,000 in ARR 752 594 426 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 fiscal quarters end on April 30, July 31, October 31 and January 31. In this section, we discuss the results of our operations for the year ended January 31, 2022 compared to the year ended January 31, 2021.
The last day of our fiscal year is January 31. Our fiscal quarters end on April 30, July 31, October 31 and January 31. In this section, we discuss the results of our operations for the year ended January 31, 2023 compared to the year ended January 31, 2022.
Cash Flows The following table shows a summary of our cash flows for the periods presented : Year Ended January 31, 2022 2021 2020 (in thousands) Net cash (used in) provided by operating activities $ (6,021) $ 10,095 $ (173) Net cash provided by (used in) investing activities $ 17,376 $ (49,320) $ (232,070) Net cash (used in) provided by financing activities $ (736) $ 254,367 $ 225,944 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.
Cash Flows The following table shows a summary of our cash flows for the periods presented : Year Ended January 31, 2023 2022 2021 (in thousands) Net cash provided by (used in) operating activities $ 16,980 $ (6,021) $ 10,095 Net cash (used in) provided by investing activities $ (86,165) $ 17,376 $ (49,320) Net cash (used in) provided by financing activities $ (6,413) $ (736) $ 254,367 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.
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.
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 and Catalytic, to the extent applicable, beginning on the acquisition dates of October 1, 2020 and March 8, 2022, respectively.
Year Ended January 31, 2022 2021 2020 (in thousands) Net cash (used in) provided by operating activities $ (6,021) $ 10,095 $ (173) Less: Purchases of property and equipment (3,457) (4,038) (5,174) Capitalization of internal-use software costs (3,353) (810) — Free cash flow $ (12,831) $ 5,247 $ (5,347) Net cash provided by (used in) investing activities $ 17,376 $ (49,320) $ (232,070) Net cash (used in) provided by financing activities $ (736) $ 254,367 $ 225,944 60 Table of Contents 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.
Year Ended January 31, 2023 2022 2021 (in thousands) Net cash provided by (used in) operating activities $ 16,980 $ (6,021) $ 10,095 Less: Purchases of property and equipment (4,637) (3,457) (4,038) Capitalization of internal-use software costs (3,836) (3,353) (810) Free cash flow $ 8,507 $ (12,831) $ 5,247 Net cash (used in) provided by investing activities $ (86,165) $ 17,376 $ (49,320) Net cash (used in) provided by financing activities $ (6,413) $ (736) $ 254,367 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.
We account 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.
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.
As of January 31, 2022, we had deferred revenue of $170.2 million, of which $162.9 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.
As of January 31, 2023, we had deferred revenue of $209.1 million, of which $204.1 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.
Factors that could cause or contribute to such differences include, but are not limited to, adverse effects 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 elsewhere in this Form 10-K. The last day of our fiscal year is January 31.
Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, adverse effects 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 elsewhere in this Form 10-K.
As the open source software is publicly available at no cost to the customer, we have determined that there is no value to be assigned to the open source software in our term-license software subscription arrangements.
We account for the license to the software and support as two separate performance obligations. As the open source software is publicly available at no cost to the customer, we have determined that there is no value to be assigned to the open source software in our term-license software subscription arrangements.
Term-license software subscriptions Our subscriptions sold through our on-premise service are primarily term (or time-based) license subscriptions to our platform, which includes both open source and proprietary software as well as support, patches, and the right to receive unspecified software updates and upgrades released when and if available during the subscription.
Term-license software subscriptions Our on-premise software subscriptions are primarily term (or time-based) license subscriptions to our platform, which include both open source and proprietary software as well as support, patches, and the right to receive unspecified software updates and upgrades released when and if available during the subscription. Our term-license software subscription agreements generally have annual contractual terms.
We generally recognize 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.
We generally recognize 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. We account for forfeitures as they occur.
Year Ended January 31, 2022 2021 2020 (dollars in thousands) Gross profit $ 233,035 $ 182,870 $ 141,772 Add: Stock-based compensation 3,751 1,702 1,018 Employer taxes related to employee stock transactions 131 54 35 Amortization of acquired intangible assets 1,120 373 — Non-GAAP gross profit $ 238,037 $ 184,999 $ 142,790 Gross margin 83 % 86 % 85 % Non-GAAP gross margin 85 % 87 % 86 % 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.
Year Ended January 31, 2023 2022 2021 (dollars in thousands) Gross profit $ 300,359 $ 233,035 $ 182,870 Add: Stock-based compensation 6,827 3,751 1,702 Employer taxes related to employee stock transactions 163 131 54 Amortization of acquired intangible assets 7,401 1,120 373 Restructuring costs 357 — — Non-GAAP gross profit $ 315,107 $ 238,037 $ 184,999 Gross margin 81 % 83 % 86 % Non-GAAP gross margin 85 % 85 % 87 % Non-GAAP Operating Income (Loss) and Non-GAAP Operating Margin We define non-GAAP operating income (loss) as loss from operations excluding stock-based compensation expense, employer taxes related to employee stock transactions, amortization of acquired intangible assets, acquisition-related expenses, which include transaction costs, acquisition-related retention payments, which are not necessarily reflective of operational performance during a given period, and restructuring costs.
(Provision for) benefit from income taxes also includes the benefit associated with the reduction in our valuation allowance from the increase in the deferred tax liability associated with acquired intangible assets from our acquisition in the fiscal year ended January 31, 2021.
(Provision for) benefit from income taxes also includes the benefit associated with the reduction in our valuation allowance from the increase in the deferred tax liability associated with acquired intangible assets from our acquisitions.
Non-GAAP Financial Measures In addition to our results determined in accordance with U.S. 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.
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 61 Table of Contents purposes.
Item 7. 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 should be read in conjunction with the section titled “Selected Consolidated Financial and Other Data” and the consolidated financial statements and related notes thereto included elsewhere in this Form 10-K.
Item 7. 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 should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties.
Our financial performance will depend in large part on the overall demand for our platform, particularly demand from mid-market and enterprise customers, and our ability to meet the evolving needs of our customers.
We will continue to invest in building brand awareness as we further penetrate our addressable markets. Our financial performance will depend in large part on the overall demand for our platform, particularly demand from mid-market and enterprise customers, and our ability to meet the evolving needs of our customers.
The following table sets forth our consolidated statements of operations data expressed as a percentage of revenue: Year Ended January 31, 2022 2021 2020 Revenue 100 % 100 % 100 % Cost of revenue 17 14 15 Gross margin 83 86 85 Operating expenses: Research and development 34 30 29 Sales and marketing 57 57 59 General and administrative 28 29 31 Total operating expenses 119 117 119 Loss from operations (36) (31) (33) Interest income 1 2 3 Interest expense (2) (5) — Other (expense) income, net (1) — — Loss before (provision for) benefit from income taxes (38) (34) (30) (Provision for) benefit from income taxes — 2 — Net loss (38) % (32) % (30) % ______________ Note: Certain figures may not sum due to rounding.
The following table sets forth our consolidated statements of operations data expressed as a percentage of revenue: Year Ended January 31, 2023 2022 2021 Revenue 100 % 100 % 100 % Cost of revenue 19 17 14 Gross margin 81 83 86 Operating expenses: Research and development 36 34 30 Sales and marketing 53 57 57 General and administrative 27 28 29 Total operating expenses 116 119 117 Loss from operations (35) (36) (31) Interest income 1 1 2 Interest expense (1) (2) (5) Other expense, net — (1) — Loss before benefit from (provision for) income taxes (35) (38) (34) Benefit from (provision for) income taxes — — 2 Net loss (35) % (38) % (32) % Net loss attributable to redeemable non-controlling interests — % — % — % Net loss attributable to PagerDuty, Inc.
Year Ended January 31, 2022 2021 2020 (in thousands) Net loss $ (107,455) $ (68,903) $ (50,339) Add: Stock-based compensation (1) 70,033 43,231 27,205 Amortization of debt discount and issuance costs (2) 1,805 7,808 — Employer taxes related to employee stock transactions 3,017 1,609 384 Amortization of acquired intangibles assets 3,500 1,167 — Acquisition-related expenses 2,108 2,437 — Acquisition-related tax benefit — (5,017) — Non-GAAP net loss $ (26,992) $ (17,668) $ (22,750) ______________ (1) Stock-based compensation expense above includes a one-time stock-based compensation expense of $3.1 million related to the modification of certain stock option awards in the fiscal year ended January 31, 2021.
Year Ended January 31, 2023 2022 2021 (in thousands) Net loss attributable to PagerDuty, Inc. $ (128,423) $ (107,455) $ (68,903) Add (Less): Stock-based compensation (1) 109,907 70,033 43,231 Amortization of debt issuance costs (2) 1,839 1,805 7,808 Employer taxes related to employee stock transactions 3,096 3,017 1,609 Amortization of acquired intangibles assets 10,237 3,500 1,167 Acquisition-related expenses 4,559 2,108 2,437 Restructuring costs 5,035 — — Income tax effect of non-GAAP adjustments (2,556) — (5,017) Non-GAAP net income (loss) attributable to PagerDuty, Inc. $ 3,694 $ (26,992) $ (17,668) ______________ (1) Stock-based compensation expense above includes a one-time stock-based compensation expense of $3.1 million related to the modification of certain stock option awards in the fiscal year ended January 31, 2021.
Research and Development Year Ended January 31, 2022 2021 Change % Change (dollars in thousands) Research and development $ 95,690 $ 64,566 $ 31,124 48 % Percentage of revenue 34 % 30 % Research and development expenses increased by $31.1 million, or 48%, for the fiscal year ended January 31, 2022 compared to the fiscal year ended January 31, 2021 and increased as a percentage of revenue.
Research and Development Year Ended January 31, 2023 2022 Change % Change (dollars in thousands) Research and development $ 134,876 $ 95,690 $ 39,186 41 % Percentage of revenue 36 % 34 % Research and development expenses increased by $39.2 million, or 41%, for the fiscal year ended January 31, 2023 compared to the fiscal year ended January 31, 2022 and increased as a percentage of revenue.
Results of Operations The following table sets forth our consolidated statements of operations data for the periods indicated: Year Ended January 31, 2022 2021 2020 (in thousands) Revenue $ 281,396 $ 213,556 $ 166,351 Cost of revenue (1) 48,361 30,686 24,579 Gross profit 233,035 182,870 141,772 Operating expenses: Research and development (1) 95,690 64,566 49,011 Sales and marketing (1) 161,624 122,155 97,350 General and administrative (1) 77,432 62,431 50,970 Total operating expenses 334,746 249,152 197,331 Loss from operations (101,711) (66,282) (55,559) Interest income 2,946 4,232 5,692 Interest expense (5,398) (9,965) — Other (expense) income, net (2,757) (794) 203 Loss before (provision for) benefit from income taxes (106,920) (72,809) (49,664) (Provision for) benefit from income taxes (535) 3,906 (675) Net loss $ (107,455) $ (68,903) $ (50,339) ______________ 55 Table of Contents (1) Includes stock-based compensation expense as follows: Year Ended January 31, 2022 2021 2020 (in thousands) Cost of revenue $ 3,751 $ 1,702 $ 1,018 Research and development 23,764 11,095 5,566 Sales and marketing (1) 19,012 14,733 8,924 General and administrative 23,506 15,701 11,697 Total $ 70,033 $ 43,231 $ 27,205 ______________ (1) Stock-based compensation expense above includes a one-time stock-based compensation expense of $3.1 million related to the modification of certain stock option awards in the fiscal year ended January 31, 2021.
Results of Operations The following table sets forth our consolidated statements of operations data for the periods indicated: Year Ended January 31, 2023 2022 2021 (in thousands) Revenue $ 370,793 $ 281,396 $ 213,556 Cost of revenue (1) 70,434 48,361 30,686 Gross profit 300,359 233,035 182,870 Operating expenses: Research and development (1) 134,876 95,690 64,566 Sales and marketing (1) 195,622 161,624 122,155 General and administrative (1) 99,238 77,432 62,431 Total operating expenses 429,736 334,746 249,152 Loss from operations (129,377) (101,711) (66,282) Interest income 4,765 2,946 4,232 Interest expense (5,433) (5,398) (9,965) Other expense, net (19) (2,757) (794) Loss before benefit from (provision for) income taxes (130,064) (106,920) (72,809) Benefit from (provision for) income taxes 839 (535) 3,906 Net loss $ (129,225) $ (107,455) $ (68,903) Net loss attributable to redeemable non-controlling interests (802) — — Net loss attributable to PagerDuty, Inc. $ (128,423) $ (107,455) $ (68,903) ______________ 58 Table of Contents (1) Includes stock-based compensation expense as follows: Year Ended January 31, 2023 2022 2021 (in thousands) Cost of revenue $ 6,827 $ 3,751 $ 1,702 Research and development 39,012 23,764 11,095 Sales and marketing (1) 29,804 19,012 14,733 General and administrative 34,264 23,506 15,701 Total $ 109,907 $ 70,033 $ 43,231 ______________ (1) Stock-based compensation expense above includes a one-time stock-based compensation expense of $3.1 million related to the modification of certain stock option awards in the fiscal year ended January 31, 2021.
This was partially offset by purchases of the Capped Calls of $35.7 million and $8.2 million in employee payroll taxes related to vesting of restricted stock units.
This was partially offset by purchases of the Capped Calls of $35.7 million and $8.2 million in employee payroll taxes related to vesting of restricted stock units. Contractual Obligations and Commitments Our estimated future obligations consist of purchase commitments, principal and interest payments related to the Notes, and payments for our leases.
Interest Income and Other Expense, Net Year Ended January 31, 2022 2021 Change % Change (dollars in thousands) Interest income $ 2,946 $ 4,232 $ (1,286) (30) % Other expense, net $ (2,757) $ (794) $ (1,963) 247 % Interest income decreased by $1.3 million and other expense, net increased by $2.0 million for the fiscal year ended January 31, 2022 compared to the fiscal year ended January 31, 2021, primarily due to lower interest rates on our cash, cash equivalent and investment balances in the fiscal year ended January 31, 2022.
Interest Income and Other Expense, Net Year Ended January 31, 2023 2022 Change % Change (dollars in thousands) Interest income $ 4,765 $ 2,946 $ 1,819 62 % Other expense, net $ (19) $ (2,757) $ 2,738 (99) % Interest income increased by $1.8 million for the fiscal year ended January 31, 2023 compared to the fiscal year ended January 31, 2022, primarily due to favorable interest rates on our cash, cash equivalent and investment balances in the fiscal year ended January 31, 2023.
Cash used in operating activities for the fiscal year ended January 31, 2020 of $0.2 million primarily related to our net loss of $50.3 million, adjusted for non-cash charges of $37.0 million and net cash inflows of $13.2 million due to changes in our operating assets and liabilities.
Cash provided by operating activities for the fiscal year ended January 31, 2023 of $17.0 million primarily related to our net loss of $129.2 million, adjusted for non-cash charges of $153.0 million and net cash outflows of $6.8 million due to changes in our operating assets and liabilities.
Cost of Revenue and Gross Margin Year Ended January 31, 2022 2021 Change % Change (dollars in thousands) Cost of revenue $ 48,361 $ 30,686 $ 17,675 58 % Gross margin 83 % 86 % Cost of revenue increased by $17.7 million, or 58%, primarily due to an increase of $9.3 million in personnel expenses as a result of increased headcount, an increase of $4.0 million in hosting, software, and telecom costs and $2.0 million in outside services, both of which are to support the continued growth of the business and related infrastructure, and an increase of $0.7 million in amortization of intangible assets related to the acquisition of Rundeck.
Cost of Revenue and Gross Margin Year Ended January 31, 2023 2022 Change % Change (dollars in thousands) Cost of revenue $ 70,434 $ 48,361 $ 22,073 46 % Gross margin 81 % 83 % Cost of revenue increased by $22.1 million, or 46%, primarily due to an increase of $7.4 million in personnel expenses as a result of increased headcount and salaries, an increase of $6.3 million in amortization of intangible assets related to acquisitions, increases of $4.2 million in hosting, software, and telecom costs and $1.4 million in allocated overhead costs, both of which were to support the continued growth of the business and related infrastructure, and an increase of $1.1 million in other expenses, primarily related to merchant fees.
We determine revenue recognition through the following steps: • Identification of the contract, or contracts, with a customer. • Identification of the performance obligations in the contract. • Determination of the transaction price. • Allocation of the transaction price to the performance obligations in the contract. • Recognition of revenue when, or as, we satisfy a performance obligation.
We determine revenue recognition through the following steps: • Identification of the contract, or contracts, with a customer. • Identification of the performance obligations in the contract. • Determination of the transaction price. • Allocation of the transaction price to the performance obligations in the contract. • Recognition of revenue when, or as, we satisfy a performance obligation. 67 Table of Contents Cloud-hosted software subscriptions The majority of our cloud-hosted software subscriptions allow customers to use our cloud-hosted software over the contract period without taking possession of the software.
As of January 31, 2022, we had non-cancellable purchase commitments with certain service providers totaling approximately $64.6 million, principal and interest payments in conjunction with the Notes of $300.1 million, and lease payments of $29.1 million. Refer to Note 9 , “ Commitments and Contin gencies ” for additional information.
As of January 31, 2023, we had non-cancellable purchase commitments with certain service providers totaling approximately $61.3 million, principal and interest payments in conjunction with the Notes of $296.5 million, and lease payments of $20.0 million. Refer to Note 10 , “Commitments and Contingencies” for additional information.
Revenue related to our cloud-hosted software subscriptions is recognized ratably over the related contractual term beginning on the date that our platform is made available to a customer. Access to the platform represents a series of distinct services as we continually provide access to, and fulfill our obligation to, the end customer over the subscription term.
Access to the platform represents a series of distinct services as we continually provide access to, and fulfill our obligation to, the end customer over the subscription term. The series of distinct services represents a single performance obligation that is satisfied over time.
Sales and Marketing Year Ended January 31, 2022 2021 Change % Change (dollars in thousands) Sales and marketing $ 161,624 $ 122,155 $ 39,469 32 % Percentage of revenue 57 % 57 % Sales and marketing expenses increased by $39.5 million, or 32%, for the fiscal year ended January 31, 2022 compared to the fiscal year ended January 31, 2021 and was flat as a percentage of revenue.
Sales and Marketing Year Ended January 31, 2023 2022 Change % Change (dollars in thousands) Sales and marketing $ 195,622 $ 161,624 $ 33,998 21 % Percentage of revenue 53 % 57 % 60 Table of Contents Sales and marketing expenses increased by $34.0 million, or 21%, for the fiscal year ended January 31, 2023 compared to the fiscal year ended January 31, 2022 and decreased as a percentage of revenue.
The increase was primarily driven by an increase in personnel expenses of $25.3 million as a result of increased headcount to support our continued investment in our platform, an increase of $3.2 million in costs to support the continued growth of the business and related infrastructure, which includes allocated overhead costs, and an increase of $1.8 million in outside services due to a higher volume of activities to accelerate the development of our product.
The increase was primarily driven by an increase in personnel expenses of $33.1 million as a result of increased headcount and salaries to support our continued investment in our platform and restructuring costs, an increase of $5.1 million in costs to support the continued growth of the business and related infrastructure, which included allocated overhead costs, and an increase of $1.0 million in travel related costs as a result of increased travel due to reduced travel restrictions related to the COVID-19 pandemic.
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. 61 Table of Contents Cash used in operating activities for the fiscal year ended January 31, 2022 of $6.0 million primarily related to our net loss of $107.5 million, adjusted for non-cash charges of $103.4 million and net cash outflows of $1.9 million due to changes in our operating assets and liabilities.
Cash used in operating activities for the fiscal year ended January 31, 2022 of $6.0 million primarily related to our net loss of $107.5 million, adjusted for non-cash charges of $103.4 million and net cash outflows of $1.9 million due to changes in our operating assets and liabilities.
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.
Our future capital requirements will depend on many factors, including the effects of the worldwide macroeconomic conditions, including but not limited to, global inflation and the rise in interest rates, existing and new laws and regulations, recession or economic downturn globally or in the jurisdictions in which we do business, ongoing geopolitical conflict in Ukraine and other areas of the world, the COVID-19 pandemic, volatility in foreign currency exchange rates, 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.
The series of distinct services represents a single performance obligation that is satisfied over time. We recognize revenue ratably because the customer receives and consumes the benefits of the platform throughout the contract period.
We recognize revenue ratably because the customer receives and consumes the benefits of the platform throughout the contract period.
These amounts were partially offset by a $16.0 million increase in deferred contract costs due to commissions paid on new bookings, a $3.6 million increase in accounts receivable due to timing of cash collections, and an increase of $2.1 million in prepaid expenses and other assets related to prepayments made in advance for future services.
Changes in operating assets and liabilities reflected cash outflows from a $22.8 million increase in deferred contract costs due to commissions paid on new bookings, a $16.6 million increase in accounts receivable due to a combination of timing of cash collections and growth in billings, payments for operating lease liabilities of $5.8 million, a $2.9 million decrease in accounts payable and accrued expenses and other liabilities and a $2.8 million increase in prepaid expenses and other assets related to timing of payments made in advance for future services.
(2) During the first quarter of fiscal 2022, we early adopted ASU 2020-06 which resulted in the elimination of amortization of debt discount on the convertible senior notes from February 1, 2021.
(2) During the first quarter of fiscal 2022, we early adopted ASU 2020-06 which resulted in the elimination of amortization of debt discount on the convertible senior notes from February 1, 2021. 63 Table of Contents 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 capitalization of internal-use software costs.
Comparison of the Years Ended January 31, 2022 and 2021 Revenue Year Ended January 31, 2022 2021 Change % Change (dollars in thousands) Revenue $ 281,396 $ 213,556 $ 67,840 32 % 56 Table of Contents Revenue increased by $67.8 million, or 32%, for the fiscal year ended January 31, 2022 compared to the fiscal year ended January 31, 2021.
(34.6) % (38.2) % (32.3) % ______________ Note: Certain figures may not sum due to rounding. 59 Table of Contents Comparison of the Years Ended January 31, 2023 and 2022 Revenue Year Ended January 31, 2023 2022 Change % Change (dollars in thousands) Revenue $ 370,793 $ 281,396 $ 89,397 32 % Revenue increased by $89.4 million, or 32%, for the fiscal year ended January 31, 2023 compared to the fiscal year ended January 31, 2022.
We estimate the fair value of RSUs and PSUs at our stock price on the grant date.
Assumptions and estimates used in the determination of the fair value of stock options include expected volatility, expected term, risk-free rate, and expected dividend yield. We estimate the fair value of RSUs and PSUs at its stock price on the grant date.
Cash used in investing activities for the fiscal year ended January 31, 2020 of $232.1 million consisted of purchases of investments of $269.8 million and purchases of property and equipment of $5.2 million primarily to support additional office space for our San Francisco and Atlanta offices and purchases of computers for new employees.
Investing Activities Cash used in investing activities for the fiscal year ended January 31, 2023 of $86.2 million consisted of purchases of investments of $212.2 million, cash paid for the Catalytic acquisition, net of cash acquired, of $66.3 million, purchases of property and equipment of $4.6 million primarily for purchases of computers for new employees and to support new international office space, capitalization of internal use software costs of $3.8 million, and cash paid for an asset acquisition of $1.8 million, partially offset by proceeds from maturities of investments of $202.6 million.
This was partially offset by a decrease of $3.9 million in costs to support the business and related infrastructure which includes allocated overhead costs.
The increase was driven by an increase of $18.1 million in personnel expenses as a result of increased headcount, increased salaries, and restructuring costs, an increase of $1.3 million in travel expenses as a result of increased travel due to reduced travel restrictions related to the COVID-19 pandemic, and an increase of $0.9 million in costs to support the business and related infrastructure which includes allocated overhead costs.
Cash provided by financing activities for the fiscal year ended January 31, 2020 of $225.9 million consisted primarily of net proceeds from our IPO of $220.1 million after underwriting discounts and commissions, proceeds from the exercise of stock options of $7.2 million, and proceeds from our ESPP of $4.1 million.
Financing Activities Cash used in financing activities for the fiscal year ended January 31, 2023 of $6.4 million consisted primarily of $28.7 million in employee payroll taxes related to vesting of restricted stock units, partially offset by proceeds from the exercise of stock options of $10.5 million, proceeds from our ESPP of $9.9 million, and $1.9 million of cash received from the non-controlling shareholder of PagerDuty K.K.
Non-cash charges primarily consisted of stock-based compensation of $27.2 million, amortization of our deferred contract costs of $7.8 million, and depreciation and amortization of property and equipment and capitalized implementation costs of $2.3 million.
Non-cash charges primarily consisted of stock-based compensation of $109.9 million, amortization of our deferred contract costs of $19.2 million, depreciation and amortization of property and equipment, capitalized implementation costs, and acquired intangible assets of $17.4 million, noncash lease expense of $4.1 million, amortization of debt issuance costs of $1.8 million, other charges of $1.8 million, which consist primarily of acquisition-related asset impairment and bad debt expense, and a tax benefit related to release of valuation allowance of $1.3 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIn addition, we may sell these investments at any time for 66 Table of Contents use in its current operations or for other purposes, even prior to maturity. As of January 31, 2022, our available-for-sale investments are recorded as current on our consolidated balance sheets. In June 2020, we issued the Notes with an aggregate principal amount of $287.5 million.
Biggest changeIn addition, we may sell these investments at any time for use in its current operations or for other purposes, even prior to maturity. As of January 31, 2023, our available-for-sale investments are recorded as current on our consolidated balance sheets. In June 2020, we issued the Notes with an aggregate principal amount of $287.5 million.
Primarily all of our sales are denominated in U.S. dollars, and therefore substantially all of our revenue is not currently subject to significant foreign currency risk. Our operating expenses are denominated in the currencies of the countries in which our operations are located, which are primarily in the United States, Canada, the United Kingdom, Australia, and Switzerland.
Primarily all of our sales are denominated in U.S. dollars, and therefore substantially all of our revenue is not currently subject to significant foreign currency risk. Our operating expenses are denominated in the currencies of the countries in which our operations are located, which are primarily in the United States, Canada, the United Kingdom, Australia, Switzerland, and Portugal.
As of January 31, 2022, a hypothetical 10% relative change in interest rates would not have a material impact on our consolidated financial statements. Foreign Currency Exchange Risk Our reporting currency and the functional currency of our wholly owned foreign subsidiaries is the U.S. dollar.
As of January 31, 2023, a hypothetical 10% relative change in interest rates would not have a material impact on our consolidated financial statements. Foreign Currency Exchange Risk Our reporting currency and the functional currency of our wholly owned foreign subsidiaries is the U.S. dollar.
The fair market value was determined based on the quoted bid price of the Notes in an over-the-counter market on the last trading day of the reporting period. Refer to Note 4, “Fair Value Measurements” to our consolidated financial statements for more information.
The fair market value was determined based on the quoted bid price of the Notes in an over-the-counter market on the last trading day of the reporting period. Refer to Note 5 , “Fair Value Measurements” to our consolidated financial statements for more information.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk As of January 31, 2022, we had cash, cash equivalents and investments totaling $543.4 million, invested in money market funds, U.S. Treasury securities, commercial paper, and corporate debt securities. Our cash and cash equivalents are held for working capital purposes. Our investments are made for capital preservation purposes.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk As of January 31, 2023, we had cash, cash equivalents and investments totaling $477.0 million, invested in money market funds, U.S. Treasury securities, commercial paper, and corporate debt securities. Our cash and cash equivalents are held for working capital purposes. Our investments are made for capital preservation purposes.

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