Hi Austin,
Thanks for reminding me about this one - saw the notification on seeking alpha earlier in the week and forgot all about it.
Management lists their TAM as $25 billion - take that for what you will I guess:
Our Market Opportunity
Every business across every industry is undergoing digital transformation. We believe our platform addresses every team member who is associated with the development, delivery, and operations of the digital experience. Our platform has demonstrated use cases across developers, IT, security, and customer support. We estimate there are approximately 85 million users in the developer, IT, security, and customer support segments, comprised of:
•
22.3 million global software developers
•
18 million information and communications technology skilled workers
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43.7 million customer support and success workers (applying U.S. Bureau of Labor Statistics data on a global basis)
•
1.2 million security operations workers (applying U.S. Bureau of Labor Statistics data on a global basis)
We estimate our total addressable market is over $25 billion. To calculate our total addressable market, we multiply our estimate of 85 million potential users by our average revenue per user for the financial year ended January 31, 2019.
We currently have less than 1% penetration within these markets. In addition to our core use cases, we are seeing our customers use our platform across their business operations and industrial operations.
Delivering on the promise of digital transformation is a top priority for companies as they fight to stay relevant to their customers. We believe spending on application development, IT operations, security, and customer service will increasingly shift toward processes that enable digital transformation, including digital operations management.
You asked earlier why they are only near $100mln in revenue since 2010. Appears they were formally a single use product for on call management:
PagerDuty was founded by three former Amazon.com developers who were often asked to provide on-call support for their applications. Frustrated with the inefficiencies of existing solutions and the resulting negative impact of these solutions on their day-to-day lives, they started PagerDuty with the goal of building effective, easy-to-use software that enhances the lives of on-call responders while improving their productivity and work-life balance. Since our founding in 2009, we have evolved our platform, constantly innovating and improving the value we deliver to customers. We have expanded our capabilities from a single product focused on on-call management to a real-time operations platform, spanning event intelligence, incident response, on-call management, business visibility, and analytics. We have invested in developing the scalability, reliability, and security of our platform, allowing us to address the needs of even the largest and most demanding enterprise customers. We have spent years building deep integrations into over 300 ecosystem partners so that our customers can use PagerDuty to gather and correlate digital signals from virtually any software-enabled system or device.
It’s a shame they only provide such a limited amount of financial data… basically year end 2018 and nine months through 10/31/17 and 10/31/18.
They do provide customers with greater than 100K ARR:
10/31/17: 132
10/31/18: 203
1/31/18: 144
They are as you would expect any of these companies, losing money, cash flow negative, and spending more than 50% of revenues on S&M.
For all you accounting fans out there, they did adopt Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (Topic 606), effective January 1, 2017, which was prior to fiscal 2018. As such, the consolidated financial statements present revenue in accordance with Topic 606 for the period presented.
I’m no techie, so I thought all this stuff sounded like they would be direct competitors with New Relic APM and Elastics version of it… but, according to the S-1:
The market for digital operations management is nascent, fragmented, and constantly evolving. We primarily compete against in-house solutions and manual processes and occasionally against software providers that may compete against certain components of our offering. Our primary competitors include OpsGenie (acquired by Atlassian) and VictorOps (acquired by Splunk).
SO I guess digital operations management is very different from Application Performance Monitoring.
Prior to the IPO directors and executive officers own 16% of the company.
If you made it this far, I’d agree that it looks interesting so far. Hopefully as we get closer to the IPO, we can get access to their IPO roadshow presentation where we can learn a bit more…
Best,
Matt