The value of tomorrow is realized in partnership with Zonebourse.com
For once, the “beautiful story” that accompanies the birth of this company is not overused. About fifteen years ago, three engineers from the Canadian University of Waterloo (Ontario), who work for Amazon in Toronto, decided to go see if the grass was greener elsewhere after being confronted with the hell of pager duties. At the time, the e-commerce giant used, in the event of a problem, to warn its technical teams with alert messages on their pagers, small devices that were very popular thirty or forty years ago. before mobile telephony buries them. The trio realizes that most tech companies also have somewhat archaic systems for managing on-call duty. They then decide to develop the modernized version of this wire to the leg by baptizing it with the name of their nightmare at Amazon. PagerDuty was born.
The sequel is flawless. Incubated within the famous Californian incubator Y Combinator, the San Francisco-based company is climbing the ladder with success and the luck that smiles on the daring. It must be said that its products seduce beautiful signatures. Lately, the management was delighted to equip more than half of the 500 largest American companies. Throughout the world, there are customers as diverse as the British telecom operator Vodafone, the French mobility service provider BlaBlaCar or the German software giant SAP. The portfolio now has 24,000 customers representing one million users, with a very low churn rate. The most advanced version of the PagerDuty platform enables organizations to detect and notify incidents, then organize their support efficiently. The tool’s strength comes from its ability to interconnect data from disparate sources, such as infrastructure monitoring and tracking solutions, and third-party software. Its slogan: “the central nervous system of your digital ecosystem”.
A validated business model
PagerDuty went public in 2019. Since then, its revenue has tripled, from $118 million to $371 million. This growth enabled it to reap its first operating profits during the financial year ended on January 31, a year ahead of projections. Ebitda was thus established at 20.9 million dollars and operating income at 3.5 million. Free cash generation is now in positive territory and the balance sheet holds a substantial war chest.
In the vast universe of American digital companies in the making, PagerDuty has validated its economic model, which is already a great achievement. The next stage is that of maturity, which will consist of increasing the net margin, which is still negative, to a level worthy of the best software players.
Deluge of actions for employees
The black spot of the file is common to many companies in the sector. PagerDuty is very, very generous with its employees when it comes to equity compensation. This policy allows it to retain its troops and enhance their work, but it leads to the creation of many new shares, which dilute the value of those held by ordinary shareholders. In this case, the number of shares in circulation should increase from 77 million in 2020 to 105 million at the end of the year, or 36% more in five financial years. So PagerDuty ticks a lot of boxes for those who want exposure to digital growth, but not frugality in terms of stock volume. This excessive practice of internal gratifications is more and more decried in Silicon Valley. PagerDuty is therefore a value of tomorrow, if it begins to introduce a little more sobriety in its talent management.