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PagerDuty Q2 Earnings Beat Estimates, Shares Fall on Weak FY25 View
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PagerDuty (PD - Free Report) shares fell 1.15% to close at $18.08 on Wednesday, following its second-quarter fiscal 2025 results reported on Tuesday. Although both non-GAAP earnings and revenues increased on a year-over-year basis, PD lowered its fiscal 2025 revenue guidance, as well as announced a contraction in operating margin for the fiscal third quarter. The weak outlook spooked investors.
PD continues to suffer from weakness in the SMB segment. The challenging macroeconomic environment is also negatively impacting the Enterprise segment, resulting long sales cycle.
PD reported second-quarter fiscal 2025 non-GAAP earnings of 21 cents per share, beating the Zacks Consensus Estimate by 31.25%. The figure increased 10.5% year over year.
PagerDuty’s revenues of $115.9 million lagged the consensus mark by 0.6%. Revenues increased 7.7% year over year, driven by expanding customer base, strong product portfolio, solid subscription and recurring revenue base.
Annual recurring revenues (ARR) increased 10% year over year to $474 million.
International revenues contributed 27% to total revenues in the reported quarter.
Strong Customer Growth Aids PD’s Q2 Top Line
PagerDuty benefited from strong Enterprise and Mid-Market performance, with a total dollar-based net retention rate (DBNR) of 106% as of July 31, 2024.
The total number of customers, combining free and paid subscriptions, exceeded 29,000, up approximately 12% year over year.
PD closed the fiscal second quarter with 15,044 total paid customers compared with 15,146 at the end of the year-ago period. The decline was due to weakness in the SMB segment.
Customers with an ARR of more than $100,000 increased 6% year over year to 820.
PD’s Operating Details
In the second quarter of fiscal 2025, non-GAAP gross profit rose 8.2% year over year to $99.7 million. Gross margin gained 40 basis points (bps) to 86%.
Non-GAAP research & development (R&D) expenses decreased 2% year over year to $22.8 million. As a percentage of revenues, R&D expenses declined 190 bps on a year-over-year basis to 19.6%.
Non-GAAP sales & marketing (S&M) expenses rose 4% year over year to $42.1 million. However, as a percentage of revenues, S&M expenses declined 130 bps on a year-over-year basis to 36.3%.
Non-GAAP general & administrative (G&A) expenses increased 4.3% from the year-ago quarter’s figure to $14.7 million. As a percentage of revenues, G&A expenses declined 40 bps on a year-over-year basis to 12.7%.
Non-GAAP operating income was $20.1 million up 4.1% year over year. Non-GAAP operating margin was 17%, which expanded 410 bps year over year.
Balance Sheet & Cash Flow
As of July 31, 2024, PagerDuty had cash and cash equivalents and current investments of $599.3 million compared with $592.8 million as of April 30, 2024.
The operating cash flow amounted to $35.8 million compared with $28.6 million reported in the previous quarter. Free cash flow was $33.3 million compared with 27.1 million reported in the previous quarter.
PD repurchased 1.3 million shares under its $100 million plan. It currently has $72 million remaining through May 2026.
Guidance
For the third quarter of fiscal 2025, PagerDuty expects revenues between $115.5 million and $117.5 million, indicating growth in the 6-8% range. It expects an operating margin of 13%, which is lower than the 17% reported in the fiscal second quarter.
Non-GAAP earnings for the fiscal third quarter are expected to be in the range of 16-17 cents per share.
PD expects billings on a trailing 12-month basis to increase 10% to $468 million.
For fiscal 2025, PD expects revenues in the range of $463-$467 million (lower from the previous guidance range of $471 million - $477 million), indicating growth in the 7% to 8% range over fiscal 2024.
Non-GAAP earnings are expected in the 67-72 cents per share range (up from the previous guidance range of 66-71 cents).
PagerDuty currently expects the DBNR for the third quarter of fiscal 2025 to be at least 106% and 107% for the year-end period.
Zacks Rank & Key Picks
PagerDuty currently carries a Zacks Rank #3 (Hold).
PD shares have declined 21.9% year to date, underperforming the broader Zacks Computer & Technology sector’s appreciation of 16.4%.
The long-term earnings growth rate for Aspen Technology, AudioEye, and PayPal is currently pegged at 13.12%, 25% and 15.9%, respectively.
Shares of AudioEye and PayPal have surged 286.4% and 18.2%, respectively, on a year-to-date basis. Aspen Technology shares have declined 3.7% year to date.
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PagerDuty Q2 Earnings Beat Estimates, Shares Fall on Weak FY25 View
PagerDuty (PD - Free Report) shares fell 1.15% to close at $18.08 on Wednesday, following its second-quarter fiscal 2025 results reported on Tuesday. Although both non-GAAP earnings and revenues increased on a year-over-year basis, PD lowered its fiscal 2025 revenue guidance, as well as announced a contraction in operating margin for the fiscal third quarter. The weak outlook spooked investors.
PD continues to suffer from weakness in the SMB segment. The challenging macroeconomic environment is also negatively impacting the Enterprise segment, resulting long sales cycle.
PD reported second-quarter fiscal 2025 non-GAAP earnings of 21 cents per share, beating the Zacks Consensus Estimate by 31.25%. The figure increased 10.5% year over year.
PagerDuty’s revenues of $115.9 million lagged the consensus mark by 0.6%. Revenues increased 7.7% year over year, driven by expanding customer base, strong product portfolio, solid subscription and recurring revenue base.
Annual recurring revenues (ARR) increased 10% year over year to $474 million.
PagerDuty Price, Consensus and EPS Surprise
PagerDuty price-consensus-eps-surprise-chart | PagerDuty Quote
International revenues contributed 27% to total revenues in the reported quarter.
Strong Customer Growth Aids PD’s Q2 Top Line
PagerDuty benefited from strong Enterprise and Mid-Market performance, with a total dollar-based net retention rate (DBNR) of 106% as of July 31, 2024.
The total number of customers, combining free and paid subscriptions, exceeded 29,000, up approximately 12% year over year.
PD closed the fiscal second quarter with 15,044 total paid customers compared with 15,146 at the end of the year-ago period. The decline was due to weakness in the SMB segment.
Customers with an ARR of more than $100,000 increased 6% year over year to 820.
PD’s Operating Details
In the second quarter of fiscal 2025, non-GAAP gross profit rose 8.2% year over year to $99.7 million. Gross margin gained 40 basis points (bps) to 86%.
Non-GAAP research & development (R&D) expenses decreased 2% year over year to $22.8 million. As a percentage of revenues, R&D expenses declined 190 bps on a year-over-year basis to 19.6%.
Non-GAAP sales & marketing (S&M) expenses rose 4% year over year to $42.1 million. However, as a percentage of revenues, S&M expenses declined 130 bps on a year-over-year basis to 36.3%.
Non-GAAP general & administrative (G&A) expenses increased 4.3% from the year-ago quarter’s figure to $14.7 million. As a percentage of revenues, G&A expenses declined 40 bps on a year-over-year basis to 12.7%.
Non-GAAP operating income was $20.1 million up 4.1% year over year. Non-GAAP operating margin was 17%, which expanded 410 bps year over year.
Balance Sheet & Cash Flow
As of July 31, 2024, PagerDuty had cash and cash equivalents and current investments of $599.3 million compared with $592.8 million as of April 30, 2024.
The operating cash flow amounted to $35.8 million compared with $28.6 million reported in the previous quarter. Free cash flow was $33.3 million compared with 27.1 million reported in the previous quarter.
PD repurchased 1.3 million shares under its $100 million plan. It currently has $72 million remaining through May 2026.
Guidance
For the third quarter of fiscal 2025, PagerDuty expects revenues between $115.5 million and $117.5 million, indicating growth in the 6-8% range. It expects an operating margin of 13%, which is lower than the 17% reported in the fiscal second quarter.
Non-GAAP earnings for the fiscal third quarter are expected to be in the range of 16-17 cents per share.
PD expects billings on a trailing 12-month basis to increase 10% to $468 million.
For fiscal 2025, PD expects revenues in the range of $463-$467 million (lower from the previous guidance range of $471 million - $477 million), indicating growth in the 7% to 8% range over fiscal 2024.
Non-GAAP earnings are expected in the 67-72 cents per share range (up from the previous guidance range of 66-71 cents).
PagerDuty currently expects the DBNR for the third quarter of fiscal 2025 to be at least 106% and 107% for the year-end period.
Zacks Rank & Key Picks
PagerDuty currently carries a Zacks Rank #3 (Hold).
PD shares have declined 21.9% year to date, underperforming the broader Zacks Computer & Technology sector’s appreciation of 16.4%.
Aspen Technology (AZPN - Free Report) , AudioEye (AEYE - Free Report) and PayPal Holdings (PYPL - Free Report) are some better-ranked stocks in the broader sector that investors can consider, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term earnings growth rate for Aspen Technology, AudioEye, and PayPal is currently pegged at 13.12%, 25% and 15.9%, respectively.
Shares of AudioEye and PayPal have surged 286.4% and 18.2%, respectively, on a year-to-date basis. Aspen Technology shares have declined 3.7% year to date.