PagerDuty's stock falls despite earnings beat, as these factors weigh on outlook

By Emily Bary

CFO says deals could take longer to close, and smaller businesses are still 'a headwind to growth'

PagerDuty Inc. issued a mixed outlook on Tuesday, as the company expected better bottom-line performance than previously anticipated but said some deals could take more time to play out.

Shares of PagerDuty (PD) fell 12.5% in Tuesday's extended session.

The cybersecurity company boosted its expectations for adjusted earnings per share to between 67 cents and 72 cents for the full year. That compares with a prior outlook of 66 cents to 71 cents.

The company's total revenue outlook for the full fiscal year now calls for $463 million to $467 million, compared with $471 million to $477 million previously.

PagerDuty's fiscal third-quarter outlook is for $115.5 million to $117.5 million in revenue, along with 16 cents to 17 cents in adjusted earnings per share. Analysts had been projecting $126.2 million and 18 cents, respectively.

See also: CrowdStrike's stock nabs an upgrade as analyst says, 'the bad news is behind us'

Chief Financial Officer Howard Wilson told MarketWatch that despite progress with multi-product deals, "those deals are taking longer, and so we anticipate that whilst we have strong pipeline for the back half of the year, the phasing of some of those deals could end up being different."

Small- and medium-sized businesses, meanwhile, are "showing some encouraging trends around stabilizing" but are still "a headwind to growth," he added.

Wilson is upbeat about the long term, saying that the company has been able to validate recent studies around the cost of cyber incidents to businesses. For a typical enterprise company, the dollar impact of an incident could be $800,000, he said. In the case of CrowdStrike Holdings Inc. (CRWD), investors saw that disruptions could be even costlier.

Read: Delta Air says it'll take $380 million 'direct' revenue hit from CrowdStrike outage

"For many companies, this has become an issue that is not only at the executive level, but often audit-committees boards are interested in understanding what companies are doing to be able to respond quickly, because the reality is that no one can hope to mitigate every event," he said. The goal is broader, in making sure that companies can respond quickly, according to Wilson.

When a bad CrowdStrike software update triggered a July technology outage, that brought heightened attention to cybersecurity infrastructure.

"These kind of events don't necessarily translate into instant pipeline, but certainly the discussion has gone up a notch in terms of companies really thinking about: how do they modernize their operations, and what are the things that they can do to improve their resilience?" Wilson said.

In the fiscal second quarter that just completed, PagerDuty turned in revenue of $115.9 million, up 7.7% from a year prior and above the $112 million FactSet consensus view.

The company posted a net loss of $13 million, or 14 cents a share, compared with $24 million, or 26 cents a share, in the year-earlier period. On an adjusted basis, PagerDuty earned 21 cents a share, while analysts were projecting 17 cents.

Wilson said that while PagerDuty continues to benefit from efforts begun two years ago meant the improve its operating-expense profile, the company also benefited in the latest quarter from factors like marketing spending being intentionally moved to the back half of the year.

-Emily Bary

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

09-03-24 2005ET

Copyright (c) 2024 Dow Jones & Company, Inc.