PagerDuty likely to report wider Q2 loss on Sept 5

PagerDuty Inc. (NYSE: PD) is set to release its second-quarter earnings results on Thursday after the market closes. The results are likely to be hurt by higher costs and expenses while an increase in the number of customers, number of users per customer and level of subscription purchased drove revenue higher.

Check out PagerDuty’s Q2 2020 earnings coverage

The company generates revenue primarily through sales of subscriptions to its software. The company believes that the number of customers using its platform is indicators of market penetration, particularly within enterprise accounts, the growth of its business, and its potential future business opportunities. To increase revenue, the company is required to attract new customers and retain existing customers.

Sales and marketing expenses will continue to be its largest operating expense for the foreseeable future due to efforts expansion. PagerDuty will incur additional expenses due to exchange costs, compliance and reporting obligations costs, and increased expenses for insurance, investor relations, and professional services. However, the company predicts general and administrative expenses to fall over the longer term due to the improved efficiency arising from its investments.

While experiencing significant revenue growth in recent periods, the company remained clueless of achieving profitability in the future as high enough volume of sales is required to sustain growth. The company is expected to not increase its revenue enough to offset its increased operating expenses due to costlier than expected business growth efforts.

Analysts expect the company to report a loss of $0.10 per share on revenue of $39.12 million for the second quarter. PagerDuty expects total revenues to grow 39% to 43% year-over-year to the range of $38.5 million to $39.5 million and net loss in the range of $0.10 to $0.09 per share.

Read: Palo Alto Networks Q4 earnings preview

For the first quarter, the company reported a wider loss due to higher costs and expenses. Total revenues climbed by 49% year-over-year on growing demand across industry verticals and customer segments, especially the enterprise segment. As of April 30, 2019, the company had over 11,680 customers that use its products across a broad range of use cases such as DevOps, Security, IT Operations, Business and Internet of Things.

For fiscal 2020, the company predicts total revenue to increase by 37% to 38% year-over-year to the range of $161 million to $163 million. Net loss is projected to be in the range of $0.38 to $0.37 per share, assuming about 65 million shares outstanding.

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