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HubSpot (HUBS) Beats on Q2 Earnings & Revenues, Ups '20 View

HubSpot, Inc.’s HUBS second-quarter 2020 non-GAAP earnings of 34 cents per share beat the Zacks Consensus Estimate by 41.7% and improved 9.7% from the year-ago quarter. The bottom line also exceeded management’s guided range of 23-25 cents.

Revenues of $203.6 million surpassed the Zacks Consensus Estimate by 4.2% and improved 25% (up 26% on a constant currency basis) year over year. The top line was also above the higher end of management’s guided range of $195-$196 million.

The top line was driven by accelerating Subscription revenues. Further, growing customer base, which surged 34% year over year to 86,672, contributed to the results.

Following stellar second-quarter results and raised 2020 guidance, shares of HubSpot were up more than 7.5% in the pre-market trading on Aug 6.



Coming to the year-to-date price performance, shares of HubSpot have gained 50.1%, compared with the industry’s growth of 63.3%.

Quarter Details

Subscription revenues (96.5% of the total revenues) improved 26% from the year-ago quarter to $196.4 million. Professional services and other revenues (3.5%) were down 3% year over year to $7.2 million.

Total average subscription revenue per customer was down 5% year over year to $9,466.

Deferred revenues (including current portion) improved 22% year over year to $241 million. Meanwhile, calculated billings, defined as revenues plus the change in deferred revenues, amounted to $202 million, surging 21% year over year (up 21% at cc).

International revenues climbed 32% from the year-ago quarter (up 36% at cc), representing 42% of total revenues in the reported quarter.

Margins in Detail

Per management, non-GAAP gross margin during the reported quarter remained flat year over year at 82%. Further, non-GAAP subscription margin of 85.5% contracted 40 basis points (bps) on a year-over-year basis.

Non-GAAP Research and development (R&D) expenses as a percentage of revenues expanded 80 bps year over year to 19.1%. Non-GAAP General and administrative (G&A) expenses contracted 90 bps to 9.6% on a year-over-year basis. Meanwhile, non-GAAP Sales and marketing (S&M) expenses contracted 100 bps to 44.1% from the year-ago quarter.

The company reported non-GAAP operating income of $19.2 million, up 39.2% from the year-ago figure. Management had projected non-GAAP operating income in the band of $10.5-$11.5 million for the second quarter.

Non-GAAP operating margin expanded 100 bps on a year-over-year basis to 9.4%.

Balance Sheet & Cash Flow

As of Jun 30, 2020, HubSpot reported cash and cash equivalents and short-term investments of $1.14 billion, up from $968.6 million as of Mar 31, 2020.

HubSpot, Inc. Price, Consensus and EPS Surprise

HubSpot, Inc. Price, Consensus and EPS Surprise
HubSpot, Inc. Price, Consensus and EPS Surprise

HubSpot, Inc. price-consensus-eps-surprise-chart | HubSpot, Inc. Quote

Cash flow from operations during the reported quarter was $15 million compared with $23 million reported in the prior quarter.

Free cash flow came in at $0.8 million compared with the prior-quarter figure of $7.1 million.

Guidance

For third-quarter 2020, HubSpot forecast revenues in the range of $210-$211 million. The Zacks Consensus Estimate for third quarter revenues is currently pegged at $200.5 million.

Management expects non-GAAP operating income in the band of $7.5-$8.5 million.

Moreover, the company anticipates non-GAAP net income per share in the range of 11-13 cents. The Zacks Consensus Estimate is currently pegged at 24 cents per share.

For 2020, the company has raised guidance. The company now anticipates revenues between $828  million and $832 million compared with the prior range of $800-$810 million. The Zacks Consensus Estimate for 2020 revenues currently stands at $805.8 million.

Management expects non-GAAP operating income in the band of $52-$54 million compared with the earlier guided range of $40-$42 million.

HubSpot anticipates non-GAAP net income per share in the range of 92-96 cents compared with the previous range of 88-92 cents. The Zacks Consensus Estimate is currently pegged at 92 cents per share.

Zacks Rank & Key Picks

HubSpot currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Dropbox DBX, Asure Software, Inc. ASUR and Analog Devices ADI. While Asure Software sports a Zacks Rank #1 (Strong Buy), both Analog Devices and Dropbox carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate of Dropbox, Asure Software, and Analog Devices is pegged at 16.83%, 14% and 13.33%, respectively.

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