HubSpot's (HUBS) Revenues Up Year-on-year In Q2 Earnings

Hubspot, Inc. (NYSE:HUBS) reported revenues of $89.1 million, showcasing a year-over-year increase of 37.1% in second-quarter 2017. The figure surpassed the Zacks Consensus Estimate of $86 million as well as the guided range of $85-$86 million.

The company posted adjusted profit of 7 cents per share against a loss of 7 cents per share in the year-ago quarter. Notably, including stock-based compensation, loss per share came in at 26 cents.

The Zacks Consensus Estimate was pegged at a loss of 37 cents.

The year-over-year growth in revenues can be primarily attributed to the growing customer base.

HubSpot’s stock has gained 49.2% year to date, substantially outperforming the 19.4% rally of the industry it belongs to.

Quarter Details

Total customers increased 40% year over year to 34,326. Marketing customers increased 30% to 26,560.

Average subscription revenue per customer was up 6.6% year over year to $12,773. The company continues to witness rapid adoption of its $50 per month marketing starter product, but we believe this will hurt the average subscription revenue per customer in the near term.

Management stated that it is hopeful about these customers upgrading to higher priced products over time.

Deferred revenues grew 44% year over year to $111.3 million, while calculated billings, defined as revenue plus the change in deferred revenues, came in at $94.8 million, up 39% year over year. Management noted that growth in billings was partially backed by a forex benefit.

International revenues grew 62% year over year, representing 32% of total revenue in the quarter.

Management stated that the growing adoption of Hubspot’s flagship product, One Hubspot and launch of a few other freemium products as a complementary addition to the company’s core paid sales and marketing products, have been positives for the top line.

Adjusted subscription revenue gross margin expanded 160 basis points (bps) from the year-ago quarter to 85.4%.

The company reported non-GAAP operating income of $2.4 million against a loss of $2.5 million in the year-ago quarter.

Guidance

HubSpot forecasts revenues in the range of $92.8-$93.8 million for the third quarter of 2017, which reflects sequential improvement of almost 4.7% at the mid-point. The Zacks Consensus Estimate is currently pegged at $84.5 million.

Management expects non-GAAP operating loss in the range of $4.5 million to $3.5 million for the quarter. Moreover, HubSpot expects non-GAAP net loss per share to be in the range 8 cents to 10 cents. The Zacks Consensus Estimate (includes stock-based compensation) is currently pegged at a loss of 43 cents per share.

For full-year 2017, HubSpot expects revenues in the range of $362.8 million to $364.8 million. Non-GAAP operating income is expected in the range of breakeven to $2 million, up from the previous guidance of a loss of $3 million to $5 million.

Non-GAAP net income per share is anticipated to be in the range of 3 cents to 7 cents compared with the previously guided range of 4 cents to 10 cents per share. The Zacks Consensus Estimate for revenues is currently pegged at $358.17 million.

The company expects free cash flow for the year in the range of $15 million to $16 million, up from $13 million to $14 million.

Zacks Rank & Stocks to Consider

Currently, HubSpot carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Better-ranked stocks in the industry are Alibaba Group Holding Limited (NYSE:BABA) , Applied Optoelectronics, Inc. (NASDAQ:AAOI) , and Symantec Corp. (NASDAQ:SYMC) , all sporting a Zacks Rank #1.

Long-term earnings growth rate for Alibaba Group, Applied Optoelectronics and Symantec are projected to be 28.9%, 18.7% and 10.3%, respectively.

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