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Hubspot (HUBS) Q3 Earnings Driven by Strong Customer Base

Hubspot, Inc. HUBS reported third-quarter 2017 adjusted profit of 3 cents per share against a loss of 5 cents per share in the year-ago quarter. The Zacks Consensus Estimate was pegged at a loss of 4 cents per share.

Revenues of $97.7 million increased 38% year over year in third-quarter 2017. The figure surpassed the Zacks Consensus Estimate of $95.96 million as well as the guided range of $92.8-$93.8 million.

The year-over-year growth in revenues can be primarily attributed to its growing customer base, which increased 47%.

Shares of Hubspot have gained 82.9% on a year-to-date basis significantly outperforming the 29.6% rally of the industry it belongs to.

Quarter Details

Subscription revenues increased 40% from the year-ago quarter to $93.2 million, representing 95% of the total revenues. Professional services and other revenues were up 12% year over year to $4.6 million.

Average subscription revenue per customer decreased 4% year over year to $10,332. The decline was primarily attributed to increased adoption of the company’s $50 per month marketing starter product and sales starter product called Sales Pro.

Deferred revenues grew 43% year over year to $120.2 million, while calculated billings, defined as revenue plus the change in deferred revenues, came in at $106.6 million, up 37% year over year. Management noted that growth in billings was partially backed by a forex benefit.

International revenues grew 71% year over year, representing 33% of total revenues in the quarter, which also benefitted from positive forex impact.

Management is positive about the performance of Hubspot One and Hubspot CRM tools. The company will be launching a new chatbot tool called Conversations  that will be in beta testing for a while before getting incorporated. This is anticipated to be a further positive for the company.

Hubspot’s recent acquisition of Motion AI is expected to enrich its chatbot offerings further. Notably, Hubspot’s Sales Professional product has also been enhanced with automation techniques to address the needs of the dynamic industry environment. Additionally, management is banking on deeper integrations with Facebook FB and introduction of a new content strategy approach called Campaign Reporting.

Management noted that the company successfully hosted the INBOUND event in September, bringing together thousands of marketing and sales professionals and eminent speakers from around the world including Michelle Obama.

Hubspot announced an e-commerce based integration with Shopify SHOP at the INBOUND event, which is expected to be a growth driver for the company. Lastly, management is also optimistic about the launch of Customer Hub scheduled in 2018.

HubSpot, Inc. Price, Consensus and EPS Surprise

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

Margin and Balance Sheet

The company reported non-GAAP operating income of $0.5 million against a loss of $1.2 million in the year-ago quarter.

Hubspot had cash, cash equivalents and investments balance of $527.5 million as of Sep 30, 2017.

Guidance

HubSpot forecasts revenues in the range of $101-$102 million for the fourth quarter of 2017. The Zacks Consensus Estimate is currently pegged at $99.6 million.

Management expects non-GAAP operating income in the range of $1.5 million to $2.5 million for the quarter. Moreover, HubSpot expects non-GAAP net income per share to be in the range of 6 cents to 8 cents. The Zacks Consensus Estimate is currently pegged at 3 cents per share.

For full-year 2017, HubSpot expects revenues in the range of $370 million to $371 million, up from the previous expectation of $362.8 million to $364.8 million. Non-GAAP operating income is expected in the range of $5.7 to $6.7 million, up from the previous guidance of breakeven to $2 million.

Non-GAAP net income per share is anticipated to be in the range of 19 cents to 21 cents compared with the previously guided range of 3 cents to 7 cents per share.

Zacks Rank & Key Pick

Hubspot has a Zacks Rank #2 (Buy).

A better-ranked stock in the broader technology sector is NVIDIA Corporation NVDA, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for NVIDIA is projected to be 11.2%.

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