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HubSpot (HUBS) Beats on Q3 Earnings & Revenues, Ups '20 View

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HubSpot, Inc.’s (HUBS - Free Report) third-quarter 2020 non-GAAP earnings of 28 cents per share beat the Zacks Consensus Estimate of 13 cents and improved 7.8% from the year-ago quarter. The bottom line also exceeded management’s guided range of 11-13 cents.

Revenues of $228.4 million surpassed the Zacks Consensus Estimate by 8.5% and improved 32% (up 30% on a constant currency basis) year over year. The top line was also above the higher end of management’s guidance of $210-$211 million.

The top line was driven by accelerating Subscription revenues. Further, growing customer base, which surged 39% year over year to 95,634, contributed to the results.

Following stellar third-quarter results and raised 2020 guidance, shares of HubSpot were up more than 11% in the pre-market trading on Nov 6.

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

Quarter Details

Subscription revenues (96.8% of the total revenues) surged 32% from the year-ago quarter to $221.1 million. Professional services and other revenues (3.2%) were down 12% year over year to $7.3 million.

Total average subscription revenue per customer was down 3% year over year to $9,669.

Deferred revenues (including current portion) improved 27% year over year to $259.1 million. Meanwhile, calculated billings, defined as revenues plus the change in deferred revenues, amounted to $246 million, surging 38% year over year (up 33% at cc).
 

HubSpot, Inc. Price, Consensus and EPS Surprise

HubSpot, Inc. Price, Consensus and EPS Surprise

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

International revenues climbed 40% from the year-ago quarter (up 39% at cc), representing 44% of total revenues in the reported quarter.

Margins in Detail

Non-GAAP gross margin during the reported quarter remained flat year over year at 82%. Further, non-GAAP subscription margin of 85.7% expanded 10 basis points (bps) on a year-over-year basis.

Non-GAAP Research and development (R&D) expenses as a percentage of revenues expanded 90 bps year over year to 19.2%. Non-GAAP General and administrative (G&A) expenses contracted 80 bps to 9.5% on a year-over-year basis. Meanwhile, non-GAAP Sales and marketing (S&M) expenses shrunk 100 bps to 46.4% from the year-ago quarter.

The company reported non-GAAP operating income of $16.5 million, up 57.1% from the year-ago figure. Management had projected non-GAAP operating income to be $7.5-$8.5 million for the third quarter.

Non-GAAP operating margin expanded 110 bps on a year-over-year basis to 7.2%.

Balance Sheet & Cash Flow

As of Sep 30, 2020, HubSpot reported cash and cash equivalents and short-term investments of $1.18 billion, up from $1.14 billion as of Jun 30, 2020.

Cash flow from operations during the reported quarter was $38.7 million compared with $15 million reported in the prior quarter and $19.7 million in the year-ago quarter.

Free cash flow was $25.3 million compared with the prior-quarter figure of $0.8 million and $6.7 million reported in the year-ago quarter.

Guidance

For fourth-quarter 2020, HubSpot forecast revenues to be $235-$237 million. The Zacks Consensus Estimate for fourth-quarter revenues is currently pegged at $217.4 million.

Management expects non-GAAP operating income in the band of $13-$15 million.

Moreover, the company anticipates non-GAAP net income per share to be 21-23 cents. The Zacks Consensus Estimate is currently pegged at 13 cents per share.

For 2020, the company has raised guidance. The company now anticipates revenues between $866 million and $868 million compared with the prior range of $828-$832 million. The Zacks Consensus Estimate for 2020 revenues currently stands at $830.6 million.

Management expects non-GAAP operating income in the band of $63.5-$65.5 million compared with the earlier guided range of $52-$54 million.

HubSpot anticipates non-GAAP net income per share to be $1.13-$1.15 compared with the previous range of 92-96 cents. The Zacks Consensus Estimate is currently pegged at 94 cents per share.

Zacks Rank & Key Picks

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

Some better-ranked stocks in the broader sector are Himax Technologies (HIMX - Free Report) , NVIDIA (NVDA - Free Report) and Covetrus . All carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Covetrus is set to report Nov 10, while Himax and NVIDIA are scheduled to report earnings on Nov 12 and Nov 18, respectively.

The long-term earnings growth rate for NVIDIA and Covetrus is currently pegged at 20.1% and 31.6%, respectively. Meanwhile, Himax’s current-year earnings of 13 cents per share, indicate year over year growth of 285.7%.

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