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HubSpot, Inc. (HUBS - Free Report) reported impressive first-quarter 2023 results, with the bottom and the top line surpassing the respective Zacks Consensus Estimate. The Cambridge, MA-based leading marketing and sales application provider reported higher revenues year over, driven by solid customer addition, unique strategy to attract users from different market segments and accelerated pace of innovation.
Net Income
On a GAAP basis, the company incurred a net loss of $38.3 million or a loss of 78 cents per share compared with a loss of $9.3 million or a loss of 20 cents per share in year-earlier quarter. Despite top-line growth, higher operating expenses and restructuring charges led to greater loss during the quarter.
Non-GAAP net income in the first quarter was $61.6 million or $1.20 per share compared with $27.5 million or 54 cents per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 37 cents.
Quarterly revenues stood at $501.6 million compared with $395.6 million reported in the prior-year quarter. Healthy customer engagement and product innovation supported the 27% year-over-year improvement in the top line. Backed by its efficient go-to-market strategy, HubSpot was able to attract customers from both the lower and upper end of the market. The top line beat the Zacks Consensus Estimate of $475 million.
Subscription revenues rose by 27% year over year to $489.7 million from $384.9 million reported in the year-ago quarter. Average subscription revenue increased 6% year over year on a constant-currency basis to $11,365. The upside was primarily driven by multi-hub adoption from professional and enterprise customers. However, large volume of starter customers partially reversed this trend. Professional services and other revenues increased to $11.9 million from $10.6 million in the year-ago quarter. The organization added 9,900 net new customers during the quarter, which increased the total customer count to $177,298, up 23% year over year.
Other Details
Gross profit reported during the quarter was $419.6 million compared with $322.7 million in the year-ago quarter. Operating loss on a GAAP basis was $44.8 million compared with a loss of $11.2 million in the prior-year period. Non-GAAP operating margin improved to 13.5% from 8.8% reported in the year-ago quarter. Restructuring actions initiated in January had a positive impact on operating margin.
Cash Flow & Liquidity
During the first quarter of 2023, HubSpot generated $81.1 million cash from operating activities. As of Mar 31, 2023, the company had $325.2 million in cash and cash equivalents with $454.7 million convertible senior notes.
Outlook
For the second quarter of 2023, management expects customers to remain cautious with their spending decisions owing to a macroeconomic difficulty. Foreign exchange headwinds are likely to affect the company’s revenue growth in 2023.
HubSpot estimates second-quarter revenues in the range of $503-$505 million. Management expects non-GAAP operating margin in the band of $54-$56 million. Non-GAAP net income is anticipated within the range of 98 cents-$1.00.
For 2023, revenues are estimated in the range of $2,080-$2,088 million. The estimated range of non-GAAP operating income is $275-$279 million. Non-GAAP net income per share is likely to be in the range of $4.8-$4.85.
Arista Networks, Inc. (ANET - Free Report) , carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 14.73%, on average, in the trailing four quarters. Earnings estimates for ANET for the current year stand at $5.81 per share. Arista provides cloud networking solutions for data centers and cloud computing environments. The company offers 10/25/40/50/100 Gigabit Ethernet switches and routers optimized for next-generation data center networks.
It continues to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. It is well-poised for growth in data-driven cloud networking business with proactive platforms and predictive operations. Arista has introduced network observability software, DANZ Monitoring Fabric (DMF), on its switching platforms for enterprise-wide traffic visibility and contextual insights.
Meta Platforms Inc. (META - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 15.46%, on average, in the trailing four quarters. Meta Platforms is the world’s largest social media platform. The company’s portfolio offering evolved from a single Facebook app to multiple apps like photo and video sharing app Instagram and WhatsApp messaging app owing to acquisitions.
Meta is considered to have pioneered the concept of social networking, which is why it enjoys a first mover’s advantage in this market. As developed regions mature, Meta undertakes measures to drive penetration in emerging markets of South East Asia, Latin America and Africa.
Bandwidth Inc. (BAND - Free Report) , carrying a Zacks Rank #2, delivered an earnings surprise of 341.97%, on average, in the trailing four quarters. It operates as a Communications Platform-as-a-Service (CPaaS) provider, offering avant-garde software application programming interfaces for voice and messaging services. It is the only application programming interface (API) platform provider that owns a Tier 1 network with enhanced network capacity, primarily catering to business enterprises.
With 8,800 on-net rate centers, it delivers unparalleled network quality and proactively monitors network operations 24/7 to resolve quality issues, capitalizing on an efficient cost structure for seamless connectivity and speed-to-market.
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HubSpot's (HUBS) Q1 Earnings Beat Estimates, Revenues Rise Y/Y
HubSpot, Inc. (HUBS - Free Report) reported impressive first-quarter 2023 results, with the bottom and the top line surpassing the respective Zacks Consensus Estimate. The Cambridge, MA-based leading marketing and sales application provider reported higher revenues year over, driven by solid customer addition, unique strategy to attract users from different market segments and accelerated pace of innovation.
Net Income
On a GAAP basis, the company incurred a net loss of $38.3 million or a loss of 78 cents per share compared with a loss of $9.3 million or a loss of 20 cents per share in year-earlier quarter. Despite top-line growth, higher operating expenses and restructuring charges led to greater loss during the quarter.
Non-GAAP net income in the first quarter was $61.6 million or $1.20 per share compared with $27.5 million or 54 cents per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 37 cents.
HubSpot, Inc. Price, Consensus and EPS Surprise
HubSpot, Inc. price-consensus-eps-surprise-chart | HubSpot, Inc. Quote
Revenues
Quarterly revenues stood at $501.6 million compared with $395.6 million reported in the prior-year quarter. Healthy customer engagement and product innovation supported the 27% year-over-year improvement in the top line. Backed by its efficient go-to-market strategy, HubSpot was able to attract customers from both the lower and upper end of the market. The top line beat the Zacks Consensus Estimate of $475 million.
Subscription revenues rose by 27% year over year to $489.7 million from $384.9 million reported in the year-ago quarter. Average subscription revenue increased 6% year over year on a constant-currency basis to $11,365. The upside was primarily driven by multi-hub adoption from professional and enterprise customers. However, large volume of starter customers partially reversed this trend. Professional services and other revenues increased to $11.9 million from $10.6 million in the year-ago quarter. The organization added 9,900 net new customers during the quarter, which increased the total customer count to $177,298, up 23% year over year.
Other Details
Gross profit reported during the quarter was $419.6 million compared with $322.7 million in the year-ago quarter. Operating loss on a GAAP basis was $44.8 million compared with a loss of $11.2 million in the prior-year period. Non-GAAP operating margin improved to 13.5% from 8.8% reported in the year-ago quarter. Restructuring actions initiated in January had a positive impact on operating margin.
Cash Flow & Liquidity
During the first quarter of 2023, HubSpot generated $81.1 million cash from operating activities. As of Mar 31, 2023, the company had $325.2 million in cash and cash equivalents with $454.7 million convertible senior notes.
Outlook
For the second quarter of 2023, management expects customers to remain cautious with their spending decisions owing to a macroeconomic difficulty. Foreign exchange headwinds are likely to affect the company’s revenue growth in 2023.
HubSpot estimates second-quarter revenues in the range of $503-$505 million. Management expects non-GAAP operating margin in the band of $54-$56 million. Non-GAAP net income is anticipated within the range of 98 cents-$1.00.
For 2023, revenues are estimated in the range of $2,080-$2,088 million. The estimated range of non-GAAP operating income is $275-$279 million. Non-GAAP net income per share is likely to be in the range of $4.8-$4.85.
Zacks Rank & Stocks to Consider
HubSpot currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Arista Networks, Inc. (ANET - Free Report) , carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 14.73%, on average, in the trailing four quarters. Earnings estimates for ANET for the current year stand at $5.81 per share. Arista provides cloud networking solutions for data centers and cloud computing environments. The company offers 10/25/40/50/100 Gigabit Ethernet switches and routers optimized for next-generation data center networks.
It continues to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. It is well-poised for growth in data-driven cloud networking business with proactive platforms and predictive operations. Arista has introduced network observability software, DANZ Monitoring Fabric (DMF), on its switching platforms for enterprise-wide traffic visibility and contextual insights.
Meta Platforms Inc. (META - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 15.46%, on average, in the trailing four quarters. Meta Platforms is the world’s largest social media platform. The company’s portfolio offering evolved from a single Facebook app to multiple apps like photo and video sharing app Instagram and WhatsApp messaging app owing to acquisitions.
Meta is considered to have pioneered the concept of social networking, which is why it enjoys a first mover’s advantage in this market. As developed regions mature, Meta undertakes measures to drive penetration in emerging markets of South East Asia, Latin America and Africa.
Bandwidth Inc. (BAND - Free Report) , carrying a Zacks Rank #2, delivered an earnings surprise of 341.97%, on average, in the trailing four quarters. It operates as a Communications Platform-as-a-Service (CPaaS) provider, offering avant-garde software application programming interfaces for voice and messaging services. It is the only application programming interface (API) platform provider that owns a Tier 1 network with enhanced network capacity, primarily catering to business enterprises.
With 8,800 on-net rate centers, it delivers unparalleled network quality and proactively monitors network operations 24/7 to resolve quality issues, capitalizing on an efficient cost structure for seamless connectivity and speed-to-market.