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Hubspot (HUBS) Q4 Earnings & Revenues Beat, Guides Strong

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Hubspot, Inc. (HUBS - Free Report) delivered fourth-quarter 2017 non-GAAP earnings of 12 cents per share against a loss of 13 cents per share in the year-ago quarter. The figure also beat the  Zacks Consensus Estimate of 7 cents per share.

Revenues of $106.5 million surged 39% year over year in fourth-quarter 2017. The figure surpassed the Zacks Consensus Estimate of $101 million as well as the guided range of $101-$102 million.

Year-over-year growth in revenues can be primarily attributed to its growing customer base, which increased 48%.

Shares of Hubspot have gained 65.1% on a year-over-year basis significantly outperforming the 22.9% rally of the industry it belongs to.

Quarter Details

Subscription revenues increased 40% from the year-ago quarter to $101.7 million, representing 95% of the total revenues. Professional services and other revenues were up 20% year over year to $4.8 million.

Average subscription revenue per customer decreased 4% year over year to $10,255. The decline can primarily be attributed to increased adoption of the company’s marketing starter product and sales starter product called Sales Pro.

Deferred revenues grew 44% year over year to $139 million, while calculated billings, defined as revenue plus the change in deferred revenues, came in at $126 million, up 41% year over year. Management noted that growth in billings was primarily driven by a forex benefit.

International revenues grew 65% year over year, representing 35% of total revenues in the quarter, which also benefited from positive forex impact.

Management is positive about the performance of Hubspot One and Hubspot CRM tools. Additionally, the acquisitions of Motion AI and Kemvi reflect the company’s focus on integrating artificial intelligence (AI) in its offerings, as well as expanding solutions portfolio.

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.

Lastly, management is also optimistic about the launch of Customer Hub scheduled in 2018.

Margin and Balance Sheet

The company reported non-GAAP operating income of $4.3 million against a loss of $4.5 million in the year-ago quarter.

Hubspot had cash, cash equivalents and investments balance of $535.7 million as of Dec 31, 2017. During the quarter, free cash flow came in at $7 million.

Guidance

HubSpot forecasts revenues in the range of $109.2-$110.2 million for first-quarter 2018. The Zacks Consensus Estimate is currently pegged at $106.8 million.

Management expects non-GAAP operating income in the range of $4-$5 million for the first quarter. Moreover, HubSpot expects non-GAAP net income per share to be in the range of 10-12 cents. The Zacks Consensus Estimate is currently pegged at 7 cents per share.

For full-year 2018, HubSpot anticipates revenues in the range of $481-$485 million. The Zacks Consensus Estimate is currently pegged at $468.5 million. Non-GAAP operating income is expected in the range of $20-$24 million. Non-GAAP net income per share is anticipated to be in the range of 51-59 cents. The Zacks Consensus Estimate is currently pegged at 40 cents per share.

Zacks Rank & Key Pick

Hubspot carries a Zacks Rank #3 (Hold).

Few better-ranked stocks in the broader technology sector are NVIDIA Corporation (NVDA - Free Report) , Broadridge Financial Solutions, Inc. (BR - Free Report) and Paycom Software, Inc. (PAYC - Free Report) , all 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, Broadridge and Paycom Software are projected to be 10.3%, 10% and 25.8%, respectively.

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