HubSpot, Inc.’s HUBS fourth-quarter 2019 non-GAAP earnings of 45 cents per share beat the Zacks Consensus Estimate by 7.1% and surged 21.6% from the year-ago quarter. The figure also exceeded management’s guided range of 40-42 cents. Revenues of $186.2 million comfortably surpassed the Zacks Consensus Estimate of $180.9 million and improved 29.3% (31% on a constant currency basis) year over year. The figure was also higher than management’s guided range of $180.3-$181.3 million. The top line was driven by accelerating Subscription revenues. Further, growing customer base, which surged 30% year over year to 73,483, contributed to the results. Quarter Details Subscription revenues (96.2% of the total revenues) improved 31% from the year-ago quarter to $179.1 million. Professional services and other revenues (3.8%) were down 2% year over year to $7.1 million. Total average subscription revenue per customer was up 0.3% year over year to $10,047. Deferred revenues (including current portion) improved 26.2% year over year to $234.1 million. Meanwhile, calculated billings, defined as revenues plus the change in deferred revenues came in at $217 million, surging 30% year over year on reported as well as constant currency basis. International revenues advanced 39% from the year-ago quarter (43% at cc), representing 41% of total revenues in the reported quarter. Margins in Detail
Per management, non-GAAP gross margin during the reported quarter came in at 82%, contracting approximately 30 basis points (bps) from the year-ago quarter. We note that non-GAAP services gross margin was negative 5%. Further, non-GAAP subscription margin of 85% contracted 150 bps on a year-over-year basis.
Non-GAAP Research and development (R&D) expenses as a percentage of revenues remained flat year over year at 18%. Non-GAAP General and administrative (G&A) expenses contracted 200 bps to 10% on a year-over-year basis. Meanwhile, non-GAAP Sales and marketing (S&M) expenses expanded 100 bps to 44% from the year-ago quarter. The company reported non-GAAP operating income of $17.6 million, soaring 24.5% from the year-ago figure. Non-GAAP operating margin contracted 30 bps on a year-over-year basis to 9.5%. Balance Sheet & Cash Flow HubSpot ended the fourth quarter with cash and cash equivalents and short-term investments of $961.5 million, up from $948.5 million at the end of the previous quarter. Cash flow from operations during the reported quarter came in at $47.9 million compared with $19.7 million reported in the prior quarter. Free cash flow came in at $24.4 million compared with the prior-quarter figure of $6.7 million. Guidance For first-quarter 2020, HubSpot forecasts revenues in the range of $192.5 million to $193.5 million. The mid-point of the range — $193 million — is higher than the current Zacks Consensus Estimate for the first quarter of $189.09 million. Management expects non-GAAP operating income in the band of $9.5-$10.5 million for the first quarter. Moreover, HubSpot anticipates non-GAAP net income per share to be in the range of 22-24 cents. The higher end of the guided range is below the Zacks Consensus Estimate, currently pegged at 35 cents per share. For 2020, HubSpot forecasts revenues in the range of $840.5 million to $844.5 million. The mid-point of the range — $842.5 million — is higher than the current Zacks Consensus Estimate for the first quarter of $826.73 million. Management expects non-GAAP operating income in the band of $54-$58 million for the full year. HubSpot anticipates non-GAAP net income per share to be in the range of $1.24-$1.32. The higher end of the guided range is below the Zacks Consensus Estimate, currently pegged at $1.58 per share. Zacks Rank & Key Picks HubSpot currently has a Zacks Rank #3 (Hold). Alteryx AYX, Cirrus Logic ( CRUS Quick Quote CRUS - Free Report) and Garmin GRMN are some better-ranked stocks worth considering, in the broader computer and technology sector, each flaunting 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 Alteryx, Cirrus Logic and Garmin is pegged at 39.85%, 15.27% and 7.35%, respectively. 5 Stocks Set to Double Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth. Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor. Today, See These 5 Potential Home Runs >>