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Why Is HubSpot (HUBS) Up 9.9% Since Last Earnings Report?
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A month has gone by since the last earnings report for HubSpot (HUBS - Free Report) . Shares have added about 9.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is HubSpot due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
HubSpot Q1 Earnings & Revenues Beat Estimates
HubSpot’s first-quarter 2020 non-GAAP earnings of 35 cents per share beat the Zacks Consensus Estimate by 52.2%. The figure also exceeded management’s guided range of 22-24 cents. However, the bottom line declined 2.8% from the year-ago quarter.
Revenues of $199 million surpassed the Zacks Consensus Estimate of $190 million and improved 31% (33% on a constant currency basis) year over year. The top line was also higher than management’s guided range of $192.5-$193.5 million.
The top line was driven by accelerating Subscription revenues. Further, growing customer base, which surged 30% year over year to 78,776, contributed to the results.
Quarter Details
Subscription revenues (96.1% of the total revenues) improved 33% from the year-ago quarter to $191.2 million. Professional services and other revenues (3.9%) were up 2% year over year to $7.7 million.
Total average subscription revenue per customer was up 2% year over year to $10,018.
Deferred revenues (including current portion) improved 25% year over year to $242 million. Meanwhile, calculated billings, defined as revenues plus the change in deferred revenues came in at $207 million, surging 30% year over year (up 32% at cc).
International revenues advanced 41% from the year-ago quarter (up 45% at cc), representing 42% of total revenues in the first quarter.
Margins in Detail
Per management, non-GAAP gross margin during the reported quarter remained flat year over year at 82%. Further, non-GAAP subscription margin of 85.4% contracted 80 basis points (bps) on a year-over-year basis.
Non-GAAP Research and development (R&D) expenses as a percentage of revenues expanded 200 bps year over year to 19%. Non-GAAP General and administrative (G&A) expenses contracted 100 bps to 10% on a year-over-year basis. Meanwhile, non-GAAP Sales and marketing (S&M) expenses expanded 200 bps to 46% from the year-ago quarter.
The company reported non-GAAP operating income of $14.6 million, up 12.3% from the year-ago figure. Management had projected non-GAAP operating income in the band of $9.5-$10.5 million for the first quarter.
Non-GAAP operating margin contracted 130 bps on a year-over-year basis to 7.3%.
Balance Sheet & Cash Flow
As of Mar 31, 2020, HubSpot reported cash and cash equivalents and short-term investments of $968.6 million, up from $961.5 million as of Dec 31, 2019.
Cash flow from operations during the reported quarter came in at $23 million compared with $47.9 million reported in the prior quarter.
Free cash flow came in at $7.1 million compared with the prior-quarter figure of $24.4 million.
Guidance
For second-quarter 2020, HubSpot forecast revenues in the range of $195-$196 million.
Management expects non-GAAP operating income in the band of $10.5-$11.5 million.
Moreover, HubSpot anticipates non-GAAP net income per share to be in the range of 23-25 cents.
For 2020, the company has trimmed guidance citing challenging business environment and macroeconomic headwinds pertaining to COVID-19 induced global crisis. The company now anticipates revenues in the range of $800-$810 million compared with the prior range of $840.5 million to $844.5 million.
Management expects non-GAAP operating income in the band of $40-$42 million compared with the earlier guided range of $54-$58 million.
HubSpot anticipates non-GAAP net income per share to be in the range of 88-92 cents compared with the previous range of $1.24-$1.32.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
At this time, HubSpot has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, HubSpot has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is HubSpot (HUBS) Up 9.9% Since Last Earnings Report?
A month has gone by since the last earnings report for HubSpot (HUBS - Free Report) . Shares have added about 9.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is HubSpot due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
HubSpot Q1 Earnings & Revenues Beat Estimates
HubSpot’s first-quarter 2020 non-GAAP earnings of 35 cents per share beat the Zacks Consensus Estimate by 52.2%. The figure also exceeded management’s guided range of 22-24 cents. However, the bottom line declined 2.8% from the year-ago quarter.
Revenues of $199 million surpassed the Zacks Consensus Estimate of $190 million and improved 31% (33% on a constant currency basis) year over year. The top line was also higher than management’s guided range of $192.5-$193.5 million.
The top line was driven by accelerating Subscription revenues. Further, growing customer base, which surged 30% year over year to 78,776, contributed to the results.
Quarter Details
Subscription revenues (96.1% of the total revenues) improved 33% from the year-ago quarter to $191.2 million. Professional services and other revenues (3.9%) were up 2% year over year to $7.7 million.
Total average subscription revenue per customer was up 2% year over year to $10,018.
Deferred revenues (including current portion) improved 25% year over year to $242 million. Meanwhile, calculated billings, defined as revenues plus the change in deferred revenues came in at $207 million, surging 30% year over year (up 32% at cc).
International revenues advanced 41% from the year-ago quarter (up 45% at cc), representing 42% of total revenues in the first quarter.
Margins in Detail
Per management, non-GAAP gross margin during the reported quarter remained flat year over year at 82%. Further, non-GAAP subscription margin of 85.4% contracted 80 basis points (bps) on a year-over-year basis.
Non-GAAP Research and development (R&D) expenses as a percentage of revenues expanded 200 bps year over year to 19%. Non-GAAP General and administrative (G&A) expenses contracted 100 bps to 10% on a year-over-year basis. Meanwhile, non-GAAP Sales and marketing (S&M) expenses expanded 200 bps to 46% from the year-ago quarter.
The company reported non-GAAP operating income of $14.6 million, up 12.3% from the year-ago figure. Management had projected non-GAAP operating income in the band of $9.5-$10.5 million for the first quarter.
Non-GAAP operating margin contracted 130 bps on a year-over-year basis to 7.3%.
Balance Sheet & Cash Flow
As of Mar 31, 2020, HubSpot reported cash and cash equivalents and short-term investments of $968.6 million, up from $961.5 million as of Dec 31, 2019.
Cash flow from operations during the reported quarter came in at $23 million compared with $47.9 million reported in the prior quarter.
Free cash flow came in at $7.1 million compared with the prior-quarter figure of $24.4 million.
Guidance
For second-quarter 2020, HubSpot forecast revenues in the range of $195-$196 million.
Management expects non-GAAP operating income in the band of $10.5-$11.5 million.
Moreover, HubSpot anticipates non-GAAP net income per share to be in the range of 23-25 cents.
For 2020, the company has trimmed guidance citing challenging business environment and macroeconomic headwinds pertaining to COVID-19 induced global crisis. The company now anticipates revenues in the range of $800-$810 million compared with the prior range of $840.5 million to $844.5 million.
Management expects non-GAAP operating income in the band of $40-$42 million compared with the earlier guided range of $54-$58 million.
HubSpot anticipates non-GAAP net income per share to be in the range of 88-92 cents compared with the previous range of $1.24-$1.32.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
At this time, HubSpot has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, HubSpot has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.