HubSpot (HUBS) Q1 Loss Narrower Than Expected, Revenues Up

HubSpot Inc. (NYSE:HUBS) reported adjusted loss (including stock-based compensation) of 22 cents per share in first-quarter 2017, significantly narrower than the Zacks Consensus Estimate of a loss of 33 cents per share.

However, adjusted profit (excluding stock-based compensation) came in at 3 cents per share against the year-ago quarter loss of 11 cents per share.

Revenues surged 40% year over year to $82.3 million. Subscription revenues increased 41% to $77.5 million, while Professional services & other revenues increased 18% to $4.7 million.

Shares were up more than 6% in pre-market trading. We note that HubSpot (up 41.8%) outperformed the Zacks Internet Software industry (up 13.0%) on a year-to-date basis.

Quarter Details

Total customers increased 40% year over year to 31,262. Marketing customers increased 28% to 24,775. Average subscription revenue per customer was up 10% year over year to $12,598 backed by strong demand for $50 per month marketing starter product.

Deferred revenues grew 43% year over year to $106 million, while calculated billings, defined as revenue plus the change in deferred revenues, came in at $91 million, up 35% year over year.

International revenues grew 64% year over year, representing 30% of total revenue in the quarter.

Adjusted subscription revenue gross margin expanded 150 basis points (bps) from the year-ago quarter to 85%. Adjusted operating loss (including stock-based compensation) was $7.9 million compared with loss of $9.8 million in the year-ago quarter. The narrower loss was primarily attributable to an increase in subscription by 41%.

Capital expenditure (including capitalized software) was $7.4 million in the quarter, slightly down from $8.1 million in the year-ago quarter. Free cash flow was $12 million in the quarter.

Guidance

HubSpot forecasts revenues in the range of $85-$86 million for second quarter of 2017, which reflects sequential improvement of almost 4% at the mid-point. The Zacks Consensus Estimate is currently pegged at $84.5 million.

Management expects non-GAAP operating loss in the range of $1 million to breakeven for the quarter. Moreover, HubSpot expects non-GAAP net loss to be in the range 2 cents per share to breakeven. The Zacks Consensus Estimate (includes stock-based compensation) is currently pegged at a loss of 35 cents.

For full-year 2017, HubSpot expects revenues in the range of $355.5 million to $359.5 million. The Zacks Consensus Estimate for revenues is currently pegged at $352.12 million.

Non-GAAP operating loss is expected in the range of $3 million to $5 million. Non-GAAP net loss per share is expected to be between 4 cents and 10 cents. The Zacks Consensus Estimate (includes stock-based compensation) is currently pegged at a loss of $1.42.

The company expects free cash flow of around $13 million to $14 million for the year, which is much higher than the previously expected figure of around a couple of million dollars.

Zacks Rank & Other Key Picks

HubSpot currently carries a Zacks Rank #2 (Buy). Top-ranked stocks include Axcelis Technologies (NASDAQ:ACLS) , Applied Optoelectronics (NASDAQ:AAOI) and KLA-Tencor Corp. (NASDAQ:KLAC) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings growth rate for Axcelis Technologies, Applied Optoelectronics and KLA-Tencor Corp is projected to be 20%, 20% and 21.24%, respectively.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge. With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>