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HubSpot's (HUB) Earnings & Revenues Beat Estimates in Q3

HubSpot's (HUBS) Q3 results reflect benefits from strong growth in subscription revenues and expanding customer base.

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This story originally appeared on Zacks

HubSpot HUBS reported third-quarter 2021 non-GAAP earnings of 50 cents per share, which improved 78.6% on a year-over-year basis and beat the Zacks Consensus Estimate by 13.6%. The bottom line exceeded management’s guidance of 42-44 cents.

Revenues of $339.2 million surpassed the Zacks Consensus Estimate by 3.9% and increased 49% (up 47% on a constant-currency basis) year over year. The top line was also above the higher end of management’s guidance range of $325-$327 million.

The top line was driven by improvement in subscription revenues. Growing customer base, which surged 34% year over year to 128,144, also contributed to the results.

- Zacks

Quarter Details

Subscription revenues (97% of the total revenues) surged 49% from the year-ago quarter’s levels to $329 million. Professional services and other revenues (3%) were up 39% year over year to $10.2 million.

Total average subscription revenue per customer was up 9% year over year to $10,536.

Deferred revenues (including current portion) as of Sep 30, 2021, increased 45% year over year to $376 million. Calculated billings, defined as revenues plus the change in deferred revenues, amounted to $353 million, surging 43% year over year (up 45% at cc).

International revenues climbed 58% from the year-ago quarter’s levels (up 54% at cc), contributing 46% to total revenues in the reported quarter. Domestic revenues rallied 41% in the quarter under review, contributing the remaining 54% to total revenues.

HubSpot, Inc. Price, Consensus and EPS Surprise HubSpot, Inc. Price, Consensus and EPS Surprise

HubSpot, Inc. price-consensus-eps-surprise-chart | HubSpot, Inc. Quote

Margins

Non-GAAP subscription margin of 83.1% contracted 260 basis points (bps) on a year-over-year basis.

Non-GAAP Research and development (R&D) expenses, as a percentage of revenues, contracted 180 bps year over year to 17.4%. Non-GAAP General and administrative (G&A) expenses contracted 100 bps to 8.5% on a year-over-year basis.

Non-GAAP Sales and marketing (S&M) expenses contracted 170 bps to 44.7% from the year-ago quarter’s levels.

The company reported non-GAAP operating income of $32.9 million, up 99.4% from the year-ago quarter’s figure. Management had projected non-GAAP operating income to be $27-$29 million for the third quarter.

Non-GAAP operating margin expanded 250 bps on a year-over-year basis to 9.7%.

Balance Sheet & Cash Flow

As of Sep 30, 2021, HubSpot reported cash and cash equivalents and short-term investments of $1.3 billion, up from $1.2 billion as of Jun 30, 2021.

Operating cash flow (excluding repayment of 2022 Convertible Notes attributable to the debt discount worth $11.4 million) during the reported quarter was $42.7 million compared with $38.7 million in the prior-year quarter.  During the first nine months of 2021, the company generated operating cash flow of $143.5 million.

Free cash flow was $38.2 million compared with the prior-year figure of $25.3 million. During the first nine months, the company generated $125 million of free cash flow.

Guidance

For fourth-quarter 2021, HubSpot forecast revenues in the range of $356 million to $358 million. The Zacks Consensus Estimate for revenues is currently pegged at $352.4 million.

Management expects non-GAAP operating income in the band of $34-36 million.

The company anticipates non-GAAP net income per share to be 52-54 cents. The Zacks Consensus Estimate is currently pegged at 52 cents per share.

For 2021, the company raised guidance. The company now anticipates revenues between $1.287 billion and $1.289 billion compared with the prior range of $1.268-$1.272 billion. The Zacks Consensus Estimate for 2021 revenues is currently at $1.27 billion.

Management now expects non-GAAP operating income to be $113-$115 million compared with the earlier guidance of $107-$109 million.

HubSpot now anticipates non-GAAP net income per share to be $1.76-$1.78 compared with the prior range of $1.67-$1.69. The Zacks Consensus Estimate currently stands at $1.69 per share.

Zacks Rank & Key Picks

HubSpot currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader computer and technology sector are Salesforce CRM, which sports a Zacks Rank #1 (Strong Buy), while both HP Inc. HPQ and Avnet AVT carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rates for Salesforce, HP and Avnet are currently pegged at 16.8%, 12.7% and 27.7%, respectively.



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