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Cloud Stocks: HubSpot Lowers Outlook Amidst Virus Concerns

Posted on Thursday, May 14th 2020

Inbound marketing specialist HubSpot (NYSE:HUBS) recently reported its first quarter results, which outpaced market expectations. However, the grim outlook of the economy is doing little for its outlook. It lowered its revenue and earnings expectations for the rest of the year from earlier forecast and missed analysts’ forecast.

HubSpot’s Financials

HubSpot’s first quarter revenues grew 31% to $199 million, ahead of the Street’s forecast of $190 million. Non GAAP EPS of $0.35 beat the market’s expectations by 52% and grew 3% over the year.

By segment, subscription revenues grew 33% to $191.2 million and Professional services and other revenues grew 2% to $7.7 million.

Among other operating metrics, its customer base grew 30% to over 78,776. A quarter ago, HubSport had just over 73,480 customers. Total average subscription revenue per customer grew 2% to $10,018. Deferred revenues grew 25% to $242 million and calculated billings, defined as revenues plus the change in deferred revenues, grew 30% to $207 million.

Unlike other technology players, HubSpot did not shy away from an outlook. It forecast revenues of $195-$196 million for the quarter with an EPS of $0.23-$0.25. The market was looking for revenues of $195.8 million with an EPS of $0.21. Due to the current pandemic, HubSpot lowered its outlook for the year to revenues of $800-$810 million with an EPS of $0.88-$0.92. Last quarter, HubSpot had forecast revenues of $840.5-$844.5 million for the year with an EPS of $1.24-$1.32. The market was looking for revenues of $806.7 million for the year with an EPS of $0.99.

HubSpot’s Product Focus

HubSpot continues to target growth through product upgrades. Earlier this year, it announced the relaunch of the enterprise tier for Marketing Hub. The relaunched application makes the Enterprise offering a lot simpler to use. It also is more powerful as it has better attribution reporting, account-based marketing and an advanced chat targeting module.

HubSpot is also helping its customers migrate to the virtual model through its products. It is working to accelerate the go-to-market strategies online through several initiatives. For instance, it lifted e-mail and calling limits on its subscriptions and added features such as meetings, bots, and 1:1 video into its free CRM. It reduced the price of its starter growth suite by over 50% by the end of the quarter. It hopes to use these strategies to help their customers manage their financials better. While the move did impact its average revenue per user, it also drove a fivefold increase in the run rate of the offering at the end of the quarter.

Last month, it introduced a new product line called content management system (CMS) Hub. Similar to Marketing Hub Enterprise, the CMS Hub is designed to help growing businesses manage websites at scale. CMS Hub offers features like dynamic content, adaptive testing, and 24/7 security monitoring to the organization. CMS Hub will be available in two tiers – professional and enterprise. The professional version will allow users to manage their websites as they grow and increase traffic to deliver better results. It will be integrated with its other tools such as Marketing Hub, Sales Hub, and Service Hub to allow users to maintain a centralized view of the customer and deliver a seamless experience.

The enterprise version of the offering will allow for higher governance and control and provide organizations with the ability to build personalized web app experiences that are easy to manage. It will enable enterprises to create microsites for specific campaigns and manage and report on multiple websites within the same CMS portal.

HubSpot remains focused on its PaaS strategy. As I mentioned earlier, it realizes the need for SaaS companies to follow an active PaaS strategy. Its platform allows developers to build apps and sell them through the App Marketplace. HubSpot claims to have delivered over 1 million app installs. It reported that 94% of its paying subscribers use apps to grow their business and that each of these users installs an average of five apps from its platform. As of last quarter, HubSpot had reported 700,000 app installs and 93% of its 73,400 users were installing apps. HubSpot still does not disclose details on the revenues earned by its developer partners.

Its stock is trading at $183.54 with a market capitalization of $7.8 billion. It touched a 52-week high of $207.98 in August last year. Earlier this year, when most stocks took a beating, it had fallen to a 52-week low of $90.83.

This segment is a part in the series : Cloud Stocks


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