HubSpot Inc. HUBS reported adjusted loss (including stock-based compensation) of 39 cents per share in fourth-quarter 2016, which was narrower than the Zacks Consensus Estimate of 47 cents. However, adjusted loss (excluding stock-based compensation) of 13 cents were wider than the year-ago quarter loss figure of 12 cents.
Revenues advanced 44% year over year to $76.4 million. Subscription revenues increased 46% to $72.4 million, while Professional services & other revenues increased 15% to $4 million.
HubSpot ended full-year 2016 with loss of 36 cents much narrower than loss of 74 cents reported in 2015. Further, revenues surged 49% year over year to $271 million.
We note that revenue growth improved share price return in the last one year. HubSpot (up 77.5%) has outperformed the Zacks Internet Software industry (23.2%) in the same period.
Total marketing customers grew 28% from the end of 2015 to 23,226 at the end of 2016. Moreover, average subscription revenue per customer increased to $12,592 from $11,135 reported in the year-ago quarter.
Deferred revenue surged 48% year over year to $96.6 million. While calculated, billings defined as revenue plus the change in deferred revenues increased 40% in the same period to $88.8 million.
International revenue grew 67% year over year, representing 29% of total revenue in the quarter.
Adjusted subscription margin expanded 290 basis points (bps) from the year-ago quarter to 84.2%.
Adjusted operating loss (including stock-based compensation) was $13.8 million as compared with loss of $10.4 million in the year-ago quarter. The wider loss resulted from 24%, 48%, and 49% surge in cost of subscription, research & development and selling, and marketing expenses, respectively.
HubSpot forecasts revenues in the range of $78.5–$79.5 million for first-quarter 2017, which reflects sequential improvement. The Zacks Consensus Estimate is currently pegged at $79 million.
Non-GAAP operating loss is expected to in the range of $3.5–$2.5 million. Non-GAAP net loss is expected to be in the range of 10–8 cents per share.
For full-year 2017, HubSpot forecasts revenues in the range of $349–$353 million for first-quarter 2017. The Zacks Consensus Estimate is currently pegged at $348.6 million.
Non-GAAP operating loss is expected to in the range of $11.5–$7.5 million. Non-GAAP net loss is expected to be in the range of 30–22 cents per share. The company anticipates services margins to improve in 2017.
Management expects normal seasonal headwinds from early hiring, payroll resets and annual compensation adjustment to keep margins under pressure in first-half 2017. However, HubSpot expects margin expansion for the full year of 2017.
Zacks Rank & Key Picks
HubSpot currently carries a Zacks Rank #3 (Hold). Better-ranked stocks are FireEye FEYE, Model N MODN and Zendesk ZEN. All the three stocks sport 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 FireEye, Model N and Zendesk is currently pegged at 15.67%, 10% and 25.01%, respectively.
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