HubSpot (NYSE:HUBS) Surprises With Q1 Sales But Stock Drops

Jabin Bastian /
2022/05/05 4:27 pm EDT
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Sales and marketing software maker HubSpot (NYSE:HUBS) beat analyst expectations in Q1 FY2022 quarter, with revenue up 40.5% year on year to $395.5 million. However, guidance for the next quarter was less impressive, coming in at $409.5 million at the midpoint, being 0.58% below analyst estimates. HubSpot made a GAAP loss of $9.34 million, improving on its loss of $23.1 million, in the same quarter last year.

Is now the time to buy HubSpot? Access our full analysis of the earnings results here, it's free.

HubSpot (HUBS) Q1 FY2022 Highlights:

  • Revenue: $395.5 million vs analyst estimates of $383 million (3.27% beat)
  • EPS (non-GAAP): $0.54 vs analyst estimates of $0.47 (14.7% beat)
  • Revenue guidance for Q2 2022 is $409.5 million at the midpoint, below analyst estimates of $411.9 million
  • The company reconfirmed revenue guidance for the full year, at $1.72 billion at the midpoint
  • Free cash flow of $62.5 million, down 20.1% from previous quarter
  • Customers: 143,689, up from 135,442 in previous quarter
  • Gross Margin (GAAP): 81.5%, up from 80.5% same quarter last year

"In the first quarter, we continued to make meaningful progress toward our goal of becoming the #1 CRM platform for scaling companies," said Yamini Rangan, Chief Executive Officer at HubSpot.

Started in 2006 by two MIT grad students, HubSpot (NYSE:HUBS) is a software as a service platform that helps small and medium-size businesses sell, market themselves, and get found on the internet.

Companies need to be able to interact with and sell to their customers as efficiently as possible. This reality, coupled with the ongoing migration of enterprises to the cloud drives demand for cloud-based customer relationship management (CRM) software that integrate data analytics with sales and marketing functions.

Sales Growth

As you can see below, HubSpot's revenue growth has been impressive over the last year, growing from quarterly revenue of $281.3 million, to $395.5 million.

HubSpot Total Revenue

And unsurprisingly, this was another great quarter for HubSpot with revenue up 40.5% year on year. But the growth did slow down a little compared to last quarter, as HubSpot increased revenue by $26.2 million in Q1, compared to $30.1 million revenue add in Q4 2021. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates HubSpot is expecting revenue to grow 31.7% year on year to $409.5 million, slowing down from the 52.6% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 30.9% over the next twelve months.

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Customer Growth

You can see below that HubSpot reported 143,689 customers at the end of the quarter, an increase of 8,247 on last quarter. That is a fair bit better customer growth than last quarter and in line with what we have seen in previous quarters, demonstrating the company has the sales momentum required to drive continued growth. We've no doubt shareholders will take this as an indication that the company's go-to-market strategy is running smoothly.

HubSpot Customers

Key Takeaways from HubSpot's Q1 Results

Sporting a market capitalization of $18.7 billion, more than $1.23 billion in cash and with positive free cash flow over the last twelve months, we're confident that HubSpot has the resources it needs to pursue a high growth business strategy.

We enjoyed seeing HubSpot’s impressive revenue growth this quarter. And we were also excited to see that it outperformed analysts' revenue expectations. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. But the market was likely expecting more and the company is down 5.4% on the results and currently trades at $324 per share.

Should you invest in HubSpot right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.