HubSpot Cuts Sales Outlook as Growth Slows
The software company repurchased $531.9 million of stock during the quarter.
HubSpot Inc. (HUBS), the software company, lowered its annual revenue outlook after second-quarter sales rose 20% to $911.7 million, slowing from 23% growth in the prior quarter.
The moderation extended across HubSpot’s operating measures. Sequential revenue growth eased to 3.5% from 4.1%, while customer growth slowed to 14% from 16% and calculated-billings growth fell to 14% from 19%.
Revenue exceeded HubSpot’s previous forecast by between $13.7 million and $14.7 million. GAAP net income swung to $43.3 million, or $0.86 a share, from a $3.3 million loss, or $0.06 a share, a year earlier. Adjusted earnings rose 49% to $3.26 a share.
Subscription revenue increased 20% to $894.0 million, while professional-services and other revenue grew 8%, down from 22% growth in the first quarter. Average subscription revenue per customer rose 4% to $11,800, compared with 6% growth in the prior period.
Operating leverage offset pressure on subscription profitability. GAAP operating margin improved to 4.8% from negative 3.2%, and adjusted operating margin widened 3.3 percentage points to 20.3%. Lower research-and-development, sales-and-marketing and administrative expense ratios outweighed an increase in subscription costs, which pushed the GAAP subscription margin down two percentage points to 83.7%.
HubSpot now expects full-year revenue of $3.678 billion to $3.686 billion, $22 million below both ends of its previous range, and constant-currency growth of 16%, down from 17%. Its adjusted operating-income forecast remains $762 million to $766 million. Third-quarter guidance calls for revenue of $924 million to $925 million, representing about 14% annual growth and 1.4% sequential growth.
Operating cash flow rose 36% to $222.8 million, while adjusted free cash flow increased 44% to $167.9 million. After first-half repurchases reached $742.9 million, HubSpot’s board authorized an additional buyback program of up to $1.0 billion.