HubSpot (NYSE:HUBS), a cloud-based sales and marketing platform specialist, released its second-quarter results on Aug. 6. The company's sales increased 33% year over year to $163.3 million and easily outpaced management's guidance, which was between $156.5 million and $157.5 million. 

HubSpot's diluted earnings per share of $0.37 also exceeded management's forecast of $0.25 per share at the midpoint. The company's strong second quarter was fueled primarily by HubSpot's subscription revenue segment, which grew 34% and accounted for more than 95% of its total sales.

Empty chairs in a room with a HubSpot podium.

Image source: HubSpot.

HubSpot's results: The raw numbers

Metric Q2 2019 Q2 2018 Change
Sales $163.3 million $122.6 million 33%
GAAP net income ($17.4 million) ($18.2 million) N/A
GAAP earnings per share ($0.41) ($0.48) N/A

Data source: HubSpot. GAAP = generally accepted accounting principles.

What happened with HubSpot this quarter?

  • Sales in the second quarter increased 33% year over year to $163.3 million.
  • Subscription revenue, the company's primary source of sales, jumped 34% to $155.9 million.
  • Professional services and other revenue grew 23% to $7.4 million.
  • Total average subscription revenue per customer was $9,913, down 1% from the year-ago period. 
  • International revenue increased 41% year over year and accounted for 40% of total sales in the quarter. 
  • Adjusted operating margin of 8.4% was up from 5.3% in Q2 2018.
  • Adjusted operating income was $13.8 million, compared to $6.5 million in the prior-year period.
  • HubSpot ended the quarter with 64,836 customers, up 35% year over year.
  • Research and development spending increased by 42% year over year to $40.5 million. 
  • Free cash flow was $3.4 million, down from $5.2 million in Q2 2018. 
  • The company ended the quarter with $993.8 million in cash and cash equivalents.

What management had to say

HubSpot's management spent some time on the quarterly earnings call talking about how the company plans to continue engaging its growing list of customers. HubSpot now has more than 300 app integrations that its customers can add on to their HubSpot software. CEO Brian Halligan said:

This year we're adding fuel to the platform fire by opening up even more API coverage and significantly increasing our investments in the overall developer experience. Through our partners we'll be able to do more and our customers themselves will be able to do more. We're just getting started here; there is a lot of promise to increase the value we provide to our customers over time.

Halligan said that the more users HubSpot has, the more attractive the platform is to developers to build more apps, which, in turn, will continually make the product more appealing to customers. 

He also talked a bit about the company's recent focus on the enterprise segment and said that the "new products are doing a better job of matching the requirements of that market. And I feel like we're just getting started in there." 

Looking ahead

HubSpot's management expects revenue in the third quarter to be in the range of $168 million to $169 million and non-GAAP earnings per share to be between $0.22 and $0.24. 

The midpoints of HubSpot's third-quarter guidance would represent a 28% year-over-year increase in sales and a 35% spike in non-GAAP earnings.

Management also raised the company's full-year revenue estimate from the previous range of $655.5 million to $658.5 million issued in the first quarter to the current range of $663 million to $665 million.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.