HUBS update

Notes from HUBS’ Inbound conference in Boston, via JPM:

'1) HubSpot enters the Customer Service market. Recall that our partner
conversations from mid-2015 noted that “HubSpot is executing the playbook…I think their strategy is to stick with SMB and cross
horizontally…I would think they’re going to move into Customer Service.”
Consistent with that, HubSpot announced Customer Hub, to be released in
2018, and includes features such as inquiry management, feedback, sentiment
analysis, automated testimonial captures, etc. Alongside is HubSpot
Conversations, a unified “inbox” aggregating customer communications from
various channels including Slack, text messaging, email, etc. The company also
discussed its focus on chatbots via its acquisition, which will enable users to visually create custom chatbots.

? 2) HubSpot announced Sales Professional, a premium version of its
Sales/CRM offering (available November 1st), to fulfill demand from certain
customers for higher-end automation, permissioning, reporting, and team
management tools. Its $400/month price for up to 5 users (or $80/month/user) is a step-up vs. $50/month currently. We don’t view this as a price increase given grandfathering and lower-price point offerings, but rather a signal that HubSpot could be attempting to service the twilight segment of SMB customers who waver between the higher end, and a more simplified platform such as HubSpot. The company is clear in that it’s not attempting to go upmarket to compete with, which CEO Brian Halligan concedes
is a better fit for large enterprises.

? 3) Q3 guidance raised. CFO John Kinzer made an unusual move of an intraquarter raise to Q3 guidance. Revenue was raised to $95.9-96.9M ($92.8-93.8M prior), while PF EPS was brought up by 6c to -4c to -2c. No updates were made to the FY. The company was clear that it feels good about the state of the business, and we reaffirm our belief that Q1 was the most challenging quarter of the year as it involved a change in sales go-to-market, fewer calendar days for subscription revenue and billings events, FX headwind, etc. That said, we believe the company’s rationale for pre-announcing positively is a function of timing – in other words, by hosting an analyst day during the last week of the quarter, and with the revenue visibility afforded by the subscription model, it felt an obligation to comment and essentially is just providing its revenue and earnings results a month or so earlier than normal. The company did not provide any new insights on bookings/billings trends, and thus we believe results may continue to be viewed against the 31% billings growth consensus for Q3. We think the business is in good shape, but would not interpret the pre-emptive guidance update as an indication of a massive or unprecedented upward inflection in the tone of business."

Stock up 9% today.