HubSpot Believes In The Importance Of PaaS

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Inbound marketing specialist HubSpot (NYSE:HUBS) recently reported its fourth quarter results. The quarter’s performance outpaced market expectations.

HubSpot’s Financials

HubSpot’s revenues grew 29% over the year to $186.2 million, ahead of the Street’s forecast of $180.9 million. The growth in the revenue was attributed to continuing adoption of subscription services and an increasing market penetration. Non GAAP EPS of $0.45 grew 22% and outpaced the market’s outlook of $0.42 per share.

By segment, subscription revenues grew 31% to $179.1 million and Professional services and other revenues fell 2% to $7.1 million.

Among other operating metrics, its customer base grew 30% to over 73,480 at the end of the quarter. Total average subscription revenue per customer grew a modest 0.3% to $10,047. Deferred revenues grew 26% to $234.1 million and calculated billings, defined as revenues plus the change in deferred revenues grew 30% to $217 million.

HubSpot ended the year with revenues growing 32% to $674.9 million and an adjusted EPS of $1.66.

For the current quarter, HubSpot expects revenues of $192.5-$193.5 million with an EPS of $0.22-$0.24. The market was looking for revenues of $189.1 million with an EPS of $0.35. HubSpot expects to end the year with revenues of $840.5-$844.5 million with an EPS of $1.24-$1.32. The market was looking for revenues of $826.73 million for the year with an EPS of $1.58.

HubSpot’s Product Growth

HubSpot has recently relaunched a powered-up Marketing Hub Enterprise that will include account-based marketing, multi-touch revenue attribution, targeted chat, partitioning, higher usage limits, and other advanced features to drive usability of its services. It will continue to enhance the offering by adding more sophisticated product announcements across the platform during the year to help its customers scale.

It had earlier relaunched its Agency Partner Program into a new Solutions Partner Program that will help attract a more diverse set of partners to enable its customers to grow beyond marketing into sales and service. The program is for agencies and service providers who are looking to expand their offerings and build expertise in HubSpot.

HubSpot’s Platform Focus

Besides growing its product and partner offering, HubSpot remains focused on an enhanced PaaS strategy as well. It has a dedicated app partner program that is geared toward developers and companies that want to grow their business by building apps on HubSpot’s open platform. The program helps companies to grow their business by distributing their apps to HubSpot’s growing customer base. Developers can create apps and then list them on its App Marketplace to access HubSpot’s customer base.

HubSpot realizes that the development of apps helps build a lucrative ecosystem for its offerings besides offering a sustainable source of revenue for the developers. Through the App Marketplace, developers can get their apps in front of HubSpot’s more than 73,400 users, each of whom averages five third-party app installs. HubSpot currently has more than 700,000 app installs that support over 200 integrations. Over 93% of its customers use apps to grow their businesses. While some of its apps are available for free, there are several apps that operate on a monthly subscription fee. HubSpot does not disclose details on the revenues earned by its developer partners. It should start disclosing such metrics to help analysts gauge the efficacy of its PaaS strategy.

But HubSpot’s app developer partner program strengthens my belief in the need for SaaS companies to follow an active PaaS strategy. Not only does this model help companies like HubSpot grow but also helps create an ecosystem of developer entrepreneurs who can create numerous profitable, sustainable, long tail businesses.

Its stock is trading at $196.97 with a market capitalization of $8.5 billion. It touched a 52-week high of $207.98 in August last year and a 52-week low of $137.30 in November last year.

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Photo credit: Kyle James/Flickr.com