HubSpot Is On A Growth Trajectory

A market research conducted last year expects the $34.3 billion MarTech market in the US and UK to grow 10% in 2018. While the market is dominated by players like Adobe Systems, Oracle, Salesforce, and IBM, there are other smaller Billion Dollar Unicorns like HubSpot that are making their presence felt.

HubSpot’s Financials

HubSpot (NYSE:HUBS) recently announced its second quarter results that continued to outpace market expectations. Revenues for the quarter grew 38% over the year to $122.6 million, ahead of the Street’s forecast of $117.6 million. It ended the quarter with a net loss of $18.2 million, or $0.48 per share compared with a net loss of $0.26 per share reported a year ago. Adjusted EPS was $0.18, compared with the Street’s forecast of $0.16.

By segment, revenues from subscription services grew 38% to $116.6 million. Professional and other services revenues grew 28% to bring in the remaining $6 million.

Among key metrics, it grew its total customer base by 40% to end with over 48,000 customers. Total average subscription revenue per customer declined 2% to $10,004 during the second quarter. Deferred revenues grew 38% to $153.8 million while calculated billings, defined as revenues plus the change in deferred revenues, grew 32% to $125.6 million.

For the current quarter, HubSpot expects revenues of $125.6-$126.6 million with an EPS of $0.03-$0.05. It expects to end the year with revenues of $496.8-$498.8 million with an EPS of $0.63-$0.67. The market was looking for revenues of $125 million for the quarter and $491.6 million for the year.

HubSpot’s Product Expansion

During the recent quarter, HubSpot announced the launch of Service Hub. Service Hub is part of HubSpot’s free CRM targeted to improve the customer experience. It is built for service teams and has been integrated into its Marketing and Sales Hubs so that all of the organizations’ front office teams — marketing, sales, and service — can share a single view of the customer. It also provides a chat capability for customers to interact with the organization, an automatically indexed knowledge base for self service, a ticketing system and a system for gathering customer feedback.

HubSpot is expanding its focus on the enterprise level customers with several upgrades. For instance, its Marketing Hub Enterprise upgrade will include customized bot building and improved analytics. Its Sales Hub Enterprise will include Sales Playbooks to help users build a library of best resources and practices for sales teams besides adding calling transcription, quota management tools, and eSignature.

Additionally, it is also integrating its Enterprise offerings with Slack, providing features such as advanced team management, machine learning, and AI-powered features including predictive lead scoring. It also launched HubSpot Video, a new service available across HubSpot platform that will allow video hosting, in-video calls-to-action, and a video creation tool to help marketers engage through video content.

The market is pleased with HubSpot’s performance. Its subscription base is already growing strong and is expected to maintain that pace given the significant product upgrades lined up for the year. Earlier this year, it expanded its AI capabilities through the acquisition of Motion AI. HubSpot plans to integrate Motion AI’s Chatbot building capabilities into the HubSpot platform to build tools to automate important tasks, scale conversations, and proactively engage and acquire new customers.

I would like to know from its users how they expect HubSpot’s upgrades to improve their experience. What additional features do they expect HubSpot to deliver?

HubSpot was venture funded till four years ago. It had raised $100.5 million in funding from investors including CRV, Altimeter Capital, Cross Creek Advisors, Dharmesh Shah, General Catalyst Partners, Brian Shin, Mike Volpe, Matrix Partners, Scale Venture Partners, Sequoia Capital, Google Ventures, and Salesforce.com. In October 2014, it raised another $125 million through its listing. It was valued at $759 million at the time of listing. Its stock is currently trading at $145.60 with a market capitalization of $5.6 billion. It had touched a 52-week high of $146.10 earlier this week. It has been climbing from the 52-week low of $71.00 that it was trading at almost a year ago.

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