Sales and marketing software maker HubSpot (NYSE: HUBS) reported Q4 CY2024 results topping the market’s revenue expectations, with sales up 20.8% year on year to $703.2 million. On the other hand, next quarter’s revenue guidance of $698 million was less impressive, coming in 0.9% below analysts’ estimates. Its non-GAAP profit of $2.32 per share was 5.6% above analysts’ consensus estimates.
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HubSpot (HUBS) Q4 CY2024 Highlights:
- Revenue: $703.2 million vs analyst estimates of $673.5 million (20.8% year-on-year growth, 4.4% beat)
- Adjusted EPS: $2.32 vs analyst estimates of $2.20 (5.6% beat)
- Adjusted Operating Income: $133.1 million vs analyst estimates of $128.9 million (18.9% margin, 3.3% beat)
- Management’s revenue guidance for the upcoming financial year 2025 is $2.99 billion at the midpoint, in line with analyst expectations and implying 13.8% growth (vs 21.1% in FY2024)
- Adjusted EPS guidance for the upcoming financial year 2025 is $9.15 at the midpoint, in line with analyst estimates
- Operating Margin: -1.5%, up from -4% in the same quarter last year
- Free Cash Flow Margin: 23.2%, up from 18.6% in the previous quarter
- Customers: 247,939, up from 238,128 in the previous quarter
- Billings: $793.1 million at quarter end, up 17.1% year on year
- Market Capitalization: $40.5 billion
“We had a solid finish to 2024, highlighting our leadership as a platform company”, said Yamini Rangan, Chief Executive Officer at HubSpot.
Company Overview
Started in 2006 by two MIT grad students, HubSpot (NYSE: HUBS) is a software-as-a-service platform that helps small and medium-sized businesses market themselves, sell, and get found on the internet.
Sales Software
Companies need to be able to interact with and sell to their customers as efficiently as possible. This reality coupled with the ongoing migration of enterprises to the cloud drives demand for cloud-based customer relationship management (CRM) software that integrates data analytics with sales and marketing functions.
Sales Growth
A company’s long-term sales performance signals its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, HubSpot’s 26.4% annualized revenue growth over the last three years was solid. Its growth beat the average software company and shows its offerings resonate with customers, a helpful starting point for our analysis.
This quarter, HubSpot reported robust year-on-year revenue growth of 20.8%, and its $703.2 million of revenue topped Wall Street estimates by 4.4%. Company management is currently guiding for a 13.1% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 13.7% over the next 12 months, a deceleration versus the last three years. Still, this projection is commendable and implies the market is factoring in success for its products and services.
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Billings
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
HubSpot’s billings punched in at $793.1 million in Q4, and over the last four quarters, its growth was impressive as it averaged 20.2% year-on-year increases. This performance aligned with its total sales growth, indicating robust customer demand. The high level of cash collected from customers also enhances liquidity and provides a solid foundation for future investments and growth. 
Customer Base
HubSpot reported 247,939 customers at the end of the quarter, a sequential increase of 9,811. That’s roughly in line with what we’ve observed over the last year, confirming that the company is maintaining its sales momentum.
Key Takeaways from HubSpot’s Q4 Results
We enjoyed seeing HubSpot exceed analysts’ billings expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. On the other hand, its EPS guidance for next quarter missed and its revenue guidance for next year suggests a slowdown in demand. Overall, this was a mixed quarter. The stock remained flat at $785 immediately following the results.
So should you invest in HubSpot right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
