Customer relationship management software provider HubSpot (HUBS 0.13%) reported fourth-quarter earnings on Wednesday, Feb. 12 that topped analysts' consensus expectations. Adjusted EPS (diluted) came in at $2.32, outperforming the expected $2.19. Revenue of $703.2 million surpassed estimates of $673 million as well as management's guidance of $672 to $674 million. Revenue for the quarter rose 21% year over year, reflecting successful strategic shifts and solid execution.
While a slight decline in average revenue per customer emerged, the overall quarterly results illustrate a strong performance.
| Metric | Q4 2024 | Analysts' Estimate | Q4 2023 | Change (YOY) |
|---|---|---|---|---|
| Adjusted EPS (diluted) | $2.32 | $2.19 | $1.77 | 31% |
| Revenue | $703.2 million | $673 million | $581.9 million | 21% |
| Adj. operating margin | 18.9% | N/A | 17.1% | 1.8 pps |
| Free cash flow | $163 million | N/A | $83 million | 96.4% |
Source: HubSpot. Note: Analyst consensus estimates for the quarter provided by FactSet. YOY = Year over year. pps = Percentage points.
HubSpot is a leading provider of customer relationship management (CRM) software for businesses around the globe. Its integrated cloud-based platform allows mid-market businesses to manage marketing, sales, customer service, and other operations. The company focuses on a freemium pricing model that enables users to start with free-tier products and upgrade to paid versions as they require more comprehensive services. This strategy is central to its success, particularly in the middle-market B2B sector.
Key business areas include platform integration and artificial intelligence (AI) innovation. HubSpot's Smart CRM offers a seamless management experience by integrating marketing, sales, and service functions into one interface, reducing complexity for users. Recent focuses for the business have been AI enhancements to bolster the CRM experience and international market growth.
HubSpot’s strong Q4 revenue growth can be attributed to robust customer acquisition and retention. Subscription revenue amounted to $687.3 million, up 21% from the previous year, driven by a growing customer base.
The operating margin improved to 18.9%, reflecting effective cost management despite expanded investments in AI and platform development. Operating cash flow was particularly strong at $194.1 million, nearly doubling from $104.3 million in the prior year. This increased cash flow highlights solid financial management and operational efficiency.
In Q4, HubSpot integrated significant AI functionalities across its platform, enhancing user engagement and feature accessibility. CEO Yamini Rangan emphasized, "2024 was transformative as we reimagined our products and platform with AI." The total customer count rose by 21%, reaching 247,939, benefiting from the freemium model and expanding market reach.
Challenges, however, were noted. The average subscription revenue per customer (ASRPC) saw a 0.5% decline, showing potential pressure from the new seat pricing model. The macroeconomic environment continued to pose challenges, affecting additional sales and upselling opportunities.
Looking ahead, HubSpot forecasts full-year 2025 revenue between $2.985 billion and $2.995 billion. This guidance suggests a year-over-year growth rate of 14%. The company commits to ongoing AI integration throughout its platform, anticipated to be a key driver behind this growth potential. Adjusted net income per share for 2025 is expected to range from $9.11 to $9.19.
Investors are advised to monitor developments in AI-driven enhancements and international market expansions as these are pivotal to HubSpot's sustained growth trajectory.
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