HubSpot, Inc. revenue growth decelerated from 38.6% in 2017 to 36.6% in 2018
02/12/2019 • About HubSpot, Inc. (
$HUBS) • By InTwits
HubSpot, Inc. reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- HubSpot, Inc. is a fast growth stock: 2018 revenue growth was 36.6%, 5 year revenue CAGR was 45.9% at 2018 ROIC -9.0%
- The company operates at negative EBITDA Margin: -4.8%
- HubSpot, Inc. motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for 2014-2018 was 13.3% while average EBITDA Margin was -11.3% for the sames years. In 2018 SBC/Revenue was even higher: 14.9%
- HubSpot, Inc. has medium CAPEX intensity: 5 year average CAPEX/Revenue was 5.3%. At the same time it's a lot of higher than industry average of 3.1%.
- CAPEX is quite volatile: $22m in 2018, $20m in 2017, $16m in 2016, $8m in 2015, $7m in 2014
- The company has unprofitable business model: ROIC is -9.0%
- It operates with medium-size leverage: Net Debt/EBITDA is 2.2x while industry average is -2.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
HubSpot, Inc.'s Revenue jumped on 36.6%. Revenue growth showed small slowdown in 18Q4 - it was 35.2% YoY. During the last 5 years Revenue growth topped in 2015 at 57.0% and was decelerating since that time. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased slightly on 1.7 pp from 29.6% to 27.9% in 2018. EBITDA Margin stuck to a growing trend at 7.9 pp per annum in the last 5 years.
Gross Margin increased slightly on 0.60 pp from 79.8% to 80.4% in 2018. Gross Margin followed a growing trend at 2.8 pp per annum in the last 5 years. SG&A as a % of Revenue decreased on 4.9 pp from 71.8% to 66.9% in 2018. SG&A as a % of Revenue stuck to a declining trend at -5.5 pp per annum in 2014-2018. Stock Based Compensation (SBC) as a % of Revenue increased on 2.3 pp from 12.6% to 14.9% in 2018. During 2014-2018 SBC as a % of Revenue bottomed in 2015 at 11.7% and was growing since that time.
Net Income margin decreased slightly on 1.9 pp from -10.6% to -12.4% in 2018. Net Income margin followed a growing trend at 7.3 pp per annum in 2014-2018.
Investments (CAPEX, working capital and M&A)
In 2018 the company had CAPEX/Revenue of 4.3%. HubSpot, Inc.'s CAPEX/Revenue showed almost no change from 2015 to 2018. It's average level of CAPEX/Revenue for the last three years was 5.2%.
Accounts receivable as a % of Revenue decreased slightly on 1.1 pp from 16.2% to 15.0% in 2018. Accounts payable as a % of Revenue increased slightly on 1.6 pp from 6.1% to 7.8% in 2018.
Return on investment
The company operates at negative ROIC (-9.0%) and ROE (-28.1%). ROIC increased on 3.8 pp from -12.7% to -9.0% in 2018. ROE decreased on 3.9 pp from -24.1% to -28.1% in 2018. ROIC followed a growing trend at 17.2 pp per annum in 2014-2018.
Leverage (Debt)
Debt level is 2.2x Net Debt / EBITDA and Debt / EBITDA. Net Debt / EBITDA didn't change in 2018. Debt increased on 6.8% while cash surged on 27.2%.
The company has no short term refinancing risk: short term debt is zero.
Management team
Brian Halligan is a the company's CEO. Brian Halligan is a founder and has spent 14 years with the company. CEO total compensation was
$3,108,818 in 2018 which included
$1 salary. The company's CFO is Kate Bueker. Kate Bueker has 1 year tenure at the company.
6.0% of the company is owned by insiders. Insider ownership didn't change in 2018.
The company has 2,638 employees. The number of employees surged on 26.8%. Average revenue per employee in 2018 was
$194,458 and it increased on 7.7%.
Financial and operational results
FY ended 12/31/2018
HubSpot, Inc. ($HUBS) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 115.9 | 181.9 | 271.0 | 375.6 | 513.0 | 36.6% |
| Gross Profit | 80.8 | 134.0 | 209.1 | 299.9 | 412.6 | 37.6% |
| SG&A | 103.8 | 148.0 | 207.8 | 269.6 | 343.3 | 27.3% |
| EBITDA | -42.9 | -39.1 | -33.5 | -24.4 | -24.8 | |
| EBIT | -48.6 | -46.5 | -44.7 | -40.1 | -48.3 | |
| Tax | -0.1 | 0.4 | 0.5 | -10.3 | 1.9 | |
| Net Income | -48.2 | -46.1 | -45.6 | -39.7 | -63.8 | |
| Stock Based Compensation | 16.4 | 21.3 | 32.7 | 47.3 | 76.3 | 61.2% |
Balance Sheet
|
|---|
| Cash | 123.7 | 55.6 | 59.7 | 87.7 | 111.5 | 27.2% |
| Accounts Receivable | 14.3 | 25.1 | 39.0 | 60.7 | 77.1 | 27.1% |
| Accounts Payable | 2.8 | 2.6 | 4.4 | 4.7 | 7.8 | 67.7% |
| Short Term Debt | 0.1 | 0.5 | 0.8 | 0.0 | 0.0 | |
| Long Term Debt | 0.1 | 0.3 | 0.3 | 298.4 | 318.8 | 6.8% |
Cash flow
|
|---|
| Capex | 7.3 | 8.4 | 15.8 | 20.3 | 22.3 | 10.0% |
| Acquisitions | | 0.6 | | 9.4 | | |
Ratios
|
|---|
| Revenue growth | 49.3% | 57.0% | 48.9% | 38.6% | 36.6% | |
| EBITDA growth | 44.0% | -8.8% | -14.4% | -27.3% | 2.0% | |
|
|---|
| Gross Margin | 69.7% | 73.7% | 77.2% | 79.8% | 80.4% | 0.6% |
| EBITDA Margin | -37.0% | -21.5% | -12.4% | -6.5% | -4.8% | 1.6% |
| EBIT Margin | -41.9% | -25.5% | -16.5% | -10.7% | -9.4% | 1.3% |
| SG&A, % of revenue | 89.6% | 81.4% | 76.7% | 71.8% | 66.9% | -4.9% |
| SBC, % of revenue | 14.1% | 11.7% | 12.1% | 12.6% | 14.9% | 2.3% |
| Net Income Margin | -41.6% | -25.3% | -16.8% | -10.6% | -12.4% | -1.9% |
| CAPEX, % of revenue | 6.3% | 4.6% | 5.8% | 5.4% | 4.3% | -1.1% |
|
|---|
| ROIC | -81.3% | -39.7% | -36.7% | -12.7% | -9.0% | 3.8% |
| ROE | | -39.6% | -37.9% | -24.1% | -28.1% | -3.9% |
People
|
|---|
| Insider ownership | 6.0% | 6.0% | 6.0% | 6.0% | 6.0% | 0.0% |
| Employees | 785 | 1,157 | 1,597 | 2,081 | 2,638 | 26.8% |
| Revenue/Employee, th. $ | 148 | 157 | 170 | 180 | 194 | 7.7% |
HubSpot, Inc. ($HUBS) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 115 | 123 | 132 | 144 | | 39.3% | 37.6% | 34.9% | 35.2% |
| EBITDA | -6 | -9 | -9 | -1 | | | | | |
| Net Income | -15 | -18 | -19 | -11 | | | | | |
Balance Sheet
|
|---|
| Cash | 154 | 98 | 96 | 111 | | 120.7% | -44.0% | -45.6% | 27.2% |
| Short Term Debt | 0 | 0 | 0 | 0 | | -100.0% | -100.0% | | |
| Long Term Debt | 303 | 308 | 314 | 319 | | 105,231.6% | 6.7% | | 6.8% |
Ratios
|
|---|
| Gross Margin | 80.5% | 79.7% | 80.5% | 81.0% | | 1.2% | 0.6% | -0.1% | 0.8% |
| EBITDA Margin | -5.4% | -7.0% | -6.9% | -0.7% | | 0.3% | 0.7% | 1.3% | 3.8% |
| Net Income Margin | -13.5% | -14.9% | -14.2% | -8.0% | | -3.7% | -4.2% | -3.3% | 2.8% |
Peers in Application Software
Below we provide HubSpot, Inc. benchmarking against other companies in Application Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| nFusz Inc ($FUSZ) | | | | | 433.3% |
| CloudCommerce Inc ($CLWD) | | -38.1% | 247.6% | 40.9% | 301.1% |
| Seven Stars Cloud Group, Inc. ($SSC) | | 134.7% | 663.8% | 310.3% | 161.7% |
| Aurora Mobile Limited ($JG) | | | | 304.9% | 150.8% |
| Intelligent Systems Corporation ($INS) | | 14.2% | 71.0% | 12.2% | 119.0% |
| |
|---|
| Median (151 companies) | -43.3% | 13.5% | 13.6% | 14.8% | 15.2% |
|---|
| HubSpot, Inc. ($HUBS) | | 57.0% | 48.9% | 38.6% | 36.6% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 99.7% | 97.4% | 98.0% | 97.6% | 96.5% |
| hopTo Inc ($HPTO) | 91.8% | 87.8% | 95.9% | 98.2% | 95.4% |
| Aware, Inc. ($AWRE) | 75.4% | 87.2% | 90.3% | 94.6% | 92.3% |
| Alteryx, Inc. ($AYX) | 77.5% | 80.5% | 81.3% | 83.4% | 91.0% |
| Aspen Technology, Inc. ($AZPN) | 86.5% | 88.7% | 89.7% | 90.2% | 89.9% |
| |
|---|
| Median (150 companies) | 62.8% | 61.7% | 63.8% | 64.4% | 65.7% |
|---|
| HubSpot, Inc. ($HUBS) | 69.7% | 73.7% | 77.2% | 79.8% | 80.4% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aspen Technology, Inc. ($AZPN) | 34.5% | 42.2% | 46.0% | 45.2% | 43.3% |
| ANSYS, Inc. ($ANSS) | 45.9% | 45.8% | 45.1% | 41.9% | 41.4% |
| Paycom Software, Inc. ($PAYC) | 15.1% | 19.5% | 35.1% | 34.4% | 35.9% |
| j2 Global, Inc. ($JCOM) | 41.6% | 40.6% | 41.7% | 36.5% | 35.7% |
| Adobe Inc. ($ADBE) | 17.5% | 25.9% | 31.2% | 34.2% | 35.3% |
| |
|---|
| Median (152 companies) | -10.1% | -9.4% | -4.7% | -3.3% | -3.2% |
|---|
| HubSpot, Inc. ($HUBS) | -37.0% | -21.5% | -12.4% | -6.5% | -4.8% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| TimefireVR Inc ($TFVR) | 0.0% | 350.5% | 4.3% | | 1,021.9% |
| MGT Capital Investments Inc ($MGTI) | 0.0% | 36.5% | 221.4% | 129.8% | 344.5% |
| Integrated Ventures Inc ($INTV) | | | | | 199.9% |
| ShotSpotter, Inc. ($SSTI) | | 18.3% | 28.9% | 27.1% | 24.3% |
| Ellie Mae, Inc. ($ELLI) | 12.3% | 20.6% | 16.7% | 21.1% | 19.4% |
| |
|---|
| Median (153 companies) | 2.8% | 2.7% | 2.9% | 2.3% | 2.4% |
|---|
| HubSpot, Inc. ($HUBS) | 6.3% | 4.6% | 5.8% | 5.4% | 4.3% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InsPro Technologies Corp ($ITCC) | -558.9% | | | | 127.4% |
| Manhattan Associates, Inc. ($MANH) | 64.8% | 78.7% | 99.3% | 102.5% | 80.9% |
| Intuit Inc. ($INTU) | 34.2% | 23.7% | 52.1% | 72.6% | 66.8% |
| Aspen Technology, Inc. ($AZPN) | 133.4% | | | | 58.1% |
| Paycom Software, Inc. ($PAYC) | 16.7% | 30.5% | 75.4% | 51.1% | 47.5% |
| |
|---|
| Median (179 companies) | -14.2% | -11.2% | -9.2% | -10.2% | -10.4% |
|---|
| HubSpot, Inc. ($HUBS) | -81.3% | -39.7% | -36.7% | -12.7% | -9.0% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Upland Software, Inc. ($UPLD) | | | 16.4x | 115.6x | 16.7x |
| Nuance Communications, Inc. ($NUAN) | 7.9x | 5.7x | 5.3x | 7.1x | 15.2x |
| Asure Software Inc ($ASUR) | 3.4x | 4.5x | 3.6x | 9.5x | 14.5x |
| SS&C Technologies Holdings, Inc. ($SSNC) | 1.7x | 7.3x | 4.6x | 3.1x | 8.5x |
| Avaya Holdings Corp. ($AVYA) | | | | | 7.4x |
| |
|---|
| Median (70 companies) | -1.4x | -1.0x | -0.9x | -0.8x | -0.7x |
|---|
