Hubspot $HUBS nearly $1.5 billion revenue and still loosing money
So you might gather from the title that I'm not a huge fan of Hubspot from an 'investment' perspective. They are on track for $1.5 billion in revenue this year but continue to lose money, with a profit margin of -4.52%.
I appreciate that the company is cash-flow profitable which in times of a recession is critical to longevity and success. However, my personal opinion is that they operate in a highly competitive landscape that forces them to continue to spend large amounts of money on product enhancements and integrations. And I see this competitiveness only continuing to ramp up as more products and services become integrated via the ever-increasing product agnostic APIs that are launched.
From a product perspective, I think their solutions address core requirements for their target audience and in general are well received. The company I currently work for uses Hubspot internally to manage sales pipelines and handle marketing efforts and likes it because it offers integrations into many of our external applications.
But the one thing I've noticed is just how much time and effort the Hubspot team spends supporting the myriad of integrations that their customers require. For instance, our company has no short of 27 different products that we have integrated into Hubspot. And as each of those products evolve and introduces new features so too does Hubspot have to allocate resources to cater to these as well. This is evidenced by the operating expenses of the company that continue to increase largely in line with revenue.
This for me is the core issue with Hubspot, it will require an ever-increasing amount of development and support to maintain the product given the number of integrations and the pace at which those products evolve and new products are introduced.
I am however encouraged by the fact that are making an increasing amount of free cash flow, which is 188m over the last twelve months. I will be watching closely to see if their revenue growth can outstrip expenses over the next few quarters or will the pending recession put more pressure on revenue growth.