Key Points
- Total revenue was $637.2 million, surpassing the upper end of management's guidance.
- Non-GAAP net income per share was $1.94, exceeding the expected range of $1.62-$1.64.
- HubSpot raised its full-year 2024 guidance for both revenue and non-GAAP net income per share.
HubSpot (HUBS -0.39%), the company known for its integrated customer relationship management platform, released its Q2 2024 earnings on August 7, 2024. The most notable news is that the firm surpassed management's expectations across several key metrics. Specifically, HubSpot reported total revenue of $637.2 million, exceeding the guided range of $617.0 to $619.0 million. Non-GAAP net income per share came in at $1.94, well above the expected range of $1.62 to $1.64. Overall, the quarter demonstrated robust revenue growth and a significant improvement in operating margins.
| Metric | Q2 2024 Results | Management's Expectation | Q2 2023 Results | % Change YoY |
|---|---|---|---|---|
| Total Revenue | $637.2 million | $617.0-$619.0 million | $529.1 million | 20.4% |
| Subscription Revenue | $623.8 million | - | $517.7 million | 20.5% |
| GAAP Operating Margin | -3.8% | - | -22.0% | 18.2 ppt |
| Non-GAAP Operating Margin | 17.2% | - | 14.5% | 2.7 ppt |
| Non-GAAP Net Income per Share | $1.94 | $1.62-$1.64 | $1.45 | 33.8% |
| Source: Expectations based on management's guidance, as provided in 2024-05-08 earnings report. |
Understanding HubSpot's Business
HubSpot offers a unified customer platform that includes a variety of engagement hubs such as Marketing, Sales, Service, Operations, CMS, and Commerce Hubs, built around its foundational Smart CRM. This cohesive ecosystem allows businesses to manage multiple functions seamlessly, driving customer retention and revenue growth.
The company's freemium pricing strategy enables businesses to start using the platform for free and upgrade to paid tiers as their needs grow, helping drive customer acquisition and revenue. HubSpot focuses particularly on mid-market B2B businesses, which are typically underserved by more complex solutions.
Quarterly Highlights
In Q2 2024, HubSpot saw significant achievements and improvements. Total revenue increased by 20.4% year-over-year, reaching $637.2 million, while subscription revenue grew to $623.8 million, up by 20.5% from the prior year.
HubSpot's GAAP operating margin improved dramatically, reducing from -22.0% in Q2 2023 to -3.8% in Q2 2024. Its non-GAAP operating margin also increased to 17.2%, compared to 14.5% in the previous year. This shows a significant operational efficiency improvement.
Net income figures showed improvement too. The GAAP net loss dropped to $14.4 million from $111.8 million in Q2 2023. Non-GAAP net income increased to $103.5 million, compared to $71.8 million last year. This was achieved while maintaining a strong cash and investment balance of $1.9 billion, up from $1.7 billion in Q2 2023.
Looking Ahead
Management has provided positive future guidance. For Q3 2024, they expect revenue of $646.0-$647.0 million and non-GAAP operating income between $107.0-$108.0 million. Similarly, HubSpot has increased its full-year 2024 revenue guidance to $2.567-$2.573 billion from the previous $2.550-$2.560 billion. Non-GAAP net income per share is now forecasted to be between $7.64-$7.70, up from $7.30-$7.38.
Going forward, investors should watch out for HubSpot's ability to maintain its strong growth while navigating the challenges posed by economic uncertainties and competitive pressures. Key areas to monitor include the company's Average Subscription Revenue Per Customer and its ongoing investments in AI and international expansion.
