A while back, I highlighted Hubspot (HUBS) as a potential company to watch due to improving growth rates. I promised to follow up after earnings. I’ll try to keep this short and simple.
Last 4 quarters revenue growth:
2020Q4 2021Q1 2021Q2 2021Q3 35% 41% 53% 47%
2020Q4 2021Q1 2021Q2 2021Q3 103994 113925 121048 128144
2020Q4 2021Q1 2021Q2 2021Q3 $9758 $9886 $10198 $10536
So, solid performance, but the trend of increasing growth was broken, and I suspect the growth will continue to decelerate. Here’s why:
In my initial write-up, I talked about how implementing Hubspot generally requires hiring a marketing company who bill themselves as Hubspot integrators. The whole process requires a lot of work–basically re-building the company website and creating marketing content to drive the Hubspot process. The number I spoke of in the first review was a cost of $150,000 which I have seen quoted when my company was looking at implementing Hubspot earlier this year. (We did not.)
That’s not the problem, exactly. Rather, it is the labor-intensive implementation that it implies. Because it is a lot of work, while HUBS might be a SaaS company, it can’t grow as fast as many other SaaS companies.
Look at the customer growth. It’s not exponential; it’s linear. It’s been between 7000 and 9000 new customers per quarter for the last 2 years and they are guiding for 7000 new customers in Q4 of this year.
Then, look at ARPU. It’s growing, but at only 9% YOY (and only 4% higher than Q1 of 2020, so I’m not sold that this will continue.)
If they add 28000 new customers in the next year, and keep 9% YOY ARPU growth, that implies 33% growth around Q3 next year. Still a good business, but not what Saul is looking for.