HubSpot (NYSE:HUBS), a cloud-based sales and marketing platform specialist, released its fourth-quarter and full-year 2018 results on Feb. 12. Once again, it outpaced its own guidance.

Sales in the fourth quarter reached $144 million, up 35% from the year-ago quarter. That beat management's guidance of $136.5 million to $137.5 million.

The company also beat its non-GAAP earnings-per-share guidance range of $0.29 to $0.31, reporting EPS of $0.37. Non-GAAP net income for the quarter reached $15.8 million, which was a vast improvement over $4.6 million in the fourth quarter of 2017.

HubSpot's logo on a brown brick wall and a woman opening the glass door next to it.

Image source: HubSpot.

HubSpot results: The raw numbers

Metric Q4 2018 Q4 2017 Year-Over-Year Change
Sales $144 million $106.5 million 35.2%
GAAP net income ($11.5 million) ($11.5 million) N/A
GAAP earnings per share ($0.29) ($0.31) N/A

Data source: HubSpot. Chart by author.

What happened with HubSpot in the quarter?

  • Total sales for the full year reached $513 million, up 37% year over year.
  • Subscription revenue, which accounts for 95% of total sales, jumped 35% year over year in the fourth quarter, reaching $136.8 million. Subscription revenue rose 37% for the full year, to $487.5 million.
  • Total average subscription revenue per customer fell by 2% in the fourth quarter, to $10,012.
  • Professional services and other revenue jumped 49% in the fourth quarter, to $7.2 million. For the full year, the segment grew 35% to $25.5 million.
  • International revenue grew by 48% year over year and accounted for 38% of total revenue in the fourth quarter.
  • Non-GAAP operating margin reached 9.8% last quarter, up from 4.1% in the year-ago quarter.
  • Non-GAAP operating income improved as well and hit $14.2 million, compared to $4.3 million in the fourth quarter of 2017.
  • HubSpot ended 2018 with 56,628 customers, an increase of 36% compared to the end of 2017.
  • Research and development spending totaled $32 million in the quarter, up nearly 44% from the fourth quarter of 2017.
  • Free cash flow jumped 256% to $25 million in Q4. Free cash flow for the full year was $51.4 million, compared to $22.3 million in 2017.
  • HubSpot ended the year with $603.7 million in cash, cash equivalents, and investments, compared to $535.7 million at the end of 2017. 

What management had to say

Speaking about the company's customer growth, co-founder and CEO Brian Halligan said on the fourth-quarter earnings call: "At HubSpot we're seeing lots of new customers buying multiple products upfront, and our new products have improved our cross-sale motion, allowing us to reach nearly 20,000 multiple-product customers in Q4, up 90% year-over-year."

Halligan added later that the company is working on new projects that could add more value to its existing enterprise products. He said, "We're working on a long list of funded, high-return projects in 2019 that we think will make an existing suite even more valuable to our customers, particularly at that enterprise tier."

Management also addressed the slight year-over-year drop in subscription revenue per customer, with CFO Kate Buecker saying, "While we are encouraged by the sequential increase, we continue to expect this metric to bounce around depending on product mix and the amount of new versus install-based selling in any quarter."

Check out the latest earnings call transcripts for companies we cover.

Looking ahead

HubSpot's management expects revenue in the first quarter of 2019 to be in the range of $146.5 million to $147.5 million and for full-year sales to be between $648 million and $652 million. Non-GAAP EPS guidance is in the range of $0.23 to $0.25 for the first quarter and $1.08 to $1.16 for the full year. 

The midpoint of HubSpot's first-quarter guidance would represent a 28% year-over-year increase in sales and a 60% year-over-year increase in earnings.

Halligan said on the conference call that 2018 was one of the best years in the company's history and added, "We're extremely pleased with our Q4 results, and I'm very excited on the outlook for our business entering 2019."