HubSpot Inc

The letter discusses HubSpot as one of the positions contributing to the fund's performance but does not provide a directional argument regarding its future prospects.

HubSpot, Inc. (HUBS), a provider of front-office software to the small and medium-sized business (SMB) market, was a bottom contributor during the second quarter. Despite exceeding consensus revenue and earnings expectations, the share price declined amid broader pessimism around the software sector due to the perceived threat of AI. However, our research gives us confidence that by integrating tools like AI agents into its products, HubSpot will ultimately prove to be a net beneficiary of AI, by offering a superior value proposition to its customers.

HubSpot Inc (HUBS) is struggling to figure out how to monetize AI in its customer base while core demand for its solutions is decelerating. We exited to fund relatively more attractive growth opportunities.

HubSpot Inc. offers a cloud-based customer relationship management platform. We exited the position due to the combination of potential AI disruption and the seat-based model's potential challenges. The stock tumbled -39% before it was sold.

HubSpot Inc. offers a cloud-based customer relationship management platform. Second quarter results exceeded the consensus. Growth was driven on its platform by AI adoption, seat growth, and more multi-hub deals. Despite the solid results, management maintained forward guidance excluding tailwinds from currency translation which caused a -16% slide in their shares. In our view, management is erring on the side of conservatism.

HubSpot faced pressure as concerns around AI disintermediation continued to weigh on the industry. The Strategy was hurt by poor results from application software makers, including HubSpot, which indicates a challenging environment for growth in this sector. As a result, we have reduced our exposure to this area within technology, selling HubSpot along with other application software companies.

HubSpot is viewed positively as it trades at more than 9x 2025 revenue, indicating strong market confidence in its growth potential. The manager believes that the business is not imploding, as evidenced by the hiring of HubSpot’s former VP of Product to Thryv’s board, suggesting that there is optimism about HubSpot's trajectory. The comparison of HubSpot's valuation to Thryv's, which trades at less than 2x 2025 SaaS revenue, highlights the perceived undervaluation of Thryv relative to its cash-generating legacy business, further underscoring HubSpot's strong market position.

During the quarter, we initiated a position in HubSpot, a leading, cloud-based customer relationship management (CRM) platform known for rapid innovation and strong growth. HubSpot has consistently expanded its customer base and increased adoption across marketing, sales, service, and content management. By moving beyond small and mid-sized businesses to attract larger enterprises, and with its user-friendly, all-in-one platform, HubSpot stands out as a compelling alternative to legacy CRM systems.