HubSpot, Inc. (NYSE: HUBS), the customer platform for scaling
companies, today announced financial results for the second quarter
ended June 30, 2024.
Financial Highlights:
Revenue
- Total revenue was $637.2 million, up 20% compared to Q2'23.
- Subscription revenue was $623.8 million, up 20% compared to
Q2'23.
- Professional services and other revenue was $13.5 million, up
18% compared to Q2'23.
Operating Income (Loss)
- GAAP operating margin was (3.8%), compared to (22.0%) in
Q2'23.
- Non-GAAP operating margin was 17.2%, compared to 14.5% in
Q2'23.
- GAAP operating loss was ($23.9) million, compared to ($116.2)
million in Q2'23.
- Non-GAAP operating income was $109.3 million, compared to $76.6
million in Q2'23.
Net Income (Loss)
- GAAP net loss was ($14.4) million, or ($0.28) per basic and
diluted share, compared to net loss of ($111.8) million, or ($2.25)
per basic and diluted share in Q2'23.
- Non-GAAP net income was $103.5 million, or $2.03 per basic and
$1.94 per diluted share, compared to $71.8 million, or $1.45 per
basic and $1.38 per diluted share in Q2'23.
- Weighted average basic and diluted shares outstanding for GAAP
net loss per share was 51.0 million, compared to 49.7 million basic
and diluted shares in Q2'23.
- Weighted average basic and diluted shares outstanding for
non-GAAP net income per share was 51.0 million and 53.4 million,
respectively, compared to 49.7 million and 52.1 million,
respectively in Q2'23.
Balance Sheet and Cash Flow
- The company’s cash, cash equivalents, and short-term and
long-term investments balance was $1.9 billion as of June 30,
2024.
- During the second quarter, the company generated $117.8 million
of cash from operating cash flow, compared to $76.5 million during
Q2'23.
- During the second quarter, the company generated $121.7 million
of cash from non-GAAP operating cash flow and $92.1 million of
non-GAAP free cash flow, compared to $87.0 million of cash from
non-GAAP operating cash flow and $59.6 million of non-GAAP free
cash flow during Q2'23.
Additional Recent Business Highlights
- Grew Customers to 228,054 at June 30, 2024, up 23% from June
30, 2023.
- Average Subscription Revenue Per Customer was $11,215 during
the second quarter of 2024, down 2% compared to the second quarter
of 2023.
“Q2 was another solid quarter of revenue growth and
profitability driven by our rapid pace of innovation and consistent
execution,” said Yamini Rangan, Chief Executive Officer at HubSpot.
“I am thrilled to see customers consolidating on HubSpot and the
momentum we have in becoming the customer platform of choice for
scaling companies. We run our business for the long-term and are
focused on solving for our customers, innovating our platform, and
prioritizing strong execution. That has been and will continue to
be our priority. And it will continue to set us apart to drive
durable growth and create long term shareholder value.”
Business Outlook
Based on information available as of August 7, 2024, HubSpot is
issuing guidance for the third quarter of 2024 and full year 2024
as indicated below.
Third Quarter 2024:
- Total revenue is expected to be in the range of $646.0 million
to $647.0 million.
- Foreign exchange rates are expected to have a neutral impact to
third quarter 2024 revenue growth(1).
- Non-GAAP operating income is expected to be in the range of
$107.0 million to $108.0 million.
- Non-GAAP net income per common share is expected to be in the
range of $1.89 to $1.91. This assumes approximately 53.5 million
weighted average diluted shares outstanding.
Full Year 2024:
- Total revenue is expected to be in the range of $2.567 billion
to $2.573 billion.
- Foreign exchange rates are expected to have a neutral impact to
full year 2024 revenue growth(1).
- Non-GAAP operating income is expected to be in the range of
$437.0 million to $441.0 million.
- Non-GAAP net income per common share is expected to be in the
range of $7.64 to $7.70. This assumes approximately 53.4 million
weighted average diluted shares outstanding.
(1) Foreign exchange rates impact on revenue is calculated by
comparing current period rates with prior period average rates.
Use of Non-GAAP Financial Measures
In our earnings press releases, conference calls, slide
presentations, and webcasts, we may use or discuss non-GAAP
financial measures, as defined by Regulation G. The GAAP financial
measure most directly comparable to each non-GAAP financial measure
used or discussed, and a reconciliation of the differences between
each non-GAAP financial measure and the comparable GAAP financial
measure, are included in this press release after the consolidated
financial statements. Our earnings press releases containing such
non-GAAP reconciliations can be found in the Investors section of
our website ir.hubspot.com.
Conference Call Information
HubSpot will host a conference call on Wednesday, August 7, 2024
at 4:30 p.m. Eastern Time (ET) to discuss the company’s second
quarter 2024 financial results and its business outlook. To
register for this conference call, please use this dial in
registration link or visit HubSpot's Investor Relations website at
ir.hubspot.com. After registering, a confirmation email will be
sent, including dial-in details and a unique code for entry.
Participants who wish to register for the conference call webcast
please use this link.
Following the conference call, a replay will be available at
(866) 813-9403 (domestic) or +44 204-525-0658 (international). The
replay passcode is 614825. An archived webcast of this conference
call will also be available on HubSpot's Investor Relations website
at ir.hubspot.com.
The company has used, and intends to continue to use, the
investor relations portion of its website as a means of disclosing
material non-public information and for complying with disclosure
obligations under Regulation FD.
About HubSpot
HubSpot is the customer platform that helps businesses connect
and grow better. HubSpot delivers seamless connection for
customer-facing teams with a unified platform that includes
AI-powered engagement hubs, a Smart CRM, and a connected ecosystem
with over 1,500 App Marketplace integrations, a community network,
and educational content. Learn more at www.hubspot.com.
Cautionary Language Concerning Forward-Looking
Statements
This press release includes certain “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995, including statements regarding management’s expectations
of future financial and operational performance and operational
expenditures, expected growth, foreign currency movement, and
business outlook, including our financial guidance for the third
fiscal quarter of and full year 2024 and our long-term financial
framework; statements regarding our positioning for future growth
and market leadership; statements regarding the economic
environment; and statements regarding expected market trends,
future priorities and related investments, and market
opportunities. These forward-looking statements include, but are
not limited to, plans, objectives, expectations and intentions and
other statements contained in this press release that are not
historical facts and statements identified by words such as
“expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,”
“estimates” or words of similar meaning. These forward-looking
statements reflect our current views about our plans, intentions,
expectations, strategies and prospects, which are based on the
information currently available to us and on assumptions we have
made. Although we believe that our plans, intentions, expectations,
strategies and prospects as reflected in or suggested by those
forward-looking statements are reasonable, we can give no assurance
that the plans, intentions, expectations or strategies will be
attained or achieved. Furthermore, actual results may differ
materially from those described in the forward-looking statements
and will be affected by a variety of risks and factors that are
beyond our control including, without limitation, risks associated
with our history of losses; our ability to retain existing
customers and add new customers; the continued growth of the market
for a customer platform; our ability to develop new products and
technologies and differentiate our platform from competing products
and technologies, including artificial intelligence and machine
learning technologies; our ability to manage our growth effectively
over the long-term to maintain our high level of service; our
ability to maintain and expand relationships with our solutions
partners; the price volatility of our common stock; the impact of
geopolitical conflicts, inflation, foreign currency movement, and
macroeconomic instability on our business, the broader economy, our
workforce and operations, the markets in which we and our partners
and customers operate, and our ability to forecast our future
financial performance; regulatory and legislative developments on
the use of artificial intelligence and machine learning; and other
risks set forth under the caption “Risk Factors” in our SEC
filings. We assume no obligation to update any forward-looking
statements contained in this document as a result of new
information, future events or otherwise.
Consolidated Balance Sheets
(in thousands)
June 30,
December 31,
2024
2023(1)
Assets
Current assets:
Cash and cash equivalents
$
797,875
$
387,987
Short-term investments
937,830
1,000,245
Accounts receivable
269,908
295,303
Deferred commission expense
119,558
99,326
Prepaid expenses and other current
assets
111,033
88,679
Total current assets
2,236,204
1,871,540
Long-term investments
209,992
325,703
Property and equipment, net
105,886
103,331
Capitalized software development costs,
net
132,026
106,229
Right-of-use assets
228,406
251,071
Deferred commission expense, net of
current portion
138,636
122,194
Other assets
93,866
75,247
Intangible assets, net
37,421
42,316
Goodwill
173,565
173,761
Total assets
$
3,356,002
$
3,071,392
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$
4,115
$
9,106
Accrued compensation costs
61,206
53,462
Accrued commissions
78,657
78,169
Accrued expenses and other current
liabilities
95,078
94,074
Operating lease liabilities
32,886
35,047
Convertible senior notes
457,196
—
Deferred revenue
708,113
672,150
Total current liabilities
1,437,251
942,008
Operating lease liabilities, net of
current portion
273,137
296,561
Deferred revenue, net of current
portion
4,606
5,810
Other long-term liabilities
40,109
36,459
Convertible senior notes, net of current
portion
—
456,206
Total liabilities
1,755,103
1,737,044
Stockholders’ equity:
Common stock
51
50
Additional paid-in capital
2,418,608
2,136,908
Accumulated other comprehensive income
(loss)
(4,822
)
1,827
Accumulated deficit
(812,938
)
(804,437
)
Total stockholders’ equity
1,600,899
1,334,348
Total liabilities and stockholders’
equity
$
3,356,002
$
3,071,392
(1) In the three months ended March 31,
2024, we discovered an immaterial error in our calculation of Cost
of Revenues—Subscription related to how we calculate contractual
credits in one of our third-party vendor agreements. As a result,
we have revised the Consolidated Statement of Operations by
reducing Cost of Revenues- Subscription by $2.3 million for the
three months ended June 30, 2023 and $4.0 million for the six
months ended June 30, 2023 to reflect the revised impact of the
credits on that period. We have also revised the balance sheet as
of December 31, 2023 to reflect the cumulative impact of the error
on prior periods, resulting in a decrease to accrued expenses and
other current liabilities and a decrease to accumulated deficit
totaling $14.2 million. Lastly, we have updated certain line items
within the operating section of the statement of cash flows for the
three and six months ended June 30, 2023 but note no net impact to
cash flows provided by operating activities. Refer to our Form 10-Q
for additional information.
Consolidated Statements of
Operations
(in thousands, except per share data)
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2024
2023(1)
2024
2023(1)
Revenues:
Subscription
$
623,763
$
517,678
$
1,227,559
$
1,007,421
Professional services and other
13,467
11,460
27,085
23,337
Total revenue
637,230
529,138
1,254,644
1,030,758
Cost of revenues:
Subscription
81,618
71,494
162,342
138,116
Professional services and other
13,899
13,462
28,262
27,169
Total cost of revenues
95,517
84,956
190,604
165,285
Gross profit
541,713
444,182
1,064,040
865,473
Operating expenses:
Research and development
198,180
169,955
373,817
297,639
Sales and marketing
293,794
265,294
594,081
515,971
General and administrative
72,597
61,222
141,452
118,630
Restructuring
1,077
63,880
1,859
92,450
Total operating expenses
565,648
560,351
1,111,209
1,024,690
Loss from operations
(23,935
)
(116,169
)
(47,169
)
(159,217
)
Other income (expense):
Interest income
20,370
13,542
39,097
24,013
Interest expense
(901
)
(937
)
(1,836
)
(1,867
)
Other expense
1,784
330
14,945
(465
)
Total other income
21,253
12,935
52,206
21,681
(Loss) income before income tax
expense
(2,682
)
(103,234
)
5,037
(137,536
)
Income tax expense
(11,753
)
(8,569
)
(13,538
)
(10,987
)
Net loss
$
(14,435
)
$
(111,803
)
$
(8,501
)
$
(148,523
)
Net loss per share, basic and diluted
$
(0.28
)
$
(2.25
)
$
(0.17
)
$
(3.00
)
Weighted average common shares used in
computing basic and diluted net loss per share:
51,005
49,703
50,847
49,550
(1) In the three months ended March 31,
2024, we discovered an immaterial error in our calculation of Cost
of Revenues—Subscription related to how we calculate contractual
credits in one of our third-party vendor agreements. As a result,
we have revised the Consolidated Statement of Operations by
reducing Cost of Revenues- Subscription by $2.3 million for the
three months ended June 30, 2023 and $4.0 million for the six
months ended June 30, 2023 to reflect the revised impact of the
credits on that period. We have also revised the balance sheet as
of December 31, 2023 to reflect the cumulative impact of the error
on prior periods, resulting in a decrease to accrued expenses and
other current liabilities and a decrease to accumulated deficit
totaling $14.2 million. Lastly, we have updated certain line items
within the operating section of the statement of cash flows for the
three and six months ended June 30, 2023 but note no net impact to
cash flows provided by operating activities. Refer to our Form 10-Q
for additional information.
Consolidated Statements of Cash
Flows
(in thousands)
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2024
2023(1)
2024
2023(1)
Operating Activities:
Net loss
$
(14,435
)
$
(111,803
)
$
(8,501
)
$
(148,523
)
Adjustments to reconcile net loss to net
cash and cash equivalents provided by operating activities
Depreciation and amortization
22,204
16,429
43,438
32,999
Stock-based compensation
128,994
128,003
240,116
211,038
Restructuring charges
—
62,657
—
64,938
Gain on strategic investments
(2,103
)
—
(18,456
)
—
Impairment of strategic investments
479
—
4,094
—
(Benefit from) provision for deferred
income taxes
(45
)
4,755
(212
)
4,802
Amortization of debt discount and issuance
costs
502
496
1,002
980
Accretion of bond discount
(10,517
)
(10,769
)
(23,080
)
(18,777
)
Unrealized currency translation
(1,486
)
236
(948
)
(122
)
Changes in assets and liabilities
Accounts receivable
(7,001
)
(8,991
)
18,422
21,626
Prepaid expenses and other assets
(21,755
)
(27,028
)
(27,228
)
(47,445
)
Deferred commission expense
(23,083
)
(18,495
)
(40,084
)
(37,034
)
Right-of-use assets
13,994
12,489
20,384
20,972
Accounts payable
1,082
59
(218
)
(17,814
)
Accrued expenses and other liabilities
28,330
23,868
15,049
46,527
Operating lease liabilities
(10,410
)
(8,156
)
(23,153
)
(17,985
)
Deferred revenue
13,078
12,793
44,291
41,431
Net cash and cash equivalents provided by
operating activities
117,828
76,543
244,916
157,613
Investing Activities:
Purchases of investments
(252,339
)
(369,117
)
(651,717
)
(731,363
)
Maturities of investments
496,805
441,867
849,595
729,834
Purchases of property and equipment
(8,200
)
(10,879
)
(14,082
)
(14,189
)
Purchases of strategic investments
(3,600
)
—
(3,627
)
(6,000
)
Capitalization of software development
costs
(21,441
)
(16,473
)
(43,075
)
(31,595
)
Proceeds from net working capital
settlement
1,933
—
1,933
—
Net cash and cash equivalents provided by
(used in) investing activities
213,158
45,398
139,027
(53,313
)
Financing Activities:
Employee taxes paid related to the net
share settlement of stock-based awards
(4,696
)
(2,904
)
(13,484
)
(4,102
)
Proceeds related to the issuance of common
stock under stock plans
25,301
13,296
45,244
24,550
Net cash and cash equivalents provided by
financing activities
20,605
10,392
31,760
20,448
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(1,509
)
(274
)
(5,815
)
1,448
Net increase in cash, cash equivalents and
restricted cash
350,082
132,059
409,888
126,196
Cash, cash equivalents and restricted
cash, beginning of period
451,846
328,312
392,040
334,175
Cash, cash equivalents and restricted
cash, end of period
$
801,928
$
460,371
$
801,928
$
460,371
(1) In the three months ended March 31,
2024, we discovered an immaterial error in our calculation of Cost
of Revenues—Subscription related to how we calculate contractual
credits in one of our third-party vendor agreements. As a result,
we have revised the Consolidated Statement of Operations by
reducing Cost of Revenues- Subscription by $2.3 million for the
three months ended June 30, 2023 and $4.0 million for the six
months ended June 30, 2023 to reflect the revised impact of the
credits on that period. We have also revised the balance sheet as
of December 31, 2023 to reflect the cumulative impact of the error
on prior periods, resulting in a decrease to accrued expenses and
other current liabilities and a decrease to accumulated deficit
totaling $14.2 million. Lastly, we have updated certain line items
within the operating section of the statement of cash flows for the
three and six months ended June 30, 2023 but note no net impact to
cash flows provided by operating activities. Refer to our Form 10-Q
for additional information.
Reconciliation of non-GAAP operating
income and operating margin
(in thousands, except percentages)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
GAAP operating loss
$
(23,935
)
$
(116,169
)
$
(47,169
)
$
(159,217
)
Stock-based compensation
128,994
128,003
240,116
211,038
Amortization of acquired intangible
assets
2,341
851
4,685
1,696
Acquisition related expense
838
—
2,389
—
Restructuring charges
1,077
63,880
1,859
92,450
Non-GAAP operating income
$
109,315
$
76,565
$
201,880
$
145,967
GAAP operating margin
(3.8
%)
(22.0
%)
(3.8
%)
(15.4
%)
Non-GAAP operating margin
17.2
%
14.5
%
16.1
%
14.2
%
Reconciliation of non-GAAP net
income
(in thousands, except per share
amounts)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
GAAP net loss
$
(14,435
)
$
(111,803
)
$
(8,501
)
$
(148,523
)
Stock-based compensation
128,994
128,003
240,116
211,038
Acquisition related expense
838
—
2,389
—
Amortization of acquired intangibles
assets
2,341
851
4,685
1,696
Restructuring charges
1,077
63,880
1,859
92,450
Non-cash interest expense for amortization
of debt issuance costs
502
496
1,002
980
Gain on strategic investments
(1,624
)
—
(14,362
)
—
(Gain) loss on equity method
investment
(11
)
(188
)
54
(66
)
Income tax effects of non-GAAP items
(14,134
)
(9,393
)
(34,618
)
(22,725
)
Non-GAAP net income
$
103,548
$
71,846
$
192,624
$
134,850
Non-GAAP net income per share:
Basic
$
2.03
$
1.45
$
3.79
$
2.72
Diluted
$
1.94
$
1.38
$
3.62
$
2.60
Shares used in non-GAAP per share
calculations
Basic
51,005
49,703
50,847
49,550
Diluted
53,376
52,100
53,250
51,798
Reconciliation of non-GAAP expense and
expense as a percentage of revenue
(in thousands, except percentages)
Three Months Ended June
30,
2024
2023
COS, Subs- cription
COS, Prof. services &
other
R&D
S&M
G&A
COS, Subs- cription
COS, Prof. services &
other
R&D
S&M
G&A
GAAP expense
$
81,618
$
13,899
$
198,180
$
293,794
$
72,597
$
71,494
$
13,462
$
169,955
$
265,294
$
61,222
Stock -based compensation
(5,444
)
(1,128
)
(64,693
)
(36,168
)
(21,561
)
(3,516
)
(1,459
)
(64,060
)
(38,625
)
(20,343
)
Amortization of acquired intangible
assets
(1,879
)
—
—
(357
)
(105
)
(405
)
—
—
(446
)
—
Acquisition related expense
—
—
(709
)
—
(129
)
—
—
—
—
—
Non-GAAP expense
$
74,295
$
12,771
$
132,778
$
257,269
$
50,802
$
67,573
$
12,003
$
105,895
$
226,223
$
40,879
GAAP expense as a percentage of
revenue
12.8
%
2.2
%
31.1
%
46.1
%
11.4
%
13.5
%
2.5
%
32.1
%
50.1
%
11.6
%
Non-GAAP expense as a percentage of
revenue
11.7
%
2.0
%
20.8
%
40.4
%
8.0
%
12.8
%
2.3
%
20.0
%
42.8
%
7.7
%
Six Months Ended June
30,
2024
2023
COS, Subs- cription
COS, Prof. services &
other
R&D
S&M
G&A
COS, Subs- cription
COS, Prof. services &
other
R&D
S&M
G&A
GAAP expense
$
162,342
$
28,262
$
373,817
$
594,081
$
141,452
$
138,116
$
27,169
$
297,639
$
515,971
$
118,630
Stock -based compensation
(10,404
)
(2,215
)
(115,318
)
(71,325
)
(40,854
)
(6,259
)
(2,546
)
(97,384
)
(68,794
)
(36,055
)
Amortization of acquired intangible
assets
(3,761
)
—
—
(714
)
(210
)
(804
)
—
—
(892
)
—
Acquisition related expense
—
—
(1,755
)
—
(634
)
—
—
—
—
—
Non-GAAP expense
$
148,177
$
26,047
$
256,744
$
522,042
$
99,754
$
131,053
$
24,623
$
200,255
$
446,285
$
82,575
GAAP expense as a percentage of
revenue
12.9
%
2.3
%
29.8
%
47.4
%
11.3
%
13.4
%
2.6
%
28.9
%
50.1
%
11.5
%
Non-GAAP expense as a percentage of
revenue
11.8
%
2.1
%
20.5
%
41.6
%
8.0
%
12.7
%
2.4
%
19.4
%
43.3
%
8.0
%
Reconciliation of non-GAAP subscription
margin
(in thousands, except percentages)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
GAAP subscription margin
$
542,145
$
446,184
$
1,065,217
$
869,305
Stock-based compensation
5,444
3,516
10,404
6,259
Amortization of acquired intangible
assets
1,879
405
3,761
804
Non-GAAP subscription margin
$
549,468
$
450,105
$
1,079,382
$
876,368
GAAP subscription margin percentage
86.9
%
86.2
%
86.8
%
86.3
%
Non-GAAP subscription margin
percentage
88.1
%
86.9
%
87.9
%
87.0
%
Reconciliation of free cash
flow
(in thousands)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
GAAP net cash and cash equivalents
provided by operating activities
$
117,828
$
76,543
$
244,916
$
157,613
Purchases of property and equipment
(8,200
)
(10,879
)
(14,082
)
(14,189
)
Capitalization of software development
costs
(21,441
)
(16,473
)
(43,075
)
(31,595
)
Payment of restructuring charges
3,881
10,425
8,071
32,939
Non-GAAP free cash flow
$
92,068
$
59,616
$
195,830
$
144,768
Reconciliation of operating cash
flow
(in thousands)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
GAAP net cash and cash equivalents
provided by operating activities
$
117,828
$
76,543
$
244,916
$
157,613
Payment of restructuring charges
3,881
10,425
8,071
32,939
Non-GAAP operating cash flow
$
121,709
$
86,968
$
252,987
$
190,552
Reconciliation of forecasted non-GAAP
operating income
(in thousands, except percentages)
Three Months Ended September
30, 2024
Year Ended December 31,
2024
GAAP operating income range
($31,149)-($30,299)
($96,152)-($92,752)
Stock-based compensation
134,049
516,149
Amortization of acquired intangible
assets
2,350
9,403
Acquisition related expense
800
3,800
Restructuring charges
950-1,100
3,800-4,400
Non-GAAP operating income range
$107,000-$108,000
$437,000-$441,000
Reconciliation of forecasted non-GAAP
net income and non-GAAP net income per share
(in thousands, except per share
amounts)
Three Months Ended September
30, 2024
Year Ended December 31,
2024
GAAP net loss range
($15,057)-($13,894)
($30,085)-($26,935)
Stock-based compensation
134,049
516,149
Amortization of acquired intangible
assets
2,350
9,403
Acquisition related expense
800
3,800
Non-cash interest expense for amortization
of debt issuance costs
503
2,019
Gain on strategic investments
—
(14,362)
Loss on equity method investment
—
54
Restructuring charges
950-1,100
3,800-4,400
Income tax effects of non-GAAP items
(22,795)-(23,058)
(82,578)-(83,328)
Non-GAAP net income range
$100,800-$101,850
$408,200-$411,200
GAAP net income per basic and diluted
share
($0.29)-($0.27)
($0.59)-($0.53)
Non-GAAP net income per diluted share
$1.89-$1.91
$7.64-$7.70
Weighted average common shares used in
computing GAAP basic and diluted net loss per share:
51,367
51,182
Weighted average common shares used in
computing non-GAAP diluted net loss per share:
53,454
53,422
HubSpot’s estimates of stock-based compensation, amortization of
acquired intangible assets, non-cash interest expense for
amortization of debt issuance costs, gain on or impairment of
strategic investments, loss of equity method investment,
restructuring charges, and income tax effects of non-GAAP items
assume, among other things, the occurrence of no additional
acquisitions, and no further revisions to stock-based compensation
and related expenses.
Non-GAAP Financial Measures
We report our financial results in accordance with accounting
principles generally accepted in the United States of America, or
GAAP. However, management believes that, in order to properly
understand our short-term and long-term financial and operational
trends, investors may wish to consider the impact of certain
non-cash or non-recurring items when used as a supplement to
financial performance measures in accordance with GAAP. These items
result from facts and circumstances that vary in frequency and
impact on continuing operations. In this release, HubSpot’s
non-GAAP operating income, operating margin, subscription margin,
expense, expense as a percentage of revenue, net income, operating
and free cash flow are not presented in accordance with GAAP and
are not intended to be used in lieu of GAAP presentations of
results of operations. Non-GAAP operating cash flow is defined as
cash and cash equivalents provided by or used in operating
activities plus payment of restructuring charges. Non-GAAP free
cash flow is defined as cash and cash equivalents provided by or
used in operating activities less purchases of property and
equipment and capitalization of software development costs, plus
payment of restructuring charges. Although non-GAAP operating cash
flow and non-GAAP free cash flow are not residual cash flow
available for our discretionary expenditures, we believe
information regarding non-GAAP operating cash flow and non-GAAP
free cash flow provide useful information to investors in
understanding and evaluating the strength of our liquidity and
provides a comparable framework for assessing how our business
performed when compared to prior periods which were not impacted by
restructuring charges paid from operating cash flow.
Management believes that these non-GAAP financial measures
provide additional means of evaluating period-over-period operating
performance. Specifically, these non-GAAP financial measures
provide management with additional means to understand and evaluate
the operating results and trends in our ongoing business by
eliminating certain non-cash expenses and other items that
management believes might otherwise make comparisons of our ongoing
business with prior periods more difficult, obscure trends in
ongoing operations, or reduce management’s ability to make useful
forecasts. In addition, management understands that some investors
and financial analysts find this information helpful in analyzing
our financial and operational performance and comparing this
performance to our peers and competitors. However, these non-GAAP
financial measures have limitations as an analytical tool and are
not intended to be an alternative to financial measures prepared in
accordance with GAAP. In addition, it should be noted that these
non-GAAP financial measures may be different from non-GAAP measures
used by other companies. We intend to provide these non-GAAP
financial measures as part of our future earnings discussions and,
therefore, the inclusion of these non-GAAP financial measures will
provide consistency in our financial reporting. Management may,
however, utilize other measures to illustrate performance in the
future. Investors are encouraged to review the reconciliation of
these non-GAAP measures to their most directly comparable GAAP
financial measures. A reconciliation of our non-GAAP financial
measures to their most directly comparable GAAP measures has been
provided in the financial statement tables included above in this
press release.
These non-GAAP measures exclude stock-based compensation,
amortization of acquired intangible assets, acquisition related
expenses, disposition related income, non-cash interest expense for
the amortization of debt issuance costs, gain or impairment losses
on strategic investments, gain or loss on equity method investment,
restructuring charges and account for the income tax effects of the
exclusion of these non-GAAP items. We believe investors may want to
incorporate the effects of these items in order to compare our
financial performance with that of other companies and between time
periods:
A.
Stock-based compensation is a non-cash
expense accounted for in accordance with FASB ASC Topic 718. We
believe that the exclusion of stock-based compensation expense
allows for financial results that are more indicative of our
operational performance and provide for a useful comparison of our
operating results to prior periods and to our peer companies
because stock-based compensation expense varies from period to
period and company to company due to such things as differing
valuation methodologies and changes in stock price.
B.
Expense for the amortization of acquired
intangible assets is excluded from non-GAAP expense and income
measures as HubSpot views amortization of these assets as arising
from pre-acquisition activities determined at the time of an
acquisition. While these intangible assets are evaluated for
impairment regularly, amortization of the cost of purchased
intangibles is a non-cash expense that is not typically affected by
operations during any particular period. Valuation and subsequent
amortization of intangible assets can also be inconsistent in
amount and frequency because they can significantly vary based on
the timing and size of acquisitions and the inherently subjective
nature of the degree to which a purchase price is allocated to
intangible assets. We believe that the exclusion of this
amortization expense provides for a useful comparison of our
operating results to prior periods, for which we have historically
excluded amortization expense, and to our peer companies, which
commonly exclude acquired intangible asset amortization. It is
important to note that although we exclude amortization of acquired
intangible assets from our non-GAAP expense and income measures,
revenue generated from such intangibles is included within our
non-GAAP income measures. The use of these intangible assets
contributed to our revenues earned during the periods presented and
will contribute to future periods as well.
C.
Acquisition related expenses, such as
transaction costs, retention payments, and holdback payments, and
disposition related income, such as proceeds from sale of assets,
are transactions that are not necessarily reflective of our
operational performance during a period. We believe that the
exclusion of these expenses and income provides for a useful
comparison of our operating results to prior periods and to our
peer companies, which commonly exclude these expenses and
income.
D.
In June 2020, we issued $460 million of
convertible notes due in 2025 with a coupon interest rate of
0.375%. The issuance cost of the debt is amortized as interest
expense over the remaining term of the debt. We believe the
exclusion of this non-cash interest expense provides for a useful
comparison of our operating results to prior periods and to our
peer companies.
E
Strategic investments consist of
non-controlling equity investments in privately held companies. The
recognition of gains or impairment losses can vary significantly
across periods and we do not view them to be indicative of our
fundamental operating activities and believe the exclusion of gains
or impairment losses provides for a useful comparison of our
operating results to prior periods and to our peer companies.
F.
We made a contribution to the Black
Economic Development Fund (the “investee”) managed by the Local
Initiatives Support Corporation and have committed to make
additional capital contributions. We account for this investment
under the equity method of accounting. The proportionate share of
our equity method investee's net earnings have been excluded in
order to provide a comparable view of our operating results to
prior periods and to our peer companies. We believe this activity
is not reflective of our recurring core business operating
results.
G.
Restructuring charges are related to
severance, employee related benefits, facilities and other costs
associated with the restructuring plan implemented on January 25,
2023. Restructuring charges fluctuate in amount and frequency and
are not reflective of our core business operating results. Over the
remaining lease term (into 2027), we expect to both incur
incremental restructuring charges and make cash payments related to
the facilities that we abandoned in 2023. The abandonment of
facilities is part of the restructuring plan we authorized in
January 2023 and is intended to consolidate our lease space and
create higher density across our workspaces. The incremental
charges we expect to incur relate to continuing costs for the
abandoned facilities and are expected to be in the range of $13-16
million and will be paid in cash over the remaining lease term. We
also expect to make cash payments of approximately $51.0 million in
fixed rent payments for the abandoned facilities that will be made
in monthly installments over the remaining lease term for which we
have taken the full P&L restructuring charge during the year
ended 2023. We plan on excluding both the incremental charges and
cash payments and the related restructuring cash rent payments from
our non-GAAP earnings, operating cash flow, and free cash flow
metrics. We believe exclusion of these charges and cash payments
provides useful information to investors in understanding and
evaluating the strength of earnings and liquidity and provides a
comparable framework for assessing how our business performed when
compared to prior periods which were not impacted by excluded
restructuring charges paid from operating cash flow.
H.
The effects of income taxes on non-GAAP
items reflect a fixed long-term projected tax rate of 20% to
provide better consistency across reporting periods. To determine
this long-term non-GAAP tax rate, we exclude the impact of other
non-GAAP adjustments and take into account other factors such as
our current operating structure and existing tax positions in
various jurisdictions. We will periodically reevaluate this tax
rate, as necessary, for significant events such as relevant tax law
changes and material changes in our forecasted geographic earnings
mix.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240807979848/en/
Investor Relations Contact: investors@hubspot.com
Media Contact: media@hubspot.com
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