Exhibit 99.1
HubSpot Reports Q3 2024 Results
CAMBRIDGE, MA (November 6, 2024) — HubSpot, Inc. (NYSE: HUBS), the customer platform for scaling companies, today announced financial results for the third quarter ended September 30, 2024.
Financial Highlights:
Revenue
●
Total revenue was $669.7 million, up 20% compared to Q3'23.
o
Subscription revenue was $654.7 million, up 20% compared to Q3'23.
o
Professional services and other revenue was $15.0 million, up 28% compared to Q3'23.
Operating Income (Loss)
●
GAAP operating margin was (1.4%), compared to (3.3%) in Q3'23.
●
Non-GAAP operating margin was 18.7%, compared to 16.5% in Q3'23.
●
GAAP operating loss was ($9.6) million, compared to ($18.6) million in Q3'23.
●
Non-GAAP operating income was $125.2 million, compared to $92.1 million in Q3'23.
Net Income (Loss)
●
GAAP net income was $8.1 million, or $0.16 per basic and diluted share, compared to net loss of ($3.6) million, or ($0.07) per basic and diluted share in Q3'23.
●
Non-GAAP net income was $116.6 million, or $2.27 per basic and $2.18 per diluted share, compared to $84.9 million, or $1.70 per basic and $1.62 per diluted share in Q3'23.
●
Weighted average basic and diluted shares outstanding for GAAP net loss per share was 51.4 million, compared to 50.1 million basic and diluted shares in Q3'23.
●
Weighted average basic and diluted shares outstanding for non-GAAP net income per share was 51.4 million and 53.4 million, respectively, compared to 50.1 million and 52.5 million, respectively, in Q3'23.
Balance Sheet and Cash Flow
•
The company’s cash, cash equivalents, and short-term and long-term investments balance was $2.1 billion as of September 30, 2024.
●
During the third quarter, the company generated $159.5 million of cash from operating cash flow, compared to $89.0 million during Q3'23.
●
During the third quarter, the company generated $164.0 million of cash from non-GAAP operating cash flow and $129.2 million of non-GAAP free cash flow, compared to $93.3 million of cash from non-GAAP operating cash flow and $64.7 million of non-GAAP free cash flow during Q3'23.
Additional Recent Business Highlights
●
Grew Customers to 238,128 at September 30, 2024, up 23% from September 30, 2023.
●
Average Subscription Revenue Per Customer was $11,235 during the third quarter of 2024, down 2% compared to the third quarter of 2023.
“Q3 was another strong quarter of revenue growth, operating profit growth and customer growth”, said Yamini Rangan, Chief Executive Officer at HubSpot. “We hosted our annual INBOUND conference which was a huge success, showcasing over 200 new innovations, including the standout launches of Breeze and Breeze Intelligence. We are embedding AI across
Page | 1
all our hubs and our entire platform to help SMBs grow. With our relentless focus on innovation with AI and solid momentum in Q3, I’m more confident than ever in HubSpot’s durable growth.”
Business Outlook
Based on information available as of November 6, 2024, HubSpot is issuing guidance for the fourth quarter of 2024 and full year 2024 as indicated below.
Fourth Quarter 2024:
•
Total revenue is expected to be in the range of $672.0 million to $674.0 million.
o
Foreign exchange rates are expected to have a 1 point tailwind to fourth quarter 2024 revenue growth(1).
•
Non-GAAP operating income is expected to be in the range of $128.0 million to $129.0 million.
•
Non-GAAP net income per common share is expected to be in the range of $2.18 to $2.20. This assumes approximately 53.8 million weighted average diluted shares outstanding.
Full Year 2024:
•
Total revenue is expected to be in the range of $2.597 billion to $2.599 billion.
o
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 $455.0 million to $456.0 million.
•
Non-GAAP net income per common share is expected to be in the range of $7.98 to $8.00. 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, November 6, 2024 at 4:30 p.m. Eastern Time (ET) to discuss the company’s third 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.
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.
Page | 2
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 fourth 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.
Page | 3
Consolidated Balance Sheets
(in thousands)
|
| September 30, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023(1) |
| ||
Assets |
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 410,060 |
|
| $ | 387,987 |
|
Short-term investments |
|
| 1,527,928 |
|
|
| 1,000,245 |
|
Accounts receivable |
|
| 278,893 |
|
|
| 295,303 |
|
Deferred commission expense |
|
| 135,116 |
|
|
| 99,326 |
|
Prepaid expenses and other current assets |
|
| 86,704 |
|
|
| 88,679 |
|
Total current assets |
|
| 2,438,701 |
|
|
| 1,871,540 |
|
Long-term investments |
|
| 165,623 |
|
|
| 325,703 |
|
Property and equipment, net |
|
| 110,950 |
|
|
| 103,331 |
|
Capitalized software development costs, net |
|
| 144,829 |
|
|
| 106,229 |
|
Right-of-use assets |
|
| 225,922 |
|
|
| 251,071 |
|
Deferred commission expense, net of current portion |
|
| 149,619 |
|
|
| 122,194 |
|
Other assets |
|
| 112,045 |
|
|
| 75,247 |
|
Intangible assets, net |
|
| 35,211 |
|
|
| 42,316 |
|
Goodwill |
|
| 174,158 |
|
|
| 173,761 |
|
Total assets |
| $ | 3,557,058 |
|
| $ | 3,071,392 |
|
Liabilities and stockholders’ equity |
|
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
|
| ||
Accounts payable |
| $ | 5,267 |
|
| $ | 9,106 |
|
Accrued compensation costs |
|
| 83,602 |
|
|
| 53,462 |
|
Accrued commissions |
|
| 88,418 |
|
|
| 78,169 |
|
Accrued expenses and other current liabilities |
|
| 99,358 |
|
|
| 94,074 |
|
Operating lease liabilities |
|
| 34,630 |
|
|
| 35,047 |
|
Convertible senior notes |
|
| 457,674 |
|
| — |
| |
Deferred revenue |
|
| 719,595 |
|
|
| 672,150 |
|
Total current liabilities |
|
| 1,488,544 |
|
|
| 942,008 |
|
Operating lease liabilities, net of current portion |
|
| 265,706 |
|
|
| 296,561 |
|
Deferred revenue, net of current portion |
|
| 4,232 |
|
|
| 5,810 |
|
Other long-term liabilities |
|
| 46,694 |
|
|
| 36,459 |
|
Convertible senior notes, net of current portion |
| — |
|
|
| 456,206 |
| |
Total liabilities |
|
| 1,805,176 |
|
|
| 1,737,044 |
|
Stockholders’ equity: |
|
|
|
|
|
| ||
Common stock |
|
| 51 |
|
|
| 50 |
|
Additional paid-in capital |
|
| 2,550,974 |
|
|
| 2,136,908 |
|
Accumulated other comprehensive income |
|
| 5,649 |
|
|
| 1,827 |
|
Accumulated deficit |
|
| (804,792 | ) |
|
| (804,437 | ) |
Total stockholders’ equity |
|
| 1,751,882 |
|
|
| 1,334,348 |
|
Total liabilities and stockholders’ equity |
| $ | 3,557,058 |
|
| $ | 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 $1.9 million for the three months ended September 30, 2023 and $5.9 million for the nine months ended September 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 nine months ended September 30, 2023 but note no net impact to cash flows provided by operating activities. Refer to our Form 10-Q for additional information.
Page | 4
Consolidated Statements of Operations
(in thousands, except per share data)
| For the Three Months Ended September 30, |
|
| For the Nine Months Ended September 30, |
| ||||||||||
| 2024 |
|
| 2023(1) |
|
| 2024 |
|
| 2023(1) |
| ||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
| ||||
Subscription | $ | 654,738 |
|
| $ | 545,832 |
|
| $ | 1,882,241 |
|
| $ | 1,553,253 |
|
Professional services and other |
| 14,983 |
|
|
| 11,725 |
|
|
| 42,124 |
|
|
| 35,062 |
|
Total revenue |
| 669,721 |
|
|
| 557,557 |
|
|
| 1,924,365 |
|
|
| 1,588,315 |
|
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
| ||||
Subscription |
| 85,066 |
|
|
| 71,895 |
|
|
| 247,408 |
|
|
| 210,011 |
|
Professional services and other |
| 14,258 |
|
|
| 13,745 |
|
|
| 42,520 |
|
|
| 40,910 |
|
Total cost of revenues |
| 99,324 |
|
|
| 85,640 |
|
|
| 289,928 |
|
|
| 250,921 |
|
Gross profit |
| 570,397 |
|
|
| 471,917 |
|
|
| 1,634,437 |
|
|
| 1,337,394 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
| ||||
Research and development |
| 191,185 |
|
|
| 156,871 |
|
|
| 565,001 |
|
|
| 454,511 |
|
Sales and marketing |
| 309,928 |
|
|
| 271,448 |
|
|
| 904,010 |
|
|
| 787,423 |
|
General and administrative |
| 77,928 |
|
|
| 61,308 |
|
|
| 219,380 |
|
|
| 179,939 |
|
Restructuring |
| 987 |
|
|
| 846 |
|
|
| 2,847 |
|
|
| 93,296 |
|
Total operating expenses |
| 580,028 |
|
|
| 490,473 |
|
|
| 1,691,238 |
|
|
| 1,515,169 |
|
Loss from operations |
| (9,631 | ) |
|
| (18,556 | ) |
|
| (56,801 | ) |
|
| (177,775 | ) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
| ||||
Interest income |
| 21,780 |
|
|
| 16,181 |
|
|
| 60,877 |
|
|
| 40,195 |
|
Interest expense |
| (936 | ) |
|
| (950 | ) |
|
| (2,772 | ) |
|
| (2,817 | ) |
Other (expense) income |
| (565 | ) |
|
| (1,664 | ) |
|
| 14,381 |
|
|
| (2,128 | ) |
Total other income |
| 20,279 |
|
|
| 13,567 |
|
|
| 72,486 |
|
|
| 35,250 |
|
Income (loss) before income tax expense |
| 10,648 |
|
|
| (4,989 | ) |
|
| 15,685 |
|
|
| (142,525 | ) |
Income tax (expense) benefit |
| (2,502 | ) |
|
| 1,412 |
|
|
| (16,040 | ) |
|
| (9,575 | ) |
Net income (loss) | $ | 8,146 |
|
| $ | (3,577 | ) |
| $ | (355 | ) |
| $ | (152,100 | ) |
Net income (loss) per share, basic | $ | 0.16 |
|
| $ | (0.07 | ) |
| $ | (0.01 | ) |
| $ | (3.06 | ) |
Net income (loss) per share, diluted | $ | 0.16 |
|
| $ | (0.07 | ) |
| $ | (0.01 | ) |
| $ | (3.06 | ) |
Weighted average common shares used in |
| 51,354 |
|
|
| 50,051 |
|
|
| 51,017 |
|
|
| 49,719 |
|
Weighted average common shares used in |
| 51,778 |
|
|
| 50,051 |
|
|
| 51,017 |
|
|
| 49,719 |
|
(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 $1.9 million for the three months ended September 30, 2023 and $5.9 million for the nine months ended September 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 nine months ended September 30, 2023 but note no net impact to cash flows provided by operating activities. Refer to our Form 10-Q for additional information.
Page | 5
Consolidated Statements of Cash Flows
(in thousands)
| For the Three Months Ended September 30, |
|
| For the Nine Months Ended September 30, |
| ||||||||||
| 2024 |
|
| 2023(1) |
|
| 2024 |
|
| 2023(1) |
| ||||
Operating Activities: |
|
|
|
|
|
|
|
|
|
|
| ||||
Net income (loss) | $ | 8,146 |
|
| $ | (3,577 | ) |
| $ | (355 | ) |
| $ | (152,100 | ) |
Adjustments to reconcile net loss to net cash and cash equivalents provided |
|
|
|
|
|
|
|
|
|
|
| ||||
Depreciation and amortization |
| 25,009 |
|
|
| 20,509 |
|
|
| 68,447 |
|
|
| 53,508 |
|
Stock-based compensation |
| 130,266 |
|
|
| 107,506 |
|
|
| 370,382 |
|
|
| 318,545 |
|
Restructuring charges | — |
|
| — |
|
| — |
|
|
| 64,938 |
| |||
Gain on strategic investments |
| (99 | ) |
| — |
|
|
| (18,555 | ) |
| — |
| ||
Impairment of strategic investments | — |
|
| — |
|
|
| 4,094 |
|
| — |
| |||
(Benefit from) provision for deferred income taxes |
| (399 | ) |
|
| 141 |
|
|
| (611 | ) |
|
| 4,943 |
|
Amortization of debt discount and issuance costs |
| 499 |
|
|
| 497 |
|
|
| 1,501 |
|
|
| 1,477 |
|
Accretion of bond discount |
| (13,614 | ) |
|
| (11,436 | ) |
|
| (36,694 | ) |
|
| (30,213 | ) |
Unrealized currency translation |
| (2,429 | ) |
|
| (1,259 | ) |
|
| (3,377 | ) |
|
| (1,380 | ) |
Changes in assets and liabilities |
|
|
|
|
|
|
|
|
|
|
| ||||
Accounts receivable |
| (4,561 | ) |
|
| (8,448 | ) |
|
| 13,861 |
|
|
| 13,178 |
|
Prepaid expenses and other assets |
| 18,622 |
|
|
| 11,423 |
|
|
| (8,606 | ) |
|
| (36,023 | ) |
Deferred commission expense |
| (21,341 | ) |
|
| (17,301 | ) |
|
| (61,425 | ) |
|
| (54,335 | ) |
Right-of-use assets |
| 6,077 |
|
|
| 2,272 |
|
|
| 26,461 |
|
|
| 23,244 |
|
Accounts payable |
| 1,667 |
|
|
| 12,649 |
|
|
| 1,449 |
|
|
| (5,165 | ) |
Accrued expenses and other liabilities |
| 24,273 |
|
|
| (12,250 | ) |
|
| 39,322 |
|
|
| 34,276 |
|
Operating lease liabilities |
| (9,402 | ) |
|
| (10,948 | ) |
|
| (32,555 | ) |
|
| (28,933 | ) |
Deferred revenue |
| (3,172 | ) |
|
| (732 | ) |
|
| 41,119 |
|
|
| 40,699 |
|
Net cash and cash equivalents provided by operating activities |
| 159,542 |
|
|
| 89,046 |
|
|
| 404,458 |
|
|
| 246,659 |
|
Investing Activities: |
|
|
|
|
|
|
|
|
|
|
| ||||
Purchases of investments |
| (834,621 | ) |
|
| (405,920 | ) |
|
| (1,486,338 | ) |
|
| (1,137,283 | ) |
Maturities of investments |
| 305,960 |
|
|
| 424,950 |
|
|
| 1,155,555 |
|
|
| 1,154,784 |
|
Sale of investments |
| 1,997 |
|
| — |
|
|
| 1,997 |
|
| — |
| ||
Purchases of property and equipment |
| (11,131 | ) |
|
| (10,842 | ) |
|
| (25,213 | ) |
|
| (25,031 | ) |
Equity method investment |
| (3,943 | ) |
|
| (2,250 | ) |
|
| (3,943 | ) |
|
| (2,250 | ) |
Purchases of strategic investments |
| (3,996 | ) |
|
| (3,250 | ) |
|
| (7,623 | ) |
|
| (9,250 | ) |
Capitalization of software development costs |
| (23,646 | ) |
|
| (17,693 | ) |
|
| (66,721 | ) |
|
| (49,288 | ) |
Proceeds from net working capital settlement | — |
|
| — |
|
|
| 1,933 |
|
| — |
| |||
Net cash and cash equivalents used in investing activities |
| (569,380 | ) |
|
| (15,005 | ) |
|
| (430,353 | ) |
|
| (68,318 | ) |
Financing Activities: |
|
|
|
|
|
|
|
|
|
|
| ||||
Employee taxes paid related to the net share settlement of stock-based awards |
| (4,293 | ) |
|
| (3,469 | ) |
|
| (17,777 | ) |
|
| (7,571 | ) |
Proceeds related to the issuance of common stock under stock plans |
| 15,967 |
|
|
| 13,384 |
|
|
| 61,211 |
|
|
| 37,934 |
|
Net cash and cash equivalents provided by financing activities |
| 11,674 |
|
|
| 9,915 |
|
|
| 43,434 |
|
|
| 30,363 |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
| 10,349 |
|
|
| (5,629 | ) |
|
| 4,534 |
|
|
| (4,181 | ) |
Net increase in cash, cash equivalents and restricted cash |
| (387,815 | ) |
|
| 78,327 |
|
|
| 22,073 |
|
|
| 204,523 |
|
Cash, cash equivalents and restricted cash, beginning of period |
| 801,928 |
|
|
| 460,371 |
|
|
| 392,040 |
|
|
| 334,175 |
|
Cash, cash equivalents and restricted cash, end of period | $ | 414,113 |
|
| $ | 538,698 |
|
| $ | 414,113 |
|
| $ | 538,698 |
|
(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 $1.9 million for the three months ended September 30, 2023 and $5.9 million for the nine months ended September 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 nine months ended September 30, 2023 but note no net impact to cash flows provided by operating activities. Refer to our Form 10-Q for additional information.
Page | 6
Reconciliation of non-GAAP operating income and operating margin
(in thousands, except percentages)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, |
| ||||||||||
| 2024 |
| 2023 |
|
| 2024 |
| 2023 |
| ||||
GAAP operating loss | $ | (9,631 | ) | $ | (18,556 | ) |
| $ | (56,801 | ) | $ | (177,775 | ) |
Stock-based compensation |
| 130,266 |
|
| 107,506 |
|
|
| 370,382 |
|
| 318,545 |
|
Amortization of acquired intangible assets |
| 2,344 |
|
| 2,311 |
|
|
| 7,029 |
|
| 4,007 |
|
Acquisition related expense |
| 1,243 |
|
| — |
|
|
| 3,634 |
|
| — |
|
Restructuring charges |
| 987 |
|
| 846 |
|
|
| 2,847 |
|
| 93,296 |
|
Non-GAAP operating income | $ | 125,209 |
| $ | 92,107 |
|
| $ | 327,091 |
| $ | 238,073 |
|
|
|
|
|
|
|
|
|
|
| ||||
GAAP operating margin |
| (1.4 | %) |
| (3.3 | %) |
|
| (3.0 | %) |
| (11.2 | %) |
Non-GAAP operating margin |
| 18.7 | % |
| 16.5 | % |
|
| 17.0 | % |
| 15.0 | % |
Reconciliation of non-GAAP net income
(in thousands, except per share amounts)
| For the Three Months Ended September 30, |
|
| For the Nine Months Ended September 30, |
| ||||||||
| 2024 |
| 2023 |
|
| 2024 |
| 2023 |
| ||||
GAAP net income (loss) | $ | 8,146 |
| $ | (3,577 | ) |
| $ | (355 | ) | $ | (152,100 | ) |
Stock-based compensation |
| 130,266 |
|
| 107,506 |
|
|
| 370,382 |
|
| 318,545 |
|
Acquisition related expense |
| 1,243 |
| — |
|
|
| 3,634 |
| — |
| ||
Amortization of acquired intangibles assets |
| 2,344 |
|
| 2,311 |
|
|
| 7,029 |
|
| 4,007 |
|
Restructuring charges |
| 987 |
|
| 846 |
|
|
| 2,847 |
|
| 93,296 |
|
Non-cash interest expense for amortization of debt issuance costs |
| 499 |
|
| 497 |
|
|
| 1,501 |
|
| 1,477 |
|
Gain on strategic investments |
| (99 | ) | — |
|
|
| (14,461 | ) | — |
| ||
Gain on equity method investment |
| (140 | ) |
| (30 | ) |
|
| (86 | ) |
| (96 | ) |
Income tax effects of non-GAAP items |
| (26,648 | ) |
| (22,640 | ) |
|
| (61,266 | ) |
| (45,366 | ) |
Non-GAAP net income | $ | 116,598 |
| $ | 84,913 |
|
| $ | 309,225 |
| $ | 219,763 |
|
|
|
|
|
|
|
|
|
|
| ||||
Non-GAAP net income per share: |
|
|
|
|
|
|
|
|
| ||||
Basic | $ | 2.27 |
| $ | 1.70 |
|
| $ | 6.06 |
| $ | 4.42 |
|
Diluted | $ | 2.18 |
| $ | 1.62 |
|
| $ | 5.80 |
| $ | 4.22 |
|
Shares used in non-GAAP per share calculations |
|
|
|
|
|
|
|
|
| ||||
Basic |
| 51,354 |
|
| 50,051 |
|
|
| 51,017 |
|
| 49,719 |
|
Diluted (1) |
| 53,402 |
|
| 52,521 |
|
|
| 53,300 |
|
| 52,039 |
|
(1) The non-GAAP diluted share count includes shares related to our 2025 notes using the if converted method. The GAAP diluted share count excludes shares related to our 2025 notes using the if converted method because inclusion of those shares would be anti-dilutive.
Page | 7
Reconciliation of non-GAAP expense and expense as a percentage of revenue
(in thousands, except percentages)
| For the Three Months Ended September 30, |
| |||||||||||||||||||||||||||||
| 2024 |
|
| 2023 |
| ||||||||||||||||||||||||||
| COS, Subs- |
| COS, Prof. services & other |
| R&D |
| S&M |
| G&A |
|
| COS, Subs- |
| COS, Prof. services & other |
| R&D |
| S&M |
| G&A |
| ||||||||||
GAAP expense | $ | 85,066 |
| $ | 14,258 |
| $ | 191,185 |
| $ | 309,928 |
| $ | 77,928 |
|
| $ | 71,895 |
| $ | 13,745 |
| $ | 156,871 |
| $ | 271,448 |
| $ | 61,308 |
|
Stock -based compensation |
| (6,408 | ) |
| (1,113 | ) |
| (62,595 | ) |
| (36,218 | ) |
| (23,932 | ) |
|
| (3,157 | ) |
| (1,201 | ) |
| (49,460 | ) |
| (34,439 | ) |
| (19,249 | ) |
Amortization of acquired |
| (1,882 | ) |
| — |
|
| — |
|
| (357 | ) |
| (105 | ) |
|
| (408 | ) |
| — |
|
| — |
|
| (1,903 | ) |
| — |
|
Acquisition related expense |
| — |
|
| — |
|
| (764 | ) |
| — |
|
| (479 | ) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Non-GAAP expense | $ | 76,776 |
| $ | 13,145 |
| $ | 127,826 |
| $ | 273,353 |
| $ | 53,412 |
|
| $ | 68,330 |
| $ | 12,544 |
| $ | 107,411 |
| $ | 235,106 |
| $ | 42,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
GAAP expense as a |
| 12.7 | % |
| 2.1 | % |
| 28.5 | % |
| 46.3 | % |
| 11.6 | % |
|
| 12.9 | % |
| 2.5 | % |
| 28.1 | % |
| 48.7 | % |
| 11.0 | % |
Non-GAAP expense as a |
| 11.5 | % |
| 2.0 | % |
| 19.1 | % |
| 40.8 | % |
| 8.0 | % |
|
| 12.3 | % |
| 2.2 | % |
| 19.3 | % |
| 42.2 | % |
| 7.5 | % |
| For the Nine Months Ended September 30, |
| |||||||||||||||||||||||||||||
| 2024 |
|
| 2023 |
| ||||||||||||||||||||||||||
| COS, Subs- |
| COS, Prof. services & other |
| R&D |
| S&M |
| G&A |
|
| COS, Subs- |
| COS, Prof. services & other |
| R&D |
| S&M |
| G&A |
| ||||||||||
GAAP expense | $ | 247,408 |
| $ | 42,520 |
| $ | 565,001 |
| $ | 904,010 |
| $ | 219,380 |
|
| $ | 210,011 |
| $ | 40,910 |
| $ | 454,511 |
| $ | 787,423 |
| $ | 179,939 |
|
Stock -based compensation |
| (16,811 | ) |
| (3,328 | ) |
| (177,914 | ) |
| (107,543 | ) |
| (64,786 | ) |
|
| (9,110 | ) |
| (3,748 | ) |
| (146,845 | ) |
| (103,233 | ) |
| (55,609 | ) |
Amortization of acquired |
| (5,643 | ) |
| — |
|
| — |
|
| (1,071 | ) |
| (315 | ) |
|
| (1,212 | ) |
| — |
|
| — |
|
| (2,795 | ) |
| — |
|
Acquisition related expense |
| — |
|
| — |
|
| (2,520 | ) |
| — |
|
| (1,114 | ) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Non-GAAP expense | $ | 224,954 |
| $ | 39,192 |
| $ | 384,567 |
| $ | 795,396 |
| $ | 153,165 |
|
| $ | 199,689 |
| $ | 37,162 |
| $ | 307,666 |
| $ | 681,395 |
| $ | 124,330 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
GAAP expense as a |
| 12.9 | % |
| 2.2 | % |
| 29.4 | % |
| 47.0 | % |
| 11.4 | % |
|
| 13.2 | % |
| 2.6 | % |
| 28.6 | % |
| 49.6 | % |
| 11.3 | % |
Non-GAAP expense as a |
| 11.7 | % |
| 2.0 | % |
| 20.0 | % |
| 41.3 | % |
| 8.0 | % |
|
| 12.6 | % |
| 2.3 | % |
| 19.4 | % |
| 42.9 | % |
| 7.8 | % |
Page | 8
Reconciliation of non-GAAP subscription margin
(in thousands, except percentages)
|
| For the Three Months Ended September 30, |
|
| For the Nine Months Ended September 30, |
| ||||||||
|
| 2024 |
| 2023 |
|
| 2024 |
| 2023 |
| ||||
GAAP subscription margin |
| $ | 569,672 |
| $ | 473,937 |
|
| $ | 1,634,833 |
| $ | 1,343,242 |
|
Stock-based compensation |
|
| 6,408 |
|
| 3,157 |
|
|
| 16,811 |
|
| 9,110 |
|
Amortization of acquired intangible assets |
|
| 1,882 |
|
| 408 |
|
|
| 5,643 |
|
| 1,212 |
|
Non-GAAP subscription margin |
| $ | 577,962 |
| $ | 477,502 |
|
| $ | 1,657,287 |
| $ | 1,353,564 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
GAAP subscription margin percentage |
|
| 87.0 | % |
| 86.8 | % |
|
| 86.9 | % |
| 86.5 | % |
Non-GAAP subscription margin percentage |
|
| 88.3 | % |
| 87.5 | % |
|
| 88.0 | % |
| 87.1 | % |
Reconciliation of free cash flow |
|
|
|
|
|
|
|
|
| |||||
(in thousands) |
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
| For the Three Months Ended September 30, |
|
| For the Nine Months Ended September 30, |
| ||||||||
|
| 2024 |
| 2023 |
|
| 2024 |
| 2023 |
| ||||
GAAP net cash and cash equivalents provided by operating activities |
| $ | 159,542 |
| $ | 89,046 |
|
| $ | 404,458 |
| $ | 246,659 |
|
Purchases of property and equipment |
|
| (11,131 | ) |
| (10,842 | ) |
|
| (25,213 | ) |
| (25,031 | ) |
Capitalization of software development costs |
|
| (23,646 | ) |
| (17,693 | ) |
|
| (66,721 | ) |
| (49,288 | ) |
Payment of restructuring charges |
|
| 4,466 |
|
| 4,225 |
|
|
| 12,537 |
|
| 37,164 |
|
Non-GAAP free cash flow |
| $ | 129,231 |
| $ | 64,736 |
|
| $ | 325,061 |
| $ | 209,504 |
|
Reconciliation of operating cash flow
(in thousands)
|
| For the Three Months Ended September 30, |
|
| For the Nine Months Ended September 30, |
| ||||||||
|
| 2024 |
| 2023 |
|
| 2024 |
| 2023 |
| ||||
GAAP net cash and cash equivalents provided by operating activities |
| $ | 159,542 |
| $ | 89,046 |
|
| $ | 404,458 |
| $ | 246,659 |
|
Payment of restructuring charges |
|
| 4,466 |
|
| 4,225 |
|
|
| 12,537 |
|
| 37,164 |
|
Non-GAAP operating cash flow |
| $ | 164,008 |
| $ | 93,271 |
|
| $ | 416,995 |
| $ | 283,823 |
|
Reconciliation of forecasted non-GAAP operating income |
|
|
|
|
| ||
| Three Months Ended |
|
| Year Ended |
| ||
GAAP operating income range | ($13,347)-($12,497) |
|
| ($73,090)-($72,240) |
| ||
Stock-based compensation |
| 134,538 |
|
|
| 507,747 |
|
Amortization of acquired intangible assets |
| 2,350 |
|
|
| 9,403 |
|
Acquisition related expense |
| 3,659 |
|
|
| 7,293 |
|
Restructuring charges | 800-950 |
|
| 3,647-3,797 |
| ||
Non-GAAP operating income range | $128,000-$129,000 |
|
| $455,000-$456,000 |
| ||
Page | 9
Reconciliation of forecasted non-GAAP net income and non-GAAP net income per share |
| ||||||
|
|
|
|
|
| ||
| Three Months Ended |
|
| Year Ended |
| ||
GAAP net loss range | ($519)-$582 |
|
| ($3,635)-($2,535) |
| ||
Stock-based compensation |
| 134,538 |
|
|
| 507,747 |
|
Amortization of acquired intangible assets |
| 2,350 |
|
|
| 9,403 |
|
Acquisition related expense |
| 3,659 |
|
|
| 7,293 |
|
Non-cash interest expense for amortization of debt issuance costs |
| 514 |
|
|
| 2,019 |
|
Gain on strategic investments |
| — |
|
|
| (14,461 | ) |
Loss on equity method investment |
| — |
|
|
| (86 | ) |
Restructuring charges | 800-950 |
|
| 3,647-3,797 |
| ||
Income tax effects of non-GAAP items | (24,142)-(24,392) |
|
| (85,427)-(85,677) |
| ||
Non-GAAP net income range | $117,200-$118,201 |
|
| $426,500-$427,500 |
| ||
|
|
|
|
|
| ||
GAAP net income per basic and diluted share | ($0.01)-$0.01 |
|
| ($0.07)-($0.05) |
| ||
Non-GAAP net income per diluted share | $2.18-$2.20 |
|
| $7.98-$8.00 |
| ||
|
|
|
|
|
| ||
|
|
|
|
|
| ||
Weighted average common shares used in computing GAAP basic and diluted net loss per share: |
| 51,669 |
|
|
| 51,181 |
|
Weighted average common shares used in computing non-GAAP diluted net loss per share: |
| 53,762 |
|
|
| 53,425 |
|
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,
Page | 10
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
Page | 11
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 $12-14 million and will be paid in cash over the remaining lease term. We also expect to make cash payments of approximately $47.0 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.
Investor Relations Contact:
investors@hubspot.com
Media Contact:
media@hubspot.com
Page | 12