News & Press Releases

HubSpot Reports Q1 2024 Results

Published on May 8, 2024

HubSpot, Inc. (NYSE: HUBS), the customer platform for scaling companies, today announced financial results for the first quarter ended March 31, 2024.

Financial Highlights:

• Total revenue was $617.4 million, up 23% compared to Q1'23.
• Subscription revenue was $603.8 million, up 23% compared to Q1'23.
• Professional services and other revenue was $13.6 million, up 15% compared to Q1'23.
  
  

Operating Income (Loss)

• GAAP operating margin was (3.8%), compared to (8.6%) in Q1'23.
• Non-GAAP operating margin was 15.0%, compared to 13.8% in Q1'23.
• GAAP operating loss was ($23.2) million, compared to ($43.1) million in Q1'23.
• Non-GAAP operating income was $92.6 million, compared to $69.4 million in Q1'23.
  
  

Net Income (Loss)

• GAAP net income was $5.9 million, or $0.12 per basic and diluted share, compared to net loss of ($36.6) million, or ($0.74) per basic and diluted share in Q1'23.
• Non-GAAP net income was $89.1 million, or $1.76 per basic and $1.68 per diluted share, compared to $63.0 million, or $1.28 per basic and $1.22 per diluted share in Q1'23.
• Weighted average basic and diluted shares outstanding for GAAP net loss per share was 50.7 million, compared to 49.4 million basic and diluted shares in Q1'23.
• Weighted average basic and diluted shares outstanding for non-GAAP net income per share was 50.7 million and 53.1 million respectively, compared to 49.4 million and 51.5 million, respectively in Q1'23.
  
  

Balance Sheet and Cash Flow

• The company’s cash, cash equivalents, and short-term and long-term investments balance was $1.8 billion as of March 31, 2024.
• During the first quarter, the company generated $127.1 million of cash from operating cash flow, compared to $81.1 million during Q1'23.
• During the first quarter, the company generated $131.3 million of cash from non-GAAP operating cash flow and $103.8 million of non-GAAP free cash flow, compared to $103.6 million of cash from non-GAAP operating cash flow and $85.2 million of non-GAAP free cash flow during Q1'23.

Additional Recent Business Highlights

• Grew Customers to 216,840 at March 31, 2024, up 22% from March 31, 2023.
• Average Subscription Revenue Per Customer was $11,447 during the first quarter of 2024, up 1% compared to the first quarter of 2023.

“We kicked off the year with solid revenue growth and another good quarter of operating margin expansion. Customers across all segments are consolidating on HubSpot because it is easy to use, easy to scale and delivers fast time to value” said Yamini Rangan, Chief Executive Officer at HubSpot. “While the macro environment remains challenging, the pace of innovation has accelerated in our industry with AI. We are setting that pace for scaling companies and are becoming the de facto standard which gives me confidence in our ability to drive long-term durable growth.”

Business Outlook
Based on information available as of May 8, 2024, HubSpot is issuing guidance for the second quarter of 2024 and full year 2024 as indicated below.

Second Quarter 2024:

• Total revenue is expected to be in the range of $617.0 million to $619.0 million.
  • Foreign exchange rates are expected to be a 1 point headwind to second quarter 2024 revenue growth(1).
• Non-GAAP operating income is expected to be in the range of $92.0 million to $93.0 million.
• Non-GAAP net income per common share is expected to be in the range of $1.62 to $1.64. This assumes approximately 53.3 million weighted average diluted shares outstanding.

• Total revenue is expected to be in the range of $2.55 billion to $2.56 billion.
• Foreign exchange rates are expected to be a 1 point headwind to full year 2024 revenue growth(1).
• Non-GAAP operating income is expected to be in the range of $426.0 million to $430.0 million.
• Non-GAAP net income per common share is expected to be in the range of $7.30 to $7.38. This assumes approximately 53.5 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, May 8, 2024 at 4:30 p.m. Eastern Time (ET) to discuss the company’s first 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 545107. An archived webcast of this conference call will also be available on HubSpot's Investor Relations website at ir.hubspot.com.

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 second 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

(1) In connection with the quarter close, 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 for the period ending March 31, 2023 by reducing Cost of Revenues- Subscription by $1.7 million 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 period ending March 31, 2023 but note no net impact to cash flows provided by operating activities. In conjunction with the revisions, we plan to also correct for certain other previously identified immaterial errors. All amounts are preliminary. We plan to revise our financial statements to correct this matter in our Form 10-Q for the three months ended March 31, 2024 (“Form 10-Q”), which we expect to file on May 10, 2024. Refer to our Form 10-Q for additional information.

Consolidated Statements of Operations

(1) In connection with the quarter close, 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 for the period ending March 31, 2023 by reducing Cost of Revenues- Subscription by $1.7 million 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 period ending March 31, 2023 but note no net impact to cash flows provided by operating activities. In conjunction with the revisions, we plan to also correct for certain other previously identified immaterial errors. All amounts are preliminary. We plan to revise our financial statements to correct this matter in our Form 10-Q for the three months ended March 31, 2024 (“Form 10-Q”), which we expect to file on May 10, 2024. Refer to our Form 10-Q for additional information.

Consolidated Statements of Cash Flows

(1) In connection with the quarter close, 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 for the period ending March 31, 2023 by reducing Cost of Revenues- Subscription by $1.7 million 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 period ending March 31, 2023 but note no net impact to cash flows provided by operating activities. In conjunction with the revisions, we plan to also correct for certain other previously identified immaterial errors. All amounts are preliminary. We plan to revise our financial statements to correct this matter in our Form 10-Q for the three months ended March 31, 2024 (“Form 10-Q”), which we expect to file on May 10, 2024. Refer to our Form 10-Q for additional information.

Reconciliation of non-GAAP operating income and operating margin

Reconciliation of non-GAAP net income

(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.

Reconciliation of non-GAAP expense and expense as a percentage of revenue

Reconciliation of non-GAAP subscription margin

Reconciliation of operating cash flow

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.

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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 next three years (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 $14-17 million and will be paid in cash over the next three years. We also expect to make cash payments of approximately $54.0 million in fixed rent payments for the abandoned facilities that will be made in monthly installments over the next three years 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.
8. 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