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HubSpot Reports Q2 2016 Results

August 3, 2016

Strong Revenue Growth with Improved Margins and Positive Cash Flow
Full-Year 2016 Guidance Raised

CAMBRIDGE, Mass., Aug. 3, 2016 /PRNewswire/ -- HubSpot, Inc. (NYSE: HUBS), a leading inbound marketing and sales software company, today announced financial results for the second quarter ended June 30th, 2016.

HubSpot, Inc. logo - www.hubspot.com

Financial Highlights:

Revenue

  • Total revenue was $65.0 million, up 51% compared to the second quarter of 2015.
  • Subscription revenue was $60.9 million, up 55% compared to the second quarter of 2015.
  • Professional services and other revenue was $4.1 million, up 11% compared to the second quarter of 2015.

Operating Loss

  • GAAP operating margin was (17.0%) for the quarter, compared to (26.4%) in the second quarter of 2015. 
  • Non-GAAP operating margin was (3.9%) for the quarter, an improvement of approximately 9 percentage points from (13.2%) in the second quarter of 2015.
  • GAAP operating loss was ($11.0) million for the quarter, compared to ($11.3) million in the second quarter of 2015.
  • Non-GAAP operating loss was ($2.5) million for the quarter, compared to ($5.7) million in the second quarter of 2015.

Net Loss

  • GAAP net loss was ($11.1) million, or ($0.32) per share for the quarter, compared to ($11.4) million, or ($0.34) per share, in the second quarter of 2015.
  • Non-GAAP net loss was ($2.6) million, or ($0.07) per share for the quarter, compared to ($5.7) million, or ($0.17) per share, in the second quarter of 2015. 
  • Second quarter weighted average common shares outstanding were 35.0 million compared to 33.2 million shares in the second quarter of 2015.

Balance Sheet and Cash Flow

  • The company's cash, cash equivalents and investments balance was $148 million as of June 30, 2016.
  • During the second quarter of 2016, the company generated $8.6 million of operating cash flow and invested $5.7 million in purchases of property and equipment and capitalization of internally developed software, resulting in free cash flow of $2.9 million.  During the second quarter of 2015, the company generated $1.6 million of operating cash flow and invested $1.2 million in purchases of property and equipment and capitalization of internally developed software, resulting in free cash flow of $400 thousand.

Additional Recent Business Highlights

  • Grew total customers to 20,444 at June 30th, 2016, up 29% from June 30th, 2015.
  • Increased average subscription revenue per customer during the second quarter of 2016 to $11,978 from $10,127 in the second quarter of 2015.

"The second quarter was another strong set of results for HubSpot," said Brian Halligan, co-founder and CEO. "We were able to deliver solid revenue growth, while showing significant operating leverage that allowed us to generate both positive operating and free cash flow in the quarter. As we continue to build on our product offerings across sales and marketing, we're really excited to help usher in a new era of doing business that matches the way modern humans buy."

Business Outlook

Based on information available as of August 3, 2016, HubSpot is issuing guidance for the third quarter of 2016 and raising guidance for full year 2016 as indicated below.

Third Quarter 2016:

  • Total revenue is expected to be in the range of $67.2 million to $68.2 million.
  • Non-GAAP operating loss is expected to in the range of ($5.2) million to ($4.2) million.  This excludes stock-based compensation expense of approximately $9.0 million and amortization of acquired intangible assets of approximately $20 thousand.
  • Non-GAAP net loss per common share is expected to be in the range of ($0.14) to ($0.12).  This excludes stock-based compensation expense of approximately $9.0 million and amortization of acquired intangible assets of approximately $20 thousand.  This assumes approximately 35.4 million weighted common shares outstanding.

Full Year 2016:

  • Total revenue is expected to be in the range of $263 million to $265 million.
  • Non-GAAP operating loss is expected to in be in the range of ($20) million to ($18) million.  This excludes stock-based compensation expense of approximately $33.2 million and amortization of acquired intangible assets of approximately $84 thousand.
  • Non-GAAP net loss per common share is expected to be in the range of ($0.55) to ($0.51).  This excludes stock-based compensation expense of approximately $33.2 million and amortization of acquired intangible assets of approximately $84 thousand.  This assumes approximately 35.2 million weighted common shares outstanding.

Conference Call Information

HubSpot will host a conference call on Wednesday, August 3, 2016, at 5:00 p.m. Eastern Time (ET) to discuss its second quarter 2016 financial results and business outlook.  To access this call, dial (877) 201-0168 (domestic) or (647) 788-4901 (international).  The conference ID is 43638681. Additionally, a live webcast of the conference call will be available in the "Investor" section of the HubSpot's web site at www.hubspot.com.

Following the conference call, a replay will be available until 11 pm on August 10, 2016 at (855) 859-2056 (domestic) or (404) 537-3406 (international). The replay pass code is 43638681. An archived webcast of this conference call will also be available in the "Investor" section of HubSpot's web site at www.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 a leading inbound marketing and sales platform. Over 20,000 customers in over 90 countries use HubSpot's award-winning software, services, and support to create an inbound experience that will attract, engage, and delight customers. Learn more at www.hubspot.com .

The tables at the end of this press release include a reconciliation of generally accepted accounting principles ("GAAP") to non-GAAP operating loss, operating margin, subscription margin, expense, expense as a percentage of revenue, and net loss for the second quarter ended June 30, 2016 and 2015. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

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 concerning our financial guidance for the third fiscal quarter of 2016 and full year 2016, our position to execute on our growth strategy in the mid-market, and our ability to expand our leadership position and market opportunity for our inbound platform.  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, our history of losses, our ability to retain existing customers and add new customers, the continued growth of the market for an inbound platform; our ability to differentiate our platform from competing products and technologies; our ability to manage our growth effectively to maintain our high level of service; our ability to maintain and expand relationships with our marketing agency partners; our ability to successfully recruit and retain highly-qualified personnel; the price volatility of our common stock, and other risks set forth under the caption "Risk Factors" in our Quarterly Report on Form 10-Q filed on May 4, 2016 and our other 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,




2016



2015


Assets









Current assets:









Cash and cash equivalents


$

58,661



$

55,580


Short-term investments



58,831




48,972


Accounts receivable — net of allowance for doubtful accounts of $306 and $371 
at June 30, 2016 and December 31, 2015, respectively



25,643




25,142


Deferred commission expense



8,128




8,114


Prepaid hosting costs



1,224




3,047


Prepaid expenses and other current assets



9,206




4,899


Total current assets



161,693




145,754


Long-term investments



30,507




40,566


Property and equipment, net



28,034




18,161


Capitalized software development costs, net



4,990




4,655


Restricted cash



370




363


Other assets



1,111




1,007


Intangible assets, net



56




100


Goodwill



9,773




9,773


Total assets


$

236,534



$

220,379


Liabilities and stockholders' equity









Current liabilities:









Accounts payable


$

2,707



$

2,588


Accrued compensation costs



11,442




11,371


Other accrued expenses



15,406




12,313


Capital lease obligations



714




542


Deferred rent



194




86


Deferred revenue



76,507




64,407


Total current liabilities



106,970




91,307


Capital lease obligations, net of current portion



259




277


Deferred rent, net of current portion



8,164




6,345


Deferred revenue, net of current portion



675




732


Other long-term liabilities



14




10


Total liabilities



116,082




98,671


Commitments and contingencies









Stockholders' equity:









Common stock



35




34


Additional paid-in capital



342,435




322,833


Accumulated other comprehensive loss



(446)




(805)


Accumulated deficit



(221,572)




(200,354)


Total stockholders' equity



120,452




121,708


Total liabilities and stockholders' equity


$

236,534



$

220,379


 

 

Consolidated Statements of Operations

(in thousands, except per share data)










For the Three Months Ended June 30,



For the Six Months Ended June 30,




2016



2015



2016



2015


Revenues:

















Subscription


$

60,916



$

39,273



$

115,852



$

74,212


Professional services and other



4,058




3,668




8,082




6,895


Total revenue



64,974




42,941




123,934




81,107


Cost of Revenues:

















Subscription



9,985




7,484




18,895




14,424


Professional services and other



5,210




3,789




10,271




7,314


Total cost of revenues



15,195




11,273




29,166




21,738


Gross profit



49,779




31,668




94,768




59,369


Operating expenses:

















Research and development



11,278




8,158




21,082




15,658


Sales and marketing



39,140




26,291




74,338




50,188


General and administrative



10,391




8,541




20,239




16,255


Total operating expenses



60,809




42,990




115,659




82,101


Loss from operations



(11,030)




(11,322)




(20,891)




(22,732)


Other (expense) income:

















Interest income



201




101




380




108


Interest expense



(93)




(79)




(180)




(109)


Other (expense) income



(202)




(55)




(535)




572


Total other (expense) income



(94)




(33)




(335)




571


Loss before income tax benefit (provision)



(11,124)




(11,355)




(21,226)




(22,161)


Income tax benefit (provision)



60




(37)




8




(89)


Net loss


$

(11,064)



$

(11,392)



$

(21,218)



$

(22,250)


Net loss per share, basic and diluted


$

(0.32)



$

(0.34)



$

(0.61)



$

(0.69)


Weighted average common shares used in computing basic
and diluted net loss per share:



35,023




33,208




34,858




32,432


 

 

Consolidated Statements of Cash Flows

(in thousands)










Three Months Ended

June 30,



Six Months Ended

June 30,




2016



2015



2016



2015


Operating Activities:

















Net loss


$

(11,064)



$

(11,392)



$

(21,218)



$

(22,250)


Adjustments to reconcile net loss to net cash and cash
equivalents provided by operating activities

















Depreciation and amortization



3,022




1,818




5,223




3,565


Stock-based compensation



8,474




5,642




14,705




10,783


Provision for deferred income taxes



(168)







(165)




26


Amortization of bond premium discount



190




190




411




192


Noncash rent expense



837




24




1,949




192


Unrealized currency translation



188




159




(63)




(289)


Changes in assets and liabilities

















Accounts receivable



(732)




(667)




(385)




(2,118)


Prepaid expenses and other assets



(221)




(2,201)




(2,624)




(3,352)


Deferred commission expense



296




(18)




(3)




(14)


Accounts payable



1,106




800




302




(310)


Accrued expenses



3,091




3,890




1,937




4,542


Deferred rent



(11)




265




(34)




265


Deferred revenue



3,634




3,068




11,786




9,531


Net cash and cash equivalents provided by operating activities



8,642




1,578




11,821




763


Investing Activities:

















Purchases of investments



(12,142)




(52,499)




(21,111)




(78,283)


Maturity of investment



12,468







21,343





Purchases of property and equipment



(4,628)




(158)




(11,269)




(1,183)


Capitalization of software development costs



(1,078)




(1,022)




(2,512)




(1,792)


Acquisition of a business












(600)


Net cash and cash equivalents used in investing activities



(5,380)




(53,679)




(13,549)




(81,858)


Financing Activities:

















Secondary offering proceeds, net of offering costs paid of $573












33,679


Payment of offering costs






(435)








Employee taxes paid related to the net share settlement of stock-based awards



(384)




(7,852)




(1,342)




(7,852)


Proceeds related to issuance of common stock under stock plans



3,176




5,223




6,168




6,189


Repayments of capital lease obligations



(177)




(25)




(319)




(49)


Net cash and cash equivalents provided by (used in) financing activities



2,615




(3,089)




4,507




31,967


Effect of exchange rate changes on cash



(235)




50




302




(358)


Net increase (decrease) in cash and cash equivalents



5,642




(55,140)




3,081




(49,486)


Cash and cash equivalents, beginning of period



53,019




129,375




55,580




123,721


Cash and cash equivalents, end of period


$

58,661



$

74,235



$

58,661



$

74,235


 

 

Reconciliation of non-GAAP operating loss and operating
margin


Three Months Ended
June 30,



Six Months Ended June
30,




2016


2015



2016


2015


(in thousands, except percentages)






























GAAP operating loss


$

(11,030)


$

(11,322)



$

(20,891)


$

(22,732)


Stock-based compensation



8,475



5,642




14,705



10,783


Amortization of acquired intangible assets



20



26




44



44


Non-GAAP operating loss


$

(2,535)


$

(5,654)



$

(6,142)


$

(11,905)

















GAAP operating margin



(17.0%)



(26.4%)




(16.9%)



(28.0%)


Non-GAAP operating margin



(3.9%)



(13.2%)




(5.0%)



(14.7%)























Reconciliation of non-GAAP net loss


Three Months Ended
June 30,



Six Months Ended June
30,




2016


2015



2016


2015


(in thousands, except per share amounts)






























GAAP net loss


$

(11,064)


$

(11,392)



$

(21,218)


$

(22,250)


Stock-based compensation



8,475



5,642




14,705



10,783


Amortization of acquired intangibles



20



26




44



44


Non-GAAP net loss


$

(2,569)


$

(5,724)



$

(6,469)


$

(11,423)

















Non-GAAP net loss per share, basic and diluted

$

(0.07)


$

(0.17)



$

(0.19)


$

(0.35)


Weighted average common shares used in computing basic and diluted GAAP and non-GAAP net loss per common share:


35,023



33,208




34,858



32,432


 

 

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











(in thousands, except percentages)





























Three Months Ended June 30,



2016



2015



COS,
Subscription


COS,
Prof.
services
&
other


R&D


S&M


G&A



COS,
Subscription


COS,
Prof.
services
& other


R&D


S&M


G&A


GAAP expense

$

9,985


$

5,210


$

11,278


$

39,140


$

10,391



$

7,484


$

3,789


$

8,158


$

26,291


$

8,541


Stock -based compensation


(131)



(477)



(2,272)



(3,469)



(2,126)




(92)



(347)



(1,629)



(2,077)



(1,497)


Amortization of acquired intangibles


(13)


$


$



(7)


$




(19)


$


$



(7)


$


Non-GAAP expense

$

9,841


$

4,733


$

9,006


$

35,664


$

8,265



$

7,373


$

3,442


$

6,529


$

24,207


$

7,044


































GAAP expense as a percentage of revenue


15.4

%


8.0

%


17.4

%


60.2

%


16.0

%



17.4

%


8.8

%


19.0

%


61.2

%


19.9

%

Non-GAAP expense as a percentage of revenue


15.1

%


7.3

%


13.9

%


54.9

%


12.7

%



17.2

%


8.0

%


15.2

%


56.4

%


16.4

%


































































































Six Months Ended June 30,



2016



2015



COS, Subscription


COS,
Prof. services &
other


R&D


S&M


G&A



COS, Subscription


COS, Prof. services & other


R&D


S&M


G&A


GAAP expense

$

18,895


$

10,271


$

21,082


$

74,338


$

20,239



$

14,424


$

7,314


$

15,658


$

50,188


$

16,255


Stock -based compensation


(224)



(800)



(4,030)



(5,895)



(3,756)




(159)



(604)



(3,262)



(4,132)



(2,626)


Amortization of acquired intangibles


(31)


$


$



(13)


$




(30)


$


$



(14)


$


Non-GAAP expense

$

18,640


$

9,471


$

17,052


$

68,430


$

16,483


 `

$

14,235


$

6,710


$

12,396


$

46,042


$

13,629


































GAAP expense as a percentage of revenue


15.2

%


8.3

%


17.0

%


60.0

%


16.3

%



17.8

%


9.0

%


19.3

%


61.9

%


20.0

%

Non-GAAP expense as a percentage of revenue


15.0

%


7.6

%


13.8

%


55.2

%


13.3

%



17.6

%


8.3

%


15.3

%


56.8

%


16.8

%

 

 

Reconciliation of non-GAAP subscription margin

(in thousands, except percentages)










Three Months Ended June 30,



Six Months Ended June 30,




2016


2015



2016


2015

















GAAP subscription margin


$

50,931



$             31,789



$

96,957


$

59,788


Stock -based compensation



131



92




224



159


Amortization of acquired intangible
assets



13



19




31



30


Non-GAAP subscription margin


$

51,075


$

31,900



$

97,212


$

59,977

















GAAP subscription margin percentage



83.6

%


80.9

%



83.7

%


80.6

%

Non-GAAP subscription margin percentage



83.8

%


81.2

%



83.9

%


80.8

%

 

Non-GAAP Financial Measures

In this release, HubSpot's non-GAAP operating loss, operating margin, subscription margin, expense, expense as a percentage of revenue, net loss, 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.

Management presents these non-GAAP financial measures because it considers them to be important supplemental measures of performance. Management uses the non-GAAP financial measures for planning purposes, including analysis of the company's performance against prior periods, the preparation of operating budgets and to determine appropriate levels of operating and capital investments. Management also believes that the non-GAAP financial measures provide additional insight for analysts and investors in evaluating the company's financial and operational performance. 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. 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. 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 share-based compensation and amortization of acquired intangible assets. We believe investors may want to exclude 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 a non-cash item, and we believe that the exclusion of this amortization expense provides for a useful comparison of our operating results to prior periods and to our peer companies.

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To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/hubspot-reports-q2-2016-results-300308639.html

SOURCE HubSpot

Investor Relations Contact: Charles MacGlashing, (857) 829-5429, investors@hubspot.com; Media Contact: Laura Moran, (857) 829-5688, lmoran@hubspot.com



 About HubSpot

HubSpot (NYSE: HUBS) is a leading growth platform. Since 2006, HubSpot has been on a mission to make the world more inbound. Today, over 86,000 total customers in more than 120 countries use HubSpot’s award-winning software, services, and support to transform the way they attract, engage, and delight customers. Comprised of Marketing Hub, Sales Hub, Service Hub, CMS Hub, and a powerful free CRM, HubSpot gives companies the tools they need to Grow Better.

HubSpot has been named a top place to work by Glassdoor, Fortune, The Boston Globe, and The Boston Business Journal. The company is headquartered in Cambridge, MA with offices in Dublin, Ireland; Singapore; Sydney, Australia; Tokyo, Japan; Berlin, Germany; Bogotá, Colombia; Paris, France; Ghent, Belgium; and Portsmouth, NH.

Learn more at www.hubspot.com.

 

Press Contact

Ellie Flanagan

eflanagan@hubspot.com

857-829-5301