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HubSpot Reports Q3 2019 Results

November 5, 2019

HubSpot, Inc. (NYSE: HUBS), a leading growth platform, today announced financial results for the third quarter ended September 30, 2019.


Financial Highlights:

 

Revenue

  • Total revenue was $173.6 million, up 32% compared to Q3’18.
  • Subscription revenue was $167.1 million, up 33% compared to Q3’18.
  • Professional services and other revenue was $6.5 million, up 3% compared to Q3’18.

 

Operating Income (Loss)

  • GAAP operating margin was (8.1%), compared to (11.4%) in Q3’18.
  • Non-GAAP operating margin was 6.1%, an improvement of approximately 1.7 percentage points from 4.4% in Q3’18.
  • GAAP operating loss was ($14.1) million, compared to ($15.1) million in Q3’18.
  • Non-GAAP operating income was $10.5 million, compared to $5.9 million in Q3’18.

 

Net Income (Loss)

  • GAAP net loss was ($15.0) million, or ($0.35) per basic and diluted share, compared to ($18.7) million, or ($0.48) per basic and diluted share in Q3’18.
  • Non-GAAP net income was $15.1 million, or $0.36 per basic and $0.32 per diluted share, compared to $7.4 million, or $0.19 per basic and $0.17 per diluted share in Q3’18.
  • Weighted average basic and diluted shares outstanding for GAAP net loss per share was 42.5 million, compared to 38.8 million basic and diluted shares in Q3’18.
  • Weighted average basic and diluted shares outstanding for non-GAAP net income per share was 42.5 million and 47.9 million respectively, compared to 38.8 million and 43.1 million, respectively in Q3’18.

 

Balance Sheet and Cash Flow

  • The company’s cash, cash equivalents and investments balance was $1,008 million as of September 30, 2019.
  • During the third quarter, the company generated $6.7 million of free cash flow compared to $3.2 million during Q3’18.

 

Additional Recent Business Highlights

  • Grew total customers to 68,803 at September 30, 2019 up 31% from September 30, 2018.
  • Total average subscription revenue per customer was $9,992 during the third quarter of 2019 up 0.3% compared to Q3’18.

"In the last year we've really expanded from an all-in-one suite to an all-on-one platform," said Brian Halligan, co-founder and CEO. "Our ecosystem is strong and getting stronger, which is one of the reasons we're really happy to have announced our acquisition of PieSync this week. PieSync helps ensure that as our ecosystem expands, our customers can keep their data whole across the tools they use."

 

Business Outlook
Based on information available as of November 5, 2019, HubSpot is issuing guidance for the fourth quarter of 2019 and full year 2019 as indicated below.


Fourth Quarter 2019:

  • Total revenue is expected to be in the range of $180.3 million to $181.3 million.
  • Non-GAAP operating income is expected to be in the range of $17.1 million to $18.1 million.
  • Non-GAAP net income per common share is expected to be in the range of $0.40 to $0.42. This assumes approximately 47.0 million weighted average diluted shares outstanding.

 

Full Year 2019:

  • Total revenue is expected to be in the range of $669.0 million to $670.0 million.
  • Non-GAAP operating income is expected to be in the range of $54.5 million to $55.5 million.
  • Non-GAAP net income per common share is expected to be in the range of $1.44 to $1.46. This assumes approximately 47.0 million weighted average diluted shares outstanding.

 

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 at ir.hubspot.com.


Conference Call Information

HubSpot will host a conference call on Tuesday, November 5, 2019 at 4:30 p.m. Eastern Time (ET) to discuss the company's third quarter financial results and its business outlook.To access this call, dial (833) 241-7257 (domestic) or (647) 689-4221 (international). The conference ID is 8576778. Additionally, a live webcast of the conference call will be available on HubSpot’s Investor Relations website at ir.hubspot.com. 


Following the conference call, a replay will be available at (800) 585-8367 (domestic) or (416) 621-4642 (international). The replay passcode is 8576778. 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 a leading growth platform. Over 68,800 total customers in over 100 countries use HubSpot’s award-winning software, services, and support to transform the way they attract, engage, and delight customers. 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, and business outlook, including our financial guidance for the fourth fiscal quarter and full year 2019; statements regarding our positioning for future growth; and statements regarding the anticipated benefits from our recent acquisition of PieSync. 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 acquire and integrate companies and assets; 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 August 6, 2019 and our other SEC filings, including our upcoming Quarterly Report on Form 10-Q for the quarter ended September 30, 2019. 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)
 
 
                 
 
 
September 30,
 
 
December 31,
 
 
 
2019
 
 
2018
 
Assets
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
225,770
 
 
$
111,489
 
Short-term investments
 
 
722,767
 
 
 
480,761
 
Accounts receivable
 
 
77,551
 
 
 
77,100
 
Deferred commission expense
 
 
29,080
 
 
 
23,664
 
Restricted cash
 
 
6,019
 
 
 
5,175
 
Prepaid expenses and other current assets
 
 
20,052
 
 
 
14,229
 
Total current assets
 
 
1,081,239
 
 
 
712,418
 
Long-term investments
 
 
59,783
 
 
 
11,450
 
Property and equipment, net
 
 
63,959
 
 
 
52,468
 
Capitalized software development costs, net
 
 
15,095
 
 
 
12,746
 
Right-of-use assets
 
 
215,797
 
 
 
 
Deferred commission expense, net of current portion
 
 
17,608
 
 
 
18,114
 
Other assets
 
 
7,894
 
 
 
6,888
 
Intangible assets, net
 
 
2,556
 
 
 
4,919
 
Goodwill
 
 
14,950
 
 
 
14,950
 
Total assets
 
$
1,478,881
 
 
$
833,953
 
Liabilities and stockholders’ equity
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
Accounts payable
 
$
14,882
 
 
$
7,810
 
Accrued compensation costs
 
 
23,913
 
 
 
23,589
 
Accrued expenses and other current liabilities
 
 
25,706
 
 
 
22,305
 
Lease liabilities
 
 
15,646
 
 
 
 
Deferred revenue
 
 
200,771
 
 
 
183,305
 
Total current liabilities
 
 
280,918
 
 
 
237,009
 
Lease liabilities, net of current portion
 
 
225,628
 
 
 
 
Deferred rent, net of current portion
 
 
 
 
 
26,445
 
Deferred revenue, net of current portion
 
 
2,835
 
 
 
2,179
 
Other long-term liabilities
 
 
6,182
 
 
 
4,897
 
Convertible senior notes
 
 
334,966
 
 
 
318,782
 
Total liabilities
 
 
850,529
 
 
 
589,312
 
Stockholders’ equity:
 
 
 
 
 
 
 
 
Common stock
 
 
43
 
 
 
40
 
Additional paid-in capital
 
 
1,017,046
 
 
 
589,708
 
Accumulated other comprehensive loss
 
 
(909
)
 
 
(723
)
Accumulated deficit
 
 
(387,828
)
 
 
(344,384
)
Total stockholders’ equity
 
 
628,352
 
 
 
244,641
 
Total liabilities and stockholders’ equity
 
$
1,478,881
 
 
$
833,953
 

 

Consolidated Statements of Operations

(in thousands, except per share data)
 
 
                               
 
For the Three Months Ended
September 30,
 
 
For the Nine Months Ended
September 30,
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Subscription
$
167,078
 
 
$
125,478
 
 
$
467,180
 
 
$
350,646
 
Professional services and other
 
6,543
 
 
 
6,348
 
 
 
21,494
 
 
 
18,312
 
Total revenue
 
173,621
 
 
 
131,826
 
 
 
488,674
 
 
 
368,958
 
Cost of revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Subscription
 
25,671
 
 
 
17,777
 
 
 
70,550
 
 
 
49,976
 
Professional services and other
 
7,592
 
 
 
7,988
 
 
 
23,433
 
 
 
23,017
 
Total cost of revenues
 
33,263
 
 
 
25,765
 
 
 
93,983
 
 
 
72,993
 
Gross profit
 
140,358
 
 
 
106,061
 
 
 
394,691
 
 
 
295,965
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Research and development
 
39,847
 
 
 
30,761
 
 
 
115,480
 
 
 
85,598
 
Sales and marketing
 
91,283
 
 
 
71,293
 
 
 
250,267
 
 
 
196,484
 
General and administrative
 
23,300
 
 
 
19,057
 
 
 
67,777
 
 
 
54,309
 
Total operating expenses
 
154,430
 
 
 
121,111
 
 
 
433,524
 
 
 
336,391
 
Loss from operations
 
(14,072
)
 
 
(15,050
)
 
 
(38,833
)
 
 
(40,426
)
Other expense:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
 
5,185
 
 
 
2,416
 
 
 
14,783
 
 
 
6,332
 
Interest expense
 
(5,760
)
 
 
(5,393
)
 
 
(16,946
)
 
 
(15,893
)
Other expense
 
(89
)
 
 
(277
)
 
 
(773
)
 
 
(1,087
)
Total other expense
 
(664
)
 
 
(3,254
)
 
 
(2,936
)
 
 
(10,648
)
Loss before income tax expense
 
(14,736
)
 
 
(18,304
)
 
 
(41,769
)
 
 
(51,074
)
Income tax expense
 
(251
)
 
 
(359
)
 
 
(1,675
)
 
 
(1,262
)
Net loss
$
(14,987
)
 
$
(18,663
)
 
$
(43,444
)
 
$
(52,336
)
Net loss per share, basic and diluted
$
(0.35
)
 
$
(0.48
)
 
$
(1.04
)
 
$
(1.37
)
Weighted average common shares used in computing basic
and diluted net loss per share:
 
42,531
 
 
 
38,762
 
 
 
41,749
 
 
 
38,319
 

 

Consolidated Statements of Cash Flows

(in thousands)
 
 
                               
 
For the Three Months Ended
September 30,
 
 
For the Nine Months Ended
September 30,
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
Operating Activities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
$
(14,987
)
 
$
(18,663
)
 
$
(43,444
)
 
$
(52,336
)
Adjustments to reconcile net loss to net cash and cashequivalents provided by operating activities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
7,213
 
 
 
6,000
 
 
 
21,248
 
 
 
16,539
 
Stock-based compensation
 
23,790
 
 
 
19,613
 
 
 
73,659
 
 
 
55,334
 
Provision (benefit) for deferred income taxes
 
184
 
 
 
(4
)
 
 
49
 
 
 
43
 
Amortization of debt discount and issuance costs
 
5,509
 
 
 
5,141
 
 
 
16,184
 
 
 
15,103
 
Accretion of bond discount
 
(4,068
)
 
 
(1,876
)
 
 
(10,889
)
 
 
(4,517
)
Noncash rent expense
 
 
 
 
367
 
 
 
 
 
 
1,972
 
Unrealized currency translation
 
(175
)
 
 
79
 
 
 
(193
)
 
 
215
 
Changes in assets and liabilities
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
Accounts receivable
 
(5,253
)
 
 
(9,911
)
 
 
(1,346
)
 
 
(3,266
)
Prepaid expenses and other assets
 
113
 
 
 
5,535
 
 
 
(6,217
)
 
 
823
 
Deferred commission expense
 
(12
)
 
 
(5,798
)
 
 
(5,551
)
 
 
(15,887
)
Right-of-use assets
 
5,048
 
 
 
 
 
 
14,310
 
 
 
 
Accounts payable
 
1,203
 
 
 
3,508
 
 
 
6,195
 
 
 
4,262
 
Accrued expenses and other current liabilities
 
(2,333
)
 
 
(1,876
)
 
 
955
 
 
 
3,755
 
Lease liabilities
 
(4,626
)
 
 
 
 
 
(14,788
)
 
 
 
Deferred rent
 
 
 
 
81
 
 
 
 
 
 
3,987
 
Deferred revenue
 
8,063
 
 
 
9,321
 
 
 
20,910
 
 
 
25,713
 
Net cash and cash equivalents provided by operating activities
 
19,669
 
 
 
11,517
 
 
 
71,082
 
 
 
51,740
 
Investing Activities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchases of investments
 
(370,192
)
 
 
(158,546
)
 
 
(967,994
)
 
 
(524,838
)
Maturities and sales of investments
 
347,229
 
 
 
150,300
 
 
 
689,614
 
 
 
498,850
 
Purchases of property and equipment
 
(9,141
)
 
 
(5,378
)
 
 
(21,197
)
 
 
(16,688
)
Capitalization of software development costs
 
(3,811
)
 
 
(2,920
)
 
 
(9,139
)
 
 
(8,726
)
Purchases of strategic investments
 
(201
)
 
 
(50
)
 
 
(553
)
 
 
(300
)
Net cash and cash equivalents used in investing activities
 
(36,116
)
 
 
(16,594
)
 
 
(309,269
)
 
 
(51,702
)
Financing Activities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Proceeds from common stock offering, net of offering costs paid of $365
 
 
 
 
 
 
 
342,628
 
 
 
 
Employee taxes paid related to the net share settlement of stock-based awards
 
(2,032
)
 
 
(1,888
)
 
 
(4,767
)
 
 
(5,933
)
Proceeds related to the issuance of common stock under stock plans
 
8,188
 
 
 
5,157
 
 
 
18,926
 
 
 
16,769
 
Repayments of capital lease obligations
 
(44
)
 
 
(175
)
 
 
(249
)
 
 
(592
)
Net cash and cash equivalents provided by financing activities
 
6,112
 
 
 
3,094
 
 
 
356,538
 
 
 
10,244
 
Effect of exchange rate changes on cash, cash equivalents and restricted cash
 
(1,973
)
 
 
(321
)
 
 
(2,171
)
 
 
(1,319
)
Net increase in cash, cash equivalents and restricted cash
 
(12,308
)
 
 
(2,304
)
 
 
116,180
 
 
 
8,963
 
Cash, cash equivalents and restricted cash, beginning of period
 
245,602
 
 
 
104,051
 
 
 
117,114
 
 
 
92,784
 
Cash, cash equivalents and restricted cash, end of period
$
233,294
 
 
$
101,747
 
 
$
233,294
 
 
$
101,747
 

 

 

 

                           
Reconciliation of non-GAAP operating income and operating margin
(in thousands, except percentages)
Three Months Ended
September 30,
 
 
Nine Months Ended
September 30,
 
 
2019
 
2018
 
 
2019
 
2018
 
GAAP operating loss
$
(14,072
)
$
(15,050
)
 
$
(38,833
)
$
(40,426
)
Stock-based compensation
 
23,791
 
 
19,612
 
 
 
73,659
 
 
55,334
 
Amortization of acquired intangible assets
 
762
 
 
494
 
 
 
2,362
 
 
594
 
Acquisition related expenses
 
30
 
 
802
 
 
 
95
 
 
2,407
 
Non-GAAP operating income
$
10,511
 
$
5,858
 
 
$
37,283
 
$
17,909
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP operating margin
 
(8.1
%)
 
(11.4
%)
 
 
(7.9
%)
 
(11.0
%)
Non-GAAP operating margin
 
6.1
%
 
4.4
%
 
 
7.6
%
 
4.9
%

 

                           
Reconciliation of non-GAAP net income
(in thousands, except per share amounts)
Three Months Ended
September 30,
 
 
Nine Months Ended
September 30,
 
 
2019
 
2018
 
 
2019
 
2018
 
GAAP net loss
$
(14,987
)
$
(18,663
)
 
$
(43,444
)
$
(52,336
)
Stock-based compensation
 
23,791
 
 
19,612
 
 
 
73,659
 
 
55,334
 
Amortization of acquired intangibles assets
 
762
 
 
494
 
 
 
2,362
 
 
594
 
Acquisition related expenses
 
30
 
 
802
 
 
 
95
 
 
2,407
 
Non-cash interest expense for amortization of debt discount and debt issuance costs
 
5,509
 
 
5,141
 
 
 
16,184
 
 
15,103
 
Income tax effects of non-GAAP items
 
 
 
 
 
 
 
 
 
Non-GAAP net income
$
15,105
 
$
7,386
 
 
$
48,856
 
$
21,102
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP net income per share:
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
$
0.36
 
$
0.19
 
 
$
1.17
 
$
0.55
 
Diluted
$
0.32
 
$
0.17
 
 
$
1.05
 
$
0.51
 
Shares used in non-GAAP per share calculations
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
42,531
 
 
38,762
 
 
 
41,749
 
 
38,319
 
Diluted
 
47,869
 
 
43,101
 
 
 
46,622
 
 
41,314
 

 

                                                               
Reconciliation of non-GAAP expense and expense as a percentage of revenue
 
 
 
 
 
 
 
 
 
 
(in thousands, except percentages)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
 
2019
 
 
2018
 
 
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
$
25,671
 
$
7,592
 
$
39,847
 
$
91,283
 
$
23,300
 
 
$
17,777
 
$
7,988
 
$
30,761
 
$
71,293
 
$
19,057
 
Stock -based compensation
 
(854
)
 
(614
)
 
(8,019
)
 
(8,947
)
 
(5,357
)
 
 
(391
)
 
(803
)
 
(5,990
)
 
(7,898
)
 
(4,530
)
Amortization of acquired intangible assets
 
(762
)
 
 
 
 
 
 
 
 
 
 
(494
)
 
 
 
 
 
 
 
 
Acquisition related expenses
 
 
 
 
 
(30
)
 
 
 
 
 
 
 
 
 
 
(802
)
 
 
 
 
Non-GAAP expense
$
24,055
 
$
6,978
 
$
31,798
 
$
82,336
 
$
17,943
 
 
$
16,892
 
$
7,185
 
$
23,969
 
$
63,395
 
$
14,527
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP expense as a percentage of revenue
 
14.8
%
 
4.4
%
 
23.0
%
 
52.6
%
 
13.4
%
 
 
13.5
%
 
6.1
%
 
23.3
%
 
54.1
%
 
14.5
%
Non-GAAP expense as a percentage of revenue
 
13.9
%
 
4.0
%
 
18.3
%
 
47.4
%
 
10.3
%
 
 
12.8
%
 
5.5
%
 
18.2
%
 
48.1
%
 
11.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30,
 
 
2019
 
 
2018
 
 
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
$
70,550
 
$
23,433
 
$
115,480
 
$
250,267
 
$
67,777
 
 
$
49,976
 
$
23,017
 
$
85,598
 
$
196,484
 
$
54,309
 
Stock -based compensation
 
(2,291
)
 
(2,298
)
 
(25,663
)
 
(27,275
)
 
(16,132
)
 
 
(985
)
 
(2,339
)
 
(16,866
)
 
(22,327
)
 
(12,817
)
Amortization of acquired intangible assets
 
(2,362
)
 
 
 
 
 
 
 
 
 
 
(594
)
 
 
 
 
 
 
 
 
Acquisition related expenses
 
 
 
 
 
(95
)
 
 
 
 
 
 
 
 
 
 
(2,407
)
 
 
 
 
Non-GAAP expense
$
65,897
 
$
21,135
 
$
89,722
 
$
222,992
 
$
51,645
 
 
$
48,397
 
$
20,678
 
$
66,325
 
$
174,157
 
$
41,492
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP expense as a percentage of revenue
 
14.4
%
 
4.8
%
 
23.6
%
 
51.2
%
 
13.9
%
 
 
13.5
%
 
6.2
%
 
23.2
%
 
53.3
%
 
14.7
%
Non-GAAP expense as a percentage of revenue
 
13.5
%
 
4.3
%
 
18.4
%
 
45.6
%
 
10.6
%
 
 
13.1
%
 
5.6
%
 
18.0
%
 
47.2
%
 
11.2
%

 

                               
Reconciliation of non-GAAP subscription margin
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands, except percentages)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
 
Nine Months Ended September 30,
 
 
 
2019
 
2018
 
 
2019
 
2018
 
GAAP subscription margin
 
$
141,407
 
$
107,701
 
 
$
396,630
 
$
300,670
 
Stock -based compensation
 
 
854
 
 
391
 
 
 
2,291
 
 
985
 
Amortization of acquired intangible assets
 
 
762
 
 
494
 
 
 
2,362
 
 
594
 
Non-GAAP subscription margin
 
$
143,023
 
$
108,586
 
 
$
401,283
 
$
302,249
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP subscription margin percentage
 
 
84.6
%
 
85.8
%
 
 
84.9
%
 
85.7
%
Non-GAAP subscription margin percentage
 
 
85.6
%
 
86.5
%
 
 
85.9
%
 
86.2
%

 

                             
Reconciliation of free cash flow
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
 
Nine Months Ended September 30,
 
 
 
2019
 
2018
 
 
2019
 
2018
 
GAAP net cash and cash equivalents provided by operating activities
 
$
19,669
 
$
11,517
 
 
$
71,082
 
$
51,740
 
Purchases of property and equipment
 
 
(9,141
)
 
(5,378
)
 
 
(21,197
)
 
(16,688
)
Capitalization of software development costs
 
 
(3,811
)
 
(2,920
)
 
 
(9,139
)
 
(8,726
)
Free cash flow
 
$
6,717
 
$
3,219
 
 
$
40,746
 
$
26,326
 

 

               
Reconciliation of forecasted non-GAAP operating income
(in thousands, except percentages)
 
 
 
 
 
 
 
 
Three Months Ended
December 31, 2019
 
 
Year Ended
December 31, 2019
 
GAAP operating income range
($7,980)-($6,980)
 
 
($46,030)-($45,030)
 
Stock-based compensation
 
24,300
 
 
 
97,300
 
Amortization of acquired intangible assets
 
750
 
 
 
3,100
 
Acquisition related expenses
 
30
 
 
 
130
 
Non-GAAP operating income range
$17,100-$18,100
 
 
$54,500-$55,500
 

 

               
Reconciliation of forecasted non-GAAP net income and non-GAAP net income per share
(in thousands, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
December 31, 2019
 
 
Year Ended
December 31, 2019
 
GAAP net loss range
($11,880)-($10,880)
 
 
($54,530)-($53,530)
 
Stock-based compensation
 
24,300
 
 
 
97,300
 
Amortization of acquired intangible assets
 
750
 
 
 
3,100
 
Acquisition related expenses
 
30
 
 
 
130
 
Non-cash interest expense for amortization of debt discount and debt issuance costs
 
5,600
 
 
 
21,800
 
Income tax effects of non-GAAP items
 
 
 
 
 
Non-GAAP net income range
$18,800-$19,800
 
 
$67,800-$68,800
 
 
 
 
 
 
 
 
 
GAAP net income per basic and diluted share
($0.28)-($0.25)
 
 
($1.30)-($1.27)
 
Non-GAAP net income per diluted share
$0.40-$0.42
 
 
$1.44-$1.46
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares used in computing GAAP basic and diluted net loss per share:
 
42,900
 
 
 
42,000
 
 
 
 
 
 
 
 
 
Weighted average common shares used in computing non-GAAP diluted net loss per share:
 
47,000
 
 
 
47,000
 

 

HubSpot’s estimates of stock-based compensation, amortization of acquired intangible assets, acquisition-related expenses, and non-cash interest expense for amortization of debt discount and debt issuance costs in future periods assume, among other things, the occurrence of no additional acquisitions, investments or restructurings, and no further revisions to stock-based compensation and related expenses. HubSpot has not included estimates related to the recently completed acquisition of PieSync NV for acquisition-related expenses, amortization of acquired intangibles, and any stock-based compensation for the three months ended December 31, 2019 because these expenses are unable to be determined at this time without unreasonable effort.

 

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, 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 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, non-cash interest expense for the amortization of debt discount debt issuance costs, and income tax effects of non-GAAP items. 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:

  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 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.
  3. Acquisition related expenses, such as transaction costs and retention payments, are expenses that are not necessarily reflective of operational performance during a period. We believe that the exclusion of this these expenses provides for a useful comparison of our operating results to prior periods and to our peer companies.
  4. In May 2017, the Company issued $400 million of convertible notes due in 2022 with a coupon interest rate of 0.25%. The imputed interest rate of the convertible senior notes was approximately 6.95%. This is a result of the debt discount recorded for the conversion feature that is required to be separately accounted for as equity, and debt issuance costs, which reduce the carrying value of the convertible debt instrument. The debt discount is amortized as interest expense together with the issuance costs of the debt. The expense for the amortization of debt discount and debt issuance costs is a non-cash item, and we believe the exclusion of this interest expense provides for a useful comparison of our operating results to prior periods and to our peer companies.
  5. The effects of income taxes on non-GAAP items for current and historical periods is zero due to our history of non-GAAP losses and a full valuation allowance on our U.S. deferred tax assets.

 

Investor Relations Contact:
Charles MacGlashing
investors@hubspot.com

Media Contact:
Ellie Flanagan
eflanagan@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 68,800 total customers in more than 100 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, 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; and Portsmouth, NH.

Learn more at www.hubspot.com.

 

Press Contact

Ellie Flanagan

eflanagan@hubspot.com

857-829-5301