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HubSpot's Momentum Accelerates in Q4 2014 with 53% Revenue Growth and 35% Customer Growth

February 11, 2015

CAMBRIDGE, Mass., Feb. 11, 2015 /PRNewswire/ -- HubSpot, Inc. (NYSE: HUBS), a leading inbound marketing and sales software company, today announced financial results for the fourth quarter and full year ended December 31, 2014.

Highlights include:

Revenue

Fourth Quarter 2014:

  • Total revenue was $34.2 million, up 53% compared with the fourth quarter of 2013.
  • Subscription revenue was $31.3 million, up 52% compared with the fourth quarter of 2013.
  • Services revenue was $2.8 million, up 57% compared with the fourth quarter of 2013.

Full Year 2014:

  • Total revenue was $115.9 million, up 49% compared with 2013.
  • Subscription revenue was $106.3 million, up 50% compared with 2013.
  • Services revenue was $9.6 million, up 40% compared with 2013.

Operating Loss

Fourth Quarter 2014:

  • GAAP operating margin was (58.4%) for the quarter, compared with (37.4%) in the fourth quarter of 2013. This change reflects an increase of non-cash expenses that resulted from our public offering closing early in the fourth quarter.
  • Non-GAAP operating margin was (20.7%) for the quarter, an improvement of approximately 11 percentage points from (31.9%) in the fourth quarter of 2013.
  • GAAP operating loss was ($19.9) million for the quarter, compared to ($8.4) million in the fourth quarter of 2013.
  • Non-GAAP operating loss was ($7.1) million for the quarter, compared to ($7.1) million in the fourth quarter of 2013.

Full Year 2014:

  • GAAP operating margin was (41.9%) for 2014, an improvement of approximately 2 percentage points from (44.1%) in 2013.
  • Non-GAAP operating margin was (27.7%) for 2014, an improvement of approximately 11.5 percentage points from (39.2%) in 2013.
  • GAAP operating loss was ($48.6) million for 2014, compared to ($34.3) million in 2013.
  • Non-GAAP operating loss was ($32.1) million for 2014, compared to ($30.4) million in 2013.

Net Loss attributable to common stockholders

Fourth Quarter 2014:

  • GAAP net loss attributable to common stockholders was ($20.0) million, or ($0.69) per share for the quarter, compared to ($8.4) million, or ($1.63) per share, in the fourth quarter of 2013.
  • Non-GAAP net loss attributable to common stockholders was ($7.1) million, or ($0.25) per share for the quarter, compared to ($7.2) million, or ($1.39) per share, in the fourth quarter of 2013.
  • Fourth quarter weighted average shares outstanding were 28.9 million compared to 5.2 million shares in the fourth quarter of 2013.

Full Year 2014:

  • GAAP net loss attributable to common stockholders was ($48.6) million, or ($4.20) per share for 2014, compared to ($34.3) million, or ($6.71) per share, in 2013.
  • Non-GAAP net loss attributable to common stockholders was ($32.1) million, or ($2.77) per share for 2014, compared to ($30.5) million, or ($5.97) per share, in 2013.
  • 2014 weighted average shares outstanding were 11.6 million compared to 5.1 million shares in 2013.

"HubSpot continued its rapid growth in the fourth quarter of 2014," said Brian Halligan , Chairman and CEO.  "This was a terrific quarter.  We added a record number of new customers, achieved strong financial results in both revenue growth and margin expansion, and saw continued growth in our domestic and international businesses. It is clear that we are still in the early innings of meeting the significant demand for marketing and sales technology that helps mid-market companies grow.  We believe our integrated marketing and sales software platform, our balanced go to market strategy across direct and channel, and our large ecosystem of partners and fans uniquely positions HubSpot for the future."

Additional Highlights for the Fourth Quarter and Full Year Ended December 31, 2014

Balance Sheet and Cash Flow

  • The company's cash and cash equivalents balance was $123.7 million as of December 31, 2014.
  • During the full year ended December 31, 2014, the company used ($12.5) million of cash and cash equivalents in operations compared to ($19.8) million during the year ended December 31, 2013.

Recent Business Highlights

  • Grew total customers to 13,607 at December 31, 2014, up 35% from December 31, 2013.
  • Increased average subscription revenue per customer during the fourth quarter of 2014 to $9,530 from $8,377 in the fourth quarter of 2013.

Business Outlook

Based on information available as of February 11, 2015, HubSpot is issuing guidance for the first quarter and full year of 2015 as indicated below.

First Quarter 2015:

  • Total revenue is expected to be in the range of $34.8 million to $35.8 million.
  • Non-GAAP operating loss is expected to be in the range of ($7.9) million to ($6.9) million. This excludes stock-based compensation expense of approximately $5.5 million and amortization of acquired intangible assets of approximately $13 thousand.
  • Non-GAAP net loss per common share is expected to be in the range of ($0.26) to ($0.22). This excludes stock-based compensation expense of approximately $5.5 million and amortization of acquired intangible assets of approximately $13 thousand. This assumes approximately 31.5 million weighted common shares outstanding.

Full Year 2015:

  • Total revenue is expected to be in the range of $159.0 million to $163.0 million.
  • Non-GAAP operating loss is expected to in the range of ($36.0) million to ($32.0) million. This excludes stock-based compensation expense of approximately $21.4 million and amortization of acquired intangible assets of approximately $52 thousand.
  • Non-GAAP net loss per common share is expected to be in the range of ($1.13) to ($0.97). This excludes stock-based compensation expense of approximately $21.4 million and amortization of acquired intangible assets of approximately $52 thousand. This assumes approximately 32.3 million weighted common shares outstanding.

Conference Call Information

HubSpot will host a conference call on Wednesday, February 11, 2015, at 5:00 p.m. Eastern Time (ET) to discuss its fourth quarter and full year 2014 financial results and business outlook.  To access this call, dial (877) 201-0168 (domestic) or (647) 788-4901 (international).  The conference ID is 50475229. Additionally, a live webcast of the conference call will be available in the "Investors" section of the HubSpot's web site at www.hubspot.com.

Following the conference call, a replay will be available until 5 pm on February 19, 2015 at (855) 859-2056 (domestic) or (404) 537-3406 (international). The replay pass code is 50475229. An archived webcast of this conference call will also be available in the "Investors" 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 13,500 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 attributable to common stockholders for the fourth quarter and full year ended December 31, 2014, and 2013. 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 first fiscal quarter of 2015 and full year 2015, 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 November 13, 2014 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)










December 31, 2014


December 31, 2013

Assets




Current assets:




Cash and cash equivalents 

$                           123,721


$                          12,643

Accounts receivable, net

14,270


7,220

Deferred commission expense

5,995


3,991

Restricted cash

230


307

Prepaid hosting costs

1,777


2,958

Prepaid expenses and other current assets

3,516


1,566

Total current assets

149,509


28,685





Property and equipment, net

11,381


7,243

Capitalized software development costs, net

4,433


3,479

Restricted cash

-


1,610

Other assets

116


65

Intangible assets, net

89


147

Goodwill

9,330


9,330

Total assets

$                           174,858


$                          50,559





Liabilities, redeemable convertible preferred stock and stockholders' equity (deficit)




Current liabilities:




Accounts payable

$                               2,800


$                            2,547

Accrued compensation costs

7,660


5,079

Other accrued expenses

7,953


7,160

Capital lease obligation

100


96

Deferred rent

110


-

Deferred revenue

40,805


24,662

Total current liabilities

59,428


39,544





Capital lease obligation, net of current portion

78


203

Deferred rent, net of current portion

4,153


2,523

Deferred revenue, net of current portion 

500


244

Total liabilities

64,159


42,514









Redeemable convertible preferred stock

-


101,293





Stockholders' equity (deficit):




Common stock

32


5

Additional paid-in capital

265,113


12,898

Accumulated other comprehensive loss

(145)


(79)

Accumulated deficit

(154,301)


(106,072)

Total stockholders' equity (deficit)

110,699


(93,248)





Total liabilities, redeemable convertible preferred stock and stockholders' equity (deficit)

$                           174,858


$                          50,559

 

 

Consolidated Statements of Operations

(in thousands, except per share data)











Three Months Ended December 31,



Year Ended December 31,





2014


2013



2014


2013

Revenues:









Subscription

$             31,325


$             20,574



$         106,319


$              70,819

Professional services and other

2,832


1,805



9,557


6,815

Total revenue

34,157


22,379



115,876


77,634










Cost of Revenues:









Subscription

7,247


5,384



25,655


20,280

Professional services and other

3,275


2,486



11,425


8,759

Total cost of revenues

10,522


7,870



37,080


29,039










Gross profit

23,635


14,509



78,796


48,595










Operating expenses:









Research and development

11,140


4,041



25,638


15,018

Sales and marketing

24,109


14,393



78,809


53,158

General and administrative

8,325


4,441



22,958


14,669

           Total operating expenses

43,574


22,875



127,405


82,845










Loss from operations

(19,939)


(8,366)



(48,609)


(34,250)










Other income (expense):









Interest income

42


5



46


34

Interest expense

(63)


(17)



(322)


(20)

Other income (expense)

171


(47)



564


(38)

Total other income (expense)

150


(59)



288


(24)

Loss before benefit from income taxes 

(19,789)


(8,425)



(48,321)


(34,274)

Income tax benefit

92


-



92


-










Net loss

(19,697)


(8,425)



(48,229)


(34,274)

    Preferred stock accretion

291


13



331


54

 Net loss attributable to common stockholders

(19,988)


(8,438)



(48,560)


(34,328)










Net loss attributable to common stockholders per share, basic and diluted

$               (0.69)


$               (1.63)



$             (4.20)


$                (6.71)

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

28,918


5,187



11,562


5,113

 

 

Consolidated Statements of  Cash Flows





(in thousands)







Year Ended December 31, 



2014


2013

Operating Activities:





Net loss





Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:


$              (48,229)


$     (34,274)

          Depreciation and amortization


5,714


4,472

          Stock-based compensation


16,358


3,464

      Provision for deferred income taxes


(133)


-

          Provision for doubtful accounts


632


523

          Noncash rent expense


286


908

          Unrealized currency translation


(213)


-

Changes in assets and liabilities





          Accounts receivable


(7,890)


(2,478)

          Prepaid expenses and other assets


(713)


(3,351)

          Deferred commission expense


(2,004)


(1,155)

          Accounts payable


286


(1,158)

          Accrued expenses


4,734


4,259

          Restricted cash


157


(67)

          Deferred rent


1,467


258

          Deferred revenue


17,084


8,791

            Net cash and cash equivalents used in operating activities:


(12,464)


(19,808)

Investing Activities:





Purchases of property and equipment


(7,266)


(4,358)

Capitalization of software development costs


(4,634)


(3,432)

Acquisition of intangible assets


(80)


(190)

Restricted cash


1,500


(1,190)

           Net cash and cash equivalents used in investing activities


(10,480)


(9,170)

Financing Activities:





IPO proceeds, net of offering costs paid of $2,924


130,764


-

Proceeds from exercise of options


3,794


621

Proceeds from draw-down on line of credit 


18,000


-

Payments on line of credit


(18,000)


-

Repayments of capital lease obligation


(121)


(107)

            Net cash and cash equivalents provided by financing activities

134,437


514






Effect of exchange rate changes on cash and cash equivalents


(415)


10






Net increase (decrease) in cash and cash equivalents


111,078


(28,454)

Cash, beginning of period


12,643


41,097

Cash and cash equivalents, end of period


$              123,721


$       12,643

 

 

Reconciliation of non-GAAP operating loss and operating margin 

Three Months Ended December 31, 


Year  Ended December 31, 



2014

2013


2014

2013

(in thousands, except percentages)













GAAP operating loss

$      (19,939)

$         (8,366)


$      (48,609)

$       (34,250)

Stock-based compensation 

12,844

1,069


16,358

3,464

Amortization of acquired intangible assets

13

152


138

359

Non-GAAP operating loss

$        (7,082)

$         (7,145)


$      (32,113)

$       (30,427)








GAAP operating margin 

(58.4)%

(37.4)%


(41.9)%

(44.1)%

Non-GAAP operating margin

(20.7)%

(31.9)%


(27.7)%

(39.2)%






















Reconciliation of non-GAAP net loss attributable to common stockholders

Three Months Ended December 31, 


Year  Ended December 31, 

(in thousands, except per share amounts)

2014

2013


2014

2013















GAAP net loss attributable to common stockholders

$      (19,988)

$         (8,438)


$      (48,560)

$       (34,328)

Stock-based compensation 

12,844

1,069


16,358

3,464

Amortization of acquired intangibles

13

152


138

359

Non-GAAP net loss attributable to common stockholders

$        (7,131)

$         (7,217)


$      (32,064)

$       (30,505)







Non-GAAP net loss attributable to common stockholders per share, basic and diluted

$          (0.25)

$            (1.39)


$          (2.77)

$           (5.97)

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

28,918

5,187


11,562

5,113

 

 

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








(in thousands, except percentages)

Three Months Ended December 31, 






2014


2013






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

$          7,247

$           3,275

$       11,140

$       24,109

$        8,325


$            5,384

$           2,486

$       4,041

$       14,393

$       4,441

Stock-based compensation 

(64)

(262)

(5,755)

(4,149)

(2,614)


(24)

(89)

(133)

(428)

(395)

Amortization of acquired intangibles

(6)

-

-

(7)

-


(152)

-

-

-

-

Non-GAAP expense 

$          7,177

$           3,013

$         5,385

$       19,953

$        5,711


$            5,208

$           2,397

$       3,908

$       13,965

$       4,046

















GAAP expense as a percentage of revenue 

21%

10%

33%

71%

24%


24%

11%

18%

64%

20%

Non-GAAP expense as a percentage of revenue 

21%

9%

16%

58%

17%


23%

11%

17%

62%

18%






































Year Ended December 31, 






2014


2013






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

$        25,655

$         11,425

$       25,638

$       78,809

$      22,958


$         20,280

$           8,759

$    15,018

$       53,158

$    14,669

Stock-based compensation 

(128)

(498)

(6,190)

(5,596)

(3,946)


(50)

(211)

(691)

(1,194)

(1,318)

Amortization of acquired intangibles

(118)

-

-

(20)

-


(359)

-

-

-

-

Non-GAAP expense 

$        25,409

$         10,927

$       19,448

$       73,193

$      19,012


$         19,871

$           8,548

$    14,327

$       51,964

$    13,351

















GAAP expense as a percentage of revenue 

22%

10%

22%

68%

20%


26%

11%

19%

68%

19%

Non-GAAP expense as a percentage of revenue 

22%

9%

17%

63%

16%


26%

11%

18%

67%

17%

 

 

Reconciliation of non-GAAP subscription margin




(in thousands, except percentages)


Three Months Ended December 31,


Years Ended December 31, 



2014

2013


2014

2013








GAAP subscription margin

$                   24,078

$                  15,190


$                   80,664

$                 50,539

Stock-based compensation 

64

24


128

50

Amortization of acquired intangible assets

6

152


118

359

Non-GAAP subscription margin

$                   24,148

$                  15,366


$                   80,910

$                 50,948










GAAP subscription margin percentage

76.9%

73.8%


75.9%

71.4%

Non-GAAP subscription margin percentage

77.1%

74.7%


76.1%

71.9%

 

Non-GAAP Financial Measures

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

 

HubSpot, Inc. logo - www.hubspot.com

Logo - http://photos.prnewswire.com/prnh/20110817/NE53515LOGO

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/hubspots-momentum-accelerates-in-q4-2014-with-53-revenue-growth-and-35-customer-growth-300034608.html

SOURCE HubSpot, Inc.

Investor Relations, Lisa Mullan, (857) 829-5429, investors@hubspot.com, Media, 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