HubSpot Reports Q2 2024 Results

HubSpot, Inc. (NYSE: HUBS), the customer platform for scaling companies, today announced financial results for the second quarter ended June 30, 2024.

Financial Highlights:

Revenue

  • Total revenue was $637.2 million, up 20% compared to Q2'23.
    • Subscription revenue was $623.8 million, up 20% compared to Q2'23.
    • Professional services and other revenue was $13.5 million, up 18% compared to Q2'23.

Operating Income (Loss)

  • GAAP operating margin was (3.8%), compared to (22.0%) in Q2'23.
  • Non-GAAP operating margin was 17.2%, compared to 14.5% in Q2'23.
  • GAAP operating loss was ($23.9) million, compared to ($116.2) million in Q2'23.
  • Non-GAAP operating income was $109.3 million, compared to $76.6 million in Q2'23.

Net Income (Loss)

  • GAAP net loss was ($14.4) million, or ($0.28) per basic and diluted share, compared to net loss of ($111.8) million, or ($2.25) per basic and diluted share in Q2'23.
  • Non-GAAP net income was $103.5 million, or $2.03 per basic and $1.94 per diluted share, compared to $71.8 million, or $1.45 per basic and $1.38 per diluted share in Q2'23.
  • Weighted average basic and diluted shares outstanding for GAAP net loss per share was 51.0 million, compared to 49.7 million basic and diluted shares in Q2'23.
  • Weighted average basic and diluted shares outstanding for non-GAAP net income per share was 51.0 million and 53.4 million, respectively, compared to 49.7 million and 52.1 million, respectively in Q2'23.

Balance Sheet and Cash Flow

  • The company’s cash, cash equivalents, and short-term and long-term investments balance was $1.9 billion as of June 30, 2024.
  • During the second quarter, the company generated $117.8 million of cash from operating cash flow, compared to $76.5 million during Q2'23.
  • During the second quarter, the company generated $121.7 million of cash from non-GAAP operating cash flow and $92.1 million of non-GAAP free cash flow, compared to $87.0 million of cash from non-GAAP operating cash flow and $59.6 million of non-GAAP free cash flow during Q2'23.

Additional Recent Business Highlights

  • Grew Customers to 228,054 at June 30, 2024, up 23% from June 30, 2023.
  • Average Subscription Revenue Per Customer was $11,215 during the second quarter of 2024, down 2% compared to the second quarter of 2023.

“Q2 was another solid quarter of revenue growth and profitability driven by our rapid pace of innovation and consistent execution,” said Yamini Rangan, Chief Executive Officer at HubSpot. “I am thrilled to see customers consolidating on HubSpot and the momentum we have in becoming the customer platform of choice for scaling companies. We run our business for the long-term and are focused on solving for our customers, innovating our platform, and prioritizing strong execution. That has been and will continue to be our priority. And it will continue to set us apart to drive durable growth and create long term shareholder value.”

Business Outlook

Based on information available as of August 7, 2024, HubSpot is issuing guidance for the third quarter of 2024 and full year 2024 as indicated below.

Third Quarter 2024:

  • Total revenue is expected to be in the range of $646.0 million to $647.0 million.
    • Foreign exchange rates are expected to have a neutral impact to third quarter 2024 revenue growth(1).
  • Non-GAAP operating income is expected to be in the range of $107.0 million to $108.0 million.
  • Non-GAAP net income per common share is expected to be in the range of $1.89 to $1.91. This assumes approximately 53.5 million weighted average diluted shares outstanding.

Full Year 2024:

  • Total revenue is expected to be in the range of $2.567 billion to $2.573 billion.
    • Foreign exchange rates are expected to have a neutral impact to full year 2024 revenue growth(1).
  • Non-GAAP operating income is expected to be in the range of $437.0 million to $441.0 million.
  • Non-GAAP net income per common share is expected to be in the range of $7.64 to $7.70. This assumes approximately 53.4 million weighted average diluted shares outstanding.

(1) Foreign exchange rates impact on revenue is calculated by comparing current period rates with prior period average rates.

Use of Non-GAAP Financial Measures

In our earnings press releases, conference calls, slide presentations, and webcasts, we may use or discuss non-GAAP financial measures, as defined by Regulation G. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed, and a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure, are included in this press release after the consolidated financial statements. Our earnings press releases containing such non-GAAP reconciliations can be found in the Investors section of our website ir.hubspot.com.

Conference Call Information

HubSpot will host a conference call on Wednesday, August 7, 2024 at 4:30 p.m. Eastern Time (ET) to discuss the company’s second 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 614825. An archived webcast of this conference call will also be available on HubSpot's Investor Relations website at ir.hubspot.com.

The company has used, and intends to continue to use, the investor relations portion of its website as a means of disclosing material non-public information and for complying with disclosure obligations under Regulation FD.

About HubSpot

HubSpot is the customer platform that helps businesses connect and grow better. HubSpot delivers seamless connection for customer-facing teams with a unified platform that includes AI-powered engagement hubs, a Smart CRM, and a connected ecosystem with over 1,500 App Marketplace integrations, a community network, and educational content. Learn more at www.hubspot.com.

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 third 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

(in thousands)

 

 

 

June 30,

 

 

December 31,

 

 

 

2024

 

 

2023(1)

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

797,875

 

 

$

387,987

 

Short-term investments

 

 

937,830

 

 

 

1,000,245

 

Accounts receivable

 

 

269,908

 

 

 

295,303

 

Deferred commission expense

 

 

119,558

 

 

 

99,326

 

Prepaid expenses and other current assets

 

 

111,033

 

 

 

88,679

 

Total current assets

 

 

2,236,204

 

 

 

1,871,540

 

Long-term investments

 

 

209,992

 

 

 

325,703

 

Property and equipment, net

 

 

105,886

 

 

 

103,331

 

Capitalized software development costs, net

 

 

132,026

 

 

 

106,229

 

Right-of-use assets

 

 

228,406

 

 

 

251,071

 

Deferred commission expense, net of current portion

 

 

138,636

 

 

 

122,194

 

Other assets

 

 

93,866

 

 

 

75,247

 

Intangible assets, net

 

 

37,421

 

 

 

42,316

 

Goodwill

 

 

173,565

 

 

 

173,761

 

Total assets

 

$

3,356,002

 

 

$

3,071,392

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

4,115

 

 

$

9,106

 

Accrued compensation costs

 

 

61,206

 

 

 

53,462

 

Accrued commissions

 

 

78,657

 

 

 

78,169

 

Accrued expenses and other current liabilities

 

 

95,078

 

 

 

94,074

 

Operating lease liabilities

 

 

32,886

 

 

 

35,047

 

Convertible senior notes

 

 

457,196

 

 

 

Deferred revenue

 

 

708,113

 

 

 

672,150

 

Total current liabilities

 

 

1,437,251

 

 

 

942,008

 

Operating lease liabilities, net of current portion

 

 

273,137

 

 

 

296,561

 

Deferred revenue, net of current portion

 

 

4,606

 

 

 

5,810

 

Other long-term liabilities

 

 

40,109

 

 

 

36,459

 

Convertible senior notes, net of current portion

 

 

 

 

456,206

 

Total liabilities

 

 

1,755,103

 

 

 

1,737,044

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock

 

 

51

 

 

 

50

 

Additional paid-in capital

 

 

2,418,608

 

 

 

2,136,908

 

Accumulated other comprehensive income (loss)

 

 

(4,822

)

 

 

1,827

 

Accumulated deficit

 

 

(812,938

)

 

 

(804,437

)

Total stockholders’ equity

 

 

1,600,899

 

 

 

1,334,348

 

Total liabilities and stockholders’ equity

 

$

3,356,002

 

 

$

3,071,392

 

 

(1) In the three months ended March 31, 2024, we discovered an immaterial error in our calculation of Cost of Revenues—Subscription related to how we calculate contractual credits in one of our third-party vendor agreements. As a result, we have revised the Consolidated Statement of Operations by reducing Cost of Revenues- Subscription by $2.3 million for the three months ended June 30, 2023 and $4.0 million for the six months ended June 30, 2023 to reflect the revised impact of the credits on that period. We have also revised the balance sheet as of December 31, 2023 to reflect the cumulative impact of the error on prior periods, resulting in a decrease to accrued expenses and other current liabilities and a decrease to accumulated deficit totaling $14.2 million. Lastly, we have updated certain line items within the operating section of the statement of cash flows for the three and six months ended June 30, 2023 but note no net impact to cash flows provided by operating activities. Refer to our Form 10-Q for additional information.

Consolidated Statements of Operations

(in thousands, except per share data)

 

 

For the Three Months Ended June 30,

 

 

For the Six Months Ended June 30,

 

 

2024

 

 

2023(1)

 

 

2024

 

 

2023(1)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Subscription

$

623,763

 

 

$

517,678

 

 

$

1,227,559

 

 

$

1,007,421

 

Professional services and other

 

13,467

 

 

 

11,460

 

 

 

27,085

 

 

 

23,337

 

Total revenue

 

637,230

 

 

 

529,138

 

 

 

1,254,644

 

 

 

1,030,758

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

Subscription

 

81,618

 

 

 

71,494

 

 

 

162,342

 

 

 

138,116

 

Professional services and other

 

13,899

 

 

 

13,462

 

 

 

28,262

 

 

 

27,169

 

Total cost of revenues

 

95,517

 

 

 

84,956

 

 

 

190,604

 

 

 

165,285

 

Gross profit

 

541,713

 

 

 

444,182

 

 

 

1,064,040

 

 

 

865,473

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

198,180

 

 

 

169,955

 

 

 

373,817

 

 

 

297,639

 

Sales and marketing

 

293,794

 

 

 

265,294

 

 

 

594,081

 

 

 

515,971

 

General and administrative

 

72,597

 

 

 

61,222

 

 

 

141,452

 

 

 

118,630

 

Restructuring

 

1,077

 

 

 

63,880

 

 

 

1,859

 

 

 

92,450

 

Total operating expenses

 

565,648

 

 

 

560,351

 

 

 

1,111,209

 

 

 

1,024,690

 

Loss from operations

 

(23,935

)

 

 

(116,169

)

 

 

(47,169

)

 

 

(159,217

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

20,370

 

 

 

13,542

 

 

 

39,097

 

 

 

24,013

 

Interest expense

 

(901

)

 

 

(937

)

 

 

(1,836

)

 

 

(1,867

)

Other expense

 

1,784

 

 

 

330

 

 

 

14,945

 

 

 

(465

)

Total other income

 

21,253

 

 

 

12,935

 

 

 

52,206

 

 

 

21,681

 

(Loss) income before income tax expense

 

(2,682

)

 

 

(103,234

)

 

 

5,037

 

 

 

(137,536

)

Income tax expense

 

(11,753

)

 

 

(8,569

)

 

 

(13,538

)

 

 

(10,987

)

Net loss

$

(14,435

)

 

$

(111,803

)

 

$

(8,501

)

 

$

(148,523

)

Net loss per share, basic and diluted

$

(0.28

)

 

$

(2.25

)

 

$

(0.17

)

 

$

(3.00

)

Weighted average common shares used in computing basic

and diluted net loss per share:

 

51,005

 

 

 

49,703

 

 

 

50,847

 

 

 

49,550

 

 

(1) In the three months ended March 31, 2024, we discovered an immaterial error in our calculation of Cost of Revenues—Subscription related to how we calculate contractual credits in one of our third-party vendor agreements. As a result, we have revised the Consolidated Statement of Operations by reducing Cost of Revenues- Subscription by $2.3 million for the three months ended June 30, 2023 and $4.0 million for the six months ended June 30, 2023 to reflect the revised impact of the credits on that period. We have also revised the balance sheet as of December 31, 2023 to reflect the cumulative impact of the error on prior periods, resulting in a decrease to accrued expenses and other current liabilities and a decrease to accumulated deficit totaling $14.2 million. Lastly, we have updated certain line items within the operating section of the statement of cash flows for the three and six months ended June 30, 2023 but note no net impact to cash flows provided by operating activities. Refer to our Form 10-Q for additional information.

Consolidated Statements of Cash Flows

(in thousands)

 

 

For the Three Months Ended June 30,

 

 

For the Six Months Ended June 30,

 

 

2024

 

 

2023(1)

 

 

2024

 

 

2023(1)

 

Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(14,435

)

 

$

(111,803

)

 

$

(8,501

)

 

$

(148,523

)

Adjustments to reconcile net loss to net cash and cash equivalents provided

by operating activities

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

22,204

 

 

 

16,429

 

 

 

43,438

 

 

 

32,999

 

Stock-based compensation

 

128,994

 

 

 

128,003

 

 

 

240,116

 

 

 

211,038

 

Restructuring charges

 

 

 

62,657

 

 

 

 

 

64,938

 

Gain on strategic investments

 

(2,103

)

 

 

 

 

(18,456

)

 

 

Impairment of strategic investments

 

479

 

 

 

 

 

 

4,094

 

 

 

 

(Benefit from) provision for deferred income taxes

 

(45

)

 

 

4,755

 

 

 

(212

)

 

 

4,802

 

Amortization of debt discount and issuance costs

 

502

 

 

 

496

 

 

 

1,002

 

 

 

980

 

Accretion of bond discount

 

(10,517

)

 

 

(10,769

)

 

 

(23,080

)

 

 

(18,777

)

Unrealized currency translation

 

(1,486

)

 

 

236

 

 

 

(948

)

 

 

(122

)

Changes in assets and liabilities

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

(7,001

)

 

 

(8,991

)

 

 

18,422

 

 

 

21,626

 

Prepaid expenses and other assets

 

(21,755

)

 

 

(27,028

)

 

 

(27,228

)

 

 

(47,445

)

Deferred commission expense

 

(23,083

)

 

 

(18,495

)

 

 

(40,084

)

 

 

(37,034

)

Right-of-use assets

 

13,994

 

 

 

12,489

 

 

 

20,384

 

 

 

20,972

 

Accounts payable

 

1,082

 

 

 

59

 

 

 

(218

)

 

 

(17,814

)

Accrued expenses and other liabilities

 

28,330

 

 

 

23,868

 

 

 

15,049

 

 

 

46,527

 

Operating lease liabilities

 

(10,410

)

 

 

(8,156

)

 

 

(23,153

)

 

 

(17,985

)

Deferred revenue

 

13,078

 

 

 

12,793

 

 

 

44,291

 

 

 

41,431

 

Net cash and cash equivalents provided by operating activities

 

117,828

 

 

 

76,543

 

 

 

244,916

 

 

 

157,613

 

Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

Purchases of investments

 

(252,339

)

 

 

(369,117

)

 

 

(651,717

)

 

 

(731,363

)

Maturities of investments

 

496,805

 

 

 

441,867

 

 

 

849,595

 

 

 

729,834

 

Purchases of property and equipment

 

(8,200

)

 

 

(10,879

)

 

 

(14,082

)

 

 

(14,189

)

Purchases of strategic investments

 

(3,600

)

 

 

 

 

(3,627

)

 

 

(6,000

)

Capitalization of software development costs

 

(21,441

)

 

 

(16,473

)

 

 

(43,075

)

 

 

(31,595

)

Proceeds from net working capital settlement

 

1,933

 

 

 

 

 

1,933

 

 

 

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

 

213,158

 

 

 

45,398

 

 

 

139,027

 

 

 

(53,313

)

Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

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

 

(4,696

)

 

 

(2,904

)

 

 

(13,484

)

 

 

(4,102

)

Proceeds related to the issuance of common stock under stock plans

 

25,301

 

 

 

13,296

 

 

 

45,244

 

 

 

24,550

 

Net cash and cash equivalents provided by financing activities

 

20,605

 

 

 

10,392

 

 

 

31,760

 

 

 

20,448

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

(1,509

)

 

 

(274

)

 

 

(5,815

)

 

 

1,448

 

Net increase in cash, cash equivalents and restricted cash

 

350,082

 

 

 

132,059

 

 

 

409,888

 

 

 

126,196

 

Cash, cash equivalents and restricted cash, beginning of period

 

451,846

 

 

 

328,312

 

 

 

392,040

 

 

 

334,175

 

Cash, cash equivalents and restricted cash, end of period

$

801,928

 

 

$

460,371

 

 

$

801,928

 

 

$

460,371

 

 

(1) In the three months ended March 31, 2024, we discovered an immaterial error in our calculation of Cost of Revenues—Subscription related to how we calculate contractual credits in one of our third-party vendor agreements. As a result, we have revised the Consolidated Statement of Operations by reducing Cost of Revenues- Subscription by $2.3 million for the three months ended June 30, 2023 and $4.0 million for the six months ended June 30, 2023 to reflect the revised impact of the credits on that period. We have also revised the balance sheet as of December 31, 2023 to reflect the cumulative impact of the error on prior periods, resulting in a decrease to accrued expenses and other current liabilities and a decrease to accumulated deficit totaling $14.2 million. Lastly, we have updated certain line items within the operating section of the statement of cash flows for the three and six months ended June 30, 2023 but note no net impact to cash flows provided by operating activities. Refer to our Form 10-Q for additional information.

Reconciliation of non-GAAP operating income and operating margin

(in thousands, except percentages)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2024

 

2023

 

 

2024

 

2023

 

GAAP operating loss

$

(23,935

)

$

(116,169

)

 

$

(47,169

)

$

(159,217

)

Stock-based compensation

 

128,994

 

 

128,003

 

 

 

240,116

 

 

211,038

 

Amortization of acquired intangible assets

 

2,341

 

 

851

 

 

 

4,685

 

 

1,696

 

Acquisition related expense

 

838

 

 

 

 

 

2,389

 

 

 

Restructuring charges

 

1,077

 

 

63,880

 

 

 

1,859

 

 

92,450

 

Non-GAAP operating income

$

109,315

 

$

76,565

 

 

$

201,880

 

$

145,967

 

 

 

 

 

 

 

 

 

 

 

GAAP operating margin

 

(3.8

%)

 

(22.0

%)

 

 

(3.8

%)

 

(15.4

%)

Non-GAAP operating margin

 

17.2

%

 

14.5

%

 

 

16.1

%

 

14.2

%

Reconciliation of non-GAAP net income

(in thousands, except per share amounts)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2024

 

2023

 

 

2024

 

2023

 

GAAP net loss

$

(14,435

)

$

(111,803

)

 

$

(8,501

)

$

(148,523

)

Stock-based compensation

 

128,994

 

 

128,003

 

 

 

240,116

 

 

211,038

 

Acquisition related expense

 

838

 

 

 

 

2,389

 

 

Amortization of acquired intangibles assets

 

2,341

 

 

851

 

 

 

4,685

 

 

1,696

 

Restructuring charges

 

1,077

 

 

63,880

 

 

 

1,859

 

 

92,450

 

Non-cash interest expense for amortization of debt issuance costs

 

502

 

 

496

 

 

 

1,002

 

 

980

 

Gain on strategic investments

 

(1,624

)

 

 

 

(14,362

)

 

(Gain) loss on equity method investment

 

(11

)

 

(188

)

 

 

54

 

 

(66

)

Income tax effects of non-GAAP items

 

(14,134

)

 

(9,393

)

 

 

(34,618

)

 

(22,725

)

Non-GAAP net income

$

103,548

 

$

71,846

 

 

$

192,624

 

$

134,850

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP net income per share:

 

 

 

 

 

 

 

 

 

Basic

$

2.03

 

$

1.45

 

 

$

3.79

 

$

2.72

 

Diluted

$

1.94

 

$

1.38

 

 

$

3.62

 

$

2.60

 

Shares used in non-GAAP per share calculations

 

 

 

 

 

 

 

 

 

Basic

 

51,005

 

 

49,703

 

 

 

50,847

 

 

49,550

 

Diluted

 

53,376

 

 

52,100

 

 

 

53,250

 

 

51,798

 

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

(in thousands, except percentages)

 

 

Three Months Ended June 30,

 

 

2024

 

 

2023

 

 

COS, Subs-

cription

 

COS, Prof. services & other

 

R&D

 

S&M

 

G&A

 

 

COS, Subs-

cription

 

COS, Prof. services & other

 

R&D

 

S&M

 

G&A

 

GAAP expense

$

81,618

 

$

13,899

 

$

198,180

 

$

293,794

 

$

72,597

 

 

$

71,494

 

$

13,462

 

$

169,955

 

$

265,294

 

$

61,222

 

Stock -based compensation

 

(5,444

)

 

(1,128

)

 

(64,693

)

 

(36,168

)

 

(21,561

)

 

 

(3,516

)

 

(1,459

)

 

(64,060

)

 

(38,625

)

 

(20,343

)

Amortization of acquired

intangible assets

 

(1,879

)

 

 

 

 

 

(357

)

 

(105

)

 

 

(405

)

 

 

 

 

 

(446

)

 

 

Acquisition related expense

 

 

 

 

 

(709

)

 

 

 

(129

)

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP expense

$

74,295

 

$

12,771

 

$

132,778

 

$

257,269

 

$

50,802

 

 

$

67,573

 

$

12,003

 

$

105,895

 

$

226,223

 

$

40,879

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP expense as a

percentage of revenue

 

12.8

%

 

2.2

%

 

31.1

%

 

46.1

%

 

11.4

%

 

 

13.5

%

 

2.5

%

 

32.1

%

 

50.1

%

 

11.6

%

Non-GAAP expense as a

percentage of revenue

 

11.7

%

 

2.0

%

 

20.8

%

 

40.4

%

 

8.0

%

 

 

12.8

%

 

2.3

%

 

20.0

%

 

42.8

%

 

7.7

%

 

Six Months Ended June 30,

 

 

2024

 

 

2023

 

 

COS, Subs-

cription

 

COS, Prof. services & other

 

R&D

 

S&M

 

G&A

 

 

COS, Subs-

cription

 

COS, Prof. services & other

 

R&D

 

S&M

 

G&A

 

GAAP expense

$

162,342

 

$

28,262

 

$

373,817

 

$

594,081

 

$

141,452

 

 

$

138,116

 

$

27,169

 

$

297,639

 

$

515,971

 

$

118,630

 

Stock -based compensation

 

(10,404

)

 

(2,215

)

 

(115,318

)

 

(71,325

)

 

(40,854

)

 

 

(6,259

)

 

(2,546

)

 

(97,384

)

 

(68,794

)

 

(36,055

)

Amortization of acquired

intangible assets

 

(3,761

)

 

 

 

 

 

(714

)

 

(210

)

 

 

(804

)

 

 

 

 

 

(892

)

 

 

Acquisition related expense

 

 

 

 

 

(1,755

)

 

 

 

(634

)

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP expense

$

148,177

 

$

26,047

 

$

256,744

 

$

522,042

 

$

99,754

 

 

$

131,053

 

$

24,623

 

$

200,255

 

$

446,285

 

$

82,575

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP expense as a

percentage of revenue

 

12.9

%

 

2.3

%

 

29.8

%

 

47.4

%

 

11.3

%

 

 

13.4

%

 

2.6

%

 

28.9

%

 

50.1

%

 

11.5

%

Non-GAAP expense as a

percentage of revenue

 

11.8

%

 

2.1

%

 

20.5

%

 

41.6

%

 

8.0

%

 

 

12.7

%

 

2.4

%

 

19.4

%

 

43.3

%

 

8.0

%

Reconciliation of non-GAAP subscription margin

(in thousands, except percentages)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2024

 

2023

 

 

2024

 

2023

 

GAAP subscription margin

 

$

542,145

 

$

446,184

 

 

$

1,065,217

 

$

869,305

 

Stock-based compensation

 

 

5,444

 

 

3,516

 

 

 

10,404

 

 

6,259

 

Amortization of acquired intangible assets

 

 

1,879

 

 

405

 

 

 

3,761

 

 

804

 

Non-GAAP subscription margin

 

$

549,468

 

$

450,105

 

 

$

1,079,382

 

$

876,368

 

 

 

 

 

 

 

 

 

 

 

 

GAAP subscription margin percentage

 

 

86.9

%

 

86.2

%

 

 

86.8

%

 

86.3

%

Non-GAAP subscription margin percentage

 

 

88.1

%

 

86.9

%

 

 

87.9

%

 

87.0

%

Reconciliation of free cash flow

(in thousands)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2024

 

2023

 

 

2024

 

2023

 

GAAP net cash and cash equivalents provided by operating activities

 

$

117,828

 

$

76,543

 

 

$

244,916

 

$

157,613

 

Purchases of property and equipment

 

 

(8,200

)

 

(10,879

)

 

 

(14,082

)

 

(14,189

)

Capitalization of software development costs

 

 

(21,441

)

 

(16,473

)

 

 

(43,075

)

 

(31,595

)

Payment of restructuring charges

 

 

3,881

 

 

10,425

 

 

 

8,071

 

 

32,939

 

Non-GAAP free cash flow

 

$

92,068

 

$

59,616

 

 

$

195,830

 

$

144,768

 

Reconciliation of operating cash flow

(in thousands)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2024

 

2023

 

 

2024

 

2023

 

GAAP net cash and cash equivalents provided by operating activities

 

$

117,828

 

$

76,543

 

 

$

244,916

 

$

157,613

 

Payment of restructuring charges

 

 

3,881

 

 

10,425

 

 

 

8,071

 

 

32,939

 

Non-GAAP operating cash flow

 

$

121,709

 

$

86,968

 

 

$

252,987

 

$

190,552

 

Reconciliation of forecasted non-GAAP operating income

(in thousands, except percentages)

 

Three Months Ended

September 30, 2024

 

 

Year Ended

December 31, 2024

GAAP operating income range

($31,149)-($30,299)

 

 

($96,152)-($92,752)

Stock-based compensation

134,049

 

 

516,149

Amortization of acquired intangible assets

2,350

 

 

9,403

Acquisition related expense

800

 

 

3,800

Restructuring charges

950-1,100

 

 

3,800-4,400

Non-GAAP operating income range

$107,000-$108,000

 

 

$437,000-$441,000

Reconciliation of forecasted non-GAAP net income and non-GAAP net income per share

(in thousands, except per share amounts)

 

 

 

 

 

 

Three Months Ended

September 30, 2024

 

 

Year Ended

December 31, 2024

GAAP net loss range

($15,057)-($13,894)

 

 

($30,085)-($26,935)

Stock-based compensation

134,049

 

 

516,149

Amortization of acquired intangible assets

2,350

 

 

9,403

Acquisition related expense

800

 

 

3,800

Non-cash interest expense for amortization of debt issuance costs

503

 

 

2,019

Gain on strategic investments

 

 

(14,362)

Loss on equity method investment

 

 

54

Restructuring charges

950-1,100

 

 

3,800-4,400

Income tax effects of non-GAAP items

(22,795)-(23,058)

 

 

(82,578)-(83,328)

Non-GAAP net income range

$100,800-$101,850

 

 

$408,200-$411,200

 

 

 

 

 

GAAP net income per basic and diluted share

($0.29)-($0.27)

 

 

($0.59)-($0.53)

Non-GAAP net income per diluted share

$1.89-$1.91

 

 

$7.64-$7.70

 

 

 

 

 

 

 

 

 

 

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

51,367

 

 

51,182

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

53,454

 

 

53,422

HubSpot’s estimates of stock-based compensation, amortization of acquired intangible assets, non-cash interest expense for amortization of debt issuance costs, gain on or impairment of strategic investments, loss of equity method investment, restructuring charges, and income tax effects of non-GAAP items assume, among other things, the occurrence of no additional acquisitions, and no further revisions to stock-based compensation and related expenses.

Non-GAAP Financial Measures

We report our financial results in accordance with accounting principles generally accepted in the United States of America, or GAAP. However, management believes that, in order to properly understand our short-term and long-term financial and operational trends, investors may wish to consider the impact of certain non-cash or non-recurring items when used as a supplement to financial performance measures in accordance with GAAP. These items result from facts and circumstances that vary in frequency and impact on continuing operations. In this release, HubSpot’s non-GAAP operating income, operating margin, subscription margin, expense, expense as a percentage of revenue, net income, operating and free cash flow are not presented in accordance with GAAP and are not intended to be used in lieu of GAAP presentations of results of operations. Non-GAAP operating cash flow is defined as cash and cash equivalents provided by or used in operating activities plus payment of restructuring charges. Non-GAAP free cash flow is defined as cash and cash equivalents provided by or used in operating activities less purchases of property and equipment and capitalization of software development costs, plus payment of restructuring charges. Although non-GAAP operating cash flow and non-GAAP free cash flow are not residual cash flow available for our discretionary expenditures, we believe information regarding non-GAAP operating cash flow and non-GAAP free cash flow provide useful information to investors in understanding and evaluating the strength of our liquidity and provides a comparable framework for assessing how our business performed when compared to prior periods which were not impacted by restructuring charges paid from operating cash flow.

Management believes that these non-GAAP financial measures provide additional means of evaluating period-over-period operating performance. Specifically, these non-GAAP financial measures provide management with additional means to understand and evaluate the operating results and trends in our ongoing business by eliminating certain non-cash expenses and other items that management believes might otherwise make comparisons of our ongoing business with prior periods more difficult, obscure trends in ongoing operations, or reduce management’s ability to make useful forecasts. In addition, management understands that some investors and financial analysts find this information helpful in analyzing our financial and operational performance and comparing this performance to our peers and competitors. However, these non-GAAP financial measures have limitations as an analytical tool and are not intended to be an alternative to financial measures prepared in accordance with GAAP. In addition, it should be noted that these non-GAAP financial measures may be different from non-GAAP measures used by other companies. We intend to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting. Management may, however, utilize other measures to illustrate performance in the future. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. A reconciliation of our non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included above in this press release.

These non-GAAP measures exclude stock-based compensation, amortization of acquired intangible assets, acquisition related expenses, disposition related income, non-cash interest expense for the amortization of debt issuance costs, gain or impairment losses on strategic investments, gain or loss on equity method investment, restructuring charges and account for the income tax effects of the exclusion of these non-GAAP items. We believe investors may want to incorporate the effects of these items in order to compare our financial performance with that of other companies and between time periods:

A.

Stock-based compensation is a non-cash expense accounted for in accordance with FASB ASC Topic 718. We believe that the exclusion of stock-based compensation expense allows for financial results that are more indicative of our operational performance and provide for a useful comparison of our operating results to prior periods and to our peer companies because stock-based compensation expense varies from period to period and company to company due to such things as differing valuation methodologies and changes in stock price.

 

B.

Expense for the amortization of acquired intangible assets is excluded from non-GAAP expense and income measures as HubSpot views amortization of these assets as arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are evaluated for impairment regularly, amortization of the cost of purchased intangibles is a non-cash expense that is not typically affected by operations during any particular period. Valuation and subsequent amortization of intangible assets can also be inconsistent in amount and frequency because they can significantly vary based on the timing and size of acquisitions and the inherently subjective nature of the degree to which a purchase price is allocated to intangible assets. We believe that the exclusion of this amortization expense provides for a useful comparison of our operating results to prior periods, for which we have historically excluded amortization expense, and to our peer companies, which commonly exclude acquired intangible asset amortization. It is important to note that although we exclude amortization of acquired intangible assets from our non-GAAP expense and income measures, revenue generated from such intangibles is included within our non-GAAP income measures. The use of these intangible assets contributed to our revenues earned during the periods presented and will contribute to future periods as well.

 

C.

Acquisition related expenses, such as transaction costs, retention payments, and holdback payments, and disposition related income, such as proceeds from sale of assets, are transactions that are not necessarily reflective of our operational performance during a period. We believe that the exclusion of these expenses and income provides for a useful comparison of our operating results to prior periods and to our peer companies, which commonly exclude these expenses and income.

 

D.

In June 2020, we issued $460 million of convertible notes due in 2025 with a coupon interest rate of 0.375%. The issuance cost of the debt is amortized as interest expense over the remaining term of the debt. We believe the exclusion of this non-cash interest expense provides for a useful comparison of our operating results to prior periods and to our peer companies.

 

E

Strategic investments consist of non-controlling equity investments in privately held companies. The recognition of gains or impairment losses can vary significantly across periods and we do not view them to be indicative of our fundamental operating activities and believe the exclusion of gains or impairment losses provides for a useful comparison of our operating results to prior periods and to our peer companies.

 

F.

We made a contribution to the Black Economic Development Fund (the “investee”) managed by the Local Initiatives Support Corporation and have committed to make additional capital contributions. We account for this investment under the equity method of accounting. The proportionate share of our equity method investee's net earnings have been excluded in order to provide a comparable view of our operating results to prior periods and to our peer companies. We believe this activity is not reflective of our recurring core business operating results.

 

G.

Restructuring charges are related to severance, employee related benefits, facilities and other costs associated with the restructuring plan implemented on January 25, 2023. Restructuring charges fluctuate in amount and frequency and are not reflective of our core business operating results. Over the remaining lease term (into 2027), we expect to both incur incremental restructuring charges and make cash payments related to the facilities that we abandoned in 2023. The abandonment of facilities is part of the restructuring plan we authorized in January 2023 and is intended to consolidate our lease space and create higher density across our workspaces. The incremental charges we expect to incur relate to continuing costs for the abandoned facilities and are expected to be in the range of $13-16 million and will be paid in cash over the remaining lease term. We also expect to make cash payments of approximately $51.0 million in fixed rent payments for the abandoned facilities that will be made in monthly installments over the remaining lease term for which we have taken the full P&L restructuring charge during the year ended 2023. We plan on excluding both the incremental charges and cash payments and the related restructuring cash rent payments from our non-GAAP earnings, operating cash flow, and free cash flow metrics. We believe exclusion of these charges and cash payments provides useful information to investors in understanding and evaluating the strength of earnings and liquidity and provides a comparable framework for assessing how our business performed when compared to prior periods which were not impacted by excluded restructuring charges paid from operating cash flow.

 

H.

The effects of income taxes on non-GAAP items reflect a fixed long-term projected tax rate of 20% to provide better consistency across reporting periods. To determine this long-term non-GAAP tax rate, we exclude the impact of other non-GAAP adjustments and take into account other factors such as our current operating structure and existing tax positions in various jurisdictions. We will periodically reevaluate this tax rate, as necessary, for significant events such as relevant tax law changes and material changes in our forecasted geographic earnings mix.

 

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