HubSpot Reports Q4 and Full Year 2019 Results

Written by Sample HubSpot User Sample | Feb 12, 2020 11:32:14 PM

CAMBRIDGE, MA (February 12, 2020) — HubSpot, Inc. (NYSE: HUBS), a leading growth platform, today announced financial results for the fourth quarter and full year ended December 31, 2019.


Financial Highlights:

 

Revenue

Fourth Quarter 2019:

  • Total revenue was $186.2 million, up 29% compared to Q4’18.
  • Subscription revenue was $179.1 million, up 31% compared to Q4’18.
  • Professional services and other revenue was $7.1 million, down 2% compared to Q4’18.

Full Year 2019:

  • Total revenue was $674.9 million, up 32% compared to 2018.
  • Subscription revenue was $646.3 million, up 33% compared to 2018.
  • Professional services and other revenue was $28.6 million, up 12% compared to 2018.

 

Operating Income (Loss)

Fourth Quarter 2019:

  • GAAP operating margin was (4.4%), compared to (5.4%) in Q4’18.
  • Non-GAAP operating margin was 9.5%, a slight decline from 9.8% in Q4’18.
  • GAAP operating loss was ($8.2) million, compared to ($7.8) million in Q4’18.
  • Non-GAAP operating income was $17.7 million, compared to $14.2 million in Q4’18.

Full Year 2019:

  • GAAP operating margin was (7.0%), compared to (9.4%) in 2018.
  • Non-GAAP operating margin was 8.1%, an improvement from 6.3% in 2018.
  • GAAP operating loss was ($47.0) million, compared to ($48.3) million in 2018.
  • Non-GAAP operating income was $54.9 million, compared to $32.1 million in 2018.

 

Net Income (Loss)

Fourth Quarter 2019:

  • GAAP net loss was ($10.3) million, or ($0.24) per basic and diluted share, compared to ($11.5) million, or ($0.29) per basic and diluted share in Q4’18.
  • Non-GAAP net income was $20.9 million, or $0.49 per basic and $0.45 per diluted share, compared to $15.8 million, or $0.40 per basic and $0.37 per diluted share in Q4’18.
  • Weighted average basic and diluted shares outstanding for GAAP net loss per share was 42.8 million, compared to 39.2 million basic and diluted shares in Q4’18.
  • Weighted average basic and diluted shares outstanding for non-GAAP net income per share was 42.8 million and 46.9 million respectively, compared to 39.2 million and 43.0 million, respectively in Q4’18.

 

 

 

 

Full Year 2019:

  • GAAP net loss was ($53.7) million, or ($1.28) per basic and diluted share, compared to ($63.8) million, or ($1.66) per basic and diluted share in 2018.
  • Non-GAAP net income was $69.8 million, or $1.66 per basic and $1.50 per diluted share, compared to $36.9 million, or $0.96 per basic and $0.89 per diluted share in 2018.
  • Weighted average basic and diluted shares outstanding for GAAP net loss per share was 42.0 million, compared to 38.5 million basic and diluted shares in 2018.
  • Weighted average basic and diluted shares outstanding for non-GAAP net income per share was 42.0 million and 46.5 million respectively, compared to 38.5 million and 41.6 million, respectively in 2018.

 

Balance Sheet and Cash Flow

  • The company’s cash, cash equivalents and investments balance was $1,015 million as of December 31, 2019.
  • During the fourth quarter, the company generated $47.9 million of operating cash flow compared to $33.1 million during Q4’18.
  • During the fourth quarter, the company generated $24.4 million of free cash flow compared to $25.1 million during Q4’18.
  • The company generated $119.0 million of operating cash flow in 2019 compared to $84.9 million in 2018.
  • The company generated $65.1 million of free cash flow in 2019 compared to $51.4 million in 2018.

 

Additional Recent Business Highlights

  • Grew total customers to 73,483 at December 31, 2019 up 30% from December 31, 2018.
  • Total average subscription revenue per customer was $10,047 during the fourth quarter of 2019 up 0.3% compared to the fourth quarter of 2018.

 

"Across the company, 2019 was a year centered on making meaningful improvements in the customer experience. I’m exceptionally proud of how we’ve started to see those investments pay off in the levels of customer net promoter score we saw in the fourth quarter," said Brian Halligan, co-founder and CEO. “Not only was it the right thing to do for our customers, it put us in a far better position to execute in 2020, giving us the foundation to add more power to the HubSpot platform without creating undue friction to the customer experience."

 

Business Outlook
Based on information available as of February 12, 2020, HubSpot is issuing guidance for the first quarter of 2020 and full year 2020 as indicated below.


First Quarter 2020:

  • Total revenue is expected to be in the range of $192.5 million to $193.5 million.
  • Non-GAAP operating income is expected to be in the range of $9.5 million to $10.5 million.
  • Non-GAAP net income per common share is expected to be in the range of $0.22 to $0.24. This assumes approximately 48.2 million weighted average diluted shares outstanding.

 

Full Year 2020:

  • Total revenue is expected to be in the range of $840.5 million to $844.5 million.
  • Non-GAAP operating income is expected to be in the range of $54.0 million to $58.0 million.
  • Non-GAAP net income per common share is expected to be in the range of $1.24 to $1.32. This assumes approximately 48.6 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 Wednesday February 12, 2020 at 4:30 p.m. Eastern Time (ET) to discuss the company’s fourth 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 6676017. 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 6676017. 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 73,400 total customers in over 120 countries useHubSpot’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 first fiscal quarter and full year 2020; and statements regarding our positioning for future growth. 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 November 5, 2019 and our other SEC filings, including our upcoming Annual Report on Form 10-K for the year ended December 31, 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)

 

                 
 
 
December 31,
 
 
December 31,
 
 
 
2019
 
 
2018
 
Assets
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
269,670
 
 
$
111,489
 
Short-term investments
 
 
691,834
 
 
 
480,761
 
Accounts receivable
 
 
92,517
 
 
 
77,100
 
Deferred commission expense
 
 
32,078
 
 
 
23,664
 
Restricted cash
 
 
5,816
 
 
 
5,175
 
Prepaid expenses and other current assets
 
 
17,809
 
 
 
14,229
 
Total current assets
 
 
1,109,724
 
 
 
712,418
 
Long-term investments
 
 
53,776
 
 
 
11,450
 
Property and equipment, net
 
 
83,649
 
 
 
52,468
 
Capitalized software development costs, net
 
 
16,793
 
 
 
12,746
 
Right-of-use assets
 
 
234,390
 
 
 
—
 
Deferred commission expense, net of current portion
 
 
19,110
 
 
 
18,114
 
Other assets
 
 
9,824
 
 
 
6,888
 
Intangible assets, net
 
 
11,752
 
 
 
4,919
 
Goodwill
 
 
30,250
 
 
 
14,950
 
Total assets
 
$
1,569,268
 
 
$
833,953
 
Liabilities and stockholders’ equity
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
Accounts payable
 
$
12,842
 
 
$
7,810
 
Accrued compensation costs
 
 
26,318
 
 
 
23,589
 
Accrued expenses and other current liabilities
 
 
28,686
 
 
 
22,305
 
Operating lease liabilities
 
 
23,613
 
 
 
—
 
Deferred revenue
 
 
231,030
 
 
 
183,305
 
Total current liabilities
 
 
322,489
 
 
 
237,009
 
Operating lease liabilities, net of current portion
 
 
244,216
 
 
 
—
 
Deferred rent, net of current portion
 
 
—
 
 
 
26,445
 
Deferred revenue, net of current portion
 
 
3,058
 
 
 
2,179
 
Other long-term liabilities
 
 
8,983
 
 
 
4,897
 
Convertible senior notes
 
 
340,564
 
 
 
318,782
 
Total liabilities
 
 
919,310
 
 
 
589,312
 
Stockholders’ equity:
 
 
 
 
 
 
 
 
Common stock
 
 
44
 
 
 
40
 
Additional paid-in capital
 
 
1,048,380
 
 
 
589,708
 
Accumulated other comprehensive loss
 
 
(336
)
 
 
(723
)
Accumulated deficit
 
 
(398,130
)
 
 
(344,384
)
Total stockholders’ equity
 
 
649,958
 
 
 
244,641
 
Total liabilities and stockholders’ equity
 
$
1,569,268
 
 
$
833,953
 

 

 

 

 

 

 

Consolidated Statements of Operations

(in thousands, except per share data)

 

                               
 
For the Three Months Ended December 31,
 
 
Year Ended December 31,
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Subscription
$
179,086
 
 
$
136,804
 
 
$
646,266
 
 
$
487,450
 
Professional services and other
 
7,100
 
 
 
7,218
 
 
 
28,594
 
 
 
25,530
 
Total revenue
 
186,186
 
 
 
144,022
 
 
 
674,860
 
 
 
512,980
 
Cost of revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Subscription
 
27,960
 
 
 
19,742
 
 
 
98,510
 
 
 
69,718
 
Professional services and other
 
8,015
 
 
 
7,622
 
 
 
31,448
 
 
 
30,639
 
Total cost of revenues
 
35,975
 
 
 
27,364
 
 
 
129,958
 
 
 
100,357
 
Gross profit
 
150,211
 
 
 
116,658
 
 
 
544,902
 
 
 
412,623
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Research and development
 
42,757
 
 
 
32,005
 
 
 
158,237
 
 
 
117,603
 
Sales and marketing
 
90,418
 
 
 
70,960
 
 
 
340,685
 
 
 
267,444
 
General and administrative
 
25,194
 
 
 
21,525
 
 
 
92,971
 
 
 
75,834
 
Total operating expenses
 
158,369
 
 
 
124,490
 
 
 
591,893
 
 
 
460,881
 
Loss from operations
 
(8,158
)
 
 
(7,832
)
 
 
(46,991
)
 
 
(48,258
)
Other expense:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
 
4,646
 
 
 
2,844
 
 
 
19,429
 
 
 
9,176
 
Interest expense
 
(5,872
)
 
 
(5,493
)
 
 
(22,818
)
 
 
(21,386
)
Other expense
 
380
 
 
 
(405
)
 
 
(393
)
 
 
(1,492
)
Total other expense
 
(846
)
 
 
(3,054
)
 
 
(3,782
)
 
 
(13,702
)
Loss before income tax expense
 
(9,004
)
 
 
(10,886
)
 
 
(50,773
)
 
 
(61,960
)
Income tax expense
 
(1,298
)
 
 
(606
)
 
 
(2,973
)
 
 
(1,868
)
Net loss
$
(10,302
)
 
$
(11,492
)
 
$
(53,746
)
 
$
(63,828
)
Net loss per share, basic and diluted
$
(0.24
)
 
$
(0.29
)
 
$
(1.28
)
 
$
(1.66
)
Weighted average common shares used in computing basic
and diluted net loss per share:
 
42,844
 
 
 
39,153
 
 
 
42,025
 
 
 
38,529
 

 

 

 

 

 

 

Consolidated Statements of Cash Flows

(in thousands)

 

                               
 
For the Three Months Ended December 31,
 
 
Year Ended December 31,
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
Operating Activities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
$
(10,302
)
 
$
(11,492
)
 
$
(53,746
)
 
$
(63,828
)
Adjustments to reconcile net loss to net cash and cash equivalents provided by operating activities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
7,545
 
 
 
6,889
 
 
 
28,793
 
 
 
23,428
 
Stock-based compensation
 
24,095
 
 
 
20,927
 
 
 
97,754
 
 
 
76,261
 
Deferred income tax (benefit) expense
 
(848
)
 
 
(7
)
 
 
(799
)
 
 
36
 
Amortization of debt discount and issuance costs
 
5,606
 
 
 
5,232
 
 
 
21,790
 
 
 
20,335
 
Accretion of bond discount
 
(3,271
)
 
 
(2,270
)
 
 
(14,160
)
 
 
(6,787
)
Noncash rent expense
 
—
 
 
 
364
 
 
 
—
 
 
 
2,336
 
Unrealized currency translation
 
37
 
 
 
268
 
 
 
(156
)
 
 
483
 
Changes in assets and liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accounts receivable
 
(14,082
)
 
 
(14,460
)
 
 
(15,428
)
 
 
(17,726
)
Prepaid expenses and other assets
 
2,921
 
 
 
3,057
 
 
 
(3,296
)
 
 
3,880
 
Deferred commission expense
 
(4,115
)
 
 
(8,013
)
 
 
(9,666
)
 
 
(23,900
)
Right-of-use assets
 
8,347
 
 
 
—
 
 
 
22,657
 
 
 
—
 
Accounts payable
 
(1,724
)
 
 
(964
)
 
 
3,927
 
 
 
3,298
 
Accrued expenses and other current liabilities
 
6,320
 
 
 
8,165
 
 
 
7,819
 
 
 
11,920
 
Operating lease liabilities
 
(993
)
 
 
—
 
 
 
(15,781
)
 
 
—
 
Deferred rent
 
—
 
 
 
1,812
 
 
 
—
 
 
 
5,799
 
Deferred revenue
 
28,355
 
 
 
23,603
 
 
 
49,265
 
 
 
49,316
 
Net cash and cash equivalents provided by operating activities
 
47,891
 
 
 
33,111
 
 
 
118,973
 
 
 
84,851
 
Investing Activities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchases of investments
 
(336,853
)
 
 
(156,794
)
 
 
(1,304,847
)
 
 
(681,632
)
Maturities and sales of investments
 
376,752
 
 
 
145,525
 
 
 
1,066,366
 
 
 
644,375
 
Purchases of property and equipment
 
(19,175
)
 
 
(5,617
)
 
 
(40,372
)
 
 
(22,305
)
Capitalization of software development costs
 
(4,335
)
 
 
(2,442
)
 
 
(13,474
)
 
 
(11,168
)
Acquisition of a business, net of cash acquired
 
(23,314
)
 
 
—
 
 
 
(23,314
)
 
 
—
 
Purchases of strategic investments
 
—
 
 
 
(200
)
 
 
(553
)
 
 
(500
)
Net cash and cash equivalents used in investing activities
 
(6,925
)
 
 
(19,528
)
 
 
(316,194
)
 
 
(71,230
)
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
 
(1,480
)
 
 
(2,100
)
 
 
(6,247
)
 
 
(8,033
)
Proceeds related to the issuance of common stock under stock plans
 
4,652
 
 
 
4,786
 
 
 
23,578
 
 
 
21,555
 
Repayment of debt
 
(333
)
 
 
—
 
 
 
(333
)
 
 
—
 
Repayment of finance lease obligations
 
(35
)
 
 
(152
)
 
 
(284
)
 
 
(744
)
Net cash and cash equivalents provided by financing activities
 
2,804
 
 
 
2,534
 
 
 
359,342
 
 
 
12,778
 
Effect of exchange rate changes on cash, cash equivalents and restricted cash
 
1,451
 
 
 
(750
)
 
 
(720
)
 
 
(2,069
)
Net increase in cash, cash equivalents and restricted cash
 
45,221
 
 
 
15,367
 
 
 
161,401
 
 
 
24,330
 
Cash, cash equivalents and restricted cash, beginning of period
 
233,294
 
 
 
101,747
 
 
 
117,114
 
 
 
92,784
 
Cash, cash equivalents and restricted cash, end of period
$
278,515
 
 
$
117,114
 
 
$
278,515
 
 
$
117,114
 

 

 

 

 

                           
Reconciliation of non-GAAP operating income and operating margin
(in thousands, except percentages)
Three Months Ended December 31,
 
 
Year Ended December 31,
 
 
2019
 
2018
 
 
2019
 
2018
 
GAAP operating loss
$
(8,158
)
$
(7,832
)
 
$
(46,991
)
$
(48,258
)
Stock-based compensation
 
24,095
 
 
20,927
 
 
 
97,754
 
 
76,261
 
Amortization of acquired intangible assets
 
839
 
 
800
 
 
 
3,201
 
 
1,394
 
Acquisition related expenses
 
876
 
 
289
 
 
 
971
 
 
2,696
 
Non-GAAP operating income
$
17,652
 
$
14,184
 
 
$
54,935
 
$
32,093
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP operating margin
 
(4.4
%)
 
(5.4
%)
 
 
(7.0
%)
 
(9.4
%)
Non-GAAP operating margin
 
9.5
%
 
9.8
%
 
 
8.1
%
 
6.3
%

 

 

 

                           
Reconciliation of non-GAAP net income
(in thousands, except per share amounts)
Three Months Ended December 31,
 
 
Year Ended December 31,
 
 
2019
 
2018
 
 
2019
 
2018
 
GAAP net loss
$
(10,302
)
$
(11,492
)
 
$
(53,746
)
$
(63,828
)
Stock-based compensation
 
24,095
 
 
20,927
 
 
 
97,754
 
 
76,261
 
Amortization of acquired intangibles assets
 
839
 
 
800
 
 
 
3,201
 
 
1,394
 
Acquisition related expenses
 
876
 
 
289
 
 
 
971
 
 
2,696
 
Non-cash interest expense for amortization of debt discount and debt issuance costs
 
5,606
 
 
5,232
 
 
 
21,790
 
 
20,335
 
Income tax effect of non-GAAP items
 
(195
)
 
—
 
 
 
(195
)
 
—
 
Non-GAAP net income
$
20,919
 
$
15,756
 
 
$
69,775
 
$
36,858
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP net income per share:
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
$
0.49
 
$
0.40
 
 
$
1.66
 
$
0.96
 
Diluted
$
0.45
 
$
0.37
 
 
$
1.50
 
$
0.89
 
Shares used in non-GAAP per share calculations
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
42,844
 
 
39,153
 
 
 
42,025
 
 
38,529
 
Diluted
 
46,912
 
 
43,024
 
 
 
46,492
 
 
41,595
 

 

 

 

                                                               
Reconciliation of non-GAAP expense and expense as a percentage of revenue
 
 
 
 
 
 
 
 
 
 
(in thousands, except percentages)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31,
 
 
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
$
27,960
 
$
8,015
 
$
42,757
 
$
90,418
 
$
25,194
 
 
$
19,742
 
$
7,622
 
$
32,005
 
$
70,960
 
$
21,525
 
Stock-based compensation
 
(836
)
 
(531
)
 
(8,085
)
 
(9,324
)
 
(5,319
)
 
 
(491
)
 
(585
)
 
(6,462
)
 
(8,772
)
 
(4,617
)
Amortization of acquired intangible assets
 
(839
)
 
—
 
 
—
 
 
—
 
 
—
 
 
 
(800
)
 
—
 
 
—
 
 
—
 
 
—
 
Acquisition related expenses
 
—
 
 
—
 
 
(262
)
 
—
 
 
(614
)
 
 
—
 
 
—
 
 
(289
)
 
—
 
 
—
 
Non-GAAP expense
$
26,285
 
$
7,484
 
$
34,410
 
$
81,094
 
$
19,261
 
 
$
18,451
 
$
7,037
 
$
25,254
 
$
62,188
 
$
16,908
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP expense as a percentage of revenue
 
15.0
%
 
4.3
%
 
23.0
%
 
48.6
%
 
13.5
%
 
 
13.7
%
 
5.3
%
 
22.2
%
 
49.3
%
 
14.9
%
Non-GAAP expense as a percentage of revenue
 
14.1
%
 
4.0
%
 
18.5
%
 
43.6
%
 
10.3
%
 
 
12.8
%
 
4.9
%
 
17.5
%
 
43.2
%
 
11.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31,
 
 
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
$
98,510
 
$
31,448
 
$
158,237
 
$
340,685
 
$
92,971
 
 
$
69,718
 
$
30,639
 
$
117,603
 
$
267,444
 
$
75,834
 
Stock-based compensation
 
(3,127
)
 
(2,829
)
 
(33,748
)
 
(36,599
)
 
(21,451
)
 
 
(1,476
)
 
(2,924
)
 
(23,328
)
 
(31,099
)
 
(17,434
)
Amortization of acquired intangible assets
 
(3,201
)
 
—
 
 
—
 
 
—
 
 
—
 
 
 
(1,394
)
 
—
 
 
—
 
 
—
 
 
—
 
Acquisition related expenses
 
—
 
 
—
 
 
(357
)
 
—
 
 
(614
)
 
 
—
 
 
—
 
 
(2,696
)
 
—
 
 
—
 
Non-GAAP expense
$
92,182
 
$
28,619
 
$
124,132
 
$
304,086
 
$
70,906
 
 
$
66,848
 
$
27,715
 
$
91,579
 
$
236,345
 
$
58,400
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP expense as a percentage of revenue
 
14.6
%
 
4.7
%
 
23.4
%
 
50.5
%
 
13.8
%
 
 
13.6
%
 
6.0
%
 
22.9
%
 
52.1
%
 
14.8
%
Non-GAAP expense as a percentage of revenue
 
13.7
%
 
4.2
%
 
18.4
%
 
45.1
%
 
10.5
%
 
 
13.0
%
 
5.4
%
 
17.9
%
 
46.1
%
 
11.4
%

 

 

 

                                                             
Reconciliation of non-GAAP subscription margin
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands, except percentages)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31,
 
 
 
 
Year Ended December 31,
 
 
 
2019
 
2018
 
 
 
 
2019
 
2018
 
GAAP subscription margin
 
$
151,126
 
$
117,062
 
 
 
 
$
547,756
 
$
417,732
 
Stock -based compensation
 
 
836
 
 
491
 
 
 
 
 
3,127
 
 
1,476
 
Amortization of acquired intangible assets
 
 
839
 
 
800
 
 
 
 
 
3,201
 
 
1,394
 
Non-GAAP subscription margin
 
$
152,801
 
$
118,353
 
 
 
 
$
554,084
 
$
420,602
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP subscription margin percentage
 
 
84.4
%
 
85.6
%
 
 
 
 
84.8
%
 
85.7
%
Non-GAAP subscription margin percentage
 
 
85.3
%
 
86.5
%
 
 
 
 
85.7
%
 
86.3
%

 

 

 

                             
Reconciliation of free cash flow
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31,
 
 
Year Ended December 31,
 
 
 
2019
 
2018
 
 
2019
 
2018
 
GAAP net cash and cash equivalents provided by operating activities
 
$
47,891
 
$
33,111
 
 
$
118,973
 
$
84,851
 
Purchases of property and equipment
 
 
(19,175
)
 
(5,617
)
 
 
(40,372
)
 
(22,305
)
Capitalization of software development costs
 
 
(4,335
)
 
(2,442
)
 
 
(13,474
)
 
(11,168
)
Free cash flow
 
$
24,381
 
$
25,052
 
 
$
65,127
 
$
51,378
 

 

 

 

               
Reconciliation of forecasted non-GAAP operating income
(in thousands, except percentages)
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2020
 
 
Year Ended
December 31, 2020
 
GAAP operating income range
($18,210)-($17,210)
 
 
($74,725)-($70,725)
 
Stock-based compensation
 
26,800
 
 
 
126,300
 
Amortization of acquired intangible assets
 
900
 
 
 
2,400
 
Acquisition related expenses
 
10
 
 
 
25
 
Non-GAAP operating income range
$9,500-$10,500
 
 
$54,000-$58,000
 

 

 

 

               
Reconciliation of forecasted non-GAAP net income and non-GAAP net income per share
(in thousands, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2020
 
 
Year Ended
December 31, 2020
 
GAAP net loss range
($22,440)-($21,440)
 
 
($91,155)-($87,155)
 
Stock-based compensation
 
26,800
 
 
 
126,300
 
Amortization of acquired intangible assets
 
900
 
 
 
2,400
 
Acquisition related expenses
 
10
 
 
 
25
 
Non-cash interest expense for amortization of debt discount and debt issuance costs
 
5,700
 
 
 
23,400
 
Income tax effect of non-GAAP items
 
(170
)
 
 
(870
)
Non-GAAP net income range
$10,800-$11,800
 
 
$60,100-$64,100
 
 
 
 
 
 
 
 
 
GAAP net income per basic and diluted share
($0.52)-($0.50)
 
 
($2.08)-($1.99)
 
Non-GAAP net income per diluted share
$0.22-$0.24
 
 
$1.24-$1.32
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares used in computing GAAP basic and diluted net loss per share:
 
43,300
 
 
 
43,875
 
 
 
 
 
 
 
 
 
Weighted average common shares used in computing non-GAAP diluted net loss per share:
 
48,240
 
 
 
48,640
 

 

 

 

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, and income tax 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.

 

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. 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.

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.

 

Investor Relations Contact:
 Charles MacGlashing
investors@hubspot.com

Media Contact:
 Ellie Flanagan
eflanagan@hubspot.com
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