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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
(MARK ONE)
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☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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FOR THE QUARTERLY PERIOD ENDED
March 31,
2023
OR
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD FROM
TO
COMMISSION FILE NUMBER
001-36680
HubSpot, Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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20-2632791
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Two Canal Park
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Cambridge,
Massachusetts
02141
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(Address of principal executive offices)
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(888)
482-7768
(Registrant’s telephone number, including area code)
25 First Street
Cambridge,
Massachusetts
02141
(Former name, former address and former fiscal year, if changed
since last report)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock, par value $0.001 per share
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HUBS
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New York Stock Exchange
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes
☒ NO ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).
Yes
☒ NO ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
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Large accelerated filer
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☒
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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Emerging growth company
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☐
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO
☒
There were
49,638,689
shares of the registrant’s Common Stock issued and outstanding as
of April 28, 2023.
HUBSPOT, INC.
Table of Contents
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended, and these statements involve substantial risks
and uncertainties. All statements other than statements of
historical fact contained in this Quarterly Report on Form 10-Q are
forward-looking statements. Forward-looking statements generally
relate to future events or our future financial or operating
performance. In some cases, you can identify forward-looking
statements because they contain words such as “may,” “should,”
“expects,” “plans,” “anticipates,” “could,” “intends,” “target,”
“projects,” “contemplates,” “believes,” “estimates,” “predicts,”
“potential” or “continue” or the negative of these words or other
similar terms or expressions that concern our expectations,
strategy, plans or intentions. Forward-looking statements contained
in this Quarterly Report on Form 10-Q include, but are not limited
to, statements about:
•
our future financial and operational performance, including our
expectations regarding our revenue, cost of revenue, gross margin
and operating expenses;
•
maintaining and expanding our customer base and increasing our
average subscription revenue per customer;
•
the impact of competition in our industry and innovation by our
competitors;
•
our anticipated growth and expectations regarding our ability to
manage our future growth;
•
our expectations regarding the potential impact of geo-political
conflicts, inflationary pressures, foreign currency movement,
macroeconomic stability, and the COVID-19 pandemic 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 future financial performance;
•
our anticipated areas of investments, including sales and
marketing, research and development, customer service and support,
data center infrastructure and service capabilities, and
expectations relating to such investments;
•
our predictions about industry and market trends;
•
our ability to anticipate and address the evolution of technology
and the technological needs of our customers, to roll-out upgrades
to our existing software platform and to develop new and enhanced
applications to meet the needs of our customers;
•
our ability to maintain our brand and inbound marketing, selling
and servicing thought leadership position;
the impact of our corporate culture and our ability to attract,
hire and retain necessary qualified employees to expand our
operations;
•
the anticipated effect on our business of litigation to which we
are or may become a party;
•
our ability to successfully acquire and integrate companies and
assets;
•
our plans regarding declaring or paying cash dividends in the
foreseeable future; and
•
our ability to stay abreast of new or modified laws and regulations
that currently apply or become applicable to our business both in
the United States and internationally.
We caution you that the foregoing list may not contain all of the
forward-looking statements made in this Quarterly Report on Form
10-Q.
You should not rely upon forward-looking statements as predictions
of future events. We have based the forward-looking statements
contained in this Quarterly Report on Form 10-Q primarily on our
current expectations and projections about future events and trends
that we believe may affect our business, financial condition,
results of operations and prospects. The outcome of the events
described in these forward-looking statements is subject to risks,
uncertainties and other factors described in “Risk Factors” and
elsewhere in this Quarterly Report on Form 10-Q. Moreover, we
operate in a very competitive and rapidly changing environment. New
risks and uncertainties emerge from time to time, and it is not
possible for us to predict all risks and uncertainties that could
have an impact on the forward-looking statements contained in this
Quarterly Report on Form 10-Q. The results, events and
circumstances
3
reflected in the forward-looking statements may not be achieved or
occur, and actual results, events or circumstances could differ
materially from those described in the forward-looking
statements.
The forward-looking statements made in this Quarterly Report on
Form 10-Q relate only to events as of the date on which the
statements are made. We undertake no obligation to update any
forward-looking statements made in this Quarterly Report on Form
10-Q to reflect events or circumstances after the date of this
Quarterly Report on Form 10-Q or to reflect new information or the
occurrence of unanticipated events, except as required by
law.
We may not actually achieve the plans, intentions or expectations
disclosed in our forward-looking statements and you should not
place undue reliance on our forward-looking statements. Our
forward-looking statements do not reflect the potential impact of
any future acquisitions, mergers, dispositions, joint ventures or
investments we may make.
In this Quarterly Report on Form 10-Q, the terms “HubSpot,” “we,”
“us,” and “our” refer to HubSpot, Inc. and its subsidiaries, unless
the context indicates otherwise.
Risk Factor Summary
The risk factors detailed in Item 1A entitled “Risk Factors” in
this Quarterly Report on Form 10-Q are the risks that we believe
are material to our investors and a reader should carefully
consider them. Those risks are not all of the risks we face and
other factors not presently known to us or that we currently
believe are immaterial may also affect our business if they occur.
The following is a summary of the risk factors detailed in Item
1A:
•
We are dependent upon customer renewals, the addition of new
customers, increased revenue from existing customers and the
continued growth of the market for a CRM Platform.
•
We face significant competition from both established and new
companies offering marketing, sales, customer service, operations
and content management software and other related applications, as
well as internally developed software, which may harm our ability
to add new customers, retain existing customers and grow our
business.
•
Failure to effectively develop and expand our marketing, sales,
customer service, operations, and content management capabilities
could harm our ability to increase our customer base and achieve
broader market acceptance of our platform.
•
If we fail to adapt and respond effectively to rapidly changing
technology, evolving industry standards and changing customer needs
or requirements, our CRM Platform may become less
competitive.
•
Our ability to introduce new products and features is dependent on
adequate research and development resources. If we do not
adequately fund our research and development efforts, we may not be
able to compete effectively and our business and operating results
may be harmed.
•
We are exposed to fluctuations in currency exchange rates that
could adversely affect our financial results.
•
The current economic downturn may lead to decreased demand for our
products and services and otherwise harm our business and results
of operations.
•
Interruptions or delays in service from our third-party data center
providers could impair our ability to deliver our platform to our
customers, resulting in customer dissatisfaction, damage to our
reputation, loss of customers, limited growth, and reduction in
revenue.
•
If our CRM Platform has outages or fails due to defects or similar
problems, and if we fail to correct any defect or other software
problems, we could lose customers, become subject to service
performance or warranty claims or incur significant
costs.
•
If our or our customers’ security measures are compromised or
unauthorized access to data of our customers or their customers is
otherwise obtained, our CRM Platform may be perceived as not being
secure, our customers may be harmed and may curtail or cease their
use of our platform, our reputation may be damaged and we may incur
significant liabilities.
•
We have a history of losses and may not achieve profitability in
the future.
•
We may experience quarterly fluctuations in our operating results
due to a number of factors, which makes our future results
difficult to predict and could cause our operating results to fall
below expectations or our guidance.
4
•
If we do not accurately predict subscription renewal rates or
otherwise fail to forecast our revenue accurately, or if we fail to
match our expenditures with corresponding revenue, our operating
results could be adversely affected.
•
Our ability to raise capital in the future may be limited, and our
failure to raise capital when needed could prevent us from
growing.
•
Our Restructuring Plan and associated organizational changes may
not adequately reduce our operating costs or improve operating
margins, may lead to additional workforce attrition, and may cause
operational disruptions.
5
PART I — Financial
Information
Item 1. Financial
Statements
HubSpot, Inc.
Unaudited Consolidated
Balance Sheets
(in thousands)
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|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
|
2023
|
|
|
2022
|
|
|
Assets
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
325,159
|
|
|
$
|
331,022
|
|
|
Short-term investments
|
|
|
1,159,554
|
|
|
|
1,081,662
|
|
|
Accounts receivable — net of allowance for doubtful accounts of
$3,466
at March 31, 2023 and $3,266 at
December 31, 2022
|
|
|
197,516
|
|
|
|
226,849
|
|
|
Deferred commission expense
|
|
|
76,365
|
|
|
|
70,992
|
|
|
Prepaid expenses and other current assets
|
|
|
63,480
|
|
|
|
44,074
|
|
|
Total current assets
|
|
|
1,822,074
|
|
|
|
1,754,599
|
|
|
Long-term investments
|
|
|
121,814
|
|
|
|
112,791
|
|
|
Property and equipment, net
|
|
|
107,060
|
|
|
|
105,227
|
|
|
Capitalized software development costs, net
|
|
|
73,068
|
|
|
|
63,790
|
|
|
Right-of-use assets
|
|
|
310,000
|
|
|
|
319,304
|
|
|
Deferred commission expense, net of current portion
|
|
|
80,476
|
|
|
|
66,559
|
|
|
Other assets
|
|
|
66,145
|
|
|
|
58,795
|
|
|
Intangible assets, net
|
|
|
16,702
|
|
|
|
17,446
|
|
|
Goodwill
|
|
|
46,454
|
|
|
|
46,227
|
|
|
Total assets
|
|
$
|
2,643,793
|
|
|
$
|
2,544,738
|
|
|
Liabilities and stockholders’ equity
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
2,958
|
|
|
$
|
20,883
|
|
|
Accrued compensation costs
|
|
|
70,605
|
|
|
|
62,846
|
|
|
Accrued expenses and other current liabilities
|
|
|
131,492
|
|
|
|
102,122
|
|
|
Operating lease liabilities
|
|
|
33,580
|
|
|
|
35,928
|
|
|
Deferred revenue
|
|
|
571,793
|
|
|
|
539,874
|
|
|
Total current liabilities
|
|
|
810,428
|
|
|
|
761,653
|
|
|
Operating lease liabilities, net of current portion
|
|
|
309,037
|
|
|
|
316,184
|
|
|
Deferred revenue, net of current portion
|
|
|
5,474
|
|
|
|
5,904
|
|
|
Other long-term liabilities
|
|
|
17,763
|
|
|
|
14,546
|
|
|
Convertible senior notes
|
|
|
454,712
|
|
|
|
454,227
|
|
|
Total liabilities
|
|
|
1,597,414
|
|
|
|
1,552,514
|
|
|
Commitments and contingencies (Note
10)
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
Common stock
|
|
|
49
|
|
|
|
49
|
|
|
Additional paid-in capital
|
|
|
1,734,749
|
|
|
|
1,647,446
|
|
|
Accumulated other comprehensive loss
|
|
|
(7,756
|
)
|
|
|
(12,890
|
)
|
|
Accumulated deficit
|
|
|
(680,663
|
)
|
|
|
(642,381
|
)
|
|
Total stockholders’ equity
|
|
|
1,046,379
|
|
|
|
992,224
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
2,643,793
|
|
|
$
|
2,544,738
|
|
The accompanying notes are an integral part of the consolidated
financial statements.
6
HubSpot, Inc.
Unaudited Consolidated Statements
of Operations
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
|
|
2023
|
|
|
2022
|
|
|
Revenues:
|
|
|
|
|
|
|
Subscription
|
$
|
489,743
|
|
|
$
|
384,956
|
|
|
Professional services and other
|
|
11,877
|
|
|
|
10,643
|
|
|
Total revenue
|
|
501,620
|
|
|
|
395,599
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
Subscription
|
|
68,339
|
|
|
|
59,384
|
|
|
Professional services and other
|
|
13,707
|
|
|
|
13,552
|
|
|
Total cost of revenues
|
|
82,046
|
|
|
|
72,936
|
|
|
Gross profit
|
|
419,574
|
|
|
|
322,663
|
|
|
Operating expenses:
|
|
|
|
|
|
|
Research and development
|
|
127,683
|
|
|
|
92,736
|
|
|
Sales and marketing
|
|
250,683
|
|
|
|
197,134
|
|
|
General and administrative
|
|
57,405
|
|
|
|
43,947
|
|
|
Restructuring (Note 14)
|
|
28,570
|
|
|
|
—
|
|
|
Total operating expenses
|
|
464,341
|
|
|
|
333,817
|
|
|
Loss from operations
|
|
(44,767
|
)
|
|
|
(11,154
|
)
|
|
Other expense:
|
|
|
|
|
|
|
Interest income
|
|
10,472
|
|
|
|
515
|
|
|
Interest expense
|
|
(930
|
)
|
|
|
(950
|
)
|
|
Other (expense) income
|
|
(794
|
)
|
|
|
3,692
|
|
|
Total other income
|
|
8,748
|
|
|
|
3,257
|
|
|
Loss before income tax expense
|
|
(36,019
|
)
|
|
|
(7,897
|
)
|
|
Income tax expense
|
|
(2,263
|
)
|
|
|
(1,444
|
)
|
|
Net loss
|
$
|
(38,282
|
)
|
|
$
|
(9,341
|
)
|
|
Net loss per share, basic and diluted
|
$
|
(0.78
|
)
|
|
$
|
(0.20
|
)
|
|
Weighted average common shares used in
computing basic and diluted net loss per
share:
|
|
49,395
|
|
|
|
47,577
|
|
The accompanying notes are an integral part of the consolidated
financial statements.
7
HubSpot, Inc.
Unaudited Consolidated Statements
of Comprehensive Loss
(in thousands)
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
|
|
2023
|
|
|
2022
|
|
|
Net loss
|
$
|
(38,282
|
)
|
|
$
|
(9,341
|
)
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
627
|
|
|
|
(356
|
)
|
|
Changes in unrealized gain (loss) on investments, net of income
taxes
of $0 for
the three months ended March 31, 2023 and 2022
|
|
4,507
|
|
|
|
(4,001
|
)
|
|
Comprehensive loss
|
$
|
(33,148
|
)
|
|
$
|
(13,698
|
)
|
The accompanying notes are an integral part of the consolidated
financial statements.
8
HubSpot, Inc.
Unaudited Consolidated Statements of Stockholders'
Equity
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock, $0.001
Par Value
|
|
|
Treasury Stock, $0.001
Par Value
|
|
|
Additional
Paid-In
|
|
|
Accumulated
Other
Comprehensive
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
$
|
|
|
Shares
|
|
|
$
|
|
|
Capital
|
|
|
(Loss)
|
|
|
Deficit
|
|
|
Total
|
|
|
Balances at December 31, 2022
|
|
49,217
|
|
|
$
|
49
|
|
|
|
910
|
|
|
$
|
—
|
|
|
$
|
1,647,446
|
|
|
$
|
(12,890
|
)
|
|
$
|
(642,381
|
)
|
|
|
992,224
|
|
|
Issuance of common stock under stock
plans
|
|
260
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,196
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,196
|
|
|
Restricted stock units taxes paid in cash
|
|
(4
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,198
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,198
|
)
|
|
Stock-based compensation
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
87,305
|
|
|
|
—
|
|
|
|
—
|
|
|
|
87,305
|
|
|
Cumulative translation adjustment
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
627
|
|
|
|
—
|
|
|
|
627
|
|
|
Unrealized gain on investments, net of
income taxes of $0
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,507
|
|
|
|
—
|
|
|
|
4,507
|
|
|
Net loss
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(38,282
|
)
|
|
|
(38,282
|
)
|
|
Balances at March 31, 2023
|
|
49,473
|
|
|
$
|
49
|
|
|
|
910
|
|
|
$
|
—
|
|
|
$
|
1,734,749
|
|
|
$
|
(7,756
|
)
|
|
$
|
(680,663
|
)
|
|
$
|
1,046,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock, $0.001
Par Value
|
|
|
Treasury Stock, $0.001
Par Value
|
|
|
Additional
Paid-In
|
|
|
Accumulated
Other
Comprehensive
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
$
|
|
|
Shares
|
|
|
$
|
|
|
Capital
|
|
|
(Loss)
|
|
|
Deficit
|
|
|
Total
|
|
|
Balances at December 31, 2021
|
|
47,390
|
|
|
$
|
47
|
|
|
|
910
|
|
|
$
|
—
|
|
|
$
|
1,436,089
|
|
|
$
|
(1,339
|
)
|
|
$
|
(560,998
|
)
|
|
|
873,799
|
|
|
Issuance of common stock under stock
plans
|
|
250
|
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,144
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,145
|
|
|
Restricted stock units taxes paid in cash
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
(4,354
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,354
|
)
|
|
Stock-based compensation
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
46,436
|
|
|
|
—
|
|
|
|
—
|
|
|
|
46,436
|
|
|
Conversion of the 2025 Notes
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(691
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(691
|
)
|
|
Cumulative adjustment from adoption
of convertible debt standard
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(101,167
|
)
|
|
|
—
|
|
|
|
31,366
|
|
|
|
(69,801
|
)
|
|
Cumulative translation adjustment
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(356
|
)
|
|
|
—
|
|
|
|
(356
|
)
|
|
Unrealized loss on investments, net of
income taxes of $0
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,001
|
)
|
|
|
—
|
|
|
|
(4,001
|
)
|
|
Net loss
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(9,341
|
)
|
|
|
(9,341
|
)
|
|
Balances at March 31, 2022
|
|
47,640
|
|
|
$
|
48
|
|
|
|
910
|
|
|
$
|
—
|
|
|
$
|
1,378,457
|
|
|
$
|
(5,696
|
)
|
|
$
|
(538,973
|
)
|
|
$
|
833,836
|
|
The accompanying notes are an integral part of the consolidated
financial statements.
9
HubSpot, Inc.
Unaudited Consolidated Statements
of Cash Flows
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
|
|
|
2023
|
|
|
2022
|
|
|
Operating Activities:
|
|
|
|
|
|
|
|
Net loss
|
|
|
(38,282
|
)
|
|
$
|
(9,341
|
)
|
|
Adjustments to reconcile net loss to net cash and cash equivalents
provided
by operating activities, net of
acquisitions
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
16,570
|
|
|
|
12,798
|
|
|
Stock-based compensation
|
|
|
83,037
|
|
|
|
45,704
|
|
|
Restructuring charges
|
|
|
2,281
|
|
|
|
—
|
|
|
Gain on strategic investments
|
|
|
—
|
|
|
|
(4,221
|
)
|
|
Provision on (benefit from) deferred income taxes
|
|
|
47
|
|
|
|
(246
|
)
|
|
Amortization of debt discount and issuance costs
|
|
|
484
|
|
|
|
507
|
|
|
(Accretion) amortization of bond discount
|
|
|
(8,008
|
)
|
|
|
585
|
|
|
Unrealized currency translation
|
|
|
(358
|
)
|
|
|
703
|
|
|
Changes in assets and liabilities
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
30,615
|
|
|
|
3,552
|
|
|
Prepaid expenses and other assets
|
|
|
(20,417
|
)
|
|
|
(3,927
|
)
|
|
Deferred commission expense
|
|
|
(18,539
|
)
|
|
|
(8,354
|
)
|
|
Right-of-use assets
|
|
|
8,483
|
|
|
|
6,528
|
|
|
Accounts payable
|
|
|
(17,873
|
)
|
|
|
3,625
|
|
|
Accrued expenses and other liabilities
|
|
|
24,221
|
|
|
|
7,135
|
|
|
Operating lease liabilities
|
|
|
(9,829
|
)
|
|
|
(2,318
|
)
|
|
Deferred revenue
|
|
|
28,638
|
|
|
|
29,496
|
|
|
Net cash and cash equivalents provided by operating
activities
|
|
|
81,070
|
|
|
|
82,226
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
Purchases of investments
|
|
|
(362,246
|
)
|
|
|
(435,547
|
)
|
|
Maturities of investments
|
|
|
287,967
|
|
|
|
405,219
|
|
|
Purchases of property and equipment
|
|
|
(3,310
|
)
|
|
|
(9,940
|
)
|
|
Purchases of strategic investments
|
|
|
(6,000
|
)
|
|
|
(5,046
|
)
|
|
Capitalization of software development costs
|
|
|
(15,122
|
)
|
|
|
(9,722
|
)
|
|
Net cash and cash equivalents used in investing
activities
|
|
|
(98,711
|
)
|
|
|
(55,036
|
)
|
|
Financing Activities:
|
|
|
|
|
|
|
|
Repayment of 2025 Convertible Notes attributable to the
principal
|
|
|
—
|
|
|
|
(1,619
|
)
|
|
Employee taxes paid related to the net share settlement of
stock-based awards
|
|
|
(1,198
|
)
|
|
|
(4,354
|
)
|
|
Proceeds related to the issuance of common stock under stock
plans
|
|
|
11,254
|
|
|
|
11,852
|
|
|
Net cash and cash equivalents provided by financing
activities
|
|
|
10,056
|
|
|
|
5,879
|
|
|
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
|
|
|
1,722
|
|
|
|
(1,649
|
)
|
|
Net (decrease) increase in cash, cash equivalents and restricted
cash
|
|
|
(5,863
|
)
|
|
|
31,420
|
|
|
Cash, cash equivalents and restricted cash, beginning of
period
|
|
|
334,175
|
|
|
|
380,042
|
|
|
Cash, cash equivalents and restricted cash, end of
period
|
|
$
|
328,312
|
|
|
$
|
411,462
|
|
|
Supplemental cash flow disclosure:
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
4,063
|
|
|
$
|
1,683
|
|
|
Right-of-use assets obtained in exchange for operating lease
liabilities
|
|
$
|
-
|
|
|
$
|
3,754
|
|
|
Right-of-use asset reductions related to operating lease
terminations
|
|
$
|
(1,235
|
)
|
|
$
|
-
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
Capital expenditures incurred but not yet paid
|
|
$
|
5,919
|
|
|
$
|
2,287
|
|
|
Asset retirement obligations
|
|
$
|
(108
|
)
|
|
$
|
1,188
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated
financial statements.
10
HubSpot, Inc.
Notes to Unaudited Consolidated
Financial Statements
1. Organization and Operations
HubSpot, Inc. (the “Company”) provides a cloud-based customer
relationship management (“CRM”) Platform, that enables companies to
attract, engage, and delight customers throughout the customer
experience. The Company’s CRM Platform, comprised of Marketing Hub,
Sales Hub, Service Hub, content management system ("CMS") Hub and
Operations Hub, features integrated applications, tools, and a
native payment solution, that enable businesses to create a
cohesive and adaptable customer experience.
The accompanying unaudited consolidated
financial statements have been prepared in accordance with
generally accepted accounting principles in the United States
(“GAAP”) applicable to interim periods, under the rules and
regulations of the United States Securities and Exchange Commission
(“SEC”). In the opinion of management, the Company has prepared the
accompanying unaudited consolidated financial statements on a basis
substantially consistent with the audited consolidated financial
statements of the Company as of and for the year ended
December 31, 2022, and these consolidated financial statements
include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results of the
interim periods presented. All intercompany balances and
transactions have been eliminated in consolidation.
The results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for any
subsequent quarter or for the entire year ending December 31, 2023.
The year-end balance sheet data was derived from audited financial
statements, but this Form 10-Q does not include all disclosures
required under GAAP. Certain information and note disclosures
normally included in annual financial statements prepared in
accordance with GAAP have been omitted under the rules and
regulations of the SEC.
These interim financial statements should be read in conjunction
with the audited consolidated financial statements and related
notes contained in the Company’s Annual Report on Form 10-K filed
with the SEC on February 16, 2023. There have been no changes in
the Company’s significant accounting policies from those that were
disclosed in the Company’s Annual Report on Form 10-K that have had
a material impact on our consolidated financial statements and
related notes.
Recent Accounting Pronouncements
The Company has implemented all applicable accounting
pronouncements that are in effect and there are no new accounting
pronouncements that have been issued that would have a material
impact on its financial position or results of
operations.
2. Revenues
Disaggregation
of Revenue
The Company provides disaggregation of revenue based on geographic
region (Note 13) and based on the subscription versus professional
services and other classification on the consolidated statements of
operations as it believes these best depict how the nature, amount,
timing and uncertainty of revenue and cash flows are affected by
economic factors.
Deferred Revenue and Deferred Commission Expense
Amounts that have been invoiced are recorded in accounts receivable
and deferred revenue or revenue, depending on whether the revenue
recognition criteria have been met. Deferred revenue represents
amounts billed for which revenue has not yet been recognized.
Deferred revenue that will be recognized during the succeeding
12-month period is recorded as current deferred revenue, and the
remaining portion is recorded as long-term deferred revenue.
Deferred revenue during the three months ended March 31, 2023
increased by
$31.5
million resulting from
$533.1
million of additional invoicing and was offset by revenue
recognized of $501.6
million during the same period.
$289.8
million of revenue was recognized during the
three months ended March 31, 2023 that was included in deferred
revenue at the beginning of the period. As of March 31, 2023,
approximately $622.3
million of revenue is expected to be recognized from remaining
performance obligations for contracts with original performance
obligations that exceed
one year.
The Company expects to recognize revenue on approximately
90%
of these remaining performance obligations over the next
24 months,
with the balance recognized thereafter.
Additional contract liabilities of $3.6
million and $3.0
were included in accrued expenses and other current liabilities on
the consolidated balance sheet as of March 31, 2023 and December
31, 2022.
11
The incremental direct costs of obtaining a contract, which
primarily consist of sales and partner commissions paid for new
subscription contracts, are deferred and amortized on a
straight-line basis over a period of approximately two to four
years. The
two
to
four-year
period has been determined by taking into consideration the type of
product sold, the commitment term of the customer contract, the
nature of the Company’s technology development life-cycle, and an
estimated customer relationship period. Sales and partner
commissions for upgrade contracts are deferred and amortized on a
straight-line basis over the remaining estimated customer
relationship period of the related customer. Deferred commission
expense that will be recorded as expense during the succeeding
12-month period is recorded as current deferred commission expense,
and the remaining portion is recorded as long-term deferred
commission expense.
Deferred commission expense during the three months ended March 31,
2023 increased by $19.2
million as a result of deferring incremental costs of obtaining a
contract of $40.9
million and was offset by amortization of $21.7
million during the same period.
3. Net Loss per Share
Basic net loss per share is computed by dividing net loss by the
weighted average number of common shares outstanding for the
period. Diluted net loss per share is computed by giving effect to
all potential dilutive common stock equivalents outstanding for the
period. For purposes of this calculation, options to purchase
common stock, restricted stock units (“RSUs”), shares issued
pursuant to the Employee Stock Purchase Plan (“ESPP”), performance
restricted stock units (“PSUs”), the Warrants (defined in Note 8),
the Conversion Option of the 2022 Notes, and the Conversion Option
of the 2025 Notes (the “Conversion Options”) (Note 8) are
considered to be potential common stock equivalents.
A reconciliation of the denominator used in the calculation of
basic and diluted net loss per share is as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2023
|
|
|
2022
|
|
|
Net loss
|
$
|
(38,282
|
)
|
|
$
|
(9,341
|
)
|
|
Weighted-average common shares outstanding — basic
|
|
49,395
|
|
|
|
47,577
|
|
|
Dilutive effect of share equivalents resulting from stock
options, RSUs, ESPP, PSUs, Warrants and the
Conversion Options
|
|
—
|
|
|
|
—
|
|
|
Weighted-average common shares, outstanding — diluted
|
|
49,395
|
|
|
|
47,577
|
|
|
Net loss per share, basic and diluted
|
$
|
(0.78
|
)
|
|
$
|
(0.20
|
)
|
Since the Company incurred net losses for each of the periods
presented, diluted net loss per share is the same as basic net loss
per share. All of the Company’s outstanding stock options, RSUs,
PSUs, and shares issuable under the ESPP, as well as the Warrants
and Conversion Options were excluded in the calculation of diluted
net loss per share as the effect would be anti-dilutive.
The Company uses the treasury stock method and the average market
price per share during the period for calculating any potential
dilutive effect of the Warrants. The average stock price for the
three months ended March 31, 2023
was $364.93.
The Company uses the if-converted method when calculating any
potential dilutive effect of the Conversion Options, which assumes
conversion of outstanding convertible securities at the beginning
of the reporting period or date of issuance, if the convertible
security was issued during the period.
Because the last reported sale price of the Company’s common stock
for at least
20
trading days during the period of
30
consecutive trading days ending on the last trading day of the
calendar quarter ended
March 31, 2023
was equal to or greater than
130%
of the applicable conversion price of $282.52
on each applicable trading day, the 2025 Notes (defined in Note 8)
are convertible at the option of the holders thereof during the
calendar quarter ending June 30, 2023. As of April 28, 2023, the
Company has
not
received any conversion notices.
The following table contains all potentially dilutive common stock
equivalents.
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
|
|
|
|
2023
|
|
|
2022
|
|
|
|
|
(in thousands)
|
|
|
Options to purchase common shares
|
|
|
511
|
|
|
|
527
|
|
|
RSUs
|
|
|
1,698
|
|
|
|
1,145
|
|
|
Conversion Option of the 2022 Notes and Warrants
|
|
|
—
|
|
|
|
1,232
|
|
|
Conversion Option of the 2025 Notes
|
|
|
1,625
|
|
|
|
1,627
|
|
|
PSUs
|
|
|
—
|
|
|
|
—
|
|
|
ESPP
|
|
|
—
|
|
|
|
—
|
|
12
4. Fair Value of Financial Instruments
The Company measures certain financial assets at fair value. Fair
value is determined based upon the exit price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants, as determined by
either the principal market or the most advantageous market. Inputs
used in the valuation techniques to derive fair values are
classified based on a three-level hierarchy, as follows:
•
Level 1 — Quoted prices in active markets for identical assets or
liabilities.
•
Level 2 — Observable inputs other than Level 1 prices such as
quoted prices for similar assets or liabilities; quoted prices in
markets with insufficient volume or infrequent transactions (less
active markets); or model-derived valuations in which all
significant inputs are observable or can be derived principally
from or corroborated by observable market data for substantially
the full term of the assets or liabilities.
•
Level 3 — Unobservable inputs to the valuation methodology that are
significant to the measurement of fair value of assets or
liabilities.
The following table details the fair value measurements within the
fair value hierarchy of the Company’s financial assets and
liabilities at
March 31, 2023 and December 31, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2023
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|