HubSpot, Inc. (NYSE: HUBS), the customer platform for scaling
companies, today announced financial results for the fourth quarter
and full year ended December 31, 2023.
Financial Highlights:
Revenue Fourth Quarter 2023:
- Total revenue was $581.9 million, up 24% compared to Q4'22.
- Subscription revenue was $570.2 million, up 24% compared to
Q4'22.
- Professional services and other revenue was $11.7 million, up
2% compared to Q4'22.
Full Year 2023:
- Total revenue was $2.17 billion, up 25% compared to 2022.
- Subscription revenue was $2.12 billion, up 26% compared to
2022.
- Professional services and other revenue was $46.8 million, down
16% compared to 2022.
Operating Income (Loss) Fourth Quarter 2023:
- GAAP operating margin was (4.2%), compared to (2.9%) in
Q4'22.
- Non-GAAP operating margin was 16.9%, compared to 13.6% in
Q4'22.
- GAAP operating loss was ($24.3) million, compared to ($13.5)
million in Q4'22.
- Non-GAAP operating income was $98.1 million, compared to $64.0
million in Q4'22.
Full Year 2023:
- GAAP operating margin was (9.6%), compared to (6.3%) in
2022.
- Non-GAAP operating margin was 15.2%, compared to 9.8% in
2022.
- GAAP operating loss was ($208.1) million, compared to ($109.1)
million in 2022.
- Non-GAAP operating income was $330.3 million, compared to
$169.1 million in 2022.
Net Income (Loss) Fourth Quarter 2023:
- GAAP net loss was ($13.6) million, or ($0.27) per basic and
diluted share, compared to ($15.6) million, or ($0.32) per basic
and diluted share in Q4'22.
- Non-GAAP net income was $92.4 million, or $1.83 per basic and
$1.76 per diluted share, compared to $56.8 million, or $1.17 per
basic and $1.11 per diluted share in Q4'22.
- Weighted average basic and diluted shares outstanding for GAAP
net loss per share was 50.3 million, compared to 48.8 million basic
and diluted shares in Q4'22.
- Weighted average basic and diluted shares outstanding for
non-GAAP net income per share was 50.3 million and 52.6 million
respectively, compared to 48.8 million and 51.1 million,
respectively in Q4'22.
Full Year 2023:
- GAAP net loss was ($176.3) million, or ($3.53) per basic and
diluted share, compared to ($112.7) million, or ($2.35) per basic
and diluted share in 2022.
- Non-GAAP net income was $307.4 million, or $6.16 per basic and
$5.89 per diluted share, compared to $141.8 million, or $2.95 per
basic and $2.78 per diluted share in 2022.
- Weighted average basic and diluted shares outstanding for GAAP
net loss per share was 49.9 million, compared to 48.1 million basic
and diluted shares in 2022.
- Weighted average basic and diluted shares outstanding for
non-GAAP net income per share was 49.9 million and 52.2 million
respectively, compared to 48.1 million and 51.1 million,
respectively in 2022.
Balance Sheet and Cash Flow
- The company’s cash, cash equivalents, and short-term and
long-term investments balance was $1.7 billion as of December 31,
2023.
- During the fourth quarter, the company generated $104.3 million
of cash from operating cash flow, compared to $90.0 million during
Q4'22.
- During the fourth quarter, the company generated $108.7 million
of cash from non-GAAP operating cash flow and $83.0 million of
non-GAAP free cash flow, compared to $90.0 million of cash from
non-GAAP operating cash flow and $70.9 million of non-GAAP free
cash flow during Q4'22.
- During 2023, the company generated $351.0 million of cash from
operating cash flow, compared to $273.2 million during 2022.
- During 2023, the company generated $392.5 million of cash from
non-GAAP operating cash flow and $292.5 million of non-GAAP free
cash flow, compared to $273.2 million of cash from non-GAAP
operating cash flow and $191.4 million of non-GAAP free cash flow
during 2022.
Additional Recent Business Highlights
- Grew Customers to 205,091 at December 31, 2023, up 23% from
December 31, 2022.
- Average Subscription Revenue Per Customer was $11,365 during
the fourth quarter of 2023, up 1% compared to the fourth quarter of
2022.
“We saw a strong finish to a good year despite the challenging
macro environment,” said Yamini Rangan, Chief Executive Officer at
HubSpot. “Our customers have high confidence in our ability to help
them grow in any environment and we are becoming the clear platform
of choice for scaling companies. 2023 was a banner year for product
innovation with over 800 enhancements across our platform. At the
same time, we drove go-to-market execution across digital, sales,
and partner channels while staying focused on our bi-modal
strategy. As we look to 2024, we are doubling down on making
HubSpot even easier to buy with a new seats-based pricing model. We
have clear momentum in a large market, our pricing evolution will
allow us to acquire and serve more customers, and the pace of
product innovation will help us achieve our goal of becoming the #1
AI powered customer platform for scaling companies.”
Business Outlook
Based on information available as of February 14, 2024, HubSpot
is issuing guidance for the first quarter of 2024 and full year
2024 as indicated below.
First Quarter 2024:
- Total revenue is expected to be in the range of $596.0 million
to $598.0 million.
- Foreign exchange rates are expected to have a neutral impact on
first quarter 2024 revenue growth(1).
- Non-GAAP operating income is expected to be in the range of
$83.0 million to $84.0 million.
- Non-GAAP net income per common share is expected to be in the
range of $1.48 to $1.50. This assumes approximately 53.1 million
weighted average diluted shares outstanding.
Full Year 2024:
- Total revenue is expected to be in the range of $2.55 billion
to $2.56 billion.
- Foreign exchange rates are expected to have a neutral impact on
full year 2024 revenue growth(1).
- Non-GAAP operating income is expected to be in the range of
$408.0 million to $412.0 million.
- Non-GAAP net income per common share is expected to be in the
range of $6.86 to $6.94. This assumes approximately 53.6 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 Thursday, February 14, 2024 at 4:30 p.m. Eastern
Time (ET) to discuss the company’s fourth quarter and full year
2023 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 729837. 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 first
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)
December 31,
December 31,
2023
2022
Assets
Current assets:
Cash and cash equivalents
$
387,987
$
331,022
Short-term investments
1,000,245
1,081,662
Accounts receivable
295,303
226,849
Deferred commission expense
99,326
70,992
Prepaid expenses and other current
assets
88,679
44,074
Total current assets
1,871,540
1,754,599
Long-term investments
325,703
112,791
Property and equipment, net
103,331
105,227
Capitalized software development costs,
net
106,229
63,790
Right-of-use assets
251,071
319,304
Deferred commission expense, net of
current portion
122,194
66,559
Other assets
75,247
58,795
Intangible assets, net
42,316
17,446
Goodwill
173,761
46,227
Total assets
$
3,071,392
$
2,544,738
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$
9,106
$
20,883
Accrued compensation costs
53,462
10,224
Accrued commissions
78,169
52,622
Accrued expenses and other current
liabilities
108,265
102,122
Operating lease liabilities
35,095
35,928
Deferred revenue
672,150
539,874
Total current liabilities
956,247
761,653
Operating lease liabilities, net of
current portion
296,561
316,184
Deferred revenue, net of current
portion
5,810
5,904
Other long-term liabilities
36,459
14,546
Convertible senior notes, net of current
portion
456,206
454,227
Total liabilities
1,751,283
1,552,514
Stockholders’ equity:
Common stock
50
49
Additional paid-in capital
2,136,908
1,647,446
Accumulated other comprehensive income
(loss)
1,827
(12,890
)
Accumulated deficit
(818,676
)
(642,381
)
Total stockholders’ equity
1,320,109
992,224
Total liabilities and stockholders’
equity
$
3,071,392
$
2,544,738
Consolidated Statements of
Operations
(in thousands, except per share
data)
For the Three Months Ended
December 31,
For the Year Ended December
31,
2023
2022
2023
2022
Revenues:
Subscription
$
570,225
$
458,152
$
2,123,479
$
1,690,538
Professional services and
other
11,689
11,506
46,751
40,431
Total revenue
581,914
469,658
2,170,230
1,730,969
Cost of revenues:
Subscription
74,858
66,051
290,802
257,513
Professional services and
other
13,777
14,214
54,687
56,746
Total cost of revenues
88,635
80,265
345,489
314,259
Gross profit
493,279
389,393
1,824,741
1,416,710
Operating expenses:
Research and development
163,234
116,334
617,745
442,022
Sales and marketing
281,136
235,132
1,068,560
886,069
General and administrative
69,708
51,413
249,649
197,720
Restructuring
3,547
—
96,843
—
Total operating expenses
517,625
402,879
2,032,797
1,525,811
Loss from operations
(24,346
)
(13,486
)
(208,056
)
(109,101
)
Other expense:
Interest income
18,633
7,777
58,828
15,000
Interest expense
(984
)
(941
)
(3,801
)
(3,762
)
Other expense
(2,551
)
(6,244
)
(4,673
)
(6,829
)
Total other income
15,098
592
50,354
4,409
Loss before income tax
expense
(9,248
)
(12,894
)
(157,702
)
(104,692
)
Income tax expense
(4,360
)
(2,744
)
(18,593
)
(8,057
)
Net loss
$
(13,608
)
$
(15,638
)
$
(176,295
)
$
(112,749
)
Net loss per share, basic and
diluted
$
(0.27
)
$
(0.32
)
$
(3.53
)
$
(2.35
)
Weighted average common shares
used in computing basic and diluted net loss per share:
50,347
48,787
49,877
48,065
Consolidated Statements of Cash
Flows
(in thousands)
For the Three Months Ended
December 31,
For the Year Ended December
31,
2023
2022
2023
2022
Operating Activities:
Net loss
$
(13,608
)
$
(15,638
)
$
(176,295
)
$
(112,749
)
Adjustments to reconcile net loss to net
cash and cash equivalents provided by operating activities
Depreciation and amortization
19,165
15,525
72,673
58,150
Stock-based compensation
113,726
76,768
432,271
275,849
Restructuring charges
2,325
—
67,263
—
Gain on strategic investments
—
—
—
(4,201
)
Impairment of strategic investments
1,704
5,863
1,704
5,863
Provision for (benefit from) deferred
income taxes
265
(1,533
)
5,208
(2,122
)
Amortization of debt discount and issuance
costs
509
504
1,986
2,013
Accretion of bond discount
(12,694
)
(5,851
)
(42,907
)
(9,118
)
Unrealized currency translation
1,039
530
(341
)
1,010
Changes in assets and liabilities
Accounts receivable
(70,791
)
(53,850
)
(57,618
)
(73,985
)
Prepaid expenses and other assets
(11,025
)
2,878
(47,048
)
(5,987
)
Deferred commission expense
(26,843
)
(15,373
)
(81,178
)
(37,583
)
Right-of-use assets
5,929
9,909
29,173
29,531
Accounts payable
(8,866
)
7,617
(14,031
)
18,277
Accrued expenses and other liabilities
42,207
15,920
87,074
32,375
Operating lease liabilities
(7,956
)
(6,529
)
(36,889
)
(21,118
)
Deferred revenue
69,227
53,226
109,926
116,969
Net cash and cash equivalents provided by
operating activities
104,313
89,966
350,971
273,174
Investing Activities:
Purchases of investments
(443,221
)
(248,951
)
(1,580,504
)
(1,507,870
)
Maturities of investments
347,750
167,200
1,502,534
1,184,506
Sale of investments
—
—
—
124,998
Purchases of property and equipment
(8,687
)
(6,042
)
(33,718
)
(37,426
)
Purchases of strategic investments
(3,138
)
(6,499
)
(12,388
)
(26,371
)
Purchases of intangible assets
(164
)
—
(164
)
(10,000
)
Acquisition of a business, net of cash
acquired
(142,129
)
—
(142,129
)
—
Payments for equity method investments
225
(1,250
)
(2,025
)
(3,150
)
Capitalization of software development
costs
(17,084
)
(12,995
)
(66,372
)
(44,345
)
Net cash and cash equivalents used in
investing activities
(266,448
)
(108,537
)
(334,766
)
(319,658
)
Financing Activities:
Proceeds from settlement of Convertible
Note Hedges related to the 2022 Convertible Notes
—
—
—
60,483
Payments for settlement of Warrants
related to the 2022 Convertible Notes
—
(34
)
—
(34
)
Payment for settlement of 2022 Convertible
Notes
—
—
—
(79,807
)
Repayment of 2025 Convertible Notes
attributable to the principal
(13
)
—
(13
)
(1,619
)
Employee taxes paid related to the net
share settlement of stock-based awards
(3,143
)
(1,572
)
(10,714
)
(11,526
)
Proceeds related to the issuance of common
stock under stock plans
9,804
10,213
47,738
39,931
Net cash and cash equivalents provided by
financing activities
6,648
8,607
37,011
7,428
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
8,829
9,451
4,649
(6,811
)
Net (decrease) increase in cash, cash
equivalents and restricted cash
(146,658
)
(513
)
57,865
(45,867
)
Cash, cash equivalents and restricted
cash, beginning of period
538,698
334,688
334,175
380,042
Cash, cash equivalents and restricted
cash, end of period
$
392,040
$
334,175
$
392,040
$
334,175
Reconciliation of non-GAAP operating
income and operating margin
(in thousands, except percentages)
Three Months Ended December
31,
For the Year Ended December
31,
2023
2022
2023
2022
GAAP operating loss
$
(24,346
)
$
(13,486
)
$
(208,056
)
$
(109,101
)
Stock-based compensation
113,726
76,768
432,271
275,849
Amortization of acquired intangible
assets
1,304
729
5,311
2,629
Acquisition/disposition related expense
(income)
3,906
—
3,906
(305
)
Restructuring charges
3,547
—
96,843
—
Non-GAAP operating income
$
98,137
$
64,011
$
330,275
$
169,072
GAAP operating margin
(4.2
%)
(2.9
%)
(9.6
%)
(6.3
%)
Non-GAAP operating margin
16.9
%
13.6
%
15.2
%
9.8
%
Reconciliation of non-GAAP net
income
(in thousands, except per share
amounts)
Three Months Ended December
31,
For the Year Ended December
31,
2023
2022
2023
2022
GAAP net loss
$
(13,608
)
(15,638
)
$
(176,295
)
$
(112,749
)
Stock-based compensation
113,726
76,768
432,271
275,849
Amortization of acquired intangibles
assets
1,304
729
5,311
2,629
Acquisition/disposition related expense
(income)
3,906
—
3,906
(305
)
Restructuring charges
3,547
—
96,843
—
Non-cash interest expense for amortization
of debt issuance costs
509
504
1,986
2,013
Impairment of strategic investments
1,704
5,863
1,704
1,662
Loss (gain) on equity method
investment
19
87
(77
)
125
Income tax effects of non-GAAP items
(18,733
)
(11,467
)
(58,255
)
(27,399
)
Non-GAAP net income
$
92,374
56,846
$
307,394
$
141,825
Non-GAAP net income per share:
Basic
$
1.83
$
1.17
$
6.16
$
2.95
Diluted
$
1.76
$
1.11
$
5.89
$
2.78
Shares used in non-GAAP per share
calculations
Basic
50,347
48,787
49,877
48,065
Diluted
52,621
51,094
52,188
51,099
Reconciliation of non-GAAP expense and
expense as a percentage of revenue
(in thousands, except percentages)
Three Months Ended December
31,
2023
2022
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
$
74,858
$
13,777
$
163,234
$
281,136
$
69,708
$
66,051
$
14,214
$
116,334
$
235,132
$
51,413
Stock -based compensation
(3,542
)
(1,210
)
(37,129
)
(52,108
)
(19,737
)
(2,560
)
(1,113
)
(30,248
)
(30,557
)
(12,290
)
Amortization of acquired intangible
assets
(911
)
—
—
(358
)
(35
)
(283
)
—
—
(446
)
—
Acquisition/disposition related
expense
—
—
(255
)
—
(3,651
)
—
—
—
—
—
Non-GAAP expense
$
70,405
$
12,567
$
125,850
$
228,670
$
46,285
$
63,208
$
13,101
$
86,086
$
204,129
$
39,123
GAAP expense as a percentage of
revenue
12.9
%
2.4
%
28.1
%
48.3
%
12.0
%
14.1
%
3.0
%
24.8
%
50.1
%
10.9
%
Non-GAAP expense as a percentage of
revenue
12.1
%
2.2
%
21.6
%
39.3
%
8.0
%
13.5
%
2.8
%
18.3
%
43.5
%
8.3
%
For the Year Ended December
31,
2023
2022
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
$
290,802
$
54,687
$
617,745
$
1,068,560
$
249,649
$
257,513
$
56,746
$
442,022
$
886,069
$
197,720
Stock -based compensation
(12,652
)
(4,958
)
(198,953
)
(140,362
)
(75,346
)
(9,076
)
(4,393
)
(107,517
)
(107,640
)
(47,223
)
Amortization of acquired intangible
assets
(2,123
)
—
—
(3,153
)
(35
)
(1,203
)
—
—
(1,426
)
—
Acquisition/disposition related
expense
—
—
(255
)
—
(3,651
)
—
—
300
—
5
Non-GAAP expense
$
276,027
$
49,729
$
418,537
$
925,045
$
170,617
$
247,234
$
52,353
$
334,805
$
777,003
$
150,502
GAAP expense as a percentage of
revenue
13.4
%
2.5
%
28.5
%
49.2
%
11.5
%
14.9
%
3.3
%
25.5
%
51.2
%
11.4
%
Non-GAAP expense as a percentage of
revenue
12.7
%
2.3
%
19.3
%
42.6
%
7.9
%
14.3
%
3.0
%
19.3
%
44.9
%
8.7
%
Reconciliation of non-GAAP subscription
margin
(in thousands, except percentages)
Three Months Ended December
31,
For the Year Ended December
31,
2023
2022
2023
2022
GAAP subscription margin
$
495,367
$
392,101
$
1,832,677
$
1,433,025
Stock-based compensation
3,542
2,560
12,652
9,076
Amortization of acquired intangible
assets
911
283
2,123
1,203
Non-GAAP subscription margin
$
499,820
$
394,944
$
1,847,452
$
1,443,304
GAAP subscription margin percentage
86.9
%
85.6
%
86.3
%
84.8
%
Non-GAAP subscription margin
percentage
87.7
%
86.2
%
87.0
%
85.4
%
Reconciliation of free cash
flow
(in thousands)
Three Months Ended December
31,
For the Year Ended December
31,
2023
2022
2023
2022
GAAP net cash and cash equivalents
provided by operating activities
$
104,313
$
89,966
$
350,971
$
273,174
Purchases of property and equipment
(8,687
)
(6,042
)
(33,718
)
(37,426
)
Capitalization of software development
costs
(17,084
)
(12,995
)
(66,372
)
(44,345
)
Payment of restructuring charges
4,409
—
41,573
—
Non-GAAP free cash flow
$
82,951
$
70,929
$
292,454
$
191,403
Reconciliation of operating cash
flow
(in thousands)
Three Months Ended December
31,
For the Year Ended December
31,
2023
2022
2023
2022
GAAP net cash and cash equivalents
provided by operating activities
$
104,313
$
89,966
$
350,971
$
273,174
Payment of restructuring charges
4,409
—
41,573
-
Non-GAAP operating cash flow
$
108,722
$
89,966
$
392,544
$
273,174
Reconciliation of forecasted non-GAAP
operating income
(in thousands, except percentages)
Three Months Ended March 31,
2024
Year Ended December 31,
2024
GAAP operating income range
($40,633)-($39,783)
($164,288)-($160,888)
Stock-based compensation
118,533
554,885
Amortization of acquired intangible
assets
2,350
9,403
Acquisition related expense
1,800
4,200
Restructuring charges
950-1,100
3,800-4,400
Non-GAAP operating income range
$83,000-$84,000
$408,000-$412,000
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,
2024
Year Ended December 31,
2024
GAAP net loss range
($31,002)-($29,902)
($132,816)-($128,416)
Stock-based compensation
118,533
554,885
Amortization of acquired intangible
assets
2,350
9,403
Acquisition related expense
1,800
4,200
Non-cash interest expense for amortization
of debt issuance costs
430
1,722
Restructuring charges
950-1,100
3,800-4,400
Income tax effects of non-GAAP items
(14,561)-(14,811)
(73,194)-(74,194)
Non-GAAP net income range
$78,500-$79,500
$368,000-$372,000
GAAP net income per basic and diluted
share
($0.61)-($0.59)
($2.59)-($2.51)
Non-GAAP net income per diluted share
$1.48-$1.50
$6.86-$6.94
Weighted average common shares used in
computing GAAP basic and diluted net loss per share:
50,703
51,240
Weighted average common shares used in
computing non-GAAP diluted net loss per share:
53,144
53,618
HubSpot’s estimates of stock-based compensation, amortization of
acquired intangible assets, non-cash interest expense for
amortization of debt issuance costs, 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 on termination of
operating leases, loss on disposal of fixed assets, loss on early
extinguishment of 2022 Convertible Notes, gain or impairment losses
on strategic investments, gain or loss on equity method investment,
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 in January 2023.
Restructuring charges fluctuate in amount and frequency and are not
reflective of our core business operating results. In addition to
the restructuring charges incurred during the year ended 2023, over
the next four years (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 on
January 25, 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 $15-18
million and will be paid in cash over the next four years. We also
expect to make cash payments of approximately $58.0 million in
fixed rent payments for the abandoned facilities that will be made
in monthly installments over the next four years 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240214753719/en/
Investor Relations Contact: Charles MacGlashing
investors@hubspot.com Media Contact:
media@hubspot.com
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