U.S. Markets close in 4 hrs 22 mins

HubSpot Reports Q3 2019 Results

CAMBRIDGE, Mass., Nov. 5, 2019 /PRNewswire/ -- HubSpot, Inc. (HUBS), a leading growth platform, today announced financial results for the third quarter ended September 30, 2019.

(PRNewsfoto/HubSpot, Inc.)

Financial Highlights:

Revenue

  • Total revenue was $173.6 million, up 32% compared to Q3'18.
  • Subscription revenue was $167.1 million, up 33% compared to Q3'18.
  • Professional services and other revenue was $6.5 million, up 3% compared to Q3'18.

Operating Income (Loss)

  • GAAP operating margin was (8.1%), compared to (11.4%) in Q3'18.
  • Non-GAAP operating margin was 6.1%, an improvement of approximately 1.7 percentage points from 4.4% in Q3'18.
  • GAAP operating loss was ($14.1) million, compared to ($15.1) million in Q3'18.
  • Non-GAAP operating income was $10.5 million, compared to $5.9 million in Q3'18.

Net Income (Loss)

  • GAAP net loss was ($15.0) million, or ($0.35) per basic and diluted share, compared to ($18.7) million, or ($0.48) per basic and diluted share in Q3'18.
  • Non-GAAP net income was $15.1 million, or $0.36 per basic and $0.32 per diluted share, compared to $7.4 million, or $0.19 per basic and $0.17 per diluted share in Q3'18.
  • Weighted average basic and diluted shares outstanding for GAAP net loss per share was 42.5 million, compared to 38.8 million basic and diluted shares in Q3'18.
  • Weighted average basic and diluted shares outstanding for non-GAAP net income per share was 42.5 million and 47.9 million respectively, compared to 38.8 million and 43.1 million, respectively in Q3'18.

Balance Sheet and Cash Flow

  • The company's cash, cash equivalents and investments balance was $1,008 million as of September 30, 2019.
  • During the third quarter, the company generated $6.7 million of free cash flow compared to $3.2 million during Q3'18.

Additional Recent Business Highlights

  • Grew total customers to 68,803 at September 30, 2019 up 31% from September 30, 2018.
  • Total average subscription revenue per customer was $9,992 during the third quarter of 2019 up 0.3% compared to Q3'18.

"In the last year we've really expanded from an all-in-one suite to an all-on-one platform," said Brian Halligan, co-founder and CEO. "Our ecosystem is strong and getting stronger, which is one of the reasons we're really happy to have announced our acquisition of PieSync this week. PieSync helps ensure that as our ecosystem expands, our customers can keep their data whole across the tools they use."

Business Outlook
Based on information available as of November 5, 2019, HubSpot is issuing guidance for the fourth quarter of 2019 and full year 2019 as indicated below.

Fourth Quarter 2019:

  • Total revenue is expected to be in the range of $180.3 million to $181.3 million.
  • Non-GAAP operating income is expected to be in the range of $17.1 million to $18.1 million.
  • Non-GAAP net income per common share is expected to be in the range of $0.40 to $0.42. This assumes approximately 47.0 million weighted average diluted shares outstanding.

Full Year 2019:

  • Total revenue is expected to be in the range of $669.0 million to $670.0 million.
  • Non-GAAP operating income is expected to be in the range of $54.5 million to $55.5 million.
  • Non-GAAP net income per common share is expected to be in the range of $1.44 to $1.46. This assumes approximately 47.0 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 Tuesday, November 5, 2019 at 4:30 p.m. Eastern Time (ET) to discuss the company's third 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 8576778. 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 8576778. 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 68,800 total customers in over 100 countries use HubSpot'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 fourth fiscal quarter and full year 2019; statements regarding our positioning for future growth; and statements regarding the anticipated benefits from our recent acquisition of PieSync. 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 August 6, 2019 and our other SEC filings, including our upcoming Quarterly Report on Form 10-Q for the quarter ended September 30, 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)




September 30,



December 31,




2019



2018


Assets









Current assets:









Cash and cash equivalents


$

225,770



$

111,489


Short-term investments



722,767




480,761


Accounts receivable



77,551




77,100


Deferred commission expense



29,080




23,664


Restricted cash



6,019




5,175


Prepaid expenses and other current assets



20,052




14,229


Total current assets



1,081,239




712,418


Long-term investments



59,783




11,450


Property and equipment, net



63,959




52,468


Capitalized software development costs, net



15,095




12,746


Right-of-use assets



215,797





Deferred commission expense, net of current portion



17,608




18,114


Other assets



7,894




6,888


Intangible assets, net



2,556




4,919


Goodwill



14,950




14,950


Total assets


$

1,478,881



$

833,953


Liabilities and stockholders' equity









Current liabilities:









Accounts payable


$

14,882



$

7,810


Accrued compensation costs



23,913




23,589


Accrued expenses and other current liabilities



25,706




22,305


Lease liabilities



15,646





Deferred revenue



200,771




183,305


Total current liabilities



280,918




237,009


Lease liabilities, net of current portion



225,628





Deferred rent, net of current portion






26,445


Deferred revenue, net of current portion



2,835




2,179


Other long-term liabilities



6,182




4,897


Convertible senior notes



334,966




318,782


Total liabilities



850,529




589,312


Stockholders' equity:









Common stock



43




40


Additional paid-in capital



1,017,046




589,708


Accumulated other comprehensive loss



(909)




(723)


Accumulated deficit



(387,828)




(344,384)


Total stockholders' equity



628,352




244,641


Total liabilities and stockholders' equity


$

1,478,881



$

833,953


 

 

 

Consolidated Statements of Operations

(in thousands, except per share data)



For the Three Months Ended
September 30,


For the Nine Months Ended
September 30,


2019


2018


2019


2018

Revenues:












Subscription

$

167,078


$

125,478


$

467,180


$

350,646

Professional services and other


6,543



6,348



21,494



18,312

Total revenue


173,621



131,826



488,674



368,958

Cost of revenues:












Subscription


25,671



17,777



70,550



49,976

Professional services and other


7,592



7,988



23,433



23,017

Total cost of revenues


33,263



25,765



93,983



72,993

Gross profit


140,358



106,061



394,691



295,965

Operating expenses:












Research and development


39,847



30,761



115,480



85,598

Sales and marketing


91,283



71,293



250,267



196,484

General and administrative


23,300



19,057



67,777



54,309

Total operating expenses


154,430



121,111



433,524



336,391

Loss from operations


(14,072)



(15,050)



(38,833)



(40,426)

Other expense:












Interest income


5,185



2,416



14,783



6,332

Interest expense


(5,760)



(5,393)



(16,946)



(15,893)

Other expense


(89)



(277)



(773)



(1,087)

Total other expense


(664)



(3,254)



(2,936)



(10,648)

Loss before income tax expense


(14,736)



(18,304)



(41,769)



(51,074)

Income tax expense


(251)



(359)



(1,675)



(1,262)

Net loss

$

(14,987)


$

(18,663)


$

(43,444)


$

(52,336)

Net loss per share, basic and diluted

$

(0.35)


$

(0.48)


$

(1.04)


$

(1.37)

Weighted average common shares used in computing basic

   and diluted net loss per share:


42,531



38,762



41,749



38,319

 

 

Consolidated Statements of Cash Flows

(in thousands)



For the Three Months Ended
September 30,


For the Nine Months Ended
September 30,


2019


2018


2019


2018

Operating Activities:












Net loss

$

(14,987)


$

(18,663)


$

(43,444)


$

(52,336)

Adjustments to reconcile net loss to net cash and cash equivalents provided by operating activities












Depreciation and amortization


7,213



6,000



21,248



16,539

Stock-based compensation


23,790



19,613



73,659



55,334

Provision (benefit) for deferred income taxes


184



(4)



49



43

Amortization of debt discount and issuance costs


5,509



5,141



16,184



15,103

Accretion of bond discount


(4,068)



(1,876)



(10,889)



(4,517)

Noncash rent expense




367





1,972

Unrealized currency translation


(175)



79



(193)



215

Changes in assets and liabilities


-










Accounts receivable


(5,253)



(9,911)



(1,346)



(3,266)

Prepaid expenses and other assets


113



5,535



(6,217)



823

Deferred commission expense


(12)



(5,798)



(5,551)



(15,887)

Right-of-use assets


5,048





14,310



Accounts payable


1,203



3,508



6,195



4,262

Accrued expenses and other current liabilities


(2,333)



(1,876)



955



3,755

Lease liabilities


(4,626)





(14,788)



Deferred rent




81





3,987

Deferred revenue


8,063



9,321



20,910



25,713

Net cash and cash equivalents provided by operating activities


19,669



11,517



71,082



51,740

Investing Activities:












Purchases of investments


(370,192)



(158,546)



(967,994)



(524,838)

Maturities and sales of investments


347,229



150,300



689,614



498,850

Purchases of property and equipment


(9,141)



(5,378)



(21,197)



(16,688)

Capitalization of software development costs


(3,811)



(2,920)



(9,139)



(8,726)

Purchases of strategic investments


(201)



(50)



(553)



(300)

Net cash and cash equivalents used in investing activities


(36,116)



(16,594)



(309,269)



(51,702)

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


(2,032)



(1,888)



(4,767)



(5,933)

Proceeds related to the issuance of common stock under stock plans


8,188



5,157



18,926



16,769

Repayments of capital lease obligations


(44)



(175)



(249)



(592)

Net cash and cash equivalents provided by financing activities


6,112



3,094



356,538



10,244

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


(1,973)



(321)



(2,171)



(1,319)

Net increase in cash, cash equivalents and restricted cash


(12,308)



(2,304)



116,180



8,963

Cash, cash equivalents and restricted cash, beginning of period


245,602



104,051



117,114



92,784

Cash, cash equivalents and restricted cash, end of period

$

233,294


$

101,747


$

233,294


$

101,747

 

 

Reconciliation of non-GAAP operating income and operating margin

(in thousands, except percentages)

Three Months Ended
September 30,



Nine Months Ended
September 30,



2019


2018



2019


2018


GAAP operating loss

$

(14,072)


$

(15,050)



$

(38,833)


$

(40,426)


Stock-based compensation


23,791



19,612




73,659



55,334


Amortization of acquired intangible assets


762



494




2,362



594


Acquisition related expenses


30



802




95



2,407


Non-GAAP operating income

$

10,511


$

5,858



$

37,283


$

17,909
















GAAP operating margin


(8.1)

%


(11.4)

%



(7.9)

%


(11.0)

%

Non-GAAP operating margin


6.1

%


4.4

%



7.6

%


4.9

%

 

 

Reconciliation of non-GAAP net income

(in thousands, except per share amounts)

Three Months Ended
September 30,


Nine Months Ended
September 30,


2019


2018


2019


2018

GAAP net loss

$

(14,987)


$

(18,663)


$

(43,444)


$

(52,336)

Stock-based compensation


23,791



19,612



73,659



55,334

Amortization of acquired intangibles assets


762



494



2,362



594

Acquisition related expenses


30



802



95



2,407

Non-cash interest expense for amortization of debt discount and debt issuance costs


5,509



5,141



16,184



15,103

Income tax effects of non-GAAP items








Non-GAAP net income

$

15,105


$

7,386


$

48,856


$

21,102













Non-GAAP net income per share:












Basic

$

0.36


$

0.19


$

1.17


$

0.55

Diluted

$

0.32


$

0.17


$

1.05


$

0.51

Shares used in non-GAAP per share calculations












Basic


42,531



38,762



41,749



38,319

Diluted


47,869



43,101



46,622



41,314

 

 

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











(in thousands, except percentages)















Three Months Ended September 30,



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

$

25,671


$

7,592


$

39,847


$

91,283


$

23,300



$

17,777


$

7,988


$

30,761


$

71,293


$

19,057


Stock -based compensation


(854)



(614)



(8,019)



(8,947)



(5,357)




(391)



(803)



(5,990)



(7,898)



(4,530)


Amortization of acquired intangible assets


(762)












(494)










Acquisition related expenses






(30)












(802)






Non-GAAP expense

$

24,055


$

6,978


$

31,798


$

82,336


$

17,943



$

16,892


$

7,185


$

23,969


$

63,395


$

14,527


































GAAP expense as a percentage of revenue


14.8

%


4.4

%


23.0

%


52.6

%


13.4

%



13.5

%


6.1

%


23.3

%


54.1

%


14.5

%

Non-GAAP expense as a percentage of revenue


13.9

%


4.0

%


18.3

%


47.4

%


10.3

%



12.8

%


5.5

%


18.2

%


48.1

%


11.0

%


































































































Nine Months Ended September 30,



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

$

70,550


$

23,433


$

115,480


$

250,267


$

67,777



$

49,976


$

23,017


$

85,598


$

196,484


$

54,309


Stock -based compensation


(2,291)



(2,298)



(25,663)



(27,275)



(16,132)




(985)



(2,339)



(16,866)



(22,327)



(12,817)


Amortization of acquired intangible assets


(2,362)












(594)










Acquisition related expenses






(95)












(2,407)






Non-GAAP expense

$

65,897


$

21,135


$

89,722


$

222,992


$

51,645



$

48,397


$

20,678


$

66,325


$

174,157


$

41,492


































GAAP expense as a percentage of revenue


14.4

%


4.8

%


23.6

%


51.2

%


13.9

%



13.5

%


6.2

%


23.2

%


53.3

%


14.7

%

Non-GAAP expense as a percentage of revenue


13.5

%


4.3

%


18.4

%


45.6

%


10.6

%



13.1

%


5.6

%


18.0

%


47.2

%


11.2

%

 

 

Reconciliation of non-GAAP subscription margin














(in thousands, except percentages)

















Three Months Ended September 30,



Nine Months Ended September 30,




2019


2018



2019


2018


GAAP subscription margin


$

141,407


$

107,701



$

396,630


$

300,670


Stock -based compensation



854



391




2,291



985


Amortization of acquired intangible assets



762



494




2,362



594


Non-GAAP subscription margin


$

143,023


$

108,586



$

401,283


$

302,249

















GAAP subscription margin percentage



84.6

%


85.8

%



84.9

%


85.7

%

Non-GAAP subscription margin percentage



85.6

%


86.5

%



85.9

%


86.2

%

















 

Reconciliation of free cash flow














(in thousands)
































Three Months Ended September 30,



Nine Months Ended September 30,




2019


2018



2019


2018


GAAP net cash and cash equivalents provided by operating activities


$

19,669


$

11,517



$

71,082


$

51,740


Purchases of property and equipment



(9,141)



(5,378)




(21,197)



(16,688)


Capitalization of software development costs



(3,811)



(2,920)




(9,139)



(8,726)


Free cash flow


$

6,717


$

3,219



$

40,746


$

26,326


 

Reconciliation of forecasted non-GAAP operating income

(in thousands, except percentages)









Three Months Ended
December 31, 2019



Year Ended

December 31, 2019


GAAP operating income range

($7,980)-($6,980)



($46,030)-($45,030)


Stock-based compensation


24,300




97,300


Amortization of acquired intangible assets


750




3,100


Acquisition related expenses


30




130


Non-GAAP operating income range

$17,100-$18,100



$54,500-$55,500


 

 

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

(in thousands, except per share amounts)













Three Months Ended
December 31, 2019


Year Ended

December 31, 2019

GAAP net loss range

($11,880)-($10,880)


($54,530)-($53,530)

Stock-based compensation


24,300



97,300

Amortization of acquired intangible assets


750



3,100

Acquisition related expenses


30



130

Non-cash interest expense for amortization of debt discount and debt issuance costs


5,600



21,800

Income tax effects of non-GAAP items




Non-GAAP net income range

$18,800-$19,800


$67,800-$68,800







GAAP net income per basic and diluted share

($0.28)-($0.25)


($1.30)-($1.27)

Non-GAAP net income per diluted share

$0.40-$0.42


$1.44-$1.46













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


42,900



42,000







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


47,000



47,000

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 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.  HubSpot has not included estimates related to the recently completed acquisition of PieSync NV for acquisition-related expenses, amortization of acquired intangibles, and any stock-based compensation for the three months ended December 31, 2019 because these expenses are unable to be determined at this time without unreasonable effort. 

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.

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:       

 

Cision

View original content to download multimedia:http://www.prnewswire.com/news-releases/hubspot-reports-q3-2019-results-300952183.html