CAMBRIDGE, Mass., Aug. 5, 2020 /PRNewswire/ -- HubSpot,
Inc. (NYSE: HUBS), a leading growth platform, today announced
financial results for the second quarter ended June 30, 2020.
Financial Highlights:
Revenue
- Total revenue was $203.6 million,
up 25% compared to Q2'19.
-
- Subscription revenue was $196.4
million, up 26% compared to Q2'19.
- Professional services and other revenue was $7.2 million, down 3% compared to Q2'19.
Operating Income (Loss)
- GAAP operating margin was (6.7%), compared to (9.6%) in
Q2'19.
- Non-GAAP operating margin was 9.4%, compared to 8.4% in
Q2'19.
- GAAP operating loss was ($13.6)
million, compared to ($15.7)
million in Q2'19.
- Non-GAAP operating income was $19.2
million, compared to $13.8
million in Q2'19.
Net Income (Loss)
- GAAP net loss was ($29.4)
million, or ($0.67) per basic
and diluted share, compared to ($17.4)
million, or ($0.41) per basic
and diluted share in Q2'19.
- Non-GAAP net income was $16.7
million, or $0.38 per basic
and $0.34 per diluted share, compared
to $14.6 million, or $0.35 per basic and $0.31 per diluted share in Q2'19.
- Weighted average basic and diluted shares outstanding for GAAP
net loss per share was 44.1 million, compared to 42.1 million basic
and diluted shares in Q2'19.
- Weighted average basic and diluted shares outstanding for
non-GAAP net income per share was 44.1 million and 48.4 million
respectively, compared to 42.1 million and 47.5 million,
respectively in Q2'19.
Balance Sheet and Cash Flow
- At the beginning of June, the company successfully executed a
$460 million convertible bond
offering with the concurrent repurchase of roughly 70% of the
company's existing convertible bond due in 2022.
- The company's cash, cash equivalents and investments balance
was $1,197 million as of June 30, 2020.
- During the second quarter, the company generated $15.0 million of operating cash flow, excluding
the $48.7 million used for the
repayment of our convertible notes, compared to $13.7 million generated during Q2'19.
- During the second quarter, the company generated $0.8 million of free cash flow, compared to
$3.4 million during Q2'19.
Additional Recent Business Highlights
- Grew total customers to 86,672 at June
30, 2020 up 34% compared to June 30,
2019.
- Total average subscription revenue per customer was
$9,466 during the second quarter of
2020, down 5% compared to Q2'19.
"The world is evolving this year -- from offline to online, from
old to new -- at a far greater pace than anyone could have
expected. At HubSpot, we feel well positioned to help companies
navigate that change and come out stronger on the other side," said
Brian Halligan, Chief Executive
Officer. "The onslaught of the pandemic was certainly felt
throughout our company, customers and partners this year, but I'm
encouraged by the traction HubSpot made in the second quarter and
the opportunity we see ahead. The situation, of course, is still
quite fluid so we'll be watching things closely and adapting along
with it."
Business Outlook
Based on information available as of
August 5, 2020, HubSpot is issuing
guidance for the third quarter of 2020 and full year 2020 as
indicated below.
Third Quarter 2020:
- Total revenue is expected to be in the range of $210.0 million to $211.0
million.
- Non-GAAP operating income is expected to be in the range of
$7.5 million to $8.5 million.
- Non-GAAP net income per common share is expected to be in the
range of $0.11 to $0.13. This assumes approximately 48.8 million
weighted average diluted shares outstanding.
Full Year 2020:
- Total revenue is expected to be in the range of $828.0 million to $832.0
million.
- Non-GAAP operating income is expected to be in the range of
$52.0 million to $54.0 million.
- Non-GAAP net income per common share is expected to be in the
range of $0.92 to $0.96. This assumes approximately 48.5 million
weighted average diluted shares outstanding.
While we continue to believe we are in a strong financial
position to weather the impact to our business from COVID-19, many
of our customers and prospects are still operating under very
challenging circumstances and may re-evaluate their spend. As such,
our third quarter 2020 guidance and updated full year 2020 guidance
factor in the heightened uncertainty caused by the COVID-19
pandemic based on the information available to us as of
August 5, 2020, and we undertake no
obligation to update after such date. These statements are
forward-looking, and actual results may differ materially, as
further discussed below under the heading "Cautionary Language
Concerning Forward-Looking Statements".
Use of Non-GAAP Financial Measures
In our earnings
press releases, conference calls, slide presentations, and
webcasts, we may use or discuss non-GAAP financial measures, as
defined by Regulation G. The GAAP financial measure most directly
comparable to each non-GAAP financial measure used or discussed,
and a reconciliation of the differences between each non-GAAP
financial measure and the comparable GAAP financial measure, are
included in this press release after the consolidated financial
statements. Our earnings press releases containing such non-GAAP
reconciliations can be found in the Investors section of our
website at ir.hubspot.com.
Conference Call Information
HubSpot will host a
conference call on Wednesday, August 5,
2020, at 4:30 p.m. Eastern
Time (ET) to discuss the company's second quarter financial
results and its business outlook. To register for this conference
call, please use this 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.
Following the conference call, a replay will be available at
(800) 585-8367 (domestic) or (416) 621-4642 (international). The
replay passcode is 3285702. 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 86,000 total customers in over 120 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 third fiscal quarter and full year 2020; statements regarding
the impact of the COVID-19 pandemic and related economic conditions
on our business and results of operations; and statements regarding
our positioning for future growth and market leadership. 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 the
impact of COVID-19 on our business, the broader economy, and our
ability to forecast our future financial performance as a result of
COVID-19; 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 solutions
partners; 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 SEC filings. We assume no obligation to update any
forward-looking statements contained in this document as a result
of new information, future events or otherwise.
Consolidated
Balance Sheets (in thousands)
|
|
|
|
June
30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Assets
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
201,086
|
|
|
$
|
269,670
|
|
Short-term
investments
|
|
|
934,992
|
|
|
|
691,834
|
|
Accounts
receivable
|
|
|
86,184
|
|
|
|
92,517
|
|
Deferred commission
expense
|
|
|
36,121
|
|
|
|
32,078
|
|
Prepaid expenses and
other current assets
|
|
|
37,936
|
|
|
|
23,625
|
|
Total current
assets
|
|
|
1,296,319
|
|
|
|
1,109,724
|
|
Long-term
investments
|
|
|
61,095
|
|
|
|
53,776
|
|
Property and
equipment, net
|
|
|
89,993
|
|
|
|
83,649
|
|
Capitalized software
development costs, net
|
|
|
21,391
|
|
|
|
16,793
|
|
Right-of-use
assets
|
|
|
270,462
|
|
|
|
234,390
|
|
Deferred commission
expense, net of current portion
|
|
|
20,831
|
|
|
|
19,110
|
|
Other
assets
|
|
|
10,875
|
|
|
|
9,824
|
|
Intangible assets,
net
|
|
|
10,075
|
|
|
|
11,752
|
|
Goodwill
|
|
|
29,935
|
|
|
|
30,250
|
|
Total
assets
|
|
$
|
1,810,976
|
|
|
$
|
1,569,268
|
|
Liabilities and
stockholders' equity
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
10,814
|
|
|
$
|
12,842
|
|
Accrued compensation
costs
|
|
|
26,513
|
|
|
|
26,318
|
|
Accrued expenses and
other current liabilities
|
|
|
28,211
|
|
|
|
28,686
|
|
Operating lease
liabilities
|
|
|
29,807
|
|
|
|
23,613
|
|
Deferred
revenue
|
|
|
238,101
|
|
|
|
231,030
|
|
Total current
liabilities
|
|
|
333,446
|
|
|
|
322,489
|
|
Operating lease
liabilities, net of current portion
|
|
|
275,210
|
|
|
|
244,216
|
|
Deferred revenue, net
of current portion
|
|
|
2,914
|
|
|
|
3,058
|
|
Other long-term
liabilities
|
|
|
8,832
|
|
|
|
8,983
|
|
Convertible senior
notes
|
|
|
467,523
|
|
|
|
340,564
|
|
Total
liabilities
|
|
|
1,087,925
|
|
|
|
919,310
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
46
|
|
|
|
44
|
|
Additional paid-in
capital
|
|
|
1,167,791
|
|
|
|
1,048,380
|
|
Accumulated other
comprehensive loss
|
|
|
461
|
|
|
|
(336)
|
|
Accumulated
deficit
|
|
|
(445,247)
|
|
|
|
(398,130)
|
|
Total
stockholders' equity
|
|
|
723,051
|
|
|
|
649,958
|
|
Total liabilities
and stockholders' equity
|
|
$
|
1,810,976
|
|
|
$
|
1,569,268
|
|
Consolidated
Statements of Operations (in thousands, except per share
data)
|
|
|
For the Three
Months Ended June 30,
|
|
|
For the Six Months
Ended June 30,
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscription
|
$
|
196,415
|
|
|
$
|
155,876
|
|
|
$
|
387,643
|
|
|
$
|
300,102
|
|
Professional services
and other
|
|
7,193
|
|
|
|
7,379
|
|
|
|
14,932
|
|
|
|
14,951
|
|
Total
revenue
|
|
203,608
|
|
|
|
163,255
|
|
|
|
402,575
|
|
|
|
315,053
|
|
Cost of
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscription
|
|
30,400
|
|
|
|
23,578
|
|
|
|
60,135
|
|
|
|
44,879
|
|
Professional services
and other
|
|
8,377
|
|
|
|
7,564
|
|
|
|
16,926
|
|
|
|
15,841
|
|
Total cost of
revenues
|
|
38,777
|
|
|
|
31,142
|
|
|
|
77,061
|
|
|
|
60,720
|
|
Gross
profit
|
|
164,831
|
|
|
|
132,113
|
|
|
|
325,514
|
|
|
|
254,333
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development
|
|
49,372
|
|
|
|
40,456
|
|
|
|
95,573
|
|
|
|
75,633
|
|
Sales and
marketing
|
|
102,600
|
|
|
|
84,079
|
|
|
|
204,928
|
|
|
|
158,984
|
|
General and
administrative
|
|
26,484
|
|
|
|
23,303
|
|
|
|
52,741
|
|
|
|
44,477
|
|
Total operating
expenses
|
|
178,456
|
|
|
|
147,838
|
|
|
|
353,242
|
|
|
|
279,094
|
|
Loss from
operations
|
|
(13,625)
|
|
|
|
(15,725)
|
|
|
|
(27,728)
|
|
|
|
(24,761)
|
|
Other
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
2,135
|
|
|
|
5,424
|
|
|
|
6,192
|
|
|
|
9,598
|
|
Interest
expense
|
|
(16,809)
|
|
|
|
(5,673)
|
|
|
|
(22,761)
|
|
|
|
(11,186)
|
|
Other
expense
|
|
(91)
|
|
|
|
(672)
|
|
|
|
(1,143)
|
|
|
|
(684)
|
|
Total other
expense
|
|
(14,765)
|
|
|
|
(921)
|
|
|
|
(17,712)
|
|
|
|
(2,272)
|
|
Loss before income
tax expense
|
|
(28,390)
|
|
|
|
(16,646)
|
|
|
|
(45,440)
|
|
|
|
(27,033)
|
|
Income tax
expense
|
|
(1,011)
|
|
|
|
(711)
|
|
|
|
(1,677)
|
|
|
|
(1,424)
|
|
Net loss
|
$
|
(29,401)
|
|
|
$
|
(17,357)
|
|
|
$
|
(47,117)
|
|
|
$
|
(28,457)
|
|
Net loss per share,
basic and diluted
|
$
|
(0.67)
|
|
|
$
|
(0.41)
|
|
|
$
|
(1.08)
|
|
|
$
|
(0.69)
|
|
Weighted average
common shares used in computing
basic and diluted net loss per share:
|
|
44,130
|
|
|
|
42,127
|
|
|
|
43,703
|
|
|
|
41,352
|
|
Consolidated
Statements of Cash Flows (in thousands)
|
|
|
For the Three
Months
Ended June 30,
|
|
|
For the Six
Months
Ended June 30,
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(29,401)
|
|
|
$
|
(17,357)
|
|
|
$
|
(47,117)
|
|
|
$
|
(28,457)
|
|
Adjustments to
reconcile net loss to net cash and cash equivalents
provided by operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
8,972
|
|
|
|
7,063
|
|
|
|
17,683
|
|
|
|
14,035
|
|
Stock-based
compensation
|
|
31,374
|
|
|
|
28,663
|
|
|
|
58,837
|
|
|
|
49,869
|
|
Loss on early
extinguishment of 2022 Convertible Notes
|
|
10,493
|
|
|
—
|
|
|
|
10,493
|
|
|
—
|
|
Repayment of 2022
Convertible Notes attributable to the debt discount
|
|
(48,675)
|
|
|
—
|
|
|
|
(48,675)
|
|
|
—
|
|
Benefit for deferred
income taxes
|
|
(165)
|
|
|
|
(107)
|
|
|
|
(422)
|
|
|
|
(135)
|
|
Amortization of debt
discount and issuance costs
|
|
5,959
|
|
|
|
5,415
|
|
|
|
11,662
|
|
|
|
10,675
|
|
Accretion of bond
discount
|
|
(1,336)
|
|
|
|
(4,070)
|
|
|
|
(3,490)
|
|
|
|
(6,821)
|
|
Unrealized currency
translation
|
|
(597)
|
|
|
|
263
|
|
|
|
184
|
|
|
|
(18)
|
|
Changes in assets and
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
(3,850)
|
|
|
|
(3,851)
|
|
|
|
5,930
|
|
|
|
3,907
|
|
Prepaid expenses and
other assets
|
|
(5,313)
|
|
|
|
(7,216)
|
|
|
|
(20,420)
|
|
|
|
(6,330)
|
|
Deferred commission
expense
|
|
(4,314)
|
|
|
|
(2,205)
|
|
|
|
(5,837)
|
|
|
|
(5,539)
|
|
Right-of-use
assets
|
|
7,675
|
|
|
|
3,757
|
|
|
|
13,398
|
|
|
|
9,262
|
|
Accounts
payable
|
|
342
|
|
|
|
81
|
|
|
|
1,837
|
|
|
|
4,992
|
|
Accrued expenses and
other liabilities
|
|
5,883
|
|
|
|
5,359
|
|
|
|
444
|
|
|
|
3,288
|
|
Operating lease
liabilities
|
|
(7,033)
|
|
|
|
(6,052)
|
|
|
|
(12,314)
|
|
|
|
(10,162)
|
|
Deferred
revenue
|
|
(3,704)
|
|
|
|
3,954
|
|
|
|
7,128
|
|
|
|
12,847
|
|
Net cash and cash
equivalents (used in) provided by operating
activities
|
|
(33,690)
|
|
|
|
13,697
|
|
|
|
(10,679)
|
|
|
|
51,413
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of
investments
|
|
(527,139)
|
|
|
|
(211,301)
|
|
|
|
(967,028)
|
|
|
|
(597,802)
|
|
Maturities of
investments
|
|
327,127
|
|
|
|
158,925
|
|
|
|
710,002
|
|
|
|
342,385
|
|
Sale of
investments
|
|
10,932
|
|
|
—
|
|
|
|
10,932
|
|
|
—
|
|
Purchases of property
and equipment
|
|
(8,799)
|
|
|
|
(7,791)
|
|
|
|
(19,897)
|
|
|
|
(12,056)
|
|
Capitalization of
software development costs
|
|
(5,394)
|
|
|
|
(2,507)
|
|
|
|
(10,163)
|
|
|
|
(5,328)
|
|
Purchases of strategic
investments
|
|
(1,000)
|
|
|
|
(352)
|
|
|
|
(1,000)
|
|
|
|
(352)
|
|
Net cash and cash
equivalents used in investing activities
|
|
(204,273)
|
|
|
|
(63,026)
|
|
|
|
(277,154)
|
|
|
|
(273,153)
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance
of 2025 Convertible Notes, net of issuance costs
paid of $9.4 million
|
|
450,614
|
|
|
—
|
|
|
|
450,614
|
|
|
—
|
|
Proceeds from
settlement of Convertible Note Hedges related to the 2022
Convertible Notes
|
|
362,492
|
|
|
—
|
|
|
|
362,492
|
|
|
—
|
|
Payments for
settlement of Warrants related to the 2022 Convertible
Notes
|
|
(327,543)
|
|
|
—
|
|
|
|
(327,543)
|
|
|
—
|
|
Repayment of 2022
Convertible Notes attributable to the principal
|
|
(234,366)
|
|
|
—
|
|
|
|
(234,366)
|
|
|
—
|
|
Payments for Capped
Call Options related to the 2025 Convertible Notes
|
|
(50,600)
|
|
|
—
|
|
|
|
(50,600)
|
|
|
—
|
|
Proceeds from common
stock offering, net of offering costs paid of $365
|
—
|
|
|
—
|
|
|
—
|
|
|
|
342,628
|
|
Payments for common
stock offering costs
|
—
|
|
|
|
(111)
|
|
|
—
|
|
|
—
|
|
Employee taxes paid
related to the net share settlement of stock-based
awards
|
|
(1,259)
|
|
|
|
(1,651)
|
|
|
|
(2,200)
|
|
|
|
(2,735)
|
|
Proceeds related to
the issuance of common stock under stock plans
|
|
8,354
|
|
|
|
5,048
|
|
|
|
15,208
|
|
|
|
10,738
|
|
Repayments of finance
lease obligations
|
|
2
|
|
|
|
(87)
|
|
|
|
(28)
|
|
|
|
(205)
|
|
Net cash and cash
equivalents provided by financing activities
|
|
207,694
|
|
|
|
3,199
|
|
|
|
213,577
|
|
|
|
350,426
|
|
Effect of exchange
rate changes on cash, cash equivalents and restricted
cash
|
|
1,670
|
|
|
|
586
|
|
|
|
(144)
|
|
|
|
(198)
|
|
Net increase in cash,
cash equivalents and restricted cash
|
|
(28,599)
|
|
|
|
(45,544)
|
|
|
|
(74,400)
|
|
|
|
128,488
|
|
Cash, cash
equivalents and restricted cash, beginning of period
|
|
232,714
|
|
|
|
291,146
|
|
|
|
278,515
|
|
|
|
117,114
|
|
Cash, cash
equivalents and restricted cash, end of period
|
$
|
204,115
|
|
|
$
|
245,602
|
|
|
$
|
204,115
|
|
|
$
|
245,602
|
|
Reconciliation of
non-GAAP operating income and operating
margin (in thousands,
except percentages)
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
2020
|
|
2019
|
|
|
2020
|
|
2019
|
|
GAAP operating
loss
|
$
|
(13,625)
|
|
$
|
(15,725)
|
|
|
$
|
(27,728)
|
|
$
|
(24,761)
|
|
Stock-based
compensation
|
|
31,374
|
|
|
28,663
|
|
|
|
58,837
|
|
|
49,869
|
|
Amortization of
acquired intangible assets
|
|
899
|
|
|
800
|
|
|
|
1,798
|
|
|
1,600
|
|
Acquisition related
expenses
|
|
518
|
|
|
32
|
|
|
|
851
|
|
|
65
|
|
Non-GAAP operating
income
|
|
19,166
|
|
$
|
13,770
|
|
|
$
|
33,758
|
|
$
|
26,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating
margin
|
|
(6.7)
|
%
|
|
(9.6)
|
%
|
|
|
(6.9)
|
%
|
|
(7.9)
|
%
|
Non-GAAP operating
margin
|
|
9.4
|
%
|
|
8.4
|
%
|
|
|
8.4
|
%
|
|
8.5
|
%
|
Reconciliation of
non-GAAP net income
(in thousands, except
per share amounts)
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
2020
|
|
2019
|
|
|
2020
|
|
2019
|
|
GAAP net
loss
|
$
|
(29,401)
|
|
$
|
(17,357)
|
|
|
$
|
(47,117)
|
|
$
|
(28,457)
|
|
Stock-based
compensation
|
|
31,374
|
|
|
28,663
|
|
|
|
58,837
|
|
|
49,869
|
|
Amortization of
acquired intangibles assets
|
|
899
|
|
|
800
|
|
|
|
1,798
|
|
|
1,600
|
|
Acquisition related
expenses
|
|
518
|
|
|
32
|
|
|
|
851
|
|
|
65
|
|
Non-cash interest
expense for amortization of debt discount and debt
issuance costs
|
|
5,959
|
|
|
5,415
|
|
|
|
11,662
|
|
|
10,675
|
|
Loss on early
extinguishment of 2022 Convertible Notes
|
|
10,493
|
|
|
—
|
|
|
|
10,493
|
|
|
—
|
|
Impairment of
strategic investment
|
|
—
|
|
|
—
|
|
|
|
250
|
|
|
—
|
|
Income tax effects of
non-GAAP items
|
|
(3,160)
|
|
|
(2,942)
|
|
|
|
(6,013)
|
|
|
(5,611)
|
|
Non-GAAP net
income
|
$
|
16,682
|
|
$
|
14,611
|
|
|
$
|
30,761
|
|
$
|
28,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income
per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.38
|
|
$
|
0.35
|
|
|
$
|
0.70
|
|
$
|
0.68
|
|
Diluted
|
$
|
0.34
|
|
$
|
0.31
|
|
|
$
|
0.64
|
|
$
|
0.61
|
|
Shares used in
non-GAAP per share calculations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
44,130
|
|
|
42,127
|
|
|
|
43,703
|
|
|
41,352
|
|
Diluted
|
|
48,367
|
|
|
47,532
|
|
|
|
47,988
|
|
|
46,394
|
|
Reconciliation of
non-GAAP expense and expense as a percentage of
revenue
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except
percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
2020
|
|
|
2019
|
|
|
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
|
$
|
30,400
|
|
$
|
8,377
|
|
$
|
49,372
|
|
$
|
102,600
|
|
$
|
26,484
|
|
|
$
|
23,578
|
|
$
|
7,564
|
|
$
|
40,456
|
|
$
|
84,079
|
|
$
|
23,303
|
|
Stock -based
compensation
|
|
(1,075)
|
|
|
(628)
|
|
|
(10,111)
|
|
|
(12,868)
|
|
|
(6,692)
|
|
|
|
(822)
|
|
|
(666)
|
|
|
(10,553)
|
|
|
(10,523)
|
|
|
(6,099)
|
|
Amortization of
acquired intangible assets
|
|
(879)
|
|
|
—
|
|
|
—
|
|
|
(20)
|
|
|
—
|
|
|
|
(800)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Acquisition related
expenses
|
|
—
|
|
|
—
|
|
|
(327)
|
|
|
—
|
|
|
(191)
|
|
|
|
—
|
|
|
—
|
|
|
(32)
|
|
|
—
|
|
|
—
|
|
Non-GAAP
expense
|
$
|
28,446
|
|
$
|
7,749
|
|
$
|
38,934
|
|
$
|
89,712
|
|
$
|
19,601
|
|
|
$
|
21,956
|
|
$
|
6,898
|
|
$
|
29,871
|
|
$
|
73,556
|
|
$
|
17,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP expense as a
percentage of revenue
|
|
14.9
|
%
|
|
4.1
|
%
|
|
24.2
|
%
|
|
50.4
|
%
|
|
13.0
|
%
|
|
|
14.4
|
%
|
|
4.6
|
%
|
|
24.8
|
%
|
|
51.5
|
%
|
|
14.3
|
%
|
Non-GAAP expense as a
percentage of revenue
|
|
14.0
|
%
|
|
3.8
|
%
|
|
19.1
|
%
|
|
44.1
|
%
|
|
9.6
|
%
|
|
|
13.4
|
%
|
|
4.2
|
%
|
|
18.3
|
%
|
|
45.1
|
%
|
|
10.5
|
%
|
|
Six Months Ended
June 30,
|
|
|
2020
|
|
|
2019
|
|
|
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
|
$
|
60,135
|
|
$
|
16,926
|
|
$
|
95,573
|
|
$
|
204,928
|
|
$
|
52,741
|
|
|
$
|
44,879
|
|
$
|
15,841
|
|
$
|
75,633
|
|
$
|
158,984
|
|
$
|
44,477
|
|
Stock -based
compensation
|
|
(1,974)
|
|
|
(1,234)
|
|
|
(18,819)
|
|
|
(23,684)
|
|
|
(13,126)
|
|
|
|
(1,437)
|
|
|
(1,685)
|
|
|
(17,644)
|
|
|
(18,327)
|
|
|
(10,776)
|
|
Amortization of
acquired intangible assets
|
|
(1,759)
|
|
|
—
|
|
|
—
|
|
|
(39)
|
|
|
—
|
|
|
|
(1,600)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Acquisition related
expenses
|
|
—
|
|
|
—
|
|
|
(657)
|
|
|
—
|
|
|
(194)
|
|
|
|
—
|
|
|
—
|
|
|
(65)
|
|
|
—
|
|
|
—
|
|
Non-GAAP
expense
|
$
|
56,402
|
|
$
|
15,692
|
|
$
|
76,097
|
|
$
|
181,205
|
|
$
|
39,421
|
|
|
$
|
41,842
|
|
$
|
14,156
|
|
$
|
57,924
|
|
$
|
140,657
|
|
$
|
33,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP expense as a
percentage of revenue
|
|
14.9
|
%
|
|
4.2
|
%
|
|
23.7
|
%
|
|
50.9
|
%
|
|
13.1
|
%
|
|
|
14.2
|
%
|
|
5.0
|
%
|
|
24.0
|
%
|
|
50.5
|
%
|
|
14.1
|
%
|
Non-GAAP expense as a
percentage of revenue
|
|
14.0
|
%
|
|
3.9
|
%
|
|
18.9
|
%
|
|
45.0
|
%
|
|
9.8
|
%
|
|
|
13.3
|
%
|
|
4.5
|
%
|
|
18.4
|
%
|
|
44.6
|
%
|
|
10.7
|
%
|
Reconciliation of
non-GAAP subscription margin
|
(in thousands, except
percentages)
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
2019
|
|
|
2020
|
|
2019
|
|
GAAP subscription
margin
|
|
$
|
166,015
|
|
$
|
132,298
|
|
|
$
|
327,508
|
|
$
|
255,223
|
|
Stock -based
compensation
|
|
|
1,075
|
|
|
822
|
|
|
|
1,974
|
|
|
1,437
|
|
Amortization of
acquired intangible assets
|
|
|
879
|
|
|
800
|
|
|
|
1,759
|
|
|
1,600
|
|
Non-GAAP subscription
margin
|
|
$
|
167,969
|
|
$
|
133,920
|
|
|
$
|
331,241
|
|
$
|
258,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP subscription
margin percentage
|
|
|
84.5
|
%
|
|
84.9
|
%
|
|
|
84.5
|
%
|
|
85.0
|
%
|
Non-GAAP subscription
margin percentage
|
|
|
85.5
|
%
|
|
85.9
|
%
|
|
|
85.5
|
%
|
|
86.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
operating cash flow
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
2019
|
|
|
2020
|
|
2019
|
|
GAAP net cash and
cash equivalents provided by
operating activities
|
|
$
|
(33,690)
|
|
$
|
13,697
|
|
|
$
|
(10,679)
|
|
$
|
51,413
|
|
Repayment of 2022
Convertible Notes attributable to
the debt discount
|
|
|
48,675
|
|
|
—
|
|
|
|
48,675
|
|
|
—
|
|
Operating cash flow,
excluding repayment of
convertible debt
|
|
$
|
14,985
|
|
$
|
13,697
|
|
|
$
|
37,996
|
|
$
|
51,413
|
|
Reconciliation of
free cash flow
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
2019
|
|
|
2020
|
|
2019
|
|
GAAP net cash and
cash equivalents provided by operating
activities
|
|
$
|
(33,690)
|
|
$
|
13,697
|
|
|
$
|
(10,679)
|
|
$
|
51,413
|
|
Purchases of property
and equipment
|
|
|
(8,799)
|
|
|
(7,791)
|
|
|
|
(19,897)
|
|
|
(12,056)
|
|
Capitalization of
software development costs
|
|
|
(5,394)
|
|
|
(2,507)
|
|
|
|
(10,163)
|
|
|
(5,328)
|
|
Repayment of 2022
Convertible Notes attributable to the debt
discount
|
|
|
48,675
|
|
|
—
|
|
|
|
48,675
|
|
|
—
|
|
Free cash
flow
|
|
$
|
792
|
|
$
|
3,399
|
|
|
$
|
7,936
|
|
$
|
34,029
|
|
Reconciliation of
forecasted non-GAAP operating income
(in thousands, except
percentages)
|
|
Three Months
Ended
September 30, 2020
|
|
|
|
|
Year
Ended
December 31,
2020
|
|
GAAP operating income
range
|
($22,680)-($21,680)
|
|
|
|
|
($70,825)-($68,825)
|
|
Stock-based
compensation
|
|
29,400
|
|
|
|
|
|
119,100
|
|
Amortization of
acquired intangible assets
|
|
450
|
|
|
|
|
|
2,405
|
|
Acquisition related
expenses
|
|
330
|
|
|
|
|
|
1,320
|
|
Non-GAAP operating
income range
|
$7,500
-$8,500
|
|
|
|
|
$52,000-$54,000
|
|
Reconciliation of
forecasted non-GAAP net income and non-GAAP net income per
share
(in thousands, except
per share amounts)
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30, 2020
|
|
|
Year
Ended
December 31,
2020
|
|
GAAP net loss
range
|
($30,884)-($29,634)
|
|
|
($106,542)-($104,042)
|
|
Stock-based
compensation
|
|
29,400
|
|
|
|
119,100
|
|
Amortization of
acquired intangible assets
|
|
450
|
|
|
|
2,405
|
|
Acquisition related
expenses
|
|
330
|
|
|
|
1,320
|
|
Non-cash interest
expense for amortization of debt discount and debt issuance
costs
|
|
6,526
|
|
|
|
24,874
|
|
Loss on early
extinguishment of 2022 Convertible Notes
|
|
—
|
|
|
|
10,493
|
|
Impairment of
strategic investment
|
|
—
|
|
|
|
250
|
|
Income tax effects
of non-GAAP items
|
(322)-(572)
|
|
|
(7,300)-(7,800)
|
|
Non-GAAP net income
range
|
$5,500-$6,500
|
|
|
$44,600-$46,600
|
|
|
|
|
|
|
|
|
|
GAAP net income per
basic and diluted share
|
($0.68)-($0.65)
|
|
|
($2.38)-($2.32)
|
|
Non-GAAP net
income per diluted share
|
$0.11-$0.13
|
|
|
$0.92-$0.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares used in computing GAAP basic and diluted
net loss per share:
|
|
45,630
|
|
|
|
44,750
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares used in computing non-GAAP diluted net loss
per share:
|
|
48,770
|
|
|
|
48,460
|
|
HubSpot's estimates of stock-based compensation, amortization of
acquired intangible assets, acquisition-related expenses, non-cash
interest expense for amortization of debt discount and debt
issuance costs, loss on early extinguishment of 2022 Convertible
Notes, impairment of strategic investment, and income tax effects
of non-GAAP items assume, among other things, the occurrence of no
additional acquisitions, investments or restructurings, and no
further revisions to stock-based compensation and related
expenses.
Non-GAAP Financial Measures
We report our financial results in accordance with accounting
principles generally accepted in the
United States of America, or GAAP. However, management
believes that, in order to properly understand our short-term and
long-term financial and operational trends, investors may wish to
consider the impact of certain non-cash or non-recurring items when
used as a supplement to financial performance measures in
accordance with GAAP. These items result from facts and
circumstances that vary in frequency and impact on continuing
operations. In this release, HubSpot's non-GAAP operating income,
operating margin, subscription margin, expense, expense as a
percentage of revenue, net income, and free cash flow are not
presented in accordance with GAAP and are not intended to be used
in lieu of GAAP presentations of results of operations. Free cash
flow is defined as cash and cash equivalents provided by or used in
operating activities less purchases of property and equipment and
capitalization of software development costs, plus repayments of
convertible notes attributable to debt discount. We believe
information regarding free cash flow provides useful information to
investors in understanding and evaluating the strength of liquidity
and available cash and the exclusion of repayments of convertible
notes attributable to debt discount provides a comparable framework
for assessing how our business performed when compared to prior
periods and also aligns the non-GAAP treatment of our debt discount
that is amortized as non-cash interest expense.
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, loss on early extinguishment of 2022
Convertible Notes, impairment of strategic 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:
- 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.
- Expense for the amortization of acquired intangible assets is a
non-cash item, and we believe that the exclusion of this
amortization expense provides for a useful comparison of our
operating results to prior periods and to our peer companies.
- Acquisition related expenses, such as transaction costs and
retention payments, are expenses that are not necessarily
reflective of operational performance during a period. We believe
that the exclusion of these expenses provides for a useful
comparison of our operating results to prior periods and to our
peer companies.
- In May 2017, the Company issued
$400 million of convertible notes due
in 2022 with a coupon interest rate of 0.25%. In June 2020, the Company issued $460 million of convertible notes due in 2025
with a coupon interest rate of 0.375%. The imputed interest rates
of the convertible senior notes were approximately 6.87% and 5.71%,
respectively. This is a result of the debt discount recorded for
the conversion feature that is required to be separately accounted
for as equity, and debt issuance costs, which reduce the carrying
value of the convertible debt instrument. The debt discount is
amortized as interest expense together with the issuance costs of
the debt. The expense for the amortization of debt discount and
debt issuance costs is a non-cash item, and we believe the
exclusion of this interest expense provides for a useful comparison
of our operating results to prior periods and to our peer
companies
In June 2020, the Company used a
portion of the proceeds from the issuance of the convertible notes
due in 2025 to repay approximately $272.1
million of its convertible notes that were due in
2022. In connection with the repayment of these notes, the
Company recorded a $10.5 million loss
on early extinguishment of debt, which represents the difference
between the fair value and carrying value of the debt extinguished.
The amount of this charge may be inconsistent in size and varies
depending on the timing of the repurchase of debt. In connection
with the debt extinguishment, approximately $48.7 million of the repayment of convertible
notes that is attributable to debt discount was classified as
operating cash flow. These activities are not considered reflective
of our recurring core business operating results. As such, we
believe the exclusion of these expenses and payments provides for a
useful comparison of our operating results to prior periods and to
our peer companies.
- Strategic investments consist of non-controlling equity
investments in privately held companies. The recognition of gains
or 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 losses provides for a useful
comparison of our operating results to prior periods and to our
peer companies.
- 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.
Updated Non-GAAP Net Income Calculation
In our presentations of non-GAAP net income (which is a non-GAAP
financial measure) in our earnings release for each of the quarters
ending March 31, 2019, June 30, 2019, September
30, 2019, December 31, 2019,
and March 31, 2020, and the year
ended December 31, 2019, we did not
include a hypothetical income tax effect due to a full valuation
allowance on our U.S. deferred tax assets. We have elected to
update our non-GAAP net income calculations (and our
reconciliations to GAAP net loss) and non-GAAP net income per share
for each of these quarters and the year ended December 31, 2019, and the updated information is
provided below. No updates have been made to any other adjustments
in the calculation of each of non-GAAP net income or non-GAAP net
income per share for such periods, and our consolidated financial
results as calculated under GAAP are not affected. Had we not
updated our presentation of non-GAAP net income to reflect a
hypothetical income tax effect in Q2'20, our Q2'20 non-GAAP net
income would have been $19.9 million,
our Q2'20 non-GAAP basic net income per share would have been
$0.45, and our Q2'20 non-GAAP diluted
net income per share would have been $0.41.
Reconciliation of
non-GAAP net income
(in thousands, except
per share amounts)
|
|
Three months
ended
|
|
|
|
|
Year
ended
|
|
|
March 31,
2019
|
|
|
June 30,
2019
|
|
|
September 30,
2019
|
|
|
December 31,
2019
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
GAAP net
loss
|
$
|
(11,100)
|
|
|
$
|
(17,357)
|
|
|
$
|
(14,987)
|
|
|
$
|
(10,302)
|
|
|
$
|
(17,716)
|
|
|
$
|
(53,746)
|
|
Stock-based
compensation
|
|
21,205
|
|
|
|
28,663
|
|
|
|
23,791
|
|
|
|
24,095
|
|
|
|
27,463
|
|
|
|
97,754
|
|
Amortization of
acquired intangibles assets
|
|
800
|
|
|
|
800
|
|
|
|
762
|
|
|
|
839
|
|
|
|
900
|
|
|
|
3,201
|
|
Acquisition related
expenses
|
|
32
|
|
|
|
32
|
|
|
|
30
|
|
|
|
876
|
|
|
|
333
|
|
|
|
971
|
|
Non-cash interest
expense for amortization of debt
discount and debt issuance costs
|
|
5,260
|
|
|
|
5,415
|
|
|
|
5,509
|
|
|
|
5,606
|
|
|
|
5,703
|
|
|
|
21,790
|
|
Impairment of
strategic investment
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
250
|
|
|
|
—
|
|
Income tax effects of
non-GAAP items
|
|
(2,669)
|
|
|
|
(2,942)
|
|
|
|
(2,820)
|
|
|
|
(3,184)
|
|
|
|
(2,854)
|
|
|
|
(11,616)
|
|
Non-GAAP net income
(1)
|
$
|
13,528
|
|
|
$
|
14,611
|
|
|
$
|
12,285
|
|
|
$
|
17,930
|
|
|
$
|
14,079
|
|
|
$
|
58,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income
per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (2)
|
$
|
0.33
|
|
|
$
|
0.35
|
|
|
$
|
0.29
|
|
|
$
|
0.42
|
|
|
$
|
0.33
|
|
|
$
|
1.39
|
|
Diluted (3)
|
$
|
0.30
|
|
|
$
|
0.31
|
|
|
$
|
0.26
|
|
|
$
|
0.38
|
|
|
$
|
0.30
|
|
|
$
|
1.26
|
|
|
|
(1)
|
We previously
reported non-GAAP net income of $16.2 million, $17.6 million, $15.1
million, $20.9 million, and $16.7 million for the three months
ended March
31, 2019, June 30, 2019, September 30, 2019, December 31, 2019, and
March 31, 2020, respectively, and $69.8 million for the year ended
December 31, 2019.
|
(2)
|
We previously
reported non-GAAP basic net income per share of $0.40, $0.42,
$0.36, $0.49, and $0.39 for the three months ended March 31, 2019,
June 30,
2019, September 30, 2019, December 31, 2019, and March 31, 2020,
respectively, and $1.66 for the year ended December 31,
2019.
|
(3)
|
We previously
reported non-GAAP diluted net income per share of $0.36, $0.37,
$0.32, $0.45, and $0.35 for the three months ended March 31, 2019,
June 30,
2019, September 30, 2019, December 31, 2019, and March 31, 2020,
respectively, and $1.50 for the year ended December 31,
2019.
|
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SOURCE HubSpot