HUBS HubSpot Inc

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(MARK ONE)

 

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED June 30, 2023

OR

 

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 001-36680

 

HubSpot, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware		20-2632791
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

Two Canal Park

Cambridge, Massachusetts 02141

(Address of principal executive offices)

(888) 482-7768

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001 per share		HUBS		New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer		☒		Accelerated filer		☐
Non-accelerated filer		☐		Smaller reporting company		☐
Emerging growth company		☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

There were 50,015,326 shares of the registrant’s Common Stock issued and outstanding as of July 28, 2023.

 

---

 

HUBSPOT, INC.

Table of Contents

Part I — Financial Information
Item 1.		Unaudited Consolidated Financial Statements:
		Unaudited Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022	6
		Unaudited Consolidated Statements of Operations for the Three and Six Months ended June 30, 2023 and 2022	7
		Unaudited Consolidated Statements of Comprehensive Loss for the Three and Six Months ended June 30, 2023 and 2022	8
		Unaudited Consolidated Statements of Cash Flows for the Three and Six Months ended June 30, 2023 and 2022	10
		Notes to Unaudited Consolidated Financial Statements	11
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.		Quantitative and Qualitative Disclosures about Market Risk	32
Item 4.		Controls and Procedures	33
Part II — Other Information
Item 1.		Legal Proceedings	34
Item 1A.		Risk Factors	34
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3.		Default Upon Senior Securities	59
Item 4.		Mine Safety Disclosures	59
Item 5.		Other Information	59
Item 6.		Exhibits	60
Signatures			61
EX-31.1		CERTIFICATION OF THE CEO PURSUANT TO SECTION 302
EX-31.2		CERTIFICATION OF THE CFO PURSUANT TO SECTION 302
EX-32.1		CERTIFICATION OF THE CEO AND CFO PURSUANT TO SECTION 906

 

 

 

 

---

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and these statements involve substantial risks and uncertainties. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q are forward-looking statements. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have

3

---

 

an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

In this Quarterly Report on Form 10-Q, the terms “HubSpot,” “we,” “us,” and “our” refer to HubSpot, Inc. and its subsidiaries, unless the context indicates otherwise.

Risk Factor Summary

The risk factors detailed in Item 1A entitled “Risk Factors” in this Quarterly Report on Form 10-Q are the risks that we believe are material to our investors and a reader should carefully consider them. Those risks are not all of the risks we face and other factors not presently known to us or that we currently believe are immaterial may also affect our business if they occur. The following is a summary of the risk factors detailed in Item 1A:

4

---

 

5

---

 

PART I — Financial Information

 

 

Item 1. Financial Statements

HubSpot, Inc.

Unaudited Consolidated Balance Sheets

(in thousands)

		June 30,				December 31,
		2023				2022
Assets
Current assets:
Cash and cash equivalents		$	457,218			$	331,022
Short-term investments			1,071,927				1,081,662
Accounts receivable — net of allowance for doubtful accounts of $4,178      at June 30, 2023 and $3,266 at December 31, 2022			206,697				226,849
Deferred commission expense			82,158				70,992
Prepaid expenses and other current assets			89,845				44,074
Total current assets			1,907,845				1,754,599
Long-term investments			146,245				112,791
Property and equipment, net			104,227				105,227
Capitalized software development costs, net			86,548				63,790
Right-of-use assets			262,759				319,304
Deferred commission expense, net of current portion			93,277				66,559
Other assets			65,876				58,795
Intangible assets, net			15,854				17,446
Goodwill			46,464				46,227
Total assets		$	2,729,095			$	2,544,738
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable		$	3,133			$	20,883
Accrued compensation costs			69,758				62,846
Accrued expenses and other current liabilities			157,485				102,122
Operating lease liabilities			31,145				35,928
Deferred revenue			585,934				539,874
Total current liabilities			847,455				761,653
Operating lease liabilities, net of current portion			313,632				316,184
Deferred revenue, net of current portion			4,568				5,904
Other long-term liabilities			25,768				14,546
Convertible senior notes			455,207				454,227
Total liabilities			1,646,630				1,552,514
Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock			50				49
Additional paid-in capital			1,890,409				1,647,446
Accumulated other comprehensive loss			(8,385	)			(12,890	)
Accumulated deficit			(799,609	)			(642,381	)
Total stockholders’ equity			1,082,465				992,224
Total liabilities and stockholders’ equity		$	2,729,095			$	2,544,738

 

The accompanying notes are an integral part of the consolidated financial statements.

6

---

 

HubSpot, Inc.

Unaudited Consolidated Statements of Operations

(in thousands, except per share data)

	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2023				2022				2023				2022
Revenues:
Subscription	$	517,678			$	412,401			$	1,007,421			$	797,356
Professional services and other		11,460				9,354				23,337				19,998
Total revenue		529,138				421,755				1,030,758				817,354
Cost of revenues:
Subscription		73,824				64,431				142,163				123,816
Professional services and other		13,462				14,500				27,169				28,053
Total cost of revenues		87,286				78,931				169,332				151,869
Gross profit		441,852				342,824				861,426				665,485
Operating expenses:
Research and development		169,955				118,914				297,639				211,650
Sales and marketing		265,294				224,262				515,971				421,396
General and administrative		61,222				51,898				118,630				95,844
Restructuring (Note 15)		63,880				—				92,450				—
Total operating expenses		560,351				395,074				1,024,690				728,890
Loss from operations		(118,499	)			(52,250	)			(163,264	)			(63,405	)
Other expense:
Interest income		13,542				2,050				24,013				2,564
Interest expense		(937	)			(949	)			(1,867	)			(1,898	)
Other (expense) income		330				(3,091	)			(465	)			602
Total other income (expense)		12,935				(1,990	)			21,681				1,268
Loss before income tax expense		(105,564	)			(54,240	)			(141,583	)			(62,137	)
Income tax expense		(13,382	)			(2,121	)			(15,645	)			(3,565	)
Net loss	$	(118,946	)		$	(56,361	)		$	(157,228	)		$	(65,702	)
Net loss per share, basic and diluted	$	(2.39	)		$	(1.18	)		$	(3.17	)		$	(1.38	)
Weighted average common shares used in   computing basic and diluted net loss per share:		49,703				47,815				49,550				47,697

 

The accompanying notes are an integral part of the consolidated financial statements.

7

---

 

HubSpot, Inc.

Unaudited Consolidated Statements of Comprehensive Loss

(in thousands)

	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2023				2022				2023				2022
Net loss	$	(118,946	)		$	(56,361	)		$	(157,228	)		$	(65,702	)
Other comprehensive loss:
Foreign currency translation adjustment		399				(2,669	)			1,026				(3,025	)
Changes in unrealized (loss) gain on investments, net of   income taxes of $0 for the three and six months ended   June 30, 2023 and 2022		(1,028	)			(2,652	)			3,479				(6,653	)
Comprehensive loss	$	(119,575	)		$	(61,682	)		$	(152,723	)		$	(75,380	)

 

The accompanying notes are an integral part of the consolidated financial statements.

 

8

---

 

HubSpot, Inc.

Unaudited Consolidated Statements of Stockholders' Equity

(in thousands, except per share amounts)

 

	Common Stock, $0.001 Par Value								Treasury Stock, $0.001 Par Value								Additional Paid-In				Accumulated Other Comprehensive				Accumulated
	Shares				$				Shares				$				Capital				(Loss)				Deficit				Total
Balances at December 31, 2022		49,217			$	49				910			$	—			$	1,647,446			$	(12,890	)		$	(642,381	)			992,224
Issuance of common stock under stock   plans		260				—				—				—				1,196				—				—				1,196
Restricted stock units taxes paid in cash		(4	)			—				—				—				(1,198	)			—				—				(1,198	)
Stock-based compensation		—				—				—				—				87,305				—				—				87,305
Cumulative translation adjustment		—				—				—				—				—				627				—				627
Unrealized gain on investments, net of   income taxes of $0		—				—				—				—				—				4,507				—				4,507
Net loss		—				—				—				—				—				—				(38,282	)			(38,282	)
Balances at March 31, 2023		49,473			$	49				910			$	—			$	1,734,749			$	(7,756	)		$	(680,663	)		$	1,046,379
Issuance of common stock under stock   plans		375				1				—				—				22,782				—				—				22,783
Restricted stock units taxes paid in cash		(7	)			—				—				—				(2,904	)			—				—				(2,904	)
Stock-based compensation		—				—				—				—				135,782				—				—				135,782
Cumulative translation adjustment		—				—				—				—				—				399				—				399
Unrealized loss on investments, net of   income taxes of $0		—				—				—				—				—				(1,028	)			—				(1,028	)
Net loss		—				—				—				—				—				—				(118,946	)			(118,946	)
Balances at June 30, 2023		49,841			$	50				910			$	-			$	1,890,409			$	(8,385	)		$	(799,609	)		$	1,082,465

 

 

	Common Stock, $0.001 Par Value								Treasury Stock, $0.001 Par Value								Additional Paid-In				Accumulated Other Comprehensive				Accumulated
	Shares				$				Shares				$				Capital				(Loss)				Deficit				Total
Balances at December 31, 2021		47,390			$	47				910			$	—			$	1,436,089			$	(1,339	)		$	(560,998	)			873,799
Issuance of common stock under stock   plans		250				1				—				—				2,144				—				—				2,145
Restricted stock units taxes paid in cash		—				—				—								(4,354	)			—				—