CAMBRIDGE, Mass.–(BUSINESS WIRE)–HubSpot, Inc. (NYSE: HUBS), the customer relationship management (CRM) platform for scaling companies, today announced financial results for the second quarter ended June 30, 2023.
Financial Highlights:
Revenue
Total revenue was $529.1 million, up 25% compared to Q2’22.
Subscription revenue was $517.7 million, up 26% compared to Q2’22.
Professional services and other revenue was $11.5 million, up 23% compared to Q2’22.
Operating Income (Loss)
GAAP operating margin was (22.4%), compared to (12.4%) in Q2’22.
Non-GAAP operating margin was 14.0%, compared to 7.0% in Q2’22.
GAAP operating loss was ($118.5) million, compared to ($52.3) million in Q2’22.
Non-GAAP operating income was $74.2 million, compared to $29.4 million in Q2’22.
Net Income (Loss)
GAAP net loss was ($118.9) million, or ($2.39) per basic and diluted share, compared to ($56.4) million, or ($1.18) per basic and diluted share in Q2’22.
Non-GAAP net income was $70.0 million, or $1.41 per basic and $1.34 per diluted share, compared to $22.4 million, or $0.47 per basic and $0.44 per diluted share in Q2’22.
Weighted average basic and diluted shares outstanding for GAAP net loss per share was 49.7 million, compared to 47.8 million basic and diluted shares in Q2’22.
Weighted average basic and diluted shares outstanding for non-GAAP net income per share was 49.7 million and 52.1 million respectively, compared to 47.8 million and 51.1 million, respectively in Q2’22.
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 June 30, 2023.
During the second quarter, the company generated $76.5 million of cash from operating cash flow, compared to $40.9 million during Q2’22.
During the second quarter, the company generated $87.0 million of cash from non-GAAP operating cash flow and $59.6 million of free cash flow, compared to $40.9 million of cash from non-GAAP operating cash flow and $22.4 million of free cash flow during Q2’22.
Additional Recent Business Highlights
Grew Customers to 184,924 at June 30, 2023, up 23% from June 30, 2022.
Average Subscription Revenue Per Customer was $11,432 during the second quarter of 2023, up 2% compared to the second quarter of 2022.
The company had 7,136 full-time employees, up 1% from June 30, 2022.
“We had another solid quarter and I’m pleased with the continued momentum we have in becoming the platform of choice for scaling companies,” said Yamini Rangan, Chief Executive Officer at HubSpot. “Our teams are driving the pace of product innovation, iterating fast with AI while executing on our bi-modal strategy, despite a still challenging macroeconomic environment. This focus and alignment is what will continue to set us apart to drive durable and profitable growth over the long term.”
Business Outlook
Based on information available as of August 2, 2023, HubSpot is issuing guidance for the third quarter of 2023 and full year 2023 as indicated below.
Third Quarter 2023:
Total revenue is expected to be in the range of $532.0 million to $534.0 million.
Favorable foreign exchange rates are expected to be a one to two point tailwind to third quarter 2023 revenue growth.(1)
Non-GAAP operating income is expected to be in the range of $67.0 million to $69.0 million(2).
Non-GAAP net income per common share is expected to be in the range of $1.22 to $1.24. This assumes approximately 52.6 million weighted average diluted shares outstanding.
Full Year 2023:
Total revenue is expected to be in the range of $2.116 billion to $2.122 billion.
Favorable foreign exchange rates are expected to be a 50 basis points tailwind to full year 2023 revenue growth.(1)
Non-GAAP operating income is expected to be in the range of $293.0 million to $297.0 million(2).
Non-GAAP net income per common share is expected to be in the range of $5.24 to $5.29. This assumes approximately 52.3 million weighted average diluted shares outstanding.
(1) Foreign exchange rates impact on revenue is calculated by comparing current period average rates with prior period average rates.
(2) The impact of restructuring charges, which include employee severance and lease consolidation costs, are excluded from our non-GAAP operating income and non-GAAP net income per common share business outlook.
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 Wednesday, August 2, 2023, at 4:30 p.m. Eastern Time (ET) to discuss the company’s second quarter 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. 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 067108. 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 CRM platform that provides software and support to help companies grow better. The platform includes marketing, sales, service, operations, and website management products that start free and scale to meet our customers’ needs at any stage of growth. Today, over 184,000 customers across more than 120 countries use HubSpot’s powerful and easy-to-use tools and integrations to 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, foreign currency movement, and business outlook, including our financial guidance for the third fiscal quarter of and full year 2023 and out 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 CRM 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)
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
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
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
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
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 income (expense)
330
(3,091
)
(465
)
602
Total other 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
Consolidated Statements of Cash Flows
(in thousands)
For the Three Months Ended
June 30,
For the Six Months Ended
June 30,
2023
2022
2023
2022
Operating Activities:
Net loss
(118,946
)
$
(56,361
)
$
(157,228
)
$
(65,702
)
Adjustments to reconcile net loss to net cash and cash equivalents provided
by operating activities
Depreciation and amortization
16,429
14,265
32,999
27,063
Stock-based compensation
128,003
81,165
211,038
126,868
Restructuring charges
62,657
—
64,938
—
Loss (gain) on strategic investments
—
21
—
(4,200
)
Provision for (benefit from) deferred income taxes
4,755
(152
)
4,802
(398
)
Amortization of debt discount and issuance costs
496
510
980
1,017
Accretion of bond discount
(10,769
)
(735
)
(18,777
)
(150
)
Unrealized currency translation
236
1,277
(122
)
1,980
Changes in assets and liabilities
Accounts receivable
(8,991
)
(17,901
)
21,626
(14,349
)
Prepaid expenses and other assets
(27,028
)
(17,984
)
(47,445
)
(21,911
)
Deferred commission expense
(18,495
)
(5,390
)
(37,034
)
(13,744
)
Right-of-use assets
12,489
6,919
20,972
13,447
Accounts payable
59
5,335
(17,814
)
8,960
Accrued expenses and other liabilities
31,011
15,954
55,232
23,089
Operating lease liabilities
(8,156
)
(9,012
)
(17,985
)
(11,330
)
Deferred revenue
12,793
23,010
41,431
52,506
Net cash and cash equivalents provided by operating activities
76,543
40,921
157,613
123,146
Investing Activities:
Purchases of investments
(369,117
)
(428,516
)
(731,363
)
(864,063
)
Maturities of investments
441,867
220,159
729,834
625,378
Sale of investments
—
124,998
—
124,998
Purchases of property and equipment
(10,879
)
(8,332
)
(14,189
)
(18,272
)
Purchases of strategic investments
—
(8,827
)
(6,000
)
(13,873
)
Purchases of intangible assets
—
(10,000
)
—
(10,000
)
Equity method investment
—
(250
)
—
(250
)
Capitalization of software development costs
(16,473
)
(10,209
)
(31,595
)
(19,931
)
Net cash and cash equivalents provided by (used in) investing activities
45,398
(120,977
)
(53,313
)
(176,013
)
Financing Activities:
Proceeds from settlement of Convertible Note Hedges related to the 2022
Convertible Notes
—
60,483
—
60,483
Payment for settlement of 2022 Convertible Notes
—
(79,807
)
—
(79,807
)
Repayment of 2025 Convertible Notes attributable to the principal
—
—
—
(1,619
)
Employee taxes paid related to the net share settlement of stock-based awards
(2,904
)
(3,410
)
(4,102
)
(7,764
)
Proceeds related to the issuance of common stock under stock plans
13,296
7,847
24,550
19,699
Net cash and cash equivalents provided by (used in) financing activities
10,392
(14,887
)
20,448
(9,008
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(274
)
(7,826
)
1,448
(9,474
)
Net (decrease) increase in cash, cash equivalents and restricted cash
132,059
(102,769
)
126,196
(71,349
)
Cash, cash equivalents and restricted cash, beginning of period
328,312
411,462
334,175
380,042
Cash, cash equivalents and restricted cash, end of period
$
460,371
$
308,693
$
460,371
$
308,693
Reconciliation of non-GAAP operating income and operating margin
(in thousands, except percentages)
Three Months Ended June 30,
Six Months Ended June 30,
2023
2022
2023
2022
GAAP operating loss
$
(118,499
)
$
(52,250
)
$
(163,264
)
$
(63,405
)
Stock-based compensation
128,003
81,165
211,038
126,868
Amortization of acquired intangible assets
851
752
1,696
1,163
Acquisition related expenses
—
(281
)
—
(288
)
Restructuring charges
63,880
—
92,450
—
Non-GAAP operating income
$
74,235
$
29,386
$
141,920
$
64,338
GAAP operating margin
(22.4
%)
(12.4
%)
(15.8
%)
(7.8
%)
Non-GAAP operating margin
14.0
%
7.0
%
13.8
%
7.9
%
Reconciliation of non-GAAP net income
(in thousands, except per share amounts)
Three Months Ended June 30,
Six Months Ended June 30,
2023
2022
2023
2022
GAAP net loss
$
(118,946
)
(56,361
)
$
(157,228
)
$
(65,702
)
Stock-based compensation
128,003
81,165
211,038
126,868
Amortization of acquired intangibles assets
851
752
1,696
1,163
Acquisition related expenses
—
(281
)
—
(288
)
Restructuring charges
63,880
—
92,450
—
Non-cash interest expense for amortization of debt issuance costs
496
510
980
1,017
Loss (gain) on strategic investments
—
21
—
(4,200
)
(Gain) loss on equity method investment
(188
)
103
(66
)
—
Income tax effects of non-GAAP items
(4,114
)
(3,485
)
(17,258
)
(8,920
)
Non-GAAP net income
$
69,982
22,424
$
131,612
$
49,938
Non-GAAP net income per share:
Basic
$
1.41
$
0.47
$
2.66
$
1.05
Diluted
$
1.34
$
0.44
$
2.54
$
0.98
Shares used in non-GAAP per share calculations
Basic
49,703
47,815
49,550
47,697
Diluted
52,100
51,066
51,798
51,082
Reconciliation of non-GAAP expense and expense as a percentage of revenue
(in thousands, except percentages)
Three Months Ended June 30,
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
$
73,824
$
13,462
$
169,955
$
265,294
$
61,222
$
64,431
$
14,500
$
118,914
$
224,262
$
51,898
Stock -based compensation
(3,516
)
(1,459
)
(64,060
)
(38,625
)
(20,343
)
(2,383
)
(1,248
)
(31,698
)
(32,183
)
(13,653
)
Amortization of acquired
intangible assets
(405
)
—
—
(446
)
—
(306
)
—
—
(446
)
—
Acquisition/disposition related
income (expenses)
—
—
—
—
—
—
—
300
—
(19
)
Non-GAAP expense
$
69,903
$
12,003
$
105,895
$
226,223
$
40,879
$
61,742
$
13,252
$
87,516
$
191,633
$
38,226
GAAP expense as a
percentage of revenue
14.0
%
2.5
%
32.1
%
50.1
%
11.6
%
15.3
%
3.4
%
28.2
%
53.2
%
12.3
%
Non-GAAP expense as a
percentage of revenue
13.2
%
2.3
%
20.0
%
42.8
%
7.7
%
14.6
%
3.1
%
20.8
%
45.4
%
9.1
%
Six Months Ended June 30,
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
$
142,163
$
27,169
$
297,639
$
515,971
$
118,630
$
123,816
$
28,053
$
211,650
$
421,396
$
95,844
Stock -based compensation
(6,259
)
(2,546
)
(97,384
)
(68,794
)
(36,055
)
(4,206
)
(2,083
)
(48,684
)
(49,052
)
(22,843
)
Amortization of acquired
intangible assets
(804
)
—
—
(892
)
—
(628
)
—
—
(535
)
—
Acquisition/disposition related
income (expenses)
—
—
—
—
—
—
—
300
—
(12
)
Non-GAAP expense
$
135,100
$
24,623
$
200,255
$
446,285
$
82,575
$
118,982
$
25,970
$
163,266
$
371,809
$
72,989
GAAP expense as a
percentage of revenue
13.8
%
2.6
%
28.9
%
50.1
%
11.5
%
15.1
%
3.4
%
25.9
%
51.6
%
11.7
%
Non-GAAP expense as a
percentage of revenue
13.1
%
2.4
%
19.4
%
43.3
%
8.0
%
14.6
%
3.2
%
20.0
%
45.5
%
8.9
%
Reconciliation of non-GAAP subscription margin
(in thousands, except percentages)
Three Months Ended June 30,
Six Months Ended June 30,
2023
2022
2023
2022
GAAP subscription margin
$
443,854
$
347,970
$
865,258
$
673,540
Stock-based compensation
3,516
2,383
6,259
4,206
Amortization of acquired intangible assets
405
306
804
628
Non-GAAP subscription margin
$
447,775
$
350,659
$
872,321
$
678,374
GAAP subscription margin percentage
85.7
%
84.4
%
85.9
%
84.5
%
Non-GAAP subscription margin percentage
86.5
%
85.0
%
86.6
%
85.1
%
Reconciliation of non-GAAP operating cash flow
(in thousands)
Three Months Ended June 30,
Six Months Ended June 30,
2023
2022
2023
2022
GAAP net cash and cash equivalents provided by operating activities
$
76,543
$
40,921
$
157,613
$
123,146
Payment of restructuring charges
10,425
—
32,939
—
Non-GAAP operating cash flow
$
86,968
$
40,921
$
190,552
$
123,146
Reconciliation of free cash flow
(in thousands)
Three Months Ended June 30,
Six Months Ended June 30,
2023
2022
2023
2022
GAAP net cash and cash equivalents provided by operating activities
$
76,543
$
40,921
$
157,613
$
123,146
Purchases of property and equipment
(10,879
)
(8,332
)
(14,189
)
(18,272
)
Capitalization of software development costs
(16,473
)
(10,209
)
(31,595
)
(19,931
)
Payment of restructuring charges
10,425
—
32,939
—
Free cash flow
$
59,616
$
22,380
$
144,768
$
84,943
Reconciliation of forecasted non-GAAP operating income
(in thousands, except percentages)
Three Months Ended
September 30, 2023
Year Ended
December 31, 2023
GAAP operating income range
($50,376)
($257,045)
Stock-based compensation
115,531
452,212
Amortization of acquired intangible assets
845
3,383
Restructuring charges
1,000-3,000
94,450-98,450
Non-GAAP operating income range
$67,000-$69,000
$293,000-$297,000
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, 2023
Year Ended
December 31, 2023
GAAP net loss range
($39,678)-($40,428)
($229,623)-($230,498)
Stock-based compensation
115,531
452,212
Amortization of acquired intangible assets
845
3,383
Non-cash interest expense for amortization of debt issuance costs
497
1,985
Restructuring charges
1,000-3,000
94,450-98,450
Gain on equity method investment
—
(66)
Income tax effects of non-GAAP items
(13,895)-(14,145)
(48,591)-(49,216)
Non-GAAP net income range
$64,300-$65,300
$273,750-$276,250
GAAP net income per basic and diluted share
($0.79)-($0.81)
($4.60)-($4.63)
Non-GAAP net income per diluted share
$1.22-$1.24
$5.24-$5.29
Weighted average common shares used in computing GAAP basic and diluted net loss per share:
50,074
49,896
Weighted average common shares used in computing non-GAAP diluted net loss per share:
52,597
52,270
Contacts
Investor Relations Contact:
Charles MacGlashing
investors@hubspot.com
Media Contact:
media@hubspot.com