CAMBRIDGE, Mass.–(BUSINESS WIRE)–HubSpot, Inc. (NYSE: HUBS), the customer relationship management (CRM) platform for scaling companies, today announced financial results for the third quarter ended September 30, 2022.
Financial Highlights:
Revenue
Total revenue was $444.0 million, up 31% compared to Q3’21.
Subscription revenue was $435.0 million, up 32% compared to Q3’21.
Professional services and other revenue was $8.9 million, down 13% compared to Q3’21.
Operating Income (Loss)
GAAP operating margin was (7.3%), compared to (4.4%) in Q3’21.
Non-GAAP operating margin was 9.2%, compared to 9.7% in Q3’21.
GAAP operating loss was ($32.2) million, compared to ($14.9) million in Q3’21.
Non-GAAP operating income was $40.7 million, compared to $32.9 million in Q3’21.
Net Income (Loss)
GAAP net loss was ($31.4) million, or ($0.65) per basic and diluted share, compared to ($13.7) million, or ($0.29) per basic and diluted share in Q3’21.
Non-GAAP net income was $35.1 million, or $0.73 per basic and $0.69 per diluted share, compared to $25.6 million, or $0.54 per basic and $0.50 per diluted share in Q3’21.
Weighted average basic and diluted shares outstanding for GAAP net loss per share was 48.1 million, compared to 47.0 million basic and diluted shares in Q3’21.
Weighted average basic and diluted shares outstanding for non-GAAP net income per share was 48.1 million and 51.0 million respectively, compared to 47.0 million and 50.8 million, respectively in Q3’21.
Balance Sheet and Cash Flow
The company’s cash, cash equivalents, and short-term and long-term investments balance was $1.4 billion as of September 30, 2022.
During the third quarter, the company generated $60.1 million of cash from operating activities and operating cash flow, compared to $42.7 million of cash from operating activities and $54.1 million of operating cash flow, which excluded the $11.4 million used for the repayment of our convertible notes, during Q3’21.
During the third quarter, the company generated $35.5 million of free cash flow, compared to $38.2 million during Q3’21.
Additional Recent Business Highlights
Grew Customers to 158,905 at September 30, 2022, up 24% from September 30, 2021.
Average Subscription Revenue Per Customer was $11,233 during the third quarter of 2022, up 7% compared to the third quarter of 2021.
“Q3 was another strong quarter for HubSpot, reflecting our continued focus on innovation and execution,” said Yamini Rangan, Chief Executive Officer at HubSpot. “Our platform is driving value for customers and continues to be mission-critical as they look to connect with their customers and increase efficiencies during this period of uncertainty. We are operating from a position of strength with a solid balance sheet, an incredible team, and a company culture that allows us to attract and retain top talent. Looking ahead, we will continue to adapt to the realities of the environment without losing sight of our mission to become the #1 CRM platform for scaling companies.”
Business Outlook
Based on information available as of November 2, 2022, HubSpot is issuing guidance for the fourth quarter of 2022 and full year 2022 as indicated below.
Fourth Quarter 2022:
Total revenue is expected to be in the range of $444 million to $446 million.
Unfavorable foreign exchange rates are expected to be a 9 point headwind to fourth quarter 2022 revenue growth.(1)
Non-GAAP operating income is expected to be in the range of $47 million to $49 million.
Non-GAAP net income per common share is expected to be in the range of $0.82 to $0.84. This assumes approximately 51.2 million weighted average diluted shares outstanding.
Full Year 2022:
Total revenue is expected to be in the range of $1.705 billion to $1.707 billion.
Unfavorable foreign exchange rates are expected to be a 6 point headwind to full year 2022 revenue growth(1)
Non-GAAP operating income is expected to be in the range of $152 million to $154 million.
Non-GAAP net income per common share is expected to be in the range of $2.48 to $2.50. This assumes approximately 51.1 million weighted average diluted shares outstanding.
(1) Foreign exchange rates impact on revenue is calculated by comparing current period rates with prior period average rates.
Use of Non-GAAP Financial Measures
In our earnings press releases, conference calls, slide presentations, and webcasts, we may use or discuss non-GAAP financial measures, as defined by Regulation G. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed, and a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure, are included in this press release after the consolidated financial statements. Our earnings press releases containing such non-GAAP reconciliations can be found in the Investors section of our website ir.hubspot.com.
Conference Call Information
HubSpot will host a conference call on Wednesday, November 2, 2022, at 4:30 p.m. Eastern Time (ET) to discuss the company’s third quarter 2022 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 848471. 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 158,000 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 fourth fiscal quarter of and full year 2022 and 2023; 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 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; the impact of geopolitical conflicts, inflation, foreign currency movement, macroeconomic instability, and the COVID-19 pandemic 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; 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)
September 30,
December 31,
2022
2021
Assets
Current assets:
Cash and cash equivalents
$
331,659
$
377,013
Short-term investments
952,697
820,962
Accounts receivable
166,667
157,362
Deferred commission expense
65,010
59,849
Prepaid expenses and other current assets
45,060
38,388
Total current assets
1,561,093
1,453,574
Long-term investments
152,725
174,895
Property and equipment, net
102,628
96,134
Capitalized software development costs, net
56,803
39,858
Right-of-use assets
251,422
280,828
Deferred commission expense, net of current portion
53,240
42,681
Other assets
56,402
29,244
Intangible assets, net
17,592
10,565
Goodwill
45,014
47,075
Total assets
$
2,296,919
$
2,174,854
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$
13,318
$
2,773
Accrued compensation costs
63,373
63,836
Accrued expenses and other current liabilities
90,827
74,457
Convertible senior notes
–
19,630
Operating lease liabilities
32,155
26,364
Deferred revenue
468,536
430,414
Total current liabilities
668,209
617,474
Operating lease liabilities, net of current portion
250,678
283,873
Deferred revenue, net of current portion
5,188
4,473
Other long-term liabilities
12,424
12,134
Convertible senior notes, net of current portion
453,723
383,101
Total liabilities
1,390,222
1,301,055
Stockholders’ equity:
Common stock
48
47
Additional paid-in capital
1,550,905
1,436,089
Accumulated other comprehensive loss
(17,511
)
(1,339
)
Accumulated deficit
(626,745
)
(560,998
)
Total stockholders’ equity
906,697
873,799
Total liabilities and stockholders’ equity
$
2,296,919
$
2,174,854
Consolidated Statements of Operations
(in thousands, except per share data)
For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
2022
2021
2022
2021
Revenues:
Subscription
$
435,030
$
328,975
$
1,232,387
$
899,661
Professional services and other
8,928
10,220
28,926
31,688
Total revenue
443,958
339,195
1,261,313
931,349
Cost of revenues:
Subscription
67,648
57,547
191,466
152,533
Professional services and other
14,479
12,059
42,532
34,685
Total cost of revenues
82,127
69,606
233,998
187,218
Gross profit
361,831
269,589
1,027,315
744,131
Operating expenses:
Research and development
114,038
78,473
325,687
218,973
Sales and marketing
229,541
170,016
650,936
468,836
General and administrative
50,465
36,027
146,309
102,883
Total operating expenses
394,044
284,516
1,122,932
790,692
Loss from operations
(32,213
)
(14,927
)
(95,617
)
(46,561
)
Other expense:
Interest income
4,658
230
7,222
1,046
Interest expense
(923
)
(7,798
)
(2,822
)
(24,376
)
Other (expense) income
(1,185
)
9,877
(583
)
11,064
Total other income (expense)
2,550
2,309
3,817
(12,266
)
Loss before income tax expense
(29,663
)
(12,618
)
(91,800
)
(58,827
)
Income tax expense
(1,748
)
(1,117
)
(5,313
)
(2,639
)
Net loss
$
(31,411
)
$
(13,735
)
$
(97,113
)
$
(61,466
)
Net loss per share, basic and diluted
$
(0.65
)
$
(0.29
)
$
(2.03
)
$
(1.31
)
Weighted average common shares used in computing basic and diluted net loss per share:
48,067
47,044
47,821
46,752
Consolidated Statements of Cash Flows
(in thousands)
For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
2022
2021
2022
2021
Operating Activities:
Net loss
$
(31,411
)
$
(13,735
)
$
(97,113
)
$
(61,466
)
Adjustments to reconcile net loss to net cash and cash equivalents provided by operating activities
Depreciation and amortization
15,562
11,452
42,625
33,188
Stock-based compensation
72,213
44,987
199,081
120,847
Loss on early extinguishment of 2022 Convertible Notes
—
1,736
—
4,824
Repayment of 2022 Convertible Notes attributable to the debt discount
—
(11,429
)
—
(24,457
)
Gain on strategic investments
—
(10,717
)
(4,200
)
(11,739
)
Gain on termination of operating leases
—
(4,276
)
—
(4,276
)
Loss on disposal of fixed assets
—
6,468
—
6,468
Benefit from deferred income taxes
(191
)
(201
)
(589
)
(1,321
)
Amortization of debt discount and issuance costs
492
5,603
1,509
18,115
(Accretion) amortization of bond discount
(3,117
)
1,273
(3,267
)
2,943
Unrealized currency translation
(1,500
)
323
480
603
Changes in assets and liabilities
Accounts receivable
(5,785
)
(11,189
)
(20,135
)
(2,249
)
Prepaid expenses and other assets
13,048
545
(8,863
)
(7,149
)
Deferred commission expense
(8,466
)
(7,969
)
(22,210
)
(24,371
)
Right-of-use assets
6,175
8,401
19,622
26,948
Accounts payable
1,700
(10,682
)
10,660
(11,951
)
Accrued expenses and other liabilities
(6,634
)
22,651
16,455
38,184
Operating lease liabilities
(3,259
)
(8,048
)
(14,589
)
(26,422
)
Deferred revenue
11,237
17,460
63,743
66,825
Net cash and cash equivalents provided by operating activities
60,064
42,653
183,209
143,544
Investing Activities:
Purchases of investments
(394,856
)
(383,268
)
(1,258,919
)
(1,037,331
)
Maturities of investments
391,928
344,174
1,017,306
940,776
Sale of investments
—
—
124,998
—
Purchases of property and equipment
(13,112
)
(6,653
)
(31,384
)
(17,399
)
Purchases of intangible assets
—
—
(10,000
)
—
Acquisition of a business, net of cash acquired
—
—
—
(16,810
)
Purchases of strategic investments
(5,999
)
(4,000
)
(19,872
)
(10,202
)
Equity method investment
(1,650
)
—
(1,900
)
(3,100
)
Capitalization of software development costs
(11,419
)
(9,217
)
(31,350
)
(25,638
)
Net cash and cash equivalents used in investing activities
(35,108
)
(58,964
)
(211,121
)
(169,704
)
Financing Activities:
Proceeds from settlement of Convertible Note Hedges related to the 2022 Convertible Notes
—
4
60,483
729
Payment for settlement of 2022 Convertible Notes
—
—
(79,807
)
—
Repayment of 2022 Convertible Notes attributable to the principal
—
(35,019
)
—
(80,428
)
Repayment of 2025 Convertible Notes attributable to the principal
—
—
(1,619
)
—
Employee taxes paid related to the net share settlement of stock-based awards
(2,190
)
(4,815
)
(9,954
)
(11,728
)
Proceeds related to the issuance of common stock under stock plans
10,019
9,256
29,718
34,124
Net cash and cash equivalents provided by (used in) financing activities
7,829
(30,574
)
(1,179
)
(57,303
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(6,790
)
(3,117
)
(16,263
)
(6,326
)
Net increase (decrease) in cash, cash equivalents and restricted cash
25,995
(50,002
)
(45,354
)
(89,789
)
Cash, cash equivalents and restricted cash, beginning of period
308,693
341,365
380,042
381,152
Cash, cash equivalents and restricted cash, end of period
$
334,688
$
291,363
$
334,688
$
291,363
Reconciliation of non-GAAP operating income and operating margin
(in thousands, except percentages)
Three Months Ended September 30,
Nine Months Ended September 30,
2022
2021
2022
2021
GAAP operating loss
$
(32,213
)
$
(14,927
)
$
(95,617
)
$
(46,561
)
Stock-based compensation
72,213
44,987
199,081
120,847
Amortization of acquired intangible assets
738
326
1,901
1,008
Acquisition/disposition related expenses (income)
—
350
(306
)
1,917
Gain on termination of operating leases
—
(4,276
)
—
(4,276
)
Loss on disposal of fixed assets
—
6,468
—
6,468
Non-GAAP operating income
$
40,738
$
32,928
$
105,059
$
79,403
GAAP operating margin
(7.3
%)
(4.4
%)
(7.6
%)
(5.0
%)
Non-GAAP operating margin
9.2
%
9.7
%
8.3
%
8.5
%
Reconciliation of non-GAAP net income
(in thousands, except per share amounts)
Three Months Ended September 30,
Nine Months Ended September 30,
2022
2021
2022
2021
GAAP net loss
$
(31,411
)
(13,735
)
$
(97,113
)
$
(61,466
)
Stock-based compensation
72,213
44,987
199,081
120,847
Amortization of acquired intangibles assets
738
326
1,901
1,008
Acquisition/disposition related expenses (income)
—
350
(306
)
1,917
Gain on termination of operating leases
—
(4,276
)
—
(4,276
)
Loss on disposal of fixed assets
—
6,468
—
6,468
Non-cash interest expense for amortization of debt discount and debt issuance costs
492
5,603
1,509
18,115
Gain on strategic investments
—
(10,717
)
(4,200
)
(11,739
)
Loss on early extinguishment of 2022 Convertible Notes
—
1,736
—
4,824
Loss on equity method investment
39
137
38
221
Income tax effects of non-GAAP items
(7,016
)
(5,282
)
(15,932
)
(13,073
)
Non-GAAP net income
$
35,055
25,597
$
84,978
$
62,846
Non-GAAP net income per share:
Basic
$
0.73
$
0.54
$
1.78
$
1.34
Diluted
$
0.69
$
0.50
$
1.66
$
1.24
Shares used in non-GAAP per share calculations
Basic
48,067
47,044
47,821
46,752
Diluted
51,022
50,804
51,098
50,628
Reconciliation of non-GAAP expense and expense as a percentage of revenue
(in thousands, except percentages)
Three Months Ended September 30,
2022
2021
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
$
67,648
$
14,479
$
114,038
$
229,541
$
50,465
$
57,547
$
12,059
$
78,473
$
170,016
$
36,027
Stock -based compensation
(2,311
)
(1,168
)
(28,585
)
(28,060
)
(12,089
)
(1,660
)
(748
)
(18,449
)
(17,302
)
(6,828
)
Amortization of acquired intangible assets
(292
)
—
—
(446
)
—
(234
)
—
—
(92
)
—
Acquisition/disposition related income (expenses)
—
—
—
—
—
—
—
(337
)
—
(13
)
Gain on termination of operating leases
—
—
—
—
—
395
275
1,346
1,839
421
Loss on disposal of fixed assets
(600
)
(415
)
(2,036
)
(2,781
)
(636
)
Non-GAAP expense
$
65,045
$
13,311
$
85,453
$
201,035
$
38,376
$
55,448
$
11,171
$
58,997
$
151,680
$
28,971
GAAP expense as a percentage of revenue
15.2
%
3.3
%
25.7
%
51.7
%
11.4
%
17.0
%
3.6
%
23.1
%
50.1
%
10.6
%
Non-GAAP expense as a percentage of revenue
14.7
%
3.0
%
19.2
%
45.3
%
8.6
%
16.3
%
3.3
%
17.4
%
44.7
%
8.5
%
Nine Months Ended September 30,
2022
2021
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
$
191,466
$
42,532
$
325,687
$
650,936
$
146,309
$
152,533
$
34,685
$
218,973
$
468,836
$
102,883
Stock -based compensation
(6,516
)
(3,251
)
(77,269
)
(77,113
)
(34,932
)
(4,556
)
(2,270
)
(45,014
)
(49,902
)
(19,105
)
Amortization of acquired intangible assets
(920
)
—
—
(981
)
—
(709
)
—
—
(299
)
—
Acquisition/disposition related income (expenses)
—
—
300
—
6
—
—
(1,021
)
(367
)
(529
)
Gain on termination of operating leases
—
—
—
—
—
395
275
1,346
1,839
421
Loss on disposal of fixed assets
—
—
—
—
—
(600
)
(415
)
(2,036
)
(2,781
)
(636
)
Non-GAAP expense
$
184,030
$
39,281
$
248,718
$
572,842
$
111,383
$
147,063
$
32,275
$
172,248
$
417,326
$
83,034
GAAP expense as a percentage of revenue
15.2
%
3.4
%
25.8
%
51.6
%
11.6
%
16.4
%
3.7
%
23.5
%
50.3
%
11.0
%
Non-GAAP expense as a percentage of revenue
14.6
%
3.1
%
19.7
%
45.4
%
8.8
%
15.8
%
3.5
%
18.5
%
44.8
%
8.9
%
Reconciliation of non-GAAP subscription margin
(in thousands, except percentages)
Three Months Ended September 30,
Nine Months Ended September 30,
2022
2021
2022
2021
GAAP subscription margin
$
367,382
$
271,428
$
1,040,921
$
747,128
Stock -based compensation
2,311
1,660
6,516
4,556
Amortization of acquired intangible assets
292
234
920
709
Gain on termination of operating leases
—
(395
)
—
(395
)
Loss on disposal of fixed assets
—
600
—
600
Non-GAAP subscription margin
$
369,985
$
273,527
$
1,048,357
$
752,598
GAAP subscription margin percentage
84.4
%
82.5
%
84.5
%
83.0
%
Non-GAAP subscription margin percentage
85.0
%
83.1
%
85.1
%
83.7
%
Reconciliation of free cash flow
(in thousands)
Three Months Ended September 30,
Nine Months Ended September 30,
2022
2021
2022
2021
GAAP net cash and cash equivalents provided by operating activities
$
60,064
$
42,653
$
183,209
$
143,544
Purchases of property and equipment
(13,112
)
(6,653
)
(31,384
)
(17,399
)
Capitalization of software development costs
(11,419
)
(9,217
)
(31,350
)
(25,638
)
Repayment of 2022 Convertible Notes attributable to the debt discount
—
11,429
—
24,457
Free cash flow
$
35,533
$
38,212
$
120,475
$
124,964
Reconciliation of operating cash flow
(in thousands)
Three Months Ended September 30,
Nine Months Ended September 30,
2022
2021
2022
2021
GAAP net cash and cash equivalents provided by operating activities
$
60,064
$
42,653
$
183,209
$
143,544
Repayment of 2022 Convertible Notes attributable to the debt discount
—
11,429
—
24,457
Operating cash flow, excluding repayment of convertible debt
$
60,064
$
54,082
$
183,209
$
168,001
Reconciliation of forecasted non-GAAP operating income
(in thousands, except percentages)
Three Months Ended
December 31, 2022
Year Ended
December 31, 2022
GAAP operating income range
($36,974)-($34,974
)
($129,363)-($127,363
)
Stock-based compensation
83,231
279,029
Amortization of acquired intangible assets
743
2,640
Acquisition/disposition related (income) expenses
—
(306
)
Non-GAAP operating income range
$47,000-$49,000
$152,000-$154,000
Contacts
Investor Relations Contact:
Charles MacGlashing
investors@hubspot.com
Media Contact:
Ellie Flanagan
eflanagan@hubspot.com