HubSpot Reports Q3 2019 Results

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

(PRNewsfoto/HubSpot, Inc.)

Financial Highlights:

Revenue

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

Operating Income (Loss)

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

Net Income (Loss)

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

Balance Sheet and Cash Flow

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

Additional Recent Business Highlights

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

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

Business Outlook

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

Fourth Quarter 2019:

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

Full Year 2019:

  • Total revenue is expected to be in the range of $669.0 million to $670.0 million.
  • Non-GAAP operating income is expected to be in the range of $54.5 million to $55.5 million.
  • Non-GAAP net income per common share is expected to be in the range of $1.44 to $1.46. This assumes approximately 47.0 million weighted average diluted shares outstanding.

Use of Non-GAAP Financial Measures

In our earnings press releases, conference calls, slide presentations, and webcasts, we may use or discuss non-GAAP financial measures, as defined by Regulation G. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed, and a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure, are included in this press release after the consolidated financial statements. Our earnings press releases containing such non-GAAP reconciliations can be found in the Investors section of our website at ir.hubspot.com

Conference Call Information

HubSpot will host a conference call on Tuesday, November 5, 2019 at 4:30 p.m. Eastern Time (ET) to discuss the company's third quarter financial results and its business outlook. To access this call, dial (833) 241-7257 (domestic) or (647) 689-4221 (international). The conference ID is 8576778. Additionally, a live webcast of the conference call will be available on HubSpot's Investor Relations website at ir.hubspot.com

Following the conference call, a replay will be available at (800) 585-8367 (domestic) or (416) 621-4642 (international). The replay passcode is 8576778. An archived webcast of this conference call will also be available on HubSpot's Investor Relations website at ir.hubspot.com

The company has used, and intends to continue to use, the investor relations portion of its website as a means of disclosing material non-public information and for complying with disclosure obligations under Regulation FD.

About HubSpot

HubSpot is a leading growth platform. Over 68,800 total customers in over 100 countries use HubSpot's award-winning software, services, and support to transform the way they attract, engage, and delight customers. Learn more at www.hubspot.com.

Cautionary Language Concerning Forward-Looking Statements

This press release includes certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding management's expectations of future financial and operational performance and operational expenditures, expected growth, and business outlook, including our financial guidance for the fourth fiscal quarter and full year 2019; statements regarding our positioning for future growth; and statements regarding the anticipated benefits from our recent acquisition of PieSync. These forward-looking statements include, but are not limited to, plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts and statements identified by words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" or words of similar meaning.  These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made.  Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by those forward-looking statements are reasonable, we can give no assurance that the plans, intentions, expectations or strategies will be attained or achieved.  Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control including, without limitation, our history of losses, our ability to retain existing customers and add new customers, the continued growth of the market for an inbound platform; our ability to differentiate our platform from competing products and technologies; our ability to manage our growth effectively to maintain our high level of service; our ability to maintain and expand relationships with our marketing agency partners; our ability to successfully acquire and integrate companies and assets; our ability to successfully recruit and retain highly-qualified personnel; the price volatility of our common stock, and other risks set forth under the caption "Risk Factors" in our Quarterly Report on Form 10-Q filed on August 6, 2019 and our other SEC filings, including our upcoming Quarterly Report on Form 10-Q for the quarter ended September 30, 2019.  We assume no obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.

Consolidated Balance Sheets

(in thousands)







September 30,





December 31,







2019





2018



Assets

















Current assets:

















Cash and cash equivalents



$

225,770





$

111,489



Short-term investments





722,767







480,761



Accounts receivable





77,551







77,100



Deferred commission expense





29,080







23,664



Restricted cash





6,019







5,175



Prepaid expenses and other current assets





20,052







14,229



Total current assets





1,081,239







712,418



Long-term investments





59,783







11,450



Property and equipment, net





63,959







52,468



Capitalized software development costs, net





15,095







12,746



Right-of-use assets





215,797









Deferred commission expense, net of current portion





17,608







18,114



Other assets





7,894







6,888



Intangible assets, net





2,556







4,919



Goodwill





14,950







14,950



Total assets



$

1,478,881





$

833,953



Liabilities and stockholders' equity

















Current liabilities:

















Accounts payable



$

14,882





$

7,810



Accrued compensation costs





23,913







23,589



Accrued expenses and other current liabilities





25,706







22,305



Lease liabilities





15,646









Deferred revenue





200,771







183,305



Total current liabilities





280,918







237,009



Lease liabilities, net of current portion





225,628









Deferred rent, net of current portion











26,445



Deferred revenue, net of current portion





2,835







2,179



Other long-term liabilities





6,182







4,897



Convertible senior notes





334,966







318,782



Total liabilities





850,529







589,312



Stockholders' equity:

















Common stock





43







40



Additional paid-in capital





1,017,046







589,708



Accumulated other comprehensive loss





(909)







(723)



Accumulated deficit





(387,828)







(344,384)



Total stockholders' equity





628,352







244,641



Total liabilities and stockholders' equity



$

1,478,881





$

833,953



 

 

 

Consolidated Statements of Operations

(in thousands, except per share data)





For the Three Months Ended

September 30,



For the Nine Months Ended

September 30,



2019



2018



2019



2018

Revenues:























Subscription

$

167,078



$

125,478



$

467,180



$

350,646

Professional services and other



6,543





6,348





21,494





18,312

Total revenue



173,621





131,826





488,674





368,958

Cost of revenues:























Subscription



25,671





17,777





70,550





49,976

Professional services and other



7,592





7,988





23,433





23,017

Total cost of revenues



33,263





25,765





93,983





72,993

Gross profit



140,358





106,061





394,691





295,965

Operating expenses:























Research and development



39,847





30,761





115,480





85,598

Sales and marketing



91,283





71,293





250,267





196,484

General and administrative



23,300





19,057





67,777





54,309

Total operating expenses



154,430





121,111





433,524





336,391

Loss from operations



(14,072)





(15,050)





(38,833)





(40,426)

Other expense:























Interest income



5,185





2,416





14,783





6,332

Interest expense



(5,760)





(5,393)





(16,946)





(15,893)

Other expense



(89)





(277)





(773)





(1,087)

Total other expense



(664)





(3,254)





(2,936)





(10,648)

Loss before income tax expense



(14,736)





(18,304)





(41,769)





(51,074)

Income tax expense



(251)





(359)





(1,675)





(1,262)

Net loss

$

(14,987)



$

(18,663)



$

(43,444)



$

(52,336)

Net loss per share, basic and diluted

$

(0.35)



$

(0.48)



$

(1.04)



$

(1.37)

Weighted average common shares used in computing basic

   and diluted net loss per share:



42,531





38,762





41,749





38,319

 

 

Consolidated Statements of Cash Flows

(in thousands)





For the Three Months Ended

September 30,



For the Nine Months Ended

September 30,



2019



2018



2019



2018

Operating Activities:























Net loss

$

(14,987)



$

(18,663)



$

(43,444)



$

(52,336)

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























Depreciation and amortization



7,213





6,000





21,248





16,539

Stock-based compensation



23,790





19,613





73,659





55,334

Provision (benefit) for deferred income taxes



184





(4)





49





43

Amortization of debt discount and issuance costs



5,509





5,141





16,184





15,103

Accretion of bond discount



(4,068)





(1,876)





(10,889)





(4,517)

Noncash rent expense







367









1,972

Unrealized currency translation



(175)





79





(193)





215

Changes in assets and liabilities



-



















Accounts receivable



(5,253)





(9,911)





(1,346)





(3,266)

Prepaid expenses and other assets



113





5,535





(6,217)





823

Deferred commission expense



(12)





(5,798)





(5,551)





(15,887)

Right-of-use assets



5,048









14,310





Accounts payable



1,203





3,508





6,195





4,262

Accrued expenses and other current liabilities



(2,333)





(1,876)





955





3,755

Lease liabilities



(4,626)









(14,788)





Deferred rent







81









3,987

Deferred revenue



8,063





9,321





20,910





25,713

Net cash and cash equivalents provided by operating activities



19,669





11,517





71,082





51,740

Investing Activities:























Purchases of investments



(370,192)





(158,546)





(967,994)





(524,838)

Maturities and sales of investments



347,229





150,300





689,614





498,850

Purchases of property and equipment



(9,141)





(5,378)





(21,197)





(16,688)

Capitalization of software development costs



(3,811)





(2,920)





(9,139)





(8,726)

Purchases of strategic investments



(201)





(50)





(553)





(300)

Net cash and cash equivalents used in investing activities



(36,116)





(16,594)





(309,269)





(51,702)

Financing Activities:























Proceeds from common stock offering, net of offering costs paid of $365











342,628





Employee taxes paid related to the net share settlement of stock-based awards



(2,032)





(1,888)





(4,767)





(5,933)

Proceeds related to the issuance of common stock under stock plans



8,188





5,157





18,926





16,769

Repayments of capital lease obligations



(44)





(175)





(249)





(592)

Net cash and cash equivalents provided by financing activities



6,112





3,094





356,538





10,244

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



(1,973)





(321)





(2,171)





(1,319)

Net increase in cash, cash equivalents and restricted cash



(12,308)





(2,304)





116,180





8,963

Cash, cash equivalents and restricted cash, beginning of period



245,602





104,051





117,114





92,784

Cash, cash equivalents and restricted cash, end of period

$

233,294



$

101,747



$

233,294



$

101,747

 

 

Reconciliation of non-GAAP operating income and operating margin

(in thousands, except percentages)

Three Months Ended

September 30,





Nine Months Ended

September 30,





2019



2018





2019



2018



GAAP operating loss

$

(14,072)



$

(15,050)





$

(38,833)



$

(40,426)



Stock-based compensation



23,791





19,612







73,659





55,334



Amortization of acquired intangible assets



762





494







2,362





594



Acquisition related expenses



30





802







95





2,407



Non-GAAP operating income

$

10,511



$

5,858





$

37,283



$

17,909































GAAP operating margin



(8.1)

%



(11.4)

%





(7.9)

%



(11.0)

%

Non-GAAP operating margin



6.1

%



4.4

%





7.6

%



4.9

%

 

 

Reconciliation of non-GAAP net income

(in thousands, except per share amounts)

Three Months Ended

September 30,



Nine Months Ended

September 30,



2019



2018



2019



2018

GAAP net loss

$

(14,987)



$

(18,663)



$

(43,444)



$

(52,336)

Stock-based compensation



23,791





19,612





73,659





55,334

Amortization of acquired intangibles assets



762





494





2,362





594

Acquisition related expenses



30





802





95





2,407

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



5,509





5,141





16,184





15,103

Income tax effects of non-GAAP items















Non-GAAP net income

$

15,105



$

7,386



$

48,856



$

21,102

























Non-GAAP net income per share:























Basic

$

0.36



$

0.19



$

1.17



$

0.55

Diluted

$

0.32



$

0.17



$

1.05



$

0.51

Shares used in non-GAAP per share calculations























Basic



42,531





38,762





41,749





38,319

Diluted



47,869





43,101





46,622





41,314

 

 

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





















(in thousands, except percentages)





























Three Months Ended September 30,





2019





2018





COS,

Subscription



COS,

Prof.

services

& other



R&D



S&M



G&A





COS,

Subscription



COS,

Prof.

services

& other



R&D



S&M



G&A



GAAP expense

$

25,671



$

7,592



$

39,847



$

91,283



$

23,300





$

17,777



$

7,988



$

30,761



$

71,293



$

19,057



Stock -based compensation



(854)





(614)





(8,019)





(8,947)





(5,357)







(391)





(803)





(5,990)





(7,898)





(4,530)



Amortization of acquired intangible assets



(762)























(494)



















Acquisition related expenses











(30)























(802)











Non-GAAP expense

$

24,055



$

6,978



$

31,798



$

82,336



$

17,943





$

16,892



$

7,185



$

23,969



$

63,395



$

14,527



































































GAAP expense as a percentage of revenue



14.8

%



4.4

%



23.0

%



52.6

%



13.4

%





13.5

%



6.1

%



23.3

%



54.1

%



14.5

%

Non-GAAP expense as a percentage of revenue



13.9

%



4.0

%



18.3

%



47.4

%



10.3

%





12.8

%



5.5

%



18.2

%



48.1

%



11.0

%



































































































































































































Nine Months Ended September 30,





2019





2018





COS,

Subscription



COS,

Prof.

services

& other



R&D



S&M



G&A





COS,

Subscription



COS,

Prof.

services

& other



R&D



S&M



G&A



GAAP expense

$

70,550



$

23,433



$

115,480



$

250,267



$

67,777





$

49,976



$

23,017



$

85,598



$

196,484



$

54,309



Stock -based compensation



(2,291)





(2,298)





(25,663)





(27,275)





(16,132)







(985)





(2,339)





(16,866)





(22,327)





(12,817)



Amortization of acquired intangible assets



(2,362)























(594)



















Acquisition related expenses











(95)























(2,407)











Non-GAAP expense

$

65,897



$

21,135



$

89,722



$

222,992



$

51,645





$

48,397



$

20,678



$

66,325



$

174,157



$

41,492



































































GAAP expense as a percentage of revenue



14.4

%



4.8

%



23.6

%



51.2

%



13.9

%





13.5

%



6.2

%



23.2

%



53.3

%



14.7

%

Non-GAAP expense as a percentage of revenue



13.5

%



4.3

%



18.4

%



45.6

%



10.6

%





13.1

%



5.6

%



18.0

%



47.2

%



11.2

%

 

 

Reconciliation of non-GAAP subscription margin



























(in thousands, except percentages)

































Three Months Ended September 30,





Nine Months Ended September 30,







2019



2018





2019



2018



GAAP subscription margin



$

141,407



$

107,701





$

396,630



$

300,670



Stock -based compensation





854





391







2,291





985



Amortization of acquired intangible assets





762





494







2,362





594



Non-GAAP subscription margin



$

143,023



$

108,586





$

401,283



$

302,249

































GAAP subscription margin percentage





84.6

%



85.8

%





84.9

%



85.7

%

Non-GAAP subscription margin percentage





85.6

%



86.5

%





85.9

%



86.2

%

































 

Reconciliation of free cash flow



























(in thousands)































































Three Months Ended September 30,





Nine Months Ended September 30,







2019



2018





2019



2018



GAAP net cash and cash equivalents provided by operating activities



$

19,669



$

11,517





$

71,082



$

51,740



Purchases of property and equipment





(9,141)





(5,378)







(21,197)





(16,688)



Capitalization of software development costs





(3,811)





(2,920)







(9,139)





(8,726)



Free cash flow



$

6,717



$

3,219





$

40,746



$

26,326



 

Reconciliation of forecasted non-GAAP operating income

(in thousands, except percentages)

















Three Months Ended

December 31, 2019





Year Ended

December 31, 2019



GAAP operating income range

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





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



Stock-based compensation



24,300







97,300



Amortization of acquired intangible assets



750







3,100



Acquisition related expenses



30







130



Non-GAAP operating income range

$17,100-$18,100





$54,500-$55,500



 

 

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

(in thousands, except per share amounts)

























Three Months Ended

December 31, 2019



Year Ended

December 31, 2019

GAAP net loss range

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



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

Stock-based compensation



24,300





97,300

Amortization of acquired intangible assets



750





3,100

Acquisition related expenses



30





130

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



5,600





21,800

Income tax effects of non-GAAP items







Non-GAAP net income range

$18,800-$19,800



$67,800-$68,800













GAAP net income per basic and diluted share

($0.28)-($0.25)



($1.30)-($1.27)

Non-GAAP net income per diluted share

$0.40-$0.42



$1.44-$1.46

























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

42,900



42,000













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

47,000



47,000

HubSpot's estimates of stock-based compensation, amortization of acquired intangible assets,  acquisition-related expenses, and non-cash interest expense for amortization of debt discount and debt issuance costs in future periods assume, among other things, the occurrence of no additional acquisitions, investments or restructurings, and no further revisions to stock-based compensation and related expenses.  HubSpot has not included estimates related to the recently completed acquisition of PieSync NV for acquisition-related expenses, amortization of acquired intangibles, and any stock-based compensation for the three months ended December 31, 2019 because these expenses are unable to be determined at this time without unreasonable effort. 

Non-GAAP Financial Measures 

We report our financial results in accordance with accounting principles generally accepted in the United States of America, or GAAP. However, management believes that, in order to properly understand our short-term and long-term financial and operational trends, investors may wish to consider the impact of certain non-cash or non-recurring items when used as a supplement to financial performance measures in accordance with GAAP. These items result from facts and circumstances that vary in frequency and impact on continuing operations. In this release, HubSpot's non-GAAP operating income, operating margin, subscription margin, expense, expense as a percentage of revenue, net income, and free cash flow are not presented in accordance with GAAP and are not intended to be used in lieu of GAAP presentations of results of operations.

Management believes that these non-GAAP financial measures provide additional means of evaluating period-over-period operating performance. Specifically, these non-GAAP financial measures provide management with additional means to understand and evaluate the operating results and trends in our ongoing business by eliminating certain non-cash expenses and other items that management believes might otherwise make comparisons of our ongoing business with prior periods more difficult, obscure trends in ongoing operations, or reduce management's ability to make useful forecasts. In addition, management understands that some investors and financial analysts find this information helpful in analyzing our financial and operational performance and comparing this performance to our peers and competitors. However, these non-GAAP financial measures have limitations as an analytical tool and are not intended to be an alternative to financial measures prepared in accordance with GAAP. In addition, it should be noted that these non-GAAP financial measures may be different from non-GAAP measures used by other companies. We intend to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting. Management may, however, utilize other measures to illustrate performance in the future. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. A reconciliation of our non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included above in this press release.

These non-GAAP measures exclude stock-based compensation, amortization of acquired intangible assets, acquisition related expenses, non-cash interest expense for the amortization of debt discount debt issuance costs, and income tax effects of non-GAAP items. We believe investors may want to exclude the effects of these items in order to compare our financial performance with that of other companies and between time periods:       

    1. 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.
    2. 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.
    3. 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 this these expenses provides for a useful comparison of our operating results to prior periods and to our peer companies.
    4. In May 2017, the Company issued $400 million of convertible notes due in 2022 with a coupon interest rate of 0.25%. The imputed interest rate of the convertible senior notes was approximately 6.95%. 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.
    5. The effects of income taxes on non-GAAP items for current and historical periods is zero due to our history of non-GAAP losses and a full valuation allowance on our U.S. deferred tax assets.

 

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

SOURCE HubSpot

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
Date
ticker
name
Actual EPS
EPS Surprise
Actual Rev
Rev Surprise
Posted In: EarningsPress ReleasesadvertisingConference Call AnnouncementsMultimedia/Online/Internet
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!