EX-99 2 hubs-ex99_1.htm EX-99.1 EX-99

Exhibit 99.1

img151174279_0.jpg  

 

HubSpot Reports Q4 and Full Year 2022 Results

 

CAMBRIDGE, MA (February 16, 2023) — HubSpot, Inc. (NYSE: HUBS), the customer relationship management (CRM) platform for scaling companies, today announced financial results for the fourth quarter and full year ended December 31, 2022.


Financial Highlights:

 

Revenue

Fourth Quarter 2022:

●
Total revenue was $469.7 million, up 27% compared to Q4'21.
o
Subscription revenue was $458.2 million, up 28% compared to Q4'21.
o
Professional services and other revenue was $11.5 million, up 8% compared to Q4'21.

Full Year 2022:

●
Total revenue was $1.731 billion, up 33% compared to 2021.
o
Subscription revenue was $1.691 billion, up 34% compared to 2021.
o
Professional services and other revenue was $40.4 million, down 5% compared to 2021.

Operating Income (Loss)

Fourth Quarter 2022:

●
GAAP operating margin was (2.9%), compared to (2.2%) in Q4'21.
●
Non-GAAP operating margin was 13.6%, compared to 10.3% in Q4'21.
●
GAAP operating loss was ($13.5) million, compared to ($8.2) million in Q4'21.
●
Non-GAAP operating income was $64.0 million, compared to $38.2 million in Q4'21.

 

Full Year 2022:

●
GAAP operating margin was (6.3%), compared to (4.2%) in 2021.
●
Non-GAAP operating margin was 9.8%, compared to 9.0% in 2021.
●
GAAP operating loss was ($109.1) million, compared to ($54.8) million in 2021.
●
Non-GAAP operating income was $169.1 million, compared to $117.6 million in 2021.

 

Net Income (Loss)

Fourth Quarter 2022:

●
GAAP net loss was ($15.6) million, or ($0.32) per basic and diluted share, compared to ($16.4) million, or ($0.35) per basic and diluted share in Q4'21.
●
Non-GAAP net income was $56.8 million, or $1.17 per basic and $1.11 per diluted share, compared to $29.6 million, or $0.63 per basic and $0.58 per diluted share in Q4'21.
●
Weighted average basic and diluted shares outstanding for GAAP net loss per share was 48.8 million, compared to 47.3 million basic and diluted shares in Q4'21.
●
Weighted average basic and diluted shares outstanding for non-GAAP net income per share was 48.8 million and 51.1 million respectively, compared to 47.3 million and 50.9 million, respectively in Q4'21.

 

Full Year 2022:

●
GAAP net loss was ($112.7) million, or ($2.35) per basic and diluted share, compared to ($77.8) million, or ($1.66) per basic and diluted share in 2021.

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●
Non-GAAP net income was $141.8 million, or $2.95 per basic and $2.78 per diluted share, compared to $92.5 million, or $1.97 per basic and $1.82 per diluted share in 2021.
●
Weighted average basic and diluted shares outstanding for GAAP net loss per share was 48.1 million, compared to 46.9 million basic and diluted shares in 2021.
●
Weighted average basic and diluted shares outstanding for non-GAAP net income per share was 48.1 million and 51.1 million respectively, compared to 46.9 million and 50.7 million, respectively in 2021.

 

Balance Sheet and Cash Flow

•
The company’s cash, cash equivalents, and short-term and long-term investments balance was $1.5 billion as of December 31, 2022.
●
During the fourth quarter, the company generated $90.0 million of cash from operating activities and operating cash flow, compared to $95.2 million of cash from operating activities and $97.2 million of operating cash flow, which excluded the $2.0 million used for the repayment of its convertible notes, during Q4'21.
●
During the fourth quarter, the company generated $70.9 million of free cash flow, compared to $78.3 million during Q4'21.
●
During 2022, the company generated $273.2 million of cash from operating activities and operating cash flow, compared to $238.7 million of cash from operating activities and $265.2 million of operating cash flow, which excluded the $26.4 million used for the repayment of its convertible notes, during 2021.
●
The company generated $191.4 million of free cash flow during 2022, compared to $203.3 million during 2021.

 

Additional Recent Business Highlights

●
Grew Customers to 167,386 at December 31, 2022, up 24% from December 31, 2021.
●
Average Subscription Revenue Per Customer was $11,231 during the fourth quarter of 2022, up 3% compared to the fourth quarter of 2021.

 

“I’m proud of the way our team stepped up to the challenging macroeconomic conditions that emerged in 2022. We executed well and helped our customers navigate choppy waters,” said Yamini Rangan, Chief Executive Officer at HubSpot. “We focused on product innovation and showing the value HubSpot can deliver. As a result, we increasingly see HubSpot becoming the platform of choice for SMBs. Looking ahead, we have a tremendous opportunity in 2023 to help our customers grow and make progress on our vision of becoming the #1 CRM platform for scaling companies. We’ve taken the hard but necessary steps to restructure our business so we’re better positioned to navigate the current environment and emerge stronger long-term. Our mission of helping millions of organizations grow better is as exciting as ever.”

 

Business Outlook
Based on information available as of February 16, 2023, HubSpot is issuing guidance for the first quarter of 2023 and full year 2023 as indicated below.


First Quarter 2023:

•
Total revenue is expected to be in the range of $473.0 million to $475.0 million.
o
Unfavorable foreign exchange rates are expected to be a 4 point headwind to first quarter 2023 revenue growth(1).
•
Non-GAAP operating income is expected to be in the range of $45.0 million to $47.0 million(2).
•
Non-GAAP net income per common share is expected to be in the range of $0.82 to $0.84(2). This assumes approximately 51.5 million weighted average diluted shares outstanding.

 

Full Year 2023:

•
Total revenue is expected to be in the range of $2.050 billion to $2.060 billion.
o
Unfavorable foreign exchange rates are expected to be a one point headwind to full year 2023 revenue growth(1).
•
Non-GAAP operating income is expected to be in the range of $248.0 million to $252.0 million(2).

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•
Non-GAAP net income per common share is expected to be in the range of $4.24 to $4.32(2). This assumes approximately 52.2 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.

(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 Thursday February 16, 2023 at 4:30 p.m. Eastern Time (ET) to discuss the company’s fourth quarter and full year 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. After registering, a confirmation email will be sent, including dial-in details and a unique code for entry. 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 434716. 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 167,000 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 first fiscal quarter of and full year 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 recent reduction in force, including

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risks that the related costs and charges may be greater than anticipated and that the restructuring efforts may not generate their intended benefits, may adversely affect the Company’s internal programs and the Company’s ability to recruit and retain skilled and motivated personnel, and may be distracting to employees and management; 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 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, 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.

 

 

 

 

Page | 4

 

Consolidated Balance Sheets

(in thousands)

 

 

December 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

331,022

 

 

$

377,013

 

Short-term investments

 

 

1,081,662

 

 

 

820,962

 

Accounts receivable

 

 

226,849

 

 

 

157,362

 

Deferred commission expense

 

 

70,992

 

 

 

59,849

 

Prepaid expenses and other current assets

 

 

44,074

 

 

 

38,388

 

Total current assets

 

 

1,754,599

 

 

 

1,453,574

 

Long-term investments

 

 

112,791

 

 

 

174,895

 

Property and equipment, net

 

 

105,227

 

 

 

96,134

 

Capitalized software development costs, net

 

 

63,790

 

 

 

39,858

 

Right-of-use assets

 

 

319,304

 

 

 

280,828

 

Deferred commission expense, net of current portion

 

 

66,559

 

 

 

42,681

 

Other assets

 

 

58,795

 

 

 

29,244

 

Intangible assets, net

 

 

17,446

 

 

 

10,565

 

Goodwill

 

 

46,227

 

 

 

47,075

 

Total assets

 

$

2,544,738

 

 

$

2,174,854

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

20,883

 

 

$

2,773

 

Accrued compensation costs

 

 

62,846

 

 

 

63,836

 

Accrued expenses and other current liabilities

 

 

102,122

 

 

 

74,457

 

Convertible senior notes

 

—

 

 

 

19,630

 

Operating lease liabilities

 

 

35,928

 

 

 

26,364

 

Deferred revenue

 

 

539,874

 

 

 

430,414

 

Total current liabilities

 

 

761,653

 

 

 

617,474

 

Operating lease liabilities, net of current portion

 

 

316,184

 

 

 

283,873

 

Deferred revenue, net of current portion

 

 

5,904

 

 

 

4,473

 

Other long-term liabilities

 

 

14,546

 

 

 

12,134

 

Convertible senior notes, net of current portion

 

 

454,227

 

 

 

383,101

 

Total liabilities

 

 

1,552,514

 

 

 

1,301,055

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock

 

 

49

 

 

 

47

 

Additional paid-in capital

 

 

1,647,446

 

 

 

1,436,089

 

Accumulated other comprehensive loss

 

 

(12,890

)

 

 

(1,339

)

Accumulated deficit

 

 

(642,381

)

 

 

(560,998

)

Total stockholders’ equity

 

 

992,224

 

 

 

873,799

 

Total liabilities and stockholders’ equity

 

$

2,544,738

 

 

$

2,174,854

 

 

 

 

 

 

 

 

 

 

 

 

 

Page | 5

 

 

Consolidated Statements of Operations

(in thousands, except per share data)

 

 

For the Three Months Ended December 31,

 

 

For the Year Ended December 31,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Subscription

$

458,152

 

 

$

358,657

 

 

$

1,690,538

 

 

$

1,258,319

 

Professional services and other

 

11,506

 

 

 

10,652

 

 

 

40,431

 

 

 

42,339

 

Total revenue

 

469,658

 

 

 

369,309

 

 

 

1,730,969

 

 

 

1,300,658

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

Subscription

 

66,051

 

 

 

58,599

 

 

 

257,513

 

 

 

211,132

 

Professional services and other

 

14,214

 

 

 

13,040

 

 

 

56,746

 

 

 

47,725

 

Total cost of revenues

 

80,265

 

 

 

71,639

 

 

 

314,259

 

 

 

258,857

 

Gross profit

 

389,393

 

 

 

297,670

 

 

 

1,416,710

 

 

 

1,041,801

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

116,334

 

 

 

82,997

 

 

 

442,022

 

 

 

301,970

 

Sales and marketing

 

235,132

 

 

 

180,845

 

 

 

886,069

 

 

 

649,681

 

General and administrative

 

51,413

 

 

 

42,065

 

 

 

197,720

 

 

 

144,949

 

Total operating expenses

 

402,879

 

 

 

305,907

 

 

 

1,525,811

 

 

 

1,096,600

 

Loss from operations

 

(13,486

)

 

 

(8,237

)

 

 

(109,101

)

 

 

(54,799

)

Other expense:

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

7,777

 

 

 

126

 

 

 

15,000

 

 

 

1,173

 

Interest expense

 

(941

)

 

 

(5,905

)

 

 

(3,762

)

 

 

(30,282

)

Other (expense) income

 

(6,244

)

 

 

(974

)

 

 

(6,829

)

 

 

10,090

 

Total other income (expense)

 

592

 

 

 

(6,753

)

 

 

4,409

 

 

 

(19,019

)

Loss before income tax expense

 

(12,894

)

 

 

(14,990

)

 

 

(104,692

)

 

 

(73,818

)

Income tax expense

 

(2,744

)

 

 

(1,380

)

 

 

(8,057

)

 

 

(4,019

)

Net loss

$

(15,638

)

 

$

(16,370

)

 

$

(112,749

)

 

$

(77,837

)

Net loss per share, basic and diluted

$

(0.32

)

 

$

(0.35

)

 

$

(2.35

)

 

$

(1.66

)

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

 

48,787

 

 

 

47,304

 

 

 

48,065

 

 

 

46,891

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Page | 6

 

 

Page | 7

 

Consolidated Statements of Cash Flows

(in thousands)

 

 

For the Three Months Ended December 31,

 

 

For the Year Ended December 31,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(15,638

)

 

$

(16,370

)

 

$

(112,749

)

 

$

(77,837

)

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

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

15,525

 

 

 

11,970

 

 

 

58,150

 

 

 

45,159

 

Stock-based compensation

 

76,768

 

 

 

45,914

 

 

 

275,849

 

 

 

166,761

 

Loss on early extinguishment of 2022 Convertible Notes

—

 

 

 

68

 

 

—

 

 

 

4,892

 

Repayment of 2022 Convertible Notes attributable to the debt discount

—

 

 

 

(1,971

)

 

—

 

 

 

(26,428

)

Gain on strategic investments

—

 

 

 

(2

)

 

 

(4,201

)

 

 

(11,741

)

Impairment of strategic investments

 

5,863

 

 

—

 

 

 

5,863

 

 

—

 

Gain on termination of operating leases

—

 

 

—

 

 

—

 

 

 

(4,276

)

Loss on disposal of fixed assets

—

 

 

—

 

 

—

 

 

 

6,468

 

Benefit from deferred income taxes

 

(1,533

)

 

 

(1,548

)

 

 

(2,122

)

 

 

(2,869

)

Amortization of debt discount and issuance costs

 

504

 

 

 

5,393

 

 

 

2,013

 

 

 

23,507

 

(Accretion) amortization of bond discount

 

(5,851

)

 

 

1,332

 

 

 

(9,118

)

 

 

4,275

 

Unrealized currency translation

 

530

 

 

 

701

 

 

 

1,010

 

 

 

1,304

 

Changes in assets and liabilities

 

 

 

 

 

 

 

 

 

 

-

 

Accounts receivable

 

(53,850

)

 

 

(31,859

)

 

 

(73,985

)

 

 

(34,107

)

Prepaid expenses and other assets

 

2,878

 

 

 

6,072

 

 

 

(5,987

)

 

 

(1,077

)

Deferred commission expense

 

(15,373

)

 

 

(8,189

)

 

 

(37,583

)

 

 

(32,560

)

Right-of-use assets

 

9,909

 

 

 

4,470

 

 

 

29,531

 

 

 

31,418

 

Accounts payable

 

7,617

 

 

 

1,343

 

 

 

18,277

 

 

 

(10,608

)

Accrued expenses and other liabilities

 

15,920

 

 

 

20,025

 

 

 

32,375

 

 

 

58,209

 

Operating lease liabilities

 

(6,529

)

 

 

(3,056

)

 

 

(21,118

)

 

 

(29,478

)

Deferred revenue

 

53,226

 

 

 

60,891

 

 

 

116,969

 

 

 

127,716

 

Net cash and cash equivalents provided by operating activities

 

89,966

 

 

 

95,184

 

 

 

273,174

 

 

 

238,728

 

Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

Purchases of investments

 

(248,951

)

 

 

(447,431

)

 

 

(1,507,870

)

 

 

(1,484,762

)

Maturities of investments

 

167,200

 

 

 

446,722

 

 

 

1,184,506

 

 

 

1,387,498

 

Sale of investments

—

 

 

—

 

 

 

124,998

 

 

—

 

Purchases of property and equipment

 

(6,042

)

 

 

(11,327

)

 

 

(37,426

)

 

 

(28,726

)

Purchases of intangible assets

—

 

 

—

 

 

 

(10,000

)

 

—

 

Acquisition of a business, net of cash acquired

—

 

 

—

 

 

—

 

 

 

(16,810

)

Purchases of strategic investments

 

(6,499

)

 

 

(2,887

)

 

 

(26,371

)

 

 

(13,089

)

Proceeds from sale of strategic investments

—

 

 

 

12,620

 

 

—

 

 

 

12,620

 

Payments for equity method investments

 

(1,250

)

 

—

 

 

 

(3,150

)

 

 

(3,100

)

Capitalization of software development costs

 

(12,995

)

 

 

(7,501

)

 

 

(44,345

)

 

 

(33,139

)

Net cash and cash equivalents used in investing activities

 

(108,537

)

 

 

(9,804

)

 

 

(319,658

)

 

 

(179,508

)

Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

Proceeds from settlement of Convertible Note Hedges related to the 2022
  Convertible Notes

—

 

 

 

8,256

 

 

 

60,483

 

 

 

8,985

 

Payments for settlement of Warrants related to the 2022 Convertible Notes

 

(34

)

 

—

 

 

 

(34

)

 

—

 

Payment for settlement of 2022 Convertible Notes

—

 

 

 

(9,097

)

 

 

(79,807

)

 

 

(89,525

)

Repayment of 2025 Convertible Notes attributable to the principal

—

 

 

—

 

 

 

(1,619

)

 

—

 

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

 

(1,572

)

 

 

(5,711

)

 

 

(11,526

)

 

 

(17,439

)

Proceeds related to the issuance of common stock under stock plans

 

10,213

 

 

 

12,386

 

 

 

39,931

 

 

 

46,510

 

Net cash and cash equivalents provided by (used in) financing
  activities

 

8,607

 

 

 

5,834

 

 

 

7,428

 

 

 

(51,469

)

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

 

9,451

 

 

 

(2,535

)

 

 

(6,811

)

 

 

(8,861

)

Net (decrease) increase in cash, cash equivalents and restricted cash

 

(513

)

 

 

88,679

 

 

 

(45,867

)

 

 

(1,110

)

Cash, cash equivalents and restricted cash, beginning of period

 

334,688

 

 

 

291,363

 

 

 

380,042

 

 

 

381,152

 

Cash, cash equivalents and restricted cash, end of period

$

334,175

 

 

$

380,042

 

 

$

334,175

 

 

$

380,042

 

 

 

 

 

 

Reconciliation of non-GAAP operating income and operating margin

(in thousands, except percentages)

Page | 8

 

 

 

Three Months Ended December 31,

 

 

For the Year Ended December 31,

 

 

2022

 

2021

 

 

2022

 

2021

 

GAAP operating loss

$

(13,486

)

$

(8,237

)

 

$

(109,101

)

$

(54,799

)

Stock-based compensation

 

76,768

 

 

45,914

 

 

 

275,849

 

 

166,761

 

Amortization of acquired intangible assets

 

729

 

 

318

 

 

 

2,629

 

 

1,326

 

Acquisition/disposition related expenses (income)

 

—

 

 

170

 

 

 

(305

)

 

2,087

 

Gain on termination of operating leases

 

—

 

 

—

 

 

 

—

 

 

(4,276

)

Loss on disposal of fixed assets

 

—

 

 

—

 

 

 

—

 

 

6,468

 

Non-GAAP operating income

$

64,011

 

$

38,165

 

 

$

169,072

 

$

117,567

 

 

 

 

 

 

 

 

 

 

 

GAAP operating margin

 

(2.9

%)

 

(2.2

%)

 

 

(6.3

%)

 

(4.2

%)

Non-GAAP operating margin

 

13.6

%

 

10.3

%

 

 

9.8

%

 

9.0

%

 

Reconciliation of non-GAAP net income

(in thousands, except per share amounts)

 

 

Three Months Ended December 31,

 

 

For the Year Ended December 31,

 

 

2022

 

2021

 

 

2022

 

2021

 

GAAP net loss

$

(15,638

)

 

(16,370

)

 

$

(112,749

)

$

(77,837

)

Stock-based compensation

 

76,768

 

 

45,914

 

 

 

275,849

 

 

166,761

 

Amortization of acquired intangibles assets

 

729

 

 

318

 

 

 

2,629

 

 

1,326

 

Acquisition/disposition related expenses (income)

 

—

 

 

170

 

 

 

(305

)

 

2,087

 

Gain on termination of operating leases

 

—

 

 

—

 

 

 

—

 

 

(4,276

)

Loss on disposal of fixed assets

 

—

 

 

—

 

 

 

—

 

 

6,468

 

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

 

504

 

 

5,393

 

 

 

2,013

 

 

23,507

 

Impairment of (gain on) strategic investments

 

5,863

 

 

(2

)

 

 

1,662

 

 

(11,741

)

Loss on early extinguishment of 2022 Convertible Notes

 

—

 

 

68

 

 

 

—

 

 

4,892

 

Loss on equity method investment

 

87

 

 

150

 

 

 

125

 

 

371

 

Income tax effects of non-GAAP items

 

(11,467

)

 

(6,024

)

 

 

(27,399

)

 

(19,096

)

Non-GAAP net income

$

56,846

 

 

29,617

 

 

$

141,825

 

$

92,462

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP net income per share:

 

 

 

 

 

 

 

 

 

Basic

$

1.17

 

$

0.63

 

 

$

2.95

 

$

1.97

 

Diluted

$

1.11

 

$

0.58

 

 

$

2.78

 

$

1.82

 

Shares used in non-GAAP per share calculations

 

 

 

 

 

 

 

 

 

Basic

 

48,787

 

 

47,304

 

 

 

48,065

 

 

46,891

 

Diluted

 

51,094

 

 

50,888

 

 

 

51,099

 

 

50,694

 

 

Page | 9

 

 

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

(in thousands, except percentages)

 

 

Three Months Ended December 31,

 

 

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

$

66,051

 

$

14,214

 

$

116,334

 

$

235,132

 

$

51,413

 

 

$

58,599

 

$

13,040

 

$

82,997

 

$

180,845

 

$

42,065

 

Stock -based compensation

 

(2,560

)

 

(1,113

)

 

(30,248

)

 

(30,557

)

 

(12,290

)

 

 

(1,742

)

 

(821

)

 

(16,600

)

 

(17,511

)

 

(9,240

)

Amortization of acquired
  intangible assets

 

(283

)

 

—

 

 

—

 

 

(446

)

 

—

 

 

 

(228

)

 

—

 

 

—

 

 

(90

)

 

—

 

Acquisition/disposition related
  expense

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

 

—

 

 

—

 

 

(131

)

 

—

 

 

(39

)

Non-GAAP expense

$

63,208

 

$

13,101

 

$

86,086

 

$

204,129

 

$

39,123

 

 

$

56,629

 

$

12,219

 

$

66,266

 

$

163,244

 

$

32,786

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP expense as a
  percentage of revenue

 

14.1

%

 

3.0

%

 

24.8

%

 

50.1

%

 

10.9

%

 

 

15.9

%

 

3.5

%

 

22.5

%

 

49.0

%

 

11.4

%

Non-GAAP expense as a
  percentage of revenue

 

13.5

%

 

2.8

%

 

18.3

%

 

43.5

%

 

8.3

%

 

 

15.3

%

 

3.3

%

 

17.9

%

 

44.2

%

 

8.9

%

 

 

For the Year Ended December 31,

 

 

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

$

257,513

 

$

56,746

 

$

442,022

 

$

886,069

 

$

197,720

 

 

$

211,132

 

$

47,725

 

$

301,970

 

$

649,681

 

$

144,949

 

Stock -based compensation

 

(9,076

)

 

(4,393

)

 

(107,517

)

 

(107,640

)

 

(47,223

)

 

 

(6,297

)

 

(3,092

)

 

(61,614

)

 

(67,413

)

 

(28,345

)

Amortization of acquired
  intangible assets

 

(1,203

)

 

—

 

 

—

 

 

(1,426

)

 

—

 

 

 

(937

)

 

—

 

 

—

 

 

(389

)

 

—

 

Acquisition/disposition related
  income (expenses)

 

—

 

 

—

 

 

300

 

 

—

 

 

5

 

 

 

—

 

 

—

 

 

(1,152

)

 

(367

)

 

(568

)

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

$

247,234

 

$

52,353

 

$

334,805

 

$

777,003

 

$

150,502

 

 

$

203,693

 

$

44,493

 

$

238,514

 

$

580,570

 

$

115,821

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP expense as a
  percentage of revenue

 

14.9

%

 

3.3

%

 

25.5

%

 

51.2

%

 

11.4

%

 

 

16.2

%

 

3.7

%

 

23.2

%

 

50.0

%

 

11.1

%

Non-GAAP expense as a
  percentage of revenue

 

14.3

%

 

3.0

%

 

19.3

%

 

44.9

%

 

8.7

%

 

 

15.7

%

 

3.4

%

 

18.3

%

 

44.6

%

 

8.9

%

 

 

 

 

 

Page | 10

 

 

Reconciliation of non-GAAP subscription margin

(in thousands, except percentages)

 

 

 

Three Months Ended December 31,

 

 

For the Year Ended December 31,

 

 

 

2022

 

2021

 

 

2022

 

2021

 

GAAP subscription margin

 

$

392,101

 

$

300,058

 

 

$

1,433,025

 

$

1,047,187

 

Stock -based compensation

 

 

2,560

 

 

1,742

 

 

 

9,076

 

 

6,297

 

Amortization of acquired intangible assets

 

 

283

 

 

228

 

 

 

1,203

 

 

937

 

Gain on termination of operating leases

 

—

 

—

 

 

—

 

 

(395

)

Loss on disposal of fixed assets

 

—

 

—

 

 

—

 

 

600

 

Non-GAAP subscription margin

 

$

394,944

 

$

302,028

 

 

$

1,443,304

 

$

1,054,626

 

 

 

 

 

 

 

 

 

 

 

 

GAAP subscription margin percentage

 

 

85.6

%

 

83.7

%

 

 

84.8

%

 

83.2

%

Non-GAAP subscription margin percentage

 

 

86.2

%

 

84.2

%

 

 

85.4

%

 

83.8

%

 

 

Reconciliation of free cash flow

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

 

For the Year Ended December 31,

 

 

 

2022

 

2021

 

 

2022

 

2021

 

GAAP net cash and cash equivalents provided by operating activities

 

$

89,966

 

$

95,184

 

 

$

273,174

 

$

238,728

 

Purchases of property and equipment

 

 

(6,042

)

 

(11,327

)

 

 

(37,426

)

 

(28,726

)

Capitalization of software development costs

 

 

(12,995

)

 

(7,501

)

 

 

(44,345

)

 

(33,139

)

Repayment of 2022 Convertible Notes attributable to the debt discount

 

—

 

 

1,971

 

 

—

 

 

26,428

 

Free cash flow

 

$

70,929

 

$

78,327

 

 

$

191,403

 

$

203,291

 

 

 

Reconciliation of operating cash flow

(in thousands)

 

 

 

Three Months Ended December 31,

 

 

For the Year Ended December 31,

 

 

 

2022

 

2021

 

 

2022

 

2021

 

GAAP net cash and cash equivalents provided by operating activities

 

$

89,966

 

$

95,184

 

 

$

273,174

 

$

238,728

 

Repayment of 2022 Convertible Notes attributable to the debt discount

 

—

 

 

1,971

 

 

—

 

 

26,428

 

Operating cash flow, excluding repayment of convertible debt

 

$

89,966

 

$

97,155

 

 

$

273,174

 

$

265,156

 

 

 

Reconciliation of forecasted non-GAAP operating income
(in thousands, except percentages)

 

 

 

 

 

 

Three Months Ended
March 31, 2023

 

 

Year Ended
December 31, 2023

 

GAAP operating income range

($64,045)-($110,045)

 

 

($287,972)-($316,972)

 

Stock-based compensation

 

84,199

 

 

 

460,589

 

Amortization of acquired intangible assets

 

846

 

 

 

3,383

 

Restructuring charges

24,000-72,000

 

 

72,000-105,000

 

Non-GAAP operating income range

$45,000-$47,000

 

 

$248,000-$252,000

 

 

 

 

Page | 11

 

 

 

Reconciliation of forecasted non-GAAP net income and non-GAAP net income per share
(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

Three Months Ended
March 31, 2023

 

 

Year Ended
December 31, 2023

 

GAAP net loss range

($61,846)-($108,596)

 

 

($275,688)-($303,688)

 

Stock-based compensation

 

84,199

 

 

 

460,589

 

Amortization of acquired intangible assets

 

846

 

 

 

3,383

 

Restructuring charges

24,000-72,000

 

 

72,000-105,000

 

Non-cash interest expense for amortization of debt issuance costs

 

484

 

 

 

1,985

 

Income tax effects of non-GAAP items

(5,383)-(5,633)

 

 

(40,869)-(41,869)

 

Non-GAAP net income range

$42,300-$43,300

 

 

$221,400-$225,400

 

 

 

 

 

 

 

GAAP net income per basic and diluted share

($1.25)-($2.20)

 

 

($5.68)-($6.29)

 

Non-GAAP net income per diluted share

$0.82-$0.84

 

 

$4.24-$4.32

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

49,403

 

 

 

50,000

 

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

 

51,507

 

 

 

52,199

 

 

HubSpot’s estimates of stock-based compensation, amortization of acquired intangible assets, restructuring charges, non-cash interest expense for amortization of debt issuance costs, and income tax effects of non-GAAP items assume, among other things, the occurrence of no additional acquisitions, 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, operating 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 from operating cash flow 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

Page | 12

 

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, disposition related income, non-cash interest expense for the amortization of debt issuance costs, gain on termination of operating leases, loss on disposal of fixed assets, loss on early extinguishment of 2022 Convertible Notes, gain or impairment losses on strategic investments, gain or loss on equity method 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:
 

A.
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.

 

B.
Expense for the amortization of acquired intangible assets, excluding backlog acquired intangible assets amortized as contra revenue, is excluded from non-GAAP expense and income measures as HubSpot views amortization of these assets as arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are evaluated for impairment regularly, amortization of the cost of purchased intangibles is a non-cash expense that is not typically affected by operations during any particular period. Valuation and subsequent amortization of intangible assets can also be inconsistent in amount and frequency because they can significantly vary based on the timing and size of acquisitions and the inherently subjective nature of the degree to which a purchase price is allocated to intangible assets. We believe that the exclusion of this amortization expense provides for a useful comparison of our operating results to prior periods, for which we have historically excluded amortization expense, and to our peer companies, which commonly exclude acquired intangible asset amortization. It is important to note that although we exclude amortization of acquired intangible assets from our non-GAAP expense and income measures, revenue generated from such intangibles is included within our non-GAAP income measures. The use of these intangible assets contributed to our revenues earned during the periods presented and will contribute to future periods as well.

 

C.
Acquisition related expenses, such as transaction costs and retention payments, and disposition related income, such as proceeds from sale of assets, are transactions that are not necessarily reflective of our operational performance during a period. We believe that the exclusion of these expenses and income provides for a useful comparison of our operating results to prior periods and to our peer companies, which commonly exclude these expenses and income.

 

D.

In June 2020, the Company issued $460 million of convertible notes due in 2025 with a coupon interest rate of 0.375%. In August 2020, the FASB published ASU 2020-06, which was adopted on January 1, 2022. ASU 2020-06 simplifies the accounting for convertible debt and other equity-linked instruments and eliminates requirements to separately account for liability and equity components of such convertible debt instruments. Consequently, our convertible notes are accounted for as a single liability and the discount created by the recognition of a component of the convertible debt in equity is eliminated. The issuance cost of the debt is amortized as interest expense over

Page | 13

 

the remaining term of the debt. We believe the exclusion of this non-cash interest expense provides for a useful comparison of our operating results to prior periods and to our peer companies.

 

Prior to January 1, 2022, the difference between the fair value and carrying value of debt conversion settlements was recorded as a loss on early extinguishment of debt within interest expense. Upon the adoption of ASU 2020-06, no loss is recognized.

 

E.
Strategic investments consist of non-controlling equity investments in privately held companies. The recognition of gains or impairment 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 impairment losses provides for a useful comparison of our operating results to prior periods and to our peer companies.

 

F.
We made a contribution to the Black Economic Development Fund (the “investee”) managed by the Local Initiatives Support Corporation and have committed to make additional capital contributions. We account for this investment under the equity method of accounting. The proportionate share of our equity method investee's net earnings have been excluded in order to provide a comparable view of our operating results to prior periods and to our peer companies. We believe this activity is not reflective of our recurring core business operating results.

 

G.
Gain on termination of operating leases results from early lease terminations and related improvement reimbursements from landlords being recorded as income. Loss on fixed assets result from the disposal of property and equipment associated with early lease terminations. As we generally fulfill our obligations for the full lease term and use these assets for their full useful lives, we believe these activities are not considered reflective of our recurring core business operating results. As such, we believe the exclusion of these transactions provides for a useful comparison of our operating results to prior periods and to our peer companies.

 

H.
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.

 

 

 

Investor Relations Contact:
Charles MacGlashing
investors@hubspot.com

Media Contact:
media@hubspot.com

 

Page | 14