10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

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

FOR THE QUARTERLY PERIOD ENDED March 31, 2017

OR

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

FOR THE TRANSITION PERIOD FROM  TO

COMMISSION FILE NUMBER 001-36680

HubSpot, Inc.

(Exact name of registrant as specified in its charter)

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

25 First Street, 2nd Floor

Cambridge, Massachusetts, 02141

(Address of principal executive offices)

(888) 482-7768

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES☒NO☐

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

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐(Do not check if a smaller reporting company)	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    YES☐NO☐

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

There were 36,555,873 shares of the registrant’s Common Stock issued and outstanding as of April 27, 2017.

HUBSPOT, INC.

Table of Contents

Part I — Financial Information
Item 1.	Unaudited Consolidated Financial Statements:
	Unaudited Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016	4
	Unaudited Consolidated Statements of Operations for the Three Months Ended March 31, 2017 and 2016	5
	Unaudited Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2017 and 2016	6
	Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	23
Item 4.	Controls and Procedures	24
Part II — Other Information
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Default Upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	43
Signatures
EX-31.1	CERTIFICATION OF THE CEO PURSUANT TO SECTION 302
EX-31.2	CERTIFICATION OF THE CFO PURSUANT TO SECTION 302
EX-32.1	CERTIFICATION OF THE CEO AND CFO PURSUANT TO SECTION 906

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

• our future financial performance, including our expectations regarding our revenue, cost of revenue, gross margin and operating expenses;

• maintaining and expanding our customer base and increasing our average subscription revenue per customer;

• the impact of competition in our industry and innovation by our competitors;

• our anticipated growth and expectations regarding our ability to manage our future growth;

• our predictions about industry and market trends;

• our ability to anticipate and address the evolution of technology and the technological needs of our customers, to roll-out upgrades to our existing software platform and to develop new and enhanced applications to meet the needs of our customers;

• our ability to maintain our brand and inbound marketing thought leadership position;

• the impact of our corporate culture and our ability to attract, hire and retain necessary qualified employees to expand our operations;

• the anticipated effect on our business of litigation to which we are or may become a party;

• our ability to successfully acquire and integrate companies and assets; and

• our ability to stay abreast of new or modified laws and regulations that currently apply or become applicable to our business both in the United States and internationally.

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

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

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

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

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PART I — Financial Information

ITEM 1. Financial Statements

HubSpot, Inc.

Unaudited Consolidated Balance Sheets

(in thousands)

	March 31,			December 31,
	2017			2016
Assets
Current assets:
Cash and cash equivalents	$	69,786		$	59,702
Short-term investments		53,001			54,648
Accounts receivable — net of allowance for doubtful accounts of $748 at March 31, 2017 and $617 at December 31, 2016		34,935			38,984
Deferred commission expense		9,550			9,025
Restricted cash		-			162
Prepaid hosting costs		2,234			5,299
Prepaid expenses and other current assets		10,263			8,433
Total current assets		179,769			176,253
Long-term investments		37,846			35,718
Property and equipment, net		34,697			30,201
Capitalized software development costs, net		7,072			6,523
Restricted cash		4,940			321
Other assets		1,184			966
Goodwill		9,773			9,773
Total assets	$	275,281		$	259,755
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	3,257		$	4,350
Accrued compensation costs		8,717			11,415
Other accrued expenses		18,187			15,237
Capital lease obligations		790			796
Deferred rent		249			159
Deferred revenue		104,432			95,426
Total current liabilities		135,632			127,383
Capital lease obligations, net of current portion		288			275
Deferred rent, net of current portion		11,643			10,079
Deferred revenue, net of current portion		1,139			1,171
Asset retirement obligations		611			591
Other long-term liabilities		1,625			1,556
Total liabilities		150,938			141,055
Commitments and contingencies (Note 6)
Stockholders’ equity:
Common stock		36			36
Additional paid-in capital		379,459			365,444
Accumulated other comprehensive loss		(708	)		(864	)
Accumulated deficit		(254,444	)		(245,916	)
Total stockholders’ equity		124,343			118,700
Total liabilities and stockholders’ equity	$	275,281		$	259,755

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

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HubSpot, Inc.

Unaudited Consolidated Statements of Operations

(in thousands, except per share data)

	For the Three Months Ended March 31,
	2017			2016
Revenues:
Subscription	$	77,503		$	54,936
Professional services and other		4,749			4,024
Total revenue		82,252			58,960
Cost of revenues:
Subscription		11,409			8,910
Professional services and other		5,663			5,061
Total cost of revenues		17,072			13,971
Gross profit		65,180			44,989
Operating expenses:
Research and development		13,370			9,804
Sales and marketing		46,672			35,198
General and administrative		13,138			9,848
Total operating expenses		73,180			54,850
Loss from operations		(8,000	)		(9,861	)
Other income (expense):
Interest income		303			179
Interest expense		(52	)		(87	)
Other expense		(128	)		(333	)
Total other income (expense)		123			(241	)
Loss before income tax provision		(7,877	)		(10,102	)
Income tax provision		(198	)		(52	)
Net loss	$	(8,075	)	$	(10,154	)
Net loss per share, basic and diluted	$	(0.22	)	$	(0.29	)
Weighted average common shares used in computing basic    and diluted net loss per share:		36,205			34,692

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

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HubSpot, Inc.

Unaudited Consolidated Statements of Comprehensive Loss

(in thousands)

	For the Three Months Ended March 31,
	2017			2016
Net loss	$	(8,075	)	$	(10,154	)
Other comprehensive loss:
Foreign currency translation adjustment		121			166
Changes in unrealized gain on investments, net of    income taxes of $18 for the three months ended March 31, 2017 and $0 for the    three months ended March 31, 2016		35			334
Comprehensive loss	$	(7,919	)	$	(9,654	)

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

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HubSpot, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)

	For the Three Months Ended March 31,
	2017			2016
Operating Activities:
Net loss	$	(8,075	)	$	(10,154	)
Adjustments to reconcile net loss to net cash and cash equivalents provided    by operating activities
Depreciation and amortization		3,329			2,201
Stock-based compensation		9,303			6,231
Provision for deferred income taxes		(27	)		3
Amortization of bond premium discount		77			221
Noncash rent expense		1,667			1,112
Unrealized currency translation		(46	)		(252	)
Changes in assets and liabilities, net of acquisition
Accounts receivable		4,176			347
Prepaid expenses and other assets		1,061			(2,403	)
Deferred commission expense		(464	)		(299	)
Accounts payable		(1,250	)		(804	)
Accrued expenses		922			(1,154	)
Deferred rent		(34	)		(23	)
Deferred revenue		8,453			8,152
Net cash and cash equivalents provided by operating activities		19,092			3,178
Investing Activities:
Purchases of investments		(16,367	)		(8,969	)
Maturities of investments		15,860			8,875
Purchases of property and equipment		(5,835	)		(6,641	)
Capitalization of software development costs		(1,610	)		(1,434	)
Restricted cash		(4,431	)		—
Net cash and cash equivalents used in investing activities		(12,383	)		(8,169	)
Financing Activities:
Employee taxes paid related to the net share settlement of stock-based awards		(1,153	)		(958	)
Proceeds related to the issuance of common stock under stock plans		4,340			2,992
Repayments of capital lease obligations		(240	)		(142	)
Net cash and cash equivalents provided by financing activities		2,947			1,892
Effect of exchange rate changes on cash and cash equivalents		428			538
Net increase (decrease) in cash and cash equivalents		10,084			(2,561	)
Cash and cash equivalents, beginning of period		59,702			55,580
Cash and cash equivalents, end of period	$	69,786		$	53,019
Supplemental cash flow disclosure:
Cash paid for interest	$	192		$	87
Cash paid for income taxes	$	37		$	73
Non-cash investing and financing activities:
Property and equipment acquired under capital lease	$	247		$	257
Capital expenditures incurred but not yet paid	$	1,525		$	2,974

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

7

HubSpot, Inc.

Notes to Unaudited Consolidated Financial Statements

1. Organization and Operations

HubSpot, Inc. (the “Company”) was formed as a limited liability company in Delaware on April 4, 2005. The Company converted to a Delaware corporation on June 7, 2007. The Company provides a cloud-based inbound marketing and sales platform which features integrated applications to help businesses attract visitors to their websites, convert visitors into leads, close leads into customers and delight customers so they become promoters of those businesses. These integrated applications include social media, search engine optimization, blogging, website content management, marketing automation, email, CRM, analytics, and reporting.

The Company is headquartered in Cambridge, Massachusetts, and has wholly-owned subsidiaries in Dublin, Ireland, which commenced operations in January 2013, in Sydney, Australia, which commenced operations in August 2014, in Singapore, which commenced operations in October 2015, and in Tokyo, Japan, which commenced operations in July 2016. Additionally, the Company has announced that it will open an office in Berlin, Germany during the second half of 2017.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) applicable to interim periods, under the rules and regulations of the United States Securities and Exchange Commission (“SEC”). In the opinion of management, the Company has prepared the accompanying unaudited consolidated financial statements on a basis substantially consistent with the audited consolidated financial statements of the Company as of and for the year ended December 31, 2016, and these consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results of the interim periods presented. All intercompany balances and transactions have been eliminated in consolidation.   

The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire year ending December 31, 2017. The year-end balance sheet data was derived from audited financial statements, but this Form 10-Q does not include all disclosures required under GAAP. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted under the rules and regulations of the SEC.

These interim financial statements should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K filed with the SEC on February16, 2017. There have been no changes in the Company’s significant accounting policies from those that were disclosed in the Company’s Annual Report on Form 10-K that have had a material impact on our consolidated financial statements and related notes, except the adoption of updated guidance related to certain aspects of share-based payments to employee described within the Recent Accounting Pronouncements below.

Recent Accounting Pronouncements

Recent accounting standards not included below are not expected to have a material impact on our consolidated financial position and results of operations.

The Company adopted updated guidance related to certain aspects of share-based payments to employees. The guidance requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid-in capital pools. As a result of the adoption, we recorded an increase to deferred tax assets with a corresponding increase to the valuation allowance of $30.4 million to recognize net operating loss carryforwards attributable to excess tax benefits on stock compensation that had not been previously recognized as additional paid-in capital. In addition, the Company changed its policy election to account for forfeitures as they occur rather than on an estimated basis. The change in the policy election related to forfeitures resulted in the Company reclassifying $453 thousand from additional paid-in capital to accumulative deficit for the net cumulative-effect adjustment in stock compensation expense related to prior periods.

In January 2017, the Financial Accounting Standards Board (“FASB”) issued guidance simplifying the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test. Under current guidance, Step 2 of the goodwill impairment test requires entities to calculate the implied fair value of goodwill in the same manner as the amount of goodwill recognized in a business combination by assigning the fair value of a reporting unit to all of the assets and liabilities of the reporting unit. The carrying value in excess of the implied fair value is recognized as goodwill impairment. Under the new standard, goodwill impairment is recognized based on Step 1 of the current guidance, which calculates the carrying value in excess of the reporting unit’s fair value. The new standard is effective beginning in January 2020, with early adoption permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

8

In November 2016, the FASB issued guidance related to the presentation of restricted cash within the statement of cash flows. The guidance requires entities to show the changes in cash, cash equivalents, and restricted cash in the statement of cash flows. Entities will no longer present transfers between cash and cash equivalents and restricted cash in the statement of cash flows. As of March 31, 2017, we had $4.9 million in restricted cash. The new standard is effective beginning in the first quarter of 2018, with early adoption permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In February 2016, the FASB issued guidance that requires lessees to recognize most leases on their balance sheets but record expenses on their income statements in a manner similar to current accounting. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. The guidance is effective in 2019 with early adoption permitted. The Company is currently evaluating the impact of this guidance on the consolidated financial statements.

In May 2014, the FASB issued updated guidance and disclosure requirements for recognizing revenue. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard also provides guidance on the recognition of costs related to obtaining customer contracts.  In July 2015, the FASB approved the deferral of the new standard's effective date by one year. The new standard now is effective for annual reporting periods beginning January 1, 2018. The FASB will permit companies to adopt the new standard early, but not before the original effective date of January 1, 2017. The Company will adopt the standard on January 1, 2018, and currently anticipates adopting the standard using the modified retrospective method, which would result in a cumulative effect adjustment as of the date of adoption. The Company has established a cross-functional coordinated team that is continuing to assess potential impacts of the standard on the timing of revenue recognition and accounting for deferred commission balances and whether the adoption will have a material impact on the consolidated financial statements and footnote disclosures.

2. Net Loss per Share

Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per share is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period. For purposes of this calculation, options to purchase common stock, restricted stock units (“RSUs”), and Employee Stock Purchase Plan (“ESPP”) are considered to be potential common stock equivalents.

A reconciliation of the denominator used in the calculation of basic and diluted net loss per share is as follows:

	Three Months Ended March 31,
		2017			2016
Net loss	$	(8,075	)	$	(10,154	)
Weighted-average common shares outstanding — basic		36,205			34,692
Dilutive effect of share equivalents resulting from stock    options, RSUs, and ESPP		—			—
Weighted-average common shares,    outstanding — diluted		36,205			34,692
Net loss per share, basic and diluted	$	(0.22	)	$	(0.29	)

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Additionally, since the Company incurred net losses for each of the periods presented, diluted net loss per share is the same as basic net loss per share. The Company’s outstanding stock options, RSUs, and ESPP were not included in the calculation of diluted net loss per share as the effect would be anti-dilutive. The following table contains all potentially dilutive common stock equivalents.

	As of March 31,
		2017	2016
	(in thousands)
Options to purchase common shares		2,561	3,200
RSUs		2,013	1,785
ESPP		3	—

3. Fair Value of Financial Instruments

The Company measures certain financial assets at fair value. Fair value is determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market. Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy, as follows:

• Level 1 — Quoted prices in active markets for identical assets or liabilities.

• Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3 — Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

The following table details the fair value measurements within the fair value hierarchy of the Company’s financial assets and liabilities at March 31, 2017 and December 31, 2016.

	March 31, 2017
	Level 1		Level 2		Level 3		Total
	(in thousands)
Cash equivalents and investments:
Money market funds	$	32,128	$	—	$	—	$	32,128
Commercial paper		—		11,962		—		11,962
Corporate bonds		—		67,901		—		67,901
U.S. government agency obligations		—		10,984		—		10,984
Restricted cash:
Certificates of deposit		—		4,940		—		4,940
Total	$	32,128	$	95,787	$	—	$	127,915

	December 31, 2016
	Level 1		Level 2		Level 3		Total
	(in thousands)
Cash equivalents and investments:
Money market funds	$	32,260	$	—	$	—	$	32,260
Commercial paper		—		12,439		—		12,439
Corporate bonds		—		66,947		—		66,947
U.S. government agency obligations		—		10,980		—		10,980
Total	$	32,260	$	90,366	$	—	$	122,626

The Company considers all highly liquid investments purchased with a remaining maturity of three months or less to be cash equivalents. The fair value of the Company’s investments in certain money market funds is their face value and such instruments are classified as Level 1 and are included in cash and cash equivalents on the consolidated balance sheets. At March 31, 2017 and December 31, 2016, our Level 2 securities were priced by pricing vendors. These pricing vendors utilize the most recent observable market information in pricing these securities or, if specific prices are not available for these securities, use other observable inputs like market transactions involving identical or comparable securities.

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For certain other financial instruments, including accounts receivable, accounts payable, capital leases and other current liabilities, the carrying amounts approximate their fair value due to the relatively short maturity of these balances.

Restricted cash is comprised of certificates of deposit related to landlord guarantees for our leased facilities. These restricted cash balances have been excluded from our cash and cash equivalents balance on our consolidated balance sheets.

The following tables summarize the composition of our short- and long-term investments at March 31, 2017 and December 31, 2016.

	March 31, 2017
	Amortized Cost		Unrealized Gains		Unrealized Losses			Aggregate Fair Value
	(in thousands)
Commercial paper	$	11,967	$	—	$	(5	)	$	11,962
Corporate bonds		68,034		3		(136	)		67,901
U.S. government agency obligations		10,999		1		(16	)		10,984
Total	$	91,000	$	4	$	(157	)	$	90,847

	December 31, 2016
	Amortized Cost		Unrealized Gains		Unrealized Losses			Aggregate Fair Value
	(in thousands)
Commercial paper	$	12,446	$	—	$	(7	)	$	12,439
Corporate bonds		67,126		—		(179	)		66,947
U.S. government agency obligations		10,998		—		(18	)		10,980
Total	$	90,570	$	—	$	(204	)	$	90,366

For all of our securities for which the amortized cost basis was greater than the fair value at March 31, 2017, the Company has concluded that there is no plan to sell the security nor is it more likely than not that the Company would be required to sell the security before its anticipated recovery. In making the determination as to whether the unrealized loss is other-than-temporary, the Company considered the length of time and extent the investment has been in an unrealized loss position, the financial condition and near-term prospects of the issuers, the issuers’ credit rating and the time to maturity.

Contractual Maturities

The contractual maturities of short-term and long-term investments held at March 31, 2017 and December 31, 2016 are as follows:

	March 31, 2017				December 31, 2016
	Amortized Cost Basis		Aggregate Fair Value		Amortized Cost Basis		Aggregate Fair Value
	(in thousands)				(in thousands)
Due within one year	$	53,059	$	53,001	$	54,694	$	54,648
Due after 1 year through 2 years		37,941		37,846		35,876		35,718
Total	$	91,000	$	90,847	$	90,570	$	90,366

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4. Property and Equipment, Net

Property and equipment, net consists of the following:

	March 31, 2017			December 31, 2016
	(in thousands)
Computer equipment and purchased software	$	3,364		$	3,237
Employee computer equipment		1,780			1,534
Furniture and fixtures		8,237			8,174
Office equipment		2,357			2,326
Leasehold improvements		23,902			23,693
Equipment under capital lease		2,658			2,412
Internal-use software		1,732			1,301
Construction in progress		5,390			322
Total property and equipment		49,420			42,999
Less accumulated depreciation and amortization		(14,723	)		(12,798	)
Property and equipment, net	$	34,697		$	30,201

Depreciation and amortization expense on property and equipment was $1.9 million for the three months ended March 31, 2017 and $981 thousand for the three months ended March 31, 2016.

5. Capitalized Software Development Costs

Capitalized software development costs, exclusive of those recorded within property and equipment, consisted of the following:

	March 31, 2017			December 31, 2016
	(in thousands)
Gross capitalized software development costs	$	27,054		$	25,152
Accumulated amortization		(19,982	)		(18,629	)
Capitalized software development costs, net	$	7,072		$	6,523

Capitalized software development costs are amortized on a straight-line basis over their estimated useful life of two to three years.

The following table summarizes software development costs capitalized, stock-based compensation included in capitalized software development costs, and amortization of capitalized software development costs.

	Three Months Ended March 31,
	2017		2016
	(in thousands)
Software development costs capitalized	$	1,902	$	1,627
Stock-based compensation included in capitalized software    development costs	$	338	$	193
Amortization of software development costs	$	1,369	$	1,196

6. Commitments and Contingencies

Contractual Obligations

There were no material changes in our commitments under contractual obligations, as disclosed in the Company’s audited consolidated financial statements for the year ended December 31, 2016 and related notes thereto contained in the Company’s Annual Report on Form 10-K, except those disclosed below.

In February 2017, the Company signed an amendment related to a leased facility in Cambridge, Massachusetts. The amended lease increased the Company’s future commitments by approximately $6.0 million, which will be payable over approximately nine years.

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Legal Contingencies

From time to time, we may become a party to litigation and subject to claims incident to the ordinary course of business, including intellectual property claims, labor and employment claims, and threatened claims, breach of contract claims, tax, and other matters. We currently have no material pending litigation.

7. Changes in Accumulated Other Comprehensive Loss

The following table summarizes the changes in accumulated other comprehensive loss, which is reported as a component of stockholders’ equity, for the three months ended March 31, 2017.

	Cumulative Translation Adjustment			Unrealized Losson Investments			Total
	(in thousands)
Beginning balance at January 1, 2017	$	(589	)	$	(275	)	$	(864	)
Other comprehensive loss before reclassifications		121			35			156
Amounts reclassified from accumulated other    comprehensive income		—			—			—
Ending balance at March 31, 2017	$	(468	)	$	(240	)	$	(708	)

8. Stock-Based Compensation Expense

The following two tables show stock-based compensation expense by award type and where the stock-based compensation expense is recorded in the Company’s consolidated statements of operations:

	Three Months Ended March 31,
	2017		2016
	(in thousands)
Options	$	1,247	$	1,478
RSUs		7,790		4,533
Employee stock purchase plan		266		220
Total stock-based compensation expense	$	9,303	$	6,231

Effect of stock-based compensation expense on income by line item:

	Three Months Ended March 31,
	2017		2016
	(in thousands)
Cost of revenue, subscription	$	115	$	94
Cost of revenue, service		449		324
Research and development		2,442		1,758
Sales and marketing		3,770		2,427
General and administrative		2,527		1,628
Total stock-based compensation expense	$	9,303	$	6,231

Capitalized software development costs excluded from stock-based compensation expense is $338 thousand for the three months ended March 31, 2017 and $193 thousand for the three months ended March 31, 2016.

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9. Segment Information and Geographic Data

The Company operates as one operating segment. Operating segments are defined as components of an enterprise for which separate financial information is regularly evaluated by the chief operating decision makers (“CODMs”), which are the Company’s chief executive officer and chief operating officer, in deciding how to allocate resources and assess performance. The Company’s CODMs evaluate the Company’s financial information and resources and assess the performance of these resources on a consolidated basis. Since the Company operates in one operating segment, all required financial segment information can be found in the consolidated financial statements. Revenue and long-lived assets by geographic region, based on the physical location of the operations recording the sale or the asset, are as follows:

Revenues by geographical region:

	Three Months Ended March 31,
	2017			2016
Americas	$	64,352		$	48,777
Europe		13,844			8,499
Asia Pacific		4,056			1,684
Total	$	82,252		$	58,960
Percentage of revenues generated outside of the Americas		22	%		17	%

In the three months ended March 31, 2017, revenue derived from customers outside the United States (international) was approximately 30% of total revenue. In the three months ended March 31, 2016, revenue derived from customers outside the United States (international) was approximately 26% of total revenue.

Total long-lived assets by geographical region:

	As of March 31, 2017			As of December 31, 2016
Americas	$	27,441		$	23,205
Europe		4,824			4,716
Asia Pacific		2,432			2,280
Total long-lived assets	$	34,697		$	30,201
Percentage of long-lived assets held outside of the    Americas		21	%		23	%

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on February 16, 2017. As discussed in the section titled “Special Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included under Part II, Item 1A below.

Overview

We provide a cloud-based marketing and sales software platform that enables businesses to deliver an inbound experience. An inbound marketing and sales experience attracts, engages and delights customers by being more relevant, more helpful, more personalized and less interruptive than traditional marketing and sales tactics. Our software platform features integrated applications to help businesses attract visitors to their websites, convert visitors into leads, close leads into customers and delight customers so that they become promoters of those businesses. These integrated applications include social media, search engine optimization, blogging, website content management, marketing automation, email, sales productivity, CRM, analytics and reporting.

While our platform can scale to the enterprise, we focus on selling to mid-market businesses because we believe we have significant competitive advantages attracting and serving them. We efficiently reach these businesses at scale through our proven inbound go-to-market approach and our marketing agency partners. Our platform is particularly suited to serving the needs of mid-market business-to-business companies. These mid-market businesses seek an integrated, easy to implement and easy to use solution to reach customers and compete with organizations that have larger marketing and sales budgets. As of March 31, 2017, we had 31,262 total customers including 24,775 marketing customers of varying sizes in more than 90 countries, representing almost every industry.

We derive most of our revenue from subscriptions to our cloud-based software platform and related professional services, which consist of customer on-boarding and training services. Subscription revenue accounted for 94% of our total revenue in the three months ended March 31, 2017 and 93% of our total revenue in the three months ended March 31, 2016. We sell three product plans at different base prices on a subscription basis, each of which includes our core platform and integrated applications to meet the needs of the various customers we serve. Customers pay additional fees if the number of contacts stored and tracked in the customer’s database exceeds specified thresholds. We generate additional revenue based on the purchase of additional subscriptions, purchases of our add-on products and the number of account users, subdomains and website visits. Substantially all of our customers’ subscriptions are one year or less in duration.

Subscriptions are non-cancelable and are billed in advance on various schedules. Because the mix of billing terms for orders can vary from period to period, the annualized value of the orders we enter into with our customers will not be completely reflected in deferred revenue at any single point in time. Accordingly, we do not believe that change in deferred revenue is an accurate indicator of future revenue for a given period of time.

Most of our customers purchase on-boarding and training services which are designed to help customers enhance their ability to attract, engage and delight their customers using our platform. Professional services and other revenue accounted for 6% of our total revenue in the three months ended March 31, 2017 and 7% of our total revenue in the three months ended March 31, 2016.  We expect professional services and other margins to range from a moderate loss to breakeven for the foreseeable future.

We have focused on rapidly growing our business and plan to continue to make investments to help us address some of the challenges facing us to support this growth, such as demand for our platform by existing and new customers, significant competition from other providers of marketing software and related applications and rapid technological change in our industry. We believe that the growth of our business is dependent on many factors, including our ability to expand our customer base, increase adoption of our platform within existing customers, develop new products and applications to extend the functionality of our platform and provide a high level of customer service. We expect to increase our investment in sales and marketing as we continue to expand our sales teams, increase our marketing activities and grow our international operations. We also expect to increase our investment in research and development as we continue to introduce new products and applications to extend the functionality of our platform. We also intend to invest in maintaining a high level of customer service and support which we consider critical for our continued success. We plan to continue investing in our data center infrastructure and services capabilities in order to support continued future customer growth. We also expect to continue to incur additional general and administrative expenses as a result of both our growth and the infrastructure required to be a public company. We expect to use our cash flow from operations and the proceeds from our prior stock offerings to fund these growth strategies and do not expect to be profitable in the near term.

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We believe that these investments will result in an increase in our subscription revenue base. This will result in revenue increasing faster than the increase in sales and marketing, research and development and general and administrative expenses, exclusive of stock-based compensation, as we reach economies of scale. With this increased operating leverage, we expect our operating margins to increase in the long term. However, we will incur losses in the short term. If we are unable to achieve our revenue growth objectives, including a high rate of renewals of our customer agreements, we may not be able to achieve profitability.

Key Business Metrics

The following key business metrics are presented in this Quarterly Report on Form 10-Q or in our press release announcing our financial results which is furnished on Form 8-K. We use these key business metrics to evaluate our business, measure our performance, identify trends affecting our business and results of operations, formulate financial projections and make strategic decisions. During the first quarter of 2017, our paid sales product business became a more significant part of our product offerings.  To reflect this development, for periods beginning with the first quarter of 2017, our key business metrics will include our paid sales product customers and revenue as described below.  These key business metrics may be calculated in a manner different than similar key business metrics used by other companies.

Total Customers. We believe that our ability to increase our customer base is an indicator of our market penetration and growth of our business as we continue to expand our sales force and invest in marketing efforts. We define our total customers at the end of a particular period as the number of business entities or individuals with one or more paid subscriptions to our sales or marketing platforms, either paid directly or through an agency partner. We do not include in total customers business entities or individuals with one or more paid subscriptions solely for our legacy HubSpot Sales ($10) product. A single customer may have separate paid subscriptions for separate websites, sales licenses or seats, or our marketing and sales platforms, but we count these as one customer if certain customer-provided information such as company name, URL, or email address indicate that these subscriptions are managed by the same business entity or individual. As of March 31, 2017 we had 31,262 total customers.  

Marketing Customers.  Our marketing customers are a sub-set of our total customers.  We define marketing customers at the end of a particular period as our total customers, excluding business entities or individuals that have only paid for a subscription to our sales platform. As of March 31, 2017 we had 24,775 total marketing customers.  

Total Average Subscription Revenue per Customer. We believe that our ability to increase the total average subscription revenue per customer is an indicator of our ability to grow the long-term value of our existing customer relationships. We define total average subscription revenue per customer during a particular period as subscription revenue, excluding revenue from our legacy HubSpot Sales ($10) product, from our total customers during the period divided by the average total customers during the same period.  In the three months ended March 31, 2017, total average subscription revenue per customer was $10,357.

Marketing Average Subscription Revenue per Customer.  We define marketing average subscription revenue per customer during a particular period as subscription revenue from our marketing customers during the period, divided by our average marketing customers during the same period.   In the three months ended March 31, 2017, marketing average subscription revenue per customer was $12,598.

Total Subscription Dollar Retention Rate. We believe that our ability to retain and expand a customer relationship is an indicator of the stability of our revenue base and the long-term value of our customers. We assess our performance in this area using a metric we refer to as our Total Subscription Dollar Retention Rate. We compare the aggregate Total Contractual Monthly Subscription Revenue of our total customer base as of the beginning of each month, which we refer to as Total Retention Base Revenue, to the aggregate Total Contractual Monthly Subscription Revenue of the same group of customers at the end of that month, which we refer to as Total Retained Subscription Revenue. We define Total Contractual Monthly Subscription Revenue as the total amount of subscription fees contractually committed to be paid for a full month under all of our total customer agreements, excluding any commissions owed to our partners. We do not include in Total Contractual Monthly Subscription Revenue any subscription fees contractually committed to be paid by business entities or individuals with subscriptions for our legacy HubSpot Sales ($10) product. Our Total Subscription Dollar Retention Rate for a given period is calculated by first dividing Total Retained Subscription Revenue by Total Retention Base Revenue for each month in the period, calculating the weighted average of these rates using the Total Retention Base Revenue for each month in the period, and then annualizing the resulting rates.

Marketing Subscription Dollar Retention Rate.   Our marketing subscription dollar retention rate for a given period is calculated by first dividing Total Retained Marketing Subscription Revenue by Total Retention Base Marketing Revenue for each month in the period, calculating the weighted average of these rates using the Total Retention Base Marketing Revenue for each month in the period, and then annualizing the resulting rates. We compare the aggregate Total Contractual Monthly Marketing Subscription Revenue of our marketing customers as of the beginning of each month, which we refer to as Total Retention Base Marketing

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Revenue, to the aggregate Total Contractual Monthly Marketing Subscription Revenue of the same group of marketing customers at the end of that month, which we refer to as Total Retained Marketing Subscription Revenue. We define Total Contractual Monthly Marketing Subscription Revenue as the total amount of subscription fees contractually committed to be paid for a full month under all of our marketing customer agreements, excluding any commissions owed to our partners.

Results of Operations for the Three Months Ended March 31, 2017 and 2016

The following tables set forth our results of operations for the periods presented and as a percentage of our total revenue for those periods. The data has been derived from the unaudited consolidated financial statements contained in this Quarterly Report on Form 10-Q which include, in our opinion, all adjustments, consisting only of normal recurring adjustments, that we consider necessary for a fair statement of the financial position and results of operations for the interim periods presented. The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods.

	For the Three Months Ended March 31,
	2017			2016
Revenues:
Subscription	$	77,503		$	54,936
Professional services and other		4,749			4,024
Total revenue		82,252			58,960
Cost of revenues:
Subscription		11,409			8,910
Professional services and other		5,663			5,061
Total cost of revenues		17,072			13,971
Gross profit		65,180			44,989
Operating expenses:
Research and development		13,370			9,804
Sales and marketing		46,672			35,198
General and administrative		13,138			9,848
Total operating expenses		73,180			54,850
Loss from operations		(8,000	)		(9,861	)
Other income (expense):
Interest income		303			179
Interest expense		(52	)		(87	)
Other income (expense)		(128	)		(333	)
Total other income (expense)		123			(241	)
Loss before income tax provision		(7,877	)		(10,102	)
Income tax provision		(198	)		(52	)
Net loss	$	(8,075	)	$	(10,154	)

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	Three Months Ended March 31,
	2017			2016
Revenues:
Subscription		94	%		93	%
Professional services and other	6			7
Total revenue	100			100
Cost of revenues:
Subscription	14			15
Professional services and other	7			9
Total cost of revenue	21			24
Gross profit	79			76
Operating expenses:
Research and development	16			17
Sales and marketing	57			60
General and administrative	16			17
Total operating expenses	89			93
Loss from operations		(10	)		(17	)
Total other income (expense)		—			—
Loss before income tax provision		(10	)		(17	)
Income tax provision		—			—
Net loss		(10	)%		(17	)%

Percentages are based on actual values. Totals may not sum due to rounding.

Three Months Ended March 31, 2017 Compared to the Three Months Ended March 31, 2016

Revenue

	Three Months Ended March 31,
(dollars in thousands)	2017		2016		$ Change		% Change
Revenues:
Subscription	$	77,503	$	54,936	$	22,567		41	%
Professional services and other		4,749		4,024		725		18	%
Total revenue	$	82,252	$	58,960	$	23,292		40	%

Subscription revenue increased during the three months ended March 31, 2017 compared to the same period in 2016 primarily due to the increase in total marketing customers, which grew from 19,322 as of March 31, 2016 to 24,775 as of March 31, 2017, and an increase in average subscription revenue per marketing customer, which grew from $11,494 for the three months ended March 31, 2016 to $12,598 for the three months ended March 31, 2017. The growth in total customers was primarily driven by our increased sales representative capacity to meet market demand. The increase in average subscription revenue per customer was driven primarily by existing customers increasing their use of our products, existing customers purchasing additional subscriptions and add-on products, and new customers purchasing our higher price product plans.

The 18% increase in professional services and other revenue resulted primarily from the delivery of on-boarding and training services for subscriptions sold.

Cost of Revenue, Gross Profit and Gross Margin Percentage

	Three Months Ended March 31,
(dollars in thousands)	2017			2016			$ Change		%Change
Total cost of revenue	$	17,072		$	13,971		$	3,101		22	%
Gross profit	$	65,180		$	44,989		$	20,191		45	%
Gross margin percentage		79	%		76	%

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Total cost of revenue for the three months ended March 31, 2017 increased compared to the same period in 2016 primarily due to an increase in subscription and hosting costs, employee-related costs, amortization of developed technology, and allocated overhead expenses. The increase in gross margin was primarily driven by improved leverage of our hosting costs relative to growth in subscription revenue.

	Three Months Ended March 31,
(dollars in thousands)	2017			2016			$ Change		%Change
Subscription cost of revenue	$	11,409		$	8,910		$	2,499		28	%
Percentage of subscription revenue		15	%		16	%

The increase in subscription cost of revenue for the three months ended March 31, 2017 compared to the same period in 2016 was primarily due to the following:

	Change
	Three Months
	(in thousands)
Subscription and hosting costs	$	1,134
Employee-related costs		964
Capitalized software amortization		255
Allocated overhead expenses		146
	$	2,499

Subscription and hosting costs increased due to growth in our marketing customer base from 19,322 at March 31, 2016 to 24,775 at March 31, 2017. Employee-related costs increased as a result of increased headcount as we continue to grow our customer support organization to support our customer growth and improve service levels and offerings.Amortization of capitalized software development costs increased due to the increased number of developers working on our software platform as we continue to develop new products and increased functionality. Allocated overhead expenses increased due to expansion of our leased space and infrastructure as we continue to grow our business and expand headcount.

	Three Months Ended March 31,
(dollars in thousands)	2017			2016			$ Change		%Change
Professional services and other cost of revenue	$	5,663		$	5,061		$	602		12	%
Percentage of professional services and other revenue		119	%		126	%

The increase in professional services and other cost of revenue for the three months ended March 31, 2017 compared to the same period in 2016 was primarily due to the following:

	Change
	Three Months
	(in thousands)
Employee-related costs	$	241
Allocated overhead expenses		361
	$	602

Employee-related costs increased as a result of increased headcount as we continue to grow our professional services organization to support our customer growth. Allocated overhead expenses increased due to expansion of our leased space and infrastructure as we continue to grow our business and expand headcount.

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Research and Development

	Three Months Ended March 31,
(dollars in thousands )	2017			2016			$ Change		% Change
Research and development	$	13,370		$	9,804		$	3,566		36	%
Percentage of total revenue		16	%		17	%

The increase in research and development expense for the three months ended March 31, 2017 compared to the same period in 2016 was primarily due to the following:

	Change
	Three Months
	(in thousands)
Employee-related costs	$	2,892
Allocated overhead expenses		674
	$	3,566

Employee-related costs increased as a result of increased headcount as we continue to grow our engineering organization to develop new products, increase functionality and to maintain our existing platform. Allocated overhead expense increased due to expanding our leased space and infrastructure as we continue to grow our business and expand headcount.

Sales and Marketing

	Three Months Ended March 31,
(dollars in thousands)	2017			2016			$ Change		% Change
Sales and marketing	$	46,672		$	35,198		$	11,474		33	%
Percentage of total revenue		57	%		60	%

The increase in sales and marketing expense for the three months ended March 31, 2017 compared to the same period in 2016 was primarily due to the following:

	Change
	Three Months
	(in thousands)
Employee-related costs	$	7,438
Allocated overhead expenses		1,863
Partner commissions		1,479
Marketing programs		694
	$	11,474

Employee-related costs increased as a result of increased headcount as we continue to expand our selling and marketing organizations to grow our customer base. Allocated overhead expenses increased due to expanding our leased space and infrastructure as we continue to grow our business and expand headcount. Partner commissions increased as a result of increased revenue generated through our marketing agency partners. Marketing programs increased due to the timing of certain marketing efforts compared to prior year.

General and Administrative

	Three Months Ended March 31,
(dollars in thousands)	2017			2016			$ Change		%Change
General and administrative	$	13,138		$	9,848		$	3,290		33	%
Percentage of total revenue		16	%		17	%

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The increase in general and administrative expense for the three months ended March 31, 2017 compared to the same period in 2016 was primarily due to the following:

	Change
	ThreeMonths
	(in thousands)
Employee-related costs	$	2,245
Allocated overhead expenses		715
Customer credit card fees		330
	$	3,290

Employee-related costs increased as a result of increased headcount as we continue to grow our business and require additional personnel to support our expanded operations. Allocated overhead expenses increased due to expanding our leased space and infrastructure as we continue to grow our business and expand headcount. Customer credit card fees increased due to increased customer transactions as we continue to grow our business.

Other income (expense)

	Three Months Ended March 31,
(dollars in thousands)	2017		2016			$ Change		%Change
Other income (expense)	$	123	$	(241	)	$	364		(151	)%
Percentage of total revenue	*		*

* not meaningful

Other income(expense) includes interest income and expense and the impact of foreign currency transaction gains and losses associated with monetary assets and liabilities. Other income (expense) fluctuated primarily as a result of changes in foreign exchange rates and the composition of our non-functional currency accounts.

Income tax provision

	Three Months Ended March 31,
(dollars in thousands)	2017			2016			$ Change			%Change
Income tax provision	$	(198	)	$	(52	)	$	(146	)		281	%
Effective tax rate		2.5	%		0.5	%

Income tax provision consists of current and deferred taxes for U.S. and foreign income taxes. Income tax provision is not significant for any period presented.

Liquidity and Capital Resources

Our principal sources of liquidity to date have been cash and cash equivalents, net accounts receivable and our common stock offerings.

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The following table shows cash and cash equivalents, working capital, net cash and cash equivalents provided by operating activities, net cash and cash equivalents used in investing activities, and net cash and cash equivalents provided by financing activities for the three months ended March 31, 2017 and 2016.

	Three Months Ended March 31,
	2017			2016
	(in thousands)
Cash and cash equivalents	$	69,786		$	53,019
Working capital		44,137			51,066
Net cash and cash equivalents provided by operating activities		19,092			3,178
Net cash and cash equivalents used in investing activities		(12,383	)		(8,169	)
Net cash and cash equivalents provided by    financing activities		2,947			1,892

Our cash and cash equivalents at March 31, 2017 were held for working capital purposes. We believe our working capital is sufficient to support our operations for at least the next 12 months. At March 31, 2017, $21.4 million of our cash and cash equivalents was held in accounts outside the United States. A portion of these funds would be subject to U.S. federal taxation if repatriated, with such tax liability partially offset by foreign tax credits.   However, our intent is to indefinitely reinvest these funds outside of the U.S. and our current plans do not demonstrate a need to repatriate them to fund our U.S. operations.

Net Cash and Cash Equivalents Provided by Operating Activities

Net cash and cash equivalents provided by operating activities consists primarily of net loss adjusted for certain non-cash items, including stock-based compensation, depreciation and amortization and other non-cash charges, net.

Net cash and cash equivalents provided by operating activities during the three months ended March 31, 2017 primarily reflected our net loss of $8.1 million offset by non-cash expenses that included $3.3 million of depreciation and amortization, $9.3 million in stock-based compensation, $1.7 million of non-cash rent expense and $77 thousand amortization of bond premium. Working capital sources of cash and cash equivalents included an $8.5 million increase in deferred revenue primarily resulting from the growth in the number of customers invoiced during the period, a $4.2 million decrease in accounts receivable related to increased collections, $1.1 million decrease in prepaid expenses, and a $922 thousand increased in accrued expenses. These sources of cash and cash equivalents were offset by a $1.3 million decrease in accounts payable and a $464 thousand increase in deferred commissions.

Net cash and cash equivalents provided by operating activities during the three months ended March 31, 2016 primarily reflected our net loss of $10.2 million and $252 thousand of unrealized currency translation, offset by non-cash expenses that included $2.2 million of depreciation and amortization, $6.2 million in stock-based compensation, $1.1 million of non-cash rent expense and $221 thousand amortization of bond premium. Working capital sources of cash and cash equivalents included an $8.2 million increase in deferred revenue primarily resulting from the growth in the number of customers invoiced during the period and a $347 thousand decrease in accounts receivable related to increased collections.  These sources of cash and cash equivalents were offset by a $1.2 million decrease in accrued expenses, an $804 thousand decrease in accounts payable, a $299 thousand increase in deferred commissions and a $2.4 million increase in prepaid expenses related to increased activity consistent with the growth of the business.

Net Cash and Cash Equivalents Used in Investing Activities

Our investing activities have consisted primarily of purchases and maturities of investments, property and equipment purchases, the restriction of cash associated with certain landlord guarantees for our leases, and capitalization of software development costs. Capitalized software development costs are related to new products or improvements to our existing software platform that expands the functionality for our customers.

Net cash and cash equivalents used in investing activities during the three months ended March 31, 2017 consisted primarily of $16.4 million purchases of investments, $5.8 million of purchased property and equipment, $1.6 million of capitalized software development costs, and $4.4 million increase in restricted cash related to our leased facilities. These uses of cash were offset by $15.9 million received related to the maturity of investments.

Net cash and cash equivalents used in investing activities during the three months ended March 31, 2016 consisted primarily of $9.0 million purchases of investments, $6.6 million of purchased property and equipment and $1.4 million of capitalized software development costs. These uses of cash were offset by $8.9 million received related to maturity of investments.

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Net Cash and Cash Equivalents Provided by Financing Activities

Our financing activities have consisted primarily of our stock offerings, the issuance of common stock under our stock plans, payments of employee taxes related to the net share settlement of stock-based awards, and repayments of our capital lease obligations.

For the three months ended March 31, 2017, cash provided by financing activities consisted primarily of $4.3 million of proceeds related to issuance of common stock under stock plans. This source of cash was offset by $1.2 million used for payment of employee taxes related to the net share settlement of stock-based awards and $240 thousand used for repayments of capital lease obligations.  

For the three months ended March 31, 2016, cash provided by financing activities consisted primarily of $3.0 million of proceeds related to issuance of common stock under stock plans. This source of cash was offset by $958 thousand used for payment of employee taxes related to the net share settlement of stock-based awards and $142 thousand used for repayments of capital leases.

Contractual Obligations and Commitments

As of March 31, 2017, there were no material changes in our contractual obligations and commitments from those disclosed in the Annual Report on Form 10-K filed with the SEC on February 16, 2017, other than those appearing in the notes to the consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

Recent Accounting Pronouncements

For information on recent accounting pronouncements, see Recent Accounting Pronouncements in the notes to the consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements

During the three months ended March 31, 2017, we had no material off-balance sheet arrangements, exclusive of operating leases and indemnifications of officers, directors and employees for certain events or occurrences while the officer, director or employee is, or was, serving at our request in such capacity.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Risk

We have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. dollar, primarily the Euro, British Pound Sterling, Australian dollar, Singaporean dollar, and Japanese Yen. Decreases in the relative value of the U.S. dollar to other currencies may negatively affect our revenue and other operating results as expressed in U.S. dollars.

We have experienced and will continue to experience fluctuations in our net loss as a result of transaction gains or losses related to revaluing certain current asset and current liability balances that are denominated in currencies other than the functional currency of the entities in which they are recorded. We recognized immaterial amounts of foreign currency gains and losses in each of the periods presented. We have not engaged in the hedging of our foreign currency transactions to date, we are evaluating the costs and benefits of initiating such a program and may in the future hedge selected significant transactions denominated in currencies other than the U.S. dollar as we expand our international operation and our risk grows.

Interest Rate Sensitivity

Our portfolio of cash and cash equivalents and short- and long-term investments is maintained in a variety of securities, including government agency obligations, corporate bonds and money market funds. Investments are classified as available-for-sale securities and carried at their fair market value with cumulative unrealized gains or losses recorded as a component of accumulated other comprehensive loss within stockholders' equity. A sharp rise in interest rates could have an adverse impact on the fair market value of certain securities in our portfolio. We do not currently hedge our interest rate exposure and do not enter into financial instruments for trading or speculative purposes.

Inflation Risk

We do not believe that inflation has had a material effect on our business. However, if our costs, in particular personnel, sales and marketing and hosting costs, were to become subject to significant inflationary pressures, we may not be able to fully offset such

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higher costs through price increases. Our inability or failure to do so could harm our business, operating results and financial condition.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting. There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations of Internal Controls. Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II

Other Information

Item 1. Legal Proceedings

From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our business, operating results, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

ITEM 1A. RISK FACTORS

An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below and the other information in this Quarterly Report on Form 10-Q and in our other public filings before making an investment decision. Our business, prospects, financial condition, or operating results could be harmed by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial. If any of such risks and uncertainties actually occurs, our business, financial condition or operating results could differ materially from the plans, projections and other forward-looking statements included in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report and in our other public filings. The trading price of our common stock could decline due to any of these risks, and, as a result, you may lose all or part of your investment.

Risks Related to Our Business and Strategy

We have a history of losses and may not achieve profitability in the future.

We generated net losses of $8.1 million and $10.2 million for the three months ended March 31, 2017 and 2016, respectively. As of March 31, 2017, we had an accumulated deficit of $254.4 million. We will need to generate and sustain increased revenue levels in future periods to become profitable, and, even if we do, we may not be able to maintain or increase our level of profitability. We intend to continue to expend significant funds to grow our marketing and sales operations, develop and enhance our inbound platform, scale our data center infrastructure and services capabilities and expand into new markets. Our efforts to grow our business may be more costly than we expect, and we may not be able to increase our revenue enough to offset our higher operating expenses. We may incur significant losses in the future for a number of reasons, including the other risks described in this Quarterly Report on Form 10-Q, and unforeseen expenses, difficulties, complications and delays and other unknown events. If we are unable to achieve and sustain profitability, the market price of our common stock may significantly decrease.

We are dependent upon customer renewals, the addition of new customers, increased revenue from existing customers and the continued growth of the market for an inbound platform.

We derive, and expect to continue to derive, a substantial portion of our revenue from the sale of subscriptions to our inbound platform. The market for inbound marketing and sales products is still evolving, and competitive dynamics may cause pricing levels to change as the market matures and as existing and new market participants introduce new types of point applications and different approaches to enable businesses to address their respective needs. As a result, we may be forced to reduce the prices we charge for our platform and may be unable to renew existing customer agreements or enter into new customer agreements at the same prices and upon the same terms that we have historically. In addition, our growth strategy involves a scalable pricing model (including “freemium” versions of our products) intended provide us with an opportunity to increase the  value of our customer relationships over time as we expand their use of our platform, sell to other parts of their organizations, cross-sell our sales products to existing marketing product customers and vice versa through touchless or low touch in product purchases, and upsell additional offerings and features. If our cross-selling efforts are unsuccessful or if our existing customers do not expand their use of our platform or adopt additional offerings and features, our operating results may suffer.

Our subscription renewal rates may decrease, and any decrease could harm our future revenue and operating results.

Our customers have no obligation to renew their subscriptions for our platform after the expiration of their subscription periods, substantially all of which are one year or less. In addition, our customers may seek to renew for lower subscription amounts or for shorter contract lengths. Also, customers may choose not to renew their subscriptions for a variety of reasons, including an inability or failure on the part of a customer to create blogging, social media and other content necessary to realize the benefits of our platform. Our renewal rates may decline or fluctuate as a result of a number of factors, including limited customer resources, pricing changes, adoption and utilization of our platform and add-on applications by our customers, adoption of our new products, customer

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satisfaction with our platform, the acquisition of our customers by other companies and deteriorating general economic conditions. If our customers do not renew their subscriptions for our platform or decrease the amount they spend with us, our revenue will decline and our business will suffer.

We face significant competition from both established and new companies offering marketing and sales software and other related applications, as well as internally developed software, which may harm our ability to add new customers, retain existing customers and grow our business.

The marketing and sales software market is evolving, highly competitive and significantly fragmented. With the introduction of new technologies and the potential entry of new competitors into the market, we expect competition to persist and intensify in the future, which could harm our ability to increase sales, maintain or increase renewals and maintain our prices.

We face intense competition from other software companies that develop marketing and sales software and from marketing services companies that provide interactive marketing services. Competition could significantly impede our ability to sell subscriptions to our inbound marketing and sales platform on terms favorable to us. Our current and potential competitors may develop and market new technologies that render our existing or future products less competitive, or obsolete. In addition, if these competitors develop products with similar or superior functionality to our platform, we may need to decrease the prices or accept less favorable terms for our platform subscriptions in order to remain competitive. If we are unable to maintain our pricing due to competitive pressures, our margins will be reduced and our operating results will be negatively affected.

Our competitors include:

• cloud-based marketing automation providers;

• email marketing software vendors;

• sales force automation and CRM software vendors; and

• large-scale enterprise suites.

In addition, instead of using our platform, some prospective customers may elect to combine disparate point applications, such as content management, marketing automation, CRM, analytics and social media management. We expect that new competitors, such as enterprise software vendors that have traditionally focused on enterprise resource planning or other applications supporting back office functions, will develop and introduce applications serving customer-facing and other front office functions. This development could have an adverse effect on our business, operating results and financial condition. In addition, sales force automation and CRM system vendors could acquire or develop applications that compete with our marketing software offerings. Some of these companies have acquired social media marketing and other marketing software providers to integrate with their broader offerings.

Our current and potential competitors may have significantly more financial, technical, marketing and other resources than we have, be able to devote greater resources to the development, promotion, sale and support of their products and services, may have more extensive customer bases and broader customer relationships than we have, and may have longer operating histories and greater name recognition than we have. As a result, these competitors may respond faster to new technologies and undertake more extensive marketing campaigns for their products. In a few cases, these vendors may also be able to offer marketing and sales software at little or no additional cost by bundling it with their existing suite of applications. To the extent any of our competitors has existing relationships with potential customers for either marketing software or other applications, those customers may be unwilling to purchase our platform because of their existing relationships with our competitor. If we are unable to compete with such companies, the demand for our inbound platform could substantially decline.

In addition, if one or more of our competitors were to merge or partner with another of our competitors, our ability to compete effectively could be adversely affected. Our competitors may also establish or strengthen cooperative relationships with our current or future strategic distribution and technology partners or other parties with whom we have relationships, thereby limiting our ability to promote and implement our platform. We may not be able to compete successfully against current or future competitors, and competitive pressures may harm our business, operating results and financial condition.

We have experienced rapid growth and organizational change in recent periods and expect continued future growth. If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service or address competitive challenges adequately.

Our head count and operations have grown substantially. For example, we had 1,663 full-time employees as of March 31, 2017, as compared with 1,597 as of December 31, 2016. We opened our first international office in Dublin, Ireland in January 2013, a

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second international office in Sydney, Australia in August 2014, a third international office in Singapore in October 2015 and a fourth international office in Tokyo in July 2016. We have announced our intention to open an international office in Berlin in the second half of 2017. This growth has placed, and will continue to place, a significant strain on our management, administrative, operational and financial infrastructure. We anticipate further growth will be required to address increases in our product offerings and continued expansion. Our success will depend in part upon our ability to recruit, hire, train, manage and integrate a significant number of qualified managers, technical personnel and employees in specialized roles within our company, including in technology, sales and marketing. If our new employees perform poorly, or if we are unsuccessful in recruiting, hiring, training, managing and integrating these new employees, or retaining these or our existing employees, our business may suffer.

In addition, to manage the expected continued growth of our head count, operations and geographic expansion, we will need to continue to improve our information technology infrastructure, operational, financial and management systems and procedures. Our anticipated additional head count and capital investments will increase our costs, which will make it more difficult for us to address any future revenue shortfalls by reducing expenses in the short term. If we fail to successfully manage our growth, we will be unable to successfully execute our business plan, which could have a negative impact on our business, results of operations or financial condition.

Failure to effectively develop and expand our marketing and sales capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our platform.

To increase total customers and achieve broader market acceptance of our inbound platform, we will need to expand our marketing and sales operations, including our sales force and third-party channel partners. We will continue to dedicate significant resources to inbound sales and marketing programs. The effectiveness of our inbound sales and marketing and third-party channel partners has varied over time and may vary in the future and depends on our ability to maintain and improve our inbound platform. All of these efforts will require us to invest significant financial and other resources. Our business will be seriously harmed if our efforts do not generate a correspondingly significant increase in revenue. We may not achieve anticipated revenue growth from expanding our sales force if we are unable to hire, develop and retain talented sales personnel, if our new sales personnel are unable to achieve desired productivity levels in a reasonable period of time or if our sales and marketing programs are not effective.

The rate of growth of our business depends on the continued participation and level of service of our marketing agency partners.

We rely on our marketing agency partners to provide certain services to our customers, as well as pursue sales of our inbound platform to customers. To the extent we do not attract new marketing agency partners, or existing or new marketing agency partners do not refer a growing number of customers to us, our revenue and operating results would be harmed. In addition, if our marketing agency partners do not continue to provide services to our customers, we would be required to provide such services ourselves either by expanding our internal team or engaging other third-party providers, which would increase our operating costs.

If we cannot maintain our company culture as we grow, we could lose the innovation, teamwork, passion and focus on execution that we believe contribute to our success and our business may be harmed.

We believe that a critical component to our success has been our company culture, which is based on transparency and personal autonomy. We have invested substantial time and resources in building our team within this company culture. Any failure to preserve our culture could negatively affect our ability to retain and recruit personnel and to effectively focus on and pursue our corporate objectives. As we grow as and continue to develop the infrastructure of a public company, we may find it difficult to maintain these important aspects of our company culture. If we fail to maintain our company culture, our business may be adversely impacted.

If we fail to maintain our inbound thought leadership position, our business may suffer.

We believe that maintaining our thought leadership position in inbound marketing, sales and services is an important element in attracting new customers. We devote significant resources to develop and maintain our thought leadership position, with a focus on identifying and interpreting emerging trends in the inbound experience, shaping and guiding industry dialog and creating and sharing the best inbound practices. Our activities related to developing and maintaining our thought leadership may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incurred in such effort. We rely upon the continued services of our management and employees with domain expertise with inbound marketing, sales and services, and the loss of any key employees in this area could harm our competitive position and reputation. If we fail to successfully grow and maintain our thought leadership position, we may not attract enough new customers or retain our existing customers, and our business could suffer.

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If we fail to further enhance our brand and maintain our existing strong brand awareness, our ability to expand our customer base will be impaired and our financial condition may suffer.

We believe that our development of the HubSpot brand is critical to achieving widespread awareness of our existing and future inbound experience solutions, and, as a result, is important to attracting new customers and maintaining existing customers. In the past, our efforts to build our brand have involved significant expenses, and we believe that this investment has resulted in strong brand recognition in the business-to-business, or B2B, market. Successful promotion and maintenance of our brands will depend largely on the effectiveness of our marketing efforts and on our ability to provide a reliable and useful inbound platform at competitive prices. Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incurred in building our brand. If we fail to successfully promote and maintain our brand, our business could suffer.

If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards and changing customer needs or requirements, our inbound platform may become less competitive.

Our future success depends on our ability to adapt and innovate our inbound platform. To attract new customers and increase revenue from existing customers, we need to continue to enhance and improve our offerings to meet customer needs at prices that our customers are willing to pay. Such efforts will require adding new functionality and responding to technological advancements, which will increase our research and development costs. If we are unable to develop new applications that address our customers’ needs, or to enhance and improve our platform in a timely manner, we may not be able to maintain or increase market acceptance of our platform. Our ability to grow is also subject to the risk of future disruptive technologies. Access and use of our inbound platform is provided via the cloud, which, itself, was disruptive to the previous enterprise software model. If new technologies emerge that are able to deliver inbound marketing software and related applications at lower prices, more efficiently, more conveniently or more securely, such technologies could adversely affect our ability to compete.

We rely on our management team and other key employees, and the loss of one or more key employees could harm our business.

Our success and future growth depend upon the continued services of our management team, including our co-founders, Brian Halligan and Dharmesh Shah, and other key employees in the areas of research and development, marketing, sales, services and general and administrative functions. From time to time, there may be changes in our management team resulting from the hiring or departure of executives, which could disrupt our business. We also are dependent on the continued service of our existing software engineers and information technology personnel because of the complexity of our platform, technologies and infrastructure. We may terminate any employee’s employment at any time, with or without cause, and any employee may resign at any time, with or without cause. We do not have employment agreements with any of our key personnel. The loss of one or more of our key employees could harm our business.

The failure to attract and retain additional qualified personnel could prevent us from executing our business strategy.

To execute our business strategy, we must attract and retain highly qualified personnel. In particular, we compete with many other companies for software developers with high levels of experience in designing, developing and managing cloud-based software, as well as for skilled information technology, marketing, sales and operations professionals, and we may not be successful in attracting and retaining the professionals we need. Also, inbound sales, marketing and services domain experts are very important to our success and are difficult to replace. We have from time to time in the past experienced, and we expect to continue to experience in the future, difficulty in hiring and difficulty in retaining highly skilled employees with appropriate qualifications. In particular, we have experienced a competitive hiring environment in the Greater Boston area, where we are headquartered. Many of the companies with which we compete for experienced personnel have greater resources than we do. In addition, in making employment decisions, particularly in the software industry, job candidates often consider the value of the stock options or other equity incentives they are to receive in connection with their employment. If the price of our stock declines, or experiences significant volatility, our ability to attract or retain key employees will be adversely affected. If we fail to attract new personnel or fail to retain and motivate our current personnel, our growth prospects could be severely harmed.

If we fail to offer high-quality customer support, our business and reputation may suffer.

High-quality education, training and customer support are important for the successful marketing, sale and use of our inbound platform and for the renewal of existing customers. Providing this education, training and support requires that our personnel who manage our online training resource, HubSpot Academy, or provide customer support have specific inbound experience domain knowledge and expertise, making it more difficult for us to hire qualified personnel and to scale up our support operations. The importance of high-quality customer support will increase as we expand our business and pursue new customers. If we do not help our customers use multiple applications within our inbound platform and provide effective ongoing support, our ability to sell additional functionality and services to, or to retain, existing customers may suffer and our reputation with existing or potential customers may be harmed.

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We may not be able to scale our business quickly enough to meet our customers’ growing needs and if we are not able to grow efficiently, our operating results could be harmed.

As usage of our inbound platform grows and as customers use our platform for additional inbound applications, such as sales and services, we will need to devote additional resources to improving our application architecture, integrating with third-party systems and maintaining infrastructure performance. In addition, we will need to appropriately scale our internal business systems and our services organization, including customer support and professional services, to serve our growing customer base, particularly as our customer demographics change over time. Any failure of or delay in these efforts could cause impaired system performance and reduced customer satisfaction. These issues could reduce the attractiveness of our inbound platform to customers, resulting in decreased sales to new customers, lower renewal rates by existing customers, the issuance of service credits, or requested refunds, which could impede our revenue growth and harm our reputation. Even if we are able to upgrade our systems and expand our staff, any such expansion will be expensive and complex, requiring management’s time and attention. We could also face inefficiencies or operational failures as a result of our efforts to scale our infrastructure. Moreover, there are inherent risks associated with upgrading, improving and expanding our information technology systems. We cannot be sure that the expansion and improvements to our infrastructure and systems will be fully or effectively implemented on a timely basis, if at all. These efforts may reduce revenue and our margins and adversely affect our financial results.

Our ability to introduce new products and features is dependent on adequate research and development resources. If we do not adequately fund our research and development efforts, we may not be able to compete effectively and our business and operating results may be harmed.

To remain competitive, we must continue to develop new product offerings, applications, features and enhancements to our existing inbound platform. Maintaining adequate research and development personnel and resources to meet the demands of the market is essential. If we are unable to develop our platform internally due to certain constraints, such as high employee turnover, lack of management ability or a lack of other research and development resources, we may miss market opportunities. Further, many of our competitors expend a considerably greater amount of funds on their research and development programs, and those that do not may be acquired by larger companies that would allocate greater resources to our competitors’ research and development programs. Our failure to maintain adequate research and development resources or to compete effectively with the research and development programs of our competitors could materially adversely affect our business.

Changes in the sizes or types of businesses that purchase our platform or in the applications within our inbound platform purchased or used by our customers could negatively affect our operating results.

Our strategy is to sell subscriptions to our inbound platform to mid-sized businesses, but we have sold and will continue to sell to organizations ranging from small businesses to enterprises. Our gross margins can vary depending on numerous factors related to the implementation and use of our inbound platform, including the sophistication and intensity of our customers’ use of our platform and the level of professional services and support required by a customer. Sales to enterprise customers may entail longer sales cycles and more significant selling efforts. Selling to small businesses may involve greater credit risk and uncertainty. If there are changes in the mix of businesses that purchase our platform or the mix of the product plans purchased by our customers, our gross margins could decrease and our operating results could be adversely affected.

We have in the past completed acquisitions and may acquire or invest in other companies or technologies in the future, which could divert management’s attention, fail to meet our expectations, result in additional dilution to our stockholders, increase expenses, disrupt our operations or harm our operating results.

We have in the past acquired, and we may in the future acquire or invest in, businesses, products or technologies that we believe could complement or expand our platform, enhance our technical capabilities or otherwise offer growth opportunities. For example, in June 2011, we acquired Performable, a marketing automation provider. We may not be able to fully realize the anticipated benefits of these or any future acquisitions. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses related to identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated.

There are inherent risks in integrating and managing acquisitions. If we acquire additional businesses, we may not be able to assimilate or integrate the acquired personnel, operations and technologies successfully or effectively manage the combined business following the acquisition and our management may be distracted from operating our business. We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including: unanticipated costs or liabilities associated with the acquisition; incurrence of acquisition-related costs, which would be recognized as a current period expense; inability to generate sufficient revenue to offset acquisition or investment costs; the inability to maintain relationships with customers and partners of the acquired business; the difficulty of incorporating acquired technology and rights into our platform and of maintaining quality and security standards consistent with our brand; delays in customer purchases due to uncertainty related to any acquisition; the need to

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integrate or implement additional controls, procedures and policies; challenges caused by distance, language and cultural differences; harm to our existing business relationships with business partners and customers as a result of the acquisition; the potential loss of key employees; use of resources that are needed in other parts of our business and diversion of management and employee resources; the inability to recognize acquired deferred revenue in accordance with our revenue recognition policies; and use of substantial portions of our available cash or the incurrence of debt to consummate the acquisition. Acquisitions also increase the risk of unforeseen legal liability, including for potential violations of applicable law or industry rules and regulations, arising from prior or ongoing acts or omissions by the acquired businesses which are not discovered by due diligence during the acquisition process. Generally, if an acquired business fails to meet ourexpectations, our operating results, business and financial condition may suffer. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our business, results of operations or financial condition.

In addition, a significant portion of the purchase price of companies we acquire may be allocated to goodwill and other intangible assets, which must be assessed for impairment at least annually. If our acquisitions do not ultimately yield expected returns, we may be required to make charges to our operating results based on our impairment assessment process, which could harm our results of operations.

Because our long-term growth strategy involves further expansion of our sales to customers outside the United States, our business will be susceptible to risks associated with international operations.

A component of our growth strategy involves the further expansion of our operations and customer base internationally. We opened our first international office in Dublin, Ireland in January 2013 and we opened additional international offices in Sydney, Australia in August 2014, in Singapore in October 2015 and in Tokyo in July 2016. We have announced our intention to open an international office in Berlin in the second half of 2017. These international offices focus primarily on sales, professional services and support. We also have a development team in Dublin, Ireland. Our current international operations and future initiatives will involve a variety of risks, including:

• difficulties in maintaining our company culture with a dispersed and distant workforce;

• more stringent regulations relating to data security and the unauthorized use of, or access to, commercial and personal information, particularly in the European Union;

• unexpected changes in regulatory requirements, taxes or trade laws;

• differing labor regulations, especially in the European Union, where labor laws are generally more advantageous to employees as compared to the United States, including deemed hourly wage and overtime regulations in these locations;

• challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits and compliance programs;

• difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems and regulatory systems;

• currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions if we chose to do so in the future;

• limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries;

• limited or insufficient intellectual property protection;

• political instability or terrorist activities;

• likelihood of potential or actual violations of domestic and international anticorruption laws, such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act, or of U.S. and international export control and sanctions regulations, which likelihood may increase with an increase of sales or operations in foreign jurisdictions and operations in certain industries; and

• adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash.

Our limited experience in operating our business internationally increases the risk that any potential future expansion efforts that we may undertake will not be successful. If we invest substantial time and resources to expand our international operations and are unable to do so successfully and in a timely manner, our business and operating results will suffer. We continue to implement policies and procedures to facilitate our compliance with U.S. laws and regulations applicable to or arising from our international business.

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Inadequacies in our past or current compliance practices may increase the risk of inadvertent violations of such laws and regulations, which could lead to financial and other penalties that could damage our reputation and impose costs on us.

Interruptions or delays in service from our third-party data center providers could impair our ability to deliver our platform to our customers, resulting in customer dissatisfaction, damage to our reputation, loss of customers, limited growth and reduction in revenue.

We currently serve the majority of our platform functions from third-party data center hosting facilities operated by Amazon Web Services and located in northern Virginia. In addition, we serve ancillary functions for our customers from third-party data center hosting facilities operated by Rackspace located in Dallas, Texas, with a backup facility in Chicago, Illinois. Our operations depend, in part, on our third-party facility providers’ abilities to protect these facilities against damage or interruption from natural disasters, power or telecommunications failures, criminal acts and similar events. In the event that any of our third-party facilities arrangements is terminated, or if there is a lapse of service or damage to a facility, we could experience interruptions in our platform as well as delays and additional expenses in arranging new facilities and services.

Any damage to, or failure of, the systems of our third-party providers could result in interruptions to our platform. Despite precautions taken at our data centers, the occurrence of spikes in usage volume, a natural disaster, an act of terrorism, vandalism or sabotage, a decision to close a facility without adequate notice, or other unanticipated problems at a facility could result in lengthy interruptions in the availability of our on-demand software. Even with current and planned disaster recovery arrangements, our business could be harmed. Also, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. These factors in turn could further reduce our revenue, subject us to liability and cause us to issue credits or cause customers to fail to renew their subscriptions, any of which could materially adversely affect our business.

We are dependent on the continued availability of third-party data hosting and transmission services.

A significant portion of our operating cost is from our third-party data hosting and transmission services. If the costs for such services increase due to vendor consolidation, regulation, contract renegotiation, or otherwise, we may not be able to increase the fees for our inbound platform or services to cover the changes. As a result, our operating results may be significantly worse than forecasted.

If we do not or cannot maintain the compatibility of our inbound platform with third-party applications that our customers use in their businesses, our revenue will decline.

A significant percentage of our customers choose to integrate our platform with certain capabilities provided by third-party application providers using application programming interfaces, or APIs, published by these providers. The functionality and popularity of our inbound platform depends, in part, on our ability to integrate our platform with third-party applications and platforms, including CRM, CMS, e-commerce, call center, analytics and social media sites that our customers use and from which they obtain data. Third-party providers of applications and APIs may change the features of their applications and platforms, restrict our access to their applications and platforms or alter the terms governing use of their applications and APIs and access to those applications and platforms in an adverse manner. Such changes could functionally limit or terminate our ability to use these third-party applications and platforms in conjunction with our platform, which could negatively impact our offerings and harm our business. If we fail to integrate our platform with new third-party applications and platforms that our customers use for marketing, sales or services purposes, we may not be able to offer the functionality that our customers need, which would negatively impact our ability to generate revenue and adversely impact our business.

We rely on data provided by third parties, the loss of which could limit the functionality of our platform and disrupt our business.

Select functionality of our inbound platform depends on our ability to deliver data, including search engine results and social media updates, provided by unaffiliated third parties, such as Facebook, Google, LinkedIn and Twitter. Some of this data is provided to us pursuant to third-party data sharing policies and terms of use, under data sharing agreements by third-party providers or by customer consent. In the future, any of these third parties could change its data sharing policies, including making them more restrictive, or alter its algorithms that determine the placement, display, and accessibility of search results and social media updates, any of which could result in the loss of, or significant impairment to, our ability to collect and provide useful data to our customers. These third parties could also interpret our, or our service providers’, data collection policies or practices as being inconsistent with their policies, which could result in the loss of our ability to collect this data for our customers. Any such changes could impair our ability to deliver data to our customers and could adversely impact select functionality of our platform, impairing the return on investment that our customers derive from using our solution, as well as adversely affecting our business and our ability to generate revenue.

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Privacy concerns and end users’ acceptance of Internet behavior tracking may limit the applicability, use and adoption of our inbound platform.

Privacy concerns may cause end users to resist providing the personal data necessary to allow our customers to use our platform effectively. We have implemented various features intended to enable our customers to better protect end user privacy, but these measures may not alleviate all potential privacy concerns and threats. Even the perception of privacy concerns, whether or not valid, may inhibit market adoption of our platform, especially in certain industries that rely on sensitive personal information. Privacy advocacy groups and the technology and other industries are considering various new, additional or different self-regulatory standards that may place additional burdens on us. The costs of compliance with, and other burdens imposed by these groups’ policies and actions may limit the use and adoption of our inbound platform and reduce overall demand for it, or lead to significant fines, penalties or liabilities for any noncompliance or loss of any such action.

We are subject to governmental regulation and other legal obligations, particularly related to privacy, data protection and information security, and our actual or perceived failure to comply with such obligations could harm our business. Compliance with such laws could also impair our efforts to maintain and expand our customer base, and thereby decrease our revenue.

Our handling of data is subject to a variety of laws and regulations, including regulation by various government agencies, including the U.S. Federal Trade Commission, or FTC, and various state, local and foreign agencies. We collect personally identifiable information and other data from our customers and leads. We also handle personally identifiable information about our customers’ customers. We use this information to provide services to our customers, to support, expand and improve our business. We may also share customers’ personally identifiable information with third parties as authorized by the customer or as described in our privacy policy.

The U.S. federal and various state and foreign governments have adopted or proposed limitations on the collection, distribution, use and storage of personal information of individuals. In the United States, the FTC and many state attorneys general are applying federal and state consumer protection laws as imposing standards for the online collection, use and dissemination of data. However, these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other requirements or our practices. Any failure or perceived failure by us to comply with privacy or security laws, policies, legal obligations or industry standards or any security incident that results in the unauthorized release or transfer of personally identifiable information or other customer data may result in governmental enforcement actions, litigation, fines and penalties and/or adverse publicity, and could cause our customers to lose trust in us, which could have an adverse effect on our reputation and business.

Laws and regulations concerning privacy, data protection and information security are evolving, and changes to such laws and regulations could require us to change features of our platform or restrict our customers’ ability to collect and use email addresses, page viewing data and personal information, which may reduce demand for our platform. Our failure to comply with federal, state and international data privacy laws and regulations could harm our ability to successfully operate our business and pursue our business goals.

In addition, several foreign countries and governmental bodies, including the European Union and Canada, have regulations dealing with the collection and use of personal information obtained from their residents, which are often more restrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security of personal information that identifies or may be used to identify an individual Within the European Union, legislators have adopted the General Data Protection Regulation, or GDPR, effective May 2018 which may impose additional obligations and risk upon our business and which may increase substantially the penalties to which we could be subject in the event of any non-compliance. We may incur substantial expense in complying with the new obligations to be imposed by the GDPR and we may be required to make significant changes in our business operations, all of which may adversely affect our revenues and our business overall.

We have in the past relied upon adherence to the U.S. Department of Commerce’s Safe Harbor Privacy Principles and compliance with the U.S.-EU and U.S.-Swiss Safe Harbor Frameworks as agreed to and set forth by the U.S. Department of Commerce, and the European Union and Switzerland, which established a means for legitimating the transfer of personal data by data controllers in the European Economic Area, or EEA, to the U.S. As a result of the October 6, 2015 European Union Court of Justice, or ECJ, opinion in Case C-362/14 (Schrems v. Data Protection Commissioner) regarding the adequacy of the U.S.-EU Safe Harbor Framework, the U.S. – EU Safe Harbor Framework is no longer deemed to be a valid method of compliance with requirements set forth in the Directive (and member states’ implementations thereof) regarding the transfer of personal data outside of the EEA.

On May 23, 2016 the European Parliament adopted a resolution and on July 8, 2016 the European Member State representatives approved the final version of the EU-US Privacy Shield as a successor to the Safe Harbor framework. As of August 1, 2016, interested companies have been permitted to register for the program. We are currently certified to the EU-US Privacy Shield. There continue to be concerns about whether the EU-US Privacy Shield will face additional challenges. Until the remaining legal uncertainties regarding

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the future of the EU-US Privacy Shield are settled, we will continue to face uncertainty as to whether our efforts to comply with our obligations under European privacy laws will be sufficient. If we are investigated by a European data protection authority, we may face fines and other penalties. Any such investigation or charges by European data protection authorities could have a negative effect on our existing business and on our ability to attract and retain new customers.

We may also experience hesitancy, reluctance, or refusal by European or multi-national customers to continue to use our services due to the potential risk exposure to such customers as a result of the ECJ ruling in Case C-362/14 and the current data protection obligations imposed on them by certain data protection authorities. Such customers may also view any alternative approaches to compliance as being too costly, too burdensome, too legally uncertain or otherwise objectionable and therefore decide not to do business with us. For example, some of our customers or potential customers in the EU may require their vendors to host all personal data within the EU and may decide to do business with one of our competitors who hosts personal data within the EU instead of doing business with us.

We and our customers are at risk of enforcement actions taken by certain EU data protection authorities until such point in time that we may be able to ensure that all transfers of personal data to us from the EEA are conducted in compliance with all applicable regulatory obligations, the guidance of data protection authorities, and evolving best practices. We may find it necessary to establish systems to maintain personal data originating from the EU in the EEA, which may involve substantial expense and may cause us to need to divert resources from other aspects of our business, all of which may adversely affect our business.

In addition, if our privacy or data security measures fail to comply with current or future laws and regulations, we may be subject to claims, legal proceedings or other actions by individuals or governmental authorities based on privacy or data protection regulations and our commitments to customers or others, as well as negative publicity and a potential loss of business. Moreover, if future laws and regulations limit our subscribers’ ability to use and share personal information or our ability to store, process and share personal information, demand for our solutions could decrease, our costs could increase, and our business, results of operations and financial condition could be harmed.

If our or our customers’ security measures are compromised or unauthorized access to data of our customers or their customers is otherwise obtained, our inbound platform may be perceived as not being secure, our customers may be harmed and may curtail or cease their use of our platform, our reputation may be damaged and we may incur significant liabilities.

Our operations involve the storage and transmission of data of our customers and their customers, including personally identifiable information. Our storage is typically the sole source of record for portions of our customers’ businesses and end user data, such as initial contact information and online interactions. Security incidents could result in unauthorized access to, loss of or unauthorized disclosure of this information, litigation, indemnity obligations and other possible liabilities, as well as negative publicity, which could damage our reputation, impair our sales and harm our customers and our business. Cyber-attacks and other malicious Internet-based activity continue to increase generally, and cloud-based platform providers of marketing services have been targeted. If our security measures are compromised as a result of third-party action, employee or customer error, malfeasance, stolen or fraudulently obtained log-in credentials or otherwise, our reputation could be damaged, our business may be harmed and we could incur significant liability. If third parties with whom we work, such as vendors or developers, violate applicable laws or our security policies, such violations may also put our customers’ information at risk and could in turn have an adverse effect on our business. In addition, if the security measures of our customers are compromised, even without any actual compromise of our own systems, we may face negative publicity or reputational harm if our customers or anyone else incorrectly attributes the blame for such security breaches to us or our systems. We may be unable to anticipate or prevent techniques used to obtain unauthorized access or to sabotage systems because they change frequently and generally are not detected until after an incident has occurred. As we increase our customer base and our brand becomes more widely known and recognized, we may become more of a target for third parties seeking to compromise our security systems or gain unauthorized access to our customers’ data. Additionally, we provide extensive access to our database, which stores our customer data, to our development team to facilitate our rapid pace of product development. If such access or our own operations cause the loss, damage or destruction of our customers’ business data, their sales, lead generation, support and other business operations may be permanently harmed. As a result, our customers may bring claims against us for lost profits and other damages.

Many governments have enacted laws requiring companies to notify individuals of data security incidents or unauthorized transfers involving certain types of personal data. In addition, some of our customers contractually require notification of any data security compromise. Security compromises experienced by our competitors, by our customers or by us may lead to public disclosures, which may lead to widespread negative publicity. Any security compromise in our industry, whether actual or perceived, could harm our reputation, erode customer confidence in the effectiveness of our security measures, negatively impact our ability to attract new customers, cause existing customers to elect not to renew their subscriptions or subject us to third-party lawsuits, regulatory fines or other action or liability, which could materially and adversely affect our business and operating results.

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There can be no assurance that any limitations of liability provisions in our contracts for a security breach would be enforceable or adequate or would otherwise protect us from any such liabilities or damages with respect to any particular claim. We also cannot be sure that our existing general liability insurance coverage and coverage for errors or omissions will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims, or that the insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, financial condition and operating results.

If our inbound platform fails due to defects or similar problems, and if we fail to correct any defect or other software problems, we could lose customers, become subject to service performance or warranty claims or incur significant costs.

Our platform and its underlying infrastructure are inherently complex and may contain material defects or errors. We release modifications, updates, bug fixes and other changes to our software several times per day, without traditional human-performed quality control reviews for each release. We have from time to time found defects in our software and may discover additional defects in the future. We may not be able to detect and correct defects or errors before customers begin to use our platform or its applications. Consequently, we or our customers may discover defects or errors after our platform has been implemented. These defects or errors could also cause inaccuracies in the data we collect and process for our customers, or even the loss, damage or inadvertent release of such confidential data. We implement bug fixes and upgrades as part of our regular system maintenance, which may lead to system downtime. Even if we are able to implement the bug fixes and upgrades in a timely manner, any history of defects or inaccuracies in the data we collect for our customers, or the loss, damage or inadvertent release of confidential data could cause our reputation to be harmed, and customers may elect not to purchase or renew their agreements with us and subject us to service performance credits, warranty claims or increased insurance costs. The costs associated with any material defects or errors in our platform or other performance problems may be substantial and could materially adversely affect our operating results.

Risks Related to Intellectual Property

Our business may suffer if it is alleged or determined that our technology infringes the intellectual property rights of others.

The software industry is characterized by the existence of a large number of patents, copyrights, trademarks, trade secrets and other intellectual and proprietary rights. Companies in the software industry, including those in marketing software, are often required to defend against litigation claims based on allegations of infringement or other violations of intellectual property rights. Many of our competitors and other industry participants have been issued patents and/or have filed patent applications and may assert patent or other intellectual property rights within the industry. Moreover, in recent years, individuals and groups that are non-practicing entities, commonly referred to as “patent trolls,” have purchased patents and other intellectual property assets for the purpose of making claims of infringement in order to extract settlements. From time to time, we may receive threatening letters or notices or may be the subject of claims that our services and/or platform and underlying technology infringe or violate the intellectual property rights of others. Responding to such claims, regardless of their merit, can be time consuming, costly to defend in litigation, divert management’s attention and resources, damage our reputation and brand and cause us to incur significant expenses. Our technologies may not be able to withstand any third-party claims or rights against their use. Claims of intellectual property infringement might require us to redesign our application, delay releases, enter into costly settlement or license agreements or pay costly damage awards, or face a temporary or permanent injunction prohibiting us from marketing or selling our platform. If we cannot or do not license the infringed technology on reasonable terms or at all, or substitute similar technology from another source, our revenue and operating results could be adversely impacted. Additionally, our customers may not purchase our inbound platform if they are concerned that they may infringe third-party intellectual property rights. The occurrence of any of these events may have a material adverse effect on our business.

In our subscription agreements with our customers, we generally do not agree to indemnify our customers against any losses or costs incurred in connection with claims by a third party alleging that a customer’s use of our services or platform infringes the intellectual property rights of the third party. There can be no assurance, however, that customers will not assert a common law indemnity claim or that any existing limitations of liability provisions in our contracts would be enforceable or adequate, or would otherwise protect us from any such liabilities or damages with respect to any particular claim. Our customers who are accused of intellectual property infringement may in the future seek indemnification from us under common law or other legal theories. If such claims are successful, or if we are required to indemnify or defend our customers from these or other claims, these matters could be disruptive to our business and management and have a material adverse effect on our business, operating results and financial condition.

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If we fail to adequately protect our proprietary rights, in the United States and abroad, our competitive position could be impaired and we may lose valuable assets, experience reduced revenue and incur costly litigation to protect our rights.

Our success is dependent, in part, upon protecting our proprietary technology. We rely on a combination of copyrights, trademarks, service marks, trade secret laws and contractual restrictions to establish and protect our proprietary rights in our products and services. However, the steps we take to protect our intellectual property may be inadequate. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. Any of our trademarks or other intellectual property rights may be challenged by others or invalidated through administrative process or litigation. Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain. Despite our precautions, it may be possible for unauthorized third parties to copy our technology and use information that we regard as proprietary to create products and services that compete with ours. Some license provisions protecting against unauthorized use, copying, transfer and disclosure of our offerings may be unenforceable under the laws of certain jurisdictions and foreign countries. In addition, the laws of some countries do not protect proprietary rights to the same extent as the laws of the United States. To the extent we expand our international activities, our exposure to unauthorized copying and use of our technology and proprietary information may increase.

We enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with the parties with whom we have strategic relationships and business alliances. No assurance can be given that these agreements will be effective in controlling access to and distribution of our products and proprietary information. Further, these agreements may not prevent our competitors from independently developing technologies that are substantially equivalent or superior to our platform and offerings.

We may be required to spend significant resources to monitor and protect our intellectual property rights. Litigation may be necessary in the future to enforce our intellectual property rights and to protect our trade secrets. Such litigation could be costly, time consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attackingthe validity and enforceability of our intellectual property rights. Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation, could delay further sales or the implementation of our platform and offerings, impair the functionality of our platform and offerings, delay introductions of new features or enhancements, result in our substituting inferior or more costly technologies into our platform and offerings, or injure our reputation.

Our use of “open source” software could negatively affect our ability to offer our platform and subject us to possible litigation.

A substantial portion of our cloud-based platform incorporates so-called “open source” software, and we may incorporate additional open source software in the future. Open source software is generally freely accessible, usable and modifiable. Certain open source licenses may, in certain circumstances, require us to offer the components of our platform that incorporate the open source software for no cost, that we make available source code for modifications or derivative works we create based upon, incorporating or using the open source software and that we license such modifications or derivative works under the terms of the particular open source license. If an author or other third party that distributes open source software we use were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, including being enjoined from the offering of the components of our platform that contained the open source software and being required to comply with the foregoing conditions, which could disrupt our ability to offer the affected software. We could also be subject to suits by parties claiming ownership of what we believe to be open source software. Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition and require us to devote additional research and development resources to change our products.

Risks Related to Government Regulation and Taxation

We could face liability, or our reputation might be harmed, as a result of the activities of our customers, the content of their websites or the data they store on our servers.

As a provider of a cloud-based inbound marketing and sales software platform, we may be subject to potential liability for the activities of our customers on or in connection with the data they store on our servers. Although our customer terms of use prohibit illegal use of our services by our customers and permit us to take down websites or take other appropriate actions for illegal use, customers may nonetheless engage in prohibited activities or upload or store content with us in violation of applicable law or the customer’s own policies, which could subject us to liability or harm our reputation.

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Several U.S. federal statutes may apply to us with respect to various customer activities:

• The Digital Millennium Copyright Act of 1998, or DMCA, provides recourse for owners of copyrighted material who believe that their rights under U.S. copyright law have been infringed on the Internet. Under the DMCA, based on our current business activity as an Internet service provider that does not own or control website content posted by our customers, we generally are not liable for infringing content posted by our customers or other third parties, provided that we follow the procedures for handling copyright infringement claims set forth in the DMCA. Generally, if we receive a proper notice from, or on behalf, of a copyright owner alleging infringement of copyrighted material located on websites we host, and we fail to expeditiously remove or disable access to the allegedly infringing material or otherwise fail to meet the requirements of the safe harbor provided by the DMCA, the copyright owner may seek to impose liability on us. Technical mistakes in complying with the detailed DMCA take-down procedures could subject us to liability for copyright infringement.

• The Communications Decency Act of 1996, or CDA, generally protects online service providers, such as us, from liability for certain activities of their customers, such as the posting of defamatory or obscene content, unless the online service provider is participating in the unlawful conduct. Under the CDA, we are generally not responsible for the customer-created content hosted on our servers. Consequently, we do not monitor hosted websites or prescreen the content placed by our customers on their sites. However, the CDA does not apply in foreign jurisdictions and we may nonetheless be brought into disputes between our customers and third parties which would require us to devote management time and resources to resolve such matters and any publicity from such matters could also have an adverse effect on our reputation and therefore our business.

• In addition to the CDA, the Securing the Protection of our Enduring and Established Constitutional Heritage Act, or the SPEECH Act, provides a statutory exception to the enforcement by a U.S. court of a foreign judgment for defamation under certain circumstances. Generally, the exception applies if the defamation law applied in the foreign court did not provide at least as much protection for freedom of speech and press as would be provided by the First Amendment of the U.S. Constitution or by the constitution and law of the state in which the U.S. court is located, or if no finding of defamation would be supported under the First Amendment of the U.S. Constitution or under the constitution and law of the state in which the U.S. court is located. Although the SPEECH Act may protect us from the enforcement of foreign judgments in the United States, it does not affect the enforceability of the judgment in the foreign country that issued the judgment. Given our international presence, we may therefore, nonetheless, have to defend against or comply with any foreign judgments made against us, which could take up substantial management time and resources and damage our reputation.

Although these statutes and case law in the United States have generally shielded us from liability for customer activities to date, court rulings in pending or future litigation may narrow the scope of protection afforded us under these laws. In addition, laws governing these activities are unsettled in many international jurisdictions, or may prove difficult or impossible for us to comply with in some international jurisdictions. Also, notwithstanding the exculpatory language of these bodies of law, we may become involved in complaints and lawsuits which, even if ultimately resolved in our favor, add cost to our doing business and may divert management’s time and attention. Finally, other existing bodies of law, including the criminal laws of various states, may be deemed to apply or new statutes or regulations may be adopted in the future, any of which could expose us to further liability and increase our costs of doing business.

We may be subject to additional obligations to collect and remit sales tax and other taxes, and we may be subject to tax liability for past sales, which could harm our business.

State, local and foreign jurisdictions have differing rules and regulations governing sales, use, value added and other taxes, and these rules and regulations are subject to varying interpretations that may change over time. In particular, the applicability of such taxes to our inbound platform in various jurisdictions is unclear. Further, these jurisdictions’ rules regarding tax nexus are complex and vary significantly. As a result, we could face the possibility of tax assessments and audits, and our liability for these taxes and associated penalties could exceed our original estimates. A successful assertion that we should be collecting additional sales, use, value added or other taxes in those jurisdictions where we have not historically done so and do not accrue for such taxes could result in substantial tax liabilities and related penalties for past sales, discourage customers from purchasing our application or otherwise harm our business and operating results.

Changes in tax laws or regulations that are applied adversely to us or our customers could increase the costs of our inbound platform and adversely impact our business.

New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time. Any new taxes could adversely affect our domestic and international business operations, and our business and financial performance. Further,

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existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. These events could require us or our customers to pay additional tax amounts on a prospective or retroactive basis, as well as require us or our customers to pay fines and/or penalties and interest for past amounts deemed to be due. If we raise our prices to offset the costs of these changes, existing and potential future customers may elect not to continue or purchase our inbound platform in the future. Additionally, new, changed, modified or newly interpreted or applied tax laws could increase our customers’ and our compliance, operating and other costs, as well as the costs of our platform. Any or all of these events could adversely impact our business and financial performance.

We are a multinational organization faced with increasingly complex tax issues in many jurisdictions, and we could be obligated to pay additional taxes in various jurisdictions.

As a multinational organization, we may be subject to taxation in several jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain. The amount of taxes we pay in these jurisdictions could increase substantially as a result of changes in the applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents, which could have a material adverse effect on our liquidity and operating results. Changes in tax laws, such as tax reform in the United States or changes in tax laws resulting from the Organization for Economic Co-operation and Development’s multi-jurisdictional plan of action to address “base erosion and profit shifting,” could impact our effective tax rate. In addition, the authorities in these jurisdictions could review our tax returns and impose additional tax, interest and penalties, and the authorities could claim that various withholding requirements apply to us or our subsidiaries or assert that benefits of tax treaties are not available to us or our subsidiaries, any of which could have a material impact on us and the results of our operations.

Failure to comply with laws and regulations could harm our business.

Our business is subject to regulation by various federal, state, local and foreign governmental agencies, including agencies responsible for monitoring and enforcing employment and labor laws, workplace safety, environmental laws, consumer protection laws, anti-bribery laws, import/export controls, federal securities laws and tax laws and regulations. In certain jurisdictions, these regulatory requirements may be more stringent than those in the United States. Noncompliance with applicable regulations or requirements could subject us to investigations, sanctions, mandatory recalls, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties or injunctions.

We may not be able to utilize a significant portion of our net operating loss carryforwards, which could adversely affect our profitability.

As of December 31, 2016, we had federal and state net operating loss carryforwards due to prior period losses, which, if not utilized, will begin to expire in 2027 for federal purposes and began to expire in 2014 for state purposes. These net operating loss carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our profitability. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, which we refer to as the Code, our ability to utilize net operating loss carryforwards or other tax attributes, such as research tax credits, in any taxable year may be further limited if we experience an ownership change. A Section 382 ownership change generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. Future issuances of our stock could cause an ownership change. It is possible that an ownership change in connection with a future offering, or any future ownership change, could have a material effect on the use of our net operating loss carryforwards or other tax attributes, which could adversely affect our profitability.

The standards that private entities use to regulate the use of email have in the past interfered with, and may in the future interfere with, the effectiveness of our inbound platform and our ability to conduct business.

Our customers rely on email to communicate with their existing or prospective customers. Various private entities attempt to regulate the use of email for commercial solicitation. These entities often advocate standards of conduct or practice that significantly exceed current legal requirements and classify certain email solicitations that comply with current legal requirements as spam. Some of these entities maintain “blacklists” of companies and individuals, and the websites, internet service providers and internet protocol addresses associated with those entities or individuals that do not adhere to those standards of conduct or practices for commercial email solicitations that the blacklisting entity believes are appropriate. If a company’s internet protocol addresses are listed by a blacklisting entity, emails sent from those addresses may be blocked if they are sent to any internet domain or internet address that subscribes to the blacklisting entity’s service or purchases its blacklist.

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From time to time, some of our internet protocol addresses may become listed with one or more blacklisting entities due to the messaging practices of our customers. There can be no guarantee that we will be able to successfully remove ourselves from those lists. Blacklisting of this type could interfere with our ability to market our inbound platform and services and communicate with our customers and, because we fulfill email delivery on behalf of our customers, could undermine the effectiveness of our customers’ email marketing campaigns, all of which could have a material negative impact on our business and results of operations.

Existing federal, state and foreign laws regulate Internet tracking software, the senders of commercial emails and text messages, website owners and other activities, and could impact the use of our inbound platform and potentially subject us to regulatory enforcement or private litigation.

Certain aspects of how our customers utilize our platform are subject to regulations in the United States, European Union and elsewhere. In recent years, U.S. and European lawmakers and regulators have expressed concern over the use of third-party cookies or web beacons for online behavioral advertising, and legislation adopted recently in the European Union requires informed consent for the placement of a cookie on a user’s device. Regulation of cookies and web beacons may lead to restrictions on our activities, such as efforts to understand users’ Internet usage. New and expanding “Do Not Track” regulations have recently been enacted or proposed that protect users’ right to choose whether or not to be tracked online. These regulations seek, among other things, to allow end users to have greater control over the use of private information collected online, to forbid the collection or use of online information, to demand a business to comply with their choice to opt out of such collection or use, and to place limits upon the disclosure of information to third party websites. These policies could have a significant impact on the operation of our inbound platform and could impair our attractiveness to customers, which would harm our business.

Many of our customers and potential customers in the healthcare, financial services and other industries are subject to substantial regulation regarding their collection, use and protection of data and may be the subject of further regulation in the future. Accordingly, these laws or significant new laws or regulations or changes in, or repeals of, existing laws, regulations or governmental policy may change the way these customers do business and may require us to implement additional features or offer additional contractual terms to satisfy customer and regulatory requirements, or could cause the demand for and sales of our inbound platform to decrease and adversely impact our financial results.

In addition, the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, or the CAN-SPAM Act, establishes certain requirements for commercial email messages and specifies penalties for the transmission of commercial email messages that are intended to deceive the recipient as to source or content. The CAN-SPAM Act, among other things, obligates the sender of commercial emails to provide recipients with the ability to opt out of receiving future commercial emails from the sender. The ability of our customers’ message recipients to opt out of receiving commercial emails may minimize the effectiveness of the email components of our inbound platform. In addition, certain states and foreign jurisdictions, such as Australia, Canada and the European Union, have enacted laws that regulate sending email, and some of these laws are more restrictive than U.S. laws. For example, some foreign laws prohibit sending unsolicited email unless the recipient has provided the sender advance consent to receipt of such email, or in other words has “opted-in” to receiving it. A requirement that recipients opt into, or the ability of recipients to opt out of, receiving commercial emails may minimize the effectiveness of our platform.

While these laws and regulations generally govern our customers’ use of our platform, we may be subject to certain laws as a data processor on behalf of, or as a business associate of, our customers. For example, laws and regulations governing the collection, use and disclosure of personal information include, in the United States, rules and regulations promulgated under the authority of the Federal Trade Commission, the Health Insurance Portability and Accountability Act of 1996, the Gramm-Leach-Bliley Act of 1999 and state breach notification laws, and internationally, the Data Protection Directive in the European Union and the Federal Data Protection Act in Germany. If we were found to be in violation of any of these laws or regulations as a result of government enforcement or private litigation, we could be subjected to civil and criminal sanctions, including both monetary fines and injunctive action that could force us to change our business practices, all of which could adversely affect our financial performance and significantly harm our reputation and our business.

We are subject to governmental export controls and economic sanctions laws that could impair our ability to compete in international markets and subject us to liability if we are not in full compliance with applicable laws.

Our business activities are subject to various restrictions under U.S. export controls and trade and economic sanctions laws, including the U.S. Commerce Department’s Export Administration Regulations and economic and trade sanctions regulations maintained by the U.S. Treasury Department’s Office of Foreign Assets Control. If we fail to comply with these laws and regulations, we and certain of our employees could be subject to civil or criminal penalties and reputational harm. Obtaining the necessary authorizations, including any required license, for a particular transaction may be time-consuming, is not guaranteed, and may result in the delay or loss of sales opportunities. Furthermore, U.S. export control laws and economic sanctions laws prohibit certain transactions with U.S. embargoed or sanctioned countries, governments, persons and entities. Although we take precautions to prevent

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transactions with U.S. sanction targets, the possibility exists that we could inadvertently provide our solutions to persons prohibited by U.S. sanctions. This could result in negative consequences to us, including government investigations, penalties and reputational harm.

Risks Related to Our Operating Results and Financial Condition

We may experience quarterly fluctuations in our operating results due to a number of factors, which makes our future results difficult to predict and could cause our operating results to fall below expectations or our guidance.

Our quarterly operating results have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, our past results may not be indicative of our future performance, and comparing our operating results on a period-to-period basis may not be meaningful. In addition to the other risks described in this Quarterly Report on Form 10-Q, factors that may affect our quarterly operating results include the following:

• changes in spending on marketing and sales software by our current or prospective customers;

• pricing our inbound platform subscriptions effectively so that we are able to attract and retain customers without compromising our profitability;

• attracting new customers for both our marketing and sales software, increasing our existing customers’ use of our platform and providing our customers with excellent customer support;

• customer renewal rates and the amounts for which agreements are renewed;

• global awareness of our thought leadership and brand;

• changes in the competitive dynamics of our market, including consolidation among competitors or customers and the introduction of new products or product enhancements;

• changes to the commission plans, quotas and other compensation-related metrics for our sales representatives;

• the amount and timing of payment for operating expenses, particularly research and development, sales and marketing expenses and employee benefit expenses;

• the amount and timing of costs associated with recruiting, training and integrating new employees while maintaining our company culture;

• our ability to manage our existing business and future growth, including increases in the number of customers on our platform and the introduction and adoption of our inbound platform in new markets outside of the United States;

• unforeseen costs and expenses related to the expansion of our business, operations and infrastructure, including disruptions in our hosting network infrastructure and privacy and data security;

• foreign currency exchange rate fluctuations; and

• general economic and political conditions in our domestic and international markets.

We may not be able to accurately forecast the amount and mix of future subscriptions, revenue and expenses and, as a result, our operating results may fall below our estimates or the expectations of public market analysts and investors. If our revenue or operating results fall below the expectations of investors or securities analysts, or below any guidance we may provide, the price of our common stock could decline.

If we do not accurately predict subscription renewal rates or otherwise fail to forecast our revenue accurately, or if we fail to match our expenditures with corresponding revenue, our operating results could be adversely affected.

Because our recent growth has resulted in the rapid expansion of our business, we do not have a long history upon which to base forecasts of renewal rates with customers or future operating revenue. As a result, our operating results in future reporting periods may be significantly below the expectations of the public market, equity research analysts or investors, which could harm the price of our common stock.

Because we generally recognize revenue from subscriptions ratably over the term of the agreement, near term changes in sales may not be reflected immediately in our operating results.

We offer our inbound platform primarily through a mix of monthly, quarterly and single-year subscription agreements and generally recognize revenue ratably over the related subscription period. As a result, much of the revenue we report in each quarter is derived from agreements entered into during prior months, quarters or years. In addition, we do not record deferred revenue beyond

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amounts invoiced as a liability on our balance sheet. A decline in new or renewed subscriptions or marketing solutions agreements in any one quarter is not likely to be reflected immediately in our revenue results for that quarter. Such declines, however, would negatively affect our revenue and deferred revenue balances in future periods, and the effect of significant downturns in sales and market acceptance of our platform, and potential changes in our rate of renewals, may not be fully reflected in our results of operations until future periods. Our subscription model also makes it difficult for us to rapidly increase our total revenue and deferred revenue balance through additional sales in any period, as revenue from new customers must be recognized over the applicable subscription term.

We are exposed to fluctuations in currency exchange rates.

We face exposure to movements in currency exchange rates, which may cause our revenue and operating results to differ materially from expectations. As we have expanded our international operations our exposure exchange rate fluctuations has increased, in particular with respect to the Euro, British Pound Sterling, Australian Dollar, and Japanese Yen. As exchange rates vary, revenue, cost of revenue, operating expenses and other operating results, when re-measured, may differ materially from expectations. In addition, our operating results are subject to fluctuation if our mix of U.S. and foreign currency denominated transactions and expenses changes in the future. Although we may apply certain strategies to mitigate foreign currency risk, these strategies might not eliminate our exposure to foreign exchange rate fluctuations and would involve costs and risks of their own, such as ongoing management time and expertise, external costs to implement the strategies and potential accounting implications. Additionally, as we anticipate growing our business further outside of the United States, the effects of movements in currency exchange rates will increase as our transaction volume outside of the United States increases.

Risks Related to Our Common Stock

Our stock price may be volatile and you may be unable to sell your shares at or above the price you purchased them.

The trading prices of the securities of technology companies, including providers of software via the cloud-based model, have been highly volatile. Since shares of our common stock were sold in our initial public offering in October 2014 at a price of $25.00 per share, our stock price has ranged from $25.79 to $66.10, through March 31, 2017. The market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

• actual or anticipated fluctuations in our revenue and other operating results, including as a result of the addition or loss of any number of customers;

• announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments;

• the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

• failure of securities analysts to initiate or maintain coverage of us, changes in ratings and financial estimates and the publication of other news by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;

• changes in operating performance and stock market valuations of cloud-based software or other technology companies, or those in our industry in particular;

• price and volume fluctuations in the trading of our common stock and in the overall stock market, including as a result of trends in the economy as a whole;

• new laws or regulations or new interpretations of existing laws or regulations applicable to our business or industry, including data privacy and data security;

• lawsuits threatened or filed against us;

• changes in key personnel; and

• other events or factors, including changes in general economic, industry and market conditions and trends.

In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many technology companies. Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies.

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In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and adversely affect our business.

We have incurred, and expect to continue to incur, increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could adversely affect our business, operating results and financial condition.

As a public company we have incurred, and expect to continue to incur significant legal, accounting and other expenses. We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, and the rules and regulations of the New York Stock Exchange, or NYSE. These requirements have increased and will continue to increase our legal, accounting and financial compliance costs and have made and will continue to make some activities more time consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to maintain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as our executive officers.

The Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control over financial reporting annually and the effectiveness of our disclosure controls and procedures quarterly. In particular, Section 404 of the Sarbanes-Oxley Act, or Section 404, requires us to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on, and our independent registered public accounting firm to attest to, the effectiveness of our internal control over financial reporting. Our compliance with applicable provisions of Section 404 requires that we incur substantial accounting expense and expend significant management time on compliance-related issues as we implement additional corporate governance practices and comply with reporting requirements. Moreover, if we are not able to comply with the requirements of Section 404 applicable to us in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources. We have in the past identified control deficiencies, including a material weakness during the quarters ended June 30, 2015 and September 30, 2015. While we remediated this material weakness in 2015 and continue to seek improvements to enhance our control environment, we may identify additional material weaknesses or other deficiencies in the future.

Furthermore, investor perceptions of our company may suffer if deficiencies are found, and this could cause a decline in the market price of our stock. Irrespective of compliance with Section 404, any failure of our internal control over financial reporting could have a material adverse effect on our stated operating results and harm our reputation. If we are unable to implement these requirements effectively or efficiently, it could harm our operations, financial reporting, or financial results and could result in an adverse opinion on our internal controls from our independent registered public accounting firm.

Our ability to raise capital in the future may be limited, and our failure to raise capital when needed could prevent us from growing.

Our business and operations may consume resources faster than we anticipate. In the future, we may need to raise additional funds to invest in future growth opportunities. Additional financing may not be available on favorable terms, if at all. If adequate funds are not available on acceptable terms, we may be unable to invest in future growth opportunities, which could seriously harm our business and operating results. If we incur debt, the debt holders would have rights senior to common stockholders to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock. Furthermore, if we issue equity securities, stockholders will experience dilution, and the new equity securities could have rights senior to those of our common stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. As a result, our stockholders bear the risk of our future securities offerings reducing the market price of our common stock and diluting their interest.

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Anti-takeover provisions in our charter documents and Delaware law may delay or prevent an acquisition of our company.

Our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions that may have the effect of delaying or preventing a change in control of us or changes in our management. Our amended and restated certificate of incorporation and bylaws include provisions that:

• authorize “blank check” preferred stock, which could be issued by the board without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock;

• provide for a classified board of directors whose members serve staggered three-year terms;

• specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of the board, the chief executive officer or the president;

• prohibit stockholder action by written consent;

• establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors;

• provide that our directors may be removed only for cause;

• provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;

• specify that no stockholder is permitted to cumulate votes at any election of directors;

• authorize our board of directors to modify, alter or repeal our amended and restated bylaws; and

• require supermajority votes of the holders of our common stock to amend specified provisions of our charter documents.

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.

In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us in certain circumstances.

Any provision of our amended and restated certificate of incorporation or amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults on Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

The exhibits listed below are filed or incorporated by reference into this Report.

Exhibit Number	Exhibit Title
3.1(1)	Amended and Restated Certificate of Incorporation of the Registrant
3.2(2)	Amended and Restated Bylaws of the Registrant
4.1(3)	Form of Common Stock certificate of the Registrant
10.1	First Amendment to Lease, dated February 14, 2017 between One Canal Park Massachusetts LLC and HubSpot, Inc.
10.2	First Amendment to Amended and Restated Lease, dated March 23, 2017 by and between Davenport Owner (DE) LLC (as successor in interest to Jamestown Premier Davenport, LLC) and HubSpot, Inc.
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
32.1*	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

(1) Filed as Exhibit 3.1 to Registrant’s Form 10-K filed with the Securities and Exchange Commission on February 24, 2016 and incorporated herein by reference.

(2) Filed as Exhibit 3.4 to Registrant’s Form 10-K filed with the Securities and Exchange Commission on February 24, 2016 and incorporated herein by reference.

(3) Filed as Exhibit 4.1 to Amendment No. 1 to Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on September 26, 2014, and incorporated herein by reference.

* The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference. Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

HUBSPOT, INC.
By:	/s/ John Kinzer
Name:	John Kinzer
Title:	Chief Financial Officer (Principal Financial and Accounting Officer and Authorized Signatory)

May 2, 2017

EX-10.1

Exhibit 10.1

FIRST AMENDMENT TO LEASE

This FIRST AMENDMENT TO LEASE (the “Amendment”) dated this 14th day of February, 2017 (the “Effective Date”) is made by and between ONE CANAL PARK MASSACHUSETTS, LLC, a Delaware limited liability company (the “Landlord”), and HUBSPOT, INC., a Delaware corporation (the “Tenant”).

RECITALS:

A.WHEREAS, Landlord and Tenant entered into that certain Lease dated October 7, 2016 (the “Lease”) whereby Tenant leases from Landlord certain premises consisting of approximately: (i) 16,750 rentable square feet on the second (2^nd) floor (“Premises A”); and (ii) approximately 8,562 rentable square feet on the second (2^nd) floor (“Premises B”) (collectively, Premises A and Premises B shall be known as the “Premises”) in the buildinglocated at One Canal Park, Cambridge, Massachusetts (the “Building”);

B.WHEREAS, the Expiration Date with respect to the Term of the Lease is scheduled to expire on January 31, 2026 (the “Expiration Date”); and

C.WHEREAS, Landlord has agreed to lease additional space to Tenant pursuant to Tenant’s exercise of its right of first offer under Section 30.17 of the Lease and consisting of: (i) approximately 9,022 rentable square feet on fourth (4th) floor of the Building (“Premises C”); and (ii) approximately 21,052 rentable square feet on the fourth (4^th) floor of the Building (“Premises D”) substantially shown on the floor plan attached hereto as Exhibit “A” (the on the terms and conditions set forth herein.  

AGREEMENT:

NOW THEREFORE, in consideration of the promises contained herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree as follows:

1.Recitals.  The recitals set forth above are incorporated herein and made a part of this Amendment as if set forth herein in full.

2.Capitalized Terms.  All capitalized terms used in this Amendment that are not defined in this Amendment shall have the meanings ascribed to such terms in the Lease. In the event of any conflict between the terms of the Lease and the terms of this Amendment, the definitions set forth in this Amendment shall control.

3.Term for Premises C.  Landlord demises to Tenant, and Tenant takes from Landlord, the Premises C upon and subject to the provisions of the Lease, as amended by this Amendment.   Subject to the terms and conditions set forth herein, the Term of the Lease with respect to

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Premises C shall commence on the later date to occur of (the “Premises C Commencement Date”):  (i) March 1, 2017, and (ii) date Landlord delivers possession of Premises C to Tenant vacant, broom clean, free of tenants, occupants, property and debris, in compliance with all applicable Laws and free of all Hazardous Materials that are required to be removed, remediated, or encapsulated pursuant to applicable Environmental Laws and shall expire on the Expiration Date under the Lease.  Except as otherwise expressly provided herein, Tenant’s lease of the Premises C shall be on all of the terms and conditions of the Lease, and the Term of the Lease with respect to the Premises C shall be coterminous with the Term of the Lease for the Premises, as the same may be earlier terminated or extended as provided in the Lease.   For purposes of this Amendment, the “Estimated Commencement Date” for Premises C is March 1, 2017 and Premises C shall be deemed a “Portion of the Premises” under the Lease.  Once the Premises C Commencement Date has occurred, Landlord and Tenant shall execute an agreement, in a form similar to that which is attached as Exhibit 5 to the Lease in order to confirm the Premises C Commencement Date and the schedule with respect to Yearly Rent for Premises C.

4.Term for Premises D.  Landlord demises to Tenant, and Tenant takes from Landlord, the Premises D upon and subject to the provisions of the Lease, as amended by this Amendment.   Subject to the terms and conditions set forth herein, the Term of the Lease with respect to the Premises D shall commence on the later date to occur of (the “Premises D Commencement Date”):  (i) August 1, 2020, and (ii) date Landlord delivers possession of Premises D to Tenant vacant, broom clean, free of tenants, occupants, property and debris, in compliance with all applicable Laws and free of all Hazardous Materials that are required to be removed, remediated, or encapsulated pursuant to applicable Environmental Laws and shall expire on the Expiration Date under the Lease.  Except as otherwise expressly provided herein, Tenant’s lease of the Premises D shall be on all of the terms and conditions of the Lease, and the Term of the Lease with respect to the Premises D shall be coterminous with the Term of the Lease for the Premises, as the same may be earlier terminated or extended as provided in the Lease.  For purposes of this Amendment, the “Estimated Commencement Date” for Premises D is August 1, 2020 and Premises D shall be deemed a “Portion of the Premises” under the Lease.  Once the Premises D Commencement Date has occurred, Landlord and Tenant shall execute an agreement, in a form similar to that which is attached as Exhibit 5 to the Lease in order to confirm the Premises D Commencement Date and the schedule with respect to Yearly Rent for Premises D.

5.Yearly Rent for Premises C. Effective as of the Premises C Rent Commencement Date (as hereinafter defined), Tenant shall pay Yearly Rent with respect to the Premises C in accordance with the following schedule and in accordance with all other terms and conditions applicable to the payment of Yearly Rent under the Lease:

Term for Premises C Yearly Rent   Monthly Payment Per Rentable Square Foot of Premises D

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From the Premises C Commencement Date through the day immediately preceding the Premises C Rent Commencement Date	$0	$0	$0
From the Premises C Rent Commencement Date through the expiration of the First Expansion Premises Rent Year	$640,562.00	$53,380.17	$71.00
Second Expansion Premises Rent Year	$649,584.00	$54,132.00	$72.00
Third Expansion Premises Rent Year	$658,606.00	$54,883.83	$73.00
Fourth Expansion Premises Rent Year	$667,628.00	$55,635.67	$74.00
Fifth Expansion Premises Rent Year	$676,650.00	$56,387.50	$75.00
Sixth Expansion Premises Rent Year	$685,672.00	$57,139.33	$76.00
Seventh Expansion Premises Rent Year	$694,694.00	$57,891.17	$77.00
Eighth Expansion Premises Rent Year	$703,716.00	$58,643.00	$78.00
From the commencement of the Ninth Expansion Premises Rent Year through January 31, 2026	$712,738.00	$59,394.83	$79.00

Tenant shall have no obligation to pay Yearly Rent for Premises C for the period commencing as of the Premises C Commencement Date and expiring on the date that is one (1) month following the Premises C Commencement Date (the “Premises C Rent Abatement Period”).   The “Premises C Rent Commencement Date” shall be the day immediately following the expiration of the Premises C Rent Abatement Period.  

For purposes of the Lease, the term “Expansion Premises Rent Year” shall mean a twelve-month period beginning on the Premises C Commencement Date or any anniversary of the Premises C Commencement Date, except that if the Premises C Commencement Date does not fall on the first day of a calendar month, then the first Expansion Premises Rent Year shall begin on the Premises C Commencement Date and end on the last day of the month containing the first anniversary of the Premises C Commencement Date, and each succeeding Expansion Premises Rent Year shall begin on the day following the last day of the prior Expansion Premises Rent Year.

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6.Yearly Rent for Premises D. Effective as of the Premises D Rent Commencement Date (as hereinafter defined), Tenant shall pay Yearly Rent with respect to the Premises D in accordance with the following schedule and in accordance with all other terms and conditions applicable to the payment of Yearly Rent under the Lease:

Term for Premises D	Yearly Rent	Monthly Payment	Per Rentable Square Foot of Premises D
From the Premises D Commencement Date through the day immediately preceding the Premises D Rent Commencement Date	$0	$0	$0
From the Premises D Rent Commencement Date through the expiration of the Fourth Expansion Premises Rent Year	$1,557,848.00	$129,820.667	$74.00
Fifth Expansion Premises Rent Year	$1,578,900.00	$131,575.00	$75.00
Sixth Expansion Premises Rent Year	$1,599,952.00	$133,329.33	$76.00
Seventh Expansion Premises Rent Year	$1,621,004.00	$135,083.67	$77.00
Eighth Expansion Premises Rent Year	$1,642,056.00	$136,838.00	$78.00
From the commencement of the Ninth Expansion Premises Rent Year through January 31, 2026	$1,663,108.00	$138,592.33	$79.00

Tenant shall have no obligation to pay Yearly Rent for Premises D for the period commencing as of the Premises D Commencement Date and expiring on the date that is three (3) months following the Premises D Commencement Date (the “Premises D Rent Abatement Period”).  The “Premises D Rent Commencement Date” shall be the day immediately following the expiration of the Premises D Rent Abatement Period.    

7.Tax Excess for Premises C. The Tax Base with respect Premises C shall be the actual amount of Taxes for the fiscal year 2018 (i.e., July 1, 2017, through June 30, 2018). From and after July 1, 2018, Tenant shall pay to Landlord Tenant’s Premises C Proportionate Share (as hereinafter defined) of the amount by which Taxes in any Tax Period exceed the Tax Base with

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respect to the Premises C, with such excess payable in accordance with the terms and conditions of the Lease. “Tenant’s Premises C Proportionate Share” shall be 8.89%.  

8.Operating Excess for Premises C. The Operating Costs in the Base Year with respect to Premises C shall be the actual amount of Operating Costs for the calendar year 2017. From and after January 1, 2018, Tenant shall pay to Landlord Tenant’s Premises C Proportionate Share of the amount by which Operating Costs in any Operating Year exceed the Operating Costs in the Base Year with respect to Premises C, with such excess payable in accordance with the terms and conditions of the Lease.  

9.Tax Excess for Premises D. The Tax Base with respect to the Premises D shall be the actual amount of Taxes for the fiscal year 2020 (i.e., July 1, 2019, through June 30, 2020). From and after July 1, 2020, Tenant shall pay to Landlord Tenant’s Premises D Proportionate Share (as hereinafter defined) of the amount by which Taxes in any Tax Period exceed the Tax Base with respect to the Premises D, with such excess payable in accordance with the terms and conditions of the Lease. “Tenant’s Premises D Proportionate Share” shall be 20.75%.  

10.Operating Excess for Premises D. The Operating Costs in the Base Year with respect to Premises D shall be the actual amount of Operating Costs for the calendar year 2020. Tenant shall pay to Landlord Tenant’s Premises D Proportionate Share of the amount by which Operating Costs in any Operating Year exceed Operating Costs in the Base Year with respect to Premises D, with such excess payable in accordance with the terms and conditions of the Lease.  

11.Amendment to Parking.  Effective as of the Premises C Commencement Date, Tenant shall have the right to five (5) additional Parking Passes, and effective as of the Premises D Commencement Date, Tenant shall have the right to ten (10) additional Parking Passes under the Lease. The additional Parking Passes shall be subject to all of the terms and conditions of Section 30.12 of the Lease. Landlord’s representation set forth in Section 30.12 of the Lease shall be deemed restated by Landlord as of each of the Premises C Commencement Date and the Premises D Commencement Date.  

12.Condition of Premises C and Premises D. Except for the Landlord’s obligation to: (a) deliver Premises C to Tenant lawfully demised and with egress that is compliant with applicable law; (b) Landlord’s obligation to deliver Premises C and Premises D in accordance with Sections 4.1 and 4.2 of the Lease; and (c) provide the Improvement Allowance as more particularly described on Exhibit B, Landlord shall not be obligated to make any improvements or contribute any allowances and Tenant shall take occupancy of the Premises C and Premises D in their “as-is” condition as of the date of this Amendment.   Notwithstanding the foregoing, (i) Landlord’s representation set forth in Section 2.2 of the Lease shall apply with respect to Premises C as of the Premises C Commencement Date and with respect to Premises D as of the Premises D Commencement Date, (ii) Section 3.1(c) of the Lease shall apply to Premises C and Premises D, and (iii) Section 3.1(d) shall apply to Premises C and Premises D.  In addition, Landlord shall deliver Premises D to Tenant in the same condition as Premises D is in as of the date of this Amendment, normal wear and tear (exclusive of physical damage) only excepted and in no event shall there be any alterations or changes performed to Premises D after the date of this Amendment without Tenant’s prior written consent, in Tenant’s sole discretion.  

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13.Tenant’s Extension Option and Right of First Offer.  For purposes of confirmation herein, Tenant’s Extension Option under Section 30.16 (Tenant’s Option to Extend the Term of the Lease) shall be applicable to Premises C and Premises D.  Reference is hereby made to Tenant’s Extension Option in Section 30.16 and Tenant’s Right of First Offer in Section 30.17 (Tenant’s Right of First Offer) and Landlord and Tenant agree that, notwithstanding the terms and conditions of the Extension Option or the Right of First Offer, Tenant shall be permitted to sublease all or any portion of Premises without being subject to the 25% cap on subletting in Section 30.16 and Section 30.17 and without forfeiting its rights under the Extension Option or the Right of First Offer so long as such subleases are entered into prior to December 31, 2020 and the terms of the subleases do not extend beyond January 31, 2023 (the foregoing, an “Exempt Sublease”). In addition, clause (iv) set forth in the first paragraph of Section 17 (e.g. RFO Premises must be for the exclusive use of Tenant) shall not apply prior to December 31, 2020.  

The “RFO Premises” as defined in Section 30.17(a) of the Lease is hereby amended to exclude any rentable space on the first (1^st) floor of the Building but only if Landlord is offering such first (1^st) floor space to lease for retail purposes only and not for office purposes. For purposes of the Lease, the only superior rights to which Tenant’s Right of First Offer will be subject pursuant to Section 30.17(a) are the prior rights expressly existing as of the Execution Date and identified on Exhibit C attached hereto.  

14.Landlord’s Recapture Rights. Notwithstanding the terms and conditions to the contrary set forth in Section 17 of the Lease,  Tenant shall not be required to give Landlord a “Recapture Offer” when offering or advertising a sublease under the Lease for an Exempt Sublease and Landlord’s recapture right under Section 17 shall also not apply to any sublease (and Tenant shall not be required to give Landlord a “Recapture Offer” with respect to any sublease) with a term that expires prior to January 31, 2023.   In addition, for purposes of Section 17 of the Lease, Simon Kucher, an existing tenant in the Building, shall not be deemed to be a Restricted Occupant with respect to any Exempt Sublease.  

15.Letter of Credit.   Exhibit 1, Lease Data is hereby amended to delete Article 8 therefrom and insert the following in place thereof:  

“$984,187.50

Notwithstanding the foregoing, a Letter of Credit in the amount of $284,749.71 with respect to Premises A shall be delivered on or before the Commencement Date with respect to Premises A. The Letter of Credit shall be amended or replaced so as to increase the amount to $444,890.2 on or before the Premises C Commencement Date. The Letter of Credit shall be amended or replaced so as to increase the amount to $594,725.50 on or before the Commencement Date with respect to Premises B. The Letter of Credit shall be amended or replaced so as to increase the amount to $984,187.50 on or before the Premises D Commencement Date.”

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16.Miscellaneous.  Exhibit 1, Lease Data, Article 6 (Yearly Rent) contains a rent chart for the Yearly Rent for Premises B and is hereby amended to correct an error in the first column of the first row following the column headings row to read as follows:  “If applicable, from the Rent Commencement Date for Premises B through the expiration of the Second Lease Year.”

17.Brokers. Tenant represents to Landlord that Tenant has not dealt with any broker in connection with this Amendment other than CBRE/New England representing Landlord exclusively (“Landlord’s Broker”), and T3 Advisors, LLC, representing Tenant exclusively (“Tenant’s Broker”), and warrants that no other broker is or may be entitled to any commission in connection therewith. Tenant agrees to indemnify, defend and hold harmless Landlord and Landlord’s agents from all damages, liability and expense (including reasonable attorneys’ fees) arising from any claims or demands of any other brokers or finders for any commission alleged to be due such brokers or finders in connection with their participation in the negotiation with Tenant of this Amendment other than Landlord’s Broker and Tenant’s Broker. Landlord represents and warrants that, in connection with the execution and delivery of the Lease, it has not directly or indirectly dealt with any broker other than the Landlord’s Broker and the Tenant’s Broker.  Landlord agrees to defend, exonerate and save harmless Tenant and anyone claiming by, through, or under Tenant against any claims arising in breach of the representation and warranty set forth in the immediately preceding sentence.  Landlord shall pay any commissions due to Landlord’s Broker and Tenant’s Broker pursuant to a separate agreement between Landlord, Landlord’s Broker.

18.Counterparts.  This Amendment may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

19.Confirmation of Lease.   Except as amended by this Amendment, all terms and provisions of the Lease shall remain in full force and effect.

[SIGNATURE PAGE TO FOLLOW]

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IN WITNESS WHEREOF, Landlord and Tenant have caused this Amendment to be executed as of the Effective Date.

LANDLORD:  

ONE CANAL PARK MASSACHUSETTS, LLC

a Delaware limited liability company

By:  Bay State REIT, LLC

a Delaware limited liability company, its Manager

By:  U.S. Real Estate Investment Fund REIT, Inc.

a Delaware corporation, its Manager

By:/s/ Thomas Taranto

Name:  Thomas Taranto

Title:   Vice President

TENANT:

HUBSPOT, INC.

a Delaware corporation

By:/s/ John Kelleher

Name: John Kelleher

Title: General Counsel

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EXHIBIT “A”

PREMISES C

AND

PREMISES D

9

EXHIBIT “B”

IMPROVEMENT Allowance

1.Landlord shall, in the manner set forth in Section 5.2(b) of the Lease, provide to Tenant a tenant improvement allowance of up to $5.00 per rentable square foot of the  Premises C and Premises D per annum (the “Improvement Allowance”) provided, however, the Improvement Allowance with respect to Premises D shall be prorated and reduced to reflect the number of months remaining in the Term for Premises D following the Premises D Rent Commencement Date.  The Improvement Allowance shall be used by Tenant to pay for the hard and soft costs to construct certain improvements with respect to the Premises C and Premises D (“Tenant’s Improvements”). By way of example, if the Premises C Rent Commencement Date occurs on April 1, 2017, the Improvement Allowance with respect to Premises C would be $398,471.70 and, if the Premises D Rent Commencement Date occurs on November 1, 2020, the Improvement Allowance with respect to Premises D would be $552,615.00.

2.Landlord agrees that Tenant may apply the Improvement Allowance towards hard construction costs, soft costs (such as permitting, architectural and engineering fees), voice and data wiring and cabling costs, and furniture, fixtures and equipment expenses subject to and in accordance with the same terms and conditions set forth in Sections 5.2(b) and 5.2(c) of the Lease.

3.Tenant acknowledges that all costs for Tenant’s Improvements in excess of the Improvement Allowance shall be at the sole cost and expense of the Tenant.

4.All Tenant Improvements shall: (a) be subject to the same terms and conditions set forth in Section 5 of the Lease applicable to the Tenant’s Work, provided, however, in no event shall Tenant be required to post any lien bonds or surety payment and performance bonds with respect to the Tenant Improvements; (b) based on plans and specifications previously approved by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed; (c) performed in a good and workmanlike manner by contractors previously approved by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed; and (d) be in compliance with all applicable laws and regulations.

5.Landlord shall disburse the Improvement Allowance to Tenant on a periodic basis (but no more than once per month) in accordance with the terms and conditions of Section 5.2 of the Lease applicable to the Landlord’s Contribution.

6.Tenant must request disbursement of the Improvement Allowance on or before January 31, 2022, the failing of which shall cause Tenant to forfeit any portion of the Improvement Allowance not requisitioned by Tenant as of such date. Tenant shall not be permitted to apply any unused Improvement Allowance toward Rent or other amounts due under the Lease.

7.   If Landlord fails timely to pay any portion of Landlord’s Contribution or the Improvement Allowance when properly due and as to which Tenant has satisfied the requisition conditions, and such failure shall continue for thirty (30) days after written notice from Tenant to Landlord,

10

then Tenant, provided no monetary or material non-monetary Event of Default of Tenant has occurred and is continuing, may deliver a second notice to Landlord, which notice shall specify the Requisition that has not been timely paid, the date upon which it was sent to Landlord, and if Landlord fails to disburse the amount expressly referenced in such notice within five (5) business days, then Tenant shall have the right to have such unpaid amount credited against the next installment(s) of Yearly Rent thereafter due under this Lease, until such sums due Tenant have been fully paid by Landlord or fully credited and accounted for.

11

EX-10.2

Exhibit 10.2

THE DAVENPORT

Cambridge, Massachusetts

First Amendment to Amended and Restated Lease

HubSpot, Inc.

THIS FIRST AMENDMENT TO AMENDED AND RESTATED LEASE (“First Amendment”) is made as of March 23, 2017 (the “Effective Date”) by and between DAVENPORT OWNER (DE) LLC, a Delaware limited liability company, having an office c/o Oxford I Asset Management USA Inc., 125 Summer Street, 16th Floor, Boston, Massachusetts 02110 (“Landlord”), and HUBSPOT, INC., a Delaware corporation (“Tenant”), having an office at 25 First Street, Cambridge, Massachusetts 02141.

Background

A.Pursuant to the provisions of that certain Amended and Restated Lease dated as of November 1, 2015 between Tenant and Landlord’s predecessor in interest, Jamestown Premier Davenport, LLC, dated as of  November 1, 2015 as affected by Commencement Letter dated September 29, 2016 (as so affected, the “Existing Lease”), Tenant leases premises located at 25 First Street, Cambridge Massachusetts more particularly described in the Lease (the “Premises”).  Capitalized terms used and not defined herein shall have the respective meanings ascribed to them in the Existing Lease.  The Existing Lease, as amended hereby, is hereinafter referred to as the “Lease.”  

B.In order to facilitate the leasing of Put Premises A and Put Premises B to Tenant, Landlord has agreed to (i) enter into an amendment to that certain lease with Accomplice Management, LLC, successor to Atlas Venture Advisors, Inc. (“Accomplice”) for Put Premises A and Put Premises B, under which Accomplice’s rights to extend the term of its lease will be eliminated and the initial term thereunder will be extended to December 31, 2017 and (ii) enter into that certain Consent to Sublease of even date herewith (the "Consent") concerning a sublease between Tenant and Accomplice, which sublease provides for the continued occupancy of Put Premises A by Accomplice for a period of time after December 31, 2017.

C.Pursuant to Section 3.3(D)(6)  of the Lease, Landlord and Tenant wish to enter into this First Amendment to memorialize Tenant’s agreement to lease from Landlord and Landlord’s agreement to lease to Tenant Put Premises A and Put Premises B, as set forth more fully below.  

Agreement

NOW, THEREFORE, in consideration of the foregoing and mutual covenants contained herein, Landlord and Tenant hereby agree as follows:

EAST\139344767.4

1.Put Premises A and Put Premises B.  

(a) Addition of Put Premises A and Put Premises B to Premises.  Commencing on January 1, 2018, Put Premises A (consisting of 16,616 square feet of Rentable Floor Area) and Put Premises B (consisting of 2,245 square feet of Rentable Floor area) shall automatically be added to the Premises and Tenant will be leasing Put Premises A and Put Premises B on all of the same terms and conditions of the Lease applicable to the demise of the other portions of the Premises leased to Tenant, except as described in Section 3.3(D)(1) – (6) of the Existing Lease, as amended hereby.  Landlord and Tenant agree that:

(i) The Commencement Date for Put Premises A and Put Premises B shall be January 1, 2018, notwithstanding anything in the Lease to the contrary, including without limitation under Section 3.3(D)(i)(1) of the Lease; and

(ii) The Rent Commencement Date for Put Premises A and Put Premises B shall be July 1, 2018, notwithstanding anything in the Lease to the contrary, including without limitation under Section 3.3(D)(i)(3) of the Lease.  

(b) Substantial Full Occupancy.  As of the Commencement Date for Put Premises A and Put Premises B (and other space is not added to the Premises), Landlord and Tenant agree that:

(i) the Substantial Full Occupancy Commencement Date will be January 1, 2018 (or such earlier date as the Put Premises C Leasing Test is satisfied) under Section 2.1(B)(i)(a) of the Lease;  

(ii) the Rentable Floor Area of the Building will be increased to 220,190 square feet of Rentable Floor Area pursuant to Section 2.1(B)(i)(b)(i) of the Lease;

(iii) Tenant shall be leasing a total of approximately 206,169 square feet of Rentable Floor Area of Premises after giving effect to the deemed increase in Rentable Floor Area under Section 2.1(B)(i)(b)(ii) and Exhibit 2.1 of the Lease;

(iv) the Annual Fixed Rent payable with respect to each Portion of the Premises shall be calculated in accordance with Section 3.3(D)(2) of the Lease based on the Rentable Floor Area of the Premises as increased pursuant to Section 2.1(B) of the Lease, as described above;

(v) Pursuant to Section 2.1(B)(i)(b)(iv) of the Lease, Tenant’s Share for purposes of calculating Landlord’s Tax Expenses Allocable to the Premises and Operating Expenses Allocable to the Premises will not change on account of the occurrence of the Substantial Full Occupancy Commencement Date;

- 2 -

EAST\139344767.4

(vi) Tenant shall pay Landlord, as Additional Rent, all electricity costs with respect to the Building and Lot (exclusive of Third-Party Electrical Costs) pursuant to Section 7.4(E) of the Lease (it being acknowledged that Tenant shall not be obligated thereafter to pay the Electricity Rent under Section 7.4(D) of the Lease and that Electricity Costs shall be excluded from Operating Expenses for the Building pursuant to Section 6.2(A)(iii)(c) of the Lease);

(vii) Landlord shall provide the applicable portion of the Currently-Committed Put Premises Allowance not to exceed $880,180.00 in the aggregate (i.e., 18,861 rsf x $50.00  x (112 mo./120 mo.) = $880,180.00) for the purpose of defraying the cost of Tenant’s Currently Committed Put Premises Work, which Tenant must properly requisition no later than (1) January 1, 2020 with respect to Put Premises A, and (2) July 1, 2019 with respect to Put Premises B, as set forth in Section 3.3(D)(5) of the Lease;

(viii) Tenant’s Maximum Parking Requirement shall be 238 Parking Permits (i.e., 154 Parking Permits plus 84 additional Parking Permits for the Delayed Portion of the Existing Premises, plus the Expansion Premises, plus Put Premises A and Put Premises B) under Section 10.2(A) of the Lease and Tenant’s Minimum Parking Requirement shall be 193 Parking Permits (based on 109 Parking Permits plus 84 additional Parking Permits) under Section 10.2(B) of the Lease; and  

(ix) Pursuant to Section 16.42 of the Lease, effective as of the Substantial Full Occupancy Commencement Date, Landlord shall separately demise the Basement Storage Premises and Tenant shall lease the Basement Storage Premises in its “as is” condition, pursuant to the terms and provisions of the Lease.

(c) As Is.  Tenant acknowledges that Landlord has satisfied its obligations under Section 3.3(A) and (B) of the Lease with respect to Put Premises A and Put Premises B.  Landlord shall have no obligation to deliver any Currently-Committed Put Premises Demise Notice with respect to Put Premises A or Put Premises B.   Tenant hereby accepts Put Premises A and Put Premises B in their “as is” and “where is” condition on January 1, 2018, without representations or warranties by Landlord or Landlord’s agents, and because Landlord has consented to the Sublease pursuant to the Consent, Landlord shall have no obligation to deliver Put Premises A or Put Premises B free and clear of tenants and occupants.  

2.Miscellaneous.  

(a)Sublease of Put Premises A.   Pursuant to the Consent, Landlord will consent to Tenant’s sublease of Put Premises A to Accomplice and Landlord agrees that in no event shall Landlord be entitled to (and Landlord expressly waives) any profit sharing under Section 11.6 of the Lease with respect to such Sublease provided that Tenant is not paid amounts that are not described in the Sublease attached to the Consent.  In addition, Tenant acknowledges and agrees that Landlord will not be providing invoices

- 3 -

EAST\139344767.4

or statements for Landlord’s Tax Expenses or Operating Expenses Allocable to the Put Premises prior to the applicable Rent Commencement Date.

(b)Confirmatory Provisions.  As of the Effective Date, the terms set forth on Exhibit A attached to this First Amendment are hereby added to the Lease.

(c)Brokerage.  Landlord and Tenant each represent and warrant to the other that they have not dealt with any brokers in connection with this First Amendment, provided, however, the brokers identified in the Lease shall be paid a broker commission for Tenant’s lease of Put Premises A and Put Premises B in connection with the broker agreement executed between Landlord and such brokers in connection with the Lease.  Each party covenants to pay, hold harmless, and indemnify the other from and against any and all costs, expense, or liability for any compensation, commissions, or charges claimed by any other broker or agent with respect to this First Amendment or the negotiation thereof arising from its breach of the foregoing warranty.  

(c)Authority.  Landlord and Tenant each represent to the other party that it has the authority to enter into this First Amendment.    

(d)Ratification.   Except as expressly modified by this First Amendment, the Lease is hereby confirmed and shall remain in full force and effect.

(e)Counterparts.  This First Amendment may be executed in counterparts, and when both Landlord and Tenant have signed and delivered at least one such counterpart, each counterpart shall be deemed an original, and, when taken together with other signed counterparts, shall constitute one First Amendment, which shall be binding upon and effective as to Landlord and Tenant.

[signature page follows]

- 4 -

EAST\139344767.4

IN WITNESS WHEREOF, Landlord and Tenant have entered into this First Amendment as of the date first set forth above.  

LANDLORD:

DAVENPORT OWNER (DE) LLC,

a Delaware limited liability company

By: _/s/ Chad Remis______________

Name:Chad Remis

Title:Vice President

(duly authorized)

/s/ Kristen E. Binck
Kristen E. Bink
Assistant Secretary

TENANT:

HUBSPOT, INC.,

a Delaware corporation

By:/s/ JD Sherman__

Name: JD Sherman

Title: COO

(duly authorized)

[Signature Page to First Amendment to Amended and Restated Lease]

EXHIBIT A

Confirmatory REIT Provisions

(a)Rents from Real Property.  Landlord and Tenant acknowledge and agree that all rental payable by Tenant to Landlord, which includes all sums, charges, or amounts of whatever nature to be paid by Tenant to Landlord in accordance with the provisions of the Lease, shall qualify as “rents from real property” within the meaning of both Sections 512(b)(3) and 856(d) of the Internal Revenue Code of 1986, as amended (the “Code”) and the U.S. Department of Treasury Regulations promulgated thereunder (the “Regulations”).  In the event that Landlord, in its sole discretion, determines that there is any risk that all or part of any rental shall not qualify as “rents from real property” for the purposes of Sections 512(b)(3) or 856(d) of the Code and the Regulations promulgated thereunder, Tenant agrees (x) to cooperate with Landlord by entering into such amendment or amendments as Landlord deems necessary to qualify all payments as “rents from real property,” (y) to permit an assignment of the Lease and (z) to allow Landlord to assign any and all obligations that Landlord has under the Lease to a third party; provided, however, that any adjustments required pursuant to this paragraph shall be made so as to produce the equivalent rental payments (in economic terms) payable prior to such adjustment.

(b)Acknowledgements.  In furtherance of, and without limiting the generality of, the foregoing matters, Tenant acknowledges and agrees that (x) any payments due from Tenant on account of excess rent that may hereafter be received by Tenant in connection with any sublease or assignment under the Lease shall be made only if Landlord so elects such payments to be made, and (y) any parking spaces required to be provided to Tenant under the Lease or the Parking Addendum thereto shall be leased to Tenant by Landlord or the parking garage operator on the terms provided under the Lease or such Parking Addendum.

EAST\139344767.4

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to

Exchange Act Rules 13a-14(a) and 15d-14(a),

As Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Brian Halligan, certify that:

1. I have reviewed this quarterly report on Form 10-Q of HubSpot, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 2, 2017	By:	/s/ Brian Halligan
		Brian Halligan
		Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to

Exchange Act Rules 13a-14(a) and 15d-14(a),

As Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, John Kinzer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of HubSpot, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 2, 2017	By:	/s/ John Kinzer
		John Kinzer
		Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Brian Halligan, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the Quarterly Report on Form 10-Q of HubSpot, Inc. for the period ended March 31,  2017 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of HubSpot, Inc.

Date: May 2, 2017	By:	/s/ Brian Halligan
		Brian Halligan
		Chief Executive Officer (Principal Executive Officer)

I, John Kinzer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the Quarterly Report on Form 10-Q of HubSpot, Inc. for the period ended March 31, 2017 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of HubSpot, Inc.

Date: May 2, 2017	By:	/s/ John Kinzer
		John Kinzer
		Chief Financial Officer (Principal Financial Officer)

The foregoing certifications are not deemed filed with the Securities and Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), and are not to be incorporated by reference into any filing of HubSpot, Inc. under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2017	Apr. 27, 2017
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1
Trading Symbol	HUBS
Entity Registrant Name	HUBSPOT INC
Entity Central Index Key	0001404655
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		36,555,873

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 69,786	$ 59,702
Short-term investments	53,001	54,648
Accounts receivable — net of allowance for doubtful accounts of $748 at March 31, 2017 and $617 at December 31, 2016	34,935	38,984
Deferred commission expense	9,550	9,025
Restricted cash		162
Prepaid hosting costs	2,234	5,299
Prepaid expenses and other current assets	10,263	8,433
Total current assets	179,769	176,253
Long-term investments	37,846	35,718
Property and equipment, net	34,697	30,201
Capitalized software development costs, net	7,072	6,523
Restricted cash	4,940	321
Other assets	1,184	966
Goodwill	9,773	9,773
Total assets	275,281	259,755
Current liabilities:
Accounts payable	3,257	4,350
Accrued compensation costs	8,717	11,415
Other accrued expenses	18,187	15,237
Capital lease obligations	790	796
Deferred rent	249	159
Deferred revenue	104,432	95,426
Total current liabilities	135,632	127,383
Capital lease obligations, net of current portion	288	275
Deferred rent, net of current portion	11,643	10,079
Deferred revenue, net of current portion	1,139	1,171
Asset retirement obligations	611	591
Other long-term liabilities	1,625	1,556
Total liabilities	150,938	141,055
Commitments and contingencies (Note 6)
Stockholders’ equity:
Common stock	36	36
Additional paid-in capital	379,459	365,444
Accumulated other comprehensive loss	(708)	(864)
Accumulated deficit	(254,444)	(245,916)
Total stockholders’ equity	124,343	118,700
Total liabilities and stockholders’ equity	$ 275,281	$ 259,755

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Statement Of Financial Position [Abstract]
Accounts receivable, net of allowance for doubtful accounts	$ 748	$ 617

XML

Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Revenues:
Subscription	$ 77,503	$ 54,936
Professional services and other	4,749	4,024
Total revenue	82,252	58,960
Cost of revenues:
Subscription	11,409	8,910
Professional services and other	5,663	5,061
Total cost of revenues	17,072	13,971
Gross profit	65,180	44,989
Operating expenses:
Research and development	13,370	9,804
Sales and marketing	46,672	35,198
General and administrative	13,138	9,848
Total operating expenses	73,180	54,850
Loss from operations	(8,000)	(9,861)
Other income (expense):
Interest income	303	179
Interest expense	(52)	(87)
Other expense	(128)	(333)
Total other income (expense)	123	(241)
Loss before income tax provision	(7,877)	(10,102)
Income tax provision	(198)	(52)
Net loss	$ (8,075)	$ (10,154)
Net loss per share, basic and diluted	$ (0.22)	$ (0.29)
Weighted average common shares used in computing basic and diluted net loss per share:	36,205	34,692

XML

Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Statement Of Income And Comprehensive Income [Abstract]
Net loss	$ (8,075)	$ (10,154)
Other comprehensive loss:
Foreign currency translation adjustment	121	166
Changes in unrealized gain on investments, net of income taxes of $18 for the three months ended March 31, 2017 and $0 for the three months ended March 31, 2016	35	334
Comprehensive loss	$ (7,919)	$ (9,654)

XML

Consolidated Statements of Comprehensive Loss (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Statement Of Income And Comprehensive Income [Abstract]
Changes in unrealized gain (loss) on investments, income taxes	$ 18	$ 0

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Operating Activities:
Net loss	$ (8,075)	$ (10,154)
Adjustments to reconcile net loss to net cash and cash equivalents provided by operating activities
Depreciation and amortization	3,329	2,201
Stock-based compensation	9,303	6,231
Provision for deferred income taxes	(27)	3
Amortization of bond premium discount	77	221
Noncash rent expense	1,667	1,112
Unrealized currency translation	(46)	(252)
Changes in assets and liabilities, net of acquisition
Accounts receivable	4,176	347
Prepaid expenses and other assets	1,061	(2,403)
Deferred commission expense	(464)	(299)
Accounts payable	(1,250)	(804)
Accrued expenses	922	(1,154)
Deferred rent	(34)	(23)
Deferred revenue	8,453	8,152
Net cash and cash equivalents provided by operating activities	19,092	3,178
Investing Activities:
Purchases of investments	(16,367)	(8,969)
Maturities of investments	15,860	8,875
Purchases of property and equipment	(5,835)	(6,641)
Capitalization of software development costs	(1,610)	(1,434)
Restricted cash	(4,431)
Net cash and cash equivalents used in investing activities	(12,383)	(8,169)
Financing Activities:
Employee taxes paid related to the net share settlement of stock-based awards	(1,153)	(958)
Proceeds related to the issuance of common stock under stock plans	4,340	2,992
Repayments of capital lease obligations	(240)	(142)
Net cash and cash equivalents provided by financing activities	2,947	1,892
Effect of exchange rate changes on cash and cash equivalents	428	538
Net increase (decrease) in cash and cash equivalents	10,084	(2,561)
Cash and cash equivalents, beginning of period	59,702	55,580
Cash and cash equivalents, end of period	69,786	53,019
Supplemental cash flow disclosure:
Cash paid for interest	192	87
Cash paid for income taxes	37	73
Non-cash investing and financing activities:
Property and equipment acquired under capital lease	247	257
Capital expenditures incurred but not yet paid	$ 1,525	$ 2,974

XML

Organization and Operations

3 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

Organization and Operations

1. Organization and Operations

HubSpot, Inc. (the “Company”) was formed as a limited liability company in Delaware on April 4, 2005. The Company converted to a Delaware corporation on June 7, 2007. The Company provides a cloud-based inbound marketing and sales platform which features integrated applications to help businesses attract visitors to their websites, convert visitors into leads, close leads into customers and delight customers so they become promoters of those businesses. These integrated applications include social media, search engine optimization, blogging, website content management, marketing automation, email, CRM, analytics, and reporting.

The Company is headquartered in Cambridge, Massachusetts, and has wholly-owned subsidiaries in Dublin, Ireland, which commenced operations in January 2013, in Sydney, Australia, which commenced operations in August 2014, in Singapore, which commenced operations in October 2015, and in Tokyo, Japan, which commenced operations in July 2016. Additionally, the Company has announced that it will open an office in Berlin, Germany during the second half of 2017.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) applicable to interim periods, under the rules and regulations of the United States Securities and Exchange Commission (“SEC”). In the opinion of management, the Company has prepared the accompanying unaudited consolidated financial statements on a basis substantially consistent with the audited consolidated financial statements of the Company as of and for the year ended December 31, 2016, and these consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results of the interim periods presented. All intercompany balances and transactions have been eliminated in consolidation.   

The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire year ending December 31, 2017. The year-end balance sheet data was derived from audited financial statements, but this Form 10-Q does not include all disclosures required under GAAP. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted under the rules and regulations of the SEC.

These interim financial statements should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K filed with the SEC on February16, 2017. There have been no changes in the Company’s significant accounting policies from those that were disclosed in the Company’s Annual Report on Form 10-K that have had a material impact on our consolidated financial statements and related notes, except the adoption of updated guidance related to certain aspects of share-based payments to employee described within the Recent Accounting Pronouncements below.

Recent Accounting Pronouncements

Recent accounting standards not included below are not expected to have a material impact on our consolidated financial position and results of operations.

The Company adopted updated guidance related to certain aspects of share-based payments to employees. The guidance requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid-in capital pools. As a result of the adoption, we recorded an increase to deferred tax assets with a corresponding increase to the valuation allowance of $30.4 million to recognize net operating loss carryforwards attributable to excess tax benefits on stock compensation that had not been previously recognized as additional paid-in capital. In addition, the Company changed its policy election to account for forfeitures as they occur rather than on an estimated basis. The change in the policy election related to forfeitures resulted in the Company reclassifying $453 thousand from additional paid-in capital to accumulative deficit for the net cumulative-effect adjustment in stock compensation expense related to prior periods.

In January 2017, the Financial Accounting Standards Board (“FASB”) issued guidance simplifying the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test. Under current guidance, Step 2 of the goodwill impairment test requires entities to calculate the implied fair value of goodwill in the same manner as the amount of goodwill recognized in a business combination by assigning the fair value of a reporting unit to all of the assets and liabilities of the reporting unit. The carrying value in excess of the implied fair value is recognized as goodwill impairment. Under the new standard, goodwill impairment is recognized based on Step 1 of the current guidance, which calculates the carrying value in excess of the reporting unit’s fair value. The new standard is effective beginning in January 2020, with early adoption permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In November 2016, the FASB issued guidance related to the presentation of restricted cash within the statement of cash flows. The guidance requires entities to show the changes in cash, cash equivalents, and restricted cash in the statement of cash flows. Entities will no longer present transfers between cash and cash equivalents and restricted cash in the statement of cash flows. As of March 31, 2017, we had $4.9 million in restricted cash. The new standard is effective beginning in the first quarter of 2018, with early adoption permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In February 2016, the FASB issued guidance that requires lessees to recognize most leases on their balance sheets but record expenses on their income statements in a manner similar to current accounting. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. The guidance is effective in 2019 with early adoption permitted. The Company is currently evaluating the impact of this guidance on the consolidated financial statements.

In May 2014, the FASB issued updated guidance and disclosure requirements for recognizing revenue. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard also provides guidance on the recognition of costs related to obtaining customer contracts.  In July 2015, the FASB approved the deferral of the new standard's effective date by one year. The new standard now is effective for annual reporting periods beginning January 1, 2018. The FASB will permit companies to adopt the new standard early, but not before the original effective date of January 1, 2017. The Company will adopt the standard on January 1, 2018, and currently anticipates adopting the standard using the modified retrospective method, which would result in a cumulative effect adjustment as of the date of adoption. The Company has established a cross-functional coordinated team that is continuing to assess potential impacts of the standard on the timing of revenue recognition and accounting for deferred commission balances and whether the adoption will have a material impact on the consolidated financial statements and footnote disclosures.

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Net Loss per Share

3 Months Ended

Mar. 31, 2017

Earnings Per Share [Abstract]

Net Loss per Share

2. Net Loss per Share

Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per share is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period. For purposes of this calculation, options to purchase common stock, restricted stock units (“RSUs”), and Employee Stock Purchase Plan (“ESPP”) are considered to be potential common stock equivalents.

A reconciliation of the denominator used in the calculation of basic and diluted net loss per share is as follows:

	Three Months Ended March 31,
		2017			2016
Net loss	$	(8,075	)	$	(10,154	)
Weighted-average common shares outstanding — basic		36,205			34,692
Dilutive effect of share equivalents resulting from stock    options, RSUs, and ESPP		—			—
Weighted-average common shares,    outstanding — diluted		36,205			34,692
Net loss per share, basic and diluted	$	(0.22	)	$	(0.29	)

Additionally, since the Company incurred net losses for each of the periods presented, diluted net loss per share is the same as basic net loss per share. The Company’s outstanding stock options, RSUs, and ESPP were not included in the calculation of diluted net loss per share as the effect would be anti-dilutive. The following table contains all potentially dilutive common stock equivalents.

	As of March 31,
		2017	2016
	(in thousands)
Options to purchase common shares		2,561	3,200
RSUs		2,013	1,785
ESPP		3	—

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Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

3. Fair Value of Financial Instruments

The Company measures certain financial assets at fair value. Fair value is determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market. Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy, as follows:

• Level 1 — Quoted prices in active markets for identical assets or liabilities.

• Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3 — Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

The following table details the fair value measurements within the fair value hierarchy of the Company’s financial assets and liabilities at March 31, 2017 and December 31, 2016.

	March 31, 2017
	Level 1		Level 2		Level 3		Total
	(in thousands)
Cash equivalents and investments:
Money market funds	$	32,128	$	—	$	—	$	32,128
Commercial paper		—		11,962		—		11,962
Corporate bonds		—		67,901		—		67,901
U.S. government agency obligations		—		10,984		—		10,984
Restricted cash:
Certificates of deposit		—		4,940		—		4,940
Total	$	32,128	$	95,787	$	—	$	127,915

	December 31, 2016
	Level 1		Level 2		Level 3		Total
	(in thousands)
Cash equivalents and investments:
Money market funds	$	32,260	$	—	$	—	$	32,260
Commercial paper		—		12,439		—		12,439
Corporate bonds		—		66,947		—		66,947
U.S. government agency obligations		—		10,980		—		10,980
Total	$	32,260	$	90,366	$	—	$	122,626

The Company considers all highly liquid investments purchased with a remaining maturity of three months or less to be cash equivalents. The fair value of the Company’s investments in certain money market funds is their face value and such instruments are classified as Level 1 and are included in cash and cash equivalents on the consolidated balance sheets. At March 31, 2017 and December 31, 2016, our Level 2 securities were priced by pricing vendors. These pricing vendors utilize the most recent observable market information in pricing these securities or, if specific prices are not available for these securities, use other observable inputs like market transactions involving identical or comparable securities.

For certain other financial instruments, including accounts receivable, accounts payable, capital leases and other current liabilities, the carrying amounts approximate their fair value due to the relatively short maturity of these balances.

Restricted cash is comprised of certificates of deposit related to landlord guarantees for our leased facilities. These restricted cash balances have been excluded from our cash and cash equivalents balance on our consolidated balance sheets.

The following tables summarize the composition of our short- and long-term investments at March 31, 2017 and December 31, 2016.

	March 31, 2017
	Amortized Cost		Unrealized Gains		Unrealized Losses			Aggregate Fair Value
	(in thousands)
Commercial paper	$	11,967	$	—	$	(5	)	$	11,962
Corporate bonds		68,034		3		(136	)		67,901
U.S. government agency obligations		10,999		1		(16	)		10,984
Total	$	91,000	$	4	$	(157	)	$	90,847

	December 31, 2016
	Amortized Cost		Unrealized Gains		Unrealized Losses			Aggregate Fair Value
	(in thousands)
Commercial paper	$	12,446	$	—	$	(7	)	$	12,439
Corporate bonds		67,126		—		(179	)		66,947
U.S. government agency obligations		10,998		—		(18	)		10,980
Total	$	90,570	$	—	$	(204	)	$	90,366

For all of our securities for which the amortized cost basis was greater than the fair value at March 31, 2017, the Company has concluded that there is no plan to sell the security nor is it more likely than not that the Company would be required to sell the security before its anticipated recovery. In making the determination as to whether the unrealized loss is other-than-temporary, the Company considered the length of time and extent the investment has been in an unrealized loss position, the financial condition and near-term prospects of the issuers, the issuers’ credit rating and the time to maturity.

Contractual Maturities

The contractual maturities of short-term and long-term investments held at March 31, 2017 and December 31, 2016 are as follows:

	March 31, 2017				December 31, 2016
	Amortized Cost Basis		Aggregate Fair Value		Amortized Cost Basis		Aggregate Fair Value
	(in thousands)				(in thousands)
Due within one year	$	53,059	$	53,001	$	54,694	$	54,648
Due after 1 year through 2 years		37,941		37,846		35,876		35,718
Total	$	91,000	$	90,847	$	90,570	$	90,366

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Property and Equipment, Net

3 Months Ended

Mar. 31, 2017

Property Plant And Equipment [Abstract]

Property and Equipment, Net

4. Property and Equipment, Net

Property and equipment, net consists of the following:

	March 31, 2017			December 31, 2016
	(in thousands)
Computer equipment and purchased software	$	3,364		$	3,237
Employee computer equipment		1,780			1,534
Furniture and fixtures		8,237			8,174
Office equipment		2,357			2,326
Leasehold improvements		23,902			23,693
Equipment under capital lease		2,658			2,412
Internal-use software		1,732			1,301
Construction in progress		5,390			322
Total property and equipment		49,420			42,999
Less accumulated depreciation and amortization		(14,723	)		(12,798	)
Property and equipment, net	$	34,697		$	30,201

Depreciation and amortization expense on property and equipment was $1.9 million for the three months ended March 31, 2017 and $981 thousand for the three months ended March 31, 2016.

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Capitalized Software Development Costs

3 Months Ended

Mar. 31, 2017

Research And Development [Abstract]

Capitalized Software Development Costs

5. Capitalized Software Development Costs

Capitalized software development costs, exclusive of those recorded within property and equipment, consisted of the following:

	March 31, 2017			December 31, 2016
	(in thousands)
Gross capitalized software development costs	$	27,054		$	25,152
Accumulated amortization		(19,982	)		(18,629	)
Capitalized software development costs, net	$	7,072		$	6,523

Capitalized software development costs are amortized on a straight-line basis over their estimated useful life of two to three years.

The following table summarizes software development costs capitalized, stock-based compensation included in capitalized software development costs, and amortization of capitalized software development costs.

	Three Months Ended March 31,
	2017		2016
	(in thousands)
Software development costs capitalized	$	1,902	$	1,627
Stock-based compensation included in capitalized software    development costs	$	338	$	193
Amortization of software development costs	$	1,369	$	1,196

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2017

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

6. Commitments and Contingencies

Contractual Obligations

There were no material changes in our commitments under contractual obligations, as disclosed in the Company’s audited consolidated financial statements for the year ended December 31, 2016 and related notes thereto contained in the Company’s Annual Report on Form 10-K, except those disclosed below.

In February 2017, the Company signed an amendment related to a leased facility in Cambridge, Massachusetts. The amended lease increased the Company’s future commitments by approximately $6.0 million, which will be payable over approximately nine years.

Legal Contingencies

From time to time, we may become a party to litigation and subject to claims incident to the ordinary course of business, including intellectual property claims, labor and employment claims, and threatened claims, breach of contract claims, tax, and other matters. We currently have no material pending litigation.

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Changes in Accumulated Other Comprehensive Loss

3 Months Ended

Mar. 31, 2017

Equity [Abstract]

Changes in Accumulated Other Comprehensive Loss

7. Changes in Accumulated Other Comprehensive Loss

The following table summarizes the changes in accumulated other comprehensive loss, which is reported as a component of stockholders’ equity, for the three months ended March 31, 2017.

	Cumulative Translation Adjustment			Unrealized Losson Investments			Total
	(in thousands)
Beginning balance at January 1, 2017	$	(589	)	$	(275	)	$	(864	)
Other comprehensive loss before reclassifications		121			35			156
Amounts reclassified from accumulated other    comprehensive income		—			—			—
Ending balance at March 31, 2017	$	(468	)	$	(240	)	$	(708	)

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Stock-Based Compensation Expense

3 Months Ended

Mar. 31, 2017

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation Expense

8. Stock-Based Compensation Expense

The following two tables show stock-based compensation expense by award type and where the stock-based compensation expense is recorded in the Company’s consolidated statements of operations:

	Three Months Ended March 31,
	2017		2016
	(in thousands)
Options	$	1,247	$	1,478
RSUs		7,790		4,533
Employee stock purchase plan		266		220
Total stock-based compensation expense	$	9,303	$	6,231

Effect of stock-based compensation expense on income by line item:

	Three Months Ended March 31,
	2017		2016
	(in thousands)
Cost of revenue, subscription	$	115	$	94
Cost of revenue, service		449		324
Research and development		2,442		1,758
Sales and marketing		3,770		2,427
General and administrative		2,527		1,628
Total stock-based compensation expense	$	9,303	$	6,231

Capitalized software development costs excluded from stock-based compensation expense is $338 thousand for the three months ended March 31, 2017 and $193 thousand for the three months ended March 31, 2016.

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Segment Information and Geographic Data

3 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Segment Information and Geographic Data

9. Segment Information and Geographic Data

The Company operates as one operating segment. Operating segments are defined as components of an enterprise for which separate financial information is regularly evaluated by the chief operating decision makers (“CODMs”), which are the Company’s chief executive officer and chief operating officer, in deciding how to allocate resources and assess performance. The Company’s CODMs evaluate the Company’s financial information and resources and assess the performance of these resources on a consolidated basis. Since the Company operates in one operating segment, all required financial segment information can be found in the consolidated financial statements. Revenue and long-lived assets by geographic region, based on the physical location of the operations recording the sale or the asset, are as follows:

Revenues by geographical region:

	Three Months Ended March 31,
	2017			2016
Americas	$	64,352		$	48,777
Europe		13,844			8,499
Asia Pacific		4,056			1,684
Total	$	82,252		$	58,960
Percentage of revenues generated outside of the Americas		22	%		17	%

In the three months ended March 31, 2017, revenue derived from customers outside the United States (international) was approximately 30% of total revenue. In the three months ended March 31, 2016, revenue derived from customers outside the United States (international) was approximately 26% of total revenue.

Total long-lived assets by geographical region:

	As of March 31, 2017			As of December 31, 2016
Americas	$	27,441		$	23,205
Europe		4,824			4,716
Asia Pacific		2,432			2,280
Total long-lived assets	$	34,697		$	30,201
Percentage of long-lived assets held outside of the    Americas		21	%		23	%

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Organization and Operations (Policies)

3 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Recent accounting standards not included below are not expected to have a material impact on our consolidated financial position and results of operations.

The Company adopted updated guidance related to certain aspects of share-based payments to employees. The guidance requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid-in capital pools. As a result of the adoption, we recorded an increase to deferred tax assets with a corresponding increase to the valuation allowance of $30.4 million to recognize net operating loss carryforwards attributable to excess tax benefits on stock compensation that had not been previously recognized as additional paid-in capital. In addition, the Company changed its policy election to account for forfeitures as they occur rather than on an estimated basis. The change in the policy election related to forfeitures resulted in the Company reclassifying $453 thousand from additional paid-in capital to accumulative deficit for the net cumulative-effect adjustment in stock compensation expense related to prior periods.

In January 2017, the Financial Accounting Standards Board (“FASB”) issued guidance simplifying the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test. Under current guidance, Step 2 of the goodwill impairment test requires entities to calculate the implied fair value of goodwill in the same manner as the amount of goodwill recognized in a business combination by assigning the fair value of a reporting unit to all of the assets and liabilities of the reporting unit. The carrying value in excess of the implied fair value is recognized as goodwill impairment. Under the new standard, goodwill impairment is recognized based on Step 1 of the current guidance, which calculates the carrying value in excess of the reporting unit’s fair value. The new standard is effective beginning in January 2020, with early adoption permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In November 2016, the FASB issued guidance related to the presentation of restricted cash within the statement of cash flows. The guidance requires entities to show the changes in cash, cash equivalents, and restricted cash in the statement of cash flows. Entities will no longer present transfers between cash and cash equivalents and restricted cash in the statement of cash flows. As of March 31, 2017, we had $4.9 million in restricted cash. The new standard is effective beginning in the first quarter of 2018, with early adoption permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In February 2016, the FASB issued guidance that requires lessees to recognize most leases on their balance sheets but record expenses on their income statements in a manner similar to current accounting. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. The guidance is effective in 2019 with early adoption permitted. The Company is currently evaluating the impact of this guidance on the consolidated financial statements.

In May 2014, the FASB issued updated guidance and disclosure requirements for recognizing revenue. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard also provides guidance on the recognition of costs related to obtaining customer contracts.  In July 2015, the FASB approved the deferral of the new standard's effective date by one year. The new standard now is effective for annual reporting periods beginning January 1, 2018. The FASB will permit companies to adopt the new standard early, but not before the original effective date of January 1, 2017. The Company will adopt the standard on January 1, 2018, and currently anticipates adopting the standard using the modified retrospective method, which would result in a cumulative effect adjustment as of the date of adoption. The Company has established a cross-functional coordinated team that is continuing to assess potential impacts of the standard on the timing of revenue recognition and accounting for deferred commission balances and whether the adoption will have a material impact on the consolidated financial statements and footnote disclosures.

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Net Loss per Share (Tables)

3 Months Ended

Mar. 31, 2017

Earnings Per Share [Abstract]

Summary of Reconciliation of Denominator Used in Calculation of Basic and Diluted Net Loss Per Share

A reconciliation of the denominator used in the calculation of basic and diluted net loss per share is as follows:

	Three Months Ended March 31,
		2017			2016
Net loss	$	(8,075	)	$	(10,154	)
Weighted-average common shares outstanding — basic		36,205			34,692
Dilutive effect of share equivalents resulting from stock    options, RSUs, and ESPP		—			—
Weighted-average common shares,    outstanding — diluted		36,205			34,692
Net loss per share, basic and diluted	$	(0.22	)	$	(0.29	)

Schedule of Potentially Dilutive Common Stock Equivalents

The following table contains all potentially dilutive common stock equivalents.

	As of March 31,
		2017	2016
	(in thousands)
Options to purchase common shares		2,561	3,200
RSUs		2,013	1,785
ESPP		3	—

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Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

Schedule of Fair Value Measurements of Financial Assets and Liabilities

The following table details the fair value measurements within the fair value hierarchy of the Company’s financial assets and liabilities at March 31, 2017 and December 31, 2016.

	March 31, 2017
	Level 1		Level 2		Level 3		Total
	(in thousands)
Cash equivalents and investments:
Money market funds	$	32,128	$	—	$	—	$	32,128
Commercial paper		—		11,962		—		11,962
Corporate bonds		—		67,901		—		67,901
U.S. government agency obligations		—		10,984		—		10,984
Restricted cash:
Certificates of deposit		—		4,940		—		4,940
Total	$	32,128	$	95,787	$	—	$	127,915

	December 31, 2016
	Level 1		Level 2		Level 3		Total
	(in thousands)
Cash equivalents and investments:
Money market funds	$	32,260	$	—	$	—	$	32,260
Commercial paper		—		12,439		—		12,439
Corporate bonds		—		66,947		—		66,947
U.S. government agency obligations		—		10,980		—		10,980
Total	$	32,260	$	90,366	$	—	$	122,626

Summary of Composition of Short and Long Term Investments

The following tables summarize the composition of our short- and long-term investments at March 31, 2017 and December 31, 2016.

	March 31, 2017
	Amortized Cost		Unrealized Gains		Unrealized Losses			Aggregate Fair Value
	(in thousands)
Commercial paper	$	11,967	$	—	$	(5	)	$	11,962
Corporate bonds		68,034		3		(136	)		67,901
U.S. government agency obligations		10,999		1		(16	)		10,984
Total	$	91,000	$	4	$	(157	)	$	90,847

	December 31, 2016
	Amortized Cost		Unrealized Gains		Unrealized Losses			Aggregate Fair Value
	(in thousands)
Commercial paper	$	12,446	$	—	$	(7	)	$	12,439
Corporate bonds		67,126		—		(179	)		66,947
U.S. government agency obligations		10,998		—		(18	)		10,980
Total	$	90,570	$	—	$	(204	)	$	90,366

Summary of Contractual Maturities of Short and Long Term Investments

The contractual maturities of short-term and long-term investments held at March 31, 2017 and December 31, 2016 are as follows:

	March 31, 2017				December 31, 2016
	Amortized Cost Basis		Aggregate Fair Value		Amortized Cost Basis		Aggregate Fair Value
	(in thousands)				(in thousands)
Due within one year	$	53,059	$	53,001	$	54,694	$	54,648
Due after 1 year through 2 years		37,941		37,846		35,876		35,718
Total	$	91,000	$	90,847	$	90,570	$	90,366

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Property and Equipment, Net (Tables)

3 Months Ended

Mar. 31, 2017

Property Plant And Equipment [Abstract]

Schedule of Property and Equipment Net

Property and equipment, net consists of the following:

	March 31, 2017			December 31, 2016
	(in thousands)
Computer equipment and purchased software	$	3,364		$	3,237
Employee computer equipment		1,780			1,534
Furniture and fixtures		8,237			8,174
Office equipment		2,357			2,326
Leasehold improvements		23,902			23,693
Equipment under capital lease		2,658			2,412
Internal-use software		1,732			1,301
Construction in progress		5,390			322
Total property and equipment		49,420			42,999
Less accumulated depreciation and amortization		(14,723	)		(12,798	)
Property and equipment, net	$	34,697		$	30,201

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Capitalized Software Development Costs (Tables)

3 Months Ended

Mar. 31, 2017

Research And Development [Abstract]

Summary of Capitalized Software Development Costs, Exclusive of those Recorded within Property and Equipment

Capitalized software development costs, exclusive of those recorded within property and equipment, consisted of the following:

	March 31, 2017			December 31, 2016
	(in thousands)
Gross capitalized software development costs	$	27,054		$	25,152
Accumulated amortization		(19,982	)		(18,629	)
Capitalized software development costs, net	$	7,072		$	6,523

Summary of Capitalized Software Development Costs Including Stock-Based Compensation and Amortization

The following table summarizes software development costs capitalized, stock-based compensation included in capitalized software development costs, and amortization of capitalized software development costs.

	Three Months Ended March 31,
	2017		2016
	(in thousands)
Software development costs capitalized	$	1,902	$	1,627
Stock-based compensation included in capitalized software    development costs	$	338	$	193
Amortization of software development costs	$	1,369	$	1,196

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Changes in Accumulated Other Comprehensive Loss (Tables)

3 Months Ended

Mar. 31, 2017

Equity [Abstract]

Changes in Accumulated Other Comprehensive Loss

The following table summarizes the changes in accumulated other comprehensive loss, which is reported as a component of stockholders’ equity, for the three months ended March 31, 2017.

	Cumulative Translation Adjustment			Unrealized Losson Investments			Total
	(in thousands)
Beginning balance at January 1, 2017	$	(589	)	$	(275	)	$	(864	)
Other comprehensive loss before reclassifications		121			35			156
Amounts reclassified from accumulated other    comprehensive income		—			—			—
Ending balance at March 31, 2017	$	(468	)	$	(240	)	$	(708	)

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Stock-Based Compensation Expense (Tables)

3 Months Ended

Mar. 31, 2017

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Schedule of Stock-Based Compensation Expense by Award Type

The following two tables show stock-based compensation expense by award type and where the stock-based compensation expense is recorded in the Company’s consolidated statements of operations:

	Three Months Ended March 31,
	2017		2016
	(in thousands)
Options	$	1,247	$	1,478
RSUs		7,790		4,533
Employee stock purchase plan		266		220
Total stock-based compensation expense	$	9,303	$	6,231

Effect of Stock-Based Compensation on Income by Line Item

Effect of stock-based compensation expense on income by line item:

	Three Months Ended March 31,
	2017		2016
	(in thousands)
Cost of revenue, subscription	$	115	$	94
Cost of revenue, service		449		324
Research and development		2,442		1,758
Sales and marketing		3,770		2,427
General and administrative		2,527		1,628
Total stock-based compensation expense	$	9,303	$	6,231

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Segment Information and Geographic Data (Tables)

3 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Revenues by Geographical Region

Revenues by geographical region:

	Three Months Ended March 31,
	2017			2016
Americas	$	64,352		$	48,777
Europe		13,844			8,499
Asia Pacific		4,056			1,684
Total	$	82,252		$	58,960
Percentage of revenues generated outside of the Americas		22	%		17	%

Long Lived Assets by Geographical Region

Total long-lived assets by geographical region:

	As of March 31, 2017			As of December 31, 2016
Americas	$	27,441		$	23,205
Europe		4,824			4,716
Asia Pacific		2,432			2,280
Total long-lived assets	$	34,697		$	30,201
Percentage of long-lived assets held outside of the    Americas		21	%		23	%

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Organization and Operations - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Accounting Policies [Abstract]
Increase in valuation allowance	$ 30,400
Reclassification from additional paid in capital to accumulative deficit due to change in policy	453
Restricted cash	$ 4,940	$ 321

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Net Loss per Share - Summary of Reconciliation of Denominator Used in Calculation of Basic and Diluted Net Loss Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Earnings Per Share Basic And Diluted [Abstract]
Net loss	$ (8,075)	$ (10,154)
Weighted-average common shares outstanding — basic	36,205	34,692
Weighted-average common shares, outstanding — diluted	36,205	34,692
Net loss per share, basic and diluted	$ (0.22)	$ (0.29)

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Net Loss per Share - Schedule of Potentially Dilutive Common Stock Equivalents (Detail) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Options to Purchase Common Shares [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	2,561	3,200
RSUs [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	2,013	1,785
ESPP [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	3

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Fair Value of Financial Instruments - Schedule of Fair Value of Financial Assets and Liabilities (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of short and long term investments	$ 90,847	$ 90,366
Fair value of financial assets	127,915	122,626
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of financial assets	32,128	32,260
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of financial assets	95,787	90,366
Money Market Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of cash and cash equivalents	32,128	32,260
Money Market Funds [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of cash and cash equivalents	32,128	32,260
Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of cash and cash equivalents	11,962	12,439
Fair value of short and long term investments	11,962	12,439
Commercial Paper [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of cash and cash equivalents	11,962	12,439
Corporate Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of short and long term investments	67,901	66,947
Corporate Bonds [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of short and long term investments	67,901	66,947
US Government Agency Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of short and long term investments	10,984	10,980
US Government Agency Obligations [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of short and long term investments	10,984	$ 10,980
Certificates of Deposit [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of restricted cash	4,940
Certificates of Deposit [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of restricted cash	$ 4,940

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Fair Value of Financial Instruments - Summary of Composition of Short and Long Term Investments (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 91,000	$ 90,570
Unrealized Gains	4
Unrealized Losses	(157)	(204)
Aggregate Fair Value	90,847	90,366
Commercial Paper [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	11,967	12,446
Unrealized Losses	(5)	(7)
Aggregate Fair Value	11,962	12,439
Corporate Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	68,034	67,126
Unrealized Gains	3
Unrealized Losses	(136)	(179)
Aggregate Fair Value	67,901	66,947
US Government Agency Obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	10,999	10,998
Unrealized Gains	1
Unrealized Losses	(16)	(18)
Aggregate Fair Value	$ 10,984	$ 10,980

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Fair Value of Financial Instruments - Summary of Contractual Maturities of Short and Long Term Investments (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Fair Value Disclosures [Abstract]
Amortized Cost Basis, Due within one year	$ 53,059	$ 54,694
Amortized Cost Basis, Due after 1 year through 2 years	37,941	35,876
Amortized Cost	91,000	90,570
Aggregate Fair Value, Due within one year	53,001	54,648
Aggregate Fair Value, Due after 1 year through 2 years	37,846	35,718
Aggregate Fair Value, Total	$ 90,847	$ 90,366

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Property and Equipment, Net - Schedule of Property and Equipment (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Property, Plant and Equipment [Line Items]
Total property and equipment	$ 49,420	$ 42,999
Less accumulated depreciation and amortization	(14,723)	(12,798)
Property and equipment, net	34,697	30,201
Computer Equipment and Purchased Software [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	3,364	3,237
Employee Computer Equipment [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	1,780	1,534
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	8,237	8,174
Office Equipment [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	2,357	2,326
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	23,902	23,693
Equipment under Capital Lease [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	2,658	2,412
Internal-Use Software [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	1,732	1,301
Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	$ 5,390	$ 322

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Property and Equipment, Net - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Property Plant And Equipment [Abstract]
Depreciation and amortization	$ 1,900	$ 981

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Summary of Capitalized Software Development Costs, Exclusive of those Recorded within Property and Equipment (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Capitalized Computer Software Net [Abstract]
Gross capitalized software development costs	$ 27,054	$ 25,152
Accumulated amortization	(19,982)	(18,629)
Capitalized software development costs, net	$ 7,072	$ 6,523

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Capitalized Software Development Costs - Additional Information (Detail) - Capitalized Software Development Costs [Member]	3 Months Ended
	Mar. 31, 2017
Minimum [Member]
Capitalized Computer Software [Line Items]
Property and equipment, estimated useful life	2 years
Maximum [Member]
Capitalized Computer Software [Line Items]
Property and equipment, estimated useful life	3 years

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Capitalized Software Development Costs - Summary of Capitalized Software Development Costs Including Stock-Based Compensation and Amortization (Detail) - Software Development [Member] - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Capitalized Computer Software [Line Items]
Software development costs capitalized	$ 1,902	$ 1,627
Stock-based compensation included in capitalized software development costs	338	193
Amortization of software development costs	$ 1,369	$ 1,196

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Commitments and Contingencies- Additional Information (Detail) $ in Millions	1 Months Ended
	Feb. 28, 2017 USD ($)
Commitments And Contingencies Disclosure [Abstract]
Increase in future lease commitments	$ 6.0
Purchase commitment, payable period	9 years

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Changes in Accumulated Other Comprehensive Loss - Changes in Accumulated Other Comprehensive Loss (Detail) $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($)
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance at January 1, 2017	$ 118,700
Other comprehensive loss before reclassifications	156
Ending balance at March 31, 2017	124,343
Cumulative Translation Adjustment [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance at January 1, 2017	(589)
Other comprehensive loss before reclassifications	121
Ending balance at March 31, 2017	(468)
Accumulated Net Unrealized Investment Gain (Loss) [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance at January 1, 2017	(275)
Other comprehensive loss before reclassifications	35
Ending balance at March 31, 2017	(240)
Accumulated Other Comprehensive Loss [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance at January 1, 2017	(864)
Ending balance at March 31, 2017	$ (708)

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Stock-Based Compensation Expense - Schedule of Stock-Based Compensation Expense by Award Type (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	$ 9,303	$ 6,231
Common Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	1,247	1,478
RSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	7,790	4,533
Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	$ 266	$ 220

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Stock-Based Compensation Expense - Effect of Stock-Based Compensation on Income by Line Item (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	$ 9,303	$ 6,231
Cost of Revenue, Subscription [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	115	94
Cost of Revenue, Service [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	449	324
Research and Development [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	2,442	1,758
Sales and Marketing [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	3,770	2,427
General and Administrative [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	$ 2,527	$ 1,628

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Stock-Based Compensation Expense - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Software Development [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Capitalized software development costs excluded from stock based compensation	$ 338	$ 193

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Segment Information and Geographic Data - Additional Information (Detail) - Segment	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Segment Reporting Information [Line Items]
Number of operating segment	1
Revenue [Member] | Outside Of United States [Member] | Geographic Concentration Risk [Member]
Segment Reporting Information [Line Items]
Concentration risk, percentage	30.00%	26.00%

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Segment Information and Geographic Data - Revenues by Geographical Region (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Segment Reporting Information [Line Items]
Total Revenues	$ 82,252	$ 58,960
Americas [Member]
Segment Reporting Information [Line Items]
Total Revenues	64,352	48,777
Europe [Member]
Segment Reporting Information [Line Items]
Total Revenues	13,844	8,499
Asia Pacific [Member]
Segment Reporting Information [Line Items]
Total Revenues	$ 4,056	$ 1,684
Revenue [Member] | Outside Of Americas [Member] | Geographic Concentration Risk [Member]
Segment Reporting Information [Line Items]
Percentage of revenues generated outside of the Americas	22.00%	17.00%

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Segment Information and Geographic Data - Long Lived Assets by Geographical Region (Detail) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Segment Reporting Information [Line Items]
Total long lived assets	$ 34,697	$ 30,201
Americas [Member]
Segment Reporting Information [Line Items]
Total long lived assets	27,441	23,205
Europe [Member]
Segment Reporting Information [Line Items]
Total long lived assets	4,824	4,716
Asia Pacific [Member]
Segment Reporting Information [Line Items]
Total long lived assets	$ 2,432	$ 2,280
Outside Of Americas [Member] | Assets Total [Member] | Geographic Concentration Risk [Member]
Segment Reporting Information [Line Items]
Percentage of long lived assets held outside of the Americas	21.00%	23.00%