●

Total revenue was $252.1 million, up 35% compared to Q4'19.

●

Total revenue was $883.0 million, up 31% compared to 2019.

●

GAAP operating margin was (3.0%), compared to (4.4%) in Q4'19.  

●

Non-GAAP operating margin was 9.8%, compared to 9.5% in Q4'19.

●

GAAP operating loss was ($7.6) million, compared to ($8.2) million in Q4'19.

●

Non-GAAP operating income was $24.6 million, compared to $17.7 million in Q4'19.

●

GAAP operating margin was (5.8%), compared to (7.0%) in 2019.  

●

Non-GAAP operating margin was 8.5%, compared to 8.1% in 2019.

●

GAAP operating loss was ($50.8) million, compared to ($47.0) million in 2019.

●

Non-GAAP operating income was $74.9 million, compared to $54.9 million in 2019.

●

GAAP net loss was ($15.4) million, or ($0.34) per basic and diluted share, compared to ($10.3) million, or ($0.24) per basic and diluted share in Q4'19.

●

Non-GAAP net income was $20.1 million, or $0.44 per basic and $0.40 per diluted share, compared to $17.9 million, or $0.42 per basic and $0.38 per diluted share in Q4'19.  

●

Weighted average basic and diluted shares outstanding for GAAP net loss per share was 46.0 million, compared to 42.8 million basic and diluted shares in Q4'19.

●

Weighted average basic and diluted shares outstanding for non-GAAP net income per share was 46.0 million and 49.9 million respectively, compared to 42.8 million and 46.9 million, respectively in Q4'19.

●

GAAP net loss was ($85.0) million, or ($1.90) per basic and diluted share, compared to ($53.7) million, or ($1.28) per basic and diluted share in 2019.

●

Non-GAAP net income was $64.5 million, or $1.44 per basic and $1.32 per diluted share, compared to $58.4 million, or $1.39 per basic and $1.26 per diluted share in 2019.  

●

Weighted average basic and diluted shares outstanding for GAAP net loss per share was 44.8 million, compared to 42.0 million basic and diluted shares in 2019.

●

Weighted average basic and diluted shares outstanding for non-GAAP net income per share was 44.8 and 48.7 million respectively, compared to 42.0 million and 46.5 million, respectively in 2019.

•

The company’s cash, cash equivalents and investments balance was $1,282 million as of December 31, 2020.

●

During the fourth quarter, the company generated $61.3 million of operating cash flow, excluding the $0.4 million used for the repayment of our convertible notes, compared to $47.9 million during Q4'19.

●

During the fourth quarter, the company generated $45.8 million of free cash flow, compared to $24.4 million during Q4'19.

●

The company generated $138.0 million of operating cash flow in 2020, excluding the $49.0 million used for the repayment of our convertible notes, compared to $119.0 million in 2019.

●

The company generated $79.1 million of free cash flow in 2020 compared to $65.1 million in 2019.

●

Grew total customers to 103,994 at December 31, 2020, up 42% from December 31, 2019.

●

Total average subscription revenue per customer was $9,758 during the fourth quarter of 2020 down 3% compared to the fourth quarter of 2019.

•

Total revenue is expected to be in the range of $260 million to $265 million. 

•

Non-GAAP operating income is expected to be in the range of $17 million to $19 million. 

•

Non-GAAP net income per common share is expected to be in the range of $0.28 to $0.30. This assumes approximately 50.3 million weighted average diluted shares outstanding.

•

Total revenue is expected to be in the range of $1,160 million to $1,170 million.

•

Non-GAAP operating income is expected to be in the range of $98 million to $102 million. 

•

Non-GAAP net income per common share is expected to be in the range of $1.51 to $1.59. This assumes approximately 50.7 million weighted average diluted shares outstanding.

December 31,

December 31,

2020

2019

Assets

Current assets:

Cash and cash equivalents

$

378,123

$

269,670

Short-term investments

873,073

691,834

Accounts receivable

126,433

92,517

Deferred commission expense

44,576

32,078

Prepaid expenses and other current assets

34,716

23,625

Total current assets

1,456,921

1,109,724

Long-term investments

30,697

53,776

Property and equipment, net

101,123

83,649

Capitalized software development costs, net

24,943

16,793

Right-of-use assets

275,893

234,390

Deferred commission expense, net of current portion

28,296

19,110

Other assets

13,893

9,824

Intangible assets, net

10,282

11,752

Goodwill

31,318

30,250

Total assets

$

1,973,366

$

1,569,268

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

13,540

$

12,842

Accrued compensation costs

44,054

26,318

Accrued expenses and other current liabilities

37,184

28,686

Convertible senior notes

7,837

—

Operating lease liabilities

30,020

23,613

Deferred revenue

312,866

231,030

Total current liabilities

445,501

322,489

Operating lease liabilities, net of current portion

279,664

244,216

Deferred revenue, net of current portion

3,636

3,058

Other long-term liabilities

10,811

8,983

Convertible senior notes, net of current portion

471,099

340,564

Total liabilities

1,210,711

919,310

Stockholders’ equity:

Common stock

46

44

Additional paid-in capital

1,241,167

1,048,380

Accumulated other comprehensive income (loss)

4,603

(336

)

Accumulated deficit

(483,161

)

(398,130

)

Total stockholders’ equity

762,655

649,958

Total liabilities and stockholders’ equity

$

1,973,366

$

1,569,268

For the Three Months Ended
December 31,

Year Ended December 31,

2020

2019

2020

2019

Revenues:

Subscription

$

244,323

$

179,086

$

853,025

$

646,266

Professional services and other

7,742

7,100

30,001

28,594

Total revenue

252,065

186,186

883,026

674,860

Cost of revenues:

Subscription

37,369

27,960

130,685

98,510

Professional services and other

9,925

8,015

36,274

31,448

Total cost of revenues

47,294

35,975

166,959

129,958

Gross profit

204,771

150,211

716,067

544,902

Operating expenses:

Research and development

55,564

42,757

205,589

158,237

Sales and marketing

127,851

90,418

452,081

340,685

General and administrative

28,997

25,194

109,225

92,971

Total operating expenses

212,412

158,369

766,895

591,893

Loss from operations

(7,641

)

(8,158

)

(50,828

)

(46,991

)

Other expense:

Interest income

623

4,646

7,773

19,429

Interest expense

(7,226

)

(5,872

)

(37,049

)

(22,818

)

Other expense

441

380

(711

)

(393

)

Total other expense

(6,162

)

(846

)

(29,987

)

(3,782

)

Loss before income tax expense

(13,803

)

(9,004

)

(80,815

)

(50,773

)

Income tax expense

(1,613

)

(1,298

)

(4,216

)

(2,973

)

Net loss

$

(15,416

)

$

(10,302

)

$

(85,031

)

$

(53,746

)

Net loss per share, basic and diluted

$

(0.34

)

$

(0.24

)

$

(1.90

)

$

(1.28

)

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

45,983

42,844

44,757

42,025

For the Three Months Ended December 31,

Year Ended December 31,

2020

2019

2020

2019

Operating Activities:

Net loss

(15,416

)

$

(10,302

)

$

(85,031

)

$

(53,746

)

Adjustments to reconcile net loss to net cash and cash equivalents provided

   by operating activities

Depreciation and amortization

9,993

7,545

37,060

28,793

Stock-based compensation

31,466

24,095

121,488

97,754

Loss on early extinguishment of 2022 Convertible Notes

14

—

10,507

—

Repayment of 2022 Convertible Notes attributable to the debt discount

(373

)

—

(49,048

)

—

(Benefit) provision for deferred income taxes

(1,449

)

(848

)

(2,185

)

(799

)

Amortization of debt discount and issuance costs

6,702

5,606

24,890

21,790

Accretion of bond discount

59

(3,271

)

(3,657

)

(14,160

)

Unrealized currency translation

(831

)

37

(952

)

(156

)

Changes in assets and liabilities

Accounts receivable

(29,592

)

(14,082

)

(29,971

)

(15,428

)

Prepaid expenses and other assets

5,570

2,921

(17,026

)

(3,296

)

Deferred commission expense

(7,937

)

(4,115

)

(19,288

)

(9,666

)

Right-of-use assets

8,824

8,347

31,406

22,657

Accounts payable

627

(1,724

)

3,697

3,927

Accrued expenses and other liabilities

12,240

6,320

26,020

7,819

Operating lease liabilities

(10,105

)

(993

)

(31,621

)

(15,781

)

Deferred revenue

51,133

28,355

72,624

49,265

Net cash and cash equivalents provided by operating activities

60,925

47,891

88,913

118,973

Investing Activities:

Purchases of investments

(139,915

)

(336,853

)

(1,517,357

)

(1,304,847

)

Maturities of investments

338,961

376,752

1,352,231

1,066,366

Sale of investments

—

—

10,932

—

Purchases of property and equipment

(9,521

)

(19,175

)

(37,274

)

(40,372

)

Capitalization of software development costs

(5,955

)

(4,335

)

(21,599

)

(13,474

)

Purchases of strategic investments

(500

)

—

(2,500

)

(553

)

Acquisition of a business, net of cash acquired

—

(23,314

)

—

(23,314

)

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

183,070

(6,925

)

(215,567

)

(316,194

)

Financing Activities:

Proceeds from issuance of 2025 Convertible Notes, net of issuance costs paid of $9.9 million

—

—

450,123

—

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

1,062

—

363,554

—

Payments for settlement of Warrants related to the 2022 Convertible Notes

—

—

(327,543

)

—

Repayment of 2022 Convertible Notes attributable to the principal

(1,627

)

—

(235,993

)

—

Payments for Capped Call Options related to the 2025 Convertible Notes

—

—

(50,600

)

—

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

—

—

—

342,628

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

(2,787

)

(1,480

)

(7,424

)

(6,247

)

Proceeds related to the issuance of common stock under stock plans

8,115

4,652

30,371

23,578

Repayment of debt

—

(333

)

—

(333

)

Repayments of finance lease obligations

—

(35

)

(28

)

(284

)

Net cash and cash equivalents provided by financing activities

4,763

2,804

222,460

359,342

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

4,470

1,451

6,831

(720

)

Net increase in cash, cash equivalents and restricted cash

253,228

45,221

102,637

161,401

Cash, cash equivalents and restricted cash, beginning of period

127,924

233,294

278,515

117,114

Cash, cash equivalents and restricted cash, end of period

$

381,152

$

278,515

$

381,152

$

278,515

Reconciliation of non-GAAP operating income and operating margin

(in thousands, except percentages)

Three Months Ended December 31,

Year Ended December 31,

2020

2019

2020

2019

GAAP operating loss

$

(7,641

)

$

(8,158

)

$

(50,828

)

$

(46,991

)

Stock-based compensation

31,466

24,095

121,488

97,754

Amortization of acquired intangible assets

159

839

2,419

3,201

Acquisition related expenses

640

876

1,832

971

Non-GAAP operating income

24,624

$

17,652

$

74,911

$

54,935

GAAP operating margin

(3.0

%)

(4.4

%)

(5.8

%)

(7.0

%)

Non-GAAP operating margin

9.8

%

9.5

%

8.5

%

8.1

%

Three Months Ended December 31,

Year Ended December 31,

2020

2019

2020

2019

GAAP net loss

$

(15,416

)

$

(10,302

)

$

(85,031

)

$

(53,746

)

Stock-based compensation

31,466

24,095

121,488

97,754

Amortization of acquired intangibles assets

159

839

2,419

3,201

Acquisition related expenses

640

876

1,832

971

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

6,702

5,606

24,890

21,790

Loss on early extinguishment of 2022 Convertible Notes

14

—

10,507

—

Impairment of strategic investment

—

—

250

—

Income tax effects of non-GAAP items

(3,423

)

(3,184

)

(11,898

)

(11,616

)

Non-GAAP net income

$

20,142

$

17,930

$

64,457

$

58,354

Non-GAAP net income per share:

Basic

$

0.44

$

0.42

$

1.44

$

1.39

Diluted

$

0.40

$

0.38

$

1.32

$

1.26

Shares used in non-GAAP per share calculations

Basic

45,983

42,844

44,757

42,025

Diluted

49,922

46,912

48,739

46,492

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

(in thousands, except percentages)

Three Months Ended December 31,

2020

2019

COS, Subscription

COS, Prof. services & other

R&D

S&M

G&A

COS, Subscription

COS, Prof. services & other

R&D

S&M

G&A

GAAP expense

$

37,369

$

9,925

$

55,564

$

127,851

$

28,997

$

27,960

$

8,015

$

42,757

$

90,418

$

25,194

Stock -based compensation

(1,294

)

(651

)

(10,303

)

(13,568

)

(5,650

)

(836

)

(531

)

(8,085

)

(9,324

)

(5,319

)

Amortization of acquired intangible assets

(139

)

—

—

(20

)

—

(839

)

—

—

—

—

Acquisition related expenses

—

—

(285

)

—

(355

)

—

—

(262

)

—

(614

)

Non-GAAP expense

$

35,936

$

9,274

$

44,976

$

114,263

$

22,992

$

26,285

$

7,484

$

34,410

$

81,094

$

19,261

GAAP expense as a percentage of revenue

14.8

%

3.9

%

22.0

%

50.7

%

11.5

%

15.0

%

4.3

%

23.0

%

48.6

%

13.5

%

Non-GAAP expense as a percentage of revenue

14.3

%

3.7

%

17.8

%

45.3

%

9.1

%

14.1

%

4.0

%

18.5

%

43.6

%

10.3

%

Year Ended December 31,

2020

2019

COS, Subscription

COS, Prof. services & other

R&D

S&M

G&A

COS, Subscription

COS, Prof. services & other

R&D

S&M

G&A

GAAP expense

$

130,685

$

36,274

$

205,589

$

452,081

$

109,225

$

98,510

$

31,448

$

158,237

$

340,685

$

92,971

Stock -based compensation

(4,408

)

(2,536

)

(39,366

)

(50,552

)

(24,626

)

(3,127

)

(2,829

)

(33,748

)

(36,599

)

(21,451

)

Amortization of acquired intangible assets

(2,340

)

—

—

(79

)

—

(3,201

)

—

—

—

—

Acquisition related expenses

—

—

(1,287

)

—

(545

)

—

—

(357

)

—

(614

)

Non-GAAP expense

$

123,937

$

33,738

$

164,936

$

401,450

$

84,054

$

92,182

$

28,619

$

124,132

$

304,086

$

70,906

GAAP expense as a percentage of revenue

14.8

%

4.1

%

23.3

%

51.2

%

12.4

%

14.6

%

4.7

%

23.4

%

50.5

%

13.8

%

Non-GAAP expense as a percentage of revenue

14.0

%

3.8

%

18.7

%

45.5

%

9.5

%

13.7

%

4.2

%

18.4

%

45.1

%

10.5

%

Three Months Ended December 31,

Year Ended December 31,

2020

2019

2020

2019

GAAP subscription margin

$

206,954

$

151,126

$

722,340

$

547,756

Stock -based compensation

1,294

836

4,408

3,127

Amortization of acquired intangible assets

139

839

2,340

3,201

Non-GAAP subscription margin

$

208,387

$

152,801

$

729,088

$

554,084

GAAP subscription margin percentage

84.7

%

84.4

%

84.7

%

84.8

%

Non-GAAP subscription margin percentage

85.3

%

85.3

%

85.5

%

85.7

%

Reconciliation of free cash flow

(in thousands)

Three Months Ended
December 31,

Year Ended December 31,

2020

2019

2020

2019

GAAP net cash and cash equivalents provided by operating activities

$

60,925

$

47,891

$

88,913

$

118,973

Purchases of property and equipment

(9,521

)

(19,175

)

(37,274

)

(40,372

)

Capitalization of software development costs

(5,955

)

(4,335

)

(21,599

)

(13,474

)

Repayment of 2022 Convertible Notes attributable to the debt discount

373

—

49,048

—

Free cash flow

$

45,822

$

24,381

$

79,088

$

65,127

Reconciliation of operating cash flow

(in thousands)

Three Months Ended
December 31,

Year Ended December 31,

2020

2019

2020

2019

GAAP net cash and cash equivalents provided by operating activities

$

60,925

$

47,891

$

88,913

$

118,973

Repayment of 2022 Convertible Notes attributable to the debt discount

373

—

49,048

—

Operating cash flow, excluding repayment of convertible debt

$

61,298

$

47,891

$

137,961

$

118,973

Reconciliation of forecasted non-GAAP operating income

(in thousands, except percentages)

Three Months Ended March 31, 2021

Year Ended

December 31, 2021

GAAP operating income range

($17,096)-($15,096)

($73,212)-($69,212)

Stock-based compensation

33,500

169,065

Amortization of acquired intangible assets

248

988

Acquisition related expenses

348

1,159

Non-GAAP operating income range

$17,000 -$19,000

$98,000-$102,000

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

(in thousands, except per share amounts)

Three Months Ended March 31, 2021

Year Ended

December 31, 2021

GAAP net loss range

($23,892)-($22,642)

($107,263)-(102,263)

Stock-based compensation

33,500

169,065

Amortization of acquired intangible assets

248

988

Acquisition related expenses

348

1,159

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

6,610

27,363

Income tax effects of non-GAAP items

(2,814)-(3,064)

(14,812)-(15,812)

Non-GAAP net income range

$14,000-$15,000

$76,500-$80,500

GAAP net income per basic and diluted share

($0.51)-($0.49)

($2.27)-($2.16)

Non-GAAP net income per diluted share

$0.28-$0.30

$1.51-$1.59

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

46,477

47,303

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

50,300

50,659

A.

Stock-based compensation is a non-cash expense accounted for in accordance with FASB ASC Topic 718. We believe that the exclusion of stock-based compensation expense allows for financial results that are more indicative of our operational performance and provide for a useful comparison of our operating results to prior periods and to our peer companies because stock-based compensation expense varies from period to period and company to company due to such things as differing valuation methodologies and changes in stock price.

B.

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

C.

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

D.

In May 2017, the Company issued $400 million of convertible notes due in 2022 with a coupon interest rate of 0.25%.  In June 2020, the Company issued $460 million of convertible notes due in 2025 with a coupon interest rate of 0.375%. The imputed interest rates of the convertible senior notes were approximately 6.87% and 5.71%, respectively. This is a result of the debt discount recorded for the conversion feature that is required to be separately accounted for as equity, and debt issuance costs, which reduce the carrying value of the convertible debt instrument. The debt discount is amortized as interest expense together with the issuance costs of the debt. The expense for the amortization of debt discount and debt issuance costs is a non-cash item, and we believe the exclusion of this non-cash interest expense provides for a useful comparison of our operating results to prior periods and to our peer companies.

E.

Strategic investments consist of non-controlling equity investments in privately held companies. The recognition of gains or losses can vary significantly across periods and we do not view them to be indicative of our fundamental operating activities and believe the exclusion of gains or losses provides for a useful comparison of our operating results to prior periods and to our peer companies.

F.

The effects of income taxes on non-GAAP items reflect a fixed long-term projected tax rate of 20% to provide better consistency across reporting periods. To determine this long-term non-GAAP tax rate, we exclude the impact of other non-GAAP adjustments and take into account other factors such as our current operating structure and existing tax positions in various jurisdictions. We will periodically reevaluate this tax rate, as necessary, for significant events such as relevant tax law changes and material changes in our forecasted geographic earnings mix.