●

Total revenue was $281.4 million, up 41% compared to Q1'20.

●

GAAP operating margin was (5.3%), compared to (7.1%) in Q1'20.  

●

Non-GAAP operating margin was 6.7%, compared to 7.3% in Q1'20.

●

GAAP operating loss was ($15.0) million, compared to ($14.1) million in Q1'20.

●

Non-GAAP operating income was $18.9 million, compared to $14.6 million in Q1'20.

●

GAAP net loss was ($23.2) million, or ($0.50) per basic and diluted share, compared to ($17.7) million, or ($0.41) per basic and diluted share in Q1'20.

●

Non-GAAP net income was $15.7 million, or $0.34 per basic and $0.31 per diluted share, compared to $14.1 million, or $0.33 per basic and $0.30 per diluted share in Q1'20.  

●

Weighted average basic and diluted shares outstanding for GAAP net loss per share was 46.4 million, compared to 43.3 million basic and diluted shares in Q1'20.

●

Weighted average basic and diluted shares outstanding for non-GAAP net income per share was 46.4 million and 50.4 million respectively, compared to 43.3 million and 47.7 million, respectively in Q1'20.

•

The company’s cash, cash equivalents, and short-term and long-term investments balance was $1,286 million as of March 31, 2021.

●

During the first quarter, the company generated $72.5 million of operating cash flow, excluding the $9.8 million used for the repayment of our convertible notes, compared to $23.0 million during Q1'20.

●

During the first quarter, the company generated $61.2 million of free cash flow, compared to $7.1 million during Q1'20.

●

Grew total customers to 113,925 at March 31, 2021, up 45% from March 31, 2020.

●

Total average subscription revenue per customer was $9,886 during the first quarter of 2021, down 1% compared to the first quarter of 2020.

•

Total revenue is expected to be in the range of $293 million to $297 million. 

•

Non-GAAP operating income is expected to be in the range of $19 million to $21 million. 

•

Non-GAAP net income per common share is expected to be in the range of $0.30 to $0.32. This assumes approximately 50.9 million weighted average diluted shares outstanding.

•

Total revenue is expected to be in the range of $1,237 million to $1,247 million.

•

Non-GAAP operating income is expected to be in the range of $104 million to $106 million. 

•

Non-GAAP net income per common share is expected to be in the range of $1.61 to $1.65. This assumes approximately 50.8 million weighted average diluted shares outstanding.

March 31,

December 31,

2021

2020

Assets

Current assets:

Cash and cash equivalents

$

397,498

$

378,123

Short-term investments

782,335

873,073

Accounts receivable

109,602

126,433

Deferred commission expense

47,279

44,576

Prepaid expenses and other current assets

31,459

34,716

Total current assets

1,368,173

1,456,921

Long-term investments

105,990

30,697

Property and equipment, net

96,845

101,123

Capitalized software development costs, net

28,340

24,943

Right-of-use assets

261,601

275,893

Deferred commission expense, net of current portion

30,607

28,296

Other assets

18,795

13,893

Intangible assets, net

11,878

10,282

Goodwill

47,588

31,318

Total assets

$

1,969,817

$

1,973,366

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

17,907

$

13,540

Accrued compensation costs

44,856

44,054

Accrued expenses and other current liabilities

40,868

37,184

Convertible senior notes

11,810

7,837

Operating lease liabilities

30,563

30,020

Deferred revenue

336,183

312,866

Total current liabilities

482,187

445,501

Operating lease liabilities, net of current portion

265,664

279,664

Deferred revenue, net of current portion

3,227

3,636

Other long-term liabilities

11,399

10,811

Convertible senior notes, net of current portion

432,626

471,099

Total liabilities

1,195,103

1,210,711

Stockholders’ equity:

Common stock

47

46

Additional paid-in capital

1,279,113

1,241,167

Accumulated other comprehensive income

1,874

4,603

Accumulated deficit

(506,320

)

(483,161

)

Total stockholders’ equity

774,714

762,655

Total liabilities and stockholders’ equity

$

1,969,817

$

1,973,366

For the Three Months Ended
March 31,

2021

2020

Revenues:

Subscription

$

270,263

$

191,229

Professional services and other

11,102

7,739

Total revenue

281,365

198,968

Cost of revenues:

Subscription

43,853

29,734

Professional services and other

10,881

8,551

Total cost of revenues

54,734

38,285

Gross profit

226,631

160,683

Operating expenses:

Research and development

68,396

46,202

Sales and marketing

141,017

102,328

General and administrative

32,250

26,255

Total operating expenses

241,663

174,785

Loss from operations

(15,032

)

(14,102

)

Other expense:

Interest income

475

4,057

Interest expense

(9,399

)

(5,953

)

Other income (expense)

660

(1,052

)

Total other expense

(8,264

)

(2,948

)

Loss before income tax expense

(23,296

)

(17,050

)

Income tax benefit (expense)

137

(666

)

Net loss

$

(23,159

)

$

(17,716

)

Net loss per share, basic and diluted

$

(0.50

)

$

(0.41

)

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

46,428

43,275

For the Three Months Ended

March 31,

2021

2020

Operating Activities:

Net loss

(23,159

)

$

(17,716

)

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

   by operating activities

Depreciation and amortization

11,208

8,711

Stock-based compensation

32,423

27,463

Loss on early extinguishment of 2022 Convertible Notes

2,406

—

Repayment of 2022 Convertible Notes attributable to the debt discount

(9,805

)

—

Benefit from deferred income taxes

(1,006

)

(257

)

Amortization of debt discount and issuance costs

6,493

5,703

Amortization (accretion) of bond discount

515

(2,154

)

Unrealized currency translation

(49

)

781

Changes in assets and liabilities

Accounts receivable

16,475

9,780

Prepaid expenses and other assets

2,715

(15,107

)

Deferred commission expense

(6,305

)

(1,523

)

Right-of-use assets

10,354

5,723

Accounts payable

4,598

1,495

Accrued expenses and other liabilities

(2,429

)

(5,439

)

Operating lease liabilities

(9,272

)

(5,281

)

Deferred revenue

27,538

10,832

Net cash and cash equivalents provided by operating activities

62,700

23,011

Investing Activities:

Purchases of investments

(362,288

)

(439,889

)

Maturities of investments

376,918

382,875

Equity method investment

(2,308

)

—

Purchases of property and equipment

(3,967

)

(11,098

)

Capitalization of software development costs

(7,341

)

(4,769

)

Purchases of strategic investments

(1,850

)

—

Acquisition of a business, net of cash acquired

(16,810

)

—

Net cash and cash equivalents used in investing activities

(17,646

)

(72,881

)

Financing Activities:

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

723

—

Repayment of 2022 Convertible Notes attributable to the principal

(35,900

)

—

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

(2,964

)

(941

)

Proceeds related to the issuance of common stock under stock plans

16,339

6,854

Repayments of finance lease obligations

—

(30

)

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

(21,802

)

5,883

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

(3,877

)

(1,814

)

Net increase in cash, cash equivalents and restricted cash

19,375

(45,801

)

Cash, cash equivalents and restricted cash, beginning of period

381,152

278,515

Cash, cash equivalents and restricted cash, end of period

$

400,527

$

232,714

Reconciliation of non-GAAP operating income and operating margin

(in thousands, except percentages)

Three Months Ended March 31,

2021

2020

GAAP operating loss

$

(15,032

)

$

(14,102

)

Stock-based compensation

32,423

27,463

Amortization of acquired intangible assets

345

900

Acquisition related expenses

1,195

333

Non-GAAP operating income

$

18,931

$

14,594

GAAP operating margin

(5.3

%)

(7.1

%)

Non-GAAP operating margin

6.7

%

7.3

%

Three Months Ended March 31,

2021

2020

GAAP net loss

$

(23,159

)

(17,716

)

Stock-based compensation

32,423

27,463

Amortization of acquired intangibles assets

345

900

Acquisition related expenses

1,195

333

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

6,493

5,703

Loss on early extinguishment of 2022 Convertible Notes

2,406

—

Impairment of strategic investment

—

250

Income tax effects of non-GAAP items

(4,050

)

(2,854

)

Non-GAAP net income

$

15,653

14,079

Non-GAAP net income per share:

Basic

$

0.34

$

0.33

Diluted

$

0.31

$

0.30

Shares used in non-GAAP per share calculations

Basic

46,428

43,275

Diluted

50,436

47,715

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

(in thousands, except percentages)

Three Months Ended March 31,

2021

2020

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

$

43,853

$

10,881

$

68,396

$

141,017

$

32,250

$

29,734

$

8,551

$

46,202

$

102,328

$

26,255

Stock -based compensation

(1,310

)

(697

)

(11,484

)

(13,629

)

(5,303

)

(898

)

(607

)

(8,708

)

(10,816

)

(6,434

)

Amortization of acquired intangible assets

(239

)

—

—

(106

)

—

(880

)

—

—

(20

)

—

Acquisition related expenses

—

—

(344

)

(367

)

(484

)

—

—

(330

)

—

(3

)

Non-GAAP expense

$

42,304

$

10,184

$

56,568

$

126,915

$

26,463

$

27,956

$

7,944

$

37,164

$

91,492

$

19,818

GAAP expense as a percentage of revenue

15.6

%

3.9

%

24.3

%

50.1

%

11.5

%

14.9

%

4.3

%

23.2

%

51.4

%

13.2

%

Non-GAAP expense as a percentage of revenue

15.0

%

3.6

%

20.1

%

45.1

%

9.4

%

14.1

%

4.0

%

18.7

%

46.0

%

10.0

%

Three Months Ended March 31,

2021

2020

GAAP subscription margin

$

226,410

$

161,495

Stock -based compensation

1,310

898

Amortization of acquired intangible assets

239

880

Non-GAAP subscription margin

$

227,959

$

163,273

GAAP subscription margin percentage

83.8

%

84.5

%

Non-GAAP subscription margin percentage

84.3

%

85.4

%

Reconciliation of free cash flow

(in thousands)

Three Months Ended March 31,

2021

2020

GAAP net cash and cash equivalents provided by operating activities

$

62,700

$

23,011

Purchases of property and equipment

(3,967

)

(11,098

)

Capitalization of software development costs

(7,341

)

(4,769

)

Repayment of 2022 Convertible Notes attributable to the debt discount

9,805

—

Free cash flow

$

61,197

$

7,144

Reconciliation of operating cash flow

(in thousands)

Three Months Ended March 31,

2021

2020

GAAP net cash and cash equivalents provided by operating activities

$

62,700

$

23,011

Repayment of 2022 Convertible Notes attributable to the debt discount

9,805

—

Operating cash flow, excluding repayment of convertible debt

$

72,505

$

23,011

Reconciliation of forecasted non-GAAP operating income

(in thousands, except percentages)

Three Months Ended June 30, 2021

Year Ended

December 31, 2021

GAAP operating income range

($26,134)-($24,134)

($61,089)-($59,089)

Stock-based compensation

44,470

161,800

Amortization of acquired intangible assets

332

1,319

Acquisition related expenses

332

1,970

Non-GAAP operating income range

$19,000 -$21,000

$104,000-$106,000

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

(in thousands, except per share amounts)

Three Months Ended June 30, 2021

Year Ended

December 31, 2021

GAAP net loss range

($33,453)-($32,203)

($91,899)-($89,399)

Stock-based compensation

44,470

161,800

Amortization of acquired intangible assets

332

1,319

Acquisition related expenses

332

1,970

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

6,100

25,125

Income tax effects of non-GAAP items

(2,481)-(2,731)

(16,615)-(17,115)

Non-GAAP net income range

$15,300-$16,300

$81,700-$83,700

GAAP net income per basic and diluted share

($0.71)-($0.69)

(1.96)-($1.91)

Non-GAAP net income per diluted share

$0.30-$0.32

$1.61-$1.65

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

46,793

46,879

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

50,879

50,763

A.

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

B.

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

C.

Acquisition related expenses, such as transaction costs and retention payments, 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.