HubSpot, Inc. (NYSE: HUBS), the customer relationship management (CRM) platform for scaling companies, today announced financial results for the second quarter ended June 30, 2023.
Financial Highlights:
Revenue
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Total revenue was $529.1 million, up 25% compared to Q2'22.
- Subscription revenue was $517.7 million, up 26% compared to Q2'22.
- Professional services and other revenue was $11.5 million, up 23% compared to Q2'22.
Operating Income (Loss)
- GAAP operating margin was (22.4%), compared to (12.4%) in Q2'22.
- Non-GAAP operating margin was 14.0%, compared to 7.0% in Q2'22.
- GAAP operating loss was ($118.5) million, compared to ($52.3) million in Q2'22.
- Non-GAAP operating income was $74.2 million, compared to $29.4 million in Q2'22.
Net Income (Loss)
- GAAP net loss was ($118.9) million, or ($2.39) per basic and diluted share, compared to ($56.4) million, or ($1.18) per basic and diluted share in Q2'22.
- Non-GAAP net income was $70.0 million, or $1.41 per basic and $1.34 per diluted share, compared to $22.4 million, or $0.47 per basic and $0.44 per diluted share in Q2'22.
- Weighted average basic and diluted shares outstanding for GAAP net loss per share was 49.7 million, compared to 47.8 million basic and diluted shares in Q2'22.
- Weighted average basic and diluted shares outstanding for non-GAAP net income per share was 49.7 million and 52.1 million respectively, compared to 47.8 million and 51.1 million, respectively in Q2'22.
Balance Sheet and Cash Flow
- The company’s cash, cash equivalents, and short-term and long-term investments balance was $1.7 billion as of June 30, 2023.
- During the second quarter, the company generated $76.5 million of cash from operating cash flow, compared to $40.9 million during Q2'22.
- During the second quarter, the company generated $87.0 million of cash from non-GAAP operating cash flow and $59.6 million of free cash flow, compared to $40.9 million of cash from non-GAAP operating cash flow and $22.4 million of free cash flow during Q2'22.
Additional Recent Business Highlights
- Grew Customers to 184,924 at June 30, 2023, up 23% from June 30, 2022.
- Average Subscription Revenue Per Customer was $11,432 during the second quarter of 2023, up 2% compared to the second quarter of 2022.
- The company had 7,136 full-time employees, up 1% from June 30, 2022.
“We had another solid quarter and I’m pleased with the continued momentum we have in becoming the platform of choice for scaling companies,” said Yamini Rangan, Chief Executive Officer at HubSpot. “Our teams are driving the pace of product innovation, iterating fast with AI while executing on our bi-modal strategy, despite a still challenging macroeconomic environment. This focus and alignment is what will continue to set us apart to drive durable and profitable growth over the long term.”
Business Outlook
Based on information available as of August 2, 2023, HubSpot is issuing guidance for the third quarter of 2023 and full year 2023 as indicated below.
Third Quarter 2023:
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Total revenue is expected to be in the range of $532.0 million to $534.0 million.
- Favorable foreign exchange rates are expected to be a one to two point tailwind to third quarter 2023 revenue growth.(1)
- Non-GAAP operating income is expected to be in the range of $67.0 million to $69.0 million(2).
- Non-GAAP net income per common share is expected to be in the range of $1.22 to $1.24. This assumes approximately 52.6 million weighted average diluted shares outstanding.
Full Year 2023:
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Total revenue is expected to be in the range of $2.116 billion to $2.122 billion.
- Favorable foreign exchange rates are expected to be a 50 basis points tailwind to full year 2023 revenue growth.(1)
- Non-GAAP operating income is expected to be in the range of $293.0 million to $297.0 million(2).
- Non-GAAP net income per common share is expected to be in the range of $5.24 to $5.29. This assumes approximately 52.3 million weighted average diluted shares outstanding.
(1) Foreign exchange rates impact on revenue is calculated by comparing current period average rates with prior period average rates. |
(2) The impact of restructuring charges, which include employee severance and lease consolidation costs, are excluded from our non-GAAP operating income and non-GAAP net income per common share business outlook. |
Use of Non-GAAP Financial Measures
In our earnings press releases, conference calls, slide presentations, and webcasts, we may use or discuss non-GAAP financial measures, as defined by Regulation G. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed, and a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure, are included in this press release after the consolidated financial statements. Our earnings press releases containing such non-GAAP reconciliations can be found in the Investors section of our website ir.hubspot.com.
Conference Call Information
HubSpot will host a conference call on Wednesday, August 2, 2023, at 4:30 p.m. Eastern Time (ET) to discuss the company’s second quarter 2023 financial results and its business outlook. To register for this conference call, please use this dial in registration link or visit HubSpot's Investor Relations website at ir.hubspot.com. Participants who wish to register for the conference call webcast please use this link.
Following the conference call, a replay will be available at (866) 813-9403 (domestic) or +44 (204) 525-0658 (international). The replay passcode is 067108. An archived webcast of this conference call will also be available on HubSpot's Investor Relations website at ir.hubspot.com.
The company has used, and intends to continue to use, the investor relations portion of its website as a means of disclosing material non-public information and for complying with disclosure obligations under Regulation FD.
About HubSpot
HubSpot is a leading CRM platform that provides software and support to help companies grow better. The platform includes marketing, sales, service, operations, and website management products that start free and scale to meet our customers' needs at any stage of growth. Today, over 184,000 customers across more than 120 countries use HubSpot's powerful and easy-to-use tools and integrations to attract, engage, and delight customers. Learn more at www.hubspot.com.
Cautionary Language Concerning Forward-Looking Statements
This press release includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding management’s expectations of future financial and operational performance and operational expenditures, expected growth, foreign currency movement, and business outlook, including our financial guidance for the third fiscal quarter of and full year 2023 and out long-term financial framework; statements regarding our positioning for future growth and market leadership; statements regarding the economic environment; and statements regarding expected market trends, future priorities and related investments, and market opportunities. These forward-looking statements include, but are not limited to, plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts and statements identified by words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” or words of similar meaning. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by those forward-looking statements are reasonable, we can give no assurance that the plans, intentions, expectations or strategies will be attained or achieved. Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control including, without limitation, risks associated with our history of losses; our ability to retain existing customers and add new customers; the continued growth of the market for a CRM platform; our ability to develop new products and technologies and differentiate our platform from competing products and technologies, including artificial intelligence and machine learning technologies; our ability to manage our growth effectively over the long-term to maintain our high level of service; our ability to maintain and expand relationships with our solutions partners; the price volatility of our common stock; the impact of geopolitical conflicts, inflation, foreign currency movement, and macroeconomic instability on our business, the broader economy, our workforce and operations, the markets in which we and our partners and customers operate, and our ability to forecast our future financial performance; regulatory and legislative developments on the use of artificial intelligence and machine learning; and other risks set forth under the caption “Risk Factors” in our SEC filings. We assume no obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.
Consolidated Balance Sheets (in thousands) | ||||||||
June 30, | December 31, | |||||||
2023 | 2022 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 457,218 | $ | 331,022 | ||||
Short-term investments | 1,071,927 | 1,081,662 | ||||||
Accounts receivable | 206,697 | 226,849 | ||||||
Deferred commission expense | 82,158 | 70,992 | ||||||
Prepaid expenses and other current assets | 89,845 | 44,074 | ||||||
Total current assets | 1,907,845 | 1,754,599 | ||||||
Long-term investments | 146,245 | 112,791 | ||||||
Property and equipment, net | 104,227 | 105,227 | ||||||
Capitalized software development costs, net | 86,548 | 63,790 | ||||||
Right-of-use assets | 262,759 | 319,304 | ||||||
Deferred commission expense, net of current portion | 93,277 | 66,559 | ||||||
Other assets | 65,876 | 58,795 | ||||||
Intangible assets, net | 15,854 | 17,446 | ||||||
Goodwill | 46,464 | 46,227 | ||||||
Total assets | $ | 2,729,095 | $ | 2,544,738 | ||||
Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 3,133 | $ | 20,883 | ||||
Accrued compensation costs | 69,758 | 62,846 | ||||||
Accrued expenses and other current liabilities | 157,485 | 102,122 | ||||||
Operating lease liabilities | 31,145 | 35,928 | ||||||
Deferred revenue | 585,934 | 539,874 | ||||||
Total current liabilities | 847,455 | 761,653 | ||||||
Operating lease liabilities, net of current portion | 313,632 | 316,184 | ||||||
Deferred revenue, net of current portion | 4,568 | 5,904 | ||||||
Other long-term liabilities | 25,768 | 14,546 | ||||||
Convertible senior notes | 455,207 | 454,227 | ||||||
Total liabilities | 1,646,630 | 1,552,514 | ||||||
Stockholders’ equity: | ||||||||
Common stock | 50 | 49 | ||||||
Additional paid-in capital | 1,890,409 | 1,647,446 | ||||||
Accumulated other comprehensive loss | (8,385 | ) | (12,890 | ) | ||||
Accumulated deficit | (799,609 | ) | (642,381 | ) | ||||
Total stockholders’ equity | 1,082,465 | 992,224 | ||||||
Total liabilities and stockholders’ equity | $ | 2,729,095 | $ | 2,544,738 | ||||
Consolidated Statements of Operations (in thousands, except per share data) | |||||||||||||||
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
Revenues: | |||||||||||||||
Subscription | $ | 517,678 | $ | 412,401 | $ | 1,007,421 | $ | 797,356 | |||||||
Professional services and other | 11,460 | 9,354 | 23,337 | 19,998 | |||||||||||
Total revenue | 529,138 | 421,755 | 1,030,758 | 817,354 | |||||||||||
Cost of revenues: | |||||||||||||||
Subscription | 73,824 | 64,431 | 142,163 | 123,816 | |||||||||||
Professional services and other | 13,462 | 14,500 | 27,169 | 28,053 | |||||||||||
Total cost of revenues | 87,286 | 78,931 | 169,332 | 151,869 | |||||||||||
Gross profit | 441,852 | 342,824 | 861,426 | 665,485 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 169,955 | 118,914 | 297,639 | 211,650 | |||||||||||
Sales and marketing | 265,294 | 224,262 | 515,971 | 421,396 | |||||||||||
General and administrative | 61,222 | 51,898 | 118,630 | 95,844 | |||||||||||
Restructuring | 63,880 | — | 92,450 | — | |||||||||||
Total operating expenses | 560,351 | 395,074 | 1,024,690 | 728,890 | |||||||||||
Loss from operations | (118,499 | ) | (52,250 | ) | (163,264 | ) | (63,405 | ) | |||||||
Other expense: | |||||||||||||||
Interest income | 13,542 | 2,050 | 24,013 | 2,564 | |||||||||||
Interest expense | (937 | ) | (949 | ) | (1,867 | ) | (1,898 | ) | |||||||
Other income (expense) | |||||||||||||||
