●

Total revenue was $199.0 million, up 31% compared to Q1'19.

●

GAAP operating margin was (7.1%), compared to (6.0%) in Q1'19.

●

Non-GAAP operating margin was 7.3%, compared to 8.6% in Q1'19.

●

GAAP operating loss was ($14.1) million, compared to ($9.0) million in Q1'19.

●

Non-GAAP operating income was $14.6 million, compared to $13.0 million in Q1'19.

●

GAAP net loss was ($17.7) million, or ($0.41) per basic and diluted share, compared to ($11.1) million, or ($0.27) per basic and diluted share in Q1'19.

●

Non-GAAP net income was $16.7 million, or $0.39 per basic and $0.35 per diluted share, compared to $16.2 million, or $0.40 per basic and $0.36 per diluted share in Q1'19.  

●

Weighted average basic and diluted shares outstanding for GAAP net loss per share was 43.3 million, compared to 40.6 million basic and diluted shares in Q1'19.

●

Weighted average basic and diluted shares outstanding for non-GAAP net income per share was 43.3 million and 47.7 million respectively, compared to 40.6 million and 45.5 million, respectively in Q1'19.

●

The company’s cash, cash equivalents and investments balance was $1,035 million as of March 31, 2020.

●

During the first quarter, the company generated $23.0 million of operating cash flow, compared to $37.7 million during Q1’19.

●

During the first quarter, the company generated $7.1 million of free cash flow, compared to $30.6 million during Q1'19.

●

Grew total customers to 78,776 at March 31, 2020 up 30% compared to March 31, 2019.

●

Total average subscription revenue per customer was $10,018 during the first quarter of 2020, up 2% compared to Q1'19.

●

temporarily closed our global offices, suspended all company-related travel, and all HubSpot employees globally are required to work from home for the foreseeable future;

●

implemented certain changes to our pricing and packaging structure, including reducing prices on our Starter Growth Suite, offering discounts and flexible payment terms to customers and prospects under more severe short-term financial strain, offering certain product functionality free of charge, suspending marketing email send limits, and increasing limits on calling; and

●

offered a six-month advance on commissions to certain of our Solutions Partners in addition to expediting Q1 commissions for all Solutions Partners.

●

Total revenue is expected to be in the range of $195.0 million to $196.0 million.

●

Non-GAAP operating income is expected to be in the range of $10.5 million to $11.5 million.

●

Non-GAAP net income per common share is expected to be in the range of $0.23 to $0.25. This assumes approximately 47.2 million weighted average diluted shares outstanding.

●

Total revenue is expected to be in the range of $800.0 million to $810.0 million.

●

Non-GAAP operating income is expected to be in the range of $40.0 million to $42.0 million.

●

Non-GAAP net income per common share is expected to be in the range of $0.88 to $0.92. This assumes approximately 47.4 million weighted average diluted shares outstanding.

March 31,

December 31,

2020

2019

Assets

Current assets:

Cash and cash equivalents

$

229,133

$

269,670

Short-term investments

739,428

691,834

Accounts receivable

81,055

92,517

Deferred commission expense

33,214

32,078

Prepaid expenses and other current assets

29,923

23,625

Total current assets

1,112,753

1,109,724

Long-term investments

66,184

53,776

Property and equipment, net

85,653

83,649

Capitalized software development costs, net

18,826

16,793

Right-of-use assets

230,565

234,390

Deferred commission expense, net of current portion

18,792

19,110

Other assets

12,883

9,824

Intangible assets, net

10,898

11,752

Goodwill

29,956

30,250

Total assets

$

1,586,510

$

1,569,268

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

10,671

$

12,842

Accrued compensation costs

23,809

26,318

Accrued expenses and other current liabilities

29,450

28,686

Operating lease liabilities

24,542

23,613

Deferred revenue

238,913

231,030

Total current liabilities

327,385

322,489

Operating lease liabilities, net of current portion

239,655

244,216

Deferred revenue, net of current portion

3,334

3,058

Other long-term liabilities

8,898

8,983

Convertible senior notes

346,265

340,564

Total liabilities

925,537

919,310

Stockholders’ equity:

Common stock

44

44

Additional paid-in capital

1,077,605

1,048,380

Accumulated other comprehensive loss

(830

)

(336

)

Accumulated deficit

(415,846

)

(398,130

)

Total stockholders’ equity

660,973

649,958

Total liabilities and stockholders’ equity

$

1,586,510

$

1,569,268

For the Three Months Ended March 31,

2020

2019

Revenues:

Subscription

$

191,229

$

144,226

Professional services and other

7,739

7,572

Total revenue

198,968

151,798

Cost of revenues:

Subscription

29,734

21,301

Professional services and other

8,551

8,277

Total cost of revenues

38,285

29,578

Gross profit

160,683

122,220

Operating expenses:

Research and development

46,202

35,177

Sales and marketing

102,328

74,905

General and administrative

26,255

21,174

Total operating expenses

174,785

131,256

Loss from operations

(14,102

)

(9,036

)

Other expense:

Interest income

4,057

4,174

Interest expense

(5,953

)

(5,513

)

Other expense

(1,052

)

(12

)

Total other expense

(2,948

)

(1,351

)

Loss before income tax expense

(17,050

)

(10,387

)

Income tax expense

(666

)

(713

)

Net loss

$

(17,716

)

$

(11,100

)

Net loss per share, basic and diluted

$

(0.41

)

$

(0.27

)

Weighted average common shares used in computing basic

   and diluted net loss per share:

43,275

40,568

For the Three Months Ended March 31,

2020

2019

Operating Activities:

Net loss

$

(17,716

)

$

(11,100

)

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

   by operating activities

Depreciation and amortization

8,711

6,973

Stock-based compensation

27,463

21,205

Deferred income tax benefit

(257

)

(28

)

Amortization of debt discount and issuance costs

5,703

5,260

Accretion of bond discount

(2,154

)

(2,751

)

Unrealized currency translation

781

(281

)

Changes in assets and liabilities

Accounts receivable

9,780

7,758

Prepaid expenses and other assets

(15,107

)

886

Deferred commission expense

(1,523

)

(3,334

)

Right-of-use assets

5,723

5,505

Accounts payable

1,495

4,911

Accrued expenses and other current liabilities

(5,439

)

(2,071

)

Operating lease liabilities

(5,281

)

(4,110

)

Deferred revenue

10,832

8,893

Net cash and cash equivalents provided by operating activities

23,011

37,716

Investing Activities:

Purchases of investments

(439,889

)

(386,501

)

Maturities and sales of investments

382,875

183,460

Purchases of property and equipment

(11,098

)

(4,265

)

Capitalization of software development costs

(4,769

)

(2,821

)

Net cash and cash equivalents used in investing activities

(72,881

)

(210,127

)

Financing Activities:

Proceeds from common stock offering, net of offering costs paid of $256

-

342,739

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

(941

)

(1,084

)

Proceeds related to the issuance of common stock under stock plans

6,854

5,690

Repayments of capital lease obligations

(30

)

(118

)

Net cash and cash equivalents provided by financing activities

5,883

347,227

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

(1,814

)

(784

)

Net increase in cash, cash equivalents and restricted cash

(45,801

)

174,032

Cash, cash equivalents and restricted cash, beginning of period

278,515

117,114

Cash, cash equivalents and restricted cash, end of period

$

232,714

$

291,146

Reconciliation of non-GAAP operating income and operating margin

(in thousands, except percentages)

Three Months Ended     March 31,

2020

2019

GAAP operating loss

$

(14,102

)

$

(9,036

)

Stock-based compensation

27,463

21,205

Amortization of acquired intangible assets

900

800

Acquisition related expenses

333

32

Non-GAAP operating income

14,594

$

13,001

GAAP operating margin

(7.1

%)

(6.0

%)

Non-GAAP operating margin

7.3

%

8.6

%

Reconciliation of non-GAAP net income

(in thousands, except per share amounts)

Three Months Ended March 31,

2020

2019

GAAP net loss

$

(17,716

)

$

(11,100

)

Stock-based compensation

27,463

21,205

Amortization of acquired intangibles assets

900

800

Acquisition related expenses

333

32

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

5,703

5,260

Impairment of strategic investment

250

—

Income tax effects of non-GAAP items

(204

)

—

Non-GAAP net income

$

16,729

$

16,197

Non-GAAP net income per share:

Basic

$

0.39

$

0.40

Diluted

$

0.35

$

0.36

Shares used in non-GAAP per share calculations

Basic

43,275

40,568

Diluted

47,715

45,540

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

(in thousands, except percentages)

Three Months Ended March 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

$

29,734

$

8,551

$

46,202

$

102,328

$

26,255

$

21,301

$

8,277

$

35,177

$

74,905

$

21,174

Stock -based compensation

(898

)

(607

)

(8,708

)

(10,816

)

(6,434

)

(614

)

(1,019

)

(7,091

)

(7,804

)

(4,677

)

Amortization of acquired intangible assets

(880

)

—

—

(20

)

—

(800

)

—

—

—

—

Acquisition related expenses

—

—

(330

)

—

(3

)

—

—

(32

)

—

—

Non-GAAP expense

$

27,956

$

7,944

$

37,164

$

91,492

$

19,818

$

19,887

$

7,258

$

28,054

$

67,101

$

16,497

GAAP expense as a percentage of revenue

14.9

%

4.3

%

23.2

%

51.4

%

13.2

%

14.0

%

5.5

%

23.2

%

49.3

%

13.9

%

Non-GAAP expense as a percentage of revenue

14.1

%

4.0

%

18.7

%

46.0

%

10.0

%

13.1

%

4.8

%

18.5

%

44.2

%

10.9

%

Reconciliation of non-GAAP subscription margin

(in thousands, except percentages)

Three Months Ended March 31,

2020

2019

GAAP subscription margin

$

161,495

$

122,925

Stock -based compensation

898

614

Amortization of acquired intangible assets

880

800

Non-GAAP subscription margin

$

163,273

$

124,339

GAAP subscription margin percentage

84.5

%

85.2

%

Non-GAAP subscription margin percentage

85.4

%

86.2

%

Reconciliation of free cash flow

(in thousands)

Three Months Ended March 31,

2020

2019

GAAP net cash and cash equivalents provided by operating activities

$

23,011

$

37,716

Purchases of property and equipment

(11,098

)

(4,265

)

Capitalization of software development costs

(4,769

)

(2,821

)

Free cash flow

$

7,144

$

30,630

Reconciliation of forecasted non-GAAP operating income

(in thousands, except percentages)

Three Months Ended June 30, 2020

Year Ended

December 31, 2020

GAAP operating income range

($21,450)-($20,450)

($84,020)-($82,020)

Stock-based compensation

30,700

120,200

Amortization of acquired intangible assets

920

2,500

Acquisition related expenses

330

1,320

Non-GAAP operating income range

$10,500 -$11,500

$40,000-$42,000

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, 2020

Year Ended

December 31, 2020

GAAP net loss range

($26,855)-($25,855)

($104,710)-($102,710)

Stock-based compensation

30,700

120,200

Amortization of acquired intangible assets

920

2,500

Acquisition related expenses

330

1,320

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

5,800

23,400

Income tax effects of non-GAAP items

(195

)

(1,010

)

Non-GAAP net income range

$10,700-$11,700

$41,700-$43,700

GAAP net income per basic and diluted share

($0.62)-($0.59)

($2.39)-($2.34)

Non-GAAP net income per diluted share

$0.23-$0.25

$0.88-$0.92

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

43,611

43,800

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

47,166

47,360

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 a non-cash item, and we believe that the exclusion of this amortization expense provides for a useful comparison of our operating results to prior periods and to our peer companies.

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.

D.

In May 2017, the Company issued $400 million of convertible notes due in 2022 with a coupon interest rate of 0.25%. The imputed interest rate of the convertible senior notes was approximately 6.95%. 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 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 for historical periods is zero due to a full valuation allowance on our U.S. deferred tax assets.