HubSpot Reports Strong Q4 and Full Year 2015 Results

Total revenue grows 57% in 2015 as revenue retention tops 100% for the first quarter ever

Feb 10, 2016, 16:05 ET from HubSpot, Inc.

CAMBRIDGE, Mass., Feb. 10, 2016 /PRNewswire/ -- HubSpot, Inc. (NYSE: HUBS), a leading inbound marketing and sales software company, today announced financial results for the fourth quarter and full year ended December 31, 2015.

Financial Highlights:

Revenue

Fourth Quarter 2015:

  • Total revenue was $53.1 million, up 56% compared to the fourth quarter of 2014.
  • Subscription revenue was $49.6 million, up 58% compared to the fourth quarter of 2014.
  • Professional services and other revenue was $3.5 million, up 24% compared to the fourth quarter of 2014.

Full Year 2015:

  • Total revenue was $181.9 million, up 57% compared to 2014.
  • Subscription revenue was $167.9 million, up 58% compared to 2014.
  • Professional services and other revenue was $14.0 million, up 47% compared to 2014.

Operating Loss

Fourth Quarter 2015:

  • GAAP operating margin was (19.7%) for the quarter, compared to (58.4%) in the fourth quarter of 2014. 
  • Non-GAAP operating margin was (8.3%) for the quarter, an improvement of approximately 12 percentage points from (20.7%) in the fourth quarter of 2014.
  • GAAP operating loss was ($10.4) million for the quarter, compared to ($19.9) million in the fourth quarter of 2014.
  • Non-GAAP operating loss was ($4.4) million for the quarter, compared to ($7.1) million in the fourth quarter of 2014.

Full Year 2015:

  • GAAP operating margin was (25.5%) for 2015, compared to (41.9%) in 2014.
  • Non-GAAP operating margin was (13.8%) for 2015, an improvement of approximately 14 percentage points from (27.7%) in 2014.
  • GAAP operating loss was ($46.5) million for 2015, compared to ($48.6) million in 2014.
  • Non-GAAP operating loss was ($25.1) million for 2015, compared to ($32.1) million in 2014.

Net Loss attributable to common stockholders

Fourth Quarter 2015:

  • GAAP net loss attributable to common stockholders was ($10.3) million, or ($0.30) per share for the quarter, compared to ($20.0) million, or ($0.69) per share, in the fourth quarter of 2014.
  • Non-GAAP net loss attributable to common stockholders was ($4.2) million, or ($0.12) per share for the quarter, compared to ($7.1) million, or ($0.25) per share, in the fourth quarter of 2014. 
  • Fourth quarter weighted average shares outstanding were 34.2 million compared to 28.9 million shares in the fourth quarter of 2014.

Full Year 2015:

  • GAAP net loss attributable to common stockholders was ($46.1) million, or ($1.39) per share for 2015, compared to ($48.6) million, or ($4.20) per share, in 2014.
  • Non-GAAP net loss attributable to common stockholders was ($24.6) million, or ($0.74) per share for 2015, compared to ($32.1) million, or ($2.77) per share, in 2014. 
  • 2015 weighted average shares outstanding were 33.2 million compared to 11.6 million shares in 2014.

Balance Sheet and Cash Flow

  • The company's cash and cash equivalents and investments balance was $145.1 million as of December 31, 2015.
  • During the fourth quarter, the company generated $2.6 million of operating cash flow compared to using ($1.8) million of operating cash flow during the fourth quarter of 2014.
  • During the full year ended December 31, 2015, the company used ($0.4) million of operating cash flow compared to using ($12.5) million of operating cash flow during the year ended December 31, 2014.

Additional Recent Business Highlights

  • Grew total customers to 18,116 at December 31, 2015, up 33% from December 31, 2014.
  • Increased average subscription revenue per customer during the fourth quarter of 2015 to $11,135 from $9,530 in the fourth quarter of 2014.

"This was a terrific quarter and year for HubSpot. We added a record number of new customers, continued our momentum with strong revenue growth and margin expansion, and saw continued growth in our domestic and international businesses," said Brian Halligan, HubSpot co-founder and CEO. "But even with such fantastic growth, all signs point to the fact that we are still in the early innings of meeting the significant demand for marketing and sales technology that helps mid-market companies grow around the world. We're incredibly excited about what the future holds and the milestones we will reach in 2016."

Business Outlook

Based on information available as of February 10, 2016, HubSpot is issuing guidance for the first quarter and full year of 2016 as indicated below.

First Quarter 2016:

  • Total revenue is expected to be in the range of $54.7 million to $55.7 million.
  • Non-GAAP operating loss is expected to in the range of ($6.6) million to ($5.6) million.  This excludes stock-based compensation expense of approximately $6.2 million and amortization of acquired intangible assets of approximately $24 thousand.
  • Non-GAAP net loss per common share is expected to be in the range of ($0.20) to ($0.16).  This excludes stock-based compensation expense of approximately $6.2 million and amortization of acquired intangible assets of approximately $24 thousand.  This assumes approximately 34.7 million weighted common shares outstanding.

Full Year 2016:

  • Total revenue is expected to be in the range of $248 million to $251 million.
  • Non-GAAP operating loss is expected to in be in the range of ($27) million to ($24) million.  This excludes stock-based compensation expense of approximately $32.2 million and amortization of acquired intangible assets of approximately $80 thousand.
  • Non-GAAP net loss per common share is expected to be in the range of ($0.78) to ($0.66).  This excludes stock-based compensation expense of approximately $32.2 million and amortization of acquired intangible assets of approximately $80 thousand.  This assumes approximately 35.3 million weighted common shares outstanding.

Conference Call Information
HubSpot will host a conference call on Wednesday, February 10, 2016, at 5:00 p.m. Eastern Time (ET) to discuss its fourth quarter and full year 2015 financial results and business outlook.  To access this call, dial (877) 201-0168 (domestic) or (647) 788-4901 (international).  The conference ID is 2120006. Additionally, a live webcast of the conference call will be available in the "Investors" section of the HubSpot's web site at www.hubspot.com.

Following the conference call, a replay will be available until 11 pm on February 17, 2016 at (855) 859-2056 (domestic) or (404) 537-3406 (international). The replay pass code is 2120006. An archived webcast of this conference call will also be available in the "Investor" section of HubSpot's web site at www.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 inbound marketing and sales platform. Over 18,000 customers in over 90 countries use HubSpot's award-winning software, services, and support to create an inbound experience that will attract, engage, and delight customers. Learn more at www.hubspot.com.

The tables at the end of this press release include a reconciliation of generally accepted accounting principles ("GAAP") to non-GAAP operating loss, operating margin, subscription margin, expense, expense as a percentage of revenue, and net loss attributable to common stockholders for the fourth quarter ended December 31, 2015 and 2014. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

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 concerning our financial guidance for the first fiscal quarter of 2016 and full year 2016, our position to execute on our growth strategy in the mid-market, and our ability to expand our leadership position and market opportunity for our inbound platform.  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, our history of losses, our ability to retain existing customers and add new customers, the continued growth of the market for an inbound platform; our ability to differentiate our platform from competing products and technologies; our ability to manage our growth effectively to maintain our high level of service; our ability to maintain and expand relationships with our marketing agency partners; our ability to successfully recruit and retain highly-qualified personnel; the price volatility of our common stock, and other risks set forth under the caption "Risk Factors" in our Quarterly Report on Form 10-Q filed on November 4, 2015 and our other 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)











December 31,

2015



December 31,

2014


Assets









Current assets:









Cash and cash equivalents


$

55,580



$

123,721


Short-term investments



48,972





Accounts receivable, net



25,142




14,270


Deferred commission expense



8,114




5,995


Restricted cash






230


Prepaid hosting costs



3,047




1,777


Prepaid expenses and other current assets



4,899




3,516


Total current assets



145,754




149,509


Long-term investments



40,566






Property and equipment, net



18,161




11,381


Capitalized software development costs, net



4,655




4,433


Restricted cash



363





Other assets



1,007




116


Intangible assets, net



100




89


Goodwill



9,773




9,330


Total assets



220,379




174,858


Liabilities and stockholders' equity









Current liabilities:









Accounts payable



2,588




2,800


Accrued compensation costs



11,371




7,660


Other accrued expenses



12,313




7,953


Capital lease obligations



542




100


Deferred rent



86




110


Deferred revenue



64,407




40,805


Total current liabilities



91,307




59,428


Capital lease obligations, net of current portion



277




78


Deferred rent, net of current portion



6,345




4,153


Deferred revenue, net of current portion



732




500


Other long term liabilities



10





Total liabilities



98,671




64,159


Commitments and contingencies









Stockholders' equity:









Common stock



34




32


Additional paid-in capital



322,833




265,113


Accumulated other comprehensive loss



(805)




(145)


Accumulated deficit



(200,354)




(154,301)


Total stockholders' equity



121,708




110,699


Total liabilities and stockholders' equity


$

220,379



$

174,858


 

Consolidated Statements of Operations


(in thousands, except per share data)











Three Months Ended December 31,



Year ended December 31,




2015



2014



2015





2014


Revenues:



















Subscription


$

49,618



$

31,325



$

167,920





$

106,319


Professional services and other



3,508




2,832




14,023






9,557


Total revenue



53,126




34,157




181,943






115,876


Cost of Revenues:



















Subscription



9,377




6,654




32,271






23,655


Professional services and other



4,330




3,275




15,652






11,425


Total cost of revenues



13,707




9,929




47,923






35,080


Gross profit



39,419




24,228




134,020






80,796


Operating expenses:



















Research and development



8,671




11,140




32,457






25,638


Sales and marketing



31,572




24,109




112,629






78,809


General and administrative



9,625




8,918




35,408






24,958


Total operating expenses



49,868




44,167




180,494






129,405


Loss from operations



(10,449)




(19,939)




(46,474)






(48,609)


Other income (expense):



















Interest income



151




42




390






46


Interest expense



(46)




(63)




(185)






(322)


Other income



241




171




628






564


Total other income



346




150




833






288


Loss before income tax (provision) benefit



(10,103)




(19,789)




(45,641)






(48,321)


Income tax (provision) benefit



(149)




92




(412)






92


Net loss



(10,252)




(19,697)




(46,053)






(48,229)


Preferred stock accretion






(291)









(331)


Net loss attributable to common stockholders


$

(10,252)



$

(19,988)



$

(46,053)





$

(48,560)


Net loss attributable to common stockholders per share,
basic and diluted


$

(0.30)



$

(0.69)



$

(1.39)





$

(4.20)


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



34,172




28,918




33,222






11,562


 

Consolidated Statements of Cash Flows


(in thousands)






Three Months Ended

December 31,



Year ended December 31,




2015



2014



2015



2014


Operating Activities:

















Net loss


$

(10,252)



$

(19,697)



$

(46,053)



$

(48,229)


Adjustments to reconcile net loss to net cash and cash
equivalents provided by (used in) operating activities

















Depreciation and amortization



1,832




890




7,343




5,714


Stock-based compensation



6,015




12,844




21,308




16,358


Provision for deferred income taxes



(95)




(133)




(50)




(133)


Amortization of bond premium discount



233







671





Noncash rent expense



1,582




50




1,793




286


Unrealized currency translation



(89)




26




(329)




(213)


Changes in assets and liabilities

















Accounts receivable



(5,533)




(3,846)




(11,249)




(7,258)


Prepaid expenses and other assets



(2,096)




(859)




(3,373)




(713)


Deferred commission expense



(1,470)




(1,158)




(2,119)




(2,004)


Accounts payable



(424)




614




(508)




286


Accrued expenses



2,552




2,542




7,085




4,734


Restricted cash












157


Deferred rent



13




40




392




1,467


Deferred revenue



10,372




6,935




24,666




17,084


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



2,640




(1,752)




(423)




(12,464)


Investing Activities:

















Purchases of investments



(19,746)







(113,615)





Maturities of investments



19,018







23,018





Purchases of property and equipment



(6,245)




(1,374)




(8,427)




(7,266)


Capitalization of software development costs



(1,189)




(704)




(4,314)




(4,634)


Acquisition of a business



-







(600)





Acquisition of intangible assets



-










(80)


Restricted cash



222







(166)




1,500


Net cash and cash equivalents used in investing activities



(7,940)




(2,078)




(104,104)




(10,480)


Financing Activities:

















Proceeds from common stock offerings, net of offering costs paid of $583 in 2015 and $2,924 for the years ended December 31, 2015 and 2014, respectively






132,754




33,669




130,764


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



(390)







(8,607)





Proceeds related to issuance of common stock under stock plans



2,827




743




12,083




3,794


Proceeds from draw-down on line of credit












18,000


Payments on line of credit






(18,000)







(18,000)


Repayments of capital lease obligations



(99)




(24)




(206)




(121)


Net cash and cash equivalents provided by financing activities



2,338




115,473




36,939




134,437


Effect of exchange rate changes on cash and cash equivalents



(267)




(301)




(553)




(415)


Net decrease in cash and cash equivalents



(3,229)




111,342




(68,141)




111,078


Cash and cash equivalents, beginning of period



58,809




12,379




123,721




12,643


Cash and cash equivalents, end of period


$

55,580



$

123,721



$

55,580



$

123,721


 

Reconciliation of non-GAAP operating loss and operating margin


Three Months Ended December 31,



Year Ended December 31,




2015


2014



2015


2014


(in thousands, except percentages)






























GAAP operating loss


$

(10,449)


$

(19,939)



$

(46,474)


$

(48,609)


Stock-based compensation



6,015



12,844




21,308



16,358


Amortization of acquired intangible assets



26



13




96



138


Non-GAAP operating loss


$

(4,408)


$

(7,082)



$

(25,070)


$

(32,113)

















GAAP operating margin



(19.7%)



(58.4%)




(25.5%)



(41.9%)


Non-GAAP operating margin



(8.3%)



(20.7%)




(13.8%)



(27.7%)















































Reconciliation of non-GAAP net loss attributable to common stockholders


Three Months Ended December 31,



Year Ended December 31,




2015


2014



2015


2014


(in thousands, except per share amounts)






























GAAP net loss attributable to common stockholders


$

(10,252)


$

(19,988)



$

(46,053)


$

(48,560)


Stock-based compensation



6,015



12,844




21,308



16,358


Amortization of acquired intangibles



26



13




96



138


Non-GAAP net loss attributable to common stockholders


$

(4,211)


$

(7,131)



$

(24,649)


$

(32,064)

















Non-GAAP net loss attributable to common stockholders per share, basic and diluted

$

(0.12)


$

(0.25)



$

(0.74)


$

(2.77)


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


34,172



28,918




33,222



11,562


 

Reconciliation of non-GAAP expense and expense as a percentage of revenue  
(in thousands, except percentages)


Three Months Ended December 31,



2015



2014



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

$

9,377


$

4,330


$

8,671


$

31,572


$

9,625



$

6,654


$

3,275


$

11,140


$

24,109


$

8,918


Stock -based compensation


(92)



(365)



(1,497)



(2,380)



(1,681)




(64)



(262)



(5,755)



(4,149)



(2,614)


Amortization of acquired intangibles


(20)







(6)






(6)







(7)




Non-GAAP expense

$

9,265


$

3,965


$

7,174


$

29,186


$

7,944



$

6,584


$

3,013


$

5,385


$

19,953


$

6,304


































GAAP expense as a percentage of revenue


17.7

%


8.2

%


16.3

%


59.4

%


18.1

%



19.5

%


9.6

%


32.6

%


70.6

%


26.1

%

Non-GAAP expense as a percentage of revenue


17.4

%


7.5

%


13.5

%


54.9

%


15.0

%



19.3

%


8.8

%


15.8

%


58.4

%


18.5

%


































































































Year Ended December 31,



2015



2014



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

$

32,271


$

15,652


$

32,457


$

112,629


$

35,408



$

23,655


$

11,425


$

25,638


$

78,809


$

24,958


Stock -based compensation


(341)



(1,216)



(6,327)



(7,658)



(5,766)




(128)



(498)



(6,190)



(5,596)



(3,946)


Amortization of acquired intangibles


(70)







(26)






(118)







(20)




Non-GAAP expense

$

31,860


$

14,436


$

26,130


$

104,945


$

29,642


 `

$

23,409


$

10,927


$

19,448


$

73,193


$

21,012


































GAAP expense as a percentage of revenue


17.7

%


8.6

%


17.8

%


61.9

%


19.5

%



20.4

%


9.9

%


22.1

%


68.0

%


21.5

%

Non-GAAP expense as a percentage of revenue


17.5

%


7.9

%


14.4

%


57.7

%


16.3

%



20.2

%


9.4

%


16.8

%


63.2

%


18.1

%

 

 

Reconciliation of non-GAAP subscription margin
(in thousands, except percentages)




Three Months Ended December 31,



Year Ended December 31,




2015


2014



2015


2014

















GAAP subscription margin


$

40,241


$

24,671



$

135,649


$

82,664


Stock -based compensation



92



64




341



128


Amortization of acquired intangible assets



20



6




70



118


Non-GAAP subscription margin


$

40,353


$

24,741



$

136,060


$

82,910

















GAAP subscription margin percentage



81.1

%


78.8

%



80.8

%


77.8

%

Non-GAAP subscription margin percentage



81.3

%


79.0

%



81.0

%


78.0

%

 

Non-GAAP Financial Measures

In this release, HubSpot's non-GAAP operating loss, operating margin, subscription margin, expense, expense as a percentage of revenue, and net loss attributable to common stockholders are not presented in accordance with GAAP and are not intended to be used in lieu of GAAP presentations of results of operations.

Management presents these non-GAAP financial measures because it considers them to be important supplemental measures of performance. Management uses the non-GAAP financial measures for planning purposes, including analysis of the company's performance against prior periods, the preparation of operating budgets and to determine appropriate levels of operating and capital investments. Management also believes that the non-GAAP financial measures provide additional insight for analysts and investors in evaluating the company's financial and operational performance. However, these non-GAAP financial measures have limitations as an analytical tool and are not intended to be an alternative to financial measures prepared in accordance with GAAP. We intend to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. A reconciliation of our non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included above in this press release.

These non-GAAP measures exclude share-based compensation and amortization of acquired intangible assets. We believe investors may want to exclude the effects of these items in order to compare our financial performance with that of other companies and between time periods:

(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.

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SOURCE HubSpot, Inc.



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