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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