HubSpot Reports Q2 2015 Results

Continued Strong Revenue Growth, Improved Margins and Positive Cash Flow From Operations - Raises Full-Year 2015 Guidance

Aug 06, 2015, 16:04 ET from HubSpot, Inc.

CAMBRIDGE, Mass., Aug. 6, 2015 /PRNewswire/ -- HubSpot, Inc. (NYSE: HUBS), a leading inbound marketing and sales software company, today announced financial results for the second quarter ended June 30, 2015.

Financial Highlights:

Revenue

  • Total revenue was $42.9 million, up 58% compared with the second quarter of 2014.
  • Subscription revenue was $39.3 million, up 58% compared with the second quarter of 2014.
  • Professional services and other revenue was $3.7 million, up 67% compared with the second quarter of 2014.

Operating Loss

  • GAAP operating margin was (26.4%) for the quarter, compared with (30.5%) in the second quarter of 2014.
  • Non-GAAP operating margin was (13.2%) for the quarter, an improvement of approximately 13 percentage points from (26.0%) in the second quarter of 2014.
  • GAAP operating loss was ($11.3) million for the quarter, compared to ($8.3) million in the second quarter of 2014.
  • Non-GAAP operating loss was ($5.7) million for the quarter, compared to ($7.1) million in the second quarter of 2014.

Net Loss attributable to common stockholders

  • GAAP net loss attributable to common stockholders was ($11.4) million, or ($0.34) per share for the quarter, compared to ($8.3) million, or ($1.44) per share, in the second quarter of 2014.
  • Non-GAAP net loss attributable to common stockholders was ($5.7) million, or ($0.17) per share for the quarter, compared to ($7.1) million, or ($1.22) per share, in the second quarter of 2014.
  • Second quarter weighted average common shares outstanding were 33.2 million compared to 5.8 million shares in the second quarter of 2014.

Balance Sheet and Cash Flow

  • The company's cash and cash equivalents balance was $74.2 million as of June 30, 2015.
  • During the second quarter, the company generated $1.6 million of operating cash flow compared to using ($2.3) million of cash in operations during the second quarter of 2014.

Additional Recent Business Highlights

  • Grew total customers to 15,839 at June 30, 2015, up 36% from June 30, 2014.
  • Increased average subscription revenue per customer (ASRPC) during the second quarter of 2015 to $10,127 from $8,823 in the second quarter of 2014.

"The first half of 2015 has been a transformative time for HubSpot," said Brian Halligan, Chairman and CEO.  "We've seen tremendous momentum, from strong revenue growth and positive cash flow from operations to improved margins.  We see our positive growth as a sign that our solve-for-the-customer mentality is working and that our marketing and sales products are in turn helping our customers grow their businesses."

Business Outlook

Based on information available as of August 6, 2015, HubSpot is issuing guidance for the third quarter of 2015 and raising guidance for full year 2015 as indicated below.

Third Quarter 2015:

  • Total revenue is expected to be in the range of $44.0 million to $45.0 million.
  • Non-GAAP operating loss is expected to in the range of ($11.3) million to ($10.3) million. This excludes stock-based compensation expense of approximately $4.6 million and amortization of acquired intangible assets of approximately $26 thousand.
  • Non-GAAP net loss per common share is expected to be in the range of ($0.34) to ($0.32). This excludes stock-based compensation expense of approximately $4.6 million and amortization of acquired intangible assets of approximately $26 thousand. This assumes approximately 33.9 million weighted common shares outstanding.

Full Year 2015:

  • Total revenue is expected to be in the range of $171.7 million to $173.7 million.
  • Non-GAAP operating loss is expected to in be in the range of ($30.9) million to ($28.9) million. This excludes stock-based compensation expense of approximately $21.5 million and amortization of acquired intangible assets of approximately $96 thousand.
  • Non-GAAP net loss per common share is expected to be in the range of ($0.92) to ($0.88). This excludes stock-based compensation expense of approximately $21.5 million and amortization of acquired intangible assets of approximately $96 thousand. This assumes approximately 33.3 million weighted common shares outstanding.

Conference Call Information

HubSpot will host a conference call on Thursday, August 6, 2015, at 5:00 p.m. Eastern Time (ET) to discuss its second quarter 2015 financial results and business outlook.  To access this call, dial (877) 201-0168 (domestic) or (647) 788-4901 (international).  The conference ID is 69239654. Additionally, a live webcast of the conference call will be available in the "Investor" section of the HubSpot's web site at www.hubspot.com.

Following the conference call, a replay will be available until 5 pm on August 13, 2015 at (855) 859-2056 (domestic) or (404) 537-3406 (international). The replay pass code is 69239654. 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 15,500 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 second quarter ended June 30, 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 third fiscal quarter of 2015 and full year 2015, 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 May 7, 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)

June 30,

December 31,

2015

2014

Assets

Current assets:

Cash and cash equivalents

$

74,235

$

123,721

Short-term investments

35,591

Accounts receivable — net of allowance for doubtful accounts of $233 and $218    at June 30, 2015 and December 31, 2014, respectively

16,217

14,270

Deferred commission expense

6,009

5,995

Restricted cash

210

230

Prepaid hosting costs

1,928

1,777

Prepaid expenses and other current assets

6,570

3,516

Total current assets

140,760

149,509

Long-term investments

42,342

Property and equipment, net

11,337

11,381

Capitalized software development costs, net

4,233

4,433

Other assets

259

116

Intangible assets, net

153

89

Goodwill

9,773

9,330

Total assets

208,857

174,858

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

2,415

2,800

Accrued compensation costs

8,182

7,660

Other accrued expenses

12,608

7,953

Capital lease obligations

235

100

Deferred rent

562

110

Deferred revenue

49,712

40,805

Total current liabilities

73,714

59,428

Capital lease obligations, net of current portion

141

78

Deferred rent, net of current portion

4,149

4,153

Deferred revenue, net of current portion

534

500

Total liabilities

78,538

64,159

Commitments and contingencies

Stockholders' equity:

Common stock

33

32

Additional paid-in capital

307,295

265,113

Accumulated other comprehensive loss

(458)

(145)

Accumulated deficit

(176,551)

(154,301)

Total stockholders' equity

130,319

110,699

Total liabilities and stockholders' equity

$

208,857

$

174,858

 

Consolidated Statements of Operations

(in thousands, except per share data)

For the Three Months Ended June 30,

For the Six Months Ended June 30,

2015

2014

2015

2014

Revenues:

Subscription

$

39,273

$

24,903

$

74,212

$

47,188

Professional services and other

3,668

2,195

6,895

4,084

Total revenue

42,941

27,098

81,107

51,272

Cost of Revenues:

Subscription

7,484

5,668

14,424

10,765

Professional services and other

3,789

2,614

7,314

5,181

Total cost of revenues

11,273

8,282

21,738

15,946

Gross profit

31,668

18,816

59,369

35,326

Operating expenses:

Research and development

8,158

4,948

15,658

9,641

Sales and marketing

26,291

17,094

50,188

33,020

General and administrative

8,541

5,051

16,255

10,356

Total operating expenses

42,990

27,093

82,101

53,017

Loss from operations

(11,322)

(8,277)

(22,732)

(17,691)

Other (expense) income:

Interest income

101

1

108

3

Interest expense

(79)

(70)

(109)

(121)

Other (expense) income

(55)

67

572

65

Total other (expense) income

(33)

(2)

571

(53)

Loss before provision for income taxes

(11,355)

(8,279)

(22,161)

(17,744)

Provision for income taxes

(37)

-

(89)

-

Net loss

(11,392)

(8,279)

(22,250)

(17,744)

Preferred stock accretion

-

(13)

-

(27)

Net loss attributable to common stockholders

$

(11,392)

$

(8,292)

$

(22,250)

$

(17,771)

Net loss attributable to common stockholders per share, basic and

   diluted

$

(0.34)

$

(1.44)

$

(0.69)

$

(3.15)

Weighted average common shares used in computing basic and

   diluted net loss attributable to common stockholders per share:

33,208

5,773

32,432

5,636

 

 

Consolidated Statements of Cash Flows

(in thousands)

Three Months Ended

June 30,

Six Months Ended

June 30,

2015

2014

2015

2014

Operating Activities:

Net loss

$

(11,392)

$

(8,279)

$

(22,250)

$

(17,744)

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

Depreciation and amortization

1,818

1,604

3,565

3,047

Stock-based compensation

5,642

1,176

10,783

2,248

Provision for deferred income taxes

26

Provision for doubtful accounts

245

158

454

258

Amortization of bond premium discount

190

192

Noncash rent expense

24

115

192

206

Unrealized currency translation

159

(289)

Changes in assets and liabilities

Accounts receivable

(912)

(1,127)

(2,572)

(2,329)

Prepaid expenses and other assets

(2,201)

(195)

(3,352)

(203)

Deferred commission expense

(18)

(313)

(14)

(590)

Accounts payable

800

702

(310)

60

Accrued expenses

3,890

590

4,542

1,232

Restricted cash

220

157

Deferred rent

265

232

265

1,234

Deferred revenue

3,068

2,799

9,531

7,530

Net cash and cash equivalents provided by (used in)

operating activities

1,578

(2,318)

763

(4,894)

Investing Activities:

Purchases of investments

(52,499)

(78,283)

Purchases of property and equipment

(158)

(2,444)

(1,183)

(4,924)

Capitalization of software development costs

(1,022)

(1,418)

(1,792)

(2,372)

Acquisition of a business

-

(600)

Acquisition of intangible assets

(80)

(80)

Restricted cash

1,500

1,500

Net cash and cash equivalents used in investing activities

(53,679)

(2,442)

(81,858)

(5,876)

Financing Activities:

Secondary offering  proceeds, net of offering costs paid of $573

33,679

Payment of offering costs

(435)

Proceeds from draw-down on line of credit

5,000

5,000

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

(7,852)

(7,852)

Proceeds related to issuance of common stock under stock plans

5,223

635

6,189

2,039

Payment of deferred initial public offering costs

(1,481)

(1,507)

Repayments of capital lease obligations

(25)

(28)

(49)

(75)

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

(3,089)

4,126

31,967

5,457

Effect of exchange rate changes on cash

50

(31)

(358)

(28)

Net decrease in cash and cash equivalents

(55,140)

(665)

(49,486)

(5,341)

Cash and cash equivalents, beginning of period

129,375

7,967

123,721

12,643

Cash and cash equivalents, end of period

$

74,235

$

7,302

$

74,235

$

7,302

 

 

Reconciliation of non-GAAP operating loss and operating

margin

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

(in thousands, except percentages)

GAAP operating loss

$

(11,322)

$

(8,277)

$

(22,732)

$

(17,691)

Stock-based compensation

5,642

1,176

10,783

2,248

Amortization of acquired intangible assets

26

50

44

112

Non-GAAP operating loss

$

(5,654)

$

(7,051)

$

(11,905)

$

(15,331)

GAAP operating margin

(26.4%)

(30.5%)

(28.0%)

(34.5%)

Non-GAAP operating margin

(13.2%)

(26.0%)

(14.7%)

(29.9%)

 

 

Reconciliation of non-GAAP net loss attributable to

common stockholders

Three Months Ended

June 30,

Six Months Ended

June 30,

2015

2014

2015

2014

(in thousands, except per share amounts)

GAAP net loss attributable to common stockholders

$

(11,392)

$

(8,292)

$

(22,250)

$

(17,771)

Stock-based compensation

5,642

1,176

10,783

2,248

Amortization of acquired intangibles

26

50

44

112

Non-GAAP net loss attributable to common stockholders

$

(5,724)

$

(7,066)

$

(11,423)

$

(15,411)

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

basic and diluted

$

(0.17)

$

(1.22)

$

(0.35)

$

(2.73)

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

33,208

5,773

32,432

5,636

 

 

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

(in thousands, except percentages)

Three Months Ended June 30,

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

$

7,484

$

3,789

$

8,158

$

26,291

$

8,541

$

5,668

$

2,614

$

4,948

$

17,094

$

5,051

Stock -based compensation

(92)

(347)

(1,629)

(2,077)

(1,497)

(24)

(83)

(153)

(475)

(441)

Amortization of acquired intangibles

(19)

-

-

(7)

-

(43)

-

-

(7)

-

Non-GAAP expense

$

7,373

$

3,442

$

6,529

$

24,207

$

7,044

$

5,601

$

2,531

$

4,795

$

16,612

$

4,610

GAAP expense as a percentage of revenue

17

%

9

%

19

%

61

%

20

%

21

%

10

%

18

%

63

%

19

%

Non-GAAP expense as a percentage of revenue

17

%

8

%

15

%

56

%

16

%

21

%

9

%

18

%

61

%

17

%

Six Months Ended June 30,

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

$

14,424

$

7,314

$

15,658

$

50,188

$

16,255

$

10,765

$

5,181

$

9,641

$

33,020

$

10,356

Stock -based compensation

(159)

(604)

(3,262)

(4,132)

(2,626)

(40)

(152)

(299)

(887)

(870)

Amortization of acquired intangibles

(30)

-

-

(14)

-

(105)

-

-

(7)

-

Non-GAAP expense

$

14,235

$

6,710

$

12,396

$

46,042

$

13,629

$

10,620

$

5,029

$

9,342

$

32,126

$

9,486

GAAP expense as a percentage of revenue

18

%

9

%

19

%

62

%

20

%

21

%

10

%

19

%

64

%

20

%

Non-GAAP expense as a percentage of revenue

18

%

8

%

15

%

57

%

17

%

21

%

10

%

18

%

63

%

19

%

 

 

Reconciliation of non-GAAP subscription margin

(in thousands, except percentages)

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

GAAP subscription margin

$

31,789

$

19,235

$

59,788

$             36,423

Stock -based compensation

92

24

159

40

Amortization of acquired intangible

assets

19

43

30

105

Non-GAAP subscription margin

$

31,900

$

19,302

$

59,977

$

36,568

GAAP subscription margin percentage

80.9

%

77.2

%

80.6

%

77.2

%

Non-GAAP subscription margin percentage

81.2

%

77.5

%

80.8

%

77.5

%

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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