HubSpot Reports Q2 2018 Results

CAMBRIDGE, Mass., Aug. 1, 2018 /PRNewswire/ — HubSpot, Inc. (NYSE: HUBS), a leading growth platform, today announced financial results for the second quarter ended June 30, 2018.

Financial Highlights:

Revenue

• Total revenue was $122.6 million, up 38% compared to the second quarter of 2017.
• Subscription revenue was $116.6 million, up 38% compared to the second quarter of 2017.
• Professional services and other revenue was $6.0 million, up 27% compared to the second quarter of 2017.

Operating Income (Loss)

• GAAP operating margin was (11.5%) for the quarter, compared to (11.9%) in the second quarter of 2017. 
• Non-GAAP operating margin was 5.3% for the quarter, an improvement of approximately 2.6 percentage points from 2.7% in the second quarter of 2017.
• GAAP operating loss was ($14.1) million for the quarter, compared to ($10.6) million in the second quarter of 2017.
• Non-GAAP operating income was $6.5 million for the quarter, compared to $2.4 million in the second quarter of 2017. Non-GAAP operating income and margin excludes stock-based compensation expense, amortization of acquired intangible assets, and acquisition related expenses.

Net Income (Loss)

• GAAP net loss was ($18.2) million, or ($0.48) per basic and diluted share for the quarter, compared to ($9.5) million, or ($0.26) per basic and diluted share, in the second quarter of 2017.
• Non-GAAP net income was $7.4 million, or $0.19 per basic and $0.18 per diluted share for the quarter, compared to $2.6 million, or $0.07 per basic and diluted share, in the second quarter of 2017.  Non-GAAP net income per share excludes stock-based compensation expense, amortization of acquired intangible assets, acquisition related expenses, non-cash interest expense for amortization of debt discount and debt issuance costs, and the deferred income tax benefit from convertible notes.
• Second quarter weighted average basic and diluted shares outstanding for GAAP net loss per share was 38.4 million, compared to 36.7 million basic and diluted shares in the second quarter of 2017.
• Second quarter weighted average basic and diluted shares outstanding for non-GAAP net income per share was 38.4 million and 41.8 million respectively, compared to 36.7 million and 39.2 million, respectively, in the second quarter of 2017.

Balance Sheet and Cash Flow

• The company’s cash, cash equivalents and investments balance was $566.6 million as of June 30, 2018.
• During the second quarter, the company generated $5.2 million of free cash flow compared to $1.8 million during the second quarter of 2017. 

Additional Recent Business Highlights

• Grew total customers to 48,091 at June 30, 2018, up 40% from June 30, 2017.
• Total average subscription revenue per customer was $10,004 during the second quarter of 2018 down 2% compared to the second quarter of 2017.

“Q2 was another strong quarter for HubSpot and I’m really pleased with our results,” said Brian Halligan, co-founder and CEO. “We’re starting to see the fruits of our investment in R&D and we’re excited about the progress we’ve made towards building out our suite of products. We also added a great new CFO in Kate Bueker.  I’ve never been more excited about the future of HubSpot.” 

Business Outlook
Based on information available as of August 1, 2018, HubSpot is issuing guidance for the third quarter of 2018 and raising guidance for full year 2018 as indicated below.

Third Quarter 2018:

• Total revenue is expected to be in the range of $125.6 million to $126.6 million.
• Non-GAAP operating income is expected to be in the range of $1.0 million to $2.0 million. This excludes stock-based compensation expense of approximately $19.2 million, amortization of acquired intangible assets of approximately $500 thousand, and acquisition related expenses of approximately $800 thousand.
• Non-GAAP net income per common share is expected to be in the range of $0.03 to $0.05.  This excludes stock-based compensation expense of approximately $19.2 million, amortization of acquired intangible assets of approximately $500 thousand, acquisition related expenses of approximately $800 thousand, and non-cash interest expense for the amortization of debt discount and debt issuance costs of approximately $5.1 million.  This assumes approximately 43.1 million weighted average diluted shares outstanding.

Full Year 2018:

• Total revenue is expected to be in the range of $496.8 million  to $498.8 million, up from our previously guided range of  $489 million to $492 million.
• Non-GAAP operating income is expected to in be in the range of $24.3 million to $26.3 million, up from our previously guided range of $22 million to $25 million. This excludes stock-based compensation expense of approximately $75 million, amortization of acquired intangible assets of approximately $1.4 million, and acquisition related expenses of approximately $2.7 million.
• Non-GAAP net income per common share is expected to be in the range of $0.63 to $0.67, up from our previously guided range of $0.59 to $0.65. This excludes stock-based compensation expense of approximately $75 million, amortization of acquired intangible assets of approximately $1.4 million, acquisition related expenses of approximately $2.7 million, and non-cash interest expense for the amortization of debt discount and debt issuance costs of approximately $20.3 million. This assumes approximately 42.5 million weighted average diluted shares outstanding.

HubSpot’s estimates of stock-based compensation, amortization of acquired intangible assets,  acquisition-related expenses, and non-cash interest expense for amortization of debt discount and debt issuance costs in future periods assume, among other things, the occurrence of no additional acquisitions, investments or restructurings, and no further revisions to stock-based compensation and related expenses.

Conference Call Information
HubSpot will host a conference call on Wednesday, August 1, 2018 at 4:30 p.m. Eastern Time (ET) to discuss the company’s second quarter financial results and its business outlook.  To access this call, dial (866) 393-4306 (domestic) or (734) 385-2616 (international). The conference ID is 8395876. Additionally, a live webcast of the conference call will be available in the “Investors” section of HubSpot’s website at www.hubspot.com.

Following the conference call, a replay will be available at (855) 859-2056 (domestic) or (404) 537-3406 (international). The replay pass code is 8395876. An archived webcast of this conference call will also be available in the “Investors” section of HubSpot’s website 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 growth platform. Over 48,000 total customers in over 100 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 GAAP to non-GAAP operating income (loss), operating margin, subscription margin, expense, expense as a percentage of revenue, net income (loss), and free cash flow for the three and six months ended June 30, 2018 and 2017. 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 regarding management’s expectations of future financial and operational performance and operational expenditures, expected growth, and business outlook, including our financial guidance for the third fiscal quarter and full year 2018; statements regarding our plans to build out our product suite; and statements regarding our ability to achieve continued success into the future.  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 acquire and integrate companies and assets; 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 10, 2018 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.