HubSpot Reports Q1 2022 Results

CAMBRIDGE, Mass., May 5, 2022 /PRNewswire/ – HubSpot, Inc. (NYSE: HUBS), the customer relationship management (CRM) platform for scaling companies, today announced financial results for the first quarter ended March 31, 2022.

HubSpot, Inc. logo - www.hubspot.com . (PRNewsfoto/HubSpot)

HubSpot, Inc. logo – www.hubspot.com . (PRNewsfoto/HubSpot)

Financial Highlights:

Revenue

Operating Income (Loss)

  • GAAP operating margin was (2.8%), compared to (5.3%) in Q1’21.

  • Non-GAAP operating margin was 8.8%, compared to 6.7% in Q1’21.

  • GAAP operating loss was ($11.2) million, compared to ($15.0) million in Q1’21.

  • Non-GAAP operating income was $35.0 million, compared to $18.9 million in Q1’21.

Net Income (Loss)

  • GAAP net loss was ($9.3) million, or ($0.20) per basic and diluted share, compared to ($23.2) million, or ($0.50) per basic and diluted share in Q1’21.

  • Non-GAAP net income was $27.5 million, or $0.58 per basic and $0.54 per diluted share, compared to $15.7 million, or $0.34 per basic and $0.31 per diluted share in Q1’21.

  • Weighted average basic and diluted shares outstanding for GAAP net loss per share was 47.6 million, compared to 46.4 million basic and diluted shares in Q1’21.

  • Weighted average basic and diluted shares outstanding for non-GAAP net income per share was 47.6 million and 51.2 million respectively, compared to 46.4 million and 50.4 million, respectively in Q1’21.

Balance Sheet and Cash Flow

  • The company’s cash, cash equivalents, and short-term and long-term investments balance was $1.4 billion as of March 31, 2022.

  • During the first quarter, the company generated $82.2 million of operating cash flow, compared to $72.5 million during Q1’21, which excluded the $9.8 million used for the repayment of our convertible notes.

  • During the first quarter, the company generated $62.6 million of free cash flow, compared to $61.2 million during Q1’21.

Additional Recent Business Highlights

  • Grew Customers to 143,689 at March 31, 2022, up 26% from March 31, 2021.

  • Average Subscription Revenue Per Customer was $11,030 during the first quarter of 2022, up 12% compared to the first quarter of 2021.

“In the first quarter, we continued to make meaningful progress toward our goal of becoming the #1 CRM platform for scaling companies,” said Yamini Rangan, Chief Executive Officer at HubSpot. “Despite uncertainty in the world, we remained resilient and committed to empowering our customers to grow their businesses. I’m particularly excited about the Service Hub relaunch and the robust new features we introduced to help customers deliver even more exceptional service. Looking ahead, 2022 is a year of focus and consistency. We will continue to execute on our key strategy priorities and solve for our customers.”

Business Outlook
Based on information available as of May 5, 2022, HubSpot is issuing guidance for the second quarter of 2022 and full year 2022 as indicated below.

Second Quarter 2022:

  • Total revenue is expected to be in the range of $409.0 million to $410.0 million.

  • Non-GAAP operating income is expected to be in the range of $27.0 million to $28.0 million.

  • Non-GAAP net income per common share is expected to be in the range of $0.42 to $0.44. This assumes approximately 51.2 million weighted average diluted shares outstanding.

Full Year 2022:

  • Total revenue is now expected to be in the range of $1.722 billion to $1.728 billion.

  • Non-GAAP operating income is now expected to be in the range of $152.0 million to $154.0 million.

  • Non-GAAP net income per common share is now expected to be in the range of $2.40 to $2.42. This assumes approximately 51.5 million weighted average diluted shares outstanding.

Use of Non-GAAP Financial Measures
In our earnings press releases, conference calls, slide presentations, and webcasts, we may use or discuss non-GAAP financial measures, as defined by Regulation G. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed, and a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure, are included in this press release after the consolidated financial statements. Our earnings press releases containing such non-GAAP reconciliations can be found in the Investors section of our website ir.hubspot.com.

Conference Call Information
HubSpot will host a conference call on Thursday, May 5, 2022 at 4:30 p.m. Eastern Time (ET) to discuss the company’s first quarter 2022 financial results and its business outlook. To register for this conference call, please use this dial in registration link or visit HubSpot’s Investor Relations website at ir.hubspot.com. After registering, a confirmation email will be sent, including dial-in details and a unique code for entry. Participants who wish to register for the conference call webcast please use this link.

Following the conference call, a replay will be available at (866) 813-9403 (domestic) or +44 (204) 525-0658 (international). The replay passcode is 734602. An archived webcast of this conference call will also be available on HubSpot’s Investor Relations website at ir.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 CRM platform that provides software and support to help companies grow better. The platform includes marketing, sales, service, operations, and website management products that start free and scale to meet our customers’ needs at any stage of growth. Today, over 143,000 customers across more than 120 countries use HubSpot’s powerful and easy-to-use tools and integrations to attract, engage, and delight customers. Learn more at www.hubspot.com.

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 second fiscal quarter of and full year 2022; and statements regarding our positioning for future growth and market leadership; statements regarding expected market trends, future priorities and related investments, and opportunities. 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, risks associated with our history of losses; our ability to retain existing customers and add new customers; the continued growth of the market for a CRM 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 solutions partners; our ability to successfully recruit and retain highly-qualified personnel; the price volatility of our common stock; the impact of geo-political conflicts, inflation, macroeconomic instability, and the COVID-19 pandemic on our business, the broader economy, our workforce and operations, and our ability to forecast our future financial performance; and other risks set forth under the caption “Risk Factors” in our 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)

March 31,

December 31,

2022

2021

Assets

Current assets:

Cash and cash equivalents

$

408,433

$

377,013

Short-term investments

826,449

820,962

Accounts receivable

152,729

157,362

Deferred commission expense

63,210

59,849

Prepaid expenses and other current assets

40,260

38,388

Total current assets

1,491,081

1,453,574

Long-term investments

195,045

174,895

Property and equipment, net

102,751

96,134

Capitalized software development costs, net

44,020

39,858

Right-of-use assets

276,548

280,828

Deferred commission expense, net of current portion

47,181

42,681

Other assets

39,918

29,244

Intangible assets, net

9,988

10,565

Goodwill

46,770

47,075

Total assets

$

2,253,302

$

2,174,854

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

8,321

$

2,773

Accrued compensation costs

60,595

63,836

Accrued expenses and other current liabilities

84,825

74,457

Convertible senior notes

19,367

19,630

Operating lease liabilities

30,947

26,364

Deferred revenue

457,916

430,414

Total current liabilities

661,971

617,474

Operating lease liabilities, net of current portion

278,056

283,873

Deferred revenue, net of current portion

4,700

4,473

Other long-term liabilities

21,992

12,134

Convertible senior notes, net of current portion

452,747

383,101

Total liabilities

1,419,466

1,301,055

Stockholders’ equity:

Common stock

48

47

Additional paid-in capital

1,378,457

1,436,089

Accumulated other comprehensive (loss) income

(5,696)

(1,339)

Accumulated deficit

(538,973)

(560,998)

Total stockholders’ equity

833,836

873,799

Total liabilities and stockholders’ equity

$

2,253,302

$

2,174,854

Consolidated Statements of Operations

(in thousands, except per share data)

For the Three Months Ended March 31,

2022

2021

Revenues:

Subscription

$

384,956

$

270,263

Professional services and other

10,643

11,102

Total revenue

395,599

281,365

Cost of revenues:

Subscription

59,384

43,853

Professional services and other

13,552

10,881

Total cost of revenues

72,936

54,734

Gross profit

322,663

226,631

Operating expenses:

Research and development

92,736

68,396

Sales and marketing

197,134

141,017

General and administrative

43,947

32,250

Total operating expenses

333,817

241,663

Loss from operations

(11,154)

(15,032)

Other expense:

Interest income

515

475

Interest expense

(950)

(9,399)

Other income

3,692

660

Total other expense

3,257

(8,264)

Loss before income tax expense

(7,897)

(23,296)

Income tax (expense) benefit

(1,444)

137

Net loss

$

(9,341)

$

(23,159)

Net loss per share, basic and diluted

$

(0.20)

$

(0.50)

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

47,577

46,428

Consolidated Statements of Cash Flows

(in thousands)

For the Three Months Ended March 31,

2022

2021

Operating Activities:

Net loss

(9,341)

$

(23,159)

Adjustments to reconcile net loss to net cash and cash equivalents provided
by operating activities

Depreciation and amortization

12,798

11,208

Stock-based compensation

45,704

32,423

Loss on early extinguishment of 2022 Convertible Notes

2,406

Repayment of 2022 Convertible Notes attributable to the debt discount

(9,805)

Gain on strategic investments

(4,221)

Benefit from deferred income taxes

(246)

(1,006)

Amortization of debt discount and issuance costs

507

6,493

Amortization of bond discount

585

515

Unrealized currency translation

703

(49)

Changes in assets and liabilities

Accounts receivable

3,552

16,475

Prepaid expenses and other assets

(3,927)

2,715

Deferred commission expense

(8,354)

(6,305)

Right-of-use assets

6,528

10,354

Accounts payable

3,625

4,598

Accrued expenses and other liabilities

7,135

(2,429)

Operating lease liabilities

(2,318)

(9,272)

Deferred revenue

29,496

27,538

Net cash and cash equivalents provided by operating activities

82,226

62,700

Investing Activities:

Purchases of investments

(435,547)

(362,288)

Maturities of investments

405,219

376,918

Purchases of property and equipment

(9,940)

(3,967)

Acquisition of a business, net of cash acquired

(16,810)

Purchases of strategic investments

(5,046)

(1,850)

Equity method investment

(2,308)

Capitalization of software development costs

(9,722)

(7,341)

Net cash and cash equivalents used in investing activities

(55,036)

(17,646)

Financing Activities:

Proceeds from settlement of Convertible Note Hedges related to the 2022
Convertible Notes

723

Repayment of 2022 Convertible Notes attributable to the principal

(35,900)

Repayment of 2025 Convertible Notes attributable to the principal

(1,619)

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

(4,354)

(2,964)

Proceeds related to the issuance of common stock under stock plans

11,852

16,339

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

5,879

(21,802)

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

(1,649)

(3,877)

Net increase in cash, cash equivalents and restricted cash

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