Core Insights - HubSpot, Inc. reported stronger-than-expected fourth-quarter results with earnings of $2.32 per share, surpassing the analysts' consensus estimate of $2.19, and quarterly revenue of $703.17 million, exceeding the consensus estimate of $673.32 million [1] - CEO Yamini Rangan highlighted 2024 as a transformative year for HubSpot, emphasizing the integration of AI into their products and platforms, which is driving value for customers [2] - The company projects first-quarter revenue between $697 million and $699 million, below the estimate of $705.71 million, and EPS between $1.74 and $1.76, compared to the $2.00 estimate [2] Analyst Reactions - Oppenheimer analyst Ken Wong maintained an Outperform rating and raised the price target from $850 to $900 [4] - Piper Sandler analyst Brent Bracelin maintained a Neutral rating and increased the price target from $640 to $808 [4] - Canaccord Genuity analyst David Hynes maintained a Buy rating and raised the price target from $710 to $900 [4] - Morgan Stanley analyst Keith Weiss maintained an Overweight rating and boosted the price target from $835 to $898 [4] - Barclays analyst Ryan Macwilliams maintained an Equal-Weight rating and raised the price target from $725 to $815 [4] - Needham analyst Joshua Reilly maintained a Buy rating and increased the price target from $730 to $900 [4] - Truist Securities analyst Terry Tillman reiterated a Buy rating and raised the price target from $750 to $900 [4]

Financial Data and Key Metrics Changes - Q4 revenue grew 20% year-over-year in constant currency, while full year 2024 revenue grew 21% in constant currency [21][47] - Operating margin was 19% in Q4 and 17.5% for the full year, both up 200 basis points year-over-year [21][52] - Net income for Q4 was $125 million, or $2.32 per fully diluted share [52] - Free cash flow was $163 million in Q4, representing 23% of revenue, and $488 million for the full year, or 19% of revenue [52][66] Business Line Data and Key Metrics Changes - Subscription revenue grew 21% year-over-year, while services and other revenue increased 36% in Q4 [47][49] - Multi-hub adoption reached new heights, with over 35% of pro plus customers using four or more hubs, up 7% year-over-year [24] - AI-powered features contributed significantly to growth, with the Content Hub's attach rate to the Marketing Hub increasing from 13% to 54% [29][30] Market Data and Key Metrics Changes - Domestic revenue grew 19% year-over-year, while international revenue growth was 20% in constant currency [48][49] - The company added over 9,800 net new customers in Q4, ending the year with nearly 248,000 customers, a 21% year-over-year increase [49][50] - Net revenue retention increased 2 points sequentially to 104%, reflecting continued momentum from the new seat-based pricing model [50][90] Company Strategy and Development Direction - The company aims to become an AI-first customer platform by embedding AI across all hubs and the entire platform [28][43] - Focus on four key growth levers: rep-driven growth, improved retention, migration to new pricing, and ongoing product innovation with AI [44][45] - The strategy includes enhancing customer focus and making products easy, fast, unified, and AI-first [43][44] Management's Comments on Operating Environment and Future Outlook - Management noted improvements in the demand environment, with customers more open to discussing growth initiatives [131] - The company expects a seasonal downtick in net revenue retention in Q1 but anticipates overall improvement for the full year of 2025 [50][54] - The management emphasized the importance of delivering consistent value before monetizing AI features [76][128] Other Important Information - The company experienced a significant increase in the user base of Agent.AI, growing from 50,000 to over 900,000 users [42][109] - The company expects foreign exchange to be a 200 basis point headwind to 2025 revenue growth [54][66] - The company plans to unveil new capabilities at their spring spotlight in April and later at Inbound in September [43][44] Q&A Session Summary Question: Discussion on AI monetization and customer conversations - Management stated that their strategy is to embed AI across every hub, focusing on driving customer acquisition and expansion [72][76] - They plan to introduce a hybrid pricing model combining seat-based and usage-based pricing as customers see consistent value from AI [75][76] Question: Insights on cost efficiency with AI models - Management noted a significant reduction in cost of goods sold (COGS) due to increased competition and advancements in AI models [83][85] Question: Upselling activity and customer sentiment - Management indicated that net revenue retention improved due to the new seat-based pricing model, but overall upgrades remain a challenge [90][92] Question: Partner behavior changes and revenue acceleration - Management explained changes to partner commissions aimed at increasing customer value and engagement, resulting in a 68% year-over-year increase in co-selling [100][101] Question: New customer acquisitions and ARPC growth - Management expects net customer additions to remain in the 9,000 to 10,000 range, with a balanced mix across different customer tiers [105][106] Question: Control tower for AI agents - Management discussed the importance of composability among agents and the strategy to build a network of AI agents within HubSpot [108][109] Question: Internal AI adoption and expense growth - Management highlighted that internal AI adoption is expected to drive efficiency and allow for reinvestment in R&D and go-to-market capacity [114][115]

Core Insights - HubSpot, Inc. is conducting its Q4 2024 earnings conference call to discuss financial results and business performance [2][3] Company Overview - The call features key company executives including CEO Yamini Rangan, Co-Founder and CTO Dharmesh Shah, and CFO Kate Bueker [3] Financial Performance - The earnings call will cover results announced in a press release issued after market close, indicating a structured approach to financial reporting [3]

Investor Presentation Q4 2024 Safe Harbor Statement This presentation 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, foreign currency movement, and business outlook, including our financial guidance for the first fiscal quarter of and full year 2025 and our long-term financial framewo ...

Core Insights - HubSpot reported revenue of $703.17 million for the quarter ended December 2024, reflecting a year-over-year increase of 20.8% and surpassing the Zacks Consensus Estimate by 4.38% [1] - The company's EPS for the quarter was $2.32, up from $1.76 in the same quarter last year, exceeding the consensus estimate of $2.19 by 5.94% [1] Financial Performance Metrics - Total customers reached 247,939, exceeding the five-analyst average estimate of 247,373 [4] - Average subscription revenue per customer was $11,312, compared to the average estimate of $10,845.89 [4] - Subscription revenues amounted to $687.32 million, surpassing the average estimate of $659.33 million, marking a 20.5% year-over-year increase [4] - Professional services and other revenues were reported at $15.86 million, exceeding the estimated $14.42 million and reflecting a 35.7% year-over-year increase [4] - Non-GAAP gross margin for subscription was $606.50 million, compared to the average estimate of $578.40 million [4] Stock Performance - HubSpot's shares have returned +11.5% over the past month, outperforming the Zacks S&P 500 composite's +4.3% change [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

HubSpot (HUBS) came out with quarterly earnings of $2.32 per share, beating the Zacks Consensus Estimate of $2.19 per share. This compares to earnings of $1.76 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 5.94%. A quarter ago, it was expected that this cloud-based marketing and sales software platform would post earnings of $1.89 per share when it actually produced earnings of $2.18, delivering a surprise of 15.34%.Over the ...

HubSpot reported strong quarterly earnings, outpacing both management's guidance and analyst estimates. It was driven by impressive revenue growth and enhanced platform capabilities.Customer relationship management software provider HubSpot (HUBS 0.13%) reported fourth-quarter earnings on Wednesday, Feb. 12 that topped analysts' consensus expectations. Adjusted EPS (diluted) came in at $2.32, outperforming the expected $2.19. Revenue of $703.2 million surpassed estimates of $673 million as well as managemen ...

Here's our initial take on HubSpot's (HUBS 0.13%) fourth-quarter financial report.Key MetricsMetricQ4 2023Q4 2024Changevs. ExpectationsRevenue$581.9 million$703.1 million+21%BeatAdjusted earnings per share$1.83$2.42+32%BeatCustomers205,091247,939+21%n/aSubscription revenue per customer$11,365$11,312-1%n/aSolid Growth, But a Slowdown Is ComingHubSpot easily beat analyst expectations for both revenue and adjusted earnings per share in the fourth quarter. Both revenue and the total customer count jumped by 21% ...

Employee Growth and Management - The company had 8,246 full-time employees as of December 31, 2024, up from 7,663 as of December 31, 2023, indicating significant growth in headcount[100]. - The company relies heavily on its management team and key employees, and the loss of any could adversely affect its business[128]. - The company competes for skilled personnel in a highly competitive market, which may hinder its ability to execute its business strategy[129]. - The company faces challenges in maintaining its corporate culture with a hybrid workforce model, which could impact innovation and employee retention[127]. Revenue and Financial Performance - The company generated a net income of $4.6 million in 2024, compared to net losses of $164.5 million in 2023 and $107.3 million in 2022, resulting in an accumulated deficit of $799.8 million as of December 31, 2024[202]. - The company has $640.0 million of U.S. federal and $723.7 million of state net operating loss carryforwards, with state losses beginning to expire in 2027[201]. - The company has a history of fluctuating quarterly operating results, making future performance difficult to predict[205]. - The company’s efforts to grow its business may incur significant costs that could exceed revenue increases, impacting profitability[202]. Market Competition and Strategy - The company faces intense competition in the software market, which could impact its ability to add new customers and retain existing ones[94]. - The company’s growth strategy includes a scalable pricing model, but if cross-selling efforts are unsuccessful, revenue and operating results may suffer[91]. - The company’s ability to maintain its thought leadership position is crucial for attracting new customers and retaining existing ones[104]. - The company’s brand development is critical for achieving widespread awareness and attracting new customers, with significant past investments yielding strong brand recognition[105]. Subscription and Revenue Risks - The company relies heavily on subscription renewals, with most agreements being one year or less, which poses a risk to future revenue if renewal rates decline[92]. - The company’s subscription-based revenue recognition may not immediately reflect declines in new or renewed subscriptions, potentially impacting future financial results[93]. Investment and Development - The company must continue to invest in research and development to remain competitive, particularly in AI and machine learning, or risk losing market opportunities[111]. - The company has made significant investments in developing next-generation solutions, including AI and machine learning technologies, but market acceptance remains uncertain[112]. - The company is investing in AI technologies, but ethical concerns and potential regulatory scrutiny could lead to reputational harm and increased R&D costs[126]. International Operations and Risks - The company is expanding its international operations, which involves risks such as regulatory compliance, cultural differences, and currency fluctuations[123]. - The company has increased exposure to currency exchange rate fluctuations due to international operations, which may adversely affect revenue and operating results[132]. - In Q1 2024, the company implemented a hedging program to mitigate foreign exchange impacts, but there is no guarantee of its effectiveness[132]. Cybersecurity and Data Protection - The company faces significant risks related to cybersecurity, including potential unauthorized access to customer data, which could harm its reputation and lead to substantial liabilities[152]. - Cyber incidents have been increasing in sophistication and frequency, with various types of attacks such as ransomware and phishing posing ongoing threats to the company's operations[154]. - The company has experienced past security incidents, indicating a persistent risk of data breaches that could disrupt business operations and lead to financial losses[156]. - The company may incur significant costs associated with remediation and implementing additional security measures in the event of a data breach[157]. Regulatory Compliance and Legal Risks - The company is subject to various governmental regulations regarding data protection and privacy, and failure to comply could adversely affect its business[167]. - The evolving regulatory landscape for privacy and data protection may increase compliance costs and risks for the company, particularly with laws like the California Consumer Privacy Act (CCPA) and the EU General Data Protection Regulation (GDPR) imposing significant obligations[171][176]. - Non-compliance with GDPR could result in monetary penalties of up to €20 million or 4% of worldwide annual revenue, whichever is higher[176]. - The company may face legal challenges related to intellectual property rights, which could divert resources and negatively impact its business[160]. Financial Liabilities and Debt - The company incurred indebtedness of $460.0 million from the issuance of 0.375% convertible senior notes due June 1, 2025[210]. - The company’s ability to service its debt will depend on its future cash flow generation, which is subject to various external factors[210]. - The company may face increased vulnerability to adverse changes in economic conditions due to its existing indebtedness[212]. Economic and Market Conditions - Global inflation rates have risen to levels not seen in decades, potentially decreasing demand for products and increasing operating costs[135]. - Economic uncertainty may lead to reduced customer spending on the company's products, affecting growth and operating results[138]. - Catastrophic events could disrupt business operations and negatively impact financial results[231]. - The company is vulnerable to regional epidemics or global pandemics, which may adversely affect operations and financial results[232]. - Climate change poses long-term risks that could disrupt business and increase operational costs[233].

[Q4 and Full Year 2024 Financial Results](index=1&type=section&id=Q4%20and%20Full%20Year%202024%20Financial%20Results) HubSpot reported strong financial performance for Q4 and full year 2024, showing significant revenue growth, improved profitability, and robust cash flow generation [Q4 2024 Financial Performance](index=1&type=section&id=Q4%202024%20Financial%20Performance) HubSpot reported strong financial performance for Q4 2024, with total revenue increasing 21% year-over-year. The company achieved GAAP net income and significantly improved non-GAAP operating income and net income compared to the prior year Q4 2024 Financial Performance Summary | Metric | Q4 2024 (Millions) | Q4 2023 (Millions) | Year-over-Year Change | Year-over-Year Change (Constant Currency) | | :-------------------------------- | :------------------ | :------------------ | :--------- | :----------------------------- | | **Total Revenue** | $703.2 | $581.9 | 21% | 20% | | Subscription Revenue | $687.3 | $570.2 | 21% | - | | Professional Services & Other Revenue | $15.9 | $11.7 | 36% | - | | **GAAP Operating Margin** | (1.5%) | (4.0%) | +2.5 percentage points | - | | **Non-GAAP Operating Margin** | 18.9% | 17.1% | +1.8 percentage points | - | | **GAAP Net Income (Loss)** | $4.9 | ($12.4) | Not Applicable | - | | GAAP EPS (Diluted) | $0.09 | ($0.25) | Not Applicable | - | | **Non-GAAP Net Income** | $124.9 | $93.3 | 33.9% | - | | Non-GAAP EPS (Diluted) | $2.32 | $1.77 | 31.1% | - | [Full Year 2024 Financial Performance](index=1&type=section&id=Full%20Year%202024%20Financial%20Performance) For the full year 2024, HubSpot demonstrated consistent growth, with total revenue up 21% and a significant turnaround from a GAAP net loss in 2023 to a net income in 2024. Non-GAAP profitability also saw substantial improvement Full Year 2024 Financial Performance Summary | Metric | FY 2024 (Billions/Millions) | FY 2023 (Billions/Millions) | Year-over-Year Change | Year-over-Year Change (Constant Currency) | | :-------------------------------- | :------------------ | :------------------ | :--------- | :----------------------------- | | **Total Revenue** | $2.63 billion | $2.17 billion | 21% | 21% | | Subscription Revenue | $2.57 billion | $2.12 billion | 21% | - | | Professional Services & Other Revenue | $58.0 | $46.8 | 24% | - | | **GAAP Operating Margin** | (2.6%) | (9.3%) | +6.7 percentage points | - | | **Non-GAAP Operating Margin** | 17.5% | 15.5% | +2.0 percentage points | - | | **GAAP Net Income (Loss)** | $4.6 | ($164.5) | Not Applicable | - | | GAAP EPS (Diluted) | $0.09 | ($3.30) | Not Applicable | - | | **Non-GAAP Net Income** | $434.1 | $313.1 | 38.6% | - | | Non-GAAP EPS (Diluted) | $8.12 | $6.00 | 35.3% | - | [Balance Sheet and Cash Flow Highlights](index=3&type=section&id=Balance%20Sheet%20and%20Cash%20Flow%20Highlights) HubSpot significantly increased its cash and investments balance and generated strong operating and free cash flow in both Q4 and the full year 2024, indicating robust liquidity and financial health Balance Sheet Highlights (in Billions of US dollars) | Metric | As of Dec 31, 2024 | As of Dec 31, 2023 | Year-over-Year Change | | :------------------------------------ | :----------------------------- | :----------------------------- | :--------- | | Cash, Cash Equivalents, & Investments | $2.2 billion | $1.33 billion | 65.4% | Q4 2024 Cash Flow Highlights (in Millions of US dollars) | Metric | Q4 2024 | Q4 2023 | Year-over-Year Change | | :------------------------------------ | :------------------ | :------------------ | :--------- | | Cash from Operating Activities | $194.1 | $104.3 | 86.1% | | Non-GAAP Operating Cash Flow | $198.6 | $108.7 | 82.7% | | Non-GAAP Free Cash Flow | $163.0 | $83.0 | 96.4% | Full Year 2024 Cash Flow Highlights (in Millions of US dollars) | Metric | FY 2024 | FY 2023 | Year-over-Year Change | | :------------------------------------ | :------------------ | :------------------ | :--------- | | Cash from Operating Activities | $598.6 | $351.0 | 70.5% | | Non-GAAP Operating Cash Flow | $615.6 | $392.5 | 56.8% | | Non-GAAP Free Cash Flow | $488.1 | $292.5 | 66.9% | [Recent Business Highlights](index=3&type=section&id=Recent%20Business%20Highlights) HubSpot's CEO emphasized a transformative year with significant AI integration, while the company continued to expand its customer base and calculated billings [CEO Commentary and Strategic Direction](index=3&type=section&id=CEO%20Commentary%20and%20Strategic%20Direction) CEO Yamini Rangan highlighted 2024 as a transformative year for HubSpot, emphasizing the company's leadership as a platform company and its significant progress in embedding AI across its products. The strategic focus for 2025 is to solidify its position as the leading AI-first customer platform for scaling companies - HubSpot's CEO, Yamini Rangan, stated that 2024 was a transformative year, marked by reimagining products, platform, and company with AI. The company made significant progress in embedding AI across its hubs, driving value for customers[5](index=5&type=chunk) - Heading into 2025, HubSpot is focused on cementing its position as the **leading AI-first customer platform** for scaling companies, with increased clarity on strategy, alignment on outcomes, and urgency in execution[5](index=5&type=chunk) [Customer and Revenue Metrics](index=3&type=section&id=Customer%20and%20Revenue%20Metrics) HubSpot continued to expand its customer base, growing 21% year-over-year, while calculated billings also saw strong growth. Average Subscription Revenue Per Customer remained stable Customer Count | Metric | As of Dec 31, 2024 | As of Dec 31, 2023 | Year-over-Year Change | | :-------------------------------- | :------------------ | :------------------ | :--------- | | Customers | 247,939 | 204,900 (approx) | 21% | Q4 2024 Revenue Metrics (in US dollars/Millions of US dollars) | Metric | Q4 2024 | Q4 2023 | Year-over-Year Change | | :-------------------------------- | :------------------ | :------------------ | :--------- | | Average Subscription Revenue Per Customer | $11,312 | $11,369 (approx) | (0.5%) | | Calculated Billings | $767.6 million | $661.7 million (approx) | 16% | | Calculated Billings (Constant Currency) | - | - | 21% | [Business Outlook](index=3&type=section&id=Business%20Outlook) HubSpot provided optimistic financial guidance for Q1 and the full year 2025, projecting continued revenue growth and improved profitability [First Quarter 2025 Guidance](index=3&type=section&id=First%20Quarter%202025%20Guidance) HubSpot provided guidance for Q1 2025, projecting continued revenue growth and positive non-GAAP operating income and net income per share Q1 2025 Financial Guidance (in Millions of US dollars, except per share amounts) | Metric | Q1 2025 Guidance | Year-over-Year Growth (As-reported) | Year-over-Year Growth (Constant Currency) | | :-------------------------------- | :-------------------------- | :----------------------- | :----------------------------- | | Total Revenue | $697.0 - $699.0 | 13% | 15% | | Non-GAAP Operating Income | $98.0 - $99.0 | - | - | | Non-GAAP Operating Profit Margin | 14% | - | - | | Non-GAAP Net Income Per Common Share | $1.74 - $1.76 | - | - | | Weighted Average Diluted Shares Outstanding | ~54.1 million | - | - | [Full Year 2025 Guidance](index=3&type=section&id=Full%20Year%202025%20Guidance) For the full year 2025, HubSpot anticipates sustained revenue growth and further expansion of non-GAAP operating income and net income per share, reflecting confidence in its strategic initiatives Full Year 2025 Financial Guidance (in Billions/Millions of US dollars, except per share amounts) | Metric | FY 2025 Guidance | Year-over-Year Growth (As-reported) | Year-over-Year Growth (Constant Currency) | | :-------------------------------- | :-------------------------- | :----------------------- | :----------------------------- | | Total Revenue | $2.985 billion - $2.995 billion | 14% | 16% | | Non-GAAP Operating Income | $543.0 - $547.0 | - | - | | Non-GAAP Operating Profit Margin | 18% | - | - | | Non-GAAP Net Income Per Common Share | $9.11 - $9.19 | - | - | | Weighted Average Diluted Shares Outstanding | ~53.9 million | - | - | [Consolidated Financial Statements](index=8&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements for 2024 reveal HubSpot's strengthened balance sheet, improved operational profitability, and robust cash flow generation [Consolidated Balance Sheets](index=8&type=section&id=Consolidated%20Balance%20Sheets) HubSpot's balance sheet as of December 31, 2024, shows a significant increase in total assets, driven by higher cash and investments, and a corresponding increase in total stockholders' equity Consolidated Balance Sheets (in thousands of US dollars) | Metric | December 31, 2024 | December 31, 2023 | | :------------------------------------ | :------------------ | :------------------ | | **Assets** | | | | Cash and cash equivalents | $512,667 | $387,987 | | Short-term investments | $1,556,828 | $1,000,245 | | Total current assets | $2,633,603 | $1,871,540 | | Total assets | $3,795,833 | $3,071,392 | | **Liabilities and stockholders' equity** | | | | Convertible senior notes (current) | $458,184 | — | | Deferred revenue (current) | $784,253 | $672,150 | | Total current liabilities | $1,573,399 | $942,008 | | Total liabilities | $1,887,547 | $1,737,044 | | Total stockholders' equity | $1,908,286 | $1,334,348 | | Total liabilities and stockholders' equity | $3,795,833 | $3,071,392 | [Consolidated Statements of Operations](index=9&type=section&id=Consolidated%20Statements%20of%20Operations) The consolidated statements of operations highlight HubSpot's revenue growth and improved profitability for both the fourth quarter and full year 2024, with a notable shift from operating loss to net income on a GAAP basis Consolidated Statements of Operations (in thousands of US dollars, except per share data) | Metric | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :------------------------------------ | :------- | :------- | :------- | :------- | | Total revenue | $703,172 | $581,914 | $2,627,543 | $2,170,230 | | Gross profit | $599,800 | $494,473 | $2,234,278 | $1,831,868 | | Loss from operations | ($10,849) | ($23,152) | ($67,602) | ($200,929) | | Total other income | $23,793 | $15,098 | $96,279 | $50,354 | | Income (loss) before income tax expense | $12,944 | ($8,054) | $28,677 | ($150,575) | | Net income (loss) | $4,935 | ($12,414) | $4,628 | ($164,510) | | Net income (loss) per share, diluted | $0.09 | ($0.25) | $0.09 | ($3.30) | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) HubSpot's cash flow statements demonstrate strong cash generation from operating activities, significantly increasing year-over-year for both the quarter and full year, contributing to a net increase in cash and cash equivalents Consolidated Statements of Cash Flows (in thousands of US dollars) | Metric | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :------------------------------------ | :------- | :------- | :------- | :------- | | Net cash provided by operating activities | $194,141 | $104,313 | $598,599 | $350,971 | | Net cash used in investing activities | ($85,508) | ($266,448) | ($515,861) | ($334,766) | | Net cash provided by financing activities | $10,061 | $6,648 | $53,495 | $37,011 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $102,607 | ($146,658) | $124,680 | $57,865 | | Cash, cash equivalents and restricted cash, end of period | $516,720 | $392,040 | $516,720 | $392,040 | [Non-GAAP Financial Measures and Reconciliations](index=5&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) This section provides detailed reconciliations of GAAP to non-GAAP financial measures, offering a clearer view of HubSpot's underlying operational performance [Reconciliation of Non-GAAP Operating Income and Margin](index=11&type=section&id=Reconciliation%20of%20Non-GAAP%20Operating%20Income%20and%20Margin) HubSpot's non-GAAP operating income and margin significantly improved in both Q4 and full year 2024, primarily by excluding stock-based compensation, amortization of acquired intangibles, acquisition-related expenses, and restructuring charges Reconciliation of Non-GAAP Operating Income and Margin (in thousands of US dollars, except percentages) | Metric | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :------------------------------------ | :------- | :------- | :------- | :------- | | GAAP operating loss | ($10,849) | ($23,152) | ($67,602) | ($200,929) | | Stock-based compensation | 134,388 | 113,726 | 504,770 | 432,271 | | Amortization of acquired intangible assets | 2,527 | 1,304 | 9,557 | 5,311 | | Acquisition related expense | 5,863 | 3,906 | 9,496 | 3,906 | | Restructuring charges | 1,143 | 3,547 | 3,990 | 96,843 | | **Non-GAAP operating income** | **$133,072** | **$99,331** | **$460,211** | **$337,402** | | GAAP operating margin | (1.5%) | (4.0%) | (2.6%) | (9.3%) | | **Non-GAAP operating margin** | **18.9%** | **17.1%** | **17.5%** | **15.5%** | [Reconciliation of Non-GAAP Net Income](index=11&type=section&id=Reconciliation%20of%20Non-GAAP%20Net%20Income) Non-GAAP net income and diluted EPS saw substantial increases, reflecting the exclusion of non-cash and non-recurring items such as stock-based compensation, acquisition-related expenses, and the tax effects of these adjustments Reconciliation of Non-GAAP Net Income (in thousands of US dollars, except per share amounts) | Metric | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :------------------------------------ | :------- | :------- | :------- | :------- | | GAAP net income (loss) | $4,935 | ($12,414) | $4,628 | ($164,510) | | Stock-based compensation | 134,388 | 113,726 | 504,770 | 432,271 | | Acquisition related expense | 5,863 | 3,906 | 9,496 | 3,906 | | Amortization of acquired intangibles assets | 2,527 | 1,304 | 9,557 | 5,311 | | Restructuring charges | 1,143 | 3,547 | 3,990 | 96,843 | | Non-cash interest expense for amortization of debt issuance costs | 511 | 509 | 2,012 | 1,986 | | (Gain)/loss on strategic investments | (1,307) | 1,723 | (15,854) | 1,627 | | Income tax effects of non-GAAP items | (23,205) | (18,972) | (84,481) | (64,339) | | **Non-GAAP net income** | **$124,855** | **$93,329** | **$434,118** | **$313,095** | | Non-GAAP net income per share: Diluted | $2.32 | $1.77 | $8.12 | $6.00 | | Shares used in non-GAAP per share calculations: Diluted | 53,867 | 52,621 | 53,444 | 52,188 | [Reconciliation of Non-GAAP Expense and Expense as a Percentage of Revenue](index=12&type=section&id=Reconciliation%20of%20Non-GAAP%20Expense%20and%20Expense%20as%20a%20Percentage%20of%20Revenue) HubSpot's non-GAAP expenses across various categories (Cost of Subscription, R&D, S&M, G&A) were lower than GAAP figures, leading to improved expense percentages relative to revenue, reflecting the exclusion of non-cash items like stock-based compensation and amortization Reconciliation of Non-GAAP Expense and Expense as a Percentage of Revenue (in thousands of US dollars, except percentages) | Metric | Q4 2024 Non-GAAP | Q4 2023 Non-GAAP | FY 2024 Non-GAAP | FY 2023 Non-GAAP | | :------------------------------------ | :---------------- | :---------------- | :---------------- | :---------------- | | COS, Subscription | $80,821 | $69,211 | $305,740 | $268,900 | | COS, Professional services & other | $12,723 | $12,567 | $51,915 | $49,729 | | R&D | $144,553 | $125,850 | $529,123 | $418,537 | | S&M | $276,139 | $228,670 | $1,071,504 | $925,045 | | G&A | $55,864 | $46,285 | $209,050 | $170,617 | | **Non-GAAP expense as a percentage of revenue** | | | | | | COS, Subscription | 11.5% | 11.9% | 11.6% | 12.4% | | COS, Professional services & other | 1.8% | 2.2% | 2.0% | 2.3% | | R&D | 20.6% | 21.6% | 20.1% | 19.3% | | S&M | 39.3% | 39.3% | 40.8% | 42.6% | | G&A | 7.9% | 8.0% | 8.0% | 7.9% | [Reconciliation of Non-GAAP Subscription Margin](index=13&type=section&id=Reconciliation%20of%20Non-GAAP%20Subscription%20Margin) HubSpot's non-GAAP subscription margin and margin percentage improved slightly in 2024 compared to 2023, reflecting the exclusion of stock-based compensation and amortization of acquired intangible assets from GAAP figures Reconciliation of Non-GAAP Subscription Margin (in thousands of US dollars, except percentages) | Metric | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :------------------------------------ | :------- | :------- | :------- | :------- | | GAAP subscription margin | $597,811 | $496,561 | $2,232,668 | $1,839,804 | | Stock-based compensation | 6,802 | 3,542 | 23,613 | 12,652 | | Amortization of acquired intangible assets | 1,882 | 911 | 7,525 | 2,123 | | **Non-GAAP subscription margin** | **$606,495** | **$501,014** | **$2,263,806** | **$1,854,579** | | GAAP subscription margin percentage | 87.0% | 87.1% | 86.9% | 86.6% | | **Non-GAAP subscription margin percentage** | **88.2%** | **87.9%** | **88.1%** | **87.3%** | [Reconciliation of Non-GAAP Cash Flow](index=13&type=section&id=Reconciliation%20of%20Non-GAAP%20Cash%20Flow) HubSpot's non-GAAP operating cash flow and free cash flow significantly increased in both Q4 and full year 2024, demonstrating strong cash generation after adjusting for restructuring charges, property and equipment purchases, and capitalized software development costs Reconciliation of Non-GAAP Cash Flow (in thousands of US dollars) | Metric | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :------------------------------------ | :------- | :------- | :------- | :------- | | GAAP net cash provided by operating activities | $194,141 | $104,313 | $598,599 | $350,971 | | Payment of restructuring charges | 4,490 | 4,409 | 17,027 | 41,573 | | **Non-GAAP operating cash flow** | **$198,631** | **$108,722** | **$615,626** | **$392,544** | | Purchases of property and equipment | (12,726) | (8,687) | (37,939) | (33,718) | | Capitalization of software development costs | (22,915) | (17,084) | (89,636) | (66,372) | | **Non-GAAP free cash flow** | **$162,990** | **$82,951** | **$488,051** | **$292,454** | [Reconciliation of Forecasted Non-GAAP Guidance](index=13&type=section&id=Reconciliation%20of%20Forecasted%20Non-GAAP%20Guidance) HubSpot provided reconciliations for its Q1 and full year 2025 non-GAAP operating income and net income per share guidance, adjusting for stock-based compensation, amortization of acquired intangibles, acquisition-related expenses, restructuring charges, and income tax effects Reconciliation of Forecasted Non-GAAP Operating Income Guidance (in thousands of US dollars, except percentages) | Metric | Q1 2025 Forecast | FY 2025 Forecast | | :------------------------------------ | :---------------- | :---------------- | | GAAP operating loss range | ($34,027)-($33,027) | ($38,392)-($34,392) | | Stock-based compensation | 121,662 | 544,072 | | Amortization of acquired intangible assets | 2,600 | 10,400 | | Acquisition related expense | 6,615 | 22,320 | | Restructuring charges | 1,150 | 4,600 | | **Non-GAAP operating income range** | **$98,000-$99,000** | **$543,000-$547,000** | Reconciliation of Forecasted Non-GAAP Net Income Guidance (in thousands of US dollars, except per share amounts) | Metric | Q1 2025 Forecast | FY 2025 Forecast | | :------------------------------------ | :---------------- | :---------------- | | GAAP net (loss) income range | ($15,018)-($13,768) | $10,304-$15,304 | | Stock-based compensation | 121,662 | 544,072 | | Amortization of acquired intangible assets | 2,600 | 10,400 | | Acquisition related expense | 6,615 | 22,320 | | Non-cash interest expense for amortization of debt issuance costs | 491 | 837 | | Restructuring charges | 1,150 | 4,600 | | Income tax effects of non-GAAP items | (23,500)-(23,750) | (101,533)-(102,533) | | **Non-GAAP net income range** | **$94,000-$95,000** | **$491,000-$495,000** | | Non-GAAP net income per diluted share | $1.74-$1.76 | $9.11-$9.19 | [Explanation of Non-GAAP Financial Measures](index=5&type=section&id=Explanation%20of%20Non-GAAP%20Financial%20Measures) HubSpot utilizes non-GAAP financial measures to provide investors with a clearer understanding of its operational performance by excluding certain non-cash or non-recurring items. These adjustments aim to offer a more consistent comparison across periods and with peers, covering metrics like operating income, net income, subscription margin, expenses, and cash flows - Non-GAAP financial measures are used to supplement GAAP results, helping investors understand short-term and long-term financial and operational trends by excluding non-cash or non-recurring items that vary in frequency and impact on continuing operations[9](index=9&type=chunk)[27](index=27&type=chunk)[31](index=31&type=chunk) - Key adjustments for non-GAAP measures include **stock-based compensation**, **amortization of acquired intangible assets**, **acquisition-related expenses**, **non-cash interest expense**, **gains/losses on strategic investments**, and **restructuring charges**, with a fixed long-term projected tax rate of **20%** applied to non-GAAP items[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) - Calculated billings are defined as total revenue plus the sequential change in total deferred revenue. Non-GAAP operating cash flow adds restructuring charges paid to GAAP operating cash flow, while non-GAAP free cash flow further subtracts purchases of property and equipment and capitalized software development costs[28](index=28&type=chunk) - Constant currency amounts are presented to assess operating performance excluding foreign exchange rate fluctuations, converting current period results for non-USD entities using average exchange rates from the comparative period[29](index=29&type=chunk)[30](index=30&type=chunk) [Additional Information](index=5&type=section&id=Additional%20Information) This section provides background on HubSpot's platform, details for the financial results conference call, and important cautionary language regarding forward-looking statements [About HubSpot](index=5&type=section&id=About%20HubSpot) HubSpot is a customer platform designed to help businesses connect and grow, offering a unified platform with AI-powered engagement hubs, a Smart CRM, and an extensive ecosystem of integrations, community, and educational content - HubSpot provides a customer platform that helps businesses connect and grow, featuring **AI-powered engagement hubs**, a **Smart CRM**, and an ecosystem with over **1,700 App Marketplace integrations**, a community network, and educational content[12](index=12&type=chunk) [Conference Call Details](index=5&type=section&id=Conference%20Call%20Details) HubSpot hosted a conference call on February 12, 2025, to discuss its Q4 and full year 2024 financial results and business outlook. Registration and archived webcast information are available on the investor relations website - HubSpot held a conference call on **February 12, 2025**, at **4:30 p.m. ET** to discuss Q4 and full year 2024 financial results and business outlook. Registration links and an archived webcast are available on ir.hubspot.com[10](index=10&type=chunk)[11](index=11&type=chunk) [Cautionary Language Regarding Forward-Looking Statements](index=5&type=section&id=Cautionary%20Language%20Regarding%20Forward-Looking%20Statements) This press release contains forward-looking statements regarding future financial and operational performance, growth expectations, and market trends. These statements are subject to various risks and uncertainties, including those related to customer retention, market growth, technology development, macroeconomic factors, and regulatory changes, and actual results may differ materially - The press release includes forward-looking statements concerning future financial and operational performance, growth, foreign currency movement, business outlook, and market leadership, based on current views and assumptions[13](index=13&type=chunk) - Actual results may differ materially due to risks such as historical losses, ability to retain and acquire customers, market growth, product differentiation (including AI/ML), effective growth management, geopolitical conflicts, inflation, and regulatory developments on AI/ML[13](index=13&type=chunk)[14](index=14&type=chunk) - HubSpot assumes no obligation to update any forward-looking statements due to new information, future events, or otherwise[14](index=14&type=chunk)