Summary
HubSpot reported first quarter fiscal 2021 revenue of $281.4 million, up 41.4% from $199.0 million in the prior-year quarter. Gross profit was $226.6 million, up 41.0%, while gross margin was 80.5%, down 0.2 percentage points from 80.8%. The company ended the quarter with 113,925 customers, up 45% from 78,776 a year earlier. Average subscription revenue per customer was $9,886, down 1% from $10,018. Management attributed the customer growth to increased sales representative capacity and demand for lower priced starter products. That mix shift explains the decline in average revenue per customer. The quarter also included the launch of Operations Hub and the acquisition of the Hustle, which added advertising revenue that management does not expect to recur.
GAAP operating loss was $15.0 million, compared with $14.1 million in the prior-year quarter, so the loss widened. Operating margin was -5.3%, up from -7.1%, a 1.7 percentage point gain. GAAP net loss was $23.2 million, or $0.50 per diluted share, compared with $17.7 million, or $0.41. The net loss widened. On a non-GAAP basis, operating income was $18.9 million versus $14.6 million, and non-GAAP operating margin was 6.7%, down from 7.3%. Non-GAAP net income was $15.7 million, or $0.31 per diluted share, compared with $14.1 million, or $0.30. The gap between GAAP and non-GAAP results largely reflects stock-based compensation and other non-cash items.
Cash generation was a bright spot. Operating cash flow was $62.7 million, up 172.5% from $23.0 million in the prior-year quarter. Free cash flow was $61.2 million, compared with $7.1 million. Capital expenditures were $4.0 million, down 64.3% from $11.1 million. Deferred revenue was $336.2 million at March 31, 2021, up 40.7% from $238.9 million a year earlier. Remaining performance obligations were $269.4 million, up 46.7% from $183.7 million. Management noted that deferred revenue changes are not an accurate indicator of future revenue because billing terms vary.
For the second quarter of 2021, HubSpot guided revenue to $293 million to $297 million, non-GAAP operating income to $19 million to $21 million, and non-GAAP net income per diluted share to $0.30 to $0.32. For the full year 2021, the company guided revenue to $1,237 million to $1,247 million, non-GAAP operating income to $104 million to $106 million, and non-GAAP net income per diluted share to $1.61 to $1.65. The full-year guidance assumes approximately 50.8 million weighted average diluted shares. The second quarter guidance assumes approximately 50.9 million weighted average diluted shares. Both periods are expected to produce GAAP operating losses.
Risks remain familiar for a high-growth software company. HubSpot cited the COVID-19 pandemic, its history of losses, the ability to retain existing customers and add new customers, the continued growth of the market for a CRM platform, competition, managing growth effectively, maintaining and expanding partner relationships, and recruiting and retaining highly qualified personnel. The company also pointed to the pandemic's impact on the broader economy, its workforce, and its ability to forecast future financial performance. Management said it plans to keep investing in sales and marketing, research and development, and customer service, and it does not expect to be profitable in the near term.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2021 | Q4 FY2020 | QoQ | Q1 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $281.4M | $252.1M | +11.6% | $199.0M | +41.4% |
| Gross profit | $226.6M | $204.8M | +10.7% | $160.7M | +41.0% |
| Gross margin | 80.5% | 81.2% | -0.7 pp | 80.8% | -0.2 pp |
| Research & development | $68.4M | $55.6M | +23.1% | $46.2M | +48.0% |
| Sales & marketing | $141.0M | $127.9M | +10.3% | $102.3M | +37.8% |
| General & administrative | $32.3M | $29.0M | +11.2% | $26.3M | +22.8% |
| Total operating expenses | $241.7M | $212.4M | +13.8% | $174.8M | +38.3% |
| Operating income (loss) | -$15.0M | -$7.6M | -96.7% | -$14.1M | -6.6% |
| Operating margin | -5.3% | -3.0% | -2.3 pp | -7.1% | +1.8 pp |
| Net income (loss) | -$23.2M | -$15.4M | -50.2% | -$17.7M | -30.7% |
| Net margin | -8.2% | -6.1% | -2.1 pp | -8.9% | +0.7 pp |
| Customers | 120 | 120 | ±0.0% | 120 | ±0.0% |
Risks
The COVID-19 pandemic has materially affected how HubSpot and its customers operate, and the duration and extent of the impact remains uncertain. HubSpot implemented pricing changes such as reducing prices on Starter Growth Suite and offering free functionality, and the pandemic may reduce customers' ability or willingness to purchase offerings or increase attrition.
The marketing, sales, customer service, and CMS market is highly competitive and fragmented, and competitors may bundle competing software at little or no additional cost. Competitive pressure could force HubSpot to reduce prices or accept less favorable terms, reducing margins and operating results.
HubSpot depends on customer renewals, new customer additions, and increased revenue from existing customers, with substantially all subscription periods one year or less. A decline in new or renewed subscriptions may not be immediately reflected in reported revenue but could reduce future revenue and deferred revenue.
HubSpot is subject to evolving privacy and data protection laws, including the CCPA, CPRA effective January 1, 2023, Virginia CDPA effective January 1, 2023, GDPR, and UK GDPR. Non-compliance with UK GDPR may result in penalties up to £17.5 million or 4% of worldwide revenue, and EU-US data transfer uncertainty could cause customers to avoid HubSpot.
HubSpot stores and transmits customer and end-user data, and cyber incidents could result in unauthorized access, litigation, indemnity obligations, and reputational harm. The pandemic and remote work have increased risks such as COVID-19 themed phishing attacks and exploitation of cybersecurity flaws.
As of March 31, 2021, $81.4 million of principal remained outstanding on the 2022 Notes, and the 2022 Notes and 2025 Notes are convertible at holder option during the quarter ending June 30, 2021 because the stock price condition was met. Cash settlement of conversions could adversely affect liquidity, and $11.8 million of the Notes was classified as current as of March 31, 2021.
Total Average Subscription Revenue per Customer decreased from $10,018 for the three months ended March 31, 2020 to $9,886 for the three months ended March 31, 2021, driven by continued purchases of lower priced starter products. A shift toward lower priced products or different customer sizes could reduce gross margins and operating results.
HubSpot's headcount grew to 4,551 full-time employees as of March 31, 2021 from 4,225 as of December 31, 2020, placing strain on management and culture. Remote work and a competitive hiring environment, especially in Greater Boston and for remote talent worldwide, may impair its ability to attract and retain key personnel.
HubSpot has opened 8 international offices since 2012 and plans further international expansion, exposing it to regulatory, tax, labor, currency, and geopolitical risks including Brexit. Inadequate compliance with anticorruption and export laws could lead to penalties and reputational damage.
HubSpot has experienced rapid growth and organizational change, and expects continued future growth, which strains management, administrative, operational, and financial infrastructure. Anticipated additional headcount and capital investments will increase costs and make it harder to offset future revenue shortfalls by reducing expenses in the short term.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Non-GAAP Subscription Margin
Free cash flow
Total Customers
Non-GAAP Operating Income
Total Average Subscription Revenue per Customer
Summary, forecast, risks and KPIs are extracted from HUBSPOT INC's SEC filings for Q1 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.