Summary
HubSpot's first quarter of fiscal 2023 showed strong top-line growth but a much wider GAAP loss. Revenue rose 26.8% to $501.6 million. Gross profit increased 30.0% to $419.6 million, and gross margin improved to 83.6%, up 2.1 percentage points. The company's GAAP operating loss widened to $44.8 million, and operating margin fell to -8.9%, down 6.1 percentage points. Net loss widened to $38.3 million, and diluted EPS was -$0.78, a wider loss than the prior-year quarter. Those GAAP results include a restructuring plan implemented in January 2023. On a non-GAAP basis, operating income was $67.7 million and operating margin was 13.5%. Non-GAAP net income was $61.6 million, or $1.20 per diluted share. The gap between GAAP and non-GAAP results reflects large stock-based compensation and restructuring charges. Non-GAAP profitability improved even as GAAP losses widened. The gross margin expansion came from hosting cost efficiencies, according to the MD&A.
Cash generation held roughly steady. Operating cash flow was $81.1 million, down 1.4%. Capital expenditures were $3.31 million, down 66.7%. Free cash flow was $85.2 million, and non-GAAP operating cash flow was $103.6 million. Deferred revenue was $571.8 million, up 24.9%. The company said the increase in deferred revenue primarily resulted from growth in the number of customers invoiced during the period. Remaining performance obligations were $622.3 million, up 52.9%. Net cash provided by operating activities primarily reflected the net loss, offset by non-cash expenses including stock-based compensation and depreciation.
Operational metrics continued to expand. HubSpot had 177,298 customers at March 31, 2023, up 23% from March 31, 2022. Average subscription revenue per customer was $11,365 in the first quarter of 2023, up 3% from the first quarter of 2022. The company employed 7,055 full-time employees, up 10% from March 31, 2022. Management said growth in customers was driven by demand for lower-priced Starter products. The increase in average subscription revenue per customer came from Professional and Enterprise demand, partly offset by Starter mix and foreign currency translation. HubSpot focuses on mid-market B2B companies with between two and 2,000 employees. The company's CRM platform includes Marketing Hub, Sales Hub, Service Hub, CMS Hub, and Operations Hub. Management described a tough macroeconomic environment and an early shift brought on by Generative AI. Risks include a history of losses, the recent reduction in force, the ability to retain and add customers, competition, inflation, foreign exchange fluctuations, recession risks, and geopolitical conflicts.
Guidance points to continued growth. For the second quarter of 2023, revenue is expected to be $503.0 million to $505.0 million. Unfavorable foreign exchange rates are expected to be a 1 point headwind to second quarter revenue growth. Non-GAAP operating income is expected to be $54.0 million to $56.0 million. Non-GAAP net income per common share is expected to be $0.98 to $1.00, assuming about 52.4 million weighted average diluted shares. For the full year 2023, revenue is expected to be $2.080 billion to $2.088 billion. Foreign exchange rates are expected to have a neutral impact on full year revenue growth. Non-GAAP operating income is expected to be $275.0 million to $279.0 million. Non-GAAP net income per common share is expected to be $4.80 to $4.85, assuming about 52.3 million weighted average diluted shares. Restructuring charges are excluded from the non-GAAP outlook. The company also said it does not expect to be profitable in the near term.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2023 | Q4 FY2022 | QoQ | Q1 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $501.6M | $469.7M | +6.8% | $395.6M | +26.8% |
| Gross profit | $419.6M | $389.4M | +7.8% | $322.7M | +30.0% |
| Gross margin | 83.6% | 82.9% | +0.7 pp | 81.6% | +2.1 pp |
| Research & development | $127.7M | $116.3M | +9.8% | $92.7M | +37.7% |
| Sales & marketing | $250.7M | $235.1M | +6.6% | $197.1M | +27.2% |
| General & administrative | $57.4M | $51.4M | +11.7% | $43.9M | +30.6% |
| Total operating expenses | $464.3M | $402.9M | +15.3% | $333.8M | +39.1% |
| Operating income (loss) | -$44.8M | -$13.5M | -232.0% | -$11.2M | -301.4% |
| Operating margin | -8.9% | -2.9% | -6.0 pp | -2.8% | -6.1 pp |
| Net income (loss) | -$38.3M | -$15.6M | -144.8% | -$9.3M | -309.8% |
| Net margin | -7.6% | -3.3% | -4.3 pp | -2.4% | -5.3 pp |
| Diluted EPS | -$0.78 | -$0.33 | -$0.45 | — | — |
| Customers | 177,298 | 167,386 | +5.9% | 143,689 | +23.4% |
Risks
HubSpot implemented a Restructuring Plan in January 2023 cutting about 7% of its workforce and consolidating leases. Q1 FY2023 restructuring charges were $28.6 million and operating loss widened to $44.8 million from $11.2 million in Q1 FY2022. The filing warns the plan may not reduce operating costs or improve margins as expected and may cause attrition or operational disruption.
MD&A and risk factors highlight foreign currency fluctuations, rising inflation, higher interest rates and recession risks. HubSpot says these have had and may continue to have an adverse impact on financial condition and operating results, with foreign currency translation from Euro and British Pound Sterling declines already affecting average subscription revenue per customer.
The filing states recent cybersecurity incidents and compromises affecting large institutions, including an incident that affected HubSpot, show the risk is significant even with security measures. A breach could cause liability, remediation costs, reputational harm and customer loss.
A new and expanded risk factor says uncertainty around generative AI content creation may require costly investment in proprietary datasets and machine learning models. Developing, testing and deploying AI systems may also increase the cost profile of offerings due to computing costs, and failure to monetize these assets could impact profit margin.
Substantially all subscriptions are one year or less and customers have no renewal obligation; they may renew for lower tiers, fewer contacts or shorter terms. MD&A notes growth was driven by lower-priced Starter products, which could pressure average subscription revenue per customer if mix shifts further.
Risk factors emphasize intense and fragmented competition from cloud marketing automation, email marketing, sales force automation, CRM, enterprise suites and content management vendors. Some competitors have greater resources and may bundle competing software at little or no additional cost, which could force price reductions and reduce margins.
The 2025 Notes became convertible at holder option during the quarter ending June 30, 2023 because the stock price condition was met. If holders convert, HubSpot may need cash settlement or reclassify principal as a current liability, which could reduce net working capital and liquidity.
Privacy and data protection obligations are expanding, including CCPA/CPRA, new state laws and GDPR penalties of up to €20 million or 4% of worldwide annual revenue. Cross-border data transfer requirements and the IDTA transition by March 21, 2024 impose significant compliance costs and could deter customers.
SaaS KPIs
All quarters →Average Subscription Revenue Per Customer
Non-GAAP Operating Margin
Non-GAAP Subscription Margin
Free cash flow
Total Customers
Non-GAAP Operating Cash Flow
Summary, forecast, risks and KPIs are extracted from HUBSPOT INC's SEC filings for Q1 FY2023 (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 1, 2026.