Summary
HubSpot closed the second quarter of 2021 with total revenue of $310.8 million, up 52.6% from the prior-year quarter. Gross profit rose 50.4% to $247.9 million. For the first six months of 2021, revenue reached $592.2 million, up 47.1% from the same period in 2020. The company sells to mid-market business-to-business companies, which it defines as those with between two and 2,000 employees, and its platform starts free before customers upgrade to paid plans. Growth also reflects the push behind Marketing Hub, Sales Hub, Service Hub, CMS Hub and Operations Hub, which launched in April 2021.
Profitability remains a work in progress. Gross margin slipped to 79.8% from 81.0% a year earlier, a decline of 1.2 percentage points, as cost of revenue grew faster than revenue. The GAAP operating loss widened to $16.6 million from $13.6 million, yet operating margin improved to negative 5.3% from negative 6.7%. Net loss narrowed to $24.6 million from $29.4 million, and diluted EPS was negative $0.53. On a non-GAAP basis, operating income was $27.5 million against $19.2 million a year earlier, and non-GAAP operating margin was 8.9%, down from 9.4%. Non-GAAP net income was $21.6 million, or $0.43 per diluted share, compared with $0.34 a year earlier. For the six months ended June 30, 2021, the net loss widened slightly to $47.7 million from $47.1 million.
Cash flow swung hard in the right direction. Operating cash flow was $38.2 million for the quarter, up from negative $33.7 million in the prior-year quarter. Free cash flow, a non-GAAP measure, was $25.6 million versus $0.8 million a year earlier. The press release also reported operating cash flow of $41.4 million excluding the $3.2 million used to repay convertible notes. Capital expenditures were $6.8 million, down 23.0%. Through six months, operating cash flow was $100.9 million compared with negative $10.7 million in the first half of 2020. Deferred revenue ended the quarter at $358.8 million, up 50.7%, and remaining performance obligations were $305.8 million, up 61.7%.
Customer counts and pricing both moved up. Total customers reached 121,048 at June 30, 2021, up 40% from a year earlier. Average subscription revenue per customer was $10,198 in the quarter, up 8%. Management tied the gains to added sales representative capacity and demand for Professional and Enterprise products. The company employed 4,981 full-time people at quarter end.
Guidance points to more of the same. For the third quarter of 2021, HubSpot expects non-GAAP operating income of $27 million to $29 million and non-GAAP net income per share of $0.42 to $0.44. For the full year 2021, the company guided to non-GAAP operating income of $107 million to $109 million and non-GAAP net income per share of $1.67 to $1.69. Management said the outlook assumes no additional acquisitions, investments or restructurings.
The quarter also brought a leadership change. Brian Halligan will move to Executive Chairman of the board on September 7, 2021, and Chief Customer Officer Yamini Rangan will take over as CEO the same day. Rangan has run day-to-day operations since March 2021. The risks the company flags are familiar: the ongoing impact of COVID-19 on the business and the economy, a history of losses, the ability to retain and add customers, competition in the CRM market, managing rapid growth, hiring and keeping talent, and the price volatility of its stock. HubSpot also said it does not expect to be profitable in the near term and plans to keep spending on sales and marketing, research and development, and customer service.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2021 | Q1 FY2021 | QoQ | Q2 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $310.8M | $281.4M | +10.5% | $203.6M | +52.6% |
| Gross profit | $247.9M | $226.6M | +9.4% | $164.8M | +50.4% |
| Gross margin | 79.8% | 80.5% | -0.8 pp | 81.0% | -1.2 pp |
| Research & development | $72.1M | $68.4M | +5.4% | $49.4M | +46.0% |
| Sales & marketing | $157.8M | $141.0M | +11.9% | $102.6M | +53.8% |
| General & administrative | $34.6M | $32.3M | +7.3% | $26.5M | +30.7% |
| Total operating expenses | $264.5M | $241.7M | +9.5% | $178.5M | +48.2% |
| Operating income (loss) | -$16.6M | -$15.0M | -10.4% | -$13.6M | -21.8% |
| Operating margin | -5.3% | -5.3% | ±0.0 pp | -6.7% | +1.4 pp |
| Net income (loss) | -$24.6M | -$23.2M | -6.1% | -$29.4M | +16.4% |
| Net margin | -7.9% | -8.2% | +0.3 pp | -14.4% | +6.5 pp |
| Customers | 120 | 120 | ±0.0% | 120 | ±0.0% |
Risks
The COVID-19 pandemic and related restrictions have disrupted operations, shifted INBOUND 2020 and INBOUND 2021 to virtual-only events, and may reduce customer spending, delay purchasing decisions, or increase attrition. MD&A states the pandemic has not had a material adverse financial impact to date, but the duration and extent of the impact remain uncertain.
Revenue depends on customer renewals, new customer additions, and increased revenue from existing customers. Customers have no obligation to renew subscriptions that are substantially all one year or less, and may renew for lower tiers, fewer contacts or seats, or shorter terms; MD&A highlights Total Customers grew from 86,672 as of June 30, 2020 to 121,048 as of June 30, 2021.
The marketing, sales, customer service, and content management software market is highly competitive and fragmented, with competitors including cloud marketing automation, email marketing, sales force automation, CRM, enterprise suites, customer service, and CMS providers. Some competitors may bundle competing software at little or no additional cost, which could force price reductions and reduce margins.
The company faces a competitive hiring environment, particularly in the Greater Boston area and for remote talent worldwide, and depends on key employees including co-founders Brian Halligan and Dharmesh Shah and CEO Yamini Rangan. It has no employment agreements with key personnel, and stock price declines or volatility could impair retention.
Cyber-attacks, ransomware, phishing, and business email compromises are prevalent, and remote work during the pandemic has increased risks such as COVID-19 themed phishing attacks. The filing also notes residual risk from the SolarWinds supply chain attack and prior customer disruptions from an outage.
Privacy and data protection obligations are expanding, including the CCPA, CPRA, Virginia CDPA, Colorado CPA, GDPR, and UK GDPR, with non-compliance under the UK GDPR potentially resulting in penalties up to £17.5 million or 4% of worldwide revenue. New standard contractual clauses for EU data transfers may require significant effort and cost.
As of June 30, 2021, $68.7 million of principal remained outstanding on the 2022 Notes, and both the 2022 Notes and 2025 Notes were convertible during the quarter ending September 30, 2021. As of July 30, 2021, the company had received conversion notices for approximately $46.4 million of the 2022 Notes principal, which will be settled in cash during the quarter ended September 30, 2021, potentially affecting liquidity.
The company generated net losses of $47.7 million and $47.1 million for the six months ended June 30, 2021 and 2020, respectively, and had an accumulated deficit of $530.9 million as of June 30, 2021. MD&A states it does not expect to be profitable in the near term and intends to continue significant investments.
Headcount grew to 4,981 full-time employees as of June 30, 2021 from 4,225 as of December 31, 2020, placing strain on management, infrastructure, and culture. The hybrid workplace model and remote work may create unpredictability in expenses, local tax laws, and employee morale.
Changes in the sizes or types of businesses purchasing the platform or in product plans could decrease gross margins. Reported gross margin was 79.8% in the current quarter versus 81.0% in the prior-year quarter, down 1.2 percentage points.
The company has acquired businesses including PieSync in 2019 and the Hustle in 2021, and may pursue more acquisitions. Integration may divert management attention, fail to meet expectations, result in dilution or debt, and lead to goodwill impairment charges.
International expansion involves risks including data security regulations, labor laws, currency fluctuations, Brexit-related uncertainty, and compliance with anticorruption and export laws. The company has opened 8 international offices since 2012 and plans additional offices.
The platform depends on third-party data center providers including Amazon Web Services, Google Cloud Platform, and Rackspace. Interruptions, damage, or termination of these arrangements could impair platform delivery, cause customer dissatisfaction, and reduce revenue.
Subscription revenue is generally recognized ratably over the subscription term, and much of each quarter's revenue comes from prior agreements. MD&A states deferred revenue is not an accurate indicator of future revenue, and declines in new or renewed subscriptions may not be reflected until future periods.
The company committed $20 million to social impact investing and contributed $2.3 million and $0.8 million in cash to the Black Economic Development Fund in 2021. There is no guarantee of performance, and it may receive no return or lose its entire investment.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Non-GAAP Subscription Margin
Free cash flow
Total Customers
Total Average Subscription Revenue per Customer
Summary, forecast, risks and KPIs are extracted from HUBSPOT INC's SEC filings for Q2 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 1, 2026.