Summary
HubSpot reported third quarter fiscal 2021 revenue of $339.2 million, up 48.5% from the prior-year quarter. Year-to-date revenue was $931.3 million, up 47.6%. Gross profit for the quarter was $269.6 million, up 45.1%. Subscription revenue accounted for 97% of total revenue in the quarter, so the model stays heavily recurring. Total customers reached 128,144 at September 30, 2021, up 34% from a year earlier, and average subscription revenue per customer was $10,536 for the quarter, up 9%. Management credited higher sales representative capacity and stronger demand for Professional and Enterprise products.
Profitability is still a work in progress. The GAAP operating loss was $14.9 million, narrower than the $15.5 million loss in the prior-year quarter, and the GAAP operating margin improved to negative 4.4% from negative 6.8%. GAAP net loss was $13.7 million, or $0.29 per diluted share, against a $22.5 million loss a year earlier. Non-GAAP operating income was $32.9 million, and non-GAAP net income was $25.6 million, or $0.50 per diluted share. The non-GAAP operating margin was 9.7%, up from 7.2%. Gross margin slipped to 79.5% from 81.3%, down 1.9 percentage points, as subscription and hosting costs, employee-related costs and amortization of capitalized software development costs all climbed. Sales and marketing remained the largest cost line at 50% of total revenue, and the company ended the quarter with 5,496 full-time employees.
Cash generation improved. Operating cash flow was $42.7 million for the quarter, up 10.3%, and $143.5 million year to date, up 412.9%. Capital expenditures were $6.7 million, down 15.3%. Free cash flow, a non-GAAP measure, was $38.2 million against $25.3 million a year earlier, and operating cash flow excluding the repayment of convertible debt was $54.1 million. Deferred revenue reached $372.4 million at September 30, 2021, up 45.4%, and remaining performance obligations were $329.7 million, up 53.8%. Cash, cash equivalents and short-term and long-term investments totaled $1.3 billion, and working capital was $861.2 million.
Guidance for the fourth quarter of 2021 calls for non-GAAP operating income of $34 million to $36 million and non-GAAP net income per share of $0.52 to $0.54, assuming roughly 50.9 million weighted average diluted shares. For the full year 2021, management guided to non-GAAP operating income of $113 million to $115 million and non-GAAP net income per share of $1.76 to $1.78 on about 50.7 million weighted average diluted shares. Both sets of targets are non-GAAP, and the company also published corresponding GAAP ranges for operating income and net loss for the same periods.
The risk list is familiar but real. HubSpot points to its history of losses, the difficulty of retaining existing customers and adding new ones, competition from other CRM providers, the challenge of managing rapid growth, dependence on Solutions Partners, and the need to recruit and retain qualified personnel. COVID-19 remains a stated uncertainty for the business, the workforce and the broader economy. The company also carries convertible notes and repaid early conversions of its 2022 notes during the period, activity it strips out of its non-GAAP measures. Management says it does not expect to be profitable in the near term. Contractual obligations totaled $1,479.9 million at September 30, 2021, mostly vendor commitments and operating leases, and $119.0 million of cash and cash equivalents sat in accounts outside the United States.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $339.2M | $310.8M | +9.1% | $228.4M | +48.5% |
| Gross profit | $269.6M | $247.9M | +8.7% | $185.8M | +45.1% |
| Gross margin | 79.5% | 79.8% | -0.3 pp | 81.3% | -1.9 pp |
| Research & development | $78.5M | $72.1M | +8.8% | $54.5M | +44.1% |
| Sales & marketing | $170.0M | $157.8M | +7.7% | $119.3M | +42.5% |
| General & administrative | $36.0M | $34.6M | +4.1% | $27.5M | +31.1% |
| Total operating expenses | $284.5M | $264.5M | +7.6% | $201.2M | +41.4% |
| Operating income (loss) | -$14.9M | -$16.6M | +10.1% | -$15.5M | +3.5% |
| Operating margin | -4.4% | -5.3% | +0.9 pp | -6.8% | +2.4 pp |
| Net income (loss) | -$13.7M | -$24.6M | +44.1% | -$22.5M | +39.0% |
| Net margin | -4.0% | -7.9% | +3.9 pp | -9.8% | +5.8 pp |
| Customers | 120 | 120 | ±0.0% | 120 | ±0.0% |
Risks
The market for CRM, marketing, sales, and customer service software is highly competitive and fragmented. Competitors may bundle products at little or no additional cost, and pricing pressure could reduce margins and operating results.
Headcount grew to 5,496 full-time employees as of September 30, 2021 from 4,225 as of December 31, 2020, straining management and culture. The hybrid workplace model and remote work may hurt retention, morale, and ability to recruit.
Cyberattacks, ransomware, phishing, and supply chain attacks like SolarWinds are prevalent, and remote work increases risk. A breach could lead to liability, fines, and customer loss.
The COVID-19 pandemic has caused business slowdowns and shifted INBOUND 2020 and INBOUND 2021 to virtual-only events, while management continues to spend significant time monitoring it. MD&A states the pandemic has not had a material adverse financial impact to date, but future effects on customer spending and renewals remain uncertain.
Changes in the sizes or types of businesses purchasing the platform, including enterprise customers with longer sales cycles and small businesses with greater credit risk, could decrease gross margins. Gross margin declined to 79.5% in FY2021 Q3 from 81.3% in FY2020 Q3.
New and evolving privacy laws, including the CCPA, CPRA, Virginia CDPA, Colorado CPA, GDPR, and UK GDPR, impose complex compliance obligations and potential fines. The European Court of Justice invalidated the EU-US Privacy Shield, creating uncertainty for personal data transfers to the United States.
The 2022 Notes and 2025 Notes are convertible at holders' option during the quarter ending December 31, 2021 because the stock price condition was met. The company settled $46.4 million of 2022 Notes principal in cash in FY2021 Q3 and may need cash for future conversions.
Expansion outside the United States exposes the company to data transfer restrictions, Brexit-related uncertainty, currency fluctuations, and complex labor and tax laws. The company has opened 8 international offices since 2012 and plans more.
Subscription revenue is recognized ratably, so near-term sales declines may not be immediately reflected in reported results. Deferred revenue increased $66.8 million in the nine months ended September 30, 2021, but the company does not believe changes in deferred revenue are an accurate indicator of future revenue.
Most employees, including those critical to disclosure controls and internal control over financial reporting, work remotely. The company has limited experience maintaining effective controls in a remote environment.
The platform depends on AWS, Google Cloud, and Rackspace data centers. Interruptions, capacity constraints, or cost increases at these providers could harm operations and margins.
The company committed $20 million to social impact investing and contributed to the Black Economic Development Fund. 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 Q3 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.