HUBSPOT INC
For the period ended Mar 31, 2025. Filed May 8, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 8, 2025
HUBS$200.61-2.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-06.
0000950170-24-122373
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-08.
0000950170-25-067055
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 95 previous paragraphs and 111 current paragraphs.
38 unchanged; 40 reworded; 32 added; 7 removed; 10 previous and 1 current paragraphs rearranged.
Tables are not compared: 21 previous and 21 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (32)
Current report
Key Components of Consolidated Statements of Operations
Current report
We derive our revenue from two major sources, revenue from subscriptions to our customer platform and professional services and other revenue consisting mainly of on-boarding, training, consulting services fees, and Commerce Hub.
Current report
Subscription-based revenue is derived from customers using our customer platform for their marketing, sales, service, operations, and content management needs. Our customer platform includes a system of engagement for efficiently engaging customers through SEO, web content, social, blogging, email, marketing automation, messaging, support ticketing, knowledge base, commerce, conversation routing, video hosting, and data enrichment. Over 1,700 integrations and applications are available for our users, across a wide range of categories, including integrations with leading social media, email, sales, video, analytics, content and webinar tools. All subscription fees that are billed in advance of service are recorded in deferred revenue. Subscription based revenue is recognized net of consideration paid to Solutions Partners when those Solutions Partners purchase a subscription to our customer platform.
Current report
Professional services and other revenue are derived primarily from customer on-boarding, training, consulting services, and Commerce Hub. Depending on which Hubs and services a customer purchases, they receive on-boarding guidance or one-on-one training from one of our on-boarding, inbound consultants, or technical consultants via web meetings. Training is generally sold in connection with a customer’s initial subscription and is billed in advance. The training is also available to be purchased separately following a customer’s purchase of its initial subscription and our Solutions Partners routinely provide the same training to customers. We also derive revenue from a number of revenue-share agreements with other companies.
Current report
Cost of Revenue, Operating and Other Expenses
Current report
Cost of Revenue
Current report
Cost of subscription revenue consists primarily of managed hosting providers and other third-party service providers, employee-related costs including payroll, benefits and stock-based compensation expense for our customer support team, amortization of capitalized software development costs and acquired technology, and allocated overhead costs, which we define as facilities, depreciation of fixed assets, and costs related to information technology.
Current report
Cost of professional services and other revenue consists primarily of personnel costs of our professional services organization, including salaries, benefits, bonuses and stock-based compensation, amortization of capitalized software development costs associated with our internally built software platform, as well as professional fees and allocated overhead costs, which we define as facilities, depreciation of fixed assets, and costs related to information technology. It also consists of costs associated with our other service offerings, including Commerce Hub.
Current report
We expect that the cost of subscription and professional services and other revenue will increase in absolute dollars as we continue to invest in growing our business. Over time, we expect to gain benefits of scale associated with our costs of hosting our customer platform relative to subscription revenues, resulting in improved subscription gross margin, exclusive of stock-based compensation. We expect professional services and other margins to break-even in the next 12 months, exclusive of stock-based compensation.
Current report
Research and development expenses consist primarily of personnel costs of our development team, including payroll, benefits and stock-based compensation expense, professional and contractor fees and allocated overhead costs. We capitalize certain software development costs that are attributable to developing new products and adding incremental functionality to our customer platform and amortize such costs as costs of subscription and cost of professional services and other revenue over the estimated life of the new product or incremental functionality, which is generally two years. We also capitalize certain development costs that are attributable to developing our internally developed software platforms and amortize such costs throughout the consolidated statement of operations over the estimated life of our internally developed software platforms, which is generally five years. We focus our research and development efforts on improving our products and developing new ones, delivering new functionality and enhancing the customer experience. We believe delivering new functionality for our customers is an integral part of our solution and provides our customers with access to a broad array of options and information critical to their marketing, sales, and customer service efforts. We expect to continue to make investments in and expand our offerings to enhance our customers’ experience and satisfaction and attract new customers. Over time, we expect research and development expenses to increase in absolute dollars as we continue to increase the functionality of our customer platform and remain consistent as a percentage of total revenue, exclusive of stock-based compensation expense.
Current report
Sales and marketing expenses consist primarily of personnel costs of our sales and marketing employees, including sales commissions and incentives, benefits and stock-based compensation expense, marketing programs, including lead generation, costs of our annual INBOUND conference, other brand building expenses, amortization of intangible assets, professional and contractor fees and allocated overhead costs. Sales and marketing expenses also include commissions paid to our Solutions Partners in instances where the end customer purchases and pays for a subscription to our customer platform. We defer certain sales and Solutions Partner commissions related to acquiring new contracts and amortize them ratably over a period of benefit that we have determined to be approximately two to four years.
Current report
We plan to continue to invest in sales and marketing to grow our customer base and increase sales to existing customers. This growth will include adding sales personnel and expanding our marketing activities to continue to generate leads and build brand awareness. We expect sales and marketing expenses to increase in absolute dollars as we continue to develop our sales and marketing teams. Over time, we expect sales and marketing expenses will decline as a percentage of total revenue, exclusive of stock-based compensation.
Current report
General and administrative expenses consist of personnel costs and related expenses for executive, finance, legal, human resources, employee-related information technology, administrative personnel, including payroll, benefits and stock-based compensation expense, professional fees for external legal, accounting and other consulting services, and allocated overhead costs. We expect that general and administrative expenses will increase on an absolute dollar basis as we incur the costs of compliance associated with being a publicly trade company, and remain relatively consistent as a percentage of total revenue, exclusive of stock-based compensation expense, as we focus on processes, systems and controls to enable our internal support functions to scale with the growth of our business. Over time, we expect general and administrative expenses to remain consistent as a percentage of total revenue, exclusive of stock-based compensation.
Current report
Restructuring expenses primarily consist of variable lease costs related to properties vacated under our restructuring plan. On January 25, 2023, the Company's board of directors authorized a restructuring plan (the “Restructuring Plan”) that was designed to reduce operating costs and enable investment in key opportunities for long-term growth while driving continued profitability. The Restructuring Plan included a reduction of the Company’s workforce by approximately 7% and a global lease consolidation to create higher density across our workspaces. Future variable facilities related costs for vacated properties will continue to be recorded to restructuring charges.
Current report
Revenue
Current report
Allocated overhead expenses decreased primarily due to the decreased proportional allocation of shared company expenses associated with headcount in subscription cost of revenue.
Current report
Research and Development
Current report
Sales and Marketing
Current report
General and Administrative
Current report
Restructuring
Current report
The increase during the three months ended March 31, 2025 is primarily due to higher average investment balances, slightly offset by lower average yields on those investments.
Current report
Interest expense decreased slightly due to the early conversion of a portion of our 2025 notes during the three months ended March 31, 2025.
Current report
Other income (expense)
Current report
Income tax expense
Current report
The increase in income tax expense was primarily driven by an uneven mix in U.S. pre-tax earnings and losses.
Current report
Net Cash and Cash Equivalents Provided by (Used in) Investing Activities
Current report
Liquidity and Capital Resources Considerations
Current report
Convertible Senior Notes
Current report
As of March 31, 2025, the carrying value was $368.9 million for our 2025 Notes. The interest rate is fixed at 0.375% for the 2025 Notes and the notes are due June 1, 2025. The Company expects to settle the principal amount of the 2025 Notes in cash. Between March 31, 2025 and the date of filing this report, the Company settled $143.6 million of the principal balance of the 2025 Notes in cash in response to conversion notices received prior to March 31, 2025. See Note 10 and Note 17 of the notes to consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Current report
Letters of Credit
Current report
As of March 31, 2025, we had a total of $4.1 million in letters of credit outstanding for office space. These irrevocable letters of credit are expected to remain in effect, in some cases, until 2029.
Current report
We have no material off-balance sheet arrangements as of March 31, 2025 exclusive of items described above and indemnifications of officers, directors and employees for certain events or occurrences while the officer, director or employee is, or was, serving at our request in such capacity.
Removed paragraphs (7)
Previous report
The increase in subscription cost of revenue for the three and nine months ended September 30, 2024 compared to the same period in 2023 was primarily due to the following:
Previous report
Restructuring charges in the nine months ended September 30, 2024 consists of only variable facilities-related costs on unused space. Restructuring charges were $93.3 million in the nine months ended September 30, 2023 due to the implementation of the Restructuring Plan in the first quarter of 2023 and its continued execution during the third quarter. Restructuring costs primarily consisted of $26.9 million of severance, employee related benefits and other costs, and $66.4 million related to facilities for the termination and abandonment of leases globally.
Previous report
Three and Nine month change
Previous report
Three and Nine month change
Previous report
Three and nine month change
Previous report
In December 2021, the Organization for Economic Cooperation and Development (“OECD”) released Pillar Two Global Anti-Base Erosion Model Rules (“Pillar Two”), designed to ensure large corporations are taxed at a minimum rate of 15% in all countries of operation. Although the U.S. has not yet enacted legislation implementing Pillar Two, other countries where the Company does business have enacted legislation implementing Pillar Two which are effective on January 1, 2024. The implementation of Pillar Two in each jurisdiction in which we operate does not have a material impact on our effective tax rate. We will continue to evaluate the impact as jurisdictions implement legislation.
Previous report
As of September 30, 2024, we are committed to contribute additional capital of $3.0 million to the Black Economic Development Fund. There were no other material off-balance sheet arrangements.
Reworded paragraphs (40)
Previous wording
We provide a customer platform that helps businesses connect and grow better. We deliver seamless connection for customer-facing teams with a unified platform that includes three layers: AI-powered engagement hubs, a Smart CRM, and a connected ecosystem that extends the customer platform with app marketplace integrations, a community network, and educational content.
Current wording
We provide a customer platform that helps businesses connect and grow better. We deliver seamless connection for customer-facing teams with a unified platform that includes three layers: AI-powered engagement hubs, a Smart CRM, and a connected ecosystem that extends the customer platform with app marketplace integrations, a community network, and an academy of educational content.
Previous wording
Our engagement hubs include Marketing Hub, Sales Hub, Service Hub, Operations Hub, Content Hub and Commerce Hub, as well as other tools and integrations that enable companies to attract, engage, and delight customers throughout the customer experience. Our customer platform features a central database of lead and customer interactions and integrated applications designed to help businesses attract visitors to their websites, convert visitors into leads, close leads into customers, transact with those customers, and delight them so they become promoters of those businesses.
Current wording
Our AI-powered engagement hubs include Marketing, Sales, Service, Operations, Content, and Commerce, as well as other tools and integrations that enable companies to attract, engage, and delight customers throughout the customer lifecycle. Our customer platform features a central database of lead and customer interactions and integrated applications designed to help businesses attract visitors to their websites, convert visitors into leads, close leads into customers, transact with those customers, and delight them so they become promoters of those businesses.
Previous wording
The core of our customer platform is our Smart CRM: a single database of lead and customer information that allows businesses to track their interactions with contacts and customers, manage their customer activities, and report on their pipeline and sales. Our customer platform was built to easily and seamlessly integrate third party applications to further customize to an individual company’s industry or needs. As data is becoming more important to our customers’ success and a differentiator for our business, there is a need to move quickly on data enrichment. The acquisition of APIHub, Inc. (dba Clearbit), which closed in December 2023, allowed us to build Breeze Intelligence, a B2B-focused data enrichment tool directly into our customer platform.
Current wording
Breeze is our AI that powers the customer platform, including our Smart CRM, engagement Hubs, and the connected ecosystem. The core of our customer platform is our Smart CRM: a unified data platform of lead and customer information that allows businesses to track their interactions with contacts and customers, manage their customer activities, report on their pipeline and sales, and manage and govern their team and business processes. Our customer platform was built to easily and seamlessly integrate third party applications to further customize to an individual company’s industry or needs. As data is becoming more important to our customers’ success and a differentiator for our business, there is a need to move quickly on data enrichment.
Previous wording
We focus on selling to mid-market business-to-business, or B2B, companies, which we define as companies that have between two and 2,000 employees. While our customer platform was built to grow with any company, we focus on selling to mid-market businesses because we believe we have significant competitive advantages attracting and serving this market segment. These mid-market businesses seek an integrated, easy-to-implement and easy-to-use solution to reach customers and compete with organizations that have larger marketing, sales, and customer service budgets. We efficiently reach these businesses at scale through our proven inbound methodology, our Solutions Partners, and our “freemium” model. A Solutions Partner is a service provider that helps businesses with strategy, execution, and implementation of go-to-market activities and technology solutions. Our freemium model attracts customers who begin using our customer platform through our free products and then upgrade to our paid products. As of September 30, 2024, we had 8,103 full-time employees and 238,128 Customers of varying sizes in more than 135 countries, representing many industries.
Current wording
We focus on selling to mid-market business-to-business, or B2B, companies, which we define as companies that have between two and 2,000 employees. While our customer platform was built to grow with any company, we focus on selling to mid-market businesses because we believe we have significant competitive advantages attracting and serving this market segment. These mid-market businesses seek an integrated, easy-to-implement and easy-to-use solution to reach customers and compete with organizations that have larger marketing, sales, and customer service budgets. We efficiently reach these businesses at scale through our traditional and AI-enhanced engagement strategies, our Solutions Partners, and our “freemium” model. A Solutions Partner is a service provider that helps businesses with strategy, execution, and implementation of go-to-market activities and technology solutions. Our freemium model attracts customers who begin using our customer platform through our free products and then upgrade to our paid products. As of March 31, 2025, we had 8,574 full-time employees and 258,258 Customers of varying sizes in more than 135 countries, representing many industries.
Previous wording
We derive most of our revenue from subscriptions to our cloud-based customer platform and related professional services, which consist of customer on-boarding, training and consulting services. Subscription revenue accounted for 98% of our total revenue for the three and nine months ended September 30, 2024 and 2023. We sell multiple product plans at different base prices on a subscription basis, each of which includes our Smart CRM and integrated applications to meet the needs of the various customers we serve. Customers pay additional fees if the number of contacts stored and tracked in the customer’s database exceeds specified thresholds. We also generate additional revenue based on the purchase of additional subscriptions, products and seats, and the number of account users and subdomains. Most of our Customers’ subscriptions are one year or less in duration.
Current wording
We derive most of our revenue from subscriptions to our cloud-based customer platform and related professional services, which consist of customer on-boarding, training and consulting services. Subscription revenue accounted for 98% of our total revenue for the three months ended March 31, 2025 and 2024. We sell multiple product plans at different base prices on a subscription basis, each of which includes our Smart CRM and integrated applications to meet the needs of the various customers we serve. We also generate revenue through usage and consumption-based models. Customers pay additional fees if the number of contacts stored and tracked in the customer’s database exceeds specified thresholds. We also generate additional revenue based on the purchase of additional subscriptions, products and seats, and the number of account users. Most of our Customers’ subscriptions are one year or less in duration.
Previous wording
Many of our customers purchase on-boarding, training, and consulting services, as well as other tools, which are designed to help customers enhance their ability to attract, engage and delight their customers using our customer platform. We also generate revenue from Commerce Hub and a number of revenue-share agreements with other companies based on mutually agreed upon terms. Professional services and other revenue accounted for 2% of total revenue for three and nine months ended September 30, 2024 and 2023.
Current wording
Many of our customers purchase on-boarding, training, and consulting services, which are designed to help customers enhance their ability to attract, engage and delight their customers using our customer platform. We also generate revenue from Commerce Hub and a number of revenue-share agreements with other companies. Professional services and other revenue accounted for 2% of total revenue for three months ended March 31, 2025 and 2024.
Previous wording
We have focused on rapidly growing our business and plan to continue to make investments to help us address some of the challenges facing us to support this growth, such as demand for our customer platform by existing and new customers, significant competition from other providers of marketing, sales, customer service, operations, commerce, and content management software and related applications and rapid technological change in our industry.
Current wording
We have focused on rapidly growing our business and plan to continue to make investments to help us address some of the challenges facing us to support this growth, such as demand for our customer platform by existing and new customers, significant competition from other customer platform providers and related applications and rapid technological changes in our industry.
Previous wording
We believe that the growth of our business is dependent on many factors, including our ability to expand our customer base, increase adoption of our customer platform within existing customers, develop new products and applications to extend the functionality of our customer platform and provide a high level of customer service. We have invested and intend to continue investing for long-term growth. We intend to continue to invest in sales and marketing to support our growth. We plan to continue to invest in research and development as we continue to introduce new products and applications to extend the functionality of our customer platform. We intend to continue maintaining a high level of customer service and support which we consider critical for our continued success. We also plan to continue investing in our data center infrastructure and services capabilities in order to support continued future customer growth. We also expect to continue to incur additional general and administrative expenses as a result of both our growth and the infrastructure required to be a public company. We expect to use our cash flow from operations to fund these growth strategies and support our business and do not expect to be profitable in the next 12 months.
Current wording
We believe that the growth of our business is dependent on many factors, including our ability to expand our customer base, increase adoption of our customer platform within existing customers, develop new products and applications to extend the functionality of our customer platform and provide a high level of customer service. We have invested and intend to continue investing for long-term growth. We intend to continue to invest in sales and marketing to support our growth. We plan to continue to invest in research and development as we continue to introduce new products and applications to extend the functionality of our customer platform. We intend to continue maintaining a high level of customer service and support which we consider critical for our continued success. We also plan to continue investing in our data center infrastructure and services capabilities in order to support continued future customer growth. We also expect to continue to incur additional general and administrative expenses as a result of both our growth and the infrastructure required to be a public company. We expect to use our cash flow from operations to fund these growth strategies and support our business and may break-even from a profitability perspective in the next 12 months.
Previous wording
Our results of operations may be significantly influenced by general macroeconomic conditions, including, but not limited to, the impact of pandemics (such as the COVID-19 pandemic), geo-political conflicts, foreign currency fluctuations, interest rates, inflation, recession risks, existing and new domestic and foreign laws and regulations, all of which are beyond our control. Fluctuations in foreign exchange rates and rising inflation have had, and may continue to have an adverse impact on our financial condition and operating results in future periods. As we continue to monitor the direct and indirect impacts of these circumstances, the broader implications of these macroeconomic events on our business, results of operations and overall financial position, particularly in the long term, remain uncertain. See the section titled “Risk Factors'' included under Part II, Item 1A below for further discussion of the possible impact of these factors and other risks on our business.
Current wording
Our results of operations may be significantly influenced by general macroeconomic conditions, including, but not limited to, the impact of pandemics, geo-political conflicts, foreign currency fluctuations, interest rates, inflation, recession risks, tariffs or other trade restrictions, existing and new domestic and foreign laws and regulations, all of which are beyond our control. Fluctuations in foreign exchange rates and rising inflation have had, and may continue to have an adverse impact on our financial condition and operating results in future periods. As we continue to monitor the direct and indirect impacts of these circumstances, the broader implications of these macroeconomic events on our business, results of operations and overall financial position, particularly in the long term, remain uncertain. See the section titled “Risk Factors'' included under Part II, Item 1A below for further discussion of the possible impact of these factors and other risks on our business.
Previous wording
Interest income primarily consists of interest earned on invested cash and cash equivalents balances and investments. The increase during the three and nine months ended September 30, 2024 is due to an increase in yields on our investment balances.
Current wording
Interest income primarily consists of interest earned on invested cash and cash equivalents balances and investments. Interest expense primarily consists of amortization of issuance costs and contractual interest expense related to our 2025 Notes. Other income (expense) primarily consists of the impact of foreign currency transaction gains and losses associated with monetary assets and liabilities and any gains, losses, or impairments on our strategic investments.
Previous wording
Income tax expense consists of current and deferred taxes for U.S. and international jurisdictions. The increase in income tax expense was primarily due to an increase in income generated in tax paying jurisdictions.
Current wording
Income tax expense consists of current and deferred taxes for U.S. and foreign jurisdictions.
Previous wording
Three and Nine Months Ended September 30, 2024 Compared to the Three and Nine Months Ended September 30, 2023
Current wording
Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024
Previous wording
Subscription revenue increased during the three months ended September 30, 2024 compared to the same period in 2023 primarily due to the increase in Customers, which grew from 194,098 as of September 30, 2023 to 238,128 as of September 30, 2024. Average Subscription Revenue per Customer decreased from $11,520 for the three months ended September 30, 2023 to $11,235 for the three months ended September 30, 2024. The growth in Customers was primarily driven by increased demand for our lower-priced Starter products, as well as Professional and Enterprise products from our new seats model. The decrease in Average Subscription Revenue per Customer was primarily driven by continued purchases of our lower-priced Starter products and the impact of our new seats pricing model, offset by a continued demand for our Professional and Enterprise products, as well as the addition of customers from the acquisition of Clearbit.
Current wording
Subscription revenue increased during the three months ended March 31, 2025 compared to the same period in 2024 primarily due to the increase in Customers, which grew from 216,060 as of March 31, 2024 to 258,258 as of March 31, 2025. Average Subscription Revenue per Customer decreased from $11,447 for the three months ended March 31, 2024 to $11,038 for the three months ended March 31, 2025. The growth in Customers was primarily driven by increased demand for our lower-priced Starter products. The decrease in Average Subscription Revenue per Customer was primarily driven by continued purchases of our lower-priced Starter products and the impact of foreign currency translation primarily attributable to the increase in the value of the U.S. Dollar relative to the Euro and British Pound Sterling, offset by increased demand for our Professional and Enterprise products.
Previous wording
Total cost of revenue for the three and nine months ended September 30, 2024 increased compared to the same period in 2023 primarily due to an increase in subscription and hosting costs, amortization of capitalized software development costs, amortization of acquired technology and employee-related costs, offset by a decrease in allocated overhead expenses. Gross margins remained consistent year-over-year.
Current wording
Total cost of revenue for the three months ended March 31, 2025 increased compared to the same period in 2024 primarily due to an increase in subscription and hosting costs, amortization of capitalized software development costs, and amortization of acquired technology, offset by decreases in allocated overhead expenses and employee-related costs. Gross margins remained relatively consistent year-over-year.
Previous wording
Subscription and hosting costs increased primarily due to growth in our Customer base from 194,098 as of September 30, 2023 to 238,128 as of September 30, 2024. We also saw higher subscription and hosting costs as we continued to focus on the security, reliability and performance of our customer platform. Amortization of capitalized software development costs increased due to the increased number of developers working on our software platform as we continued to develop new products and increased functionality. Amortization of acquired technology increased due to the amortization of acquired technology associated with our acquisition of Clearbit in December 2023. Employee-related costs increased as a result of increased headcount as we continue to grow our customer support organization to support our customer growth and improve service levels and offerings. Allocated overhead expenses increased due to an increase in shared company third-party services costs.
Current wording
Subscription and hosting costs increased primarily due to growth in our Customer base from 216,060 as of March 31, 2024 to 258,258 as of March 31, 2025. We also saw higher subscription and hosting costs as we continued to focus on the security, reliability and performance of our customer platform. Amortization of capitalized software development costs increased due to the increased number of developers working on our software platform as we continued to develop new products and increased functionality. Amortization of acquired technology increased due to the amortization of acquired technology associated with our acquisition of Frame AI in January 2025. Employee-related costs decreased as a result of improved resource alignment and operational efficiencies.
Previous wording
The increase in professional services and other cost of revenue for three and nine months ended September 30, 2024 compared to the same period in 2023 was primarily due to the following:
Current wording
The increase in professional services and other cost of revenue for three months ended March 31, 2025 compared to the same period in 2024 was primarily due to the following:
Previous wording
Allocated overhead and other expenses increased primarily due to increased costs associated with our other service offering, including Commerce Hub. Employee-related costs decreased as we continue to leverage our Solutions Partners to deliver on-boarding and other professional services.
Current wording
Commerce payment processing fees increased due to higher payment volume and merchant activity. Amortization of capitalized software development costs increased as we continued to increase functionality with our internally build software platform. Allocated overhead expenses decreased primarily due to the decreased proportional allocation of shared company expenses associated with headcount in subscription cost of revenue. Employee-related costs decreased as we continue to leverage our Solutions Partners to deliver on-boarding and other professional services.
Previous wording
The increase in research and development expense for the three and nine months ended September 30, 2024 compared to the same period in 2023 was primarily due to the following:
Current wording
The increase in research and development expense for the three months ended March 31, 2025 compared to the same period in 2024 was primarily due to the following:
Previous wording
Employee-related costs increased as a result of increased headcount as we continued to grow our engineering organization to develop new products, increase functionality and to maintain our existing customer platform. Allocated overhead expenses increased due to an increase in shared company expenses associated with our systems and infrastructure as we continued to grow our business. Professional fees increased due to an increase in the use of third-party services and contractors.
Current wording
Employee-related costs increased as a result of increased headcount as we continued to grow our engineering organization to develop new products, increase functionality and to maintain our existing customer platform. Allocated overhead expenses increased due to an increase in shared company expenses associated with our systems and infrastructure as we continued to grow our business and increased proportional allocation of shared company expenses associated with headcount in research and development.
Previous wording
The increase in sales and marketing expense for the three and nine months ended September 30, 2024 compared to the same period in 2023 was primarily due to the following:
Current wording
The increase in sales and marketing expense for the three months ended March 31, 2025 compared to the same period in 2024 was primarily due to the following:
Previous wording
Employee-related costs increased as a result of increased headcount as we expanded our selling and marketing organizations to grow our customer base. Marketing programs increased due to the timing and size of certain marketing efforts as we made investments in attracting new customers. Allocated overhead expenses increased due to an increase in shared company expenses associated with our systems and infrastructure. Solutions Partner commissions increased as a result of increased revenue generated through our Solutions Partners, partially offset by certain costs that are deferred and amortized over two to four years as we changed the duration of certain Solutions Partner commissions term from lifetime to three years.
Current wording
Employee-related costs increased as a result of increased headcount as we expanded our selling and marketing organizations to grow our customer base. Marketing programs increased due to the timing and size of certain marketing efforts as we made investments in attracting new customers. Solutions Partner commissions increased as a result of increased revenue generated through our Solutions Partners. Allocated overhead expenses increased due to an increase in shared company expenses associated with our systems and infrastructure.
Previous wording
The increase in general and administrative expense for the three and nine months ended September 30, 2024 compared to the same period in 2023 was primarily due to the following:
Current wording
The increase in general and administrative expense for the three months ended March 31, 2025 compared to the same period in 2024 was primarily due to the following:
Previous wording
Employee-related costs increased as a result of increased headcount as we grew our business and required additional personnel to support our expanded operations. Customer credit card fees increased due to increased customer transactions as we continued to grow our business. Allocated overhead expenses increased due to an increase in shared company expenses associated with our systems and infrastructure as we continued to grow our business. Professional fees increased due to an increase in the use of third-party services and contractors.
Current wording
Employee-related costs increased as a result of increased headcount as we grew our business and required additional personnel to support our expanded operations. Customer credit card fees increased due to increased customer transactions as we continued to grow our business. Professional fees increased primarily due to increase in the use of third-party services and contractors. Allocated overhead expenses increased due to an increase in shared company expenses associated with our systems and infrastructure as we continued to grow our business.
Previous wording
Restructuring charges in the three and nine months ended September 30, 2024 consists of only variable facilities-related costs on unused space. Restructuring charges were $0.8 million in the three months ended September 30, 2023 due to the implementation of the Restructuring Plan in the first quarter of 2023 and its continued execution during the third quarter. Restructuring costs consisted primarily of facilities related costs for the terminations and abandonments of leases globally.
Current wording
Restructuring charges in the three months ended March 31, 2025 and 2024 consisted of variable facilities-related costs on unused space.
Previous wording
The change in other income (expense) during the three and nine months ended September 30, 2024 is primarily due to the following:
Current wording
The change in other income (expense) during three months ended March 31, 2025 is primarily due to the following:
Previous wording
Other income (expense) primarily consists of the impact of foreign currency transaction gains and losses associated with monetary assets and liabilities. The change in foreign currency transactions is primarily attributable to the increase in the value of the Euro and British Pound Sterling relative to the U.S. Dollar. The increase in the impairment of and gain on strategic investments is due to an impairment of $4.1 million and gains of $18.6 million from observable price changes in the value of certain strategic investments in the nine months ended September 30, 2024 that did not occur in 2023.
Current wording
The decrease in the impairment of strategic investments is due to an impairment of $3.6 million in the first quarter of 2024 compared to $1.6 million loss in 2025. The decrease in gain on strategic investments is due to gains of $16.4 million from observable price changes in the value of certain strategic investments in the first quarter of 2024 that did not occur in 2025. The change in foreign currency gains and losses transactions is primarily attributable to the value of the U.S. Dollar relative to the Euro and British Pound Sterling.
Previous wording
The following table shows cash and cash equivalents, working capital, net cash and cash equivalents provided by operating activities, net cash and cash equivalents used in investing activities, and net cash and cash equivalents provided by financing activities for the nine months ended September 30, 2024 and 2023.
Current wording
The following table shows cash and cash equivalents, working capital, net cash and cash equivalents provided by operating activities, net cash and cash equivalents used in investing activities, and net cash and cash equivalents provided by financing activities for the three months ended March 31, 2025 and 2024.
Previous wording
Our cash and cash equivalents at September 30, 2024 were held for working capital purposes. At September 30, 2024, $238.8 million of our cash and cash equivalents was held in accounts outside the United States. We do not assert indefinite reinvestment of our foreign earnings because these earnings have been subject to United States Federal tax. While we have concluded that any incremental tax incurred upon ultimate distribution of these earnings to be immaterial, our current plans do not demonstrate a need to repatriate undistributed earnings to fund our U.S. operations.
Current wording
Our cash and cash equivalents at March 31, 2025 were held for working capital purposes and for a business acquisition (See Note 17 of the notes to consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q). At March 31, 2025, $250.7 million of our cash and cash equivalents was held in accounts outside the United States. We do not assert indefinite reinvestment of our foreign earnings because these earnings have been subject to United States Federal tax. While we have concluded that any incremental tax incurred upon ultimate distribution of these earnings to be immaterial, our current plans do not demonstrate a need to repatriate undistributed earnings to fund our U.S. operations.
Previous wording
Net cash and cash equivalents provided by operating activities consists primarily of net loss adjusted for certain non-cash items, including stock-based compensation, depreciation and amortization and other non-cash charges, net.
Current wording
Net cash and cash equivalents provided by operating activities consists primarily of net (loss) income adjusted for certain non-cash items, including stock-based compensation, depreciation and amortization and other non-cash charges, net.
Previous wording
Net cash and cash equivalents provided by operating activities during the nine months ended September 30, 2023 primarily reflected our net loss of $162.7 million, $30.2 million accretion of bond discounts, offset by non-cash expenses that included $53.5 million of depreciation and amortization, $318.5 million in stock-based compensation, restructuring charges of $64.9 million, and $1.5 million of amortization of debt discount and issuance costs. Working capital sources of cash and cash equivalents primarily included a $40.7 million increase in deferred revenue primarily resulting from the growth in the number of customers invoiced during the period, a $13.2 million decrease in accounts receivable related to increased collection, a $23.2 million increase in right-of-use asset, and $44.9 million increase in accrued expenses and other liabilities. These sources of cash and cash equivalents were offset by a $36.0 million increase in prepaid expenses and other assets, a $28.9 million decrease in operating lease liabilities, a $54.3 million increase in deferred commissions, and a $5.2 million increase in accounts payable related to timing of bill payments.
Current wording
Net cash and cash equivalents provided by operating activities during the three months ended March 31, 2025 primarily reflected our net loss of $21.8 million, $28.8 million of depreciation and amortization, $116.7 million in stock-based compensation and an impairment of strategic investments of $1.6 million, $0.5 million of amortization of debt discount and issuance costs, offset by non-cash expenses that included $14.0 million accretion of bond discounts, and $2.7 million of unrealized currency translation. Working capital sources of cash and cash equivalents primarily included a $39.4 million increase in deferred revenue primarily resulting from the growth in the number of customers invoiced during the period, a $45.7 million decrease in accounts receivable related to increased collection, a $18.0 million increase in accounts payable related to timing of bill payments, and a $6.4 million decrease in right-of-use asset. These sources of cash and cash equivalents were offset by a $26.4 million increase in prepaid expenses and other assets, a $7.5 million decrease in operating lease liabilities, a $27.2 million increase in deferred commissions, and $1.2 million decrease in accrued expenses and other liabilities.
Previous wording
Net cash and cash equivalents provided by operating activities during the nine months ended September 30, 2024 primarily reflected our net loss of $0.4 million, $68.4 million of depreciation and amortization, $370.4 million in stock-based compensation, an impairment of strategic investments of $4.1 million, and $1.5 million of amortization of debt discount and issuance costs, offset by non-cash expenses that included $36.7 million accretion of bond discounts, a gain on strategic investments of $18.5 million, $0.6 million benefit from deferred income taxes, and $3.4 million of unrealized currency translation. Working capital sources of cash and cash equivalents primarily included a $41.1 million increase in deferred revenue primarily resulting from the growth in the number of customers invoiced during the period, a $13.9 million decrease in accounts receivable related to increased collection, a $39.3 million decrease in accrued expenses and other liabilities, and a $26.5 million increase in right-of-use asset. These sources of cash and cash equivalents were offset by a $8.6 million increase in prepaid expenses and other assets, a $32.6 million decrease in operating lease liabilities, a $61.4 million increase in deferred commissions, and a $1.4 million increase in accounts payable related to timing of bill payments.
Current wording
Net cash and cash equivalents provided by operating activities during the three months ended March 31, 2024 primarily reflected our net income of $5.9 million, $21.2 million of depreciation and amortization, $111.1 million in stock-based compensation and an impairment of strategic investments of $3.6 million, $0.5 million of amortization of debt discount and issuance costs, offset by non-cash expenses that included $12.6 million accretion of bond discounts, a gain on strategic investments of $16.4 million, and $0.5 million of unrealized currency translation. Working capital sources of cash and cash equivalents primarily included a $31.2 million increase in deferred revenue primarily resulting from the growth in the number of customers invoiced during the period, a $25.4 million decrease in accounts receivable related to increased collection, and a $6.4 million decrease in right-of-use asset. These sources of cash and cash equivalents were offset by a $5.5 million increase in prepaid expenses and other assets, a $12.7 million decrease in operating lease liabilities, a $17.0 million increase in deferred commissions, a $1.3 million decrease in accounts payable related to timing of bill payments, and $13.3 million decrease in accrued expenses and other liabilities.
Previous wording
Our investing activities have consisted primarily of purchases and maturities of investments, property and equipment purchases, purchases of strategic investments, and capitalization of software development costs. Capitalized software development costs are related to new products or improvements to our existing software platform that expands the functionality for our customers.
Current wording
Our investing activities have consisted primarily of purchases and maturities of investments, property and equipment purchases, purchases of strategic investments, capitalization of software development costs, and business acquisitions. Capitalized software development costs are related to new products or improvements to our existing software platform that expands the functionality for our customers.
Previous wording
Net cash and cash equivalents used in investing activities during the nine months ended September 30, 2024 consisted primarily of cash used for $1.5 billion purchases of investments, $7.6 million of purchases of strategic investments, $3.9 million in an equity method investment, $25.2 million of purchased property and equipment, and $66.7 million of capitalized software development costs, offset by $1.2 billion received related to the maturity of investments, $2.0 million of proceeds from sale of investments, and $1.9 million of proceeds from a net working capital settlement.
Current wording
Net cash and cash equivalents provided by investing activities during the three months ended March 31, 2025 consisted primarily of $674.4 million purchases of investments, $13.3 million of purchased property and equipment, $11.0 million purchases of strategic investments, $51.4 million related to business acquisitions, and $30.4 million of capitalized software development costs. These uses of cash were offset by $803.1 million received related to the maturity of investments.
Previous wording
Net cash and cash equivalents used in investing activities during the nine months ended September 30, 2023 consisted primarily of $1.1 billion purchases of investments and $25.0 million of purchased property and equipment, $9.3 million of purchases of strategic investments, $2.3 million in an equity method investment and $49.3 million of capitalized software development costs. These uses of cash were offset by $1.2 billion received related to the maturity of investments.
Current wording
Net cash and cash equivalents used in investing activities during the three months ended March 31, 2024 consisted primarily of $399.4 million purchases of investments, $5.9 million of purchased property and equipment, and $21.6 million of capitalized software development costs. These uses of cash were offset by $352.8 million received related to the maturity of investments.
Previous wording
Net Cash and Cash Equivalents Provided by Financing Activities
Current wording
Net Cash and Cash Equivalents (Used in) Provided by Financing Activities
Previous wording
Our financing activities have consisted primarily of the issuance of common stock under our stock plans, and payments of employee taxes related to the net share settlement of stock-based awards.
Current wording
Our financing activities have consisted primarily of the repayment of our 2025 Notes, the issuance of common stock under our stock plans, and payments of employee taxes related to the net share settlement of stock-based awards.
Previous wording
For the nine months ended September 30, 2023 cash used in financing activities consisted $7.6 million used for payment of employee taxes related to the net share settlement of stock-based awards, offset by $37.9 million of proceeds related to issuance of common stock under stock plans.
Current wording
For the three months ended March 31, 2025 cash provided in financing activities consisted of $19.3 million of proceeds related to issuance of common stock under stock plans, offset by $9.1 million used for payment of employee taxes related to the net share settlement of stock-based awards and $90.6 million for repayments of the 2025 Notes attributable to the principal.
Previous wording
For the nine months ended September 30, 2024 cash provided in financing activities consisted of $61.2 million of proceeds related to issuance of common stock under stock plans, offset by $17.8 million used for payment of employee taxes related to the net share settlement of stock-based awards.
Current wording
For the three months ended March 31, 2024 cash provided in financing activities consisted of $19.9 million of proceeds related to issuance of common stock under stock plans, offset by $8.8 million used for payment of employee taxes related to the net share settlement of stock-based awards.
Previous wording
Contractual obligations are cash that we are obligated to pay as part of certain contracts that we have entered during our course of business. Our contractual obligations consist of operating lease liabilities that are included in our consolidated balance sheet and vendor commitments associated with agreements that are legally binding. See Note 10 for all obligations the Company is committed to in the notes to the consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.
Current wording
Contractual obligations are cash that we are obligated to pay as part of certain contracts that we have entered during our course of business. Our contractual obligations consist of operating lease liabilities that are included in our consolidated balance sheet and vendor commitments associated with agreements that are legally binding. As of March 31, 2025, the total obligation for operating leases was $346.5 million, of which $54.7 million is expected in the next twelve months. As of March 31, 2025, our vendor commitment was $618.2 million, of which $240.4 million is expected in the next twelve months. See Note 12 for all obligations the Company is committed to in the notes to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Previous wording
There have been no significant changes in our critical accounting policies and estimates during the nine months ended September 30, 2024 as compared to the critical accounting policies and estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.
Current wording
There have been no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2025 as compared to the critical accounting policies and estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
The increase in subscription cost of revenue for the three months ended March 31, 2025 compared to the same period in 2024 was primarily due to the following:
Rearranged previous paragraphs (10)
Previous report — wording carried elsewhere
Subscription revenue increased during the three months ended September 30, 2024 compared to the same period in 2023 primarily due to the increase in Customers, which grew from 194,098 as of September 30, 2023 to 238,128 as of September 30, 2024. Average Subscription Revenue per Customer decreased from $11,457 for the nine months ended September 30, 2023 to $11,324 for the nine months ended September 30, 2024. The growth in Customers was primarily driven by increased demand for our lower-priced Starter products, as well as Professional and Enterprise products from our new seats model. The decrease in Average Subscription Revenue per Customer was primarily by continued purchases of our lower-priced Starter products and the impact of our new seats pricing model, offset by a continued demand for our Professional and Enterprise products, as well as the addition of customers from the acquisition of Clearbit.
Previous report — wording carried elsewhere
Professional services and other revenue increased during the nine months ended September 30, 2024 compared to the same period in 2023 primarily due to an increase in other revenue streams, including Commerce Hub.
Previous report — wording carried elsewhere
Subscription and hosting costs increased primarily due to growth in our Customer base from 194,098 as of September 30, 2023 to 238,128 as of September 30, 2024. We also saw higher subscription and hosting costs as we continued to focus on the security, reliability and performance of our customer platform. Amortization of capitalized software development costs increased due to the increased number of developers working on our software platform as we continued to develop new products and increased functionality. Amortization of acquired technology increased due to the amortization of acquired technology associated with our acquisition of Clearbit in December 2023. Employee-related costs increased as a result of increased headcount as we continue to grow our customer support organization to support our customer growth and improve service levels and offerings. Allocated overhead expenses decreased primarily due to the reduction of our leased space as a result of the global lease consolidation under the Restructuring Plan, offset slightly by an increase in shared company third-party services costs.
Previous report — wording carried elsewhere
Allocated overhead and other expenses increased primarily due to increased costs associated with our other service offerings, including Commerce Hub. Employee-related costs decreased as we continue to leverage our Solutions Partners to deliver on-boarding and other professional services.
Previous report — wording carried elsewhere
Employee-related costs increased as a result of increased headcount as we continued to grow our engineering organization to develop new products, increase functionality and to maintain our existing customer platform. Allocated overhead expenses increased due to an increase in shared company expenses associated with our systems and infrastructure as we continued to grow our business. Professional fees increased due to an increase in the use of third-party services and contractors.
Previous report — wording carried elsewhere
Employee-related costs increased as a result of increased headcount as we expanded our selling and marketing organizations to grow our customer base. Marketing programs increased due to the timing and size of certain marketing efforts as we made investments in attracting new customers. Allocated overhead expenses increased due to an increase in shared company expenses associated with our systems and infrastructure. Solutions Partner commissions decreased as we changed the duration of certain Solutions Partner commissions term from lifetime to three years and began to defer these costs and amortize over a period of approximately two to four years in the first quarter of 2023. This was partially offset by increases in Solutions Partner commissions as a result of increased revenue generated through our Solutions Partners.
Previous report — wording carried elsewhere
Employee-related costs increased as a result of increased headcount as we grew our business and required additional personnel to support our expanded operations. Customer credit card fees increased due to increased customer transactions as we continued to grow our business. Allocated overhead expenses increased due to an increase in shared company expenses associated with our systems and infrastructure as we continued to grow our business. Professional fees increased due to an increase in the use of third-party services and contractors.
Previous report — wording carried elsewhere
Interest expense primarily consists of amortization of the debt discount and issuance costs and contractual interest expense related to our 2025 Notes. Interest expense remained relatively consistent.
Previous report — wording carried elsewhere
Other income (expense) primarily consists of the impact of foreign currency transaction gains and losses associated with monetary assets and liabilities. The change in foreign currency transactions is primarily attributable to the increase in the value of the Euro and British Pound Sterling relative to the U.S. Dollar.
Previous report — wording carried elsewhere
Net Cash and Cash Equivalents Used in Investing Activities