UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO
There were
HUBSPOT, INC.
Table of Contents
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Item 1. |
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Unaudited Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 |
6 |
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Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 |
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Notes to Unaudited Consolidated Financial Statements |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
22 |
Item 3. |
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Item 4. |
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34 |
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Item 1. |
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Item 1A. |
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Item 2. |
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61 |
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Item 3. |
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61 |
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Item 4. |
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61 |
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Item 5. |
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Item 6. |
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63 |
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EX-31.1 |
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CERTIFICATION OF THE CEO PURSUANT TO SECTION 302 |
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EX-31.2 |
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CERTIFICATION OF THE CFO PURSUANT TO SECTION 302 |
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EX-32.1 |
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CERTIFICATION OF THE CEO AND CFO PURSUANT TO SECTION 906 |
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and these statements involve substantial risks and uncertainties. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q are forward-looking statements. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have
3
an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
In this Quarterly Report on Form 10-Q, the terms “HubSpot,” “we,” “us,” and “our” refer to HubSpot, Inc. and its subsidiaries, unless the context indicates otherwise.
Risk Factor Summary
The risk factors detailed in Item 1A entitled “Risk Factors” in this Quarterly Report on Form 10-Q are the risks that we believe are material to our investors and a reader should carefully consider them. Those risks are not all of the risks we face and other factors not presently known to us or that we currently believe are immaterial may also affect our business if they occur. The following is a summary of the risk factors detailed in Item 1A:
4
5
PART I — Financial Information
Item 1. Financial Statements
HubSpot, Inc.
Unaudited Consolidated Balance Sheets
(in thousands)
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June 30, |
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December 31, |
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2024 |
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2023 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Accounts receivable — net of allowance for doubtful accounts of $ |
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Deferred commission expense |
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Prepaid expenses and other current assets |
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Total current assets |
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Long-term investments |
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Property and equipment, net |
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Capitalized software development costs, net |
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Right-of-use assets |
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Deferred commission expense, net of current portion |
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Other assets |
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Intangible assets, net |
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Goodwill |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued compensation costs |
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Accrued commissions |
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Accrued expenses and other current liabilities |
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Operating lease liabilities |
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Convertible senior notes |
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— |
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Deferred revenue |
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Total current liabilities |
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Operating lease liabilities, net of current portion |
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Deferred revenue, net of current portion |
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Other long-term liabilities |
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Convertible senior notes |
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— |
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Total liabilities |
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Stockholders’ equity: |
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Common stock |
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Additional paid-in capital |
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Accumulated other comprehensive (loss) income |
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Accumulated deficit |
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( |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of the consolidated financial statements.
6
HubSpot, Inc.
Unaudited Consolidated Statements of Operations
(in thousands, except per share data)
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For the Three Months Ended June 30, |
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For the Six Months Ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Revenues: |
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Subscription |
$ |
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$ |
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$ |
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$ |
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Professional services and other |
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Total revenue |
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Cost of revenues: |
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Subscription |
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Professional services and other |
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Total cost of revenues |
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Gross profit |
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Operating expenses: |
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Research and development |
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Sales and marketing |
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General and administrative |
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Restructuring |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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( |
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( |
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Other income (expense): |
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Interest income |
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Interest expense |
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( |
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( |
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( |
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( |
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Other income (expense) |
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Total other income |
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(Loss) income before income tax expense |
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( |
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( |
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( |
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Income tax expense |
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( |
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( |
) |
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( |
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( |
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Net loss |
$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Net loss per share, basic and diluted |
$ |
( |
) |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted average common shares used in computing |
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The accompanying notes are an integral part of the consolidated financial statements.
7
HubSpot, Inc.
Unaudited Consolidated Statements of Comprehensive Loss
(in thousands)
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For the Three Months Ended June 30, |
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For the Six Months Ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Net loss |
$ |
( |
) |
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$ |
( |
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$ |
( |
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$ |
( |
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Other comprehensive loss: |
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Foreign currency translation adjustment |
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( |
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( |
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Changes in unrealized loss on investments, net of income |
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( |
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( |
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( |
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Changes in unrealized loss on cash flow hedges, net of |
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( |
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— |
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( |
) |
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— |
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Comprehensive loss |
$ |
( |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
The accompanying notes are an integral part of the consolidated financial statements.
8
HubSpot, Inc.
Unaudited Consolidated Statements of Stockholders' Equity
(in thousands, except per share amounts)
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Common |
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Treasury Stock, $0.001 |
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Additional |
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Accumulated |
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Accumulated |
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Shares |
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$ |
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Shares |
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$ |
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Capital |
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(Loss) |
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Deficit |
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Total |
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Balances at December 31, 2023 |
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$ |
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$ |
— |
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$ |
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$ |
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$ |
( |
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Issuance of common stock under |
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( |
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— |
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— |
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— |
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Restricted stock units taxes paid |
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( |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive loss, net |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Balances at March 31, 2024 |
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$ |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Issuance of common stock under |
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— |
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( |
) |
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— |
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— |
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— |
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Restricted stock units taxes paid |
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( |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive loss, net |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balances at June 30, 2024 |
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$ |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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Common |
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Treasury Stock, $0.001 |
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Additional |
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Accumulated |
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Accumulated |
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Shares |
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$ |
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Shares |
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$ |
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Capital |
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(Loss) |
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Deficit |
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Total |
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||||||||
Balances at December 31, 2022 |
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$ |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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|||||
Issuance of common stock under |
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— |
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— |
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— |
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— |
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— |
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|||
Restricted stock units taxes paid |
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( |
) |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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||
Other comprehensive income, net |
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— |
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— |
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— |
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— |
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— |
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— |
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||
Net loss |
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— |
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— |
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— |
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— |
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— |
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|
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— |
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|
|
( |
) |
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( |
) |
Balances at March 31, 2023 |
|
|
|
$ |
|
|
|
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|
$ |
— |
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|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||||
Issuance of common stock under |
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— |
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— |
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|
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— |
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— |
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|
||||
Restricted stock units taxes paid |
|
( |
) |
|
|
— |
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— |
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|
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— |
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|
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( |
) |
|
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— |
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— |
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( |
) |
Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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||
Other comprehensive loss, net |
|
— |
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— |
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— |
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|
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— |
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|
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— |
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( |
) |
|
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— |
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( |
) |
Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balances at June 30, 2023 |
|
|
|
$ |
|
|
|
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|
$ |
— |
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|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
The accompanying notes are an integral part of the consolidated financial statements.
9
HubSpot, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
|
|
For the Six Months Ended June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Operating Activities: |
|
|
|
|
|
|
||
Net loss |
|
|
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash and cash equivalents provided |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Stock-based compensation |
|
|
|
|
|
|
||
Restructuring charges |
|
|
— |
|
|
|
|
|
Gain on strategic investments |
|
|
( |
) |
|
|
— |
|
Impairment of strategic investments |
|
|
|
|
|
— |
|
|
(Benefit from) provision for deferred income taxes |
|
|
( |
) |
|
|
|
|
Amortization of debt discount and issuance costs |
|
|
|
|
|
|
||
Accretion of bond discount |
|
|
( |
) |
|
|
( |
) |
Unrealized currency translation |
|
|
( |
) |
|
|
( |
) |
Changes in assets and liabilities |
|
|
|
|
|
|
||
Accounts receivable |
|
|
|
|
|
|
||
Prepaid expenses and other assets |
|
|
( |
) |
|
|
( |
) |
Deferred commission expense |
|
|
( |
) |
|
|
( |
) |
Right-of-use assets |
|
|
|
|
|
|
||
Accounts payable |
|
|
( |
) |
|
|
( |
) |
Accrued expenses and other liabilities |
|
|
|
|
|
|
||
Operating lease liabilities |
|
|
( |
) |
|
|
( |
) |
Deferred revenue |
|
|
|
|
|
|
||
Net cash and cash equivalents provided by operating activities |
|
|
|
|
|
|
||
Investing Activities: |
|
|
|
|
|
|
||
Purchases of investments |
|
|
( |
) |
|
|
( |
) |
Maturities of investments |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
Purchases of strategic investments |
|
|
( |
) |
|
|
( |
) |
Capitalization of software development costs |
|
|
( |
) |
|
|
( |
) |
Proceeds from net working capital settlement |
|
|
|
|
|
— |
|
|
Net cash and cash equivalents provided by (used) in investing activities |
|
|
|
|
|
( |
) |
|
Financing Activities: |
|
|
|
|
|
|
||
Employee taxes paid related to the net share settlement of stock-based awards |
|
|
( |
) |
|
|
( |
) |
Proceeds related to the issuance of common stock under stock plans |
|
|
|
|
|
|
||
Net cash and cash equivalents provided by financing activities |
|
|
|
|
|
|
||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash, beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash, end of period |
|
$ |
|
|
$ |
|
||
Supplemental cash flow disclosure: |
|
|
|
|
|
|
||
Cash paid for income taxes |
|
$ |
|
|
$ |
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
Right-of-use assets obtained in exchange for operating lease liabilities |
|
$ |
|
|
$ |
|
||
Right-of-use asset reductions related to operating lease terminations |
|
$ |
— |
|
|
$ |
( |
) |
Non-cash investing and financing activities: |
|
|
|
|
|
|
||
Capital expenditures incurred but not yet paid |
|
$ |
|
|
$ |
|
||
Asset retirement obligations |
|
$ |
— |
|
|
$ |
( |
) |
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
10
HubSpot, Inc.
Notes to Unaudited Consolidated Financial Statements
1. Organization and Operations
HubSpot, Inc. (the “Company”) provides a customer platform that helps businesses connect and grow better. The Company delivers seamless connection for customer-facing teams with a unified platform that includes three layers: AI-powered engagement hubs, a Smart customer relationship management product (“CRM”), and a connected ecosystem supporting the customer platform with a marketplace of integrations, templates, and expert partners, a community network, and an academy of educational content.
The 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.
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) applicable to interim periods, under the rules and regulations of the United States Securities and Exchange Commission (“SEC”). In the opinion of management, the Company has prepared the accompanying unaudited consolidated financial statements on a basis substantially consistent with the audited consolidated financial statements of the Company as of and for the year ended December 31, 2023, and these consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results of the interim periods presented. All intercompany balances and transactions have been eliminated in consolidation.
The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire year ending December 31, 2024. The year-end balance sheet data was derived from audited financial statements, but this Form 10-Q does not include all disclosures required under GAAP. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted under the rules and regulations of the SEC.
These interim financial statements should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K filed with the SEC on February 14, 2024. Other than the addition of the accounting policy related to derivatives as described in Note 6, there have been no changes in the Company’s significant accounting policies from those that were disclosed in the Company’s Annual Report on Form 10-K that have had a material impact on our consolidated financial statements and related notes.
Recent Accounting Pronouncements
Recent accounting standards not included below are not expected to have a material impact on our consolidated financial position and results of operations.
In November 2023, the Financial Accounting Standards Board ("FASB") issued guidance enhancing the disclosures of reportable segment information, primarily about significant segment expenses. The new standard will be effective for the Company for the annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements. The adoption of this standard only impacts disclosures and is not expected to have a material impact on the Company's consolidated financial statements.
In December 2023, the FASB issued guidance enhancing income tax disclosure requirements by requiring specified categories and greater disaggregation within the rate reconciliation table, disclosure of income taxes paid by jurisdiction, and providing clarification on uncertain tax positions and related financial statement impacts. The new standard will be effective for the Company on January 1, 2025, with early adoption permitted. The adoption of this standard only impacts disclosures and is not expected to have a material impact on the Company's consolidated financial statements.
Revision of Previously Issued Financial Statements
During the financial close process for the first quarter of 2024, the Company identified an error related to the calculation of contractual credits in one of its third-party vendor agreements which impacted the Company's previously issued financial statements beginning with the quarter ended December 31, 2021. The error impacted subsequent annual and quarterly reporting periods through December 31, 2023. The Company assessed the materiality of the error, in consideration of both quantitative and qualitative factors, and concluded that it is not material to any previously presented interim or annual financial statements. The Company revised its financial statements for the periods impacted. In connection with the revisions, the Company also corrected a previously identified immaterial error related to the recording of certain deferred tax balances.
11
Changes to the interim consolidated statements of operations for the three and six months ended June 30, 2023, as a result of the error, were as follows (in thousands, except per share data):
Consolidated Statements of Operations and Comprehensive Loss |
|
For the Three Months Ended June 30, 2023 |
|
|||||||||
|
|
As Previously Reported |
|
|
Adjustments |
|
|
As Revised |
|
|||
|
|
(in thousands) |
|
|||||||||
Cost of revenues - Subscription |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Total cost of revenues |
|
|
|
|
|
( |
) |
|
|
|
||
Gross profit |
|
|
|
|
|
|
|
|
|
|||
Loss from operations |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Loss before income tax expense |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Income tax expense |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net loss |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Comprehensive loss |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net loss per common share, basic and diluted |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
|
|
For the Six Months Ended June 30, 2023 |
|
|||||||||
|
|
As Previously Reported |
|
|
Adjustments |
|
|
As Revised |
|
|||
|
|
(in thousands) |
|
|||||||||
Cost of revenues - Subscription |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Total cost of revenues |
|
|
|
|
|
( |
) |
|
|
|
||
Gross profit |
|
|
|
|
|
|
|
|
|
|||
Loss from operations |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Loss before income tax expense |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Income tax expense |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net loss |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Comprehensive loss |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net loss per common share, basic and diluted |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
2. Revenues
Disaggregation of Revenue
The Company provides disaggregation of revenue based on geographic region (Note 14) and based on the subscription versus professional services and other classification on the consolidated statements of operations as it believes these best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
Deferred Revenue and Deferred Commission Expense
Amounts that have been invoiced are recorded in accounts receivable and deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. Deferred revenue represents amounts billed for which revenue has not yet been recognized. Deferred revenue that will be recognized during the succeeding 12-month period is recorded as current deferred revenue, and the remaining portion is recorded as long-term deferred revenue. Deferred revenue during the six months ended June 30, 2024 increased by $