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What changed in HUBSPOT INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of HUBSPOT INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+316 added−348 removedSource: 10-K (2025-02-12) vs 10-K (2024-02-14)

Top changes in HUBSPOT INC's 2024 10-K

316 paragraphs added · 348 removed · 270 edited across 7 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

149 edited+31 added−21 removed283 unchanged
Biggest changeThe CCPA may require us to modify our data collection or processing practices and policies and to potentially incur substantial costs and expenses in an effort to comply. In addition to increasing our potential exposure to regulatory enforcement, the CCPA also provides for violations and a limited private right of action, which may increase our exposure to civil litigation.
Biggest changeIn addition to increasing our potential exposure to regulatory enforcement, the CCPA also provides for violations and a limited private right of action, which may increase our exposure to civil litigation. Numerous other states have passed comprehensive privacy and data security laws, which impose obligations on covered businesses similar – but not identical – to those under the CCPA.
We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including: unanticipated costs or liabilities associated with the acquisition; incurrence of acquisition-related costs, which would be recognized as a current period expense; inability to generate sufficient revenue to offset acquisition or investment costs; the inability to maintain relationships with customers and partners of the acquired business; the difficulty of incorporating acquired technology and rights into our platform and of maintaining quality and security standards consistent with our brand; delays in customer purchases due to uncertainty related to any acquisition; the need to integrate or implement additional controls, procedures and policies; challenges caused by distance, language and cultural differences; harm to our existing business relationships with business partners and customers as a result of the acquisition; the potential loss of key employees; use of resources that are needed in other parts of our business and diversion of management and employee resources; and use of substantial portions of our available cash or the incurrence of debt to consummate the acquisition.
We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including: unanticipated costs or liabilities associated with the acquisition; incurrence of acquisition-related costs, which would be recognized as a current period expense; the inability to generate sufficient revenue to offset acquisition or investment costs; the inability to maintain relationships with customers and partners of the acquired business; the difficulty of incorporating acquired technology and rights into our platform and of maintaining quality and security standards consistent with our brand; delays in customer purchases due to uncertainty related to any acquisition; the need to integrate or implement additional controls, procedures and policies; challenges caused by distance, language and cultural differences; harm to our existing business relationships with business partners and customers as a result of the acquisition; the potential loss of key employees; use of resources that are needed in other parts of our business and diversion of management and employee resources; and use of substantial portions of our available cash or the incurrence of debt to consummate the acquisition.
We may incur significant losses in the future for a number of reasons, including the other risks described in this Annual Report on Form 10-K, and unforeseen expenses, difficulties, complications and delays and other unknown events. If we are unable to achieve and sustain profitability, the market price of our common stock may significantly decrease.
We may incur significant losses in the future for a number of reasons, including the other risks described in this Annual Report on Form 10-K, and unforeseen expenses, difficulties, complications and delays and other unknown events. If we are unable to achieve and sustain profitability, the market price of our common stock may decrease significantly.
Our amended and restated certificate of incorporation and bylaws include provisions that: • authorize “blank check” preferred stock, which could be issued by the board without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock; • provide for a classified board of directors whose members serve staggered three-year terms; • specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of the board, the chief executive officer or the president; • prohibit stockholder action by written consent; • establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors; • provide that our directors may be removed only for cause; • provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; • specify that no stockholder is permitted to cumulate votes at any election of directors; • authorize our board of directors to modify, alter or repeal our amended and restated bylaws; and • require supermajority votes of the holders of our common stock to amend specified provisions of our charter documents.
Our amended and restated certificate of incorporation and bylaws include provisions that: • authorize “blank check” preferred stock, which could be issued by the board of directors without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock; • provide for a classified board of directors whose members serve staggered three-year terms; • specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of the board of directors, the chief executive officer or the president; • prohibit stockholder action by written consent; 39 • establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors; • provide that our directors may be removed only for cause; • provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; • specify that no stockholder is permitted to cumulate votes at any election of directors; • authorize our board of directors to modify, alter or repeal our amended and restated bylaws; and • require supermajority votes of the holders of our common stock to amend specified provisions of our charter documents.
In addition, the authorities in these jurisdictions could review our tax returns and impose additional tax, interest and penalties, and the authorities could claim that various withholding requirements apply to us or our subsidiaries or assert that benefits of tax treaties are not available to us or our subsidiaries, or assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable nexus, often referred to as a “permanent 34 establishment” under international tax treaties, any of which could have a material impact on us, our financial condition or our operating results.
In addition, the authorities in these jurisdictions could review our tax returns and impose additional tax, interest and penalties, and the authorities could claim that various withholding requirements apply to us or our subsidiaries or assert that benefits of tax treaties are not available to us or our subsidiaries, or assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable nexus, often referred to as a “permanent establishment” under international tax treaties, any of which could have a material impact on us, our financial condition or our operating results.
The Company’s inability, for technological or other reasons, some of which may be beyond the Company’s control, to enhance, develop, introduce and monetize products and services in a timely manner, or at all, in response to changing market 19 conditions or customer requirements could have a material adverse effect on the Company’s business, results of operations and financial condition or could result in its products and services not achieving market acceptance or becoming obsolete.
The Company’s inability, for technological or other reasons, some of which may be beyond the Company’s control, to enhance, develop, introduce and monetize products and services in a timely manner, or at all, in response to changing market conditions or customer requirements could have a material adverse effect on the Company’s business, results of operations and financial condition or could result in its products and services not achieving market acceptance or becoming obsolete.
To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, incur significant costs associated with remediation and the implementation of additional security measures, including costs to deploy additional personnel and protection technologies, train employees, and engage third-party experts and consultants, and our competitive position could be harmed.
To the extent that any compromise, disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, incur significant costs associated with remediation and the implementation of additional security measures, including costs to deploy additional personnel and protection technologies, train employees, and engage third-party experts and consultants, and our competitive position could be harmed.
Any security compromise in our industry, whether actual or perceived, could harm our reputation, erode customer confidence in the effectiveness of our security measures, negatively impact our ability to attract new customers, cause 27 existing customers to elect not to renew their subscriptions or subject us to third-party lawsuits, regulatory fines or other action or liability, which could materially and adversely affect our business and operating results.
Any security compromise in our industry, whether actual or perceived, could harm our reputation, erode customer confidence in the effectiveness of our security measures, negatively impact our ability to attract new customers, cause existing customers to elect not to renew their subscriptions or subject us to third-party lawsuits, regulatory fines or other action or liability, which could materially and adversely affect our business and operating results.
If we experience any of these effects in connection with future growth, if our new employees perform poorly, or if we are unsuccessful in recruiting, hiring, training, managing and integrating new employees, or retaining our existing employees, it could materially impair our ability to attract new customers, retain existing customers and expand their use of our platform, all of which would materially and adversely affect our business, financial condition and results of operations.
If we experience any of these effects in connection with future growth, if our new employees perform poorly, or if we are unsuccessful in recruiting, hiring, training, managing and integrating new employees, or retaining our existing employees, it could materially impair our ability to attract new customers, retain existing customers and 17 expand their use of our platform, all of which would materially and adversely affect our business, financial condition and results of operations.
Accordingly, these laws or significant new laws or regulations or changes in, or repeals of, existing laws, regulations or governmental policy may change the way these customers do business and may require us to implement additional features or offer additional contractual terms to satisfy customer and regulatory requirements, or could cause the demand for and sales of our customer platform to decrease and adversely impact our financial results.
Accordingly, these laws or significant new laws or regulations or changes in, or repeals of, existing laws, regulations or governmental policy may change the way these customers do business and may require us to implement additional features or offer additional 33 contractual terms to satisfy customer and regulatory requirements, or could cause the demand for and sales of our customer platform to decrease and adversely impact our financial results.
In the event that any of our third-party facilities arrangements is terminated, or if there is a lapse of service or damage to a facility, we could experience interruptions in our platform as well as delays and additional expenses in arranging new facilities and services. Even with current and planned disaster recovery arrangements, our business could be harmed.
In the event that any of our third-party facilities arrangements is terminated, or if there is a lapse of service or damage to a facility, we could experience interruptions in our platform as well as delays and additional expenses in 24 arranging new facilities and services. Even with current and planned disaster recovery arrangements, our business could be harmed.
Generally, if we receive a 31 proper notice from, or on behalf, of a copyright owner alleging infringement of copyrighted material located on websites we host, and we fail to expeditiously remove or disable access to the allegedly infringing material or otherwise fail to meet the requirements of the safe harbor provided by the DMCA, the copyright owner may seek to impose liability on us.
Generally, if we receive a proper notice from, or on behalf, of a copyright owner alleging infringement of copyrighted material located on websites we host, and we fail to expeditiously remove or disable access to the allegedly infringing material or otherwise fail to meet the requirements of the safe harbor provided by the DMCA, the copyright owner may seek to impose liability on us.
Any provision of our amended and restated certificate of incorporation or amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for 40 their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.
Any provision of our amended and restated certificate of incorporation or amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.
In addition, if our Solutions Partners do not continue to provide services to our customers, we would be required to provide such services ourselves either by expanding our internal team or engaging other third-party providers, which would increase our operating costs. If we fail to maintain our inbound thought leadership position, our business may suffer.
In addition, if our Solutions Partners do not continue to provide services to our customers, we would be required to provide such services ourselves either by expanding our internal team or engaging other third-party providers, which would increase our operating costs. If we fail to maintain our thought leadership position, our business may suffer.
Defects or errors could result in product outages and could also cause inaccuracies in the data we collect and process for our 24 customers, or even the loss, damage or inadvertent release of such confidential data. We implement bug fixes and upgrades as part of our regular system maintenance, which may lead to system downtime.
Defects or errors could result in product outages and could also cause inaccuracies in the data we collect and process for our customers, or even the loss, damage or inadvertent release of such confidential data. We implement bug fixes and upgrades as part of our regular system maintenance, which may lead to system downtime.
These cyber-attacks could be carried out by threat actors of all types (including but not limited to nation states, organized crime, other criminal enterprises, individual actors and/or advanced persistent threat groups). In addition, we may experience intrusions on our physical premises by any of these threat actors.
These cyber-attacks could be carried 27 out by threat actors of all types (including but not limited to nation states, organized crime, other criminal enterprises, individual actors and/or advanced persistent threat groups). In addition, we may experience intrusions on our physical premises by any of these threat actors.
While we have implemented certain contractual measures with such vendors to protect our interests, we are ultimately unable to verify with complete certainty the source of such data, how it was received, and that such information was collected and is being shared with us in compliance with all applicable data privacy laws.
While we have implemented certain contractual measures with such vendors to protect our interests, we are ultimately unable to verify with complete certainty the source of such data, how it was received, and that such information was collected and is being 30 shared with us in compliance with all applicable data privacy laws.
The market for inbound marketing, sales, service, operations, commerce and customer management products is still evolving, and competitive dynamics may cause pricing levels to change as the market matures and as existing and new market participants introduce new types of point applications and different approaches to enable businesses to address their respective needs.
The market for marketing, sales, service, operations, commerce and customer management products is still evolving, and competitive dynamics may cause pricing levels to change as the market matures and as existing and new market participants introduce new types of point applications and different approaches to enable businesses to address their respective needs.
If our security measures, or those of our service providers, are compromised as a result of third-party action, employee or customer error, malfeasance, stolen or fraudulently obtained log-in credentials or otherwise, our reputation could be damaged, our business may be harmed and we could incur significant liability.
If our security measures, or those of our service providers, are compromised as a result of third-party action, employee or customer error, malfeasance, stolen or fraudulently obtained log-in credentials or otherwise, our reputation could be damaged, our business may be harmed and we could 26 incur significant liability.
Compliance with such laws could also impair our efforts to maintain and expand our customer base and business lines, and thereby decrease our revenue. Our handling of data across our products and services is subject to a variety of laws and regulations, including regulation by various government agencies, including the U.S.
Compliance 29 with such laws could also impair our efforts to maintain and expand our customer base and business lines, and thereby decrease our revenue. Our handling of data across our products and services is subject to a variety of laws and regulations, including regulation by various government agencies, including the U.S.
Potential government regulation related to AI use and ethics 21 may also increase the burden and cost of research and development in this area, and failure to properly remediate AI usage or ethics issues may cause public confidence in AI to be undermined, which could slow adoption of AI in our products and services.
Potential government regulation related to AI use and ethics may also increase the burden and cost of research and development in this area, and failure to properly remediate AI usage or ethics issues may cause public confidence in AI to be undermined, which could slow adoption of AI in our products and services.
Further, potential government regulation related to AI use and ethics may also increase the burden and cost of research and development in this area, and failure to properly remediate AI usage or ethics issues may cause public confidence in AI to be undermined, which could slow adoption of AI in our products and services.
Further, potential government regulation related to AI use and ethics may also increase the cost of research and development in this area, and failure to properly remediate AI usage or ethics issues may cause public confidence in AI to be undermined, which could slow adoption of AI in our products and services.
Any of these factors could materially and adversely affect our business, financial condition and results of operations. In addition, if we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase. The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and operating results.
Any of these factors could materially and adversely affect our business, financial condition and results of operations. In addition, if we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase. 37 The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and operating results.
Our success and future growth depend upon the continued services of our management team, including our co-founders, Brian Halligan and Dharmesh Shah, our chief executive officer, Yamini Rangan, and other key employees in the areas of research and development, marketing, sales, services, operations, content management, and general and administrative functions.
Our success and future growth depend upon the continued services of our management team, including our co-founders, Brian Halligan and Dharmesh Shah, our chief executive officer, Yamini Rangan, and other key employees in the areas of research and development, marketing, sales, services, operations, and general and administrative functions.
More recently, global inflation rates have increased to levels not seen in several decades, which may result in decreased demand for our products and services, increases in our operating costs, including our labor costs, constrained credit and liquidity, reduced government spending and volatility in financial markets.
More recently, global inflation rates have increased to levels not seen in several decades, which may result in decreased demand for our products and services, increases in our operating costs, including our labor costs, constrained credit and liquidity, reduced 23 government spending and volatility in financial markets.
If we fail to successfully promote and maintain our brand, our business could suffer. 18 If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards and changing customer needs or requirements, our customer platform may become less competitive. Our future success depends on our ability to adapt and innovate our customer platform.
If we fail to successfully promote and maintain our brand, our business could suffer. If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards and changing customer needs or requirements, our customer platform may become less competitive. Our future success depends on our ability to adapt and innovate our customer platform.
We have in the past completed acquisitions and may acquire or invest in other companies or technologies in the future, which could divert management’s attention, fail to meet our expectations, result in additional dilution to our stockholders, increase expenses, disrupt our operations or harm our operating results.
We have in the past completed acquisitions and may continue to acquire or invest in other companies or technologies in the future, which could divert management’s attention, fail to meet our expectations, result in additional dilution to our stockholders, increase expenses, disrupt our operations or harm our operating results.
Some of these entities maintain “blacklists” of companies and individuals, and the websites, internet service providers and internet protocol 32 addresses associated with those entities or individuals that do not adhere to those standards of conduct or practices for commercial email solicitations that the blacklisting entity believes are appropriate.
Some of these entities maintain “blacklists” of companies and individuals, and the websites, internet service providers and internet protocol addresses associated with those entities or individuals that do not adhere to those standards of conduct or practices for commercial email solicitations that the blacklisting entity believes are appropriate.
In particular, Section 404 of the 39 Sarbanes-Oxley Act (“Section 404”), requires us to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on, and our independent registered public accounting firm to attest to, the effectiveness of our internal control over financial reporting.
In particular, Section 404 of the Sarbanes-Oxley Act (“Section 404”), requires us to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on, and our independent registered public accounting firm to attest to, the effectiveness of our internal control over financial reporting.
In addition to the other risks described in this Annual Report on Form 10-K, factors that may affect our quarterly operating results include the following: • changes in spending on marketing, sales, customer service, operations, and content management software by our current or prospective customers; • pricing our customer platform subscriptions effectively so that we are able to attract and retain customers without compromising our profitability; • attracting new customers for our marketing, sales, customer service, operations, and content management software, increasing our existing customers’ use of our platform and providing our customers with excellent customer support; 35 • customer renewal rates and the amounts for which agreements are renewed; • global awareness of our thought leadership and brand; • changes in the competitive dynamics of our market, including consolidation among competitors or customers and the introduction of new products or product enhancements; • changes to the commission plans, quotas and other compensation-related metrics for our sales representatives; • the amount and timing of payment for operating expenses, particularly research and development, sales and marketing expenses and employee benefit expenses; • the amount and timing of costs associated with recruiting, training and integrating new employees while maintaining our company culture; • our ability to manage our existing business and future growth, including increases in the number of customers on our platform and the introduction and adoption of our customer platform in new markets outside of the United States; • unforeseen costs and expenses related to the expansion of our business, operations and infrastructure, including disruptions in our hosting network infrastructure and privacy and data security; • foreign currency exchange rate fluctuations; • rising inflation in the economies in which we operate and our ability to control costs, including operating expenses; and • general economic and political conditions in our domestic and international markets.
In addition to the other risks described in this Annual Report on Form 10-K, factors that may affect our quarterly operating results include the following: • changes in spending on software by our current or prospective customers; • pricing our customer platform subscriptions effectively so that we are able to attract and retain customers without compromising our profitability; • attracting new customers for our customer platform, increasing our existing customers’ use of our customer platform and providing our customers with excellent customer support; • customer renewal rates and the amounts for which agreements are renewed; • global awareness of our thought leadership and brand; • changes in the competitive dynamics of our market, including consolidation among competitors or customers and the introduction of new products or product enhancements; • changes to the commission plans, quotas and other compensation-related metrics for our sales representatives; • the amount and timing of payment for operating expenses, particularly research and development, sales and marketing expenses and employee benefit expenses; • the amount and timing of costs associated with recruiting, training and integrating new employees while maintaining our company culture; • our ability to manage our existing business and future growth, including increases in the number of customers on our platform and the introduction and adoption of our customer platform in new markets outside of the United States; • unforeseen costs and expenses related to the expansion of our business, operations and infrastructure, including disruptions in our hosting network infrastructure and privacy and data security; • foreign currency exchange rate fluctuations; • rising inflation in the economies in which we operate and our ability to control costs, including operating expenses; and • general economic and political conditions in our domestic and international markets.
Impacts of such economic weakness include: • falling overall demand for goods and services, leading to reduced profitability; • reduced credit availability; • higher borrowing costs; • reduced liquidity; • changes in the labor market; • supply chain disruptions; • volatility in credit, equity and foreign exchange markets; and • bankruptcies.
Impacts of economic weakness include: • falling overall demand for goods and services, leading to reduced profitability; • reduced credit availability; • higher borrowing costs; • reduced liquidity; • changes in the labor market; • supply chain disruptions; • volatility in credit, equity and foreign exchange markets; and • bankruptcies.
As a provider of a cloud-based inbound marketing, sales and customer service software platform, we may be subject to potential liability for the activities of our customers on or in connection with the data they store on our servers.
As a provider of a cloud-based marketing, sales and customer service software platform, we may be subject to potential liability for the activities of our customers on or in connection with the data they store on our servers.
As usage of our customer platform grows and as customers use our platform for additional inbound applications, such as sales and services, we will need to devote additional resources to improving our application architecture, integrating with third-party systems and maintaining infrastructure performance.
As usage of our customer platform grows and as customers use our platform for additional applications, such as sales and services, we will need to devote additional resources to improving our application architecture, integrating with third-party systems and maintaining infrastructure performance.
If such claims are successful, or if we are required to indemnify or defend our customers from these or other claims, these matters could be disruptive to our business and management and have a material adverse effect on our business, operating results and financial condition.
If such 28 claims are successful, or if we are required to indemnify or defend our customers from these or other claims, these matters could be disruptive to our business and management and have a material adverse effect on our business, operating results and financial condition.
Also, notwithstanding the exculpatory language of these bodies of law, we may become involved in complaints and lawsuits which, even if ultimately resolved in our favor, add cost to our doing business and may divert management’s time and attention.
Also, notwithstanding the exculpatory language of these bodies of law, we may become involved in complaints and lawsuits which, even if ultimately resolved in our favor, add cost to our doing business and may divert 32 management’s time and attention.
If we are unable to generate such cash 36 flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional debt financing or equity capital on terms that may be onerous or highly dilutive.
If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional debt financing or equity capital on terms that may be onerous or highly dilutive.
In addition, the laws of some countries do not protect proprietary rights to the 28 same extent as the laws of the United States. To the extent we expand our international activities, our exposure to unauthorized copying and use of our technology and proprietary information may increase.
In addition, the laws of some countries do not protect proprietary rights to the same extent as the laws of the United States. To the extent we expand our international activities, our exposure to unauthorized copying and use of our technology and proprietary information may increase.
Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings.
Because our decision to issue securities in any future offering will depend on market conditions and other 40 factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings.
In some instances, including because we do not control our service providers, we may not be able to identify the cause or causes of these problems within a period of time acceptable to our customers.
In 25 some instances, including because we do not control our service providers, we may not be able to identify the cause or causes of these problems within a period of time acceptable to our customers.
These sanctions laws with which we must comply may also change rapidly from time to time as a result of geopolitical events, such as the recent imposition of sanctions on Russia as a result of the conflict between Russia and Ukraine.
These sanctions laws with which we must comply may also change rapidly from time to time as a result of geopolitical events, such as the imposition of sanctions on Russia as a result of the conflict between Russia and Ukraine.
Any new taxes could adversely affect our domestic and international business operations, and our business and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us.
Any new taxes could adversely affect our domestic and international business operations, and our business and financial performance. Further, 34 existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us.
If we incur debt, the debt holders would have rights senior to common stockholders to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock.
If we incur debt, the debt holders could have rights senior to common stockholders to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock.
Third-party providers of applications and APIs may change the features of their applications and platforms, restrict 25 our access to their applications and platforms, or alter the terms governing use of their applications and APIs and access to those applications and platforms in an adverse manner.
Third-party providers of applications and APIs may change the features of their applications and platforms, restrict our access to their applications and platforms, or alter the terms governing use of their applications and APIs and access to those applications and platforms in an adverse manner.
Cyber-attacks, denial-of-service attacks, ransomware attacks, business email compromises, computer malware, viruses, and social engineering (including phishing) are prevalent in our industry, the industries of certain of our service providers and our customers' industries.
Cyber-attacks, denial-of-service attacks, ransomware attacks, business email compromises, computer malware, viruses, social engineering (including phishing), and other compromises are prevalent in our industry, the industries of certain of our service providers and our customers' industries.
Additionally, the intellectual property ownership and license rights, including copyright, surrounding AI technologies, which we are increasingly building into our product offerings, has not been fully addressed by U.S. courts or other federal or state laws or regulations, and the use or adoption of AI technologies in our products and services may expose us to copyright infringement or other intellectual property misappropriation claims.
Additionally, the intellectual property ownership and license rights, including copyrights and patents surrounding AI technologies, which we are increasingly building into our product offerings, has not been fully addressed by U.S. courts or other federal or state laws or regulations, and the use or adoption of AI technologies in our products and services may expose us to copyright infringement or other intellectual property misappropriation claims.
In addition, under Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended, which we refer to as the Code, our ability to utilize net operating loss carryforwards or other tax attributes, such as research tax credits, in any taxable year may be further limited if we experience an “ownership change.” An ownership change generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage (by value) within a rolling three-year period.
In addition, under Section 382 and Section 383 of the Internal Revenue Code of 1986, our ability to utilize net operating loss carryforwards or other tax attributes, such as research tax credits, in any taxable year may be further limited if we experience an “ownership change.” An ownership change generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage (by value) within a rolling three-year period.
Under payment card network rules and our contracts with our payment processors, if there is a data breach of payment resulting in the compromise of cardholder payment information that we store, or that is stored by our direct payment card processing vendors, we could be liable to the payment card issuing banks for their cost of issuing new cards and related expenses depending on the cause of such data breach.
Under payment card network rules and our contracts with our payment processors, if there is a data breach of payment resulting in the compromise of cardholder payment information that is stored by our direct payment card processing vendors, we could be liable to the payment card issuing banks for their cost of issuing new cards and related expenses depending on the cause of such data breach.
Access and use of our customer platform is provided via the cloud, which, itself, was disruptive to the previous enterprise software model. If new technologies emerge that are able to deliver inbound marketing software and related applications at lower prices, more efficiently, more conveniently or more securely, such technologies could adversely affect our ability to compete.
Access and use of our customer platform is provided via the cloud, which, itself, was disruptive to the previous enterprise software 18 model. If new technologies emerge that are able to deliver marketing software and related applications at lower prices, more efficiently, more conveniently or more securely, such technologies could adversely affect our ability to compete.
We have limited experience maintaining effective control systems with our employees working in remote environments, and risks that we have not contemplated may arise and result in our failure to maintain effective disclosure controls or internal control over financial reporting. Anti-takeover provisions in our charter documents and Delaware law may delay or prevent an acquisition of our company.
While we have experience maintaining effective control systems with our employees working in remote environments, and risks that we have not contemplated may arise and result in our failure to maintain effective disclosure controls or internal control over financial reporting. Anti-takeover provisions in our charter documents and Delaware law may delay or prevent an acquisition of our company.
Acquisitions also increase the risk of unforeseen legal and compliance liabilities, including for potential violations of applicable law or industry rules and regulations, arising from prior or ongoing acts or omissions by the acquired businesses which are not discovered by due diligence during the acquisition process, i ncluding data handling and privacy violations .
Acquisitions also increase the risk of unforeseen legal and compliance liabilities, including for potential violations of applicable law or industry rules and regulations, arising from prior or ongoing acts or omissions by the acquired businesses which are not discovered by due diligence during the acquisition process, including data handling and privacy violations.
Our current international operations and future initiatives will involve a variety of risks, including: • difficulties in maintaining our company culture with a dispersed and distant workforce; • more stringent regulations relating to data security and the unauthorized use of, or access to, commercial and personal data, particularly in the European Union; • unexpected changes in regulatory requirements, taxes or trade laws; • differing labor regulations, especially in the European Union, where labor laws are generally more advantageous to employees as compared to the United States, including deemed hourly wage and overtime regulations in these locations; • challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits and compliance programs; • difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems and regulatory systems; • currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions; • global economic uncertainty caused by global political events; • limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries; • limited or insufficient intellectual property protection; • international disputes, wars (such as the conflict between Russia and Ukraine and the evolving events in Israel and Gaza), political instability or terrorist activities and resulting economic instability; • likelihood of potential or actual violations of domestic and international anticorruption laws, such as the U.S.
Our current international operations and future initiatives will involve a variety of risks, including: • difficulties in maintaining our company culture with a dispersed and distant workforce; • more stringent regulations relating to data security and the unauthorized use of, or access to, commercial and personal data, particularly in the European Union; • unexpected changes in regulatory requirements, taxes or trade laws; • differing labor regulations, especially in the European Union, where labor laws are generally more advantageous to employees as compared to the United States, including deemed hourly wage and overtime regulations in these locations; • challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits and compliance programs; • difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems and regulatory systems; • currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions; • global economic uncertainty caused by global political events; • limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries; • limited or insufficient intellectual property protection; • international disputes, wars, political instability or terrorist activities and resulting economic instability; • likelihood of potential or actual violations of domestic and international anticorruption laws, such as the U.S.
Responding to such claims, regardless of their merit, can be time consuming, costly to defend in litigation, divert management’s attention and resources, damage our reputation and brand and cause us to incur significant expenses. Our technologies may not be able to withstand any third-party claims or rights against their use.
Responding to such claims, regardless of their merit, can be time consuming, costly to defend in litigation, divert management’s attention and resources, damage our reputation and brand and cause us to incur significant expenses. Our technologies may not be able to withstand any third-party claims against their use.
From time to time, we may invest funds in social impact investment funds, and may receive no return on our investment or lose our entire investment. From time to time, we may invest in social impact investment funds.
From time to time, we may invest funds in social impact investment funds, and may receive no return on our investment or lose our entire investment. 35 From time to time, we may invest in social impact investment funds.
The extent to which global pandemics, such as the COVID-19 pandemic, impact our financial condition or results of operations will depend on factors, such as the duration and scope of the pandemic, as well as whether there is a material impact on the businesses or productivity of our customers, partners, employee, suppliers and other partners.
The extent to which global pandemics, impact our financial condition or results of operations will depend on factors, such as the duration and scope of the pandemic, as well as whether there is a material impact on the businesses or productivity of our customers, partners, employee, suppliers and other partners.
Providing this education, training and support requires that our personnel who manage our online training resource, HubSpot Academy, or provide customer support have specific inbound experience domain knowledge and expertise, making it more difficult for us to hire qualified personnel and to scale up our support operations.
Providing this education, training and support requires that our personnel who manage our online training resource, HubSpot Academy, or provide customer support have specific domain knowledge and expertise, making it more difficult for us to hire qualified personnel and to scale up our support operations.
Further, the economies of countries in Europe have been experiencing weakness associated with high sovereign debt levels, weakness in the banking sector, uncertainty over the future of the Euro zone and volatility in the value of the pound sterling and the Euro and instability resulting from the ongoing conflict between Russia and Ukraine.
Further, the economies of countries in Europe have been experiencing weakness associated with high sovereign debt levels, weakness in the banking sector, uncertainty over the future of the Eurozone and volatility in the value of the pound sterling and the Euro and instability resulting from the ongoing conflict between Russia and Ukraine.
As a result, we may be forced to reduce the prices we charge for our platform and may be unable to renew existing customer agreements or enter into new customer agreements at the same prices and upon the same terms that we have historically.
As a result, we may be forced to, or strategically choose to, reduce the prices we charge for our platform and may be unable to renew existing customer agreements or enter into new customer agreements at the same prices and upon the same terms that we have historically.
We have previously been, and may in the future become, the target of cyber-attacks by third parties seeking unauthorized access to our or our customers' data, systems, or infrastructure, or to disrupt our operations or ability to provide our services.
We have previously been, and may in the future become, the target of cyber-attacks, incidents, or compromises by third parties seeking unauthorized access to our or our customers' data, systems, or infrastructure, or to disrupt our operations or ability to provide our services.
Recent cybersecurity incidents and compromises affecting large institutions, including an incident that affected us, suggest that the risk of such events is significant, even if privacy protection and security measures are implemented and enforced.
Recent cybersecurity incidents and compromises affecting large institutions, including an incident that affected us in 2024, suggest that the risk of such events is significant, even if privacy protection and security measures are implemented and enforced.
Because the last reported sale price of the Company’s common stock for at least 20 trading days during the period of 30 consecutive trading days ending on the last trading day of the calendar quarter ended December 31, 2023 was equal to or greater than 130% of the applicable conversion price on each applicable trading day, the 2025 Notes are convertible at the option of the holders thereof during the calendar quarter ending December 31, 2023.
Because the last reported sale price of the Company’s common stock for at least 20 trading days during the period of 30 consecutive trading days ending on the last trading day of the calendar quarter ended December 31, 2024 was equal to or greater than 130% of the applicable conversion price on each applicable trading day, the 2025 Notes are convertible at the option of the holders thereof during the calendar quarter ending March 31, 2025.
Climate-related events, including the increasing frequency of extreme weather events and their impact on the U.S.’s, Europe’s and other major regions’ critical infrastructure, have the potential to disrupt our business, our third-party suppliers and/or the business of our customers, and may cause us to experience higher attrition, losses and additional costs to maintain or resume operations.
Climate-related events, including the increasing frequency of extreme weather events and their impact on the U.S.’s, Europe’s and other major region’s critical infrastructure, have the potential to disrupt our business, our third-party suppliers and/or the business of our customers, and may cause us to experience higher attrition of our employees, losses and additional costs to maintain or resume operations.
We rely upon the continued services of our management and employees with domain expertise with inbound marketing, sales, services, operations, and content management, and the loss of any key employees in this area could harm our competitive position and reputation.
We rely upon the continued services of our management and employees with domain expertise with marketing, sales, services, operations, commerce and content management, and the loss of any key employees in this area could harm our competitive position and reputation.
The market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including: • actual or anticipated fluctuations in our revenue and other operating results, including as a result of the addition or loss of any number of customers; • announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments; • the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; • failure of securities analysts to initiate or maintain coverage of us, changes in ratings and financial estimates and the publication of other news by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • changes in operating performance and stock market valuations of cloud-based software or other technology companies, or those in our industry in particular; • price and volume fluctuations in the trading of our common stock and in the overall stock market, including as a result of trends in the economy as a whole; • sales of large blocks of our common stock or the dilutive effect of our Notes or any other equity or equity-linked financings; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business or industry, including data privacy and data security; • lawsuits threatened or filed against us; • changes in key personnel; and • other events or factors, including changes in general economic, industry and market conditions and trends, international disputes, wars (such as the conflict between Russia and Ukraine and the evolving events in Israel and Gaza), and political stability.
The market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including: • actual or anticipated fluctuations in our revenue and other operating results, including as a result of the addition or loss of any number of customers; • announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments; • the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; • failure of securities analysts to initiate or maintain coverage of us, changes in ratings and financial estimates and the publication of other news by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • changes in operating performance and stock market valuations of cloud-based software or other technology companies, or those in our industry in particular; • price and volume fluctuations in the trading of our common stock and in the overall stock market, including as a result of trends in the economy as a whole; • sales of large blocks of our common stock or the dilutive effect of our Notes or any other equity or equity-linked financings; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business or industry, including data privacy and data security; • lawsuits threatened or filed against us; 38 • changes in key personnel; and • other events or factors, including changes in general economic, industry and market conditions and trends, international disputes, wars, and political stability.
To inform our disclosures and take potential action as appropriate, we are working to align our reporting with emerging disclosure and accounting standards such as the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures, the Sustainability Accounting Standards Board and the Global Reporting Initiative as well as potential new disclosure requirements from regulators such as the SEC. 42 ITEM 1B.
To inform our disclosures and take potential action as appropriate, we are working to align our reporting with emerging disclosure and accounting standards such as the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures, the Sustainability Accounting Standards Board and the Global Reporting Initiative, as well as new disclosure requirements from regulators. 41 ITEM 1B.
We believe that our development of the HubSpot brand is critical to achieving widespread awareness of our existing and future inbound experience solutions, and, as a result, is important to attracting new customers and maintaining existing customers.
We believe that our development of the HubSpot brand is critical to achieving widespread awareness of our existing and future solutions, and, as a result, is important to attracting new customers and maintaining existing customers.
The Company may be required to commit significant resources to developing new products, software and services before knowing whether such investment will result in products or services that the market will accept.
The Company may be required to commit significant resources to developing new products, software and services, such as Breeze, before knowing whether such investment will result in products or services that the market will accept.
Cyber incidents have been increasing in sophistication and frequency and can include third parties gaining access to employee or customer data using stolen or inferred credentials, computer malware, viruses, spamming, phishing attacks, ransomware, card skimming code, and other deliberate attacks and attempts to gain unauthorized access.
Cyber incidents have been increasing in sophistication and frequency and can include third parties gaining access to employee or customer data using stolen or inferred credentials, computer malware, viruses, spamming, phishing attacks, ransomware, vulnerabilities in first- or third-party code, card skimming code, and other deliberate attacks and attempts to gain unauthorized access.
A cyber-attack could result in a material disruption of our development programs and our business operations, whether due to a loss of our trade secrets or other proprietary information or other disruptions.
A cyber-attack, incident, or compromise could result in a material disruption of our development programs and our business operations, whether due to a loss of our trade secrets or other proprietary information or other disruptions.
Companies in the software industry, including those in marketing software, are often required to defend against litigation claims based on allegations of infringement or other violations of intellectual property rights. Many of our competitors and other industry participants have been issued patents and/or have filed patent applications and may assert patent or other intellectual property rights within the industry.
Companies in the software industry are often required to defend against litigation claims based on allegations of infringement or other violations of intellectual property rights. Many of our competitors and other industry participants have been issued patents and/or have filed patent applications and may assert patent or other intellectual property rights within the industry.
Federal Trade Commission ("FTC"), and various state, local and foreign agencies. We collect personal data and other data from our customers, prospects, partners, and publicly available sources. We also handle personal data about our customers’ customers. We use this information to provide services to our customers, to support, expand and improve our business.
Federal Trade Commission ("FTC"), and various state, local and foreign agencies. We collect personal data and other data from our customers, prospects, partners, third-party providers and publicly available sources. We also handle personal data about our customers’ customers. We use this information to provide services to our customers, to support, expand and improve our business.
A portion of the subscription-based revenue we report each quarter results from the recognition of deferred revenue relating to subscription agreements entered into during previous quarters. In addition, we do not record deferred revenue beyond amounts invoiced as a liability on our balance sheet.
A portion of the subscription-based revenue we report each quarter results from the recognition of deferred revenue relating to subscription agreements entered into during previous quarters. In addition, we do not record deferred revenue beyond amounts invoiced as a liability on our consolidated balance sheets.
A disruption, infiltration or failure of these systems or third-party hosted services in the event of a major earthquake, fire, flood, tsunami or other weather event, power loss, telecommunications failure, software or hardware malfunctions, pandemics (such as the COVID-19 pandemic), cyber-attack, war, terrorist attack or other catastrophic event that we do not adequately address, could cause system interruptions, reputational harm, loss of intellectual property, delays in our product development, lengthy interruptions in our services, breaches of data security and loss of critical data.
A disruption, infiltration or failure of these systems or third-party hosted services in the event of a major earthquake, fire, flood, tsunami or other weather event, power loss, telecommunications failure, software or hardware malfunctions, pandemics, cyber-attack, war, terrorist attack or other catastrophic event that we do not adequately address, could cause system interruptions, reputational harm, loss of intellectual property, delays in our product development, lengthy interruptions in our services, breaches of data security and loss of critical data.
As of December 31, 2023, we have invested $8.5 million in the Black Economic Development Fund and $7.5 million in support of Minority Depository Institutions to help close the racial wealth, health and opportunity gap. There is no guarantee as to the performance of this investment or any similar investments we make in the future.
As of December 31, 2024, we have invested $9.5 million in the Black Economic Development Fund and $7.5 million in support of Minority Depository Institutions to help close the racial wealth, health and opportunity gap. There is no guarantee as to the performance of this investment or any similar investments we make in the future.
Within the European Union, the EU GDPR, and in the United Kingdom, the EU GDPR as incorporated into the laws of the United Kingdom (the “UK GDPR” together with the EU GDPR, the “GDPR”), impose heightened obligations and risk upon our business and may substantially increase the penalties to which we could be subject in the event of any non-compliance.
Within the European Union, the EU GDPR, and in the United Kingdom, the EU GDPR as incorporated into the laws of the United Kingdom ("UK") (the “UK GDPR” together with the EU GDPR, the “GDPR”), impose heightened obligations and risk upon our business and substantially increases the penalties to which we could be subject in the event of any non-compliance.
We rely on data provided by third parties, the loss of which could limit the functionality of our platform and disrupt our business. Select functionality of our customer platform depends on our ability to deliver data, including search engine results and social media updates, provided by unaffiliated third parties, such as Facebook, Google, LinkedIn and Twitter.
We rely on data provided by third parties, the loss of which could limit the functionality of our platform and disrupt our business. Select functionality of our customer platform depends on our ability to deliver data, including search engine results and social media updates, provided by unaffiliated third parties, such as Meta, Google, LinkedIn and X.
We cannot be sure that the expansion and improvements to our infrastructure and systems will be fully or effectively implemented on a timely basis, if at all. Our ability to introduce new products and features is dependent on adequate research and development resources.
We cannot be sure that the expansion and improvements to our infrastructure and systems will be fully or effectively implemented on a timely basis, if at all. Our ability to introduce new products and features, including new products and features that utilize artificial intelligence, is dependent on adequate research and development resources.
Similar rules may apply under state tax laws. We may have experienced an ownership change in the past, and future issuances of our stock could cause an ownership change.
Similar rules may apply under state tax laws. We may have experienced an ownership change in the past, and future issuances of our stock or other transactions could cause an ownership change.
Competition could significantly impede our ability to sell subscriptions to our customer platform on terms favorable to us. Our current and potential competitors may develop and market new technologies including as a result of new or better use of evolving artificial intelligence (“AI”) technologies that render our existing or future products less competitive, or obsolete.
Competition could significantly impede our ability to sell subscriptions to our customer platform on terms favorable to us. 16 Our current and potential competitors may develop and market new technologies including as a result of new or better use of evolving AI technologies that render our existing or future products less competitive, or obsolete.
As a result, these competitors may respond faster to new technologies and undertake more extensive marketing campaigns for their products. In a few cases, these vendors may also be able to offer marketing, sales, customer service and content management software at little or no additional cost by bundling it with their existing suite of applications.
As a result, these competitors may respond faster to new technologies and undertake more extensive marketing campaigns for their products. In a few cases, these vendors may also be able to offer a customer platform at little or no additional cost by bundling it with their existing suite of applications.
Many governments have enacted laws requiring companies to notify individuals of data security incidents or unauthorized transfers involving certain types of personal data. In addition, the data processing agreement we execute with our customers contractually requires us to notify them of any personal data breach.
Many governments have enacted laws requiring companies to notify individuals of security incidents, including unauthorized access and transfers of certain types of personal data. In addition, the data processing agreement we execute with our customers contractually requires us to notify them of any personal data breach.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changePolicies and procedures, including our Written Information Security Policy, are periodically updated to adapt to evolving business conditions and information technology requirements. We, like other companies in our industry, face a number of cybersecurity risks in connection with our business.
Biggest changePolicies and procedures : Our security and legal teams actively participate in industry and other advisory groups and monitor regulatory requirements to keep apprised of evolving risks. Policies and procedures, including our Written Information Security Policy, are periodically updated to adapt to evolving business conditions and information technology requirements.
As appropriate, the board also receives information regarding cybersecurity incidents as well as ongoing updates regarding mitigation of any such incidents until they have been resolved. Management’s role in assessing and managing cybersecurity risk : Our risk management program for cybersecurity is led by the HubSpot Security & Privacy Committee, which we refer to as the Committee.
As appropriate, the board of directors also receives information regarding cybersecurity incidents as well as ongoing updates regarding mitigation of any such incidents until they have been resolved. Management’s role in assessing and managing cybersecurity risk : Our risk management program for cybersecurity is led by the HubSpot Security & Privacy Committee, which we refer to as the Committee.
The audit committee assists the board in fulfilling its oversight responsibilities with respect to the management of risks arising from cybersecurity threats, and our security team provides written reports to the audit committee for its review. The audit committee is responsible for reporting findings related to its review of these matters to the board.
The audit committee assists the board of directors in fulfilling its oversight responsibilities with respect to the management of risks arising from cybersecurity threats, and our security team provides written reports to the audit committee for its review. The audit committee is responsible for reporting findings related to its review of these matters to the board of directors.
ITEM 1C. CYBERSECURITY Cybersecurity represents an important component of our overall approach to business strategy, risk management and financial oversight. Our board recognizes the critical importance of maintaining the trust and confidence of our customers, business partners and employees, and is actively involved in oversight of our risk management program.
ITEM 1C. CYBERSECURITY Cybersecurity represents an important component of our overall approach to business strategy, risk management and financial oversight. Our board of directors recognizes the critical importance of maintaining the trust and confidence of our customers, business partners and employees, and is actively involved in oversight of our risk management program.
The board performs this oversight function at the full board level, as well as through its standing committees that address risks inherent in their respective areas of oversight.
The board of directors performs this oversight function at the full board level, as well as through its standing committees that address risks inherent in their respective areas of oversight.
Risk assessments: Our security team, in coordination with our enterprise risk management team, conducts periodic risk assessments to identify and analyze the business and security risks, vulnerabilities, emerging technologies, laws and regulations. An internal audit team evaluates the results of these risk assessments to determine critical areas for review as part of our annual internal audit plan.
Risk assessments: Our security team, in coordination with our enterprise risk management team, conducts periodic risk assessments to identify and analyze the business and security risks, vulnerabilities, emerging technologies, laws and regulations. Our internal audit team evaluates the results of these risk assessments to determine critical areas for audit as part of our annual internal audit plan.
Our Deputy CISO has over 25 years of experience working in security and infrastructure for SaaS and hosted services.
Our CISO has over 25 years of experience working in security and infrastructure for SaaS and hosted services.
She has a master's degree in cybersecurity and has maintained an active CISSP certification since 2012.The CISO reports to the Chief Technology Officer, who has overseen the cybersecurity team since 2020 and has led infrastructure teams at the Company for over 11 years.
She has a master's degree in cybersecurity and has maintained an active CISSP certification since 2012.The CISO reports to the Chief Technology Officer, who has overseen the cybersecurity team since 2020 and has led infrastructure teams at the Company for over 12 years.
The results of the internal audit plan are reported to the audit committee, and the security team manages and maintains remediation strategies for identified risks. Vendor risk management: As part of our risk management program, our vendor risk management teams are responsible for conducting due diligence on vendors submitted for risk evaluation where medium- or high-risk data is in scope.
The results of the internal audits are reported to the audit committee, and the security team manages and maintains remediation strategies for identified risks. Vendor risk management: As part of our risk management program, our vendor risk management teams are responsible for conducting due diligence on vendors submitted for risk evaluation where medium- or high-risk data are in scope.
These sessions, led by our Chief Information Security Officer (CISO), address a range of cybersecurity-related topics, such as recent developments related to the threat 43 landscape, security controls, vulnerability assessments, third-party reviews, technological trends and information security considerations arising with respect to our peers and third parties.
These sessions, led by our Chief Information Security Officer (CISO), address a range of cybersecurity-related topics, such as recent developments related to the threat landscape, security controls, vulnerability assessments, third-party reviews, internal audits, technological trends and information security considerations arising with respect to our peers and third parties.
For more information, please see “Item 1A, Risk Factors.” Governance Related to Cybersecurity Risks Board oversight : Our board has final oversight responsibility over cybersecurity-related matters. The full board participates in interactive sessions with management, typically twice a year, dedicated to cybersecurity risks.
For more information, please see “Item 1A, Risk Factors.” Governance Related to Cybersecurity Risks 42 Board oversight : Our board of directors has final oversight responsibility over cybersecurity-related matters. The full board of directors participates in interactive sessions with management, typically twice a year, dedicated to cybersecurity risks.
Cyber Risk Management and Strategy Under the board’s and audit committee’s oversight, we have implemented and maintain a risk management program that includes processes for the systematic identification, assessment and treatment (through mitigation, transfer, avoidance and/or acceptance) of cybersecurity risks.
Cyber Risk Management and Strategy Under the board of directors’and audit committee’s oversight, we have implemented and maintain a risk management program that includes processes for the systematic identification, assessment and treatment (through mitigation, transfer, avoidance and/or acceptance) of cybersecurity risks.
The audit committee is responsible for reviewing and assessing the quality and effectiveness of our cybersecurity policies, practices and procedures protecting our information technology systems, data, products and services across all business functions, and reporting its findings to the board, which has final oversight responsibility over cybersecurity-related matters. Our cybersecurity policies, standards, processes and practices are informed by industry-recognized standards.
The audit committee is responsible for assisting the board of directors in reviewing and assessing the quality and effectiveness of our cybersecurity policies, practices and procedures protecting our information technology systems, data, products and services across all business functions, and reporting its findings to the board of directors, which has final oversight responsibility over cybersecurity-related matters.
In general, we seek to address cybersecurity risks through a cross-functional approach that is designed to preserve the confidentiality, security and availability of the information that we collect and store.
Our cybersecurity policies, standards, processes and practices are informed by industry-recognized standards. In general, we seek to address cybersecurity risks through a cross-functional approach that is designed to preserve the confidentiality, security and availability of the information that we collect and store.
We require assessments of these third-party vendors prior to establishing a business relationship, and annually thereafter for high-risk vendors, as part of our efforts to require these vendors to maintain their commitments related to data security, availability and confidentiality. Our security team’s assessment of vendors’ security controls and processes is calibrated to the risk level assigned to the vendor.
We require assessments of these third-party vendors prior to establishing a business relationship, and monitor high-risk vendors on an ongoing basis, as part of our efforts to require these vendors to maintain their commitments related to data security, availability and confidentiality.
Incident response : We employ a formal process to identify, track, prioritize and remediate cybersecurity incidents that may impact the confidentiality, integrity and availability of data stored and processed on our information systems. This process addresses event detection, triage and classification, investigation and escalation, containment and mitigation, recovery and corrective actions.
Our security team’s assessment of vendors’ security controls and processes is calibrated to the risk level assigned to the vendor. Incident response : We employ a formal process to identify, track, prioritize and remediate cybersecurity incidents that may impact the confidentiality, integrity and availability of data stored and processed on our information systems.
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We maintain a written incident response plan that establishes roles, responsibilities and procedures to guide incident response operations. Policies and procedures : Our security and legal teams actively participate in industry and other advisory groups and monitor regulatory requirements to keep apprised of evolving risks.
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This process addresses event detection, triage and classification, investigation and escalation, containment and mitigation, recovery and corrective actions. We maintain a written incident response plan that establishes roles, responsibilities and procedures to guide incident response operations.
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Our CISO has over seven years of experience running cybersecurity programs and also served as the leader of the cybersecurity team at his previous organization. Effective March 1, 2024, our CISO will be departing the Company, and our Deputy CISO will be promoted to the CISO role at that time.
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We, like other companies in our industry, face a number of cybersecurity risks in connection with our business.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. Pr operties We occupy approximately 223,000 square feet of office space in Cambridge, Massachusetts pursuant to lease agreements that expire through 2035. We also maintain a number of international offices across the world. In January 2023, we announced our Restructuring Plan and began the process of consolidating our office space and reducing the square footage of our facilities.
Biggest changeITEM 2. Pr operties Our corporate headquarters are located in Cambridge, Massachusetts, where we currently occupy approximately 205,000 square feet of office space under lease agreements that expire through 2035. We also maintain a number of international offices across the world. We believe that our existing facilities and offices are adequate to meet our needs for the foreseeable future.
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We believe that our existing facilities and offices are adequate to meet our needs for the foreseeable future.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeRegardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. ITEM 4. Mine Safety Disclosu res Not Applicable. 44 PART II
Biggest changeRegardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. ITEM 4. Mine Safety Disclosu res Not Applicable. 43 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe actual number of shareholders is greater than this number of record holders, and includes shareholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include shareholders whose shares may be held in trust by other entities.
Biggest changeAs of February 7, 2025, we had 23 holders of record of our common stock. The actual number of shareholders is greater than this number of record holders, and includes shareholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
The following graph shows a comparison of the cumulative total return for our common stock, the Nasdaq Computer Index and the S&P 500 Index for each of the last six fiscal years ended December 31, 2023. The graph assumes an initial investment of $100 in each of the Company’s common stock, the Nasdaq Computer Index and the S&P 500.
The following graph shows a comparison of the cumulative total return for our common stock, the Nasdaq Computer Index and the S&P 500 Index for each of the last six fiscal years ended December 31, 2024. The graph assumes an initial investment of $100 in each of the Company’s common stock, the Nasdaq Computer Index and the S&P 500.
In connection with the offering of the 2025 Notes, the Company purchased capped call options (“Capped Call Options”) that give the Company the option to purchase up to approximately 1.6 million shares of its common stock for $282.52 per share. See Note 9 in the Notes to the Consolidated Financial Statements for more information.
In connection with the offering of the 2025 Notes, the Company purchased capped call options (“Capped Call Options”) that give the Company the option to purchase up to approximately 1.6 million shares of its common stock for $282.52 per share.
Dividends We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain future earnings to fund development and growth of our business, and do not anticipate declaring or paying cash dividends in the foreseeable future.
We currently anticipate that we will retain future earnings to fund development and growth of our business, and do not anticipate declaring or paying cash dividends in the foreseeable future.
Outstanding Convertible Senior Notes and Capped Call Options In June 2020, we issued $460 million aggregate principal amount of convertible senior notes due June 1, 2025 (the “2025 Notes”), of which $459.1 million of the principal amount remained outstanding as of December 31, 2023.
Securities Authorized for Issuance Under Equity Compensation Plans The information required by this Item is incorporated by reference herein to our definitive proxy statement for our 2025 Annual Meeting of Stockholders Outstanding Convertible Senior Notes and Capped Call Options In June 2020, we issued $460 million aggregate principal amount of convertible senior notes due June 1, 2025 (the “2025 Notes”), of which $459.0 million of the principal amount remained outstanding as of December 31, 2024.
Such returns are based on historical results and are not intended to suggest future performance. 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 HubSpot $ 100 $ 142 $ 179 $ 448 $ 746 $ 327 $ 657 S&P 500 Index $ 100 $ 94 $ 121 $ 140 $ 178 $ 144 $ 178 Nasdaq Computer Index $ 100 $ 96 $ 145 $ 217 $ 299 $ 192 $ 320 45 Recent Sales of Unregistered Securities None.
Such returns are based on historical results and are not intended to suggest future performance. 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 HubSpot $ 100 $ 126 $ 315 $ 524 $ 230 $ 462 $ 554 S&P 500 Index $ 100 $ 129 $ 150 $ 190 $ 153 $ 190 $ 235 Nasdaq Computer Index $ 100 $ 150 $ 225 $ 311 $ 200 $ 332 $ 453 44 Recent Sales of Unregistered Securities None.
Removed
Our initial public offering was priced at $25.00 per share on October 8, 2014. As of February 9, 2024, we had 23 holders of record of our common stock.
Added
This number of holders of record also does not include shareholders whose shares may be held in trust by other entities. Dividends We have never declared or paid any cash dividends on our common stock.
Removed
Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Securities Authorized for Issuance Under Equity Compensation Plans See Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” for information regarding securities authorized for issuance.
Added
Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.
Added
Between December 31, 2024 and the date of filing this report, the Company settled $89.3 million of the principal balance of the 2025 Notes in cash in response to conversion notices received prior to December 31, 2024. ITEM 6. [ Reserved] Not Applicable. 45

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

89 edited+10 added−51 removed52 unchanged
Biggest changeYear Ended December 31, 2023 2022 2021 (in thousands) Revenue: Subscription $ 2,123,479 $ 1,690,538 $ 1,258,319 Professional services and other 46,751 40,431 42,339 Total revenue 2,170,230 1,730,969 1,300,658 Cost of revenue: Subscription 290,802 257,513 211,132 Professional services and other 54,687 56,746 47,725 Total cost of revenue 345,489 314,259 258,857 Gross profit 1,824,741 1,416,710 1,041,801 Operating expenses: Research and development 617,745 442,022 301,970 Sales and marketing 1,068,560 886,069 649,681 General and administrative 249,649 197,720 144,949 Restructuring 96,843 — — Total operating expenses 2,032,797 1,525,811 1,096,600 Loss from operations (208,056 ) (109,101 ) (54,799 ) Other expense: Interest income 58,828 15,000 1,173 Interest expense (3,801 ) (3,762 ) (30,282 ) Other (expense) income (4,673 ) (6,829 ) 10,090 Total other income (expense) 50,354 4,409 (19,019 ) Loss before income tax expense (157,702 ) (104,692 ) (73,818 ) Income tax expense (18,593 ) (8,057 ) (4,019 ) Net loss $ (176,295 ) $ (112,749 ) $ (77,837 ) 51 Year Ended December 31, 2023 2022 2021 Revenue: Subscription 98 % 98 % 97 % Professional services and other 2 2 3 Total revenue 100 100 100 Cost of revenue: Subscription 13 15 16 Professional services and other 3 3 4 Total cost of revenue 16 18 20 Gross profit 84 82 80 Operating expenses: Research and development 28 26 23 Sales and marketing 49 51 50 General and administrative 12 11 11 Restructuring 4 0 0 Total operating expenses 94 88 84 Loss from operations (10 ) (6 ) (4 ) Total other expense 2 0 (1 ) Loss before income tax expense (7 ) (6 ) (6 ) Income tax expense (1 ) (0 ) (0 ) Net loss -8 % -7 % -6 % * Percentages are based on actual values.
Biggest changeYear Ended December 31, 2024 2023 2022 (in thousands) Revenue: Subscription $ 2,569,546 $ 2,123,479 $ 1,690,538 Professional services and other 57,997 46,751 40,431 Total revenue 2,627,543 2,170,230 1,730,969 Cost of revenue: Subscription 336,878 283,675 251,274 Professional services and other 56,387 54,687 56,746 Total cost of revenue 393,265 338,362 308,020 Gross profit 2,234,278 1,831,868 1,422,949 Operating expenses: Research and development 778,714 617,745 442,022 Sales and marketing 1,218,844 1,068,560 886,069 General and administrative 300,332 249,649 197,720 Restructuring 3,990 96,843 — Total operating expenses 2,301,880 2,032,797 1,525,811 Loss from operations (67,602 ) (200,929 ) (102,862 ) Other income (expense) Interest income 82,706 58,828 15,000 Interest expense (3,721 ) (3,801 ) (3,762 ) Other income (expense) 17,294 (4,673 ) (6,829 ) Total other income (expense) 96,279 50,354 4,409 Income (loss) before income tax expense 28,677 (150,575 ) (98,453 ) Income tax expense (24,049 ) (13,935 ) (8,894 ) Net income (loss) $ 4,628 $ (164,510 ) $ (107,347 ) 50 Year Ended December 31, 2024 2023 2022 Revenue: Subscription 98 % 98 % 98 % Professional services and other 2 2 2 Total revenue 100 100 100 Cost of revenue: Subscription 13 13 15 Professional services and other 2 3 3 Total cost of revenue 15 16 18 Gross profit 85 84 82 Operating expenses: Research and development 30 28 26 Sales and marketing 46 49 51 General and administrative 11 12 11 Restructuring 0 4 0 Total operating expenses 88 94 88 Loss from operations (3 ) (9 ) (6 ) Total other income (expense) 4 2 0 Income (loss) before income tax expense 1 (7 ) (6 ) Income tax expense (1 ) (1 ) (1 ) Net income (loss) 0 % -8 % -6 % * Percentages are based on actual values.
We believe that our ability to retain and expand a customer relationship is an indicator of the stability of our revenue base and the long-term value of our Customers. Net Revenue Retention is a measure of the percentage of recurring revenue retained from Customers over a given period of time.
Net Revenue Retention. We believe that our ability to retain and expand a customer relationship is an indicator of the stability of our revenue base and the long-term value of our Customers. Net Revenue Retention is a measure of the percentage of recurring revenue retained from Customers over a given period of time.
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 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. We also saw higher subscription and hosting costs as we continued to focus on the security, reliability and performance of our customer platform.
These sources of cash and cash equivalents were offset by a $47.0 million increase in prepaid expenses and other assets, a $36.9 million decrease in operating lease liabilities, a $14.0 million increase in accounts payable related to timing of bill payments, a $81.2 million increase in deferred commissions, and a $57.6 million increase in accounts receivable as a result of increased billings to customers.
These sources of cash and cash equivalents were offset by a $47.0 million increase in prepaid expenses and other assets, a $36.9 million decrease in operating lease liabilities, a $14.0 million decrease in accounts payable related to timing of bill payments, a $81.2 million increase in deferred commissions, and a $57.6 million increase in accounts receivable as a result of increased billings to customers.
Adjustments to the fair value of assets acquired and liabilities assumed made after the end of the measurement period are recorded within our operating results. Recent Accounting Pronouncements For information on recent accounting pronouncements, see Recent Accounting Pronouncements in the notes to the consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.
Adjustments to the fair value of assets acquired and liabilities assumed made after the end of the measurement period are recorded within our operating results. 58 Recent Accounting Pronouncements For information on recent accounting pronouncements, see Recent Accounting Pronouncements in the notes to the consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.
If the actual selling price for the sale of an online software product or professional service offering within a multiple performance 63 obligation arrangement substantially differs from the SSP of that offering, we use the relative SSP to allocate the transaction price to the performance obligations in the contract.
If the actual selling price for the sale of an online software product or professional service offering within a multiple performance obligation arrangement substantially differs from the SSP of that offering, we use the relative SSP to allocate the transaction price to the performance obligations in the contract.
Actual results may vary from these estimates that may result in adjustments to goodwill and 64 acquisition date fair values of assets and liabilities during a measurement period or upon a final determination of asset and liability fair values, whichever occurs first.
Actual results may vary from these estimates that may result in adjustments to goodwill and acquisition date fair values of assets and liabilities during a measurement period or upon a final determination of asset and liability fair values, whichever occurs first.
Net Cash and Cash Equivalents Provided by Operating Activities 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.
Net Cash and Cash Equivalents Provided by Operating Activities Net cash and cash equivalents provided by operating activities consists primarily of net income (loss) adjusted for certain non-cash items, including stock-based compensation, depreciation and amortization and other non-cash charges, net.
Significant judgment is used in determining fair values of assets acquired and liabilities assumed, as well as intangible assets and their estimated useful lives. Fair value and useful life determinations are based on, among other factors, estimates of future expected cash flows attributable to the acquired intangible assets and appropriate discount rates used in computing present values.
Significant judgment is used in determining fair values of assets acquired and liabilities assumed, as well as intangible assets and their estimated useful lives. Fair value and useful life determinations are based on, among other factors, estimates of replacement costs, future expected cash flows attributable to the acquired intangible assets and appropriate discount rates used in computing present values.
A single customer may have separate paid subscriptions to our customer platform, but we count these as one Customer if certain customer-provided information such as company name, URL, or email address indicate that these subscriptions are managed by the same business entity. 48 Average Subscription Revenue per Customer.
A single customer may have separate paid subscriptions to our customer platform, but we count these as one Customer if certain customer-provided information such as company name, URL, or email address indicate that these subscriptions are managed by the same business entity. 47 Average Subscription Revenue per Customer.
The increase during the year is due to higher balance of cash invested and increases in yields on our investment balances.
The increase during the year is due to a higher balance of cash invested and increases in yields on our investment balances.
Off Balance Sheet Arrangements We have no material off-balance sheet arrangements at December 31, 2023 or 2022 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.
Off Balance Sheet Arrangements We have no material off-balance sheet arrangements at December 31, 2024 or 2023 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.
Over 1,500 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.
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.
Net cash and cash equivalents provided by operating activities during the year ended December 31, 2023 primarily reflected our net loss of $176.3 million and $42.9 million accretion of bond discounts, offset by non-cash expenses that included $72.7 million of depreciation and amortization, restructuring charges of $67.3 million, $432.3 million in stock-based compensation, $1.7 million on impairment of strategic investments, and $2.0 million of amortization of debt issuance costs.
Net cash and cash equivalents provided by operating activities during the year ended December 31, 2023 primarily reflected our net loss of $164.5 million and $42.9 million accretion of bond discounts, offset by non-cash expenses that included $72.7 million of depreciation and amortization, restructuring charges of $67.3 million, $432.3 million in stock-based compensation, $1.7 million on impairment of strategic investments, and $2.0 million of amortization of debt issuance costs.
Global Economic Conditions 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.
Global Economic Conditions 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, existing and new domestic and foreign laws and regulations, all of which are beyond our control.
Our customer platform is a multi-tenant, globally available software-as-a-service product delivered through APIs, web browsers or mobile applications. We sell our customer platform on a subscription basis. Our total revenue increased to $2.2 billion in 2023, from $1.7 billion in 2022, and from $1.3 billion in 2021, representing year-over-year increases of 25% in 2023 and 33% in 2022.
Our customer platform is a multi-tenant, globally available software-as-a-service product delivered through APIs, web browsers or mobile applications. We sell our customer platform on a subscription basis. Our total revenue increased to $2.6 billion in 2024, from $2.2 billion in 2023, and from $1.7 billion in 2022, representing year-over-year increases of 21% in 2024 and 25% in 2023.
We believe our working capital is sufficient to support our operations for at least the next 12 months. At December 31, 2023, $179.8 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.
We believe our working capital is sufficient to support our operations for at least the next 12 months. At December 31, 2024, $184.3 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.
Capitalized software development costs are related to new products or improvements to our existing software platform that expands the functionality for our customers.
Capitalized software development costs are related to new products or improvements to our existing software platform that expands the functionality for our customers and for Company use.
The decrease in impairment of strategic investments is due to a $5.9 million loss recorded in 2022 from the decrease in value of our strategic investments compared to $1.7 million in 2023. 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 impairment of strategic investments is due to a $5.3 million loss recorded in 2024 from the decrease in value of our strategic investments compared to $1.7 million in 2023. 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.
For the year ended December 31, 2023, cash provided by financing activities consisted of $47.7 million of proceeds related to issuance of common stock under stock plans, offset by $10.7 million used for payment of employee taxes related to the net share settlement of stock-based awards.
For the year ended December 31, 2024, cash provided by financing activities consisted of $75.5 million of proceeds related to issuance of common stock under stock plans, offset by $21.9 million used for payment of employee taxes related to the net share settlement of stock-based awards. 56 For the year ended December 31, 2023, cash provided by financing activities consisted of $47.7 million of proceeds related to issuance of common stock under stock plans, offset by $10.7 million used for payment of employee taxes related to the net share settlement of stock-based awards.
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.
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 change in our industry.
Working capital sources of cash and cash equivalents primarily included a $109.9 million increase in deferred revenue primarily resulting from the growth in the number of customers invoiced during the period, a $29.2 million increase in right-of-use asset, and $87.1 million increase in accrued expenses and other liabilities.
Working capital sources of cash and cash equivalents primarily included a $109.9 million increase in deferred revenue primarily resulting from the growth in the number of customers invoiced during the period, a $29.2 million decrease in right-of-use assets, and $79.9 million increase in accrued expenses and other liabilities.
We expect that general and administrative expenses will increase on an absolute dollar basis 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.
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.
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 Part I, Item 1A.
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 Part I, Item 1A. "Risk Factors" for further discussion of the impact of these general macroeconomic factors and risks on our business.
Net cash and cash equivalents used in investing activities during the year ended December 31, 2023 consisted primarily of $1.6 billion purchases of investments, $33.7 million of purchased property and equipment, $12.4 million of purchases of strategic investments, $2.0 million in an equity method investment, $66.4 million of capitalized software development costs, and $142.1 million in a business acquisition.
Net cash and cash equivalents used in investing activities during the year ended December 31, 2023 consisted primarily of $1.6 billion purchases of investments, $33.7 million of purchased property and equipment, $14.4 million of purchases of strategic investments, $66.4 million of capitalized software development costs, and $142.1 million for a business acquisition.
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 breakeven for the foreseeable future, exclusive of stock-based compensation.
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.
Interest Expense Year Ended December 31, Change 2023 2022 Amount % (dollars in thousands) Interest expense $ (3,801 ) $ (3,762 ) $ 39 1 % Percentage of total revenue * * * not meaningful Interest expense primarily consists of amortization of the debt issuance costs and contractual interest expense related to our 2025 Notes.
Interest Expense Year Ended December 31, Change 2024 2023 Amount % (dollars in thousands) Interest expense $ (3,721 ) $ (3,801 ) $ (80 ) (2 %) Percentage of total revenue * * * not meaningful 54 Interest expense primarily consists of amortization of the debt issuance costs and contractual interest expense related to our 2025 Notes.
Our engagement hubs include Marketing Hub, Sales Hub, Service Hub, Operations Hub, CMS 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 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 freemium model attracts customers who begin using our customer platform through our free products and then upgrade to our paid products. As of December 31, 2023, we had 7,663 full-time employees and 205,091 Customers of varying sizes in more than 135 countries, representing many industries.
Our freemium model attracts customers who begin using our customer platform through our free products and then upgrade to our paid products. As of December 31, 2024, we had 8,246 full-time employees and 247,939 Customers of varying sizes in more than 135 countries, representing many industries.
Restructuring Restructuring expenses primarily consist primarily of lease consolidation charges and personnel costs, such as employee severance payments, benefits, and stock-based compensation expense, associated with our workforce reduction, which are described in Note 17 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K Other Income (Expense) Interest income primarily consists of interest earned on invested cash and cash equivalents balances and investments.
Restructuring Restructuring expenses primarily consist primarily of lease consolidation charges and personnel costs, such as employee severance payments, benefits, and stock-based compensation expense, associated with our workforce reduction, which are described in Note 18 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
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.
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.
We define our Customers at the end of a particular period as the number of business entities with one or more paid subscriptions to our customer platform either purchased directly with us or purchased from a Solutions Partner. We do not include in Customers any legacy PieSync or Clearbit products.
We define our Customers at the end of a particular period as the number of business entities with one or more paid subscriptions to our customer platform either purchased directly with us or purchased from a Solutions Partner.
Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included under Part I, Item 1A within this Annual Report on Form 10-K. Company Overview We provide a customer platform that helps businesses connect and grow better.
Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included under Part I, Item 1A within this Annual Report on Form 10-K.
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. 49 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.
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.
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.
Company Overview 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.
The decrease in gain on strategic investments is due to gains of $4.2 million from observable price changes in the value of certain strategic investments in 2022 that did not reoccur in 2023.
The increase in gain on strategic investments is due to gains of $21.2 million from observable price changes in the value of certain strategic investments in 2024 that did not occur in 2023.
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 and the proceeds from our convertible debt to fund these growth strategies and support our business.
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.
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.
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.
Customer credit card fees increased due to increased customer transactions as we continue 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.
Allocated overhead expenses increased due to an increase in shared company expenses associated with infrastructure as we continued to grow our business.
Revenue from online software products is recognized ratably over the subscription period beginning on the date the online software product is made available to customers. We recognize revenue from on-boarding, training, consulting services, and Commerce Hub as the services are provided. Amounts billed that have not yet met the applicable revenue recognition criteria are recorded as deferred revenue.
Revenue from online software products and support is recognized ratably over the subscription period beginning on the date the online software product is made available to customers. We recognize revenue from on-boarding, training, consulting services, and Commerce Hub as the services are provided.
The acquisition of Clearbit will allow us to build enriched B2B records directly into our customer platform. We designed and built our customer platform to serve a broad range of customers globally. Our customer platform starts completely free and grows with our customers to meet their needs at different stages in their life-cycles.
We designed and built our customer platform to serve a broad range of customers globally. Our customer platform starts completely free and grows with our customers to meet their needs at different stages in their life-cycles.
We had net losses of $176.3 million in 2023, $112.7 million in 2022, and $77.8 million in 2021. 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.
We had net income of $4.6 million in 2024, net losses of $164.5 million in 2023, and $107.3 million in 2022. 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.
Average Subscription Revenue per Customer also increased from $11,163 for the year ended December 31, 2022 to $11,384 for the year ended December 31, 2023. The growth in Customers was primarily driven by increased demand for our lower-priced Starter products.
Average Subscription Revenue per Customer also decreased from $11,384 for the year ended December 31, 2023 to $11,343 for the year ended December 31, 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.
Other (Expense) Income Year Ended December 31, Change 2023 2022 Amount % (dollars in thousands) Other (expense) income $ (4,673 ) $ (6,829 ) $ 2,156 (32 )% Percentage of total revenue * * 55 * not meaningful The change in other expense during 2023 is primarily due to the following: Change (in thousands) Gain on strategic investments $ (4,201 ) Impairment of strategic investments 4,159 Foreign currency transaction gains and losses 2,198 $ 2,156 Other expense primarily consists of the impact of foreign currency transaction gains and losses associated with monetary assets and liabilities and any gains or impairments on our strategic investments.
Other (Expense) Income Year Ended December 31, Change 2024 2023 Amount % (dollars in thousands) Other income (expense) $ 17,294 $ (4,673 ) $ 21,967 470 % Percentage of total revenue 1 % * * not meaningful The change in other expense during 2024 is primarily due to the following: Change (in thousands) Gain on strategic investments $ 21,245 Impairment of strategic investments (3,602 ) Foreign currency transaction gains and losses 4,324 $ 21,967 Other income (expense) primarily consists of the impact of foreign currency transaction gains and losses associated with monetary assets and liabilities and any gains or impairments on our strategic investments.
Year Ended December 31, 2023 2022 2021 Customers 205,091 167,386 135,442 Average Subscription Revenue per Customer $ 11,384 $ 11,163 $ 10,486 Net Revenue Retention 103.9 % 110.3 % 115.2 % Customers .
Year Ended December 31, 2024 2023 2022 Customers 247,939 205,091 167,386 Average Subscription Revenue per Customer $ 11,343 $ 11,384 $ 11,163 Net Revenue Retention 102.2 % 103.9 % 110.3 % Customers .
Net cash and cash equivalents provided by operating activities during the year ended December 31, 2022 primarily reflected our net loss of $112.7 million, benefit from deferred income taxes of $2.1 million, $9.1 million accretion of bond discounts, and gains on strategic investments of $4.2 million, offset by non-cash expenses that included $58.2 million of depreciation and amortization, $275.8 million in stock-based compensation, $5.9 million on impairment of strategic investments, and $2.0 million of amortization of debt issuance costs.
Net cash and cash equivalents provided by operating activities during the year ended December 31, 2024 primarily reflected our net income of $4.6 million, $51.7 million accretion of bond discounts and a $21.2 million gain on investments, offset by non-cash expenses that included $96.8 million of depreciation and amortization, $504.8 million in stock-based compensation, $5.3 million on impairment of strategic investments, $2.7 million provision for deferred income taxes, and $2.0 million of amortization of debt issuance costs.
Particularly for the acquisition of Clearbit, management applied judgment in estimating the fair value of the acquired developed technology intangible asset, which involved estimates and assumptions with respect to forecasted revenue growth rates, the revenue attributable to the acquired intangible asset over its estimated economic life and the discount rate.
For the acquisition of Clearbit, the valuation involved estimates and assumptions with respect to forecasted revenue growth rates, the revenue attributable to the acquired intangible asset over its estimated economic life and the discount rate.
We allocate the transaction price to each distinct performance obligation based on the standalone selling price (“SSP”) of each good or service. We calculate SSP for each type of online software product and professional service offering by averaging the selling price of all purchases within the trailing four calendar quarters.
We calculate SSP for each type of online software product and professional service offering by averaging the selling price of all purchases within the trailing four calendar quarters.
Working capital sources of cash and cash equivalents primarily included a $127.7 million increase in deferred revenue primarily resulting from the growth in the number of customers invoiced during the period, a $31.4 million increase in right-of-use asset, and a $58.2 million increase in accrued expenses and other liabilities.
Working capital sources of cash and cash equivalents primarily included a $131.0 million increase in deferred revenue primarily resulting from the growth in the number of customers invoiced during the period, a $32.3 million decrease in right-of-use assets, and $89.0 million increase in accrued expenses and other liabilities.
We believe that our ability to increase the Average Subscription Revenue per Customer is an indicator of our ability to grow the long-term value of our existing customer relationships.
We believe that our ability to increase the Average Subscription Revenue per Customer is an indicator of our ability to grow the long-term value of our existing customer relationships. We define Average Subscription Revenue per Customer during a particular period as subscription revenue from our Customers during the period divided by the average Customers during the same period.
The increase in Average Subscription Revenue per Customer was primarily driven by a continued demand for our Professional and Enterprise products, partially offset by continued purchases of our lower-priced Starter products and the impact of foreign currency translation primarily attributable to the decline in the value of the Euro and British Pound Sterling relative to the U.S. Dollar.
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, the addition of customers from the acquisition of Clearbit, and the impact of foreign currency translation primarily attributable to the increase in the value of the U.S.
These sources of cash and cash equivalents were offset by a $6.0 million increase in prepaid expenses and other assets, a $21.1 million decrease in operating lease liabilities, a $37.6 million increase in deferred commissions, and a $74.0 million increase in accounts receivable as a result of increased billings to customers.
These sources of cash and cash equivalents were offset by a $4.4 million increase in prepaid expenses and other assets, a $41.5 million decrease in operating lease liabilities, a $4.6 million decrease in accounts payable related to timing of bill payments, a $96.7 million increase in deferred commissions, and a $48.4 million increase in accounts receivable as a result of increased billings to customers.
There is judgment involved in estimating the time allocated to a particular project in the application stage. A significant change in the time spent on each project could have a material impact on the amount capitalized and related amortization expense in subsequent periods. Leases We lease office facilities under non-cancelable operating leases that expire at various dates through February 2035.
There is judgment involved in estimating the time allocated to a particular project in the application stage. A significant change in the time spent on each project could have a material impact on the amount capitalized and related amortization expense in subsequent periods.
Key Components of Consolidated Statements of Operations Revenue 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, and consulting services fees. Subscription based revenue is derived from customers using our customer platform for their inbound marketing, sales, service, operations, and content management needs.
Key Components of Consolidated Statements of Operations Revenue 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.
Letters of Credit As of December 31, 2023, 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.
See Note 10 and Note 19 of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report. Letters of Credit As of December 31, 2024, 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.
Liquidity and Capital Resources Our principal sources of liquidity to date have been cash and cash equivalents, net accounts receivable, our common stock offerings, and our convertible notes offerings.
The increase in income tax expense was primarily due to an increase in income generated in tax paying jurisdictions. Liquidity and Capital Resources Our principal sources of liquidity to date have been cash and cash equivalents, net accounts receivable, our common stock offerings, and our convertible notes offerings.
Sales and Marketing Year Ended December 31, Change 2023 2022 Amount % (dollars in thousands) Sales and marketing $ 1,068,560 $ 886,069 $ 182,491 21 % Percentage of total revenue 49 % 51 % The increase in sales and marketing expense for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to the following: Change (in thousands) Employee-related costs $ 119,846 Marketing programs 44,169 Solutions Partner commissions 14,596 Amortization of intangible asset 1,727 Allocated overhead expenses 2,153 $ 182,491 Employee-related costs increased as a result of increased headcount as we expanded our selling and marketing organizations to grow our customer base.
Sales and Marketing Year Ended December 31, Change 2024 2023 Amount % (dollars in thousands) Sales and marketing $ 1,218,844 $ 1,068,560 $ 150,284 14 % Percentage of total revenue 46 % 49 % The increase in sales and marketing expense for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to the following: Change (in thousands) Employee-related costs $ 125,840 Marketing programs 14,862 Solutions Partner commissions 3,966 Software and services 6,147 Allocated overhead expenses 1,143 Intangible asset write off (1,674 ) $ 150,284 Employee-related costs increased as a result of increased headcount as we expanded our selling and marketing organizations to grow our customer base.
Income Tax expense Year Ended December 31, Change 2023 2022 Amount % (dollars in thousands) Income tax expense $ (18,593 ) $ (8,057 ) $ (10,536 ) 131 % Effective tax rate 12 % 8 % Income tax expense consists of current and deferred taxes for U.S. and foreign jurisdictions.
Income Tax Expense Year Ended December 31, Change 2024 2023 Amount % (dollars in thousands) Income tax expense $ (24,049 ) $ (13,935 ) $ (10,114 ) 73 % Effective tax rate (84 %) 9 % Income tax expense consists of current and deferred taxes for U.S. and foreign jurisdictions.
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, partially offset by certain costs that are deferred and amortized over two to four years.
Solutions Partner commissions increased as a result of increased revenue generated through our Solutions Partners, partially offset by certain Solutions Partner commissions that are deferred and amortized over two to four years as we changed the duration of certain Solutions Partner commissions terms from lifetime to three years in 2023.
Sales commissions for upgrade contracts are deferred and amortized on a straight-line basis over the remaining estimated customer relationship period of the related customer. While we do not anticipate any significant changes to the two to four year amortization period, if a change did occur it could produce a material impact on our financial statements.
While we do not anticipate any significant changes to the two to four year amortization period, if a change did occur it could produce a material impact on our financial statements.
Net Cash and Cash Equivalents Provided by (Used in) Financing Activities Our financing activities have consisted primarily of the various components of our 2022 Notes repayment, the various components of our 2025 Notes offering and repayment, the issuance of common stock under our stock plans, and payments of employee taxes related to the net share settlement of stock-based awards.
These uses of cash were offset by $1.5 billion received related to the maturity of investments. Net Cash and Cash Equivalents Provided by Financing Activities 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.
The two to four-year period has been determined by taking into consideration the type of product sold, the commitment term of the customer contract, the nature of the Company’s technology development life-cycle, and an estimated customer relationship period.
The two to four-year period has been determined by taking into consideration the commitment term of the customer contract, the nature of the Company’s technology development life-cycle, and an estimated customer relationship period. Sales commissions for upgrade contracts are deferred and amortized on a straight-line basis over the remaining estimated customer relationship period of the related customer.
Solutions Partner commissions increased as a result of increased revenue generated through our Solutions Partners. Marketing programs increased due to the timing and size of certain marketing efforts as we continue to make investments in attracting new customers.
Marketing programs increased due to the timing and size of certain marketing efforts as we made investments in attracting new customers.
Research and Development Year Ended December 31, Change 2023 2022 Amount % (dollars in thousands) Research and development $ 617,745 $ 442,022 $ 175,723 40 % Percentage of total revenue 28 % 26 % 53 The increase in research and development expense for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to the following: Change (in thousands) Employee-related costs $ 168,490 Allocated overhead expenses 7,233 $ 175,723 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.
Employee-related costs decreased as we continue to leverage our Solutions Partners to deliver on-boarding and other professional services. 52 Research and Development Year Ended December 31, Change 2024 2023 Amount % (dollars in thousands) Research and development $ 778,714 $ 617,745 $ 160,969 26 % Percentage of total revenue 30 % 28 % The increase in research and development expense for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to the following: Change (in thousands) Employee-related costs $ 141,720 Hosting expenses 6,479 Allocated overhead expenses 9,805 Professional fees 2,965 $ 160,969 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.
Because the mix of billing terms for orders can vary from period to period, the annualized value of the orders we enter into with our customers will not be completely reflected in deferred revenue at any single point in time. Accordingly, we do not believe that change in deferred revenue is an accurate indicator of future revenue.
Most of our Customers’ subscriptions are one year or less in duration. Subscriptions are billed in advance on various schedules. Because the mix of billing terms for orders can vary from period to period, the annualized value of the orders we enter into with our customers will not be completely reflected in deferred revenue at any single point in time.
"Risk Factors" for further discussion of the impact and possible future impacts of pandemics, geo-politcal conflicts, and other general macroeconomic impacts on our business. Key Business Metrics The following key business metrics are presented in this Annual Report on Form 10-K or in our press releases announcing our financial results which are furnished on Form 8-K.
Key Business Metrics The following key business metrics are presented in this Annual Report on Form 10-K or in our press releases announcing our financial results which are furnished on Form 8-K.
Interest Income Year Ended December 31, Change 2023 2022 Amount % (dollars in thousands) Interest income $ 58,828 $ 15,000 $ 43,828 292 % Percentage of total revenue 3 % 1 % Interest income primarily consists of interest earned on invested cash and cash equivalents balances and investments.
See Note 18 in the Notes to the Consolidated Financial Statements. Interest Income Year Ended December 31, Change 2024 2023 Amount % (dollars in thousands) Interest income $ 82,706 $ 58,828 $ 23,878 41 % Percentage of total revenue 3 % 3 % Interest income primarily consists of interest earned on invested cash and cash equivalents balances and investments.
General and Administrative Year Ended December 31, Change 2023 2022 Amount % (dollars in thousands) General and administrative $ 249,649 $ 197,720 $ 51,929 26 % Percentage of total revenue 12 % 11 % 54 The increase in general and administrative expense for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to the following: Change (in thousands) Employee-related costs $ 36,633 Customer credit card fees 6,197 Professional fees 5,815 Allocated overhead expenses 3,284 $ 51,929 Employee-related costs increased as a result of increased headcount as we grew our business and required additional personnel to support our expanded operations.
In addition, during 2023, we recorded a one-time write off of an intangible asset which did not recur in 2024. 53 General and Administrative Year Ended December 31, Change 2024 2023 Amount % (dollars in thousands) General and administrative $ 300,332 $ 249,649 $ 50,683 20 % Percentage of total revenue 11 % 12 % The increase in general and administrative expense for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to the following: Change (in thousands) Employee-related costs $ 34,681 Customer credit card fees 4,519 Professional fees 5,037 Software and services 5,025 Allocated overhead expenses 1,421 $ 50,683 Employee-related costs increased as a result of increased headcount as we grew our business and required additional personnel to support our expanded operations.
Restructuring costs primarily consisted of $26.8 million of severance, employee related benefits and other costs, and $70.0 million related to the termination and abandonment of leases globally (Note 17).
Restructuring charges were $96.8 million in 2023 due to the implementation of the Restructuring Plan in the first quarter of 2023 and its continued execution throughout the year. Restructuring charges in 2023 primarily consisted of $26.8 million of severance, employee related benefits and other costs, and $70.0 million related to the termination and abandonment of leases globally.
In 2023 and 2022, interest expense consisted of amortization of issuance costs and contract interest expense related to our 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 or impairments on our strategic investments.
Other income 49 (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. Income Tax Expense Income tax expense consists of current and deferred taxes for U.S. and foreign jurisdictions.
Year Ended December 31, Change 2023 2022 Amount % (dollars in thousands) Subscription cost of revenue $ 290,802 $ 257,513 $ 33,289 13 % Percentage of subscription revenue 14 % 15 % The increase in subscription cost of revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to the following: Change (in thousands) Subscription and hosting costs $ 24,374 Amortization of capitalized software development costs 11,243 Amortization of acquired technology 920 Employee-related costs (2,014 ) Allocated overhead expenses (1,234 ) $ 33,289 Subscription and hosting costs increased primarily due to growth in our Customer base from 167,386 at December 31, 2022 to 205,091 at December 31, 2023.
Year Ended December 31, Change 2024 2023 Amount % (dollars in thousands) Subscription cost of revenue $ 336,878 $ 283,675 $ 53,203 19 % Percentage of subscription revenue 13 % 13 % The increase in subscription cost of revenue for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to the following: Change (in thousands) Amortization of capitalized software development costs $ 27,937 Subscription and hosting costs 16,766 Amortization of acquired technology 5,402 Employee-related costs 3,727 Allocated overhead expenses (629 ) $ 53,203 Subscription and hosting costs increased primarily due to growth in our Customer base from 205,091 at December 31, 2023 to 247,939 at December 31, 2024.
Hosting expense decreased due to incremental spend in the first half of 2021 associated with product development infrastructure that is unrelated to the hosting of our customer platform for paying Customers.
Hosting expense increased due to incremental spend associated with our product development infrastructure that is unrelated to the hosting of our customer platform for our paying Customers. Allocated overhead expenses increased due to the increased proportional allocation of shared company expenses associated with the growth in research and development headcount relative to other departments.
Year Ended December 31, Change 2023 2022 Amount % (dollars in thousands) Professional services and other cost of revenue $ 54,687 $ 56,746 $ (2,059 ) -4 % Percentage of professional services and other revenue 117 % 140 % The decrease in professional services and other cost of revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to the following: Change (in thousands) Allocated overhead and other expenses $ 7,912 Employee-related costs (9,971 ) $ (2,059 ) Allocated overhead and other expenses increased primarily due to increased costs associated with our other service offerings, offset slightly by a decrease in expense from the reduction of our leased office space under the Restructuring Plan.
Year Ended December 31, Change 2024 2023 Amount % (dollars in thousands) Professional services and other cost of revenue $ 56,387 $ 54,687 $ 1,700 3 % Percentage of professional services and other revenue 97 % 117 % The increase in professional services and other cost of revenue for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to the following: Change (in thousands) Allocated overhead and other expenses $ 9,747 Employee-related costs (8,047 ) $ 1,700 Allocated overhead and other expenses increased primarily due to increased costs associated with our other service offerings, including Commerce Hub.
The interest rate is fixed at 0.375% for the 2025 Notes. Interest is payable semi-annually in arrears on June 1 and December 1 of each year for both Notes. See Note 9 of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report.
See Note 12 of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report. Convertible Senior Notes As of December 31, 2024, the carrying value was $458.2 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.
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.
Subscription revenue accounted for 98% of our total revenue for the years ended December 31, 2024, 2023, and 2022. 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.
Cost of Revenue, Gross Profit and Gross Margin Percentage Year Ended December 31, Change 2023 2022 Amount % (dollars in thousands) Total cost of revenue $ 345,489 $ 314,259 $ 31,230 10 % Gross profit 1,824,741 1,416,710 408,031 29 % Gross margin 84 % 82 % 52 Total cost of revenue increased during 2023 primarily due to an increase in subscription and hosting costs, amortization of capitalized software development costs, amortization of acquired technology, offset by a decrease in employee-related costs and allocated overhead expenses.
Professional services and other revenue increased during 2024 primarily due to an increase in other revenue streams, including Commerce Hub. 51 Cost of Revenue, Gross Profit and Gross Margin Percentage Year Ended December 31, Change 2024 2023 Amount % (dollars in thousands) Total cost of revenue $ 393,265 $ 338,362 $ 54,903 16 % Gross profit $ 2,234,278 $ 1,831,868 $ 402,410 22 % Gross margin 85 % 84 % Total cost of revenue increased during 2024 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.
Net cash and cash equivalents used in investing activities during the year ended December 31, 2022 consisted primarily of $1.5 billion purchases of investments, $37.4 million of purchased property and equipment, $26.4 million of purchases of strategic investments, $3.1 million in an equity method investment, $44.3 million of capitalized software development costs, and a $10.0 million purchase of intangible assets.
Net cash and cash equivalents used in investing activities during the year ended December 31, 2024 consisted primarily of cash used for $2.0 billion purchases of investments, $15.5 million of purchases of strategic investments, $40.4 million for acquisition of a business, $37.9 million of purchased property and equipment, $1.2 million purchases of intangible assets, and $89.6 million of capitalized software development costs, offset by $1.7 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.
Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Revenue Year Ended December 31, Change 2023 2022 Amount % (dollars in thousands) Subscription $ 2,123,479 $ 1,690,538 $ 432,941 26 % Professional services and other 46,751 40,431 6,320 16 % Total revenue $ 2,170,230 $ 1,730,969 $ 439,261 25 % Subscription revenue increased during 2023 due to the increase in Customers, which grew from 167,386 as of December 31, 2022 to 205,091 as of December 31, 2023.
Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 Revenue Year Ended December 31, Change 2024 2023 Amount % (dollars in thousands) Subscription $ 2,569,546 $ 2,123,479 $ 446,067 21 % Professional services and other 57,997 46,751 11,246 24 % Total revenue $ 2,627,543 $ 2,170,230 $ 457,313 21 % Subscription revenue increased during 2024 due to the increase in Customers, which grew from 205,091 as of December 31, 2023 to 247,939 as of December 31, 2024.
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 (used in) and provided by 60 financing activities for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, 2023 2022 2021 (in thousands) Cash and cash equivalents $ 387,987 $ 331,022 $ 377,013 Working capital 915,293 992,946 836,100 Net cash and cash equivalents provided by operating activities 350,971 273,174 238,728 Net cash and cash equivalents used in investing activities (334,766 ) (319,658 ) (179,508 ) Net cash and cash equivalents provided by (used in) financing activities 37,011 7,428 (51,469 ) Our cash and cash equivalents at December 31, 2023 were held for working capital purposes.
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 years ended December 31, 2024, 2023 and 2022: Year Ended December 31, 2024 2023 2022 (in thousands) Cash and cash equivalents $ 512,667 $ 387,987 $ 331,022 Working capital 1,060,204 929,532 1,000,058 Net cash and cash equivalents provided by operating activities 598,599 350,971 273,174 Net cash and cash equivalents used in investing activities (515,861 ) (334,766 ) (319,658 ) Net cash and cash equivalents provided by financing activities 53,495 37,011 7,428 55 Our cash and cash equivalents at December 31, 2024 were held for working capital purposes and for a business acquisition (See Note 19 of the Notes to Consolidated Financial Statements).
Professional services and other revenue accounted for 2% of total revenue for the years ended December 31, 2023 and 2022, and 3% of total revenue for the year ended December 31, 2021.
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 the years ended December 31, 2024, 2023, and 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 7A. Qualitative and Quantitat ive Disclosures About Market Risk Foreign Currency Exchange Risk We have foreign currency risks related to our revenue, cost of revenue, and operating expenses denominated in currencies other than the U.S. dollar, primarily the Euro, British Pound Sterling, Australian dollar, Singaporean dollar, Japanese Yen, Colombian Peso and Canadian dollar.
Biggest changeITEM 7A. Qualitative and Quantitat ive Disclosures About Market Risk Foreign Currency Exchange Risk We have foreign currency risks related to our revenue, cost of revenue, and operating expenses denominated in currencies other than the U.S. dollar. Since we translate foreign currencies into U.S. dollars for financial reporting purposes, currency fluctuations can have an impact on our financial results.
We do not currently hedge our interest rate exposure and do not enter into financial instruments for trading or speculative purposes. Market Risk and Market Interest Risk In June 2020, we issued $460.0 million aggregate principal amount of convertible senior notes due June 1, 2025, of which $459.1 million remained outstanding as of December 31, 2023.
We do not currently hedge our interest rate exposure and do not enter into financial instruments for trading or speculative purposes. Market Risk and Market Interest Risk In June 2020, we issued $460.0 million aggregate principal amount of convertible senior notes due June 1, 2025, of which $459.0 million remained outstanding as of December 31, 2024.
There continues to be uncertainty in the changing market and economic conditions, including the possibility or additional measures that could be taken by the Federal Reserve and other government agencies, related to concerns over inflation risk.
There continues to be uncertainty in the changing market and economic conditions, including the possibility of additional measures that could be taken by the Federal Reserve and other government agencies, related to concerns over inflation risk.
The table below provides a sensitivity analysis of hypothetical 10% changes of our stock price as of December 31, 2023 and the estimated impact on the fair value of the 2025 Notes.
The table below provides a sensitivity analysis of hypothetical 10% changes of our stock price as of December 31, 2024 and the estimated impact on the fair value of the 2025 Notes.
We have experienced and will continue to experience fluctuations in our net loss as a result of transaction gains or losses related to revaluing certain current asset and current liability balances that are denominated in currencies other than the functional currency of the entities in which they are recorded.
We have experienced and will continue to experience fluctuations in our net income (loss) as a result of transaction gains or losses related to revaluing monetary assets and liabilities that are denominated in currencies other than the functional currency of the entities in which they are recorded.
Our Board recently approved a hedging program intended to allow us to mitigate foreign exchange impacts, such as exposure to currency exchange rates in connection with significant transactions denominated in currencies other than the U.S. dollar, by entering into derivatives transactions such as foreign exchange forwards. We expect to begin our hedging program in 2024.
In the first quarter of 2024, we implemented a hedging program intended to allow us to mitigate foreign exchange impacts, such as exposure to currency exchange rates in connection with significant transactions denominated in currencies other than the U.S. dollar, by entering into derivatives transactions such as foreign exchange forwards.
Interest Rate Sensitivity Our portfolio of cash and cash equivalents and short- and long-term investments is maintained in a variety of securities, including government agency obligations, corporate bonds and money market funds.
See Note 15 in the Notes to the Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K. Interest Rate Sensitivity Our portfolio of cash and cash equivalents and short- and long-term investments is maintained in a variety of securities, including government agency obligations, corporate bonds and money market funds.
The selected scenarios are not predictions of future events, but rather are intended to illustrate the effect such event may have on the fair value of the Notes. 2025 Notes Hypothetical change in HubSpot stock price Fair value Estimated change in fair value Hypothetical percentage increase (decrease) in fair value 10% increase $ 853,193 $ (101,222 ) -11 % No change $ 954,414 $ — — 10% decrease $ 1,037,604 $ 83,189 9 % 65
The selected scenarios are not predictions of future events, but rather are intended to illustrate the effect such event may have on the fair value of the Notes. 2025 Notes Hypothetical change in HubSpot stock price Fair value Estimated change in fair value Hypothetical percentage increase (decrease) in fair value 10% increase $ 1,242,450 $ 111,466 10 % No change $ 1,130,984 $ — — 10% decrease $ 1,016,020 $ (114,964 ) (10 )% 59
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Since we translate foreign currencies into U.S. dollars for financial reporting purposes, currency fluctuations can have an impact on our financial results.

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