HubSpot, Inc.

Good afternoon, and thank you for attending today's HubSpot Q1 Fiscal Year 2023 Earnings Conference Call. My name is Donyell, and I will be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. It is now my pleasure to hand the conference over to our host, Chuck McGlashing, Head of Investor Relations. Mr. McGlashing, you may proceed.

Thanks, operator. Good afternoon and welcome to HubSpot's first quarter 2023 earnings conference call. Today, we'll be discussing the results announced in the press release that was issued after the market closed. With me on the call this afternoon is Yamini Rangan, our Chief Executive Officer, Dharmesh Shah, our co-founder and CTO, and Kate Buecher, our Chief Financial Officer. Before we start, I'd like to draw your attention to the Safe Harbor Statement included in today's press release. During this call, we'll make statements related to our business that may be considered forward-looking within the meaning of Section 27A of the Securities Exchange Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. All statements other than statements of historical fact are forward-looking statements, including those regarding management's expectations of future financial and operational performance and operational expenditures, The expected impact of the restructuring, expected growth, FX movement, and business outlook, including our financial guidance for the second fiscal quarter and full year 2023. Forward-looking statements reflect our views only as of today and is required by law. We undertake no obligation to update or revise these forward-looking statements. Please refer to the cautionary language in today's press release and our Form 10-Q, which will be filed with the SEC this afternoon for discussion of the risks and uncertainties that could cause actual results to differ materially from expectations. During the course of today's call, we'll refer to certain non-GAAP financial measures as defined by Regulation G. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed and a reconciliation of the differences between such measures can be found within our first quarter 2023 earnings press release in the Investor Relations section of our website. Now, it's my pleasure to turn over the call to HubSpot's Chief Executive Officer, Yamini Rangan. Yamini?

Thank you so much, Chuck, and welcome to everyone joining us on the call. Today, I want to focus on our Start to 2023, share observations on the current macro environment, and provide some perspective on what generative AI means for HubSpot and our customers. Let's start with our Q1 results. We had a solid start to the year with revenue growing 30% in constant currency year over year. We delivered more than four points of margin expansion year over year, bringing operating margins to over 13%. Total customers grew by 23% to over 177,000 customers globally, fueled by net customer additions of over 9,900 in the quarter. I'm pleased with our momentum coming into the year and the focused execution by the HubSpot team. These results show that our product innovation is in high gear and that our bimodal go-to-market strategy is working. Our focus with our bimodal strategy remains clear. We want to drive volume at the lower end of the market while driving increased value upmarket. In Q1, we continue to gain momentum in both segments of the market. On the lower end, we saw a significant uptick in our net customer additions. This was driven by strength in free signups and pricing optimization plays we ran in our starter edition. In addition to that, HubSpot is powerful yet easy to use, and we are increasingly becoming the platform of choice for scaling companies. Looking up market, we continue to see our multi-hub value proposition resonating. More professional and enterprise customers are starting with multiple hubs, and over 45% of our ARR install base is now on three or more hubs. Upmarket customers are increasingly looking for two things, a single source of truth that provides full visibility across their entire customer journey and clear cost savings in this environment. HubSpot's connected platform delivers both, Specifically, Sales Hub continued to gain momentum in Q1 as customers looked to build tighter alignment between marketing and sales to drive more efficiency across the front office. Take Liquidity Services, a B2B e-commerce marketplace as an example. After adopting Sales Hub and Marketing Hub, they were able to eliminate eight other tools, reducing their overall cost by 50%. They were able to connect their marketing and sales data to get better insights and drive an increase in their conversions and campaign effectiveness. This is a great example of our customers driving growth with MultiHub while saving time and budget. We also saw Operations Hub come up in more deals as customers focused on consolidation. They see the clear value of a solution that can connect systems, automate processes, and demonstrate value. especially in this economic environment. In fact, over two thirds of our top 25 deals closed in Q1 adopted OpsHub. Leveraging multiple hubs boosts efficiency and I'm excited by the value our customers are seeing from our connected platform. As you can see, our bimodal strategy is working and we will continue to maintain our pace of product innovation. Next, I want to shift gears and share what we're seeing in the macro environment. Overall, we continue to operate in a tough environment and we're not out of the woods yet. While we see our top of funnel activity improving, sales cycles remain long and budgets remain under scrutiny. Decisions by committee have become the norm with multiple executives involved in sales cycles. It is clear based on my conversations with customers that they're continuing to tighten their belts in terms of budgets. And we can see this in optimization across seats, contact tiers, and portals. Decision makers are focused on budget optimization and continue to spend cautiously. Now, despite these challenges, we have a solid playbook for executing and driving sustainable growth. We remain focused on product innovation and consistent execution. On the product side, we're cranking. One of our strategic objectives is to become the market share leader in marketing, sales, and service for scaling companies, and we remain focused on delivering depth of features in order to get there. In Q1, with Marketing Hub, we moved customer journey analytics to general availability, and the strong adoption and usage we're seeing gives me confidence that we are driving meaningful innovation that serves marketeers' needs today. With Sales Hub, we significantly enhanced the sequences tools for upmarket customers with selective threading and advanced permissioning. And we moved generative AI email functionality to beta. We also launched a key Service Hub enterprise feature with multiple knowledge bases. This has been a top product request from upmarket customers who need to be able to support various audiences, products, or brands. And in payments and commerce, we introduced scheduled subscriptions and moved payable invoices to private beta. I'm thrilled with the progress we are making on our journey to become the number one CRM for scaling companies. On the go-to-market side, our strategy has been to focus on total cost of ownership for customers and communicating the value of HubSpot. Our quick time to value and connected platform message is clearly resonating as customers look to become more effective and efficient. We're driving enablement across both our direct and partner channels, and we are keenly focused on value-centric conversations. Looking ahead, we'll continue to navigate this macro environment by following our playbook to drive product innovation, and consistent, strong execution. Now, I want to double click on innovation and share how we're thinking about generative AI and why we are well positioned to add even more value for our customers. We are in the early stages of a transformative shift. Generative AI is rapidly changing the landscape in three fundamental ways. It helps businesses generate content, generate insights, and generate code, all using natural language. This will be a massive opportunity for SMBs and scaling companies. Activities that once took them time, money, and deep expertise no longer do with GenAI. And this shift will enable SMBs to reach more customers, serve them at record speed with unprecedented relevance. So what does this really mean for marketing, sales, and service professionals? In the simplest terms, we believe AI will guide go-to-market teams and make them more effective. This will fuel a new era of AI-guided growth for our customers. When we bring together the power of foundational models with the deep contextual data in HubSpot CRM, we can help go-to-market teams drive better results. Marketeers can use GenAI to guide them in creating more effective blog posts, email campaigns, and social content. Salespeople can use it to guide them to write better prospecting emails and deliver more relevant insights for customers. And service professionals can use GenAI to anticipate customer needs, suggest resolutions, and offer proactive support. AI won't replace go-to-market teams. It will guide them to drive better outcomes. While there will be efficiency benefits, we're even more excited about effectiveness gains and the ability to drive guided growth for customers. While we are in the early stages of GenAI, HubSpot has unique differentiators. First, we have unique data and broad distribution. HubSpot CRM data is unified and cohesive, making it easier for AI to ingest and drive relevance. Second, we're at the center of our customers' workflows. HubSpot is where work gets done, so we can bring relevance to generate content and insights across the entire front office. We're not another AI point solution. We are an all-in-one CRM platform powered by AI. Third, We've always had a human-centric approach and companies with a human feedback loop are at an advantage with AI. We made a ton of progress in Q1 with the launches of Content Assistant in public beta and ChatSpot in public alpha. Since our launch in March, we've had over 40,000 users sign up for ChatSpot and the early feedback has been very positive. Content Assistant has thousands of users to date. and we are seeing customers leveraging it daily for creating marketing emails, blog posts, landing pages, and more. We're ambitiously integrating AI across our entire CRM platform, so our customers don't have to become AI experts to reap the transformational benefits. I'm incredibly excited that the opportunity AI is creating to deliver even more value for our customers. Reflecting on the quarter, I'm pleased with the progress we made on our path to becoming the CRM platform of choice for scaling companies. Our teams maintained the pace of product innovation and drove strong execution, which was just fantastic to see. With that, I'll turn the call over to Kate to take you through Q1 results in more detail.