HubSpot, Inc.

Hello and welcome to the HubSpot Q2 2023 earnings call. My name is Alex and I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you may press star followed by one on your telephone keypad. If you'd like to withdraw your question, you may press star followed by two. I'll now hand it over to your host, Chuck McGlashing, Head of Investor Relations. Please go ahead.

Thanks, Operator. Good afternoon and welcome to HubSpot's second quarter 2023 earnings call. 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 Bucher, 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 regarding management's expectations of future financial and operational performance and operational expenditures, the impact of the restructuring, expected growth, FX movement, and business outlook, including our financial guidance for the third fiscal quarter and full year of 2023. Forward-looking statements reflect our views only as of today and, except as 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 and a reconciliation of the differences between such measures can be found within our second quarter 2023 earnings press release in the investor relations section of our website. Now, it's my pleasure to turn over the call to Hotspot's Chief Executive Officer, Yamini Rangan. Yamini?

Thank you so much, Jacques, and welcome to everyone joining us on the call. Today, I want to highlight our continued momentum in Q2, reiterate our playbook for winning in this macro environment, and close with updates on our generative AI roadmap as well as insights based on customer usage. Let's jump into our Q2 results. Q2 was a solid quarter for HubSpot, with revenue growing 26% year-over-year in constant currency. We delivered 700 basis points of margin expansion year-over-year, driving operating margin to 14%. We've talked about our strategy for balancing growth and profitability, and we're purposefully executing against the strategy. I'm really happy with the operating leverage we delivered while driving growth in the quarter. Total customers grew by 23% to over 184,000 globally, fueled by over 7,600 net customer additions in the quarter. I'm very pleased with the strong results in Q2, the consistent performance demonstrated by our teams, and the momentum we have in becoming the platform of choice for scaling companies. Q2 results were driven by two key themes, our ability to deliver product innovation for our customers and our ability to consistently execute our bimodal good market strategy. As you've seen over the past few years, our bimodal strategy is working. Our starter tier continues to fuel volume on the low end of the market, driven by product and pricing optimization. That said, the story in Q2 was about upmarket momentum. with continued growth in multi-hubs as well as full suite adoption. We saw more new customers starting with multiple hubs fueling larger deals. One third of our pro and enterprise customers are now on three or more hubs, which is up by four points year over year. In addition, we continue to see Sales Hub pick up steam with larger customers. Our investment in upmarket functionality, like customization, extensibility, and governance, is paying off as we win bigger deals with Sales Hub. Service Hub also gained traction upmarket in this quarter with 12 of our 25 largest deals, including a Service Hub attached. Companies are looking to improve handoffs across their marketing, sales, and service teams, and they want a clear, shared view of customer insights. By connecting Sales Hub and Service Hub, Support can log tickets that the sales team can now see because there is one central contact record. That context helps sales team close deals and is just one example of why a connected front office platform is so powerful. Take MarineMax, a national boat retailer, for example. Before HubSpot, their legacy CRM was causing a disjointed customer experience. They couldn't effectively route leads from marketing to sales, And because the CRM was difficult to use, sales reps weren't adopting it. Since switching to HubSpot and adopting Marketing Hub, Sales Hub, Service Hub, and Ops Hub, MarineMax has increased annual revenue by 113% and reduced their average sales response time from days to minutes. They now have a shared visibility across the entire customer journey, leading to a better and faster customer experience. I love hearing that our connected value proposition is resonating and that our product innovation is driving clear value for customers. Now, I want to shift gears to talk about the macro environment. Overall, customer buying trends remain steady. Budgets remain under scrutiny. Multiple stakeholders continue to be involved in decisions. And while buying trends have not improved, they have not gotten worse either. Customers are continuing to optimize their budgets, and we can see this optimization across seats, additions, contact tiers, and portals. The bar to buy has risen, but companies are continuing to invest in digital transformation and prioritize platform level decisions. This is where HubSpot shines. We have a proven playbook for driving growth with our product innovation and focused execution. On the product side, HubSpot continues to win by being extremely easy to use and extremely powerful under the hood. Our product innovation is in high gear, and I want to highlight just a few developments from the quarter. With Marketing Hub, we doubled down on omnichannel by moving Instagram Reels into public beta as marketeers increasingly focus on short form social video. We also introduced Event Visualizer to give customers even more insight into their audience's activity and get deeper analytics on customer behavior. With Service Hub, we introduced Content Assistant into Inbox so that service teams can leverage GenAI to respond to customers faster across various channels. We're also enabling teams to summarize customer conversations with GenAI and move that functionality into private beta in Q2. Lastly, on our path to building a more customizable and extensible CRM, we released customized pipeline views, enabling our customers to edit their views based on currency and tags that are specific to their business. We also improved permissions and user management for custom objects. This has been a top request from our enterprise customers. Our pace of product innovation is just cranking, and I'm very pleased with the progress we're making in becoming the platform of choice for scaling companies. On the go-to-market side, how we sell is why we win. We've built a competitive moat with three go-to-market motions, product driven, partner driven, and direct sales driven. Our customers tell us that the way our sales and customer success teams serve them sets us apart. They see a notable difference in our team's ability to move quickly to demo the value of HubSpot, articulate clear platform consolidation benefits, and line up the best partners to deliver services. Today, over 40% of all new customer ARR and existing customer expansion is co-sold and influenced by our partners. Just awesome stuff. While the macro environment remains challenging, what we sell and how we sell continue to be unique differentiators for HubSpot to drive durable, profitable growth. Lastly, let's shift gears to talk about everyone's favorite topic, generative AI. Last quarter, we talked about GenAI, and it is a transformative shift for SMBs and what this means for marketing, sales, and service. In short, we believe AI will not replace go-to-market teams. It will guide and assist them to drive better customer outcomes. Today, I want to provide an overview of how we're building an entire layer of AI assistance across our platform, how our customers are responding, and what our unique differentiators are with AI. We launched ChatSpot earlier this year, and it has quickly grown to 70,000 total users, with 20,000 prompts ingested weekly. Our customers tell us that they like our weekly updates, they love how quickly we are innovating with new AI capabilities, And they're getting value from the breadth of actions ChatSpot is helping them take. Customers are using ChatSpot to prospect for good fit companies based on location, industry, recent news, and more. They're creating entire campaigns with SEO research, blog title generation, and image generation, all from within ChatSpot. The easy chat interface combined with the power of HubSpot's platform have our customers eager for what's next with ChatSpot. We also launched Content Assistant earlier this year, and since moving it to public beta in June, adoption has grown by 10x, with 26% of our enterprise customers using it today. Customers are describing Content Assistant as a game changer because they can quickly generate social copy, block content, prospecting emails, all based on insights without having to leave HubSpot. Content Assistant embeds Gen AI into our customers' natural workflow, helping them work faster and smarter right where they are. As I look at our AI roadmap, we are ambitiously building AI into the entire CRM platform so our customers can get even more value from our platform. We want to help scaling companies power their entire customer journey with AI, and we believe we can help them leverage AI better than other platforms for three reasons. First, data is the fuel for AI and HubSpot has unique data. While other platforms provide data on who your customers are, HubSpot has data on who your customers are, what they did across channels, what they bought. And when we bring together the power of large language models with deep, contextual, first-party data in HubSpot CRM, magic happens. Second, HubSpot is where work gets done in the front office. We own the workflows that scaling businesses use every day. We're beginning to see this play out with content assistance usage that I just mentioned. Finally, Gen AI needs human intervention to work responsibly, and we've always had a human-centric approach to product innovation. We're committed to having strong customer feedback loops and implementing that feedback very quickly. We're well positioned to become the AI leader for scaling companies, and we're moving fast We are prioritizing AI use cases in our roadmap, and without giving too much away, AI is going to be a major theme at our inbound conference in September. I'm really excited for you to learn a lot more about our AI strategy and roadmap at our upcoming conference. Reflecting on the quarter, I'm very pleased with how our teams are driving the pace of product innovation, focusing on iterating fast with AI while executing on our bimodal strategy. This focus and alignment is what will continue to set us apart to drive durable and profitable growth. With that, I'll turn the call over to Kate to take you through our Q2 financial results. Kate?