HubSpot, Inc.

Our host, Ryan Burkhart, Senior Director of Investor Relations. Ryan, please go ahead.

Thanks, operator. Good afternoon and welcome to HubSpot's fourth quarter and fiscal year 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 timing and benefits of the Clearbit acquisition, expected growth, FX movement, and business outlook, including our financial guidance for the first fiscal quarter and full year 2024. 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 to each non-GAAP financial measure used or discussed and a reconciliation of the differences between such measures can be found within our fourth quarter in fiscal year 2023 earnings press release in the investor relations section of our website. Now, it's my pleasure to turn the call over to HubSpot's chief executive officer, Yamini Rangan. Yamini?

Thank you, Ryan, and welcome to everyone joining us today. Let me start with our Q4 and 2023 results, share my observations on the macro environment as we step into a new year, and wrap up with our strategy for balancing growth, efficiency, and culture in 2024. We saw a solid finish to a good year despite the challenging macro environment. Q4 revenue grew 21% year over year in constant currency, and full year 2023 revenue grew 25% in constant currency. We delivered a standout operating profit margin of 17% in Q4 and 15% for the full year, up over 500 basis points year over year. Total customers grew 23% to over 205,000 customers globally, driven by nearly 11,000 net customer additions in the quarter, a new record for us. Our customers have high confidence in our ability to help them grow, and we're becoming the clear platform of choice for scaling companies. Our momentum in Q4 and 2023 results highlight two important aspects of our strategy that are working. First, we're focused on crafting great products and continuously innovating to solve for the customer. And second, we are consistently driving go-to-market execution across digital, sales, and partner channels. At the lower end of the market, we saw exceptionally strong net ads driven by starter momentum. Our pricing optimization plays continue to work. Our value proposition of an easy-to-buy, easy-to-use platform is crystal clear, and our efforts to amplify this value in app, in chat, and across brand campaigns drove results in the quarter. We improved our in-app onboarding and support to help customers get value faster and our investments to drive retention are beginning to work. These efforts resulted in record net ads that we are pleased with. In upmarket, the big themes in Q4 were large deal strength, sales hub, and multi-hub momentum. We saw a seasonally strong impact from large deals as more upmarket customers are consolidating on our platform. 60% of pro and enterprise customers are now on two or more hubs and more customers are starting with multi-hub. Post the relaunch at inbound, sales hub is just cranking. Customers are getting value from AI powered features like call summarization and forecasting and are driving sales productivity with the new prospecting workspace. We can see from the results that doubling down here was the right choice. Sales hub was our fastest growing hub. in the quarter in terms of new business with 18 of the top 25 wins, including Sales Hub. It is becoming a sustainable front door to HubSpot, and I'm thrilled with the momentum we are seeing after the relaunch. Overall, 2023 was a banner year for product innovation with over 800 product enhancements across our hubs and entire platform. We want to be the market share leader in marketing, sales, and service for scaling companies. and we doubled down on core hubs to deliver even more value to customers. In addition to relaunching Sales Hub, we enhanced Marketing Hub with more omnichannel features like Instagram Reels and introduced more robust insights with customer journey analytics. With Service Hub, we introduced multiple knowledge bases, which was a top customer request and advanced our vision of a modern help desk. And of course, The big headline in 2023 was the launch of HubSpot AI. We were early with gen AI beta launches and have embedded AI features across our entire platform and hubs. So customers can get the power of AI without needing to become AI experts. Reflecting on 2023, we moved fast with AI to drive innovation for our customers. We doubled down on core hubs to further establish ourselves as the platform of choice for scaling companies. and we focused on consistent execution of our bimodal strategy. I'm thrilled with the innovation the team delivered in 2023 and look forward to driving even more value for our customers this year. Okay, I want to quickly touch on what we're seeing in the macro environment. Throughout 2023, we saw customers tightening their budgets, deal cycles taking longer, and overall scrutiny in the buying process. Though these trends continued in Q4, we saw some buyer urgency at the end of the year, driving sequential improvement in large deals. Customers are simplifying and consolidating on fewer, more effective platforms, and this translated to stable growth retention and more multi-hub wins for HubSpot. That said, we're not sounding the all clear just yet, as we continue to see cautious buying and multiple decision makers involved in deals. Overall, we expect this choppy environment to persist, and we will remain focused on HubSpot's specific growth drivers and execution in 2024. Shifting gears, I want to share context on the pricing change we recently announced and the strategic rationale behind it. As we have evolved from an app to suite to customer platform, we have had a simple strategy, make HubSpot easy to use and easy to buy. we're doubling down on the strategy to make HubSpot even easier to buy. That's why we announced a new seat space pricing model on January 30th that will go into effect for all new customers on March 5th. For existing customers, pricing will remain the same at the time of the migration, but they will see a price increase of 5% or less at the time of their next renewal. Now, there are three reasons for the shift. First, We want to make it even easier for customers to get started with HubSpot, and therefore, we're removing seat minimums for sales hub and service hub. This will remove friction for customers and will help us accelerate market share gains. Second, we want to make it easier for customers to upgrade from starter. We have heard feedback that the price jump from starter to pro or enterprise is high. This is a point of friction as customers look to upgrade. So we're changing the pro and enterprise seat pricing for Sales Hub and Service Hub, and we are introducing view-only seats, core seats for users who want to edit, and specialized seats for users who need specific functionality like sales or service. This change will bridge the gap between starter and pro and drive more pro-plus adoption and upgrades. Third, and perhaps most importantly, we're aligning price to the value from our AI-powered Smart CRM. We've invested heavily in our Smart CRM over the past few years to make it more customizable, extensible, and easier to integrate with. The easiest way for you to think about Smart CRM is it's the unified customer record, which enables our customers to have a single view of their customers. Now customers can continue to view the CRM for free, but will need a core seat to edit it. This expands our ability to monetize beyond core personas to ops admin finance personas who may need more powerful edit capabilities. In addition, we have embedded HubSpot AI across our entire platform and hubs, which means that customers at every tier can access AI features at no additional cost. This differentiated strategy should drive even more adoption of HubSpot AI and drive more upgrades as we continue to add value in higher tiers. We launched the seats pricing changes as a pilot in ANZ in April 2023, and we have fine-tuned our execution based on customer partner and sales feedback. For the global launch in March, we are hyper-focused on enabling our teams and partners to communicate the value of the changes to customers. Overall, I'm really excited about our pricing model evolution. It's going to make HubSpot easier to buy and easier to scale as our product grows while matching how we monetize the platform based on the value we deliver to customers. Okay, I want to wrap up by sharing our strategy for 2024 and how we are balancing growth, profitability, and culture to drive durable growth. Our strategy is working, and we have high conviction in our strategic choices. We remain focused on SMBs, a very large growing and underserved market, and we are well positioned to innovate and be a leader in this market. The way we differentiate is by making our products easy to buy, easy to adopt, and easy to use. In 2024, we will double down on our playbook of driving the pace of product innovation, focusing on consistent execution, and building a high-performing, sustainable company. On the product side, you can expect to see us take big swings in AI, build deeper and more sophisticated upmarket functionality, and focus on driving product usage across all hubs and platforms. AI in 2023 was all about speed and being fast to market. 2024 is going to be all about delivering value. We are doubling down on HubSpot AI use cases that are driving repeat usage and will innovate even more with AI agents. With our core hubs, we will continue to go deep on the key use cases our customers need across marketing, sales, and service, and bring more upmarket sophistication to sales hub and service hub specifically. In addition, access to rich contextual data is a top priority for our customers, and we are excited to evolve our data offering in 2024 following the Clearbit acquisition. In terms of go-to-market, we're focused on driving efficiency across all motions. We're scaling self-service to expand beyond acquisition to activation and engagement. We're investing in partner and rep productivity, and we will drive guided selling initiatives with AI to save reps time, surface insights, and power deeper conversations. And as a company, our goal is to create a culture where people can do their best work and we're investing to help employees grow better, work better, and connect better. As we look forward this year, we have momentum in a large market. A pricing evolution will allow us to accelerate acquiring and serving more customers, and the pace of product innovation will enable us to become the number one AI-powered customer platform for scaling companies. With that, I'll hand it over to our CFO, Kate Bucher, to take you through our financial and operating results.