HubSpot, Inc.

My name is Liz, and I will be your operator today. At this time, all participant lines are in listen-only mode, and there will be an opportunity for questions and answers after management's prepared remarks. If you'd like to enter the queue for questions, you may do so by dialing star followed by 11 on your telephone keypad. I would now like to hand the conference over to Senior Director of Investor Relations, Ryan Burkhart. Please go ahead.

Thanks, Operator. Good afternoon and welcome to HubSpot's third quarter 2024 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 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 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, expected growth, FX movement, and business outlook, including our financial guidance for the fourth 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 a 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 third quarter of fiscal year 2024 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 everyone to the call. I'll start by discussing our Q3 2024 results and the key trends driving our momentum. Then, I'll give an update on the product launches at inbound and the feedback from our customers. I'll wrap by highlighting how we are setting ourselves apart as a leading customer platform for scaling companies. Let's dive in. Q3 was another strong quarter for HubSpot with revenue growing 20% year-over-year in constant currency. We delivered another quarter of significant operating margin growth with over 200 basis points of margin expansion year-over-year, driving our operating margin to 19%. Total customers grew to 238,000 customers globally, driven by 10,000 net customer additions in the quarter. I am thrilled to see customers continuing to consolidate on HubSpot as their customer platform, driven by our focus on customers and our pace of product innovation. In the upmarket segment, we continue to see strong momentum in large deals and multi-hub wins, trends that have remained consistent throughout this year. Two main factors are driving larger deals. First, our product market fit has improved significantly in upmarket. And second, our platform's ease of use and ability to deliver quick results resonate with scaling companies. Discerning upmarket buyers want lower cost, high value, and great adoption in a matter of weeks. We deliver on all of these, making HubSpot an easy choice for them. Multi-hub wins are driven by customers looking to consolidate their tech stack and at a level of innovation in our hubs, like Content Hub and Service Hub. In Q3, more than 50% of our new business in Pro Plus tiers came from customers using three or more hubs. Additionally, over 40% of our install base of customers now use all three core hubs, marketing, sales, and service, highlighting the value our customers find in HubSpot's unified customer platform. It has been a great year for Content Hub, with rapid growth driven by AI innovation, We added video capabilities to our popular content remix feature and launched Content Agent that helps create and personalize content. Customers are quickly adopting these AI features to create landing pages, videos, and blog posts, and they're seeing immediate value. For example, Franchise Brokers Association, our customer who connects great leaders with franchise opportunities, increased content production by 250% and improve organic lead generation by 216% using tools like our blog writer and content remix. The level of innovation with AI features in Content Hub has accelerated growth and the attached rate to Marketing Hub is strong at nearly 50%. In Service Hub, we introduce new features to better support larger customers, including a customer agent that helps answer customer questions, a new customer success workspace to help teams improve retention and enhancements to the help desk. These innovations are driving higher attach and upgrade rates. Customers appreciate having tickets and conversations in one workspace, which is making them more productive. With the level of innovation and recent launches targeted at customers with larger service teams, we've seen customers with 100 plus Service Hub seats grow 60% year over year. Overall, I am thrilled with the progress we are making across product innovation and go-to-market execution to drive up market momentum. In the lower end of our segment, we've continued to drive strong customer growth by improving our product and pricing. Our pricing strategy is working. We lowered the seat price to make it easy for customers to get started and we removed seat minimums to make it easy for customers to upgrade and grow with HubSpot. We made significant progress in driving higher volumes of customers, which is now offsetting expected ASP decline. We've also improved our free and starter tiers to increase conversion rates. We added personalized upgrade prompts throughout the customer journey to encourage more customers to move from free to starter and drive conversion rates. In addition, we relaunched the starter tier in July, which is improved customer experience. All of these changes have helped us drive net customer growth in this segment. Now, the highlight of Q3 was, of course, our annual inbound conference, where we launched a significant set of AI innovations that were very well received by our customers and partners. The event was a huge success, attracting over 12,000 in-person attendees and over 40,000 online. The conference and the campaigns following have generated nearly 1 billion impressions, creating tremendous momentum as we closed out Q3. While Inbound showcased over 200 new innovations, the two standout moments were the launches of Breeze and Breeze Intelligence. Here's a quick recap of what we launched and the customer feedback so far. At Inbound, we launched Breeze. which is HubSpot AI that powers the entire platform, including co-pilot, agents, new features, and an agent marketplace. Our strategy is to embed AI into every hub and across the entire platform and democratize AI for scaling companies. Since the launch, we have seen a notable increase in AI awareness, adoption, and usage. AI app awareness within HubSpot grew by 13% quarter over quarter, with two-thirds of enterprise and half of pro customers engaging with AI features. Co-pilot, our AI assistant, has resonated well, particularly with startup customers who use it to summarize CRM data and objects, rewrite text, and generate insights from their customer data. Co-pilot is now in public beta, and we are seeing repeat usage with 43% of users, which is a strong start. We also launched four agents at inbound, social, content, prospecting, and customer. Though still in beta, customers are already seeing value. For example, Kaplan Early Learning Company is using a customer agent to enable 25% to 30% of their customers to self-serve. reducing average ticket response time by 30%. Morehouse College is using our content agent to create blogs with best practices, which has resulted in 30% increase in page views and 27% more time spent on their site. Exactly the kind of results content marketeers are looking to drive with AI today. And we know AI is only as good as the data that powers it. which is why we also launched Breeze Intelligence to provide our customers with the best possible data about their customers. To recap, Breeze Intelligence does three things. It enriches company and contact data with over 200 million data points, provides buyer intent signals to prioritize prospects, and when those prospects visit their websites, shortens forms to increase conversion, all out of the box, in HubSpot. While this is still in beta, it has been ungated now for all customers and there is clear enthusiasm. Customers are using it for lead scoring to see if the company is in their ideal customer profile. Lead routing to send leads to the right reps. Segmentation and personalization to ensure the right messaging gets to the right person. It's early days, but the trends from our September cohort are strong with high activation and repeat usage rates. And finally, let's talk about our recent acquisition of cash flow and how we are advancing our commerce vision. Everything we do at HubSpot is in service of one clear goal, solving for the customer. In 2023, we launched Commerce Hub based on the belief that for businesses to grow, they not only need customer data, but also need transaction data. What they bought, when they paid, how long they have until renewal, We've made progress by offering simple billing and payment with Commerce Hub, processing more than $1 billion in GMV with strong year-over-year growth in enrollment. By acquiring cash flow, we're doubling down to provide subscription management and robust configuration pricing and quoting CPQ tools right in HubSpot. That means our customers will be able to close deals faster and increase revenue, while having their customer and transaction data in one place. Sarika and Brian, the founders of Cashflow, have decades of experience in the space and have built a high-performing team focused on removing the friction when a prospect decides to purchase. One of HubSpot's competitive advantages is having a crafted product, and that is a promise we intend to keep with acquisitions. To wrap up, We double down on product innovation, and we are leading with AI and data. We understand what it takes to help SMBs grow, a platform that is easy, fast, and unified. And that is exactly why our customers are consolidating on HubSpot as their platform of choice. With our relentless focus on innovation and solid momentum in Q3, I'm more confident than ever in HubSpot's durable growth. A huge thank you to all HubSpotters around the world for staying focused on our customers every single day. With that, I'll turn the call over to Kate to take you through Q3 results in more detail. Kate?