Q4 2021 HubSpot Inc Earnings Call

Speaker 1: Please stand by. We're about to begin.

Please standby were about to begin.

Speaker 1: Good afternoon, everyone, and welcome to the HubSpot Q4 2021 earnings conference call. Just a quick reminder, today's call is being recorded at the end of today's prepared remarks. We will have a formal question and answer session. To queue up for questions, please press star 1. We do ask that you please limit yourself to one question. And now at this time, I'll turn the call over to the head of investor relations, Mr. Chuck McGlashan. Please go ahead, sir.

Good afternoon, everyone and welcome to the hub spot Q4, 2021 earnings Conference call. Just a quick reminder, today's call is being recorded at the end of today's prepared remarks, we will have a formal question and answer session.

Four questions. Please press star one we do ask that you. Please limit yourself to one question.

And now at this time I'll turn the call over to the head of Investor Relations. Mr. Chuck Mclaughlin. Please go ahead Sir.

Speaker 1: Thanks operator good afternoon and welcome to HubSpot fourth quarter and full year 2020.

Thanks, operator, good afternoon, and welcome to hotspots fourth quarter and full year 2021 earnings conference call.

Speaker 1: 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...

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 to see how many rondon, our chief Executive Officer, Dr Shah Cofounder, and CTO and Kate Bueker, 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 27, a of Securities Exchange Act of 1933 as amended.

Speaker 1: Section 21e of the Security Exchange Act of 1934 is amended.

In section 21 E of the Securities Exchange Act 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.

Speaker 1: those regarding management's expectations of future financial and operational performance and operational expenditures, expected growth, and future financial performance.

Expected growth leadership positions and business outlook, including our financial guidance for the first fiscal quarter and full year 2022.

Speaker 1: and Business Outlook, including our financial guidance for the first fiscal quarter in full-year 2022.

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.

Speaker 1: is required by law, we undertake no obligation to update or...

Speaker 1: Please refer to the cautionary language in today's press release and our Form 10-K ey which was filed with the SEC on November 3rd, 2021 for discussion.

Please refer to the cautionary language in today's press release, and our Form 10-Q , which was filed with the SEC on November three 2021 for a discussion of the risks and uncertainties that could cause actual results to differ materially from expectations.

Speaker 1: uncertainties that could cause actual results to differ materially.

During the course of today's call will refer to certain non-GAAP financial measures as defined by regulation G.

Speaker 1: During the course of today's call, we'll refer to certain non-GAAP financial measures as defined by regulation.

Speaker 2: the GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed.

The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed.

Speaker 2: reconciliation of the differences between such measures can be found within our fourth year of Mac tourism.

Reconciliation of the differences between such measures can be found within our fourth quarter and fiscal year 2021 earnings press release in the Investor Relations section of our website.

Speaker 2: year 2021 earnings press release in the investor relations section of our

Speaker 2: Now, it's my pleasure to turn over the call to HubSpot's Chief Executive Officer, Yamini Rangan. Yamini?

Now, it's my pleasure to turn it over to the call. It the hotspots Chief Executive Officer, Yeah, Many Brunken, Germany.

Speaker 3: Thank you so much Chuck and welcome everyone. Thank you for joining us as we review HubSpot's 4th Quarter and Full Year 2021 results.

Thank you so much shock and welcome everyone. Thank you for joining us as we review hub spot fourth quarter and full year 2021 results.

Speaker 3: Last year was one of immense change and I'm incredibly proud of how the HubSpot team was able to adapt and execute to meet the needs of our customers.

Last year was one of immense change and I'm incredibly proud of how the hotspot team was able to adapt and execute to meet the needs of our customers.

Speaker 3: Going into 2021, our goal was to be the number one CRM platform for scaling.

Going into 2021 our goal was to be the number one CRM platform for scaling companies.

Speaker 3: We made significant progress toward that goal, and you can see that in our results.

We made significant progress towards that goal and you can see that in our results.

Speaker 3: We've continued to see broad-based trends across the business, with revenue growing 47% year-over-year in constant currency in the fourth quarter.

We've continued to see broad based strength across the business with revenue growing 47% year over year in constant currency in the fourth quarter.

Speaker 3: We closed out 2021 with more than 135,000 customers globally, nearly $1.5 billion in ARR, and we generated more than $200 million of free cash flow.

We closed out 2021 with more than 135000 customers globally, nearly one $5 billion in E. R. R and we generated more than $200 million of free cash flow.

Speaker 3: We also recently hit the exciting milestone of having more than 1000 apps available in our market.

We also recently hit the exciting milestone of having more than thousand apps available in our marketplace.

Speaker 3: We know that customers who use integrations are more successful. And so having a robust ecosystem is essential to delivering on our platform.

We know that customers, who use integrations are more successful and so having a robust ecosystem is essential to delivering on our platform vision.

Speaker 3: Now I want to take a step back and look at the macro trends that drove our sustained growth in 2021.

No I wanted to take a step back and look at the macro trends that drove our sustained growth in 2020 one.

Speaker 3: Since HubSpot's inception, we've evangelized the shift towards digital transformation.

Since hub spot inception, we evangelize the shift towards digital transformation.

Speaker 3: That shift accelerated as small and medium businesses around the world have had to quickly adapt to doing business online.

That shift accelerated as small and medium businesses around the world have had to quickly pivot to doing business online in.

Speaker 3: In this world of rapid digital transformation, providing a remarkable customer experience has gone from being a competitive advantage to being a necessary

This world of rapid digital transformation, providing a remarkable customer experience has gone from being a competitive advantage to being a necessity.

Speaker 3: Now more than ever, businesses need a modern and powerful CRM that helps them create those experiences.

Now more than ever businesses need a modern and powerful CRM that helps them create those experiences.

Speaker 3: HubSpot is becoming a CRM provider of choice for these SMBs as they navigate this journey. We did two things exceptionally well in 2021. We drove product innovation and we aligned our product and go-to-market functions for tight execution. First,

And hotspot is becoming a CRM provider of choice for these smbs as they navigate this journey, we did two things exceptionally well in 2020 , one we drove product innovation and we aligned our product and go to market functions for tight execution.

First let's talk about product innovation.

Speaker 3: We both innovated on our anchor hubs and expanded our CRM platform with new product offers.

We bought innovated on our anchor hubs and expanded our CRM platform with new product offerings.

Speaker 3: Operations Hub, which we launched in April , is one of those new products.

Operations hub, which we launched in April is one of those new products.

Speaker 3: This new hub meets the needs of operations teams struggling to get clean data, automate that data, report on that data, and drive insights to help their businesses grow.

This new hub meets the needs of operations teams struggling to get clean data automate that data report on that data and drive insights to help their businesses grow.

Speaker 3: Through Operations Hub, revenue operations teams have access to more than 100 native integrations that bring even more data into HubSpot to make it very powerful.

Through operations hub revenue operations teams have access to more than 100 native integrations that bring even more data into hub spot to make it very powerful.

Speaker 3: Operations Hub supercharges the HubSpot CRM and drives more value, and we are seeing that in a number of ways.

Operations hub Supercharging, the hotspot CRM and drives more value and we are seeing that in the numbers.

Speaker 3: We surpassed more than 15,000 customers using Operations Hub in Q4 and are seeing strong demand among both existing customers and new customers adopting it as part of our CRM.

We surpassed more than 15000 customers using operations hub in Q4 and are seeing strong demand among both existing customers and new customers adopting it as part of our CRM suite.

Speaker 3: We also introduced a new level for growth with payments and commerce, and believe that Commerce-enabled CRM can drive growth for our customers.

We also introduced a new lever for growth with payments and Commerce and believe that Congress enables CRM can drive growth for our customers.

Speaker 3: I'm really thrilled to share that HubSpot Payments is now available to all US customers, with our target segment being companies with fewer than 100 employees.

I'm really thrilled to share that hub spot payments is now available to all U S customers with our target segment being companies with fewer than 100 employees.

Speaker 3: Customer feedback is validating our hypothesis that a commerce solution is much more powerful when it's natively built inside of a CRM.

Customer feedback is validating our hypothesis that our commerce solution is much more powerful when it's natively built inside of our CRM.

Speaker 3: We know that native payments are vitally important for SMBs to grow their businesses online, particularly when it comes to having commerce context embedded in CRM.

We know that NATO payments are vitally important for smbs to grow their businesses online.

He can early when it comes to having commerce context embedded in CRM.

Speaker 3: This actually ensures that all front office teams have visibility into their interactions with the customer.

This actually ensures that all front office teams have visibility into their interactions with the customer.

Speaker 3: While it's very early days, we're encouraged by the momentum we're seeing with our payments off.

While it's very early days, we're encouraged by the momentum we're fine with our payments offering.

Speaker 3: In addition to launching new products, we've continued to invest in our anchor hubs of marketing, sales and service.

In addition to launching new products, we have continued to invest in our anchor hubs of marketing sales and service.

Speaker 3: We extended our lead in CRM and drove sustained growth with new enterprise-level features platform-wide.

We extended our lead in CRM and drove sustained growth with new enterprise level features platform wide.

Speaker 3: Getting insights across the entire front office is still a huge challenge for many scaling companies.

Getting insights across the entire front office is still a huge challenge for many scaling companies, they're forced to use siloed disparate systems that don't give them the visibility they need to grow their business.

Speaker 3: They're forced to use siloed disparate systems that don't give them the visibility they need to grow their business.

Speaker 3: The improvements we made in 2021 are helping to solve those challenges, particularly when customers adopt multiple homes.

The improvements we made in 2021 are helping to solve those challenges, particularly when customers adopt multiple hubs.

Speaker 3: Multi-hub adoption now accounts for 60% of our customer base compared to 34% in 2017, which is a powerful indicator that our customers are seeing value in adopting HubSpot across multiple parts of their business.

Multi hub adoption now accounts for 60% of our customer base compared to 34% and 2017, which is a powerful indicator that our customers are seeing value in adopting hub spot across multiple parts of their business.

Speaker 3: Take a look at Reseller ratings, a user-generated content platform for retail brands.

Take a look at reseller ratings of user generated content platform for retail brands.

Speaker 3: Like many scaling companies, they were bogged down with a disparate stack of multiple front office tools that did not provide visibility across the business.

Like many scaling companies they were bogged down with a disparate stock of multiple front office tools that did not provide visibility across the business.

Speaker 3: So their marketing and sales teams consolidated all of their work on HubSpot and saw a 25% increase in traffic, 30% increase in contract value, and a 75% decrease in customer turn rate.

So their marketing and sales teams consolidated all of their work on hotspot and saw a 25% increase in traffic, 30% increase in contract value and a 75% decrease in customer churn rate.

Speaker 3: This is exactly what we expect to see when customers adopt our CRM.

This is exactly what we expect to see when customers adopt our CRM suite.

Speaker 3: Reseller ratings is creating better experience for customers and scaling with HubSpot.

Reseller ratings is creating better experience for their customers and scaling with top spot.

Speaker 3: Now let's shift gears to talk about the alignment between product and go to market and how that drove great execution in 2021.

Now, let's shift gears to talk about the alignment between product and go to market and how that drove great execution in 2020 one.

Speaker 3: Our sweet spot historically has been the 20 to 200 employee segment.

Our sweet spot historically has been the 'twenty 200 employee segment.

Speaker 3: Last year, we set out to optimize the customer experience across all three key segments in which we operate.

Last year, we set out to optimize the customer experience across all three key segments in which we operate at the Lauren we're providing a full suite that is easy to use and easy to buy and we are driving better experience through touchless and chat assisted sales were.

Speaker 3: At the lower end, we're providing a full suite that is easy to use and easy to buy. And we're driving better experience through touchless and chat assisted sales.

Speaker 3: We're making it seamless for customers to adopt our product, and we see that within our suite momentum.

We're making it seamless for customers to adopt our product and we see that within our sweet momentum.

Speaker 3: At the higher end of the market, we've continued to invest significantly in internal enablement initiatives that are driving higher sales productivity.

At the higher end of the market. We have continued to invest significantly in internal enablement initiatives that are driving higher sales productivity.

Speaker 3: We're also working to strengthen the alignment between inside sales and our solutions partners. We're seeing momentum there.

We're also working to strengthen the alignment between inside sales and our solutions partners and we're seeing momentum there.

Speaker 3: The process rigor that we have is enabling our sales team to better communicate the value of HubSpot and win higher value, higher ASP, upmarket deals that contributed to the strong results we saw across the year.

The process rigor that'd be hap is enabling our sales team to better communicate the value of hub spot and then higher value higher asps upmarket deals that contributed to the strong results we saw across the year.

Speaker 3: As I look back on our accomplishments in 2021, we made remarkable progress on our path to becoming the CRM platform of choice for scaling.

As I look back on our accomplishments in 2020 , one we made remarkable progress on our path to becoming the CRM platform of choice for scaling companies.

Speaker 3: Small and medium businesses need great front office solutions that can provide insights to drive growth.

Small and medium businesses need great front office solutions that can provide insights to drive growth.

Speaker 3: that increase me, coupled with our product innovation and go to market execution, gives us a solid foundation for strong growth in 2020.

That increase mean, coupled with our product innovation and go to market execution gives us a solid foundation for strong growth in 2022.

Speaker 3: Looking to this year, we're going to stay focused on the four strategic priorities that I outlined at the analyst.

Looking to this year, we're going to stay focused on the four strategic priorities that I outlined at the analyst day.

Speaker 3: Our first priority is to deliver a world-class front office platform by continuing to invest in new and existing hubs, as well as driving extensibility of that platform.

Our first priority is to deliver a world class front office platform by continuing to invest in new and existing hubs as well as driving extensibility of our platform.

Speaker 3: Our second strategic priority is to strengthen our segmentation approach across product and go to market.

Our second strategic priority is to strengthen our segmentation approach across product and go to market.

Speaker 3: we will continue to deliver consumer grade experiences with powerful enterprise grades.

We will continue to deliver a consumer grade experiences with powerful enterprise grade features.

Speaker 3: That will translate into a focus on driving broad suite adoption at the starter tier, while enabling customers to gain more value from professional and enterprise.

That will translate into a focus on driving broad suite adoption at the starter tier while enabling customers to gain more value from professional and enterprise tiers.

Speaker 3: Our third strategic priority is to invest in payments and commerce.

Our third strategic priority is to invest in payments and commerce.

Speaker 3: We will be laser focused on driving full adoption through the entire customer journey, from payment discovery to transaction.

We will be laser focused on driving full adoption through the entire customer journey from payment discovery could transaction.

Speaker 3: We will also look to increase the volume that merchants transact in the product.

We will also look to increase the volume that merchants transact in the product.

Speaker 3: Finally, our priority is to build a sustainable comp-

Finally, our priority is to build a sustainable company.

Speaker 3: We'll do that by hiring and developing diverse talent, adopting and reporting on environmentally sustainable practices, and investing in data privacy solutions that build customers.

We'll do that by hiring and developing diverse talent adopting and reporting on environmentally sustainable practices and investing in data privacy solutions that build customer trust.

Speaker 3: I am really excited about the opportunity ahead and the investments we're making in 2022 to execute towards that opportunity.

I am really excited about the opportunity ahead, and the investments, we're making in 2022 to execute towards that opportunity.

Speaker 3: With that, I'll hand it over to Kate to discuss our financial results. Kate?

With that I'll hand, it over to Katie to discuss our financial results.

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Speaker 4: Thanks, Yamini. Let's turn to our fourth quarter and full year 2021 financial.

Thanks, Chamonix, let's turn to our fourth quarter and full year 2021 financial results fourth quarter revenue grew 47% year over year, both in constant currency and on an as reported basis.

Speaker 4: Fourth quarter revenue grew 47% year over year, both in constant currency and on an as reported basis.

Speaker 4: Q4 subscription revenue grew 47% year-over-year. Will services and other revenue increase 38% both on an as-reported basis?

For subscription revenue grew 47% year over year, well services and other revenue increased 38% both on an as reported basis.

Speaker 4: Full year 2021 revenue grew 45% year over year in constant currency and 47% as reported.

Full year 2021 revenue grew 45% year over year in constant currency and 47% as reported.

Speaker 4: Full-year subscription revenue grew 48% year-over-year. Will services and other revenue increase 41%? Again, both on an as-reported basis.

Full year subscription revenue grew 48% year over year, well services and other revenue increased 41% again, both on an as reported basis.

Speaker 4: The combination of our strong product innovation and internal alignment enabled us to deliver strong 2021 financial results.

The combination of our strong product innovation and internal alignment enable us to deliver strong 'twenty 'twenty. One financial results, we were particularly pleased with the healthy CRM suite and installed base selling in Q4 that fueled a nice close out to the year.

Speaker 4: We were particularly pleased with the healthy CRM suite and install-based selling in Q4 that fueled a nice closeout to the year.

Speaker 4: We saw net revenue retention rates that trended nicely above 110% for both Q4 and the full year.

We saw net revenue retention rates that trended nicely above 110% for both Q4 and the full year.

Speaker 4: customer dollar retention, continue to be an important foundation for our overall strong retention performance this quarter.

Customer dollar retention continued to be an important foundation for our overall strong retention performance this quarter.

Speaker 4: Net revenue retention continued to benefit from multiple upgrade drivers with particular strength in cross-sell activity in Q4.

Net revenue retention continued to benefit from multiple upgrade drivers with particular strength in cross sell activity in Q4.

Speaker 4: Domestic revenue grew 42% year-over-year in Q4, while international revenue growth was 54% in constant currency and 53% as reported.

Domestic revenue grew 42% year over year in Q4, while international revenue growth was 54% in constant currency and 53% as reported.

Speaker 4: International revenue as a percentage of total revenue increased two points year over year to 46 percent. Thank you.

International revenue as a percentage of total revenue increased two points year over year to 46% in Q4.

Speaker 4: We added 7,300 net new customers in the quarter, bringing our total customer count to 135,000, up 30% year over year.

We added 7300 net new customers in the quarter, bringing our total customer count to 135000 up 30% year over year.

Speaker 4: Average subscription revenue per customer grew 11% year over year to $10,875. As we saw a continued positive mix shift towards our professional and enterprise tiers along with strong install-based selling.

Average subscription revenue per customer grew 11% year over year to $10875 as.

As we saw a continued positive mix shift towards our professional and enterprise tiers, along with strong install base selling.

Speaker 4: The deferred revenue as of the end of December was $435 million, a 37% increase year over year.

Deferred revenue as of the end of December was $435 million or 37% increase year over year.

Speaker 4: Calculated billings was $428 million in Q4, growing 43% year-on-year in the constant currency and 38% as reported.

Calculated billings was $428 million in Q4 growing 43% year on year in constant currency and 38% as reported.

Speaker 4: Constant currency revenue growth in Q4 exceeded constant currency billing's growth primarily as a result of the strong install-based selling mix in the quarter and modestly lower overall billing duration.

Constant currency revenue growth in Q4 exceeded constant currency billings growth, primarily as a result of the strong install base selling mix in the quarter and modestly lower overall billing duration.

Speaker 4: The remainder of my comments will refer to non-GAAP measures.

The remainder of my comments will refer to non-GAAP measures.

Speaker 4: Fourth quarter gross margin was 81% down slightly year over year.

Fourth quarter gross margin was 81% down slightly year over year.

Speaker 4: Subscription gross margin was 84% in Q4. Social services and other gross margin was negative 15%.

Subscription gross margin was 84% in Q4, well services and other gross margin was negative 15%.

Speaker 4: Full year gross margin was 81%, down a point year over year. Human gross margin was 84% while services and other gross margin was negative 5%.

Full year gross margin was 81% down a point year over year.

Subscription gross margin was 84% while services and other gross margin was negative 5%.

Speaker 4: Fourth quarter operating margin was 10 percent and full year operating margin was 9 percent, both up slightly compared to 2020.

Fourth quarter operating margin was 10% and full year operating margin was 9% both up slightly compared to 2020.

Speaker 4: At the end of the fourth quarter, we had nearly 5,900 employees, up 40% year over year.

At the end of the fourth quarter, we had nearly 5900 employees up 40% year over year.

Speaker 4: Throughout 2021, we invested in the strategic priorities that Yamini outlined and are well positioned to continue to meet the strong customer demand for our products and drive innovation to fuel growth in 2022 and beyond.

Throughout 2021 we invested in the strategic priorities that yamani outlined and are well positioned to continue to meet the strong customer demand for our products and drive innovation to fuel growth in 2022 and beyond.

Speaker 4: Net income in the fourth quarter was $30 million, or 58 cents per fully diluted share.

Net income in the fourth quarter was $30 million or 58 cents per fully diluted share.

Speaker 4: Net income for the full year was $92 million, or $1.82 per fully diluted share.

Net income for the full year was $92 million or $1.82 per fully diluted share.

Speaker 4: CapEx, including capitalized software development costs, was $19 million, or 5% of revenue in Q4, and $62 million, or 5% of revenue for the full year.

Capex, including capitalized software development costs was $19 million or 5% of revenue in Q4, and $62 million or 5% of revenue for the full year.

Speaker 4: Free cash flow in the quarter was $78 million, or 21% of revenue, and $203 million, or 16% of revenue for the full year. Finally, our cash and marketable securities totaled $1.4 billion at the end of December .

Free cash flow in the quarter was $78 million or 21% of revenue and $203 million or 16% of revenue for the full year finally, our cash and marketable securities totaled $1.4 billion at the end of December .

Speaker 4: And with that, let's dive into guidance for the first quarter and full year of 2022.

And with that let's dive into guidance for the first quarter and full year of 2022.

For the first quarter.

Speaker 4: Total as reported revenue is expected to be in the range of $381 to $383 million, up 36% year over year at the midpoint.

Total as reported revenue is expected to be in the range of $381 million to $383 million up 36% year over year at the midpoint.

Speaker 4: We expect FX to be approximately a four point headwind to as reported revenue growth in the first quarter.

We expect FX to be approximately a four point headwind to as reported revenue growth in the first quarter.

Speaker 4: non-GAAP operating income is expected to be between $30 and $31 million.

non-GAAP operating income is expected to be between 30 and $31 million non-GAAP diluted net income per share is expected to be between 46 cents and 48 cents.

Speaker 4: non-GAAP diluted net income per share is expected to be between $0.46 and $0.48.

Speaker 4: This assumes 51.3 million fully diluted shares outstanding.

This assumes 51.3 million fully diluted shares outstanding.

And for the full year of 2022 .

Speaker 4: Total as-reported revenue is expected to be in the range of $1.72 to $1.73 billion, up 33% year-over-year at the end of the year.

Total as reported revenue is expected to be in the range of $1.72 billion to $1.73 billion up 33% year over year at the midpoint, we expect FX to be approximately a three point headwind to as reported revenue growth for the full year 2022 .

Speaker 4: We expect FX to be approximately a three point headwind to as reported revenue growth for the full year 2020.

Speaker 4: non-GAAP operating income is expected to be between $153 and $157 million.

non-GAAP operating income is expected to be between 153 and $157 million.

Speaker 4: non-GAAP diluted net income per share is expected to be between $2.34 and $2.42.

non-GAAP diluted net income per share is expected to be between $2.34 and $2.42. This assumes 51.5 million fully diluted shares outstanding.

Speaker 4: This assumes 51.5 million fully diluted pairs outstanding. As you adjust your models.

As you adjust your models keep in mind the following.

Speaker 4: Given we will have some unusual revenue growth comparisons again in 2022, I thought it would be helpful to provide some color on the cadence of growth throughout the year.

Given we will have some unusual revenue growth comparisons again in 2022 I thought it would be helpful to provide some color on the cadence of growth throughout the year.

We anticipate as reported revenue growth of 34% year over year in the first half of 2022 followed by 32% in the second half of the year.

Speaker 4: At the beginning of 2022, we adopted the new Convertible Debt Accounting Standard.

At the beginning of 2022 we adopted the new convertible debt accounting standard.

Speaker 4: Under this new standard, our fully diluted share count assumes a full share settlement of our notes, which adds approximately 1 million shares to our Q1 fully diluted share count and 850,000 shares to our full year fully diluted share count. This change is embedded in our guidance.

Under this new standard our fully diluted share count assumes a full share settlement of our notes, which adds approximately 1 million shares to our Q1 fully diluted share count and 850000 shares to our full year fully diluted share count.

This change is embedded in our guidance.

Speaker 4: We expect CapEx as a percentage of revenue to be roughly 6% and free cashflow to be about $240 million for the full year of 2022.

We expect capex as a percentage of revenue to be roughly 6% and free cash flow to be about $240 million for the full year of 2022 with seasonally stronger free cash flow in Q1 and Q4.

Speaker 4: with seasonally stronger free cash flow in Q1 and Q2.

Speaker 4: And with that, I'll hand things back over to Yamini for her closing remarks.

And with that I'll hand things back over to you harmony for her closing remarks.

Speaker 3: Thank you so much, Kate. I want to close out today by circling back on our commitments to building a diverse and inclusive workplace.

Thank you so much Gabe.

To close out today by circling back on our commitment to building a diverse and inclusive workplace.

Speaker 3: Just last month HubSpot was named the number two best place to work on Glassdoor. And we've similarly been recognized for our inclusive culture in multiple categories on comparable.

Just last month hub spot was named the number two best place to work on Glassdoor and we have similarly been recognized for our inclusive culture in multiple categories on comparable <unk>.

Speaker 3: Having a strong team is essential to growing the company and becoming the number one CRM platform for scaling companies.

Having a strong team is essential to growing the company and becoming the number one CRM platform for scaling companies I'm, So thankful to the entire hub spot team for making this such an amazing place to work and I'm excited about the investments we are continuing to make to ensure that all of our employees.

Speaker 3: I'm so thankful to the entire HubSpot team for making this such an amazing place to work. And I'm excited about the investments we are continuing to make to ensure that all of our employees feel included and inspired.

Feel included and inspired.

Speaker 3: With that, operator, please open up the call for some questions.

With that operator, please open up the call for some questions.

Speaker 1: Thank you very much, Ms. Rangan. Ladies and gentlemen, at this time, if you do have any questions or comments, simply press star one. And just a quick reminder, we do ask that you please limit yourself to one question. And with that, we'll take our first question this afternoon from Stan Vlachke at Morgan Stanley .

Thank you very much Ms ranking ladies and gentlemen at this time. If you do you have any questions or comments simply press star one and just a quick reminder, we do ask you. Please limit yourself to one question.

That will take our first question. This afternoon from Stan Blocky at Morgan Stanley .

Speaker 5: Perfect. Thank you so much, guys, and congratulations on a very strong quarter and a very strong end to the year. Kate, maybe just one question for you. Could you just unpack the delta again between the Q4 reported billings and the Q4 constant currency billings for us, please? Yeah, sure thing.

Perfect. Thank you so much guys and congratulations on a very strong quarter.

Very strong end to the year Kate maybe just one question for you could you just unpack the Delta again between the Q4 reported billings.

And in the Q4 constant currency billings for us please.

Yes sure thing thanks for the question and thanks for the comments.

Speaker 4: So, we reported constant currency billings of 43%. Our constant currency revenue growth was 47, as you know. There are two things that contribute to the difference. The first is that we, again, this quarter, had a very strong focus on install-based selling. And what tends to happen when we sell into our install base is we co-term those deals with their existing contracts. So, the months up front associated with those deals are relatively shorter. And then, the second thing is that.

So we reported constant currency billings of 43% our constant currency revenue growth was four it was 47 as you know there are two things that contribute to the difference.

First is that we again this quarter.

<unk> had a very strong focus on installed base selling and what tends to happen when we sell into our installed base as we co term those deals with their existing contracts. So the months upfront associated with those deals are relatively shorter.

And then the second thing is that there was Uh huh.

Speaker 4: a modest decreased overall in duration, and those two things together actually more than accounted for the difference between constant currency revenue and constant currency billing.

Our modest decrease overall in duration and those two things together actually more than accounted for the difference between constant currency revenue in constant currency.

Got it thank you very much.

Speaker 1: Thank you. We'll take our next question now from Samad Samana with Jeff.

Thank you and we'll take our next question now from some of the Mama with Jefferies.

Speaker 6: everybody on just a great year to all the companies employees, even with transitions and everything, you didn't miss a beat, Yomini and congrats on that. So maybe, you know, if I think about the quarter and Kate, I appreciate the growth cadence. I think one of the things I'd like to ask about is that the cross sell upsell motion, you know, as the cohorts have settled into this kind of 7000 plus

Everybody on just a great year to all of the company's employees, even with transitions and everything you didn't Miss a beat harmony and congrats on that so maybe if I think about the quarter and Katie I. Appreciate the growth cadence I think one of the things I'd like to ask you about is that the cross sell upsell motion.

As the cohorts are settled into this kind of 7000, plus net adds how should we think about how much of it is cross selling additional modules into the base versus up selling these cohorts into higher tier skus and what's driving that because even as those cohorts have stabilized you're still seeing really robust our billings growth and revenue growth.

Speaker 6: net ads, how should we think about how much of it is cross-selling additional modules into the base versus up-selling these cohorts into higher-tier SKUs and what's driving that because even as those cohorts have stabilized, you've still seen really robust billings growth and revenue growth.

Okay.

Speaker 4: It's an interesting question. I think that, you know, as we've talked about retention over the last couple of quarters, I think the good news is that it's coming, the increase in retention is coming from a lot of different

Yeah. It's an interesting question I think that you know as we've talked about retention over the last couple of quarters I think the good news is that it's I mean, the increase in retention is coming from a lot of different places.

Speaker 4: and you know we always start with the sort of foundation of customer dollar retention stepping up but when we talk about the difference in

And you know, we always start with a firm foundation of customer dollar retention stepping up but when we talk about the difference and customer dollar retention and net revenue retention. What I've said consistently is that that upgrade motion is being driven by a variety of factors.

Speaker 4: customer dollar retention and net revenue retention. What I've said consistently is that that upgrade motion is being driven by a variety of factors, right? And so the upgrade in addition has been a notable driver of that change. The increase in seats.

So the upgrade in addition has been a notable driver of that change the increase and she has been a notable driver and then finally and I think this was really the highlight for Q4 for me.

Speaker 4: has been a notable driver. And then finally, and I think this was really the highlight for Q4 for me, the cross-sell activity, particularly around operations hub, was notable in Q4. Great, I appreciate that, Kate. Thank you.

The cross sell activities, particularly around operations habit was notable in Q4.

Great I appreciate that thank you.

And we'll go next to Mark Murphy with J P. Morgan.

Yeah.

Yes, Thank you very much and I'll add my congratulations.

Speaker 7: uh... you know many some of your partners had mentioned uh... you know very strong pipeline uh... i think the largest pipeline in in company history that they were saying

Some of your partners had mentioned your very strong pipeline I think the largest pipeline in company history that they were seeing it.

Speaker 7: I noticed your preliminary 2022 guidance, it's actually, I believe it's six points faster than the preliminary guidance you gave last year.

And I noticed your your preliminary 2022 guidance, it's actually I believe it's six points faster than the preliminary guidance, we gave last year.

Speaker 7: But there's kind of an investor narrative around pull forward of IT spending, you know, kind of in the last couple years. Could you just help us understand what are customers prioritizing incrementally here for 2022 in terms of, you know, maybe movement from marketing to sales or maybe going up to enterprise SKUs or custom objects or something else that's underpinning that?

But there's kind of an investor narrative around pull forward of spending you know kind of in the last couple of years could you just help us understand what our customers prioritizing incrementally.

Here for 2022 in terms of.

Maybe move it from marketing to sales or maybe going up the to enterprise skus or custom objects or or something else that's underpinning that.

Speaker 3: Yeah, thanks a lot, Mark, for the question and appreciate your feedback. And yes, we are entering this year with a very solid pipeline. And if I were to step back and think about all of the combination of reasons why we have a solid pipeline getting into this year, it's, I think, three specific things. First off.

Okay. Thanks, a lot Mark for that question and I appreciate your feedback.

And yes, we are enjoying the yard with a very solid pipeline and if I were to step back and think about the all of the combination of reason why we have a solid pipeline getting into this year. If I think three specific <unk> first off stepping way back at the beginning of the past that.

Speaker 3: Stepping way back, at the beginning of the pandemic, customers were looking for digital solutions.

Customers were looking for digital solutions to help them get connected to their customers. That's the inbound marketing the inside sales the Omnichannel Ward and hub what was a very a perfect solution for that I think no ads, we are slowly getting out of the pandemic.

Speaker 3: to help them get connected to their customers. That's the inbound marketing, the inside sales, the omnichannel support, and HubSpot was a very perfect solution for that. I think now as we are slowly getting out of the pandemic,

Speaker 3: Small, medium businesses are looking to grow, and they're looking to increase front office productivity. And so when I talk to customers, they are continuing to lean in on technology investments. They are looking to get marketing sales service on the same platform so that there is clear visibility in terms of customer trends that can drive the growth.

Small medium businesses are looking to grow and Theyre looking to increase front office productivity and so when I talk to customers. They are continuing to lean in on technology investments. They are looking to get marketing sales service on the same platform. So that there is no.

Disability in terms of customer trends that can drive the growth and I think the third factor is that we have a very unique value proposition at this time and it resonates really well for the market that we serve our platform is crafted easy to buy it's easy to use.

Speaker 3: And I think the third factor is that we have a very unique value proposition at this time, and it resonates really well for the market that we serve.

Speaker 3: Our platform is crafted, it's easy to buy, it's easy to use, and this is exactly what meets the needs of our customers. So I think the combination of these factors lead to solid demand environment, and that's what we're seeing in the pipeline.

And this is exactly what meets the needs of our customers. So I think the combination of these factors lead to solid demand environment. That's what we're seeing in the pipeline.

Thank you very much.

Speaker 1: Thank you. And next we'll go to Brad Sills with Bank of America.

Thank you and next we'll go to Brad Sills with Bank of America.

Speaker 8: Oh great, thanks guys and congratulations for me as well on a real nice end of the year. Maybe one for you, Yamini.

Oh, great. Thanks, guys and congratulations from me as well on a real nice end of the year.

Maybe one for you.

Speaker 8: We see a pretty challenging hiring environment across software. You guys are guiding to 36% constant currency growth for the year, so obviously a lot of growth there. How are you finding the hiring environment? Any commentary on that effort as you look at it?

We see a pretty challenging hiring environment across software you guys are guiding to 36% constant currency growth for the year. So obviously a lot of growth there.

How are you finding the hiring environment.

Any commentary on that on that effort as you as you look to the year in hiring thank you.

Speaker 3: Thanks a lot Brad, and thank you for that question. Look, I think that talent overall in general and SaaS talent in particular, have been in high demand for a little while. It's really hard to remember a time where that has not been the case.

Thanks, a lot Brad and thank you for that question.

Look I think Scott talent overall in general and SaaS talent in particular have been in high demand for a little while it's really hard to remember a time, where that has not been the case, but having said that I look at the foundational factors that hub.

Speaker 3: But having said that, I look at the foundational factors that HubSpot has for us to be able to hire and regain great talent. And it starts with our culture. We've talked a lot about how products and culture are equally important and how we continue to evolve both product and culture.

Bob has or ought to be able to hire and retain great talent and it starts with our culture.

We've talked a lot about how product and culture are equally important and how we continue to evolve both product and culture that has continued to be the case for a very long time at hotspot and we've invested in that you know just like product we use net promoter score as a way to look at.

Speaker 3: That has continued to be the case for a very long time at HubSpot, and we've invested in it. You know, just like product, we use Net Promoter Score as a way to look at, you know, product quality. Same thing comes with culture, and the way we measure that is both ENPS, Employee Net Promoter Score, internally, and it is, you know, our rating on things like Glassdoor. We just got awarded number two best place to work on Glassdoor, and that shows the strength in terms of the culture.

Product quality same thing comes with culture and the way we measure that is both E. M. P. S employee net promoter score internally and it is you know are waiting on things like Glassdoor. We just got awarded number two best place to work on Glassdoor and that shows the strength in terms of the culture.

Speaker 3: The second part of the foundation is really providing for flexibility. You know, we made a choice very early on during the pandemic on hybrid work.

The second part of the foundation is really providing for flexibility we made a choice very early on during the pandemic on hybrid work and that means you provided a lot of flexibility and we have made hybrid work for RP and that flexibility rules and so the combination of.

Speaker 3: And that means we've provided a lot of flexibility and we have made hybrid work for our team, and that's flexibility rules. And so the combination of culture as well as the foundation for flexibility has really helped us hire and retain top talent even in this market. So I feel very good going into this year. Thanks so much, Yamini.

Our culture as well as the foundation or flexibility has really helped us hire and retain top talent even in this market. So I feel very good going into this year.

Thanks, so much for harmony.

Okay.

And that's what you'll hear from Arjun Bhatia with William Blair.

Speaker 1: Perfect. Thank you for taking my question and congrats on a great quarter. Yamini and Kate, I think you both mentioned operations hub as a major driver of the growth this quarter, especially the cross-sale activity. I'm just curious if

Perfect. Thank you for taking my question and congrats on a great quarter.

Okay.

And the operation side.

Major driver.

The growth this quarter, especially the cross sell activity I'm just curious.

Speaker 1: You've seen any pent-up demand for that enterprise edition that you released late in the year last year. And then I'd be curious to hear what you're seeing in terms of market and competitive dynamics there, because there are some pure plays in the Red Ops market. So is this more greenfield, or do you see other vendors playing in these deals where you are seeing success with Red Ops subproducts?

You've seen any pent up demand for that enterprise edition that was.

And then you released late in the year last year, and then I'd be curious to hear what youre seeing in terms of market and competitive dynamics. There because there are some pure plays in the robotics market. So it gives us more greenfield or do you see.

Other vendors, claiming these deals where you are seeing success.

We're off to a product.

Speaker 3: Great question, Arjun. Thank you so much for that. Well, we're very pleased with the momentum within Operations Hub. As you heard me talk about, we now have 15,000 customers on Operations Hub, and that's grown from about 10,000 customers in October . And I was also very pleased to see that 40% of Operations Hub new bookings in Q4 came from that enterprise tier that we recently launched.

Great question, John Thank you so much for that well, we're very pleased with the momentum within operations as you've heard me talk about we now have 15000 customers on operation and that's gone from about 10000 customers.

And I was also very pleased to see that 1% all operations of new bookings in Q4 came from that enterprise tier that we recently launched so that's clearly resonating and there is momentum and adoption of that enterprise tier no.

Speaker 3: So that's clearly resonating and there is momentum and adoption of that enterprise tier.

Speaker 3: Now, just a step back on Operations Hub, that hub is slightly different from all other hubs.

No. It's just a step back on operations that have a slightly different from all other pumps.

Speaker 3: You know, we think of like marketing and sales as the front door. Operations hub is like the supercharger. You know, you go and go to a nice restaurant and you have a great meal. Uh, there's a main course, but then there's a sauce that makes the whole meal just tastier. Operations hub is like that for us. It just makes the whole CRM platform sing in terms of the value. And so, uh, it's really solid and it's resonating. We saw a lot of the momentum in Q4.

We think of like marketing and sales at the front door operations hub is like the supercharger.

You go and go to a nice restaurant I mean, you have a great meal. There was the main course, but then theres a thought that makes the whole meal just safety our operation public like that for US. It just makes the whole CRM platform thing in terms of the value and so it's really solid and it's resonating he saw a lot of momentum.

In Q4 no.

Speaker 3: Now, you asked about the Enterprise Edition, we launched it and the Enterprise Edition is all about reporting and driving insights so that our customers who are adopting the entire CRM suite can see a lot of those insights and continue to grow. Data sets is a very key feature there. We're definitely seeing data sets as well as the advanced reporting within the Enterprise Edition drive momentum. So overall, look, we're very pleased with how the launch overall went and the momentum that we're seeing within operations.

Asking about the enterprise.

This shouldn't be launched it and you know the enterprise edition is all about reporting and driving insights so that our customers who are adopting the entire CRM suite can see a lot of those insights from continuing to grow.

This is a very key feature there, we're definitely seeing datasets as well as the advanced reporting within the enterprise edition drive momentum.

So overall look we're very pleased with you know how the launch overall went and the momentum that we're seeing with an operations hub.

Speaker 9: Perfect, that's great to hear. Thank you, Anna.

Okay, that's great to hear thank you yair.

Thank you and we'll go next to Matthew <unk> with Keybanc.

Speaker 10: Hey, congrats on the quarter. Kate, on the net ad, 7,000, which is about where you and everyone expect them to be, do you feel like that is stable or what the trends are for it? You commented on gross dollar churn, but on a customer churn basis, are we through that churn of the 2020 starter customers and is customer churn starting to stabilize?

Hey, congrats on the quarter.

7000, which was about where June everyone expected them to do.

We feel like that is stable.

Our board and our.

You commented on gross dollar churn, but on a customer churn basis or withdrew the chairman of the 2020 starter customers.

As customers churn starting to stabilize.

Speaker 4: Yeah thanks for the question. So we have one more difficult quarter of comparison in the first quarter around that starter growth suite. But I will say, you know, we've seen some consistency around that 7,000 plus in terms of new customer ads quarter in and quarter out. We feel good about that continuing into 2022. I think the balance there is obviously ASRPC. We've seen that trend up a bit over the course of 2021. It grew 11% in Q4. Going into 2022, we feel like, you know, we've been saying high single digits. We feel now comfortable.

Yeah. Thanks for the question. So we we have one more difficult.

Order of comparison in the first quarter around that startup growth suite.

But I will say we have.

<unk> seen some consistency around that 7000, plus in terms of new customer adds quarter in quarter out we feel good about that continuing into 2022.

The balance there is obviously a S. R. P C.

We've seen that trend up a bit over the course of 2021 grew 11% in Q4.

Going into 2022, we feel like we've been saying high single digits. We feel now comfortable that we think ASR PC can grow in that low double digits in 2022.

Speaker 4: that we think ASRPC can grow in that low double digits in 2022. That's great. Well, thank you.

That's great. Thanks, Ken.

Thank you and next we'll go now to Ken Wong with Guggenheim Securities.

Speaker 6: Great, thank you for taking my question. I think this one's probably for Dharmesh. Obviously, data restrictions have been impacting marketing ROI. We even heard Facebook management express a need to rebuild their ad infrastructure to improve targeting. Are you guys hearing that from your customer base? Anything that maybe is resonating across kind of that marketing world that we should be thinking about as far as data restrictions and potential tailwinds for your business?

Great. Thank you for taking my question I think this is probably for <unk> mesh.

Obviously data restrictions have been impacting marketing ROI, we even heard Facebook management expressed the need to rebuild their add infrastructure to improve targeting are you guys hearing from your customer base or anything that maybe is resonating across kind of that marketing world that we should be thinking about as far as data.

And as a potential tailwind for for your business.

Speaker 1: Yeah, a couple of things. Thanks for the question. So first, on the kind of the privacy front, you know, we've seen this movement towards increased focus on privacy for all of our 15 years now. HubSpot kind of grew up with this kind of inbound marketing philosophy, which is very kind of consumer friendly and privacy focused.

A couple of things. Thanks for the question. So first of all on the kind of the privacy front. We've seen this moving towards increased focus on privacy.

For all of our 15 years now helps that's kind of grew up with this kind of inbound marketing philosophy, which is very kind of consumer friendly and privacy focused so on that front.

Speaker 11: So on that front, you know, we've seen kind of neutral to positive as regulations have shifted and there's increased.

Neutral to positive as regulations have shifted as there is increased scrutiny around privacy.

Speaker 11: scrutiny around privacy. The other thing I'd kind of note is that the companies that are most impacted by these kind of shifts in regulation are the ones that are like have a large network with a large advertising base where you're a massive consumer mobile application with tens of millions of users HubSpot doesn't fall into that camp so we haven't really seen much

The other thing I'd kind of note is that the companies that are most impacted by these shifts and regulation are the ones that are like have a large network with a large advertising base, where you're a massive consumer mobile application with tens of millions of users hopefully fall into that camp. So we haven't really seen much.

Speaker 11: much impact on our business, and our customers are similar. They're in the kind of B2B considered purchase side of things. So.

The impact on our business and our customers are similar there in the kind of BTB considered purchase side of things. So the regulation shifts haven't really impacted them measurably either.

Speaker 11: The regulation shifts haven't really impacted them measurably either.

Speaker 11: The other thing that's happening, as you noted, is this kind of focus on the EU to US kind of data transfer regulations. We've been watching that closely. We haven't seen any impact on our business yet. Operationally, we did make a change last year where we launched a feature called Hublets, which allows us to take all of HubSpot and host it in different geographies. And we use that new feature to be able to offer our customers the option to host in the EU if they choose to do so. But overall, we're watching the headlines like everyone else, but no real meaningful impact on the business.

The other thing Thats happening as you noted is the kind of focus on the EU to U S data transfer regulations, we've been watching that closely we haven't seen any impact on our business yet operationally, we did make a change last year, where we launched a feature called <unk>, which allows us to take all of hub spot and hosted in different geographies and we use that new future too.

To be able to offer our customers the option to host in the EU.

Used to do so but.

Overall, we're watching the headlines like everyone else, but no real meaningful impact on the business.

Great. Thank you so much.

Speaker 1: Thank you. And next week, we go out to Gabriela Borges with Goldman Sachs.

Thank you our next week, you got to Gabriela Borges with Goldman Sachs.

Speaker 12: Good afternoon. Thanks for taking my question. I want to put follow up on the commentary on customer ads being stable and ask a little bit of a depth of town question, which is.

Good afternoon, and thanks for taking my question I want a quick follow up on the commentary on customer apps being stable and ask a little bit of depth of Tam question, which is yeah me take could you describe for us a little bit the customers that are joining the hub spot platform today is new customers that were not compare.

Speaker 12: Yamini, could you describe for us a little bit the customers that are joining the HubSpot platform today as new customers that were not compelled to upgrade or to digitally transform in 2019, 2020, 2021. How would you describe those customers and how do you get comfortable with the depth of the TAN that you're targeting as it pertains to customer ads and the runway ahead of you? Thank you.

Upgrade wants to digitally transform in 2019 from 2021 how would you describe those customers and how do you get comfortable with the depth of the time, they got targeting as it pertains to customer adds and the runway ahead of us. Thank you.

Thank you so much for the question.

Speaker 3: You know, it's what we see is customers on different parts of the journey. We certainly saw in 2020, 2021, that the

You know what I'd say.

What do you see is customers on different parts of the journey. We certainly saw in 2020, 2021 a whole wave customers that what we're thinking about digital first in thinking about being digital ready and they all need it to be able to connect with their customers and we.

Speaker 3: a whole wave of customers that were thinking about digital first, and thinking about being digital ready. And they all needed to be able to connect with their customers and we saw that wave. I think what we're seeing now is just this continued digitization of the front office.

You know that way I think what we're seeing now is just the continued.

Digitization of the front office and.

Speaker 3: And specifically, customers still have.

Typically customers still have very disparate systems their front office tools in the tech stack is really fragmented and it's like trying to pitch all of these pieces together to get the kind of visibility that they need.

Speaker 3: very disparate systems. Their front office tools and the tech stack is really fragmented. And it's like trying to stitch all of these pieces together to get the kind of visibility that they need.

Speaker 3: We're seeing customers that continue to have growth as a priority and they don't have the visibility across the whole

We're seeing customers that continue to have growth as a priority and they don't have the visibility across the whole marketing sales service and you know if you look at these customers. They look at the tech stack. They look at how they need to drive front office productivity and they're like Okay, we need something that is.

Speaker 3: marketing, sales, service, and if you look at these customers, they look at the tech stack, they look at how they need to drive front office productivity, and they're like, okay, we need something that is just this beautiful, seamless customer experience that we can deliver to be able to drive growth. And so

Just this beautiful seamless customer experience that we can deliver to be able to drive growth and so that's.

Speaker 3: That's, you know, maybe a slight shift, but in both cases, I think we have invested from a product innovation perspective over the last 12 to 18 months. And our value proposition of quick time to value, easy to adopt and easy to drive, you know, the consolidation of the tech stack that just works. And that's what we're seeing overall. Appreciate the call and congrats.

You know, maybe a slight shift but in both cases I think.

We have invested from a product innovation perspective over the last 12 to 18 months and our value proposition of quick time to value easy to adopt and easy to drive you know the consolidation of the tech stack that just works and that's what we're seeing overall.

I appreciate the color and congrats.

Next we go now to Ryan Macdonald with Needham and company.

Speaker 13: Hey guys, this is Josh on for Ryan, congrats on the strong quarter and year. Wanted to get some color on, you know, what payments use cases seem to be resonating.

Hey, guys. This is Josh on for Ryan Congrats on the strong quarter and year.

I wanted to get some color on what what payments use cases seem to be resonating more materially with customers.

Speaker 13: Would it be like the touchless B2B sales motion or the optimization around the quote-to-cash process? Or, you know, what's, what maybe gets more...

Would it be like the touch with BW sales, most motion or the optimization around the quote to cash process or what.

Maybe get some more detail there thanks.

Speaker 3: Hey Josh, yeah, thanks a lot for the question. First off, we're very excited about payments going GA, but it's very, very early days. And if we step back, we want to help our B2B customers deliver great consumer grade buying experience, whether they want to sell online or they want to sell the REX. That's what they're focused on.

Hey, Josh Yeah. Thanks, a lot for the question.

So first of all we're very excited about payments going G. A but it's very very early days and if we step back we wanted to help our b to b customers Denver, great consumer grade buying experience, whether they want to sell online or they want to sell the art, but that's what we're focused on and Ed.

Speaker 3: And at this early stage of a new product introduction, I'm looking for a couple of things. I'm looking for product market fit and the validation of our early hypothesis.

This early stage of our new product introduction I'm looking for a couple of things I'm looking for product market fit and the validation of our early hypothesis and that's exactly what we're hearing from early customer feedback. So we went in.

Speaker 3: And that's exactly what we are hearing from early customer feedback. So we went in with a couple of big hypotheses. One is that embedding payments into CRM will spur B2B e-commerce. And it will remove the cost of the product from the customer's account. And the other thing is that we can see that we have a lot of customers who are not familiar with CRM. And they are not familiar with CRM. And they are not familiar with CRM.

With a couple of big hypothesis, what is that embedding payments into CRM with horror B to B E Commerce and it will.

Yeah.

Speaker 3: fine. And we're seeing that we're seeing that in the use cases, a number of examples of that use case. But we have a management consulting customer that connecting family offices to businesses, they had this entire outsourced finance team that was creating invoices, sending invoice.

Fine and we're seeing that we're seeing that in the use cases, a number of examples of that use case, but we have a management consulting customer that's connecting family offices to businesses. They had the entire outsourced finance team that was creating invoices.

Sending invoices.

Speaker 3: Tracking those tracking check all of these are like manual with HubSpot payments they are just selling online and they are

<unk> tracking check all of these are like manual with hub spot payments. They are just selling online and they are just seamlessly getting their customers without any touch into their service and so that's the example of the use case and so that's selling online use cases definitely resonating the second big hype.

Speaker 3: seamlessly getting their customers without any touch into their service. And so that's the example of the use case. And so that selling online use case is definitely resonating. The second big hypothesis we have is commerce context in CRM is going to add a ton of value for our customers.

Offices, we have is commerce context in CRM is going to add a ton of value for our customers and that is also resonating in that's a set of use cases that we're seeing and so early feedback has been really good we will continue to be very focused on the target market Fitch as well as.

Speaker 3: And that's also resonating and that's a set of youth cases that we're seeing. And so early feedback has been really good.

Speaker 3: will continue to be very focused on the target market fit as well as making sure that the customer experience all the way from discovery of payment to

Making sure that the customer experience all the way from discovering a payment to starting an application completing an obligation finishing the transaction that entire process is just beautiful and consumer like so that's what we're going to be focused on well, we're happy with the feedback that we're getting already on.

Speaker 3: starting an application, completing an application, finishing the transaction, that entire process is just beautiful and consumer-like. So that's what we're gonna be focused on. We're happy with the feedback that we're getting early on.

Yeah.

Speaker 1: Thank you. We go next now to Rishi Jalluria with RBC Capital Markets.

Thank you. We'll go next now to Rishi Galeria with RBC capital markets.

Speaker 1: Wonderful. Thanks so much for taking my questions and nice to see continued strength in the business. I just wanted to double click on the operating margin guidance.

Wonderful. Thanks, so much for taking my questions and nice to see continued strength in the business.

I wanted to double click on the operating margin guidance.

You're guiding to effectively flat operating margins in 2022.

To see a bit, but maybe just wanted to kind of get a sense for how you're thinking about.

Speaker 1: how you're thinking about where your investment priorities are and maybe alongside that, as we in the back half of the year hopefully start to reopen up offices, start to get back to in-person conferences, maybe even get salespeople back on the road and in person doing meetings, how do you think about the return of some of those costs as you put out that guidance? Thank you. Yeah, sure, why don't I take that one? I think you've heard from Yamini throughout this call.

Where are your investment priorities are and maybe alongside that.

We in the back half of the year, hopefully start to reopen up offices start to get back to in person conferences, maybe even get salespeople back on the road and in.

In person doing meetings, how you think about the return of some of those costs as you put out that guidance. Thank you.

Speaker 4: Yeah, sure. Why don't I take that one? You know, I think you've heard from Yamini throughout this call that we feel really good about the long-term opportunity that's sitting in front of us. We're focused on making sure that we are investing to drive that long-term, durable growth.

Yes, sure why don't I take that one.

I think you've heard from Yamana throughout this call that we feel really good about the long term.

Opportunity that sitting in front of us.

We're focused on making sure that we are investing to drive that long term durable growth and there are a few areas in 2022 that we're focused on making those investments there.

Speaker 4: Right. And there are a few areas in 2022 that we're focused on making those investments.

Speaker 4: They're going to line up pretty closely with the strategic priorities that Yamini talked about in her prepared remarks. So the first one would be product and engineering. We're going to continue to invest in our R&D organization to drive innovation. We think it's important to both plant the seeds and continue to innovation across our portfolio. We feel really good about the return we're getting there. You saw a lot of new product and features in 2021.

We're gonna lineup.

Pretty closely with the strategic priorities that you have and he talked about in her prepared remarks. So the first one would be product and engineering, we're going to continue to invest in our R&D organization to drive innovation and we think it is important to both plan to see then and continue to innovate across our portfolio, we feel really.

Good about the return we're getting there is a lot of new product and features and 2021.

Speaker 4: On the go-to-market side, we are definitely leaning into our segmentation, and that is investing in automation at the low end, it's investing in that sort of value, and all of the surround sound components more upmarket. And then finally, we're investing really across the business in systems and process to make sure we're laying the foundation to scale over time.

On the go to market side, we are definitely leaning into our segmentation.

And that is investing in automation at the low end is the best thing and that sort of value.

And all of the surround sound components were up market.

And then finally, we're investing really across the business and.

That process to make sure we're laying the foundation to scale over time.

Speaker 4: I guess to answer your specific question around what happens as we, you know, sort of open back up, you know, we are assuming that along with, you know, regulation, local regulation, that we will, you know, start to become a more sort of mobile in-office or at least highly flexible workforce. We are less.

I guess to answer your specific question around what happens as you know for the open back up.

We are assuming that along with <unk>.

Graduation, local regulation that we will start to become.

A more sort of mobile.

In office or at least highly flexible workforce.

We are less.

Speaker 4: T&E dependents and many other enterprise oriented companies. And so there is a bit of a headwind to our margin in 2022 as a result of that, but it's not the same that you would see at many other places. Got it. This is helpful. Thank you.

T and independent that many other enterprise oriented companies and so there is a bit of a headwind.

Our margin in 2022 as a result of that but it's not the same that you would see at many other places.

Got it that's helpful. Thank you.

Thank you next we go to Parker Lane with Stifel.

Speaker 14: Yeah, hi. Thanks for taking my question. In the last few years, you've released a lot of new tools, whether it be content management, operations-focused, service-focused use cases. How has the type of partner that you're attracting to the ecosystem changed with the release of these tools? And what's the company's strategy around acquiring new partners, getting them ramped up, and making sure they're going to be successful, given that these are a little bit different use cases than the marketing and sales-focused partners you've worked with in the past? Thanks.

Yeah, Hi, Thanks for taking my question.

Last few years, you've released a lot of new tools, whether it be content management operations focused service focus use cases.

How is the type of partner that you are tracking the ecosystem change with the release of these tools and what's the company's strategy around acquiring new partners getting them ramped up and making sure theyre going to be successful given that these are a little bit different use cases than the marketing and sales focused partners, who worked with in the past. Thanks.

Speaker 3: Thanks a lot. I love a good partner question. I love the partner ecosystem. I'll tell you, like, you know, the partner ecosystem is, you know, really come along with us. And almost 18 months ago, we went to the partners and we said we have a clear strategy for the partner ecosystem.

Thanks, a lot I love a good partner question.

And a lot of apartment ecosystem I would tell me like you know the partner ecosystem is that you know really come along with us and almost 18 months ago. We went to the partners and we said we have a clear strategy for the partner ecosystem, which is b one of scale selling and servicing with partners why because then partners get involved.

Speaker 3: which is we want to scale selling and servicing with partners. Why? Because when partners get involved our customers get on boarded the right way, they get a lot more value and therefore they stay longer with us. It's good for our customers and therefore it's good for our customers.

Customers get onboard it the right way they get a lot more value and therefore, they stay longer with us it's good for our customers and therefore, it's good for hotspot.

Speaker 3: And so what we've done, and if you step back, we had a lot of these marketing agencies that were working on a retainer basis. And over the last couple of years, we have invested in training, enablement.

So.

What we've done and you know if you step back we had a lot of these marketing agencies that we're working on a regional basis and over the last couple of years.

Vested in training enablement joint selling so that would be normally do that but are able to meet you know the entire breadth of the product portfolio and services needs. There and so now we have partners that do more complex CRM implementation much more in.

Speaker 3: joint selling so that they not only do that but are able to meet the entire breadth of the product portfolio and the services needs there. And so now we have partners that do more complex CRM implementation, much more integration, deal with complex use cases as we go upmarket.

Gration deal with complex use cases, as we go up market and there's just a nice development in momentum of partners, who can provide the full set of services.

Speaker 3: and there's just a nice development and momentum of partners who can provide the full set of services. In 2022, we're investing in that co-selling. We have a common interface so that we know exactly the conversations we're jointly having with customers, and we're continuing to invest in terms of partner enablement, but also getting our direct sales team talking with the partners a lot more. I'm really happy with where the partner ecosystem is going based on a lot of the investments we've made.

You know 2022 we're investing in that co selling we have a common interface. So that we know exactly the conversations they are jointly shopping with customers and are continuing to invest in terms of partner enablement, but also getting our direct sales teams talking with the partners lot more I'm really happy.

With you know where the partner ecosystem, that's kind of going.

Just on a lot of the investments they've made.

Speaker 14: very helpfully have any thanks again.

Very helpful. Thanks again.

Thank you and next we go to city Pentagon with Mizuho.

Speaker 1: Thank you. Next, we go to City of Panagrahi with Mizuho.

Speaker 15: Hey guys, this is Matt on Furbs City. Yamini, I'm very curious about your payments business, the assumptions around that embedded into 2022 guidance. You've spoken very eloquently about digital transformation this year. It sounds like there's a lot of impetus for customers to upgrade. I'd love to hear your thinking around how payments could generate your, could be a driver for your guidance in 2022.

Hey, guys. This is Matt on for Citi.

I'm very curious about your payments business.

The assumptions around that embedded into 2022 guidance, you've spoken very eloquently about digital transformation. This year. It sounds like there's a lot of impetus for customers to upgrade I'd love to hear your thinking around how payments could generates your could be a driver for your guidance in 2022.

Speaker 4: Thanks for the question, Kate. I think I'll jump in on that one. You know, I think we are very excited about the long-term future for payments. But I do want to make sure that you heard Yamini that we are early. It was, the payments offering was a beta for Q4. It's gone GA, which is an incredible milestone in Q1. That said, we do not...

Yeah. Thanks for the question Katie I think I'll I'll jump in on that one.

I think we are very excited about the long term future for payments, but I do want to make sure that you heard geometry that we are early.

It was the payments offering one of the beta for Q4, it's gone <unk>, which is an incredible milestone in Q1.

That said, we do not.

Speaker 4: We did not embed any material revenue or COGS associated with payments in our 22 guidance. So, it's neither, we didn't see meaningful results in Q4, and we don't expect it to be a meaningful revenue driver in 2022. Excellent. Thanks so much.

We did not embed any material revenue or Cogs associated with payments in our 'twenty two guidance. So it's neither we didn't see meaningful results in Q4.

And we don't expect it to be a meaningful revenue driver in 2022.

Excellent. Thanks, so much.

Thank you and next we'll go to Brent <unk> with Piper Sandler.

Okay.

Speaker 16: Thanks for taking the question here. I wanted to go back to average subscription revenue per customer. We haven't seen double-digit growth here for five six years and and now you're suggesting that that could be sustainable into next year. So a question here, why now is this just the multi-

Thanks for taking my question here I wanted to go back to average subscription revenue per customer.

We haven't seen double digit growth here for five six years, and now you're suggesting that that could be sustainable into next year or so.

Question here why now is this just a multi.

Speaker 16: product strategy is is maturing and and it's now resonating just trying to understand the change there because it does sound like it's material you're increasingly confident that in the cross sell just would love a little more color on kind of the the why now and what gives you confidence it's sustainable thanks

Our product strategy is is maturing and it's now resonating just trying to understand the change there because it does sound like it's material you're increasingly confident that our in the cross sell just would love a little more color on kind of the why now and what gives you confidence it's sustainable thanks.

Speaker 4: Yeah, thank you. Maybe I'll start and then if I miss anything, Yamini can add some perspective. You know, I think that you have heard from us that we have been driving innovation at that upmarket tier. We've also been driving innovation at the low end where that is a more product and automated set of innovation. Both of those things help drive the overall growth of HubSpot.

Yeah. Thank you maybe I'll start and then if I Miss anything how many ads.

Some perspective.

Thank you have heard from us that we have been driving innovation AD that upmarket tier we've also been driving innovation.

The LOE and where that is a more product and automated.

Set of innovation both of those things helped drive the overall growth of hub spot they are going to ebb and flow from one quarter to the next quarter and they will have a bunch of there will be some balanced you saw a real strength in that starter tier throughout.

Speaker 4: They are going to ebb and flow from one quarter to the next quarter. And they will have a bunch of there will be some balance. You saw a real strength in that starter tier throughout 2020. What you've seen over 2021 and what we're expecting to continue into 2022 is a lot of the benefit of some of the innovation that we've been doing at that market. Right. And so it's a combination of the mix of customers over the last quarter.

2020, what you've seen over 2021 and what we're expecting to continue into 2022 is a lot of the benefit of some of the innovation that we've been doing at that market right and so it's a combination of the mix of customers over the last two quarters.

Speaker 4: being at that pro and enterprise level, along with the install-based selling motion that we're getting success with in cross-sell, in seed expansion, et cetera. Super helpful, Culler. Thank you. Thank you. And next we go to.

Being at that pro and enterprise level, along with the install base selling motion that we're getting success with it.

In cross sell and seat expansion et cetera.

Super helpful color. Thank you.

Yeah.

Thank you and next we'll go to Michael <unk> with Wells Fargo.

Hey, there. Thanks, good afternoon, obviously, a great job with the 'twenty to 'twenty one results.

I wanted to start there, but was hoping to spend some time on just segmentation on the move up market. We've heard some encouraging signs from your partners echoing what Japanese saying just around better alignment, but also larger customers than that historical sweet spots showing up asking for hubs in more formal processes and I just want to explore.

What's happening behind the scenes there how much of this from your perspective is tied to internal efforts some of the partner.

Speaker 14: is tied to internal efforts, some of the partner...

The partner efforts that you've embarked on and obviously, having a more comprehensive products that helps too, but just would love to just explore that in more context, given theres just a lot of good things happening with what the growth drivers here currently.

Speaker 3: Yeah, thanks a lot for the question, Michael, and you exactly made it right. So we definitely see from a product perspective, from a go-to-market perspective, as well as partner alignment. And if you step back, you know, for the past year, we've been talking about our focus in terms of really all of our segments.

Yeah. Thanks, a lot for the question, Michael and you exactly they made it right. So we definitely.

Really see from a product perspective from a go to market perspective, as well as partner alignment and if you step back you know for the past year, we've been talking about our focus in terms of really all of our segments and especially that 200 to 2000 segment, which we call the upmarket.

Speaker 3: And especially that 200 to 2,000 segment, which we call the upmarket segment, we're really focusing both from a product as well as the go-to-market perspective.

Mcmahon.

We're really focusing both from a product as well as the go to market perspective on the product side you saw a lot of the investments that we did last year. The bets that we're making are paying off.

Speaker 3: On the product side, you saw a lot of the investments that we did last year. You know, the bets that we are making are paying off. On the sales hub side, a ton of innovation, all the way from conversation intelligence to more advanced forecasting to CPQ. All of those add a tremendous amount of power at that enterprise tier. You saw the same thing with the marketing hub. And so almost every hub we have really invested and the pace of acceleration, the pace of innovation is actually showing up. On the go-to-market side...

On the sales side tons of innovation, all the way from conversation intelligence to more advanced forecasting to see you all of those add tremendous amount of power at that enterprise tier you saw the same thing with marketing hub and so almost every hub, we've really invested and.

The pace of acceleration of the pace of innovation is actually showing up on the go to market side.

Speaker 3: One of the things that we say internally at HubSpot is that you can have great strategy, but just alignment across product and go-to-market is even more important than strategy. And over the last 18 months, we have again focused on that alignment. And when we say alignment within go-to-market, it's like when we pour innovation to the enterprise tier, then there is an aligned sales motion where our sales reps with the partner ecosystem are talking to our customers about the value that we are getting, which is very powerful. So I think it's that coordinated effort across product.

One of the things that would be say internally at Hum part is that you can have a great strategy, but just alignment across product and go to market is even more important than strategy and where.

Over the last 18 months, we have again focus on that alignment and when we say alignment what's been good Mark I'd, just like when we pour innovation to the enterprise Tier then there isn't aligned sales motion, where our sales reps with the partner ecosystem are talking to our customers about.

The value that we are getting which is very powerful right. So I think it's a coordinated effort across product go to market and partners that drives that off market momentum and we're going to continue to invest on that.

Speaker 3: gold market and partners that drive that up market momentum. And we're going to continue to invest on that.

Thank you.

Next I will go to Brian Peterson at Raymond James.

Hi, Congrats on a really strong quarter and thanks for taking my question. So just one for me on the international strength, that's what FERC, 50% growth in constant currency for three quarters in a row now so just curious.

Speaker 15: Congrats on a really strong quarter and thanks for taking the question. So just one for me on the international strength, that's been above 50% growth in constant currency for three quarters in a row now. So just curious, anything that's driving that that may be different than the domestic results? And how should we think about the level of investment internationally? Thank you.

Thing thats driving that that may be different than the domestic results.

Should we think about the level of investment internationally. Thank you.

Speaker 3: Thanks a lot, Brian , for the question. Look, it's consistent both in terms of North America as well as international. And in fact, in Q4, they both accelerated in terms of constant currency growth.

Thanks, a lot Bryan for the question look at them both in terms of North America, and Willis International and in fact in Q4 are they both accelerated.

In terms of constant currency growth.

Speaker 3: You know, I'd say if you step back, what is common across North America and international is just the need for just a beautiful front office platform. That is the demand that we see both in terms of North America as well as international segments. And we just meet the needs right now. And we talked a lot about the product innovation. We've talked a lot about the improvements that we have had both on the product side and the go to market side. And I think we're firing kind of on all cylinders across the pillar.

You know I'd say, if you step back what is common across North America and international is just the need for a just a beautiful.

Front office platform that is the demand that we see both in terms of North America as well as international segments, and we just meet the needs right now and we talked a lot about the product innovation, we've not talked a lot about the improvements that we've had both on the product side and the go to market side and I. Thank God we're firing.

On all cylinders across the pillars.

Speaker 3: In terms of international, I'd say a couple of things. First off, it is a little bit of an earlier stage in some of the countries that they operate in. Customers are a bit earlier in digital transformation and therefore our market penetration is low and therefore there's momentum there. And then the second thing I'd say is that we have continued to invest in terms of product localization, customer facing resources, and there's really good LTV to CAC and return on that LTV to CAC that we see in international markets. And so overall, we continue to invest in both of the markets and we like the balance in terms of the performance both internationally as well as in North America.

In terms of international I'd say, a couple of things first off it is a little bit of an earlier stage in some of the countries that they operate in customers are a bit earlier in digital transformation and therefore, our market penetration is low and therefore, there's momentum there and then the second thing I'd say is that.

We have continued to invest.

In terms of product localization customer facing resources and Theres really good LTV to CAC and just turn on that LTV to CAC that we see in international markets and so overall, we continue to invest in both of the markets are and where we like the balance in terms of the performance both in.

Internationally as well as in North America.

Speaker 17: Good to hear. Thanks, Sheldon.

Good to hear thanks, so much.

Speaker 1: And next we'll hear from Ryan Krieger with Wolf Research.

And next we'll hear from Ryan Krieger with Wolfe Research.

Speaker 14: Hey there, this is Alan on for Alex. Thanks for taking the question. Kate, can you please unpack the subscription dollar retention rate in the quarter? How does that directly compare to previous Q3? And is that a number that settles here? Is there a pathway for it to grow? How should we think about that going forward?

Hey, there this is Alan on for Alex Thanks for taking the question.

Can you. Please move past the subscription dollar retention rate in the quarter, how does that directly compare to previous Q3.

And is that a number that settles here is there a pathway for it to grow how should we think about that going forward.

Yeah.

Speaker 4: So we've talked about net revenue, we spent a bunch of time at the Analyst Day talking about what is going on with our retention, right, and we look at retention internally in two different ways. We look at our gross retention, we call it customer dollar retention. And that has, over the last 12 to 18 months, moved up pretty meaningfully.

So we've talked about net revenue retention a bunch of time at the analyst day talking about what is going on with our retention.

And we look at retention internally in two different ways, we look at our gross retention we call it customer dollar retention.

And that has over the last 12 to 18 months.

Moved up pretty meaningfully.

Speaker 4: When you look at it relative to Q3, it's, you know, generally in the same ballpark, right? We saw a step up, and that has stayed very healthy. And what is driving that is a couple of things. One is that, you know, our customers are just using our product more. You know, Yamini talked about the sort of front office answer that HubSpot provides. We are just seeing our customers use more and different parts of the product.

When you look at it relative to Q3 as you know.

Is it generally in the same ballpark right. We saw a step up and that has stayed very healthy and what is driving that is a couple of things. One is that our customers are just using our product or are you already talked about the sort of front office answer that hub provides we're just seeing our customers use more.

Sure and different parts of the product.

Speaker 4: The other thing that is benefiting our customer retention is that we're signing longer contracts with our customers, and that sort of just helps with the overall retention.

The other thing that we are or is benefiting our customer dollar retention is that were finding longer contracts with our customers and.

That sort of just helps with the overall retention.

Speaker 4: In terms of, then there's an upgrade between our growth retention and our net retention. That also has improved over the, you know, last 12 to 18 months. And what we've said is, as a target in mind, is 110 plus for net revenue retention. And the upgrade drivers are pretty diverse. I've talked a little bit about them already on this call. You know, it's

In terms of then Theres an upgrade.

Our gross retention in our net retention.

That also has improved over the last 12 to 18 months and what we've said is we as a target in mind is 110 plus for net revenue retention and the upgrade drivers are pretty diverse I've talked a little bit about them already on this call. It's addition upgrades.

Speaker 4: addition upgrades, it's expansions of seeds, it's, you know, cross-selling and adopting multiple hubs. And we think, you know, that 110 plus is the right target for you to be thinking about for the foreseeable future. Got it. Thank you.

The expansion of it.

Cross selling and adopting multiple hubs.

And we think that 110 plus is the right target for you to be thinking about for.

For the foreseeable foreseeable future.

Okay.

Got it thank you.

Thank you and next we'll go to Adam <unk> with BMO.

Okay.

Hi, Adam.

Speaker 11: It's Keith Bachman from BMO. If you can hear me, I'm just gonna launch into my question.

It's Keith Bachman from BMO.

You can hear me I'm, just gonna watching just quick question.

Speaker 11: Um, the question is this, yeah, sorry, excuse me,

The question is this.

Yeah, sorry, excuse me.

Hum.

Two Kate for you.

Speaker 16: You've talked about the customer ads being consistent, but just wondering if the context of that is a different mix. What I mean by that is within the customer ads that you're getting on a quarterly basis.

Talked about the customer adds being consistent but just wondering if.

The context to that.

Is it different different mix, what do mean by that is within the customer adds that you're gathering on a quarterly basis.

Speaker 11: Is it a richer mix of customers or is it the same mix of customers? As you're attracting larger enterprise, it seemed to me that it's a richer mix of customers, but just like to hear a clarification of that as we're thinking about the customers.

Is it a richer mix of customers or is it the same mix of customers.

You know as you're attracting larger enterprise it seem to me that it's a richer mix of customers, but just like to hear a clarification of that as we're thinking about the customer adds.

Speaker 11: as during 2022. Along with that, if you could just comment on how we should be thinking about Operations Hub attach rates and growth rates in 2022. Again, with the backdrop, it seems to us that you're getting a larger share of larger customers. We would like to hear your context of how Operations Hub may do within the color of 2022 guidance. Thank you.

During 2022.

Along with that if you could just comment on how we should be thinking about operations hub attach.

Attach rates and growth rates in 2022 again with the backdrop it seems to us that you're getting a larger share of larger customers and so just would like to hear your.

The context of how operations have made do within the within the color on 2022 guidance. Thank you.

Speaker 4: Yeah, why don't I start with the customer ad question and, Yamini, I might hand it to you for the operations contact.

Yeah, why don't I start with the customer add question yesterday, I might hand, it to you for the operations.

Yeah.

Speaker 4: You know, it's an interesting question. I think, you know, I would answer it by kind of turning back the clock to the beginning of the pandemic. And 2020 was a year where we launched our starter growth suite at $50. And that was a big change for us. And what we saw was just a step function increase. And the ads at that starter tier, you know,

It's an interesting question, but I think you know.

I would answer it by kind of turning back the clock to that'd be getting of the pandemic in 2020 was a year, where we launched our starter growth suite at $50 and that was a big change for us and what we saw was just a step function increase and the ads that starter tier.

Yep.

Speaker 4: Having now lacked that for a couple of quarters, what we're seeing is a bit more of a balance, right? In terms of the composition of the new customer ads across the starter tier and with the professional and enterprise.

Having now lapped that for a couple of quarters, what we're seeing is a bit more of a balance right in terms of the composition of the new customer adds across the starter tier and with the professional and enterprise and that mix is actually one of the drivers of the increase in as RPC.

Speaker 4: And that mix is actually one of the drivers of the increase in ASRPC that we're seeing. And so I do expect.

We're seeing them right and so I do expect that composition in 2022 will look more like 2021.

Speaker 4: that composition in 2022 will look more like 2021 than it will the start of the pandemic and that really concentrated starter as that we saw in 2020.

It will.

Start of the pandemic and that really concentrated darner ads that we saw in 2020.

Speaker 3: Okay. Then, you know, I'll take that operations hub. I think it's, I talked a little bit about the operations hub and the value of operations hub is really supercharging the other hub.

Okay, then I you know I would think.

That's all the time I think it's I talked a little bit about the operations hub in the value of operations hub is really supercharging. The other half I think the broader point in terms of the mix that we see is just more multi hub, we talked about it in the prepared remarks then.

Speaker 3: I think the broader point in terms of the mix that we see is just more multi-hub. We talked about it in the prepared remarks and.

Speaker 3: in 60% of our customer base being multi-hub. Now, having introduced products like Operations Hub and CMS and also adding more value to our anchor hubs like marketing and sales, we just see a lot more of two hub or three hub pairs. And that goes to show the overall value that our customers are getting from HubSpot. And so that's how I would think about it for last year as well as going into 2022. OK, great. Thank you.

60% of our customer base being multi hub now having introduced products like operations hub and CMS and also adding more value to our anchor hubs like marketing and sales, we just see a lot more off.

Two hub or three hub, Paris, then that goes to show the overall value that our customers are getting from hub BOP and so that's how I would think about it for last year as well as going into 2022.

Okay, great. Thank you.

Okay.

And next we'll go to Terry Tillman at <unk> Securities.

Speaker 6: Hey team, this is Connor on for Terry. Thanks for, uh, for squeezing me in. So you touched a little bit on this before, but just our bigger picture view as your product portfolio ramps up and more products start to come online. How have your conversations with customers shifted in terms of seeing the value of adopting multiple hubs? And what are some ways you've really seen customers leaning into the connectedness of the platform and the vision that you set forward?

Hey, Tim This is Connor on for Terry Thanks for squeezing me in so you touched a little bit on this before but just sort of a bigger picture view as your product portfolio ramps up more product start to come online how have your conversations or customer shifting in terms of seeing the value of adopting multiple hubs and what are some ways, you're really seeing customers spanning into the connectedness of our platform.

Thank you Stefan.

Speaker 3: Yeah, that's a great question. We've been talking about the overall pace of innovation and also the value that customers get. I would say if I step back, and I've been talking to a lot of customers in Q4 as well as January .

Yeah. That's a that's a great question, we've been talking about the you know the overall pace of innovation and also the value that customers get us sounded like if I step back.

And I've been talking to a lot of customers in Q4 as well as.

January there are a couple of really big challenges for small medium businesses right now there's just a huge challenge of trying to pitch them disparate systems that just don't work well no small medium businesses don't have the time. They don't have the budget. They don't have the technical teams that are.

Speaker 3: There are a couple of really big challenges for small and medium businesses right now. There's just a huge challenge of trying to stitch disparate systems that just don't work well. You know, small and medium businesses don't have the time, they don't have the budget, they don't have the technical teams that are sitting around, unlike maybe some of the larger companies, and that's a huge challenge. The second part of the challenge is that

Sitting around unlike maybe some of the larger companies and that's a huge challenge the second part of the challenge is that they.

Speaker 3: They want to get clear visibility across the entire customer journey, but marketing and sales are still in silos, and they don't get that type of visibility to drive the growth that they need. And so HubSpot solves both of these challenges, and we become an easy and clear platform choice.

They want to get visibility across the entire customer journey, but marketing and sale of sales are still in silos and then they don't get that type of visibility to drive the growth that they need and so hum.

Both of these challenges and we become an easy and clear platform choice and that's why customers are adopting more hubs on average and getting more value for hub.

Speaker 3: And that's why customers are adopting more hubs on average and getting more value per hub. And when I talk to customers, they're like, look, we don't even know when one of your hubs stops and the other one starts.

And when I talk to customers, they're like look we don't even know when one of your hub stops and the other one starts it seamless and it's just a beautiful customer experience.

Speaker 3: seamless and it's just a beautiful customer experience. Plus we have added a lot to our overall ecosystem, which is the thousand integrations that we talked about. And this makes us an easier platform choice for small, medium businesses. And this is exactly what we want. We want to be the number one CRM platform for scaling businesses. And I think it really meets the needs of customers within the segment. We feel very good about it.

Plus we have added a lot to our overall ecosystem, which is the 1000 integrations that we've talked about and it makes us an easier platform choice for small and medium businesses and this is exactly what we want we want to be the number one CRM platform for scaling businesses and I think it.

Really meet the needs of customers within the segment, we feel very good about it.

Great. Thank you.

Speaker 1: Thank you. And ladies and gentlemen, I will conclude our question and answer session for today. Ms. Rangan, I'd like to turn the conference back to you for any closing or additional comments.

Thank you and ladies and gentlemen that will conclude our question and answer session for today. This rangan I'd like to turn the conference back to you for any closing or additional comments.

Speaker 3: But thank you, everyone. It was great talking to you. Look forward to connecting back in a quarter. Thanks a lot.

Well. Thank you everyone was great talking to you and look forward to connecting back in the quarter. Thanks a lot.

Speaker 1: Thank you, and ladies and gentlemen, that will conclude today's HubSpot Q4 2021 earnings conference call. I'd like to thank you all for joining us and wish you all a great evening. Goodbye.

Thank you and ladies and gentlemen that will conclude today's hub spot Q4, 2021 earnings conference call I'd like to thank you all for joining us and wish you all great evening Goodbye.

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