Q3 2023 HubSpot Inc Earnings Call

Speaker 1: The sun will shine in my back door someday The sun will shine in my back door someday The sun will shine in my back door someday

Yes.

Sure.

[music] where to shop.

Yes.

[music] combined.

Speaker 2: Good afternoon, ladies and gentlemen. Thank you for joining today's HubSpot Q323 earnings call. My name is Tia and I will be your moderator for today's call.

Good afternoon, ladies and gentlemen, thank you for joining today's hub spot Q3, 'twenty three earnings calls.

Mr <unk> and I'll be your moderator for today's call.

Speaker 3: All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad.

All lines will be muted during the presentation, you're pushing up the call with an opportunity for questions and answers that you gained.

You would like to ask a question. Please press star one on your telephone keypad.

Speaker 4: I would now like to pass the call for service to your host, Chuck McGlashan. Please proceed.

I would now like to pass the conference over to your host Chuck Mcglashan. Please proceed.

Speaker 5: Thanks, operator. Good afternoon and welcome to HubSpot's third quarter 2023 earnings conference.

Thanks, operator, good afternoon, and welcome to <unk> third quarter 2023 earnings Conference call.

Speaker 6: 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, Darbesh Shah, our Co-Founder and CTO, and Kate Buecher, our Chief Executive Officer.

We will be discussing the results announced in the press release that was issued after the market closed with me on the call. This afternoon is <unk>, our Chief Executive Officer, <unk> Shah, our cofounder and CTO and Keith <unk>, Our Chief Financial Officer.

Speaker 7: Before we start, I'd like to draw your attention to the Safe Harbor statement included in today's press.

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 day that secured 60 injected 1933 as amended.

Speaker 8: During this call, we'll make statements related to our business that may be considered forward-looking within the meaning of Section 27A of the Security Exchange Act of 1933.

Speaker 9: Section 21e of the Security Exchange Act of 1934.

And section 20, <unk> of the Securities Exchange Act of 1934 as amended.

Speaker 10: All statements other than statements of historical factor for looking statements, including those regarding management expectations of future financial and operational performance and operational expenditures. The expected timing and benefits of the proposed...

All statements other than statements of historical fact are forward looking statements, including those regarding management's expectations for <unk>.

Future financial and operational performance and operational expenditures.

The expected timing and benefits of the proposed clear bid acquisition.

Speaker 11: growth, FX movement, and business outlook, including our financial guidance of the fourth fiscal quarter and four-year term.

We expect the growth FX movement and business outlook, including our financial guidance for the fourth fiscal quarter and full year 2023.

Forward looking statements reflect our views only as of today and except as required by law, we undertake no obligation to update or revise these forward looking statements.

Speaker 12: 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 words.

Speaker 13: Please refer to the cautionary language in today's press release in our form 10Q, which will be filed with the FCC this afternoon for discussions at risk and uncertainties that could cause actual results to differ materially.

Please refer to the cautionary language in today's press release, and our Form 10-Q, which will be filed with the SEC.

For a discussion of the risks and uncertainties that could cause actual results to differ materially from expectations.

Speaker 14: During the course of today's call, we'll refer to certain non-GAAP financial measures as defined by Regulation G. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed, and a reconciliation of the differences between such measures can be found within our 3rd quarter 2023 earnings press release.

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

The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed and a reconciliation of the differences between such measures can be found within our third quarter 2023 earnings press release, and the Investor Relations section of our website.

Speaker 15: Now, my pleasure to turn over the call to HubSpot's Chief Executive Officer Yamini Rankin. Yamini?

Now my pleasure to turn over the call to <unk> <unk>, Chief Executive Officer, Yummy Rock nominee.

Speaker 16: Thank you, Chuck, and welcome to everyone joining us on the call. Let me start with our performance in the quarter, share my observations on the macro environment, and wrap up with our vision for our customer platform powered by AI and data. Let's jump into our next session. We'll be starting in a few minutes. But first, I want to thank you for joining us and for joining us in this session. We'll be starting in a few minutes. And we'll be starting in a few minutes.

Thank you Chuck and welcome to everyone joining us on the call. Let me start with our performance in the quarter share my observations on the macro environment and wrap up with our vision for our customer platform powered by AI and data.

Let's jump into our Q3 results.

Speaker 17: We had another quarter of solid execution with revenue growing 24% year over year in constant currency.

We had another quarter of solid execution with revenue growing 24% year over year in constant currency.

Speaker 18: We delivered another exceptional quarter of operating margin growth with 700 basis points of margin expansion year over year, driving our operating margin to 16%.

We delivered another exceptional quarter of operating margin growth with 700 basis points of margin expansion year over year, driving our operating margin to 16%.

Total customers grew by 22% year over year to over 194000 customers globally, driven by over 9100 net customer additions in the quarter.

Speaker 19: Total customers grew by 22% year over year to over 194,000 customers globally, driven by over 9,100 net customer additions in the quarter.

Speaker 20: I'm pleased with our team's focused execution and the progress we are making to become the number one customer platform for scaling companies.

I'm pleased with our team's focused execution and the progress we are making to become the number one customer platform for scaling companies.

Speaker 21: Our Q3 results highlight two consistent teams this year.

Our Q3 results highlight two consistent themes this year.

Speaker 22: Our bimodal go-to-market strategy is working, and our product innovation is in high gear, especially coming out of inbound in September .

By more go to market strategy is working and our product innovation is in high gear, especially coming out of inbound in September.

Speaker 23: In the lower end of our segment, we saw strength in net customer additions driven by free signups and growth optimization plays in our starter edition.

In the lower end of our segments, we saw strength in net customer additions driven by three sign ups and growth optimization place in our starter edition.

Speaker 24: Our value proposition of an easy to use, easy to scale customer platform resonates within the segment.

Our value proposition of our easy to use easy to scale customer platform resonates within the segment.

Speaker 25: In upmarket, we continue to see multi-hub adoption as customers consolidate on fewer platforms and drive better visibility across marketing sales and search.

Upmarket, we continue to see multi hub adoption as customers consolidate on fewer platforms and drive better visibility across marketing sales and service.

Speaker 26: A great example of a multi-hub customer who is seeing results from consolidating on HubSpot is Knowledge Academy.

A great example of our multi hub customer who is seeing results from consolidating on hotspot knowledge Academy.

Speaker 27: They are the largest provider of online instructor-led training globally.

They are the largest provider of online instructor led training globally.

Speaker 28: They started with Sales Hub to get better visibility into their pipeline, and then added Marketing Hub to optimize their marketing budget, and also added Service Hub to get a complete view of their customers.

They started with sales hub to get better visibility into their pipeline and then added marketing hub to optimize their marketing budget and also added service up to get a complete view of their customers.

Speaker 29: Since implementing HubSpot, Knowledge Academy has grown leads by 4x. Boosted sales by nearly 2x and increase their average order value by 25%.

Since implementing hotspot knowledge Academy has grown leads by Forex boosted sales by nearly two X and increased our average order value by 25%.

Speaker 30: As you've heard we say before, our hubs are powerful on their own, but the real value for our customers comes from using them together.

As you've heard me say before our hubs are powerful on their own but the real value for our customers comes from using them together.

Speaker 31: We can see this in our results with over 50% of our install base now on three or more hubs.

And we can see this in our results, but over 50% of our install base now on three or more hubs.

Turning to product innovation, we continue to be in high gear and our launches at inbound are driving momentum.

Speaker 32: Turning to product innovation, we continue to be in high gear and are launches at inbound or driving momentum.

While we have launched over 200 new product enhancements this year, the two big moments at Inbound were the Sales Hub relaunch and HubSpot AI launch.

While we have launched over 200, new product enhancements. This year, the two big moments at inbound where the sales hub relaunch and hub spot AI launch.

So why did we relaunch Sales Hub when we're already seeing momentum within this hub this year?

So why did we relaunched sales hub and we're already seeing momentum within this hub this year.

It's simple. We want to deliver the best prospecting and deal management solutions that are deeply connected, especially for our upmarket customers.

Well simple we want to deliver the best prospecting and deal management solutions that are deeply connected especially for our upmarket customers.

The new prospecting workspace, which is now generally available, gives reps one place to organize their leads and paths, so that they can spend less time looking for information, and more time connecting with customers.

The new prospecting workspace, which is now generally available gives reps one place to organize their leads and pass so that they can spend less time looking for information and more time connecting with customers.

In deal management, we introduced AI powered forecasting to help sales leaders improve accuracy in revenue projections very important in any environment.

In deal management, we introduced AI-powered forecasting to help sales leaders improve accuracy in revenue projections. Very important in any environment.

We have a compelling vision to drive sales productivity, and we are hearing positive feedback from our customers, particularly in the market, about the new found power and sophistication of sales at all.

We have a compelling vision to drive sales productivity and we are hearing positive feedback from our customers, particularly in the market about the new found power and sophistication of sales hub.

Another highlight that inbound was the launch of hotspot AI.

Another highlighted inbound was the launch of HubSpot AI.

We believe that every scaling organization deserves an AI-powered customer platform. That is why we are deeply embedding AI across all of our hubs and our entire platform.

We believe that every scaling organization deserves an AI powered customer platform that is why we are deeply embedding AI across all of our hubs and our entire platform.

we announced a number of features across AI Assistance, AI Agents, AI Insights and ChatSpot.

We announced a number of features across AI assistance.

<unk> AI insights and chat spot.

While I'm certainly excited about our pace of innovation, what we are really focused on is driving usage and value for customers.

While I'm certainly excited about our pace of innovation, what we are really focused on is driving usage and value for customers.

40% of enterprise customers have already used HubSpot AI features, along with 20% of pro customers.

40% of enterprise customers have already used hub spot AI features along with 20% of pro customers.

About two-thirds of AI users are leveraging AI assistance to craft marketing emails and blogs.

About two thirds of AI users are leveraging AI assistant to craft marketing E mails and blogs.

Social publishing is proving out to be a sticky use case, drawing in engaged users.

Social publishing is proving out to be a sticky use case, drawing and engaged users.

In short, when we embed AI into the flow of work, it works.

In short when we embed AI into the flow of work it works.

I'm pleased to see usage beginning to grow and we know we're still in the early stages of a major technology.

I'm pleased to see usage beginning to grow and we know we're still in the early stages of a major technology shift.

Looking ahead, we're focused on driving discoverability of and differentiation with AI features. We will drive adoption both in product and via customer education. We will drive differentiation by bringing more sophisticated use cases that are more deeply connected with HubSpot data. To summarize, I like the early adoption trend and our well-defined AI roadmap to bring innovation to our customers.

Looking ahead, we're focused on driving discover ability off and differentiation with AI features we will drive adoption, both in product and customer education.

We'll drive differentiation by bringing more sophisticated use cases that are more deeply connected with hub spot data.

To summarize I like the early adoption trends and are well defined AI roadmap to bring innovation to our customers.

Okay, let's shift gears and talk about what we're seeing in the macro environment.

Okay, let's shift gears and talk about what we're seeing in the macro environment.

Overall, we continue to operate in a choppy and challenging environment.

Overall, we continue to operate in a choppy and challenging environment.

Sales cycles remain lengthy, budgets are still under scrutiny, and buying urgency remains low.

Sales cycles remain lumpy budgets are still under scrutiny and buying urgency remains low.

It is clear based on my conversations with customers that they still need approvals from multiple decision makers and are continuing to optimize pens.

It is pure based on my conversations with customers that they still need approvals from multiple decision makers and are continuing to optimize spend.

Despite these headbands, HubSpot's connected value proposition continues to resonate with customers looking to optimize spend and boost productivity.

Despite these headwinds hotspots connected value proposition continues to resonate with customers looking to optimize spend and boost productivity.

As we look ahead, we will continue to navigate this macro environment by following our playbook to drive product innovation and consistent, strong execution.

As we look ahead, we will continue to navigate this macro environment by following our playbook to drive product innovation and consistent strong execution.

Now, I want to dive deep into our vision for our customer platform and talk about how our recently signed agreement to acquire clear bit accelerates that vision.

Now I want to dive deep into our vision for our customer platform and talk about how our recently signed agreement to acquire pyramid accelerates that vision.

Our vision is to give millions of companies the best possible data about their customers in HubSpot.

Our vision is to give millions of companies the best possible data about their customers and hotspot.

Today, we pull in data from website visits, marketing emails, sales calls, support tickets, and more. And we unify all of that data on a beautiful, simple customer record. This is arguably the biggest...

Today, we pull in data from website visits marketing emails sales calls and support to get some more.

Unify all of that data on a beautiful simple customer record.

This is arguably the biggest advantage with hub spot.

With Clearbit, we will be able to bring in even more external data that can help our customers connect better with their end customers.

With <unk>, we will be able to bring in even more external data that can help our customers connect better with their end customers.

So.

What can we solve for our customers with more unified data.

Well, we can help our customers identify great fit customers and provide clear signals on buying intent, both keys to increasing their go-to-market effects.

Well, we can help our customers identify great fit customers and provide clear signals on buying intent.

Keys to increasing their go to market effectiveness.

Our customers want company data, not just the name of the company and employee count, but they want rich attributes about companies, including demographic data, like who's the CIO, and technographic data, like which automation products are they using.

Our customers one company data not just the name of the company and employee count, but they want rich attributes about companies, including demographic data like who is the CIO and techno graphic data like which automation products are they using.

In addition, they want a real-time way to monitor buying intent. Not just based on direct engagements within HubSpot platform, but also based on customers' activities outside of HubSpot and around the web. This is exactly...

In addition, they want a real time way to monitor buying intent.

Not just based on direct engagements within hub spot platform, but also based on customers' activities outside of hub spot and around the web.

This is exactly what <unk> is good at.

They have 100 plus attributes for more than 20 million companies from more than 250 plus public and private data sources. We can take all of this data from HubSpot and Clearbit to power generative AI tools to create even more personal messages and insights for customers.

They have 100, plus attributes for more than 20 million companies for more than 250, plus public and private data sources. We can take all of those data from hub spot and clear, but to power generative AI tools to create even more personal messages and insights for our customers.

Our differentiation will be to bring together unified customer data with powerful AI tools that can consume that data and our market-leading engagement hubs to supercharge our customers go to market apps.

Our differentiation will be to bring together a unified customer data with powerful AI tools that can consume that data and our market leading engagement hubs to supercharge our customers go to market efforts.

Finally.

Finally, wipe clear bit and water a plan going forward.

Why player base and what are our plans going forward.

Pierre Bitt has world-class data and they share our commitment to helping customers grow.

<unk> has world class data and they share our commitment to helping customers grow.

They also have a deep bench of B2B data experts with a bold mission to leverage AI to power in flight.

They also have a deep bench of BTB data experts with a bold mission to leverage AI to power insight.

In all our conversations with Clearbit, it was clear that the team would be a great addition to our culture.

In all our conversations with clearer, but it was clear that the team would be a great addition to our culture and most importantly, this does not take away from our approach to building great products with cohesive user experiences.

And most importantly, this does not take away from our approach to building great products, which cohesive user experience.

We use clear bit data on our product today, and we have a very clear vision for how we can integrate their data to provide immediate value for our customers.

We use <unk> data on our product today, and we have a very clear vision for how we can integrate their data to provide immediate value for our customers.

In addition, we can leverage our product led, partner led, and sales led distribution engines to get us into the hands of our customers post-close.

In addition, we can leverage our product lead partner led and sales led distribution engines to get this into the hands of our customers post close.

I'm thrilled by the prospect of acquiring Clearbit and our shared vision of solving for the customer. We'll share more about our future plans.

I'm thrilled by the prospect of acquired Turbot, and our shared vision of solving for the customer we will share more about our future plans. After the deal has closed.

So reflecting on the quarter, we doubled down on product innovation in our core hubs, and we established leadership in AI with our customers.

So reflecting on the quarter, we doubled down on product innovation in our core hubs and we established leadership in AI with our customers.

our teams are focused on consistent execution. And we have a clear vision for taking our customer platform to the next level with AI and data to deliver even more value to our customers.

Our teams are focused on consistent execution, and we have a clear vision for taking our customer platform to the next level with AI and data to deliver even more value to our customers.

With that, I'll turn the call over to Kate to take you through Q3 results in more detail.

With that I'll turn the call over to Kate to take you through Q3 results in more detail.

<unk>.

Thanks, Jomini. Let's turn to our third quarter 2023 financial.

Thanks Tommy.

Let's turn to our third quarter 2023 financial results.

Revenue grew 24% year-over-year in constant currency and 26% on an ads reported.

Revenue grew 24% year over year in constant currency and 26% on an as reported basis.

Subscription revenue grew 25% year over year. Will services and other revenue increase 31% on an as reported?

Subscription revenue grew 25% year over year, while services and other revenue increased 31% on an as reported basis.

Domestic Revenue Grew 22% year over year. International Revenue Growth was 26% in constant currency and 30% as reported, now representing 47% of total...

Domestic revenue grew 22% year over year.

International revenue growth was 26% in constant currency and 30% as reported now representing 47% of total revenue.

We added 9,100 net new customers in the quarter, bringing our total customer count to over 194,000, up 22% year over year.

We added 9100 net new customers in the quarter.

Our total customer count to over 194000 up 22% year over year.

Average subscription revenue per customer grew 1% year over year in constant currency and 3% on an as reported basis to $11,500.

Average subscription revenue per customer grew 1% year over year in constant currency and 3% on an as reported basis to $11500.

Our ASRPC growth was driven by continued multi-hab adoption by our professional and enterprise.

Our ASR PC growth was driven by continued multi have adoption by a professional and enterprise customers offset by the large volume of starter customers. We added at the low end of our bimodal strategy over the last few quarters.

Offset by the large volume of starter customers, we added at the low end of our Bimodal strategy over the last few quarters.

Gross retention remained healthy in the high 80s for the quarter, and net revenue retention was up slightly quarter over quarter.

Gross retention remained healthy in the high <unk> for the quarter and net revenue retention was up slightly quarter over quarter.

We continue to see pressure on net upgrade motions, including seats, contact tiers, additions, and portals, and expect this to persist in the short.

We continue to see pressure on net upgrade motion, including seats contact tiers additions and portal and expect this to persist in the short term.

Nevertheless, we remain confident that we can maintain net revenue retention above 100.

The last we remain confident that we can maintain net revenue retention above 100%.

Calculated billings were $550 million growing 20% year over year in constant currency and 24% as reported.

calculated billions for $550 million, growing 20% year over year in constant currency, and 24% as reported. The remainder of my comments will.

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

Operating margin was 16% of 7 points compared to the Urogo period.

Operating margin was 16% up seven points compared to the year ago period.

Operating margin in the quarter benefited from lower TNE and other discretionary spend continued infrastructure optimization and more concentrated hiring in Q3 and Q4 in key areas such as product innovation, AI and internal systems and data.

Operating margin in the quarter benefited from lower <unk> and other discretionary spend continued infrastructure optimization and more concentrated hiring in Q3 and Q4 in key areas, such as product innovation, AI and internal systems and data.

Net income was $83 million or $1.59 per fully deleted share.

Net income was $83 million or $1 59 per fully diluted share.

Free cash flow of $65 million or 12% of revenue and our cash and marketable securities totaled $1 $7 billion at the end of September.

Free cash flow is $65 million or 12% of revenue, and our cash and marketable securities totaled $1.7 billion at the end of September .

On October 31.

On October 31st, we entered into a definitive agreement to acquire Clearbit for approximately $150 million in cash.

We entered into a definitive agreement to acquire clear bet for approximately $150 million in cash.

The acquisition is subject to customary closing conditions, including regulatory approval, and we expect the transaction to close before the end of the year.

The acquisition is subject to customary closing conditions, including regulatory approval and we expect the transaction to close before the end of the year.

Like Yomini, I am excited about the value we can create for our customers with a combination of ClearBits world-class data and HubSpots AI-powered customer platform. And I look forward to welcoming the ClearBit team to HubSpots.

Like you harmony I am excited about the value we can create for our customers with a combination of cleared with world class data and hotspots AI powered customer platform and I look forward to welcoming the <unk> team to hotspot.

Okay.

Before we dive into guidance, I wanted to touch quickly on the macro environment.

Before we dive into guidance I wanted to touch quickly on the macro environment.

As Yamani indicated, we continue to operate a challenging environment.

As you harmony indicated we continue to operate in a challenging environment.

Q3 felt similar to what we saw in the first half of the year.

Q3 felt similar to what we saw in the first half of the year.

Budgets are still under scrutiny, deals are taking longer to close, buying urgency is low, and customers are continuing to look for ways to optimize their spend.

Budgets are still under scrutiny deals are taking longer to close buying urgency is low and customers are continuing to look for ways to optimize their spend.

Our guidance assumes that these weak conditions persist in Q4.

Our guidance assumes that these weak conditions persist in Q4.

Now let's review our guidance for the fourth quarter and full year of 2023.

Now lets review our guidance for the fourth quarter and full year of 2023.

For the fourth quarter.

Total as reported revenue is expected to be in the range of $556 to $558 million. Up 19% year-rear at the midpoint.

Total as reported revenue is expected to be in the range of $556 million to $558 million up 19% year over year at the midpoint.

We expect foreign exchange to be a two point tailwind as reported revenue growth in the quarter.

We expect foreign exchange to be a two point tailwind to as reported revenue growth in the quarter.

Non-Gap operating profit is expected to be between $85 and $86 million.

non-GAAP operating profit is expected to be between 85 and $86 million.

Non-gap diluted nending comfort share is expected to be between $1.53 and $1.55.

non-GAAP diluted net income per share is expected to be between $1 53 and $1 55.

This assumes 52.7 million fully diluted shares outstanding. And for the full year.

This assumes $52 7 million fully diluted shares outstanding.

And for the full year of 2023.

Total S reported revenue is now expected to be in the range of 2.144 to 2.146 billion dollars, up 24% year-over-year at the midpoint.

Total as reported revenue is now expected to be in the range of $2 144 to $2 $146 billion.

Up 24% year over year at the midpoint.

We now expect foreign exchange to have no material impact on as-reported revenue growth for the full year.

We now expect foreign exchange to have no material impact on as reported revenue growth for the full year.

non-GAAP operating profit is now expected to be between $317 and $318 million.

non-GAAP operating profit is now expected to be between 317 and $318 million.

non-GAAP diluted net income per share is now expected to be between $5 66.

non-GAAP diluted net income per share is now expected to be between $5.66 and $5.68.

And $5.68.

This assumes 52.2 million fully diluted shares outstanding.

This assumes $52 2 million fully diluted shares outstanding.

As you adjust your models, keep in mind the following.

As you adjust your models keep.

In mind the following.

We continue to expect CapEx as a percentage of revenue to be roughly 5% and now expect free cash flow to be about $275 million for the full year of 2023.

We continue to expect Capex as a percentage of revenue to be roughly 5% and now expect free cash flow to be about $275 million for the full year of 2023.

Looking forward to 2024, we expect foreign exchange to be a one to two point headwind to as reported revenue growth.

Looking forward to 2024.

We expect foreign exchange to be a one to two point headwind to as reported revenue growth.

And with that, I will hand things back over to Yamini for her closing remarks.

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

Thank you so much.

I want to close by reiterating our commitment to balancing growth, profitability and great culture to build and end your company.

I want to close by reiterating our commitment to balancing growth profitability and a great culture to build an enduring company.

We're driving rapid innovation with our customer platform and HubSpot AI to drive growth. We're focused on improving sales and marketing efficiency and scaling distribution. And on culture, we remain committed to building a high performing, sustainable and diverse culture.

We're driving rapid innovation with our customer platform and hub spot AI to drive growth, we're focused on improving sales and marketing efficiency and scaling distribution and on culture. We've remained committed to building a high performing sustainable and diverse culture.

This quarter, we hosted our first ever global leadership summit, which brought together our top leaders across the globe for workshops, trainings on performance, leadership and strategy. It was just a fantastic week and left me energized about HubSpot's future.

This quarter, we hosted our first ever global leadership summit, which brought together our top leaders across the globe for workshop trainings on performance leadership and strategy. It was just a fantastic week and left me energized about hotspots future.

A huge thank you to all our employees and partners for their dedication to driving results and to our customers and shareholders for the continued support on this journey. With that, operator, let's please open up the call for questions.

Huge thank you to all our employees and partners for their dedication to driving results and to our customers and shareholders for their continued support on this journey with that operator, let's please open up the call for questions.

Absolutely. We will now begin the QA session.

Absolutely we will.

We'll now begin the Q&A session.

If you would like to ask a question, please press star followed by one on your touch-tunkey pad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one.

I would like to ask a question. Please press star followed by one or your Touchtone keypad. If for any reason you would like to remove that question. Please press star followed by two <unk>.

To ask a question press star one.

As a reminder, if you are using a spikophone, please remember to pick up your handset before ask your question.

As a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question.

We will pause here briefly to allow questions to generate and kill.

Hello policies briefly to allow questions to generate in Q.

The first question comes from the line of our Junubit DM with William Blair. Please proceed.

The first question comes from the line of our June <unk> with William Blair. Please proceed.

Great. Thank you and congrats on a great quarter here.

Perfect, thank you and congrats on a great quarter here. How many, you called out Mac ahead wins. I know that's similar to what you called out in prior quarters, but...

Yes.

You called out macro headwinds I know, that's similar to what you called out in prior quarters, but.

It seems like despite the challenging environment, we're not really seeing the slowdown.

It seems like despite the challenging environment, we're not really seeing the slowdown.

take hold in the fundamentals, the net new revs are strong, the new customers are strong. Is this something that you're seeing get worse, get better, or is this something that you're anticipating in Q4 that there's signals that maybe things are a little bit tougher heading into the holiday season? And if we do continue down this path, how are you thinking about?

Take hold in the fundamentals.

Revenue was strong in the.

Customers are strong as this.

Something that Youre seeing.

Worst get better or is that something that you're kind of anticipating.

In Q4.

Signals.

Maybe things are a little bit tougher heading into the holiday season.

If we do kind of continue down this path how are you thinking about.

adjusting your bi-modal go-to-market strategy between the new and the mid-market upsell existing doing heavily, more heavily one way or another as a result of that. Thank you.

Adjusting your bimodal go to market strategy between the new and the mid market upsell existing do mean heavily more heavily one way or another as a result of that.

Hey origin, yes. Thanks for that question look as both I sat in Cape said, the environment continues to be choppy and challenging Gan customer urgency remains low.

Hey, Arjun. Yes, thanks for that question. Look, as both I said and Kate said, the environment continues to be choppy and challenging and customer urgency remains low. More broadly speaking, what we are seeing in second half as customer trends is very similar to what we saw in the first half of 2023. It's not gotten better and it's not gotten worse.

More broadly speaking what we are seeing in second half.

As customer trends is very similar to what we saw in the first half of 2023.

It's not gotten better and it has not gotten worse and when we are looking at our pipeline and we have conversations with customers. We see more decision makers involved in the process more budget scrutiny continued optimization of spend.

And when we are looking at our pipeline and we have conversations with customers, we see more decision makers involved in the process, more budget scrutiny, continued optimization of spend. And deals are definitely.

Deals are definitely clothing, but it takes more conversations more demos and more time now having said that I think I've consistently executed in this type of choppy and challenging environment and when I look at the pipeline going into Q4, but I have conversations with customers a couple of things.

it takes more conversations, more demos and more time. Now, having said that, I think I've consistently executed in this type of a choppy and challenging environment. And...

When I look at the pipeline going into Q4, when I have conversations with customers, couple things tend.

Turned out one is customers are focused on consolidating on fewer platforms to eliminate spend and this is exactly where hub spot value proposition really resonates and we are helping consolidate point solutions for our customers and the second is that we're focused on increasing productivity, especially.

One is customers are focused on consolidating on fewer platforms to eliminate spend. And this is exactly where HubSpot's value proposition really resonates and we are helping consolidate.

point solutions for customers. The second is they're focused on increasing productivity, especially because they're not increasing headcount. And again, our quick time to value and the ease with which they can scale with our products is really helping.

Because.

They're not increasing head count and again, our quick time to value and debt.

Ease with which they can scale with our products is really helping.

So we are going to remain very laser focused on executing in this environment. And we are assuming that this environment will continue into Q4. I don't think that changes our bimodal strategy. In fact, what has been good is that we have been consistently executing on a bimodal strategy to increase volume at the bottom and continue to deliver value at the top and will continue to drive product innovation to be able to win within this environment.

We are going to remain very laser focused on executing in this environment and we are assuming that this environment will continue into Q4.

I don't think that changes our bimodal strategy. In fact, what has been good is that we've been consistently executing on our bimodal strategy to increase volume at the bottom and continue to deliver value at the top and we will continue to drive product innovation to be able to win within this environment.

Thank you.

The next question comes from the line of Samar Samana with Jeffries. Please proceed.

The next question comes from the line of Cimarex Samana with Jefferies. Please proceed.

Great, thank you. Kate, maybe for you, I think the, the creation of NRR quarter of a quarter's really encouraging. I guess if you think about the, the slide at the analyst day where you broke the pieces by what things were changing, consumption versus value, can you maybe help us understand what you saw quarter of a quarter and just maybe what the trend line looks like through the first few weeks of the fourth quarter in which you may be assuming for those two trends.

Great. Thank you.

Maybe for you I think.

The increase in at RR quarter over quarters really encouraging I guess, if you think about the this slide at the analyst day, where you broke the pieces by what things were changing consumption versus value can you maybe help us understand what you saw quarter over quarter and just maybe what the trend line looks like through the first few weeks.

The fourth quarter, and what you might be assuming for those two drugs.

Yeah, sure thing. Thanks, Samad. You rightly indicated. NetNew Arrow was slightly in Q3.

Yes sure thing Thanks Ahmad.

Rightly indicated net new Aero was up slightly in Q3.

The drivers of net revenue retention, we're very much the same ones that we talked about at analyst day, and frankly that we've been talking about for the last three.

The drivers of net revenue retention were very much the same ones that we talked about at Analyst Day and frankly that we've been talking about for the last

sort of four to six quarters here. The highlight continues to be customer dollar retention. Customer dollar retention is holding nicely in the high 80s. We typically see a little seasonal step up in customer dollar retention in Q3. We did see that again this year.

Four to six quarters here.

Highlight continues to be customer dollar retention customer dollar retention is holding nicely in the high eighties.

Typically see a little seasonal step up in customer dollar retention in Q3, we did see that again this year.

The downside here is that we continue to see a challenge in this net upgrade motion. And it's both on more downgrade, so more customers continuing to optimize their spend with HubSpot and also less volume of customers upgrading. And it's all the same motions that we talked about at Analyst Day. On the downgrade side, it is the consumption base.

On the downside here is that we continue to see a challenge in this net upgrade motion.

On more downgrades, so more customers continuing to optimize their spend with hotspot and also less volume of customers upgrading.

And it's all the same motions that we talked about at analyst day on the downgrade side. It is.

The consumption based.

motions of seats and context as well as addition and it is fewer customers adding seats and concepts.

Motions of seats and context as well as additions.

And it has fewer customers, adding seats in contact tiers.

You know, nothing to report in terms of a change in the net revenue retention trajectory in Q4. As I said at analyst ad, I'd reiterate here, in order for us to really see that in flex, we would really want to see the external environment improve, which we think is first gonna show up in downgrade pressure lessening, and then we would see a follow on effect of more customers starting to add to the next step.

Nothing to report in terms of a change in the net revenue retention trajectory in Q4.

As I've said on analyst and I would reiterate here in order for us to really see that as black we would really want to see the external environment improve which we think is first going to show up in downgrade pressure lessening and then we would see a follow on effect of more customers starting to add seats.

Starting to add contact here, so it's largely a function of the external environment turning around.

Starting to add contact here, so it's largely a function of the external environment turn it around.

And I just want to clarify, we talked about net revenue retention being up slightly sequentially, not that new ARR. So just want to make sure that we're clear on that. Thank you.

Yes.

I just wanted to clarify.

We had talked about net revenue retention being up slightly sequentially not that the way I just want to make sure that we're clear cut.

Thank you.

Thank you.

Also, please limit your questions to one question and one follow up.

Also please limit your questions to one question and one follow up.

The next question comes from the lot of Mark Murphy with Jpmorgan. Please proceed.

The next question comes from the lot of Mark Murphy with JP Morgan. Please proceed.

Okay.

Okay.

Thank you so much, and a lot of my congress. Yomani, we continue to hear that the decoupling of sales hub from the Smart CRM is a big positive development and a major unlock for some future opportunities. Can you walk us through the strategic rationale? That word decoupling is how partners were referring to it, by the way. You know, just what was the rationale and how that might open up some new opportunities for companies to engage with HubSpot.

Thank you so much and I'll add my congrats.

How many we continue to hear that the decoupling of sales hub from the smart CRM is a big positive development in our major unlock for some future opportunities can you walk us through the strategic rationale that we're decoupling is.

How partners, we're referring to it by the way.

Just what was the rationale and how that might open up some new opportunities for companies to engage with all the spot.

Hey, thank you, Mark. And I just love that you picked it up, that you're clearly calling out the separation of the smart CRM from

Hey, Thank you Marc and I, just loved that you've picked it up that youre clearly calling out that separation of the smart CRM from.

in a sales hub in particular, but just a hub. And maybe explaining the strategy. So when we went into this year, we said that one, we want to become absolute product and top leaders in terms of our marketing hub sales hub and service hub.

Sales hub in particular, but just the hubs and maybe.

Explaining the strategy. So when we went into this year, we said that one we want to become absolute product and thought leaders in terms of our marketing hub sales hub and service hub and I credit. This too you know Andy Petri, our head of product, but he came in and he said we're going to focus.

And I credit this to, you know, Andy Petri, our head of products, but he came in and he said, we're gonna focus on two or three big use cases for hub. And specifically for sales hub, we pick...

On two or three big use cases for hub and specifically for sales hub, we picked prospecting and deal management and these two are really important because prospecting, obviously increases the productivity of sales reps and deal management with AI.

prospecting and deal management and these two are really important because prospecting obviously increases the productivity of sales reps and deal management with AI and forecasting Improves the effectiveness of sales management and leaders and so those were the two things and You know at at inbound we relaunch sales tab we Reinvented what prospecting and deal management look like and that's gotten You know prettyochem

And forecasting improves the effectiveness of sales management and meters and so those were the two things.

At inbound we relaunched sales hub, we re invented what prospecting and deal management look like and that's gotten pretty significant traction. So the other thing that we did is be separated out smart CRM from each of our engagement top.

So, the other thing that we did is we separated out smart CRM from each of our engagement hub.

The reason is this smart CRM now we've been investing in it for multiple quarters and it's now become a clear unified customer of record that can be customized that can be extended and where people can kind of bring information and continue to expand the use of a bot.

Smart CRM now we've been investing in it for multiple quarters and it's now become a clear unified customer record that can be customized, that can be extended and where people can kind of bring information and continue to expand the use of.

Hubsaught and it's clearly different in value from the engagement hubs and so we separated it out and I I think partners love it customers now have even more clarity and it's going to drive the overall adoption of the customer plant

Clearly different in value from the engagement Thompson, so we separated it out and I'm I think partners love. It customers now have even more clarity and it's going to drive the overall adoption of the customer platform.

Thank you. The next question comes from the line of Brian C. Peterson with Raymond James. Please proceed.

Thank you.

The next question comes from the line of Brian Peterson with Raymond James. Please proceed.

Thanks for taking the questions and all echoed by congrats. Maybe a product question for me. Can you discuss some of the AI announcements coming out of inbound earlier this year? How is that influencing your 2024 roadmap? And anything interesting that came out of the OpenAI event this week as it relates to us.

Hi, Thanks for taking the questions and I'll Echo my Congrats maybe a product question for me can you discuss some of the AI announcements coming out of inbound earlier this year.

How is that influencing your 2024 road map in anything interesting that came out of reopening this week as it relates to Comstock.

Thanks for the question, Brian . So we're really thrilled with the kind of adoption of HubSpot AI after it's launch at inbound. And we're particularly pleased with the repeat usage we're getting out of some of the marketing oriented use cases. And as Yomini mentioned in the opening comments.

Thanks for the question, Brian So, we're really thrilled with the kind of adoption.

AI after its launch.

Inbound and we're particularly pleased with the repeat usage, we're getting out of some of the marketing oriented use cases and as Tommy mentioned in the opening comments. One thing. We've learned is that if you can put these AI features right where people do their work it works and so we're continue to double down on that.

One thing we've learned is that if you can put these AI features right where people do their work, it works. And so we're continuing to double down on that. AI is literally the number one priority on the HubSpot product roadmap going into 2024. We're super excited. And one thing we're going to do is take the lessons from the adoption that we've seen so far. And we're kicking in chat spot. And we're going to kind of weave it through the entire platform. So we have a natural language interface and kind of add the smart and smart CRM within HubSpot. So that's kind of high on the list.

AI is the literally the number one priority on the hotspot product roadmap going into 2024.

Super excited and one thing we're going to do is take the lessons from the adoption that we've seen so far and we're kicking jackpot and we're going to kind of rebuild through the entire platform. So we have a natural language interface and kind of add the smart and smart CRM. We've been hotspots. So that's kind of high on the list.

In terms of opening eye and their recent conference they had just two days ago on Monday.

In terms of opening out in their recent conference. They had just two days ago on Monday.

Super exciting things. Here are things that are most relevant that has, and we've been working with them on preview releases of what just got announced. The number one thing is they launched a new version of their model called GTT4 Turbo, which is as a name implies is a factor. But the thing that's much more exciting about it is that they expanded the context window.

Super exciting things here are things that are most relevant that has and we've been working with them on <unk>.

Releases of what just got announced the number one thing is they launched.

A new version of their model called GTT for Turbo, which is as the name implies is a factor, but the thing thats much more exciting about it is that they expanded the context window.

And without getting too geeky, the context window defines how much data you can pass, how much information, when you prompt the LLM. When you ask a question.

Now getting too geeky the context window defined how much data you can pass how much information when you pump the LLM when you're asking the question and they went from 8000 tokens, which was the default before to 128000 tokens and to put that in context. That's the equivalent of a 300 page book now.

And they went from 8,000 tokens, which was the default before, to 128,000 tokens.

And to put that in context, that'd be equivalent of a 300 page book.

Now here's why that's important for HubSpot. When we're generating, let's say a sale of email, that says, oh, we want to do an upgrade sales with this particular customer, now we can take all the information that's in the HubSpot Smart CRM on this Unified Data Record and take all that context and pass it to the LLM in real time so that when it crafts that message, it does the best job possible.

Here's why that's important for hotspot.

When we're generating let's say of sales E mail that says all we wanted to upgrade sales. This particular customer now we can take all the information that's in the hotspot smart CRM on this unified beta record and take all of that context and pass it to the <unk> in real time, so that when it crossed that message. It does the best job possible, what hasnt even more excited.

what hasn't even more expected. So it's not just the CRM data that we have now, imagine in the future we have clear bit data where we have all this information, all these 200 attributes, all this intense data, we can bring that all together into one single, kind of prompt to the LLM and it can take all that information in real time and craft these really, really pointed effective messages. So super exciting going into 2024. And then one per cake here is that one thing they did announce is that the cost

So it's not just the CRM data that we have now imagine in the future. We have clear bid data, where we have all this information. All these 200 attribute all of this intense data we can bring that all together into one single kind of prompt to the LLS and it can take all that information in real time and copy is really really.

Appointed effective messages, so super exciting going into 2024, and then one for Kate here is that one thing. They did announce is that the cost for all of this is kind of in vacation of their latest model is going down our estimates are somewhere around 50%, 70% based on our usage once it goes into GAA, so lots to be excited about AI as well.

for all this kind of invocation of their latest model is going down, our estimates are somewhere around 50 to 70%. Based on our usage, once this goes into GA, so lots of be excited about AI is.

Massively exciting going into 2024. Thanks for the question.

Matt really exciting going into 'twenty 'twenty four thanks for the question.

Thank you.

The next question comes from the line of Rishi Jalaria with RBC. Please proceed.

The next question comes from the line of receipts malaria with RBC. Please proceed.

A wonderful thanks so much for taking my question. Just wanted to dive a little bit deeper into a clear bit. You know, really exciting acquisition, heard some good things about the company. Can you talk a little bit about how this is going to impact your relationship with other players in the space? Now, including Ximinfo, which is popular to use a long-hub spot. Apollo, we actually saw, I'm just not speaking at Apollo. Yeah.

Wonderful thanks, so much for taking my questions.

Wanted to dive a little bit deeper into clear bid.

Really exciting acquisition heard some good things about.

The company can you talk a little bit about how this is going to impact your relationship with other players in the space.

<unk> been forward just copier to use along hotspot Apollo we actually saw offshore speaking on apollo's.

Yes.

user event earlier today and maybe alongside that, you know, I know privacy is obviously very, very important. How do you think about just dealing with some of the maybe privacy and governance concerns that might come with something that is serving up data? Thank you so much.

User event earlier today, and maybe alongside that.

I know privacy is obviously very very important how do you think about just dealing with some of the maybe privacy and governance concerns that might come with something that is serving up data. Thank you. So much.

Hey Rishi, I'll take that multi-part question, maybe start with the vision and then the competitive landscape and then how we're thinking about.

Hey, Rishi.

I'll take that multipart question, maybe start with the vision and then the competitive landscape and then how we're thinking about.

privacy. Look, we're super excited about Clearbit and how they'll help us accelerate our vision for the customer platform. And what we're doing is we're bringing together this data and powerful AI tools that can consume that data and world-class engagement hubs and that will help our, you know, customers connect and grow better.

Privacy.

Look we're super excited about a clear a bit and how they will help us accelerate our vision for the custom.

Customer platform and what we're doing is we're bringing together the data and powerful AI tools that can consume that data and world class engagement hubs and that will help our.

Customers connected grow better.

And if we step back and think about the rationale for us, the age old problem with CRM is that when you open up the box and set it up, it's empty and our customers want us to pre-fill it with

And if we step back and think about the rationale for us the age old problem with CRM is that when you open up the box and set it up it's empty.

And our customers want us to pre fill it with data on day, one they want us to pre fill it with company data who else can they fall to Intel data, who else is looking to buy their products and services and contact data can be connected and this makes complete sense for our customers and.

They want us to pre-fill it with company data, who else can they sell to? Intent data, who else is looking to buy their products and services and contact data, who do we connect to? And this makes complete sense for our customers. And it solves a huge problem for them. And that's why Clearbit makes sense. Like I just mentioned in the prepared remarks they have.

It solves a huge problem for them that's why it makes sense like I just mentioned in the prepared remarks, they have 20 million company profiles with rich attributes for each of these companies and makes absolute sense, especially in the world of AI and in terms of the competitive.

20 million company profiles with rich attributes for each of these companies and makes absolute sense, especially in the world of AI.

And in terms of the competitive landscape, this is not about us entering the database. This is much more about us accelerating our customer platform vision.

<unk> this is not.

Not about us entering a database. This is much more about us accelerating our customer platform vision and vision that we have articulated is we want to have engagement all powered by a smart CRM powered by data powered by AI that helps our customers grow that's what we are.

And vision that we have articulated is we want to have engagement hubs powered by smart CRM, powered by data, powered by AI that helps our customers grow. That's what we're accelerating. In the word platform.

Accelerating the word platform really means we will continue to operate in a very open ecosystem and if our customers choose to work with zoom info and Apollo we welcome that and we will continue to have a very open.

really means we'll continue to operate in a very open ecosystem, and if our customers choose to work with ZoomInfo and Apollo, we welcome that, and we'll continue to have a very open platform as well as ecosystem.

Platform as well as the ecosystem.

And I think in terms of the final part of your three-part question, which is how do we think about data privacy? Look, we know our customers value having trust in our security privacy.

And I think in terms of the final part of your three part question, which is how do we think about data privacy look we know our customers value having trust in our security privacy practices and our level of commitment to security privacy and governance will not change as we look at integrating.

and our level of commitment to security, privacy, and governance will not change as we look at integrating the data asset. You know, when it came to email, you know, deliverability, we took the right side of the road in terms of

A data asset.

When it came to email deliverability, we took the right side of the road in terms of how to help our customers Delaware email, but do it in a very thoughtful.

how to help our customers deliver emails, but do it in a very thoughtful manner. And that's the same way in which we will look at this as we go into accelerating our vision. Overall, super excited. I have to say that the feedback from customers and partners has been really, really positive in the last week.

Thoughtful manner and that's the same way in which we will look at this as we go into.

Accelerating our vision overall Super excited I have to say that the feedback from customers and partners has been really really positive in the last week.

Thank you.

The next question comes from the line of Alex Zukin with Wolfe Research. Please proceed.

The next question comes from the line of Alex Zuckins with Wolf Research. Please proceed.

Hey, guys, thanks for taking the question. Maybe just a quick two-parter for me. As we think about this macroeconomic environment, I know we're guiding one quarter at a time, but at this point, we're starting to kind of get our models ready for next year. Is it fair to assume that, you know, you're kind of planning for this type of environment to persist and continue? And any things that we should think about or keep in mind as we start tuning our models for next year, or thinking about, you mentioned FX and the headwind there, anything about from either billings or...

Hey, guys. Thanks for taking the question maybe just a quick two parter for me as we think about this macroeconomic environment I know, we're guiding one quarter at a time, but at this point, we are starting to kind of get our models ready for next year is it fair to assume that you're kind of planning for this type of environment persist and continue and anything.

Things that we should think about or keep in mind as we start tuning our models for next year, we're thinking about you mentioned FX and the headwind there but anything about.

From either billings or.

Or.

You know, I don't know, just the retention environment or the putting in clear, but into the numbers, anything there would be super helpful. And maybe just as a adjunct, any thoughts around for next year, as we think about AI monetization pathways, is it more around peering up into more premium hubs? Is it new product modalities? Anything helpful there?

I don't know if the just the retention environment or where are they putting unclear but into the numbers anything there would be super helpful. And then maybe just as a adjunct any thoughts around for next year.

Think about AI monetization pathways is it more around peering up.

Into more pre.

Premium hubs is it new new product modalities.

Helpful. There.

Maybe I'll start and talk through a bit of the, how should we think about the economic environment in setting guidance.

Maybe I'll start and talk through a bit of the how.

How should how do we think about the economic environment in setting guidance.

Certainly, Yamini and I said this in the prepared remarks, it continues to be a very challenging external environment. We believe that that environment will continue to be challenging through the end of this year.

Certainly.

Yeah, I mean, I said this in the prepared remarks at.

It continues to be very challenging external environment we.

Believe that that environment will continue to be challenging through the end of this year.

It's frankly a little too early to talk about next year. We will give, as you know, formal guidance on our Q4 call in February .

It's frankly, it's a little too early to talk about next year, we will give.

Formal guidance on our Q4 call in February.

You know what you should have heard, Yamini says really like we have very clear focus areas. We're focused on product innovation. We're focused on AI. We're executing really well. And we feel really good about how that sets us up when the economy does turn. That's the expectation is that things remain challenging at least through early.

What you should have heard domine phase really like we have very clear focus areas. We're focused on product innovation, we're focused on AI, we're executing really well.

And we feel really good about how that sets us up when the economy does turn that's what the expectation is that things remain challenging at least through early next year.

And I think on the last part of your question, from an AI monetization perspective, really no change from what we walked you all through at Analyst Day. We're really focused on delivering that roadmap. Most of the features that we announced at Inbound are either generally available now or getting close to general availability by early Q1. And that's when we'll share even more specifics about AI, but overall consistent with what we shared with you at the Analyst Day.

And I think on the last part of your question from an AI monetization perspective really no change from what we walked you all through at Analyst day, we're really focused on delivering that roadmap. Most of the features that we announced at inbound are either generally available now are getting <unk>.

Close to general availability by early Q1, and that's when we will.

No sure even more specifics about AI, but overall consistent with what we shared with you at the analyst day.

Thank you.

Thank you.

The next question comes from the line of Brad Fields with Bank of America. Please proceed.

Our next question comes from the line of Brad Sills with Bank of America. Please proceed.

Oh, great. Thank you so much.

Oh great, thank you so much. Wanted to ask a question around the net ad strength. Clearly, Starter has been holding up real nicely through the challenging macro. The question is, why is that, do you think? Is it?

Wanted to ask a question around the net adds strength clearly start or has been holding up real nicely through through the challenging macro well. The question is why is that do you think is it just simply larger customers that might be starting with a higher priced offering like pro are starting with starter in a challenging environment. The plans to go to pro and then what did.

Think about that cohort of customers spend three or four quarters since you've cited strength here and start or.

Is there a cohort of customer in there that you think coming out of the macro we could see some nice acceleration, maybe it's just from a better macro or some of the uptake on AI features that might be going into.

Thrown enterprise version.

Yeah, maybe I will start. Brett, thank you very much. We were very happy with the level of new customer additions for the quarter. You were also right, the increase in the new customer additions quarter over quarter is very much driven by the starter edition. So you heard Yamini talk about the bimodal strategy as being one of the things that's really working for us.

Maybe I will start.

Brett. Thank you very much we were very happy with the level of new customer additions for the quarter. You are also right. The increase in the new customer additions quarter over quarter was very much driven by the starter edition or you heard Dominic talk about the bimodal strategy as being one of the things that's really working for us.

And, you know, as we talked about at analyst day, the goal, the low end of the bimodal strategy is really to maximize the volume of customers that we can bring on to the platform.

And you also you talked about at analyst day, the goal of the low end of the bimodal strategy is really to maximize the volume.

Customers that we can bring onto the platform and so as a result, we are constantly running experiments to try to drive volume into our starter tier we certainly watch the characteristics of those cohorts to make sure that we feel really good about their ability to retain.

And so, as a result, we are constantly running experiments to try to drive volume into our starter tier. We certainly watch the characteristics of those cohorts to make sure that we feel really good about their ability to retain and upgrade.

An upgrade.

You know, this quarter is no different. There were a number of experiments that we ran across.

This quarter was no different there were a number of experiments that we ran across <unk>.

You know pricing and packaging as well as a number of plays that we ran to really mean into

Pricing and packaging as well as a number of plays that we ran to really lean into activation and conversion of free users into starter customers.

activation and conversion of free users into starter customers.

So we're feeling, we're feeling really good about it.

So.

We're feeling we're feeling really good about it.

Yeah.

Thank you.

The next question comes from the line of Gabriela Borges with Goldman Sachs. Please proceed.

The next question comes from the line of Gabriella Bord with Goldman Sachs. Please proceed.

Thanks for taking the question. This is Jake Tittleman on Fragabriela. Congrats on a great quarter. I want to ask the NetAds questions slightly differently. Before the pandemic, HubSpot was adding closer to 15,000 new customers each year. Since then, NetAds have trended over 30,000 annually. Do you view this shift as cyclical or are there structural drivers that lead you to believe HubSpot can sustain this level of NetAds going forward?

Thanks for taking the question. This is Jake <unk> on for <unk>. Congrats on a great quarter I wanted to ask the net ads question slightly differently before the pandemic hub spot was adding closer to 15000, new customers. Each year. Since then net adds have trended over 30000 annually do you view the shift of cyclical or are their structure.

Drivers that lead you to believe hub spot can sustain this level of net adds going forward.

Thanks for the question.

Thanks for the question. I think that it is very purposeful. So we have, you know, you've heard us talk about the fact that

I think that it is very purposeful.

So we have.

You've heard us talk about the fact that when we entered.

When we entered the early stages of the pandemic, we made a change from a pricing and packaging perspective to really dramatically lower the price point for starter. And we were frankly surprised at how sensitive.

The early stages of the pandemic, we made a change from a pricing and packaging perspective to really dramatically lower the price point for starter and we were frankly surprised at how sensitive to that pricing.

to that pricing, potential customers work. And so we have taken that learning and really leaned into it through what we've been referring to as the bimodal strategy, but we are getting better and better at running experiments at that low end to drive volume. And we feel good about our ability to continue to deliver net customer ads, call it at the high end of that seven to 8,000 range that we've been talking about for the last year.

Potential customers work and so we have taken that learning and really leaned into it through what we've been referring to as the bi modal strategy, but we are getting better and better at.

Running experiments at that low end to drive volume and we feel good about our ability to continue to deliver a net customer add call. It at the high end of that seven to 8000 range that we've been talking about for the last couple of quarters.

And maybe, you know, the point to add here is that the success that we see

And maybe you know the point to add here is that the success that we see it's a testament to us becoming a platform of choice for SMB part of the strategy is to.

It's a testament to us becoming a platform of choice for SMBs. Part of the strategy is to...

get companies started early in their digital journey with us, continue to deliver value as a scale. And so that clear strategy and value proposition of.

Get companies started early in their digital journey with us continue to deliver value as they scale and so that clear strategy and value proposition of making it easy to buy and easy to use and easy to scale that is what resonates and so we're pleased with.

making it easy to buy and easy to use and easy to scale that is what resonates and so

We're pleased with that and I think we'll continue with that by model strategy into next year.

And I think that will continue with that bimodal strategy into next year.

Thank you.

The next question comes from Delano Derek Wood with Cowan. Please proceed.

The next question comes from the line of Derrick Wood with Cowen. Please proceed.

Oh, great thanks. The nominee at the upper end of the CRM market in the enterprise, there are a lot of different sales tools being used for things like prospecting, sales, and revenue intelligence. I'm curious, do you see that kind of fragmentation in the SMB mid-market? And when you talk about a focus on prospecting and deal management, this more of a consolidation player or is this more green field than replacing manual effort?

Oh, great. Thanks.

It did.

The upper end of the CRM market and the enterprise there are a lot of different sales tools being used for things like prospecting sales enablement revenue intelligence I'm curious do you see that kind of fragmentation in the SMB mid market and when you talk about a focus on prospecting and deal management. This more of a consolidation.

Play or is this more greenfield than replacing manual efforts.

Derek, I like that. It's all of those. I think in the market that we see, you know, it's certainly, you know, there are customers who've gone through the route of point solution.

Derek I like that it's all of those I think in the market that we see you know it's certainly you know there are customers who have gone through the route of point solutions and they want to be able to consolidate on a single plaque.

and they want to be able to consolidate on a single platform to get better visibility. And the fact that we not only have a market leading sale solution, but it is tightly integrated with a market leading marketing solution placed well within the segments that we serve. And so it's point solution consolidation.

For them to get better visibility and the fact that we not only have a market leading sales solution, but it is tightly integrated with our market leading marketing solution plays well within the segments that we serve and so it's point solution consolidation. The other part of it is that.

The other part of it is that, when we look at the environment right now, it is one where people are looking to optimize their sense while improving productivity. And our sales solution does exactly that. We've been able to integrate it with obviously deeply with marketing, but also make prospecting deal management forecasting much more sophisticated over the past few quarters and it resonates. And there's pretty clear momentum in terms of sales hub. And in fact...

You know when when we look at the environment right now.

Is one where people are looking to optimize their spend while improving productivity and our sales solution does exactly that.

Been able to integrated obviously deeply with marketing, but also make prospecting deal management forecasting much more sophisticated over the past few quarters and address nights and there's pretty clear momentum in terms of sales hub and in fact sales hub as a percentage of three plus hubs jud.

sales hub as a percentage of 3 plus hub.

jumped from 49% last year to 56% this year. So clear momentum based on the leadership that we have in the market.

<unk> from 49% last year to 56% this year, so clear momentum based on the leadership that we have in the market.

Thank you. The next question comes from the line of Keith Wife with Morton Stanley. Please proceed.

Thank you.

Next question comes from the line of Keith Weiss with Morgan Stanley. Please proceed.

Excellent. Thank you guys for taking the question. And congratulations on a really nice quarter and a difficult environment. I wanted to ask a A2 parter.

Okay excellent. Thank you guys for taking my question and congratulations on a really nice quarter in <unk>.

<unk> environment.

That's good.

A two parter.

A lot of new functionality and new product announced at the user conference earlier. That can be a camera.

A lot of new functionality and new product announced at the.

User conference.

Earlier.

Back in September.

And one of the things you guys talked about was the ability for them to pull people to sort of higher level Skus and whatnot.

And one of the things you guys talked about was the ability for that to pull people up.

to sort of higher level skews and whatnot, particularly the AI functionality. So part one, have you seen any of that start to impact numbers as of yet, or perhaps average pricing as of yet? Part two, behind all that product, is there going to be increased investment in distribution or marketing or whatnot? One of the highlights of the past year has definitely been the margin expansion this quarter, 700 based 20 year on years, but it's definitely above expectations. Is that durable on a go-alword basis, or should we be expecting more investment behind all this innovation?

The AI functionality.

One have you seen any of that.

Our two impact.

Numbers as of yet or perhaps an average pricing as of yet part two behind all of that product.

Is there going to be increased investment in distribution or marketing or whatnot. One of the highlights of the past year has definitely been the margin expansion this quarter 700 basis points year on year, but it was definitely above expectations.

Is that durable on a go forward basis or should we be expecting more investment behind all of this innovation. Thank you.

Thanks.

Oh, maybe get started on the two-part question. On the first part, overall, you know, product and pricing philosophy stays the same. From a product perspective, our philosophy is to deliver powerful tools that are just easy to use. And everything that we announced at Inbound and we continue to innovate on, consistently drives both power and ease of use.

I'll, maybe I'll get started on the two part question on the first part our.

Overall product and pricing philosophy stays the same from a product perspective, our philosophy is to deliver powerful tools that are just easy to use and everything to be announced at inbound and we continue to innovate on consistently drives both power and <unk>.

Of us specifically on AI as I mentioned, a little bit earlier, Keith we're still in the March towards getting a lot of the features from beta to general availability and so we've not yet seen that impact pricing and that will be what will continue to focus on in terms of driving usage.

Specifically on AI as I mentioned a little bit earlier key.

We're still in the march towards getting a lot of the features from beta to general availability. And so we've not yet seen that impact pricing and that will be what we'll continue to focus on in terms of driving usage and adoption as we go into next year. So you'll hear more about AI pricing in early Q1 and then we'll talk about the trends that we're seeing on the impact of the scene action on that.

Adoption as we go into next year, so you'll hear more about AI pricing in early Q1, and then we'll talk about the trends that we're seeing on the impact of ASP next year on that.

But the strategy that you articulated is exactly the case.

The strategy that you articulated is exactly the case and then in terms of how we think about scaling distribution and how we're looking at investments look we do have.

And then in terms of how we think about scaling distribution and how we're looking at investments, look, we do have great modes.

Great moat.

And the moat that we have in distribution is our ability to scale product led sales lead and partner driven and we want to do it in a way where they get efficient overtime and Kate.

<unk> articulated a number of areas at the analyst day and as we look at the next few years, we want to balance growth and profitability and the biggest area in terms of profitability is sales and marketing efficiency and so we'll continue to make investments. So we increase our distribution mode, but.

We do it in an efficient manner.

Thank you.

Thank you.

Next question comes from the lot of Michael Purin, but we'll as far go. Please proceed. Hey, great. Thanks. Appreciate you taking the question. And I want to go back to the second part of the last one. And just ask Kate, on margin, you've shown more meaningful expansion this year in this quarter, even with inbound. We're seeing a bit more uptick. It also looks like head count ads are coming back. I'll be at a modest pace. Can you just walk us through the trade-offs you're evaluating going forward as we're still in this? What sounds like elongated macro?

The next question comes from the lot of Michael Purin, but well fargo. Please proceed.

The next question comes from the lot of Michael <unk> with Wells Fargo. Please proceed.

Hey, great. Thanks. Appreciate you taking the question and kind of want to go back to the second part of the last one and just ask Kate on margin. You've shown more meaningful expansion this year in this quarter, even with inbound. We're seeing a bit more up to it. It also looks like head count ads are coming back. I'll be at a modest pace. So can you

Hey, great. Thanks, I appreciate you taking the question and kind of want to go back to the second part of the last one and just ask Kate on margin you have shown.

More meaningful expansion this year and this quarter, even with inbound.

We're seeing a bit more uptick it also looks like head count adds are coming back, albeit at a modest pace can you just walk us through the tradeoffs, you're evaluating going forward as we're still in this it sounds like elongated macro.

Walk us through the trade-off you're evaluating going forward as we're still in this, what sounds like elongated macro and what leads you to kind of turn those dials between adding...

What leads you to kind of.

Turn those dials between adding heads and investing into the product side and.

So pushing more margin if if growth remains more challenged.

Yeah, thank you very much for the question. You know, we do continue to strive for a real balance in growth and profitability. A lot of the profitability that we are delivering this year is the result of the fact that we pulled back pretty dramatically on hiring in the back half of last year. We did a risk at the beginning of this year. And we've been very focused and targeted on where we're adding impact.

Yes. Thank you very much for the question.

We do continue to strive for a real balance in growth and profitability a lot of the profitability that we are delivering this year as a result of the fact that we pulled back pretty dramatically on hiring in the back half of last year, we did a RIF at the beginning of this year.

It's very focused and targeted on where we're adding investment.

The first place we're going to continue to add investment is in product and engineering to continue to drive innovation and you're seeing that translate into you know product introduction and over time long term and sustainable growth. We're going to continue to invest in the go to market to make sure that we have the capacity to.

First place we're going to continue to add investment is in product and engineering to continue to drive innovation and youre seeing that translate into product introduction and over time long term and sustainable growth, we're going to continue to invest in the go to market to make sure.

We have the capacity to.

Two.

service, the demand that we are seeing. And we're going to continue to invest an internal product, internal systems, automation, and AI to drive some of the continued efficiency over the next three to five years, as we talked about at Animal Health Center. Bye.

Service the demand that we're seeing and we're going to continue to invest in internal product internal systems automation and AI to drive some of the continued efficiency over the next three to five years.

As we talked about at analyst day.

Thank you.

The next question comes from the line of Josh Riley with Meet Him and Company. Please proceed.

Our next question comes from the line of Joshua Reilly with Needham and company. Please proceed.

Hi, This is Ron <unk> on for Josh Thanks for taking the question and congrats on the quarter.

Hi, this is Ramra Leon for Josh and Mr. Taylor question and grats on the quarter. You know, if you take a look at your tech customers compared to non tech, every single, every single greater calling.

Take a look at your tech customers compared to non tech.

Have you seen a greater calling in seats over this current cycle or has it been fairly broad and if we can.

over this current cycle, or has it been fairly broad? And of weakness, you know, in the broader context.

And the broader economy continues to spread is there a lag where non tech customers need to take another cycles, calling sheets, so where does the supercuts already taken by customers. Thanks.

bread. Is there a like where non tech customers need to take another cycle of cooling seats?

I think for the question, you know, we talked in the past about the diversity of our customer base and that just remains true. We have a very highly diversified customer base across industries. Software is our largest, which remains sort of not mid to high teens in terms of the percentage of ARR. And we have not seen any meaningful shift in the composition of our install base ARR over

Yeah. Thanks for the question.

<unk> talked in the past about the diversity of our customer base not just remains true.

We have a very highly diversified customer base across industries.

<unk> is our largest which but remains sort of in that mid to high teens in terms of the percentage of <unk> and we have not seen any meaningful shift in the composition of our installed base.

Hi.

Thank you. The next question comes from the lot of Michael Turtis. Would Key Corp please proceed?

Thank you.

Next question comes from the line of Michael Wood.

With Keycorp. Please proceed.

Thanks very much, Saul Korder. So first, Kate, I know no guidance for next year, but can you give us something around Clearbit in terms of, is it a kind of a low, double digit, and millions in terms of ARR contribution? Just something to give us some sense of whether there's any dilution there. And then, for Yamini, if I can add two parts.

Thanks, very much solid quarter so.

Great.

No guidance for next year, but can you give us something that's around.

A clear but in terms of this is a kind of a low double digit.

Millions in terms they are a contribution to something to give us some sense of whether there is any dilution there and then predominate if I can add two part.

How do you balance that simplicity plus sophistication of the new products as you roll out such that you don't alienate the base and your appeal?

How do you balance that simplicity plus sophistication of the new products as you pull up such that you don't alienate the basin.

Appeal of market.

Yeah, I'll start and I'm sorry to disappoint you, but we are one week post signing of the acquisition of ClearBet. We have not yet closed. We are expecting that we will close by the end of this year, but that obviously means that we will own ClearBet for a very short period in 2023. And so not surprisingly, the minimum contribution in terms of revenue or any margin impact.

Yeah, I'll start and I am sorry to disappoint, you, but we are one week.

Timing of the acquisition of clear, but we have not yet closed.

We are expecting that we will close by the end of this year, but that obviously means that we will unclear, but for a very short period in 2023.

So not surprisingly de Minimis contribution in terms of revenue or any margin impact.

In terms of 2024, we'll be more explicit with some financial targets or implications of the acquisition once we've closed it, likely on our call. And.

Turning to 2024.

We'll be more explicit with some financial.

Targets are implications of the acquisition once we've closed it.

On our call in Q4.

Yeah and in terms of <unk>. The second part of your question on how we balance the power and ease we just have to do it carefully and we have conversations with our products and UX leaders and are they.

Yeah, and in terms of the second part of your question on how we balance the power and ease, we just have to do it carefully. And we have conversations with our products and UX leaders, and they always are like, hey, you really want us to have a consumer like...

They always are like Hey, you really want us to have a consumer like steel at the lower end for F&B, but you want the sophistication of really amazing products at the top end and the answer is yes. We want you to do that so that is a feature not a bug in terms of what they're asking you to do.

feel at the lower end for S&B, but you want the sophistication of really amazing products at the top end? And the answer is yes, we want you to do that. So that is a feature, not a bug, in terms of what we're asking you to do. And so what has happened as we have implemented our bimodal strategy is we understand that in order for someone to get started,

So what has happened as we have implemented a bimodal strategy as we understand that in order for someone to get started very early in their digital journey. It just needs to be Super simple very intuitive take 15 minutes to set up a website 60 minutes to open up in Unbox CRM and get.

very early in their digital journey. It just needs to be super simple, very intuitive. Take 60 minutes to set up a website, take 60 minutes to open up and unbox CRM and get going on it. And we want that experience. In fact, we'll.

Going on it and we want that experience in fact, we'll keep improving that experience and that actually plays a lot as you know.

keep improving that experience. And that actually plays a lot as, you know, we continue to build sophisticated features. And internally, we talk about opinionated customization.

We continue to build sophisticated features and internally we talk about opinionated customization.

So, you know, a lot of software typically ends up becoming unreal because the customization takes over. And internally, we really talk about opinionated customization and how do you deliver something that is simple, opinionated, but really, really powerful. And that's super intentional. Huge kudos to our product and UX organization. And Darma, feel free to add here. Yeah, one thing to add here is that, you know, this...

You know a lot of software it typically ends up becoming unwieldy because like optimization takes over and internally, we really talk about opinionated customization and how do you deliver something that is simple opinionated, but really really powerful and that's super intentional huge kudos to our product in.

<unk> organization and feel free to add one thing to add here is that.

One thing to we're most proud of is that we didn't wake up a month or a quarter ago. It's said, wouldn't it be nice to have an easy to use product? We've had 17 years of conviction around SMB. We deliberately chose it and we've been working for those 17 years to kind of maintain that ease of use, even as we add more power to top end. And this is where the bi-modal strategy really shows up. So this is not an optional thing, right? It's like, oh, it would be nice to have an easy to use product.

One thing that we're most proud of is that we didn't wake up a month or a quarter ago. So wouldn't it be nice to have an easy to use product. We've had 17 years of conviction around F&B, we deliberately chose it and we've been working for those 17 years to kind of maintain that ease of use even as we add more power to the top end and this is where the bimodal strategy really shows up. So this is not an optional thing right.

Oh, it would be nice to have an easy to use product.

we kind of force our hand and we kind of make ourselves have that discipline, because if we could not keep that ease of use there, the bimodal strategy just would not work. So it's 17 years of effort by the product team to continue to drive that ease of use while continuing to kind of add sophistication to the top end. I'm super proud of the team.

Kind of forced our hand, we kind of make ourselves have that discipline, because if we could not keep that ease of use there the bimodal strategy would not work.

So.

19 years of effort by the product team to continue to drive that ease of use while continuing to kind of ask specification of top and I'm Super proud of the team.

Thank you.

The next question comes from the line of tolerance with Citigroup. Please proceed.

The next question comes from Nilana Talarac with Citigroup. Please proceed.

Okay.

Yes, thanks for taking my question. I'm curious on the upmarket and enterprise momentum that you're seeing. If you could just kind of comment on what you're seeing for Q4, especially as it relates to some large renewals that, you know, you're seeing at an incumbent, you know, are you seeing similar sales cycle issues and challenges and expansion? But if you could just kind of compare and contrast what you're seeing upmarket relative to your core customer base. Thank you.

Yes, Thanks for taking my question I'm curious on the upmarket and enterprise.

The momentum that Youre seeing if you could just kind of comment on what youre seeing for for Q4, especially as it relates to some large.

Renewals that you.

You're seeing it at an incumbent.

Are you seeing similar sales cycle issues and challenges and expansion, but if you could just kind of compare and contrast.

What you're seeing up market relative to your core customer base. Thank you.

I think it's good, a good question. In terms of upmarket, the customer trends are very consistent with what we broadly said.

I think it's a good question in terms of upmarket the customer trends are very consistent with what we are broadly said, which is when I look at our pipeline. We look at the market customers are there's a lot of engagement. There's a lot of interest, especially if customers are looking to consolidate on fewer platform and optimize their spa.

which is when I look at the pipeline, we look at market customers, there's a lot of engagement, there's a lot of interest.

Ben.

you know, we come into the picture, the thing is it does take few more conversations, few more demos, few more decision makers in order for them to get approval. But maybe more broadly, if I step back and think about our upmarket momentum, we've been focused on upmarket, you know, for more than a few quarters, both from a product as well as from a go-to-market perspective. Our product has gotten much better and it's meeting the needs of upmarket customers with.

We come into the picture. The thing is it does take few more conversation few more dabble a few more decision makers in order for them to get approval, but maybe more broadly if I step back and think about our upmarket momentum.

We've been focused on up market.

For more than a few quarters, both from a product as well as from a go to market perspective, our product has gotten much better and it's meeting the needs of upmarket customers with more customization more admin features in fact, there's even more of that coming up that helps our product be easy and powerful that's a.

Our product has gotten much better and it's meeting the needs of upmarket customers with

easy and powerful. That's a differentiator. The perception of market has also clearly improved. We are gaining momentum not just within the marketing organization, but other parts of the organization, and our ability to co-sell with partners and deliver value to customers of market is also great. So there is momentum both on the product side as well as customer driven, but we continue to see very similar trends up market as we have seen in the bulk of food days that on sites we look at with viewers of

Differentiator the perception upmarket is also clearly improved we are gaining momentum not just within the marketing organization, but other parts of the organization and our ability to cross sell with partners and deliver value to customers up market is also a great. So there is momentum.

Both on the product side as well as customer driven but we continue to see you know a very similar trend upmarket as we have seen in the bulk of hub spot customers right.

Thank you.

Thank you.

The next question comes from the line of David Hines with Chemicord.

The next question comes from the line of David Hynes with Canaccord.

You May proceed.

Hey guys, congrats on the quarter. Maybe another one on unclear bit.

Hey, guys congrats on the quarter, maybe another one on unclear but.

The pricing appears to be volume-based, it's not a ton of color on their website. Can you give us a sense for like a range of potential spend, their average customer might generate if they were to adopt clear bit? And I guess like, is that current pricing convention how you plan to fold it into HubSpot any color they would?

The pricing appears to be volume based and not a ton of color on their website can you give us a sense for like a range of potential spend there your average customer.

Mike generate if they were to adopt queer eye and I guess like is that current pricing convention, how you plan to photos into hubs, but any color there would be interesting.

Yeah, thank you. This is Yamini. I'll start well.

Yeah. Thank you. This is yamana I'll start well the the deal still needs to go through the regulatory approval process. It can take a few weeks or longer so between now and closing we're not being that beat there and nothing changes once it close as you can expect a couple of integration phases, where.

can take a few weeks or longer. So between now and closing, we're not digging that deep there and nothing changes. Once it closes, you can expect a couple of integration phases where we'll share a lot more about the pricing strategy. But the initial phases, we'll look to get Clearbit data into our customer base. And Clearbit is already in our app market. They already have an integration with HubSpot. They've already been working with our customers. So I think it'll naturally continue with what they currently have. And then medium term to longer term, we'll more seamlessly integrate their data into HubSpot's products and use cases. And again, our vision is really how do we accelerate our customer platform with this data. And so we'll be very thoughtful and in both in terms of pricing strategy, but also go to market. And we'll share a lot more once the deal has closed. Thanks, Yamini. Hey, Tia, I think we've got time for maybe.

We'll share a lot more about the pricing strategy, but the initial phases, we'll look to get their big data into our customer base and turbot is already in our App market are they already have an integration the tub thought they've already been working with our customers. So I think it'll naturally continue with what they currently.

And then medium term to longer term will more seamlessly integrate their data into hotspot products and use cases and again our vision is really how do we accelerate our customer platform.

With this data and so we'll be very thoughtful and in both in terms of pricing strategy, but also go to market and we'll share a lot more once the deal has closed.

Thanks, Yalmone. Hey, Tia. I think we've got time for maybe one more question. I know we have a bunch of people in the queue, but time for one more. Thank you.

<unk> I think we've got time for maybe one more question I know, we have a bunch of people in the queue, but.

One mark Thank you.

Absolutely.

The last question is from the line of Ryan McWilliams with Barclays. Please proceed.

The last question from the line of Ryan Macwilliams with Barclays. Please proceed.

Yeah.

Just on your contract duration, are you seeing any customers at this point, just from one year to the monthly contracts? Just asking about the gap between, you know, the constant currency revenue growth and the constant currency billings growth? And then are you also seeing any differences in growth contribution from your direct sales force compared to your channel ecosystem this quarter versus the quarter prior?

Hey, guys. Thanks for taking the questions.

Just on your contract duration are you seeing any customers at this point just from one year to have any more.

Contracts.

Just asking about the gap between them.

Constant currency revenue growth and the constant currency billings growth and then are you also seeing any differences in growth contribution.

From your direct sales force compared to your channel ecosystem this quarter versus the quarter prior.

Yeah, thanks for the question. We have been talking about duration for a number of quarters now as we talk about billings and what we're seeing this quarter, what we saw in Q3 is very consistent with what we are have been seeing for quite a bit of time now, which is a slight reduction in overall billing duration of the customer base. So nothing new there.

Yeah. Thanks for the question, we have been talking about duration for a number of quarters now as we talk about billings and what we're seeing this quarter. What we saw in Q3 is very consistent with what we have been seeing for quite a bit of time now which is a slight.

Reduction in overall billing duration.

The customer base, so nothing new there.

In terms of all this all close about, in terms of the partner versus direct contribution, again, very similar, you know, partners continue to represent, you know, in and around 40% of the contribution to the business, they are an important channel for us and we'll continue to be so. Thank you.

In terms of I'll, just I'll close it out in terms of the partner versus direct contribution again very similar you know partners continue to represent in an around 40% of the contribution to the business.

Are an important channel for us and will continue to visa.

Yeah.

Sure. Thank you.

Thank you.

There are no additional questions left at this time. I will now hand it back to you, Manny, for close remarks.

There are no additional questions at this time I will now hand, it back to you Amy for closing remarks.

Thanks everyone. I really appreciate all the effort by our employees, partners, and thank you for your support. We'll speak to you all in the new year.

Ah Thanks, everyone I really appreciate all the effort by our employees partners and thank you for your support will speak to you all in the new year.

That concludes today's conference call. Thank you. You may now disconnect your line.

That concludes today's conference call. Thank you you may now disconnect your line.

Goodbye.