Q3 2024 HubSpot Inc Earnings Call

The End

Liz: Good afternoon and welcome to the HubSpot Start Quarter 2024 earnings call. My name is Liz and I will be our operator today. At this time, all participants lines are in listen only mode, and there will be an opportunity for questions and answers after management's prepared remarks.

If you'd like to enter the queue for questions, you may do so by dialing star, followed by one, one, on your telephone keypad.

I would now like to hand the conference over to Senior Director of Investor Relations, Ryan Burkart. Please go ahead.

Ryan Burkart: Thanks operator.

Ryan Burkart: Good afternoon and welcome to HubSpot's 3rd quarter 2024 earnings conference call.

Today we'll be discussing the results announced in the press release that was issued after the market closed.

With me on the call this afternoon is Yamini Rangan, our Chief Executive Officer, Dar Meshaw, our co-founder and CTO, and Kate Bueker, our Chief Financial Officer.

Ryan Burkart: Before we start, I'd like to draw your attention to the safe harbor statement included in today's press release.

During this call, we'll make statements related to our business that may be considered forward-looking within the meaning of Section 27A of the Securities Exchange Act in 1933 as amended and Section 21E of the Securities Exchange Act in 1934 as amended.

Ryan Burkart: All statements, other statements of historical factor, forward-looking statements, including those regarding management expectations of future financial and operational performance and operational expenditures.

Executive Growth, FX Movement, and Business Outlook, including our financial guidance for the fourth fiscal quarter and full year 2024.

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

Please refer to the cautionary language in today's press release in our Form 10Q, which will be filed with the SEC this afternoon for discussion of the risks and uncertainties that could cause actual results to differ materially from expectations.

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

The Gap Financial Measure most directly comparable to each non-gap financial measure user discussed and a reconciliation of the differences between such measures can be found within our third quarter of fiscal year 2024 earnings press release in the investor relations section of our website.

Ryan Burkart: Now, it's my pleasure to turn the call over to HUMSplot's Chief Executive Officer Yamini Rangan. Yamini?

Yamini Rangan: Thank you, Ryan and welcome everyone to the call. I'll start by discussing our Q32024 results and the key trends driving our momentum.

Yamini Rangan: Then, all given update on the product launches at Inbound and the feedback from our customers. A wrap by highlighting how we are setting our sales apart as a leading customer platform or scaling companies.

Yamini Rangan: Let's talk in!

Yamini Rangan: Q3 was another strong quarter for Hubsbyq, but revenue is going 20% year over year in constant currency.

Yamini Rangan: We delivered not a quarter of significant operating margin growth with over 200 basis points of margin expansion year over year, driving our operating margin to 19%.

Yamini Rangan: Total customers grew to 238,000 customers globally, driven by 10,000 net customer additions in the quarter. I am thrilled to see customers continuing to consolidate on hotspot as their customer platform, driven by our focus on customers and our pace of product innovation.

Yamini Rangan: In the Upmarket segment, we continue to see strong momentum in large deals and multi-hubwinds, trends that have remained consistent throughout the year.

Yamini Rangan: Two main factors are driving larger deals. First, our product market split has improved significantly in up market and second, our platforms ease of use and ability to deliver quick results resonate with scaling companies.

Yamini Rangan: Deserting Up Market fires, wants lower cost, high value and great adoption in a matter of week.

Yamini Rangan: We deliver on all of these, making them spot an easy choice for them.

Yamini Rangan: Manta Habwin, or driven by customers looking to consolidate their text act, and with a level of innovation in our hubs, like content hub and service hub.

Yamini Rangan: In Q3, more than 50% of our new business in pro-plus tiers came from customers using 3 or more hubs.

Yamini Rangan: Additionally, over 40% of our install base of customers now use all three core hubs, marketing, sales and service, highlighting the value our customers find in hubspot Unified Customer Platform.

Yamini Rangan: It has been a great year for content hub with rapid growth driven by AI innovation.

Yamini Rangan: We added video capabilities to our popular content remix feature and launched content agent that helps create and personalized content.

Yamini Rangan: Customers are quickly adopting these AI features to create lining pages, videos and blog posts, and they're seeing immediate value.

Yamini Rangan: For example, franchise brokers association, our customer who connects great leaders with franchise opportunities, increased content production by 250% and improve organic elite generation by 216% using tools like our blog writer and content remakes.

Yamini Rangan: The level of innovation with AI features in content hub has accelerated growth and the attached rate to marketing hub is strong at nearly 50%.

Yamini Rangan: In Service Hub, we introduce new features to better support larger customers, including a customer agent that helps answer customer questions, a new customer success workspace to help teams improve retention and enhancements to the help desk.

Yamini Rangan: These innovations are driving fire attached and upgrade link.

Yamini Rangan: Customers, appreciate having tickets and conversations in one workspace, which is making them more productive.

Yamini Rangan: With the level of innovation and recent launches targeted at customers with larger service teams, we've seen customers with 100 plus service hub seats grow 60% year over year.

Yamini Rangan: Overall, I am thrilled with the progress we are making across product innovation and go to market execution to drive up market momentum.

Yamini Rangan: In the lower end of our segment, we've continued to drive strong customer growth by improving our product and pricing.

Yamini Rangan: Our pricing strategy is working.

Yamini Rangan: We lowered the seat price to make it easy for customers to get started and we removed the feed minimum to make it easy for customers to upgrade and grow with HubSpot

Yamini Rangan: We made significant progress in driving higher volumes of customers, which is now off-sitting expected ASB decline.

Yamini Rangan: We've also improved our free and starter tiers to increase conversion rate.

Yamini Rangan: We added personalized upgrade prompts throughout the customer journey to encourage more customers to move from free to starter and drive conversion rates. In addition, we relaunch the starter tier in July which is improved customer experience.

Yamini Rangan: All of these changes have helped us drive net customer growth in the segment.

Yamini Rangan: Now the highlight of Q3 was of course our annual Inbound Conference where we launched a significant set of AI innovations that were very well received by our customers and partners. The event was a huge success attracting over 12,000 in-person attendees and over 40,000 online.

Yamini Rangan: The conference and the campaigns following have generated nearly 1 billion impressions, creating tremendous momentum as it closed out Q3.

Yamini Rangan: While in Bamshok is over 200 new innovations, the two standout moments where the launches of brief and brief intelligence.

Yamini Rangan: Here's a quick recap of what we launched in the customer feedback so far. At Inbound we launched Breeze, which is HubSpot AI that powers the entire platform, including Copeland, Agents, new features and an aging marketplace.

Yamini Rangan: Our strategy is to embed AI into every hub and across the entire platform and democratize AI for scaling companies.

Yamini Rangan: Since the launch, we have seen a notable increase in AI awareness, adoption and usage.

Yamini Rangan: AIAF Awareness within HubSpot grew by 13% quarter over quarter with 2 thirds of Enterprise and half of ProCustomers engaging with AI features.

Yamini Rangan: Co-pilot RAI Assistant has resonated well, particularly with startup customers who use it to summarize CRM data and objects, rewrite text and generate insights from their customer data.

Yamini Rangan: Co-Pilot is now in public beta and we are seeing repeat usage with 43% of users which is a strong start.

Yamini Rangan: We also launched four agents at In-Bam, Social, Content, Prof-Specting and Customer. Those who are in beta, customers are already seeing value.

Yamini Rangan: For example, Kaplan Early Learning Company

Yamini Rangan: is using a customer agent to enable 25-30% of their customers to self-serve. Reducing average ticket response time by 30%.

Yamini Rangan: More House College is using our content agent to create blogs with best practices which has resulted in 30% increase in page views and 27% more time spent on their site. Exactly the kind of results content marketers are looking to drive with AI today.

Yamini Rangan: And we know AI is only asked good as the data the power of it, which is why we also launched brief intelligence to provide our customers with the best possible data about their customers.

Yamini Rangan: To recap, breathe intelligence to three things.

Yamini Rangan: It enriches company and contact data with over 200 million data points provides buyer-intensignals to prioritize prospects and when those prospects visit their website, Shortrun's form to increase conversion, all at the box in the spot.

Yamini Rangan: While this is still in beta, it has been ungated now for all customers and there is clear into the other.

Yamini Rangan: Customers are using it for lead scoring to seize the company in their ideal customer profile, lead routing to send leads to the right reps, segmentation and personalization to ensure the right messaging gets to the right person.

Yamini Rangan: It's early days, but the trends from our September cohort are strong, with high activation and repeat usage rate.

Yamini Rangan: And finally, let's talk about our recent acquisition of cash flow and how we are advancing our commerce vision.

Yamini Rangan: Everything we do at HubSpot is in service of one clear goal, solving for the customer.

Yamini Rangan: In 2023, we launched commerce hub based on the beliefs that for businesses to grow, they not only need customer data, but also need transaction data. What they bought, when they paid, how long they have until renewal.

Yamini Rangan: We've made progress by offering simple billing and payment with commerce hub, processing more than one billion in GMD with strong, year-over-year growth in enrollment.

Yamini Rangan: By acquiring cash law, we're doubling down to provide subscription management and robust configuration pricing and quoting CPQ tools right in Huntspot.

Yamini Rangan: Radnines, our customers will be able to close the faster and increase revenue while having their customer and transaction data in one place.

Yamini Rangan: Sarika and Brian, the founders of Cashflow, have decades of experience in the space and have built a high-performing team focused on removing the friction when a prospect decides to purchase.

Yamini Rangan: One of HubSpot's competitive advantages is having a crafted product and that is a promise we intend to keep with acquisitions.

Yamini Rangan: To wrap up, we doubled down on product innovation and we are leading with AI and data.

Yamini Rangan: We understand what it takes to help SMBs grow. A platform that is easy, fast, and unified. And that is exactly why our customers are consolidating on HubSpot as their platform of choice.

Yamini Rangan: With our relentless focus on innovation and solid momentum in Q3, I'm more confident than ever in HubSpot's durable growth.

Yamini Rangan: A huge thank you to all HubSpotters around the world for staying focused on our customers every single day.

Ryan Burkart: Thanks, Yamini. Let's turn to our third quarter 2024 financial results.

Yamini Rangan: Q3 revenue grew 20% year-over-year in both constant currency and on an as-reported basis.

Yamini Rangan: Subscription revenue grew 20% year-over-year while services and other revenue increased 28% on an as-reported basis.

Yamini Rangan: Q3 domestic revenue grew 20% year-over-year. International revenue growth was 21% in constant currency and 20% as reported, now representing 47% of total revenue.

Yamini Rangan: We added over 10,000 net new customers in Q3, ending the quarter with a total of 238,000 customers growing 23% year over year.

Yamini Rangan: We saw a healthy balance of low-end customer additions across starter and professional tiers this quarter, driven by the seats pricing model change.

Yamini Rangan: As a result, we continue to see a headwind to ASRPC for more customers getting started at lower initial price points.

Yamini Rangan: More multi-hub and larger deals are offsetting these lower ASPs.

Yamini Rangan: And ASRPC growth, excluding our starter tier, is in the mid-single digits.

Yamini Rangan: We continue to see healthy customer dollar retention rates in the high 80s in Q3. Net revenue retention held flat sequentially, driven by continued improvements and downgrades, and early positive momentum in seed upgrades, offset by continued headwinds across our other upgrade motions.

Yamini Rangan: Calculated billings were $681 million in Q3, growing 20% year-over-year in constant currency and 24% on an as-reported basis.

Yamini Rangan: The significant weakening of the U.S. dollar at the end of the quarter and its impact on deferred revenue resulted in an overall four-point FX tailwind to as-reported billings growth.

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

Yamini Rangan: Q3 operating margin was 19%, up two points compared to the year-ago period.

Yamini Rangan: This reflects our continued progress and driving efficiencies in our go-to-market and product infrastructure, as well as a $7 million catch-up benefit related to R&D credits.

Yamini Rangan: Net income was $117 million in Q3, or $2.18 per fully diluted share.

Yamini Rangan: Free cash flow was $129 million in Q3 or 19% of revenue.

Yamini Rangan: Finally, our cash and marketable securities totaled $2.1 billion at the end of September.

Yamini Rangan: Before I dive into guidance, I wanted to touch quickly on the macro environment.

Yamini Rangan: We continue to operate in a value-conscious buying environment, consistent with what we've seen throughout 2024. Our Q4 guidance assumes this will persist through the end of the year.

Yamini Rangan: With that, let's review our guidance for the fourth quarter and full year of 2024.

Yamini Rangan: For the fourth quarter, total as reported revenue is expected to be in the range of $672 to $674 million, up 16% year-over-year at the midpoint.

Yamini Rangan: We expect foreign exchange to be a one-point tailwind to as-reported revenue growth in the quarter.

Yamini Rangan: Non-GAAP operating profit is expected to be between $128 and $129 million.

Yamini Rangan: Non-gap diluted net income per share is expected to be between $2.18 and $2.20.

Yamini Rangan: This assumes 53.8 million fully diluted shares outstanding.

Yamini Rangan: And for the full year of 2024.

Yamini Rangan: Total as reported revenue is now expected to be in the range of $2.597 to $2.599 billion, up 20% year-over-year.

Yamini Rangan: We continue to expect foreign exchange to be roughly neutral to as reported revenue growth for the full year.

Yamini Rangan: Non-GAAP operating profit is now expected to be between $455 and $456 million.

Yamini Rangan: Non-GAAP diluted net income per share is now expected to be between $7.98 and $8.00. This assumes 53.4 million fully diluted shares outstanding.

Yamini Rangan: As you adjust your models, please keep in mind the following.

Yamini Rangan: We now expect CapEx as a percentage of revenue to be roughly 5% and free cash flow to be about $420 million for the full year of 2024.

Yamini Rangan: And finally, on November 1st, we successfully closed our acquisition of Cashflow, a leading B2B subscription billing and CPQ company.

Yamini Rangan: We expect a de minimis impact to revenue in Q4 from the acquisition and a slight headwind to expenses.

Speaker Change: Like Yamini, I'm excited about the value cash flow will create for our Commerce Hub customers by making it easy for them to send quotes, close deals, and get paid.

Yamini Rangan: With that, Operator, let's please open up the call for questions.

Speaker Change: Thank you. If you'd like to ask a question, please dial star followed by 11 on your telephone keypad now.

Yamini Rangan: If you change your mind, please dial star 1 1 again to exit the queue.

Yamini Rangan: When preparing to ask your question, please ensure your phone is unmuted and limit yourself to one question per person.

Yamini Rangan: First question today is from Mark Murphy and J.P. Morgan.

Speaker Change: Unknown Speaker 0.01.1

Mark Murphy: Thank you so much and congratulations to all the HubSpotters on the on the phenomenal results

Speaker Change: I wanted to ask you how might you describe the investment HubSpot is making into AI? Just for instance, do you have any model training expenses that are feathering into the R&D line? That seems like it's upticking as a percentage of revenue.

Speaker Change: And might you have some inference flowing through the cost of goods sold?

Speaker Change: As you commercialize the models or just anything that would help us understand the amount of R&D.

Speaker Change: going into your AI initiatives. And then for Yamini, are you seeing that daily usage?

Speaker Change: or Engagement pick up or develop faster with the Breeze products that are in beta right now.

Speaker Change: Although still modest on our cost of goods sold from the AI investment.

Speaker Change: I think you would, if you looked back in time, recognize that our philosophy for a long time has been to try to invest in an outsized way in our R&D organization so that we can continue to drive the innovation flywheel that will fuel long-term growth for us.

Speaker Change: So we have continued to do that over the last few years, and one of the big areas of investment certainly is AI.

Speaker Change: Yeah, and Mark, thank you again for that question. I will double down on what Kate said. Innovation and AI-first innovation in particular are top priorities for the company and will continue to be the top priority going forward. We are a platform company, and we will be the app and agent platform to help our customers innovate and grow. And our overall strategy to embed AI into every hub and across the entire platform is really working.

Speaker Change: I'm very pleased with the progress that we are making. I look at our AI strategy and I'm looking at three indicators. The first is, is AI awareness within our customer base and prospect base increasing?

Speaker Change: Second, are we beginning to see repeat usage? And third, is that driving consistent value? And I'm pleased that we're making progress on all three.

Speaker Change: As I just shared, when we launched Breeze at InBound, we did it so it can be consistent, it can be easy, our customers can recognize features and begin to adopt it. And we saw AI awareness go up by 13% in just one quarter. And so I think the Breeze branding as well as how customers are getting aware of the features within the product is working.

Speaker Change: And if I look at our enterprise and pro customers in particular, I'm really pleased with the repeat usage, and that every, every day, every week, you know, every couple weeks, and we're beginning to see repeat usage trend in the right direction. And then in terms of overall value, I would continue to highlight that content use cases,

Speaker Change: Our next question comes from Rishi Jaluria at RBC Capital Markets.

Rishi Jaluria: Wonderful. Thanks so much for taking my question. And I should see continued momentum in the business. Maybe I want to continue by talking about some of the investments in AI.

Rishi Jaluria: Now clearly seeing some some early traction with Breeze and really exciting to see that. When we think about maybe some of your offerings around agents and agentic AI, Yamini can you maybe you know help us consider how is the future of how

Rishi Jaluria: customers interact with and work with HubSpot in both a co-pilot and agentic AI world going to look like. And ultimately, if you can help those customers become meaningfully more successful and more productive at that,

Rishi Jaluria: How do you think that maybe impacts your own pricing power or pricing model with those customers?

Speaker Change: Yeah, multiple questions there. I'm going to get started. And then Dharmesh, you know, who lives, breathes agent can also, you know, share his thoughts. I'd say that we're living in an exciting world. You know, there's just a transformative technology that's happening.

Rishi Jaluria: co-pilot, we just launched our co-pilot, which

Rishi Jaluria: Help any front-off is market to your salesperson, serviceperson, you know, do better work and agents work for them, right? Whether it is in, you know, content are, you know, customers. So, add inbound, we launched both. [inaudible]

Rishi Jaluria: co-pilot that we launched is seeing very good and very early traction with all of our customers, because it's just easy. It just allows them to tap into HubSpot at a very broad level, use natural language to be able to ask questions, summarize,

Rishi Jaluria: you know, a CRM object, summarize insights, and that's gaining traction. And we launched four agents, content, prospecting, customer and social, and now they're all kind of moving into beta and beginning to see really consistent results. So

Rishi Jaluria: We think the future, you know, is all about co-pilots and agents driving value with structured and unstructured data within, within, you know, the customer platform.

Rishi Jaluria: Say one quick thing about, you know, the pricing question that you asked. We will stay very, very consistent with our pricing philosophy.

Rishi Jaluria: add value before we think about monetizing value that has really worked for us throughout our history. We are very, very, you know, focused on driving that value and we'll continue to do that.

Rishi Jaluria: In terms of agents,

Rishi Jaluria: When agents begin to deliver consistent value, we'll likely have different axes for agents, whether it is, you know, credits or tokens or something that is consumption based, but right now we're really focused on delivering value.

Rishi Jaluria: Dharmesh.

Dharmesh: Yeah, a couple of points to add to that would be one is we're taking a very kind of as we do with all things very platform based approach to agents as well, which is we're building the underlying platform to allow

Rishi Jaluria: our customers and partners to build these agent applications that leverage our unified data store. We have all the information one singular cohesive place. And what we've found is that that kind of data access makes

Rishi Jaluria: Lots of very interesting agent use cases possible. The thing that's happening now in terms of like in the moment is that the other part of our kind of agent approach is that

Rishi Jaluria: We have an open, open model in terms of which large language models and which AI tool sets we use. What this allows us to do is to say as the industry is evolving. There is no one model to rule them all. We can move across models based on what the best

Rishi Jaluria: tool is for a given use case, and this is differentiated from how others are approaching it.

Rishi Jaluria: And just recently we saw OpenAI launch the O1 model, which has much better reasoning, it's a breakthrough in terms of a large language model, and we're able to capitalize on those kinds of innovations that are happening in the kind of AI ecosystem as a result of this kind of open approach to large language models and AI tools.

Speaker Change: Our next question comes from Samad Samana with Jeffreys.

Samad Samana: Hi, good evening. Thanks for taking my questions. I'll echo the congrats from

Rishi Jaluria: and I suspect it's because payments is a high margin business. I'm curious what's driving the inflection if that's the case and how do you see cash flow maybe strategically fitting into that? Could you maybe double click on that and how we think about the revenue model for that company?

Speaker Change: Yeah, thanks, Samad, for the question. Maybe I'll just start with a reminder that you're

Speaker Change: You're exactly right in how you ask the question, which is that services and other revenue line item is actually very small as a percentage of our overall revenue at 2%.

Speaker Change: The largest part of that number continues to be services.

Rishi Jaluria: And we primarily think about services as an enabler of our software business. As you know, we have been increasingly leaning in with partners to provide customer onboarding and ongoing customer services.

Rishi Jaluria: And so the services portion of that revenue line item has been a headwind over the last couple of years.

Rishi Jaluria: On the positive side, we have seen year-over-year growth that is largely being driven by the momentum we're seeing on the commerce business.

Rishi Jaluria: We have done a lot of work to drive efficiencies within our support and services organizations. And that is the primary needle mover for the margins of that line item.

Speaker Change: Unknown Speaker 0

Speaker Change: And then Samad, I think you also asked about our recent acquisition of Cashflow. I'm really excited about this because it accelerates the vision that we have for our customer platform, not just making it easy for sellers to sell, which is what our core platform does, but also making it easy for buyers to buy. And in order to do that, you've got to have both customer data and transaction data in one unified system. And that is exactly what we can do with Cashflow. And as Kate just mentioned, we've had a pretty strong momentum with Commerce Hub. You can see that because of the product innovation that we have driven, helping our customers bring their own payment processors and providing flexibility for invoicing and billing.

Speaker Change: But at the same time, when we've asked our customers what more can we be doing, they asked us for more sophisticated subscription management capabilities.

Speaker Change: more sophisticated CPQ functionality. I'd say like those two are the most frequently asked requests from our customers in terms of where they want to see us go and cashflow is doing exactly that.

Speaker Change: Now, you know, when we started talking to Sorica and Brian, who are the founders of Cashflow,

Speaker Change: you know, have the same DNA as us. They've been thinking about this problem. They want to make it easy. In fact, half of the customers they currently have are HubSpot customers. So they not only understand the need of our customers, but they've been thinking about this problem for, you know, our customers. And so we're really excited to bring the whole team on board. And we're going to take the same approach like we take with all acquisitions. We'll, you know, keep it very true in terms of having a crafted product. We'll natively build new functionality so we deliver a seamless experience, and we'll accelerate our product vision.

Speaker Change: Our next question comes from Kirk Maturin with Evercore ISI.

Kirk Maturin: Yeah, thanks very much. I'll add my congrats.

Speaker Change: Kate, I was wondering, you know, as you spoke about the NRR trends this quarter, you mentioned that there were some headwinds on other upgrade motions. Is there anything more you can add there? Is it specific hubs, or is it just sort of the macro remaining? I realize this is really consistent with what you guys have talked about, but I was just curious if there's anything either hub specific or geographic that you could call out on that. Thanks. Unknown Speaker

Speaker Change: Yeah, thanks for the question, Kirk. It's, I would say, much the same as the last few quarters as it relates to net revenue retention. I think the positive aspects of net revenue retention remain a really strong foundation of customer dollar retention. We see that holding very well in the high 80s.

Speaker Change: Downgrades have been stable now or stabilized for a number of quarters, and so both of those things are positive. And as I mentioned in the prepared remarks, we are also seeing some green shoots on the seat upgrade motion, largely as a result of the pricing model change.

Speaker Change: All the other upgrade motions continue to have pressure. That's addition upgrades, it's cross sell, it's discount upgrades, it's really, and contacts, it's across the board there. So nothing specific to call out.

Speaker Change: You know, you didn't ask the question, but, you know, I would expect that we will see largely the same in Q4.

Speaker Change: Our next question comes from Alex Zugin with Wolf Research.

Alex Zugin: Hey guys, I echo the congratulations on another very solid quarter

Speaker Change: Maybe I'm going to try my best to ask a multi-part question here.

Speaker Change: The

Speaker Change: The impact that you're seeing from what I would characterize as kind of one of the most clear AI propositions that you talked about at InBound, is that, what is that doing to sales cycles? Is it making them, is it driving more of them? Is it making them longer but bigger? And how do we think about into, you know, the big selling quarter Q4 last year, there was a big quarter for you guys, I would almost characterize as a kind of a budget flush How do we think about that into this quarter? I realize, you know, not much

Speaker Change: kind of change in the macro at this point in time. But how are you thinking about that and anticipating that for Q4 and beyond?

Speaker Change: Alex, thanks for the question. I would say that

Speaker Change: If last year AI was a buzzword and there was a level of hesitancy on how AI needs to get adopted, this year our customers tell us that AI is real.

Speaker Change: There's real value, there's real use cases, there's real growth opportunities. And if anything that they took away from InBound, it was that they got to get going on it. And so following InBound into the conversations in late Q3 and Q4, there's just been a lot of momentum that has been driven through our Breeze and Breeze Intelligence launches.

Speaker Change: and specifically the approach that we have taken is to embed AI into every hub.

Speaker Change: So, you know, if you're if you're sitting here as a customer thinking about next year's growth, well, you want a better content marketing platform, you want, you know, better guided selling solutions, you want better, you know, service capabilities that leverage AI. And so all of those conversations are happening now.

Speaker Change: Tangibly, it's doing two things. One, it is increasing the attach rate of content hubs, service hub to our core hubs.

Speaker Change: And you can see this consistently through the year as our customers have really embraced content use cases, content hub has seen pretty significant growth and a 50% attached rate to marketing hub. And it's similar in terms of the multi-hub momentum within service hub. So all of those are positive going into Q4, Q4 is a big quarter, December is a big month. And we have all of the pipeline now it really comes down to execution and we are laser focused on executing.

Speaker Change: Our next question comes from Brad Sills with Bank of America.

Brad Sills: Oh, great. Thank you so much. I wanted to ask a question around the strength you're seeing in these multi-hub winds. It really seems like a standout this quarter.

Speaker Change: and you called out, you know, content and service hub in particular is seeing traction. Would love a little bit of color. Is that, you know, customers that are kind of landing with, you know, a multi-hub footprint? Are you seeing more of that kind of cross-sell activity that's occurring more recently?

Brad Sills: And why now, I guess, would be the question. Why? What is it about, you know, the products or maybe it's the environment that you're starting to see even more momentum? I know it's been strong in the past, but it sounds like it's an area where you're seeing, you know, some real uptick. Thank you.

Speaker Change: That is a great question. And the answer is all of the above. And what I mean by that is, we are seeing multi-hub both in terms of new customers that we're winning, and we're seeing multi-hub that is driven in the install base as customers adopt one and go for more. And the most prevalent combinations are marketing hub, sales hub, we just land with, you know, marketing hub, sales hub. And the second most prevalent multi-hub lands are marketing hub, sales hub, and service hub. And I think, you know, the consistent, you know, themes that we have seen here are driven by a couple of things. The first one is that

Speaker Change: Our customers are consolidating, they're consolidating and they're looking at HubSpot as the platform that provides insights across their entire front office. That is exactly what is happening and we've seen this trend continue throughout this year. The second is the level of innovation. And sometimes,

Speaker Change: It is not just about the strategy. It's about alignment to the strategy and executing the strategy.

Speaker Change: We've had a strategy of going from app to suite to platform and as part of that strategy we have

Speaker Change: and hubs like marketing and sales, but across every single hub and the level of innovation drives multi-hub.

Speaker Change: Content Hub, Service Hub, great examples of that. So the answer is, the environment is more conducive for consolidation and the level of innovation that we're driving makes us that choice and is driving multi-hub momentum.

Speaker Change: Our next question comes from Michael Turin with Wells Fargo Securities.

Michael Turin: Hey, great. Thanks. Appreciate you taking the question.

Speaker Change: Some useful color on the net retention characteristics throughout the prepared remarks just in helping us think through what could catalyze.

Speaker Change: Yamini Rangan, Ryan Burkart, Unknown Executive

Speaker Change: New features, functionality you're hearing, customer interest around post-inbound that could eventually, whenever we get to that point, catalyze that return to upsell and appreciation for some of the advanced functionality you've been adding.

Speaker Change: Maybe I'll take that one.

Speaker Change: And I guess what I would do, Michael, is we would call you back to some of the conversation that we had at the Analyst Day.

Speaker Change: You know, there's some strong foundation that we see in net revenue retention, you know, we talked and I've already talked about on this call that customer dollar retention.

Speaker Change: It's really firm and strong in the high 80s.

Speaker Change: should also be a tailwind as we transition the existing install base and as more and more of our customer base gets started on the new seat space pricing model.

Speaker Change: On the other hand, you know, as you know, we continue to see some headwinds and pressure on the upgrade motions. We've been operating in what we would call a value conscious buying environment for a while. It is

Speaker Change: Unpredictable out there as if today is not another example and so it's hard to say when that is going to change but really that is gonna that is an ingredient required for us to really see net revenue retention expand from here.

Speaker Change: Our next question comes from Elizabeth Porter with Morgan Stanley.

Elizabeth Porter: Great, thank you so much. I wanted to follow up on the upgrade rate from starters, and I'm hoping that you could just double click on the comment around early reads from the new pricing model potentially benefiting that pace. Understanding it's probably a small part today, but just in the future, how should we just think about the opportunity given the high volume of starter customers that have really been added over the last few years?

Speaker Change: The upgrade rate from starting to professional has really stayed relatively stable here for a pretty long period of time.

Speaker Change: The shift to the seat-based pricing model does two things.

Speaker Change: One, it lowers the barrier of entry to get started, not only on starter, but also on professional. And so what you saw this quarter was a little bit more of a balance in our new customer ads, our net customer ads across professional as well as starter. And then over time, we do believe that we will see an increase in the upgrade rate, but it's still early for us to give...

Speaker Change: You know, lots of concrete data points there.

Speaker Change: Our next question comes from Tyler Radke with Citi.

Tyler Radke: Thank you for taking the question. This quarter it seemed like you raised the full-year revenue guidance by more than you'd be we didn't see that the last two quarters. I guess first it was there any FX considerations we should be taking into account there and

Tyler Radke: If not, maybe just unpack kind of the drivers of the increased confidence, was it...

Tyler Radke: just better visibility in terms of this pricing rollout, more stable macro view, anything you'd just add in terms of what's driving the stronger raise relative to what we've seen the last two quarters.

Tyler Radke: Yeah.

Tyler Radke: Before I walk through the math, Tyler, just a comment on the assumptions around the environment moving into Q4.

Tyler Radke: I tried to share in my prepared remarks a bit of color here, but our assumption is that it's

Tyler Radke: it's going to be a very much the same environment moving into Q4. We've been operating through the year in an environment where we've seen more decision makers involved in deals and higher bar to action. We think that's going to continue and that's

Tyler Radke: embedded in the guidance that we share with you. But if I walk you through the specific pieces here, we beat the midpoint of our Q3 guidance by $24 million, and we're flowing that through to the full year.

Tyler Radke: We're also raising the full year guidance by an additional $3 million, and that's really just a reflection of incremental FX benefits that we expect to see in Q4. So on a constant currency basis, our outlook for Q4

Tyler Radke: is unchanged to our prior guidance with a growth of 15%.

Speaker Change: And we feel, as Yamini told you earlier in the call, we feel good about our pipeline and we're just laser focused on executing the big quarter in Q4.

Speaker Change: Unknown Speaker

Speaker Change: Our next question comes from Gabriela Borges with Goldman Sachs.

Gabriela Borges: Hi, good afternoon. Thanks for taking the question. Yamini, I wanted to ask you about the competitive dynamic in the mid market at some of your larger new customer ads.

Gabriela Borges: and more specifically, when you have competitors who perhaps

Gabriela Borges: respond with more aggressive pricing concessions when they see the success you're having. What approach or what framework do you give to your sales folks to help kind of navigate that conversation, given how much focus you put on the value of the HubSpot product suite and the engagement of the customers that you do land? Thank you.

Speaker Change: Hey, Gabriela, good to hear from you. And it's a great question. I think you answered the question, which is we focus on value.

Speaker Change: I think that the environment is, you know, it's competitive and it's always been competitive.

Speaker Change: We don't compete on price, we compete on value. And so the playbooks, the conversations that we have with our customers all focus on the total cost of ownership. And there, we have distinct advantage. You know, you don't need a big consulting project with, you know, large SIs. You don't need 10 developers inside. You don't need a huge army of admins that are inside. And so we talk about that. And there's like tangible, you know, total cost benefits there. Then we talk about value. And very specifically in this environment and in any environment, our customers care about getting value quickly. It is fast time to value.

Speaker Change: weeks. And, you know, when I talk to customers, I ask them a simple question.

Speaker Change: In the previous times that they have CRM, how many of their salespeople use CRM in a year?

Speaker Change: And if the answer is, you know, anything like 20%, 30%, which is what is typical, and we talk about how we can drive adoption, because the ultimate value that they get is

Speaker Change: is getting adoption to be in the high 80s and 90s, which we can consistently do. And so while the environment is, you know, competitive, we win on being easy to use, we win on being fast,

Speaker Change: you know, time to value, delivering fast time to value and having a very unified, crafted experience that helps our customers grow.

Speaker Change: Our next question comes from Joshua Riley with Needham.

Joshua Riley: Thanks for taking my question. With the cash flow acquisition, that gets you kind of into this.

Speaker Change: what I would characterize somewhat competitive space for SMB subscription billing and invoicing. But it seems that I think you're, you know, you're going to have an edge with your platform strategy there versus competitors that are primarily point solutions. How do you kind of leverage that edge to grow that within the broader hub for Commerce Hub? Thank you.

Speaker Change: I love that question. And you're exactly right. It is a platform advantage, right? Almost everything comes down to

Speaker Change: Our customers keep telling us it's not about individual products and coin solutions. It's about having a unified platform with customer and transaction data. And cash flow allows us to do that. And if you look at what cash flow will enable us,

Speaker Change: from creating an easy proposal, making changes to the proposal, getting the proposal signed, completing the payment, and doing it in a super seamless way and getting all of that information in a seamless manner so that the next set of customer conversations are armed with those insights. That is really our vision for commerce, and it's going to help us enable that. And ultimately, we just want a single platform that's easy for sellers to sell and buyers to buy. And we're pretty excited about how we can accelerate that vision.

Speaker Change: Our next question comes from Ken Wong with Oppenheimer.

Ken Wong: Great, thanks for taking my question. Kate, I wanted to maybe dive into the customer ads. I think in the past you guys touched on nine to ten thousand, you did ten thousand this year, but also talked up really strong conversions and seat licensing tailwinds as well as relaunching the kind of starter in July. How should we think about what that pacing could look like going forward?

Speaker Change: Yeah, Ken, thanks for that one. We were actually very happy with the 10,000 customer editions we delivered in Q3. It was

Speaker Change: right in line with the range that we shared on our last call of nine to 10,000. As I mentioned in my prepared remarks, there was a balanced mix.

Speaker Change: in those customer ads across our professional and starter additions in the quarter. We've talked about the fact that that was largely enabled by the new seats pricing model and the elimination of seat minimums.

Speaker Change: The other thing we talked about last quarter was that we were starting to lap some very large starter cohorts from the back half of 2023.

Speaker Change: And although those cohorts were renewing at a similar rate, the nominal number of customers that were leaving the platform were higher. And we continue to see that this quarter. That said, the growth starter additions were really strong in Q3.

Speaker Change: So all of that said, I believe that at least in the near term, we should continue to look at that 9 to 10,000 as the right range for net ads.

Speaker Change: Our next question comes from Parker Lane with Stiefel.

Parker Lane: Yeah, hi, thanks for taking the question. Yamini, when we look at the new AI solutions and especially agents you have, I'd love to hear more about the partner enablement programs and campaigns you have in place there and just what your overall vision is for the role that those partners will play in developing business-specific agents going forward.

Yamini Rangan: Hey, Parker, I love that question. Um, I think partners are

Yamini Rangan: very excited about the AI vision. And I think they have a huge role to play. I mean,

Speaker Change: If you step back and look at our AI strategy, it is to embed it into every hub, it is to embed it across our entire platform, and to provide a platform for partners to be able to build agents on top as well.

Parker Lane: And obviously, the first set of agents are the ones that we are developing and bring to market, like the four that we launched at InBound. But the vision for us is to be able to allow partners to be able to build on top as well.

Parker Lane: The enablement, you know, from a partner perspective has been going strong. At Inbound, we had

Parker Lane: executive briefing sessions on where AI is going, where our product roadmap is going. And that's certainly got our partners excited. And now, you know, we have like, incentivize them, motivated them, and hopefully inspired them to offer a set of, you know, AI services and to be able to bring what we are offering to our customers. And so I feel really good in terms of

Parker Lane: The feedback from partners both inbound as well as how we are executing overall in our AI strategy.

Speaker Change: Our next question comes from Brent Braceland with Piper Sandler.

Brent Braceland: Unknown Speaker

Brent Braceland: Thank you. Good afternoon. You know, Kate, I wanted to kind of go back to the growth algorithm here. If I look at street expectations for next year, pretty wide variance of 12 and a half to 18% growth. I get you're kind of reiterating this 15% growth rate for Q4. But that only includes a partial comp with clear, but what's the right kind of normalized growth profile puts and takes as we should think about the right growth rate for next year?

Speaker Change: Yeah, thanks for the question. You know, like, it's obviously really early for us to start talking about 2025. We're

Parker Lane: in the middle of our financial planning process internally. And, you know, as always, we will provide you with guidance for 2025 when we report our results in February. So I'm not going to talk specifically about 2025. But

Parker Lane: I can talk a little bit about that growth algorithm, which we spent some time on.

Parker Lane: the Analyst Day. And over time, this is sort of a longer term look. But over time, we think that there are a number of levers that we have.

Parker Lane: to drive growth. The first is that, you know, we're still early, we have very low market share in a really big market. And so our ability to continue to drive new customer acquisition over time is strong.

Parker Lane: The second is that we are the customer platform of choice for scaling companies, and we expect that the trend that we're seeing toward bigger deals, toward more multi-hub deals, is just going to continue.

Parker Lane: The third thing is, and we've talked about this before, you know, we are transitioning our customer base onto our new seed space pricing model. That should be a multi-year tailwind to us and should help us drive higher net revenue retention over time.

Parker Lane: And finally, we continue to innovate aggressively. In particular, you know, we spent a lot of time talking about

Parker Lane: Unknown Speaker AI innovation, data innovation, commerce innovation, and all of these things are, you know, elements that can fuel long term growth over time. And so I'm, you know, confident in our ability to drive durable growth over a long period of time here. All that said, like

Parker Lane: We have to execute very well in Q4. There's a lot of uncertainty still out there in the market. And, you know, we will come back with a more clear view of 2025 in February.

Parker Lane: Unknown Speaker 0.0.0.0.

Speaker Change: Our next question comes from Brian Peterson with Raymond James.

Brian Peterson: Thanks and congrats on the strong results. Wanted to hit on your appetite for M&A. You've been more active there over the last year or so with Clearbit and Cashflow. How are you thinking about the balance of organic versus inorganic investments? And are there some hub adjacencies that look particularly interesting to you? Thanks, guys.

Speaker Change: Hey, that's a great question. And I think our approach to M&A has remained consistent. We take a very Apple-esque approach to M&A, and the approach is to look for great technology, great talent that can accelerate our customer platform vision.

Speaker Change: And we want to do that in a way where we do not disrupt the great customer experience that we offer. And so we've gotten very comfortable with executing, you know, this type of an M&A playbook. We look for, you know, great talent that can accelerate innovation in very specific parts of our platform. You mentioned Clearbit, PySync, Cashflow, these are all examples of that. We look for great culture ads that can, you know, come and build something incredible. We want to natively build everything into HubSpot so that we offer a crafted platform. And we want to ensure that it drives financial results in the mid to long term. That is the playbook.

Parker Lane: You have seen us execute the playbook with PySync, with Clearbit, and we intend to do the same thing with Cashflow, and we'll continue doing these types of acquisitions as it accelerates our vision.

Speaker Change: Our next question comes from Nick Altman with Scotiabank.

Nick Altman: Awesome. Thanks, guys. Um, just a quick one. But I, I think you guys said there was 60% growth in 100 plus.

Parker Lane: heat deals for Service Hub customers, which is pretty interesting. But can you maybe just unpack how much of that is driven by larger lands or cross-selling some of those larger customers versus perhaps a little bit of better sheet expansion or stabilization in Service Hub? Thanks.

Speaker Change: Yeah, that's a great question. Look, I'm very excited about the innovation that's happening in Service Hub. And I think the product team and the gold market teams have made excellent progress over the last 18 months. It's not one thing, it's the fact that we have consistently innovated in Service Hub. Last year, there was a lot of pro features that we launched within the market. And this year, there were, you know, I'd say two big unlocks. The first is leveraging AI within support, our customer agent, I talked a little bit about the success that we're seeing with customer agent that is helping our customers, you know, do faster self serve with better knowledge bases. And then more importantly, also helps

Speaker Change: handle some portion of the ticket, typically between 20 to 40%. And that has been great. I think the second part is that as we talk to a lot of our customers and prospects, we heard from them the need for having both support as well as customer success in one place.

Speaker Change: And therefore, earlier this year, as part of the spotlight, we launched a workspace for both customer success and for support so it can drive retention and improvement. And then, you know, there's a steady drumbeat of offering better SLA management, better routing, more granular permission management. All of these are the ones that upmarket customers have been asking us for in Service Hub.

Speaker Change: And look, I think if you step back, we did this with Sales Hub.

Speaker Change: We have time for one more question. This question comes from Adam Hollitz with BMO.

Speaker Change: Unknown Speaker 05.

Speaker Change: Hi, thank you very much. It's Keith Bachman here. I wanted to ask a question also on growth and I'll break it into a couple different parts. One, you talked about customer growth was 23%. Is there any growth metrics you can give us on what was seat growth or at a minimum was seat growth faster or slower than the customer growth?

Speaker Change: And the second is, how should we think about that seat growth or customer, you know, versus customer growth as we as we sort of tune our models for 25.

Speaker Change: And part of that is what I'm thinking about is, as we get into it, ASRPC is being impacted by growth of lower end seats.

Speaker Change: As the pricing model changes, does that continue on that ASRPC will have a negative growth rate or do you anniversary it and all the innovation?

Speaker Change: can flow through so that we could think about ASRPC perhaps beginning to grow to grow next year. Thank you.

Speaker Change: You know, we've made the change to lower the barrier to entry for customers to get started and then to upgrade and grow with HubSpot. And one of the ways is that they purchase what they need up front, and then they grow over time.

Speaker Change: and the assumption was that we would see higher net revenue retention from those customers.

Speaker Change: And I think the highlight of the seeds.

Speaker Change: Model change so far has been that that

Speaker Change: that sort of assumption that we had has truly played out. And so we have seen in those early cohorts, that the, you know, customers who join on the seats model, have higher upgrade rates, and are upgrading and adding seats.

Speaker Change: and have a higher net revenue retention. By definition, that means that it's growing faster than our sort of overall growth, but we have not shared the specific data point around that.

Speaker Change: Thank you. This concludes the HubSpot third quarter 2024 earnings call.

Speaker Change: Ryan Burkart, Unknown Executive Ryan Burkart, Unknown Executive Ryan Burkart, Unknown Executive

Speaker Change: I went down to the river and I took a look around and I saw a man in a gold man's shoes, he was wearing needles on the ground. No more mysteries, baby.

Speaker Change: No more secrets and no more clues The stars are out there You can almost see the moon The streets are windy And the subway's closed down Gonna carry these dreams To the other side of town Walk that line To the phone Gotta spend your whole life trying

Speaker Change: Music Music Music Music Music

Speaker Change: It's my last storm of days My wind will blow, all my troubles away I wish I was on a northbound train I wish I was a headlight on a northbound train I'd shine my light

Speaker Change: Good afternoon, and welcome to the HubSpot's third quarter 2024 earnings call. My name is Liz, and I will be your operator today. At this time, all participant lines are in listen-only mode, and there will be an opportunity for questions and answers after management's prepared remarks.

Speaker Change: If you'd like to enter the queue for questions, you may do so by dialing star followed by one one on your telephone keypad.

Speaker Change: I would now like to hand the conference over to Senior Director of Investor Relations, Ryan Burkart. Please go ahead.

Ryan Burkart: Thanks, Operator. Good afternoon and welcome to HubSpot's third quarter 2024 earnings conference call.

Speaker Change: Today, we'll be discussing the results announced in the press release that was issued after the market closed.

Speaker Change: With me on the call this afternoon is Yamini Rangan, our Chief Executive Officer, Dharmesh Shah, our Co-Founder and CTO, and Kate Bueker, our Chief Financial Officer.

Speaker Change: Before we start, I'd like to draw your attention to the safe harbor statement included in today's press release.

Speaker Change: During this call we'll make statements related to our business that may be considered forward-looking within the meaning of Section 27a of the Securities Exchange Act of 1933 as amended and Section 21e of the Securities Exchange Act of 1934 as amended.

Speaker Change: All statements, other than statements of historical fact, are forward-looking statements, including those regarding management's expectations of future financial and operational performance and operational expenditures,

Speaker Change: Expected Growth, FX Movement, and Business Outlook, including our financial guidance for the fourth fiscal quarter and full year 2024.

Speaker Change: 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 Change: Please refer to the cautionary language in today's press release and our Form 10-Q, which will be filed with the SEC this afternoon, for a discussion of the risks and uncertainties that could cause actual results to differ materially from expectations.

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

Speaker Change: The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed and a reconciliation of the differences between such measures can be found within our third quarter of fiscal year 2024 earnings press release in the investor relations section of our website.

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

Yamini Rangan: Thank you, Ryan, and welcome everyone to the call. I'll start by discussing our Q3 2024 results and the key trends driving our momentum.

Yamini Rangan: Then, I'll give an update on the product launches at InBound and the feedback from our customers. I'll wrap by highlighting how we are setting ourselves apart as a leading customer platform for scaling companies.

Yamini Rangan: Let's dive in!

Yamini Rangan: Total customers grew to 238,000 customers globally, driven by 10,000 net customer additions in the quarter.

Yamini Rangan: I am thrilled to see customers continuing to consolidate on HubSpot as their customer platform, driven by our focus on customers and our pace of product innovation.

Speaker Change: In the upmarket segment, we continue to see strong momentum in large deals and multi-hub wins, trends that have remained consistent throughout this year.

Speaker Change: Two main factors are driving larger deals. First, our product market fit has improved significantly in upmarket. And second, our platform's ease of use and ability to deliver quick results resonate with scaling companies.

Speaker Change: Deserting upmarket buyers want lower cost, high value, and great adoption in a matter of weeks.

Speaker Change: We deliver on all of these, making HubSpot an easy choice for them.

Speaker Change: Multihub wins are driven by customers looking to consolidate their tech stack and at a level of innovation in our hubs like content hub and service hub.

Speaker Change: In Q3, more than 50% of our new business in Pro Plus tiers came from customers using three or more hubs.

Speaker Change: Additionally, over 40% of our install base of customers now use all three core hubs, marketing, sales, and service, highlighting the value our customers find in HubSpot's unified customer platform.

Speaker Change: It has been a great year for ContentHub, with rapid growth driven by AI innovation.

Speaker Change: We added video capabilities to our popular content remix feature and launched Content Agent that helps create and personalize content.

Speaker Change: Customers are quickly adopting these AI features to create landing pages, videos, and blog posts, and they're seeing immediate value.

Speaker Change: For example, Franchise Brokers Association, our customer who connects great leaders with franchise opportunities, increased content production by 250% and improved organic lead generation by 216% using tools like our Blog Writer and Content Remix.

Speaker Change: The level of innovation with AI features in Content Hub has accelerated growth and the attached rate to Marketing Hub is strong at nearly 50%.

Speaker Change: Customers appreciate having tickets and conversations in one workspace, which is making them more productive.

Speaker Change: With the level of innovation and recent launches targeted at customers with larger service teams, we have seen customers with 100 plus service hub seats grow 60% year over year. Overall, I am thrilled with the progress we are making across product innovation and go-to-market execution to drive upmarket momentum.

Speaker Change: In the lower end of our segment, we've continued to drive strong customer growth by improving our product and pricing.

Speaker Change: Our pricing strategy is working.

Speaker Change: We lowered the fee price to make it easy for customers to get started, and we removed fee minimums to make it easy for customers to upgrade and grow with HubSpot.

Speaker Change: We made significant progress in driving higher volumes of customers, which is now offsetting expected ASP decline.

Speaker Change: We've also improved our free and starter tiers to increase conversion rates.

Speaker Change: We added personalized upgrade prompts throughout the customer journey to encourage more customers to move from free to starter and drive conversion rates. In addition, we relaunched the starter tier in July, which has improved customer experience.

Speaker Change: All of these changes have helped us drive net customer growth in this segment.

Speaker Change: The conference and the campaigns following have generated nearly 1 billion impressions, creating tremendous momentum as we closed out Q3.

Speaker Change: While Inbound showcased over 200 new innovations, the two standout moments were the launches of Breeze and Breeze Intelligence.

Speaker Change: Here's a quick recap of what we launched in the customer feedback so far. At Inbound, we launched Breeze, which is HubSpot AI that powers the entire platform, including co-pilot, agents, new features, and an agent marketplace.

Speaker Change: Our strategy is to embed AI into every hub and across the entire platform and democratize AI for scaling companies.

Speaker Change: Since the launch, we have seen a notable increase in AI awareness, adoption, and usage.

Speaker Change: AI awareness within HubSpot grew by 13% quarter over quarter with two thirds of enterprise and half of pro customers engaging with AI features.

Speaker Change: Co-pilot, our AI assistant, has resonated well, particularly with starter customers who use it to summarize CRM data and objects, rewrite text, and generate insights from their customer data.

Speaker Change: Co-pilot is now in public beta and we are seeing repeat usage with 43% of users, which is a strong start.

Speaker Change: We also launched four agents at Inbound, Social, Content, Prospecting, and Customer.

Speaker Change: For example, Kaplan Early Learning Company.

Speaker Change: is using a customer agent to enable 25-30% of their customers to self-serve, reducing average ticket response time by 30%.

Speaker Change: Morehouse College is using our content agent to create blogs with best practices, which has resulted in 30% increase in page views and 27% more time spent on their site. Exactly the kind of results content marketeers are looking to drive with AI today.