Q4 2024 HubSpot Inc Earnings Call
Laila Jalees, Unknown Executive, Lyn� Recipient, Action Club Podcast
Andrew: Good afternoon and welcome to the HubSpot's Q4 2024 earnings call. My name is Andrew and I'll 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.
Andrew: <unk> growth FX movement, and business outlook, including our financial guidance for the fourth fiscal quarter and full year 2024.
Andrew: 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.
Andrew: Please refer to the cautionary language in today's press release, and our Form 10-K, 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.
Andrew: During the course of today's call, we'll refer to certain non-GAAP financial measures such as defined by regulation G.
Andrew: The GAAP financial measure most directly comparable to each non-GAAP financial measure user discussed and a reconciliation of the differences between such measures can be found within our fourth quarter and 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 hub spots Chief Executive Officer Yamani rocket.
Andrew: Do you have any.
Speaker Change: Thank you, Brian and welcome everyone to the call I'll begin with our Q4 and 2024 results and the consistent themes driving those results then I want to switch gears and highlight our strong momentum in AI, how we are positioned to lead and win with AI and the multiple growth levers we are activating.
Andrew: To drive long term success.
Let's dive in we have a solid finish to 2024, highlighting our leadership as a platform company.
Andrew: Q4 revenue grew 20% year over year in constant currency and full year 2024 revenue grew 21% in constant currency.
Andrew: We delivered another quarter of standout operating profit growth with operating margin of 19% in Q4, and 17, 5% for the full year up.
Andrew: 200 basis points year over year.
Andrew: We are consistently balancing growth and profitability as we scale.
Andrew: Our customer base expanded to 248000 customers globally with over 9800 net customer additions in the quarter.
Andrew: These results underscore the trust our customers have in our platform as they consolidate on hotspot and rely on our innovation to scale in any environment.
Andrew: Beyond the results what truly excites me are the consistent themes driving our performance.
Andrew: Our momentum in 2024 was driven by growing multi hop adoption strong upmarket and downmarket success improvements in retention and product innovation.
Andrew: 124 was a defining year one that's the mandate our position as a leading customer platform for scaling company and marked a transformative leap in our evolution as an AI first platform.
Andrew: We made significant strides as a unified customer platform with multi adoption, reaching new heights.
Andrew: Over 35% of our pro plus customers buy <unk> now.
Andrew: Now use tour are more hubs up 7% year over year clear proof of the value of our unified customer view.
Andrew: In the upmarket segment momentum was driven by product innovation growing awareness of hotspot as a platform and strong execution with partners in our ecosystem.
Andrew: Large deals grew 21% year over year, driven by key product advancements like sensitive data support you are extensions and CRM development tool for deeper customization and enterprise grade service hub capabilities that resonate with larger team.
Andrew: Awareness of hotspot as a customer platform improved by seven points globally, and our partner ecosystem is driving success with core selling increasing by 68% year over year.
In the down market segment, the pricing model change, we introduced combined with AI innovation lays a strong foundation for growth.
Andrew: Lowering initial prices and removing seed minimums, we made it easier for teams to start and grow with hotspot accelerating customer acquisition and driving seat upgrades.
Andrew: Also improve the overall experience for startup customers with better onboarding and ever boarding and finally retention was a consistent theme in 2024, our focused efforts across product and customer success teams led to increased usage fewer downgrades and reduced churn.
Andrew: It's really exciting to see customers, finding lasting value with hub spot and the consistent themes driving our results demonstrate our momentum as our platform. Okay, let's switch gears and talk about AI.
Andrew: 2020 forward was a transformative year for hub spot as we re imagine our product or platform and company with AI.
Andrew: We are committed to becoming the AIG first customer platform by embedding AI into every hub and across the entire platform to.
Andrew: To deliver on the vision, we launched a copilot that give every customer facing employee a digital assistant to work with AI agents that handle complex sensitive task out of the box and 80, plus AI features embedded within our hubs.
Andrew: Content hub and AI first hub launched in early 2024 was the fastest growing hub of the year.
Andrew: Attach rate of marketing hub increased from 13% at the start of the year to 54% in December driven by the success of content remix. Our most popular AI feature we've continued to innovate with new capabilities like multi input remix podcasts and case studies mimicked, enabling customers to create it.
Andrew: Pocketful content faster than ever.
Andrew: Service hub is seeing strong upmarket growth driven by AI powered enterprise features.
Andrew: Service hub enterprise portals grew 100% quarter over quarter in Q4 and customers with 100, plus seats increased 54% year over year.
Andrew: You helped us and customer success Workspaces with AI features like call summaries ticket summary, and reply recommendations are seeing strong adoption and delivering value to larger team.
Andrew: Brief copilot is beginning to crack we now have over 75000 weekly active users on copilot, our customers are adopting copilot, because it's easy to use and in the flow of their work unique advantages with hotspot brief.
Andrew: <unk> agents are beginning to deliver value for customers, especially customer agent and content agent.
Andrew: Now customer agent is now available to all service hub pro plus customers with over three.
Andrew: 340 customers using it to achieve an average resolution rate of 42%.
Andrew: While it's still early days customers are beginning to see value and as one customer transcribers.
Andrew: Sure implementing the customer agent has been transformative what used to be manual time intensive process is now streamlined and efficient.
Andrew: Content agent is also gaining traction with some of our most active users leveraging it to publish over 80% of their blocks.
Andrew: This is helping businesses optimize workflow and produce more effective content with less effort.
Andrew: While it's still early days for brief copilot agents and our embedded AI features the momentum we built in 2024 is exciting.
Andrew: What is equally exciting is how we are using AI to transform the way we work internally at hub spot.
Andrew: By experimenting bowley with AI, we are showing our customers what's possible with AI.
Andrew: AI support bought now handles over 35% of support ticket, while maintaining high customer satisfaction and we are working to get this to over 50% in 2025.
Andrew: This has enabled us to grow our customer base without adding more support staff freeing our team to focus on solving more complex issues.
Andrew: Similarly, our AI sales box is resolving over 80% of website chat inquiries, making are chatting more efficient, while delivering great customer experiences and we're transforming sales prospecting AIP.
Andrew: AI powered automated communications generated over 10000 meetings for our sales teams in Q4 alone.
Andrew: AI is helping us work smarter serve customers better and lead by example, and this is just the beginning of an exciting journey of transformation with AI.
Andrew: Okay.
Andrew: Our AI efforts are gaining momentum, but the bigger question is how will have bought lead and win in an AI first future.
Andrew: The answer is clear we will win for three key reasons.
Andrew: First we unify structured and unstructured data second we provide complete context across the entire customer journey and three we have the industry's most active AI agent ecosystem connecting AI builders and users.
Andrew: Plus eight in July on great data to succeed and hotspot is uniquely positioned here the meaningful structured data customer company contact record and the need for access and reporting on that data does not go away.
Andrew: This is where our hotspot already excel, but agents also need unstructured data the 80% of data and calls E mails, and transcripts, which would be deeper insight into customer needs.
Andrew: So for example, imagine an agent, creating a list of sales calls that made reference to a specific competitor that is using unstructured data.
Andrew: Now you can filter that lift and only include the deals that were one that's using structured data.
Andrew: Now you can use the transcripts and summarize the key points that seem to be most effective in winning against that competitor a combination of structured and unstructured data is a game changer and our acquisition of frame Dot AI takes this to a whole new level by doing this and grill.
Andrew: Time.
Speaker Change: A second yeah agents need more than just data they need context siloed agents. That's all task specific problems will fall short just like Siloed point applications that the hotspots all in one approach unifying our system of record with data a system of engagement with hub and a.
Speaker Change: System of action with AI powered execution ensures that agents have the context, they need across the entire customer journey.
Speaker Change: Finally, we've been investing in creating a vibrant agent ecosystem. We think the future is about hybrid team consisting of both people and AI agents working together.
Speaker Change: To realize this vision, we have been incubating agent Dot AI a project to create a network of AI agents.
Speaker Change: We've grown the user base of agent Doc AI over Tenex in six months from 50000 users at inbound to over 500000 users and powered over 5000 builders to create agents with our low cost tool <unk>.
Speaker Change: By combining the best structured and unstructured data, providing complete context about the customer and following an ecosystem centric approach, we are helping our customers seamlessly shift to the age of AI.
Speaker Change: Okay, Let me wrap up by highlighting our strategy and the levers for growth that will drive long term success.
Speaker Change: We are entering this year with more clarity on strategy more alignment on outcomes and more urgency in execution than ever before we will double down on our customer focus and make our products easy fast unified and AI first on.
Speaker Change: On the product side, you can expect to see us make meaningful progress with brisco pilots agents and the AI platform layer that will power all AI offerings.
Speaker Change: We will continue to build deeper upmarket functionality, while making onboarding in EVAR boarding easier within our product.
Speaker Change: We are excited to unveil a host of new capabilities at our spring spotlight in April and later at inbound in September.
Speaker Change: Now in terms of growth, we will focus on four key levers.
Speaker Change: Rep, driven growth with targeted head count investments that match the opportunity improve retention and downgrades driven by more product usage building on the progress we made in 2024.
Speaker Change: Yeah.
Speaker Change: Thank you operator.
Speaker Change: If you would like to ask a question. Please.
Jeremy: We had some technical difficulties at the start I guess the webcast didn't start on time. So some folks missed seemed to be getting comments. So we're going to turn it over to you how many to give us your comments again. So she is going to start from the top right now so I'll turn it over to Jeremy.
Okay. Thank you Ryan and sorry about the technical difficulties, we'll start the call now thanks and welcome everyone to the call I'll begin with our Q4 and 2024, a result of the consistent themes driving those results and I wanted to switch gears and highlight our strong momentum in AI, how we are positioned to lead and win with AI and the multiple growth.
Jeremy: Levers, we are activating to drive long term success.
Jeremy: So let's dive in.
Jeremy: We had a solid finish to 2024, highlighting our leadership as a platform company Q.
Jeremy: Q4 revenue grew 20% year over year in constant currency and full year of 2024 revenue grew 21% in constant currency.
Jeremy: We delivered another quarter of standout operating profit growth with operating margin of 19% in Q4, and 17, 5% for the full year.
Jeremy: Up 200 basis points year over year.
Jeremy: We're consistently balancing growth and profitability as we scale.
Jeremy: Base expanded to 248000 customers globally with over 9800 net customer additions in the quarter. These.
Jeremy: These results underscore the trust our customers have in our platform as they consolidate on hotspot and rely on our innovation to scale in any environment.
Jeremy: Beyond the resolve what truly excites me are the consistent themes driving our performance.
Jeremy: Our momentum in 2024 was driven by growing multi help adoption strong upmarket and our market success improvements in retention and product innovation.
Jeremy: 24 was a defining year, one that cement our position as a leading customer platform for scaling companies and marked a transformative leap in our evolution as an AI first platform.
Jeremy: We made significant strides as a unified customer platform with multi hub adoption, reaching new heights.
Jeremy: Over 35% of our Pearl plus customers buy <unk> now.
Jeremy: Now used four or more hubs up 7% year over year clear proof of the value of our unified customer platform.
Jeremy: In the upmarket segment momentum was driven by product innovation growing awareness of hub spot as a platform and strong execution with partners in our ecosystem.
Jeremy: Large deals grew 21% year over year, driven by key product advancements like sensitive data support you are extensions and CRM development tools for deeper customization and enterprise grade service hub capabilities that resonate with larger teams.
Jeremy: Wariness of hub spot as a customer platform improved by seven points globally, and our partner ecosystem is driving success with coal selling increasing by 68% year over year.
Jeremy: In the <unk> market segment, the pricing model change, we introduced combined with AI innovation latest strong foundation for growth.
Jeremy: By lowering initial prices and removing seat minimums, we made it easier for teams to start and grow with hub spot accelerating customer acquisition and driving seat upgrades.
Jeremy: We also improved the overall experience for startup customers with better onboarding and ever boarding.
Jeremy: And finally with tension was a consistent theme in 2024.
Jeremy: Our focused efforts across product and customer success teams led to increased usage fewer downgrades and reduce churn.
Jeremy: It's really exciting to see customers, finding lasting value with hub spot and the consistency consistent themes driving our results demonstrate our momentum as a platform.
Okay, let's switch gears and talk about AI.
Jeremy: 2024 was a transformative year for hub spot as we re imagine our product our platform and our entire company with AI.
Jeremy: We are committed to becoming the AI first customer platform by embedding AI into every hub and across the entire platform.
Jeremy: To deliver on this vision, we launched a copilot that get every customer facing employee a digital assistant to work with AI agents that handle context sensitive task out of the box and 80, plus AI features embedded within our hubs.
Jeremy: Content hub and AI first hub launched in early 2024 was the fastest growing hub of the year, it's attach rate marketing hub increased from 13% at the start of the year to 54% in December driven by the success of content Premix are most popular AI feature with <unk>.
Jeremy: To innovate with new capabilities like multi input remix podcasts and case study remix, enabling customers to create impactful content faster than ever.
Jeremy: Service hub is seeing strong market growth driven by AI powered enterprise features.
Jeremy: New service hub enterprise portals grew 100% quarter over quarter in Q4 and customers with 100, plus seats increased 54% year over year.
Jeremy: You helped us and customer success Workspaces with AI features like call summaries ticket summaries and reply recommendations are seeing strong adoption and delivering value to larger teams.
Jeremy: Brief co pilot is beginning to crack.
Jeremy: We now have over 75000 weekly active users on co pilot.
Jeremy: Our customers are adopting copilot, because it's easy to use and in the blow up their work unique advantages with top spot.
Jeremy: <unk> agents are beginning to deliver value for customers, especially customer agent and content agent.
Jeremy: Customer agent is now available to all service hub pro plus customers with over 1340 customers using it to achieve an average resolution rate of 42%.
Jeremy: We're still in early days, but customers are beginning to see value and as one of our customers transcribe or shared implementing the customer agent has been transformative what used to be manual time intensive process is now streamlined and efficient.
Jeremy: Content agent is also gaining traction with some of our most active users leveraging it to publish over 80% of their blogs.
Jeremy: This is helping businesses optimize workflows and produce more effective content with less effort. While it's still early days for brief copilot agents and our embedded AI features the momentum we built in 2024 with AI is exciting.
Jeremy: What is equally exciting is how we're using AI to transform the way we work internally at hub spot by experimenting bowley with AI, we're showing our customers what's possible with AI.
Jeremy: Our AI support bought now handles over 35% of support tickets, while maintaining high customer satisfaction and we are working to get this to over 50% in 2025.
Jeremy: This has enabled us to grow our customer base without adding more support staff freeing our team to focus on solving more complex issues.
Jeremy: Emily are AI sales box is resolving over 80% of website chat inquiries, making are chatting more efficient while delivering great customer experiences.
Jeremy: We're transforming sales prospecting.
Jeremy: AI powered and automated communications generated over 10000 meeting for our sales teams in Q4 alone.
Jeremy: AI is helping us work smarter serve customers better and lead by example.
Jeremy: And this is just the beginning of an exciting journey of transformation with AI.
Jeremy: Okay Alright.
Jeremy: Alright efforts are gaining momentum, but the bigger question is how old hotspot lead and win in an AI first future.
Jeremy: So it's clear we will win for three key reasons first we unify structure and unstructured data second we provide complete context across the entire customer journey and third we have the industry's most active AI agent ecosystem connecting AI builders and users.
Jeremy: First agents rely on great data to succeed and hotspot is uniquely positioned here the need for structured data like customer company contact records and the need for access and reporting on the data does not go away. This is where our hub spot already excels, but agents also need on structured data the 80% of data.
Jeremy: Impulse emails and transcript, which revealed deeper insights into customer needs.
Jeremy: For example, imagine an agent, creating a list of calls that made a reference to a specific competitor well that's using unstructured data now you can filter that list and only include the deals that were one that is using structured data now you can use the transcripts and summarize the key points that seem to be the most effective.
Jeremy: And winning against that competitor a combination of structured and unstructured data is a game changer and our acquisition of framed our AI takes this to a whole new level by doing it in real time.
Speaker Change: Second yeah agents need more than just data they need context siloed agents. That's all task specific problems will fall short just like Siloed point applications that hub.
Speaker Change: Hub spot all on one approach unifying system of record with data a system of engagement with hub and a system of action with AI powered execution ensures that agents have the context, they need across the entire customer journey.
Speaker Change: Finally, we have been investing in creating a vibrant agent ecosystem. We think the future is about hybrid teams consisting of both people and AI agents working together to realize this vision, we have been incubating AI agent AI a project to create a network of AI.
Speaker Change: Agents we.
Speaker Change: We have grown the user base of agent Dot AI over Tenex in six months from 50000 users at inbound to over 500000 users and empower over 5000 builders to create agents with our local tool by combining the best structured.
Speaker Change: And unstructured data, providing complete context about the customer and following an ecosystem centric approach, we are helping our customers seamlessly shift to the age of AI.
Speaker Change: Let me wrap up by highlighting our strategy and the levers for growth that will drive long term success.
Speaker Change: We are entering this year with more clarity on strategy more alignment on outcomes and more urgency in execution than ever before.
Speaker Change: We will double down on our customer focus and make our products easy fast unified and AI first.
Speaker Change: On the product side, you can expect to see us make meaningful progress with brief co pilots breached agents and the AI platform layer that will power all AI offerings we.
Speaker Change: We will continue to build deeper upmarket functionality, while making onboarding and ever boarding easier within our product.
Speaker Change: We are excited to unveil a host of new capabilities at our spring spotlight in April and later at inbound in September.
Speaker Change: Now in terms of growth, we will focus on four key levers wrapped.
Speaker Change: Rep, driven growth with targeted head count investments that match the opportunity.
Speaker Change: Improved retention and downgrades driven by more product usage building on the progress we made in 2024.
Speaker Change: Gration, two new pricing, creating tailwind from feed upgrades and renewal price lift post migration and ongoing product innovation with AI, which will be another tailwind for customer acquisition and expansion.
Speaker Change: Together these levers provide a clear and sustainable path for long term growth with that I'll hand, it over to our CFO Kate Bueker to walk you through our financial and operating results. Okay.
Kate Bueker: Thanks, Domine, let's turn to our fourth quarter and full year 2024 financial results.
Kate Bueker: Full year 2024 revenue grew 21% year over year in both constant currency and as reported.
Kate Bueker: Full year subscription revenue grew 21% year over year, while services and other revenue increased 24% both on an as reported basis.
Kate Bueker: Q4 revenue grew 20% year over year in constant currency and 21% on an as reported basis.
Kate Bueker: Subscription revenue grew 21% year over year, while services and other revenue increased 36% on an as reported basis.
Kate Bueker: Q4, domestic revenue grew 19% year over year.
Kate Bueker: International revenue growth was 20% in constant currency and 23% as reported representing 47% of total revenue.
Kate Bueker: We added over 9800 net new customers in Q4, ending the year with a total of nearly 248000 customers growing 21% year over year.
Kate Bueker: Average subscription revenue per customer was $11300 in Q4 down 1% year over year in constant currency and roughly flat on an as reported basis.
Kate Bueker: Q4 customer dollar retention remained healthy in the high eighties.
Kate Bueker: Net revenue retention increased two points sequentially to 104% rich.
Kate Bueker: Reflecting the continued momentum in seat expansion from customers on the new seat based pricing model.
Kate Bueker: While we're encouraged by the improvements we saw in Q4, we expect to see a seasonal downtick in net revenue retention in Q1.
For the full year of 2025, we expect net revenue retention to be up a couple of points year over year largely from the pricing model change we made in early 2024.
Kate Bueker: Calculated billings were $768 million in Q4, growing 21% year over year in constant currency and 16% on an as reported basis.
Kate Bueker: The significant strengthening of the U S dollar at the end of the quarter and its impact on deferred revenue resulted in an overall five point FX headwind to as reported billings growth.
Kate Bueker: The remainder of my comments will refer to non-GAAP measures.
Kate Bueker: Q4, operating margin was 19% and full year operating margin was 17, 5% those up two points compared to the year ago period.
Kate Bueker: This reflects our continued progress in optimizing our product infrastructure.
Kate Bueker: Focused hiring.
Kate Bueker: Any impact from the changes to our partner Commission structure.
Kate Bueker: Net income was $125 million in Q4 or $2 32 per fully diluted share.
Free cash flow was $163 million or 23% of revenue in Q4, and $488 million or 19% of revenue for the full year.
Kate Bueker: Finally, our cash and marketable securities totaled $2 $2 billion at the end of December.
Kate Bueker: Before I dive into guidance I wanted to highlight several key inputs to our 2025 growth profile.
Kate Bueker: First we expect a continued strong foundation of product usage and customer retention.
Kate Bueker: Our seat based pricing model will benefit 2025 revenue as customers come up for their first renewal post migration.
Kate Bueker: And we will continue to invest in go to market capacity.
Kate Bueker: Second while we have seen small business sentiment improve we continue to see value value driven purchase behavior and we assume that this will be the case throughout the year.
Kate Bueker: Finally, the U S. Dollar has strengthened meaningfully since we reported Q3 results in November.
Kate Bueker: As a result at current spot rates, we expect foreign exchange to be an approximately 200 basis point headwind to 2025 revenue growth and a 50 basis point headwind to operating profit margin.
Kate Bueker: With that let's dive into guidance for the full year in the first quarter of 2025.
For the full year of 2025 total as reported revenue is expected to be in the range of $2 95 to $2 90, 95 billion up 16% year over year in constant currency and 14% on an as reported basis.
Kate Bueker: non-GAAP operating profit is expected to be between 400, 543, and $547 million, representing an 18% operating profit margin.
Kate Bueker: non-GAAP diluted net income per share is expected to be between $9 and 11.
Kate Bueker: $9 19.
Kate Bueker: This assumes $53 9 million fully diluted shares outstanding.
Kate Bueker: And for the first quarter.
Kate Bueker: Total as reported revenue is expected to be in the range of $697 million to $699 million up 15% year over year in constant currency and 13% on an as reported basis.
Kate Bueker: non-GAAP operating profit is expected to be between 98 and $99 million, representing a 14% operating profit margin.
Kate Bueker: We expect a little over a point headwind to operating profit margin in Q1 due to an increase in the company match rate of our 401K contributions.
Kate Bueker: non-GAAP diluted net income per share is expected to be between $1 74.
Kate Bueker: And $1 76.
Kate Bueker: This assumes $54 1 million fully diluted shares outstanding.
Kate Bueker: As you adjust your models please keep in mind the following.
Kate Bueker: We are excited with the recent launch and multi year growth opportunity of our Breeze intelligence product.
Kate Bueker: We expect a little less at a point of headwind to 2025 revenue.
Kate Bueker: Okay.
Speaker Change: Ladies and gentlemen, please remain on your lines. Please.
Kate Bueker: Please remain on your lines.
Kate Bueker: Okay.
Kate Bueker: Yeah.
So again, ladies and gentlemen, please remain on your lines Your conference will resume momentarily.
Kate Bueker: Okay.
Kate Bueker: Okay.
Kate Bueker: Okay.
Kate Bueker: No material.
Kate Bueker: Operator.
Kate Bueker: We can hear you.
Kate Bueker: Okay, we seem to be having more telephone or technical difficulties here.
Kate Bueker: It's kind of pick up where she left off.
Kate Bueker: The guidance section apologies to everybody for the.
Kate Bueker: So technical difficulties here, we will get through it.
Kate Bueker: Okay, I'm going to just dive in to the key modeling points.
Kate Bueker: As you adjust your models. Please keep in mind. The following will we're excited with the recent launch of multi year growth opportunity of our breathe intelligence product, we expect a bit less than a point of headwind to 2025 revenue growth from the wind down of the legacy <unk> business.
Kate Bueker: We expect capex as a percentage of revenue to be roughly 5% for the full year of 2025.
Kate Bueker: Driven primarily by capitalization of software development.
Kate Bueker: And lastly, we expect free cash flow to be about $560 million for the full year of 2025 with seasonally stronger free cash flow in Q1 and Q4.
Kate Bueker: As we close out 2024, I'm going to take a moment to recognize all hub butters for their contributions to our mission of helping our customers grow better and a big Thank you to our customers partners and investors for the ongoing support.
Speaker Change: With that operator, let's open up the call for questions.
Kate Bueker: Certainly.
Kate Bueker: Due to the technical difficulties, we will be extending the Q&A session.
Kate Bueker: If you would like to ask a question resell score.
Kate Bueker: One one on your telephone keypad now.
Kate Bueker: You changed your mind, please dial star followed by one one.
Kate Bueker: In Q.
Kate Bueker: Ask your question. Please ensure your phone is on muted and limit yourself to one question per person.
Kate Bueker: One moment please.
Kate Bueker: Okay.
Speaker Change: And our first question comes from the line of Samad Samana with Jefferies.
Samad Samana: Hi, good evening.
Speaker Change: Another technical difficulties brought what I heard loud and clear.
Speaker Change: You guys had another very strong quarter congrats on that.
Speaker Change: Maybe let's talk about AI, a little bit further given all the puts and takes there I wanted to dig in on.
Speaker Change: What some other software companies, especially in the context of what Youre doing around AI.
Speaker Change: We think all of our brands and discuss the change in the modernization plans.
Couple of months as their products and spent more time in the market I'm just curious how your customer conversations have been.
Speaker Change: By measuring ROI Abbott customers have had reason there Ken.
Speaker Change: Yes.
Speaker Change: Past Commoditization scripting and maybe related to that can you comment on fair bit wind down and a one point headwind on how are you thinking about the impact of AI modernization inventory by revenue forecast.
Speaker Change: Thank you Bob taking my questions.
Speaker Change: Thanks, a lot for mob and thanks for hanging in with Us and.
Speaker Change: No.
Speaker Change: I'm, so glad that you've heard it loud and clear that we are gaining momentum from an AI perspective. So let me take that question on monetization.
Speaker Change: Look the way, we think about AI is that there should be one product and AI first product. So we don't believe that there should be a separate hub or a separate add on for AI and that has been our strategy from the beginning that's why our vision has been to embed AI.
Speaker Change: Across every hub and across the entire platform. Therefore, our monetization strategy is really about how we drive customer acquisition and expansion across the entire platform with AI and how we lead and win with AI across the platform and as I mentioned in my.
Speaker Change: Bagged remarks, the success of content hub in the last year with AI, driven we improve the attach rate to marketing hub by three X. The traction in service hub, especially up market is AI, driven and we're going to continue to drive that type of innovation that strategy is working for us.
Speaker Change: And we have even more conviction as we talk to customers who are in our pipeline and who are in our install base and we're going to keep doing that now having said that I do think that the future of pricing for AI will be hybrid that is will have both seat based and usage based pricing right now we're focused on delivering value.
Speaker Change: Our agents and as more customers get consistent value with AI, we will introduce usage based pricing. So our pricing model will be a combination of usage and seats based pricing, but what is really important is that we will consistently focus on delivering value first before.
Adding on to our fee based model and then monetizing based on usage that approach has worked for us and we'll continue to work for us and that approach. So the focus for us remains very clear embedding AI across the entire platform delivering repeat value and consistently driving innovation that is having.
Speaker Change: Really good impact in terms of our pipeline conversations and customer conversations.
Speaker Change: And tomorrow just to answer the specific question on what is assumed for AI and guidance, we aren't going to provide specific assumptions, there, but I will share a few things.
Speaker Change: First is that we have not assumed any direct agent monetization and our 2025 guidance that said, we're glad you heard that.
Speaker Change: We are focused on AI.
Speaker Change: <unk> heard from the omni that customers are seeing value from AI that adoption is growing quickly.
Speaker Change: You see the strong momentum and hear about the strong momentum and content hub.
Speaker Change: And sales hub and service hub that is directly related to the AI features and functionality that we are adding we are seeing customers increasingly consider AI in their decision, making and the assumption is that that is all going to continue through 2025 and that is what is baked into guidance.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: And our next question.
Speaker Change: I know Mark Murphy with JP Morgan.
Mark Murphy: Thank you so much I would appreciate hearing your perspective on <unk> and the ability for <unk> to drive a breakthrough on the cost side.
Speaker Change: <unk> side.
Speaker Change: I'm curious, whether it's Dharma assured yamana arcade.
Speaker Change: Cross your mines.
Speaker Change: Ken could you run. These can you run the breeze agents with a lower insurance cost profile. If you use one of these.
Speaker Change: Very efficient models.
Speaker Change: Do you think you can unleash more power for customers and is there something does it alter what do you think on the volume of AI. You can provide maybe volume goes up in costs goes down any perspective would be great.
Mark Murphy: Sure. This is mark thanks for the question.
Mark Murphy: So a couple of things one on the.
Speaker Change: Cogs side.
Speaker Change: There was already a dramatic reduction in Cogs, even before deep sea showed up on the scene.
Speaker Change: <unk> has now been like a spectacular reduction simply because of increased competition. The fact that deep sea because it open source and open weights model has kind of driven driven costs down even further so yes, absolutely there will be.
Speaker Change: A really positive impact on lowering inference costs across the board because everyone. As we've already started seeing are going to reduce their reduce their cost per influence what's actually.
Speaker Change: Even more exciting to me that that we should be excited about reduction in Cogs.
Speaker Change: Is that these reasoning models both deep seek an opening is those remodel.
Speaker Change: Really expand the use cases in terms of what agents can take on what types of goals, what kind of customer problems can we solve because the reasoning models. All of these sound similar because they are large language model, they're very different in terms of the kinds of things. They can do with <unk>. They can actually take on much more nuanced and sophisticated goals that we were able to do before so that's super exciting.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Brad Sills with Bank of America.
Oh, great. Thank you so much really excited to see all the progress here with co pilots and agents I wanted to ask a question around the upselling.
Speaker Change: Motion of activity during the quarter I think that's been the one area where.
Speaker Change: In the current environment, you haven't really seen that unlock yet.
Speaker Change: Been pretty clear that downgrades in.
Speaker Change:
Speaker Change: Churn has stabilized here, but I'm curious what your observation was through the quarter or are you seeing any improvement there in this kind of telling you described is still in kind of value oriented mode. Amongst smbs. Thank you yeah.
Speaker Change: Brad. Thank you so much for the question.
Speaker Change: Net revenue retention as you know was up two points sequentially to 104, but as I shared in the prepared remarks, the biggest driver of that improvement in net revenue retention was from the impact of seat upgrades largely associated.
With the new seat based pricing model that we launched in 2000.
Speaker Change: Earlier in the year.
Speaker Change: Other than the seat based pricing model, you're right what flows into net revenue retention is net upgrades and downgrades what you heard from us over the last couple of quarters is that we had seen a stabilization.
Speaker Change: And an easing of the downgrade motion and that was very consistent with what we saw in the fourth quarter.
Speaker Change: Remaining headwind is upgrades other upgrades and that we saw again in Q4.
Speaker Change: We have seen.
Speaker Change: Some improvements in the sentiment externally, but people are still value driven and I think it's really going to take a big change in the external environment for that other upgrade motion to really move.
unknown: Understood. Thanks Kate.
Speaker Change: Yeah.
Speaker Change: You.
Speaker Change: And our next question comes from the line of.
John: Our John back to you with William Blair.
John: Yes, perfect. Thank you and congrats.
John: Our strong Q4 here.
Speaker Change: Keith one thing on the margin side, you mentioned the partner behavior.
John: <unk> might might impact margins here can you just.
John: Elaborate a little bit on how partner behavior as adjusted after you change the compensation model I think that was a couple of years back now, but what are you seeing there is an acceleration of revenue got.
John: A better cost structure on yourself the marketing side.
John: That would be very helpful. Thank you.
Yao: K R. Jim This is Yao many I'm going to take the partner question and.
John: Walk you through where we are in the process, though.
John: As you mentioned, we made some changes to the partner commissions in 2023, and we're very confident that those changes we made will increase the value of our customers get from working with partners.
And specifically in 2023, we announced that new deals will have a three or a commissions and existing deal will retire multiyear Commission lifetime Commission starting in 2025, and so that just that the changes if you are in existing D.
John: Bill and you're actively engaged with customers who continue to preserve the commission, but if youre not engaged with the customers you lose the commissions and that comes into effect in April for existing deal now.
John: We prepared the ecosystem, we've been communicating with the ecosystem.
John: Really held hands with the ecosystem and all of the changes and that changes will come to effect in April and that shows up you know in in terms of our numbers now in parallel the thing that I would mention a couple of fold, we've been investing pretty heavily in partners, while driving growth.
John: And we have been providing growth from marketing development funds, increasing the level of enablement efforts and all of that has resulted in much better engagement between partners and our sales teams and you can see that in our co selling with partners as I just mentioned <unk>.
John: <unk> grew 68% year over year, so that is really beginning to work.
John: Thank you.
Speaker Change: And our next question comes from the line of Kurt.
Kurt: Return with Evercore ISI.
Kurt: Yes, thanks, very much and I'll Echo my congrats on the quarter.
Speaker Change: Could you just provide maybe a little color on how we should be thinking about the guide as it relates to sort of new customer acquisitions over the year relative to RPC growth Youre, just given some of the commentary around service hub and some of the upmarket momentum I'm. Just wondering if there is potentially any change in the way we should be thinking about those metrics.
Yeah, Kurt Thanks for the question.
Overall, we were really happy with the net adds coming in at 9800, it's really at the upper end of the 9000 to 10000 range that we discussed.
There is some we have seen variability quarter over quarter in net additions, but I think this is the right zone at least for the next couple of quarters for your expectation that the one thing that I would say is that over the last couple of quarters. What we have seen is more of a balanced mix of the new customer.
Profile across the starter tier and the professional and enterprise tier and this is something that we expected post.
Speaker Change: The steep model introduction, because we eliminated the minimum seats on professional and enterprise.
Speaker Change: So the balance that we're seeing.
Speaker Change: It is primarily a result of that.
Speaker Change: So net net adds as we look at 2025 net adds in that nine to 10-K range is probably right a higher mix of professional and enterprise I would assume that that.
Speaker Change: Keep happening and then what will result is that <unk> should stabilize in the near term and then we would expect something that looks more like a.
Speaker Change: Low single digit growth in RPC as we move into the back half of the year.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: And our next question comes from the line of DJ Hynes with Canaccord Genuity.
DJ Hynes: Hey, good evening guys.
Speaker Change: Maybe one for Don mesh so it's almost one of the questions we've been getting more in an agenda world.
Speaker Change: Who becomes the control tower for all of these agents. If every app in the stack is bringing their own version right and maybe that's more of an enterprise issue, but I assume the need still exists and F&B.
Speaker Change: Even if <unk> owns the majority of that App estate. So how do you think about that need and how does have a swap positioned to be that control tower. Yes. Thanks for that question. So what we see happening.
Speaker Change: The agent platforms kind of evolve is composed ability becomes a super important factor, but these agents need to collaborate discover each other and work with each other in order to accomplish higher order goals and so that's what we've been doing with agent that AI is we want to kind of capture that mind share and have builders build on the hotspot agent AI network and we.
Speaker Change: Just wanted a way harmony Chevy kind of opening comments and said we had gotten from 50000 to 500000 users I'm excited to share as of last night that number across 900000. So we're seeing some really great uptake. We have enabled 7000 people to build their own agents on the platform. So the way we see this evolving it's similar to how we saw with the original cloud computing that there.
Speaker Change: We'll be some.
Speaker Change: Some dominant platforms, where all the builders want to kind of aggregate and theyre going to want to aggregate, where the users are where the customers are so we can take our existing customer base. All the contextual data unify idea that we have and make that available to use agent builders, along with a local tool and the distribution mechanism to reach hundreds of thousands of people. So we think that's a winning strategy we are super excited.
Speaker Change: Thanks for the question.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Jackson Ader with Keybanc capital markets.
Jackson Ader: Great. Good evening, everybody, thanks for taking our questions.
Speaker Change: Yes.
Speaker Change: Sounds like you guys are internally adopting a lot of AI.
Yes, I mean, you went through a bunch of different use cases on.
Speaker Change: Yes, I think marketing and sales.
So would we expect or do you expect that to meaningfully impact.
Speaker Change: <unk> expense growth, obviously for the better and then if it does allow you to save some money and where might you redeploy those savings. Thanks.
Speaker Change: Yeah. Thanks for the question.
Speaker Change: I think that Jeremy can talk a bit about how we're envisioning the transformation of our go to market. We are broadly adopting AI internally what youll see in terms of areas for reinvestment is very consistent with the areas, where we have driven outsized investment over the last three years.
Speaker Change: The first is really into R&D to continue to drive that innovation engine and fuel growth for the long term.
Speaker Change: And the second is in the capacity and go to market, we obviously want to invest against the opportunity we see and we feel like this is a year where added capacity to our sales force well pay off well.
Speaker Change: Yes.
Speaker Change: I'll talk about how we're re imagining.
Speaker Change: Our own go to market internally.
Speaker Change: As soon as we saw this big Gen of AI moment in and we pivoted our product. We did the same thing internally and we've been re imagining our go to market.
Speaker Change: For the better part of the last couple of years and you heard me talk about support that use case is very very clear and we have not only improved the resolution great with AI. We've also been able to take our support agents and really leverage them in more complex issues and so I think we'll continue.
We're on that path.
Speaker Change: Marketing huge benefits, we are re imagining our entire marketing strategy with AI I talked about leveraging it for setting up meetings. We're at the early stages, even with 10000, new meeting set up by AI. We are at the very early stages of that.
Speaker Change: We can continue to scale that but not just in the prospecting use case, but really leveraging AI AI for personalization and through that entire content marketing process. If you look at kept our CMO. He is at the forefront of AI and he is doing does not just to re margin our own.
Speaker Change: Marketing, but he is also doing this to educate our customer base on the right ways to apply AI and to get value from AI and the same thing with sales I mean, we're in the early stages of what we can do we are already leveraging it for discovery better research followed through with follow ups or chat and the law.
Speaker Change: List goes on so as much as we are innovating with our product we are re imagining it for our go to market and that is going to have midterm to long term impact on our own level of innovation, but also efficiency.
Speaker Change: Thank you.
Speaker Change: And our next question comes from the line of Gabriel <unk> with Goldman Sachs.
Speaker Change: Hi, good afternoon. Thanks for taking my question, how many at this idea of driving value for customers and productivity increases for customers and then realizing pricing at a later date, that's not a new concept for hub, but maybe just remind us your framework.
Speaker Change: One of the things you could be looking for it to turn on that consumption pieces of pricing models for agents and AI and how do you think about mapping some of the statistics on productivity to pricing increases further that Lloyd. Thank you.
Speaker Change: Yeah. That's a great question, one that we think about all the time and Youre right that our pricing approach should be no surprise to anybody.
Speaker Change: <unk>, our pricing philosophy, our philosophy has been innovate extensively introduce innovation to customers make sure that theyre getting consistent value and then drive monetization over the years. When we have increased prices for marketing hub sales hub service hub, we've never gotten pushed back because.
Speaker Change: By the time, we do that we have delivered significant value. So in terms of AI. Our approach has been twofold first off we want our entire platform to have AI features so embedding AI not actually creating friction at the point of purchase and making it super.
Speaker Change: Easy visible within the product to adopt AI has been the first kind of like step. So last year I talked a lot about awareness and I have to say that towards the end of the year. The awareness of AI within hub spot was significantly higher compared to the beginning of the year. So that's number one I we feel like we.
Speaker Change: Made a lot of progress the second is adoption one of the things that we did with Breeze and the reason we launched Breeze is one we want it to be easy, but two we wanted to be recognizable within product. So neither going within hub spot you can just see the sparkle button, which are AI features and customers click on it and use it and begin to.
Speaker Change: Like you know get value from it and those are all the examples that I shared I think specifically with agents, we launched a set of agents at inbound. It's early stages, we're seeing very good momentum, but when we see repeat value repeat usage of agents. Then we'll feel very very much at ease to add a component form.
Speaker Change: Monetization, we're already monetizing AI with our current model, we'll be able to add when we begin to see repeat usage and value from agents and that's our focus for 2025.
Speaker Change: Thank you.
Speaker Change: And our next question comes from the line of Alex Zukin with Wolfe Research.
Speaker Change: Hey, guys. Thanks for taking my question I've got.
Speaker Change: Two different ones, maybe how many first for you.
Speaker Change: Comments on the demand environment exiting the quarter.
Speaker Change: There was kind of a change post election, just signs of or lack thereof of SMB optimism kind of driving either.
Speaker Change: New tail winds or creating headwinds as you look at the year and then I've got a quick follow up for Dennis.
Speaker Change: Sure Alex.
Speaker Change: Look I think we've seen some improvements in the demand environment and customers are much more open now to talking about growth initiatives and I, probably think it started around September with some of the interest rate changes now, having said that and like he emphasized.
Speaker Change: A lot of the buying trends remain similar to what we saw last year. The decisions are value driven it's committee based decisions in most all of these decisions are made by C suite and the board level and we're just going to assume that part of customer buying patterns continue to exist now.
Speaker Change: When I look at the demand environment and when I look at our pipeline a few trends are very encouraging first off when customers are looking at marketing or sales or service in the mid market company. We are in consideration we have a seat at the table with and learn more about the platform of choice and our.
Speaker Change: <unk> easy to use fast time to value value proposition really resonates within the segment the second when customers TARP with top spot Theyre now starting multi hub and they continue to consolidate on hotspot both to optimize their cost and to increase the visibility and to drive innovation.
Speaker Change: And we're having more conversations now about AI innovation within our roadmap and customers love. The fact that it's embedded within AI, there's no friction for them to buy a separate SKU and they begin to use it they get value out of it and we're seeing all of those as encouraging trends. So our focus is to do.
Speaker Change: Ray this pace of AI innovation to communicate the value of our AI first platform and to help customers grow in any environment.
Speaker Change: Perfect and then maybe just one very much.
Speaker Change: A longer form a question for you.
Speaker Change: Basically.
Speaker Change: Look at what the foundation model companies continue to do at the edge of what's possible with agents and software development.
Speaker Change: Do you view that there is this consistent I'd say anxiety level and the investor community around the evolution of like DIY, AI and software agents and agenda.
Speaker Change: Versus kind of packaged software and I'm, referring specifically I guess the sales agent demo from open AI recently like how do you think about a world where the center of gravity.
Speaker Change: It stems from having this holistic record plus intelligence plus a gentle workflow system that hub spot.
Speaker Change: And bodies versus what.
Speaker Change: Future, where maybe that's more of the presence of what the foundation of all the companies are doing sure. Thanks for the question just a.
Speaker Change: A quick high level thought is that just like we saw with cloud computing, there will always be kind of mega corporations that take a DIY approach I said, all we want to build our own software you want to build our own agents, we want to build our own everything we see the exact opposite happening in SMB Smbs do not have the appetite.
Speaker Change: To go off and try and build them assemble all these pieces together, regardless of how easy it becomes.
Speaker Change: So my personal belief is that in the SMB world, what's going to be Super important is what's always been important is ease of adoption and fast time to value and they want something thats unified all put together, what we see playing out is that at a platform level.
Speaker Change: Envision an entire new generation of what.
Speaker Change: What used to be sort of agencies and kind of development companies software companies building on top of a common core platform like like upsides willing to provide and we think that's the actual answer Smbs will say I want one core platform I want everything done for me and I would love to see it ecosystem of thousands of possible agents that are tailored for my industry for my business.
Speaker Change: And we can piece it altogether all on one platform, that's how we see it shaping up.
Speaker Change: Thank you.
Brian Peterson: And our next question comes from the line of Brian Peterson with Raymond James.
Brian Peterson: Alright, thanks, and congrats on the strong quarter. So I wanted to double click on that 68% growth in cross selling that you guys mentioned, that's a pretty impressive stat.
Brian Peterson: Mix of channel touch business change over the course of 2020 or is there any commonality that you can share on what drove the shrink with channel partners. Thank you.
Speaker Change: Thank you Brian I. Appreciate the question, Yes, we are very thrilled to see the core selling kind of take off and we're very happy with the results there.
Speaker Change: I think that this is been multiple years in the making we went to our partner ecosystem and we said.
Speaker Change: We want you to source co sell and service our partners at experts within the field and we really help them go from way back marketing agencies to CRM Implementers and as we did that we've really focused those.
Speaker Change: Partners on upmarket so a lot of the benefit that we're now seeing is like a multiyear arc that we have been working with our partner ecosystem and if we look at specifically 2024, we got much better at working upmarket joint customer pursuits with our partner.
Speaker Change: Ecosystem, our product got better and we are enabling both our sales teams as well as the partner ecosystem to understand the full benefit of multi hub adoption and so they are selling more multi hub deals on implementing multi hub deals upmarket with those customers and we are now talking to them about.
Speaker Change: Being an AI first ecosystem then they are leaning into it front and center with us and they see the opportunity of not just being in a customer platform, but being an AI first ecosystem in.
Speaker Change: And an ecosystem like often they see the huge benefit associated with it. So it's been multi years in the making and there is an even bigger opportunity as an AI first ecosystem ahead.
Thank you.
Speaker Change: Your next question comes from the line of Ryan Macwilliams with Barclays.
Ryan Macwilliams: Hey, Thanks for taking the question.
Speaker Change: Can you just remind us.
Speaker Change: Do you expect your installed base to receive.
Speaker Change: The pricing increase.
Speaker Change: You can layer in 2025.
Speaker Change: Sure I appreciate the question I think as we covered at the analyst day, we have started to migrate our existing customers from the legacy pricing model onto the new seat based pricing model.
Speaker Change: That has happened for the.
Speaker Change: The simplest customers through the back half of 2024, and we will continue to drive the migration of the customer base through 2025, all of our customer base, we intend to have migrated to the new.
Speaker Change: Pricing model by the end of this year now.
Speaker Change: Now that said the price increase for existing customers happens when they come up for renewal. After they are migrated so they are migrated over at a neutral a R. R.
Speaker Change: Then they can receive up to a 5% increase in pricing upon their first renewal.
Speaker Change: We are as you can imagine then earlier on in the sort of renewal motion for customers post migration.
Speaker Change: Pretty early there still and the expectation is that between 50 and 60% of our a R. R will have gone through that first renewal by the end of this year.
Speaker Change: Thank you.
Speaker Change: And our next question comes from the line of Rishi <unk> with RBC capital markets.
Speaker Change: Wonderful. Thanks, so much for taking my question.
Speaker Change: Maybe something a little bit more longer term focus so great to see this momentum with AI a lot of times one.
Speaker Change: We're talking II, it's a focus on greater efficiency greater productivity, but we really think about prior technological waves. What really gets these waves exciting is the technological unlock whether its the internet mobile or cloud.
Speaker Change: If we think about some of your early work Youre doing in niche where are you seeing the ability to unlock those net new use cases for hotspot that you can do things with generative AI that you couldn't do before and as we think about what does this mean architecturally down the line.
Speaker Change: How should we be thinking about kind of your ability to pivot to these new architectures as a result thanks.
Speaker Change: I like that question a lot and that is exactly how we're thinking about it look I talked about frame.
Speaker Change: Is the recent acquisition and this is emblematic of the kinds of things that we can now unlock frame will allow our customers to get much better insights from unstructured data, but if you really step back and think about it generative AI made it possible to ask questions of structured data things like.
Speaker Change: Company contact deal status and you get back answers in natural language. So that was the first breakthrough, but there is another bigger breakthrough with unstructured data, 80% of all customer conversations are on structure, there and call their in email.
Speaker Change: They are in France scripts and that flows through the company every single day and it is now possible to ask evergreen questions off that data and to get better insights in real time and in natural language to convert those insights into action. So I think that's a huge.
Speaker Change: Unlocked by one bringing structured and unstructured data together, which is exactly what we are doing the second part of the shift is it's not just important to have these two pieces you need up context layer on top of it and I think of it as a knowledge layer on top of that.
Speaker Change: That data and the easiest way to think about this is when you become a employee within the company you know the tone of the company the voice of the company the ideal customer profile or the value proposition all that as context on top of that data, we're building that and we're building that knowledge layer right on.
Speaker Change: <unk> top of that data fabric of structured and unstructured data and the fact that we have $1 8 million weekly active users that are bringing this vast data and collaborating that gives us a huge benefit from an architecture perspective, and then the third layer on top of that is just orchestration how do you get feedback.
Speaker Change: Daily and how do you learn from the feedback in terms of what customers are using we're building that and I do think one of the things that we haven't talked about is the UI is going to change we're going to see a lot more compulsive Bowl UI that sits on top of all of that data and in a gentle future and we're already re.
Speaker Change: Margining all of that and so I think the combination of structured and unstructured data the ability to go broad across the customer journey, while going deep in our function, which we have and the ability to kind of like run at the pace that startups are going we're innovating like a startup and so the.
Speaker Change: Architecture's changing what they are with it and I'm. So excited about what the unlock for our customers.
Speaker Change: Thank you.
Speaker Change: We have time for one last question then comes from the line of Michael <unk> with Wells Fargo.
Speaker Change: Hey, Thanks for thanks for fitting me in and extending the call I appreciate the context, the retention commentary was especially encouraging.
Speaker Change: I wanted to see if we could hear you maybe compare and contrast, both what hub spot saw Q4 this year versus last year in terms of just end of year decision, making and then and guidance for Q1 is there any extra conservatism you're embedding given.
Speaker Change: Q4 to Q1, there was a change last year that many saw.
Speaker Change: That took us all a bit by surprise. So just wondering how you're applying some of the lessons learned there last year and incorporating those into.
Speaker Change: The upcoming guide for the year. Thank you.
Speaker Change: Yeah.
Speaker Change: When I take a shot at this I think what we saw in Q4 last year.
Speaker Change: Was a really significant change in the trajectory of buying behavior that is not what we saw this year. There is typically a flush of business at the end of the year. We did see that in 2024, but what we saw was more of a continuation of Q3 are.
Speaker Change: Then something new and different in Q4.
Speaker Change: That said I think when you look at the guidance for 2025 of the most important thing to remember is that in a SaaS business like hub box.
Speaker Change: When you the revenue growth is a lagging metric and so.
Speaker Change: What we are seeing is a trajectory change in buying behavior throughout the back half of the year, but it's going to take a while for it to flow through to revenue and so yes, we are expecting a step down in our constant currency growth rate in the first quarter. We also expect that our Q1 constant currency.
<unk> growth will be the low point for the year and that our revenue growth rate will accelerate a bit throughout 2025.
Speaker Change: Thank you.
Speaker Change: This concludes the hub spot Q4 2024 earnings call. Thank.
Speaker Change: Thank you to everyone, who was able to join us today.
Speaker Change: Thank you for your lines.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Sure.
Speaker Change: Sure.
Speaker Change: Yeah.
Speaker Change: [music], okay to the city.
Speaker Change: Our time frame.
Speaker Change: [music].
Speaker Change: Mohan luxury.