HUBS - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the HubSpot Q1 2020 Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Chuck MacGlashing, Head of Investor Relations. sir. ahead, go Please

Charles MacGlashing

the afternoon, Chief Call. to the Today, press Kate is Chief issued in Good the our me XXXX this Bueker, Officer call results First and Earnings the afternoon after was that Conference we'll Halligan, release Officer. closed. and operator. With HubSpot's on our welcome Brian Quarter announced market Executive Thanks, Financial be and discussing Chairman;

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

During historical forward-looking of to Exchange be of this Exchange amended, statements business our Securities of related Securities the as Act call, we'll including All within XXXX. full make expected expenditures, XXXX, guidance and our that may statements of amended. Section forward-looking future Act the for Section are considered of fiscal XXXX, of expectations meaning the than XXE including the those and XXA management's and and as other operational year and statements, financial second financial business outlook, statements of performance regarding growth, operational facts quarter

differ except reflect and, as Please release to the materially or these our be cause from to and statements. risks press for which our only language by no discussion cautionary required to in the results of the view revise forward-looking we today filed update refer XX-Q, expectations. statements SEC obligation will today's and Form law, Forward-looking with undertake of afternoon could this uncertainties actual as that

of our measure can to differences call, GAAP financial XXXX of measures, used Relations in be measure as by The the defined press the release non-GAAP quarter we'll financial a Investor discussed, such section found to and between measures financial comparable directly Regulation course refer within earnings reconciliation or website. our During of first certain the today's non-GAAP most G. each

CEO to Brian to my call pleasure the over and Now HubSpot's Chairman, turn Halligan.

Brian Halligan

about to HubSpot's on on has to want taken business, today. recognize Thank take for so Thanks, joining to globe but people and a pandemic in talk you well folks. call Chuck. Good this I and this us here moment through right I many We're call you staying afternoon, toll can. as healthy hope this HubSpot around These home tough you the as community. closer times. all are of managing on are to the the the

earnings adoption Now let's nicely, first growth currency talk customers representing revenue surpassing tailwinds. and came just grow this nearly Total X%. XX% year-over-year, QX, about were strong continued in HubSpot's year to We quarter with grew into results. operating XX% while XX,XXX multiproduct was customers. margins over XX,XXX, non-GAAP Constant

product the always the Hub year powerful On ever front, but tier the for easy Marketing Marketing to has targeting we account-based attribution with better advanced marketing, relaunch before, kicked it reporting, with enterprise much the chat been than use, Hub. off relaunch and made exciting an more of Enterprise more.

We product main offering have to separate the out review from our set. enterprise by X that use. is categories great enterprise borne delivers GX, software in X and now, This peer-based customer an that's value excellent segment

the of first through quarter. tailwinds, those Now much they continued

world the they impact in as headwinds March, the However, of met of the felt middle strong by were pandemic. the

commission platinum, immediate customers Now prepayment the and health move a When designed hit, times. to against economic downturn. we turned reach to to through series than better trying and that to of help customers mind, that this a solutions it we're gap partners. rather X-month with we to partners, navigate fight plays the in to our QX commissions and sudden partners diamond crisis and offered our wind, With focus our elite partners helping expedited all

bots a their meaning several and steps. and including limits took We into lifted and X:X prospects, To to added meetings, video customers free rapidly calling CRM. strategies e-mail of we and go-to-market move help online, our features, collection

get We strain to XX% rate also strain did more of the started late HubSpot. over with in the in enable for starter financial suite quarter. under increase the to this the We products price at quarter. the reduced run alleviate starter of a growth our end by This our to customers fivefold and in that resulted the the companies financial offering of on

pandemic Finally, way and more is under strain. for we terms I storm it's like offer a that about of gave in big discounts financial like middle that leeway certain payment of blew March. our to team to the The our short-term customers a lot severe flexible think to the into business HubSpot

winds will I'd headwind say XXX-mile business now, I up. help but make long-term coupled that makes we're in and a tailwind models with we sell outlast hour experiencing that's largely world surge And an have The of teach shifted. the was school just weeks, hour last XXX-mile the an few it's go-to-market retention first and I historically business we companies a the picking time. represent an These over our when few weeks and downturn. old But tailwind models step think back, of to hit for with The has the one methodology have the April, that a online XXX-mile seeing sense. same offline, the as new been time. this school that for at designed go-to-market into big very hour it's headwind a The of first side new shift. all companies leaning near-term tailwind business trends HubSpot, the take a current is platform that we volatility

like use line, was wanted a CMS combine We to the of growing scale. Similar the the to management only have fit technically growing to complicated businesses functionality companies with one of is CMS and ease without April, all a The for Hub security growing have features tooling, for administrative they Marketing new system testing gap X with or overcome experience we a we the of companies notoriously CMS at starts and Enterprise, building they websites XX/X not very think stopped heavy basic the even some maintenance. their Hub. content, power it with apps want pains. the managing introduced future. dynamic options product at In companies tons between painful Many need designed websites to help for content result need. managing web And better adaptive limited the blur monitoring. that Hub websites

positive We've CMS has partners been our see really macro environment. pleased to had reception the our that and customers despite with the

the experiences might when along this fact, rival at digital are rare shifted creating just Hub In into in have given history right ones, that in-person CMS time. the moment humans come

our position tough out tough HubSpot large that, before, in said indeed Having is to said market with but customers and the come these help times. I are times weathered As a in in invest good stronger continuing when that on even we and the to out be end, To come to we the other position side. stronger expect an innovate, other side. we're and

that us well-oiled our until in serve as year. and on will July behind the team I operating X news instrumental and I that customers, a and President X our system end want adviser the exceptionally and world-class until JD JD hand Operating over, and the over in years leave global indelible years partners to the longtime before well growth driving an will to has He a will it of share an Sherman, Officer, has to Chief will on decided JD leave HubSpot's been last has some Now continue HubSpot. stay employees. come. imprint left

go, see to him I'm wherever sad done become lands. I'm of the eager While a and CEO proud to we've him work great see he

you, say the So thank I employees the our JD. Board of We've better because of around on behalf want world, you. HubSpot, of to grown and all Directors

now to financials Okay. the With that, and Kate take to I'll us over guidance. turn our it through

Kate Bueker

Thanks, Brian.

to for XXXX. second results Let's our our quarter and first full the and turn year quarter financial guidance

grew in constant XX% year-over-year, on basis. currency subscription The first services revenue as-reported as reported. XX% grew while and QX X% quarter an year-over-year, grew year-over-year revenue revenue both XX%

revenue international Domestic XX% currency in of revenue in revenue total year-over-year. reported. QX, XX% points in year-over-year constant XX% up as and grew X XX% growth was QX, represented International revenue while

of up constant basis year-over-year. billings a as in and an March of XX% year-over-year $XXX on as-reported the million, $XXX end currency. revenue million, XX% XX% was increase Calculated was Deferred

ended with our our at sequentially the suite. portfolio, first up product of revenue slightly, total by starter customer exceeded a driven for subscription was the Customer time, net both customers, XX% additions and in XX,XXX Average HubSpot low in $XX,XXX, QX end which per strength year-over-year. first and particularly quarter year-over-year. X,XXX up the was

partners. In prepaying some changes commissions. of These steps payment addition near-term our proactive important extending include Brian our alternatives customer-friendly taken partner to product the highlighted, have downgrade some flexible the offering we and terms, to and COVID-XX customers for alleviate also impact help

saw a environment, of a the actions and As these mid-March. beginning headwind economic in challenged we to revenue retention result

through the customer to versus XXs X with of color, revenue the additional To the retention fall net of rate decline from March, downgrades XXX% saw we the give our over from coming some the year months low in majority cancellations. you first

expect, would saw our you in XX-employee our from churn mid-market larger customers As we X- uptick customers. to relative to segment in a

we the and rates will customer-friendly our Given continued programs, in of anticipate environment, impact lower our uncertain QX. retention economic trend the

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

was was was gross quarter gross year-over-year. minus margin First XX%, margin X%. XX%, flat while services gross margin Subscription

to and X.X%, savings exceeded quarter, as first period down result performance, Operating COVID-XX. in of capitalization quarter strong to margins a last margin software the revenue year. the was slightly expectations operating For compared expense our same the related higher some

up employees, moved year-over-year. of to to largest adapted At many remote first our believe we office, XX% environment mid-March, working employees to businesses, systems we remote our pandemic, well. the our X,XXX a Like our Prior employees had and have quickly communities. third and the the our I to and shift already was in entire workforce end quarter, protect

of we last as growth our hiring first plan for headcount a result the half of a reminder, in XXXX strong higher fall. As

We to of plan in financial levels ensure on while road G&A to slowing R&D in the begin deliver high slow our a and hiring half order growth robust headcount and second expect in to the map continued flexibility. to year. of continue to product marketing targeted functions sales investment maintain in to We

including in was first product out to $XX development the costs software was $X.XX higher $XX.X of or our income the quarter, related driven by facility diluted innovation. CapEx, million capitalized Dublin of million development quarter in completion capitalized and per software revenue Net X% build or the share. costs,

in to of a continue revenue to XXXX. X% as CapEx be We expect about percentage

or terms million was first flow customers. cash impacted X% $X we impacted million partner was of flow the extended quarter the offered cash $XX prepayment and negatively in Free by commissions revenue. our to Free payment

free for cash Given expect factors, approximately now $XX million these flow we of XXXX.

and HubSpot economic ended marketable downturn. well securities, to is $X over with positioned and billion of the cash weather quarter this

our term. long invest the we managing expenses while remain the for to disciplined to approach to to we future, As committed look continuing

dive XXXX. let's second that, guidance the into With of for year full and quarter

of range the second million million, the in $XXX For total to revenue is expected year-over-year. XX% to quarter, $XXX be up

of operating fully This $X.XX million, now million. Non-GAAP income million approximately range between operating year-over-year. XX.X $X.XX. income of and expected the to expected million per is diluted and be the $XX.X between $XX.X million $XXX and between This million share assumes is Non-GAAP share to is diluted and expected diluted to be assumes be now year fully be outstanding. XX.X to net be approximately $XXX million shares revenue $XX in $X.XX. XX% expected Non-GAAP expected is million. income net to $XX $X.XX diluted up Non-GAAP now per income outstanding. full shares total is And for XXXX, between to

current of economic business are reflects given with, guidance the a Our that view conditions. we comfortable

environment economic and Our of a of the the range challenging wider second outlook half year. assumes to second the a through outcomes incorporate quarter

expecting As increased at of mind revenue; spot X full headwind as-reported the and points a headwind both in rates, current following: exchange foreign expect an you XXXX. QX to your models, now adjust keep the year we're in we

the With that, closing hand to over for Brian call I'll remarks. his back

Brian Halligan

of couple keep our many the break. company for drive part and moving. of time possible And be that look beyond will our spent on every world been past thing sense to months count this. that a of That about of when day. Thankful resilience. have able not purpose. employed the we of The bounds I does, Kate. you, with I've Like only thinking Thanks, on lot And it can be team many to is comes bend business to that a feeling part I'm as privileged the businesses other side and helping also gratitude our of of customers operate, over can want as of the different still

all Why the our and our in us, over every couple we continue and we customers, investors months, I who thank fight it's why we are made To conviction. of HubSpotters decisions you. made our partners, and it's to day the with globe last the wake why around invest up the with this

up the we please a few questions. can call for open Operator,

Operator

Zlotsky Stanley. first from Instructions] from Stan comes question Your [Operator Morgan

Stan Zlotsky

to be healthy. glad and certainly see safe will staying I'm missed. JD, everybody And is you

diving What pulled year. then a I the from thus that. investors the maybe that many hearing expecting is And So provided guidance far full biggest to into guys the just considering the full that you have results, that that think surprise don't I really think people gives are for guidance have confidence so will I other quick companies guidance? provide follow-up. year you we're

Brian Halligan

one? Kate, want that you to take

Kate Bueker

Sure.

scenarios significant were So a we not bit obviously, significant everyone. thinking for headwind unprecedented, yes, as how It's approach and on were a headwind that It's was through to current frankly what the environment us. guidance is us we running. lost and for a

specifically. environment took our alluded on towards And to to our the remains extent, new bunch from customers will has those a the cancellations. that throughout the net fact And while actions bookings partners. new of the For Brian our economic business QX, weak of to QX results lesser downgrades on a early that are continued expect on the and pressure we stabilized still customer We have impacts and we some quarter. assuming April, end help

this guidance recovery it No look reflects But As for outcomes always And the the an full has wider am view outcomes takes comfortable year, to will it it with today our of business to will and range a than like. been materialize. one what the guidance. of our a consider environment, full recovery frankly for we're knows past. a In year the range even that I if that is not of while we in economist. the when for start happen obviously

Stan Zlotsky

Brian. make happening in what's customers months X and really you're a seeing surprising are Okay. seeing some follow-up was move to that's because things wait really wait try out, Perfect. the to if abandon it's Where marketing until marketing And the digital their actually forcing commitment stabilize Equally a from commentary versus, traditional And let's and COVID you impact then now for ways really to that tailwind with old physical that then to coming customers world. everything from? let's reassess? that hey, it pushing of

Brian Halligan

tale way X back, the question, it's cities a And take to for sort Thanks of Stan. the here. sort of step of

just on I in as in we XXX-mile as Starting the were big for can our side. to X back there, Around downgrades, last X.X sort of recall a cranking, And First, headwind new the that week a get slowed a about kind real Stan, X months the off. -- third at mid-March tailwind. new of kind weeks bit. there, there's weeks, a X HubSpot. is HubSpot, of kind about pieces the downgrade April, kicked on really cranking, cancellations the side phase where of then business of headwind retention year, of -- second the And and and cranking the the X, headwind The tailwind, into headwind normal. mighty the the tailwind in

I moving One time to call, offline the of doing to right offline it talked is It's about sort a from is marketing what terrible marketing now. of online marketing. on business be

Moving from sales. from to outside moving outbound to sales inside inbound,

prop way these value on going the want pretty really are to and days. to go-to-market matches Our people our product well

industries you up, they that's kind and in X imagine, that e-learning which was have like One a up. last in second list pandemic that sizable Europe. like one your caught particular, are same a you and Again, a remotely, It environment. through some the surging MBA was makes day. in And picking And company here company COVID-XX from remember, the serving and orders orders the big from eye as we going remote we that. can there day, it's get really habit of every and had day I MBA, other get is falling I like the is day, on benefited company made have some from industries certain orders can and the the tailwind, a one of industries my certainly, second that's The medicine, April, things are scanners. temperature to

as, headwind, giant the of headwind, up. would has HubSpot I headwind XXX-mile X down no tailwind has So in slowed weeks describe tailwind. the and just though, a picked Last mid-March,

optimistic. So cautiously I'm feeling

Operator

comes next from Alex Your Markets. question RBC Zukin from Capital

Dylan Reider

on seen the It's maybe trends that as alleviating some some give quantification Dylan flexibility customers a percent converting Reider where of And of then around some bit details the of heavier impact? -- some of them percent as trends -- seeing can you The those you a regards around dig new and with for providing are Alex. little you are Could to any you've that in new well. customers as of into industries? getting with to speak that some prospects your and well just the the customers

Brian Halligan

Great. I to want guess segments. all think I about HubSpot, we X what have you

to to We to XX employees, have XXX employees, XXX X,XXX XX employees. X

same as as as it bucket it M people kind think SMB. S. I of So of than more

segment biggest XXX the and of you That's thing one businesses keep in segment. to mind to think is Our XX about impact. small that kind as

new started into going the to given of it. industries taken on, in and what peel terms In I've a interest what's we're in industries,

stores, little to stores. like of kind are Airlines hardest percentage of have that. the on larger little of very end, kind of and exposure industries very cruises the restaurants hit and some exposure in small We business very very the like very and our small to a restaurants --

the always kind is always if things you been verticals, vertical of about it's be biggest. pie HubSpot actually people these say, pie times. what good chuckle always had well pretty in? and verticals I section what other me, in at chart -- serving So big the of are chart, looked And your the us ask one the a of the for but are And you tough would that's

Dylan Reider

then the to you're and product spoke guys multiproduct customers your among earlier customers Got it. to the you some seeing the single of [Indiscernible] call, helpful. maybe your well? speak multiproduct that That's And differences within in Could you customers. as

Brian Halligan

Kate, do take you to want that?

Kate Bueker

Sure.

ticked So to quarter. our XX,XXX multiproduct close multiproduct again customer up this We're customers. total

talked think multiproduct retention our past customers. customers bit about little in better for than a core tend single product be the for the we've to I statistics

couple last in We churn have seen relates characteristics as it the to that the months. of continuing

Operator

from question Arjun The comes next from Blair. Bhatia William

Arjun Bhatia

quick you first the year to like, flesh Brian, well. A Hub, part at of not to driving just per which extremely which those Hub, Marketing necessarily of going It as there you little the more look And X.X sounded Hub April, the a and then Sales seat-based for trends way Service down you happening any basis. what's in the what the second versus the in question is acceleration X.X on are months? is, between months break out me. seat a alluded was one Can maybe bit first priced is

Brian Halligan

take take the Maybe one, first one, the Kate? I you second

Kate Bueker

Sure.

Brian Halligan

fancy opposite. is is much a we're so It's the was the the steps. and and it little product best new a bit sale lot security for take new not year we And speed better, last let's the back, -- there could faster the is ever -- much is a I And go the us have much wrap with step probably better. has It long worked, you usability of a better, sort better, implemented just on our of infrastructure of Hub had. actually year this main think X We relaunched at much mean was methodology steps And the the a lot product the that, very are been year which see was because hubs product We're on Marketing period I good. we've side went that where the on well, was that really time. year, exact product, uptick last a beginning this to of no Enterprise the really that year. nice Okay. forward, last a we of reception starting of X features. getting

we're kind You month We're announcing weeks probably of our into Net Promoter Hub on in starting some a very releasing announced optimum records couple functionality, CMS ever. breaking get that. lots as And our We're new just then hubs saw Apple-like was of and every Net range Scores. actually, Score new Promoter while to of we high ago. that like of

product cranking. was So really team

thing in had good up had helped a another year coming planning much think this year. the and session and I organization, that was was on last than year hiring us into caught better go-to-market shape last

is this of into say really, think out to I this A so up to feel really I in the plays that good obviously And we're in would grow we I we're thing but really come disappointing, crisis run of good really going this fast. coming this shape were crisis. lot So of good kind over, is us shape. we've like when very set stead

Kate Bueker

we if across retention the hubs the relatively consistent seeing are then is And at what across characteristics the hubs, that look portfolio. you're trends our in

have Many that different. composition were is those we There a are them March. cancellation. in fallen of downgrades the this many downgrades cancellations what -- and -- more that you the that different. are of kicked at trend both saw bit that was maybe one of about was as going others. a bit rightsizing we we is little pretty March, of plays among into sort period. than were take of that an statistics little seen a April It relative off over we've a of a specific, Retention significant. they is customer-friendly Brian the in But are further really seeing little again, and What more step downgrade both that components but downgrades retention late in that look saw unfold. seat The bit If first to increase is we time back things of is the result talked period

see heavier able time, versus customers good be will over downgrades us again. cancellations. of portion QX, those So in a Hopefully, will to with grow we back

Operator

from Samana Samad Jefferies. from comes question next our And

Samad Samana

the been And new any early that the just on now bookings there is into are shape I'm has late My the new side. how that shared? side? customers -- from booking first on for characteristics HubSpot, smaller are Any be would question, they thoughts helpful. May. curious side, how bookings Are new that on still March larger bookings, the larger

Brian Halligan

Kate, take want that? to do you

Kate Bueker

Sure.

of business this that like March, up the shut think segments picked of sort kind of base. was to of the that I smaller alluded in that And first down. Brian the sort customer of

really So that they to business. of kind faster And of XX sub was much think segment customer I more that population April, was segment some movement see at sort a -- X holding pattern. to the that And of it mid-market whereas started half back wasn't of to our in it we part until, base. call of just action, were it where our of our

used you'll the one and thing of we're potentially smaller adding get are the areas that into of see as I note, is terms I a payment just sheer that we in customers it other terms think lot healthy we would seeing. seeing more of adds some than flexible customer customers volume much are adding starter we're really we new with are adds, component. at to that And

Samad Samana

proactively maybe follow-up. tough what flexible payment offered? HubSpot If the from we think interest the Kate, downgrade guess, and then, out downgrade. you hadn't to if I the customers the ability wanting if provided it's -- proactively And -- how versus flexible terms guys should Great. But with a about tease to I inbound to guess

Kate Bueker

the downgrades, the I that running and associated downgrades underneath would at say course and more look be I would rate, relative to, think customer-driven. at And that hard the the we increased obviously with the look are half if we've we directly normal others than a of it, at we -- run call proactive plays one if that this. are -- kinds volume see the been we probably more little So motions layer down -- are really looking look downgrades associated of the with of we

Brian Halligan

add Kate. a to little me that, Let

Samad, obviously, we we of One to we because someone prefer cancel, downgrade far longer. in would system was wanted them for keep -- than our here, strategies our

down thing road. can As they this passes, the upgrade

added make help X:X bunch to get there did one, really a so in video it richer. made easier meetings cool in people by, kind box, we new CRM our of to downgrade, free. free So of whole we functionality like We -- and we decision making product for started and that a

like side bought contributors suite made service then you to. And less want room our keep them and to to our on customers. we to that We discounts easier starter of downgrades to If that an the gave had the far offer temporary expensive, downgrade sales we and system. a front-line product, in lot managers and We initial -- wave a still a would they of People there of That good-sized are are want little weeks. quieted bit to But that. it's headwind normally. pretty higher be was be little downgrades It's of strategy relative the than we bit weeks. that down few coiled a for a to X spring. last our

help it, us it hopefully, is time, our customers. system, of out of grow new come We the this, try a well when got other bunch we a when to come weather lot also over. new customers and nicely they with and us. really partners same position they've of we thing So users, waste and to crisis. this into this thing, mechanisms the starter it'll we've free provide we CRM the hopefully, don't new weathered And But at in customers

Operator

Your next Merwin question Goldman comes from Chris from Sachs.

Christopher Merwin

wanted the see the got didn't Hub. new just ask price starter and pro you've enterprise. obviously, I at I but just site to and a CMS you looking was I about there,

users larger those customers? adopters Just can thinking is the just Are and be? the say about curious. slightly toward maybe about early geared there? of who some might you who So Anything this initial traction

Brian Halligan

Sure.

add a It's into for had a HubSpot. said, content turn hubs. sec. management days okay. of bit a a About always ago, the Let's always baked We've full about done investment. very awesome talk system early It's had add-on product. a on we It's CMS year little been this since let's an

up investment ramped our over year. really we the So last

added so we Pro, about sort good, turn is then that really Hub full did product a better existing was, was excited very Hub that's what CMS we much and And Enterprise into than we're a really now The hub. add-on this add-on this. CMS funded add-on of lightly and

industry, about I it's when funny think Now actually industry. CMS a the

choice. a got You've

heavy, You use, on can market, Or to the management of either probably buy about you got buy public, you you're lot a easy those developers. few oftentimes it's lot a pretty the open systems. a of security managing There's tiering management hard source SaaS know X. of like where a need X to very light, lot so use, to X very system of And them. of can you've of content very been wares, them you are content plug-ins, a a or

can have trade-off. it's other historically. like like We false You or X don't just trade-off. we And the a felt that

So what but that a of capabilities products rest has of real of that we've management the content ease in heavier some power use the is and HubSpot's the layers products. created with of system

so far on good so it's getting really good. And product. reception We're the

Our think partners I road. And to a big, big the be it. down it's business and customers are going us for buying

Christopher Merwin

And Kate. for maybe Great. just one follow-up

Just of as relates you you're the I that specific it maybe of say gross was thinking that in revenue the might half XQ, about in it what relates year. you can I for to assumptions of think guidance. implied look some just to but in particular, called half guess, context through your might it the making, in more what that Anything guidance second second as like out what or be retention? the

Kate Bueker

Sure.

QX XXs. going as talked talked the down from obviously there. in about being We about we March as So low

that the we of I under for would retention remain good modest year, there. a the improvement probably pressure low with think part from being statistics QX point some and assume our

Operator

Panigrahi Your from next question Siti from comes Mizuho.

Michael Berg

on for You got Berg Siti. here Michael

quick suite. growth a also Just the on question starter

we the previously. that is population Xx full of can was thumb general of What on what as rule think of for general was now? much how suite starter it a the noted You

Brian Halligan

Kate?

Kate Bueker

closer It's growth Yes. that have introduced of it exactly last growth for but product. going And in saw shift I'm new question. XX-XX the toward across the strength that good what we customer suite to a sort a hit the a with the we what new Historically, and over mid-month in of the I starter being seen like adoption has really ad material marketing the sure of been ads the you starter numbers marketing the is of think to suite price the suite. more is starter. months And wrong, I'm edge that

Michael Berg

typically juncture? service, of marketing -- customers customers do the suite sales clarification, they the for full adjust or of either this just starter So or don't so

Kate Bueker

The marketing with seen starter popular product strong ads has recent been product history. over where lot a we've like and value, the volume of particularly that's highest -- of a the real

Michael Berg

do right now I the on a talking growth downgrade then suite. you singular And similar are through about Okay. mean, typically who suite? price flow follow-up there's the to for downgrades, I Or When quick people a for full reduction a they note. downgrading any see Do product? the obviously, significant you're guess, hub the

Kate Bueker

bunch downgrade forms. a the can take of So

volume you right, their professional one the that addition, on of price are you're near-term ways release. of people I -- from customers downgrade somebody point of have to to of starter, we've also about sort think reduce with with helping other where well sort as have seats contacts. thinking the is, you or been to is or who can addition enterprise professional some professional downgrading can like There enterprise or

downgrade a that is there number. things up end variety that hitting So of

Michael Berg

one the last one then And Okay. same note. on

sense Or next reduced reduced then I until how for think a you the the we will how so be frame both long time about gross Are that purposes thinking months just rate? that the or or put of and you for and think should some XX price retention on will modeling for price about suite. for how you've as the be general, pricing?

Brian Halligan

take can We're and talking now. a demand gone curve. It's well. We're piece new the that supply really of finding about kind that. of I

decisions made it. on haven't We

posted. So we'll you keep

Operator

Your from from comes JPMorgan. Mark next question Murphy

Mark Murphy

in interpreting to want turning the as the fishing headwind to you original conveying recent way JD, you for I just the are And I if Are are wanted a you of Or kind it more that of hope bonus great feel you best, here kind the also, you recovery? partial could a thanks a behind say weeks. get Brian, in the worst and comment some to headwind the about back of ask of step everything, clarify, that a getting tailwind way into just to all is combo does plan? all on like summer. the bookings us? over I and the

Brian Halligan

for interesting head on and but were back. been of weeks, Mark. coming I going thing the academy lead We step, are now. strategy kind off, departments And the partial business our it's in new where paying flow great a free a new about out we there installed coming like has and More great. on break coming has The fire. have is fire, with my premium the what's few definitely there's CRM inbound content it and business like marketing the marketing Yes. out into a been -- the super in of in and get then base. been it the on really marketing Tailwinds worried our on tailwind that's the leads strategy

pretty -- high of new customer down the we for been pre-COVID, the the downgrades weeks. at a other side, of be the come the and state was it's funny downgrades as of good. -- pace look there attractiveness highs. to the downgrades on than it made of it still X bounced a been and but attractive, really here. and because on side, It's So creation amount those in has been It's higher steady kind that's it's little the going But deal off good, well. numbers It's The to good. pretty are back the

describe I I how guess So it. that's

Mark Murphy

of we it as growth just as Okay. be of curious mid-teens the And do you when kind trough now? revenue I'm as growth? -- a instance, should a in For Kate, looking at this then follow-up decent in QX, is QX guess for see

Kate Bueker

that true as say reveal estimate Look, I around. declines trough the economy I couple think you the next you should itself will turns quarters. the of would But would over see

Operator

question Wong Securities. Your Guggenheim from Ken comes from next

Ken Wong

new something forward? Or of still can about guys are kind that your talk hubs of we particular to maybe fog? able to to appetite this this move maybe have Brian, attach in that Is we you COVID customers the until wait environment? you is clear something that

Brian Halligan

I products people Hub pretty noticed buying attach say been are Hub I anything That CMS what would that good. on CMS particularly seeing, Enterprise it. haven't there. the has strange I'm new based

so And do there's to desire it. a

online One, are knew they're coming companies they they to knew knew do -- inside think next at on do x I that it they marketing, several having going to sometime years, the they that needed in needed conclusion they to they they knew planning now. they it do to there's inbound get to it. are sales, on. And needed they things the they're doing needed do to marketing, and great

are So urgency and -- really industries growing reducing. around moving there's a little more they're a these with that. their some just increasing are Combined and budgets couple of

that's Ken. out of the we're kind seeing So how market, in what

Ken Wong

Got a your an thoughts it. this at growth And subscription you business, but on like the look how rate know reflection quickly, any Kate, look I of environment? guys maybe billings as type of in better might

Kate Bueker

Yes. A of thoughts there. couple

And saw always growth growth happen other. kind that we've So constant should in growth talked QX. and of -- about billings -- each in currency you revenue track billings of

payment the contraction of a one billing in billing things currency terms, constant or the term. we growth And definitely in wedge is think are expansion growth and either in I of reduction seeing in the drives revenue of terms. between the billings that

I in would see growth in quarters, of growth And couple lag so constant currency. would you billings revenue expect the next that

Operator

Your next question comes from Terry Tillman from SunTrust.

Nick Negulic

customer it driven could just in deeper for hoping color you provide dig on said any little other the on was I there just Nick actually primarily would I But was helpful. the be starter quarter. suite. you by guys is Terry. This know the add a net you

Brian Halligan

you Kate, take want to that?

Kate Bueker

Sure. Yes.

It starter watermark us. record us customer it new really X,XXX. quarter for So was was that QX And It's products. almost a was a additions. for high for driven by

additions additions the see We saw starter. strong April. marketing strong suite. in very to saw We're the starter through in continuing happen we that So

so And of see we're quarter another customer we'll strong new in that QX. adds anticipating

with look caution going and at the what's think I'd just ASRPC that, think there. I to us happen to about

would low strong growth the quarter. that see that next the be Given end, we at under pressure expect in to

Operator

question next from comes Roderick Tom Stifel. from Your

Tom Roderick

put was offer a about website, And of what your So you've duration? to soon just there uptick then once look better? sense back versus Kate, formal us as for maybe many are out a get discount get thought front what customers again quarterly can how contract the those on sales customers paying annually you guess break we your reps for think, you of mix your a that in kind for, how of we customers get monthly? second talk as upfront. Could XX% to to downticking, like? give a that I pay noticed I annually the them is do a of And versus for try things and behind the them apart, chance question I

Kate Bueker

asking The sort take first The sales is why handle outside So is then I billing part our reality don't a difference question. aspect it. can starter of contract of of terms. that the tier. contracts the duration annual and Brian the contracts most are The you're of -- that

So contract customers annual us that upfront. full for we have the pay

quarterly. us pay that some have We

that was billing this pay saw has payment. we And upfront those some that have annual We customers. monthly, marketing us those are, been what typically, starter

have payment the and hub, mix down. sales we typically from in year we've kind lags marketing revenue come the duration were term those into payment currency growth XX constant more seen that the know, as months. service That's I you've billings sales quarterly in gotten into And seen our our As to don't growth constant has shifted and last, products. over service, why of currency

We are proactively flexible terms are being of seeing pressure. we with -- more period economic during payment this

Marketing in the Sales to the you're so in Hub, near that but also not just see Service Hub the and term. And going on

Brian Halligan

flows terms their business discounting, we to of have X heck as a a will as them be just theory it's the We them discount. we'll in that to impacted next on X us as would and And the give Yes. that cash it And I going months and through in improves same to to X payment be on where by comes suspect the we're a there. I that COVID system, road, on want that, them going our we'll help just want We with for it. economy "Gosh, we're customer months." if down improves. a the and doing add time try revisit then saying, next to And will generous keep the who's to

Tom Roderick

not smaller competitors how of for is just Brian, And the kind of is put terms if deal level step sort here impacted. to everybody good between on and a X-month opportunity obviously, this a to knowing of of is of be in some a going pedal. Yes. the on real X, distance HubSpot There of X, really for thought type

this think, thinking on I to headcount to goals How know headcount, of continue really you're I you XX% sort to grew quarter. lay invest out the about year? don't in kind for anything of Or the aggressively? want about near You your a are if thinking headcount? But pedal you through goals the term. your and business, particularly of when marketing your us headcount pause foot with on sort investments back on just the sales take for go-to-market to thinking and put in

Brian Halligan

We're planning knows what's to And going U-shape Sure. happen It's We continuing like as want earlier, the is one that, hire. no hire. Kate part recovery. saying of to economy. to with for we're

little our to have great really been the flight bit, the But of this chop cycle. with the on made the value year, the wood deliver coming into early vision gas, the shape if lot like in is all way is Maybe, Most a little last the way of R&D shape. in There's R&D pedal, customers made That progress organization feel of So down got a gas and other side. and in about thing. on pedal really hiring. and all good can a on for We that our gas more there. the we our the the side, on is down the mind. on year on still foot sales side G&A this good our think marketing foot decisions we

on in of side to when going shape we're to hopefully, the other great we're we're thing. So And this continue invest.

Operator

comes Your from next question Needham. MacDonald from Ryan

Ryan MacDonald

those upgrade proactively that I to ahead help is for out, the the ready favorable to here. terms sort of into them terms anything terms don't of built downgrade get too downgrades and again? far want -- them and offers when favorable customers myself of there help into -- terms that to to they're in But more

Brian Halligan

that And The can you we those down structuring we're having come structured "Okay, lasts us discount that structure let's some XX where deal time." are a really. for them days. x if We'd and you say, percent." structured Not like hard are XXX it's days, to more say, you "Hey, we're most that, is back in And If for XX to way it's a say, and XX days us Give "Hey, and on of to then be we're at really and days sure still good flexible type be get comes that come the shape." struggling. someone they we'll back we'll I'm another so end price. your days, that, and you of it, into we quite XX environment.

Ryan MacDonald

a just then follow-up. And Excellent.

there don't Are that than of and quicker impact, look any as looking starting for either improved improving. it's have you're of weakness strength or or worsening whether pockets through know, remained In terms worse longer? than or has the I see, or sort expected to April surprising expected -- of pockets

Brian Halligan

lot thought and I starting their heavy remind they down. I X,XXX. kind the wanted XXX much the just to X still X canceling XX small prior business X,XXX, think Yes. some be segment, a to downgrade that to them cancellation XXX mid-March. fast segment was XX, corporate The the of downgrading, faster find as not for us. X and way that XX XX, -- than And to it's or if like COVID, really different The cancel. that at would kind to of on again at XXX, move segments chunk has at ARR. to little kind it but and That's the that describe The of they segments, and those in going buy a of move it there, and or downgrade And and the cancel react the to this XX, side. buy. froze weeks, -- is versus trying they or XX the was starting X everyone didn't react, they're way to XXX they as spot our XXX a like XXX, to our spending some mid-market for a to slowed the just but rate. if the kind small largest froze. X There's they that to buy to and in X,XXX, they're look to and XX last more I they're They bit would of over us, didn't XXX corporate, XX to and I And unthought very of to I certainly X to in sweet were of heaviest the it of mid-market higher I And all rate to stuff starting to would lot to

Operator

Your Brian Raymond from James. question from next Peterson comes

Kevin Ruth

opportunity Kevin Brian. think of a weeks. serve you the over that what the on could past here more I'm also to uptake tools side? free some the And for here has you for the customers? curious other bridge you on to near-term the in view as made been several do to customers potential help that as expansion available we Or a should

Brian Halligan

of We using those new that were about other good box, the some really collaboration features. just It's a received. the That's been are day. People question. the videos, well features, talking

It's the put whether coming as there good we down the some back leave into those starter. So stay over we decisions make tuned. a We'll question. weeks to or them

Operator

from from Sandler. Piper Brent Your next comes question Bracelin

Parker Snook

help to seen And expand paving guys you changing are on and business of impacts is Hub, as help spends. features a any customers? can This small that result budgets needs Brent. We've of land are Parker customers companies changes some that marketing are for the marketing Can the Relative to kind to? any color kind you offset there -- several COVID. discuss Marketing on the weaker how of now for of model material the

Brian Halligan

Hub Yes. weeks, They buying down but our again. a they definitely buying slowed few for definitely People are now. Marketing started

in, Google the very in low inbound media and content, upgraded a pulling way. idea really people times versus where marketing. of product cost found getting Our marketing, doing we in marketing fits we netted social this outbound and marketing Inbound

tons you're TV or And billboards advertising. advertising they're money so or of on wherever on spending

more much is inbound in success than about of wallet. your brain the width your Your width the of

So I the not. other But our our I a strongly going on, mean, the and going cure same was what's as think, not very think are based Probably value is before? prop, to product buying be people fits is way times. as marketing it the I around. it for

Operator

comes question Materne Evercore from from next Kirk Your ISI.

Kirk Materne

in it's sort pretty how guess, when customer are it's I base any reacted just they've you if forward, Brian, differences looking versus your of maybe the of going you size are all, a And about with Or geographies. if how at across all that terms similar at seeing range, thinking different you're it at internationally U.S.? even on different.

Brian Halligan

U.S. I'd it kind of Yes, kind address of the of international, On the think size. -- everywhere. it hit kind I hit

it think take and don't Those hard, of one and exposure I it The -- before, like we X about. it place wash maybe lot some will kind a hit everywhere. to. little like in is I've smaller the it talking where particularly sort recover to Am Lat all emerging markets of but longer through markets. Asia it's been a bit of And whole emerging hit of waves markets, are have

it And of so it's does harder rebounding as aren't like quickly as us, bigger for those particularly and some hit but markets. painful look other the were

Operator

from Lowe Jennifer UBS. from comes question next your And

Jennifer Lowe

Great.

months mentioned X working a in First, you so they natural small comment partner your for to quarter I the them revenue And is partners ask ask, of sort to of can just channel? the advance I you that question overall. expediate were it. commissions their know relatively giving if HubSpot on on and you mix just wanted that, the of health to a

is goodwill? their Or something asking for? a about you So concerned they that? they're businesses? just of this bit a gesture is little Are Can about this talk just

Brian Halligan

Yes.

have are question, relatively Proactive some to sure felt just will relatively lose cash them very they like small majority through I we wanted and the in the to us. plow part ones, hire haul, be a long think the in And And for It's on at business. firms. that that Jennifer. felt have think our bigger Most vast in good them. thought off lay invest -- their could businesses. We on least it here. flow, And small. continue channel. want it's but they over We us a and confident mid-March. for was we got cooperative, to going healthy, continue what's We've partners make you of good more good to partner partners not small to -- I very so are our was growing

Kate, you So to do that? to anything have add

Kate Bueker

it was received commission's partners. it was think well We -- and our took I majority on the No, vast Yes. offered by it. above, prepayment highly our up and very the platinum us to

Jennifer Lowe

world. being I can as whether lot all a kind those Hubs mean affected how market new the the in in about in uptick was it seen has my similar marketing, and or current But earlier. for in there's did. sense. they makes more got environment? are what one Or you least we talked you the discussion received on Service if and just similarly potentially and to of a of imagine comment interest? interest the downdraft said that a been Everyone's Sales products But at the of and maybe I sounds in around differences digitally look can there's -- me. you how And interpretation -- of it at that It hubs sort

Brian Halligan

in been up time. they when this, you Initially, [Indiscernible] all down would But at of looked stay all come would outlier same hub the get nice across of was The at coming CMS other. time, I across hope up they're is Yes. nicely nicely, or we'd thought board it's one same But up in up there others direction them, that's flat. the the it's surge of at would coming consistent kind went the the an and new big getting reception. the a and kind the kind that marketing of I one see been all where

Operator

Ikeda comes Oppenheimer. next Koji from question Your from

Koji Ikeda

low the what the quarter? the I in the range? quarter recover end. bottom macro guidance bit was low Or the there? more of you guess, the on should one we on that to low wider the the end assume book end specifically the is a into the how the second little I I on full more and on the like Just here the of if beyond somewhere on one outcomes. quick ends thinking wondering macro year begins outcomes mean, bottoms second commented you guidance. full Does guide from be range about of on more could dig year

Kate Bueker

Yes.

sort make is of variety a on back I economic And the sharp of think scenario, economy also comfortable And that of we this sort we talked internally, when L-shape, we which thinking that through which recession. those on we to looked to across the takes from V-shape that Brian track. bridging a U-shape at it a outcomes. bit period were all that sure felt envisions had our longer get have operating just our of to of and guidance setting running says recovery. bit a current about really scenario are longer this scenarios The assumption a

Operator

call And I to back will Halligan now for Brian over turn closing the remarks.

Brian Halligan

of thanks I talk and stay to joining us stay hope safe for you next call, the and on you healthy, quarter. and we'll all

Operator

gentlemen, this concludes and for Thank Ladies call. today's conference you participating.

You may disconnect. now

HubSpot (HUBS) 7 May 202020 Q1 Earnings call transcript