HubSpot, Inc. (NYSE:HUBS) Q3 2018 Earnings Conference Call Transcript

Nov 07, 2018 • 04:30 pm ET

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HubSpot, Inc. (NYSE:HUBS) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good afternoon. My name is Mike, and I will be your conference operator today. At this time, I would like to welcome everyone to the HubSpot Q3 Earnings Conference Call. (Operator Instructions)

I will now turn the call over to Chuck MacGlashing, Director of IR for HubSpot. You may begin your conference.

Executive
Charles MacGlashing

Thanks, operator. Good afternoon, and welcome to HubSpot's Third Quarter 2018 Earnings Conference Call. Today, we'll be discussing the results announced in the press release that was issued after the market closed. With me on the call this afternoon is Brian Halligan, our CEO and Chairman; and Kate Bueker, our CFO.

(Forward-Looking Cautionary Statement)

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

Executive
Brian Halligan

Thanks, Chuck, and good afternoon, folks. Thank you for joining us today as we review HubSpot's third quarter 2018 earnings results. Let's get right to it. Q3 was another strong quarter for HubSpot, with 35% revenue growth, 4% non-GAAP operating margins and over 52,000 customers, growing 40% from the prior year. These very strong numbers are the result of two big place HubSpot began investing in a couple of years ago that are starting to pay off.

First is our investment in growing HubSpot from a single app company to a full suite company, dramatically increasing the value we deliver to a customer. The second is our move from a funnel to a flywheel model to operate our business. The old funnel model used customers as an output, while the flywheel model recognizes that the central role customers themselves play in driving your growth through upgrades and especially word-of-mouth. The flywheel mentality also puts a lot more emphasis on reducing friction in the customer experience. The great news is that our performance over the last few quarters gives me more confidence than ever that our investments in suite and our move towards the flywheel are paying off already and will position us for continued growth in years to come.

Let's dig into the suite play. Back in the spring, we further expanded our offering of products with the introduction of Service Hub. This move into the service segment was particularly exciting because it gave us an even better way to add value to our customers and help them create their own remarkable customer experiences. A typical customer often starts with just one of our hubs, usually marketing or sales, and then later adds a second and a third hub. A couple of years ago, about 20% of our revenue came from multiproduct customers. Since then, that percentage has doubled, with over 40% of our revenue now coming from multiproduct, with room to grow even much higher.

By the way, we refer to this type of hub expansion of HubSpot as east-west expansion, our first of three recent product expansion vectors. At our INBOUND event in September, we released several new and upgraded products that were a major part of our north and southward expansion. To the north, we made