When we last checked in on HubSpot, CEO Yamini Rangan declared:
We’re still in the early innings of transforming from a suite to a customer platform.
Flash forward three months and as the firm released its latest quarterly earnings that made Wall Street happy and indicate that the corporate direction of travel is the correct one. For Q2, revenues came in at $637.2 million, up 20.42% year-on-year, of which subscription revenues made up $623.8 million, up 20% year-on-year. Meanwhile the company cut its net losses from $111.8 million this time last year to $14.4 million.
The average subscription price per customer was down by two percent year-on-year to $11,215. According to Rangan, this is part of the shift in pricing models that the firm rolled out in March:
As a reminder, we lowered the price point to get started with HubSpot removed seat minimums to reduce friction to upgrade and created a core seat for customers who want to edit CRM records. We did this to make HubSpot easy to buy and easy to grow with. When we made these changes, we expected it to lead to lower initial ASP, higher volume of customers and more upgrades and expansion over time. In Q2, we continue to make progress on driving higher volume to offset the ASP declines and expect this to happen in the next few months as we focus on enablement.
Customer growth was also healthy with the firm ending the quarter on 228,054, up by 11,200 net news customers in Q2 and 23% year-on-year. On the post results analyst call, Rangan said:
We saw more customers start with or expand into multiple hubs, resulting in larger deals. Over 45% of new business in our polls tiers came from customers using three or more hubs. Within customers adopting multiple hubs, we saw three popular combinations. Marketing and Sales hubs our main front doors, Marketing, Sales and Service Hubs, innovation in Service Hub is driving momentum and marketing sales from Content Hub after the Content Hub launch in April. The higher mix of multi-hub deals and the momentum we have with upmarket customers led to larger wins in Q2. Upmarket customers want to simplify and consolidate their tech stack and our focused investments to serve their needs and our pace of innovation make off their top choice.
But the macro-economic climate remains the same, she added:
We’re seeing the same trends as last year and Q1, slower decision-making, more decision-makers involved and scrutiny on business case and value before spending. When decisions are made by committees, that often includes CEOs, CFOs, CROs, and many times require board approval. The bar for buying continues to be high. We also see companies consolidating on fewer platforms that can help them grow.
There’s a flip side to this, Rangan explained:
Now the counter play for that is that as we talk to customers, they want to consolidate on fewer platforms and HubSpot is becoming that platform. So in fact, we see that that there’s a lot more value that we can add by providing an organic customer platform. And so actually speeds up the deal.
So there’s like counterbalancing impact of what we see from the macro to the trend that we see in terms of consolidating to fewer platforms, so I would say that those two play off each other. Broadly, when we talk to customers, even when they are not ready to make a decision, it’s mostly not now for HubSpot, and not necessarily a no, and they always come back a few quarters or even a few months after and see the value of consolidating on HubSpot.
My take
We have seen the monthly transacting customers grow into the thousands, and we’re very pleased with the momentum there. And the other thing that we have seen is that when customers transact with HubSpot, the percentage of the revenue that they’re flowing through HubSpot is much higher than what we had expected. Now all of this is good, but I would continue to continue to remind that this is a longer-term bet and while we feel really good with the progress, it is a strategic bet. We are willing to be very strategically patient as we see continue to see the progress within that.
A pragmatic worldview.
Onwards!
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