Ladies and gentlemen, thank you for standing by, and welcome to the HubSpot Q4 2020 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Chuck MacGlashing, Head of Investor Relations. Thank you.
Please go ahead.
Good afternoon, and welcome to HubSpot's Q4 and full year 2020 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 Chief Executive Officer Chairman, Gabe Bucher, our Chief Financial Officer. Before we start, I'd like to draw your attention to the Safe Harbor statement included in today's press release. During this call, we'll make statements related to our business that may be considered forward looking within the meaning of Section 27A of the Securities Exchange Act of 33 as amended and Section 21E of the Securities Exchange Act of 1934 as amended.
All statements other than statements of historical fact are forward looking statements, including those regarding management's expectations of future financial and operational 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 Please refer to the cautionary language in today's press release and our Form 10 Q, which was filed with the SEC on November 5, 2020, for During the course of today's call, we'll refer to certain non GAAP financial measures as defined by Regulation G. The GAAP financial measure most directly comparable to each Non GAAP financial measures used or discussed and a reconciliation of the differences between such measures can be found within our Q4 and full year 2020 earnings press release in the Investors section of our website. Now, it's my pleasure to turn over the call to HubSpot's CEO and Chairman, Brian Halligan.
Thanks, Chuck. Good afternoon, folks. Thank you for joining us today as we review HubSpot's 4th quarter and full year 2020 earnings results. I'm exceptionally proud of how HubSpot team closed out the year. In Q4, we saw a nice reacceleration in revenue growth of $1,000,000,000 in ARR, 2 terrific milestones on which to end the year.
So what's behind this reacceleration in growth? Well, this unusual year opened up everyone's eyes to just how early we still are in the digital transformation of the economy. This is the trend we've been seeing for 14 years and which sped up for obvious reasons this year. New startups we work with, well, they're born digital. Older scale ups we work with who may have only been partially online in the past have begun to fully digitize their end to end experience.
HubSpot has the ideal platform to enable all these companies to build delightful modern experiences for their customers. Another trend we've seen is the shift in the market's expectations for B2B software. People now expect it to work like the Our CRM is crafted internally with a consumer like UI match with a scalable enterprise back end. This approach is resonating very well in the All of our products in all of our geographies performed well in Q4. In particular, we saw strong growth in our enterprise year.
This year we did launches of our Marketing Hub Enterprise product, our CMS Hub Enterprise product and our Sales Hub Enterprise product. These all did well individually in the market, but the thing that really stood out was the number of companies buying 2 or more of our Hubs, taking advantage Having their entire go to market on one platform with 1 data model, one representation of their customer and one user interface. We're super pleased that our unique approach was recognized just the other day when HubSpot was named the number 2 best global software
Let's turn to our Q4 and full year financial results and our guidance for the Q1 and full year of 2020 4th quarter revenue growth reaccelerated to 32% year over year in constant currency and 35% as Q4 subscription revenue grew 36% year over year, while services revenue increased 9% year over year on an as reported basis. Full year 2020 revenue grew 30% in constant currency and 31% as reported. Full year subscription revenue grew 32%, while services revenue grew 5%, again both as reported. We saw strong demand across all of our hubs in Q4, resulting in a reacceleration in new business growth along with record customer dollar and net revenue retention rates. In Q4, we added 8,400 net customers, Domestic revenue grew 27% in Q4, while international revenue growth was 40% year over year in constant currency And 47% as reported.
International revenue represented 44% of total revenue in Q4, up 3 points year over year. Deferred revenue as of the end of December was $317,000,000 a 35% increase year over year. Calculated billings was $309,000,000 in Q4, growing 38% year over year in constant currency and 43% as reported. This reacceleration in constant currency billings growth was driven by strong revenue performance And a positive mix shift toward professional and enterprise subscriptions in the quarter. The remainder of my comments will refer to non GAAP measures.
4th quarter and full year gross margins were 82%, flat year over year. Subscription gross margin was 85%, Well services gross margin was negative 20%. 4th quarter operating margin was 10%, up slightly compared to the same period a year ago As a result of our strong revenue performance in the quarter, full year operating margin was 8%, flat year over year. We invested aggressively in our business over the last year to meet the significant demand for our products and drive innovation to fuel long term growth. We plan to continue this investment approach in 2021.
At the end of the 4th quarter, we had 4,225 employees, up 25% year over year. Net income in the 4th quarter was $20,000,000 or $0.40 per diluted share. Net income for the full year was $64,000,000 or $1.32 per diluted share. CapEx, including capitalized software development costs, was $15,000,000 or 6% of revenue for the 4th quarter and $59,000,000 or 7 percent of revenue for the full year. Free cash flow in the 4th quarter was $46,000,000 or 18% of revenue $79,000,000 or 9% of revenue for the full year.
Finally, Our cash and marketable securities totaled $1,300,000,000 at the end of December. And with that, let's dive into guidance for the Q1 and full year of 2021. For the Q1, total revenue is expected to be in the range of $260,000,000 to $265,000,000 Up 32% year over year at the midpoint, non GAAP operating income is expected to be between $17,000,000 $19,000,000 Non GAAP diluted net income per share is expected to be between $0.28 $0.30 This assumes 50,300,000 fully diluted shares outstanding. And for the full year of 2021, total revenue is expected to be in the range of 1.16 to $1,170,000,000 up 32% year over year. Non GAAP operating income is expected to be between $98,000,000 $102,000,000 Non GAAP diluted net income per share is expected to be between $1.51 $1.59 This assumes 50,700,000 fully diluted shares outstanding.
As you adjust your models, Keep in mind the following. At current spot rates, we're forecasting an FX tailwind to as reported revenue 4 points in Q1 and 3 points for the full year. As many of you are aware, we will have some unusual year over year growth Comparisons in 2021. With that in mind, I thought it would be helpful to provide some additional color on how we're thinking about the cadence of growth We anticipate revenue growth of 35% in the first half of the year, followed by revenue growth of 30% in the second half of the year as comparisons become more difficult. Our 2021 guidance assumes flat operating margins year over year.
Embedded in that guidance, we have assumed a healthy level of investment across the business to meet the market demand we're seeing, more normal levels of T and E expense in the back half of the year and continued strong investment in R and D. Lastly, we expect CapEx as a percentage of revenue to be about 5% at And with that, I'll hand the call back over to Brian for his closing comments.
Thanks, Pete. Those numbers reflect how nicely our customer flywheel Well, our employee flywheel is spinning nicely too. We were just recognized as the 4th best place to work in 2021 by Glassdoor. Last month, Comparably also highlighted HubSpot as being the number one best workplace for women and a top place to work for parents. We endeavor not just to talk the talk on diversity and inclusion, but walk the walk.
We have a variety of initiatives underway, but 2 new ones I'm The difficult years are always the ones that define you. I'm grateful I'm super grateful to the 100,000 customers who put their trust in us. Thank you for your time. Operator, let's open up the call for a few questions.
Your first question comes from Mark Murphy from JPMorgan.
Thank you and congrats on a great finish to the year. So Brian, I have noticed what you pointed out that G2 Crowd had ranked Microsoft, HubSpot and Zoom As the top 3 software companies for 2021, I thought that was pretty amazing. I'm wondering When we see that kind of prioritization that you're getting, should we assume that marketing budgets are going to shift Pretty quickly to digital and to inbound this year, is that embedded in your assumption or do you see those signs or Is it more to do with this surge you've had in the starter cohorts and maybe we're going to see that converting this year?
Hey, Mark. Thanks for your question. I was super pleased to see that sort of sandwiched between 2 terrific software companies, Zoom and First off, I think it's just a reflection of a lot of the bets we've made over the last couple of years. Product's just gotten way better. Our customers are way happier and they're giving us Good reviews there, Angie, too.
So really happy about it. In terms of kind of the second part of your question, I mean, things are good. I mean, we're seeing nice momentum kind of across all three, tiers of the product, the enterprise,
And I had a quick follow-up for Keith. I was just wondering if you see much of a structural change for your real estate Carlos, in your T and E levels in the post pandemic world, I think you said in the second half that T and E will normalize a bit. But if you have more people working a bit more remotely, is it possible there's an extra point or 2 of margin Coming out the other side of this or do you kind of prefer to reinvest that?
Well, I think The theme that you will hear over and over from us is that we believe there's a ton of opportunity ahead and that we're going to continue to reinvest in the business. And so that's The comment that I would make generally, we are as you pointed out assuming that we are largely remote at least for the first Half of the year, there are some modest assumptions that we get back to travel at some point over the course of 2021, But it doesn't have a dramatic impact on our operating margins for the year.
Thank you.
Your next question comes from Samad Samana from Jefferies.
Hi, good evening. Congrats on this Very strong finish to the year. Kate, maybe one for you and then one for Brian. But first, Brian mentioned crossing the $1,000,000,000 There are, Mark. And that implies a pretty significant acceleration, I think, in back half bookings, especially in the 4th quarter.
Can you help us maybe understand how net retention looked in and how that impacted it versus new customer bookings?
Yes. I think the good news is that we had great things to say about both of those pieces. In terms of retention, I obviously shared in the prepared remarks that we had a record quarter for retention and it's what I like about that is actually there's just a lot of components that are All complementary and driving the retention in a positive direction. It starts with the fact that we are In particular, we're seeing some strength in that addition upgrade motion.
Yes. I'll just add to that, like some of the investments we've made are really paying off in just a leading indicator, but our net promoter score is something we've been obsessed For a couple of years in this past year, it went way up like the investments you made are really paying off. And then graduation rates, Typically, somebody is like a 300 person company that's been with us since 30 and they're heading to 3,000. A lot of times you graduate there. I just think the power we've added to the platform is really paying off and people are sticking around longer and enjoying the new sophisticated features we're putting out.
Brian, so that brings me to a good follow-up question. And the ones I had for you was Crossing the $1,000,000,000 market is obviously incredibly impressive. But as you think looking forward to going from 1 to 2 and And the flywheel that you have today, are there any changes we should anticipate or that you think that need to be made or is it as it currently constructive? Can Can you start to kind of get you to that $1,520,000,000 level just as we think about investments in 'twenty one positioning you for that?
Well, when I think of HubSpot, Samad, it's like the bottom of the second inning in our baseball game. It still feels Early, there is a giant market out there for CRM. We're kind of mid transition from moving as a company from being A marketing app to try and become the number one CRM for scaling companies. So you're going to see us continue To improve the product, improve the go to market, improve the way we execute, we are sort of tireless in our desire to get better and to deliver more value to our customers. So continue it's not this isn't a steady state kind of company, a lot more investment coming, a lot more innovation, more products, existing products going to get better.
It still feels early in my head, my friend.
Great. Well, we wish you ongoing success and it's great to see everything paying off. Thanks again.
Yes.
Your next question comes from Stan Zlotsky from Morgan Stanley.
Perfect. Thank you so much. And congratulations also on a very, very strong end to 2020. Maybe just A couple of questions from my end. On the macro, right, what are you guys seeing across the world and How are you baking that into the growth acceleration that you provided for 2021 on the top line?
Want me to take that? You want to take that, Kate?
You want to start and then I can talk about how we included that in guidance?
Sure. I'd just sort of
reiterate what I kind of talked about earlier, Stan, where there's a couple of drivers going on here. I mean, COVID just sort of accelerated people's Digitization moves, like I think everybody knew they need to completely digitize their go to market and this just sort of accelerated it. And so the demand's been strong. I don't see that demand going back. I feel like people are going to lean into the future going forward.
So the demand is strong. Our target market so the whole market is growing and then our target market is also expanding if you think And we're doing we're starting to do really well and make a lot of progress on there. And so the market is large and growing. And so We're just kind of really well positioned to lean into it. I also would just say, Stan, like our competitive positioning is Super unique and super compelling for prospects and customers, our win rates are going up and our retention rates are going up like Things are really good.
Some of those bets we've been making over the last couple of years we've been talking about, they're really starting to pay off for us over the last year.
Okay, perfect. And just a quick follow-up. The starter package promotion, which was a very smart strategic decision to make through the year and the promotional pricing there. How are you guys thinking about that as you get into 2021 and some of those promotional pricing is going to start rolling off? What kind of Retention and conversion rates are you guys thinking about?
Yes. Thanks for the question. We obviously are paying a ton of attention. I would say just like stepping back on that one, what we tried to do in making the changes on the pricing and packaging side there was to just simplify things. And by bringing it together as a sweet putting forward like a $50 price point, It just really simplifies the buying process at the low end and the learning that we have there is that it was really Making it easy is super compelling.
And so we think that was a great choice to make. We have been watching the upgrade rates closely. We have been watching the usage rates Closely and we're feeling good about both of those metrics. So overall, we're feeling great about that start of growth REIT That's on the renewal of those big cohorts, and so we will continue to share that as appropriate.
Your next question comes from Terry Tillman from Truist Securities.
Hey, this is actually Nick on for Terry. Thanks for taking my question. Just wanted to touch on international a little bit. So it seems like international revenue growth has actually continued to outpace domestic growth in recent quarters. I just wondered if
you guys could talk about how you're investing
in that area to continue to drive strong growth and where international could potentially move to as a percentage of revenue longer term? Thanks.
Sure. This is Brian, Nick. I can take that. Frank, feel really happy with both the international growth and the domestic growth. Domestic growth really ticked up nicely.
I think it's just testament to the market is quite big And I think it's growing. Now when you look at the market U. S. Versus international, Really all our segments are doing well like across the geography, small business, the mid market and the enterprise segment are doing well. And then both our channels seem to be doing well, our direct channel and our Indirect channel, our partner channels seem to be doing well.
I think it's just a reflection that the product's gotten better, the value prop's getting better, our flywheel is spinning really nicely. Maybe Kate has got something to add to that?
Yes. I think that as we look at international, it has Consistently been stepping up as a larger share of the overall revenue of the company, and we would expect that, that would continue over the next few years.
Your next question comes from Arjun Bhatia from William Blair.
Hey, thank you. And I'll add
my congrats on a strong quarter. Brian, maybe one for you. You've touched on kind of this evolution from an app to a platform. I just love to hear what you're seeing from your new customers in terms of product adoption. Are you seeing them actually
buy the whole platform up Meaning
the growth suite, get all three solutions, regardless of the addition that they're starting on, do you see more Platform adoption from these new customers that are coming on board?
Yes, Hardin, great question. The transition is going real well. And when I think about HubSpot, I can't help but think about the Clydesdale rule. I'm not sure if you're familiar with that, but like If you have one Clydesdale that can pull £1,000 and then you add a second Clydesdale that can pull £1,000 The really interesting thing that happens is that combined slide sales can pull £4,000 worth of stuff. That's HubSpot.
We have our marketing hub, we have our sales hub, our service hub, our CMS hub, they're all built on this set of shared services underneath. The UI is the same. There's
you. And one follow-up if I
can for Kate. I think you mentioned really high record net retention rates. As we look forward, I think this has fluctuated in the past. Do you get the fact that we're in a place now with the expansion motion that this can Consistently stay above 100% or should we expect a little bit more fluctuation there going forward?
Yes. I mean that's a question we spend a lot of time talking about internally as well. I think you just kind of turned the clock back a little bit. At the time of the IPO, We had sort of a net retention in the mid-90s. Over the last couple of years, that has stepped up and we've been saying In and around 100, look, we've reached a new gear here in the last Couple of quarters and we're not calling a new normal, but the performance over the last couple of quarters Certainly gives me a lot of confidence that we'll be able to keep retention at or above 100.
Perfect. Thank you very much and congrats again.
Your next question comes from D. J. Hynes from Canaccord Genuity.
Hey, thanks. Congrats on all the accolades and momentum, really impressive stuff here. Brian, I got a product question for you. So if you think about HubSpot In the context of a CDP, right, collecting the data across the various customer touch points, my sense is that you guys are really good at Aggregating the data that happens inside of HubSpot, where are you in terms of pulling in data that's generated in other systems? Is that something that customers Or is it important to the growth of the platform?
Any color there would be helpful.
Excellent question, Vijay. Thanks for the question. I do think of HubSpot as a CDP, where we do a fantastic job of collecting all kinds of data about all the touch points you have with your prospects and customers, whether that visits to your website or they fill out a form or they're chatting with you on the website or It is managed by HubSpot, but with all of your front office applications and pulling all that together and making sense for our prospects. That's an area we're investing in, super excited about our customers want it and keep your eyes on that channel.
Okay, awesome. And then one follow-up for Kate, if I can. So really, really strong net adds the last few quarters, But I think equally impressive is that ARpsc has been going up sequentially, right? So do you think we've seen A bottom in that metric and is it possible that we see subscription revenue per customer actually grow in 2021?
Yes. Again, we're hitting it on all the really hard ones here. Yes, we were obviously very excited about the Incremental net adds in Q4. I think the thing that I liked about it, which seems like we're aligned The customer growth was very balanced across the starter and the professional enterprise and so it translated also into a quarter over quarter Increase in ASRPC. Honestly, you're going to see some quarters where you have less customer adds and they're going to be at the high end And you're going to see bigger increases in ASRPC.
You're going to see other quarters where you have a concentration of the Customer additions at the low end and a little bit more pressure in ASRPC. The good news is that when we look at the starter And we look at professional and enterprise. Each of those is expanding and so we feel good.
Yes. Okay, great. Thanks for the color guys. Congrats. Thanks.
Your next question comes from Brian Peterson from Raymond James.
Thanks for taking the question and I'll echo my congratulations. So Brian, maybe just one for you. If I think specifically about Sales Hub, In some of my partner conversations, I heard that the ability to kind of work with larger and larger teams is something that's kind of a common theme. What are some of your largest deployments for Sales Hub? And how large do
you think they could ultimately be over the next 3 to 5 years? Brian, thanks for the question. Sales Hub has a ton of potential. We re released Sales Hub Enterprise Right. So that product is going to get very, very legit, very, very bullish on the future of that product.
In terms of the size, we're definitely closing bigger deals. We closed a couple of whoppers in Q4 with many hundreds of seats. So I think and we should see a lot more deals in our pipeline with larger seat volumes. So it's the strategy and the investments are starting to pay off there on sale The deal size are getting big. One of the things we've just been working on, like if I think of HubSpot, I step back and think about it.
We're really strong in that middle in the very middle of the market at 20 to 200 employees and I give it's like an A plus on Product market fit or go to market market fit in there. Where we're working hard on is that 200 to 2000, what we call the enterprise And then the 2 to 2 to 20, lots of investments going in last year and this year in those areas, and we think we're going to make a lot of progress there. Good to hear. Thanks, Brian.
Your next question comes from Michael Turrin from Wells Fargo Securities.
Hey there. Thank you and good afternoon. Look, the initial guide on top line for the upcoming year really stands out. You've laid out a bunch of reasons for it, but anything else you can add? If I'm looking at this right, haven't initially guided to 30 plus percent revenue growth in 4 years now, so anything you'd call out that's just structurally different heading into this year versus prior years?
I hear Jeff Bezos talk about this, but like in the given quarter, The stuff that's happening now is stuff that we're best we've made really over the last couple of years. So like what happened this Month doesn't really impact Q1 that much. So I'm not shocked that we're seeing such good results and we have such good guidance and We've reaccelerated like we've made some in a couple of cases, we've really done like the 2 steps back so we can take 4 steps forward. And we're just getting a return on some of those bets. And then our market's bigger.
We moved from a marketing app market, is a cool market and not small and growing to get your whole darn front office. The CRM market is much, much bigger and Everyone needs one. It's not an optional thing. And whether you're a startup buying your first one or you're a scale up and you're not happy with what Scott, we're just a great fit these days and we've become a better fit over the last couple of years. Our competitive advantages have increased.
It's a little bit boring and a little old school, But our value prop has just gotten better. We win more deals and we retain customers longer. We delight our customers. It's a little bit of very old fashioned, but it works. Long term vision is neither boring nor old fashioned.
It's refreshing to hear. I mean the other question we've just been getting a lot is around New customer trends and how to think about sustainability of these elevated levels. Has the starter growth suite unlocked something new you feel you can
Yes. I mean, it definitely feels like we've sort of hit a new level. You've seen now 3 quarters where you Have broken away from that what we had been at that call it 3000, 4000 customer adds per quarter. And we feel good about our ability to continue to operate at that new level. Now that doesn't mean that I would translate it into $8,000 to $9,000 a quarter.
I do think, as I was talking about a little bit earlier, there'll be some variability from 1 quarter to the next based on whether we're seeing some strength
Your next question comes from Drew Foster from Citi.
Hey, guys. Thanks for taking the question. Brian, you've been talking a lot about the growth and evolution of your portfolio to more of a front office platform. And I'm just curious what you're seeing as Sort of the biggest changes in that market more broadly in the context of how that changes your view of different areas that look like attractive adjacencies for your portfolio?
Yes. That's a good question. If I sort of back up and think about it like I've been in this world of CRM since literally since 1990 when I graduated college. And many times over my career, I was in the position of Either buying and implementing or using a CRM. And there's the tried and true playbook for how you do this.
And it's been Around for a long time where someone builds an SFA application and then they buy a whole bunch of stuff and cobble together this giant Franken CRM. And we're seeing this, there's several of them in the market today and it's a good way to build a business. We decided to kind of zag what everyone else was digging on that playbook and we decided instead of cobbling this thing together, let's craft it sort of Apple style and make it a Beautiful application. Our development team, our product designers, our user research people are really good. The tools that we use and the platform we use internally is So powerful.
And so we've decided to build it and we think it's unique and differentiated and it really matters to the end users and the ops Now given that underneath HubSpot, we have this set of shared services and we've exposed them through 4 hubs today, Well, we aren't done. It's still pretty early innings for HubSpot. There's a lot more stuff in our heads than on our drawing boards that we can expose through additional hubs
Got it. Okay. And now that your newer hubs I've been out in the wild for a few quarters, especially some of your enterprise releases. Just wondering if you could give some anecdotes about Sort of the role they're playing as new front doors to your business as you've talked about in the past, whether you're attracting new types of customers, Just given how strong that customer number is the last couple of quarters here, just any color would be helpful. Thank you.
Yes. Thanks for the question, Drew. I kind of think of HubSpot as we have Marketing Hub, which is the OG Hub Going really well, growing fast at scale, big market we're going to continue to grow. Being at Sales Hub, Good sized business now, wow, is it growing fast, lots of opportunity there. And then you got CMS Hub and Service Hub.
Those hubs to me look a lot like the sales hub look 2, 3 years into that evolution. And so hopefully 3 years from now, we have Marketing hub and sales hub both at scale and then these 2 hubs are cranking or are big businesses and then there's new hubs kind of Coming along, so it's sort of like horizon theory. Horizon theory is 1, horizon 1 bets horizon 2 bets horizon We have sort of bets along those horizons and they're maturing into the space.
We have
new bets that will come online. So the new hubs are doing well. CMS Hub and Service Hub doing well. Remind me a lot of Sales Hub. I think they'll be big businesses.
The combination, the Clydesdale combination of these things is going to be really, really powerful over time.
Awesome. Thank you.
Your next question comes from Christopher Merwin from Goldman
Hey, thanks a lot for taking my question. I wanted to ask about the service space. We're hearing more and more about Messaging and chatbots being central and engaging with current and prospective customers. So can you talk a bit about what you're doing in that area and And how you're capturing that data and helping reps close more deals?
Yes. We're super interested and we're investing heavily in that. If you take a step back, you think about most of the communication that happened was asynchronous with email. And then just increasingly, people want to do synchronous messaging types of communication And that comes to life through lots and lots of different ways these days and lots of ways to message. About sort of chat on the website and building bots that automate that chat, that's a year and we've invested a lot in.
And we have a great offering in the market today that our Customers are buying the worst on your website if you've got an app that are working inside your app. All of that It gets pulled into a central place and people can respond to those in real time. That scenario we're super excited about. That's an area of growth for HubSpot. That's an area where Human behavior is changing and I think HubSpot is quite good at staying on top of those changes and helping people deal with them.
So it's a great question. We're really excited about that space. Great.
Thank you. And maybe just a quick follow-up. Obviously, I think you talked about it a little bit before, but accelerating growth next year, Not going to see that pass through to margin, but you're investing a lot in the long term here. I mean, is it possible to get a bit
We've been investing relatively heavily in R and D over the last several years and we're going to continue to do it. We feel like we're getting nice returns Showing up in retention rates, not the motorscore revenue growth like the leading indicators look good, the lagging indicators look good too. So we're going to keep investing there. We're going to invest in their existing products. So you saw we have a playbook where we can go into an existing product, Hub is kind of relaunch it, really go after it again and that works really well for us.
And then we'll build some new hubs and new capabilities. Our R and D team It's kind of on fire these days, so we're going to see results in those folks. Kate, do you want to add anything to that?
Yes. No, I think on the go to market side, We continue to invest to be able to service the demand that we're seeing in the market. And we talked about the fact that we're investing where We feel like we have this A on the go to market and product in the middle and that we're investing both upmarket and also in Tech Touch at the low end.
Great. Thank you very much.
Your next question comes from Ken Wong from Guggenheim Partners.
Great. Thanks for taking my question. Brian, you mentioned earlier CMS and service looks like we're 2, 3 years into what you saw with sales. As we think about the kind of the maturity of those products, is it just a matter of time you think before we get to a run rate like sales? Or is there some incremental Watering, seeding, loving that you guys have to give to Service Hub from a product go to market perspective before we maybe see those kind of results?
No, lots of watering, lots of fertilizing, lots of work left to do. I kind of like let's just pick out Service Hub. The product is terrific. Let's say if you're a 50, 75 person company, if you're a 500 or 7 50 person company, there's some stuff that's Still missing and it kind of reminds me of Sales Hub a couple of years ago if you're a 500, 7 50 person company like, you're close guys, but There's a couple of gaps. It's very, very similar.
We know what the gaps are. And in our own way, leveraging the primary colors, we're filling those gaps. Plenty of water, plenty of fertilizer left to do. And I would say that also for the Marketing Hub product, like we've had that product out there for 14 There's still plenty of low hanging fruit on that marketing hub product. It's a terrific product.
But even this year, it's going to get a lot better. And so, yes, we don't see HubSpot as sort of the fixed thing. Like there's going to be a lot of innovation across New and existing hubs over time.
Got it.
Great. And Kate, just on the margins. So 2nd year in a row that we've had flat margins and I fully recognize it's a fantastic time to step on the gas given what we're seeing. I guess as we think going ahead, should we think that you guys are more focused on the growth side versus the margin side in terms of how we should kind of adjust our model?
Yes, I think that the message that you should hear from us is that the priority is on continuing to invest in the business to drive long term growth. That said, we have a framework and over the long term, we will continue to follow
Got it. Perfect. Thanks a lot.
Your next question comes from Michael Turits from KeyBanc Capital Markets.
Hey, guys. Thanks for taking my question. So a strong quarter both on the net expansion of existing customers and it sounds like new customers Came in at a high price level too. Which was the bigger factor in both of those? Was Was it the addition upsell and higher level of additions or what was more attached at multiple ops?
It's relatively balanced across those factors. There's a bunch of stuff that plays into it.
Yes. I would just say new and cross sell both performed well.
And then Kate, you made a last quarter, You made a comment about billings in terms of duration, if there was a duration headwind. This quarter was strong billings quarter. Was there a Duration tailwind in any sense this quarter?
Yes, there was. And I think As many people who listen to these calls would probably know billings is not my favorite metric out there. There's just a lot of stuff that happens with billings that can confuse people. That said, on again, over the long term, constant currency revenue 7 packages delivered. So I'm all trying for the beacon in the background here.
I don't know how to shut it up. So last quarter, we did see constant currency billings above constant performed really well and those tend to have longer billing terms than the lower end starter products. There was another small bit here that was helpful. Some of the customers that we had given short term plays 2 in Q2 at the onset of the pandemic, we're coming off of those sort Discounts are flexible payment terms. And so they build again in Q4.
It was a smaller factor. And then the remaining is really just
Good morning, team. Do you want
to get the doorbell out there?
Good God. Sorry, I apologize.
I'll get the next one.
Your next question comes from Ryan MacDonald from Needham.
Okay. Hey, this is Alex on for Ryan. Could you discuss the strategic rationale for the Huffle acquisition? Content creation And top
of funnel lead generation has never really been an issue for the business in my view. So how does this enhance the business or HubSpot's ability to acquire new logos? Great question. Alex, when we started HubSpot, it was on this idea of inbound marketing. And the problem with marketers They're always renting space on someone else's app, a radio show, a TV show, a newspaper and increasingly more recently a social network or a search engine.
And the idea behind inbound marketing was instead of renting space in somebody else's asset With just create your own assets, increase the number of those assets and increase the return you're getting on those assets. What I love about the Hutsell folks They had some unbelievable assets. They had a newsletter asset, very, very, very modern and new newsletter. Those things are taking off. They have the best one In the business, they have a fantastic podcast and very deep research.
So it's a little bit of an acquihire to get that terrific talent And all those assets that we plan to invest in and grow over time. So we're super, super excited about the hustle. We think it's going to be an unfair advantage on the marketing side for sure.
Your next question comes from Jennifer Lowe from UBS. Great.
Thank you. Maybe Brian, you made comments a couple of times about sort of the scale up versus startup components of your business. And in particular, given that a lot of those companies that may have been in market longer are now dealing with a selling environment that's very different than how they sold in I'm just curious if you're seeing any difference and at the same time you've matured your own product with the enterprise and Pro SKUs. Are you seeing a difference
in how often you're replacing an existing technology
that may not be meeting current needs? Is Seeing an existing technology that may not be meeting current needs as opposed to how frequently you're landing in an environment where there just really isn't pre existing technology?
Yes, that's a driven question, Denver. In a startup, we're typically the 1st legit system they have in place, like the 1st legit CRM they'll put in place, which is where we want to be and then we want to scale with them. In a Gail, oftentimes someone has put in tried to put in a CRM, it just didn't go well. It was too hard to set up. It was too hard And they got it sort of partly set up and then they just said there's got to be a better way to do this And they find HubSpot and they implement us.
And that's starting to happen more and more. We've been talking about that for a while, but we're starting to See more of that in the market. I think it's a testament to our approach. It's a patient person's approach to build all this stuff. But I think that patience is paying off.
I also think our go to market, Jennifer, really helps us in that area where to engage with one of those traditional CRM players You can do a free trial. It's not premium. You got to deal with a whole bunch of sales reps to get anything done. And we've got a super modern approach to the way And I think people like it. They want to use a free product and give it a run.
They want to try it. They want a trial. And yes, the one to talk to a sales rep and engage and learn about it in pricing and And negotiating and helping them get it set up. But I think our approach to letting people really use it It matches the way they buy. I also think it really highlights our strength that it is easy to use and set up.
It's very modern. And I think HubSpot's a little bit like Zoom. Zoom is not only a better product, but their go to market is much lighter. It's much easier to buy like We want to be more like that. I think that's the future of SaaS.
It's more like that.
Okay. And then just maybe
a more Specific one, it seems like relative to the headwinds that were happening in Q2 when everything went to shelter in place, You've now largely kind of recovered some of the business that was negatively impacted by that. Is that a fair assessment or is there still more opportunity to improve on the recapture The rate of business that might have been impaired earlier in 2020.
We are largely through the impact of our COVID plays. Great. Thank you.
That's it.
Your next question comes from Keith Bachman from Bank of Montreal.
Hi, thank you. I'll ask 2 if I could and I'll just do it concurrently. One is you talked about net adds In particular, to follow on Michael Turret's question, I just want to hear some comments about this calendar year. Is there anything you want to call out in particular? Just trying to understand how you think mix for net adds may have an impact on the model.
And the second question is, in the past you talked a little bit about Commerce could be an opportunity for our market and just wanted to hear some thoughts, any updated thoughts on commerce in particular, What the opportunity might be for HubSpot in terms of your differentiated model? Thank you.
I'll just take the first one. I'll take the second one, Kate.
Yes, sure. In terms of new customer adds, I think what you saw this year 2020 was that the initial Step up that we saw in Q2 and then into Q3 was very much associated with the starter growth suite pricing Packaging change and then over the course of Q3 into Q4, what we saw is a much more balanced Set of customer additions, which is what sort of leads me to the comments that from 1 quarter to the next, there is going to be some difference in the
Keith, on your commerce question, we've largely focused on B2B. And I kind of think of like Shopify and HubSpot, they're the B2C side and they're the B2C side. We're we do think there's opportunity zones increasingly on the B2B side. The way people want to buy is And increasingly they want a very light touch experience and increasingly they want parts of their products and maybe all of their products even on the B2B side To be some sort of an e commerce each transaction. So that's an area we're very interested in, I'll just leave it as Thad, very interested in I think a nice area of opportunity for startups and companies like HubSpot over the next several years, the B2B buying process inevitably is going to change.
And I think it will change for the better for the vendors and the buyers and we want to be able to help our customers with that over time.
Okay, great. Many thanks.
Your next question comes from Kirk Materne from Evercore ISI.
Great. Thanks very much for Fitting man and congrats on the results. Brian, you touched on this in some of your prior comments, but I was just kind of curious How often the concept of a platform now comes up with both really new customers, meaning everybody's moving faster from a digital perspective. But as they move faster, are they asking more about sort of I want to make a bet on a platform as my first landing spot versus what you would have saw maybe a year or 2 ago because I think we can all see the customer adoption that you guys are seeing is accelerating. I was kind of curious if the conversations you're having around that platform are also changing at maybe the same pace.
Yes, I think they are. Yes, increasingly people are coming to us and buying the whole platform upfront And then just a lot of people who are marketing Hub customers, who are maybe looking at a new CRM, it just It's kind of a no brainer to buy HubSpot. Like they already know how to use the platform. It's a single view of the customer. I mean, it's kind of a no brainer.
So it comes up more and more. We made it over the last few years, we're paying off. And I would just add, Kurt, that we've got a ton more work to do on it. Like I look at our platform as we've made tremendous progress over the last couple of years, but there's when I talk to customers, there's plenty of low hanging fruit For us on the platform side and plenty of things they still want us to do and so we got a lot of work left to do on it.
Okay, great. Thanks very much.
Your next question comes from Siti Panagrahy from Mizuho.
Thanks for taking my question and congratulations. Going back to some earlier question about this, you talked about positive mix shift to professional and enterprises. So last year after the pandemic broke, you talked about downgrades of subscription. So Have you already upgraded most of them with the omnidiv right after March, April?
Yes. So what I would say, let me parse this into a couple of things. You are absolutely right. We gave Number of concessions or we gave a set of concessions to customers in Q2 as part of the initial reaction to the pandemic. And most of those took the form of Short term discounts and flexible payments, we are through the majority.
We are through most of those. And so It comes from the set of new customers that we're adding where we are more we're seeing more strength in that professional and enterprise tier.
Your next question comes from Derrick Wood from Cowen.
Great. Thanks for taking my question and congrats again on a strong quarter. I wanted to come back to the notion of shifting from a marketing app to a CRM And clearly, that's gaining momentum, but I wanted to maybe ask about what's going on in the channel and whether existing partners are Kind of evolving towards more of that broader platform approach as well or perhaps there's kind of a new kind of cohort Coming on board from the partner side, it would be nice to hear about how you're seeing the channel evolve.
That's an excellent question. The channel is definitely evolving. Like when we first started HubSpot, it was the marketing agency partner I think we call it the agency partner channel. We call it a solution partner channel now because they are solution partners. And there's 2 things going on.
Some of those marketing agencies just want to be marketing. They're foreign marketers. They just like marketing and they work in marketing hub and they've got a terrific business and they're not changing. Some of those marketing agencies though are shifting to be much more of a CRM partner for their customers and it really shifted the way their business model works and their value prop works. So We're thrilled to see both of those, frankly.
And then if we look at the mix of new partners coming in, we definitely still have marketing agency style partners coming in, But increasingly it's CRM Implementers. It's a little bit more technical of a partner doing a little bit of a bigger implementation, more integration, more customization. So a little bit of both. Where I think the opportunity is going to be amazing is when people can use our content management system and our CRM System combined those things together to create awesome experiences for their customers. There's a lot of opportunity for partners there.
Great. Thanks for the color.
That was our last question at this time. I will turn the Call over to Brian Halligan, CEO and Chairman for closing remarks.
Thanks everybody for joining the call today. Thanks a lot. Appreciate you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.