HUBSPOT INC Q1 FY2025 earnings call

• Q1 was a solid start with revenue growing 18% year-over-year in constant currency and over 10,000 net customer additions. Board authorized $500 million share repurchase. - Pillars: platform consolidation (over 37% of Pro+ customers by ARR using 4 or more hubs), upmarket expansion (large deal growth 23% YOY, partners up 41%), downmarket strength (free to starter conversion up, Smart CRM and core seats gaining traction). - AI innovation: embedded AI across hubs, Copilot adoption doubled, Customer Agent expanding, Spring Spotlight innovations including Knowledge-Based Agent and agent-to-agent orchestration. - Internal AI use: support tickets resolved with AI up, prospecting meetings booked with AI, marketing email conversion improved.

Q1 revenue grew 18% year-over-year in constant currency and 16% on an as reported basis. Subscription revenue grew 16% year-over-year, while services and other revenue increased 13% on an as reported basis. Domestic revenue grew 16% year-over-year. International revenue growth was 19% in constant currency and 15% as reported, representing 47% of total revenue. The company added over 10,000 net new customers in Q1, ending the quarter with 258,000 customers, growing 19% year-over-year. Average subscription revenue per customer was $11,000 in Q1, down 2% year-over-year in constant currency and 4% on an as reported basis.

• Q2 2025 total as reported revenue expected to be in range of $738 million to $740 million, up 16% YOY in constant currency and as reported. Non-GAAP operating profit expected to be between $124 million and $125 million, margin 17%. Non-GAAP diluted net income per share expected to be between $2.10 and $2.12. - Full year 2025 total as reported revenue expected to be in range of $3.036 billion to $3.044 billion, up 16% YOY in constant currency and as reported. Non-GAAP operating profit expected to be between $558 million and $562 million, margin 18%. Non-GAAP diluted net income per share expected to be between $9.29 and $9.37. Considered FX impact, share repurchase, and macro uncertainty.

Macro environment uncertainty, economic environment risks affecting actual results differing from expectations.

Q: Thank you so much and congrats on a very steady performance. So, Dharmesh, I was hoping you could give us an update on Agent.ai. And just as part of that, there was some talk about multi agent orchestration. How are you doing that across the hubs? And I’m trying to understand if you’re going use something like model context protocol or some other communication mechanism. And then I have a quick follow-up.

A: Okay. Thanks for the questions. So on the Agent.ai front, so as Yamini mentioned, Agent.ai is one of our innovation bets and the thesis behind the bet is that the future is going to consist of tens of thousands and hundreds of thousands of agents all collaborating and working with each other to accomplish higher order goals. And so our kind of goal behind Agent.ai is to kind of empower citizen builders to build this next generation of agents and we’re really pleased with the progress that that innovation bet has made. Now, one of the ways I think these agent-to-agent collaborations will happen is with what’s called model context protocol, which you brought up. What model context protocol is an open standard that defines how AI applications and agents can communicate with a variety of tools and back ends and services. And so this benefits HubSpot in a couple of ways. One is earlier this week, I’m super proud the team launched into public beta our MCP server support, which allows any AI application current and future be able to communicate with HubSpot’s backend over a natural language interface within an LLM. And so, with this unlock’s potential is that now HubSpot can be used by all sorts of applications. They can get to that data easily, so think of it as a next generation API. So past APIs were built for classic applications. Model context protocol allows agents to be able to consume HubSpot services. The flip side of it is HubSpot will also be an MCP client. This will allow us to then interact with all the third-party systems that are out there and be able to bring that data into our normalized hybrid structured and unstructured form. So it kind of expands broadly the footprint of data that we will have access to. So we’re super excited both by the kind of agent network as represented by Agent.ai and the opportunity that MCP, the Model Context Protocol, unlocks. Thanks for the question.

Q: Hi, good evening and thank you for taking my question. Great to see the strong execution in a tough backdrop. Maybe, Kate, for you, just as I think about the revised guidance, it’s obviously impressive, but it now implies a different shape of growth as the year progresses than where we started. And so I was wondering if you could maybe just help us contextualize how we should think about the quarterly progression. And then, maybe related, just on the margin side, sticking with guidance, how much you’re absorbing in terms of OpEx from M&A, because I’m guessing you would have revised that maybe higher otherwise? Just maybe help us understand that guidance just a little bit better.

A: Oh, sure thing. I would just maybe start, Samad, by saying, well, there are maybe a little bit more complex pieces to the puzzle. The way that we’ve approached guidance for this quarter is very much consistent with the way we always approach guidance. So, maybe I’ll take you through the pieces and it will help a little bit here. I think you’re well aware, foreign exchange has been quite volatile. Since we reported our earnings in February, the US dollar has weakened pretty meaningfully, which is favorable to our as reported revenue results. And we’ve flowed this through to our full year guidance. So we flowed through $50 million of FX upside, which is all of the movement that we saw in rates between February and today. That said, we did not flow through our Q1 outperformance into the full year outlook. And the decision not to do that is really a reflection of the increased macro uncertainty that you heard both Yamini and I talk about in the prepared remarks. A couple things maybe just to highlight as you think about our full year guide. Yamini said it pretty clearly, we have not seen any material headwinds to the business through April. But the environment is obviously highly uncertain and we’re actively monitoring trends in the business. Secondly, as always, our guidance is going to reflect a range of scenarios that we run in preparation for this call. We have not assumed a full scale downturn in the economic situation this year. But we do believe that our revised outlook is appropriately prudent. And it really does reflect a confident view of the business that we see today. In terms of the operating profit side and the impact of M&A, it’s honestly very small.