HubSpot, Inc. (HUBS) Earnings Call Transcript & Summary

Good day and thank you for standing by. Welcome to the HubSpot Q2 2021 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 first speaker today, Chuck MacGlashing, Head of Investor Relations for HubSpot. Thank you. Please go ahead, sir.

Thanks, operator. Good afternoon and welcome to HubSpot's Second Quarter 2021 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 Co-Founder and newly named Executive Chairman; Dharmesh Shah, our Co-Founder and CTO; Yamini Rangan, our Chief Customer Officer and newly named CEO; and Kate Bueker, 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 1933 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 performance and operational expenditures, expected growth, the leadership transitions and business outlook, including our financial guidance for the third fiscal quarter and full year 2021. 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 forward-looking statements. Please refer to the cautionary language in today's press release and our Form 10-Q, which will be filed with the SEC this afternoon for a discussion of the risks and uncertainties that could cause actual results to differ materially from expectations. 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 measure used or discussed and a reconciliation of the differences between such measures can be found within our second quarter 2021 earnings press release in the Investor Relations section of our website. Now it's my pleasure to turn over the call to HubSpot's Chief Customer Officer, soon to be Chief Executive Officer, Yamini Rangan. Yamini?

Thanks, Chuck, and greetings, everyone. Thank you for joining us today as we review HubSpot's second quarter 2021 earnings results. I know you've likely seen the exciting news that Brian will be taking on the role of Executive Chairman as of September 7. We're all looking forward to having Brian back in action and stronger than ever when he returns next month. Brian will be joining the call here in a few minutes to talk about this path forward in this new capacity as well as to share some reflections on the 15 years that have led us to today's news and this quarter's fantastic results. Before we do that, I want to focus on the business at hand: the great results from last quarter. We continue to operate from a broad position of strength, with Q2 revenue growth accelerating to 47% year-over-year in constant currency and total customers growing 40% year-over-year to over 121,000. We've seen market product adoption grow to over half of our total customers, a great indicator that more companies are realizing the advantage of managing their entire front office on one platform, with one data model, one view of their customers and one user interface that's easy to use. A key driver of this continued growth is digital transformation we're seeing as more companies have had to adapt to doing business online. This shift towards digitally powered customer experiences is one that HubSpot has been evangelizing for the past 15 years. So we've been well positioned to meet the moment. As consumers increasingly expect remarkable digital experiences at each step of their journey, scaling companies need a powerful CRM platform to tie it all together. This makes CRM not just a nice-to-have solution but an indispensable driver of long-term growth for our customers. A key part of that digital experience is the company website. This is the digital front door. Traditional website content management systems are often siloed from other essential front-office functions. They're complex to manage. They lack speed, security and scalability that companies need to grow their business. That's why we launched CMS Hub Professional and Enterprise last year, and we are continuing to invest in the platform with CMS Hub Starter launched yesterday. CMS Hub Starter is built as part of our CRM platform to give companies seamless access to all of their customer data. Having a CRM-powered site enables both marketers and developers to efficiently work together to build remarkable digital experiences and maximize the revenue-generating opportunity. As part of that launch, we also adjusted the pricing of our CMS Hub Professional and Enterprise tiers to reflect the increased value we are delivering to our customers through SEO enhancement, dynamic pages, site trees and increased limits on capacity with even more advanced features in the road map. We're still in early stages of this launch, but we are confident that CMS Hub Starter will fill a painful gap for marketers and developers that are looking to spend less time managing their system and more time driving growth. Another important function of digital-first transformation is revenue operations. Last quarter, I talked about the launch of Operations Hub, a new product designed to transform the role of operations professionals and empower them to become strategic drivers of revenue and growth. I'm excited to share that we are continuing to hear positive feedback from customers and partners and that Operations Hub has performed nicely ahead of our internal growth expectations over the past 1.5 quarters. Data sync, our robust new integration engine, has quickly become one of the most compelling and popular free tools, particularly among small customers, exemplifying how Operations Hub will drive adoption of our CRM platform. We're also seeing strong adoption of programmable automation among larger companies who are looking to take full advantage of their data and deliver personalized experiences to their customers. One of our top solutions partners had this to say about the feature, programmable automation makes us significantly more flexible. We've used it to build even the most advanced business processes in HubSpot, from ERP integrations to data enrichment, commissions calculations to renewal communications. With programmable automation in Operations Hub, if you can dream it, you can automate it. Thanks to the team at Aptitude8 for sharing the feedback. We're so glad that they are seeing value in Operations Hub. Both Operations Hub and CMS Hub Starter are great examples of our commitment to crafting our CRM platform in-house rather than cobbling it together through clunky acquisitions. That focus on delivering a consumer-grade UI, matched with a scalable enterprise back end, sets us apart from traditional CRM platforms and puts HubSpot in a strong position to achieve our goal of becoming the #1 CRM platform for scaling companies. With that, I'll turn it over to Kate to give an overview of our fantastic financial results.

Thanks, Yamini. Let's turn to our second quarter financial results and our guidance for the third quarter and full year of 2021. Second quarter revenue grew 47% year-over-year in constant currency and 53% as reported. Q2 subscription revenue grew 53% year-over-year, while services and other revenue increased 44%, both on an as-reported basis. We continued to see strong performance across all of our hubs, tiers and geographies in Q2. Revenue retention continued to be very strong in the quarter, once again benefiting from healthy customer dollar retention levels. In addition, our net revenue retention continued to benefit from a diverse set of upgrade drivers, with particular strength from addition upgrades, cross-sell activity and seat expansions. As of Q2, 58% of our customers are getting value out of 2 or more hubs as they adopt HubSpot as a platform. Domestic revenue grew 42% in Q2, while international revenue growth was 54% year-over-year in constant currency and 68% as reported. International revenue represented 46% of total revenue in Q2, up 4 points year-over-year. We added over 7,100 net customers in the quarter, bringing our total customer count to 121,000, up 40% year-over-year. Average subscription revenue per customer grew 8% year-over-year to approximately $10,200 as we saw a positive mix shift toward our Professional and Enterprise tiers, coupled with strong installed base selling in the quarter. We expect our strong installed base selling and positive product mix shift to continue through the second half of 2021. As a result, we anticipate second half net customer additions to sustain around these levels as we continue to compare against the robust Starter Growth Suite customer additions from 2020. And we expect high single digits year-over-year growth in ASRPC in Q3 and Q4. Deferred revenue as of the end of June was $362 million, a 50% increase year-over-year. Calculated billings was $334 million, growing 60% year-over-year in constant currency and 65% as reported. This acceleration in constant currency billings growth was driven by strong business performance in the quarter in addition to an easier overall comparison as a result of the challenging business environment in the second quarter of 2020. The remainder of my comments will refer to non-GAAP measures. Second quarter gross margin was 81%, down a little over 1 point year-over-year. Subscription gross margin was 84%, while services gross margin was negative 5%. Second quarter operating margin was 9%, relatively flat as compared to the same period a year ago. Operating margin in the quarter exceeded our expectations primarily as a result of our strong revenue performance. At the end of the second quarter, we had just under 5,000 employees, up 32% year-over-year. Net income in the second quarter was $22 million or $0.43 per fully diluted share. CapEx, including capitalized software development costs, was $16 million or 5% of revenue in Q2. Free cash flow in the quarter was $26 million or 8% of revenue. We continue to expect CapEx as a percentage of revenue to be about 5% in 2021 and now expect free cash flow to be between $170 million and $175 million, with a seasonally strong free cash flow quarter in Q4. Finally, our cash and marketable securities totaled $1.3 billion at the end of June. And with that, let's dive into guidance for the third quarter and full year of 2021. For the third quarter, total revenue is expected to be in the range of $325 million to $327 million, up 43% year-over-year at the midpoint. Non-GAAP operating income is expected to be between $27 million and $29 million. Non-GAAP diluted net income per share is expected to be between $0.42 and $0.44. This assumes 50.6 million fully diluted shares outstanding. And for the full year of 2021, total revenue is now expected to be in the range of $1.268 billion to $1.272 billion, up 44% year-over-year at the midpoint. Non-GAAP operating income is now expected to be between $107 million and $109 million. Non-GAAP diluted net income per share is now expected to be between $1.67 and $1.69. This assumes 50.5 million 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 of 2 points in Q3, a neutral impact to Q4 and a 3-point tailwind for the full year. Lastly, I look forward to seeing many of you again for our Virtual Analyst Day as part of our INBOUND '21 event on October 12. And with that, I'll hand things over to Brian for some closing thoughts.

Thanks, Kate. It is a true pleasure to be able to speak with all of you again. I'm so proud of the entire HubSpot team. They've been absolutely cranking during my time away. And I'm so thankful for the work that Yamini, Dharmesh, Kate and the rest of the leadership team have done in my absence. My sincere thanks to all of you. I also want to say a huge thank you to all of you for the well wishes over the past couple of months. The road to recovery has been a long one, but I'm feeling really, really good. My head is 100% back. My body, well, that needs a little more physical therapy, but I'm making great progress and should get back to 100% quite soon. Now back in June, we celebrated our 15-year anniversary of HubSpot's founding. When I look back at the last 15 years, I'm super proud of what we've been able to accomplish. We built a truly mission-driven organization designed to solve for the customer and actually help millions of organizations grow better. This past year, we've hit some exciting milestones like passing $1 billion in ARR and 100,000 customers. These are just the start. HubSpot is still in the very early innings and has a lot more value to provide to our customers, partners and employees. One of the keys to the amount of success we've had so far is we haven't been afraid to take inspiration for the Warren Buffett quote that goes something like, someone is sitting in the shade today because someone planted a seed several years ago. That's HubSpot in a nutshell. We've been willing to plant seeds like shifting from our [indiscernible] app to a front-office suite, shifting from a front-office suite to a front-office platform, shifting to a freemium model and many, many others that are all paying off quite nicely for us. Today, lots of shade going on. Now over the last 6 months, I've been thinking a lot about how I can have the most impact on HubSpot moving forward, and moving to the Executive Chairman role feels like a natural fit. As an executive member of the Board, I'll be able to lean into the things that excite me, like planting and nurturing more VCs that will turn into big shady trees for years to come. My transition to Executive Chairman would not be possible if we weren't super confident in Yamini's ability to lead HubSpot. When we hired Yamini, we knew we were getting an incredible leader with an amazing track record of holding high-impact roles at SAP, Workday and Dropbox, who will be able to align marketing sales and service teams and create a more cohesive experience for our customers. But what we've actually gotten is so much more than that. Since the day Yamini arrived, she's made HubSpot better. From reducing friction for our customers to leading the company with clarity and empathy through the pandemic, Yamini has proven she's ready to take on the role of CEO to help pull HubSpot and our customers and partners grow better. And she's just a perfect complement to Dharmesh and me to write the next chapter. I want to close out by once again thanking Yamini for her terrific leadership over the past 6 months and offering my heartfelt congratulations to her on this exciting milestone. Dharmesh and I have no doubt that she's the right person to lead HubSpot moving forward. And I'm super excited about the journey ahead. I want to thank all of you for your time. Now speaking of Yamini, over to you.

Thank you so much, Brian, for your kind words and for your incredible support during my time here at HubSpot. I am deeply humbled, grateful and super excited to take on this new role in partnership with you, Dharmesh and the entire HubSpot team. It was your visionary leadership as founders that got us here today, and that leadership will continue to be invaluable as HubSpot grows. I'm excited to continue working together to build innovative products for our customers, create a remarkable culture for our employees, and ultimately, make HubSpot the #1 CRM platform for scaling companies. Operator, please open up the call for some questions.

[Operator Instructions] Our first question is from Samad Samana from Jefferies.

Welcome back, Brian. 2Q really representing spades, the great company you and Dharmesh had built all these years and Yamini's strong leadership steering it recently. Congrats on the move to Executive Chairman, really happy you're staying. And Yamini, congrats on your move to the CEO seat full time. I'd love to hear from both of you a little bit more about how you 2 will be dividing up the core responsibilities going forward? And where each of you will be focusing your individual attention. And then, Yamini, maybe for you, it's obviously early, but you've been at the helm now for 6 months. It would be great to hear maybe if you could give us some thoughts about HubSpot's vision and strategy going forward.

Samad, I will kick it off and hand it to Yamini. But it is great to hear your voice, my friend. Thank you very much for asking the first question here. I'll say I feel fantastic. My head has fully recovered from my accident, and I'm thrilled to be back at HubSpot in this room with my friends and colleagues. It's just a terrific time for me. Now when I got hurt, I had a lot of time on my hands. I spent a lot of time in a hospital bed looking at the ceiling. And I was thinking about, what can I do? How can I add value to HubSpot in a bigger way going forward? I've been at this 15 years. And what's next for me? And I thought, this is a good time. I'm going to become an Executive Chairman, and Yamini's going to become CEO. And it's going to be a 1 plus 1 equals 3 combination. Yamini, we hired -- I hired Yamini. She is a perfect fit for this job and for this phase of growth to take us to the next level. She's just a perfect fit. She's had my job for the last 6 months. You guys see the numbers are fantastic. She's done a masterful job. I'm very, very, very bullish on it. In terms of dividing up what we're going to work on, we've talked a lot about that, and I'll let Yamini weigh in on her side. What I'm sort of focused on as the Executive Chair is, first and foremost, I plan to be Executive Chair, active and engaged Executive Chair. And you probably heard me tell the bad jokes that I used to say on these calls that if I ever leave HubSpot, they're going to have to take me out on a stretcher or straitjacket. You might have to add [indiscernible] to that list. But my main role is to help Yamini do the best as she can and keep this thing rolling. I do feel like it's the very early innings of HubSpot. The second thing that I've always enjoyed doing and help drive is plant those seeds that turn into big shady trees that we've all enjoyed over the years. The app-to-suite tree we planted several years ago, it's still a small tree. There's a lot more growth to go in the suite. We're just now planting the suite to platform seed. That's going -- it's going to go really well. It's top of the first inning on that seed. This puts the freemium model, that's the -- bet on culture. These are seeds we planted a long, long time ago that have all paid off. And I like that type of work, and I like product and product vision. So that's kind of where I'm going to be focused and then just helping Yamini. How about you, Yamini?

Yes. Well, thank you, Brian. And I have been so humbled and grateful and super excited to take this new role and write the next chapter of growth at HubSpot. It's not -- I would say I was particularly excited because I get to work with 2 brilliant people, Brian and Dharmesh, who have done this for 15 years who have fantastic experience. The 3 of us share a lot in common: a growth mindset, just curiosity, focus on product innovation, focus on customer-centricity. And I think the combination of their experience, plus my focus on scaling customers is going to be powerful. You asked a question about the vision and strategy. Our vision is clear. Our vision is to help millions of organizations grow better, and we're just getting started in accomplishing that vision. And our strategy over the last 6 months and over the last couple of years, it's been working, it's clear and it's not changing. And if I had to articulate the strategy, it's threefold. First off, we want to build a best-in-class CRM platform for scaling companies. And we'll do this by expanding into new hubs, like you saw us do with Operations Hub last quarter. And we'll do this by investing heavily into our existing hubs, like you heard about the CMS Hub this quarter. We have just a long way to go, a lot more to do in terms of the product. The second part of our strategy is fueling all of our segments. Now we focus on the 1 to 2,000 segment. And historically, they've been really good at the 20 to 200, and we have unparalleled product market fit there. We've been investing heavily in the lower end of the segment, 1 to 20. And we'll continue to invest in the 200 to 2,000. So we have just a great enterprise class of product with consumer-grade ease of use, and this is working. And finally, the third part of the strategy I'm very excited about is that we are continuing to build an organization that can scale. We care deeply about our employees. We care deeply about diversity. And we want HubSpot to be in a place that's really the best place for people to work and serve our customers. So I am super excited to get started on this journey and write the next chapter of growth at HubSpot.

Great. And Kate, I know the big news was the transition, but it wouldn't be a HubSpot quarter if I didn't ask on the financials. Just that billings number was very, very strong. I know there's an easy comp there, but even if I looked against a very strong 1Q. Maybe could you just help us unpack if there's anything that changed in terms of either duration, or was just -- were there more larger customers in the quarter that lean toward Enterprise and took more seats than normal? Just help us understand the really good amount of strength there.

Yes. Sure thing, Samad. Billings growth was notable -- notably strong in Q2. Frankly, there's not much out of the ordinary here. There's not a lot of big changes in duration. The biggest driver of the billings performance was the strong bookings growth that we had in the quarter. The one thing that I would point out, and you kind of got it in the question, is that there is a relatively easier compare for billings relative to revenue in constant currency. You might remember last year, in Q2, we ran a number of short-term customer relief plays that had a bit of a negative impact on our Q2 2020 billings. And so billings have just frankly a little bit of an easier comp than revenue.

Great. Brian, we'll miss you on the call, but congrats again, and look forward to seeing you at future INBOUNDs.

Yes. I'll see actually pretty soon in it. I'll be at the Investor Day at INBOUND. So we'll see you soon.

And our next question is from Mark Murphy from JPMorgan.

Brian, as much as I enjoy reading your tweets, it's so much better to hear your voice live. So great to hear from you. And congrats to both of you on all these tremendous milestones. Yamini, let me start with this. I think you've talked in the past about bringing high-end features down to mid-market companies. I'm just wondering which features maybe have driven the greatest traction recently in some of the Enterprise additions, whether it be custom objects or account-based marketing or different channels that are emerging. Just anything else that you see which might be resonating in the results here?

Yes. Thanks a lot, Mark. Good to hear your voice, and appreciate your visions for both Brian and myself. I'd say that Enterprise -- all of the product investments that we have been making in Enterprise is working. Our strategy is really to build products that fit every one of our segments. And our upmarket segments, from 200 to 2,000, that's been a focus area for us. Now last year, we powered up Marketing Hub, and a lot of the features that we announced at the beginning of the year deeply resonated with our customers. And at INBOUND we launched Sales Hub Enterprise as you know, and COS [indiscernible], huge hit, along with the PC queue advanced features that we added, huge hit. In Q1 of this year, we added Conversation Intelligence. Now this is a category in and of itself. And the fact that we added it to power a hub and is now a seamless part of whole suite, that is resonating deeply within the market. So our strategy for continuing to build powerhouse features, while maintaining the ease of use, that is consumer weighed, I think that is what is working and probably if you look at the upmarket, we're just getting a fair share of a fast and growing market and will continue to invest both products as well as go to markets, to continue fielding that.

One thing that we've seen...

Okay, Mark. That -- go ahead. Just adding somewhere is that we talk about custom objects which has been way well received, or continue to pull on that thread, we gave custom objects, flexible data associations, things that customers have been asking for, and the idea there is for, for a company to be able to model its entire business within HubSpot. So the more flexible the database gets, the more data we can hold there, and the higher percentage of that 20 to 2,000 segment, moved very well.

But just as a quick follow up, it sounds like you're mostly focused on executing on the previous [indiscernible] that we're trying to achieve. You've been a big part of it, it's been performing amazingly well. I think kind of falling on Samad's question, I'm just wandering do you carry some unique philosophy use or maybe just think, the time is right to make any kinds of little tweaks, for instance let's focus upmarket versus down market or the optimal number of hubs, right, [indiscernible] Conversation Intelligence, the thing to take to that or how do propose on the operations side? Any of those factors where you a little different vehicle?

That's a great question. I think it goes back to the earlier talks in terms of strategy. Our strategy is clear. We have a focus on having the best CRM suite on the market that means we'll continue to invest I our existing cost and will continue to make new investments in additional hubs. Then there is plenty of ideas. Mark we just came from our annual strategy offsite in June. And we have in our collective heads, product innovation for the next 15 years. And the focus on horizon 1, horizon 2 and horizon 3 best have worked really well for the company, and my job is to work with Brian and Dharmesh to really empower that type of innovation going forward as we have gotten. I also think that our focus in terms of all of the segments. We've fired up every portion of our segments. And the way I look at it is, how do we continue to optimize where we are strong, which is the 20 to 200 segment, but how do you continue to optimize the product-led motion at the bottom end as well as the upmarket motion through the investments that we have. And so that will continue to be the focus. And I'm super excited. I think we have the right leadership team in products. We have the right leadership team and execution-focused team in the go-to-market, and I'm really excited to work with all of that.

And our next question is from Brad Sills from Bank of America Securities.

Congratulations, Yamini and Brian, on your new roles. Well-deserved, both. And Brian, great to hear from you as well. Good to hear your voice again. One of the things that stuck out for me in the quarter was the ASP acceleration, and a lot could be driving that. Obviously, you're executing upmarket. You're seeing Operations Hub traction. It's with some of the early results there. My question is, where is the incremental ASP growth coming from when you look across all the different levers that could be driving that? Just larger customers, more Enterprise uptake and upsell, Operations Hub, multiple products. There's a lot in there. If you could just maybe even just stack rank what's been driving that acceleration in ASP?

Yes. Maybe I'll take a shot at it. I think that it's sort of interesting to see where we had a really strong quarter, and that will tell you where you're seeing the real drivers of the ASRPC growth. The first thing I would say is, with all new business, our new additions were particularly strong in the Professional and Enterprise tiers, which tend to have a larger ASP. We had a really strong quarter selling into the installed base, including a record quarter for nominal upgrade from Starter into Professional and Enterprise tiers. And then you also saw the fueling of the cross-sell with the addition of the Operations Hub. And then I guess the final thing that I would highlight is just an expansion in the number of seats that we're seeing of our Professional and Enterprise customers on the sales side.

Our next question is from Stan Zlotsky from Morgan Stanley.

Congratulations on the very exciting moves within the company. And Brian, obviously, great to hear your voice back on these calls. A quick question from my end. You mentioned the pricing changes that you guys made to some of the products. Could you walk through the, kind of the spirit, kind of the pricing changes? Why and what? And as far as like the pricing changes, is it fair to say that you're going to follow a similar strategy as in the past of grandfathering existing customers when the pricing changes are mainly for new customers? And then I have a quick follow-up.

Yes. Thanks a lot, Sam, for the question. In general, our pricing philosophy is twofold. What you will see us do is continue to bring high value-added features down to our freemium and Starter tiers. And what this ensures is that we manage disruption within our installed base versus allowing competitors to disrupt us. The second part of the strategy is that it also ensures that we keep innovating and adding new features to our higher tiers, Pro and Enterprise. And so that's our broader pricing philosophy. It's worked really well for us. That's exactly what you saw us do with CMS. As we have added more features to Enterprise and Pro, we feel pretty comfortable that we are delivering a lot more value to our customers. And therefore, there's confidence in kind of increasing that price. And in terms of your second question on grandfathering, very similar to before, we'll first roll this out. This will impact all of the new customers and then over a period of time, we'll grandfather.

Got it, got it. That's very helpful. And then the follow-up on net revenue retention. I know you guys don't really give it every quarter, but just maybe qualitatively directionally, how did it do relative to the really outstanding results you guys put up in Q1?

Yes. Thanks. We saw another really strong quarter of both customer in our retention and net revenue retention. The story that we would tell you about retention in Q2 is basically the same story that I told you about retention in Q1. It starts with that foundation of customer dollar retention, where we've seen like really healthy trends there since the back half of 2020. And then again, similar to last quarter, there were a real diversity in terms of the upsell motions that are really driving the positive net revenue retention.

Our next question is from Ken Wong from Guggenheim Securities.

Kind of congrats across the board from me as well. Building on Stan's question just on CMS Hub, so just thinking about that kind of the new basic SKU there. Is this intended to get the laggards over to adopt? Or should we view this as potentially a way to open the funnel into the HubSpot franchise using CMS?

That's a great question, Tim. Thank you. So taking a step back, if we think about CMS and why we're in that business, so CMS is one of the things that makes HubSpot unique. There are no other leading CRM platforms that have a legit content management system as part of our overall platform offering. If you ask us though why is that, I think the reason is, is because it's really hard to build a CMS. It's different from everything else. It's like picking up a trombone, which is, say, okay, well, it's kind of hard. You have to get to use that sliding thing to find it and there's no keys or anything else that. It's difficult. By the way, sliding is an official musical term, in case you're wondering. But the reason -- but if you have a marching band, you need a trombone. That's what kind of completes the thing. And so if you need a -- if you want a full CRM platform, you need a CMS. And the reason is, it's not just about putting a website up there. It's about making the website a window into the back-end data, into the CRM and often bringing the customer in. It's about forging that connection. So we're really excited about it. In terms of why we launched a Starter tier, it's basically exactly what you were alluding to. We've been getting this kind of web experience up is the first step often in the digital journey, and we want customers to take that first step correctly. So we want to bring as many people on to the platform, using CMS starters as we possibly can and kind of get them on the CRM platform from HubSpot and helps to kind of grow from there. So we're super excited about the opportunity it opens up.

Our next question is from Alex Zukin from Wolfe Research.

Well, Brian, first, great to have you back, sad to see you go. Yamini, really excited to work with you. Maybe just the first question for you, Yamini. If you think about the -- what you see in the pipeline, what you see in customer behaviors as we look out to the second half and into a new post-COVID world, can you kind of compare and contrast that with either what you saw in the first half and what you saw in the second half of last year for us?

Hey Alex, I'll start that. I'm actually not going anywhere. I'm just going to be Executive Chairman and super active. And hopefully, for a long, long time, I'm going to be very active in HubSpot and helping guide strategy and partnering with Yamini, so. You're not getting rid of me that easily, my friend.

I would echo that. Brian's like super active, always challenging us, always inspiring us. So that's pretty good. We're glad to have him back in full force. So Alex, the question in terms of a demand environment comparing first half and second half, our demand environment is solid, similar to what we saw in the last quarter. Now if you step back, our product is really unique, relative to competition. I'd say we have a very, very strong value proposition that is resonating in the market. And Brian talked about sowing seeds. I think we've done enough product investments in the past few years, and you're seeing all of that pay off. We not only have that product market fit, but we also have a go-to-market fit. And the combination of those 2 are really helping us drive really strong financial results. Now in terms of pipeline, I'd say that the digital-first and digital-ready, both of those trends are here to stay. We're not going back from here. We are clearly seeing our customers modernizing their CRM platform from website to marketing to sales and service. They're all focused on delivering a connected customer experience and that kind of customer interest that we're seeing from a pipeline. And I -- in July, at the very beginning of the quarter, we actually gave our entire global employee base a week of rest. And we did that -- it was a very important choice. We care about culture. We care about employees. We wanted them to rest, recharge and come back with a full focus in the second half, and that was the right thing to do. And I think I'm really feeling good about second half and looking forward to what they're going to do in the second half.

Our next question is from Drew Foster from Citigroup.

Great to hear you doing well, Brian. And congrats, everyone else on their new roles. Given everything that's been said about the importance of digital channels not going away, can we get an update on where net logo retention stands today? And as you reflect over sort of a more protracted period, maybe 2 or 3 years, what are kind of the 1 or 2 things playing the biggest role there? Is it a greater share of customers using more products and just general stickiness? The category more broadly rising in strategic importance? Maybe just give an update and touch on drivers there.