HubSpot Inc (NYSE: HUBS) Q2 2021 earnings call dated Aug. 04, 2021.
Corporate Participants:
Charles MacGlashing — Corporate Treasurer and Head of Investor Relations
Yamini Rangan — Chief Customer Officer & Chief Executive Officer
Kate Bueker — Chief Financial Officer
Brian Halligan — Co-Founder & Executive Chairman
Dharmesh Shah — Co-Found & Chief Technology Officer
Analysts:
Samad Samana — Jefferies — Analyst
Mark Murphy — JP Morgan — Analyst
Brad Sills — Bank of America Securities — Analyst
Stan Zlotsky — Morgan Stanley — Analyst
Ken Wong — Guggenheim Securities — Analyst
Alex Zukin — Wolfe Research — Analyst
Drew Foster — Citigroup — Analyst
Terry Tillman — Truist Securities — Analyst
DJ Hynes — Canaccord Genuity — Analyst
Brian Peterson — Raymond James — Analyst
Parker Lane — Stifel — Analyst
Ryan McDonald — Needham & Company — Analyst
Siti Panigrahi — Mizuho — Analyst
Michael Turrin — Wells Fargo Securities — Analyst
Brent Graceland — Piper Sandler — Analyst
Kirk Materne — Evercore ISI — Analyst
Presentation:
Operator
[Operator Instructions] Good day and thank you for standing by. Welcome to the HubSpot Q2 2021 Earnings Conference Call. [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.
Charles MacGlashing — Corporate Treasurer and Head of Investor Relations
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?
Yamini Rangan — Chief Customer Officer & Chief Executive Officer
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 the path forward in his 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 20% year-over-year to over 121,000. We’ve seen multi-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 a remarkable digital experiences at each step of their journey, scaling companies need a powerful CRM platform to tie it altogether. 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 a digital front door, for digital website content management systems that are often siloed from other essential front office functions. They’re complex to manage. They lack, speed, security, and scan ability, the 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 build as part of our CRM platform, to give companies seamless access to all of their customer data. Having a CRM powered website 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 [Phonetic], and increased limits and capacity, with even more advanced features in the roadmap. 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 systems 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 professional 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 quarter and a half. They [Technical Issues] think our robust new integration engine has quickly become one of the most compelling and popular free tool, 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 HubSpot significantly more flexible, We’ve used it to build even the most advanced business processes in HubSpot; from PRP integrations, to data enrichment, commissions calculations, to renew communication. This programmable automation in operation Hub, if you can dream it, you can automate it. Thanks to the team at attitude 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 acquisition. That focus on delivering a consumer-grade UI matched with a scalable enterprise back end sets us apart from traditional CRM platform and puts HubSpot in a strong position to achieve our goal of becoming the number one CRM platform for scaling company.
With that, I’ll turn it over to Kate to give an overview of our fantastic financial results.
Kate Bueker — Chief Financial Officer
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 expansion.
As of Q2, 58% of our customers are getting value out of two 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 four 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 tier, 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 one 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 [Technical Issue] reported revenue of two points in Q3, a neutral impact to Q4, and a three 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.
Brian Halligan — Co-Founder & Executive Chairman
Thanks, Kate. It is true pleasure to be able to speak with all of you again. I’m so proud of the entire HubSpot team that’s 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 a 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 uper proud of what we’ve been able to accomplish. We’ve 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 the $1 billion in ARR and a 100,000 customers. These are just the start. HubSpot’s 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 modest success we’ve had so far is we haven’t been afraid to take inspiration from 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 [Inaudible] app, to our front office suite, shifting from front office suites to front office platform, shifting to a premium model, and many, many others that are all paying [Phonetic] up quite nicely for today. Lots of shade going on.
Now, over the last six 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 of these seeds 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 team, 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 has made HubSpot better, from reducing friction for our customers to leading the company with clarity and empathy through the pandemic, Yamini has proven she is ready to take on the role of CEO to help both HubSpot and our customers and partners grow better. And she is just the 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 six months and offering my heartfelt congratulations to her on this exciting milestone. Dharmesh and I have no doubt that she is the right person to lead HubSpot moving forward, and I am super excited about the journey ahead. I want to thank all of you for your time. Now, speaking of Yamini, over to you.
Yamini Rangan — Chief Customer Officer & Chief Executive Officer
Thank you so much, Brian, for your kind words and for your incredible support during my time here at HubSpot. I’m 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 number one CRM platform for scaling company.
Operator, please open up the call for some questions.
Questions and Answers:
Operator
[Operator Instructions] Our first question is from Samad Samana from Jefferies. Your line is open.
Samad Samana — Jefferies — Analyst
Hi, good evening. Welcome back, Brian. 2Q really represents the [Technical Issues] great company you and Dharmesh have 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 CEO full time. I’d love to hear from both of you a little bit more about how you two will be dividing up the core responsibility as going forward and where each of you will be focusing their individual attention? And then, Yamini, maybe for you, it’s obviously early, but you’ve been at the helm now for six 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 will say, I feel fantastic. My head is fully recovered from my accident and I am 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. Spent a lot of time at the 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 have been at this 15 years and what’s next for me? And I thought this is a good time I need to become an Executive Chairman and Yamini’s going to become CEO. And it’s going to be a one plus one equal three combination. Yamini, I heard of Yamini, she is the perfect fit for this job and for this phase of growth to take it to the next level. She is just the perfect fit. She’s had my job for the last six months, you guys see the numbers are fantastic. She’s done a masterful job. I’m very, very, very bullish [Phonetic] 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 [Technical Issues] her side. What I’m sort of focused on as Executive Chair is, first and foremost, I plan to be Executive Chair, active and engaged Executive Chair. And you probably heard me tell bad jokes today that I used to say on these calls, that if I ever leave HubSpot, they’ll have to take me out on a stretcher or a straitjacket. You might have to add [Inaudible]. But my main role is to help Yamini to do the best [Phonetic] she can to keep this thing rolling. I do feel like it’s a very early innings at HubSpot. The second thing is, 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 [Inaudible] suite tree we planted several years ago. It’s still a small tree. There is a lot more growth to go on the suite. We’re just now planting the suite to platform seed that’s going — that’s going to go really well. It’s top of the first inning on that seed. They’ve put the premium on the [Inaudible] culture. These are seeds we planted long a long, long time ago that have all, like, 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?
Yamini Rangan — Chief Customer Officer & Chief Executive Officer
Yes. Thank you, Brian. And I have been so humbled, grateful and super excited to take this new role and write the next chapter of growth at HubSpot. I’ll say, I’m particularly excited because I got to work with two brilliant people, Brian and Dharmesh, who’ve done this for 15 years. It was a fantastic experience. The three of us share a lot in common; a growth mindset, just curiosity focused 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 six 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 of, 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 Hub, like you heard about the CMS Hub this quarter. We have just a long way to go and 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 2000 segment. And historically, we’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 2000. So, we are just a great enterprise class of product with consumer grade ease of use, and this is working. And finally, the third quarter strategy, I’m very excited about is that we want to continue to build an organization that can scale. We care deeply about our employees. We care deeply about diversity. And we want HubSpot to be at 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.
Samad Samana — Jefferies — Analyst
Great, thank you for that, both for that detailed answer. And Kate, I know the big news was the transition, but it wouldn’t be HubSpot quarter if I didn’t ask on the financials, just that billings number was very, very strong. I know there is an easy comp there. But even if I look to get the very strong 1Q, maybe could you just help us unpack if there is anything that changed in terms of either duration or was just — were there more larger customers in the quarter that lean towards enterprising, took more seats than normal? Just help us understand the really good amount of strength there.
Kate Bueker — Chief Financial Officer
Yes, sure thing, Samad. Okay, let me start with notable [Technical Issue]. I think there’s nothing 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 release plays [Phonetic] that had a bit of a negative impact on our Q2 2020 billings. And so, billings had, just frankly, a little bit of an easier comp than revenue.
Samad Samana — Jefferies — Analyst
Great. Thank you. Brian, we’ll miss you on the call, but congrats again. And look forward to seeing you at future inbound.
Brian Halligan — Co-Founder & Executive Chairman
Yes. I’ll see you actually pretty soon. I’ll be at the Investor Day, at the inbound. So, I will see you soon.
Operator
And our next question is from Mark Murphy from JP Morgan. Your line is open.
Mark Murphy — JP Morgan — Analyst
Yes, thank you very much. 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’d 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?
Yamini Rangan — Chief Customer Officer & Chief Executive Officer
Yes, thanks a lot, Mark. Good to hear your voice and I appreciate your vision for both Brian and myself. I think the 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 up-market segments from 200 to 2000 that’s been a focus area for us. Now, last year, we powered up Marketing Hub and the 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 custom objects, huge hit, a lot of the CPQ 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. The fact that we added it to power a hub, and is now a seamless part of our 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-grade, I think that is what is working. And broadly, if you look at the upmarket, we’re just getting our fair share of a fast and growing market. And we’ll continue to invest both on products as well as go-to market to continue fueling that.
Brian Halligan — Co-Founder & Executive Chairman
One thing that we’ve seen, Mark.
Mark Murphy — JP Morgan — Analyst
Okay. Go ahead.
Brian Halligan — Co-Founder & Executive Chairman
Just kind of adding in there is that, we talked about custom objects, which has been really well received. We’re continuing to pull on that thread. So, we have custom objects, flexible data association, things that customers have been asking for. And the idea there is for a company to be able to model up an entire business within HubSpot. So, the more flexible the database gets, the more data we can hold there, and a higher percentage of that 200 to 2000 segment, we can [Technical Issue] well.
Mark Murphy — JP Morgan — Analyst
Okay. Thank you. Appreciate the additional color. And Yamini, maybe just one quick follow-up. It sounds like you’re mostly focused on executing on the pre-existing [Technical Issue] strategy. You’ve been a big part of it. It’s been performing amazingly well. I think kind of following on Samad’s question, I’m just wondering do you carry some unique philosophies or maybe just think the time is right to make any kinds of little tweaks for instance, the focus up market, down market or the optimal number of hubs, right, as you were talking about [Technical Issue] conversational intelligence [Technical Issue] that, how do you to push on the operation side? Any of those factors where you have a little different view?
Yamini Rangan — Chief Customer Officer & Chief Executive Officer
That’s a great question. I think it goes back to the earlier thoughts in terms of strategy. Our strategy is clear. We have a focus on having the best CRM suite in the market. That means we’ll continue to invest in our existing hubs and we’ll continue to make new investments in additional costs. And there is plenty of ideas, Mark. We just came from our annual strategy off-site in June and we have in our collective heads product innovation for the next 15 years. And the focus on Horizon one, Horizon two, and Horizon three bets have worked really well for the company. And my job is to work with Brian and Dharmesh and to really empower that type of innovation going forward as we have done. I also think that our focus in terms of all of the segments, we’ve fired up every portion of our segment. 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 we continue to optimize the product leg 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 product. We have the right leadership team and execution focus team in the go-to market and I’m really excited to work with all of them.
Mark Murphy — JP Morgan — Analyst
Excellent. Thank you.
Operator
And our next question is from Brad Sills from Bank of America Securities. Your line is open.
Brad Sills — Bank of America Securities — Analyst
Okay, great. Thanks, guys. And 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, 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 if you can just stack rank what’s been driving that acceleration in ASP? Thank you.
Yamini Rangan — Chief Customer Officer & Chief Executive Officer
Yes, maybe I’ll take a shot at it. I think that it’s sort of interesting to see where we had a release prior quarter and I will tell you where you’re seeing the real drivers of the ASP growth. The first thing I would say is with our new business [Technical Issue], 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 record quarter for nominal upgrade from starter into professional and enterprise tier. And then, you also saw the fueling of the cross-sell with the — in 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 on our professional and enterprise customers on the sales side.
Operator
Thank you. Our next question is from Stan Zlotsky from Morgan Stanley. Your line is open.
Stan Zlotsky — Morgan Stanley — Analyst
Perfect. Thank you so much, guys. And congratulations on the very exciting moves within the company. And Brian, obviously, it’s great to hear your voice back on these calls. Quick question from my end. You mentioned the pricing changes that you guys made to some of the products. Could you walk through kind of the spirit and timing of [Technical Issue] the pricing changes, the whys 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 was in the past of grandfathering existing customers, or the pricing changes are mainly for new customers? And then, I have a quick follow-up.
Yes. Thanks a lot, Stan, 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 our freemium and starter tiers. And what this ensures is that we manage disruption within our installed base versus allowing competitors to disrupt off. 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 is 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 and it will impact all of the new customers and then over a period of time [Inaudible]. Got it, got it. That’s very helpful. And then, the follow-up on the net revenue retention. I know you guys don’t really, it doesn’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?
Yamini Rangan — Chief Customer Officer & Chief Executive Officer
Yes, thanks. We saw another really strong quarter, both customer dollar 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.
Operator
Thank you. Our next question is from Ken Wong from Guggenheim Securities. Your line is open.
Ken Wong — Guggenheim Securities — Analyst
Great, thanks for taking my question. And 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 skew 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?
Brian Halligan — Co-Founder & Executive Chairman
That’s a great question, Ken. Thank you. So, taking a step back if you 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 their overall platform offering. And if we have to funnel [Phonetic] why is that, I think the reason is because it’s really hard to build a CMS. I mean it’s different from everything else, it’s like picking up trombone, which is — okay, well, it’s kind of hard, you have to get [Phonetic] that sliding thing [Inaudible] that’s difficult. [Technical Issue] But if you have a marching band, you need a trombone, that’s kind of what completes the thing. And so, 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 into the CRM itself and 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 think 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 [Technical Issue] as we possibly can, and kind of get them on to the CRM platform from HubSpot and hope it just kind of grows from there. So, we’re super excited about the opportunity.
Operator
Thank you. Our next question is from Alex Zukin from Wolfe Research. Your line is open.
Alex Zukin — Wolfe Research — Analyst
Hey, thanks guys. Well, Brian, first, great to have you back, sad to see you go. Yamini, very excited to work with you. Maybe just the first question for you, Yamini. If you think about 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?
Brian Halligan — Co-Founder & Executive Chairman
Hey, Alex. I’ll start that. I’m actually not going anywhere. I’m going to be Executive Chairman and super active. And hopefully for a long, long time I’m going to be very active with HubSpot in helping drive strategy and working with Yamini. So, not getting rid of me that easily, my friend.
Yamini Rangan — Chief Customer Officer & Chief Executive Officer
I would echo that. Brian’s like super active, always sounding [Phonetic] us, always inspiring us. So, that’s pretty good. We are glad to have him back in full force. So, Alex, your question in terms of 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 our competition. And 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 normally have that product market fit, but we also have a go-to-market fit, and the combination of those two are really helping us drive really strong financial results.
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 platforms from websites to marketing to sales and service. They’re all focused on delivering a connected customer experience. And that’s the kind of customer interest that we’re seeing from our pipeline. And 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 second half and that was right thing to do. And I think I’m really feeling good about the second half. And looking forward to what they’re going to do in the second half.
Operator
Thank you. Our next question is from Drew Foster from Citigroup. Your line is open.
Drew Foster — Citigroup — Analyst
Hey guys, thanks for taking the questions. Great to hear you’re doing well, Brian. And congrats everyone else on their new roles. Given everything that’s been said about kind of 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 two or three years, what are kind of the one or two 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 and strategic importance? Maybe just give an update and touch on drivers there. Thanks.
Yamini Rangan — Chief Customer Officer & Chief Executive Officer
Yes, we’ll probably talk in a lot more detail around retention in general at the upcoming Analyst Day. But I would give you maybe a couple of points to take away. Customer dollar retention, which is not the same as [Inaudible] retention but is sort of the baseline of how we think about it internally. It’s very strong and showed specific improvements through the back half of 2020 and stayed at that new elevated level for the first and second quarter of this year. And I think it sounds kind of elementary but the truth is that what we’re seeing is that our customers are just using the product more. And as it turns out that we have to higher retention and we are, as a result, enjoying really healthy core retention level.
Operator
Thank you. Our next question is from Terry Tillman from Truist Securities. Your line is open.
Terry Tillman — Truist Securities — Analyst
Yes. Thank you. And Brian, congrats and good luck on the next chapter. But I think in one of the last question, I think you said you’re going to stay on these calls going forward. So, I’m going to — that’s my base case. So, we’ll see you on the next call. And good to have you back. And congrats, Yamini as well. I guess my question just relates to, it’s echoed a couple of times in terms of installed base selling strength. I think it was mentioned by Yamini and maybe Kate, if I’m not mistaken, what I’m curious about is, has there been some things you’ve done internally on a programmatic basis to kind of turn that down more and or investments? And is this more — should we see more of this in the future, whether it’s more of a structural shift where you’re just getting a lot more from the installed base, selling each quarter? Thank you.
Yamini Rangan — Chief Customer Officer & Chief Executive Officer
Terry, thank you for the wishes. Really appreciate it. I think in terms of the installed base, like, our existing customers now have a lot more products that they can adopt, right? And in the past couple of quarters we’ve introduced operations Hub. We have improved the additions on a number of hubs. And so, there is a lot more products for them to adopt. And I think that product has gotten much better. So, when our customers are on one hub, and then they see the value of a seamless single data model, single interface of other hubs, that naturally pulls them in. So, the product investments are probably the first ones that I talked about. I think the second part of it is that we certainly from a go-to-market perspective have invested more heavily in our customer service success team, working more closely with our sales team, and that helps us connect the dots in terms of installed base, and that’s certainly been part of it.
Now, looking forward, I’d say we want to have a balanced approach. We continue to acquire a lot of new customers because of the strong value proposition that we deliver and we continue to sell into the installed base. So you will see a balance of both of these across our future quarters.
Operator
Thank you. Our next question is from DJ Hynes from Canaccord. Your line is open.
DJ Hynes — Canaccord Genuity — Analyst
Hey, guys. Congrats everyone on the new roles and the continued success. It’s awesome to see. Just a go-to market question on operations Hub, is the buyer there somebody that you’re already talking to when you’re selling marketing and sales, or is it somebody else in the organization that sits on top of those efforts? I’m just trying to think about the ease of cross-sell, and what are in most cases, it’s somebody you already know, and that’s familiar with HubSpot.
Yamini Rangan — Chief Customer Officer & Chief Executive Officer
That’s a great question, DJ. That’s fantastic question. Let’s say the buyer for operations Hub is revenue of persona. Now, I spent the better part of the couple of decades saw in CRM running these operations teams and they are really the nerve centers of go-to-market functions. They are sometimes the unsung heroes, but they have a really critical role to play, which is providing the single source of truth about customers [Technical Issue] of customer success. That’s the persona. And they’ve always been involved in a CRM purchase, and now we are providing them the flexibility and the power for them to deliver insights into the front office. And if you really step back on operations Hub, it’s a couple of things. It really helps our customers connect their tech stack. It helps our customers clean up the data. It helps our customers automate the processes. And these three challenges are traditionally the ones that revenue operations teams and all of our customers struggle with.
And so, it’s really helping that critical persona be very, very successful. And we see a lot of traction. As I mentioned in my prepared remarks, we are seeing very positive feedback from our customers, as well as partners. And programmable automation has been on fire, really good traction. Key use case of that is lead routing. You want to do advanced lead routing, you are able to take all of the data from CRM but also figure out is rep capacities, rep seniority, rep is on vacation rep is on sabbatical, and use all of that information to now be able to automate your processes. And so, operations Hub provides flexibility, automates processes, and super charges our CRM suite.
Operator
Thank you. Our next question is from Brian Peterson from Raymond James. Your line is open.
Brian Peterson — Raymond James — Analyst
Thanks for taking the question. And Brian, it’s great to hear your voice and glad to hear you’re well. And congrats to both you and Yamini on your new roles. So, maybe just a higher level question for me. I’m curious, if we’re looking at the pace of net new customer adds, I’m curious, how much does the platform, in the breadth of functionality, between different areas come up? I guess I would think that post-COVID people are looking to maybe consolidate vendors and think about simplification of a digital go-to market model, is that something that’s coming up in a lot more conversations, and how do we think about that impacting greenfield[Phonetic]? Thank you.
Yamini Rangan — Chief Customer Officer & Chief Executive Officer
Yes, Brian, I’ll address that and then have maybe Kate or Dharmesh jump in. You’re exactly right. Like, if you think about our customers. They’re coming through this whole pandemic thing. One, I need to digitize my entire front office. And the starting point could be very different. The starting point could be a bunch of point solutions. It could be greenfield, using something like a [Inaudible] or they have a legacy system. And they’re looking at providing an entire connected customer experience, and therefore, having an all in one solution resonate pretty deeply with them. And that’s part of what we are enabling through to see our fleet and we definitely see that motion beginning to happen. And I think we’ll continue to invest in CRM suite. Now, the CRM suite is like very powerful. One of the things that for us works is that when you get CRM suite in the hands of new customers or existing customers, they now see the power of the entire platform. There is higher product usage. Therefore, we get much better feedback on the product. Therefore, we can improve the product. And it’s a nice little flywheel in terms of how we can drive the quality of our products even higher. And so, there’s a lot of goodness. And certainly, that’s what we are seeing in terms of trends from our customers.
Brian Halligan — Co-Founder & Executive Chairman
Yes. One thing I’ll add is that, at least as you would expect to see, thousands of companies that want to make that digital transformation be digital first. But that kind of path to digital transformation is often paved with good intentions or really terrible [Phonetic] IT implementations. It’s so complicated because they have all these databases, multiple systems. So, this kind of value proposition that HubSpot brings, which is we can simplify that. We can bring it altogether. There is one operating system, one platform, from one database, one experience, one company to call, is a very compelling value proposition because most of these mid-market companies are [Technical Issue] it’s resonated really well.
Operator
Thank you. Our next question is from Parker Lane from Stifel. Your line is open.
Parker Lane — Stifel — Analyst
Yes, hi, thanks for taking my question. You did a tremendous job in the last few years of really making the platform applicable to customers of all sizes at the starter and enterprise additions of all your tools. I was just wondering if you could talk about the multi-product adoption across those different tiers. Is it mostly weighted towards the enterprise customers that are using multiple HubSpot products? Are you seeing a lot of traction as well to the point you’re just making, at the starter level as well as getting them in the door and attaching some newer solutions around the initial [Inaudible]. Thanks.
Kate Bueker — Chief Financial Officer
Yes, maybe I’ll start with some numbers and pass it on to Yamini for a little bit more color and context. We’ve talked about this for a number of quarters. The growth in our multi-product adoption, so customers who use two or more of our products have been on this for a steady trajectory up for a number of years now. And that has happened across all of the tiers from the enterprise to the starter. We did see a bit of a step function inflection last spring when we introduced the starter Growth Suite at that really simple $50 price, easy to buy. And so, we see a lot of uptake at that starter level of just the full set of HubSpot products. As I shared in my prepared remarks, we’re at 58% of our customers who are using more than one HubSpot products And when you look at that new customers are probably 50-50 now, adopting multiple HubSpot products.
Yamini Rangan — Chief Customer Officer & Chief Executive Officer
Yes, I think, to add to the commentary that Kate provided, I think if you step back, we found [Phonetic] something really important having all of these products, which is we take a very crafted approach to CRM, it is not cobbled together through acquisitions. And if you step back and think about the single biggest challenge for customers, they’re putting together very complex tech stacks and they’re spending a lot of time on integration. They spend a lot of time on developers, spend a lot of resources there. And yes, the customer experience. Their end customer experience is not great for that. And therefore, for us our — the focus on multi-hub is to provide one data model, a single view of the customer, a simple interface that’s easy to use that is crafted and not cobbled together. And I think that’s what our customers like and that’s what is resonating in the market.
Operator
Thank you. Our next question is from Ryan McDonald from Needham and Company. Your line is open.
Ryan McDonald — Needham & Company — Analyst
Hello, this is Alex [Inaudible] on for Ryan. Congratulations on the strong quarter. I was hoping just to get a little bit of additional information on the strength in the International.
Yamini Rangan — Chief Customer Officer & Chief Executive Officer
Yes, Brian. Thank you for that question. We saw very consistent growth both in North America as well as international. As we mentioned, international has been growing really well. I think year-over-year a few points up from last year. If you step back on international, the market there and digital transformation is in an earlier stage. A lot of the customers in international markets are looking at being digital first, digital ready. And really, it’s the earlier stages, which means there is an even bigger opportunity for us. I think the second part is that we’ve been investing steadily in a lot of the international markets from product localization, in terms of content for lead management, in terms of customer-facing resources and even brand. And those investments are paying off. Our LTV to CAC is really solid in these markets. And so, we’ll continue to invest in international markets.
I think the second part of this is that North America is a really big market and that’s doing well too. I think we’re seeing very balanced consistent growth across all of the markets that we operate in. So, very pleased about that.
Operator
Thank you. Our next question is from for Siti Panigrahi from Mizuho. Your line is open.
Siti Panigrahi — Mizuho — Analyst
Hi, everybody, it’s Matt. I am on for Siti. One quick question from me. Is there anything to be called out for the linearity of bookings this quarter? Your tone certainly suggest that there is some incremental conviction in the second half. I’m curious if something happened in the quarter that might have catalyzed that that may not have been asked more directly.
Yamini Rangan — Chief Customer Officer & Chief Executive Officer
No, there is nothing that I would — there is nothing I would care [Phonetic] around linearity of bookings.
Operator
Thank you. Our next question is from Michael Turrin from Wells Fargo. Your line is open.
Michael Turrin — Wells Fargo Securities — Analyst
Hey, there. Thanks. Good afternoon. Yamini, congrats on the promotion. I hope, regardless, you’re planning to keep the hold music for earnings calls the same. I mean I go to sleep, but it’s much more pleasant with the [Inaudible] music than the classical. So, certainly [Technical Issues] I mean there have been some questions on it, but the average revenue per customer metrics certainly stands out, as do comments on just expectations that trends can hold for the rest of the year. So, can we just go back to that? I’m wondering if some of that is just tied to this being the other side of the strong customer adds strength we’ve seen over the past year? And then, just how much the new hubs and what you’re doing a bundling also just helping out there? Thank you.
Yamini Rangan — Chief Customer Officer & Chief Executive Officer
Yes. I mean I think you’ve got it in terms of the underlying theme. We’ve talked about in the past. There is a lot of quarter over quarter variability in those KPI metrics in particular, the customer additions in the ASRPC. And what we saw this quarter was strong, professional and enterprise trends, strong installed base selling trends, and as a result what you’re seeing is that ASRPC is up nicely year-over-year. And frankly, if you stripped out the starter and looked at ASRPC, it’s like up even more. And so, we don’t guide as you know to our KPI metrics. And then, Frankly, we don’t guide because that’s not how we manage the business. And so, I shared some commentary around back half in the prepared remarks around expectations. We think that we should see net customer adds for the back half the year in and around what we saw in Q2. And with that would come an ASRPC growth in those high single-digits.
Operator
Thank you. Our next question is from Michael Turits from KeyBanc Capital Markets. Your line is open. Hey, guys. Congrats to Brian and Yamini. Can you just briefly, you mentioned — but on the strength in the pro and then [Technical Issue] for new, anything customers in particular [Technical Issue] So obviously it’s one thing to add in starter while [Inaudible] lower price [Inaudible] customers to see that strength in the pro and enterprise for new customers is impressive. So how do you get that?
Kate Bueker — Chief Financial Officer
Yes, thanks. I mean this is — it’s not a new thing for Q3. For Q2, we talked about it last quarter as well. We had really strong new customer additions and private enterprise in Q1 and in Q2. And I think for all the reasons that Yamini has talked about throughout the call.
Operator
Thank you. Our next question is from Brent Graceland from Piper Sandler. Your line is open.
Brent Graceland — Piper Sandler — Analyst
Thank you. And Yamini, congrats on the promo. Brian, not only is it great to hear your healthy but also great to hear your planning to remain active with a better team here. Again, wanted to go back to the durability of growth here, we’ve been training here over the last four years, not to think of. ASRPC as a driver to growth. In fact, it’s been a slight drag to growth over the last four years. This quarter, five-year high at 8%. It’s emerged as an incremental growth lever to the business. My question is are we entering a new period where we could see both strong new customer additions and this revenue expansion, ASRPC expansion, as a incremental lever to growth or is it too early to really weigh in on that? I get that you have some similar comparisons here, but it does feel like we are entering a new period here where this could be a nice incremental lever to growth as well.
Kate Bueker — Chief Financial Officer
Yes, I guess what I would tell you is that we’ve been talking about that over the last three quarters, is that we have seen really nice customer additions and quarter-over-quarter expansion of ASRPC. I think this quarter marks a little bit of a different milestone where we’re seeing a real increase on a year-over-year basis as well. I think, yes, you would be surprised if I declared something here. What I’m going to tell you is that we expect that we will continue to see variability quarter in and quarter out of ASRPC, and new customer adds. And that’s going to come as we innovate at the high end, innovate at the low, introduce new products. And so, I think I shared our expectations for the back half of this year, but I don’t think we are at a point where we would declare sort of a long-term trend at this point.
Operator
Thank you. Our next question is from Kirk Materne from Evercore. Your line is open.
Kirk Materne — Evercore ISI — Analyst
Thanks very much. And I’ll echo the congrats to both Brian and Yamini. Yamini, maybe just on the pro and enterprise side of the business, seeing such good traction, I was just wondering how do you think about the evolution of sort of your partner platform as you start talking more of these customers that have maybe more bespoke needs, are there things you’re thinking about in terms of trying to leave various features for your partners to develop, or do you think about sort of focusing on partners that might have more vertical expertise in certain areas where you’re seeing trends, I guess just at a high level, how are you thinking about sort of the evolution of the partner ecosystem? Thanks.
Dharmesh Shah — Co-Found & Chief Technology Officer
Sure. This is Dharmesh. So, when we think of the ecosystem, there’s actually multiple parts to it. There is the app platform or the app ecosystem, where the software company’s building integrations and extending HubSpot. And there’s the solutions partner ecosystem, which would help us service HubSpot and then bring it to different markets. Now, I’ll let Yamini speak to the solutions partner side. On the app platform, we’re seeing great traction, more and more companies building and extending HubSpot using our APIs. And the thing we love about that is that it really kind of spins the flywheel; the more of those applications we get, the more of our customer problems we solve. We’ve seen a strong correlation between the number of apps on uses than their retention rates [Inaudible]. And the more apps we have, the more customers we get. So, those things kind of feed each other and kind of fuels the flywheel. So, the app back [Phonetic] for the hub is going really well. And I’ll let Yamini speak to the solutions part of the program.
Yamini Rangan — Chief Customer Officer & Chief Executive Officer
I think that was really good commentary on the app side. I think on the solution partner side, we are diversifying our entire position. I mean, and our partners are continuing to go there in terms of CRM implementations, integration, much more complex implementations, and we are really focused on this. Earlier this year, at partner kick off [Phonetic], we went to our partners and we said, look, we want to scale with you. So, the strategy has been to scale with partners, which means we will sell more with partners and enable our partners to service our customers. And that’s good for our customers, and it’s good for our partners and therefore it’s good for HubSpot. And in terms of the investments with our solution partner ecosystem, we’ll continue to work on improved incentives. We have been investing pretty heavily on enabling our partners, so they can go to market with us when we do product launches, and that’s beginning to work. And we’ll continue to invest in scaling services through the partners. And so, we definitely see them as part of scaling HubSpot and they play a critical role.
Operator
There are no further questions. I will now turn the call back over to Brian Halligan, Executive Chairman, for closing remarks.
Brian Halligan — Co-Founder & Executive Chairman
Thanks everyone for joining and we look forward to seeing you at the Virtual Analyst Day in inbound.
Operator
[Operator Closing Remarks]