Good afternoon. My name is Heidi, and I will be your conference operator today. At this time, I would like to welcome everyone to the HubSpot Q2 Earnings Conference Call. All lines have been place on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. It is now my pleasure to turn the call over to Mr. Chuck MacGlashing, Director of Investor Relations. You may begin your conference.

Thanks, operator. Good afternoon, and welcome to HubSpot's Second Quarter Earnings Conference Call. Today, we'll be discussing the results announced in the press release that was issued after the market closed. With me on the call this afternoon is Brian Halligan, our Chief Executive Officer and Chairman; and John Kinzer, 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, including statements concerning our financial guidance for the third fiscal quarter of 2017, and our position to execute on our growth strategy, including development and adoption of our sales platform, and our ability to maintain existing and acquired new customers and partners. These statements reflect our views only as of today and should not be considered our views as of any later date. Please refer to the cautionary language in today's press release and our Form 10-Q, which was filed with the SEC on May 2, 2017, 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 will refer to certain non-GAAP financial measures. There's a reconciliation schedule showing GAAP versus non-GAAP results currently available on our press release announcing financial results for the second quarter ended June 30, 2017, which is located on the Investor Relations website at hubspot.com. Before we get started today, I wanted to highlight that we'll be holding our third annual Analyst Day during our INBOUND event on September 26, 2017. If you'd like to register for the event, please e-mail our Investor Relations team at ir.inbound@hubspot.com. Now it's my pleasure to turn the call over to HubSpot's CEO and Chairman, Brian Halligan.

Thanks, Chuck, and good afternoon, folks. Thanks for joining us today as we review HubSpot's second quarter results. So let's jump in and get right to it. Second quarter revenue increased 37%, and we achieved non-GAAP operating profitability again in the quarter. I really love to see us growing this fast and at the same time, making progress towards showing sustained profitability. In fact, we're off to a good start to the year with total sales and marketing customers having surpassed 34,000, which is growing at a pace nicely above 40% year-over-year. As we mentioned late last year, the goal for 2017 was to double down on our efforts to make it as simple as humanly possible for more companies to begin using the HubSpot platform. And I've got to say, we've made really good progress during the first half of 2017 towards achieving that goal. Here at HubSpot, we're making big bets to continue to drive outside growth. Two bets in particular that we've been particularly vocal about is our One HubSpot play and our push toward offering more freemium products on our platform. We're six months in. So how's it going? Well, I think it's going really well. A couple of things are starting to work that are very, very encouraging. Let's talk first about One HubSpot, the company-wide effort to make it easy for customers to adopt all of our products, free or paid, through a single experience. I've been saying over the last couple of quarters, One HubSpot has been a pretty big shift for the business. We made some nice progress towards making that singular experience a reality. Some of you might be wondering, why is HubSpot doing this again? Why now? Well, the answer is pretty simple, it's the right thing to do for…

Thanks, Brian. The second quarter was a good one for HubSpot. We had another quarter of non-GAAP operating profitability, $1.8 million of free cash flow all while delivering strong revenue growth. Second quarter revenue grew 37%, driven by 38% subscription revenue growth and 17% services revenue growth. HubSpot ended the quarter with 34,326 total customers, was up over 40% year-over-year, and total average subscription revenue per customer came in at $10,228. The marketing customer count came in at 26,560, up 30% year-over-year while average subscription revenue per customer for our marketing business grew 7% to $12,773. As we've mentioned before, the company's focus is now on total customers and we will not be reporting standalone marketing metrics going forward. Like last quarter, the significant growth we are seeing from our $50 per month marketing starter product helped to drive a reacceleration in our marketing-only customer growth. However, the lower price point for our marketing starter product, combined with a minor FX headwind, continue to weigh on average subscription revenue per marketing customer. We will take the trade-off of lower price customers as we see significant opportunity for HubSpot to upgrade these customers over time. Deferred revenue came in at $111.3 million, growing 44% year-over-year, while calculated billings defined as revenue plus the change in deferred revenue came in at $94.8 million, up 39% versus the second quarter of 2016. While billings growth did exceeded our expectations, please note, we saw a benefit from an FX tailwind in the quarter. Please remember that billings growth can diverge from revenue growth in any quarter due to changes in billing terms, product mix or the timing of revenue recognition versus billing. However, we continue to expect billings growth and revenue growth to track one another over the long run. As you may have…

Thanks, John. The team and I had the pleasure of celebrating HubSpot's 11th anniversary this quarter, and it got me thinking back to the very beginning of the company of how far we've come to where we stand today, you know what stood out? For as long as HubSpot existed, we always tried to take the long view, always, always, always. Our mission, our north star is to drive growth for our customers. When we're debating decisions, it has always come down to what will serve that one goal in the long term. And One HubSpot and freemium are no different. These are plays that are going to set us up to drive growth for our customers for a very long time. That's why we're all here and there's no group of people I'd rather be doing it with. All the credit goes to our employees, customers, partners and friends. Thank you all very much. With that, operator, let's open the call for some questions.

Certainly [Operator Instructions] And your first question comes from the line of Ross MacMillan with Royal Bank of Canada. Ross, your line is now open. Please go ahead.

Thanks very much and congratulations on the quarter and Brian congratulations on the Wolf guitar [ph] I had a couple of quick questions. Just when we look at the metrics, obviously, the customer growth is really strong and, frankly, the -- giving you're selling more freemium even in core marketing, the fact you're still growing ASRPC there is impressive. But when we look at the total average sub revenue per customer, that was down sequentially and there's obviously a lot of inputs into that, including freemium mix and sales only mix. So I wonder if you could just maybe talk to that and how we should think about that trending over time.

Yes, Ross. It's John. Yes, so you're thinking about it the right way. The big thing there is we are - total customers includes our sales-only customers. It includes our marketing starter customers. Anybody that is paying us for a subscription, we don't put anything free in there. And as we've said, that's growing over 40%, so growing really rapidly and we expect to continue to grow that at those kind of rates. But when you're adding that many low-price customers, when you just look at the mix of adding all those together, it has brought that overall revenue per customer down. And we would expect that to continue over the short term. At some point, it's going to normalize. Obviously, the customers are actually growing. It's just we're adding a lot more lower priced customers. And so when you blend all that, that's where you're getting that lower revenue per customer.

That's great. And then, Brian, just as you think about the different selling motions you have, whether it's sales into the marketing base or freemium to paid or even marketing to sales. Can you just recap on kind of where we are in terms of sort of stack ranking those and where's the biggest opportunity still in your mind?

Ross, that's a really good question. We're going through a transition and it's going well. The way, over the first 10 years of HubSpot, that we generated a customer is someone comes to our website, they'd fill out a form, and they schedule time with a sales rep that worked through a 30-ish day sales cycle, kind of a mini solution sale, buy the product, would set them up and be successful. And that's still a large chunk of our customers, but an increasing number of our customers start that journey with us by starting to use our free CRM product. When they use our free CRM product, they really like it. Many times, they just buy our sales product without talking to a sales rep and then we engage them, sometimes we engage them while they're using the free product and then sell them something. So the journey is changing and that mix is changing in a really interesting and positive way. What I like about that, I just think if you roll the clock forward 2, 3, 4 years, that's just the way I think humans are going to buy products because they're going to want to try it and use it. And this freemium thing is going to be here to stay and the new modern models will all look like that. So we're trying to kind of match the way we sell in market to exactly the way we think humans will want to buy. In terms of the opportunity, I mentioned this a bit in my prepared remarks, but where we're starting to lean in -- we're actually starting to lean in a bit in July. We're trying to crack the code on how do you sell the marketing product to somebody who had purchased the sales products and a couple of things I like about that. The thing I like the most about it is the cost to acquire one of those sales customers is quite low. It's a low touch buy, it's very low cost to acquire a customer. And then if we can sell them the marketing products, boy, that total lifetime value goes way, way up, and that's sort of the magic, I think, in the model if we can really crack that part of the model is really exciting. Bring them in at a very low price and then deliver tons of value to them through that initial sales product and then more value to the marketing product and get a lot of value from them and give them a lot of value over time.

That’s helpful. Thank you so much and congrats again.

Thank you.

Your next question comes from the line of Samad Samana with Stephens Inc. Samad, your line is open. Please go ahead.

Hi. Congrats on a great quarter and thanks for taking my questions. Brian, I was wondering if maybe you could give us an idea of traction for sales growth through the channel and maybe some of the training or programs the company's putting in place to ensure that a channel feels incentivize to sell Sales Pro and then maybe one follow-up.

Sure, that's a really good question. As of January, we really opened things up to let our marketing partners, that over 3,000 agencies that we've been selling our marketing products. And as of January, we're really opened up and let them sell and gave them commission on our sales product, and that's gone well. Many of them have transitioned from being a marketing agency, so more of a go-to-market agency and extended their offering from just a marketing offering to a full sales and marketing offering. And similar dynamics are existing for them where they're just delivering more value and they're getting more value. The retainers are bigger and customers are staying around longer, so that's going well. And then we have a, let's call it a pilot project internally. They try to create a whole new channel inside of HubSpot targeting sales coaches. The one thing I think is interesting about the software industry and targeting these growth kind of mid-market companies, if you look back over time, Intuit did a really nice job of turning accountants into software resellers and they've really done a nice job overtime penetrating that SMB. Autodesk is another one that created a channel. They turned architects into software resellers. But HubSpot, essentially, is we turned website design agencies into marketing SaaS companies effectively. Now what we want to do is to turn sales coaches into sales SaaS companies. So we're just at the beginning of that. We've got a small team working on it, and the results are pretty good so far. So, so far so good on that.

I don't want to steal your thunder for INBOUND, but as you think about the Growth Stack strategy, what are customers clamoring for HubSpot to move into next?

Yes, I don't think I'm going to tip my hat today on what we're going to announce in INBOUND. But suffice it to say, we listen very carefully to what our customer's input is and we keep a very close eye, not on just what our customers want, but on what their customers want. We're really obsessed with studying how do people shop for products and buy products to engage with vendors over time, and the changes that are happening in the way that, that whole process works. It's remarkable how much has changed certainly since we started the company 11 years ago. But even the last few years, behaviour of all of us on the phone today, we just live our lives and shop and buy in different ways. And so rest assured, we are listening to our customers and really watching the way the marketplace and humans are changing and building products to match that. We're by no means done building out HubSpot. We still feel like as a company, we're in the early innings of the opportunity.

Your next question comes from the line of Stan Zlotsky with Morgan Stanley. Stan, your line is now open. Please go ahead.

Hi, guys. Thank you so much for taking my question and Chuck, congratulations on your new title of Corporate Treasurer. I feel like you don't get enough credit for that. Brian, just a question for you. So the international part of the business, clearly, is doing very well, very impressive 60% growth. What are you guys seeing on the U.S. side of the business because we're doing kind of back of the envelope calculations, we're seeing that growth rate slow down to 28%. Just thinking, any kind of commentary you have on this part of the geography.

Yes, that's a great question. The way we've talked about this before, but the way we kind of run the business and make decisions is we're a little bit obsessed with these unit economics. What is that cost to acquire that customer, and how much value do we get out of them over the long haul, and that's a bit of our north star here. And when we look over in Europe, the U.S. economy is really good. They are really very good in Europe and Asia right now because we're very early in the development of those markets. So we've been hitting the gaps and hiring faster there in the U.S., and you're seeing some of that. The other thing, I think, that's going on internationally is we've made over the last 2, 3 years, really big investments in international, big office in Dublin. We just opened our German office, Australia, Singapore, Japan. We translated our entire product into 5 different languages. We now market and sell and service into five different languages. So part of the really nice growth we're getting in there is some of those depths that we've made over the last couple of years are really paying off. We're really starting to get a return on investment in dollars there are plenty [ph]. As you know, John side many times before, we're carefully balancing our growth of profits. We want to be a very, very high-growth company. We think we can be high growth for over a long period of time and have steady growth in profits over time. And as we think about investments, we're hitting the gas real hard in international and getting a nice return on it.

Got it. And one quick housekeeping question and -- a big picture question and a housekeeping question. The big picture one, you have a lot of cash now in your balance sheet after the convertible. You've raised - what are the plans for cash going forward? And then a quick housekeeping one for John. With the dollar retention rate, I'm not sure if I missed it, if you mentioned it, what it was in the quarter? Thank you, guys.

You want to take the first one?

No, go ahead.

Yes. We just raised in cash -- give you a couple of thoughts on that. When I think of the value of HubSpot to our customers, there's a tremendous amount of value these mid-market companies see in really this all-in-one solution that's built from the ground up on one stack built by one company. And when we look at our competitive advantage relative to the platform players who are sort of up in the enterprise or kind of north of us in the marketplace, many of those platform players have built their solution by kind of a -- they bought a bunch of companies and they glued them together. And end users feel that in these mid-market companies. And these mid-market companies don't have IT staff to help them with that, so big advantage there. And then when you compare us to the alternative and that may be south of us in the market, the alternative is to buy a piece of e-mail software, buy an SEO tool, buy social media tool, so websites - and buy them from different vendors and you end up with a very kludgy user interface. So we kind of want to be like Apple used to be where it's just a gorgeous flow for a customer, one user interface is really easy to you. So we're mindful of that as we look into investing that money in M&A, and we're looking for opportunities, but as we look for opportunities, how do we have those opportunities at the platform level to really accelerate what's going on across the platform and keep that nice user interface for our end users. So we're going to be prudent and careful about where we do investments, but we are looking for them and if we can find reasonable opportunities to buy a company that can increase our growth rates, increase the value to our customers, increase the value to you, we'll make a move.

Yes, Stan, it's John. We were really pleased in the quarter. We're still at that 100% level, which, as you know, the company focused on the SMB space to get to that 100%, to be able to get your up-sells and cross-sells to cover what naturally you lose on the customer side, and SMB really allows us to grow fast for a long period of time. Your next question comes from the line of Richard Davis with Canaccord. Richard, you line is now open. Please go ahead.

Thanks very much. So I guess actually kind of taking on the last question that you had there. I mean if you think about, like you kind of even touched on it a little bit, but the really successful firms out there have those open platforms. I mean Salesforce has done it at a higher level but really sticky because they have all these apps that I can plug into and kind of configure my platform that way. So talk about just kind of how you see that whole platform strategy evolving and then how do you balance that to create that UI that you talked about because you want to make sure the folks have a good user experience? Thanks.

Yes, that's a great question. Thanks, Richard. HubSpot is very much an open piece of software today. There's very nice APIs into the system, and we're seeing nice traction on companies wanting to work with us so the number of third parties reaching out to us who want to build integrations to us has really gone up over the last year. Frankly, I think that's driven by two things. One, as we've been building up the product, we've been investing more in our APIs, making them richer, more endpoints, better documented and so forth and so on, more consistent for them. The second is the number of users we have is really mushroomed as we offered our premium products. There's just more and more humans out there using our product, which makes us a much more attractive partner for third party software vendors. I can just give you one example. Recently, our CRM is built kind of API-first, and that's a very good APIs. So we've recently opened up a new endpoint that's very, very powerful. So for example, inside our CRM, if you're a sales rep, you get a timeline view of Richard Davis, when Richard became a lead, we start tracking what you do. And every time you visit the website, we're tracking what you do. Every time you watch a video, we're tracking what you do, and we're watching the whole thing. Within that timeline, we've opened some interesting stuff up and there are some partners doing some amazing things that make our platform far more powerful. One partner of ours that makes the software that helps you -- that hosts videos basic on your website, what it does is when Richard Davis comes to your website, starts watching a video on your website, it will show the sales rep which video you watch, of course, it will show you where you pause that video, whether you click the call to action on this video and all the analytics around Richard's engagement on it. There's another company called Orange is a very cool company, that's the start up that we really like that builds software. That basically creates those heat maps of Richard Davis' journey across our website. So you visited the home page, you clicked on this link, you hovered over this. It's a heat map of where you were on the site, right on the timeline the sales rep can see your journey and where you hovered and exactly what you're interested in. So by opening HubSpot as a platform, and there's a lot of opportunity here for us, third party companies are starting to integrate with us and do really special things that add value to our customers and I read your recent report, I thought it was really good. It's a big opportunity for us and I'm really excited about it.

Thank you so much.

Your next question comes from the line of Alex Zukin with Piper Jaffray. Alex, your line is now open. Please go ahead.

Hey, guys. Thanks for taking the questions. So the first one, just can you talk a little bit about sales protraction in the quarter? Maybe if possible, just comment on kind of a run rate revenue for that part of the business? And any changes or impacts that you're seeing on sales productivity as more of the direct Salesforce sells that product?

Yes, on the Sales Pro side, I'm that business is going well. As we've talked about, it's more and more about total customers and the total value we're receiving. We're seeing a lot of people come in that way. We're starting to cross-sell them, that marketing product. And as Brian said, it's just a great way to get people started in a very low-cost way and then really drive a lot of value over time. On the productivity side, Brian, you want to chat about that on the sales productivity?

Yes, I think we're right where we hoped we'd be. We're cranking along, the sales reps are getting used to selling it, it's a little bit different of a motion and you're seeing some sales reps selling that Sales Pro product first. You're some of them selling that Sales Pro product into their marketing installed base. You're seeing some sales reps getting good at selling the whole thing up front and they're learning and we're getting better at it. Still think its early innings, but so far so good.

Great. And just maybe one follow-up. You guys saw a pretty meaningful sequential growth bump on billings this quarter, which is almost closer to the seasonality from '14 and '15. So I was wondering what the differences were that drove that, and maybe what was the impact to the billings growth from FX.

Yes, Alex, so it's John here. Yes, so good quarter on the billings side. The quarter finished up strong at the end and we ended up with a good number. That was buoyed by FX. We got a couple of point benefit from FX just as the euro continues to strengthen against the dollar. I think that as you're thinking about billings, we said in general, you should think about billings and revenue over time being in concert. Obviously, there tends to be some nuance [Technical Difficulty]

Alex, this is John. We heard the line cut out. Am I back on?

You are live to your audience.

Okay, I'm not sure where I cut out, but I was talking...

There's a ripper thunderstorm happening in the background, I wonder…

So anyway, I was talking about - I hope you all heard that there was about a 2-point tailwind to billings from FX, but everyone should be thinking about third quarter and just the fact that last year, we had the services, free onboarding promo that drove about a 4-point benefit to billings. And so as you're thinking about your third quarter billings estimate, that will create a bit of a tough comp. The other thing that's happening in third quarter this year is INBOUND is moving back into that quarter. But the only thing that's different in the past is it's literally the last week of the quarter. And we'll have lots of great conversations with customers. All our partners will be there and building great pipeline and starting conversations. It's just we have a 30-day sales cycle, so a lot of that benefit we'll see in the fourth quarter. So just be careful when you think about billings in the third quarter.

Your next question comes from the line of Mark Murphy with JPMorgan. Mark, your line is now open. Please go ahead.

This is Albert Chi on for Mark Murphy. Thanks for taking my question. I just want to ask about your recent acquisition of Kemvi for AI and can you talk a little bit more about how that fits into the CRM product? And maybe give us some examples about how that will be used and how it differs from other vendors out there.

Sure. Really excited about the Kemvi acquisition. The team is -- are world-class machine language - machine learning, artificial intelligence folks. I'm really delighted to have them as part of it. What they do, what they will do inside of HubSpot is really cool. When I look at what a sales rep does in any given day, they spend a tremendous amount of time researching the individual they're calling on and the company they're calling on. Is anyone inside the company changing jobs, is there a press release, is there a reorg, is there a new investment, is there a merger? Constantly keeping their eye on what's happening in that company, and it's very labor-intensive. And machine learning is a perfect application to solve that type of problem. Ingesting lots of information about that person, about that company. Processing it and displaying it to a sales rep so they can save a lot of time doing research and hit the nail on the head with they're making the call or sending the e-mail. That's effectively what can be done and they're building out their team as part of our data insights team. Most of the value will come through our CRM and our sales automation project. For me, it's going really good.

Got it. Maybe just one more on the bottom line guide improvement for the year, and I know you've talked about the shift towards a self-service model, but can you maybe detail a little bit more about where that leverage is coming from? Is there anything in terms of automation to note or maybe a switch between indirect versus direct? Thanks.

Yes. So obviously, it's really good to see the model playing out. Like we said when we went public that we were going to grow fast and continue to show incremental margin improvement, and I think we've delivered that. Most recently, we're seeing it mostly in sales and marketing. If you think about it, the company really kind of created the idea of INBOUND marketing and we spent a lot of time educating the market and spending -- investing a lot of money getting there. And now, we're seeing the benefit of that. We're getting leverage on that. We're getting customers past their acquisitions cost and then we have very high product margins, which obviously is leading to that leverage. I think going forward, you're going to continue to see it in sales and marketing. You'll continue to see it in G&A and there's probably a little room left in gross margins, more from a mix standpoint just as we - as services continues to become a lower and lower portion of our revenue mix just given that our product gross margin is at 85 and our overall is 80. So anyway, we feel good about where the margins are and to continue to deliver those strong profits.

Your next question comes from the line of Bhavan Suri with William Blair. Your line is now open. Please go ahead.

Hey, guys. Thanks for taking my questions. I guess just a follow-up on the AI question just a little bit here. As you think about sort of not now, but a few years out the road and you think about sort of the role that AI and bots and machine learning have and you think about the web as we know it today and you think about sort of the view that ends up being service that's just delivered to sort of a world of intelligent search. How does HubSpot's INBOUND model fit in with that? And how do you guys think of AI and be shipped away from sort of an HTML link based website to a more machine automated really driving some of the sales knowledge stuff you guys talk about. But at sort more tangibly, how does your product roadmap and strategy fit into maybe a world that looks a little different than it does today over a longer period of time? I'd love to sort of get your thoughts on how you think through that.

Sure, that's an excellent question. I think AI, machine learning is widely applicable to the sales and marketing space and HubSpot in general just the way we go about building software and automating task for marketers and salespeople. We're very well positioned to take advantage of it because just we have so much data we have, collect so much data about every web visit. We own the whole website, the blog, the social, so much about a customer, a potential customer. We're just sitting on a treasure trove of data. So we're in a good position to take advantage of it. I completely agree with your thesis that humans are going to change the way they behave. I think you're already starting to see people using e-mail a whole lot less and starting to use messenger more and chat more. That change is starting to happen. And I think natural language processing and artificial intelligence is beginning to enable a whole new way to interact with customers. I think you'll see HubSpot continue to study the way humans are behaving and changing. It's a topic that we're very engaged with here at HubSpot and continue to evolve our technology and our methodologies to make sure we're on top of it or even a little bit ahead of it and pulling our customers along with us. We're very cognizant. I kind of think of it as I think a few years ago versus today, it used to be everyone lived in text. They spend all day living in text, and more and more people like video and it used to be Google. People lived in Google and they certainly still use Google. But if you look how people spend their day, they're spending an awful lot of time on social media. If you looked at people a few years ago or even today, gosh, e-mail, they lived in e-mail and a more and more, they live in whether it's Slack or they're in messenger, one of these systems have big shifts going on, and HubSpot's going to be there to help our customers through it. One investment we've made that I think is super interesting is our GrowthBot. It's my co-founder's big initiative. It's going really, really well, and you can use our GrowthBot from within Facebook Messenger, within Slack. You can invite it in and you could interact and learn information about your marketing and selling and what's going on out there instead of visiting at everybody's website, you can go and use GrowthBot to find that out. So we're all over it, we're really excited about the changes. We think we're in a very good position to take advantage of AI and these changing human behaviors.

Your next question comes from the line of Ian Strgar with UBS. Ian, your line is now open. Please go ahead.

Hey, guys. Thanks for having me on the call. So if I could kind of add on to Alex's question earlier. I just want to dig into the up sell motion from sales to marketing. The marketing customer ads were really impressive in the quarter, up 30% and almost 1,800 ads was, I think the highest quarterly number that I have ever seen. So can you guys just kind of talk to that motion and how that contributed to the quarter-over-quarter ads and marketing? And also, if there are any like customer attributes that make certain customers kind of up-sell candidates? And just as you're - I know it's still early days, but just as that -- as you guys kind of gain more knowledge about that up-sell process and how it's kind of crystallizing, can you just tell us a bit more about how it's working?

Sure. I think the marketing product is just really good. We've been working on it for 11 years. And every -- really, everyday, it gets better. I'm really proud of how the R&D team has advanced it. And we're continuing to invest a lot of money in it, and it's very well positioned in the market. So frankly, I'm not surprised it's growing real fast. It's a real good solution. In terms of the growth of it, part of it -- part of that growth is the product just works and it's well positioned. A small part of it, and John may have the exact number, I don't, is that motion of, boy, we've got them in through the sales product and then they came over at the marketing product. There's a pretty good chunk of marketing customers who started with CRM and then brought marketing that's contributing to it as well. Again, I think were pretty early on in figuring that motion out. We're nowhere near I think as sophisticated as, for example, Atlassian, we added the President of Atlassian to our board recently. He's terrific, and were learning from those folks. And we hired a veteran from Dropbox. So we're learning this freemium motion and there's a lot more good work to be done and low-hanging fruits. It's really exciting opportunity.

Your next question comes from the line of Jesse Hulsing with Goldman Sachs. Jesse, your line is now open. Please go ahead.

Hi. This is Yena on for Jesse. I had to follow-up to an earlier question on different ways customers adopt Sales Pro. If I'm interpreting the numbers correctly, it looks like you have added quite a bit more standalone Sales Pro customers in the first half versus the full stack. I guess what's driving that given the cross-sell potential with existing marketing customer base, and do you expect this to continue to be the case moving forward?

We said 500 in the first half.

5, yes.

5,000.

5,000, Growth Stack, yes, in the first half so I'm sorry. Will you reword or rephrase your question? I'm having trouble understanding the…

Right. So if I'm interpreting the numbers correctly, I think you have north of 7,000 standalone sales customers. Is that right or am I not understanding that correctly?

Yes, it's just not a number that we've talked about publicly. What we have said is greater than 5,000 Growth Stack customers in the first half. I gave you a marketing customers total, but we're not talking about standalone Sales Pro customers.

Okay. And just a quick another question, if I could squeeze one in. Did you tend to see kind of higher users, Sales Pro users per customer for the full stack customers compared to standalone sales customers? Is there a difference there?

Yes. I mean, I think it makes intuitive sense. I don't have the number at the tip of my hands. I know that in general, we're starting up with 2 users on average on the Sales Pro product and that moves up to 3 over time. I think there's opportunity to get that even higher over time, but yes, I would think that if they're using it more, but I actually don't have that at the tip of my fingers.

Your next question comes from the line of a Brian Peterson with Raymond James. Brian, your line is now open. Please go ahead.

Thank you, gentlemen. And congrats on the quarter. Just one quick question for me. So if we think about the CRM customers that you're migrating over to the marketing stack, is there any difference in what you're actually displacing there? Is it mostly Greenfield? Just curious how that compares to kind of the traditional go-to-market motion? Thanks.

It's evolving. Initially, it was mostly literally start-ups who maybe were managing their business on a spreadsheet and we're like, we need to get organized here. And we're starting to hire sales reps and we need them to be productive. We need a lightweight system. Over time, there's been - we're seeing more kind of ripping and replacing of other systems and there's a lot. There are many CRM vendors out there. Ours is really nicely positioned in the market. We built it for that head of sales to be able to -- for the sales reps to enable that sales rep to sell more, less focused on the Head of Sales be able to track stuff. As we add more from functionality to the product and enable more reporting and a little bit more robust things, slightly larger companies are starting to use that CRM product and it's inching that market a little bit, and I suspect you'll see more seats going in there and a little bit more replacement. But most of it is relatively Greenfield still. We're starting to see more ripping and replacing, but most of it is Greenfield.

Your next question comes from the line of Scott Berg with Needham. Scott, your line is now open. Please go ahead.

Good morning, John. Just one question for me. Brian, you had used the term customer acquisition cost earlier and I wanted to follow up on that. As you've gotten into selling the freemium products and sales products over the last year plus now, how do you guys look at customer acquisition cost? And where does that trend over time relative to where you've been recently? And I ask the question of course, freemium doesn't necessarily means those things are coming down over time.

Sure. That's a good question. I don't think we give the exact customer acquisition cost number, but you probably are assuming, and you'd assume correctly, that the cost will require customers come down quite a bit as we've leaned into this lighter freemium emotion and really happy to see that scaling. I think one of the keys to building a big business in small and medium or more medium than small business pace is you've got to keep that cost require low and have not novel ways to acquire customers that will really scale and very happy with that. And the number we'll really look at, as we want that cost to acquire customers to stay low, but we want that return on investment, the total lifetime investment - total lifetime value to be high. And we're really happy with this ratios are on a customer-by-customer basis we're very, very profitable. So happy with what - where that CAC trend is going.

Your next question comes from the line of Koji Ikeda with Oppenheimer. Your line is now open. Please go ahead.

Thanks for taking my questions. And congrats on the quarter. I just actually wanted to build on a previous question on the impressive net new marketing customers. I think there's about 1,800 in the quarter. If you could strip out the marketing adoption trends of the $50 marketing product, what pricing level between the Basic Pro and Enterprise had the best adoption trends in the quarter? And then I guess beyond that, how has the up-sell to different pricing or the higher pricing models had been amongst the existing marketing customers during the quarter?

Yes, so I'd say the pricing absent the Marketing Starter is relatively consistent. We still have the must of the customers on the pro product, very small on Basic and the rest are on Enterprise. We get some people moving from Basic to pro and pro to Enterprise. Sometimes, functionality, sometimes just because of the contact tier pricing makes it advantageous for them to do it, that's part of the up-sell, not the biggest piece. The biggest piece continues to be contact tiers. And now, the second the biggest driver there is selling the -- cross-selling the sales product to the marketing customers. Longer term, we think, as Brian said, we have a huge opportunity to sell the marketing product into the sales customers, but that's really where our cross-sell-- or where that motion and where that's fleshing out.

Thanks for taking my questions.

Your next question comes from the line of Tom Roderick with Stifel. Tom, your line is now open. Please go ahead.

Hi. It's actually Parker Lane [ph] in for Tom. One quick one for me. I was wondering how the LinkedIn Sales Navigator integration has been received by your CRM customers and maybe what percentage of customers are using that today and what value did it derive from that? Thank you.

Parker, that's a really very good question that I should have a tighter answer on. It's been well received. People are excited about it. They're starting to get some traction, but, boy, it's very early in that. But folks are - more sales reps are excited about it and people are starting to adopt it. But I don't have the metrics at the tip of my tongue on the adoption specifically. But so far so good on it. I think it was a good investment. I think LinkedIn is pretty happy with it, and our team is pretty happy with it.

Your next question comes from the line of Derrick Wood with Cowen & Company. Derrick, your line is now open. Please go ahead.

Hi. This is Rakesh Kumar sitting in for Derrick. Thanks for taking our question. I was wondering what percentage of your 3,000 plus strong partner channel are selling sales part and if you're attracting new set of partners for this product.

Yes. There's a decent -- good size percentage of our -- of marketing agencies have started selling our CRM, our sales product and it's really worked for them. It adds more value, makes them more strategic, the retainers are bigger. And so that's really working. We're excited about it. I think that will continue to increase. It's a number we're watching. I think we publish it, but it's a good size number. And then we've got this brand-new channel trying to turn these sales coaches into HubSpot sales resellers and that's been encouraging to us. A small team working on it. It's growing nicely, and I think it's a real opportunity for us. Richard Davis asked a good question about sort of HubSpot as a platform and increasingly, people describe us as that. We've got our piece of -- core piece of software and our methodology to bring people on it. There's a bit of a moat around HubSpot that we're building. These marketing agencies, 3,000 plus of them, add a lot of value to our customers into our franchise. There's this news sort of sales agency that we're building on to there. There's these connect partners that our ISPs building onto our platform. So it takes a village to build a huge company and the village is starting to really build up. We're excited about it.

Your next question comes from the line of a Brad Sills with Bank of America Merrill Lynch. Brad, your line is now open. Please go ahead.

Thank you, guys. Congrats on a nice quarter. I wanted to ask about those customers that are growth stack customers are running 2 or more applications. I think you historically - you've seen better customer renewal rates out of that base versus just broader the base. Just any commentary on customer renewals and that base and how renewals overall had been trending?

Yes, so we still are seeing a benefit from our Growth Stack customers. The retention is higher. Clearly, they're getting more value from the product. You have more people at company using the product. And so that's playing out nicely for us and we feel like over time, getting as many people as we can using multiple products will be good for the customer, and ultimately, good for us. So we're pleased with the results there.

Great. Thanks, John. And then one more, if I may. Just on the other add-on offerings, reports, ads, websites, any commentary on how that trended this quarter and where is the focus there from a product standpoint? Thanks a lot.

Yes. So they continue to do good. Our website product, I think, it's penetration in the low 20s. Reporting now penetrated about, I think, it's high-teens of our customers. It's kind of in the high single digits, so all those are good. I think that, as I said before, that bigger, even bigger lever from cross-sell and up-sell standpoint and selling that sales product into the marketing and I think the marketing into sales will be good as well. So we like the add-on products, but the cross-sell of the main products is even a bigger opportunity for us going forward.

Great. And continuing to invest in the reporting, the site's product, the ads product are all getting better. Come to INBOUND. I think you'll hear some good stuff at INBOUND, and I guess I encourage everyone as we end the call. Please do come to INBOUND. We're going to have an Analyst Day there. Dharmesh and I are doing a keynote. Our Head of Products is going to do a demo of all the cool stuff we're building. So we hope to see you there, and look forward to connecting then.

Thank you, ladies and gentlemen. This concludes today's conference call. You may now disconnect.